UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
FORM 10-K/A
(Amendment No. 2)
 
(Mark One)
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the Fiscal Year Ended December 31, 2020
 
 
 
OR
 
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the transition period from ________ to ________
 
Commission File No. 000-30901
 
SUPPORT.COM, INC.
 (Exact name of registrant as specified in its charter)
 
Delaware
 
94-3282005
(State or other jurisdiction of
 incorporation or organization)
 
(I.R.S. Employer
 Identification No.)
 
1521 Concord Pike (US 202), Suite 301, Wilmington, DE 19803
(Address of principal executive offices, including zip code)
 
 (650) 556-9440
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
 
Common Stock, par value $0.0001
 
SPRT
 
The Nasdaq Stock Market LLC
Title of each class
 
Trading symbol(s)
 
Name of each exchange on which registered
 
Securities registered pursuant to Section 12(g) of the Act: None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
 
 
 

 
 
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
 
Accelerated filer
Non-accelerated filer
 
Smaller reporting company
 
 
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
 
The aggregate market value of the registrant’s common stock held by non-affiliates as of June 30, 2020, the end of the registrant’s second fiscal quarter, was approximately $26.9 million, based on a closing market price of $1.41 per share.
 
As of July 12, 2021, there were 24,229,460 shares of the registrant’s common stock outstanding.
 
 

 
 
 
    
 
 
EXPLANATORY NOTE
 
This Amendment No. 2 to Form 10-K (this “Amendment”) amends the Annual Report on Form 10-K for the fiscal year ended December 31, 2020 of Support.com, Inc. (“Support.com,” the “Company,” “We” or “Our”), as originally filed with the Securities and Exchange Commission (“SEC”) on March 30, 2021, and as amended by the Amendment No.1 to Form 10-K filed on April 30, 2021 (as amended, the “Original Form 10-K”).
 
Pursuant to a comment letter of the SEC dated June 7, 2021, this Amendment is being filed solely to (i) include additional information related to the Company’s business with Comcast Cable Communications Management, LLC in Management’s Discussion and Analysis of Financial Condition and Results of Operations Revenue under Item 7 and (ii) to add individual revenue percentage breakouts for customers greater than 10% of total revenue to Note 1 within Item 8.
 
This Amendment only includes the cover page, Item 7, Item 8, signatures and the Certifications.
 
Except as described above, no other changes have been made to the Original Form 10-K. This Amendment does not otherwise update information in the Original Form 10-K to reflect facts or events occurring subsequent to the filing date of the Original Form 10-K. This Amendment should be read in conjunction with the Original Form 10-K and our other filings made with the SEC subsequent to filing of the Original Form 10-K.
 
 
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
 
This Amendment contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including the following:
 
certain statements, including possible or assumed future results of operations, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;
any statements regarding the prospects for our business or any of our services;
any statements preceded by, followed by or that include the words “may,” “will,” “should,” “seeks,” “believes,” “expects,” “anticipates,” “intends,” “continue,” “estimate,” “plans,” “future,” “targets,” “predicts,” “budgeted,” “projections,” “outlooks,” “attempts,” “is scheduled,” or similar expressions; and
other statements regarding matters that are not historical facts.
 
Our business and results of operations are subject to risks and uncertainties, many of which are beyond our ability to control or predict. Because of these risks and uncertainties, actual results may differ materially from those expressed or implied by forward-looking statements, and investors are cautioned not to place undue reliance on such statements. All forward-looking statements herein speak only as of the date hereof, and we undertake no obligation to update any such forward-looking statements. Important factors that could cause actual results to differ materially from our expectations and may adversely affect our business and results of operations include, but are not limited to, those items set forth in Item 1A. “Risk Factors” appearing in the Original Form 10-K.
 
 
 
 
SUPPORT.COM, INC.
FORM 10-K/A
FOR FISCAL YEAR ENDED DECEMBER 31, 2020
TABLE OF CONTENTS
 
Part II 
 
 Part IV
 
 
 
 
 
 
 
ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Amendment. The following discussion includes forward-looking statements. Please see the section entitled “Risk Factors” in Item 1A of the Original Form 10-K for important information to consider when evaluating these statements.
 
Overview
 
We provide customer and technical support solutions delivered primarily solely through our home-based employee model. Our cloud-based technology platform is designed to deliver scalable and flexible solutions from a global, home-based workforce. With this ExpertAnywhere delivery capability, we meet client needs through a network of on-demand, custom-profiled experts.
 
We intend the following discussion of our financial condition and results of operations to provide information that will assist in understanding our consolidated financial statements, the changes in certain key items in those consolidated financial statements from year to year, and the primary factors that accounted for those changes, as well as how certain accounting principles, policies and estimates affect our consolidated financial statements.
 
