☒	~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~September 30, 2017~~March 31, 2020

☐	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 000-30901

SUPPORT.COM, INC.

~~(Exact~~ (Exact Name of Registrant as Specified in Its Charter)

Delaware		94-3282005
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

~~1200 Crossman Avenue, Suite 210~~

~~Sunnyvale, CA, 94089~~1521 Concord Pike (US 202), Suite 301, Wilmington, DE 19803

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s Telephone Number, Including Area Code:(650) 556-9440

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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, or 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 ☐	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☒
Emerging growth company ☐	~~Accelerated filer~~ ☐	~~Non-accelerated filer~~ x ~~(Do~~(Do not check if a smaller reporting company)	~~Smaller reporting company~~ ☐
~~Emerging growth company~~ ☐

If an emerging growth company, indicate by check mark if the ~~registrant~~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 submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ☐ No ☒

On ~~October 31, 2017, 18,713,580~~April 30, 2020, 19,053,854 shares of the Registrant’s Common Stock, $0.0001 par value, were outstanding.

SUPPORT.COM, INC.

FORM 10-Q

QUARTERLY PERIOD ENDED ~~September 30, 2017~~MARCH 31, 2020

INDEX

			Page
Part I. Financial Information
Item 1.	Financial Statements (Unaudited)		3
	Condensed Consolidated Balance Sheets at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019		3
	Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019		4
	Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019		5
	Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2020 and 2019		6
	Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019	6	7
	Notes to Condensed Consolidated Financial Statements	7	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25	30
Item 4.	Controls and Procedures	26	30

Part II. Other Information
Item 1.	Legal Proceedings	27	31
Item 1A.	Risk Factors	27	32
Item 6.	Exhibits	38	43
Signature		38	44
Exhibit Index		39

~~Index~~

~~PART I.~~

~~FINANCIAL INFORMATION~~45

~~ITEM 1.~~

~~FINANCIAL STATEMENTS (UNAUDITED)~~

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

SUPPORT.COM, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	September 30, 2017			December 31, 2016			March 31, 2020	December 31, 2019
	(Unaudited)						(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	21,254		$	16,890		$15,141	$10,087
Short-term investments		28,138			36,519		13,275	16,327
Accounts receivable, net		11,755			9,567		8,071	9,398
Prepaid expenses and other current assets		646			1,211		853	728
Total current assets		61,793			64,187		37,340	36,540
Property and equipment, net		1,259			1,706		462	533
Intangible assets, net		250			266
Intangible assets							250
Right of use assets, net							178	-
Other assets		981			1,070		624	717

Total assets	$	64,283		$	67,229		$38,854	$38,040

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	792		$	1,085		$710	227
Accrued compensation		2,338			2,974		2,005	1,610
Other accrued liabilities		1,905			2,496		615	1,001
Short-term lease liability							171	-
Short-term deferred revenue		2,170			2,759		1,137	1,193
Total current liabilities		7,205			9,314		4,638	4,081
Long-term deferred revenue		31			106
Other long-term liabilities		446			501		783	792
Total liabilities		7,682			9,921		5,421	4,873
Commitments and contingencies (Note 3)
Stockholders’ equity:
Common stock; par value $0.0001, 50,000,000 shares authorized; 19,196,412 issued and 18,713,498 outstanding at September 30, 2017; 19,030,024 issued and 18,548,180 outstanding at December 31, 2016		2			2
Common stock; par value $0.0001, 50,000,000 shares authorized; 19,536,768 issued and 19,053,854 outstanding at March 31, 2020 and December 31, 2019							2
Additional paid-in capital		267,722			267,400		250,206	250,092
Treasury stock, at cost (482,914 shares at September 30, 2017 and 481,844 shares at December 31, 2016)		(5,297	)		(5,295	)
Treasury stock, at cost (482,914 shares at March 31, 2020 and December 31, 2019)							(5,297)
Accumulated other comprehensive loss		(2,136	)		(2,329	)	(2,592)	(2,380)
Accumulated deficit		(203,690	)		(202,470	)	(208,886)	(209,250)
Total stockholders’ equity		56,601			57,308		33,433	33,167

Total liabilities and stockholders’ equity	$	64,283		$	67,229		$38,854	$38,040

See accompanying notes.

SUPPORT.COM, INC.

~~Index~~

CONDENSED CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~

~~SUPPORT.COM, INC.~~

OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017 2016 2017 2016

Revenue:
Services $ 13,682 $ 14,163 $ 39,744 $ 43,055
Software and other 1,350 1,364 4,085 3,998
Total revenue 15,032 15,527 43,829 47,053

Cost of revenue:
Cost of services 11,559 11,847 33,760 38,403
Cost of software and other 66 120 252 377
Total cost of revenue 11,625 11,967 34,012 38,780

Gross profit
3,407 3,560 9,817 8,273

Operating expenses:
Research and development 631 1,336 2,429 4,464
Sales and marketing 621 1,463 2,011 5,401
General and administrative 1,996 2,703 6,847 10,186
Amortization of intangible assets and other 0 267 16 801
Restructuring 128 - 128 423
Total operating expenses 3,376 5,769 11,431 21,275
Income (loss) from operations 31 (2,209 ) (1,614 ) (13,002 )
Interest income and other, net 164 124 451 383
Income (loss) from continuing operations, before income taxes 195 (2,085 ) (1,163 ) (12,619 )
Income tax (benefit) provision (36 ) 44 57 132
Income (loss) from continuing operations, after income taxes 231 (2,129 ) (1,220 ) (12,751 )

Income from discontinued operations, after income taxes - - - 284

Net income (loss) $ 231 $ (2,129 ) $ (1,220 ) $ (12,467 )

Basic and diluted income (loss) per share:
Income (loss) from continuing operations $ 0.01 $ (0.12 ) $ (0.07 ) $ (0.69 )
Income (loss) from discontinued operations 0.00 (0.00 ) (0.00 ) 0.01
Basic and diluted income (loss) per share $ 0.01 $ (0.12 ) $ (0.07 ) $ (0.68 )

Shares used in computing basic net income (loss) per share 18,692 18,446 18,613 18,372
Shares used in computing diluted net income (loss) per share 18,714 18,446 18,613 18,372

	Three Months Ended March 31,
	2020	2019
Revenue:
Services	$11,511	$16,864
Software and other	438	1,200
Total revenue	11,949	18,064
Cost of revenue:
Cost of services	7,685	13,798
Cost of software and other	29	54
Total cost of revenue	7,714	13,852
Gross profit	4,235	4,212
Operating expenses:
Engineering and IT	1,040	749
Sales and marketing	813	392
General and administrative	2,053	1,896

Total operating expenses	3,906	3,037
Income from operations	329	1,175
Interest income and other, net	84	296
Income before income taxes	413	1,471
Income tax provision	49	28
Net income	$364	$1,443

Basic and diluted earnings per share:
Net income	$0.02	$0.08
Shares used in computing basic net income per share	19,054	18,955
Shares used in computing diluted net income per share	19,233	19,004

~~See accompanying notes.~~

~~Index~~

~~SUPPORT.COM, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)~~

~~(in thousands)~~

~~(Unaudited)~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017 2016 2017 2016
��
Net Income (loss) $ 231 $ (2,129 ) $ (1,220 ) $ (12,467 )

Change in foreign currency translation adjustment 9 25 175 (13 )
Change in net unrealized gain (loss) on investments 12 (40 ) 18 82
Other comprehensive income (loss) 21 (15 ) 193 69

Comprehensive income (loss) $ 252 $ (2,144 ) $ (1,027 ) $ (12,398 )

See accompanying notes.

~~Index~~

SUPPORT.COM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~

COMPREHENSIVE INCOME

(in thousands)

(Unaudited)

Nine Months Ended
September 30,

2017 2016
Operating Activities:
Net loss $ (1,220 ) $ (12,467 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 479 530
Amortization of premiums and discounts on investments 65 244
Amortization of intangible assets and other 16 801
Stock-based compensation 295 1,776
Changes in assets and liabilities:
Accounts receivable, net (2,188 ) (176 )
Prepaid expenses and other current assets 572 122
Other long-term assets 123 (5 )
Accounts payable (292 ) 350
Accrued compensation (632 ) (363 )
Other accrued liabilities (585 ) (1,534 )
Other long-term liabilities (48 ) (324 )
Deferred revenue (664 ) 444
Net cash used in operating activities (4,079 ) (10,602 )

Investing Activities:
Purchases of property and equipment (32 ) (481 )
Purchases of investments (14,939 ) (22,901 )
Maturities of investments 23,273 22,109
Net cash provided by (used in) investing activities 8,302 (1,273 )

Financing Activities:
Proceeds from employee stock purchase plan 27 45
Repurchase of common stock (2 ) (72 )
Net cash provided by (used in) financing activities 25 (27 )
Effect of exchange rate changes on cash and cash equivalents 116 35
Net increase (decrease) in cash and cash equivalents 4,364 (11,867 )
Cash and cash equivalents at beginning of period 16,890 27,598
Cash and cash equivalents at end of period $ 21,254 $ 15,731

Supplemental schedule of cash flow information:
Income taxes paid $ 85 $ 132

	Three Months Ended March 31,
	2020	2019
Net income	$364	$1,443

Other comprehensive income (loss):
Change in foreign currency translation adjustment	(211)	90
Change in net unrealized gain (loss) on investments	(1)	50
Other comprehensive income (loss)	(212)	149

Comprehensive income	$152	$1,592

See accompanying notes.

SUPPORT.COM, INC.

6CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

~~Index~~

	Common Stock
	Shares	Amount	Additional Paid-In Capital	Treasury Stock	Accumulated Other Comprehensive Loss	Accumulated Deficit	Total Stockholders’ Shares
Balances at December 31, 2018	18,955,264	$2	$268,794	$(5,297)	$(2,507)	$(213,096)	$47,896
Net income	—	—	—	—	—	1,443	1,443
Other comprehensive income	—	—	—	—	149	—	149
Stock-based compensation expense		—	52		—	—	52
Balances at March 31, 2019	18,955,264	$2	$268,864	$(5,297)	$(2,358)	$(211,653)	$49,540

Balances at December 31, 2019	19,053,854	$2	$250,092	$(5,297)	$(2,380)	$(209,250)	$33,167
Net income	—	—	—	—	—	364	364
Other comprehensive loss	—	—	—	—	(212)	—	(212)
Stock-based compensation expense		—	114		—	—	114
Balances at March 31, 2020	19,053,854	$2	$250,206	$(5,297)	$(2,592)	$(208,886)	$33,433

See accompanying notes.

SUPPORT.COM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Three Months Ended March 31,
	2020	2019
Operating Activities:
Net income	$364	$1,443
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation	72	75
Amortization of premiums and discounts on investments	23	37
Stock-based compensation	114	52
Changes in assets and liabilities:
Accounts receivable, net	1,327	(2,579)
Prepaid expenses and other current assets	(143)	50
Other assets	(183)	72
Accounts payable	432	(11)
Accrued compensation	392	(1,028)
Other accrued liabilities and lease liability	(215)	37
Other long-term liabilities	(60)	-
Deferred revenue	(56)	180
Net cash provided by (used in) operating activities	2,067	(1,672)

Investing Activities:
Purchases of property and equipment	(1)	(9)
Purchases of investments	-	(3,570)
Maturities of investments	3,029	9,645
Net cash provided by investing activities	3,028	6,066
Effect of exchange rate changes on cash and cash equivalents	(41)	8
Net increase in cash and cash equivalents	5,054	4,402
Cash and cash equivalents at beginning of period	10,087	25,182
Cash and cash equivalents at end of period	$15,141	$29,584

Supplemental schedule of cash flow information:
Income taxes paid	$-	$-

See accompanying notes.

SUPPORT.COM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS~~

STATEMENTS

(Unaudited)

Note 1. Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements include the accounts of Support.com, Inc. (the “Company”, “Support.com”, “We” or “Our”) and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. The condensed consolidated balance sheet as of ~~September 30, 2017~~March 31, 2019 and the consolidated statements of operations and comprehensive ~~loss~~income for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 and the consolidated statements of cash flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 are unaudited. In the opinion of management, these unaudited interim condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of the results for, and as of, the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for the full fiscal year or for any future period. The condensed consolidated balance sheet information as of December 31, ~~2016~~2019 is derived from audited financial statements as of that date. These financial statements have been prepared based upon Securities and Exchange Commission (“SEC”) rules that permit reduced disclosure for interim periods. For a more complete discussion of significant accounting policies and certain other information,these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2019, filed with the SEC on March ~~7, 2017.~~18, 2020.

