Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the Fiscal Year Ended December 31, 2020
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OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the transition period from ________ to ________
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Commission File No. 000-30901
SUPPORT.COM, INC.
(Exact
name of registrant as specified in its charter)
Delaware
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94-3282005
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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1521 Concord Pike (US 202), Suite 301, Wilmington, DE
19803
(Address of principal executive offices, including zip
code)
(650) 556-9440
(Registrant’s telephone number, including area
code)
Securities registered pursuant to Section 12(b) of the
Act:
Common Stock, par value $0.0001
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SPRT
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The Nasdaq Stock Market LLC
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Title of each class
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Trading symbol(s)
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Name of each exchange on which registered
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Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes
☐ No ☒
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T during the preceding 12
months (or for such shorter period that the registrant was required
to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of "large accelerated filer," "accelerated filer,"
"smaller reporting company," and "emerging growth company" in Rule
12b-2 of the Exchange Act.
Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act. ☐
Indicate by check mark whether the registrant has filed a report on
and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting
under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b))
by the registered public accounting firm that prepared or issued
its audit report. ☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes
☐ No ☒
The aggregate market value of the registrant’s common stock
held by non-affiliates as of June 30, 2020, the end of the
registrant’s second fiscal quarter, was approximately $26.9
million, based on a closing market price of $1.41 per
share.
As of March 5, 2021, there were 19,656,591 shares of the registrant’s common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement to be
filed subsequent to the date hereof with the Securities and
Exchange Commission pursuant to Regulation 14A in connection with
the registrant’s fiscal year 2021 annual meeting of
stockholders are incorporated by reference into Part III of this
report. Such definitive proxy statement will be filed with the
Commission not later than 120 days after the end of the
registrant’s fiscal year ended December 31,
2020.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING
STATEMENTS
This
Form 10-K contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, including
the following:
●
certain statements,
including possible or assumed future results of operations, in
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations”;
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any statements
regarding the prospects for our business or any of our
services;
●
any statements
preceded by, followed by or that include the words
“may,” “will,” “should,”
“seeks,” “believes,” “expects,”
“anticipates,” “intends,”
“continue,” “estimate,”
“plans,” “future,” “targets,”
“predicts,” “budgeted,”
“projections,” “outlooks,”
“attempts,” “is scheduled,” or similar
expressions; and
●
other statements
regarding matters that are not historical facts.
Our
business and results of operations are subject to risks and
uncertainties, many of which are beyond our ability to control or
predict. Because of these risks and uncertainties, actual results
may differ materially from those expressed or implied by
forward-looking statements, and investors are cautioned not to
place undue reliance on such statements. All forward-looking
statements herein speak only as of the date hereof, and we
undertake no obligation to update any such forward-looking
statements. Important factors that could cause actual results to
differ materially from our expectations and may adversely affect
our business and results of operations include, but are not limited
to, those items set forth in Item 1A. “Risk Factors”
appearing in this Form 10-K.
3
SUPPORT.COM, INC.
FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 2020
TABLE OF CONTENTS
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Page
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PART I
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5
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8
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24
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25
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25
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25
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PART II
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25
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26
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26
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32
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33
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34
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60
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61
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61
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62
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PART III
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62
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62
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62
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62
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62
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PART IV
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62
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68
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4
PART I
ITEM 1 –
BUSINESS
Business Overview
Support.com,
Inc. (“Support.com,” the “Company,”
“We” or “Our”) provides customer and
technical support solutions delivered by home-based employees. Our
homesourcing model, which enables outsourced work to be delivered
by people working from home, has been specifically designed for
remote work, with attention to security, recruiting, training,
delivery, and employee engagement.
Customer Support Solutions
We
provide outsourced customer support and cloud-based technology
platforms to companies in multiple industry verticals. We serve
clients in verticals such as media and communication, healthcare,
retail, and technology with omnichannel programs that include
voice, chat, and self-service. We meet clients’ needs through
our network of home-based employees and cloud-based platforms. With
our fully distributed team, we are able to flex staffing levels and
skill sets to address client requirements, offering business
process continuity. We custom-profile customer support
professionals (called “experts”) who meet the
requirements for the work-from-home environment and for specific
client criteria related to industry experience, and skill
set.
Technical Support Programs
We
offer technical support programs to our enterprise clients that are
sold to the clients’ end customers. These tailored programs
can be bundled with complementary services or offered on
stand-alone basis as a subscription or one-time
purchase.
We
also offer a subscription-based tech support service
direct-to-consumers and small businesses that helps users solve a
wide-range of technology problems with all computers, smartphones,
and other connected devices, including device setup,
troubleshooting, connectivity or interoperability problems, and
malware and virus removal.
End-User Software
Our
SUPERAntiSpyware® software is a malware protection and removal
software product available for the Windows OS on personal computers
and tablets. The software is licensed on an annual basis, and is
sold direct to consumers and businesses, or through
re-sellers.
Sales and Marketing
Customer Support Solutions
We
sell our customer support solutions through a dedicated sales force
with a consultative approach. We market these solutions to clients
in a number of verticals, including media and communication,
healthcare, retail and technology. Our direct sales efforts occur
in response to our lead generation program, a request for proposal,
a reference from an existing client, or otherwise. The sales cycle
varies depending upon the type of client, the type of services, and
the existence of an established relationship.
We
also license Support.com’s technology platform and/or
applications separately from our outsourced customer support
services. In such an arrangement, customers receive the right to
use our cloud-based software in their own support organization,
using a SaaS model under which customers pay us on a per-user or a
per-session basis during the term of the arrangement. We also
provide implementation services to customers, typically covering
integration of our software with other customers’
systems.
5
Technical Support Programs
We
sell tech support subscription services and fully managed technical
support programs to clients through our direct sales efforts.
Typical clients may include communication providers (MSOs/ISPs),
retailers, or OEMs, among others. Our clients may bundle our
subscription-based tech support services with existing
complementary services or offer them on a stand-alone basis to
their end customers. Our tech support subscription services may be
offered under the client’s brand (white-labeled) or
co-branded.
We
also sell our tech support services direct to consumers and small
businesses primarily through online marketing channels, including
but not limited to search engine optimization (SEO), paid and
earned social media, and content marketing.
End-User Software Product
We
license SUPERAntiSpyware® directly to clients and through
re-sellers or partners. To date, a majority of the end-user
software revenue has come through direct sales to clients. A
substantial percentage of SUPERAntiSpyware® software revenue
arises from customers who download free trial versions of the
software or free versions of the software with limited
functionality before making a purchase decision.
Engineering and IT
Engineering
and IT expense was $3.7 million and $4.1 million for the years
ended December 31, 2020 and 2019, respectively.
We
maintain dedicated engineering and IT teams to develop, maintain,
and continue to improve proprietary, cloud-based technologies that
are essential to our business. We focus our investment in
engineering and IT across the following major areas: the creation
and refinement of our Guided Paths® software and library;
solutions for support interaction optimization; endpoint
applications and other extensions to gather data to assist support
interactions and allow remote support when necessary; business
analytics and reporting; open application interfaces; and internal
service delivery management tools.
Guided
Paths® contains step-by-step self-support guides, with
decision points along the way to help customers resolve problems.
Our experts also leverage Guided Paths as instructional guides and
knowledge base as part of customer support.
The
service delivery management tools used by our experts for
technology support services include our own Support.com cloud-based
software capabilities and other contact center applications such as
customer relationship management (“CRM”), ticketing,
ordering, methods of payment, and telephony, which are all
integrated into applications for our contact center specialists.
The tools support all omnichannel services to include voice, email,
chat, SMS and self-service.
For
business analytics and reporting, we build and maintain a data
warehouse that aggregates and restructures data from all of our
applications to create a comprehensive view of the service delivery
lifecycle, as well as data about the disposition of support
interactions. This data set provides visibility into sales
conversion effectiveness, service delivery efficiency, service
level performance, subscription utilization, partner program
performance and many other aspects of running and optimizing our
business. Our partners also receive reports and analytic
information from the warehouse for their programs on a regular
basis via secure data feeds.
Open
application interfaces of our Support.com Cloud enable
integration with CRM, ticketing systems, and other contact center
applications.
Intellectual Property
We
own the trademarks SUPPORT.COM®, GUIDED
PATHS®, PERSONAL TECHNOLOGY EXPERTS, BUSINESS TECHNOLOGY
EXPERTS and NEXUS® in the United States for specified support
services and software, and we have registrations and common law
rights for several related trademarks in the U.S. and certain other
countries. We own the domain name Support.com and additional other
domain names. We have a pending trademark registration for
Homesourcing™. We also retain exclusive rights to our
proprietary services technology, and our end user software
products. In addition, we hold non-exclusive rights to sell and
distribute certain other software products.
6
We
own two U.S. patents related to our business and have a number of
pending patent applications covering certain advanced technology.
Our issued patents include U.S. Patent No. 8,020,190
(“Enhanced Browser Security”) and U.S. Patent No.
6,754,707 (“Secure Computer Support System”). However,
we do not know if our current patent applications or any future
patent application will result in a patent being issued with the
scope of the claims we seek, if at all. Also, we do not know
whether any patents we have or may receive will be challenged or
invalidated. It is difficult to monitor unauthorized use of
technology, particularly in foreign countries where the laws may
not protect our proprietary rights as fully as they do in the
United States, and our competitors may develop technology that
competes with ours but nevertheless does not infringe our
intellectual property rights.
We
rely on a combination of copyright, trade secret, trademark and
contractual protection to establish and protect our proprietary
rights that are not protected by patents. We also enter into
confidentiality agreements with our employees and consultants
involved in product development. We generally require our
employees, customers and potential business partners to enter into
confidentiality agreements before we will disclose any sensitive
aspects of our business. Also, we generally require employees and
contractors to agree to assign and surrender to us any proprietary
information, inventions or other intellectual property they
generate while working for us in the scope of employment. These
precautions, and our efforts to register and protect our
intellectual property, may not prevent misappropriation or
infringement of our intellectual property.
Competition
We
are active in markets that are highly competitive and subject to
rapid change. Although we do not believe there is one principal
competitor for all aspects of our offerings, we do compete with a
number of other vendors.
With
regard to our customer support services, our competitors include
large multi-national corporations and smaller, regional providers,
and may vary by geography. We compete with in-house customer
management operations as well as other companies that provide
outsourced customer care including: Concentrix, Teleperformance,
Sitel, TaskUs, Alorica and 24-7 Intouch, among others. The
principal competitive factors include: technological innovation,
operational performance and efficiencies, pricing, brand, and
financial stability.
With
respect to licensing of our Support.com technology platform and
applications, our competitors include companies focused on service
desk, knowledge management, remote support and IT process
automation. We believe the principal competitive factors in our
technology platform and applications include breadth and depth of
functionality, including our remote security and employee
monitoring features, ease of implementation, overall performance,
scalability, pricing, financial resources, and customer support. We
believe that our Support.com technology platform and applications
offering provides an integrated solution that covers different
areas of functionality required by customers.
With
respect to partnerships for our technology support services, our
competitors include companies focused on premium technology
services, certain warranty providers, emerging Internet of Things
(“IoT”) technology support providers, global business
process outsourcing providers or contact centers focused on
technical support and other companies who offer technical support
through partners. We believe the principal competitive factors in
our services market include: pricing, breadth and depth of service
offerings, quality of the customer experience, proprietary
technology, time to market, account management, vendor reputation,
scale, and financial resources.
With
regard to our direct-to-consumer and small and medium-sized
business (“SMB”) technical support services, our
competitors include device retailers, multiple system operators
(MSOs)/internet service providers (ISPs), and smaller
privately-held or local companies in the home installation,
computer repair, or general tech support space. We believe the
principal competitive factors in our premium tech support market
include the breadth of service offering, value-based and flexible
pricing, and customer experience and service levels.
In
the market for our end-user software product,
SUPERAntiSpyware®, we face direct competition from other
anti-malware software vendors, anti-virus software vendors,
operating system providers and other OEMs that may provide similar
solutions and function in their products, and from individuals and
groups who offer “free” and open source utilities
online. We compete in this market on the basis of our value-based
pricing.
7
The
competitors in our markets for services and software can have some
or all of the following competitive advantages: longer operating
histories, greater economies of scale, greater financial resources,
greater engineering and technical resources, greater sales and
marketing resources, stronger strategic alliances and distribution
channels, larger user bases, products with different functions and
feature sets, and greater brand recognition than we have. We expect
new competitors to continue to enter the markets in which we
operate.
For
additional information related to competition, see Item 1A, Risk
Factors.
Employees
As
of December 31, 2020 and 2019, we had 780 and 1,231 employees,
respectively. As of December 31, 2020, we had 719 employees based
in the United States, of whom 664 were work-from-home agents and 55
were corporate employees, and 61 employees based outside of the
United States. In addition to our work-from-home employees, we also
use contract labor. None of our employees are covered by collective
bargaining agreements.
Securities and Exchange Commission (“SEC”) Filings and
Other Available Information
Our
telephone number is 650-556-9440 and our website address is
www.support.com. The information contained on our website does not
form any part of this annual report on Form 10-K. However, we make
available, free of charge through our website, our annual reports
on Form 10-K, our quarterly reports on Form 10-Q and our current
reports on Form 8-K filed or furnished pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 as soon as reasonably
practicable after we electronically file this material with, or
furnish it to, the SEC. The reports filed with the SEC by us and by
our officers, directors, and significant shareholders are also
available for review on the SEC’s website at www.sec.gov. In
addition, we make available our Code of Ethics and Business Conduct
for Employees, Officers and Directors on:
https://www.support.com/about-us/investor-relations/corporate-governance/.
This Code is also available in print without charge to any person
who requests it emailing us at IR@support.com.
ITEM 1A. – RISK
FACTORS
Risks Related to Our Operations, Customers and
Strategy
Our financial condition and results of operations may vary from
quarter to quarter, which may cause the price of our common shares
to decline.
Our
quarterly results of operations have fluctuated in the past and
could do so in the future. Because our results of operations are
difficult to predict, you should not rely on quarterly comparisons
of our results of operations as an indication of our future
performance. Fluctuations in our results of operations may be due
to a number of factors, including, but not limited to, those listed
below and those identified throughout this “Risk
Factors” section:
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The performance of
our partners, including the success of our partners in attracting
end users of our products, which can impact the amount of revenue
we derive;
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Change, or
reduction in or discontinuance of our programs with clients and
partners;
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Cancellations,
rescheduling or deferrals of significant customer products or
service programs;
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Our reliance on a
small number of partners for a substantial majority of our
revenue;
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Our ability to
successfully license and grow revenue related to our
SUPERAntiSpyware® software, Guided Paths®, Support.com
Cloud and our service offerings;
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The timing of our
sales to our clients and our partners’ resale of our products
to end users and our ability to enter into new sales with partners
and renew existing programs with our clients and
partners;
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The availability
and cost-effectiveness of advertising placements for our software
products and services and our ability to respond to changes in the
advertising markets in which we participate;
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The efficiency and
effectiveness of our technology specialists;
8
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Our ability to
effectively match staffing levels with service volumes on a
cost-effective basis;
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Our ability to
manage contract labor;
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Our ability to
hire, train, manage and retain our home-based customer support
specialists and enhance the flexibility of our staffing model in a
cost-effective fashion and in quantities sufficient to meet
forecast requirements;
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Our ability to
manage costs under our self-funded health insurance
program;
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Usage rates on the
subscriptions we offer;
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Our ability to
maintain a competitive cost structure for our
organization;
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The rate of
expansion of our offerings and our investments
therein;
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Changes in the
markets for computers and other technology devices relating to unit
volume, pricing and other factors, including changes driven by
declines in sales of personal computers and the growing popularity
of tablets, and other mobile devices and the introduction of new
devices into the connected home;
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Our ability to
adapt to our clients’ needs in a market space defined by
frequent technological change;
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Severe financial
hardship or bankruptcy of one or more of our major
clients;
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The amount and
timing of operating costs and capital expenditures in our
business;
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Failure to protect
our intellectual property;
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Diversion of
management’s attention from other business concerns,
incurrence of costs and disruption of our ongoing business
activities as a result of acquisitions or divestitures by
us;
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Costs related to
the defense and settlement of litigation, which can also have an
additional adverse impact on us because of negative publicity,
diversion of management resources and other factors;
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Costs related to
the defense and settlement of government investigations, requests
for information and audits, which can also have an additional
adverse impact on us because of negative publicity, diversion of
management resources and other factors, including, without
limitation, those audits, requests for information and
investigations described in Part II. Item 1. Legal Proceedings of
this report;
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Public health or
safety concerns, medical epidemics or pandemics, such as COVID-19,
and other natural- or man-made disasters;
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The effects of any
acquisitions, divestitures or significant investments;
and
●
Potential losses on
investments, or other losses from financial instruments we may hold
that are exposed to market risk.
Due
to fluctuations in our quarterly and annual results of operations
and other factors, the price at which our common shares trades may
be volatile. Accordingly, you may not be able to resell your common
shares at or above the price you paid. In future periods, our stock
price could decline if, amongst other factors, our revenue or
operating results are below our estimates or the estimates or
expectations of securities analysts and investors.
A substantial portion of our revenue is generated by a limited
number of clients. The loss or reduction in business from any of
these clients would adversely affect our business and results of
operations.
We
receive a significant amount of our revenue from a limited number
of customers. For the year ended December 31, 2020, two customers
accounted for over 80% of our total revenue.
In the past, sales to our largest customers have
fluctuated significantly from period to period and year to year and
will likely continue to fluctuate in the future.
The loss of
these or other significant relationships, the change of the terms
or terminations of our arrangements with any of these customers,
the reduction or discontinuance of programs or billable hours with
any of these customers, or the failure of any of these customers to
achieve their targets has in the past adversely affected and could
in the future adversely affect our business. For example, our
partners may decide to shorten our billable hours and use other
vendors in the provision of their business and/or may periodically
place these types of services out for bid. Our competitors, many of
whom have significantly more resources than we do, may offer more
favorable bids for the same business compared to what we offer; and
as a result, we may lose, or face a decline in the business we do
with these significant customers.
9
We may engage in the acquisition of other companies, investments,
joint ventures and strategic alliances outside of our current line
of business, which may have an adverse material effect on our
existing business.
We
may engage in the acquisition of other companies, investments,
joint ventures and strategic alliances outside of our current line
of business to design and develop new technologies and products, to
strengthen competitiveness by scaling up and to expand our existing
business line into new regions. Such transactions, especially in
new lines of business, inherently involve risk due to the
difficulties in integrating operations, technologies, products and
personnel. Integration issues are complex, time-consuming and
expensive and, without proper planning and implementation, may
adversely affect our existing business. Furthermore, we may incur
significant acquisition, administrative and other costs in
connection with these transactions, including costs related to
integration or restructuring of acquired businesses. In addition,
we may make investments in companies outside our current line of
business in an attempt to broaden our business opportunities. These
investments may not provide a return or lead to an increase in our
operating results, and we may not obtain the benefits of these
investments that we intend to recognize when making them. There can
be no assurance that these transactions will be beneficial to our
business or financial condition. Even assuming these transactions
are beneficial, there can be no assurance that we will be able to
successfully integrate the new business lines acquired or achieve
all or any of the initial objectives of these
transactions.
We may make acquisitions that deplete our resources and do not
prove successful.
We
have made acquisitions in the past and may make additional
acquisitions in the future. Our management may not be able to
effectively implement our acquisition program and internal growth
strategy simultaneously. The integration of acquisitions involves a
number of risks and presents financial, managerial and operational
challenges. We may have difficulty, and may incur unanticipated
expenses related to, integrating management and personnel from
these acquired entities with our management and personnel. Our
failure to identify, consummate or integrate suitable acquisitions
could adversely affect our business and results of operations. We
cannot readily predict the timing, size or success of our future
acquisitions. Even successful acquisitions could have the effect of
reducing our cash balances.
We may pursue investments, joint ventures and dispositions, which
could adversely affect our results of operations.
We
may invest in businesses that offer complementary products,
services and technologies, augment our market coverage, or enhance
our technological capabilities. We may also enter into strategic
alliances or joint ventures to achieve these goals. We may not be
able to identify suitable investment, alliance, or joint venture
opportunities, or to consummate any such transactions. In addition,
our original estimates and assumptions used in assessing any
transaction may be inaccurate and we may not realize the expected
financial or strategic benefits of any such
transaction.
We
may also seek to divest or wind down portions of our business,
either acquired or otherwise, each of which could materially affect
our cash flows and results of operations. Any future dispositions
we may make could involve risks and uncertainties, including our
ability to sell such businesses on terms acceptable to us, or at
all. In addition, any such dispositions could result in disruption
to other parts of our business, potential loss of employees or
customers, or exposure to unanticipated liabilities or ongoing
obligations to us following any such dispositions. For example, in
connection with such dispositions, we may agree to provide certain
indemnities to the purchaser, which may result in additional
expenses and may adversely affect our financial condition and
results of operations. In addition, dispositions may include the
transfer of technology and/or the licensing of certain IP rights to
third-party purchasers, which could limit our ability to utilize
such IP rights or assert these rights against such third-party
purchasers or other third parties.
We have a history of losses, we may incur losses in the future and
may not sustain profitability in the near term; and as a result, we
may need to alter our business plans or change our business
strategy.
Although
we have recently been profitable in the last two fiscal years, our
profitability declined in 2020 compared to 2019. Prior to becoming
profitable in 2019, we had a history of losses. Our accumulated
deficit as of December 31, 2020 amounted to $208.8 million. We may
incur losses in the future and may not be able to sustain our
profitability in the near term. As a result, we may elect or may be
required to alter our business plans or change our business
strategy. Any change to our business plans or strategy will present
risks related to our ability to execute on these changes and may
require us to make additional investments in our business, all of
which could harm our operating results and cause our stock price to
decline.
10
Our stock price is subject to volatility.
Our
stock price has experienced substantial price volatility in the
past and may continue to do so in the future. Further, our
business, the technology industry and the stock market as a whole
have experienced extreme stock price and volume fluctuations that
have affected stock prices in ways that may have been unrelated to
corporate operating performance. For example, in 2020 as a result
of macroeconomic conditions and the related impact of Covid-19, the
stock market experienced wide fluctuations. In the past year, our
stock price has fluctuated from as low as $0.93 per share In March
2020 to a high of $2.57 in February 2021. This significant
volatility may continue to occur in the future for reasons that are
unrelated to our business or if our business experiences unexpected
results. We believe our stock price should reflect expectations of
future growth and profitability. If we fail to meet expectations
related to future growth, profitability, potential future dividends
or share repurchases, or other market expectations, our stock price
may decline significantly, which could have a material adverse
impact on the confidence of our investors and employee
retention.
