Support.com 2014 Annual Report Download - page 47

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Table of Contents
Software and Other Revenue
Software and other revenue is comprised primarily of fees for end-user software products provided through direct customer downloads and through the sale of these end-user software products via partners.
Our software is sold to customers as a perpetual license or as a fixed period subscription. We act as the primary obligor and generally control fulfillment, pricing, product requirements, and collection risk and therefore
we record the gross amount of revenue. We provide a 30-day money back guarantee for the majority of our end-user software products.
For certain end-user software products, we sell perpetual licenses. We provide a limited amount of free technical support to customers. Since the cost of providing this free technical support is insignificant and
free product enhancements are minimal and infrequent, we do not defer the recognition of revenue associated with sales of these products.
For certain of our end-user software products (principally SUPERAntiSpyware), we sell licenses for a fixed subscription period. We provide regular, significant updates over the subscription period and therefore
recognize revenue for these products ratably over the subscription period.
Other revenue consists primarily of revenue generated through partners advertising to our customer base in various forms, including toolbar advertising, email marketing, and free trial offers. We recognize
other revenue in the period in which our partners notify us that the revenue has been earned.
Research and Development
Research and development expenditures are charged to operations as they are incurred.
Software Development Costs
Based on our product development process, technological feasibility is established on the completion of a working model. The Company determined that technological feasibility is reached shortly before the
product is ready for general release and therefore development costs incurred have been insignificant. Accordingly, we have charged all such costs to research and development expense in the period in which they
were incurred in the consolidated statements of operations.
Purchased Technology for Internal Use
We capitalize costs related to software that we license and incorporate into our product and service offerings or develop for internal use.
In July 2009, we acquired purchased technology for $350,000 and recorded amortization expense related to this technology of $62,000, and $81,000 in 2013 and 2012, respectively. This technology was fully
amortized at December 31, 2013. We recorded an impairment charge in connection with the development of software for internal use in general and administrative expenses in our consolidated statement of
operations of $70,000 during the year ended December 31, 2012. No other impairment charges were recorded during the years ended December 31, 2014 and 2013.
Advertising Costs
Advertising costs are recorded as sales and marketing expense in the period in which they are incurred. Advertising expense was $2.2 million, $9.2 million, and $8.2 million for the years ended December 31,
2014, 2013, and 2012, respectively.
Earnings (Loss) Per Share
Basic earnings (loss) per share is computed using our net income (loss) and the weighted average number of common shares outstanding during the reporting period. Diluted earnings (loss) per share is
computed using our net income (loss) and the weighted average number of common shares outstanding, including the effect of the potential issuance of common stock such as stock issuable pursuant to the
exercise of stock options and vesting of restricted stock units (“RSUs”) using the treasury stock method when dilutive. We excluded outstanding weighted average stock options of 4.0 million, 1.5 million and 2.9
million for the years ended December 31, 2014, 2013 and 2012, respectively, from the calculation of diluted earnings per common share because the exercise prices of these stock options were greater than or equal
to the average market value of the common stock. These stock options could be included in the calculation in the future if the average market value of the common stock increases and is greater than the exercise
price of these stock options. Since we reported a net loss for the years ended December 31, 2014 and 2012, 150,000 and 1.5 million outstanding options and RSUs were also excluded from the computation of
diluted loss per share since their effect would have been anti-dilutive.
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