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 thousands of individuals worldwide. In response, many countries have implemented measures to combat the outbreak which have impacted global business operations. As of the date of issuance of the financial statements, the Company’s operations have not been significantly impacted, however, the Company continues to monitor the situation. No impairments were recorded as of the balance sheet date as no triggering events or changes in circumstances had occurred as of March 31, 2020; however, due to significant uncertainty surrounding the situation, management's judgment regarding this could change in the future. In addition, while the Company’s results of operations, cash flows and financial condition could be negatively impacted, the extent of the impact cannot be reasonably estimated at this time.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed 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.

Revenue Recognition

~~For all transactions, we recognize revenue only when all~~Disaggregation of ~~the following criteria are met:~~

~~Persuasive evidence of an arrangement exists;~~

~~Delivery has occurred;~~

~~Collection is considered probable; and~~

~~The fees are fixed or determinable.~~

Revenue

We ~~consider all arrangements with payment terms longer than 90 days not to be fixed or determinable. If the fee is considered not to be fixed or determinable,~~generate revenue ~~is recognized as payment becomes due~~ from the sale of services and sale of software fees for end-user software products provided through direct customer ~~provided all other~~downloads and through the sale of these end-user software products via partners. The following table depicts the disaggregation of revenue ~~recognition criteria have been met.~~(in thousands) according to revenue type and is consistent with how we evaluate our financial performance:

	Three Months Ended
	March 31,
Revenue from Contracts with Customers:	2020	2019
Services	$11,511	$16,864
Software and other	438	1,200
Total revenue	$11,949	$18,064

Services Revenue

Services revenue is comprised primarily of fees for technology support services. Our service programs are designed for both the consumer and ~~small and medium business (“SMB”)~~SMB markets, and include computer and mobile device set-up, security and support, virus and malware removal and wireless network set-up, and automation system onboarding and support.

~~Index~~

We offer technology services to consumers and SMBs, primarily 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. Referral fees are generally expensed in the period in which revenues are recognized. In such referral programs, since we are the primary obligor and bear substantially all risks associated with the transaction, we record the gross amount of revenue. In direct transactions, we sell directly to the customer at the retail price.

The technology services described above include ~~three~~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 specialists. These services programs also include performance standards, which may result in incentives or penalties, which are recognized as earned or incurred.

~~Subscription-Based Services~~● 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~~delivered are recorded as deferred revenue and ~~recognize revenue when~~recognized at the time of 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-subscriptiondelivery.

The following table represent deferred revenue ~~balances older than 90 days as services revenue. For~~activity for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016, services breakage revenue was less than 1% of our total revenue.~~2019 (in thousands):

	March 31, 2020	March 31, 2019

Deferred revenue - beginning of period	$1,193	1,135
Deferred revenue	403	751
Recognition of unearned revenue	(459)	(571)
Deferred revenue - end of period	$1,137	$1,315

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.

We generally provide a refund period on services, during which refunds may be granted to customers under certain circumstances, including inability to resolve certain support issues. For our partnerships, the refund period varies by partner, but is generally between 5 and 14 days. For referral programs and direct transactions, the refund period is generally 5 days. For all channels, we recognize revenue net of refunds and cancellations during the period. Refunds and cancellations have not been material.

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.

As of March 31, 2020, revenues from implementation services are di minimus.

Software and Other Revenue

~~Index~~

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 as a perpetual license or as a fixed period subscription. We ~~act~~offer when-and-if-available software upgrades to our end-user products. Management has determined that these upgrades are not distinct, as the ~~primary obligor~~upgrades are an input into a combined output. In addition, Management has determined that the frequency and timing of the when-and-if-available upgrades are unpredictable and therefore we recognize revenue consistent with the sale of the perpetual license or 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.

For certain end-user software products, we sell perpetual licenses. 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.

For certain of our end-user software products (principally SUPERAntiSpyware), we sell licenses for a fixed subscription period. We provide regular, significant updates over the subscription period and therefore recognize revenue for these products ratably over the subscription period.

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 notify us that the revenue has been earned.~~

partners.

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 condensed consolidated statements of operations.

Our cash equivalents and short-term investments are classified as available-for-sale, and are reported at fair value with unrealized gains/losses included in accumulated other comprehensive loss within stockholders’ equity on the condensed consolidated balance sheets.

We view ~~our available-for-sale~~this investment portfolio as available for use in our current operations, and therefore we present our marketable securities as short-term ~~assets.~~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, the Company’s intent to sell the security and the Company’s belief that it 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 ~~September 30, 2017, we~~December 31, 2019, the Company evaluated ~~our~~its unrealized ~~gains/~~losses on ~~available-for-sale~~marketable securities 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. At ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, the fair value of cash, cash equivalents and investments was ~~$49.4~~$28.4 million and ~~$53.4~~$26.4 million, respectively.

The following is a summary of cash, cash equivalents and investments at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 (in thousands):

As of March 31, 2020	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
Cash	$9,823	$—	$—	$9,823
Money market funds	5,318	—	—	5,318
Certificates of deposit	438	—	—	438
Commercial paper	2,797	1	—	2,798
Corporate notes and bonds	8,812	4	(39)	8,777
U.S. government agency securities	1,251	11	—	1,262
	$28,439	$16	$(39)	$28,416
Classified as:
Cash and cash equivalents	$15,141	$—	$—	$15,141
Short-term investments	13,298	16	(39)	13,275
	$28,439	$16	$(39)	$28,416

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses
Fair Value
As of September 30, 2017
Cash $ 7,654 $ — $ — $ 7,654
Money market funds 13,600 — — 13,600
Certificates of deposit 1,211 — (1 ) 1,210
Commercial paper 997 — — 997
Corporate notes and bonds 20,036 1 (19 ) 20,018
U.S. government agency securities 5,917 — (4 ) 5,913
$ 49,415 $ 1 $ (24 ) $ 49,392
Classified as:
Cash and cash equivalents $ 21,254 $ — $ — $ 21,254
Short-term investments 28,161 1 (24 ) 28,138
$ 49,415 $ 1 $ (24 ) $ 49,392

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

~~Index~~

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses
Fair Value
As of December 31, 2016
Cash $ 7,593 $ — $ — $ 7,593
Money market funds 9,297 — — 9,297
Certificates of deposit 1,273 — — 1,273
Commercial paper 4,989 — — 4,989
Corporate notes and bonds 19,357 — (40 ) 19,317
U.S. government agency securities 10,941 1 (2 ) 10,940
$ 53,450 $ 1 $ (42 ) $ 53,409
Classified as:
Cash and cash equivalents $ 16,890 $ — $ — $ 16,890
Short-term investments 36,560 1 (42 ) 36,519
$ 53,450 $ 1 $ (42 ) $ 53,409

The following table summarizes the estimated fair value of our ~~available-for-sale~~marketable securities classified by the stated maturity date of the security (in thousands):

	September 30, 2017		December 31, 2016		March 31, 2020	December 31, 2019
Due within one year	$	21,647	$	27,730	$11,043	$12,754
Due within two years		6,491		8,789	2,232	3,573
	$	28,138	$	36,519	$13,275	$16,327

Fair Value Measurements

Accounting Standards Codification (“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.

~~Level 1 - Quoted prices in active markets for identical 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.~~

In accordance with ASC 820, 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 ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 (in thousands):

As of September 30, 2017	Level 1		Level 2		Level 3		Total
As of March 31, 2020									Level 1	Level 2	Level 3	Total
Money market funds	$	13,600	$	—	$	—	$	13,600	$5,318	$—		$5,318
Certificates of deposit		—		1,210		—		1,210	—	438	—	438
Commercial paper		—		997		—		997	—	2,798	—	2,798
Corporate notes and bonds		—		20,018		—		20,018	—	8,777	—	8,777
U.S. government agency securities		—		5,913		—		5,913	—	1,262	—	1,262
Total	$	13,600	$	28,138	$	—	$	41,738	$5,318	$13,275	$—	$18,593

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

~~Index~~

As of December 31, 2016 Level 1 Level 2 Level 3 Total
Money market funds $ 9,297 $ — $ — $ 9,297
Certificates of deposit — 1,273 — 1,273
Commercial paper — 4,989 — 4,989
Corporate notes and bonds — 19,317 — 19,317
U.S. government agency securities — 10,940 — 10,940
Total $ 9,297 $ 36,519 $ — $ 45,816

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 to recognize the transfer of financial instruments between levels at the end of our quarterly reporting period.

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. 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.

For the three months ended ~~September 30, 2017,~~March 31, 2020, Comcast and Cox Communications accounted for ~~62%~~47% and 37%, respectively, of our total revenue. For the three months ended ~~September 30, 2016,~~March 31, 2019, Comcast and ~~Office Depot~~ Cox Communications accounted for ~~60%~~68% and ~~15%, respectively, of our total revenue. For the nine months ended September 30, 2017, Comcast accounted for 63% of our total revenue. For the nine months ended September 30, 2016, Comcast and~~ ~~Office Depot~~ ~~accounted for 59% and 16%~~20%, respectively, of our total revenue. There were no other customers that accounted for 10% or more of total revenue for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016.~~2019.

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. As of ~~September 30, 2017~~March 31, 2020, Comcast and ~~December 31, 2016, Comcast~~Cox Communications accounted for ~~74%~~48% and ~~70%~~38%, respectively, of our total accounts ~~receivable, respectively.~~receivable. As of December 31, 2019, Comcast and Cox Communications accounted for 59% and 33%, respectively, of our total accounts receivable. There were no other customers that accounted for 10% or more of our total accounts receivable as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016.~~2019.

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. Reserves are made based on a specific review of all significant outstanding invoices. For those invoices not specifically provided for, reserves 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. We had an allowance for doubtful accounts of ~~$5,000 and $19,000~~$28,000 at ~~September 30, 2017~~both March 31, 2020 and December 31, ~~2016, respectively.~~2019.

Self-Funded Health Insurance

~~The~~Effective January 1, 2015, the Company maintains a self-funded health insurance program with a stop-loss umbrella policy with a third party insurer to limit the maximum potential liability for medical claims. With respect to this program, the Company considers historical and projected medical utilization data when estimating its health insurance program liability and related expense. As of ~~September 30, 2017,~~March 31, 2020, the Company had approximately ~~$711,000~~$239,000 in reserve for its self-funded health insurance program. As of December 31, ~~2016,~~2019, the Company had approximately ~~$911,000~~$404,000 in reserve for its self-funded health insurance program. The reserve is included in “other accrued liabilities” in the condensed consolidated balance sheets.

~~Index~~

The Company regularly analyzes its reserves for incurred but not reported claims and for reported but not paid claims related to its self-funded insurance program. The Company believes its reserves are adequate. However, significant judgment is involved in assessing these reserves such as assessing historical paid claims, average lags between the claims’ incurred date, reported dates and paid dates, and the frequency and severity of claims. There may be differences between actual settlement amounts and recorded reserves and any resulting adjustments are included in expense once a probable amount is known.

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, which relate entirely to accumulated foreign currency translation losses associated with our foreign subsidiaries and unrealized losses on investments, consisted of the following (in thousands):

Foreign
Currency
Translation
Losses

Unrealized
Losses on
Investments
Total
Balance as of December 31, 2016 $ (2,288 ) $ (41 ) $ (2,329 )
Current-period other comprehensive income 175 18 193
Balance as of September 30, 2017 $ (2,113 ) $ (23 ) $ (2,136 )

	Foreign Currency Translation Losses	Unrealized Losses on Investments	Total
Balance as of December 31, 2019	$(2,389)	$9	$(2,380)
Current-period other comprehensive (loss)	(211)	(1)	(212)
Balance as of March 31, 2020	$(2,600)	$8	$(2,592)

	Foreign Currency Translation Losses	Unrealized Losses on Investments	Total
Balance as of December 31, 2018	$(2,438)	$(69)	$(2,507)
Current-period other comprehensive income	99	50	149
Balance as of March 31, 2019	$(2,339)	$(19)	$(2,358)

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 condensed consolidated statements of comprehensive loss are shown before taking into account the related income tax impact. The income tax effect allocated to each component of other comprehensive loss for each of the periods presented is not significant.

Stock-Based Compensation

We apply the provisions of ASC 718, Compensation - Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based payment awards, including grants of stock, restricted stock awards and options to purchase stock, made to employees and directors based on estimated fair values.

