Support.com 2005 Annual Report Download - page 37

million in 2004, and $9.2 million in 2003. Research and development expense increased approximately $1.4 million, or 15%, in 2005
from 2004, and $547,000, or 6%, in 2004 from 2003. The increase in research and development expense in 2005 from 2004 and 2004
from 2003 is primarily due to an increase in headcount and related expenses resulting from the acquisition of Core Networks
Incorporated in September 2004. Twenty-three employees were added to our research and development organization from the
acquisition of Core Networks Incorporated.
Sales and marketing. Sales and marketing expense consists primarily of compensation costs, including salaries, sales
commissions and related overhead costs for sales and marketing personnel and promotional expenses, including public relations,
advertising and trade shows. Sales and marketing expense was $25.2 million in 2005, $24.0 million in 2004, and $22.0 million in
2003. Sales and marketing expense increased by $1.2 million, or 5%, in 2005 from 2004, and increased by approximately $1.9
million, or 9%, in 2004 from 2003. The increase in sales and marketing expense in 2005 from 2004 is primarily due to increased
headcount and related compensation and travel expenses throughout the year, international marketing events, and restructuring
charges relating to the Company’s re-alignment of its business in October 2005.
General and administrative. General and administrative expense consists primarily of compensation costs and related
overhead costs for administrative personnel and professional fees for legal, accounting and other professional services. General and
administrative expense was $8.6 million in 2005, $6.5 million in 2004, and $5.4 million in 2003. General and administrative expense
increased approximately $2.1 million, or 34%, in 2005 from 2004, and increased approximately $1.0 million, or 19%, in 2004 from
2003. The increase in general and administrative expense in 2005 from 2004 is primarily due to increases in salaries, consulting
expenses and legal fees related to the defense of the class action lawsuit. The increase in general and administrative expense in 2004
from 2003 resulted primarily from the cost of Sarbanes Oxley section 404 compliance and to a lesser extent from additional
headcount required to support our organization.
In-process research and development. In-process research and development expense was zero in 2005 and $1.6 million in
2004. The in-process research and development expense is a one-time expense related to our acquisition of substantially all of the
assets of Core Networks Incorporated on September 2, 2004.
Interest income and expense
($ in thousands)
Interest income and other. Interest income and other, net was $3.6 million in 2005, $2.3 million in 2004, and $502,000 in
2003. Interest income and other increased approximately $1.3 million, or 57%, in 2005 from 2004, and increased approximately $1.8
million, or 358%, in 2004 from 2003. The increase in interest income and other in 2005 from 2004 is primarily due to higher interest
rates earned on our invested cash and short-term investments. The increase in interest income and other in 2004 from 2003 is
primarily due to an increase in short-term marketable securities from the $77.7 million raised from our follow-on public offering in
November 2003.
Provision for income taxes
($ in thousands)
35
2005
% Change
2004 to 2005
2004
% Change
2003 to 2004
2003
Interest income and other, net $3,619 57% $2,298 358% $502
2005 2004 2003
Income before income taxes $4,827 $10,464 $9,916
Provision for income taxes
402 310 496
Net Income $4,425 $10,154 $9,420