UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the Quarterly Period Ended March 31,June 30, 2009

OR

For the transition period fromto

Commission File No. 000-30901

SUPPORTSOFT,SUPPORT.COM, INC.

(Exact Name of Registrant as Specified in Its Charter)

1900 Seaport Boulevard, 3^rd Floor

Redwood City, CA 94063

(Address of Principal Executive Offices)

(Zip Code)

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

FORMER NAME: SUPPORTSOFT, INC.

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  x    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. See the definitions of “large accelerated filer”, “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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 large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

On April 30,July 31, 2009, 46,551,27146,554,621 shares of the Registrant’s Common Stock, $0.0001 par value, were outstanding.

SUPPORTSOFT,SUPPORT.COM, INC.

FORM 10-Q

QUARTERLY PERIOD ENDED MARCH 31,JUNE 30, 2009

INDEX

PART I. FINANCIAL INFORMATION

SUPPORTSOFT,ITEM 1. FINANCIAL STATEMENTS

SUPPORT.COM, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

See accompanying notes.

SUPPORTSOFT,SUPPORT.COM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

See accompanying notes.

SUPPORTSOFT,SUPPORT.COM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

See accompanying notes.

SUPPORTSOFT,SUPPORT.COM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Significant Accounting Policies

Basis of Presentation

support.com, Inc. (the “Company” or “support.com,” “we,” “us” or “our”) is a Delaware corporation. The Company changed its name from SupportSoft, Inc. on June 22 2009. The Company’s common stock continues to trade on the NASDAQ Global Select Market under the symbol “SPRT.”

On June 23, 2009 the Company sold its Enterprise Business to Consona Corporation. This business had accounted for a substantial majority of our revenue in 2009 and 2008. As a result of the sale of the Enterprise Business, our unaudited condensed consolidated financial statements, accompanying notes and other information provided in this Form 10-Q reflect the Enterprise Business as a discontinued operation for all periods presented. Detailed information regarding the financial results of the Enterprise Business is presented in Note 2.

The accompanying unaudited condensed consolidated financial statements include the accounts of SupportSoft,support.com, Inc. (the “Company” or “SupportSoft”) and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. The condensed consolidated balance sheet as of March 31,June 30, 2009 and the condensed consolidated statements of operations for the three and six months ended March 31,June 30, 2009 and 2008 and the condensed consolidated cash flows for the threesix months ended March 31,June 30, 2009 and 2008 are unaudited. In the opinion of our management, these unaudited interim condensed consolidated financial statements reflect all adjustments, (consistingconsisting of normal recurring adjustments)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 financial statement information as of December 31, 2008 is derived from audited financial statements as of that date. These unaudited interim condensed consolidated financial statements and footnotes should be read with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 11, 2009.

Use of Estimates

The preparation of interim condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes. Actual results could differ materially from these estimates.

Reclassifications

Certain amounts in the condensed consolidated financial statements and accompanying notes for the prior periodperiods have been reclassified to conform to the current period presentation, including amounts relatedperiods presentation. On June 23, 2009 the Company completed the sale of the Enterprise Business. The assets, liabilities and results of operations of the Enterprise Business have been reclassified from continuing operations to cash flowdiscontinued operations, and certain costs relatedhistorically allocated to segment reporting.our previously reported operating segments, i.e., the Enterprise and Consumer operating segments, have been reclassified to general and administrative operating costs of the continuing operations (See Note 2, in each case for all periods presented).

Subsequent Events Evaluation

In accordance with FAS 165, our management has reviewed and evaluated material subsequent events from the balance sheet date of June 30, 2009 through the financial statements issue date of August 10, 2009. All appropriate subsequent event disclosures, if any, have been made in the notes to our unaudited condensed consolidated financial statements.

Revenue Recognition

Consumer support.com recognizes revenue in accordance with the SEC’s Staff Accounting Bulletin No. 104 (SAB 104)“Revenue Recognition” and the Financial Standards Accounting Board (FASB) Emerging Issues Task Force (EITF) Issue No. 00-21 “Revenue Arrangements with Multiple Deliverables.”

Consumer revenue is derived

support.com revenues come primarily from fees forpremium (fee-based) technology support services. These services include those that are delivered on a one-time basis (“incident-based” services) as well as those that are delivered over time (“subscription” services). We provide these services remotely, using skilled work-from-home agents who utilize our proprietary technology to deliver services.

We render services to consumers, either through our channel partners (which include brick and mortar and online retailers, anti-virus providers, and others) or directly via our website (www.support.com). We transact with consumers via direct transactions, referral programs or reseller programs. In reseller programs, the channel partner generally executes the financial transactions with the consumer and pays a fee to us. In such instances, since our channel partner is the transacting party that bears substantially all risks associated with the transaction, we record only the net fee received as revenue in accordance with the provisions of EITF Issue No. 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent.” In referral programs, support.com transacts with the consumer and pays a fixed fee to the referring party. In such instances, since support.com is the transacting party and bears substantially all risks associated with the transaction, we record the gross amount of revenue. In direct transactions, support.com sells directly to consumers.the consumer at the retail price. For all transactions, in accordance with SAB 104, we recognize revenue for these services only when all of the following criteria are met:

Channel partners

We consider all arrangements with payment terms longer than 90 days not to be fixed or determinable. If the fee is determined not to be fixed or determinable, revenue is recognized as payment becomes due from the customer.