The fair value of our stock-based awards was estimated using the following weighted average assumptions for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016.~~ 2019:

	Stock Option Plan
	Three Months Ended March 31,
	2020	2019 (1)
Risk-free interest rate	0.60%	0%
Expected term (in years)	3.13	0.0
Volatility	37.2%	0%
Expected dividend	0%	0%
Weighted average grant-date fair value	$0.15	$0.00

(1)

There were no ~~stock option grants during~~options granted for the three ~~month period~~months ended ~~September 30, 2017.~~March 31, 2019.

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Stock Option Plan:
Risk-free interest rate — 0.99 % 1.43 % 0.92 %
Expected term — 3.90 years 3.58 years 3.89 years
Volatility — 48.89 % 46.21 % 48.34 %
Expected dividend — 0 % 0 % 0 %
Weighted average fair value (per share)
—
$ 0.99 $ 0.96 $ 0.96

12There were no Employee Stock Purchase Plan (“ESPP”) purchases for the three months ended March 31, 2020 and 2019.

~~Index~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Employee Stock Purchase Plan:
Risk-free interest rate 1.02 % 0.38 % 1.02 % 0.38 %
Expected term 0.5 years 0.5 years 0.5 years 0.5 years
Volatility 33.66 % 48.86 % 33.66 % 48.86 %
Expected dividend 0 % 0 % 0 % 0 %
Weighted average fair value (per share) $ .59 $ 0.84 $ .59 $ 0.84

We recorded the following stock-based compensation expense for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 (in thousands):

		Three Months Ended September 30,					Nine Months Ended September 30,
		2017			2016		2017		2016		Three Months Ended March 31,
											2020	2019
Stock-based compensation expense related to grants of:	Stock-based compensation expense related to grants of:
Stock options		$	27		$	266	$	86	$	679	$31	$33
Employee Stock Purchase Plan (“ESPP”)			5			10		16		32
Restricted Stock Units (“RSU”)			(4	)		385		193		1,065
		$	28		$	661	$	295	$	1,776
Restricted stock units (“RSUs”)											83	19
											$114	$52
Stock-based compensation expense recognized in:	Stock-based compensation expense recognized in:
Cost of services		$	19		$	43	$	83	$	134
Cost of software and other			—			1		3		4
Research and development			(18	)		156		62		346
Cost of service											$5	$8
Engineering and IT											2	7
Sales and marketing			12			79		34		121	8	12
General and administrative			15			382		113		1,171	99	25
		$	28		$	661	$	295	$	1,776	$114	$52

Earnings ~~(Loss)~~ Per Share

Basic earnings ~~(loss)~~ per share is computed using our net income ~~(loss)~~ and the weighted average number of common shares outstanding during the reporting period. Diluted earnings ~~(loss)~~ per share is computed using our net income ~~(loss)~~ 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.

For the three months ended March 31, 2020 and 2019, diluted earnings per share was 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.

The following table sets forth the computation of basic and diluted ~~loss~~earnings per share (in thousands, except per share amounts):

	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months
	2017		2016			2017			2016			Ended
												March 31,
Net income (loss)	$	231	$	(2,129	)	$	(1,220	)	$	(12,467	)
												2020	2019

Net income												$364	$1,443

Basic:
Weighted-average shares of common stock outstanding		18,692		18,446			18,613			18,372		19,054	18,955
Shares used in computing basic income (loss) per share		18,692		18,446			18,613			18,372
Basic income (loss) per share		0.01		(0.12	)		(0.07	)		(0.69	)
Shares used in computing basic income per share												19,054	18,955
Basic earnings per share												0.02	0.08
Diluted:
Weighted-average shares of common stock outstanding		18,692		18,446			18,613			18,372		19,054	18,955
Add: Common equivalent shares outstanding		22		-			-			-		179	49
Shares used in computing diluted income (loss) per share		18,714		18,446			18,613			18,372
Diluted income (loss) per share	$	0.01	$	(0.12	)	$	(0.07	)	$	(0.69	)
Shares used in computing diluted earnings per share												19,233	19,004
Diluted earnings per share												$0.02	$0.08

~~Index~~

~~The following potential common shares outstanding were excluded from the computation of diluted loss per share because including them would have been antidilutive (in thousands):~~

As of September 30,
2017 2016
Stock options 417 4,475
RSUs - 1,375
Warrants - 324
Total common share equivalents 417 6,174

Warranties and Indemnifications

We generally provide a refund period on sales, during which refunds may be granted to consumers under certain circumstances, including our inability to resolve certain support issues. For our partnerships, the refund period varies by partner, but is generally between 5-14 days. For referral programs and direct transactions, the refund period is generally 5 days. For the majority of our end-user software products, we provide a30-day money back guarantee.For all channels, we recognize revenue net of refunds and cancellations during the period. Refunds and cancellations have not been material to date.

We generally agree to indemnify our customers against legal claims that our end-user software products infringe certain third-party intellectual property rights. As of ~~September 30, 2017,~~March 31, 2020, we have not been required to make any payment resulting from infringement claims asserted against our customers and have not recorded any related accruals.

Leases

We recognized operating and financing lease liabilities and corresponding right-of-use (ROU) assets on the balance sheet and to 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 right-of-use (“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 our right to use an underlying asset for the lease term and lease liabilities represent our 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. We use the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our 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.

Recent Accounting Pronouncements

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~, which provides guidance for revenue recognition and has been further clarified and amended in 2015 and 2016. ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to customers at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current U.S. GAAP. These may include identifying performance obligationsRecent Accounting Standards Adopted in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 is effective in the first quarter of 2018. Early adoption is permitted although the Company does not intend to early adopt the standard.Current Period

Financial Instruments

In adopting ASU 2014-09, companies may use either a full retrospective approach or a modified retrospective approach. Under the modified retrospective approach, the Company would not restate the prior financial statements presented. This guidance requires a company to provide additional disclosures of the amount by which each financial statement line item is affected in the current reporting period during 2018 as compared to the guidance that was in effect before the change, and an explanation of the reasons for significant changes, if any. The Company has selected the modified retrospective transition method and is currently evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures.

~~In November 2015, the FASB issued ASU No. 2015-17,~~ ~~Balance Sheet Classification of Deferred Taxes (Topic 740),~~ which simplifies the presentation of deferred income taxes. Under ASU 2015-17, deferred tax assets and liabilities are required to be classified as noncurrent, eliminating the prior requirement to separate deferred tax assets and liabilities into current and noncurrent. The new guidance is effective for the Company beginning on January ~~1, 2017. The adoption of ASU 2015-17 did not have a material effect on our consolidated financial statements or disclosures.~~

~~In February~~ 2016, the FASB issued ASU No. ~~2016-02,~~2016-01, ~~Leases~~Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities (Topic ~~842),~~825) ~~which provides guidance~~. ASU No. 2016-01 revises the classification and measurement of investments in certain equity investments and the presentation of certain fair value changes for ~~accounting for leases. Under~~certain financial liabilities measured at fair value. ASU ~~2016-02,~~No. 2016-01 requires the change in fair value of many equity investments to be recognized in net income. The Company ~~will be required to recognize~~adopted ASU 2016-01 in its first quarter of 2018 utilizing the ~~assets and liabilities for~~modified retrospective transition method. Based on the rights and obligations created by leased assets. ASU 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We are currently evaluatingcomposition of the ~~impact of~~Company's investment portfolio, the adoption of ASU 2016-02 on our consolidated financial statements. While we have not yet quantified the impact, we may be required to recognize certain assets and liabilities for our leases which would result in a change to interest expense and depreciation and amortization expenses while reducing rent expense upon adoption.

~~Index~~

~~In March 2016, the FASB issued ASU No. 2016-09,~~ ~~Compensation—Stock Compensation (Topic 718)~~, ~~Improvements to Employee Share-Based Payment Accounting~~ which includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. Excess tax benefits for share-based payments will be recorded as a reduction of income taxes and reflected in operating cash flows upon the adoption of this ASU. Excess tax benefits were previously recorded in equity and as financing activity under the prior rules. ASU 2016-09 is effective for annual and interim reporting periods beginning after December 15, 2016. ~~The adoption of ASU 2016-09~~ASU-2016-01 did not have a material ~~effect~~impact on ~~our~~the consolidated financial ~~statements or disclosures.~~statments.

In ~~October 2016,~~August 2018, the FASB issued Accounting Standard Update No. 2018-13, Changes to Disclosure Requirements for Fair Value Measurements (Topic 820) (ASU ~~No. 2016-16,~~ ~~Income Taxes - Intra-Entity Transfers~~2018-13), which improved the effectiveness of ~~Assets Other Than Inventory (Topic 740)~~, ~~which requires entities to recognize~~disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements. We adopted the ~~income tax consequences of an intra-entity transfer of an asset other than inventory when the transaction occurs as opposed to deferring tax consequences~~new standard effective January 1, 2019 and amortizing them into future periods. This update is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. A modified retrospective approach with a cumulative-effect adjustment directly to retained earnings at the beginning of the period of adoption is required. The Company doesdo not expect the adoption of this ~~standard~~guidance to have a material impact on its consolidated financial ~~position or results of operations.~~statements.

New Accounting Standards to be adopted in Future Periods

Financial Instruments

In ~~January 2017,~~June 2016, the FASB issued ASU ~~No. 2017-01,~~ ~~Business Combinations – Clarifying the Definition~~2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of ~~a Business (Topic 805), with the objective~~Credit Losses on Financial Instruments. The standard's main goal is to improve financial reporting by requiring earlier recognition of ~~adding guidance to assist entities with evaluating whether transactions should be accounted~~credit losses on financing receivables and other financial assets in scope. The effective date for ~~as acquisitions or disposals of assets or businesses. The new guidance~~all public companies, except smaller reporting companies, is ~~effective for annual and interim periods~~fiscal years beginning after December 15, ~~2017.~~2019, including interim periods within those fiscal years. The ~~Company does~~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 ~~adoption of this~~ standard to have a material impact on ~~its~~our consolidated financial ~~position~~statements.

Income Taxes

In December 2019, the FASB issued Accounting Standard Update 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 for us in the first quarter of 2021 on a prospective basis, and ~~results~~early adoption is permitted. We are currently evaluating the impact of ~~operations.~~the new guidance on our consolidated financial statements.

Note 2. Income Taxes

We recorded an income tax provision (benefit) of ~~$(36,000)~~$49,000 and ~~$57,000~~$28,000 for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2020 and 2019, respectively. ~~We recorded an~~The income tax provision for interim periods is determined using an estimate of ~~$44,000~~the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the estimate of the annual effective tax rate is updated, and ~~$132,000~~if the estimated effective tax rate changes, a cumulative adjustment is made. There is a potential for volatility of the ~~three~~effective tax rate due to several factors, including changes in the mix of the pre-tax income and ~~nine months ended September 30, 2016, respectively. The provision (benefit) for income taxes is comprised of estimates of current taxes due in domestic and foreign~~the jurisdictions ~~as well as~~to which it relates, changes in tax ~~reserves. This provision (benefit) reflects tax expense associated~~laws and settlements with ~~state income tax~~taxing authorities and foreign ~~taxes as well as a release of a tax reserve.~~currency fluctuations.

As of ~~September 30, 2017,~~March 31, 2020, our deferred tax assets are fully offset by a valuation allowance except in those jurisdictions where it is determined that a valuation allowance is not required.

ASC 740, Income Taxes, provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Based upon the weight of available evidence, which includes historical operating performance, reported cumulative net losses since inception and difficulty in accurately forecasting our future results, we provided a full valuation allowance against our net U.S. deferred tax assets and a partial valuation allowance against our foreign deferred tax assets. We reassess the need for our valuation allowance on a quarterly basis. If it is later determined that a portion or all of the valuation allowance is not required, it generally will be a benefit to the income tax provision in the period such determination is made.

~~During Q1 2016, ASC 740-10 reserves and related interest were released in the amount of $284,000 due to the expiration of statutes which resulted in a tax benefit to discontinued operations.~~

The Company ~~anticipates~~does not anticipate a material change ~~of $134,000~~ in the total amount or composition of its unrecognized tax benefits ~~within 12 months~~as of September 30, 2017. The change is expected to result from a refund of all withholding taxes and interest paid to the Canadian Revenue Agency (CRA) relating to an intercompany receivable that had existed on our Canadian subsidiary’s books but was subsequently repaid. The refund is expected once CRA has processed the Company’s previously submitted voluntary disclosure.March 31, 2020.