Our contracts generally do not contain minimum purchase
requirements and can generally be terminated by our customers on
short notice without penalty.
We enter into written agreements with each client for our services,
and we generally seek multi-year terms for such agreements.
However, these agreements generally permit our clients to terminate
for convenience on relatively short notice. Moreover, these
agreements generally allow clients to procure similar services from
other vendors, do not penalize our clients for early termination,
and do not contain minimum purchase requirements or volume
commitments. Accordingly, we face the risk that our clients may
cancel or renegotiate contracts we have with them, which may
adversely affect our results. If a principal client canceled or did
not renew its contract with us, our results would suffer. Clients
can generally reduce the volume of services they outsource to us
without any penalties, which would have an adverse effect on our
revenue, results of operations and overall financial
condition.
Our business is based on a relatively new and evolving business
model.
We
are executing a plan to grow our business by providing customer
support services provided by experts who work from their homes,
creating a robust, timely and innovative library of Guided
Path® self-support tools, licensing our Support.com Cloud
application, and providing end-user consumer software products. We
may not be able to offer these services and software products
successfully. Our customer support experts are generally
home-based, which requires a high degree of coordination and
quality control of employees working from diverse and remote
locations. We expect to invest cash generated from our existing
business to support our growth initiatives. Our investments, which
typically are made in advance of revenue, may not yield increased
revenue to offset these expenses. As a result of these factors, the
future revenue and income potential of our business is uncertain.
Any evaluation of our business and our prospects must be considered
in light of these factors and the risks and uncertainties often
encountered by companies in our stage of development. Some of these
risks and uncertainties relate to our ability to do the
following:
●
Maintain our
current relationships and service programs, and develop new
relationships, with service partners, subscriptions, and licensees
of our Support.com technical support offering on acceptable terms
or at all;
●
Reach prospective
customers for our software products in a cost-effective
fashion;
●
Reduce our
dependence on a limited number of partners for a substantial
majority of our revenue;
●
Successfully
license and grow revenue related to our consumer software,
Support.com technical support subscriptions, Guided Paths® and
our technology support service offerings;
●
Manage our
employees and contract labor efficiently and
effectively;
●
Maintain gross and
operating margins;
●
Match staffing
levels with demand for services and forecast
requirements;
●
Obtain bonuses and
avoid penalties in contractual arrangements;
●
Operate
successfully in a time-based pricing model;
●
Operate effectively
in the SMB market;
11
●
Successfully
introduce new, and adapt our existing, services and products for
consumers and businesses;
●
Respond effectively
to changes in the market for customer support
services;
●
Realize benefits of
any acquisitions we make;
●
Adapt to changes in
the markets we serve;
●
Adapt to changes in
our industry, including consolidation;
●
Adapt to changes in
the market due to public health concerns, medical epidemics or
pandemics, such as COVID-19, and other natural- or man-made
disasters;
●
Respond to
government regulations relating to our current and future
business;
●
Manage and respond
to present, threatened, and future litigation; and
●
Manage and respond
to present, threatened or future government investigations and
audits, including, without limitation, those audits and
investigations described in Part II. Item 1 Legal Proceedings of
this report.
If
we are unable to address these risks, our business, results of
operations and prospects could suffer.
Changes in the market for computers and other consumer electronics
and in the technology support services market could adversely
affect our business.
Reductions
in unit volumes of sales for computers and other devices we
support, or in the prices of such equipment, could adversely affect
our business. We offer both services that are attached to the sales
of new computers and other devices, and services designed to fix
existing computers and other devices. Declines in the unit volumes
sold of these devices or declines in the pricing of such devices
could adversely affect demand for our services or our revenue mix,
either of which would harm our operating results. Further, we do
not support all types of computers and devices, meaning that we
must select and focus on certain operating systems and technology
standards for computers, tablets, smart phones, and other devices.
We may not be successful in supporting new devices in the connected
home and “Internet of Things,” and consumers and SMBs
may prefer equipment we do not support, which may decrease the
market for our services and products if customers migrate away from
platforms we support. In addition, the structures and pricing
models for programs in the technology support services market may
change in ways that reduce our revenues and our
margins.
Risks Related to COVID-19
The COVID-19 pandemic and the remedial measures taken by many
countries to combat the pandemic may adversely impact the
Company’s business, results of operations, financial
condition and stock price.
The
global outbreak of the coronavirus disease 2019
(“COVID-19”) was declared a pandemic by the World
Health Organization and a national emergency by the U.S. Government
in March 2020. The COVID-19 pandemic has negatively affected the
U.S. and global economy, disrupted global supply chains,
significantly restricted travel and transportation, resulted in
mandated closures and orders to “shelter-in-place,” and
created significant disruption of the financial markets. The full
extent of the COVID-19 impact on our operational and financial
performance will depend on future developments, including the
duration and spread of the pandemic and related actions taken by
the U.S. government, state and local government officials, and
international governments to prevent disease spread, all of which
are uncertain, out of our control and cannot be
predicted.
The
full impact of the COVID-19 pandemic on our business is uncertain
and impossible to predict, as such impact is largely dependent on
the pandemic’s impact upon our customers. This uncertainty
makes it challenging for management to estimate the future
performance of our businesses, although management believes that
our home based employee model provides us with certain advantages
over traditional “brick and mortar” competitors in the
face of the pandemic.
The
continued spread of COVID-19 has also led to disruption and
volatility in the global capital markets, which, depending on
future developments, could impact our capital resources and
liquidity in the future. If we need to raise additional capital to
support operations in the future, we may be unable to access
capital markets and additional capital may only be available to us
on terms that could be significantly detrimental to our existing
stockholders and to our business as a result of COVID-19. We are
also monitoring the impacts of COVID-19 on the fair value of our
assets. While we do not currently anticipate any material
impairments on our assets as a result of COVID-19, future changes
in expectations for sales, earnings and cash flows related to
intangible assets and goodwill below our current projections could
cause these assets to be impaired.
12
Risks related to Regulatory Oversight, Litigation or Compliance
with Laws
We have been, are currently and may be in the future the subject of
governmental investigations relating to past products and
services.
We
have been, are currently and may in the future be the subject of
governmental investigations relating to our past products and how
those products were used by our third-party partners.
These
governmental inquiries could harm our reputation with customers and
negatively impact our ability to sell to existing customers or
attract new customers. In addition to the ongoing costs to respond
to these inquiries, we could be required to make additional
payments to resolve these or other governmental proceedings that
may be brought in the future. In some cases, we may not be the
subject of an investigation, but we may be required to expend
resources, including time from our management team, to address
information requests or to indemnify individual current or former
employees who may become involved in governmental proceedings or
also be requested to provide information. These historical
proceedings, our ongoing matters and any inquiries or proceedings
that arise in the future could have a material adverse effect on
our operations, financial results and our stock price.
We are a party to a Consent Order with the Federal Trade Commission
which imposes ongoing obligations.
On
November 6, 2018, we entered into a Stipulation to Entry of Order
for Permanent Injunction and Monetary Judgment (the “Consent
Order”), with the Federal Trade Commission
(“FTC”), resolving a multi-year FTC investigation
relating to PC Healthcheck, an obsolete software program that we
developed on behalf of a third party for their use with their
customers. As part of the Consent Order, we agreed to pay $10
million and to implement certain new procedures and enhance certain
existing procedures. Any violation or alleged violation of the
terms of the Consent Order could impose additional financial
liability in the form of regulatory fines and/or legal fees, as
well as harm our reputation with customers or prospective customers
and have a material adverse effect on our operations, financial
results and our stock price.
We have been named as a party to legal proceedings, including
governmental proceedings, in the past and may be named in
additional ones in the future, which could subject us to liability,
require us to indemnify our customers or employees, require us to
obtain or renew licenses, require us to stop selling our products,
services and/or programs, or force us to redesign our products,
services and/or programs.
We
have been named as a party to several lawsuits, government
inquiries or investigations and other legal proceedings (referred
to as “litigation”), and we may be named in additional
ones in the future. Any potential litigation also could force us to
do one or more of the following:
●
stop selling,
offering for sale, making, having made or exporting products,
services and/or programs;
●
limit or restrict
the type of work that employees involved in such litigation may
perform for us;
●
pay substantial
damages and/or license fees and/or royalties to the party bringing
the claim that could adversely impact our liquidity or operating
results; and
●
attempt to redesign
those products, services and/or programs that contain the allegedly
problematic component.
Under
certain circumstances, we have contractual and other legal
obligations to indemnify and to incur legal expenses for current
and former directors and officers and/or customers. If we are
required to make a significant payment under any of our
indemnification obligations, including those to our customers
and/or on behalf of our former or current employees, could have a
material adverse effect on our business and the trading price for
our securities. Litigation may be time consuming, expensive, and
disruptive to normal business operations, and the outcome of
litigation is difficult to predict. The ultimate outcome of
litigation could have a material adverse effect on our business and
the trading price for our securities. Furthermore, litigation,
regardless of the outcome, may result in significant expenditures,
diversion of our management’s time and attention from the
operation of our business and damage to our reputation or
relationship with third parties, which could materially and
adversely affect our business, financial condition, results of
operations, cash flows and stock price.
13
We may face intellectual property infringement claims that could be
costly to defend and result in our loss of significant
rights.
Our
business relies on the use and licensing of technology. Other
parties may assert intellectual property infringement claims
against us or our customers, and our products may infringe the
intellectual property rights of third parties. For example, our
products may infringe patents issued to third parties. In addition,
as is increasingly common in the technology sector, we may be
confronted with the aggressive enforcement of patents by companies
whose primary business activity is to acquire patents for the
purpose of offensively asserting them against other companies. From
time to time, we have received allegations or claims of
intellectual property infringement, and we may receive more claims
in the future. We may also be required to pursue litigation to
protect our intellectual property rights or defend against
allegations of infringement. Intellectual property litigation is
expensive and time-consuming and could divert management’s
attention from our business. The outcome of any litigation is
uncertain and could significantly impact our financial results. If
there is a successful claim of infringement, we may be required to
develop non-infringing technology or enter into royalty or license
agreements which may not be available on acceptable terms, if at
all. Our failure to develop non-infringing technologies or license
proprietary rights on a timely basis would harm our
business.
If we are unable to protect or enforce our intellectual property
rights, or we lose our ability to utilize the intellectual property
of others, our business could be adversely affected.
Our
success depends, in part, upon our ability to obtain intellectual
property protection for our proprietary processes, software and
other solutions. We rely upon confidentiality policies,
nondisclosure and other contractual arrangements, and patent, trade
secret, copyright and trademark laws to protect our intellectual
property rights. These laws are subject to change at any time and
could further limit our ability to obtain or maintain intellectual
property protection. There is uncertainty concerning the scope of
patent and other intellectual property protection for software and
business methods, which are fields in which we rely on intellectual
property laws to protect our rights. Even where we obtain
intellectual property protection, our intellectual property rights
may not prevent or deter competitors, former employees, or other
third parties from reverse engineering our solutions or software.
Further, the steps we take in this regard might not be adequate to
prevent or deter infringement or other misappropriation of our
intellectual property by competitors, former employees or other
third parties, and we may not be able to detect unauthorized use
of, or take appropriate and timely steps to enforce, our
intellectual property rights. Enforcing our rights might also
require considerable time, money and oversight, and we may not be
successful. Further, we rely on third-party software in providing
some of our services and solutions. If we lose our ability to
continue using any such software for any reason, including because
it is found to infringe the rights of others, we will need to
obtain substitute software or find alternative means of obtaining
the technology necessary to continue to provide our solutions. Our
inability to replace such software, or to replace such software in
a timely or cost-effective manner, could materially adversely
affect our results of operations.
We may face class actions and similar claims that could be costly
to defend or settle and result in negative publicity and diversion
of management resources.
Our business involves direct sale and licensing of
services and software to consumers and SMBs, and we typically
include customary indemnification provisions in favor of our
partners in our agreements for the distribution of our services and
software. As a result, we can be subject to consumer litigation and
legal proceedings related to our services and software, including
putative class action claims and similar legal actions, including,
but not limited to, consumer litigation and legal
proceedings. We can also be subject
to employee litigation and legal proceedings related to our
employment practices attempted on a class or representative
basis. Such litigation can be
expensive and time-consuming regardless of the merits of any action
and could divert management’s attention from our business.
The cost of defense can be large as can any settlement or judgment
in an action. The outcome of any litigation is uncertain and could
significantly impact our financial results. Regardless of outcome,
litigation can have an adverse impact on us because of defense
costs, negative publicity, diversion of management resources and
other factors.
14
We must comply with a variety of existing and future laws and
regulations that could impose substantial costs on us and may
adversely impact our business.
We
are subject to a variety of laws and regulations, which may differ
among jurisdictions, affecting our operations in areas including,
but not limited to: intellectual property ownership and
infringement; tax; anti-corruption such as the Foreign Corrupt
Practices Act and the UK Bribery Act; foreign exchange controls and
cash repatriation restrictions; data privacy requirements such as
the European Economic Area Privacy Regulation, the General Data
Protection Regulation (“GDPR”) and the California
Consumer Privacy Act (“CCPA”); competition; Consent
Order terms (for example, the recent Consent Order we entered into
with the FTC); advertising; employment; product regulations; health
and safety requirements; and consumer laws. If we fail to continue
to comply with these regulations, we may be unable to provide
products or services to certain customers, or we may incur
penalties or fines. We are unable to predict the outcome or effects
of any of these potential actions or any other legislative or
regulatory proposals on our business. Any changes to the legal and
regulatory framework applicable to our businesses could have an
adverse impact on the results of our operations. Although our
management systems are designed to maintain compliance, if we
violate or fail to comply with any laws or regulations, applicable
consent orders or decrees, a range of consequences could result,
including fines, sales limitations, criminal and civil liabilities
or other sanctions. The costs of complying with these laws
(including the costs of any investigations, auditing and
monitoring) could adversely affect our current or future
business.
Risks related to our Products or Service Offerings
Our product and service offerings are in their early stages and
failure to market, sell and develop the offerings effectively and
competitively could result in a lack of growth.
A
number of competitive offerings exist in the market, providing
various features that may overlap with our Support.com offerings
today or in the future. Some competitors in these markets far
exceed our spending on sales and marketing activities and benefit
from greater existing brand awareness, channel relationships and
existing customer relationships. We may not be able to reach the
market effectively and adequately or convey our differentiation as
needed to grow our customer base. To reach our target market
effectively, we may be required to continue to invest substantial
resources in sales and marketing and engineering and IT activities,
which could have a material adverse effect on our financial
results. In addition, if we fail to develop and maintain
competitive features, deliver high-quality products and satisfy
existing customers, our Support.com offerings could fail to grow.
Disruptions in infrastructure operations could impair our ability
to deliver Support.com offerings to customers, thereby affecting
our reputation with existing and prospective customers and possibly
resulting in monetary penalties or financial losses.
Our end-user software revenues are dependent on online traffic
patterns and the availability and cost of online advertising in
certain key placements.
Some
of our consumer end-user software revenue stream is obtained
through advertising placements in certain key online media
placements. From time to time a trend or a change in a key
advertising placement will impact us, decreasing traffic or
significantly increasing the cost or effectiveness of online
advertising and therefore compromising our ability to purchase a
desired volume and placement of advertisements at profitable rates.
If such a change were to continue to occur, on several occasions in
the past, we may be unable to attract desired amounts of traffic,
our costs for advertising may further increase beyond our forecasts
and our software revenues may further decrease. As a result, our
operating results would be negatively impacted.
We operate in a highly competitive industry, with intense price
competition, which may intensify as our competitors expand their
operations.
The
industry in which we operate is highly competitive and includes
numerous small companies capable of competing effectively in our
markets on a local basis, as well as several large companies that
possess substantially greater financial resources than we do.
Contracts are traditionally awarded on the basis of competitive
bids or direct negotiations with customers.
15
The
competitive factors in our markets include, amongst others, are
product and service quality and availability, responsiveness,
experience, technology, equipment quality, reputation for retaining
highly skilled agents and price. The competitive environment has
intensified as mergers among industry partners have reduced the
number of available customers and mergers amongst our competitors
have created larger companies for us to compete against. Some of
our current and potential competitors have greater resources,
longer histories, more customers, and/or greater brand recognition.
They may secure better terms from vendors, adopt more aggressive
pricing, and devote more resources to technology, infrastructure,
fulfillment, and marketing.
Competition
may intensify, including with the development of new business
models and the entry of new and well-funded competitors, and as our
competitors enter into business combinations or alliances and
established companies in other markets expand to become competitive
with our business. Furthermore, we cannot be sure that our
competitors will not develop competing products, systems, services
or technologies that gain market acceptance in advance of our
products, systems, services or technologies, or that our
competitors will not develop new products, systems, services or
technologies that cause our existing products, systems, services or
technologies to become non-competitive or obsolete, which may
adversely affect our results of operations through the potential
reduction of sales and profits.
Our business is highly dependent upon our brand recognition and
reputation, and the failure to maintain or enhance our brand
recognition or reputation would likely have a material adverse
effect on our business.
Our
brand recognition and reputation are critical aspects of our
business. We believe that maintaining and further enhancing our
brand as well as our reputation will be critical to retaining
existing customers and attracting new customers. We also believe
that the importance of our brand recognition and reputation will
continue to increase as competition in our markets continues to
develop. Our success in this area will be dependent on a wide range
of factors, some of which are out of our control, including the
following:
●
the efficacy of our
marketing efforts;
●
our ability to
retain existing and obtain new customers and strategic
partners;
●
the quality and
perceived value of our services;
●
actions of our
competitors, our strategic partners, and other third
parties;
●
positive or
negative publicity, including material on the
Internet;
●
regulatory and
other governmental related developments; and
●
litigation related
developments.
If
we implement new marketing and advertising strategies, we may
utilize marketing and advertising channels with significantly
higher costs than our current channels, which in turn could
adversely affect our operating results. Implementing new marketing
and advertising strategies also would increase the risk of devoting
significant capital and other resources to endeavors that do not
prove to be cost effective. Further, we also may incur marketing
and advertising expenses significantly in advance of the time we
anticipate recognizing revenue associated with such expenses, and
our marketing and advertising expenditures may not generate
sufficient levels of brand awareness or result in increased
revenue. Even if our marketing and advertising expenses result in
increased revenue, the increase might not offset our related
expenditures. If we are unable to maintain our marketing and
advertising channels on cost-effective terms or replace or
supplement existing marketing and advertising channels with
similarly or more effective channels, our marketing and advertising
expenses could increase substantially, our customer base could be
adversely affected, and our business, operating results, financial
condition, and reputation could suffer.
Furthermore,
negative publicity, whether or not justified, relating to events or
activities attributed to us, our employees, our strategic partners,
our affiliates, or others associated with any of these parties, may
tarnish our reputation and reduce the value of our brands. Damage
to our reputation and loss of brand equity may reduce demand for
our products and services and have an adverse effect on our
business, operating results, and financial condition. Moreover, any
attempts to rebuild our reputation and restore the value of our
brands may be costly and time consuming, and such efforts may not
ultimately be successful.
16
Risks related to Employees
Our success depends upon our ability to attract, develop and retain
highly qualified employees while also controlling our labor costs
in a competitive labor market.
Our
customers expect a high level of customer support and product
knowledge from our employees. To meet the needs and expectations of
our customers, we must attract, develop and retain a large number
of highly qualified employees while at the same time control labor
costs. Our ability to control labor costs is subject to numerous
external factors, including prevailing wage rates and health and
other insurance costs, as well as the impact of legislation or
regulations governing labor relations, minimum wage, or healthcare
benefits. An inability to provide wages and/or benefits that are
competitive within the markets in which we operate could adversely
affect our ability to retain and attract employees. Likewise,
changes in market compensation rates may adversely affect our labor
costs. In addition, we compete with other retail businesses for
many of our employees in hourly positions, and we invest
significant resources in training and motivating them to maintain a
high level of job satisfaction. These positions have historically
had high turnover rates, which can lead to increased training and
retention costs, particularly in a competitive labor market.
Effective succession planning is also important to our long-term
success. Failure to ensure effective transfer of knowledge and
smooth transitions involving key employees and executive management
could hinder our strategic planning and execution. There is no
assurance that we will be able to attract or retain highly
qualified employees in the future. As such, our ability to develop
and deliver successful products and services may be adversely
affected.
Our business would be adversely affected by the departure of
existing members of our senior management team.
Our
business would be adversely affected by the departure of existing
members of our senior management team. Our success depends, in
large part, on the continued contributions of our senior management
team. Effective succession planning is also important for our
long-term success. Failure to ensure effective transfers of
knowledge and smooth transitions involving senior management could
hinder our strategic planning and execution. We do not currently
maintain key person life insurance covering our senior management.
The loss of any of our senior management could harm our ability to
implement our business strategy and respond to the rapidly changing
market conditions in which we operate.
If we fail to attract, train and manage our consumer support
experts in a manner that meets forecast requirements and provides
an adequate level of support for our customers, our reputation and
financial performance could be harmed.
Our
business depends in part on our ability to attract, manage and
retain our customer support specialists and other support
personnel. If we are unable to attract, train and manage in a
cost-effective manner adequate numbers of competent specialists and
other support personnel to be available as service volumes vary,
particularly as we seek to expand the breadth and flexibility of
our staffing model, our service levels could decline, which could
harm our reputation, result in financial losses under contract
terms, cause us to lose customers and partners, and otherwise
adversely affect our financial performance. Our ability to meet our
need for support personnel while controlling our labor costs is
subject to numerous external factors, including the level of demand
for our products and services, the availability of a sufficient
number of qualified persons in the workforce, unemployment levels,
prevailing wage rates, changing demographics, health and other
insurance costs, including managing costs under our self-funded
health insurance program which can vary substantially each
reporting period, and the cost of compliance with labor and wage
laws and regulations. In the case of programs with time-based
pricing models, the impact of failing to attract, train and manage
such personnel could directly and adversely affect our revenue and
profitability. Although our service delivery and communications
infrastructure enables us to monitor and manage customer support
specialists remotely, because they are typically home-based and
geographically dispersed, we could experience difficulties meeting
services levels and effectively managing the costs, performance and
compliance of these customer support specialists and other support
personnel. Any problems we encounter in effectively attracting,
managing and retaining our customer support specialists and other
support personnel could seriously jeopardize our service delivery
operations and our financial results.
17
Risks related to Data Security and Technology
Disruptions in our information technology and service delivery
infrastructure and operations could impair the delivery of our
services and harm our business.
