Support.com 2011 Annual Report Download - page 58

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On February 7, 2012, a lawsuit seeking class-action certification was filed against the Company in the United States District Court for the
Northern District of California, No. 12-CV-00609, alleging that the design of one the Company’s software products and the method of promotion to
consumers constitute fraudulent inducement, breach of contract, breach of express and implied warranties, and unjust enrichment. On the same day the
same plaintiffs’ law firm filed another action in the United States District Court for the Southern District of New York, No. 12-CV-0963, involving
similar allegations against a subsidiary of the Company and one of the Company’s channel partners who distributes our software products, and that
channel partner has requested indemnification under contract terms with the Company. The law firm representing the plaintiffs in both cases has filed
unrelated class actions in the past year against a number of major software providers with similar allegations about those providers’ products. At this
time, the Company believes a loss is neither probable nor estimable and based on available information regarding this litigation, the Company is unable
to determine an estimate, or a range of estimates, of potential losses.
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 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.
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We have identified guarantees in accordance with ASC 450, . The 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 channel 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 statement for accounting for contingencies, as interpreted by the guidance
for guarantor’s accounting and disclosure requirements for guarantees. 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. To date, we incurred
costs of less than 1% of revenue as a result of any such obligations and have not accrued any liabilities related to such obligations in the consolidated
financial statements as of December 31, 2011 and 2010.
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In the first quarter of 2009, we implemented a reduction in our workforce and closed certain facilities worldwide in order to reduce our ongoing
cost structure. We reduced our workforce by 17 employees, or approximately 6% of our non-agent headcount. All of the affected employees were
terminated as of March 31, 2009. As a result, we recorded a restructuring charge of $896,000 in 2009. 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 totaled $821,000 in discontinued operations and $75,000 in continuing operations, including $6,000 for
sales and marketing and $69,000 for general and administrative. As of June 30, 2011, we paid in full the balance of this restructuring obligation, and
incurred $65,000 incremental facilities restoration costs related to the final obligations of our facility in the United Kingdom. This expense was
recorded in general and administrative. As of December 31, 2011 there was no remaining balance related to this restructuring obligation.
In the second quarter of 2009, we implemented a reduction in our workforce in order to align our ongoing cost structure with the scale of our
revenue following the sale of our Enterprise business. We reduced our workforce by 23 employees, or approximately 19% of our non-technology
support agent workforce. All of the affected employees were terminated as of June 30, 2009. In addition, we terminated the lease for our Canadian
facility, which we had previously impaired as of December 31, 2008. We reversed the remaining impairment balance accrued for this facility’s lease
payments, in the amount of $219,000. As a result of these actions, we recorded a restructuring charge of approximately $345,000 in the second
quarter of 2009. The restructuring charge was primarily comprised of employee terminations costs and professional services costs. Restructuring
expenses included in the consolidated statement of operations were $62,000 for cost of service, $187,000 for research and development, $315,000 for
sales and marketing and $(219,000) for general and administrative due to the reversal of the Canadian facility lease accrual. As of December 31, 2009,
there was no remaining balance related to this restructuring obligation.
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