Results of Operations
 
The following table presents certain consolidated statements of operations data for the periods indicated as a percentage of total revenue:
 
 
 
Years Ended December 31,
 
 
 
2020
 
 
2019
 
Revenue:
 
 
 
 
 
 
Services
  95.9%
  94.0%
Software and other
  4.1 
  6.0 
Total revenue
  100.0 
  100.0 
 
    
    
Cost of revenue:
    
    
Cost of services
  65.4 
  73.8 
Cost of software and other
  0.5 
  0.2 
Total cost of revenue
  65.9 
  74.0 
Gross profit
  34.1 
  26.0 
 
    
    
Operating expenses:
    
    
Engineering and IT
  8.3 
  6.5 
Sales and marketing
  5.4 
  2.8 
General and administrative
  20.2 
  12.1 
Total operating expenses
  33.9 
  21.4 
 
    
    
Income from operations
  0.1 
  4.6 
Interest and other income, net
  1.1 
  1.7 
Income from operations, before income taxes
  1.2 
  6.3 
Income tax provision
  0.2 
  0.2 
Net income
  1.0%
  6.1%
 
 
 
1
 
 
Years Ended December 31, 2020 and 2019:
 
Revenue
 
 
 
Years Ended December 31,
 
 
 
 
 
 
 
In thousands, except percentages
 
2020
 
 
2019
 
 
$ Change
 
 
% Change
 
Services
 $42,079 
 $59,545 
 $(17,466)
  (29.3)%
Software and other
  1,785 
  3,788 
  (2,003)
  (52.9)
Total revenue
 $43,864 
 $63,333 
 $(19,469)
  (30.7)%
 
Services. Services revenue consists primarily of fees for customer support services generated from our partners. We provide these services remotely, generally using service delivery personnel who utilize our proprietary technology or client systems as specified by the client to deliver the services. Services revenue is also comprised of licensing of our Support.com Cloud applications.
 
Services revenue for the year ended December 31, 2020 decreased by $17.5 million, or 29%, from the same period in 2019. This decrease was primarily due to a decline in revenue of $18.7 million resulting from termination of certain services by one of our major customers due to a realignment of the customer’s needs, which concluded in the second quarter of 2020. The revenue derived from these services previously provided to this customer was 8% and 35% of the Company’s total revenue for the years ended December 31, 2020 and 2019, respectively. To a lesser extent, this decrease also was due to a decline in revenue of an additional $1.8 million resulting from termination by this major customer of certain other services due to a further realignment of the customer’s needs. The revenue derived from these additional services provided to this customer was 10% and 10% of the Company’s total revenue for the years ended December 31, 2020 and 2019, respectively. These declines in revenue were offset by an increase in revenue from one of our other major customers of $3.0 million.
 
We intend to shift our focus from the direct-to-consumer market to the enterprise business market, and from primarily U.S. based delivery capabilities to global delivery capabilities. As with any market that is undergoing shifts, growth opportunities in our services programs are difficult to predict, but we are focused on delivering growth through these new strategic initiatives.
 
Software and other. Software and other revenue is comprised primarily of fees for end-user software products provided through direct customer downloads, and, to a lesser extent, through the sale of these software products via partners. Software and other revenue for the year ended December 31, 2020 decreased by $2.0 million, or 52.9%, from the same period in 2019 primarily due to the cancellation of a significant customer agreement.
 
Revenue Mix
 
The components of revenue, expressed as a percentage of total revenue were:
 
 
 
Years Ended December 31,
 
 
 
2020
 
 
2019
 
Services
  95.9%
  94.0%
Software and other
  4.1 
  6.0 
Total revenue
  100.0%
  100.0%
 
 
 
2
 
 
 
For the years ended December 31, 2020 and 2019, our two largest customers accounted for 44% and 43% and 63% and 25% of our total revenue, respectively. No other customers accounted for 10% or more of our total revenue in any year presented.
 
  
Cost of Revenue
 
 
 
Years Ended December 31,
 
 
 
 
 
 
 
In thousands, except percentages
 
2020
 
 
2019
 
 
$ Change
 
 
% Change
 
Cost of services
 $28,697 
 $46,714 
 $(18,017)
  (38.6)%
Cost of software and other
  224 
  151 
  73 
  48.3 
Total cost of revenue
 $28,921 
 $46,865 
 $(17,944)
  (38.3)%
 
Cost of services. Cost of services consists primarily of compensation costs and contractor expenses for people providing services, technology and telecommunication expenses related to the delivery of services and other personnel-related expenses in service delivery. The decrease of $18.0 million, or 38.6%, in cost of services for the year ended December 31, 2020 compared to the same period in 2019 was primarily due to lower personnel expenses due to a decrease in headcount as a result of the decreased business from one of our major customers, partially offset by one-time costs associated with the transition of our executive team and other transition related costs.
 