We
depend on the continuing operation of our information technology
and communication systems and those of our third-party service
providers. Any interruption or failure of our internal or external
systems could prevent us or our service providers from accepting
orders and delivering services, or cause company and consumer data
to be unintentionally lost, destroyed or disclosed. Our continuing
efforts to upgrade and enhance the security and reliability of our
information technology and communications infrastructure could be
very costly, and we may have to expend significant resources to
remedy problems such as a security breach or service interruption.
Interruptions in our services resulting from labor disputes,
telephone or Internet failures, power or service outages, natural
disasters or other events, or a security breach could reduce our
revenue, increase our costs, cause customers and partners and
licensees to fail to renew or to terminate their use of our
offerings, and harm our reputation and our ability to attract new
customers.
Costs related to software defects or other errors in our products
could have a material adverse effect on us.
From
time to time, we may experience software defects, bugs and other
errors associated with the introduction and/or use of our complex
software products. Despite our testing procedures, errors may occur
in new products or releases after commencement of commercial
deployments in the future. Such errors could result
in:
●
Loss of or delay in
market acceptance of our products;
●
Material recall and
replacement costs;
●
Delay in revenue
recognition or loss of revenue;
●
The diversion of
the attention of our engineering personnel from product development
efforts;
●
Our having to
defend against litigation related to defective products;
and
●
Damage to our
reputation in the industry that could adversely affect our
relationships with our customers.
In
addition, the process of identifying a software error in software
products that have been widely distributed may be lengthy and
require significant resources. We may have difficulty identifying
the end customers of the defective products in the field, which may
cause us to incur significant replacement costs, contract damage
claims from our customers and further reputational harm. Any of
these problems could materially and adversely affect our results of
operations. Despite our best efforts, security vulnerabilities may
exist with respect to our products. Mitigation techniques designed
to address such security vulnerabilities, including software and
firmware updates or other preventative measures, may not operate as
intended or effectively resolve such vulnerabilities. Software and
firmware updates and/or other mitigation efforts may result in
performance issues, system instability, data loss or corruption,
unpredictable system behavior, or the theft of data by third
parties, any of which could significantly harm our business and
reputation.
18
Our systems collect, access, use, and store personal customer
information and enable customer transactions, which poses security
risks, requires us to invest significant resources to prevent or
correct problems that may be caused by security breaches, and may
harm our business.
A
fundamental requirement for online communications, transactions and
support is the secure collection, storage and transmission of
confidential information. Our systems collect and store
confidential and personal information of our individual customers
as well as our partners and their customers’ users, including
personally identifiable information and payment card information,
and our employees and contractors may access and use that
information in the course of providing services. In addition, we
collect and retain personal information of our employees in the
ordinary course of our business. We and our third-party contractors
use commercially available technologies to secure this information.
Despite these measures, parties may attempt to breach the security
of our data or that of our customers. In addition, errors in the
storage or transmission of data could breach the security of that
information. We may be liable to our customers for any breach in
security and any breach could subject us to governmental or
administrative proceedings or monetary penalties, damage our
relationships with partners and harm our business and reputation.
Also, computers are vulnerable to computer viruses, physical or
electronic break-ins and similar disruptions, which could lead to
interruptions, delays or loss of data. We may be required to expend
significant capital and other resources to comply with mandatory
privacy and security standards required by law, industry standard,
or contract, and to further protect against security breaches or to
correct problems caused by any security breach.
A breach of our security systems may have a material adverse effect
on our business.
Our
security systems are designed to maintain the physical security of
our facilities and protect our customers’ and
employees’ confidential information, as well as our own
proprietary information. However, we are also dependent on a number
of third-party cloud-based and other service providers of critical
corporate infrastructure services relating to, among other things,
human resources, electronic communication services and certain
finance functions, and we are, of necessity, dependent on the
security systems of these providers. Accidental or willful security
breaches or other unauthorized access by third parties or our
employees or contractors of our facilities, our information systems
or the systems of our cloud-based or other service providers, or
the existence of computer viruses or malware in our or their data
or software could expose us to a risk of information loss and
misappropriation of proprietary and confidential information,
including information relating to our products or customers and the
personal information of our employees. In addition, we have, from
time to time, also been subject to unauthorized network intrusions
and malware on our own IT networks. Any theft or misuse of
confidential, personal or proprietary information as a result of
such activities could result in, among other things, unfavorable
publicity, damage to our reputation, loss of our trade secrets and
other competitive information, difficulty in marketing our
products, allegations by our customers that we have not performed
our contractual obligations, litigation by affected parties and
possible financial obligations for liabilities and damages related
to the theft or misuse of such information, as well as fines and
other sanctions resulting from any related breaches of data privacy
regulations, any of which could have a material adverse effect on
our reputation, business, profitability and financial condition.
Since the techniques used to obtain unauthorized access or to
sabotage systems change frequently and are often not recognized
until launched against a target, we may be unable to anticipate
these techniques or to implement adequate preventative
measures.
Data privacy regulations are expanding and compliance with, and any
violations of, these regulations may cause us to incur significant
expenses.
Privacy
legislation, enforcement and policy activity in this area are
expanding rapidly in many jurisdictions and creating a complex
regulatory compliance environment. Costs to comply with and
implement these privacy-related and data protection measures could
be significant. In addition, even our inadvertent failure to comply
with federal, state or international privacy-related or data
protection laws and regulations could result in proceedings against
us by governmental entities or others, and substantial fines and
damages. The theft, loss or misuse of personal data collected,
used, stored or transferred by us to run our business could result
in significantly increased business and security costs or costs
related to defending legal claims.
We are exposed to risks associated with payment card and payment
fraud and with payment card processing.
Certain
of our customers use payment cards to pay for our services and
products. We may suffer losses as a result of orders placed with
fraudulent payment cards or other payment data. Our failure to
detect or control payment fraud could have an adverse effect on our
results of operations. We are also subject to payment card
association operating standards and requirements, as in effect from
time to time. Compliance with those standards requires us to invest
in network and systems infrastructure and processes. Failure to
comply with these rules or requirements may subject us to fines,
potential contractual liabilities, and other costs, resulting in
harm to our business and results of operations.
19
Privacy concerns and laws or other domestic or foreign regulations
may require us to incur significant costs and may reduce the
effectiveness of our solutions, and our failure to comply with
those laws or regulations may harm our business and cause us to
lose customers.
Our
software and services contain features that allow our technology
specialists and other personnel to access, control, monitor, and
collect information from computers and other devices. Federal,
state and foreign government bodies and agencies, however, have
adopted or are considering adopting laws and regulations
restricting or otherwise regulating the collection, use and
disclosure of personal information obtained from consumers and
individuals. Those regulations could require costly compliance
measures, could reduce the efficiency of our operations, or could
require us to modify or cease to provide our systems or services.
Liability for violation of, costs of compliance with, and other
burdens imposed by such laws and regulations may limit the use and
adoption of our services and reduce overall demand for them. Even
the perception of privacy concerns, whether or not valid, may harm
our reputation and inhibit adoption of our solutions by current and
future customers. In addition, we may face claims about invasion of
privacy or inappropriate disclosure, use, storage, or loss of
information obtained from our customers. Any imposition of
liability could harm our reputation, cause us to lose customers and
cause our operating results to suffer.
We rely on third-party technologies in providing certain of our
software and services. Our inability to use, retain or integrate
third-party technologies could delay service or software
development and could harm our business.
We
license technologies from third parties, which are integrated into
our services, technology and end user software. Our use of
commercial technologies licensed on a non-exclusive basis from
third parties poses certain risks. Some of the third-party
technologies we license may be provided under “open
source” licenses, which may have terms that require us to
make generally available our modifications or derivative works
based on such open source code. Our inability to obtain or
integrate third-party technologies with our own technology could
delay service development until equivalent compatible technology
can be identified, licensed and integrated. These third-party
technologies may not continue to be available to us on commercially
reasonable terms or at all. If our relationship with third parties
were to deteriorate, or if such third parties were unable to
develop innovative and saleable products, or component features of
our products, we could be forced to identify a new developer and
our future revenue could suffer. We may fail to successfully
integrate any licensed technology into our services or software, or
maintain it through our own development work, which would harm our
business and operating results.
If our services are used to commit fraud or other similar
intentional or illegal acts, we may incur significant liabilities,
our services may be perceived as not secure and customers may
curtail or stop using our services.
Certain
software and services we provide, including our Support.com Cloud
applications, enable remote access to and control of third-party
computer systems and devices. We generally are not able to control
how such access may be used or misused by licensees of our software
offerings or our employees. If our software is used by our
employees or others to commit fraud or other illegal acts,
including, but not limited to, violating data privacy laws,
proliferating computer files that contain a virus or other harmful
elements, interfering or disrupting third-party networks,
infringing any third party’s copyright, patent, trademark,
trade secret or other rights, transmitting any unlawful, harassing,
libelous, abusive, threatening, vulgar, obscene or otherwise
objectionable material, or committing unauthorized access to
computers, devices, or protected information, third parties may
seek to hold us legally liable. As a result, defending such claims
could be expensive and time-consuming regardless of the merits, and
we could incur significant liability or be required to undertake
expensive preventive or remedial actions. As a result, our
operating results may suffer and our reputation may be
damaged.
20
Risks
Related to our Pending Merger with
Greenidge
Our
proposed merger with Greenidge is subject to a number of conditions
beyond our control. Failure to complete the merger within the
expected timeframe or at all could materially and adversely affect
our future business, results of operations, financial condition and
stock price.
On
March 19, 2021, we entered into
an Agreement and Plan of Merger (the “Merger
Agreement”) with Greenidge
Generation Holdings, Inc., a Delaware corporation
(“Greenidge”) and GGH Merger Sub, Inc., a Delaware
corporation and a wholly owned subsidiary of Greenidge
(“Merger Sub”). The Merger Agreement
provides, subject to the terms of the Merger Agreement, for the
merger of Merger Sub with and into the Company (the
“Merger”), with the Company surviving the Merger as a
wholly owned subsidiary of Greenidge. At the time the
Merger is consummated, all outstanding
shares of the Company’s common stock and all outstanding
restricted stock units and options to purchase shares of the
Company’s common stock will be cancelled and converted into
the right to receive shares of Class A Common Stock of Greenidge
(the “Greenidge Common Stock”). Please refer to
the Form 8K filed on March 22, 2021 for further
information.
The
consummation of the Merger is subject to certain conditions, a
number of which are beyond our control. These conditions that must
be satisfied or waived include, without limitation, (i) the
adoption of the Merger Agreement by a majority of the holders of
the outstanding shares of Company’s common stock entitled to
vote at a special stockholder meeting, (ii) no law or order
enjoining or making illegal the consummation of the Merger being in
effect, (iii) the receipt of all approvals and consents from any
applicable governmental authority that are necessary for the
consummation of the Merger, and the other transactions contemplated
by the Merger Agreement and the Ancillary Agreements (as defined in
the Merger Agreement), (iv) the effectiveness of a registration
statement on Form S-4 to register the Greenidge Common Stock
received pursuant to the Merger (the “Issued Stock”),
(v) the listing of the Issued Stock on the Nasdaq Global Select
Market or Nasdaq Capital Market, (vi) a requirement that we have at
least $28,000,000 in unrestricted cash, cash equivalents,
marketable securities and short-term investments, net of unpaid
transaction expenses, as of the closing of the Merger and
(vii) other conditions set forth in the Merger
Agreement.
We
cannot predict whether and when these conditions will be satisfied.
If one or more of these conditions is not satisfied, and as a
result, we do not complete the Merger, or in the event the proposed
Merger is not completed or is delayed for any other reason, our
business, results of operations, financial condition and stock
price may be harmed because:
●
management's and
our employees' attention may be diverted from our day-to-day
operations as they focus on matters related to preparing for
integration of our operations with those of Greenidge.
●
we
could potentially lose customers, new customer contracts could be
delayed or decreased and we may have difficulty hiring and
retaining employees;
●
we
could potentially lose key employees if such employees experience
uncertainty about their future roles with us and decide to pursue
other opportunities in light of the proposed Merger;
●
we have agreed to
restrictions in the Merger Agreement that limit how we conduct our
business prior to the consummation of the Merger, including, among
other things, restrictions on our ability to make certain
investments and acquisitions, sell, transfer or dispose of our
assets, amend our organizational documents and incur indebtedness.
These restrictions may not be in our best interests as an
independent company, and may disrupt or otherwise adversely affect
our business and our relationships with our customers, prevent us
from pursuing otherwise attractive business opportunities, limit
our ability to respond effectively to competitive pressures,
industry developments and future opportunities, and otherwise harm
our business, financial results and operations;
●
we
have incurred and expect to continue to incur expenses related to
the Merger, such as legal financial advisory and accounting fees,
and other expenses that are payable by us whether or not the
proposed Merger is completed;
●
we may
be required to pay a termination fee to Greenidge if the Merger
Agreement is terminated under certain circumstances, which would
negatively affect our financial results and
liquidity;
●
activities related
to the Merger and related uncertainties may lead to a loss of
revenue and market position that we may not be able to regain if
the proposed Merger does not occur; and
●
the
failure to, or delays in, consummating the Merger may result in a
negative impression of us with customers, potential customers or
the investment community.
The
occurrence of these or other events individually or in combination
could have a material adverse effect on our business, results of
operations, financial condition and stock price.
In
addition, our stock price may fluctuate significantly based on
announcements by us, Greenidge or other third parties regarding the
proposed Merger.
21
The Merger Agreement contains provisions that could discourage a
potential competing acquiror.
The
Merger Agreement contains “no-shop” restrictions on the
Company’s ability to solicit, initiate or knowingly encourage
third party proposals relating to alternative transactions or to
provide information to, or engage in discussions with, a third
party in relation to an alternative transaction, subject to certain
exceptions to permit our Board of Directors to comply with its
fiduciary duties. Before our Board Directors may change its
recommendation to stockholders to adopt the Merger or terminate the
Merger Agreement to accept a Superior Offer (as defined in the
Merger Agreement), the Company must, among other things, provide
Greenidge with four (4) business days’ notice and, if
requested by Greenidge, engage in good faith negotiations with
Greenidge to consider certain adjustments to the Merger Agreement
so that the alternative acquisition proposal ceases to constitute a
Superior Offer. Upon the termination of the Merger Agreement,
including in connection with a Superior Offer, we may be required
to pay $3.5 million as a termination fee.
These
provisions could
discourage a potential third party acquiror from considering or
proposing an acquisition transaction, even if it were prepared to
pay a higher per share price than what would be received in the
Merger. These provisions might also result in a potential third
party acquiror proposing to pay a lower price per share to our
stockholders than it might otherwise have proposed to pay because
of the added expense of the $3.5 million termination fee that may
become payable.
If the
Merger Agreement is terminated and we determine to seek another
business combination, we may not be able to negotiate a transaction
with another party on terms comparable to, or better than, the
terms of the Merger Agreement.
Our executive officers and directors have interests in the Merger
that may be different from, or in addition to, the interests of our
stockholders generally.
Our
executive officers and members of our Board of Directors may be
deemed to have interests in the Merger that may be different from
or in addition to those of our stockholders, generally. These
interests may create potential conflicts of interest. Our Board of
Directors was aware of these potentially differing interests and
considered them, among other matters, in evaluating and negotiating
the Merger Agreement and in reaching its decision to approve the
Merger Agreement and the transactions thereunder. These
interests relate to or arise from, among other
things:
●
the consideration
to be received in respect of options to purchase shares of Company
Common Stock and restricted stock unit awards held by our executive
officers and members of our Board of Directors;
●
the receipt of
certain payments and benefits to which certain executive officers
may become entitled pursuant to such executive officers’
respective employment agreements and in connection with the
completion of the Merger; and
●
the
right to continued indemnification and insurance coverage for our
directors and executive officers following the completion of the
Merger.
We could become subject to lawsuits, including class actions,
relating to the Merger, which could materially adversely affect our
business, financial condition and operating
results.
We,
our directors and officers, Greenidge and Merger Sub could become
subject to lawsuits, including class actions, brought by
shareholders relating to the Merger. Such litigation is
very common in connection with acquisitions of public companies,
regardless of any merits related to the underlying acquisition.
While we intend to defend against any actions vigorously, the costs
of the defense of such lawsuits and other effects of such
litigation could have an adverse effect on our business, financial
condition and operating results.
One
of the conditions to consummating the Merger is that no law or
order issued by any governmental entity of competent jurisdiction
enjoining or making illegal the consummation of the Merger is in
effect. Consequently, if any of the plaintiffs in any
such lawsuit is successful in obtaining an injunction preventing
the parties from consummating the Merger, such injunction may
prevent the Merger from being completed in the expected timeframe,
or at all.
We
have obligations under certain circumstances to hold harmless and
indemnify our directors and officers against judgments, fines,
settlements and expenses related to claims against such directors
and officers and otherwise to the fullest extent permitted under
Delaware law and our bylaws and certificate of incorporation. Such
obligations may apply to the current lawsuits and any other
potential litigation. However, an unfavorable outcome in any
lawsuit related to the Merger could prevent or delay the
consummation of the Merger and result in substantial costs to
us.
22
We will incur significant costs in connection with the Merger,
whether or not it is consummated.
We
will incur substantial expenses related to the Merger, whether or
not it is completed. Payment of these expenses by us as a
standalone entity would adversely affect our operating results and
financial condition and would likely adversely affect our stock
price.
General business risks
Our indemnification obligations and limitations of our director and
officer liability insurance may have a material adverse effect on
our financial condition, results of operations and cash
flows.
Under
Delaware law, our Restated Certificate of Incorporation and Amended
and Restated Bylaws and indemnification agreements to which we are
a party, we have an obligation to indemnify, or we have otherwise
agreed to indemnify, certain of our current and former directors,
officers and/or employees with respect to past, current and future
investigations and litigation. For example, we have incurred
indemnification expenses in connection with the FTC investigation
completed in March 2019. In such instances, we are required to, or
we have otherwise agreed to, advance, and have advanced, legal fees
and related expenses to certain of our current and former
directors, officers and employees, and expect to continue to do so
while these matters are pending. Indemnification obligations may
not be “covered matters” under our directors’ and
officers’ liability insurance, or there may be insufficient
coverage available. Further, in the event the directors and
officers are ultimately determined not to be entitled to
indemnification, we may not be able to recover any amounts we
previously advanced to them. We cannot provide any assurances that
future indemnification claims, including the cost of fees,
penalties or other expenses, will not exceed the limits of our
insurance policies, that such claims are covered by the terms of
our insurance policies or that our insurance carrier will be able
to cover our claims. Additionally, to the extent there is coverage
of these claims, the insurers also may seek to deny or limit
coverage in some or all of these matters. Furthermore, the insurers
could become insolvent and unable to fulfill their obligation to
defend, pay or reimburse us for insured claims. Accordingly, we
cannot be sure that claims will not arise that are in excess of the
limits of our insurance or that are not covered by the terms of our
insurance policy. Due to these coverage limitations, we may incur
significant unreimbursed costs to satisfy our indemnification
obligations, which may have a material adverse effect on our
financial condition, results of operations or cash
flows.
Our provision for income taxes is subject to volatility and could
be adversely affected by a number of factors.
Our
overall tax provisions and accruals are affected by a number of
factors, including any potential reorganization or restructuring of
our businesses, including tangible and intangible assets, the
resulting tax effects of differing tax rates in different state
jurisdictions, changes in transfer pricing rules or methods of
applying these rules, and changes in tax laws in various
jurisdictions. While we believe our tax estimates are reasonable,
there is no assurance that the final determination of our income
tax liability will not be materially different than what is
reflected in our income tax provisions and accruals. Significant
judgment is required to determine the recognition and measurement
of tax liabilities prescribed in the relevant accounting guidance
for uncertainty in income taxes. The accounting guidance for
uncertainty in income taxes applies to all income tax positions,
which, if resolved unfavorably, could adversely impact our
provision for income taxes and our payment obligation with respect
to any such taxes.
Our business operates in regulated industries.
Our
current and anticipated service offerings operate in industries,
such as home security, that are subject to various federal, state,
provincial and local laws and regulations in the markets in which
we operate. In certain jurisdictions, we may be required to obtain
licenses or permits in order to comply with standards governing
employee selection and training and to meet certain standards or
licensing requirements in the conduct of our business. The loss of
such licenses or permits or the imposition of conditions to the
granting or retention of such licenses or permits could have a
material adverse effect on us.
Changes
in laws or regulations could require us to change the way we
operate or to utilize resources to maintain compliance, which could
increase costs or otherwise disrupt operations. In addition,
failure to comply with any applicable laws or regulations could
result in substantial fines or revocation of our operating permits
and licenses for us or our partners. If laws and regulations were
to change, or if we or our products and services were deemed not to
comply with them, our business, financial condition, results of
operations and cash flows could be materially and adversely
affected.
23
Delaware law and our certificate of incorporation and bylaws
contain anti-takeover provisions, and our Board adopted a Section
382 Tax Benefits Preservation Plan, any of which could delay or
discourage takeover attempts that some stockholders may consider
favorable.
Delaware
law and our certificate of incorporation and amended and restated
bylaws contain certain provisions, any of which could render more
difficult, or discourage a merger, tender offer, or assumption of
control of the Company that is not approved by our Board that some
stockholders may consider favorable. In addition, on August 21,
2019, our Board acted to preserve the potential benefits of our
NOLs from being limited pursuant to Section 382 of the Code by
adopting a Section 382 Tax Benefits Preservation Plan (the
“Section 382 Tax Benefits Preservation Plan”). The
principal reason our Board adopted the Section 382 Tax Benefits
Preservation Plan is that we believe that the NOLs are a
potentially valuable asset and the Board believes it is in the
Company’s best interests to attempt to protect this asset by
preventing the imposition of limitations on their use. While the
Section 382 Tax Benefits Preservation Plan is not principally
intended to prevent a takeover, it does have a potential
anti-takeover effect because an “acquiring person”
thereunder may be diluted upon the occurrence of a triggering
event. Accordingly, the overall effects of the Section 382 Tax
Benefits Preservation Plan may be to render more difficult, or
discourage merger, tender offer, or assumption of control by a
substantial holder of our securities.
Our ability to use net operating loss carryforwards to offset
future taxable income for U.S. federal income tax purposes may be
limited.