Our services are of three types:

We also license certain of our Consumerconsumer software products to channel partners who use our software to provide services to their customers. Such channel partners are charged a per-use fee for the software and revenue is recognized in the period usage occurs.

Enterprise Revenue

In our Enterprise segment our revenue is comprisedChannel partners are generally invoiced monthly for services delivered and subscriptions sold during that period. Fees from transactions directly with consumers are generally paid with a credit card at the time of license, servicesdelivery (for incident-based services) or time of sale (for gift cards/service cards and maintenance revenue. We recognize revenue in our Enterprise segment in accordance with the American Institute of Certified Public Accountants’ (AICPA) Statement of Position (“SOP”) 97-2, Software Revenue Recognition, as amended by SOP 98-4 and SOP 98-9. License revenue is recognized when all of the following criteria are met:

SupportSoft considers all arrangements with payment terms longer than 90 days, not to be fixed or determinable. If the fee is determined not to be fixed or determinable, revenue is recognized as payments become due from the customer.subscriptions). Revenue is recognized net of any applicable sales tax.

License revenue is comprised of fees for perpetual and term licenses of our software. Perpetual license revenue is recognized using the residual method, in compliance with SOP 98-9 for arrangements in which licenses are sold with multiple elements. We allocate revenues on these licenses based upon the fair value of each undelivered element including undelivered maintenance, consulting and training. The determination of fair value is based upon vendor specific objective evidence (VSOE). VSOE for maintenance is based upon separate renewals of maintenance licenses from customers. VSOE for consulting or training is based upon separate sales of these services to customers. Assuming all other revenue recognition criteria are met, the difference between the total arrangement fee and the amount deferred for each undelivered element is recognized as license revenue.

Term licenses are sold with maintenance for which SupportSoft does not have VSOE to determine fair value for maintenance fees. As a result, license revenue for term licenses is recognized ratably over the duration of the agreement. License revenue in the accompanying financial statements includes maintenance for term licenses. We do not allocate maintenance revenue from term licenses to maintenance revenue, as we do not believe there is an allocation methodology thatsupport.com generally provides a meaningful and supportable allocationrefund period on services, during which refunds may be granted to consumers under certain circumstances, including inability to resolve certain support issues. For our channel sales, the refund period varies by partner, but is generally between license and maintenance revenues. Services revenue associated with5-10 days. For our direct-to-consumer sales, the term licensesrefund period is recognized ratably over the period associated with the initial payment, generally one year.

We provide resellers with the right to distribute our software to end user customers. Generally,5 days. For all channels, we recognize revenue from our arrangements with resellers when we receive persuasive evidence thatnet of refunds and cancellations during the reseller has actually contracted to license the software to a named end user (sell-through), assuming all other criteria for revenue recognition have been met. The forms of sell-through acceptable to us include one or more of the following: i) a copy of the agreement or license between the reseller and the end user, ii) a purchase order from the end user to the reseller, iii) a written communication from the reseller specifically identifying the end user, or iv) delivery made directly by SupportSoft to the end user. Whether the license revenue is then recognized immediately or ratably depends upon the terms of the arrangements with the reseller regarding the sublicense (i.e. perpetual license or term license). If a reseller is not deemed creditworthy, revenue otherwise recognizable is deferred until cash is received.period.

Maintenance revenue is primarily comprised of revenue from post-contract technical support services, which includes software product updates. Maintenance revenue is recognized ratably over the term of the maintenance period, which is generally one year. Multi-year maintenance agreements are divided into annual periods over which revenue is recognized ratably. We invoice customers who elect to renew their maintenance agreements. An equal amount is recorded as accounts receivable and deferred revenue.

Services revenue is primarily comprised of revenue from professional services such as consulting, training and hosting fees. Arrangements are evaluated to determine whether those services are essential to the functionality of other elements of the arrangement. In the event services are considered essential to the functionality of other elements of the arrangement, revenue under the arrangement is recognized using contract accounting. Non-essential consulting and training revenues are generally recognized as the services are performed or project milestones are accepted by the customer. When non-essential services are bundled in a term licensing arrangement, revenue from the services is recognized ratably over the period associated with the initial payment, generally one year.

In connection with licensing arrangements we may also provide hosting of our own software, a service for which SupportSoft does not have VSOE. If hosting services are sold with perpetual licenses, license revenue is recognized ratably over the term of the hosting contract. Hosting revenue is also recognized ratably over the duration of the hosting contract. Consulting services sold in conjunction with arrangements that include licenses and hosting services are recognized ratably over the duration of the hosting term.

