<SEC-DOCUMENT>0001193125-14-285794.txt : 20140730
<SEC-HEADER>0001193125-14-285794.hdr.sgml : 20140730
<ACCEPTANCE-DATETIME>20140730082453
ACCESSION NUMBER:		0001193125-14-285794
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20140724
ITEM INFORMATION:		Results of Operations and Financial Condition
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20140730
DATE AS OF CHANGE:		20140730

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			VASCO DATA SECURITY INTERNATIONAL INC
		CENTRAL INDEX KEY:			0001044777
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373]
		IRS NUMBER:				364169320
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-24389
		FILM NUMBER:		141001317

	BUSINESS ADDRESS:	
		STREET 1:		1901 SOUTH MYERS ROAD
		STREET 2:		SUITE 210
		CITY:			OAKBROOK TERRACE
		STATE:			IL
		ZIP:			60181
		BUSINESS PHONE:		6309328844

	MAIL ADDRESS:	
		STREET 1:		1919 S HIGHLAND AVE
		STREET 2:		STE 118 C
		CITY:			LOMBARD
		STATE:			IL
		ZIP:			60148
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>d765451d8k.htm
<DESCRIPTION>8-K
<TEXT>
<HTML><HEAD>
<TITLE>8-K</TITLE>
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 <P STYLE="line-height:1.0pt;margin-top:0pt;margin-bottom:0pt;border-bottom:1px solid #000000">&nbsp;</P>
<P STYLE="line-height:3.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1px solid #000000">&nbsp;</P> <P STYLE="margin-top:4pt; margin-bottom:0pt; font-size:18pt; font-family:Times New Roman" ALIGN="center"><B>SECURITIES AND EXCHANGE COMMISSION
</B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:12pt; font-family:Times New Roman" ALIGN="center"><B>WASHINGTON, D.C. 20549 </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><center>
<P STYLE="line-height:6.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1.00pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:18pt; font-family:Times New Roman" ALIGN="center"><B>FORM 8-K
</B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><center> <P STYLE="line-height:6.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1.00pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:12pt; font-family:Times New Roman" ALIGN="center"><B>CURRENT REPORT </B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:12pt; font-family:Times New Roman" ALIGN="center"><B>PURSUANT
TO SECTION 13 OR 15(d) </B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:12pt; font-family:Times New Roman" ALIGN="center"><B>OF THE SECURITIES EXCHANGE ACT OF 1934 </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:12pt; font-family:Times New Roman" ALIGN="center"><B>Date of Report (Date of earliest event reported): July&nbsp;24, 2014 </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><center> <P STYLE="line-height:6.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1.00pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:24pt; font-family:Times New Roman" ALIGN="center"><B>VASCO Data Security International, Inc. </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>(Exact name of registrant as specified in charter) </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><center>
<P STYLE="line-height:6.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1.00pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD VALIGN="top" ALIGN="center"><B>Delaware</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top" ALIGN="center"><B>000-24389</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top" ALIGN="center"><B>36-4169320</B></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>(State or other jurisdiction</B></P>
<P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>of incorporation)</B></P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>(Commission</B></P>
<P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>File Number)</B></P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>(IRS Employer</B></P>
<P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>Identification No.)</B></P></TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>1901 South Meyers Road, Suite 210 </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>Oakbrook Terrace, Illinois 60181 </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>(Address of principal executive offices) (Zip Code) </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>Registrant&#146;s telephone number, including area code: (630) 932-8844 </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>N/A </B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>(Former name or
former address, if changed since last report) </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><center>
<P STYLE="line-height:6.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1.00pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Check the appropriate box below
if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></TD>
<TD ALIGN="left" VALIGN="top">Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></TD>
<TD ALIGN="left" VALIGN="top">Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></TD>
<TD ALIGN="left" VALIGN="top">Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></TD>
<TD ALIGN="left" VALIGN="top">Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) </TD></TR></TABLE> <P STYLE="font-size:10pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<P STYLE="line-height:1.0pt;margin-top:0pt;margin-bottom:0pt;border-bottom:1px solid #000000">&nbsp;</P> <P STYLE="line-height:3.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1px solid #000000">&nbsp;</P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>ITEM&nbsp;2.02 Results of Operations and Financial Condition </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The information contained in this Form 8-K shall not be deemed &#147;filed&#148; for purposes of Section&nbsp;18 of the Securities Exchange Act of 1934, as
amended (the &#147;Exchange Act&#148;), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">On July&nbsp;24, 2014, VASCO Data Security International, Inc. (VASCO) issued a press release providing a financial update for the second quarter and six
months ended June&nbsp;30, 2014. The full text of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">On July&nbsp;24,
2014, VASCO held a conference call with investors to discuss VASCO&#146;s earnings and results of operations for the second quarter and six months ended June&nbsp;30, 2014. A prepared script of the conference call is furnished as Exhibit 99.2 to
this Current Report on Form 8-K. A transcript of the conference call is furnished as Exhibit 99.3 to this Current Report on Form 8-K. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The press release
and the comments by VASCO during the conference call contained non-GAAP financial measures within the meaning of the Securities and Exchange Commission&#146;s Regulation G.&nbsp;For purposes of Regulation G, a non-GAAP financial measure is a
numerical measure of a registrant&#146;s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most
directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows (or equivalent statements) of the issuer; or includes amounts, or is subject to adjustments that have
the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The press release contained a
reference to EBITDA and provided a reconciliation of EBITDA to net income from continuing operations. EBITDA, which is earnings before interest, taxes, depreciation and amortization, is computed by adding back net interest expense, income tax
expense, depreciation expense, and amortization expense to net income from continuing operations as reported. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The press release contained a reference to
Adjusted Net Income from Continuing Operations and provided a reconciliation of Adjusted Net Income from Continuing Operations to net income from continuing operations. Adjusted Net Income from Continuing Operations is computed by adding back long
term compensation expense, amortization of purchased intangible assets, and the corresponding tax impact of the two adjustments to net income from continuing operations. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The press release also contained a reference to Adjusted Diluted Earnings Per Share from Continuing Operations and provided a reconciliation to diluted
earnings per share from continuing operations. Adjusted Diluted Earnings Per Share from Continuing Operations is the same as Adjusted Net Income from Continuing Operations described above on a fully diluted per share basis. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>ITEM&nbsp;9.01 Financial Statements and Exhibits </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">(d) Exhibits. The following Exhibits are furnished herewith: </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="92%"></TD></TR>
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<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1.00pt solid #000000; width:26.20pt; font-size:8pt; font-family:Times New Roman" ALIGN="center">Exhibit<BR>Number</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1.00pt solid #000000; width:37.25pt; font-size:8pt; font-family:Times New Roman">Description</P></TD></TR>


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<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" NOWRAP>99.1</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Press release, dated July 24, 2014.</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
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<TD VALIGN="top" NOWRAP>99.2</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Prepared script of July 24, 2014 Earnings Conference Call.</TD></TR>
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<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
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<TD VALIGN="top" NOWRAP>99.3</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Transcript of July 24, 2014 Earnings Conference Call.</TD></TR>
</TABLE>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>SIGNATURE </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD VALIGN="top">Date: July&nbsp;30, 2014</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="3">VASCO Data Security International, Inc.</TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:1pt; border-bottom:1px solid #000000; font-size:10pt; font-family:Times New Roman">/s/ Clifford K. Bown</P></TD></TR>
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<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
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<TD VALIGN="top"></TD>
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<TD VALIGN="top">Clifford K. Bown</TD></TR>
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<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="top">Chief Financial Officer</TD></TR>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>EXHIBIT INDEX </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The following Exhibits are furnished herewith: </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1.00pt solid #000000; width:37.30pt; font-size:8pt; font-family:Times New Roman" ALIGN="center">Exhibit&nbsp;No.</P></TD>
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<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1.00pt solid #000000; width:37.25pt; font-size:8pt; font-family:Times New Roman">Description</P></TD></TR>


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<TD VALIGN="top" NOWRAP>99.1</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Press release, dated July&nbsp;24, 2014.</TD></TR>
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<TD VALIGN="top" NOWRAP>99.2</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Prepared script of July&nbsp;24, 2014 Earnings Conference Call.</TD></TR>
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<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" NOWRAP>99.3</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Transcript of July&nbsp;24, 2014 Earnings Conference Call.</TD></TR>
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<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>d765451dex991.htm
<DESCRIPTION>EX-99.1
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="right">Exhibit 99.1 </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">VASCO Reports Results for Second Quarter and First Six Months of 2014 </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Revenue from continuing operations for the second quarter of 2014 was $47.7 million, an increase of 28% compared to the second quarter of 2013; Operating
income from continuing operations for the second quarter of 2014 was $7.6 million, an increase of 297% compared to the second quarter of 2013. Full-year 2014 guidance increased for revenue and operating margin. Financial results for the period ended
June&nbsp;30, 2014 and guidance for full-year 2014 to be discussed on conference call today at 10:00 a.m. E.D.T. </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">OAKBROOK TERRACE, IL, and ZURICH,
Switzerland, July&nbsp;24, 2014&#151;VASCO Data Security International, Inc. (NASDAQ: VDSI), today reported financial results for the second quarter and six months ended June&nbsp;30, 2014. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Revenue from continuing operations for the second quarter of 2014 increased 28% to $47.7 million from $37.3 million in the second quarter of 2013, and for the
first six months of 2014, increased 19% to $86.5 million from $72.6 million for the first six months of 2013. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Net income from continuing operations for
the second quarter of 2014 was $6.9 million, or $0.17 per diluted share, an increase of $5.0 million, or 263%, from $1.9 million, or $0.05 per diluted share, for the second quarter of 2013. Net income from continuing operations for the first six
months of 2014 was $10.4 million, or $0.26 per diluted share, an increase of $6.1 million, or 142%, from $4.3 million, or $0.11 per diluted share, for the comparable period in 2013. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Net income, which includes the impact of our discontinued operations, for the second quarter of 2014 was $6.9 million, or $0.17 per diluted share, an increase
of $5.1 million, or 283%, from $1.8 million, or $0.05 per diluted share, for the second quarter of 2013. Net income for the first six months of 2014 was $10.4 million, or $0.26 per diluted share, an increase of $5.8 million, or 126%, from $4.6
million, or $0.12 per diluted share, for the comparable period in 2013. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Other Financial Highlights: </B></P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Gross profit from continuing operations was $31.0 million, or 65% of revenue, for the second quarter of 2014 and $56.8 million, or 66% of revenue, for the first six months of 2014. Gross profit was $23.9 million, or 64%
of revenue, for the second quarter of 2013 and $47.0 million, or 65% of revenue the first six months of 2013. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Operating expenses from continuing operations for the second quarter and first six months of 2014 were $23.4 million and $45.3 million, respectively, an increase of 6% and 7% from $22.0 million and $42.3 million
reported for the second quarter of 2013 and first six months of 2013, respectively. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Operating income from continuing operations for the second quarter and first six months of 2014 was $7.6 million and $11.5 million, respectively, an increase of $5.7 million, or 300%, from $1.9 million reported for the
second quarter of 2013 and an increase of $6.9 million, or 150%, from $4.6 million reported for the first six months of 2013. Operating income as a percentage of revenue for the second quarter and first six months of 2014 was 16% and 13%,
respectively, compared to 5% and 6% for the comparable periods in 2013. </TD></TR></TABLE>

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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations was $9.5 million and $15.4 million for the second quarter and first six months of 2014, respectively, an increase of
191% from $3.3 million reported for the second quarter of 2013 and an increase of 120% from $7.0 million reported for the first six months of 2013. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Cash balances at June&nbsp;30, 2014 totaled $123.3 million compared to $109.5 million and $98.6 million at March&nbsp;31, 2014 and December&nbsp;31, 2013, respectively. There were no bank borrowings at any of the
periods ended June&nbsp;30, 2014,&nbsp;March&nbsp;31, 2014 or December&nbsp;31, 2013. </TD></TR></TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Operational and Other Highlights: </B></P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">VASCO announced its acquisition of Risk IDS Ltd., a provider of risk-based authentication solutions to the global banking community. </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">VASCO joined the FIDO (Fast Identity Online) Alliance, an industry consortium delivering standards for simpler, stronger authentication during online transactions. </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">PointClickCare Selected VASCO to enhance security and convenience for its health care providers. PointClickCare is a leading provider of cloud-based software for the senior care industry. </TD></TR></TABLE>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Guidance for full-year 2014: </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">VASCO is increasing its