We
have federal net operating loss (NOL) carryforwards that are
available to offset future taxable income. We may recognize
additional NOLs in the future. Section 382 of the Internal
Revenue Code of 1986, as amended (the Code) imposes an annual
limitation on the amount of taxable income that may be offset by a
corporation's NOLs if the corporation experiences an
“ownership change” as defined in Section 382 of
the Code. An ownership change occurs when our
“five-percent shareholders” (as defined in
Section 382 of the Code) collectively increase their ownership
in the Company by more than 50 percentage points (by value) over a
rolling three-year period. Additionally, various states have
similar limitations on the use of state NOLs following an ownership
change.
If
an ownership change occurs, the amount of the taxable income for
any post-change year that may be offset by a pre-change loss is
subject to an annual limitation that is cumulative to the extent it
is not all utilized in a year. This limitation is derived by
multiplying the fair market value of our stock as of the ownership
change by the applicable federal long-term tax-exempt rate. To the
extent that a company has a net unrealized built-in gain at the
time of an ownership change, which is realized or deemed recognized
during the five-year period following the ownership change, there
is an increase in the annual limitation for each of the first
five-years that is cumulative to the extent it is not all utilized
in a year. If an ownership change should occur in the future, our
ability to use the NOL to offset future taxable income will be
subject to an annual limitation and will depend on the amount of
taxable income generated by us in future periods. There is no
assurance that we will be able to fully utilize the NOL and we may
be required to record an additional valuation allowance related to
the amount of the NOL that may not be realized, which could impact
our result of operations.
As
noted, we believe that these NOL carryforwards are a valuable asset
for us. Consequently, we have a Section 382 Tax Benefits
Preservation Plan in place, to protect our NOLs during the
effective period of the rights plan. Although the Tax Benefits
Preservation Plan is intended to reduce the likelihood of an
“ownership change” that could adversely affect us,
there is no assurance that the restrictions on transferability in
the rights plan will prevent all transfers that could result in
such an “ownership change”. The Tax Benefits
Preservation Plan could make it more difficult for a third party to
acquire, or could discourage a third party from acquiring, our
Company or a large block of our common stock. A third party that
acquires 4.9% or more of our common stock could suffer substantial
dilution of its ownership interest under the terms of the Tax
Benefits Preservation Plan through the issuance of common stock or
common stock equivalents to all stockholders other than the
acquiring person. The foregoing provisions may adversely affect the
marketability of our common stock by discouraging potential
investors from acquiring our stock. In addition, these provisions
could delay or frustrate the removal of incumbent directors and
could make more difficult a merger, tender offer or proxy contest
involving us, or impede an attempt to acquire a significant or
controlling interest in us, even if such events might be beneficial
to us and our stockholders.
ITEM 1B. – UNRESOLVED STAFF
COMMENTS
Not
applicable.
24
ITEM 2 – PROPERTIES
Administrative
and engineering activities were conducted in Sunnyvale, California.
On March 23, 2018, we entered into a two-year lease agreement with
an effective date of April 1, 2018 for our Sunnyvale office
facility, covering approximately 6,283 square feet with the monthly
rent of $15,000. During 2020, we extended the lease, which is now
scheduled to expire on March 31, 2021. We do not expect to extend
the Sunnyvale lease.
We
lease office facilities in Eugene, Oregon for which the lease
agreement is scheduled to expire on December 31, 2021.
We
lease office facilities in Louisville, Colorado for which the lease
agreement is scheduled to expire on April 30, 2021.
In
addition, we lease office space in Mandaluyong, Philippines for
which the lease agreement is scheduled to expire on May 15,
2021.
ITEM 3 – LEGAL
PROCEEDINGS
See Note 3 of the notes to the consolidated financial statements
contained within this annual report on Form 10-K for a discussion
of our legal proceedings.
ITEM 4 – MINE SAFETY
DISCLOSURES
Not
applicable.
PART II
ITEM 5 – MARKET FOR THE
REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASE OF EQUITY SECURITIES
Market Information
The
principal U.S. trading market for our common stock is the Nasdaq
Capital Market. Our common stock is traded under the symbol
"SPRT."
Holders
As
of December 31, 2020, there were 81 stockholders of record of our
common stock (not including beneficial holders of stock held in
street name).
25
Dividends
Historically,
we have not declared or paid any cash dividends on our capital
stock. As a part of the board of directors’ ongoing capital
allocation review, on December 6, 2019, the board of directors
authorized and declared a special cash distribution of $1.00 per
share on each outstanding share of our common stock. The record
date for this distribution was December 17, 2019 and the payment
date was December 26, 2019. Accordingly, we paid $19.1 million to
stockholders on December 26, 2019. No dividends were declared or
paid during the year ended December 31, 2020.
We
currently anticipate that all future earnings, if any, generated
from operations will be retained by us to develop and expand our
business. Any future determination with respect to the payment of
dividends will be at the discretion of the board of directors and
will depend on, among other things, our operating results,
financial condition and capital requirements, the terms of
then-existing indebtedness, general business conditions and such
other factors as the board of directors deems
relevant.
Securities Authorized for Issuance Under Equity Compensation
Plans
Information
regarding the securities authorized for issuance under our equity
compensation plans can be found under Item 12 of Part III of this
Report.
ITEM 6 – SELECTED FINANCIAL
DATA
As a “smaller reporting company,” as defined in Rule
12b-2 of the Exchange Act, we are not required to provide the
information called for by this Item.
ITEM 7 – MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion of our financial condition and results of
operations should be read in conjunction with our consolidated
financial statements and the related notes included elsewhere in
this Form 10-K. The following discussion includes forward-looking
statements. Please see the section entitled “Risk
Factors” in Item 1A of
this Form 10-K for important information to consider when
evaluating these statements.
Overview
We provide customer and technical support solutions delivered
primarily solely through our home-based employee model. Our
cloud-based technology platform is designed to deliver scalable and
flexible solutions from a global, home-based workforce. With this
ExpertAnywhere delivery capability, we meet client needs through a
network of on-demand, custom-profiled experts.
We
intend the following discussion of our financial condition and
results of operations to provide information that will assist in
understanding our consolidated financial statements, the changes in
certain key items in those consolidated financial statements from
year to year, and the primary factors that accounted for those
changes, as well as how certain accounting principles, policies and
estimates affect our consolidated financial
statements.
26
Results of Operations
The
following table presents certain consolidated statements of
operations data for the periods indicated as a percentage of total
revenue:
|
Years Ended December 31,
|
|
|
2020
|
2019
|
Revenue:
|
|
|
Services
|
95.9%
|
94.0%
|
Software
and other
|
4.1
|
6.0
|
Total
revenue
|
100.0
|
100.0
|
|
|
|
Cost
of revenue:
|
|
|
Cost
of services
|
65.4
|
73.8
|
Cost
of software and other
|
0.5
|
0.2
|
Total
cost of revenue
|
65.9
|
74.0
|
Gross
profit
|
34.1
|
26.0
|
|
|
|
Operating
expenses:
|
|
|
Engineering
and IT
|
8.3
|
6.5
|
Sales
and marketing
|
5.4
|
2.8
|
General
and administrative
|
20.2
|
12.1
|
Total
operating expenses
|
33.9
|
21.4
|
|
|
|
Income
from operations
|
0.1
|
4.6
|
Interest
and other income, net
|
1.1
|
1.7
|
Income
from operations, before income taxes
|
1.2
|
6.3
|
Income
tax provision
|
0.2
|
0.2
|
Net
income
|
1.0%
|
6.1%
|
27
Years Ended December 31, 2020 and 2019:
Revenue
|
Years Ended December 31,
|
|
|
|
In thousands, except percentages
|
2020
|
2019
|
$ Change
|
% Change
|
Services
|
$42,079
|
$59,545
|
$(17,466)
|
(29.3)%
|
Software
and other
|
1,785
|
3,788
|
(2,003)
|
(52.9)
|
Total
revenue
|
$43,864
|
$63,333
|
$(19,469)
|
(30.7)%
|
Services. Services revenue consists primarily of fees for
customer support services generated from our partners. We provide
these services remotely, generally using service delivery personnel
who utilize our proprietary technology or client systems as
specified by the client to deliver the services. Services revenue
is also comprised of licensing of our Support.com Cloud
applications. Services revenue for the year ended December 31, 2020
decreased by $17.5 million, or 29.3%, from the same period in 2019.
These decreases were primarily due to a decline in one line of
business from one of our major customers due to a realignment of
the customer’s needs, which concluded in the second quarter
of 2020. We intend to shift our focus from the direct-to-consumer
market to the enterprise business market, and from primarily U.S.
based delivery capabilities to global delivery capabilities. As
with any market that is undergoing shifts, growth opportunities in
our services programs are difficult to predict, but we are focused
on delivering growth through these new strategic
initiatives.
Software and
other. Software and other
revenue is comprised primarily of fees for end-user software
products provided through direct customer downloads, and, to a
lesser extent, through the sale of these software products via
partners. Software and other revenue for the year ended December
31, 2020 decreased by $2.0 million, or 52.9%, from the same period
in 2019 primarily due to the cancellation of a significant customer
agreement.
Revenue Mix
The
components of revenue, expressed as a percentage of total revenue
were:
|
Years Ended December 31,
|
|
|
2020
|
2019
|
Services
|
95.9%
|
94.0%
|
Software
and other
|
4.1
|
6.0
|
Total
revenue
|
100.0%
|
100.0%
|
For the years ended December 31, 2020 and 2019,
our two largest customers accounted
for 87% and 88% of our total revenue,
respectively. No
other customers accounted for 10% or more of our total revenue in
any year presented. Revenue from customers outside the United
States was immaterial during the years ended December 31, 2020 and
2019.
28
Cost of Revenue
|
Years Ended December 31,
|
|
|
|
In thousands, except percentages
|
2020
|
2019
|
$ Change
|
% Change
|
Cost
of services
|
$28,697
|
$46,714
|
$(18,017)
|
(38.6)%
|
Cost
of software and other
|
224
|
151
|
73
|
48.3
|
Total
cost of revenue
|
$28,921
|
$46,865
|
$(17,944)
|
(38.3)%
|
Cost of
services. Cost of services
consists primarily of compensation costs and contractor expenses
for people providing services, technology and telecommunication
expenses related to the delivery of services and other
personnel-related expenses in service delivery. The decrease of
$18.0 million, or 38.6%, in cost of services for the year ended
December 31, 2020 compared to the same period in 2019 was primarily
due to lower personnel expenses due to a decrease in headcount as a
result of the decreased business from one of our major customers,
partially offset by one-time
costs associated with the transition of our executive team and
other transition related costs.
Cost of software and
other. Cost of software and
other consists primarily of third-party royalty fees for our
end-user software products. Certain of these products were
developed using third-party research and development resources, and
the third party receives royalty payments on sales of products it
developed.
Operating expenses
|
Years Ended December 31,
|
|
|
|
In thousands, except percentages
|
2020
|
2019
|
$ Change
|
% Change
|
Engineering
and IT
|
$3,655
|
$4,078
|
$(423)
|
(10.4)%
|
Sales
and marketing
|
2,362
|
1,760
|
602
|
34.2
|
General
and administrative
|
8,874
|
7,679
|
1,195
|
15.6
|
Total
operating expenses
|
$14,891
|
$13,517
|
$1,374
|
10.2%
|
Engineering and IT.
Engineering and IT expense consists
primarily of compensation costs, third-party consulting expenses
and related overhead costs for engineering and IT personnel and are
expensed as they are incurred. Engineering and IT costs for the
year ended December 31, 2020 decreased $0.4 million, or 10.4%, as
compared to the same period in 2019 primarily due to reduced costs
related to contractors providing services for direct-to-consumer
related projects.
29
Sales and marketing.
Sales and marketing expense consists
primarily of compensation costs of business development, program
management and marketing personnel, as well as expenses for lead
generation and promotional activities, including public relations,
website design, advertising and marketing. Sales and marketing
costs for the year ended December 31, 2020 increased $0.6 million,
or 34.2%, as compared to the same period in 2019 primarily due to
costs related to marketing campaigns targeted to generate growth
opportunities as well as one-time costs associated with the
transition of our executive team and other transition related
costs.
General and
administrative. General and
administrative expense consists primarily of compensation costs and
related overhead costs for administrative personnel and
professional fees for legal, accounting and other professional
services. General and administrative costs for year ended December
31, 2020 increased $1.2 million, or 15.6%, as compared to the same
period in 2019 primarily due to higher headcount related costs as
well as one-time costs associated with the transition of our
executive team and other transition related costs. Additionally,
our indefinite-lived intangible asset was fully impaired during
2020.
Interest income and other, net
|
Years Ended December 31,
|
|
|
|
In thousands, except percentages
|
2020
|
2019
|
$ Change
|
% Change
|
Interest
income and other, net
|
$496
|
$1,049
|
$(553)
|
(52.7)%
|
Interest income and other,
net. Interest income and other,
net consists primarily of interest income on our cash, cash
equivalents and short-term investments. Interest income and other,
net for the year ended December 31, 2020 decreased $0.6 million, or
52.7%, as compared to the same period in 2019 primarily due to
lower cash and cash equivalents and short-term investments after
the $19.1 million cash dividend paid in December 2019, coupled with
lower yields on investments.
Income tax provision
|
Years Ended December 31,
|
|
|
|
In thousands, except percentages
|
2020
|
2019
|
$ Change
|
% Change
|
Income
tax provision
|
$102
|
$154
|
$(52)
|
(33.8)%
|
Income tax provision.
The income tax provision is comprised
of estimates of current taxes due in domestic and foreign
jurisdictions and changes in deferred tax balances. For the year
ended December 31, 2020, the income tax provision consisted of a
$93,000 provision for foreign taxes and a $9,000 provision for
state income tax. For the year ended December 31, 2019, the income
tax provision consisted of a $138,000 provision for foreign taxes
and a $16,000 provision for state income tax.
30
Liquidity and Capital Resources
Total
cash, cash equivalents and short-term investments at December 31,
2020 and 2019 was $30.0 million and $26.4 million, respectively.
Cash equivalents and short-term investments are comprised of money
market funds, certificates of deposit, corporate notes and bonds,
and U.S. government agency securities. Certain amounts of our
foreign subsidiary cash may be subject to taxes or other
restrictions if we repatriate the cash to the United States. We
have certain contractual operating leases and uncertain tax
positions, including interest and penalties, which create
contractual obligations.
Operating Activities
During
the year ended December 31, 2020, our net cash provided by
operating activities was $4.3 million as a result of net income,
non-cash adjustments of $1.3 million, and a decrease in accounts
receivable, partially offset by a decrease in deferred
revenue.
During
the year ended December 31, 2019, our net cash used in operating
activities was $4.1 million as a result of decreases in accrued
legal settlement and accrued compensation, partially offset by net
income, non-cash adjustments of $0.7 million and decreases in
accounts receivable and prepaid expenses and other current
assets.
Investing Activities
During
the year ended December 31, 2020, our net cash used in investing
activities was $1.1 million as a result of maturities of
investments, purchases of investments and purchases of property and
equipment.
During
the year ended December 31, 2019, our net cash provided by
investing activities was $8.0 million as a result of sales and
maturities of investments, purchases of investments and purchases
of property and equipment.
Financing Activities
During
the year ended December 31, 2020, our net cash provided by
financing activities was $0.2 million, as a result of proceeds from
the issuance of common stock under employee stock purchase plan and
from the exercise of stock options.
During
the year ended December 31, 2019, our net cash used in financing
activities was $19.0 million, as a result of a dividend payment and
proceeds from the issuance of common stock under employee stock
purchase plans.
31
Working Capital and Capital Expenditure Requirements
At
December 31, 2020, we had stockholders’ equity of $34.4
million and working capital of $33.7 million. We believe that our
cash and cash equivalents balances and our ongoing cash flow from
operations will be sufficient to satisfy our cash requirements for
at least the next 12 months.
If
we require additional capital resources to grow our business
internally or to acquire complementary technologies and businesses
at any time in the future, we may seek to sell additional equity or
debt securities. The sale of additional equity could result in more
dilution to our stockholders.
Recent Accounting Pronouncements
See
Note 1 – Organization and Summary of Significant Accounting
Policies to the consolidated financial statements included in Part
II, Item 8 of this annual report on Form 10-K for a summary of new
accounting standards.
Critical Accounting Policies and Estimates
In
preparing our consolidated financial statements in conformity with
accounting principles generally accepted in the United States,
management must undertake decisions that impact the reported
amounts and related disclosures. Such decisions include the
selection of the appropriate accounting principles to be applied
and assumptions upon which accounting estimates are based.
Management applies its best judgment based on its understanding and
analysis of the relevant circumstances to reach these decisions. By
their nature, these judgments are subject to an inherent degree of
uncertainty. Accordingly, actual results may vary significantly
from the estimates we have applied.
Please
refer to Note 1 of the notes to the consolidated financial
statements in our Form 10-K for the year ended December 31, 2020
for a complete description of our critical accounting policies and
estimates.
ITEM 7A – QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company,” as defined in Rule
12b-2 of the Exchange Act, we are not required to provide the
information called for by this Item.
32
ITEM 8 – FINANCIAL STATEMENTS AND
SUPPLEMENTAL DATA
SUPPORT.COM, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
Page
|
|
|
30
|
|
31
|
|
32
|
|
33
|
|
34
|
|
35
|
|
36
|
33
Report of Independent Registered
Public Accounting Firm
To the
Stockholders and Board of Directors of Support.com,
Inc.
Opinion on the Consolidated Financial
Statements
We have audited the accompanying
consolidated balance sheets of Support.com, Inc. (the
“Company”) as of December 31, 2020 and 2019, the
related consolidated statements of operations, comprehensive
income, stockholders' equity, and cash flows for each of the years
in the two year period ended December 31, 2020, and the related
notes (collectively referred to as the “financial
statements”). In our opinion, the financial statements
referred to above present fairly, in all material respects, the
financial position of the Company as of December 31, 2020 and 2019,
and the results of its operations and its cash flows for each of
the years in the two-year period ended December 31, 2020, in
conformity with accounting principles generally accepted in the
United States of America.
Basis
for Opinion
The Company's
management is responsible for these financial statements. Our
responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and are
required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audits in accordance
with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement,
whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control
over financial reporting. As part of our audits we are required to
obtain an understanding of internal control over financial
reporting but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion.
Our audits
included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audit
also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that
our audits provide a reasonable basis for our
opinion.
Emphasis
of Matter - Subsequent
Event
As
discussed in Note 9 to the financial statements, on March 19, 2021
the Company and Greenidge Generation Holdings, Inc. (Greenidge)
entered into an agreement and plan of merger which will result in
Greenidge acquiring the Company.
Critical Audit
Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated to the audit committee and that (1) relates to accounts of disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communication the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
34
Income Taxes - Refer to Notes 1 and 7 to the
financial statements
The Company's net deferred tax
liability and uncertain tax position liability were $443,000 and
$111,000, respectively, as of December 31, 2020 and the related
total income tax expense was $102,000 for the year ended December
31, 2020. Deferred tax
assets and liabilities are recognized for the future expected
tax consequences of temporary differences between income tax and
financial reporting and principally relate to differences in the
tax basis of assets and liabilities and their reported
amounts, using enacted tax rates in effect for the year in
which
differences are expected to
reverse. Filing positions in all of the federal, state and
foreign jurisdictions where the Company is
required to file income tax returns are analyzed by the Company, as
well as all open tax years in these jurisdictions, to determine
whether the positions will be more likely than not be
sustained by the applicable tax authority. Tax positions not deemed
to meet the more-likely-than-not threshold are not recorded as a
tax benefit or expense in the current year.
We identified income taxes and
uncertain tax positions as a critical audit matter due to the
multiple jurisdictions in which the Company
operates including foreign jurisdictions and the complexity of tax
laws and regulations. Performing audit procedures and evaluating
audit evidence obtained related to these considerations
required a high degree of judgement and effort.
How the
Critical Audit Matter Was Addressed in the
Audit
Our audit procedures performed to
address this critical audit matter included the following,
among
others:
●
We obtained an understanding
of management's process to identify and evaluate tax obligations
and uncertain tax positions and evaluated the design of key
controls used by management therein.
●
We evaluated the completeness
and accuracy of deferred income taxes and the income tax provision
by agreement to material tax filings.
●
We assessed the
reasonableness of the key judgements and estimates inherent in
management's assessment of their tax obligation and uncertain tax
positions, including analysis over forecasts and tax
elections.
●
We involved our tax
specialists with our evaluation of management's judgements related
to recognition of current and deferred income taxes and identified
uncertain tax positions by analyzing the related tax law, statutes,
and regulations and their application to the company's
positions.
●
We evaluated the adequacy of
the Company's disclosure in Notes 1 and 7 in relation to the income
taxes.
/s/ Plante
& Moran, PLLC
We have served as the Company's
auditor since 2017.
Denver,
Colorado
March
30, 2021
35
SUPPORT.COM, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands except per share amount)
|
December 31,
|
|
|
2020
|
2019
|
ASSETS
|
|
|
Current
assets:
|
|
|
Cash
and cash equivalents
|
$13,526
|
$10,087
|
Short-term
investments
|
16,441
|
16,327
|
Accounts
receivable, net
|
6,975
|
9,398
|
Prepaid
expenses and other current assets
|
670
|
728
|
Total
current assets
|
37,612
|
36,540
|
|
|
|
Property
and equipment, net
|
1,115
|
533
|
Intangible
assets
|
—
|
250
|
Right
of use assets, net
|
61
|
68
|
Other
assets
|
478
|
649
|
|
|
|
TOTAL
ASSETS
|
$39,266
|
$38,040
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$366
|
$277
|
Accrued
compensation
|
1,735
|
1,610
|
Other
accrued liabilities
|
879
|
940
|
Short-term
lease liability
|
58
|
61
|
Short-term
deferred revenue
|
881
|
1,193
|
Total
current liabilities
|
3,919
|
4,081
|
Other
long-term liabilities
|
911
|
792
|
Total
liabilities
|
4,830
|
4,873
|
Commitments
and contingencies (Note 3)
|
|
|
Stockholders’
equity:
|
|
|
Common
stock; par value $0.0001, 50,000 shares authorized; 19,973 issued
and 19,490 outstanding at December 31, 2020 and 19,537 issued and
19,054 outstanding at December 31, 2019
|
2
|
2
|
Additional
paid-in capital
|
250,954
|
250,092
|
Treasury
stock, at cost (483 shares at December 31, 2020 and
2019)
|
(5,297)
|
(5,297)
|
Accumulated
other comprehensive loss
|
(2,419)
|
(2,380)
|
Accumulated
deficit
|
(208,804)
|
(209,250)
|
Total
stockholders’ equity
|
34,436
|
33,167
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$39,266
|
$38,040
|
See accompanying notes.