Cost of software and other. Cost of software and other consists primarily of third-party royalty fees for our end-user software products. Certain of these products were developed using third-party research and development resources, and the third party receives royalty payments on sales of products it developed.
 
Operating expenses
 
 
 
Years Ended December 31,
 
 
 
 
 
 
 
In thousands, except percentages
 
2020
 
 
2019
 
 
$ Change
 
 
% Change
 
Engineering and IT
 $3,655 
 $4,078 
 $(423)
  (10.4)%
Sales and marketing
  2,362 
  1,760 
  602 
  34.2 
General and administrative
  8,874 
  7,679 
  1,195 
  15.6 
Total operating expenses
 $14,891 
 $13,517 
 $1,374 
  10.2%
 
Engineering and IT. Engineering and IT expense consists primarily of compensation costs, third-party consulting expenses and related overhead costs for engineering and IT personnel and are expensed as they are incurred. Engineering and IT costs for the year ended December 31, 2020 decreased $0.4 million, or 10.4%, as compared to the same period in 2019 primarily due to reduced costs related to contractors providing services for direct-to-consumer related projects.
 
Sales and marketing. Sales and marketing expense consists primarily of compensation costs of business development, program management and marketing personnel, as well as expenses for lead generation and promotional activities, including public relations, website design, advertising and marketing. Sales and marketing costs for the year ended December 31, 2020 increased $0.6 million, or 34.2%, as compared to the same period in 2019 primarily due to costs related to marketing campaigns targeted to generate growth opportunities as well as one-time costs associated with the transition of our executive team and other transition related costs.
 
General and administrative. General and administrative expense consists primarily of compensation costs and related overhead costs for administrative personnel and professional fees for legal, accounting and other professional services. General and administrative costs for year ended December 31, 2020 increased $1.2 million, or 15.6%, as compared to the same period in 2019 primarily due to higher headcount related costs as well as one-time costs associated with the transition of our executive team and other transition related costs. Additionally, our indefinite-lived intangible asset was fully impaired during 2020.
 
 
 
3
 
 
 
Interest income and other, net
 
 
 
Years Ended December 31,
 
 
 
 
 
 
 
In thousands, except percentages
 
2020
 
 
2019
 
 
$ Change
 
 
% Change
 
Interest income and other, net
 
$
496
 
 
$
1,049
 
 
$
(553
)
 
 
(52.7
)%
 
Interest income and other, net. Interest income and other, net consists primarily of interest income on our cash, cash equivalents and short-term investments. Interest income and other, net for the year ended December 31, 2020 decreased $0.6 million, or 52.7%, as compared to the same period in 2019 primarily due to lower cash and cash equivalents and short-term investments after the $19.1 million cash dividend paid in December 2019, coupled with lower yields on investments.
 
Income tax provision
 
 
 
Years Ended December 31,
 
 
 
 
 
 
 
In thousands, except percentages
 
2020
 
 
2019
 
 
$ Change
 
 
% Change
 
Income tax provision
 
$
102
 
 
$
154
 
 
$
(52
)
 
 
(33.8
)%
 
Income tax provision. The income tax provision is comprised of estimates of current taxes due in domestic and foreign jurisdictions and changes in deferred tax balances. For the year ended December 31, 2020, the income tax provision consisted of a $93,000 provision for foreign taxes and a $9,000 provision for state income tax. For the year ended December 31, 2019, the income tax provision consisted of a $138,000 provision for foreign taxes and a $16,000 provision for state income tax.
 
Liquidity and Capital Resources
 
Total cash, cash equivalents and short-term investments at December 31, 2020 and 2019 was $30.0 million and $26.4 million, respectively. Cash equivalents and short-term investments are comprised of money market funds, certificates of deposit, corporate notes and bonds, and U.S. government agency securities. Certain amounts of our foreign subsidiary cash may be subject to taxes or other restrictions if we repatriate the cash to the United States. We have certain contractual operating leases and uncertain tax positions, including interest and penalties, which create contractual obligations.
 
Operating Activities
 
During the year ended December 31, 2020, our net cash provided by operating activities was $4.3 million as a result of net income, non-cash adjustments of $1.3 million, and a decrease in accounts receivable, partially offset by a decrease in deferred revenue.
 
During the year ended December 31, 2019, our net cash used in operating activities was $4.1 million as a result of decreases in accrued legal settlement and accrued compensation, partially offset by net income, non-cash adjustments of $0.7 million and decreases in accounts receivable and prepaid expenses and other current assets.
 
Investing Activities
 
During the year ended December 31, 2020, our net cash used in investing activities was $1.1 million as a result of maturities of investments, purchases of investments and purchases of property and equipment.
 