Cash, Cash Equivalents and Investments

All liquid instruments with an original maturity at the date of purchase of ninety days or less are classified as cash equivalents. Cash equivalents and short-term investments consist primarily of money market funds, commercial paper, corporate and municipal bonds and notes andauction-rate securities issued(ARS) held by the United States government.UBS, which have a put option exercisable within one year. Long-term investments consist of auction-rate debt securities. Ourother ARS positions not held with UBS. Other than the ARS held by UBS, our cash equivalents and short-term investments are classified as available-for-sale, and are reported at fair value with unrealized

gains/losses when(when deemed to be temporary, and unrealized gainstemporary) included in accumulated other comprehensive income within stockholders’ equity on the condensed consolidated balance sheets. The ARS held by UBS are classified as trading securities and are reported at fair value with realized gains/losses included in interest income (expense) and other, net in the condensed consolidated statements of operations. We have designated all long-term investments except for auction-rate securities held by UBS, as available-for-sale and they are therefore reported at fair value, with unrealized gains and losses recorded in accumulated other comprehensive income. Our auction-rate securities held by UBS are classified as trading securities. Investments that we designate as trading assets are reported at fair value, with gains and losses resulting from changes in fair value recognized in earnings as a component of interest income (expense) and other, net. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in interest income (expense) and other, net in the condensed consolidated statements of operations. For the three months ended March 31,June 30, 2009, we recorded a realized loss of $2.1$1.6 million on the auction-rate securitiesARS put option re-valuation, offset withby a realized gain of $1.9$1.8 million on the auction-rate securities held by UBS ARS, for a net realized gain of $218,000. For the six months ended June 30, 2009, we had a net realized gain/loss of $218,000.zero. This was due to the put option re-valuation fully offsetting the UBS ARS re-valuation. There waswere no other realized gaingains or losslosses for the three and six months ended March 31,June 30, 2008. We recorded net unrealized losses on available-for-sale securities of $1.0$0.7 million and $1.6 million at March 31,June 30, 2009 and December 31, 2008, respectively.

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, and our ability andthe Company’s intent to hold investmentssell the security and, the Company’s belief that it will not be required to maturity.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 June 30, 2009, the Company evaluated its unrealized gains/losses on available-for-sale securities, the majority of which are from the long-term ARS, and determined them to be temporary. The long-term investments have been in a continuous unrealized loss position for more than 12 months. In accordance with FSP No. 115-2, the Company concluded that it does not intend to sell a security with an unrealized loss and it will not be required to sell the security before the recovery of its amortized cost basis.

The following is a summary of cash, cash equivalents and investments at March 31,June 30, 2009 (in thousands):

The following table summarizes the estimated fair value of our available-for-sale and trading debt securities classified by the stated maturity date of the security:

At March 31,June 30, 2009 and December 31, 2008 we had investments in AAA-rated auction-rate debt securitiesARS with various state student loan authorities with estimated fair values aggregating $18.2of $20.3 million and $15.8 million, respectively. The student loans made by these authorities are substantially guaranteed by the federal government through the Federal Family Education Loan Program (FFELP). Auction-rate securitiesARS are long-term floating rate bonds tied to short-term interest rates. After the initial issuance of the securities, the interest rate on

the securities is reset periodically, at intervals established at the time of issuance (e.g., every seven days, twenty-eight days, thirty-five days, or every six months), based on market demand, if the auctions are successful. Auction-rate securitiesARS are

bought and sold in the marketplace through a competitive bidding process often referred to as a “Dutch auction.” If there is insufficient interest in the securities at the time of an auction, the auction may not be completed and the auction-rate securityARS then pays a default interest rate. Following such a failed auction, we cannot access our funds that are invested in the corresponding auction-rate securitiesARS until a future auction of these investments is successful, new buyers express interest in purchasing these securities in between reset dates, issuers establish a different form of financing to replace these securities or final payments become due according to contractual maturities. Commencing in February 2008, illiquidity conditions in the global credit markets resulted in failed auctions for all of our auction-rate securitiesARS held. In the near term, our ability to liquidate our investments or fully recover the carrying values may be limited or not exist.

In August 2008, UBS, the broker-dealer for 85%most of our auction-rate securities,ARS, announced a settlement under which it has offered to provide liquidity solutions for, or purchase, the auction-rate securitiesARS held by its institutional clients. In October 2008, UBS extended an offer of rights to us to sell our eligible auction-rate securitiesARS at par value back to UBS during the time period frombeginning June 30, 2010 through July 2, 2012. All of the auction-rate securities we hold with UBS ARS qualify as “eligible” for purposes of the rights offer. Under the offer, UBS will have sole discretion without prior notice to the Company, to sell our eligible securitiesARS and return par value to the Company up through July 2, 2012. In November 2008, we elected to accept the offer of rights from UBS, which gives us the option to sell to UBS a total of $20.9$20.8 million at par value at any time beginning June 30, 2010 through July 2, 2012. Upon acceptance of the UBS rights offer, we elected to value the auction-rate securitiesARS put option at fair value as allowed under SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” Refer to the Auction-Rate Securities Put Option section below for further discussion. Given the unprecedented failure of the entire auction-rate securities market and the various legal settlements taking place to return principal to investors, including the UBS rights offer, we have elected a one-time transfer of our UBS auction-rate securitiesARS from available-for-sale to trading securities in accordance with FASB Statement No. 115, “Accounting for Certain Investments in Debt and Equity Securities” (SFAS 115). The transfer to trading securities reflects management’s intent to exercise its auction-rate securitiesARS put option during the period June 30, 2010 to July 3,2, 2012. During the quarter ended March 31,June 30, 2009, we recorded a gain of $1.9$1.8 million to adjust the value of the UBS auction-rate securitiesARS to fair value and a loss of $2.1$1.6 million on auction-rate securitiesARS put option for a net realized lossgain of $218,000 in interest income (expense) and other, net, in our condensed consolidated statement of operations. We also reclassified the UBS ARS and ARS put option to current assets in our condensed consolidated balance sheet as of June 30, 2009 because the ARS put option is now exercisable within one year. For the six months ended June 30, 2009 we had a net realized gain of zero. Further changes in the value of the UBS auction-rate securitiesARS will also be recorded on our condensed consolidated statement of operations in this manner.

