Item 8.01. Other Events.
Verizon Media
On
March 22, 2010, the Company and AOL Fulfillment Services, who now
does business as Verizon Media (“Verizon Media”),
entered into a Fulfillment Services Promotion and Marketing
Agreement (“Agreement”). The Agreement related to the
development and sale of certain products and services. The Company
sold software products to Verizon Media pursuant to the terms of
the Agreement under two programs – SUPERAntiSpyware and
Computer Check-Up. Verizon Media offered these software products to
its end-customers. As previously reported, on May 24, 2019, the
Company received a letter from Verizon Media providing notice that
it wished to terminate the Agreement and work with the Company to
wind-down all remaining subscriptions for both programs. The
Company has wound-down all services under the Computer Check-Up
program and the SUPERAntiSpyware program. Also as previously
reported, in connection with the termination of the Computer
Check-Up program, Verizon Media requested that the Company fund
rebates to its end-customers who elect to accept a refund offer
from Verizon Media. Although the Company, to date, has not agreed
with this request, Verizon Media commenced its rebate
program.
On
November 15, 2019, the Company received a letter from Verizon Media
informing the Company that, to date, Verizon Media has issued
rebates totaling $2.6 million and requesting reimbursement of this
amount from the Company. It is possible that Verizon may request
reimbursement of additional amounts in the future related to this
rebate program. At this time, the Company has not determined to
what extent, if any, the Company will fund any potential
reimbursement. If the Company agrees to participate or is otherwise
required to participate in funding such reimbursement to Verizon
Media, the Company’s results of operations and financial
condition may be materially and adversely impacted. The Company has
notified the Company’s insurance carrier of the claim, and is
reviewing potential insurance coverage for all or a portion of the
amount Verizon Media has sought from the Company.
Comcast Cable
The
Company is a party to that certain Master Services Agreement Call
Handling Services (the “Master Agreement”) dated
October 1, 2013 with Comcast Cable Communications Management, LLC
(“Comcast”). Under the general terms of the Master
Agreement, the Company and Comcast also enter into individual
agreements, or statements of work, that provide additional terms
applicable to individual client programs. The Company and Comcast
entered into Statement of Work #1 dated October 1, 2013 (the
“Statement of Work #1”) pursuant to which the Company
provided high speed Internet repair ("HSI Repair") and Wireless
Gateway technical support ("Wireless Gateway Support") to Comcast
end-customers.
On
November 21, 2019, the Company received an initial written notice
from Comcast notifying of Comcast’s intent to terminate a
portion of the support related to a specified business unit of
Comcast and the customer support that this business unit provides
to its end-customers, effective on March 21, 2020. Since receiving
the initial notice, the Company has been in discussions with
Comcast to obtain more information about Comcast’s intent and
the wind down of the program to better understand the scope of the
proposed termination. For the three months ended September 30,
2019, the revenue derived by the Company that was attributable to
this program for this Comcast business unit was approximately $4.9
million.
The
Master Agreement, including Statement of Work #1, between the
Company and Comcast Cable and all other client programs were not
terminated by Comcast and remain active at this time. Although the
volume of business done with Comcast will be reduced, the Company
believes its remaining business with other business units of
Comcast is not impacted by this most recent notice from
Comcast.
Forward-Looking Statements
This
Current Report on Form 8-K contains forward-looking statements
regarding the Company’s business and expected future
performance as well as assumptions underlying or relating to such
statements of expectation, all of which are “forward-looking
statements” within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. These forward-looking statements include, but are not
limited to, statements regarding the anticipated costs of the
rebate program related to the Computer Check-Up program previously
provided to Verizon Media, any insurance coverage that may be
available to cover these rebate costs, the termination of a certain
portion of the business that the Company does with Comcast, and the
potential impact on the Company’s results of operations and
financial condition of these events. The Company is subject to many
risks and uncertainties that may materially affect its business and
future performance, which could cause these forward-looking
statements to be inaccurate. These risks include, for example, the
risk that Verizon Media elects to require the Company to fund
entirely any rebates that Verizon Media may offer to its
end-customers related to the Company’s software products and
the risk that Comcast elects to terminate all or a portion of its
remaining business with the Company. The Company and its business
are subject to numerous other risks and uncertainties, including
those set forth in its Form 10-Q filed with the Securities and
Exchange Commission on November 8, 2019, a copy of which is
available at www.sec.gov. The forward-looking statements contained
in this Current Report on Form 8-K are based on information as of
the filing date of this report, and the Company undertakes no
obligation to publicly revise or update any forward-looking
statements, except as required by law.