Note 3. Commitments and Contingencies

Legal contingencies

15Federal Trade Commission Consent Order.

~~Index~~

On October 11, 2016, the Wage and Hour Division of the U.S. Department of Labor (the “DOL”) notified the Company that it would be conducting an audit of the Company relating to compliance with the Fair Labor Standards Act (“FLSA”). The DOL has indicated that the focus of the audit is directed to compliance with overtime requirements related to our technology specialists who work from home providing technical support services. The audit commenced on October 20, 2016, and is ongoing as of the date of this report. While a loss may be reasonably possible, an estimate of loss, if any, cannot reasonably be determined as of the date of this report. On January 24, 2017, the DOL notified the Company that it would be conducting an audit of the Company relating to compliance with the Family and Medical Leave Act of 1993. As ~~of the date of this report, the audit has not commenced and~~previously disclosed, on ~~May 5, 2017 the DOL verbally notified the Company that it would not proceed with such audit.~~

On December 20, 2016 the Federal Trade Commission (“FTC”) issued a confidential Civil Investigative Demand, or CID, to the Company requiring the Company to produce certain documents and materials and to answer certain interrogatories relating to PC Healthcheck, aan obsolete software program that the Company developed on behalf of a third party for their use with their customers. The investigation relates to the Company providing software like PC Healthcheck to third parties for their use prior to December 31, 2016, when the Company was under management of the previous Board and executive team. Since issuing the CID, the FTC has sought additional written and testimonial evidence from the Company. We have cooperated fully with the FTC’s investigation and provided all requested information. In addition, the Company has not used PC Healthcheck nor provided it to any customers since December 2016.

On March 9, 2018, the FTC notified the Company that the FTC was willing to engage in settlement discussions. On November 6, 2018, the Company and the FTC entered into a proposed Stipulation to Entry of Order for Permanent Injunction and Monetary Judgment, or the Consent Order. The Consent Orderwasapproved by the Commissionon 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 has finally resolved the FTC’s multi-year investigation of the Company.

Pursuant to the Consent Order, under which the Company neither admitted nor denied the FTC’s allegations (except as to ~~certain third parties. The~~the Court having jurisdiction over the matter), the FTC has agreed to accept a payment of $10 million in settlement of the $35 million judgement, subject to the factual accuracy of the information the Company has provided as part of our financial representations. The $10 million payment was made on April 1, 2019 and was recognized in operating expenses within the Company’s consolidated statements of operations for the year ended December 31, 2018.

Additionally, pursuant to the Consent Order, the Company has agreed to implement certain new procedures and enhance certain existing procedures. For example, the Consent Order necessitates that the Company cooperate with representatives of the Commission on associated investigations if needed; imposes requirements on the Company regarding obtaining acknowledgements of the Consent Order and compliance certification, including record creation and maintenance; and prohibits the Company 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 ~~alleged~~limited to, cell phones, tablets and computers. The Company intends to monitor the impact of the Consent Order regularly and, while the Company currently does not expect the settlement to have a ~~factual basis underlying~~long-term and materially adverse impact on its business, the ~~issuance~~Company’s business may be negatively impacted as the Company adjusts to some of the changes. If the Company is unable to comply with the Consent Order, then this could result in a material and adverse impact to the Company’s results of operations and financial condition.

Other Matters. The Company has 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 ~~Demand. On January 17, 2017, the Consumer Protection Division~~Demands described above. The Company intends to cooperate with these information requests and is not aware of ~~the Office of Attorney General, State of Washington (“Washington AG”), issued a Civil Investigative Demand to~~any other legal proceedings against the Company requiring the Company to produce certain documents and materials and to answer certain interrogatories relating to PC Healthcheck. The Washington AG has not alleged a factual basis underlying the issuance of the Civil Investigative Demand. On May 30, 2017, the Consumer Protection Division of the Office of Attorney General, State of Texas (“Texas AG”), issued a Civil Investigative Demand to the Company requiring the Company to produce certain documents and materials and to answer certain interrogatories relating to PC Healthcheck. The Texas AG has not alleged a factual basis underlying the issuance of the Civil Investigative Demand. The Company is in the process of responding to these Civil Investigative Demands and cooperating with the FTC, Washington AG and Texas AG with respect to these matters.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 our 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,~~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.

Guarantees

We have identified guarantees in accordance with ASC 450, Contingencies. This guidance stipulates that an entity must recognize an initial liability for the fair value, or market value, of the obligation it assumes under the guarantee at the time it issues such a guarantee, and must disclose that information in its interim and annual financial statements. We have entered into various service level agreements with our partners, in which we may guarantee the maintenance of certain service level thresholds. Under some circumstances, if we do not meet these thresholds, we may be liable for certain financial costs. We evaluate costs for such guarantees under the provisions of ASC 450. We consider such factors as the degree of probability that we would be required to satisfy the liability associated with the guarantee and the ability to make a reasonable estimate of the resulting cost. During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, we did not incur any costs as a result of such obligations. We have not accrued any liabilities related to such obligations in the condensed consolidated financial statements as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016.~~2019.

~~Index~~

Note 4. Intangible Assets

The Company amortizes intangible assets, which consist of purchased technologies that have estimated useful lives ranging from 1 to 6 years, using the straight-line method when the consumption pattern of the asset is not apparent. The Company reviews such assets for impairment whenever an impairment indicator exists and continually monitors events and changes in circumstances that could indicate carrying amounts of the intangible assets may not be recoverable. When such events or changes in circumstances occur, the Company assesses recoverability by determining whether the carrying value of such assets exceed the estimates of future undiscounted future cash flows expected to be generated by such assets. Should impairment exist, the impairment loss would be measured based on the excess carrying value of the asset over the asset’s estimated fair value. There was no impairment of intangible assets recorded for the nine months ended September 30, 2017.

Amortization of intangible assets and other for the three and nine months ended September 30, 2017 was zero and $16,000 respectively. Amortization of intangible assets and other for the three and nine months ended September 30, 2016 was $267,000 and $801,000, respectively.

~~The following table summarizes the components of intangible assets (in thousands):~~

Non-
compete

Partner
Relationships

Customer
Base

Technology
Rights
Tradenames
Indefinite
Life
Intangibles
Total
As of September 30, 2017

Gross carrying value $ 593 $ 145 $ 641 $ 5,330 $ 760 $ 250 $ 7,719
Accumulated amortization (593 ) (145 ) (641 ) (5,330 ) (760 ) — (7,469 )
Net carrying value $ — $ — $ — $ — $ — $ 250 $ 250

As of December 31, 2016

Gross carrying value $ 593 $ 145 $ 641 $ 5,330 $ 760 $ 250 $ 7,719
Accumulated amortization (581 ) (145 ) (637 ) (5,330 ) (760 ) — (7,453 )
Net carrying value $ 12 $ — $ 4 $ — $ — $ 250 $ 266

In December 2006, we acquired the use of a toll-free telephone number for cash consideration of $250,000. This asset has an indefinite useful life.

As of ~~September 30, 2017,~~March 31, 2020, all intangible assets have been fully amortized with the exception of the indefinite-life intangibles.

Note 5. Other Accrued Liabilities

Other accrued liabilities consist of the following (in thousands):

	September 30, 2017		December 31, 2016		March 31, 2020	December 31, 2019
Accrued expenses	$	999	$	842	$282	$443
Self-insurance accruals		711		911	239	404
Customer deposits		—		556
Restructuring obligations		71		81
Lease liabilities					-	68
Other accrued liabilities		124		106	94	86
Total other accrued liabilities	$	1,905	$	2,496	$615	$1,001

Note 6. Stockholder’s Equity

Stock Options

The following table represents the stock option activity for the ~~nine~~three months ended ~~September 30, 2017:~~March 31, 2020:

	Number of Shares	Weighted Average Exercise Price per Share	Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding options at December 31, 2019	816,185	$1.77	7.49	$16
Granted	754,000	1.35
Exercised	—	—
Forfeited	(40,616)	$1.40
Outstanding options at March 31, 2020	1,529,569	$1.57	8.78	$16
Options vested and expected to vest	1,529,569	$1.57	8.78	$16
Exercisable at March 31, 2020	703,188	$1.85	7.59	$11

~~Index~~

The following table represents the stock option activity for the three months ended March 31, 2019:

	Number of Shares			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)		Number of Shares	Weighted Average Exercise Price per Share	Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding options at December 31, 2016		1,381,843		$	5.88		4.95	$	50
Outstanding options at December 31, 2018										803,320	$2.89	8.43	$54
Granted		2,000		$	2.57					—
Exercised		—			—					—
Forfeited		(966,751	)	$	6.03					(26,750)	$2.71
Outstanding options at September 30, 2017		417,092		$	5.50		6.03	$	0
Outstanding options at March 31, 2019										776,570	$2.90	8.18	$-
Options vested and expected to vest		405,254		$	5.58		5.95	$	0	764,988	$2.90	8.18	$-
Exercisable at September 30, 2017		267,171		$	7.08		4.57	$	0
Exercisable at March 31, 2019										584,182	$3.08	8.09	$-

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value that would have been received by the option holders had they all exercised their options on ~~September 30, 2017.~~March 31, 2020. This amount changes based on the fair market value of our stock. The aggregate intrinsic value of options exercised under our stock option plans was zero during the three and nine months ended September 30, 2017, and zero during the three and nine months ended September 30, 2016. Total fair value of options vested ~~was $36,000 and $169,000~~ during the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2020 and ~~$270,000~~2019 was $46,000 and ~~$689,000 during the three and nine months ended September 30, 2016,~~$29,000, respectively.

At ~~September 30, 2017,~~March 31, 2020, there was ~~$135,000~~$158,000 of unrecognized compensation cost related to existing options outstanding which is expected to be recognized over a weighted average period of ~~2.1~~3.7 years.

During the first quarter of 2017, as a result of the resignation of the Company’s Chief Financial Officer (CFO), 50,000 total market-based stock options granted in 2014 and 2016 were forfeited. Previously recognized Stock-based compensation expense of approximately $58,000 was reversed in Q1 2017, related to the portion of those market-based grants unvested at the time of the CFO’s resignation.

Employee Stock Purchase Plan

In the second quarter of 2011, to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward eligible employees and by motivating such persons to contribute to the growth and profitability of the Company, the Company’s Board of Directors (the “Board”) and stockholders approved an ESPP and reserved 333,333 shares of our common stock for issuance effective as of May 15, 2011. The ESPP continues in effect for ten (10) years from its effective date unless terminated earlier by the Company. The ESPP consists of six-month offering periods during which employees may enroll in the plan. The purchase price on each purchase date shall not be less than ~~eighty‑five~~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. During the ~~nine~~three months ended ~~September 30, 2017, 14,542~~March 31, 2020 and 2019, no shares were purchased under ESPP. As of March 31, 2020, approximately 104,071 shares remain available for grant under the ESPP.

Restricted Stock Units

The following table represents RSU activity for the ~~nine~~three months ended ~~September 30, 2017:~~March 31, 2020:

Number of
Shares

Weighted
Average
Grant-Date
Fair Value
per Share

Weighted
Average
Remaining
Contractual Term (in years)

Aggregate
Intrinsic Value
(in thousands)

Outstanding RSUs at December 31, 2016 351,921 $ 4.59 1.06 $ 908
Awarded 102,880 $ 2.43
Released (151,886 ) $ 3.41
Forfeited (146,165 ) $ 6.01
Outstanding RSUs at September 30, 2017 156,750 $ 3.00 0.95 $ 368

	Number of Shares	Weighted Average Grant-Date Fair Value per Share	Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding RSUs at December 31, 2019	248,549	$1.62	0.60	$271
Awarded	—	—
Released	—	—
Forfeited	—	—
Outstanding RSUs at March 31, 2020	248,549	$1.62	0.34	$271

~~Index~~

The following table represents RSU activity for the three months ended March 31, 2019:

	Number of Shares	Weighted Average Grant-Date Fair Value per Share	Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding RSUs at December 31, 2018	96,230	$2.78	0.60	$227
Awarded	—	—
Released	—	—
Forfeited	(18,181)	—
Outstanding RSUs at March 31, 2019	78,049	$2.27	0.35	$177

At ~~September 30, 2017,~~March 31, 2020, there was ~~$203,000~~$113,000 of unrecognized compensation cost related to RSUs which is expected to be recognized over a weighted average period of ~~1.1~~0.3 years.

