Support.com 2008 Annual Report Download - page 74

Table of Contents
SUPPORTSOFT, 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 quarter of 2008, our India entity was issued a notice of income tax assessment
pertaining to the 2005-2006 fiscal year. The Notice 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. After benchmarking our transfer pricing level against 16 comparable companies, 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
Financial Accounting Standards Interpretation, FIN No. 48, “Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109.” We
consider such factors as the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of 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 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. The lawsuit seeks unspecified
damages as well as interest, fees and costs. Plaintiffs have commenced with discovery as to underwriters and issuers, although principally with respect to focus or
test cases that do not name us as a defendant. While we cannot predict with certainty the outcome of the litigation, we believe we and our officers have
meritorious defenses to the claims in the litigation.
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, however, and either unfavorable or favorable 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 2008, the Company reduced its workforce by 33 employees, or approximately 10% of its non-technical support agent workforce at that time, and closed
certain facilities worldwide. As a result, the Company recorded a restructuring and impairment charge of $1.9 million in 2008. All of the affected employees
were terminated as of December 31, 2008. Restructuring and impairment expenses included in the Consolidated Statements of Operations were $212,000 for cost
of services, $5,000 for cost of Consumer, $137,000 for research and development, $1.0 million for sales and marketing and $525,000 for general and
administration. Cash payments
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Source: SUPPORTSOFT INC, 10-K, March 11, 2009