36
SUPPORT.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
|
Years Ended December 31,
|
|
|
2020
|
2019
|
Revenue:
|
|
|
Services
|
$42,079
|
$59,545
|
Software
and other
|
1,785
|
3,788
|
Total
revenue
|
43,864
|
63,333
|
|
|
|
Cost
of revenue:
|
|
|
Cost
of services
|
28,697
|
46,714
|
Cost
of software and other
|
224
|
151
|
Total
cost of revenue
|
28,921
|
46,865
|
Gross
profit
|
14,943
|
16,468
|
|
|
|
Operating
expenses:
|
|
|
Engineering
and IT
|
3,655
|
4,078
|
Sales
and marketing
|
2,362
|
1,760
|
General
and administrative
|
8,874
|
7,679
|
Total
operating expenses
|
14,891
|
13,517
|
Income
from operations
|
52
|
2,951
|
Interest
income and other, net
|
496
|
1,049
|
Income
before income taxes
|
548
|
4,000
|
Income
tax provision
|
102
|
154
|
Net
income
|
$446
|
$3,846
|
|
|
|
Net
income per share – basic and diluted
|
$0.02
|
$0.20
|
|
|
|
Weighted
average common shares outstanding – basic
|
19,192
|
18,977
|
Weighted
average common shares outstanding – diluted
|
19,369
|
19,026
|
See accompanying notes.
37
SUPPORT.COM, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
|
Years Ended December 31,
|
|
|
2020
|
2019
|
|
|
|
Net
income
|
$446
|
$3,846
|
|
|
|
Other
comprehensive income (loss):
Foreign
currency translation adjustment
|
(44)
|
49
|
Net
unrealized gain on investments
|
5
|
78
|
Other
comprehensive income (loss)
|
(39)
|
127
|
|
|
|
Comprehensive
income
|
$407
|
$3,973
|
See accompanying notes.
38
SUPPORT.COM, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
|
Common Stock
|
|
|
|
|
|
|
|
Shares
|
Amount
|
Additional
Paid-In
Capital
|
Treasury
Stock
|
Accumulated
Other
Comprehensive
Loss
|
Accumulated
Deficit
|
Total
Stockholders’
Equity
|
Balances
at December 31, 2018
|
18,955
|
$2
|
$268,794
|
$(5,297)
|
$(2,507)
|
$(213,096)
|
$47,896
|
Net
income
|
—
|
—
|
—
|
—
|
—
|
3,846
|
3,846
|
Dividend
payout
|
—
|
—
|
(19,054)
|
—
|
—
|
—
|
(19,054)
|
Other
comprehensive loss
|
—
|
—
|
—
|
—
|
127
|
—
|
127
|
Issuance
of common stock upon exercise of stock options & RSU
releases
|
73
|
—
|
—
|
—
|
—
|
—
|
—
|
Issuance
of common stock under employee stock purchase plan
|
26
|
—
|
48
|
—
|
—
|
—
|
48
|
Stock-based
compensation expense
|
—
|
—
|
304
|
—
|
—
|
—
|
304
|
Balances
at December 31, 2019
|
19,054
|
$2
|
$250,092
|
$(5,297)
|
$(2,380)
|
$(209,250)
|
$33,167
|
Net
income
|
—
|
—
|
—
|
—
|
—
|
446
|
446
|
Other
comprehensive loss
|
—
|
—
|
—
|
—
|
(39)
|
—
|
(39)
|
Issuance
of common stock upon exercise of stock options & RSU
releases
|
392
|
—
|
191
|
—
|
—
|
—
|
191
|
Issuance
of common stock under employee stock purchase plan
|
44
|
—
|
37
|
—
|
—
|
—
|
37
|
Stock-based
compensation expense
|
—
|
—
|
634
|
—
|
—
|
—
|
634
|
Balances
at December 31, 2020
|
19,490
|
$2
|
$250,954
|
$(5,297)
|
$(2,419)
|
$(208,804)
|
$34,436
|
See accompanying notes.
39
SUPPORT.COM, INC.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(in thousands)
|
Years Ended December 31,
|
|
|
2020
|
2019
|
Operating
Activities:
|
|
|
Net
income
|
$$446
|
$$3,846
|
Adjustments
to reconcile net income to net cash provided by (used in) operating
activities:
|
|
|
Depreciation
|
314
|
294
|
Amortization
of premiums and discounts on investments
|
65
|
83
|
Stock-based
compensation
|
634
|
304
|
Impairment
of intangible asset
|
250
|
—
|
Changes
in assets and liabilities:
|
|
|
Accounts
receivable, net
|
2,423
|
2,893
|
Prepaid
expenses and other current assets
|
41
|
282
|
Other
long-term assets
|
142
|
40
|
Accounts
payable
|
87
|
(92)
|
Accrued
compensation
|
120
|
(1,804)
|
Accrued
legal settlement
|
—
|
(10,000)
|
Other
accrued liabilities
|
(46)
|
26
|
Other
long-term liabilities
|
104
|
18
|
Deferred
revenue
|
(312)
|
58
|
Net
cash provided by (used in) operating activities
|
4,268
|
(4,052)
|
|
|
|
Investing
Activities:
|
|
|
Purchases
of property and equipment
|
(896)
|
(124)
|
Disposal
of property and equipment
|
—
|
3
|
Purchase
of investments
|
(13,375)
|
(34,898)
|
Proceeds
from sale of investments
|
—
|
9,766
|
Maturities
of investments
|
13,200
|
33,267
|
Net
cash provided by (used in) investing activities
|
(1,071)
|
8,014
|
|
|
|
Financing
Activities:
|
|
|
Payment
of dividend
|
—
|
(19,054)
|
Proceeds
from exercise of stock options
|
191
|
—
|
Proceeds
from employee stock purchase plan
|
37
|
48
|
Net
cash provided by (used in) financing activities
|
228
|
(19,006)
|
Effect
of exchange rate changes on cash and cash equivalents
|
14
|
(51)
|
Net
increase (decrease) in cash and cash equivalents
|
3,439
|
(15,095)
|
Cash
and cash equivalents at beginning of year
|
10,087
|
25,182
|
Cash
and cash equivalents at end of year
|
$13,526
|
$10,087
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
Cash
paid for income tax
|
$135
|
$98
|
See accompanying notes.
40
SUPPORT.COM, INC
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
Note 1. Organization and Summary of Significant Accounting
Policies
Nature of Operations
Support.com,
Inc. (“Support.com,” “the Company,”
“We” or “Our”) was incorporated in the
state of Delaware on December 3, 1997. Our common stock trades on
the Nasdaq Capital Market under the symbol
“SPRT.”
We
provide customer and technical support solutions delivered by
home-based employees. Our homesourcing model, which enables
outsourced work to be delivered by people working from home, has
been specifically designed for remote work and optimized for
security, recruiting, training, delivery and employee
engagement.
We
provide outsourced customer care and cloud-based technology
platforms to companies in multiple industry verticals, helping them
strengthen customer relationships and brand loyalty, increase
revenue, and reduce costs. We serve clients in verticals such as
healthcare, retail, communication services, and technology with
omnichannel programs that include voice, chat, and self-service. We
meet client needs through our scalable, global network of
home-based employees and secure, proprietary, cloud-based
platforms. With our fully distributed team, we are able to flex
staffing levels and skill sets to address client requirements,
offering business process continuity. We custom-profile customer
care professionals (called “experts”) who meet the
requirements for the work-from-home environment and for specific
client criteria related to industry experience, skill set,
etc.
We
offer fully-managed premium technical support programs to our
enterprise clients that are upsold to the clients’ end
customers. These tailored programs can be bundled with
complementary services or offered on a stand-alone basis as a
subscription or one-time purchase. These tech support programs help
clients drive incremental revenue, reduce costs, and increase
customer satisfaction.
Basis of Presentation
The
consolidated financial statements include the accounts of
Support.com and its wholly-owned foreign subsidiaries. All
intercompany transactions and balances have been
eliminated.
Impact of Disease Outbreak
On
March 11, 2020, the World Health Organization declared the outbreak
of a respiratory disease caused by a new coronavirus as a
“pandemic.” First identified in late 2019 and known now
as COVID-19, the outbreak has impacted millions of individuals
worldwide. In response, many countries have implemented measures to
combat the outbreak which have impacted global business operations.
During 2020 and as of the financial statement date of issuance, our
operations have not been significantly impacted; however, we
continue to monitor the situation. With respect to the pandemic, no
impairments were recorded as of the balance sheet date as no
triggering events or changes in circumstances had occurred as of
December 31, 2020; however, due to significant uncertainty
surrounding the situation, management's judgment regarding this
could change in the future. In addition, while our results of
operations, cash flows and financial condition have not been
significantly impacted to date, they could be negatively impacted
in the future. The extent of the impact, if any, cannot be
reasonably estimated at this time.
Foreign Currency Translation
The
functional currency of our foreign subsidiaries is generally the
local currency. Assets and liabilities of our wholly owned foreign
subsidiaries are translated from their respective functional
currencies at exchange rates in effect at the balance sheet date,
and revenues and expenses are translated at average exchange rates
prevailing during the year. Any material resulting translation
adjustments are reflected as a separate component of
stockholders’ equity in accumulated other comprehensive
income. Realized foreign currency transaction gains (losses) were
not material during the years ended December 31, 2020 and
2019.
41
Use of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires
management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and
accompanying notes. The accounting estimates that require
management’s most significant, difficult and subjective
judgments include accounting for revenue recognition, assumptions
used to estimate self-insurance accruals, the valuation and
recognition of investments, the assessment of recoverability of
intangible assets and their estimated useful lives, the valuations
and recognition of stock-based compensation and the recognition and
measurement of current and deferred income tax assets and
liabilities. Actual results could differ materially from these
estimates.
Concentrations of Credit Risk
Financial
instruments that potentially subject us to concentrations of credit
risk consist principally of cash equivalents, investments and trade
accounts receivable. Periodically throughout the year, we have
maintained balances in various operating accounts in excess of
federally insured limits. Our investment portfolio consists of
investment grade securities. Except for obligations of the United
States government and securities issued by agencies of the United
States government, we diversify our investments by limiting our
holdings with any individual issuer. We are exposed to credit risks
in the event of default by the issuers to the extent of the amount
recorded on the consolidated balance sheets. The credit risk in our
trade accounts receivable is substantially mitigated by our
evaluation of the customers’ financial conditions at the time
we enter into business and reasonably short payment
terms.
Cash, Cash Equivalents and Investments
All
liquid instruments with an original maturity at the date of
purchase of 90 days or less are classified as cash equivalents.
Cash equivalents and short-term investments consist primarily of
money market funds, certificates of deposit, commercial paper,
corporate and municipal bonds. Our interest income on cash, cash
equivalents and investments is recorded monthly and reported as
interest income and other in our consolidated statements of
operations.
Our
cash equivalents and short-term investments are classified as
investments and are reported at fair value with unrealized
gains/losses included in accumulated other comprehensive loss
within stockholders’ equity on the consolidated balance
sheets and in the consolidated statements of comprehensive income.
We view this investment portfolio as available for use in our
current operations, and therefore we present our marketable
securities as short-term assets.
We
monitor our investments for impairment on a quarterly basis and
determine whether a decline in fair value is other-than-temporary
by considering factors such as current economic and market
conditions, the credit rating of the security’s issuer, the
length of time an investment’s fair value has been below our
carrying value, our intent to sell the security and our belief that
we will not be required to sell the security before the recovery of
its amortized cost. If an investment’s decline in fair value
is deemed to be other-than-temporary, we reduce its carrying value
to its estimated fair value, as determined based on quoted market
prices or liquidation values. Declines in value judged to be
other-than-temporary, if any, are recorded in operations as
incurred. At December 31, 2020, we evaluated unrealized losses on
security investments and determined them to be temporary. We
currently do not intend to sell securities with unrealized losses,
and we concluded that we will not be required to sell these
securities before the recovery of their amortized cost
basis.
42
At
December 31, 2020 and 2019, the estimated fair value of cash, cash
equivalents and investments was $30.0 million and $26.4 million,
respectively. At December 31, 2020 and 2019, the amount of our
foreign subsidiary cash, cash equivalents and investments was $4.3
million and $4.2 million, respectively. The following is a summary
of cash, cash equivalents and investments at December 31, 2020 and
2019 (in thousands):
As of December 31, 2020
|
Amortized Cost
|
Gross
Unrealized Gains
|
Gross
Unrealized Losses
|
Fair Value
|
Cash
|
$10,918
|
$—
|
$—
|
$10,918
|
Money
market funds
|
1,258
|
—
|
—
|
1,258
|
Certificates
of deposit
|
492
|
—
|
—
|
492
|
Commercial
paper
|
3,274
|
—
|
(1)
|
3,273
|
Corporate
notes and bonds
|
9,423
|
4
|
—
|
9,427
|
U.S.
government treasury
|
4,599
|
—
|
—
|
4,599
|
|
$29,964
|
$4
|
$(1)
|
$29,967
|
Classified
as:
|
|
|
|
|
Cash
and cash equivalents
|
$13,526
|
$—
|
$—
|
$13,526
|
Short-term
investments
|
16,438
|
4
|
(1)
|
16,441
|
|
$29,964
|
$4
|
$(1)
|
$29,967
|
As of December 31, 2019
|
Amortized Cost
|
Gross
Unrealized Gains
|
Gross
Unrealized Losses
|
Fair Value
|
Cash
|
$7,814
|
$—
|
$—
|
$7,814
|
Money
market funds
|
1,137
|
—
|
—
|
1,137
|
Certificates
of deposit
|
475
|
—
|
—
|
475
|
Commercial
paper
|
6,912
|
—
|
(1)
|
6,911
|
Corporate
notes and bonds
|
7,922
|
15
|
(4)
|
7,933
|
U.S.
government agency securities
|
2,145
|
—
|
(1)
|
2,144
|
|
$26,405
|
$15
|
$(6)
|
$26,414
|
Classified
as:
|
|
|
|
|
Cash
and cash equivalents
|
$10,087
|
$—
|
$—
|
$10,087
|
Short-term
investments
|
16,318
|
15
|
(6)
|
16,327
|
|
$26,405
|
$15
|
$(6)
|
$26,414
|
The
following table summarizes the estimated fair value of our
marketable securities classified by the stated maturity date of the
security (in thousands):
|
December 31,
|
|
|
2020
|
2019
|
Due
within one year
|
$13,248
|
$12,754
|
Due
within two years
|
3,193
|
3,573
|
|
$16,441
|
$16,327
|
We
determined that the gross unrealized losses on our security
investments as of December 31, 2020 are temporary in nature. The
fair value of our security investments at December 31, 2020 and
2019 reflects net unrealized gains of $3,000 and $9,000,
respectively. There were net realized gains of $1,000 and $2,000 on
security investments in the years ended December 31, 2020 and 2019,
respectively. The cost of securities sold is based on the specific
identification method.
The
following table sets forth the unrealized gains/losses for security
investments as of December 31, 2020 and 2019 (in
thousands):
As
of December 31, 2020
|
In Gain
Position
Less
Than 12 Months
|
In Loss
Position
More
Than 12 Months
|
Total in
Gain Position
|
|||
Description
|
Fair
Value
|
Unrealized
Gain
|
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Gain
|
Certificates
of deposit
|
$492
|
$—
|
$—
|
$—
|
$492
|
$—
|
Corporate
notes and bonds
|
9,502
|
5
|
3,195
|
(2)
|
12,697
|
3
|
U.S.
government agency securities
|
4,599
|
—
|
—
|
—
|
4,599
|
—
|
Total
|
$14,593
|
$6
|
$3,195
|
$(2)
|
$17,788
|
$3
|
43
As of December 31, 2019
|
In Gain Position
Less Than 12 Months
|
In Loss Position
More Than 12 Months
|
Total in Gain Position
|
|||
Description
|
Fair Value
|
Unrealized Gain
|
Fair Value
|
Unrealized Loss
|
Fair Value
|
Unrealized Gain
|
Certificates
of deposit
|
$475
|
$—
|
$—
|
$—
|
$475
|
$—
|
Corporate
notes and bonds
|
10,120
|
15
|
4,714
|
(5)
|
14,834
|
10
|
U.S.
government agency securities
|
2,145
|
(1)
|
—
|
—
|
2,145
|
(1)
|
Total
|
$12,740
|
$14
|
$4,714
|
$(5)
|
$17,454
|
$9
|
Trade Accounts Receivable and Allowance for Doubtful
Accounts
Trade
accounts receivable are recorded at the invoiced amount. We perform
evaluations of our customers’ financial condition and
generally do not require collateral. We make judgments as to our
ability to collect outstanding receivables and provide allowances
for a portion of receivables when collection becomes doubtful. Our
allowances are made based on a specific review of all significant
outstanding invoices. For those invoices not specifically provided
for, allowances are recorded at differing rates, based on the age
of the receivable. In determining these rates, we analyze our
historical collection experience and current payment trends. The
determination of past-due accounts is based on contractual
terms.
The
following table summarizes the allowance for doubtful accounts as
of December 31, 2020 and 2019 (in thousands):
|
Amount
|
Balance,
December 31, 2018
|
$13
|
Provision
for doubtful accounts
|
40
|
Accounts
written off
|
(25)
|
Balance,
December 31, 2019
|
28
|
Provision
for doubtful accounts
|
37
|
Accounts
written off
|
(61)
|
Balance,
December 31, 2020
|
$4
|
As
of December 31, 2020 and 2019, our two largest customers accounted
for approximately 90% and 92% of our total accounts receivable,
respectively. No other customers accounted for 10% or more of our
total accounts receivable as of December 31, 2020 and
2019.
Property and Equipment
Property
and equipment are stated at cost, less accumulated depreciation and
amortization which is determined using the straight-line method
over the estimated useful lives of two to five years for computer
equipment and software, three years for furniture and fixtures, and
the shorter of the estimated useful lives or the lease term for
leasehold improvements. Repairs and maintenance costs are expensed
as they are incurred.
Intangible Assets
In
December 2006, we acquired the use of a toll-free telephone number
for cash consideration of $250,000. This asset had an indefinite
useful life. The intangible asset is tested for impairment annually
or more often if events or changes in circumstances indicate that
the carrying value may not be recoverable. During the year ended
December 31, 2020, we determined this indefinite-lived intangible
asset was fully impaired, and we recognized a non-cash impairment
loss as an operating expense in our consolidated statement of
operations.
44
Long-Lived Assets
We
assess long-lived assets, which includes property and equipment and
identifiable intangible assets, for impairment whenever events or
changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. An impairment loss would be
recognized when the sum of the future net cash flows expected to
result from the use of the asset and its eventual disposition is
less than its carrying amount. If our estimates regarding future
cash flows derived from such assets were to change, we may record
an impairment charge to the value of these assets. Such impairment
loss would be measured as the difference between the carrying
amount of the asset and its fair value.
Leases
We
account for leases in accordance with Accounting Standards
Codification (“ASC”) 842. We recognize operating and
finance lease liabilities and corresponding right-of-use
(“ROU”) assets on the consolidated balance sheets and
provide enhanced disclosures surrounding the amount, timing and
uncertainty of cash flows arising from leasing arrangements. We
determine if an arrangement is a lease at inception. Operating
leases are included in operating lease ROU assets and short- and
long-term lease liabilities in our consolidated balance sheets.
Finance leases are included in property and equipment, other
current liabilities, and other long-term liabilities in our
consolidated balance sheets.
ROU
assets represent the right to use an underlying asset for the lease
term and lease liabilities represent the obligation to make lease
payments arising from the lease. Operating lease ROU assets and
liabilities are recognized at commencement date based on the
present value of lease payments over the lease term. As most of our
leases do not provide an implicit rate, we use our incremental
borrowing rate based on the information available at commencement
date in determining the present value of lease payments. The
implicit rate is used when readily determinable. The operating
lease ROU asset also includes any lease payments made and excludes
lease incentives. The lease terms may include options to extend or
terminate the lease when it is reasonably certain that we will
exercise that option. Lease expense for lease payments is
recognized on a straight-line basis over the lease term. We account
for the lease and non-lease components as a single lease
component.
We
have entered into various non-cancelable operating lease agreements
for certain offices and certain equipment. The Louisville, Colorado
and Sunnyvale, California office leases were both renewed during
the year ended December 31, 2020, and will expire on April 30, 2021
and March 31, 2021, respectively.
Revenue Recognition
Disaggregation of Revenue
We
generate revenue from the sale of services and sale of software
fees for end-user software products provided through direct
customer downloads and through the sale of these end-user software
products via partners. Revenue is disaggregated by type as
presented in the consolidated statements of operations and is
consistent with how we evaluate our financial
performance.
Under
ASC 606, revenue is recognized when control of the promised goods
or services is transferred to our customers, in an amount that
reflects the consideration we expect to be entitled to in exchange
for those goods or services.
We
determine revenue recognition through the following
steps:
●
identification
of the contract, or contracts, with a customer;
●
identification
of the performance obligations in the contract;
●
determination
of the transaction price;
●
allocation
of the transaction price to the performance obligations in the
contract; and
●
recognition
of revenue when, or as, we satisfy a performance
obligation.
45
Services Revenue
Services
revenue is primarily comprised of fees for customer support and
technology support services. Our service programs are designed for
enterprise clients, as well as the consumer and small and medium
business (“SMB”) markets, and include customer service,
sales support, and technical support, including computer and mobile
device set-up, security and support, virus and malware removal,
wireless network set-up, and automation system onboarding and
support.
We
offer customer support, technical support, and technology services
to large corporations, consumers and SMBs, directly and through our
partners (which include communications providers, retailers,
technology companies and others) and, to a lesser degree, directly
through our website at www.support.com. We transact with customers
via reseller programs, referral programs and direct transactions.
In reseller programs, the partner generally executes the financial
transactions with the customer and pays a fee to us which we
recognize as revenue when the service is delivered. In referral
programs, we transact with the customer directly and pay a referral
fee to the referring party. In direct transactions, we sell
directly to the customer at the retail price.
The
services described above include four types of
offerings:
●
Hourly-Based
Services – In connection with the provisions of certain
services programs, fees are calculated based on contracted hourly
rates with partners. For these programs, we recognize revenue as
services are performed, based on billable hours of work delivered
by our technology experts. These service programs also include
performance standards, which may result in incentives or penalties,
which are recognized as earned or incurred.
●
Tier-Based Services
– In connection with the provisions of certain services
programs, fees are calculated on partner subscription tiers based
on number of subscribers. For these programs, we recognize revenue
as services are performed, and are billed based on the tier level
of number of subscribers supported by our experts.