During the year ended December 31, 2019, our net cash provided by investing activities was $8.0 million as a result of sales and maturities of investments, purchases of investments and purchases of property and equipment.
 
Financing Activities
 
During the year ended December 31, 2020, our net cash provided by financing activities was $0.2 million, as a result of proceeds from the issuance of common stock under employee stock purchase plan and from the exercise of stock options.
 
 
4
 
 
During the year ended December 31, 2019, our net cash used in financing activities was $19.0 million, as a result of a dividend payment and proceeds from the issuance of common stock under employee stock purchase plans.
 
Working Capital and Capital Expenditure Requirements
 
At December 31, 2020, we had stockholders’ equity of $34.4 million and working capital of $33.7 million. We believe that our cash and cash equivalents balances and our ongoing cash flow from operations will be sufficient to satisfy our cash requirements for at least the next 12 months.
 
If we require additional capital resources to grow our business internally or to acquire complementary technologies and businesses at any time in the future, we may seek to sell additional equity or debt securities. The sale of additional equity could result in more dilution to our stockholders.
 
Recent Accounting Pronouncements
 
See Note 1 – Organization and Summary of Significant Accounting Policies to the consolidated financial statements included in Part II, Item 8 of this Amendment for a summary of new accounting standards.
 
Critical Accounting Policies and Estimates
 
In preparing our consolidated financial statements in conformity with accounting principles generally accepted in the United States, management must undertake decisions that impact the reported amounts and related disclosures. Such decisions include the selection of the appropriate accounting principles to be applied and assumptions upon which accounting estimates are based. Management applies its best judgment based on its understanding and analysis of the relevant circumstances to reach these decisions. By their nature, these judgments are subject to an inherent degree of uncertainty. Accordingly, actual results may vary significantly from the estimates we have applied.
 
Please refer to Note 1 of the notes to the consolidated financial statements in this Amendment for a complete description of our critical accounting policies and estimates.
 
  
ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
 
 
 
5
 
 
SUPPORT.COM, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 
6
 
 
 
 
Report of Independent Registered Public Accounting Firm
 
To the Stockholders and Board of Directors of Support.com, Inc.
 
 
Opinion on the Consolidated Financial Statements
 
We have audited the accompanying consolidated balance sheets of Support.com, Inc. (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows for each of the years in the two year period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
 
Basis for Opinion
 
The Company's management is responsible for these financial statements. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
 
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
 
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
 
Emphasis of Matter - Subsequent Event
 
As discussed in Note 9 to the financial statements, on March 19, 2021 the Company and Greenidge Generation Holdings, Inc. (Greenidge) entered into an agreement and plan of merger which will result in Greenidge acquiring the Company.
 
Critical Audit Matter
 
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated to the audit committee and that (1) relates to accounts of disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communication the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
 
Income Taxes - Refer to Notes 1 and 7 to the financial statements
 
The Company's net deferred tax liability and uncertain tax position liability were $443,000 and $111,000, respectively, as of December 31, 2020 and the related total income tax expense was $102,000 for the year ended December 31, 2020. Deferred tax assets and liabilities are recognized for the future expected tax consequences of temporary differences between income tax and financial reporting and principally relate to differences in the tax basis of assets and liabilities and their reported amounts, using enacted tax rates in effect for the year in which
differences are expected to reverse. Filing positions in all of the federal, state and foreign jurisdictions where the Company is required to file income tax returns are analyzed by the Company, as well as all open tax years in these jurisdictions, to determine whether the positions will be more likely than not be sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are not recorded as a tax benefit or expense in the current year.
 
 
 
7
 
 
 
We identified income taxes and uncertain tax positions as a critical audit matter due to the multiple jurisdictions in which the Company operates including foreign jurisdictions and the complexity of tax laws and regulations. Performing audit procedures and evaluating audit evidence obtained related to these considerations required a high degree of judgement and effort.
 
How the Critical Audit Matter Was Addressed in the Audit
 
Our audit procedures performed to address this critical audit matter included the following, among others:
 
We obtained an understanding of management's process to identify and evaluate tax obligations and uncertain tax positions and evaluated the design of key controls used by management therein.
 
We evaluated the completeness and accuracy of deferred income taxes and the income tax provision by agreement to material tax filings.
 
We assessed the reasonableness of the key judgements and estimates inherent in management's assessment of their tax obligation and uncertain tax positions, including analysis over forecasts and tax elections.
 
We involved our tax specialists with our evaluation of management's judgements related to recognition of current and deferred income taxes and identified uncertain tax positions by analyzing the related tax law, statutes, and regulations and their application to the company's positions.
 
We evaluated the adequacy of the Company's disclosure in Notes 1 and 7 in relation to the income taxes.
 