guidance for revenue and operating margins for the full-year 2014 as follows: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Revenue from our traditional business, which excludes our new service product offerings (DIGIPASS as a Service and MYDIGIPASS.COM), is expected to be in the range of $175 million to $180 million, an increase from the
range communicated previously of $168 million to $172 million, and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Operating income as a percentage of revenue, excluding the amortization of purchased intangible assets, is projected to be in the range of 13% to 15%, an increase from the range communicated previously of 11% to 13%.
</TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">&#147;We are very pleased with the results of the second quarter and first six months of 2014,&#148; stated T. Kendall Hunt,
Chairman&nbsp;&amp; CEO. &#147;Through the first six months of the year, our intake of new orders for our traditional products as well as our new products using the Cronto technology remained strong. The strength of both our intake of new orders and
our pipeline of prospective orders has given us the confidence to increase our guidance for both full-year revenues and operating margins. We were also very pleased to expand our authentication technology portfolio with the acquisition of Risk IDS,
a risk-based authentication solution. While Risk IDS is small, it gives us an important base upon which we can invest and build our own contextual authentication solutions.&#148; </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">&#147;The results for the second quarter and first six months of 2014 reflected improvements in our business in a
number of areas when compared to the same periods in 2013,&#148; said Jan Valcke, VASCO&#146;s President and COO. &#147;For the second quarter and first six months of 2014, revenues from both the Banking and Enterprise Security markets increased,
our operating margins improved, which reflects the leverage we have in our operating model, and revenues from our non-hardware products, which includes our mobile client and host-system products, increased. I believe that the investments we made in
previous periods in our products, whether through acquisition or internal development are generating strong returns. I also believe that the investment we made in the current quarter related to a risk-based authentication solution will result in a
strong product for us in future years as we continue to develop it internally.&#148; </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Conference Call Details </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">In conjunction with this announcement, VASCO Data Security International, Inc. will host a conference call today, July&nbsp;24, 2014, at 10:00 a.m. ET - 16:00h
CET. During the Conference Call, Mr.&nbsp;Ken Hunt, CEO, Mr.&nbsp;Jan Valcke, President and COO, and Mr.&nbsp;Cliff Bown, CFO, will discuss VASCO&#146;s Results for the Second Quarter and First Six Months Ended June&nbsp;30, 2014. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">To participate in this Conference Call, please dial one of the following numbers: </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">USA/Canada: 1 800 909 4764 </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">International: +1 212 271 4657 </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">And mention VASCO to be connected to the Conference Call. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The
Conference Call is also available in listen-only mode on <U>www.vasco.com</U>. Please log on 15 minutes before the start of the Conference Call in order to download and install any necessary software. The recorded version of the Conference Call will
be available on the VASCO website 24 hours a day for at least 60 days. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>VASCO Data Security International, Inc. </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>(in thousands, except per share data) </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>(unaudited) </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="72%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Three months ended<BR>June&nbsp;30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Six months ended<BR>June&nbsp;30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net revenue</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">47,654</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">37,260</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">86,477</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">72,626</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Cost of goods sold</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">16,633</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">13,378</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">29,660</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">25,656</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Gross profit</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">31,021</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">23,882</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">56,817</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">46,970</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Operating costs:</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Sales and marketing</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">11,310</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10,470</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">21,681</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">20,101</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Research and development</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,202</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,345</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10,343</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10,192</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">General and administrative</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,734</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,492</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">11,007</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10,944</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Amortization of purchased intangible assets</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,129</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">651</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,249</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,093</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total operating costs</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">23,375</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">21,958</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">45,280</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">42,330</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Operating income</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7,646</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,924</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">11,537</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,640</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Interest income, net</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">40</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">34</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">82</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other income (expense), net</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">249</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">265</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">687</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">413</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Income from continuing operations before income taxes</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7,905</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,229</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">12,258</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,135</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Provision for income taxes</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,012</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">379</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,839</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">873</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net income from continuing operations</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">6,893</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">1,850</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">10,419</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">4,262</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Income (loss) from discontinued operations</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(7</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(41</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(22</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">333</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net income</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">6,886</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">1,809</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">10,397</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">4,595</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Basic income (loss) per share:</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Continuing</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.18</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.05</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.26</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.11</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Discontinued</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">0.01</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total net income per share</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.18</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.05</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.26</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.12</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Diluted income (loss) per share:</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Continuing</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.17</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.05</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.26</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.11</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Discontinued</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">0.01</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total net income per share</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.17</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.05</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.26</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.12</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Weighted average common shares outstanding:</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Basic</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">39,358</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">38,908</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">39,315</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">38,798</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Diluted</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">39,471</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">39,226</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">39,430</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">39,145</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>VASCO Data Security International, Inc. </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>CONDENSED CONSOLIDATED BALANCE SHEETS </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>(In thousands, except per share data) </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="82%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>

<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>June&nbsp;30,<BR>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>December&nbsp;31,<BR>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><B>(unaudited)</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>ASSETS</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Current assets</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Cash and equivalents</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">123,314</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">98,607</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accounts receivable, net of allowance for doubtful accounts</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">22,074</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">28,528</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Inventories</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">25,692</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">25,653</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Prepaid expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,571</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,719</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Foreign sales tax receivable</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">418</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">543</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deferred income taxes</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,145</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,634</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Assets of discontinued operations</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,896</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,910</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other current assets</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,652</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,051</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total current assets</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">178,762</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">161,645</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Property and equipment, net</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,192</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,145</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Goodwill, net of accumulated amortization</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">24,428</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">23,532</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Intangible assets, net of accumulated amortization</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">15,293</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">16,733</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other assets, net of accumulated amortization</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8,512</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">6,822</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Total assets</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">230,187</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">211,877</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Current liabilities</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accounts payable</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">10,360</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">6,378</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deferred revenue</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">17,048</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">15,703</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accrued wages and payroll taxes</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8,274</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7,067</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Income taxes payable</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,498</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,087</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Liabilities of discontinued operations</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">30</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other accrued expenses</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,384</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,841</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total current liabilities</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">43,565</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">37,106</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deferred compensation</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">175</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">115</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deferred tax liability</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">295</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">321</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other long-term liabilities</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">60</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">57</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Total liabilities</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">44,095</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">37,599</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Stockholders&#146; equity</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Common stock</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">40</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">40</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Additional paid-in capital</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">81,131</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">79,871</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accumulated income</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">102,797</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">92,401</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accumulated other comprehensive income</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,124</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,966</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Total stockholders&#146; equity</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">186,092</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">174,278</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Total liabilities and stockholders&#146; equity</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">230,187</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">211,877</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>Non-GAAP Financial Measures </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The Company reports its financial results in accordance with GAAP, but Company management also evaluates its performance using EBITDA, Adjusted Net Income and