●
Subscriptions
– Customers purchase subscriptions or “service
plans” under which certain services are provided over a fixed
subscription period. Revenues for subscriptions are recognized
ratably over the respective subscription periods.
●
Incident-Based
Services – Customers purchase a discrete, one-time service.
Revenue recognition occurs at the time of service delivery. Fees
paid for services sold but not yet delivered are recorded as
deferred revenue and recognized at the time of service
delivery.
In
certain cases, we are paid for services that are sold but not yet
delivered. We initially record such balances as deferred revenue,
and recognize revenue when the service has been provided or, on the
non-subscription portion of these balances, when the likelihood of
the service being redeemed by the customer is remote
(“services breakage”). Based on our historical
redemption patterns for these relationships, we believe that the
likelihood of a service being delivered more than 90 days after
sale is remote. We therefore recognize non-subscription deferred
revenue balances older than 90 days as services revenue. For the
years ended December 31, 2020 and 2019, services breakage revenue
accounted for less than 1% of total services revenue.
The
following table represents deferred revenue activity for the years
ended December 31, 2020 and 2019 (in thousands):
|
Amount
|
Balance,
December 31, 2018
|
$1,135
|
Deferred
revenue
|
1,887
|
Recognition
of unearned revenue
|
(1,829)
|
Balance,
December 31, 2019
|
1,193
|
Deferred
revenue
|
1,243
|
Recognition
of unearned revenue
|
(1,555)
|
Balance,
December 31, 2020
|
$881
|
46
Partners
are generally invoiced monthly. Fees from customers via referral
programs and direct transactions are generally paid with a credit
card at the time of sale. Revenue is recognized net of any
applicable sales tax.
Services
revenue also includes fees from licensing of Support.com
cloud-based software. In such arrangements, customers receive a
right to use our Support.com Cloud applications in their own
support organizations. We license our cloud-based software using a
software-as-a-service (“SaaS”) model under which
customers cannot take possession of the technology and pay us on a
per-user or usage basis during the term of the arrangement. In
addition, services revenue includes fees from implementation
services of our cloud-based software. Currently, revenues from
implementation services are recognized ratably over the customer
life, which is estimated as the term of the arrangement once the
Support.com Cloud services are made available to customers. We
generally charge for these services on a time and material basis.
For the years ended December 31, 2020 and 2019, revenue from
implementation services was not material.
Software and Other Revenue
Software
and other revenue is comprised primarily of fees for end-user
software products provided through direct customer downloads and
through the sale of these end-user software products via partners.
Our software is sold to customers primarily on an annual
subscription with automatic renewal. We provide regular,
significant upgrades over the subscription period and therefore
recognize revenue for these products ratably over the subscription
period. Management has determined that these upgrades are not
distinct, as the upgrades are an input into a combined output. In
addition, management has determined that the frequency and timing
of the software upgrades are unpredictable and therefore we
recognize revenue consistent with the sale of the subscription. We
generally control fulfillment, pricing, product requirements, and
collection risk and therefore we record the gross amount of
revenue. We provide a 30-day money back guarantee for the majority
of our end-user software products.
We
provide a limited amount of free technical support to customers.
Since the cost of providing this free technical support is
insignificant and free product enhancements are minimal and
infrequent, we do not defer the recognition of revenue associated
with sales of these products.
Other
revenue consists primarily of revenue generated through partners
advertising to our customer base in various forms, including
toolbar advertising, email marketing, and free trial offers. We
recognize other revenue in the period in which control transfers to
our partners.
Engineering and IT Costs
Engineering
and IT expenditures are charged to operations as they are
incurred.
Software Development Costs
We
expense software development costs before technological feasibility
is reached. Based on our product development process, technological
feasibility is established on the completion of a working model. We
determined that technological feasibility is reached shortly before
the product is ready for general release and therefore capitalized
development costs incurred are immaterial during the periods
presented.
Purchased Technology for Internal Use
We
capitalize costs related to software that we license and
incorporate into our product and service offerings or develop for
internal use.
47
Advertising Costs
Advertising
costs are recorded as sales and marketing expense in the period in
which they are incurred. Advertising expense was $0.2 million and
$24,000 for the years ended December 31, 2020 and 2019,
respectively.
Earnings Per Share
Basic
earnings per share is computed using our net income and the
weighted-average number of common shares outstanding during the
reporting period. Diluted earnings per share is computed using our
net income and the weighted average number of common shares
outstanding, including the effect of the potential issuance of
common stock such as stock issuable pursuant to the exercise of
stock options and warrants and vesting of RSUs using the treasury
stock method when dilutive.
The
following table sets forth the computation of basic and diluted net
earnings per share (in thousands, except per share
amounts):
|
Years Ended December 31,
|
|
|
2020
|
2019
|
Net
income
|
$446
|
$3,846
|
|
|
|
Basic:
|
|
|
Weighted-average
common shares outstanding
|
19,192
|
18,977
|
Basic
earnings per share
|
$0.02
|
$0.20
|
Diluted
|
|
|
Weighted-average
common shares outstanding
|
19,192
|
18,977
|
Effect
of dilutive securities:
|
|
|
Stock
options and restricted stock units
|
177
|
49
|
Diluted
weighted-average commons shares outstanding
|
19,369
|
19,026
|
Diluted
earnings per share
|
$0.02
|
$0.20
|
Accumulated Other Comprehensive Income
The
components of accumulated other comprehensive loss relate entirely
to accumulated foreign currency translation gain (losses)
associated with our foreign subsidiaries and unrealized gains
(losses) on investments.
Realized
gains/losses on investments reclassified from accumulated other
comprehensive loss are reported as interest income and other, net
in our consolidated statements of operations.
The
amounts noted in the consolidated statements of comprehensive
income are shown before taking into account the related income tax
impact. The income tax effect allocated to each component of other
comprehensive income for each of the periods presented is not
material.
Stock-Based Compensation
We
apply the provisions of Accounting Standards Codification
(“ASC”) 718, Compensation – Stock Compensation,
which requires the measurement and recognition of compensation
expense for all stock-based payment awards, including grants of
restricted stock units (“RSUs”) and options to purchase
stock, made to employees and directors based on estimated fair
values.
In
accordance with ASC 718, Compensation – Stock Compensation,
we recognize stock-based compensation by measuring the cost of
services to be rendered based on the grant date fair value of the
equity award. We recognize stock-based compensation over the period
an employee is required to provide service in exchange for the
award, generally referred to as the requisite service period. For
awards with market-based performance conditions, the cost of the
awards is recognized as the requisite service is rendered by
employees, regardless of when, if ever, the market-based
performance conditions are satisfied.
48
The
Black-Scholes option pricing model is used to estimate the fair
value of service-based stock options and shares purchased under our
Employee Stock Purchase Plan (“ESPP”). The
determination of the fair value of options is affected by our stock
price and a number of assumptions, including expected volatility,
expected life, risk-free interest rate and expected dividends. We
use historical data for estimating the expected volatility. For
certain stock options awards, we use historical data for estimating
the expected life of stock options and for others, we use the
simplified method for estimating the expected life. The simplified
method was used during 2020 for “plain vanilla” (as
defined by the SEC) stock option awards. The risk-free interest
rate assumption is based on observed interest rates appropriate for
the expected terms of the stock options.
The
Monte-Carlo simulation model is used to estimate fair value of
market-based performance stock options. The Monte-Carlo simulation
model calculates multiple potential outcomes for an award and
establishes a fair value based on the most likely outcome. Key
assumptions for the Monte-Carlo simulation model include the
risk-free rate, expected volatility, expected dividends and the
correlation coefficient.
The
fair value of restricted stock grants is based on the closing
market price of our stock on the date of grant less the expected
dividend yield.
Income Taxes
Income
taxes are accounted for under the asset and liability method. Under
this method, deferred tax assets and liabilities are recognized for
the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases, and operating
losses and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the
year in which those temporary differences are expected to be
reversed or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the
consolidated statements of operations in the period that includes
the enactment date. A valuation allowance is recorded to reduce the
carrying amounts of deferred tax assets, if it is more likely than
not, that such assets will not be realized. Our deferred tax asset
and related valuation allowance decreased by $2.6 million to $43
million. As the deferred tax asset is fully allowed for, this
change had no impact on our financial position or results of
operations.
Warranties and Indemnifications
We
generally provide a refund period on sales, during which refunds
may be granted to consumers under certain circumstances. During the
years ended December 31, 2020 and 2019, any refunds granted to
consumers were immaterial to the financial statements.
Fair Value Measurements
ASC 820, Fair Value Measurements and
Disclosures, defines fair
value, establishes a framework for measuring fair value under
generally accepted accounting principles and enhances disclosures
about fair value measurements. Fair value is defined under ASC 820
as the exchange price that would be received for an asset or paid
to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date.
Valuation techniques used to measure fair value according to ASC
820 must maximize the use of observable inputs and minimize the use
of unobservable inputs. The standard describes a fair value
hierarchy based on three levels of inputs, of which the first two
are considered observable and the last unobservable, that may be
used to measure fair value, which are the
following:
●
Level 1 –
Quoted prices in active markets for identical assets or
liabilities.
●
Level 2 –
Inputs other than Level 1 that are observable, either directly or
indirectly, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable
market data for substantially the full term of the assets or
liabilities.
●
Level 3 –
Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets
or liabilities.
49
The
following table represents our fair value hierarchy for our
financial assets (cash equivalents and investments) measured at
fair value on a recurring basis as of December 31, 2020 and 2019
(in thousands):
As of December 31, 2020
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Money
market funds
|
$1,258
|
$—
|
$—
|
$1,258
|
Certificates
of deposit
|
—
|
492
|
—
|
492
|
Commercial
paper
|
—
|
3,273
|
—
|
3,273
|
Corporate
notes and bonds
|
—
|
9,427
|
—
|
9,427
|
U.S.
government agency securities
|
—
|
4,599
|
—
|
4,599
|
Total
|
$1,258
|
$17,791
|
$—
|
$19,049
|
As of December 31, 2019
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Money
market funds
|
$1,137
|
$—
|
$—
|
$1,137
|
Certificates
of deposit
|
—
|
475
|
—
|
475
|
Commercial
paper
|
—
|
6,911
|
—
|
6,911
|
Corporate
notes and bonds
|
—
|
7,933
|
—
|
7,933
|
U.S.
government agency securities
|
—
|
2,144
|
—
|
2,144
|
Total
|
$1,137
|
$17,463
|
$—
|
$18,600
|
For
short-term investments, measured at fair value using Level 2
inputs, we review trading activity and pricing for these
investments as of the measurement date. When sufficient quoted
pricing for identical securities is not available, we use market
pricing and other observable market inputs for similar securities
obtained from various third-party data providers. These inputs
either represent quoted prices for similar assets in active markets
or have been derived from observable market data. Our policy is
that the end of our quarterly reporting period determines when
transfers of financial instruments between levels are recognized.
No transfers were made between level 1, level 2 and level 3 for the
years ended December 31, 2020 and 2019.
Segment Information
We
report our operations as a single operating segment and has a
single reporting unit. Our Chief Operating Decision Maker
(“CODM”), our Chief Executive Officer, manages our
operations on a consolidated basis for purposes of allocating
resources. When evaluating performance and allocating resources,
the CODM reviews financial information presented on a consolidated
basis.
Revenue
from customers located outside the United States was immaterial for
the years ended December 31, 2020 and 2019.
For the years ended December 31, 2020 and 2019,
our two largest customers accounted
for 87% and 88% of our total revenue, respectively. There were no
other customers that accounted for 10% or more of our total revenue
in any of the periods presented.
Long-lived
assets are attributed to the geographic location in which they are
located. We include in long-lived assets all tangible assets.
Long-lived assets by geographic areas are as follows (in
thousands):
|
December 31,
|
|
|
2020
|
2019
|
United
States
|
$1,110
|
$532
|
Philippines
|
4
|
1
|
India
|
1
|
—
|
Total
|
$1,115
|
$533
|
50
Recent Accounting Pronouncements
Recently Adopted Accounting Standards
In August 2018, the FASB issued Accounting
Standard Update (“ASU”) No. 2018-13,
Changes to
Disclosure Requirements for Fair Value Measurements (Topic
820) (ASU 2018-13), which
improved the effectiveness of disclosure requirements for recurring
and nonrecurring fair value measurements. The standard removes,
modifies, and adds certain disclosure requirements. We adopted the
new standard effective January 1, 2020 and the standard did not have an impact on the
consolidated financial statements.
New Accounting Standards to be adopted in Future
Periods
In December 2019, the
FASB issued ASU No. 2019-12, Income
Taxes (Topic 740): Simplifying the Accounting for Income
Taxes (ASU 2019-12), which
simplifies the accounting for income taxes. This guidance will be
effective in the first quarter of 2021 on a prospective basis, and
early adoption is permitted. We do not expect the new standard to
have a material impact on the consolidated financial
statements.
In June 2016, the FASB
issued ASU 2016-13, Financial
Instruments—Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments. The standard's main
goal is to improve financial reporting by requiring earlier
recognition of credit losses on financing receivables and other
financial assets in scope. The effective date for all public
companies, except smaller reporting companies, is fiscal years
beginning after December 15, 2019, including interim periods within
those fiscal years. The effective date for all other entities is
fiscal years beginning after December 15, 2022, including interim
periods within those fiscal years. We do not expect the new
standard to have a material impact on the consolidated financial
statements.
Note 2. Property and Equipment
Property
and equipment are stated at cost, less accumulated depreciation,
and consist of the following as of December 31, 2020 and 2019 (in
thousands):
|
December 31,
|
|
|
2020
|
2019
|
Computer
equipment and software
|
$8,114
|
$7,233
|
Furniture
and office equipment
|
140
|
142
|
Leasehold
improvements
|
348
|
348
|
Construction
in progress
|
50
|
32
|
Accumulated
depreciation
|
(7,537)
|
(7,222)
|
Total
property and equipment, net
|
$1,115
|
$533
|
Depreciation
expense was $0.3 million and $0.3 million for the years ended
December 31, 2020 and 2019, respectively.
Note 3. Commitments and Contingencies
Legal contingencies
Federal
Trade Commission Consent Order. As previously
disclosed, on December 20, 2016 the Federal Trade Commission
(“FTC”) issued a confidential Civil Investigative
Demand, or CID, requiring us to produce certain documents and
materials and to answer certain interrogatories relating to PC
Healthcheck, an obsolete software program that we developed on
behalf of a third party for their use with their customers. The
investigation relates to us providing software like PC Healthcheck
to third parties for their use prior to December 31, 2016, when we
were under management of the previous board and executive team.
Since issuing the CID, the FTC has sought additional written and
testimonial evidence. We have cooperated fully with the FTC’s
investigation and provided all requested information. In addition,
we have not used PC Healthcheck nor provided it to any customers
since December 2016.
On March 9, 2018, the FTC notified us that it was willing to engage
in settlement discussions. On November 6, 2018, Support.com and the
FTC entered into a proposed Stipulation to Entry of Order for
Permanent Injunction and Monetary Judgment (the “Consent
Order”). The Consent Order was approved by the Commission on
March 26, 2019 and entered by the U.S. District Court for the
Southern District of Florida on March 29, 2019. Entry of the
Consent Order by the Court resolved the FTC’s multi-year
investigation of Support.com.
51
Pursuant to the Consent Order, under which we neither admitted nor
denied the FTC’s allegations (except as to the Court having
jurisdiction over the matter), the FTC agreed to accept a payment
of $10 million in settlement of the matter, subject to the factual
accuracy of the information we provided as part of our financial
representations. The $10 million payment was made on April 1, 2019
and was recognized in operating expenses within our consolidated
statements of operations for the year ended December 31,
2018.
Additionally, pursuant to the Consent Order, we agreed to implement
certain new procedures and enhance certain existing procedures. For
example, the Consent Order necessitates that we cooperate with
representatives of the Commission on associated investigations if
needed; imposes requirements on Support.com regarding obtaining
acknowledgements of the Consent Order and compliance certification,
including record creation and maintenance; and prohibits us from
making misrepresentations and misleading claims or providing the
means for others to make such claims regarding, among other things,
detection of security or performance issues on consumer’s
Electronic Devices. Electronic Devices include, but are not limited
to, cell phones, tablets and computers. We continue to monitor the
impact of the Consent Order regularly. If we are unable to comply
with the Consent Order, then this could result in a material and
adverse impact to the results of operations and financial
condition.
Verizon
Media. As previously
disclosed, on March 22, 2010, the Company and AOL Fulfillment
Services, who now does business as Verizon Media (“Verizon
Media”), entered into a Fulfillment Services Promotion and
Marketing Agreement (“Agreement”). The Agreement
related to the development and sale of certain products and
services. The Company sold software products to Verizon Media
pursuant to the terms of the Agreement under two programs –
SUPERAntiSpyware and Computer Check-Up. Verizon Media offered these
software products to its end-customers. On May 24, 2019, the
Company received a letter from Verizon Media providing notice that
it wished to terminate the Agreement and work with the Company to
wind-down all remaining subscriptions for both programs. The
Company has wound-down all services under the Computer Check-Up
program and the SUPERAntiSpyware program. In connection with the
termination of the Computer Check-Up program, Verizon Media
requested that the Company fund rebates to its end-customers who
elect to accept a refund offer from Verizon Media. Although the
Company made no agreement to fund such a program, Verizon Media
commenced its rebate program.
On November 15, 2019, the Company received a letter from Verizon
Media informing the Company that, to date, Verizon Media has issued
rebates totaling $2.6 million and requesting reimbursement of this
amount from the Company (the “Dispute”). Subsequently,
the parties entered into negotiations toward a settlement of any
potential claims, which culminated in the execution of a
Confidential Settlement and Release Agreement dated September 29,
2020, pursuant to which the Company issued a one-time payment to
Verizon Media in exchange for a full and complete release from any
claims related to or arising out of the Dispute. The Company
admitted no liability and incurred no financial impact from the
settlement, as the payment was funded by the Company’s
insurance carrier.
Other Matters
We
have received and may in the future receive additional requests for
information, including subpoenas, from other governmental agencies
relating to the subject matter of the Consent Order and the Civil
Investigative Demands described above. We intend to cooperate with
these information requests and is not aware of any other legal
proceedings against us by governmental authorities at this
time.
We
are also subject to other routine legal proceedings, as well as
demands, claims and threatened litigation, that arise in the normal
course of business, potentially including assertions that we may be
infringing patents or other intellectual property rights of others.
We currently do not believe that the ultimate amount of liability,
if any, for any pending claims of any type (alone or combined) will
materially affect our financial position, results of operations or
cash flows. The ultimate outcome of any litigation is uncertain;
however, any unfavorable outcomes could have a material negative
impact on our financial condition and operating results. Regardless
of outcome, litigation can have an adverse impact on us because of
defense costs, negative publicity, diversion of management
resources and other factors.
52
Note 4. Other Accrued and Other Long-Term Liabilities
Other
accrued liabilities consist of the following (in
thousands):
|
December 31,
|
|
|
2020
|
2019
|
Accrued
expenses
|
$369
|
$536
|
Self-insurance
accruals
|
270
|
404
|
Payroll
tax deferral
|
240
|
—
|
Total
other accrued liabilities
|
$879
|
$940
|
Other
long-term liabilities consist of the following (in
thousands):
|
December 31,
|
|
|
2020
|
2019
|
Deferred
tax liability, net
|
443
|
428
|
Long-term
income tax payable
|
223
|
355
|
Payroll
tax deferral
|
240
|
—
|
Other
long-term liabilities
|
5
|
9
|
Total
other long-term liabilities
|
$911
|
$792
|
Note 5. Stockholders’ Equity
During
the year ended December 31, 2020, 0.1 million shares of common
stock were issued as a result of the exercise of stock options.
During the year ended December 31, 2019, no shares of common stock
were issued as a result of the exercise of stock
options.
During
the year ended December 31, 2020, 0.2 million shares of common
stock were issued as a result of RSU releases. During the year
ended December 31, 2019, 0.1 million shares of common stock were
issued as a result of RSU releases.
During
the year ended December 31, 2020, 44,000 shares of common stock
were issued under the ESPP. During the year ended December 30,
2019, 26,000 shares of common stock were issued under the
ESPP.
Stock Repurchase Program
On
April 27, 2005, our Board of Directors (“Board”)
authorized the repurchase of up to 666,666 outstanding shares of
our common stock. As of September 30, 2020, the maximum number of
shares remaining that can be repurchased under this program was
602,467. No shares were repurchased during the year ended December
31, 2020. We do not intend to repurchase shares without further
approval from the Board.
53
2019 Cash Dividend
As
a part of the board of directors’ ongoing capital allocation
review, on December 6, 2019 the board of directors authorized and
declared a special cash distribution of $1.00 per share on each
outstanding share of our common stock. The record date for this
distribution was December 17, 2019 and the payment date was
December 26, 2019. Accordingly, we paid $19.1 million to
shareholders on December 26, 2019. In connection with the special
cash distribution of $1.00 per share, the exercise price on all
outstanding options as of December 27, 2019 was reduced by $1.00 as
permitted under the 2010 and 2014 Plans which includes an
anti-dilution feature designed to equalize the fair value of
options as a result of a transaction such as this special
distribution. This adjustment did not affect the fair value,
vesting conditions or classification of the outstanding
options.
Stockholder Rights Agreement and Tax Benefits Preservation
Plan
Our
board adopted a Section 382 Tax Benefits Preservation Plan in an
effort to diminish the risk that our ability to utilize net
operating loss carryovers (collectively, the “NOLs”) to
reduce potential future federal income tax obligations may become
substantially limited. Our stockholders approved the Section 382
Tax Benefits Preservation Plan at our annual meeting of
stockholders held on June 5, 2020. Under the Internal Revenue Code
of 1986, as amended (the “Code”), and the regulations
promulgated thereunder by the U.S. Treasury Department, these NOLs
may be “carried forward” in certain circumstances to
offset any current and future taxable income and thus reduce
federal income tax liability, subject to certain requirements and
restrictions. However, if we experience an “ownership
change,” within the meaning of Section 382 of the Code
(“Section 382”), our ability to utilize the NOLs may be
substantially limited, and the timing of the usage of the NOLs
could be substantially delayed, which could therefore significantly
impair the value of those assets. Section 382 and the Treasury
regulations thereunder make our commercial risk from a Section 382
limitation triggering event particularly acute given the relative
size of current cash on hand to market capitalization. As applied
to our current cash position and current market capitalization, if
we were to experience an ownership change, it would be subject to
Section 382’s “non-business asset” limitation,
which would result in permanently losing all $145.6 million of our
NOLs.