/s/ Plante & Moran, PLLC
 
We have served as the Company's auditor since 2017.
 
Denver, Colorado
 
March 30, 2021, except for the revision to the segment information disclosure in Note 1 as to which the date is July 16, 2021.
 
 
 
8
 
 
 
 
SUPPORT.COM, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands except per share amount)
 
 
 
December 31,
 
 
 
2020
 
 
2019
 
ASSETS
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 $13,526 
 $10,087 
Short-term investments
  16,441 
  16,327 
Accounts receivable, net
  6,975 
  9,398 
Prepaid expenses and other current assets
  670 
  728 
Total current assets
  37,612 
  36,540 
 
    
    
Property and equipment, net
  1,115 
  533 
Intangible assets
   
  250 
Right of use assets, net
  61 
  68 
Other assets
  478 
  649 
 
    
    
TOTAL ASSETS
 $39,266 
 $38,040 
 
    
    
LIABILITIES AND STOCKHOLDERS’ EQUITY
    
    
Current liabilities:
    
    
Accounts payable
 $366 
 $277 
Accrued compensation
  1,735 
  1,610 
Other accrued liabilities
  879 
  940 
Short-term lease liability
  58 
  61 
Short-term deferred revenue
  881 
  1,193 
Total current liabilities
  3,919 
  4,081 
Other long-term liabilities
  911 
  792 
Total liabilities
  4,830 
  4,873 
Commitments and contingencies (Note 3)
    
    
Stockholders’ equity:
    
    
Common stock; par value $0.0001, 50,000 shares authorized; 19,973 issued and 19,490 outstanding at December 31, 2020 and 19,537 issued and 19,054 outstanding at December 31, 2019 
  2 
  2 
Additional paid-in capital
  250,954 
  250,092 
Treasury stock, at cost (483 shares at December 31, 2020 and 2019)
  (5,297)
  (5,297)
Accumulated other comprehensive loss
  (2,419)
  (2,380)
Accumulated deficit
  (208,804)
  (209,250)
Total stockholders’ equity
  34,436 
  33,167 
 
    
    
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 $39,266 
 $38,040 
 
See accompanying notes.
 
 
 
 
9
 
 
 
SUPPORT.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
 
 
 
Years Ended December 31,
 
 
 
2020
 
 
2019
 
Revenue:
 
   
 
 
   
 
Services
 $42,079 
 $59,545 
Software and other
  1,785 
  3,788 
Total revenue
  43,864 
  63,333 
 
    
    
Cost of revenue:
    
    
Cost of services
  28,697 
  46,714 
Cost of software and other
  224 
  151 
Total cost of revenue
  28,921 
  46,865 
Gross profit
  14,943 
  16,468 
 
    
    
Operating expenses:
    
    
Engineering and IT
  3,655 
  4,078 
Sales and marketing
  2,362 
  1,760 
General and administrative
  8,874 
  7,679 
Total operating expenses
  14,891 
  13,517 
Income from operations
  52 
  2,951 
Interest income and other, net
  496 
  1,049 
Income before income taxes
  548 
  4,000 
Income tax provision
  102 
  154 
Net income
 $446 
 $3,846 
 
    
    
Net income per share – basic and diluted
 $0.02 
 $0.20 
 
    
    
Weighted average common shares outstanding – basic
  19,192 
  18,977 
Weighted average common shares outstanding – diluted
  19,369 
  19,026 
 
See accompanying notes.
 
 
10
 
 
 
 
SUPPORT.COM, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
 
 
 
Years Ended December 31,
 
 
 
2020
 
 
2019
 
 
 
 
 
 
 
 
Net income
 $446 
 $3,846 
 
    
    
Other comprehensive income (loss):
Foreign currency translation adjustment
  (44)
  49 
Net unrealized gain on investments
  5 
  78 
Other comprehensive income (loss)
  (39)
  127 
 
    
    
Comprehensive income
 $407 
 $3,973 
 
See accompanying notes.
 
 
 
 
11
 
 
 
 
SUPPORT.COM, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
 
 
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares
 
 
Amount
 
 
Additional
Paid-In
Capital
 
 
Treasury
Stock
 
 
Accumulated
Other
Comprehensive
Loss
 
 
Accumulated
Deficit
 
 
Total
Stockholders’
Equity
 
Balances at December 31, 2018
  18,955 
 $2 
 $268,794 
 $(5,297)
 $(2,507)
 $(213,096)
 $47,896 
Net income
   
   
   
   
   
  3,846 
  3,846 
Dividend payout
   
   
  (19,054)
   
   
   
  (19,054)
Other comprehensive loss
   
   
   