Adjusted Diluted EPS. The Company&#146;s management believes that these measures provide useful supplemental information regarding the performance of our business and facilitates comparisons to our historical operating results. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">These non-GAAP measures are not measures of performance under GAAP and should not be considered as alternatives or substitutes for the most directly
comparable financial measures calculated in accordance with GAAP. While we believe that these non-GAAP measures are useful within the context described below, they are in fact incomplete and are not a measure that should be used to evaluate our full
performance or our prospects. Such an evaluation needs to consider all of the complexities associated with our business including, but not limited to, how past actions are affecting current results and how they may affect future results, how we have
chosen to finance the business, and how taxes affect the final amounts that are or will be available to shareholders as a return on their investment. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>EBITDA </U></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We define EBITDA as net income from
continuing operations before interest, taxes, depreciation and amortization. We use EBITDA as a simplified measure of performance for use in communicating our performance to investors and analysts and for comparisons to other companies within our
industry. As a performance measure, we believe that EBITDA presents a view of our operating results that is most closely related to serving our customers. By excluding interest, taxes, depreciation and amortization we are able to evaluate
performance without considering decisions that, in most cases, are not directly related to meeting our customers&#146; requirements and were either made in prior periods (e.g., depreciation and amortization), or deal with the structure or financing
of the business (e.g., interest) or reflect the application of regulations that are outside of the control of our management team (e.g., taxes). Similarly, we find that the comparison of our results to those of our competitors is facilitated when we
do not need to consider the impact of those items on our competitors&#146; results. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Reconciliation of Earnings from continuing operations Before
Interest, Taxes, Depreciation and Amortization (EBITDA) to net income from continuing operations (in thousands): </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


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<TD></TD>
<TD></TD>
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<TD VALIGN="bottom" WIDTH="4%"></TD>
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<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Three months</B><br><B>ended June&nbsp;30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Six months</B><br><B>ended June&nbsp;30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><B></B>(in&nbsp;thousands,&nbsp;unaudited)<B></B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><B></B>(in&nbsp;thousands,&nbsp;unaudited)<B></B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">EBITDA&#151;continuing operations</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">9,497</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">3,267</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">15,392</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">7,004</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Interest income, net</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">40</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">34</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">82</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Provision for income taxes</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(1,012</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(379</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(1,839</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(873</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Depreciation and amortization</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(1,602</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(1,078</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(3,168</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(1,951</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net income&#151;continuing operations</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">6,893</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">1,850</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">10,419</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">4,262</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>Adjusted Net Income&nbsp;&amp; Adjusted Diluted EPS </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We define Adjusted Net Income and Adjusted Diluted EPS, as net income or EPS from continuing operations before the consideration of long-term incentive
compensation expenses and the amortization of purchased intangible assets. We use these measures to assess the impact of our performance excluding items that though they are recurring, can significantly impact the comparison of our results between
periods and the comparison to competitors. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Long-term incentive compensation for management and others is directly tied to performance and this measure
allows management to see the relationship of the cost of incentives to the performance of the business operations directly if such incentives are based on that period&#146;s performance. To the extent that such incentives are based on performance
over a period of several years, there may be periods which have significant adjustments to the accruals in the period but which relate to a longer period of time, and which can make it difficult to assess the results of the business operations in
the current period. In addition, the Company&#146;s long-term incentives generally reflect the use of restricted stock grants or cash awards while other Companies may use different forms of incentives the cost of which is determined on a different
basis, which makes a comparison difficult. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The Company also excludes amortization of purchased intangible assets because it believes that the amount of
such expenses in any given period may not be correlated directly to the performance of the business operations and that such expenses can vary significantly between periods as a result of new acquisitions, the full amortization of previously
acquired intangible assets or the write down of such assets due to an impairment event. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Reconciliation of Adusted Net Income from Continuing
Operations to Net Income from Continuing Operations </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="67%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>

<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Three months</B><br><B>ended June&nbsp;30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Six months</B><br><B>ended June&nbsp;30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><B></B>(in&nbsp;thousands,&nbsp;unaudited)<B></B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><B></B>(in&nbsp;thousands,&nbsp;unaudited)<B></B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Adjusted Net Income&#151;continuing operations</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">8,427</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">2,854</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">13,362</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">6,223</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Long-term Incentive Compensation Expense</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(788</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(604</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(1,430</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(1,358</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Amortization of Purchased Intangible Assets</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(1,129</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(651</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(2,249</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(1,093</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Tax impact of Adjustments*</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">383</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">251</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">736</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">490</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net income&#151;continuing operations</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">6,893</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">1,850</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">10,419</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">4,262</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Reconciliation of Adjusted Diluted EPS from Continuing Operations to Diluted EPS from Continuing Operations
</B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="72%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>

<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Three months</B><br><B>ended June&nbsp;30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Six months</B><br><B>ended June&nbsp;30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center">(in&nbsp;thousands,&nbsp;unaudited)</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center">(in&nbsp;thousands,&nbsp;unaudited)</TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Adjusted Diluted EPS&#151;continuing operations</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.21</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.07</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.34</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.16</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Long-term Incentive Compensation Expense</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.02</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.01</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.04</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.03</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Amortization of Purchased Intangible Assets</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.03</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.01</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.06</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.03</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Tax impact of Adjustments*</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">0.01</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">0.02</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">0.01</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Diluted EPS&#151;continuing operations</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.17</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.05</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.26</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.11</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">*</TD>
<TD ALIGN="left" VALIGN="top">= The tax impact of adjustments is calculated at 20% of the adjustments in all periods </TD></TR></TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>About VASCO</B>:
</P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">VASCO is a leading supplier of strong authentication and e-signature solutions and services specializing in Internet Security applications and
transactions.&nbsp;VASCO has positioned itself as a global software company for Internet Security serving a customer base of approximately 10,000 companies in more than 100 countries, including approximately 1,700 international financial
institutions. VASCO&#146;s prime markets are the financial sector, enterprise security, e-commerce and e-government. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Forward Looking Statements:
</B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">This press release contains forward-looking statements within the meaning of Section&nbsp;21E of the Securities Exchange Act of 1934 and
Section&nbsp;27A of the Securities Act of 1933. These forward-looking statements (1)&nbsp;are identified by use of terms and phrases such as &#147;expect&#148;, &#147;believe&#148;, &#147;will&#148;, &#147;anticipate&#148;, &#147;emerging&#148;,
&#147;intend&#148;, &#147;plan&#148;, &#147;could&#148;, &#147;may&#148;, &#147;estimate&#148;, &#147;should&#148;, &#147;objective&#148;, &#147;goal&#148;, &#147;possible&#148;, &#147;potential&#148;, &#147;project&#148; and similar words and
expressions, but such words and phrases are not the exclusive means of identifying them, and (2)&nbsp;are subject to risks and uncertainties and represent our present expectations or beliefs concerning future events. VASCO cautions that the
forward-looking statements are qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements. These risks, uncertainties and other factors that have been described in our Annual
Report on Form 10-K for the year ended December&nbsp;31, 2013 and include, but are not limited to, (a)&nbsp;risks of general market conditions, including currency fluctuations and the uncertainties resulting from turmoil in world economic and
financial markets, (b)&nbsp;risks inherent to the computer and network security industry, including rapidly changing technology, evolving industry standards, increasingly sophisticated hacking attempts, increasing numbers of patent infringement
claims, changes in customer requirements, price competitive bidding, and changing government regulations, and (c)&nbsp;risks specific to VASCO, including, demand for our products and services, competition from more established firms and others,
pressures on price levels and our historical dependence on relatively few products, </P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
certain suppliers and certain key customers. Thus, the results that we actually achieve may differ materially from any anticipated results included in, or implied by these statements. Except for
our ongoing obligations to disclose material information as required by the U.S. federal securities laws, we do not have any obligations or intention to release publicly any revisions to any forward-looking statements to reflect events or
circumstances in the future or to reflect the occurrence of unanticipated events. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">This&nbsp;document&nbsp;may contain trademarks of VASCO Data Security
International, Inc. and its subsidiaries, including VASCO, the VASCO &#147;V&#148; design, DIGIPASS, VACMAN, aXsGUARD and IDENTIKEY. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">For more information
contact: </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">John Gunn </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">+1-847-370-1486</P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>john.gunn@vasco.com </U></P>
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</TEXT>
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<TYPE>EX-99.2
<SEQUENCE>3
<FILENAME>d765451dex992.htm
<DESCRIPTION>EX-99.2
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 <BODY BGCOLOR="WHITE">

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="right">Exhibit 99.2 </P>
<P STYLE="margin-top:24pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">VASCO Data Security International, Inc. </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">Q2 2014 Earnings Conference Call </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">Prepared Remarks </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">July&nbsp;24,