The
Section 382 Tax Benefits Preservation Plan is intended to act as a
deterrent to any person or group acquiring beneficial ownership of
4.99% or more of the outstanding Common Stock without the approval
of the board (such person, an “Acquiring Person”). A
person who acquires, without the approval of the board, beneficial
ownership (other than as a result of repurchases of stock by the
Company, dividends or distributions by the Company or certain
inadvertent actions by stockholders) of 4.99% or more of the
outstanding common stock (including any ownership interest held by
that person's Affiliates and Associates as defined under the
Section 382 Tax Benefits Preservation Plan) could be subject to
significant dilution. Stockholders who beneficially own 4.99% or
more of the outstanding common stock prior to the first public
announcement by the Company of the board’s adoption of the
Section 382 Tax Benefits Preservation Plan will not trigger the
Section 382 Tax Benefits Preservation Plan so long as they do not
acquire beneficial ownership of additional shares of the Common
Stock (other than pursuant to a dividend or distribution paid or
made by the Company on the outstanding shares of Common Stock or
pursuant to a split or subdivision of the outstanding shares of
Common Stock) at a time when they still beneficially own 4.99% or
more of such stock. In addition, the board retains the sole
discretion to exempt any person or group from the penalties imposed
by the Section 382 Tax Benefits Preservation Plan.
In
the event that a person becomes an Acquiring Person, each holder of
a Right, other than Rights that are or, under certain
circumstances, were beneficially owned by the Acquiring Person
(which will thereupon become void), will thereafter have the right
to receive upon exercise of a Right and payment of the Purchase
Price, and subject to the terms, provisions and conditions of the
Section 382 Tax Benefits Preservation Plan, a number of shares of
the Common Stock having a market value of two times the Purchase
Price.
54
Note 6. Stock-Based Compensation
Equity Compensation Plan
We
adopted the amended and restated 2010 Equity and Performance
Incentive Plan (the “2010 Plan”), effective as of May
19, 2010. Under the 2010 Plan, the number of shares of Common Stock
that may be issued will not exceed in the aggregate 1,666,666
shares of Common Stock plus the number of shares of common stock
relating to prior awards under the 2000 Omnibus Equity Incentive
Plan that expire, are forfeited or are cancelled after the adoption
of the 2010 Plan, subject to adjustment as provided in the 2010
Plan. Pursuant to approval from our shareholders, the number of
shares of common stock that may be issued under the 2010 Plan was
increased by 750,000 shares of common stock in May 2013 and 333,333
shares in June 2016. No grants will be made under the 2010 Plan
after the tenth anniversary of its effective date. At the 2020
Annual Meeting, our stockholders approved the amendment and
restatement of the 2010 Plan (such plan, after the amendment and
restatement is now the Third Amended and Restated 2010 Equity and
Performance Incentive Plan, referred to herein as the
“Restated Plan”). The purpose of amending the 2010 Plan
was (i) to increase the number of shares of common stock available
for issuance under the Restated Plan by 2,000,000 shares, (ii) to
extend the term of the 2010 Plan, which otherwise would have
expired on May 19, 2020, so that the Restated Plan will continue
until terminated by the Board in its discretion, and (iii) to
eliminate obsolete provisions while adding other provisions
consistent with certain compensation and governance best practices.
As of December 31, 2020, approximately 4.0 million shares remain
available for grant under the Restated Plan.
We
adopted the 2014 Inducement Award Plan (the “Inducement
Plan”), effective as of May 13, 2014. Under the Inducement
Plan, the number of shares of common stock that may be issued will
not exceed in the aggregate 666,666 shares of common stock. As of
December 31, 2020, approximately 0.2 million shares remain
available for grant under the Inducement Plan.
Employee Stock Purchase Plan
Effective
May 15, 2011, our Board and stockholders approved an ESPP and
reserved 333,333 shares of our common stock for issuance. The ESPP
was established to advance our interests and our stockholders'
interests by providing an incentive to attract, retain and reward
eligible employees and by motivating such persons to contribute to
our growth and profitability. At the 2020 Annual Meeting of
stockholders, our stockholders approved a proposal amending and
restating the 2011 ESPP to (i) increase the maximum number of
shares of common stock available for future issuance under the ESPP
by 1,000,000 shares, (ii) extend the term, which otherwise would
have expired on May 15, 2021, so that the ESPP will continue until
terminated by the Board in its discretion, and (iii) make certain
other administrative changes.
The
ESPP consists of six-month offering periods during which employees
may enroll in the plan. Shares of common stock may be purchased
under the ESPP at a price established by the Compensation Committee
of the Board of Directors, provided that the price may not be less
than eighty-five percent (85%) of the lesser of (a) the fair market
value of a share of stock on the offering date of the offering
period or (b) the fair market value of a share of stock on the
purchase date. As of December 31, 2020, approximately 1.1 million
shares remain available for issuance under the ESPP.
Stock-Based Compensation
We
recorded the following stock-based compensation expense of $0.6
million and $0.3 million, respectively, for the fiscal years ended
December 31, 2020 and 2019 as follows (in thousands):
|
Years Ended December 31,
|
|
|
2020
|
2019
|
Stock-based compensation expense related to grants of:
|
|
|
Stock
options
|
$224
|
$130
|
RSU
|
374
|
155
|
ESPP
|
36
|
19
|
Total
|
$634
|
$304
|
Stock-based compensation expense recognized in:
|
|
|
Cost
of service
|
$28
|
$40
|
Engineering
and IT
|
25
|
25
|
Sales
and marketing
|
38
|
38
|
General
and administrative
|
543
|
201
|
Total
|
$634
|
$304
|
55
The
fair value of our stock-based awards was estimated using the
following weighted average assumptions for the years ended December
31, 2020 and 2019:
|
2010 Plan/Restated Plan
|
Employee Stock Purchase Plan
|
||
|
2020
|
2019
|
2020
|
2019
|
Risk-free
interest rate
|
0.4%
|
1.7%
|
0.2%
|
2.0%
|
Expected
term (in years)
|
6.1
|
3.1
|
0.5
|
0.5
|
Volatility
|
42.5%
|
35.6%
|
74.4%
|
42.4%
|
Expected
dividend
|
0.0%
|
0.0%
|
0.0%
|
0.0%
|
Weighted-average
grant date fair value
|
$0.55
|
$0.52
|
$0.34
|
$0.43
|
Stock Options
The
following tables represent stock option activity for the years
ended December 31, 2020 and 2019:
|
Number of shares
|
Weighted-average exercise price per share
|
Weighted-average remaining contractual term (in years)
|
Aggregate intrinsic value (in thousands)
|
Outstanding
at December 31, 2018
|
803
|
$2.89
|
8.43
|
$54
|
Granted
|
90
|
0.94
|
|
|
Exercised
|
—
|
—
|
|
|
Forfeited
|
(77)
|
1.97
|
|
|
Outstanding
at December 31, 2019
|
816
|
$1.77
|
7.49
|
$16
|
Granted
|
2,394
|
1.56
|
|
|
Exercised
|
(147)
|
1.30
|
|
116
|
Forfeited
|
(434)
|
1.58
|
|
|
Outstanding
at December 31, 2020
|
2,629
|
$1.64
|
8.79
|
$1,605
|
Exercisable
at December 31, 2020
|
724
|
$1.74
|
6.77
|
$468
|
A
summary of additional information related to the options
outstanding as of December 31, 2020 under the 2010 and 2014 Plans
are as follows:
Plan
|
Option plans ranges of exercise prices
|
Number of outstanding options
|
Weighted-average remaining contractual life
|
Weighted-average exercise price
|
2010
Plan/Restated Plan
|
$1.29 –
$16.67
|
2,029,176
|
8.61
|
$1.86
|
Inducement
Plan
|
$0.56 –
$16.67
|
600,000
|
9.37
|
$1.33
|
|
|
2,629,176
|
|
|
As
of December 31, 2020, $1.1 million of unrecognized compensation
cost related to existing options was outstanding, which is expected
to be recognized over a weighted average period of 3.0
years.
Restricted Stock Units
The
following table represents RSU activity for the years ended
December 31, 2020 and 2019:
|
Number of shares
|
Weighted-average exercise price per share
|
Weighted-average remaining contractual term (in years)
|
Aggregate intrinsic value (in thousands)
|
Outstanding
at December 31, 2018
|
96
|
$2.78
|
0.60
|
$227
|
Granted
|
243
|
1.39
|
|
|
Vested
|
(73)
|
2.06
|
|
|
Forfeited
|
(17)
|
2.75
|
|
|
Outstanding
at December 31, 2019
|
249
|
$1.62
|
0.60
|
$271
|
Granted
|
127
|
1.97
|
|
|
Vested
|
(245)
|
1.57
|
|
|
Forfeited
|
—
|
—
|
|
|
Outstanding
at December 31, 2020
|
131
|
$2.05
|
0.70
|
$287
|
56
As
of December 31, 2020, $0.2 million of unrecognized compensation
cost related to RSUs was outstanding, which is expected to be
recognized within one year.
Note 7. Income Taxes
The
components of our income before income taxes are as follows (in
thousands):
|
Years Ended December 31,
|
|
|
2020
|
2019
|
United
States
|
$50
|
$3,634
|
Foreign
|
498
|
366
|
Total
|
$548
|
$4,000
|
The
provision for income taxes from continuing operations consisted of
the following (in thousands):
|
Years Ended December 31,
|
|
|
2020
|
2019
|
Current:
|
|
|
Federal
|
$—
|
$—
|
State
|
9
|
16
|
Foreign
|
45
|
118
|
Total
current
|
$54
|
$134
|
|
|
|
Deferred:
|
|
|
Federal
|
$—
|
$—
|
State
|
—
|
—
|
Foreign
|
48
|
20
|
Total
deferred
|
$48
|
$20
|
|
|
|
Provision
for income taxes
|
$102
|
$154
|
The
reconciliation of the Federal statutory income tax rate to our
effective income tax rate is as follows (in
thousands):
|
Years Ended December 31,
|
|
|
2020
|
2019
|
Provision
of Federal statutory rate
|
$115
|
$835
|
State
taxes
|
9
|
16
|
Permanent
differences/other
|
1,825
|
(13)
|
Stock-based
compensation
|
(23)
|
23
|
Federal
valuation allowance used
|
(1,824)
|
(707)
|
Provision
for income taxes
|
$102
|
$154
|
57
Deferred
income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of our deferred tax assets and
liabilities are as follows (in thousands):
|
Years Ended December 31,
|
|
|
2020
|
2019
|
Deferred
tax assets
|
|
|
Fixed
assets
|
$13
|
$78
|
Accruals
and reserves
|
122
|
92
|
Stock
options
|
247
|
197
|
Net
operating loss carryforwards
|
36,608
|
38,335
|
Federal
and state credits
|
3,227
|
3,461
|
Foreign
credits
|
163
|
159
|
Intangible
assets
|
1,497
|
1,789
|
Research
and development expense
|
1,487
|
1,858
|
Gross
deferred tax assets
|
43,364
|
45,969
|
Valuation
allowance
|
(43,238)
|
(45,846)
|
Total
deferred tax assets
|
126
|
123
|
|
|
|
Deferred
tax liabilities (1)
|
(569)
|
(551)
|
|
|
|
Net
deferred liabilities
|
$(443)
|
$(428)
|
(1)
Of this amount,
$554,000 relates to the Indian subsidiaries unremitted earnings
deferred tax liability. The net deferred income tax liabilities are
recorded in other long-term liabilities in the accompanying balance
sheet.
ASC 740, Income
Taxes, provides for the
recognition of deferred tax assets if realization of such assets is
more likely than not to occur. Based on management’s review
of both the positive and negative evidence, which includes our
historical operating performance, reported cumulative net losses
since inception and difficulty in accurately forecasting results,
we have concluded that it is not more likely than not that we will
be able to realize all of our U.S. deferred tax assets. Therefore,
we have provided a full valuation allowance against U.S. deferred
tax assets.
Based
on management’s review of both positive and negative
evidence, which includes the historical operating performance of
our Canadian subsidiary, we have concluded that it is more likely
than not that we will be able to realize a portion of the Canadian
deferred tax assets. Therefore, we have a partial valuation
allowance on Canadian deferred tax assets. There is no valuation
allowance against our Indian deferred tax assets. We reassess the
need for a valuation allowance on a quarterly basis.
Based
on management’s review discussed above, the realization of
deferred tax assets is dependent on improvements over present
levels of pre-tax income. Until we are consistently profitable in
the U.S., we will not realize our deferred tax assets.
Beginning
in 2018, the Tax Cuts and Jobs Act of 2017 (“Tax Act”)
provides a 100% deduction for dividends received from 10-percent
owned foreign corporations by U.S. corporate shareholders, subject
to a one-year holding period. Although dividend income is now
exempt from U.S. federal tax in the hands of the U.S. corporate
shareholders, companies must still apply the guidance of ASC
740-30-25-18 to account for the tax consequences of outside basis
differences and other tax impacts of their investments in non-U.S.
subsidiaries. Deferred income taxes have not been provided on the
cumulative undistributed earnings of foreign subsidiaries except
for a change in assertion at December 31, 2017 for Support.com
India Private Ltd. The amount of cumulative undistributed Indian
subsidiary’s earnings at December 31, 2017 for which we are
changing our assertion under ASC 740-30-25 was $2.67 million. Under
the Tax Act, all foreign subsidiaries’ accumulated earnings
through December 31, 2020 has been included in U.S. taxable income.
As such, the only tax related to the Indian subsidiary remittance
would be a dividend distribution tax of $554,000 as of December 31,
2020.
The
net valuation allowance decreased by approximately $2.6 million and
$0.4 million during the years ended December 31, 2020 and 2019,
respectively. As of December 31, 2020, we had Federal and state net
operating loss carryforwards of approximately $145.6 million and
$80.3 million, respectively. The Federal net operating loss and
credit carryforwards will expire at various dates beginning in 2021
through 2040, if not utilized. Approximately $22.5 million of
Federal net operating loss carryforward is expected to expire in
2021. The state net operating loss carryforwards will expire at
various dates beginning in 2021 through 2040, if not
utilized.
58
We
also had Federal and state research and development credit
carryforwards of approximately $2.8 million and $2.4 million,
respectively. The federal credits expire in varying amounts between
2021 and 2031. The state research and development credit
carryforwards do not have an expiration date.
Utilization
of net operating loss carryforwards and credits may be subject to
substantial annual limitation or could be lost due to the ownership
change limitations provided by the Internal Revenue Code of 1986,
as amended and similar state provisions. The annual limitation may
result in the expiration of net operating losses and credits before
utilization.
ASC
740-10 clarifies the accounting for uncertainties in income taxes
by prescribing guidance for the recognition, de-recognition and
measurement in financial statements of income tax positions taken
in previously filed tax returns or tax positions expected to be
taken in tax returns, including a decision whether to file or not
to file in a particular jurisdiction. ASC 740-10 requires the
disclosure of any liability created for unrecognized tax benefits.
The application of ASC 740-10 may also affect the tax bases of
assets and liabilities and therefore may change or create deferred
tax liabilities or assets.
A
reconciliation of the beginning and ending amount of unrecognized
tax benefits is as follows (in thousands):
|
Years Ended December 31,
|
|
|
2020
|
2019
|
Balance,
beginning of year
|
$2,121
|
$2,117
|
Increase
related to prior year tax positions
|
3
|
4
|
Decrease
related to prior year tax positions
|
(126)
|
—
|
Settlements
with tax authorities
|
(78)
|
—
|
Balance,
end of year
|
$1,920
|
$2,121
|
The
total amount of unrecognized tax benefits that, if recognized,
would affect our tax rate, are $0.1 million and $0.1 million as of
December 31, 2020 and 2019, respectively.
Our
policy is to include interest and penalties related to unrecognized
tax benefits within the provision for (benefit from) income taxes.
As of December 31, 2020 and 2019, we had $0.1 million and $0.1
million, respectively, accrued for payment of interest and
penalties related to unrecognized tax benefits.
As
of December 31, 2020, it is reasonably possible that the balance of
unrecognized tax benefits could significantly change within the
next twelve months. However, an estimate of the range of reasonably
possible adjustments cannot be made at this time.
We
file federal, state and foreign income tax returns in jurisdictions
with varying statutes of limitations. Due to our net operating loss
carryforwards, our income tax returns generally remain subject to
examination by federal and most state authorities. In our foreign
jurisdictions, the 2009 through 2020 tax years remain subject to
examination by their respective tax authorities.
We
are required to make periodic filings in the jurisdictions where we
are deemed to have a presence for tax purposes. We have undergone
audits in the past and have paid assessments arising from these
audits. Our India entity was issued notices of income tax
assessment pertaining to the 2004 – 2009 fiscal years. The
notices claimed that the transfer price used in our inter-company
agreements resulted in understated income in our Indian entity.
During the fourth quarter of 2020, the Company re-evaluated the
probability of its tax position and partially released the ASC
740-10 reserve related to India transfer pricing for several
assessment years that were settled with the Indian tax authorities
in November and December of 2020. As of December 31, 2020, the ASC
740-10 reserve for India transfer pricing totals $0.1 million. As a
result of this settlement, the Company no longer records an ASC
740-10 reserve related to fiscal years 2004-2005 and
2005-2006.
We may be subject to other income tax assessments
in the future. We evaluate estimated expenses that could arise from
those assessments in accordance with ASC 740-10. We consider such factors as the degree of
probability of an unfavorable outcome and the ability to make a
reasonable estimate on the amount of expenses. We record the
estimated liability amount of those assessments that meet the
definition of an uncertain tax position under ASC
740-10.
Note 8. Leases
We
have entered into various non-cancelable operating lease agreements
for certain of our offices, and certain equipment. Our leases have
original lease periods expiring during 2021. As of December 31,
2020, the weighted average remaining lease term and weighted
average discount rate for operating leases was 0.6 years and 4.5%,
respectively.
Total
operating lease expense was $0.3 million and $0.5 million for the
years ended December 31, 2020 and 2019, respectively.
59
The
following table provides a summary of leases by balance sheet
location:
|
Years Ended December 31,
|
|
Operating leases
|
2020
|
2019
|
Right-of-use
assets
|
$61
|
$68
|
|
|
|
Lease
liabilities – short term
|
$58
|
$61
|
Lease
liabilities – long-term
|
3
|
7
|
Total
lease liabilities
|
$61
|
$68
|
The
following represents maturities of operating lease liabilities as
of December 31, 2020 (in thousands):
|
Operating leases
|
2021
|
$59
|
2022
|
3
|
Total
|
$62
|
Less:
imputed interest
|
(1)
|
Present
value of lease liabilities
|
$61
|
For
the year ended December 31, 2020, supplemental cash flow
information related to leases are as follows (in
thousands):
Operating
cash flows from operating leases
|
$181
|
Right-of-use
assets obtained in exchange for lease obligations
|
$169
|
As
of December 31, 2020, minimum payments due under all non-cancelable
lease agreements were as follows (in thousands):
Years Ending December 31,
|
Operating Leases
|
2021
|
$59
|
2022
|
3
|
Total
minimum lease payments
|
$62
|
Note 9. Subsequent Events
On March 19, 2021, the Company and Greenidge
Generation Holdings, Inc. (“Greenidge”) entered into an
Agreement and Plan of Merger (the “Merger Agreement”)
providing, among other things, that on the terms and subject to the
conditions set forth therein, Greenidge will acquire the
Company through a merger of a wholly owned subsidiary of Greenidge
with and into the Company (the “Merger”). The
Company will survive as a wholly owned subsidiary of Greenidge.
The Merger is subject to customary
closing conditions, including the approval of the shareholders of
the Company. The Merger is expected to close during the third
quarter of 2021. Effective as of the closing of the Merger, all
outstanding shares of the Company’s common stock and all
outstanding restricted stock units and options to purchase shares
of the Company’s common stock will be cancelled and converted
into the right to receive shares of Class A Common Stock of
Greenidge (the “Greenidge Common Stock”). Following
completion of the Merger, it is expected that the Company’s
stockholders and holders of stock options and restricted stock
units collectively will own approximately 8% of the outstanding
shares of the Greenidge Common Stock, and existing Greenidge
stockholders are expected to own approximately 92% of the Greenidge
Common Stock. If the Merger Agreement is terminated under
certain circumstances, the Company will be required to pay a
termination fee.
In
connection with and as a condition to Greenidge's willingness to
enter into the Merger Agreement, on March 19, 2021, the Company
entered into a subscription agreement (the "Subscription
Agreement") with 210 Capital, LLC (“210 Capital”),
pursuant to which 210 Capital subscribed for and purchased, and the
Company issued and sold, an aggregate of 3,909,871 shares of the
Company’s Common Stock for a purchase price of $1.85 per
share, for aggregate gross proceeds to the Company of
$7,233,261.35. Pursuant to and subject to the terms and conditions
set forth in the Subscription
Agreement, among other things, and only upon any termination of the
Merger Agreement, the Company has agreed that, not later than the
earlier of (i) thirty (30) days following the date of such
termination and (ii) December 31, 2021, it will increase the size
of the Company’s board of directors in order to appoint two
individuals designated by 210 Capital to the board of directors for
a term expiring at the next succeeding annual meeting of the
Company’s stockholders.
ITEM 9 – CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES
None.
60
ITEM 9A – CONTROLS AND
PROCEDURES
Evaluation of Disclosure Controls and Procedures
Based
on an evaluation under the supervision and with the participation
of the Company’s management, the Company’s principal
executive officer and principal financial officer have concluded
that the Company’s disclosure controls and procedures as
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act
were effective as of December 31, 2020 to provide reasonable
assurance that information required to be disclosed by the Company
in reports that it files or submits under the Exchange Act is (i)
recorded, processed, summarized and reported within the time
periods specified in the SEC rules and forms and (ii) accumulated
and have been communicated to the Company’s management,
including its principal executive officer and principal financial
officer, as appropriate, to allow timely decisions regarding
required disclosure.
Inherent Limitations Over Internal Controls
The
Company’s internal control over financial reporting is
designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements
for external purposes in accordance with U.S. generally accepted
accounting principles (“GAAP”). The Company’s
internal control over financial reporting includes those policies
and procedures that:
(i)
pertain
to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of
the Company’s assets;
(ii)
provide
reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP,
and that the Company’s receipts and expenditures are being
made only in accordance with authorizations of the Company’s
management and directors; and
(iii)
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
Company’s assets that could have a material effect on the
financial statements.
Management,
including the Company’s Chief Executive Officer and Chief
Financial Officer, does not expect that the Company’s
internal controls will prevent or detect all errors and all fraud.