We determined that the gross unrealized losses on our available-for-sale investments as of March 31,June 30, 2009 are temporary in nature. The fair value of our auction-rate securitiesARS at March 31,June 30, 2009 reflects an unrealized loss of $1.0$0.7 million, entirely related to securities classified as available-for-sale.

Fair value for all auction-rate securities,ARS, including both the UBS securities classified as trading securities and the other auction-rate-securitiesARS classified as available-for-sale, was based on a discounted cash flow valuation that takes into account a number of factors including the weighted average remaining term (WART) of the underlying securities, the expected return, and the discount rate. The actual WART from servicing reports was used where available. For securities where the actual WART was not available an estimate based on other securities held was used. The expected return was calculated based on the last twelve months average for the 91 day
T-bill plus a spread. This rate is the typical default rate for auction-rate securitiesARS held by us. The discount rate was calculated using the 3-month LIBOR rate plus adjustments for the security type and the current lack of liquidity.type. Changes in any of the above estimates, especially the weighted average remaining term or the discount rate, could result in a material change to the fair value. At March 31,June 30, 2009, all auction-rate securitiesARS were classified as Level 3 assets in accordance with the Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements” hierarchy. Presently we have determined the decline in value for the available-for-sale auction-rate securitiesARS to be temporary because i) we have no intent to sell the intentsecurity, and abilitywe believe that we will not be required to hold these securities insell the near term in ordersecurity before the recovery of its amortized cost due to recoup their par values;our large cash reserves; ii) through March 31,June 30, 2009 all of the securities have maintained AAA credit ratings; and iii) loans made by the issuers are backed by the federal government. In accordance with FSP No. 115-2, we also conclude that we do not intend to sell an impaired available-for-sale security and will not be required to sell such a security before the recovery of our amortized cost.

However, if circumstances change, we may be required to record an other-than-temporary impairment charge on the available-for-sale auction-rate securities.ARS. We may similarly be required to record other-than-temporary impairment charges if the ratings on any of these securities are reduced or if any of the issuers default on their obligations. In addition to impairment charges, any of these events could cause us to lose part or all of our investment in these securities. Any of these events could materially affect our results of operations and our financial condition. We currently believe these securities are not significantly impaired for the reasons described above; however, it could take until the final maturity of the underlying notes (up to 30 years) to realize our investments’ recorded value.

Auction-Rate Securities Put Option

In November 2008, we signed a Rights Agreement with UBS concerning the disposition of our auction-rate securities (ARS).ARS. The UBS agreement gives us the right to sell our ARS back to UBS, at par value, beginning June 30, 2010 through July 2, 2012. Prior to June 30, 2010, UBS has the right to sell our ARS holdings at any time, and return par value to us. The rights represent a freestanding financial instrument for accounting purposes. As noted above, we elected to value this “put” option at fair value as allowed under SFAS No. 159. As such, we recognized the value of the repurchase right as an asset with the corresponding gain recorded in earnings. Fair value was determined using a “with and without” approach based on a discounted cash flow valuation comparing the value of the auction-rate securities with the put option and without it. We took into account the same factors as those used to value the auction-rate securities noted above, adjusted to account for differences in cash flow timing and UBS credit risk. The value of the rights offer was recorded in interest income and expense, net. The value of the ARS put option at March 31,June 30, 2009 and December 31, 2008 was $5.0$3.4 million and $7.1 million. WeDuring the quarter ended June 30, 2009, we recorded $2.1a gain of $1.8 million loss ofto adjust the value of the UBS ARS to fair value and a loss of $1.6 million on ARS put option for a net gain of $218,000 in interest income (expense) and other, net, in our condensed consolidated statement of operations. At March 31, 2009 the ARS put option did not fully offset the realized loss recorded on the related auction-rate securities in our condensed statement of operations. At December 31, 2008 the ARS put option fully offset the realized loss recorded on the related auction-rate securitiesARS in our condensed statement of operations. Because the ARS put option represents a freestanding financial instrument and is valued separately taking into account adjustments to the factors used to value the related auction-rate securities,ARS, its value may not fully offset the realized losses on the related auction-rate securitiesARS in every reporting period. In any period in which a change in value of our ARS put option does not fully offset a change in value of our auction-rate securities from UBS ARS, or vice versa, our condensed consolidated statement of operations will be impacted.