2014 </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>[Comments by John Gunn: ] </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Greetings
everyone. Thank you for joining the VASCO Data Security Second Quarter, 2014 Earnings Conference call. Speaking first will be Ken Hunt, VASCO Chairman, Founder and CEO, followed by Jan Valcke, our President and Chief Operating Officer, and Cliff
Bown, our EVP and Chief Financial Officer, and then we will open the call for questions from analysts. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">PLEASE NOTE THAT STATEMENTS MADE DURING THIS
CONFERENCE CALL THAT RELATE TO FUTURE PLANS, EVENTS OR PERFORMANCES ARE FORWARD-LOOKING STATEMENTS. ANY STATEMENT CONTAINING WORDS SUCH AS &#147;BELIEVES,&#148; &#147;ANTICIPATES,&#148; &#147;PLANS,&#148; &#147;EXPECTS,&#148; &#147;PROJECTS&#148;
AND SIMILAR WORDS, IS FORWARD-LOOKING, AND THESE STATEMENTS INVOLVE RISKS AND UNCERTAINTIES AND ARE BASED ON CURRENT EXPECTATIONS. CONSEQUENTLY, ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE EXPECTATIONS EXPRESSED IN THESE FORWARD-LOOKING
STATEMENTS. I DIRECT YOUR ATTENTION TO THE COMPANY&#146;S FILINGS WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION FOR A DISCUSSION OF SUCH RISKS AND UNCERTAINTIES IN THIS REGARD. IN ADDITION, PLEASE NOTE THAT THE DATE OF THIS CONFERENCE CALL IS
JULY 24, 2014, AND ANY FORWARD-LOOKING STATEMENTS AND RELATED ASSUMPTIONS ARE MADE AS OF THIS DATE. EXCEPT AS EXPRESSLY REQUIRED BY THE FEDERAL SECURITIES LAWS, WE UNDERTAKE NO OBLIGATION TO UPDATE THESE STATEMENTS AS A RESULT OF NEW INFORMATION OR
FUTURE EVENTS OR FOR ANY OTHER REASON </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">At this time, I will turn the call over to Ken. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>[General Comments &#150; Ken Hunt] </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">First, let me
say that I will keep my comments brief today as I would like to focus on answering your questions after management&#146;s prepared remarks. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Second, I
would like to say that I am very pleased with the Company&#146;s strong performance in Q2 and the first half of 2014. I attribute this to the hard work of our entire organization in executing our long-term strategy, and to improvements in the global
economic environment, particularly in the financial sector. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Our results demonstrate our strength and increasing momentum in many areas. Revenue from
continuing operations for the second quarter of 2014 increased 28% to $47.7 million from $37.3 million in the second quarter of 2013, and for the first six months of 2014, increased 19% to $86.5 million from $72.6 million for the first six months of
2013. </P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Operating income from continuing operations for the second quarter and first six months of 2014 was $7.6 million
and $11.5 million, respectively, an increase of $5.7 million, or 297%, from $1.9 million reported for the second quarter of 2013 and an increase of $6.9 million, or 149%, from $4.6 million reported for the first six months of 2013. Operating income
as a percentage of revenue for the second quarter and first six months of 2014 was 16% and 13%, respectively, compared to 5% and 6% for the comparable periods in 2013. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Our cash increased from $109.5 million at March&nbsp;31<SUP STYLE="font-size:85%; vertical-align:top">st</SUP> to $123.3 million at June&nbsp;30, 2014. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We are maintaining a focus on executing a revenue growth strategy through five primary methods: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">The first is bringing the next generation of authentication and digital signature technologies to our customers to coincide with their authentication replacement, or refresh cycles, as we are doing with our Cronto
technology and DIGIPASS for APPS </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">The second is driving increased demand for our products in new applications and new markets. The U.S. retail banking market and our partnership with HSBC is a great example of this. </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">The Third is increasing the adoption of our Authentication-as-a-Service and cloud-based solutions such as our DIGIPASS-as-a-Service. </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Fourth is to continue expanding our client base in segments beyond our core business, such as application security for cloud application developers and Independent Software Vendors. </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Fifth is identifying security technology companies for additional tuck-in acquisitions such as our recent acquisition of Risk IDS. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Because of our consistent and strong performance, we have the cash on hand and cash flow from operations that we need to aggressively pursue and realize this
growth strategy. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We continue to make inroads into the market with the Cronto technology in our DIGIPASS 760 product. This incorporates a secure but easy
to use method to verify and digitally sign financial transactions. Some of you have read the news of this week about the Emmental banking attack profiled by Trend Micro. We were very pleased that in their report, Trend identifies VASCO&#146;s Cronto
technology as a method of protection against this attack. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Our Cronto technology utilizes a next generation QR code which is a color cryptographic matrix
displayed on the customer&#146;s PC screen &#150;essentially a high definition, color QR code. During an online banking transaction, the customer uses their mobile phone, or a small VASCO hardware device, to capture the QR code from the screen of
their PC or laptop. The customer is then presented with what the bank believes the customer has requested, specifically the amount of the transaction and the payee. This information is encoded in the high definition QR-code and cannot be spoofed or
replicated by a hacker. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">This enables the customer to verify that the transaction details are genuine and the correct amount. This mitigates the
increasing risk of Banking malware and Man in the Middle attacks, and provides the customer and the bank an assurance that the payment instructions have not been altered. This simple process takes security beyond the current use of two-factor
authentication and provides a higher level of security that is necessary to protect online and mobile banking against the most sophisticated new attacks. </P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">I feel very positive about our continuing success in achieving our growth goals and executing our long-term
strategy of expanding beyond our current markets. We are making the right investments in people and technology to deliver critical security features that the market will require and that our competitors do not have. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>At this time, I would like to introduce Jan Valcke, VASCO&#146;s President and Chief Operating Officer, Jan. </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>[Comments by Jan Valcke:] </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Thank you, Ken. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Ladies and gentlemen, </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The second quarter was another strong
quarter for VASCO that followed our improvements over Q4 of 2013 and Q1 of 2014. These results demonstrate our ability to increase revenue at a much faster rate than our expenses, and with essentially the same head count, resulting in significant
improvement in operating income and net income. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Our results for the second quarter reflected a 31% increase in revenues from the Banking market and a
14%&nbsp;% increase in revenues from the Enterprise and Application Security market. Going forward, we believe that our new solutions and new markets, including specific vertical segments and the Application Security market will continue to offer
additional opportunities for significant growth. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">One of our technology highlights for Q2 was the successful acquisition of Risk IDS, a provider of
risk-based authentication solutions to global banks. What is exciting about Risk IDS is the way the technology provides online transaction risk management analysis through an intelligent authentication decision engine. How it increases security is
by profiling and scoring the context of the user request to determine the risk profile of the transaction or request. Contextual threat information that is evaluated in real-time includes user location, the transaction amount, user-device
characteristics, the presence of malware on the user device, and other factors. We believe that this unique solution will allow us to deliver improved real-time fraud detection to our clients and a dynamic process to ensure that high risk situations
are identified and result in stronger authentication challenges when needed. The integration of this technology into our core solutions is proceeding as planned and we expect it to contribute to our revenue in 2015. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Another solution that I am very excited about and that is gaining momentum is our DIGIPASS for APPS solution. As more organizations implement applications,
commonly known as apps, for their employees&#146; and customers&#146; mobile devices, it is becoming more important to properly secure those Apps. DIGIPASS for APPS is a library of critical security functions that web and mobile application
developers can quickly and seamlessly integrate directly into their applications to enhance security. Some examples of the innovative functions available in DIGIPASS for APPS includes integrated One Time Password authentication to reduce fraud risk,
a signature function for transaction verification, a Geo-location feature to establish proof of presence, and advanced functionality to detect if a mobile device has been compromised, all of which enable the application developer to easily provide
their users with a high level of security with little expense or expertise. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">An example of how we are successfully executing the growth strategy that Ken outlined is our June announcement of
our win with Point-Click-Care, one of the leading providers of cloud-based software for the senior care industry. Point Click Care is using VASCO Authentication to enable healthcare practitioners to access patient medical records and co-sign
treatment orders through a mobile device while still meeting stringent patient privacy regulations. We have other opportunities developing in this vertical market and it is an example of a segment where technology and regulation are combining to
create enhanced opportunities for VASCO. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Thank you, Ken. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Ken: Thank you, Jan. </B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>At this time, I would like to
introduce you to Cliff Bown, VASCO&#146;s Executive Vice President and Chief Financial Officer, Cliff? </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>[Comments by Cliff Bown:] </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Thanks Ken and welcome to everyone on the call. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">As noted
earlier by Ken, revenues for the second quarter of 2014 were $47.7 million, an increase of $10.4 million or 28% from the second quarter of 2013. For the first six months, revenues were $86.5 million, an increase of $13.9 million or 19% from the
comparable period in 2013. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The increase in revenue in the second quarter reflected a 31% increase in revenues from the Banking market and a 14% increase
in revenues from the Enterprise and Application Security market. For the six months ended June&nbsp;30, 2014, the increase reflected a 19% increase in revenues from the Banking market and a 20% increase in revenues from the Enterprise and
Application Security. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Changes in exchange rates also had a favorable impact on the comparison of revenues. We estimate that revenues were $0.9 million
higher for the second quarter and $1.1 million higher for first six months of 2014 than they would have been had the exchange rates in 2014 been the same as in 2013. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The mix of revenues in the second quarter of 2014 was more heavily weighted to the Banking market than in the second quarter of 2013. Revenues from the
Banking market were 85% of our total revenue in the second quarter of 2014 compared to 83% in the second quarter of 2013. The mix of revenues for the first six months of 2014 was largely the same as in 2013 with 83% of our revenue coming from the
Banking market in both periods. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The geographic distribution of our revenue for the first six months of 2014 compared to the same period in 2013 showed a
slight increase in revenues outside of EMEA, which is our most significant region. For the first six months of 2014, EMEA contributed 62% of our total revenue compared to 64% in the first six months of 2013. Of the remaining balance for the first
six months of 2014, 5% of our revenue came from the U.S., 23% from Asia and the remaining 10% came from other countries. Of the remaining balance for the first six months of 2013, 8% of our </P>

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revenue came from the U.S., 16% from Asia and the remaining 12% came from other countries. We believe that the change in mix of revenues by region does not reflect any significant change in the
economic environment of any given market, but rather reflects that our business is based on specific projects undertaken by our customers in specific time periods. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Our gross profit margins were slightly stronger for both the second quarter and first six months in 2014 compared to the same periods in 2013. Our gross
profit margins were 65% and 66% of revenue for the second quarter and first six months of 2014, respectively, compared to 64% and 65% of revenue for the comparable periods in 2013. The increase in gross profit as a percentage of revenue for the
second quarter and first six months of 2014 compared to 2013 primarily reflects the benefit of the strengthening of the Euro versus the U.S. dollar and lower non-product costs, such as freight and inventory write-downs, partially offset by a decline
in gross margin on product sold to the Banking market. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The decline in the gross margins on product sold to the Banking market primarily reflected an
increase in the percentage of our revenue that came from card readers. For the first six months of 2014, approximately 20% of our total revenue came from the sale of card readers. For the first six months of 2013, only 15% of our total revenue came
from the sale of card readers. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">On a consolidated basis, our operating expenses for the quarter and six months ended June&nbsp;30, 2014 were $23.4 million
and $45.3 million, respectively, an increase of $1.4 million or 6% from the second quarter of 2013 and an increase of $3.0 million or 7% for the six months ended June&nbsp;30, 2014. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The increase in consolidated operating expenses for the both the second quarter and first six months of 2014 compared to the same period in 2013 primarily
reflected increased incentive compensation expenses related to higher revenues, the incremental expenses related to Cronto Ltd., which we acquired in the second quarter of 2013, and the strengthening of the Euro compared to the U.S. dollar. We
estimate that the strengthening of the Euro vs. the U.S. dollar increased our expenses by $0.8 million and $1.1 million for the second quarter and first six months of 2014 compared to the same periods in 2013. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">At June&nbsp;30, 2014 we had 375 people worldwide with 184 in sales, marketing and customer support, 134 in research and development and 57 in general and
administrative. The average headcount for the second quarter of 2014 was 8 persons or 2% lower than the average headcount for the second quarter of 2013. The average headcount for the first six months of 2014 was 2 persons or 1% higher than the
average headcount for the same period in 2013. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Operating expenses for the second quarter and first six months of 2014 included $0.8 million and $1.4
million of expenses related to long-term incentive plan costs, respectively, compared to $0.6 million and $1.4 million of long-term incentive plan costs for the second quarter and first six months of 2013, respectively. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Operating income for the second quarter of 2014 was $7.6 million, an increase of $5.7 or 297% from the $1.9 million reported in the second quarter of 2013.