Stock Repurchase Program

On April 27, 2005, our Board authorized the repurchase of up to 666,666 outstanding shares of our common stock. As of ~~September 30, 2017~~March 31, 2020 the maximum number of shares remaining that can be repurchased under this program was 602,467. The Company does not intend to repurchase shares without further approval from its Board.

Note 7. Leases

We have entered into various non-cancelable operating lease agreements for certain of our offices, and certain equipment. The Colorado and Sunnyvale office leases were both renewed during the period and will expire on January 31, 2021 and March 31, 2021, respectively.

The components of lease costs, lease term and discount rate are as follows (in thousands except lease term and discount rate):

	Three Months Ended March 31, 2020	Three Months Ended March 31, 2019
Operating leases
Operating lease right-of-use assets	$178	$186

Operating lease liabilities – short term	$171	$175
Operating lease liabilities – long-term	7	13
Total operating lease liabilities	$178	$188

Weighted Average Remaining Lease Term
Operating leases	1.1 years	1.1 years
Weighted Average Discount Rate
Operating leases	4.5%	4.5%

~~Note 7. Restructuring Obligations and Charges~~

The following represents maturities of operating lease liabilities as of March 31, 2020 (in thousands):

~~Severance~~

	Operating Leases
Reminder of 2020	$135
2020	45
2021	2
Total undiscounted cash flows	182
Less imputed interest	(4)
Present value of lease liabilities	$178

For the three and nine months ended September 30, 2017, the Company recorded $86,000 of severance and benefit related costs, included in restructuring costs in the condensed consolidated statement of operations,Supplemental cash flow information related to ~~cost reduction efforts, principally in the Company’s subsidiary India office. As of September 30, 2017, $57,000 of these costs have been paid and $29,000 of unpaid costs~~leases are ~~included in accrued liabilities in the condensed consolidated balance sheet.~~as follows (in thousands):

	Three Months Ended March 31, 2020	Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$45	$44
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$-	$-

~~Relocation~~

For the three and nine months ended September 30, 2017, the Company recorded $42,000 of relocation costs included in restructuring related costs in the condensed consolidated statement of operations, related to the relocation of several employees from the Company’s subsidiary India office to US corporate headquarters. As of September 30, 2017, none of these costs have been paid and $42,000 of remaining unpaid costs are included in accrued liabilities in the condensed consolidated balance sheet.

~~The Company expects the remaining $71,000 of relocation and severance obligations to be fully paid by December 31, 2017.~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Relocation Severance Total
Restructuring obligations, June 30, 2017 - - -
Restructuring costs incurred 42,000 86,000 128,000
Cash payments - (57,000 ) (57,000 )

Restructuring obligations, September 30, 2017 42,000 29,000 71,000

~~Index~~

~~ITEM 2.~~

~~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 condensed consolidated financial statements and the related notes included elsewhere in this Form 10-Q (the “Report”) and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019. The following discussion includes forward-looking statements. Please see “Risk Factors” in Item 1A of this Report for important information to consider when evaluating these statements.

Overview

Support.com, Inc. is a ~~leading provider~~full-spectrum leader in outsourced call center and direct-to-consumer and small business technical support solutions. With more than 20 years of providing high quality technical support services to consumers and small businesses through white-labeled partnerships or direct solutions, Support.com has the expertise, tools and software solutions to troubleshoot and maintain all the devices in the connected home and business. The company's skilled U.S.-based live agents and rich self-support tools troubleshoot thousands of technical support issues consumers and small businesses face on an ongoing basis. Support.com delivers high quality, turnkey technical support solutions, software and digital support experiences that enable ~~technology support for a connected world. Support.com is~~customers to get the ~~choice~~most out of ~~leading communications providers, top retailers, and other important brands in software, consumer and business electronics, and connected~~their technology. ~~Our technology support services programs help leading brands create new revenue streams and deepen customer relationships.~~ We offer turnkey, outsourced support services for service providers, retailers, IoT (Internet of Things) solution providers and technology companies. Our technology support services programs are designed for both the consumer and small and medium business (“SMB”) markets, and include computer and mobile device set-up, security and support, virus and malware removal, wireless network set-up, and home security and automation system support.

Total revenue for the ~~third~~first quarter of ~~2017~~2020 decreased ~~3% year-over-year.~~34% from the first quarter of 2019. Revenue from services decreased ~~3% year-over-year~~32% from the first quarter of 2019 primarily due to ~~the reduction~~a decrease in billable hours of ~~the Office Depot services program.~~our largest customer somewhat offset by an increase in revenues of other major customers. Revenue from software and other ~~including~~decreased 64% from the first quarter of 2019 due to lower new subscriptions and ~~expiring subscriptions, remained relatively flat year-over-year~~renewals..

Cost of services for the ~~third~~first quarter of ~~2017~~2020 decreased ~~2% year-over-year~~44% from the first quarter of 2019which was primarily ~~a result of~~attributable to lower ~~employee and employee benefits related~~compensation costs ~~and~~as headcount decreased commensurate with the lower ~~consulting charges.~~revenues. Cost of software and other for the ~~third~~first quarter of ~~2017 was not significant in either period.~~2020 decreased 46% from the first quarter of 2019. Total gross margin ~~remained flat with~~increased from 23% to 35% from the ~~year-ago period at 23%.~~first quarter of 2019.

Operating expenses for the ~~third~~first quarter of ~~2017 decreased 41%~~2020 increased 29% from the same period in ~~2016,~~2019, primarily driven by ~~a decrease~~increases in ~~salary~~advertising expense, consulting services, legal fees, stock based compensation and employee related costs due to a decrease in headcount as a result of our cost reduction efforts initiated during the second half of 2016 somewhat offset by $128 thousand in restructuring charges associated with the down-sizing of our India operations incurred in the current period.

temporary help.

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~~quarter to ~~year,~~quarter, and the primary factors that accounted for those changes, as well as how certain accounting principles, policies and estimates affect our consolidated financial statements.

Critical Accounting Policies and Estimates

In preparing our interim condensed consolidated financial statements, we make estimates, assumptions and judgments that can have a significant impact on our net revenue, operating income or loss and net income or loss, as well as on the value of certain assets and liabilities on our condensed consolidated balance sheet. We believe that the estimates, assumptions and judgments involved in the accounting policies described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~2019 have the greatest potential impact on our interim condensed consolidated financial statements, so we consider them to be our critical accounting policies and estimates. There have been no significant changes in these critical accounting policies and estimates except the accounting for financial instrument during the three ~~and nine~~ months ended ~~September 30, 2017.~~March 31, 2020.

Critical Accounting Policies

In preparing our consolidated financial statements in conformity with generally accepted accounting principles in the United States, we make assumptions, judgments and estimates that can have a significant impact on our revenue and operating results, as well as on the value of certain assets and liabilities on our consolidated balance sheet. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. On a regular basis we evaluate our assumptions, judgments and estimates and make changes accordingly. We believe that the assumptions, judgments and estimates involved in the accounting for revenue recognition, fair value measurements, purchase accounting in business combinations, self-insurance accruals, accounting for intangible assets, stock-based compensation and accounting for income taxes have the greatest potential impact on our consolidated financial statements, so we consider these to be our critical accounting policies. We discuss below the critical accounting estimates associated with these policies. For further information on the critical accounting policies, see Note 1 of our Notes to Consolidated Financial Statements.

Revenue Recognition

For information regarding to the disaggregation of revenue, see Note 1 – Significant Accounting Policies, Revenue Recognition.

RESULTS OF OPERATIONS

The following table sets forth the results of operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 expressed as a percentage of total revenue:

	Three Months Ended March 31,
	2020	2019
Revenue:
Services	96%	93%
Software and other	4	7

Total revenue	100	100

Cost of revenue:
Cost of services	64	76
Cost of software and other	1	1
Total cost of revenue	65	77
Gross profit	35	23
Operating expenses:
Engineering and IT	9	4
Sales and marketing	7	2
General and administrative	17	10

Total operating expenses	33	16

Income from operations	2	7
Interest income and other, net	1	1

Income from operations, before income taxes	3	8
Income tax provision	1	-
Net income	2%	8%

~~Index~~

Three Months
Ended
September 30,

Nine Months
Ended
September 30,

2017 2016 2017 2016
Revenue:
Services 91 % 91 % 91 % 92 %
Software and other 9 9 9 8
Total revenue 100 100 100 100

Costs of revenue:
Cost of services 77 76 77 81
Cost of software and other 0 1 1 1
Total cost of revenue 77 77 78 82
Gross profit 23 23 22 18
Operating expenses:
Research and development 4 9 6 9
Sales and marketing 4 9 5 11
General and administrative 13 17 16 22
Amortization of intangible assets and other — 2 — 2
Restructuring 1 — — 1
Total operating expenses 22 37 27 45

Income (loss) from operations 1 (14 ) (5 ) (27 )

Interest and other income, net 1 0 1 0

Income (loss) from continuing operations, before income taxes 2 (14 ) (4 ) (27 )

Income tax provision — — — —

Income (loss) from continuing operations, after income taxes 2 (14 ) (4 ) (27 )

Income (loss) from discontinued operations, after income taxes — — — 1

Net income (loss) 2 % (14 )% (4 )% (26 )%

REVENUE

																									Three Months Ended
	Three Months Ended September 30,												Nine Months Ended September 30,												March 31,		$	%
In thousands, except percentages	2017			2016			$ Change			% Change			2017			2016			$ Change			% Change			2020	2019	Change	Change

Services		$	13,682		$	14,163	$	(481	)		(3	)%		$	39,744		$	43,055	$	(3,311	)		(8	)%	$11,511	$16,864	$(5,353)	(32)%
Software and other			1,350			1,364		(14	)		(1	)%			4,085			3,998		87			1	%	438	1,200	(762)	(63)%
Total revenue		$	15,032		$	15,527	$	(495	)		(3	)%		$	43,829		$	47,053	$	(3,224	)		(7	)%	$11,949	$18,064	$(6,115)	(34)%

Services. Services revenue consists primarily of fees for ~~technology~~customer support services generated from our partners. We provide these services remotely, generally using service delivery personnel who utilize our proprietary technology to deliver the services. Services revenue is also comprised of licensing of our Support.com Cloud applications. Services revenue for the three months ~~and nine months~~ ended ~~September 30, 2017~~March 31, 2020 decreased by ~~$0.5~~$5.4 million, ~~and $3.3 million, respectively,~~or 32% from the same ~~periods~~period in ~~2016. These decreases were~~2019 mainly due to ~~Office Depot reducing some~~decrease in billable hours of ~~the service programs that we offer to their in-store customers, which reduced call volumes and service incidents.~~Comcast offset by an increase in sales from Cox Communications. For the three months ended ~~September 30, 2017,~~March 31, 2020, services revenue generated from our partnerships was ~~$12.7~~$11.0 million compared to ~~$13.2~~$16.2 million for the same period in ~~2016 and direct~~2019. Direct services revenue was ~~$1.0~~$0.5 million for the three months ended ~~September 30, 2017 and September 30, 2016. For the nine months ended September 30, 2017, services revenue generated from our partnerships was $36.6 million~~March 31, 2020 compared to ~~$40.1~~$0.7 million for the same period in 2016 and direct services revenue was $3.2 million compared to $3.0 million for the same period in 2016. On July 28, 2017, Office Depot provided written notice of its intent not to renew the Professional Services Agreement between the Company and Office Depot dated July 26. 2007, and such Agreement terminated on September 30, 2017. Revenue attributed to Office Depot, Inc. for 2016 was $8.9 million. Revenue attributed to Office Depot for the nine months ended September 30, 2017 was $2.9 million.2019. As with any market that is undergoing shifts, timing of downward pressures and growth opportunities in our services programs are difficult to predict. We are experiencing downward pressure with some of our services programs asPC personal computer and certain retail markets are ~~seeing some~~subject to seasonal or other sector specific softness. However, we still see opportunity in the market for growth with our service partners as a result of the evolving support market trends.