Our auction-rate securities continue to beAs of June 30, 2009, our UBS ARS are presented as long-termshort-term investments on our condensed consolidated balance sheet, while the value of the rights agreementRights Agreement is presented separately in current assets as auction-rate securitiesARS put option. The ARS put option is not a traditional put option in that it is non-transferable, non-assignable and not available for trade in any financial market. If UBS has insufficient funding to fulfill their obligation to buy back the ARS per the Rights Agreement, then we may incur further losses in our statement of operations.

The offer of rights includes the right to a loan from UBS at no net cost for up to the amount of the par value of our eligible auction-rate securities.ARS. The loan option is available until June 30, 2010. As of March 31,June 30, 2009, we had not exercised our right to obtain a loan.

Fair Value Measurements

Effective January 1, 2008, we adopted SFAS No. 157, “Fair Value Measurements” (“SFAS No 157”). SFAS No. 157 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 SFAS No. 157 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 under SFAS No. 157 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:

In accordance with SFAS No. 157, the following table represents our fair value hierarchy for our financial assets (cash equivalents and marketable securities)investments) measured at fair value on a recurring basis as of March 31,June 30, 2009 and December 31, 2008 (in thousands):

As of December 31, 2008		Level 1			Level 2			Level 3			Total
Money market funds		$	55,058		$	—		$	—		$	55,058
Commercial paper			—			7,781			—			7,781
Corporate bonds			—			2,999			—			2,999
Auction-rate securities			—			—			15,766			15,766
Auction-rate securities put option			—			—			7,148			7,148

Level 3 assets consist of auction-rate debt securitiesARS with various state student loan authorities and the auction-rate securitiesARS put option. Beginning in February 2008, allSince the auctions for these securities have failed. Based on the continued failure ofto fail since February 2008, these auctionsinvestments are not currently trading and the underlying maturities of the securities, wetherefore do not have classified auction-rate securities as long-term assets on our balance sheet.a readily determinable market value. The fair value of the auction-rate securitiesARS as of March 31,June 30, 2009 and 2008 was estimated by management.

The following table provides a summary of changes in fair value of our Level 3 financial assets as of March 31,June 30, 2009 and 2008 (in thousands):

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 also limit the amount of credit risk exposure to any one country except the United States. We are exposed to credit risks in the event of default by the issuers of the securities we hold to the extent of the amount recorded on the balance sheet. At March 31,June 30, 2009 we held approximately $18.2$20.3 million of AAA-rated student loan auction-rate debt securities.ARS.

The student loans made by the issuers of these securities are substantially guaranteed by the federal government through FFELP. Prior to February 2008, these securities had not experienced failed auctions, however, since February 2008 all auctions for these securities have failed. See the Cash, Cash Equivalents and Investments section of this Note 1 to the condensed consolidated financial statements for more information.

The credit risk in our trade accounts receivable is mitigated by our credit evaluation process, reasonably short payment terms and because we sell our products primarily to large organizations in different industries.organizations. At MarchJune 30, 2009 and December 31, 2009, Customer A2008 Office Depot accounted for 27%a substantial majority of our total accounts receivable. No other customers

For the three- and six-month periods ended June 30, 2009, and for the three- and six-month periods ended June 30, 2008 Office Depot accounted for 10% or overthe substantial majority of our total accounts receivable. At December 31, 2008, the same Customer A and Customer B each accounted for 19% and 12%, respectively, of total accounts receivable.

For the three months ended March 31, 2009, only one customer accounted for 10% or more of total revenue; Customer A accounted for 31% of total revenue. For the three months ended March 31, 2008, one customer, Customer C accounted for 15% of total revenue.

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 the portion of receivables when collection becomes doubtful. Provisions are made based upon a specific review of all significant outstanding invoices. For those invoices not specifically provided for, provisions are recorded at differing rates based upon the age of the receivable. If the judgments and estimates we use to calculate the allowance for doubtful accounts doesdo not reflect the future ability to collect outstanding receivables, additional provisions for doubtful accounts may be needed and the future results of operations could be materially affected. At March 31,Our Enterprise Business accounts receivable were sold to Consona as part of the sale of our Enterprise Business in June 2009 (see Note 2 for details). We currently believe that we have no specific account collectability risk in our continuing business, and have recorded no specific reserves against our Consumer Business as of June 30, 2009 and December 31, 2008, we had an allowance for doubtful accounts of $141,000 and $197,000, respectively.2008.

Property and Equipment

Property and equipment is stated at cost, less accumulated depreciation which is determined using the straight-line method over the estimated useful lives of 2 years for computer equipment and software, 3 years for furniture and fixtures, and the shorter of the estimated useful lives or the lease term for leasehold improvements. Repairs and maintenance costs are expensed as incurred.