For the first six months, operating income was $11.5 million in 2014, an increase of $6.9 million or 149% from the $4.6 million reported in 2013. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Operating income as a percent of revenue, or operating margin, was 16% for the second quarter and 13% first six
months of 2014. In 2013, our operating margins were 5% for the second quarter and 6% for the first six months. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We reported income tax expense of $1.0
million for the second quarter and $1.8 million for the first six months of 2014. The effective tax rate was 13% for the second quarter and 15% first six months of 2014. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">For 2013, the Company reported income tax expense of $0.4 million for the second quarter and $0.9 million for the first six months. The effective tax rate was
17% for both the second quarter and first six months of 2013. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The increase in the tax expense for the second quarter and first six months is attributable
to higher pretax income, partially offset by the lower effective tax rate. The effective rates for both 2014 and 2013 reflect our estimate of our full-year tax rate at the end of the second quarter in each period. The change in tax rate reflects a
number of differences including, but not limited to, our estimates of full-year pre-tax income at the end of the second quarter of each year as well as the geographic distribution of where the income is earned. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Our balance sheet continued to show strong cash and working capital balances throughout the second quarter of 2014. Our net cash balance was $123.3 million at
June&nbsp;30, 2014, an increase of $13.8 million or 13%, from $109.5 million at March&nbsp;31, 2014, and an increase of $24.7 million, or 25%, from $98.6 million at December&nbsp;31, 2013. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">At June&nbsp;30, 2014 we had working capital of $135.2 million, an increase of $7.5 million, or 6%, from $127.7 million at March&nbsp;31, 2014 and an increase
of $10.7 million or 9% from $124.5 million reported at December&nbsp;31, 2013. The increase in working capital is primarily related to our operating profits. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Thank you for your attention. I would now like to turn the meeting back to Ken. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Thank you, Cliff </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>[Ken Hunt: Closing Remarks]
</I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">At this time I would like to highlight our guidance for 2014. </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">VASCO is increasing its guidance for revenue for the full-year 2014. We currently believe that our revenue from our traditional business, which excludes our new service product offerings, DIGIPASS as a Service and
MYDIGIPASS.COM, will be in the range of $175 million to $180 million, an increase from the range communicated previously of $168 million to $172 million, and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">We are also increasing our guidance for operating income as a percentage of revenue. We expect that operating income as a percentage of revenue, excluding the amortization of purchased intangible assets, will be in the
range of 13% to 15%, which compares to the 11% to 13% communicated previously. </TD></TR></TABLE>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The reason for our revised guidance is the continued strong intake of new orders and the increasing demand for
our solutions. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">This concludes our presentations today and we will now open the call for questions. As a courtesy to others on the call, I would
appreciate it if you would limit your questions to an initial question plus a follow-up. If you have additional questions, please get back into the queue. </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="right">Exhibit 99.3 </P>
<P STYLE="margin-top:24pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">VASCO Data Security International, Inc. </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">Q2 2014 Earnings Conference Call </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">Edited Transcript </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">July&nbsp;24,
2014 </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>CORPORATE PARTICIPANTS </B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I></I><B>John
Gunn</B><I> VASCO Data Security International Inc.&#151;VP, Corporate Communications </I></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I></I><B>Ken Hunt</B><I> VASCO Data Security International
Inc.&#151;Chairman&nbsp;&amp; CEO </I></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I></I><B>Jan Valcke</B><I> VASCO Data Security International Inc.&#151;President&nbsp;&amp; COO </I></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I></I><B>Cliff Bown</B><I> VASCO Data Security International Inc.&#151;EVP&nbsp;&amp; CFO </I></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>CONFERENCE CALL PARTICIPANTS </B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I></I><B>Joe Maxa</B><I>
Dougherty&nbsp;&amp; Company&#151;Analyst </I></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I></I><B>Fred Ziegel</B><I> Topeka Capital Markets&#151;Analyst </I></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I></I><B>Josh Goldberg</B><I> G2 Investment Partners&#151;Analyst </I></P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>PRESENTATION </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Operator </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Ladies and gentlemen, thank you for standing by. Welcome to the Q2 2014 earnings conference call. (Operator Instructions) I would now like to turn the
conference over to John Gunn, VP of Corporate Communications. Please go ahead, sir. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>John Gunn </B><B><I>&#151;VASCO Data Security
International Inc.&#151;VP, Corporate Communications </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Greetings, everyone. Thank you for joining the VASCO Data Security second-quarter 2014
earnings conference call. Speaking first will be Ken Hunt, VASCO Chairman, Founder, and CEO, followed by Jan Valcke, our President and Chief Operating Officer, and Cliff Bown, our EVP and Chief Financial Officer. Then we will open the call for
questions from analysts. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Please note that statements made during this conference call that relate to future plans, events, or performances are
forward-looking statements. Any statements containing words such as believes, anticipates, plans, expects, projects, and similar words is forward looking and these statements involve risks and uncertainties and are based on current expectations.
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Consequently, actual results could differ materially from expectations expressed in these forward-looking statements. I direct your attention to the
Company&#146;s filings with the US Securities and Exchange Commission for a discussion of such risks and uncertainties in this regard. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">In addition,
please note that the date of this conference call is July&nbsp;24, 2014. Any forward-looking statements and related assumptions are made as of this date. Except as expressly required by the federal securities laws, we undertake no obligation to
update these statements as a result of new information or future events or any other reason. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">At this time I will turn the call over to Ken. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Ken Hunt </B><B><I>&#151;VASCO Data Security International Inc.&#151;Chairman&nbsp;&amp; CEO
</I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Thank you, John. Hi, everyone. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Operator
</B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Ladies and gentlemen, please stand by. The conference will resume shortly. Please remain on the line. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Ladies and gentlemen, the conference will now resume. We thank you for your patience. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Ken Hunt </B><B><I>&#151;VASCO Data Security International Inc.&#151;Chairman&nbsp;&amp; CEO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Hi, everyone. I understand there was a moment of silence there, sorry for that. I was actually (technical difficulty) I will keep my comments brief today as I
would like to focus on answering your questions after management&#146;s prepared remarks. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Second, I would like to say that I very pleased with the
Company&#146;s strong performance in Q2 and the first half of 2014. I attribute this to the hard work of our entire organization in executing our long-term strategy and to improvements in the global economic environment, particularly in the
financial sector. Our results demonstrate our strength and increasing momentum in many areas. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Revenue from continuing operations for the second quarter
of 2014 increased 28% to $47.7 million from $37.3 million in the second quarter of 2013 and for the first six months of 2014 increased 19% to $86.5 million from $72.6 million for the first six months of 2013. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Operating income from continuing operations for the second quarter and first six months of 2014 was $7.6 million and $11.5 million, respectively, an increase
of $5.7 million, or 297%, from $1.9 million reported for the second quarter of 2013 and an increase of $6.9 million, or 149%, from $4.6 million reported for the first six months of 2013. Operating income as a percentage of revenue for the second
quarter and first six months of 2014 was 16% and 13%, respectively, compared to 5% and 6% for the comparable periods in 2013. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Our cash increased from
$109.5 million at March&nbsp;31 to $123.3 million at June&nbsp;30, 2014. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We are maintaining a focus on executing a revenue growth strategy through five
primary methods: </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The first is bringing the next generation of authentication and digital signature technologies to our customers to coincide with their
authentication replacement, or refresh, cycles as we are doing with our Cronto technology and DIGIPASS for APPS. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The second is driving increased demand
for our products in new applications and new markets. The US retail banking market and our partnership with HSBC is a great example of this. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The third is
increasing the adoption of our authentication as a service and cloud-based solutions, such as our DIGIPASS-as-a-Service. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Fourth is to continue expanding
our client base in segments beyond our core business, such as application security for cloud application developers and independent software vendors. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Fifth is identifying security technology companies for additional tuck-in acquisitions, such as our recent acquisition of Risk IDS. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Because of our consistent and strong performance, we have the cash on hand and cash flow from operations that we
need to aggressively pursue and realize this growth strategy. We continue to make inroads into the market with the Cronto technology and our DIGIPASS 760 product. This incorporates a secure, but easy-to-use, method to verify and digitally sign
financial transactions. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Some of you have read the news this week about the Emmental banking attack profiled by Trend Micro. We are very pleased that in
their report Trend identifies VASCO&#146;s Cronto technology as a method of protection against this attack. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Our Cronto technology utilizes a
next-generation QR code, which is a color cryptographic matrix displayed on the customers&#146; PC screen. Essentially a high-definition color QR code. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">During an online banking transaction the customer uses their mobile phone or a small VASCO hardware device to capture the QR code from the screen of their PC
or laptop. The customer is then presented with what the bank believes the customer has requested, specifically the amount of the transaction and the payee. This information is encoded in the high-definition QR code and cannot be spoofed or
replicated by a hacker. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">This enables the customer to verify that the transaction details are genuine and the correct amount. This mitigates the
increasing risk of banking malware and man-in-the-middle attacks and provides the customer and the bank an assurance that the payment instructions have not been altered. This simple process takes security beyond the current use of two-factor
authentication and provides a higher level of security that is necessary to protect online and mobile banking against the most sophisticated new attacks. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">I feel very positive about our continuing success in achieving our growth goals and executing our long-term strategy of expanding beyond our current markets.