~~Index~~

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 three ~~and nine~~ months ended ~~September 30, 2017 remained at approximately~~March 31, 2020 decreased by $0.8 million, or 64%, from the same ~~levels when compared with the same periods~~period in ~~2016 reflecting a generally equal balance between~~2019 due to new ~~and expiring~~subscriptions being less than expirations of subscriptions. For the three-month ~~periods~~period ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, revenue from software and other generated from our direct sales was ~~$0.7~~$0.4 million ~~for both periods~~ and ~~software~~$0.5 million, respectively. Software and other revenue generated from our partnerships was ~~$0.7 million~~$38,000 and $0.7 million for ~~each of~~ the ~~respective periods.~~three months ended ~~For~~March 31, 2020 and the ~~nine-month periods~~three months ended September 30, 2017 and 2016, revenue from software and other generated from our direct sales was $2.1 million and $2.2 million, respectively, and software and other revenue generated from our partnerships was March 31, 2019.~~$2.0.million and $1.8 million, respectively.~~

COST OF REVENUE

																											Three Months Ended
	Three Months Ended September 30,													Nine Months Ended September 30,													March 31,		$	%
In thousands, except percentages	2017			2016			$ Change				% Change			2017			2016			$ Change				% Change			2020	2019	Change	Change

Cost of services		$	11,559		$	11,847		$	(288	)		(2	)%		$	33,760		$	38,403		$	(4,643	)		(12	)%	$7,685	$13,798	$(6.113)	(44)%
Cost of software and other			66			120			(54	)		(45	)%			252			377			(125	)		(33	)%	29	54	(25)	(46)%
Total cost of revenue		$	11,625		$	1,967		$	(342	)		(3	)%		$	34,012		$	38,780		$	(4,768	)		(12	)%	$7,714	$13,852	$(6,138)	(44)%

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. ~~Cost~~The decrease of $6.1 million in cost of services for the three months ended September 30, 2017 remained relatively stable at $11.6 million as compared to $11.8 million for the same period of 2016. The decrease of $4.6 million in cost of services for the nine months ended September 30, 2017March 31, 2020 compared to the same period in ~~2016 includes a~~2019 was mainly driven by lower compensation expenses due to decrease in ~~compensation and benefits charges of $4.9 million~~hiring and lower ~~consulting and~~ technology ~~related charges of $0.5 million, offset by a $0.9 million increase of outside consulting costs primarily attributable~~cost due to ~~our Philippines operation.~~renegotiated software hosting costs.

Cost of software and other. Cost of software and other fees consists primarily of third-party royalty ~~and processing~~ 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. The ~~decrease of~~ ~~$54,000~~ ~~and $125,000 in~~ cost of software and other for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2020 were flat as compared towith the ~~same periods in 2016 was mainly driven by lower 3~~year-ago period.^rd ~~party processing fees.~~

OPERATING EXPENSES

Three Months Ended September 30, Nine Months Ended September 30,
In thousands, except percentages 2017 2016
$
Change

%
Change
2017 2016
$
Change

%
Change

Research and development $ 631 $ 1,336 $ (705 ) (53 )% $ 2,429 $ 4,464 $ (2,035 ) (46 )%
Sales and marketing $ 621 $ 1,463 $ (842 ) (58 )% $ 2,011 $ 5,401 $ (3,390 ) (63 )%
General and administrative $ 1,996 $ 2,703 $ (707 ) (26 )% $ 6,847 $ 10,186 $ (3,339 ) (33 )%
Amortization of intangibles assets and other $ - $ 267 $ (267 ) (100 )% $ 16 $ 801 $ (785 ) (98 )%
Restructuring $ 128 $ - $ 128 100 % $ 128 $ 423 $ (295 ) (70 )%

~~Index~~

	Three Months Ended
	March 31,		$	%
In thousands, except percentages	2020	2019	Change	Change
Engineering and IT	$1,040	$749	$291	39%
Sales and marketing	$813	$392	$421	107%
General and administrative	$2,053	$1,896	$157	8%

~~Research~~Engineering and ~~development.~~IT. ~~Research~~Engineering and ~~development~~IT expense consists primarily of compensation costs, third-party consulting expenses and related overhead costs for ~~research~~engineering and ~~development personnel. Research~~IT personnel and ~~development costs~~ are expensed as they are incurred. Engineering and IT ~~The decreases of $0.7 million and $2.0 million in research and development expense~~costs for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, compared to the same periods in 2016 were~~March 31, 2020 increased $0.3 million primarily ~~the result of a decrease in salary and employee related expenses~~ due to ~~cost reduction efforts mainly related to the development of Support.com Cloud applications which also impacted travel,~~higher consulting ~~and related stock compensation charges.~~fees.

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, web site design, advertising and marketing. The ~~decrease~~increase of ~~$0.8~~$0.4 million in sales and marketing expense for the three months ended ~~September 30, 2017~~March 31, 2020 compared to the same period in ~~2016 resulted from a decrease~~2019 was primarily due to $0.2 million increase in advertising expense, $0.1 million increase in consulting fees and $0.1 million increase in salary and employee related expenses of $0.4 million and lower travel expenses of $0.1 million due to a decrease in headcount in connection with cost-reduction efforts, and lower third-party marketing program costs of approximately $0.3 million. Similarly, the decrease of $3.4 million in sales and marketing expense for the nine months ended September 30, 2017 compared to the same period in 2016 resulted from a decrease in salary and employee related expenses of $1.9 million and lower travel expenses of $0.3 million due to a decrease in headcount in connection with cost-reduction efforts, and lower third-party marketing program costs of nearly $1.0 million.expenses.

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. The ~~decrease of $0.7 million in~~ general and administrative expense for three months ended September 30, 2017 as compared to the year-ago period was the result of $0.6 million in lower headcount related charges, including stock compensation, and $0.1 million of lower facility costs including rent and utilities. The decrease of $3.4 million in general and administrative expense for the nine months ended September 30, 2017 asMarch 31, 2020 compared to the same period ~~a year ago were~~in 2019 increased by $0.2 million is primarily ~~the result of $1.8~~due to $0.1 million increase in ~~lower headcount related charges, including~~temporary help, $0.1 million increase in stock based compensation ~~$1.3 million in lower professional services and reimbursement of stockholder expenses that were incurred in the 2016 period as a result of the proxy contest, and~~due to an additional ~~$0.2~~754,000 shares granted in March 2020, $0.1 million ~~lower costs~~increase in legal fees and other increases in software and year-end related ~~to facilities and technology support costs.~~

~~Amortization of intangible assets and other.~~ ~~The~~activities, offset by a $0.1 million decrease in ~~amortization of intangibles assets~~consulting and other of $0.3 million and $0.8 million for the three and nine months ended September 30, 2017, respectively, compared to the same periods in 2016 were primarily attributable to the Company’s intangible assets being fully amortized at the end of 2016 and early 2017.recruiting charges.

~~Restructuring~~. During the third quarter of 2017, the Company incurred restructuring charges of approximately $128,000 associated with the down-sizing of its Bangalore, India facilities. These cost reductions were primarily headcount related and, to a lesser degree, attributable to property, plant and equipment.

During the second quarter of 2016, the Company implemented a cost reduction plan. In connection with implementing the plan, we incurred one-time restructuring costs of $0.4 million. The restructuring costs consisted of severance costs for terminated employees and contract termination costs. Substantially all costs associated with the plan were completed during the second quarter of 2016.

INTEREST INCOME AND OTHER, NET

																									Three Months Ended
	Three Months Ended September 30,												Nine Months Ended September 30,												March 31,		$	%
In thousands, except percentages	2017			2016			$ Change			% Change			2017			2016			$ Change			% Change			2020	2019	Change	Change

Interest income and other, net		$	164		$	124		$	40		32	%		$	451		$	383		$	68		18	%
Interest and other, net																									$84	$296	$(212)	(72)%

~~Index~~

Interest income and other, ~~net.~~net. Interest income and other, net consists primarily of interest income on our cash, cash equivalents and short-term investments. The decrease in interest income and other, net of $0.2 million for the three months ended March 31, 2020 and 2019 was primarily due to lower cash and cash equivalents and short-term investments in banks after the $10 million payment to the FTC in April 2019 and the $19.1 million cash dividend paid in December, 2019 coupled with lower yields on investments, and ~~was consistent between periods.~~$0.1 million related to international VAT charges.

INCOME TAX PROVISION

																												Three Months Ended
	Three Months Ended September 30,														Nine Months Ended September 30,													March 31,		$	%
In thousands, except percentages	2017				2016			$ Change				% Change			2017			2016			$ Change				% Change			2020	2019	Change

Income tax (benefit) provision		$	(36	)		$	44		$	(80	)		(182	)%		$	57		$	132		$	(75	)		(57	)%
Income tax provision																												$49	$28	$21	75%

Income tax provision. ~~The income tax provision is comprised of estimates of current taxes due in domestic and foreign jurisdictions.~~ For the three ~~and nine~~ months ended ~~September 30, 2017 and 2016,~~March 31, 2020, the income tax provision primarily consisted of ~~state~~foreign taxes.

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted on March 27, 2020. It contains several provisions that may have financial statement effects. Key Aspects of the CARES Act include the following:

●

Repealed the 80% taxable income ~~tax~~limitation for 2018, 2019 and ~~foreign taxes.~~2020. Also allows those years to be carried back up to five years

●

Allows corporations to claim 100% of AMT credits in 2019. It also provides for an election to take the entire refundable credit amount in 2018

●

Section 163(j) ATI limit raised from 30% to 50% for businesses

●

Technical corrections to TCJA for Qualified Improvement Property (“QIP”). Designates as 15-year property for depreciation purposes, which makes QIP a category eligible for 100% bonus depreciation

The CARES Act is not expected have a material impact to Income Taxes in the Company's financial statements.

LIQUIDITY AND CAPITAL RESOURCES

Total cash, cash equivalents and investments at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 were ~~$49.4~~$28.4 million and $~~53.4~~26.4 million, respectively. The ~~decrease~~increase in cash, cash equivalents and investments was primarily due to the use of cash in operating ~~activities.~~activities as we continue to invest in services and the Support.com Cloud product.

Operating Activities

Net cash ~~used in~~provided by (used in) operating activities was ~~$4.1~~$2.1 million and ~~$10.6~~$(1.7) million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, respectively. Net cash ~~used in~~provided by (used in) operating activities primarily ~~reflects~~reflected the net ~~loss~~income for the period, adjusted for non-cash items such as depreciation, amortization of premiums and discounts on investments, amortization of right-of-use assets, stock-based compensation expense ~~and amortization of intangible assets,~~ and changes in operating assets and liabilities.

Net cash used in operating activities ~~was $4.1 million for~~during the ~~nine~~three months ended ~~September 30, 2017 and resulted primarily from~~March 31, 2020 was the result of a net ~~loss for the period~~income of ~~$1.2~~$0.4 million, ~~adjusted for~~ non-cash items ~~totaling $855,000 offset by net changes in operating assets and liabilities~~ of $3.7 million. Adjustments for non-cash items primarily consisted of stock-based compensation expense of $295,000, amortization of intangible assets and other of $16,000, amortization of premiums and discounts on investments of $65,000, and depreciation of $479,000. The changes in operating assets and liabilities primarily consisted of an increase in accounts receivable of $2.2 million and decreases of $292,000, $632,000, $585,000, $664,000 in accounts payable, accrued compensation, other accrued liabilities, and deferred revenue, respectively, offset by decreases of $572,000 in prepaid expenses and other current assets and $123,000 in other long-term assets.

Net cash used in operating activities of $10.6 million for the nine months ended September 30, 2016 resulted primarily from a net loss for the period of $12.5 million, adjusted for non-cash items totaling $3.4$0.2 million, and changes in operating assets and liabilities of ~~$1.5~~$1.4 million. ~~Adjustments for~~Net cash used in operating activities during the three months ended March 31, 2019 was the result of a net income of $1.4 million, non-cash items ~~primarily consisted~~ of ~~stock-based compensation expense of $1.8~~$0.2 million, ~~amortization of intangible assets~~ and ~~other of $801,000, amortization of premiums and discounts on investments of $244,000, and depreciation of $530,000. The~~ changes in operating assets and liabilities ~~primarily consisted~~ of increases of $350,000 in accounts payable and $444,000 in deferred revenue and decreases in prepaid and other current assets of $122,000, offset by an increase in accounts receivable of $176,000 and decreases of $363,000, $1.5 million, and $324,000 in accrued compensation, other accrued liabilities, and other long-term liabilities, respectively.$(3.3) million.

Investing Activities

~~Net cash provided by (used in) investing activities was $8.3 million and $(1.3) million for the nine months ended September 30, 2017 and 2016, respectively.~~ Net cash provided by investing activities was $3.0 million and $6.1 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and 2019, respectively. For the three months ended March 31, 2020, net cash provided by investing activities was primarily due to ~~purchases of property and equipment of $32,000 and purchases of investments of $14.9 million offset by~~the maturities of investments of ~~$23.3~~$3.0 million. ~~Net cash used in investing activities for~~For the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2019, net cash provided by investing activities was primarily due to ~~purchases of property and equipment of $481,000 and purchases of investments of $22.9 million, offset by~~ maturities of investments of ~~$22.1~~$9.6 million offset by the purchase of marketable securities of $3.5 million.