Business Combinations – Purchase Accounting

Under the purchase method of accounting we allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. We record the excess of purchase price over the aggregate fair values as goodwill. We engage third-party appraisal firms to assist us in determining the fair values of assets acquired and liabilities assumed. These valuations require us to make significant estimates and assumptions, especially with respect to intangible assets. We have estimated the economic lives of certain acquired assets and these lives are used to calculate depreciation and amortization expenses. We have estimated the future cash flows to be derived from such assets, and these estimates are used to determine the fair value of the assets. If our estimates of the economic lives or the future cash flows change, depreciation or amortization expenses could be accelerated and the value of our intangible assets could be impaired.

Purchased Technology

Purchased technology consists of software that we licensed and incorporated into our product and service offerings. Purchased technology is accounted for in accordance with SFAS No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed.” Upon general release of the product that includes the licensed software, the costs will be amortized using the straight line method over an estimated useful life in a range of 3-5 years. We acquired the purchased technology on our balance sheet in 2008 and recorded amortization expense of $69,000 for the three months ended March 31, 2009. There was no amortization expense for the three months ended March 31, 2008.

Accounting for Goodwill and Other Intangible Assets

Goodwill is measured as the excess of the cost of acquisition over the sum of the amounts assigned to identifiable assets acquired less liabilities assumed. We record purchased intangible assets at fair value. The original cost is amortized on a straight-line basis over the estimated useful life of each asset.

In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” we review goodwill and other intangible assets that have indefinite useful lives for impairment at least annually in our third fiscal quarter, or more frequently if an event occurs indicating the potential for impairment. In accordance with SFAS No. 144,

“Accounting for the Impairment or Disposal of Long-Lived Assets,” we review intangible assets that have finite useful lives and other long-lived assets when an event occurs indicating the potential for impairment. In our reviews, we look for facts or circumstances, either internal or external, indicating that we may not recover the carrying value of the asset. We measure impairment losses related to long-lived assets based on the amount by which the carrying amounts of these assets exceed their fair values.

Stock-Based Compensation

We comply with Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment,” (“SFAS No. 123R”) which requires the measurement and recognition of compensation expense for all stock-based payment awards, including grants of stock and options to purchase stock, made to employees and directors based on estimated fair values.

For the three months ended March 31, 2009 no stock options were granted.

The fair value of theour stock options granted to employees and employee stock purchases for the three and six months ended June 30, 2009 and 2008 was estimated using the following assumptions:

On June 23, 2009 the Company sold its Enterprise Business to Consona Corporation pursuant to an Asset Purchase Agreement (see Note 2). A sale of this nature qualifies as the sale of “substantially all the assets of the business,” and according to the terms of the ESPP plan document such a sale automatically terminates the ESPP. As a result of the automatic termination of the ESPP, the company reversed all ESPP expenses related to the current purchase period and refunded all amounts to the employees. We recorded the following stock-based compensationstock-compensation expense for the three and six months ended March 31,June 30, 2009 and 2008:2008 (in thousands):

The following table represents stock option activity for the threesix months ended March 31,June 30, 2009:

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 March 31,June 30, 2009. This amount changes based on the fair market value of our stock. During the three and six months ended March 31,June 30 2009 and 2008, the aggregate intrinsic value of options exercised under our stock option plans was $180,000$180,000. During the three and $0six months ended June 30, 2008 there were no exercises, therefore, the aggregate intrinsic value of options exercised under our stock option plans was zero. Total fair value of options vested during the three and six months ended June 30, 2009 was $0.9 million and $2.1 million, respectively. Total fair value of options vested during the three and six months ended March 31, 2009 andJune 30, 2008 was $1.2$1.3 million and $1.1$2.4 million, respectively.

At March 31,June 30, 2009 there was $12.8$11.2 million of unrecognized compensation cost related to existing options outstanding, which is expected to be recognized over a weighted average period of 2.52.3 years.

Net Loss Per Share

Basic and diluted net loss per share are presented in accordance with Statement of Financial Accounting Standards No. 128 “Earnings per Share” (SFAS No. 128), for all periods presented. In accordance with SFAS No. 128, basic and diluted net loss per share have been computed using the weighted-average number of common shares outstanding during the periods. ForIn accordance with SFAS 128, which states that “an entity that reports a discontinued operation or an extraordinary item in a period shall use income from continuing operations as the three months ended March 31, 2009 and 2008, the‘control number’ in determining whether potential common shares are dilutive or antidilutive.” Accordingly, outstanding options were excluded from the computation of diluted net loss per share since their effect would have been anti-dilutive.for all periods presented given the loss from operations incurred in each period.

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

Warranties and Indemnifications

In our Consumer segment, the direct-to-consumer channelsupport.com generally provides a five-day warrantyrefund period on sales, during which refunds may be granted. With partners,granted to consumers under certain circumstances, including the warrantyinability to resolve certain support issues. For our channel sales, the refund period may vary across channels, and in some channelsvaries by partner, but is generally between 5-10 days. For our direct-to-consumer sales, the partner bears the cost of refunds. Refunds are accounted for as a reduction of revenue, as incurred. Refunds in this segment have not been material to date.