We are making the right investments in people and technology to deliver critical security features that the market will realize and that our competitors do not have. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">At this time I would like to introduce Jan Valcke, VASCO&#146;s President and Chief Operating Officer. Jan? </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Jan Valcke </B><B><I>&#151;VASCO Data Security International Inc.&#151;President&nbsp;&amp; COO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Thank you, Ken. Ladies and gentlemen, the second quarter was another strong quarter for VASCO that followed our improvements over the fourth quarter of 2013
and the first quarter of 2014. These results demonstrate our ability to increase revenue at a much faster rate than our expenses with essentially the same headcount, resulting in significant improvement in operating income and net income. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Our results for the [second] (corrected by company after the call) quarter reflected a 31% increase in revenues from the banking market and a 14% increase in
revenues from the enterprise and application security market. Going forward, we believe that our new solutions and new markets, including specific vertical segments and the application security markets, will continue to offer additional
opportunities for significant growth. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">One of our technology highlights for the second quarter was the successful acquisition of Risk IDS, a provider of
risk-based authentication solutions to global banks. What is exciting about Risk IDS is the way the technology provides online transactional risk management analysis through an intelligent authentication decision engine. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">How it increases security is by profiling and scoring the context of the user&#146;s request to determine the risk profile of the transaction or request.
Contextual threat information that is evaluated in real-time includes user location, the transaction amount, user device characteristics, the presence of malware on the user&#146;s device, and other factors. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We believe that this unique solution will allow us to deliver improved real-time fraud detection to our clients and a dynamic process to ensure that high-risk
situations are identified and result in stronger authentication challenges when needed. The integration of this technology into our core solutions is proceeding as planned and we expect it to contribute to our revenue in 2015. Another solution that
I&#146;m very excited about and that is gaining momentum is our DIGIPASS for APPS solution. As more organizations implement applications, commonly known as apps, for their employees&#146; and customers&#146; mobile devices it is becoming more
important to properly secure those apps. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">DIGIPASS for APPS is a library of critical security functions that web and mobile application developers can
quickly and seamlessly integrate directly into their application to enhance security. Some examples of the innovative functions available in DIGIPASS for APPS include integrated one-time password authentication to reduce fraud risk, a signature
function for transaction verification, a geolocation feature to establish proof of presence, and advanced functionality to detect if a mobile device has been compromised. All of which enable the application developer to easily provide their users
with a high level of security with little expense or expertise. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">An example of how we are successfully executing the growth strategy that Ken outlined is
our June announcement of our win with PointClickCare, one of the leading providers of cloud-based software for the senior care industry. PointClickCare is using VASCO authentication to enable healthcare practitioners to access patient medical
records and co-sign treatment orders through a mobile device while still meeting stringent patient privacy regulations. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We have other opportunities
developing in this vertical market and it is an example of a segment where technology and regulation are combining to create enhanced opportunities for VASCO. Thank you, Ken. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Ken Hunt </B><B><I>&#151;VASCO Data Security International Inc.&#151;Chairman&nbsp;&amp; CEO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Thank you, Jan. At this time I would like to introduce to you Cliff Bown, VASCO&#146;s Executive Vice President and Chief Financial Officer. Cliff? </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Cliff Bown </B><B><I>&#151;VASCO Data Security Internationl Inc.&#151;EVP&nbsp;&amp; CFO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Thanks, Ken, and welcome to everyone on the call. As noted earlier by Ken, revenues for the second quarter of 2014 were $47.7 million, an increase of $10.4
million, or 28%, from the second quarter of 2013. For the first six months revenues were $86.5 million, an increase of $13.9 million, or 19%, from the comparable period in 2013. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The increase in revenue in the second quarter reflected a 31% increase in revenues from the banking market and a 14% increase in revenues from the enterprise
and application security market. For the six months ended June&nbsp;30, 2014, the increase reflected a 19% increase in revenues from the banking market and a 20% increase in revenues from the enterprise and application security market. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Changes in exchange rates also had a favorable impact on the comparison of revenues. We estimate that revenues were $0.9 million higher for the second quarter
and $1.1 million higher for the first six months of 2014 than they would have been had the exchange rates in 2014 been the same as in 2013. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The mix of
revenues in the second quarter of 2014 was more heavily weighted to banking market than in the second quarter of 2013. Revenues from the banking market were 85% of our total revenues in the second quarter of 2014 compared to 83% in the second
quarter of 2013. The mix of revenues for the first six months of 2014 was largely the same as in 2013 with 83% of our revenue coming from the banking market in both periods. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The geographic distribution of our revenue for the first six months of 2014 compared to the same period in 2013 showed a slight increase in revenues outside
of EMEA, which is our most significant region. For the first six months of 2014 EMEA contributed 62% of our total revenue compared to 64% for the first six months of 2013. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Of the remaining balance for the first six months of 2014, 5% of the revenue came from the United States, 23% from Asia, and the remaining 10% came from other
countries. Of the remaining balance for the first six months of 2013, 8% of the revenue came from the US, 16% from Asia, and the remaining 12% came from other countries. We believe that the change in mix of revenues by region does not reflect any
significant change in the economic environment if any given market, but rather reflects that our business is based on specific projects undertaken by our customers in specific time periods. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Our gross profit margins were slightly stronger for both the second quarter and first six months of 2014 compared
to the same periods of 2013. Our gross profit margins were 65% and 66% of revenue for the second quarter and first six months of 2014, respectively, compared to 64% and 65% of revenue for the comparable periods in 2013. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The increase in gross profit as a percentage of revenue for the second quarter and first six months of 2014 compared to 2013 primarily reflects the benefit of
the strengthening of the euro versus the US dollar and lower non-product costs, such as freight and inventory write-downs, partially offset by a decline in gross margin on products sold to the banking market. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The decline in gross margin on products sold to the banking market primarily reflects an increase in the percentage of our revenue that came from card
readers. For the first six months of 2014 approximately 20% of our total revenue came from the sale of card readers. For the first six months of 2013 only 15% of our total revenue came from the sale of card readers. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">On a consolidated basis our operating expenses for the quarter and six months ended June&nbsp;30, 2014, were $23.4 million and $45.3 million, respectively, an
increase of $1.4 million, or 6%, from the second quarter 2013 and an increase of $3 million, or 7%, for the six months ended June&nbsp;30, 2014. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The
increase in consolidated operating expenses for both the second quarter and first six months of 2014 compared to the same period in 2013 primarily reflected increased incentive compensation expenses related to higher revenues, the incremental
expenses related to the Cronto Limited acquisition which we acquired in the second quarter of 2013, and the strengthening of the euro compared to the US dollar. We estimate that the strengthening of the euro versus the US dollar increased our
expenses by $0.8 million and $1.1 million for the second quarter and first six months of 2014 compared to the same periods in 2013. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">At June&nbsp;30,
2014, we had 375 people worldwide with 184 in sales, marketing, and customer support; 134 in research and development; and 57 in general and administrative. The average headcount for the second quarter of 2014 was 8 persons, or 2%, lower than the
average headcount for the second quarter of 2013. The average headcount for the first six months of 2014 was 2 persons, or 1%, higher than the average headcount for the same periods in 2013. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Operating expenses for the second quarter and first six months of 2014 included $0.8 million and $1.4 million of expenses related to long-term incentive plan
costs, respectively, compared to $0.6 million and $1.4 million of long-term incentive plan costs for the second quarter and first six months of 2013, respectively. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Operating income for the second quarter of 2014 was $7.6 million, an increase of $5.7 million, or 297%, from the $1.9 million reported in the second quarter
of 2013. For the first six months operating income was $11.5 million in 2014, an increase of $6.9 million, or 149%, from the $4.6 million reported in 2013. Operating income as a percent of revenue or operating margin was 16% for the second quarter
and 13% for the first six months of 2014. In 2013, our operating margins were 5% for the second quarter and 6% for the first six months. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We reported
income tax expense of $1 million for the second quarter and $1.8 million for the first six months of 2014. The effective tax rate was 13% for the second quarter and 15% for the first six months of 2014. For 2013, the Company reported income tax
expense of $0.4 million for the second quarter and $0.9 million for the first six months. The effective tax rate was 17% for both the second quarter and first six months of 2013. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The increase in tax expense for the second quarter and first six months is attributable to higher pretax income partially offset by the lower effective rate.