~~Index~~

Financing Activities

~~Net cash provided by (used in) financing activities was $25,000 and $(27,000) for the nine months ended September 30, 2017 and 2016, respectively.~~ ~~Net cash provided by financing activities~~ ~~for the nine months ended September 30, 2017~~ ~~was from the proceeds of purchase of common stock under the Company’s ESPP of~~ ~~$27,000, offset by repurchases of common stock of $2,000.~~ Net cash used in financing activities was $0 for the ~~nine~~three months ended ~~September 30, 2016~~ ~~was from the proceeds of purchase of common stock under the Company’s ESPP of $45,000 offset by repurchase of common stock of $72,000~~.March 31, 2020 and 2019.

Working Capital and Capital Expenditure Requirements

At ~~September 30, 2017,~~March 31, 2020, we had stockholders’ equity of ~~$56.6~~$33.4 million and working capital of ~~$54.6~~$32.7 million. We believe that our existing cash balances will be sufficient to meet our working capital requirements, as well as our planned capital expenditures, 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 current economic environment, however, could limit our ability to raise capital by issuing new equity or debt securities on acceptable terms, and lenders may be unwilling to lend funds on acceptable terms that would be required to support operations. The sale of additional equity or convertible debt securities could result in dilution to our existing stockholders. The issuance of debt securities would result in increased interest expenses, and could impose new restrictive covenants that would limit our operating flexibility.

We plan to continue to make investments in our business during ~~2017.~~2020. We believe these investments are essential to creating sustainable growth in our business in the future. Additionally, we may choose to acquire other businesses or complimentary technologies to enhance our product capabilities and such acquisitions would likely require the use of cash.

~~ITEM 3.~~

~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

~~Interest Rate and Market Risk~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~The value and liquidity~~As a “smaller reporting company,” as defined in Rule 12b-2 of the ~~securities in which~~Exchange Act, we ~~invest could deteriorate rapidly and~~are not required to provide the issuers of such securities could be subject to credit rating downgrades. We actively monitor market conditions and developments specific to the securities and security classes in which we invest. While we believe we take prudent measures to mitigate investment related risks, such risks cannot be fully eliminated, as there are circumstances outside of our control.

The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive from our investments without significantly increasing risk. To achieveinformation called for by this objective, we invest our excess cash in a variety of securities, including U.S. government agency securities, corporate notes and bonds, commercial paper and money market funds. These securities are classified as available-for-sale. Consequently, our available-for-sale securities are recorded on the consolidated balance sheets at fair value with unrealized gains or losses reported as a separate component of accumulated other comprehensive loss within stockholder’s equity. Our holdings of the securities of any one issuer, except government agencies, do not exceed 10% of our portfolio. We do not utilize derivative financial instruments to manage our interest rate risks.

As of September 30, 2017, we held $28.1 million in short-term investments (excluding cash and cash equivalents), which consisted primarily of certificates of deposits, government debt securities, corporate notes and bonds, and commercial paper. The weighted average interest rate of our portfolio was approximately 1.13% at September 30, 2017. A decline in interest rates over time would reduce our interest income from our investments. A hypothetical 10% increase or decrease in interest rates, however, would not have a material impact on our financial condition.Item.

25ITEM 4. CONTROLS AND PROCEDURES

~~Index~~

~~Impact of Foreign Currency Rate Changes~~

The functional currencies of our international operating subsidiaries are the local currencies. We translate the assets and liabilities of our foreign subsidiaries at the exchange rates in effect on the balance sheet date. We translate their income and expenses at the average rates of exchange in effect during the period. We include translation gains and losses in the stockholders’ equity section of our consolidated balance sheets. We include net gains and losses resulting from foreign exchange transactions in interest income and other in our consolidated statements of operations. Since we translate foreign currencies (primarily Canadian dollars and Indian rupees) into U.S. dollars for a small portion of our operations, currency fluctuations have had an immaterial impact on our consolidated statements of operations. We have both revenue and expenses that are denominated in foreign currencies. Neither a weaker or stronger U.S. dollar environment would have a material impact on our consolidated statement of operations. The historical impact of currency fluctuations on our consolidated statements of operations has generally been immaterial. As of September 30, 2017, we did not engage in foreign currency hedging activities.

~~ITEM 4.~~

~~CONTROLS AND PROCEDURES~~

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet, and management believes they meet, reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Our Chief Executive Officer and our ~~Principal~~Chief Financial Officer, after evaluating the effectiveness of our “disclosure controls and procedures” as of the end of the period covered by this quarterly report, have concluded that our disclosure controls and procedures are effective based on their evaluation of these controls and procedures required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.

Changes in Internal Control over Financial Reporting

There were no changes ~~in our internal control over financial reporting~~that occurred during the ~~quarter~~three months ended ~~September 30, 2017~~March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~Index~~

PART II. OTHER INFORMATION

~~ITEM 1.~~

~~LEGAL PROCEEDINGS~~

ITEM 1. LEGAL PROCEEDINGS

On October 11, 2016 the Wage and Hour Division of the U.S. Department of Labor (“DOL”) notified the Company that it would be conducting an audit of the Company relating to compliance with the Fair Labor Standards Act (“FLSA”). The DOL has indicated that the focus of the audit is directed to compliance with overtime requirements related to our technology specialists who work from home providing technical support services. The audit commenced on October 20, 2016 and is ongoing as of the date of this report. On January 24, 2017, the DOL notified the Company that it would be conducting an audit of the Company relating to compliance with the Family and Medical Leave Act of 1993. As of the date of this report the audit has not commenced and on May 5, 2017 the DOL verbally notified the Company that it would not proceed with such audit.

On March 9, 2018, the FTC notified the Company that the FTC was willing to engage in settlement discussions. On November 6, 2018, the Company and the FTC entered into a proposed Stipulation to Entry of Order for Permanent Injunction and Monetary Judgment, or the Consent Order. The Consent Orderwasapproved 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 has finally resolved the FTC’s multi-year investigation of this matter.

Other Proceedings

The Company has 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 ~~Demand. On January 17, 2017 the Consumer Protection Division~~Demands described above. The Company intends to cooperate with these information requests and is not aware of ~~the Office of Attorney General, State of Washington (“Washington AG”), issued a Civil Investigative Demand to~~any other legal proceedings against the Company ~~requiring the Company to produce certain documents and materials and to answer certain interrogatories relating to PC Healthcheck. The Washington AG has not alleged a factual basis underlying the~~ ~~issuance of the Civil Investigative Demand~~. On May 30, 2017, the Consumer Protection Division of the Office of Attorney General, State of Texas (“Texas AG”), issued a Civil Investigative Demand to the Company requiring the Company to produce certain documents and materials and to answer certain interrogatories relating to PC Healthcheck. The Texas AG has not alleged a factual basis underlying the ~~issuance of the Civil Investigative Demand. The Company is in the process of responding to these Civil Investigative Demands and cooperating with the FTC, Washington AG and Texas AG with respect to these matters.~~by governmental authorities at this time.

From time to time, we are subject to routine legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our 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 such routine legal proceedings (alone or combined) will materially affect our financial position, results of operations or cash flows. The ultimate outcome of any litigation is uncertain, however, and 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.

~~ITEM 1A.~~

~~RISK FACTORS~~

ITEM 1A. RISK FACTORS.

This report contains forward-looking statements regarding our business and expected future performance as well as assumptions underlying or relating to such statements of expectation, all of which are “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We are subject to many risks and uncertainties that may materially affect our business and future performance and cause those forward-looking statements to be inaccurate. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “forecasts,” “estimates,” “seeks,” “may result in,” “focused on,” “continue to,” “on-going” and similar expressions often identify forward-looking statements. In this report, forward-looking statements include, without limitation, statements regarding the following:

●

~~Our expectations and beliefs regarding future financial results;~~

●

~~Our expectations regarding partners, renewal of contracts with these partners and the anticipated timing and magnitude of revenue from programs with these partners;~~

●

~~Our ability to offer subscriptions to our services in a profitable manner;~~

●

Our expectations regarding our ability to deliver technology services efficiently and through arrangements that are profitable, including both in SKU-based and time-based pricing models and other pricing models we may employ;

●

~~Our ability to successfully license, implement and support our Support.com Cloud offering;~~

●

~~Our expectations regarding sales of our end-user software products, and our ability to source, develop and distribute enhanced versions of these products;~~

●

~~Our ability to successfully monetize customers who receive free versions of our end-user software products;~~

●

~~Index~~Our expectations regarding revenues, cash flows, expenses, including cost of revenue, sales and

●

~~Our ability to expand and diversify our customer base;~~

marketing, engineering and IT efforts, and administrative expenses, and profits;

●

~~Our ability to execute effectively in the SMB market;~~

●

~~Our ability to attract and retain qualified management and employees;~~

Our expectations regarding partners, renewal of contracts with these partners and the anticipated timing and magnitude of revenue from programs with these partners;

●

Our ability to hire, train, manage and retain technology specialists in a home-based model in quantities sufficient to meet forecast requirements, and our ability to continue to enhance the flexibility of our staffing model;

●

~~Our ability to match staffing levels with service volume in a cost-effective manner;~~

Our ability to successfully license and grow revenue related to our consumer software, Support.com technical support subscriptions, Guided Paths® and our technology support service offerings;

●

~~Our ability to manage contract labor as a component of our workforce;~~

●

~~Our ability to operate successfully in a time-based billing model;~~

Our expectations regarding sales of our end-user software products, and our ability to source, develop and distribute enhanced versions of these products;

32From 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:

~~Index~~

●

Loss of or delay in market acceptance of our products;

~~We must compete successfully~~

●

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 ~~markets~~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. For example, we recently received notice from a customer, AOL (acquired by Verizon Communications), that it may seek reimbursement from us in order to reimburse its customers related to their use of a software product. 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 ~~will suffer.~~and reputation.

We compete in markets that are highly competitive, subject to rapid change and significantly affected by new product introductions and other market activities of industry participants. We compete with a number of companiesmay engage in the ~~markets for technology services, end-user software~~acquisition of other companies, 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, joint ventures and strategic alliances outside of our current line of business to design and develop new technologies and products, ~~and technology support software. In addition, our partners may develop similar offerings internally.~~

~~The markets for our services and software products are still rapidly evolving, and we may not be able~~ to ~~compete successfully against current~~strengthen competitiveness by scaling up and ~~potential competitors. Our ability~~ to expand our existing business ~~will depend on our ability~~line into new regions. Such transactions, especially in new lines of business, inherently involve risk due to ~~maintain our technological advantage, introduce timely enhanced~~the difficulties in integrating operations, technologies, products and ~~services~~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 ~~meet growing support needs, deliver on-going value~~integration or restructuring of acquired businesses. There can be no assurance that these transactions will be beneficial to our ~~customers, scale our~~ business ~~cost-effectively, and develop complimentary relationships with other companies providing services~~ or ~~products to our partners. Competition in our markets could reduce our market share or require us to reduce the price of products and services, which could harm our business,~~ financial ~~condition and operating results.~~

The competitors in our markets for services and software can have some or all of the following comparative 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, lower labor costs, 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.

~~Our future service and product offerings may not achieve market acceptance.~~

If we fail to develop new and enhanced versions of our services and products in a timely manner or to provide services and products that achieve rapid and broad market acceptance, we may not maintain or expand our market share. We may fail to identify new service and product opportunities for our current market or new markets. In addition, our existing services and products may become obsolete if we fail to introduce new services and products that meet new customer demands or support new standards. While wecondition. Even assuming these transactions are ~~developing new services and products,~~beneficial, there can be no assurance that ~~they~~we will be ~~timely released~~able to successfully integrate the new business lines acquired or ~~ever be completed, and if they are, that they will gain market acceptance~~achieve all or ~~generate material revenue for us. We have limited control over factors that affect market acceptance~~any of ~~our services and products, including~~ the ~~willingness~~initial objectives of ~~partners to offer our services and products and customer preferences for competitor services, products and delivery models.~~these transactions.

We may make acquisitions that deplete our resources and do not prove successful.

~~Index~~

We have made acquisitions in the past and may make additional acquisitions in the future. We may not be able to identify suitable acquisition candidates at prices we consider appropriate. If we do identify an appropriate acquisition candidate, we may not be able to successfully negotiate the terms of the acquisition. 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. ~~Acquisitions~~

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.