In our Enterprise segment, we generally provide a warranty for our software products and services to our customers and accounts for our warranties under the FASB’s SFAS No. 5, “Accounting for Contingencies.” Our standard warrantyrefund period is 90 days, but warranty periods can sometimes be longergenerally 5 days. For all channels, we recognize revenue net of refunds and vary from customer to customer. Incancellations during the event there is a breach of such warranties, we generally are obligated to correct the product or service to conform to the warranty provision or, if we are unable to do so, the customer is entitled to seek a refund of the purchase price of the product or service. In certain contracts a material breach of warranty may involve penalties payable to the customer. We did not provide for a warranty accrual as of March 31, 2009 and December 31, 2008. As of March 31, 2009, our product warranty expense has not been significant.period.

We generally agree to indemnify our customers against legal claims that our software products infringe certain third-party intellectual property rights and account for our indemnification obligations under SFAS No. 5. As of March 31,June 30, 2009 we have not been required to make any payment resulting from infringement claims asserted against our customers and have not recorded any related accruals.

Recent Accounting Pronouncements

In December 2007Effective April 1, 2009, the FASB issued SFASCompany adopted three Financial Accounting Standard Board (FASB) Staff Positions (“FSP”) that provide additional application guidance and enhanced disclosures regarding fair value measurements and impairments of securities. FSP No. 141 (revised 2007)157-4, “Business Combinations.” SFAS No. 141R will significantly change“Determining Fair Value When the accountingVolume and Level of Activity for business combinations in a number of areas, including the measurement of assetsAsset or Liability Have Significantly Decreased and liabilities acquired and the treatment of contingent consideration, contingencies, acquisition costs, in-process research and development and restructuring costs. In addition, under SFAS No. 141R, changes in deferred tax asset valuation allowances and acquired income tax uncertainties in a business combination after the measurement period will affect the income tax provision. SFAS No. 141R is effectiveIdentifying Transactions That Are Not Orderly”, provides additional guidelines for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning after December 15, 2008, which makes it effective for our fiscal year beginning January 1, 2009. Early adoption is prohibited. While the adoption of SFAS No. 141R had no impact on our condensed consolidated financial statements, any subsequent acquisition will be accounted forestimating fair value in accordance with SFAS No. 141R.157, “Fair Value Measurements.” FSP No. 115-2,“Recognition and Presentation of Other-Than-Temporary Impairments,” changes existing accounting requirements for other-than-temporary-impairment (OTTI) for debt securities by replacing the current requirement that a holder have the positive intent and ability to hold an impaired security to recovery in order to conclude an impairment was temporary with a requirement that an entity conclude it does not intend to sell an impaired security and it will not be required to sell the security before the recovery of its amortized cost basis. FSP No. 107-1 and Accounting Principles Board (“APB”) Opinion No. 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” increases the frequency of fair value disclosures. These FSPs are effective for fiscal years and interim periods ended after June 15, 2009. The adoption of these FSPs did not have any impact on the Company’s consolidated financial statements.

Effective JanuaryApril 1, 2009, the Company adopted FSP 157-2, “Effective Datethe SFAS No. 165, “Subsequent Events” (SFAS 165). The standard modifies the names of FASB Statement No. 157” (FSP 157-2)the two types of subsequent events either as recognized subsequent events (previously referred to in practice as Type I subsequent events) or non-recognized subsequent events (previously referred to in practice as Type II subsequent events). FSP 157-2 delayedIn addition, the effectivestandard modifies the definition of subsequent events to refer to events or transactions that occur after the balance sheet date, of SFAS 157 for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value inbut before the financial statements on a recurring basis (at least annually), untilare issued. It also requires the beginningdisclosure of the firstdate through which subsequent events have been evaluated. The standard did not result in significant changes in the practice of subsequent event disclosures or the related accounting thereof, and therefore the adoption did not have any impact on the Company’s consolidated financial statements.

Note 2. Discontinued Operations

support.com, Inc., formerly SupportSoft, Inc., was founded as an enterprise software provider. In 2007, the Company launched a premium technology services business focused on consumers and, in 2008, began reporting two operating segments under the requirements of Statement of Financial Accounting Standard (“FAS”) No. 131, “Disclosures about Segments of an Enterprise and Related Information.” The two segments were the Enterprise Business (comprised of the enterprise software and related services businesses) and the Consumer Business (comprised of the new consumer services business). This segment reporting structure was used for all publicly filed Company financial statements beginning January 1, 2008.

During the second quarter of fiscal 2009. These include goodwill2009, pursuant to an Asset Purchase Agreement dated April 5, 2009, the Company sold substantially all of the assets and other non-amortizable intangible assets.transferred certain of the liabilities of its Enterprise Business to Consona Corporation (“Consona”). The adoption of SFAS 157 to non-financialCompany has retained all assets and liabilities didassociated with its Consumer Business and intends to continue operations in this segment. As the Company has irrevocably sold the Enterprise Business to Consona, the operations and cash flows of the disposed business have been completely eliminated from the ongoing operations of support.com. Furthermore, other than a services arrangement whereby certain support.com employees will provide transitional support services to Consona, support.com will not have any continuing involvement in the operations of the disposed business. Additionally, the Company will make no operational decisions as part of the transitional services arrangement and will only process transactions for Consona. Therefore, the Company is reporting the Enterprise Business as a significantdiscontinued operation as of June 23, 2009, and for all periods presented in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (SFAS 144).