The effective tax rates for both 2014 and 2013 reflect our estimates of our full-year tax rate at the end of the second quarter in each period. The change in tax rate reflects a number of differences including, but not limited to, our estimates of
full-year pretax income at the end of the second quarter of each year as well as the geographic distribution of where the income is earned. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Our balance
sheet continued to show strong cash and working capital balances throughout the second quarter 2014. Our net cash balance was $123.3 million at June&nbsp;30, 2014, an increase of $13.8 million, or 13%, from $109.5 million at March&nbsp;31, 2014, and
an increase of $24.7 million, or 25%, from $98.6 million at December&nbsp;31, 2013. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">At June&nbsp;30, 2014, we had working capital of $135.2 million, an increase of $7.5 million, or 6%, from $127.7
million at March&nbsp;31, 2014, and an increase of $10.7 million, or 9%, from $124.5 million reported at December&nbsp;31, 2013. The increase in working capital is primarily related to our operating profits. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Thank you for your attention. I would now like to turn the call back to Ken. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Ken Hunt </B><B><I>&#151;VASCO Data Security International Inc.&#151;Chairman&nbsp;&amp; CEO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Thank you, Cliff. At this time I would like to highlight our guidance for 2014. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">VASCO is increasing its guidance for revenue for the full-year 2014. We currently believe that our revenue from our traditional business, which excludes our
new service product offerings, DIGIPASS-as-a-Service and MYDIGIPASS.com, will be in the range of $175 million to $180 million, an increase from the range communicated previously of $168 million to $172 million, and we are also increasing our
guidance for operating income as a percentage of revenue. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We expect that operating income as a percentage of revenue, excluding the amortization of
purchased intangible assets, will be in the range of 13% to 15%, which compares to the 11% to 13% communicated previously. The reason for our revised guidance is the continued strong intake of new orders and the increasing demand for our solutions.
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">This concludes our presentations today and we will now open the call for questions. As a courtesy to others on the call, I would appreciate it if you
would limit your questions to an initial question plus a follow-up. If you have additional questions, please get back into the queue. Operator? </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>QUESTION AND ANSWER </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Operator </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">(Operator Instructions) Joe Maxa, Dougherty&nbsp;&amp; Company. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Joe Maxa </B><B><I>&#151;Dougherty&nbsp;&amp; Company&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Thank you. Good quarter, guys. Question regarding, I am just looking at the outlook. Obviously, the guidance suggests banking is going to remain strong for the
rest of the year. Can you give us a little color on what the pipeline looks like? I am wondering how sustainable this strength in the banking may be. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Ken Hunt </B><B><I>&#151;VASCO Data Security International Inc.&#151;Chairman&nbsp;&amp; CEO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Jan, why don&#146;t you address that question? </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Jan Valcke </B><B><I>&#151;VASCO Data Security International Inc.&#151;President&nbsp;&amp; COO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Joe, hello, good morning. The pipeline remains strong in the banking and I can say that it is basically in almost all regions. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Joe Maxa </B><B><I>&#151;Dougherty&nbsp;&amp; Company&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Okay. I saw that you had strength overall in Asia-Pacific first six months of this year. Not strength in the United States yet, but you have that rollout
starting with HSBC so that is clearly a second half event. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Ken Hunt </B><B><I>&#151;VASCO Data Security International
Inc.&#151;Chairman&nbsp;&amp; CEO </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">That is correct. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Joe Maxa </B><B><I>&#151;Dougherty&nbsp;&amp; Company&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Okay. Those are my two so I will jump back in the queue. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Operator </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Fred Ziegel, Topeka Capital Markets. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Fred Ziegel </B><B><I>&#151;Topeka Capital Markets&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Two questions. One, your margin guidance would assume something on the spending side is going to happen in the second half of the year given where we were in
the second quarter. Is that related to a build up on the Risk IDS business? </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Ken Hunt </B><B><I>&#151;VASCO Data Security International
Inc.&#151;Chairman&nbsp;&amp; CEO </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">I will let Cliff handle that. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Cliff Bown </B><B><I>&#151;VASCO Data Security Internationl Inc.&#151;EVP&nbsp;&amp; CFO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">It is in part that, Fred. We bought Risk IDS in the closing month of the second quarter. It was a very small operation, so as we bring it into VASCO, it, on
its own basis, wouldn&#146;t be a significant expense increase. But we are planning to invest in the development of that product over the next several quarters, as Jan mentioned in his comments. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">More important in the operating margin guidance is probably continued pressure on the gross margins from the banking business. As I noted in my comments, the
gross margins are up overall, but the margins within the banking business are down, in large part because of the significant percentage of card readers that were sold in the second quarter and first half of the year. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We expect that percentage to remain high, if not increase slightly, throughout the full year so the second half we expect more of that pressure in the banking
side. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Fred Ziegel </B><B><I>&#151;Topeka Capital Markets&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Okay. The other question is on the banking business/pipeline do you have a sense or do you know how much of that is new deployments versus banks that are
moving to a next-generation solution? I guess replacement versus new. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Ken Hunt </B><B><I>&#151;VASCO Data Security International Inc.&#151;Chairman&nbsp;&amp; CEO
</I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">This is Ken. A fairly high percentage of our revenue comes from existing customers, which is good. And as the banking regulators around the world
start noticing that there are thousands of hacking attacks, they are turning their attention to increasing the security regulations to the banks. So the banks are looking for how to increase the security, yet how to not offend and lose customers.
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">And that is one of the reasons why Cronto is so exciting to us is because it continues the digital signature capability that we have had for years and
years and it makes it easy. It makes it much easier to do that function. Jan, do you have any other follow-up? </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Jan Valcke
</B><B><I>&#151;VASCO Data Security International Inc.&#151;President&nbsp;&amp; COO </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">I think again just say the same thing like you, Ken, that it
is a mix of basically customers more and more ordering because the e-banking, their e-banking customers is also growing. And then also banks that are going for a new technology. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Fred Ziegel </B><B><I>&#151;Topeka Capital Markets&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Do you sense in the US that this upcoming HSBC deployment is getting any attention from some of the other targeted banks you would like to talk to? </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Ken Hunt </B><B><I>&#151;VASCO Data Security International Inc.&#151;Chairman&nbsp;&amp; CEO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Yes, I think all the banks &#151; at least it has been our experience since back in the early 90s, all the banks kind of look at their competitor down the
street, see what they do, examine it. And if it looks like it is a competitive differentiator, they do it and they spend money. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">So, yes, I would expect
that HSBC&#146;s decision and their prominent announcement that they are going to ask their consumer customers to actually use one of VASCO&#146;s product, either the 270 hardware device or the DIGIPASS for mobile on the smartphone of the customer.
I think that is noticed. I think that they are starting to roll it out now. They are starting to communicate to those consumers, telling them exactly what they expect. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We have not gotten any feedback about the reception so far, but I expect it to be positive. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Fred Ziegel </B><B><I>&#151;Topeka Capital Markets&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Would you expect it to be more on the mobile side as far as deployment? </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Ken Hunt </B><B><I>&#151;VASCO Data Security International Inc.&#151;Chairman&nbsp;&amp; CEO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">In the United States I think that mobile is stronger for use by consumers than it is elsewhere. Elsewhere they favor a hardware device. So, yes, I think
because of the culture here in the United States more than likely the consumers will opt for an app on their phone. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Jan, do you have any other opinions
on that? </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Jan Valcke </B><B><I>&#151;VASCO Data Security International Inc.&#151;President&nbsp;&amp; COO
</I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Maybe slightly different opinion that due to &#151; if you look a little bit at our business model and at our products basically, you will see
with the VACMAN Controller a bank can easily deploy different DIGIPASSes without changing anything at the backend. So having said that, the banks like sometimes to deploy two or three different DIGIPASSes and let sometimes the choice even to the
consumer to decide what product they are going to use. So expect in the US also that that will happen, but I do agree with Ken that most consumers will choose for the mobile solutions. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Fred Ziegel </B><B><I>&#151;Topeka Capital Markets&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Thanks. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Operator </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">(Operator Instructions) Joe Maxa, Dougherty&nbsp;&amp; Company. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Joe Maxa </B><B><I>&#151;Dougherty&nbsp;&amp; Company&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Just I see the deferred revenue has picked up nicely in the quarter. Can you just talk to that, what is driving that? Actually over the last year you have seen
some nice growth. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Cliff Bown </B><B><I>&#151;VASCO Data Security Internationl Inc.&#151;EVP&nbsp;&amp; CFO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Yes, Joe, that in part is due to the timing of some of our revenue recognition. So as we get down to the end of each quarter we are looking hard at
transactions that don&#146;t meet the accounting requirements, so that is a piece of it. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">A bigger piece is the growth in our maintenance revenue, so
right now maintenance is increasing in terms of overall volume. It is not to the point yet where it is a 10% of revenue kind of item, but it is showing nice growth year-over-year. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The third is, with the Cronto acquisition, the model they were using before we acquired them was more of a term license, which created recurring revenue but
which also results in revenues being deferred. So as I look at that deferred revenue it has grown. We are focused internally on looking for other opportunities to create more recurring revenues and hope that it continues to grow. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">But right now it is the three components. The largest component probably maintenance followed by Cronto followed by a normal revenue recognition items. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Joe Maxa </B><B><I>&#151;Dougherty&nbsp;&amp; Company&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Going forward with your current banking customers that are looking at Cronto, do you expect this same model or do you expect it to be more your traditional
revenue recognition model? </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Cliff Bown </B><B><I>&#151;VASCO Data Security Internationl Inc.&#151;EVP&nbsp;&amp; CFO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">For existing customers, we expect it to be more our traditional models. As you know, many of those customers have been with us many years. We don&#146;t have
recurring revenue with them, but we have sustainable, repeatable revenue with them where they do a large deployment and then they come back and order new product several years down the road. That new product either for upgrading the level of
security they are using or other reasons. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">So in working with them they are obviously most familiar with our traditional ways of doing business and it is
like swimming upstream to try to get them to change to a recurring revenue model. (multiple speakers) </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Joe Maxa
</B><B><I>&#151;Dougherty&nbsp;&amp; Company&#151;Analyst </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">I just wanted to make sure you weren&#146;t trying to do that. Actually last question is
what was the percent of your revenue from non-hardware? </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Cliff Bown </B><B><I>&#151;VASCO Data Security Internationl
Inc.&#151;EVP&nbsp;&amp; CFO </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Our percent of revenue for non-hardware in this quarter was 26% and that compares to 27% in the second quarter &#151;
28% in the second quarter of last year. Excuse me, Joe, that is not correct. Second quarter this year 26%, second quarter of last year 27%. Year-to-date six months this year 28%, year-to-date last year 28%. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Joe Maxa </B><B><I>&#151;Dougherty&nbsp;&amp; Company&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Okay. So the increase &#151; actually I was just interested in the gross margin strength, the higher revenue, so clearly that is some type of product mix.