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. 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 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 Articles 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 and other pending government investigations. In connection with some of these pending matters, 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 ~~other~~factors.

Our overall tax provisions and accruals are affected by a number of factors, including any potential ~~risks~~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 ~~business, including the following,~~provision for income taxes and our payment obligation with respect to any ~~of which could harm our business results:~~such taxes.

●

~~Unanticipated costs and liabilities and unforeseen accounting charges or fluctuations;~~

●

~~Delays and difficulties in delivery of services and products;~~

●

~~Failure to effectively integrate or separate management information systems, personnel, research and development, marketing, sales and support operations;~~

●

~~Loss of key employees;~~

●

~~Economic dilution to gross and operating profit;~~

●

~~Diversion of management’s attention from other business concerns and disruption of our ongoing business;~~

●

~~Difficulty in maintaining controls and procedures;~~

●

~~Uncertainty on the part of our existing customers about our ability to operate after a transaction;~~

●

~~Loss of customers;~~

●

~~Loss of partnerships;~~

●

~~Inability to execute our growth plans;~~

●

~~Declines in revenue and increases in losses;~~

●

~~Declines in cash balances as a result of cash usage on any acquisitions;~~

●

~~Failure to realize the potential financial or strategic benefits of the acquisition or divestiture; and~~

●

~~Failure to successfully further develop the combined or remaining technology, resulting in the impairment of amounts recorded as goodwill or other intangible assets.~~

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.

~~Index~~

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 ~~and relationships~~ 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. ~~Third-party licenses also expose us to increased risks that include:~~

●

~~Risks of product malfunction after new technology is integrated;~~

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~~Risks that we may be unable to obtain or continue to obtain support, maintenance and updates from the technology supplier;~~

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~~The diversion of resources from the development of our own proprietary technology; and~~

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~~Our inability to generate revenue from new technology sufficient to offset associated acquisition and maintenance costs.~~

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 wewere deemed not to comply with them, our business, financial condition, results of operations and cash flows could be materially and adversely affected.

~~Index~~

~~In some cases, we are exposed to greater risks of liability for employee acts or omissions or system failure than may be typical in other businesses.~~

We expect to support, among other programs, partners offering home security services and other devices and programs for use in the connected home. Because these services related to programs intended to help protect the lives and property, real and personal, of consumers, we may have greater exposure to liability and litigation risks than businesses that provide support for other consumer and SMB products and services. Our ability to limit our liability for the acts or omissions of our employees in our contract terms with partners and consumers in relation to such programs may be substantially less than in other markets we serve, which is to say, we may have much greater inherent legal liability exposure in such programs than is customarily seen in programs for markets we have offered historically. In the event of litigation with respect to such matters, it is possible that our risk-mitigation provisions in contracts may be deemed not applicable or unenforceable exposing us to substantial liability exposure, and, regardless of the ultimate outcome, we may incur significant costs of defense that could materially and adversely affect our business, financial condition, results of operations and cash flows.

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 ~~SaaS offerings.~~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.

We rely on intellectual property laws to protect our proprietary rights, and if these rights are not sufficiently protected or we are not able to obtain sufficient protection for our technology, it could harm our ability to compete and to generate revenue.

We rely on a combination of laws, such as those applicable to patents, copyrights, trademarks and trade secrets, and contractual restrictions, such as confidentiality agreements and licenses, to establish and protect our proprietary rights. Our ability to compete and grow our business could suffer if these rights are not adequately protected. Our proprietary rights may not be adequately protected because:

●

~~Laws and contractual restrictions may not adequately prevent infringement of our proprietary rights and misappropriation of our technologies or deter others from developing similar technologies; and~~

●

Policing infringement of our patents, trademarks and copyrights, misappropriation of our trade secrets, and unauthorized use of our products is difficult, expensive and time-consuming, and we may be unable to determine the existence or extent of this infringement or unauthorized use.

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. Also, the laws of other countries in which we market our products may offer little or no protection of our proprietary technologies. Reverse engineering, unauthorized copying or other misappropriation of our proprietary technologies could enable third parties to benefit from our technologies without paying us for them, which would harm our competitive position and market share.

~~Our success and ability to compete depend to a significant degree on the protection of our solutions and other proprietary technology. It is possible that:~~

~~Index~~

●

~~We may not be issued patents we may seek to protect our technology;~~

●

~~Competitors may independently develop similar technologies or design around any of our patents;~~

●

~~Patents issued to us may not be broad enough to protect our proprietary rights; and~~

●

~~Our issued patents could be successfully challenged.~~

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. As our employee count grows~~actions, including, but not limited to, consumer litigation and ~~consists mostly of hourly (“non-exempt”) employees working from home, we~~legal proceedings that may arise related to the FTC and DOL investigations described in Part II. Item 1. Legal Proceedings in this report. 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.

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.

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 of Directors that some stockholders may consider favorable. In addition, on ~~April 20, 2016,~~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 a merger, tender offer, or assumption of control by a substantial holder of our securities. ~~The~~

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 a 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 ~~however, should not interfere with any~~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 ~~other business combination approved by the Board.~~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 6. EXHIBITS

~~Index~~

~~ITEM 6.~~

~~EXHIBITS~~

10.1	~~Change Management Form,~~	Amendment to the Standard Office Lease dated February13, 2018 between ~~Comcast~~Jo-El Associates as Lessor and ~~Company, signed August 10, 2017 (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on August 23, 2017)~~Support.com Inc. as Lessee, effective April 1, 2020.
31.1
~~10.2~~	Change Management Form to Statement of Work 3, between Comcast and Company, signed August 10, 2017 (incorporated by reference to Exhibit 10.2 of the Company’s current report on Form 8-K filed with the SEC on August 23, 2017) (1)

~~10.3~~	Letter from BDO USA, LLP dated September 15, 2017 to the Securities and Exchange Commission (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on September 18, 2017)

~~31.1~~	Chief Executive Officer Section 302 Certification
31.2
~~31.2~~	Principal Financial Officer Section 302 Certification
32.1
~~32.1~~	Statement of the Chief Executive Officer under 18 U.S.C. § 1350 ~~(2)~~(1)
32.2
~~32.2~~	Statement of the ~~Principal~~Chief Financial Officer under 18 U.S.C. § 1350 ~~(2)~~(1)

~~(1)~~

~~Confidential treatment has been requested for portions of this exhibit.~~

~~(2)~~

(1) The certifications filed as Exhibits 32.1 and 32.2 are not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of the Company under the Securities Exchange Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof irrespective of any general incorporation by reference language contained in any such filing, except to the extent that the registrant specifically incorporates it by reference.

S~~SIGNATURE~~IGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

~~November 9, 2017~~	SUPPORT.COM, INC.


Date: May 12, 2020	By:	/s/ Richard A. Bloom
		Richard A. Bloom
		~~Interim~~ President and Chief Executive Officer

~~Index~~E

~~EXHIBIT~~XHIBIT INDEX TO SUPPORT.COM, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED ~~SEPTEMBER 30, 2017~~MARCH 31, 2020

10.1		~~10.1~~	~~Change Management Form,~~Amendment to the Standard Office Lease dated February13, 2018 between ~~Comcast~~Jo-El Associates as Lessor and ~~Company, signed August 10, 2017 (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on August 23, 2017)~~Support.com Inc. as Lessee, effective April 1, 2020.
	~~10.2~~	Change Management Form to Statement of Work 3, between Comcast and Company, signed August 10, 2017 (incorporated by reference to Exhibit 10.2 of the Company’s current report on Form 8-K filed with the SEC on August 23, 2017) (1)
	~~10.3~~	Letter from BDO USA, LLP dated September 15, 2017 to the Securities and Exchange Commission (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on September 18, 2017)
	31.1		Chief Executive Officer Section 302 Certification
	31.2		Principal Financial Officer Section 302 Certification
	32.1		Statement of the Chief Executive Officer under 18 U.S.C. § 1350 ~~(2)~~(1)
	32.2		Statement of the Chief Financial Officer under 18 U.S.C. § 1350 ~~(2)~~

(1)	~~Confidential treatment has been requested for portions of this exhibit.~~

~~(2)~~

The certifications filed as Exhibits 32.1 and 32.2 are not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of the Company under the Securities Exchange Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof irrespective of any general incorporation by reference language contained in any such filing, except to the extent that the registrant specifically incorporates it by reference.

(1)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016

Revenue:
Services	$	13,682		$	14,163		$	39,744		$	43,055
Software and other		1,350			1,364			4,085			3,998
Total revenue		15,032			15,527			43,829			47,053

Cost of revenue:
Cost of services		11,559			11,847			33,760			38,403
Cost of software and other		66			120			252			377
Total cost of revenue		11,625			11,967			34,012			38,780

Gross profit		3,407			3,560			9,817			8,273

Operating expenses:
Research and development		631			1,336			2,429			4,464
Sales and marketing		621			1,463			2,011			5,401
General and administrative		1,996			2,703			6,847			10,186
Amortization of intangible assets and other		0			267			16			801
Restructuring		128			-			128			423
Total operating expenses		3,376			5,769			11,431			21,275
Income (loss) from operations		31			(2,209	)		(1,614	)		(13,002	)
Interest income and other, net		164			124			451			383
Income (loss) from continuing operations, before income taxes		195			(2,085	)		(1,163	)		(12,619	)
Income tax (benefit) provision		(36	)		44			57			132
Income (loss) from continuing operations, after income taxes		231			(2,129	)		(1,220	)		(12,751	)

Income from discontinued operations, after income taxes		-			-			-			284

Net income (loss)	$	231		$	(2,129	)	$	(1,220	)	$	(12,467	)


Basic and diluted income (loss) per share:
Income (loss) from continuing operations	$	0.01		$	(0.12	)	$	(0.07	)	$	(0.69	)
Income (loss) from discontinued operations		0.00			(0.00	)		(0.00	)		0.01
Basic and diluted income (loss) per share	$	0.01		$	(0.12	)	$	(0.07	)	$	(0.68	)


Shares used in computing basic net income (loss) per share		18,692			18,446			18,613			18,372
Shares used in computing diluted net income (loss) per share		18,714			18,446			18,613			18,372

As of December 31, 2016	Level 1		Level 2		Level 3		Total
Money market funds	$	9,297	$	—	$	—	$	9,297
Certificates of deposit		—		1,273		—		1,273
Commercial paper		—		4,989		—		4,989
Corporate notes and bonds		—		19,317		—		19,317
U.S. government agency securities		—		10,940		—		10,940
Total	$	9,297	$	36,519	$	—	$	45,816

	Foreign Currency Translation Losses			Unrealized Losses on Investments			Total
Balance as of December 31, 2016	$	(2,288	)	$	(41	)	$	(2,329	)
Current-period other comprehensive income		175			18			193
Balance as of September 30, 2017	$	(2,113	)	$	(23	)	$	(2,136	)

	As of September 30,
	2017		2016
Stock options		417		4,475
RSUs		-		1,375
Warrants		-		324
Total common share equivalents		417		6,174

	Non- compete			Partner Relationships			Customer Base			Technology Rights			Tradenames			Indefinite Life Intangibles		Total
As of September 30, 2017
Gross carrying value	$	593		$	145		$	641		$	5,330		$	760		$	250	$	7,719
Accumulated amortization		(593	)		(145	)		(641	)		(5,330	)		(760	)		—		(7,469	)
Net carrying value	$	—		$	—		$	—		$	—		$	—		$	250	$	250

As of December 31, 2016
Gross carrying value	$	593		$	145		$	641		$	5,330		$	760		$	250	$	7,719
Accumulated amortization		(581	)		(145	)		(637	)		(5,330	)		(760	)		—		(7,453	)
Net carrying value	$	12		$	—		$	4		$	—		$	—		$	250	$	266

	Number of Shares			Weighted Average Grant-Date Fair Value per Share		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding RSUs at December 31, 2016		351,921		$	4.59		1.06	$	908
Awarded		102,880		$	2.43
Released		(151,886	)	$	3.41
Forfeited		(146,165	)	$	6.01
Outstanding RSUs at September 30, 2017		156,750		$	3.00		0.95	$	368

	Relocation		Severance			Total
Restructuring obligations, June 30, 2017		-		-			-
Restructuring costs incurred		42,000		86,000			128,000
Cash payments		-		(57,000	)		(57,000	)

Restructuring obligations, September 30, 2017		42,000		29,000			71,000