   
  127 
   
  127 
Issuance of common stock upon exercise of stock options & RSU releases
  73 
   
   
   
   
   
   
Issuance of common stock under employee stock purchase plan
  26 
   
  48 
   
   
   
  48 
Stock-based compensation expense
   
   
  304 
   
   
   
  304 
Balances at December 31, 2019
  19,054 
 $2 
 $250,092 
 $(5,297)
 $(2,380)
 $(209,250)
 $33,167 
 
Net income
   
   
   
   
   
  446 
  446 
Other comprehensive loss
   
   
   
   
  (39)
   
  (39)
Issuance of common stock upon exercise of stock options & RSU releases
  392 
   
  191 
   
   
   
  191 
Issuance of common stock under employee stock purchase plan
  44 
   
  37 
   
   
   
  37 
Stock-based compensation expense
   
   
  634 
   
   
   
  634 
Balances at December 31, 2020
  19,490 
 $2 
 $250,954 
 $(5,297)
 $(2,419)
 $(208,804)
 $34,436 
 
See accompanying notes.
 
 
 
12
 
 
SUPPORT.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
 
 
Years Ended December 31,
 
 
 
2020
 
 
2019
 
Operating Activities:
 
 
 
 
 
 
Net income $
 $446 $ 
 $3,846 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
    
    
Depreciation
  314 
  294 
Amortization of premiums and discounts on investments
  65 
  83 
Stock-based compensation
  634 
  304 
Impairment of intangible asset
  250 
   
Changes in assets and liabilities:
    
    
Accounts receivable, net
  2,423 
  2,893 
Prepaid expenses and other current assets
  41 
  282 
Other long-term assets
  142 
  40 
Accounts payable
  87 
  (92)
Accrued compensation
  120 
  (1,804)
Accrued legal settlement
   
  (10,000)
Other accrued liabilities
  (46)
  26 
Other long-term liabilities
  104 
  18 
Deferred revenue
  (312)
  58 
Net cash provided by (used in) operating activities
  4,268 
  (4,052)
 
    
    
Investing Activities:
    
    
Purchases of property and equipment
  (896)
  (124)
Disposal of property and equipment
   
  3 
Purchase of investments
  (13,375)
  (34,898)
Proceeds from sale of investments
   
  9,766 
Maturities of investments
  13,200 
  33,267 
Net cash provided by (used in) investing activities
  (1,071)
  8,014 
 
    
    
Financing Activities:
    
    
Payment of dividend
   
  (19,054)
Proceeds from exercise of stock options
  191 
   
Proceeds from employee stock purchase plan
  37 
  48 
Net cash provided by (used in) financing activities
  228 
  (19,006)
Effect of exchange rate changes on cash and cash equivalents
  14 
  (51)
Net increase (decrease) in cash and cash equivalents
  3,439 
  (15,095)
Cash and cash equivalents at beginning of year
  10,087 
  25,182 
Cash and cash equivalents at end of year
 $13,526 
 $10,087 
 
    
    
Supplemental disclosure of cash flow information:
    
    
Cash paid for income tax
 $135 
 $98 
 
See accompanying notes.
 
 
 
 
13
 
 
 
SUPPORT.COM, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Note 1. Organization and Summary of Significant Accounting Policies
 
Nature of Operations
 
Support.com, Inc. (“Support.com,” “the Company,” “We” or “Our”) was incorporated in the state of Delaware on December 3, 1997. Our common stock trades on the Nasdaq Capital Market under the symbol “SPRT.”
 
We provide customer and technical support solutions delivered by home-based employees. Our homesourcing model, which enables outsourced work to be delivered by people working from home, has been specifically designed for remote work and optimized for security, recruiting, training, delivery and employee engagement.
 
We provide outsourced customer care and cloud-based technology platforms to companies in multiple industry verticals, helping them strengthen customer relationships and brand loyalty, increase revenue, and reduce costs. We serve clients in verticals such as healthcare, retail, communication services, and technology with omnichannel programs that include voice, chat, and self-service. We meet client needs through our scalable, global network of home-based employees and secure, proprietary, cloud-based platforms. With our fully distributed team, we are able to flex staffing levels and skill sets to address client requirements, offering business process continuity. We custom-profile customer care professionals (called “experts”) who meet the requirements for the work-from-home environment and for specific client criteria related to industry experience, skill set, etc.
 
We offer fully-managed premium technical support programs to our enterprise clients that are upsold to the clients’ end customers. These tailored programs can be bundled with complementary services or offered on a stand-alone basis as a subscription or one-time purchase. These tech support programs help clients drive incremental revenue, reduce costs, and increase customer satisfaction.
 
Basis of Presentation
 
The consolidated financial statements include the accounts of Support.com and its wholly-owned foreign subsidiaries. All intercompany transactions and balances have been eliminated.
 