Oftentimes you do talk about the banking bringing gross margin down, but it has actually been pretty strong in the higher revenue. So just do you have a little bit more color on where that came from? </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Cliff Bown </B><B><I>&#151;VASCO Data Security Internationl Inc.&#151;EVP&nbsp;&amp; CFO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Part of it is exchange rate. The euro strengthened against the US dollar about 6% in the second quarter, 4% on a year-to-date basis. As you know, we buy the
majority of our inventory components on a US dollar basis, but our sales are in various currencies. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">So if you looked at the mix of our sales year-to-date
Q2, about 36% of our sales were denominated in euros so we get the currency affect on that. And as I noted in the call, we think that was about $900,000 for the quarter. It was about $1.1 million on a year-to-date basis. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">If I were to adjust the Q2 margins to back out the currency, my margin for the quarter would have been 64.5% and my margin year-to-date would have been 65.3%.
So if I backed out the currency I am really very comparable to last year. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Then the other issue gets into where the shipments are and what our freight
costs are. A lot of the shipments, as was noted earlier on the call, were to Asia and obviously, since we are producing in China, that creates lower freight expense. So our non-product cost was the other factor that is offsetting the decline in the
banking margins. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Joe Maxa </B><B><I>&#151;Dougherty&nbsp;&amp; Company&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">I see. Okay, that is helpful. Thank you. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Operator </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">(Operator Instructions) Josh Goldberg, G2 Investment Partners. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Josh Goldberg </B><B><I>&#151;G2 Investment Partners&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Congrats on a good quarter. I guess I have two questions; one more kind of bigger picture. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Obviously you announce this opportunity with HSBC and you talk about how the environment is usually the bank across the street or the next-door wants to
follow suit. You have announced the HSBC contract about three months ago. Can you guys give us more color on the conversations you are having with some other banks, how deep some of those might be in terms of implementing your solution or any
solution of two-factor authentication? And do you think this will be probably a 2015 event for your company? </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Ken Hunt
</B><B><I>&#151;VASCO Data Security International Inc.&#151;Chairman&nbsp;&amp; CEO </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Josh, I think we can&#146;t give you any specifics by a
particular banking firm but, Jan, you can probably give Josh an overview feeling for what the response has been. I am certain that our salespeople here in the United States are going to all their current banks that we have as customers, as well as
the prospects we have, and making sure that they know that HSBC has made this decision and is moving forward. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Jan, do you have anything else to say? </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Jan Valcke </B><B><I>&#151;VASCO Data Security International Inc.&#151;President&nbsp;&amp; COO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Yes, I think you need to see that even if you don&#146;t see it so much in our results we are working already since many, many, many years, over 10 years in
the banking field in the United States. The US is mainly cash management and electronic banking for was cash management was moving slowly forward in the US. But that means that we now &#151; a lot of banks in the US, a lot of banks are customers in
the US, even if today the quantities are small because it is only for cash management. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">But having said that, that means that a lot of banks have already
an infrastructure that is DIGIPASS-enabled with the VACMAN Controller. And that means that if those banks are moving forward to secure their retail banking transactions that we are probably going to be a preferred partner because the backend is
done. And I believe also they are quite happy with our service that we are doing. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">I believe what Ken is saying is banks are, yes, looking at HSBC &#151;
That is very typical in that community &#151; and we are talking with a lot of banks for their securing their next applications. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Josh
Goldberg </B><B><I>&#151;G2 Investment Partners&#151;Analyst </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Jan, since I have you (multiple speakers) go ahead. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Ken Hunt </B><B><I>&#151;VASCO Data Security International Inc.&#151;Chairman&nbsp;&amp; CEO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Josh, just one second. Let me clarify; when Jan says cash management, he is talking about corporations that are managing their cash. And so what Jan is saying
is most of the banks that we have as customers, their customers using our technology are corporations. So the very large audiences of consumers are pretty much untapped in the United States. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Josh Goldberg </B><B><I>&#151;G2 Investment Partners&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">I am just curious, Jan, you mentioned earlier that you felt that the pipeline was strong across all your geographies. Can you just touch upon that a little bit
more about the strength that you are seeing in your pipeline? Obviously your order intake has been strong, but now it seems like even our pipeline for new orders will continue to be strong as well. Thanks. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Jan Valcke </B><B><I>&#151;VASCO Data Security International Inc.&#151;President&nbsp;&amp; COO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">If you are talking about backlog, I would like that maybe Cliff give some comments on that. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Cliff Bown </B><B><I>&#151;VASCO Data Security Internationl Inc.&#151;EVP&nbsp;&amp; CFO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Josh, I think the nature of your comment, when Jan talks about backlog he is talking about firm orders that we have already received. When we are talking about
the strength of the pipeline across all geographies, what we are really seeing is the banking community globally is responding very positively to the products we have in relation to the security threats that they see. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">So as the global banks continue to push to Internet banking, as they continue to push towards mobile types of banking solutions, they look at the kind of
attacks, as Ken mentioned the Emmental attack recently. They see that our strong two-factor authentication solutions are strong defenses against those kinds of attacks. We are really seeing a pretty broad-based increase in the opportunities that we
have globally for those factors. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Josh Goldberg </B><B><I>&#151;G2 Investment Partners&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Cliff, because I have you, just curious, did you &#151; I remember I think last quarter you gave a number where you thought the tax rate would be for the year.
Is it still going to be below last year&#146;s tax rate? Is that still the expectation? </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Cliff Bown </B><B><I>&#151;VASCO Data Security
Internationl Inc.&#151;EVP&nbsp;&amp; CFO </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Well, US&nbsp;GAAP requires us to do an estimate of what the tax rate is going to be for the full year
at the end of each quarter. So our rate this year at this point in time is 15%, that is the rate that we booked to and adjusted our year-to-date tax rate to. Last year I believe we finished the year with 22%, so I do believe the tax rate is going to
be lower this year than last year. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Josh Goldberg </B><B><I>&#151;G2 Investment Partners&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">I see. And that is because of where you are generating most of your revenue and earnings? </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Cliff Bown </B><B><I>&#151;VASCO Data Security Internationl Inc.&#151;EVP&nbsp;&amp; CFO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Yes. I think you may already know, but others on the call may not, that we have got a structure in place that basically allows for a lot of the earnings
outside of the Western Hemisphere to be taxed primarily in Switzerland. They are taxed first in the areas that provide the services to those countries at the statutory rate in those countries, but the IP is owned by Switzerland. The IP for the
Western Hemisphere is owned by the United States. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">So, first, the increase in revenue is important if that increase in revenue is largely overseas, which
as you see from our results the US is only about 5% of our revenues this year. The majority is going to be taxed at that more favorable rate. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Josh Goldberg </B><B><I>&#151;G2 Investment Partners&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Okay, great. Just last one for me; it looks like your share count went up by almost 1.1&nbsp;million shares. I assume that is because of a lot more options in
the money. Do you have a sense of what the &#151; the highest the share count can go? How many more options could the share count go to in terms of an increase? And thanks again. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Cliff Bown </B><B><I>&#151;VASCO Data Security Internationl Inc.&#151;EVP&nbsp;&amp; CFO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Josh, we don&#146;t use options as incentive comp. We use restricted stock to some degree, so there are no significant stock option grants that are
outstanding. There are no large volumes of even restricted stock grants that are outstanding. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">So today we are just under 40&nbsp;million shares issued
and outstanding and the data I have doesn&#146;t really show that kind of increase. The fully diluted shares last year were 39.3&nbsp;million, the fully diluted shares for this quarter were 39.5 million. So it may be that you and I should have a
conversation offline as to &#151;. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Josh Goldberg </B><B><I>&#151;G2 Investment Partners&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">I was just looking relative to Q1. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Cliff Bown
</B><B><I>&#151;VASCO Data Security Internationl Inc.&#151;EVP&nbsp;&amp; CFO </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Q1 it was 39.4&nbsp;million so we are up only about 80,000 shares.
</P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Josh Goldberg </B><B><I>&#151;G2 Investment Partners&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Okay, fantastic. Thank you so much. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Operator </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We have no further questions at this time. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Ken
Hunt </B><B><I>&#151;VASCO Data Security International Inc.&#151;Chairman&nbsp;&amp; CEO </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">All right, good. Thanks, as always, for all of you
attending and participating. Again, as always, I want to thank the VASCO employees and staff around the world for their hard work and their excellent performance. Good day, everybody. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Operator </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Ladies and gentlemen, that does conclude the
conference call for today. We thank you for your participation and ask that you please disconnect your lines. </P>
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