Operating results for the discontinued operation are listed below for the three- and six-month periods ended June 30, 2009 and comparable periods ending June 30, 2008:

Summary results from discontinued operations, including gain on sale and tax impact, are summarized as follows:

Income from discontinued operations, before income taxes, represents the Enterprise Business’ historic segment reporting, including all directly attributable revenues (license, maintenance and professional services) and costs (cost of goods sold, research and development and sales and marketing). These revenues and costs are consistent with prior reporting methodologies, but exclude all corporate costs, primarily facilities and information technology, which were previously allocated to the segment.

Historically, the Company has allocated certain overhead expenditures, such as facilities and information technology, across the functional departments of its two operating segments. Since these support functions remain as part of the Company’s continuing operations, they are therefore not included in discontinued operations reporting.

The gain on our condensed consolidated financial statements.sale of the Enterprise Business was approximately $9.5 million, reflecting the cash received from Consona (approximately $20.5 million), and the carrying value of the net liabilities of the Enterprise Business acquired by Consona (approximately $1.9 million), less Enterprise Business goodwill ($9.8 million) and deal-related expenditures (approximately $3.1 million).

Tax expenses have been attributed to discontinued operations or continuing operations based on specific analysis for federal, state and international amounts. As a result, the Company had $4.7 million of income tax expense related to the income from discontinued operations and the gain on sale of the Enterprise segment. The income tax expense is recorded as part of the Company’s discontinued operations and is partially offset by an income tax benefit recorded as part of the continuing operations in the current period (see Note 4). The benefit represents the utilization of the Company’s continuing operations’ tax attributes, including current year losses, which can be used to offset the tax expense for the gain on the sale. The Company expects to fully offset the $4.7 million tax expense on the sale of discontinued operations with further tax benefits on continuing operations in the third and fourth quarters of 2009.

Note 2.3. Comprehensive Loss

Statement of Financial Accounting StandardsSFAS No. 130 “Reporting Comprehensive Income” (SFAS No. 130) establishes standards for reporting and displaying comprehensive net incomeincome/loss and its components in stockholders’ equity. SFAS No. 130 has no impact on our net income or loss as presented in our financial statements. SFAS No. 130 requires foreign currency translation adjustments and changes in the fair value of available-for-sale securities to be included in comprehensive income or loss.

The following are the components of comprehensive loss (in thousands):

Note 3.4. Income Taxes

We recordedAs a result of the sale of the Company’s Enterprise Business to Consona Corporation (see Note 2 for details), the Company is reporting all financial activity for that segment – including revenues, direct expenses, gain on sale of discontinued operations, and the tax impact of the gain on the sale and the related tax impact of discontinued operations – as discontinued operations. For details on the tax impact on our discontinued operations, please see Note 2. The income tax provisionsprovision reported in this Note relates to the tax position of $106,000the Company’s continuing operations.

Generally, the amount of tax expense or benefit allocated to continuing operations is determined without regard to the tax effects of other categories of income or loss, such as income from discontinued operations. However, an exception is provided when there is a pre-tax loss from continuing operations and $108,000pre-tax income from other categories in the current year. The intraperiod tax allocation rules in Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes,” (“SFAS 109”) related to items charged directly to discontinued operations can result in disproportionate tax effects that remain in discontinued operations for interim reporting periods.

During the second quarter of 2009, because support.com projected a loss in continuing operations for 2009 and generated a gain on sale on discontinuing operations for the three months ended March 31,June 30, 2009, the intraperiod tax allocation exception contained in SFAS 109 applied. Specifically, support.com recorded a tax expense of approximately $4.7 million in its discontinued operations, related primarily to the gain on sale of its discontinued operations, and recorded a benefit of approximately $2.8 million in continuing operations, primarily related to this pre-tax gain from discontinued operations. The $2.8 million benefit on continuing operations only partially off-sets the $4.7 million expense for the three- and six-month period ending June 30, 2009; however, since the company projects further losses on continuing operations in 2009, it expects to fully off-set the tax expense from discontinued operations with additional tax benefits in the third and fourth quarters of 2009.

The Company recorded an income tax benefit from continuing operations of approximately $2.8 million for the three and six months ended June 30, 2009. For the three and six months ended June 30, 2008 the Company recorded an income tax benefit of $1,000 and an income tax benefit of $1,000, respectively. These provisions primarily reflect foreignthe benefit of utilization of continuing operations tax attributes given the impact of the tax on the income from discontinued operations (for the 2009 periods) (see Note 2) as well as some state income taxes including foreign withholding taxes related to certain international customer payments.and the benefit of federal refundable research and development credits. In accordance with Financial Accounting Standards Interpretation No. 48 (FIN 48), no material increase or decrease in unrecognized tax benefits was included in the quarterly provision was an increase in unrecognized tax benefits of $147,000 and $14,000 and interest of $10,000 and $5,000 for the three months ended March 31,June 30, 2009 and 2008, respectively.