Re-issuance of Financial Statements
 
The financial statements have been reissued to revise the segment information disclosure in Note 1, to identify and breakout the significant customers and respective percentages of revenue.
 
Impact of Disease Outbreak
 
On March 11, 2020, the World Health Organization declared the outbreak of a respiratory disease caused by a new coronavirus as a “pandemic.” First identified in late 2019 and known now as COVID-19, the outbreak has impacted millions of individuals worldwide. In response, many countries have implemented measures to combat the outbreak which have impacted global business operations. During 2020 and as of the financial statement date of issuance, our operations have not been significantly impacted; however, we continue to monitor the situation. With respect to the pandemic, no impairments were recorded as of the balance sheet date as no triggering events or changes in circumstances had occurred as of December 31, 2020; however, due to significant uncertainty surrounding the situation, management's judgment regarding this could change in the future. In addition, while our results of operations, cash flows and financial condition have not been significantly impacted to date, they could be negatively impacted in the future. The extent of the impact, if any, cannot be reasonably estimated at this time.
 
 
 
14
 
 
 
Foreign Currency Translation
 
The functional currency of our foreign subsidiaries is generally the local currency. Assets and liabilities of our wholly owned foreign subsidiaries are translated from their respective functional currencies at exchange rates in effect at the balance sheet date, and revenues and expenses are translated at average exchange rates prevailing during the year. Any material resulting translation adjustments are reflected as a separate component of stockholders’ equity in accumulated other comprehensive income. Realized foreign currency transaction gains (losses) were not material during the years ended December 31, 2020 and 2019.
 
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The accounting estimates that require management’s most significant, difficult and subjective judgments include accounting for revenue recognition, assumptions used to estimate self-insurance accruals, the valuation and recognition of investments, the assessment of recoverability of intangible assets and their estimated useful lives, the valuations and recognition of stock-based compensation and the recognition and measurement of current and deferred income tax assets and liabilities. Actual results could differ materially from these estimates.
 
Concentrations of Credit Risk
 
Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash equivalents, investments and trade accounts receivable. Periodically throughout the year, we have maintained balances in various operating accounts in excess of federally insured limits. Our investment portfolio consists of investment grade securities. Except for obligations of the United States government and securities issued by agencies of the United States government, we diversify our investments by limiting our holdings with any individual issuer. We are exposed to credit risks in the event of default by the issuers to the extent of the amount recorded on the consolidated balance sheets. The credit risk in our trade accounts receivable is substantially mitigated by our evaluation of the customers’ financial conditions at the time we enter into business and reasonably short payment terms.
 
Cash, Cash Equivalents and Investments
 
All liquid instruments with an original maturity at the date of purchase of 90 days or less are classified as cash equivalents. Cash equivalents and short-term investments consist primarily of money market funds, certificates of deposit, commercial paper, corporate and municipal bonds. Our interest income on cash, cash equivalents and investments is recorded monthly and reported as interest income and other in our consolidated statements of operations.
 
Our cash equivalents and short-term investments are classified as investments and are reported at fair value with unrealized gains/losses included in accumulated other comprehensive loss within stockholders’ equity on the consolidated balance sheets and in the consolidated statements of comprehensive income. We view this investment portfolio as available for use in our current operations, and therefore we present our marketable securities as short-term assets.
 
 
 
15
 
 
 
We monitor our investments for impairment on a quarterly basis and determine whether a decline in fair value is other-than-temporary by considering factors such as current economic and market conditions, the credit rating of the security’s issuer, the length of time an investment’s fair value has been below our carrying value, our intent to sell the security and our belief that we will not be required to sell the security before the recovery of its amortized cost. If an investment’s decline in fair value is deemed to be other-than-temporary, we reduce its carrying value to its estimated fair value, as determined based on quoted market prices or liquidation values. Declines in value judged to be other-than-temporary, if any, are recorded in operations as incurred. At December 31, 2020, we evaluated unrealized losses on security investments and determined them to be temporary. We currently do not intend to sell securities with unrealized losses, and we concluded that we will not be required to sell these securities before the recovery of their amortized cost basis.
 
