Support.com 2009 Annual Report Download - page 66

Table of Contents
SUPPORT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Tax contingencies
We are required to make periodic filings in the jurisdictions where we are deemed to have a presence for tax purposes. We have undergone audits in the
past and have paid assessments arising from these audits. During the fourth quarters of 2008 and 2009, our India entity was issued notices of income tax
assessment pertaining to the 2005-2006 and 2006-2007 fiscal years. The notices claimed that the transfer price used in our inter-company agreements with our
India entity was too low, and that the rate should be increased. We believe our current transfer pricing position is more likely than not of being sustained. We
believe that this will be resolved through the normal judicial appeal process used in India, and have submitted our case to the court.
We may be subject to other income tax assessments in the future. We evaluate estimated losses that could arise from those assessments in accordance with
ASC 740. We consider such factors as the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate on the amount of loss.
We record the estimated liability amount for those assessments that we consider to be more likely than not in our balance sheet.
Legal contingencies
In November 2001, a class action lawsuit was filed against us, two of our former officers and certain underwriters in the United States District Court for
the Southern District of New York. Similar complaints have been filed against 55 underwriters and more than 300 other companies and other individual officers
and directors of those companies; the consolidated case is In re Initial Public Offering Securities Litigation, No. 21 MC 92 (SAS) (S.D.N.Y.). The lawsuit, which
sought unspecified damages, fees and costs, alleged that our registration statement and prospectus dated July 18, 2000 for the issuance and initial public offering
of 4,250,000 shares of our common stock contained material misrepresentations and/or omissions related to alleged inflated commissions received by the
underwriters of the offering. On April 1, 2009, all parties entered into a Stipulation and Agreement of Settlement that would resolve all claims and dismiss the
case against us and our former officers, without any payment by us or our former officers. On October 5, 2009, the court issued an order approving the
settlement. Certain other parties have appealed the settlement and the appeal is pending.
We are also subject to other routine legal proceedings, as well as demands, claims and threatened litigation, that arise in the normal course of its business,
potentially including assertions that we may be infringing patents or other intellectual property rights of others. We currently do not believe that the ultimate
amount of liability, if any, for any pending claims of any type (alone or combined) will materially affect our financial position, results of operations or cash
flows. The ultimate outcome of any litigation is uncertain, however, 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.
Note 7. Restructuring Obligations and Other Charges
In the fourth quarter of 2008, we reduced our workforce by 33 employees, or approximately 10% of our non-agent workforce at that time, and closed
certain facilities to reduce our ongoing cost structure. As a result, we recorded a restructuring and impairment charge of $1.9 million in 2008. All of the affected
employees were terminated as of December 31, 2008. The restructuring charge was primarily comprised of employee termination costs, professional services
costs and facilities impairment costs. Restructuring and impairment expenses included in the consolidated statement of operations for the three month period
ended December 31, 2008 totaled $690,000 in discontinued operations and $1.2 million in continuing operations, including $43,000 for cost of consumer,
$89,000 for research and development, $538,000 for sales and marketing and $525,000 for general and administration. As of December 31, 2009, there was no
remaining balance related to this restructuring obligation.
65
Source: Support.com, Inc., 10-K, March 12, 2010 Powered by Morningstar® Document Research℠