A control system, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a
control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of internal controls can provide
absolute assurance that all control issues and instances of fraud,
if any, have been detected. Also, any evaluation of the
effectiveness of controls in future periods are subject to the risk
that those internal controls may become inadequate because of
changes in business conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management’s Annual Report on Internal Control Over Financial
Reporting
The
Company’s management is responsible for establishing and
maintaining adequate internal control over financial reporting (as
defined in Rule 13a-15(f) under the Exchange Act). Management
conducted an assessment of the effectiveness of the Company’s
internal control over financial reporting based on the criteria set
forth in Internal Control – Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework). Based on the Company’s
assessment, management has concluded that its internal control over
financial reporting was effective as of December 31, 2020 to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements in accordance
with GAAP.
Changes in Internal Control Over Financial Reporting
There
were no changes in the Company’s internal control over
financial reporting during the quarter ended December 31, 2020,
which were identified in connection with management’s
evaluation required by paragraph (d) of Rules 13a-15 and 15d-15
under the Exchange Act, that have materially affected, or are
reasonably likely to materially affect, the Company’s
internal control over financial reporting.
61
This
report does not include an auditors' report on the effectiveness of
internal control over financial reporting due to SEC rules that
exempt smaller reporting companies such as Support.com from
providing such a report.
ITEM 9B – OTHER
INFORMATION
None.
PART III
Certain
information required by Part III of this report is omitted from
this report pursuant to General Instruction G(3) of Form 10-K
because we will file a definitive proxy statement pursuant to
Regulation 14A for our 2021 annual meeting of stockholders (the
“Proxy Statement”) not later than 120 days after the
end of the fiscal year covered by this report, and the information
included in the Proxy Statement that is required by Part III of
this report is incorporated herein by reference.
ITEM 10 – DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE
Incorporated
herein by reference to the information to be set forth in the Proxy
Statement.
ITEM 11 – EXECUTIVE
COMPENSATION
Incorporated
herein by reference to the information to be set forth in the Proxy
Statement.
ITEM 12 – SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
Incorporated
herein by reference to the information to be set forth in the Proxy
Statement.
ITEM 13 – CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Incorporated
herein by reference to the information to be set forth in the Proxy
Statement.
ITEM 14 – PRINCIPAL ACCOUNTANT
FEES AND SERVICES
Incorporated
herein by reference to the information to be set forth in the Proxy
Statement.
PART IV
ITEM 15 – EXHIBITS AND FINANCIAL
STATEMENT SCHEDULES
(a)
The
following documents are filed as part of this report:
(1)
Financial
Statements—See Index to the Consolidated Financial Statements
and Supplementary Data in Item 8 of this report.
(2)
Financial
Statement Schedules.
Schedule II—Valuation and qualifying accounts was omitted as
the required disclosures are included in Note 1 to the Consolidated
Financial Statements.
62
All other schedules are omitted since the information required is
not applicable or is shown in the Consolidated Financial Statements
or notes thereto.
(3)
Exhibits—See
in Item 15(b) of this report.
(b)
Exhibits.
Exhibit
|
|
Description of Document
|
|
|
Agreement and Plan
of Merger, dated March 19, 2021, by and among Greenidge Generation
Holdings Inc., Support.com, Inc. and GGH Merger Sub, Inc.
(incorporated by reference to Exhibit 2.1 of Support.com's current
report on Form 8-K filed with the SEC on March 22,
2021)
|
||
|
Restated
Certificate of Incorporation, as amended (incorporated by reference
to Exhibit 3.1 of Support.com’s annual report on
Form 10-K for the year ended December 31,
2001)
|
||
|
Certificate
of Amendment to Support.com’s Amended and Restated
Certificate of Incorporation (incorporated by reference to Exhibit
3.1 of Support.com’s current report on Form 8-K filed with
the SEC on June 23, 2009)
|
||
|
Certificate
of Designation of Series A Junior Participating Preferred Stock of
Support.com (incorporated by reference to Exhibit 3.1 of
Support.com’s current report on Form 8-K filed with the SEC
on October 14, 2015)
|
||
|
Amended
and Restated Bylaws (incorporated by reference to Exhibit 3.1
of Support.com’s current report on Form 8-K filed with
the SEC on February 5, 2016)
|
||
|
Certificate
of Designation of Series B Junior Participating Preferred Stock, as
filed with the Secretary of State of Delaware on April 21, 2016
(incorporated by reference to Exhibit 3.1 of Support.com’s
current report on Form 8-K filed with the SEC on April 21,
2016)
|
||
|
Certificate
of Amendment to the Restated Certificate of Incorporation of the
Company effective January 20, 2017, filed on January 13, 2017
(incorporated by reference to Exhibit 3.1 of Support.com’s
current report on Form 8-K filed with the SEC on January 13,
2017
|
||
|
Amended
and Restated Certificate of Designation of Series B Junior
Participating Preferred Stock of the Company (incorporated by
reference to Exhibit 3.1 of Support.com’s current report on
Form 8-K filed with the SEC on August 22, 2019)
|
||
|
Amendment
to the Amended and Restated Bylaws of the Company (incorporated by
reference to Exhibit 3.1 of Support.com’s current report on
Form 8-K filed with the SEC on April 24, 2020)
|
||
|
Form
of Common Stock Certificate (incorporated by reference to
Exhibit 4.1 of Support.com’s quarterly report on
Form 10-Q for the quarter ended June 30,
2002)
|
||
|
Certificate
of Elimination of the Series A Preferred Stock filed with the
Secretary of State of the State of Delaware on April 21, 2016
(incorporated by reference to Exhibit 4.3 to Support.com’s
Form 8-A/A filed with the SEC on April 21, 2016)
|
||
|
Support.com,
Inc. Second Amended and Restated 2010 Equity and Performance
Incentive Plan (incorporated by reference to Appendix B of
Support.com's proxy statement on Schedule 14a, filed with the SEC
on May 12, 2016)
|
||
|
Section
382 Tax Benefits Preservation Plan, dated as of August 21, 2019, by
and between Support.com, Inc. and Computershare Trust Company,
N.A., as Rights Agent (incorporated by reference to Exhibit 4.1 of
Support.com’s current report on Form 8-K filed with the SEC
on August 22, 2019)
|
||
|
Support.com’s
amended and restated 2010 Equity and Incentive Compensation Plan
(incorporated by reference to Exhibit 4.1 of Support.com’s
current report on Form 8-K filed with the SEC on May 21,
2010)
|
||
|
Support.com’s
2011 Employee Stock Purchase Plan (incorporated by reference to
Annex A of Support.com’s definitive proxy statement for
Support.com’s 2011 annual meeting of stockholders filed with
the SEC on April 15, 2011)
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||
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Support.com’s
2014 Inducement Award Plan (incorporated by reference to Exhibit
10.2 of Support.com’s current report on Form 8-K filed with
the SEC on May 19, 2014)
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63
|
Form
of Stock Option Grant Notification for Officers and Employees
(incorporated by reference to Exhibit 10.1(a) of
Support.com’s quarterly report on Form 10-Q filed on November
5, 2009).
|
|
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Sublease
Agreement with TYCO Healthcare Group LP dated June 7, 2012
(incorporated by reference to Exhibit 10.1 of
Support.com’s quarterly report on form 10-Q filed with the
SEC on August 8, 2012).
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Master
Services Agreement Call Handling Services between Comcast and
Support.com, effective as of October 1, 2013 (incorporated by
reference to Exhibit 10.19 of Support.com’s annual report on
Form 10-K filed with the SEC on March 7, 2014) (1)
|
|
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Statement
of Work Number 1 to Master Services Agreement Call Handling
Services between Comcast and Support.com, effective as of October
1, 2013 (incorporated by reference to Exhibit 10.20 of
Support.com’s annual report on Form 10-K filed with the SEC
on March 7, 2014) (1)
|
|
|
Change
Management Form Number 1 under Statement of Work Number 1 to Master
Services Agreement Call Handling Services between Comcast and
Support.com, effective as of December 22, 2013 (incorporated by
reference to Exhibit 10.24 of Support.com’s annual report on
Form 10-K filed with the SEC on March 7, 2014 (1)
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|
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Amendment
Number 1 to Statement of Work Number 1 to Master Services Agreement
Call Handling Services between Comcast and Support.com, effective
as of December 31, 2013 (incorporated by reference to Exhibit 10.21
of Support.com’s annual report on Form 10-K filed with the
SEC on March 7, 2014)
|
|
|
Statement
of Work Number 2 to Master Services Agreement Call Handling
Services between Comcast and Support.com, effective as of December
31, 2013 (incorporated by reference to Exhibit 10.22 of
Support.com’s annual report on Form 10-K filed with the SEC
on March 7, 2014) (1)
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|
|
Statement
of Work Number 3 to Master Services Agreement Call Handling
Services between Comcast and Support.com, effective as of March 21,
2014 (incorporated by reference to Exhibit 10.3 of
Support.com’s quarterly report on Form 10-Q filed with the
SEC on May 8, 2014) (1)
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|
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Change
Management Form Number 2 under Statement of Work Number 1 to Master
Services Agreement Call Handling Services between Comcast and
Support.com, effective as of February 27, 2014 (incorporated by
reference to Exhibit 10.1 of Support.com’s quarterly report
on Form 10-Q filed with the SEC on May 8, 2014) (1)
|
|
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Change
Management Form Number 3 under Statement of Work Number 1 to Master
Services Agreement Call Handling Services between Comcast and
Support.com, effective as of March 4, 2014 (incorporated by
reference to Exhibit 10.2 of Support.com’s quarterly report
on Form 10-Q filed with the SEC on May 8, 2014) (1)
|
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First
Change Management Form to Statement of Work Number 3 to Master
Services Agreement Call Handling Services between Comcast and
Support.com, effective as of June 4, 2014 (incorporated by
reference to Exhibit 10.1 of Support.com’s current report on
Form 8-K filed with the SEC on June 11, 2014)
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Reseller
Agreement between Comcast and Support.com, effective as of June 6,
2014 (incorporated by reference to Exhibit 10.1 of
Support.com’s current report on Form 8-K filed with the SEC
on June 18, 2014) (1)
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64
|
Change
Management Form Number 4 under Statement of Work Number 1 to Master
Services Agreement Call Handling Services between Comcast and
Support.com, effective as of September 17, 2014 (incorporated by
reference to Exhibit 10.1 of Support.com’s current report on
Form 8-K filed with the SEC on October 6, 2014) (1)
|
|
|
Change
Management Form Number 5 under Statement of Work Number 1 to Master
Services Agreement Call Handling Services between Comcast and
Support.com, effective as of September 18, 2014 (incorporated by
reference to Exhibit 10.2 of Support.com’s current report on
Form 8-K filed with the SEC on October 6, 2014) (1)
|
|
|
Statement
of Work Number 4 to Master Services Agreement Call Handling
Services between Comcast and Support.com, effective as of February
6, 2015 (incorporated by reference to Exhibit 10.1 of
Support.com’s current report on Form 8-K filed with the SEC
on February 18, 2015) (1)
|
|
|
Change
Management Form Number 6 under Statement of Work Number 3 to Master
Services Agreement Call Handling Services between Comcast and
Support.com, effective as of April 6, 2015 (incorporated by
reference to Exhibit 10.2 of Support.com’s current report on
Form 8-K filed with the SEC on April 9, 2015) (1)
|
|
|
Amendment
Number 1 to Statement of Work Number 3 to Master Services Agreement
Call Handling Services between Comcast and Support.com, effective
as of June 2, 2015 (incorporated by reference to Exhibit 10.2 of
Support.com’s current report on Form 8-K filed with the SEC
on July 2, 2015) (1)
|
|
|
Change
Management Form Number 6 under Statement of Work Number 1 to Master
Services Agreement Call Handling Services between Comcast and
Support.com, effective as of November 18, 2015 (incorporated by
reference to Exhibit 10.1 of Support.com’s current report on
Form 8-K filed with the SEC on November 24, 2015) (1)
|
|
|
Change
Management Form Number 7 under Statement of Work Number 3 to Master
Services Agreement Call Handling Services between Comcast and
Support.com, effective as of November 18, 2015 (incorporated by
reference to Exhibit 10.2 of Support.com’s current report on
Form 8-K filed with the SEC on November 24, 2015) (1)
|
|
|
Form
of Directors’ and Officers’ Indemnification Agreement
(incorporated by reference to Exhibit 10.1 of
Support.com’s current report on Form 8-K filed with the
SEC on December 10, 2015).
|
|
|
Change
Management Form Number 1 to Master Services Agreement Call Handling
Services between Comcast and Support.com, effective as of December
15, 2015 (incorporated by reference to Exhibit 10.1 of
Support.com’s current report on Form 8-K filed with the SEC
on December 16, 2015) (1)
|
|
|
Amendment
to Master Services Agreement Call Handling Services between Comcast
and Support.com, Inc. effective as of May 23, 2016 (incorporated by
reference to Exhibit 10.1 of Support.com’s current report on
Form 8-K filed with the SEC on May 26, 2016)
|
|
|
Change
Management Form #8 to Statement of Work #1, between Comcast and
Company, signed June 2, 2016 (incorporated by reference to Exhibit
10.1 of Support.com’s current report on Form 8-K filed with
the SEC on June 7, 2016) (1)
|
|
|
Change
Management Form #8 to Statement of Work #3, between Comcast and
Company, signed June 2, 2016 (incorporated by reference to Exhibit
10.2 of Support.com’s current report on Form 8-K filed with
the SEC on June 7, 2016) (1)
|
|
|
Change
Management Form #9 to Statement of Work #3, between Comcast and
Support.com, signed July 13, 2016 (incorporated by reference to
Exhibit 10.1 of Support.com’s current report on Form 8-K
filed with the SEC on July 29, 2016) (1)
|
|
|
Change
Management Form #7 to Statement of Work #1, between Comcast and
Company, signed December 9, 2016 (incorporated by reference to
Exhibit 10.1 of Support.com’s current report on Form 8-K
filed with the SEC on December 20, 2016) (1)
|
65
|
Change Management
Form #10 to Statement of Work #3, between Comcast and Support.com,
signed December 9, 2016 (incorporated by reference to Exhibit 10.2
of Support.com’s current report on Form 8-K filed with the
SEC on December 20, 2016) (1)
|
|
|
Lease Agreement
between HCP LS Redwood City, LLC and the Company dated December 20,
2016 (incorporated by reference to Exhibit 10.36 of
Support.com’s annual report on Form 10-K filed with the SEC
on March 7, 2017)
|
|
|
Change Management
Form #11 to Statement of Work #3, between Comcast and Company,
signed February 6, 2017 (incorporated by reference to Exhibit 10.1
of Support.com’s Form 8-K filed with the SEC on February 10,
2017) (1)
|
|
|
Change Management
Form #12 to Statement of Work #3, between Comcast and Company,
signed March 7, 2017 (incorporated by reference to Exhibit 10.1 of
Support.com’s Form 8-K filed with the SEC on March 16, 2017)
(1)
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|
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Change Management
Form #9 to Statement of Work #1, between Comcast and Company,
signed February 24, 2017 (incorporated by reference to Exhibit 10.2
of Support.com’s Form 8-K filed with the SEC on March 16,
2017) (1)
|
|
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Change Management
Form #13 to Statement of Work #3, between Comcast and Company,
signed February 24, 2017 (incorporated by reference to Exhibit 10.3
of Support.com’s Form 8-K filed with the SEC on March 16,
2017) (1)
|
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Change Management
Form #14 to Statement of Work #3, between Comcast and Company,
signed February 24, 2017 (incorporated by reference to Exhibit 10.4
of Support.com’s Form 8-K filed with the SEC on March 16,
2017) (1)
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|
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Standard Sublease
between the Company and NantMobile, LLC dated April 29, 2017
(incorporated by reference to Exhibit 10.1 of Support.com’s
Form 8-K filed with the SEC on May 3, 2017)
|
|
|
Change Management
Form 15 to Statement of Work #3, between Comcast and Company,
signed May 17, 2017 (incorporated by reference to Exhibit 10.1 of
Support.com’s Form 8-K filed with the SEC on May 23, 2017)
(1)
|
|
|
Change Management
Form to Statement of Work #3 between Comcast and Company, signed
July 6, 2017 (incorporated by reference to Exhibit 10.1 of
Support.com’s Form 8-K filed with the SEC on July 13, 2017)
(1)
|
|
|
Amendment #3 to
Master Services Agreement Call Handling Services between Comcast
and Company, entered into on July 24, 2017 (incorporated by
reference to Exhibit 10.1 of Support.com’s Form 8-K filed
with the SEC on July 27, 2017)
|
|
|
Change Management
Form to Statement of Work #1 and Statement of Work #3 between
Comcast and Company, signed August 10, 2017 (incorporated by
reference to Exhibit 10.1 of Support.com’s Form 8-K filed
with the SEC on August 23, 2017)
|
|
|
Change Management
Form to Statement of Work #3 between Comcast and Company, signed
August 10, 2017 (incorporated by reference to Exhibit 10.2 of
Support.com’s Form 8-K filed with the SEC on August 23, 2017)
(1)
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Settlement
Agreement (Consent Order) between the U.S. Federal Trade Commission
and Company entered into on November 6, 2018 (incorporated by
reference to Support.com’s current report on Form 8-K filed
with the SEC on November 7, 2018)
|
|
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Extension of Lease
Agreement between the Company and Mariposa Building, LLC executed
on February 21, 2019 (incorporated by reference to Exhibit 10.1 of
Support.com’s Form 8-K filed with the SEC on February 26,
2019)
|
66
|
Support.com’s
Amended and Restated 2011 Employee Stock Purchase Plan
(incorporated by reference to Annex B of Support.com’s
definitive proxy statement for Support.com’s 2020 annual
meeting of stockholders filed with the SEC on April 24,
2020)
|
|
|
Support.com’s
Third Amended and Restated 2010 Equity and Performance Incentive
Plan (incorporated by reference to Annex C of Support.com’s
definitive proxy statement for Support.com’s 2020 annual
meeting of stockholders filed with the SEC on April 24,
2020)
|
|
|
Employment Offer
Letter between Lance Rosenzweig and Support.com., dated August 10,
2020 (incorporated by reference to Exhibit 10.1 of
Support.com’s Form 8-K filed with the SEC on August 13,
2020)
|
|
|
Separation and
Release Agreement between Rick Bloom and Support.com, effective
August 10, 2020 (incorporated by reference to Exhibit 10.2 of
Support.com’s Form 8-K filed with the SEC on August 13,
2020)
|
|
|
Employment Offer
Letter between Christine Kowalczyk and Support.com, dated August
27, 2020 (incorporated by reference to Exhibit 10.1 of
Support.com’s Form 8-K filed with the SEC on September 4,
2020)
|
|
|
Employment Offer
Letter between Caroline Rook and Support.com, dated October 5, 2020
(incorporated by reference to Exhibit 10.1 of Support.com’s
Form 8-K filed with the SEC on October 13,
2020)
|
|
10.51 |
|
Subscription
Agreement, dated March 19, 2021, by and among Support.com, Inc. and
210 Capital, LLC (incorporated by reference to Exhibit 10.1 of
Support.com’s current report on Form 8-K filed with the SEC
on March 22, 2021)
|
|
Subsidiaries of
Support.com, Inc.
|
|
|
Consent of
Independent Registered Public Accounting Firm
|
|
|
Power of Attorney
(see the signature page of this Form 10-K)
|
|
|
Chief Executive
Officer Section 302 Certification.
|
|
|
Chief Financial
Officer Section 302 Certification.
|
|
|
Statement of the
Chief Executive Officer under 18 U.S.C.
§ 1350(2)
|
|
|
Statement of the
Chief Financial Officer under 18 U.S.C.
§ 1350(2)
|
|
101.INS
|
|
XBRL Instance
Document
|
101.SCH
|
|
XBRL Taxonomy
Extension Schema
|
101.CAL
|
|
XBRL Taxonomy
Extension Calculation Linkbase
|
101.DEF
|
|
XBRL Taxonomy
Extension Definition Linkbase
|
101.LAB
|
|
XBRL Taxonomy
Extension Label Linkbase
|
101.PRE
|
|
XBRL Taxonomy
Extension Presentation Linkbase
|
*
Denotes
an executive or director compensation plan or
arrangement.
(1)
Confidential
treatment has been requested for portions of this
exhibit.
(2)
The
material contained in Exhibit 32.1 and 32.2 shall not be deemed
“filed” with the SEC and is not to be incorporated by
reference into any filing of the Company under the Securities Act
of 1933 or the Securities Exchange Act of 1934, whether made before
or after the date hereof irrespective of any general incorporation
language contained in such filing, except to the extent that the
registrant specifically incorporates it by reference.
c)
Financial
Statement Schedules.
No
schedules have been filed because the information required to be
set forth therein is not applicable or is shown in the financial
statements or related notes included as part of this
report.
67
SIGNATURES
Pursuant to the requirements of the Section 13 or
15(d) of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on this 30th day of March 2021.
|
SUPPORT.COM, INC.
|
|
|
|
|
|
By:
|
/s/ Lance
Rosenzweig
|
|
|
Lance Rosenzweig
|
|
|
President and Chief Executive Officer
|
POWER OF ATTORNEY
KNOW
ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Lance Rosenzweig and each of
them individually, as his or her attorney-in-fact, each with full
power of substitution, for him or her in any and all capacities, to
sign any and all amendments to this Report on Form 10-K, and to
file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorney-in-fact, or
his or her substitute, may do or cause to be done by virtue
hereof.
Pursuant
to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of
the registrant in the capacities and on the dates
indicated:
Signature
|
Title
|
Date
|
|
|
|
/s/ Lance
Rosenzweig
|
President and Chief Executive Officer and Director
|
March 30, 2021
|
Lance Rosenzweig
|
(Principal Executive Officer)
|
|
|
|
|
/s/ Caroline
Rook
|
Principal Financial Officer
|
March 30, 2021
|
Caroline Rook
|
(Principal Financial Officer and Principal Accounting
Officer)
|
|
|
|
|
/s/ Joshua E.
Schechter
|
Chairman of the Board of Directors
|
March 30, 2021
|
Joshua E. Schechter
|
|
|
|
|
|
/s/ Bradley L.
Radoff
|
Director
|
March 30, 2021
|
Bradley L. Radoff
|
|
|
|
|
|
/s/ Brian
Kelley
|
Director
|
March 30, 2021
|
Brian Kelley
|
|
|
|
|
|
/s/ Richard A.
Bloom
|
Director
|
March 30, 2021
|
Richard A. Bloom
|
|
|
68