At December 31, 2020 and 2019, the estimated fair value of cash, cash equivalents and investments was $30.0 million and $26.4 million, respectively. At December 31, 2020 and 2019, the amount of our foreign subsidiary cash, cash equivalents and investments was $4.3 million and $4.2 million, respectively. The following is a summary of cash, cash equivalents and investments at December 31, 2020 and 2019 (in thousands):
 
As of December 31, 2020
 
Amortized Cost
 
 
Gross
Unrealized Gains
 
 
Gross
Unrealized Losses
 
 
Fair Value
 
Cash
 $10,918 
 $ 
 $ 
 $10,918 
Money market funds
  1,258 
   
   
  1,258 
Certificates of deposit
  492 
   
   
  492 
Commercial paper
  3,274 
   
  (1)
  3,273 
Corporate notes and bonds
  9,423 
  4 
   
  9,427 
U.S. government treasury
  4,599 
   
   
  4,599 
 
 $29,964 
 $4 
 $(1)
 $29,967 
Classified as:
    
    
    
    
Cash and cash equivalents
 $13,526 
 $ 
 $ 
 $13,526 
Short-term investments
  16,438 
  4 
  (1)
  16,441 
 
 $29,964 
 $4 
 $(1)
 $29,967 
 
As of December 31, 2019
 
Amortized Cost
 
 
Gross
Unrealized Gains
 
 
Gross
Unrealized Losses
 
 
Fair Value
 
Cash
 $7,814 
 $ 
 $ 
 $7,814 
Money market funds
  1,137 
   
   
  1,137 
Certificates of deposit
  475 
   
   
  475 
Commercial paper
  6,912 
   
  (1)
  6,911 
Corporate notes and bonds
  7,922 
  15 
  (4)
  7,933 
U.S. government agency securities
  2,145 
   
  (1)
  2,144 
 
 $26,405 
 $15 
 $(6)
 $26,414 
Classified as:
    
    
    
    
Cash and cash equivalents
 $10,087 
 $ 
 $ 
 $10,087 
Short-term investments
  16,318 
  15 
  (6)
  16,327 
 
 $26,405 
 $15 
 $(6)
 $26,414 
 
The following table summarizes the estimated fair value of our marketable securities classified by the stated maturity date of the security (in thousands):
 
 
 
December 31,
 
 
 
2020
 
 
2019
 
Due within one year
 $13,248 
 $12,754 
Due within two years
  3,193 
  3,573 
 
 $16,441 
 $16,327 
 
We determined that the gross unrealized losses on our security investments as of December 31, 2020 are temporary in nature. The fair value of our security investments at December 31, 2020 and 2019 reflects net unrealized gains of $3,000 and $9,000, respectively. There were net realized gains of $1,000 and $2,000 on security investments in the years ended December 31, 2020 and 2019, respectively. The cost of securities sold is based on the specific identification method.
 
 
16
 
 
The following table sets forth the unrealized gains/losses for security investments as of December 31, 2020 and 2019 (in thousands):
 
As of December 31, 2020
 
In Gain Position
Less Than 12 Months
 
 
In Loss Position
More Than 12 Months
 
 
Total in Gain Position
 
Description
 
Fair Value
 
 
Unrealized Gain
 
 
Fair Value
 
 
Unrealized Loss
 
 
Fair Value
 
 
Unrealized Gain
 
Certificates of deposit
 $492 
 $ 
 $ 
 $ 
 $492 
 $ 
Corporate notes and bonds
  9,502 
  5 
  3,195 
  (2)
  12,697 
  3 
U.S. government agency securities
  4,599 
   
   
   
  4,599 
   
Total
 $14,593 
 $6 
 $3,195 
 $(2)
 $17,788 
 $3 
 
 
As of December 31, 2019
 
In Gain Position
  Less Than 12 Months
 
 
In Loss Position
  More Than 12 Months
 
 
Total in Gain Position
 
Description
 
Fair Value
 
 
Unrealized Gain
 
 
Fair Value
 
 
Unrealized Loss
 
 
Fair Value
 
 
Unrealized Gain
 
Certificates of deposit
 $475 
 $ 
 $ 
 $ 
 $475 
 $ 
Corporate notes and bonds
  10,120 
  15 
  4,714 
  (5)
  14,834 
  10 
U.S. government agency securities
  2,145 
  (1)
   
   
  2,145 
  (1)
Total
 $12,740 
 $14 
 $4,714 
 $(5)
 $17,454 
 $9 
 
Trade Accounts Receivable and Allowance for Doubtful Accounts
 
Trade accounts receivable are recorded at the invoiced amount. We perform evaluations of our customers’ financial condition and generally do not require collateral. We make judgments as to our ability to collect outstanding receivables and provide allowances for a portion of receivables when collection becomes doubtful. Our allowances are made based on a specific review of all significant outstanding invoices. For those invoices not specifically provided for, allowances are recorded at differing rates, based on the age of the receivable. In determining these rates, we analyze our historical collection experience and current payment trends. The determination of past-due accounts is based on contractual terms.
 
The following table summarizes the allowance for doubtful accounts as of December 31, 2020 and 2019 (in thousands):
 
 
 
Amount
 
Balance, December 31, 2018
 $13 
Provision for doubtful accounts
  40 
Accounts written off
  (25)
Balance, December 31, 2019
  28 
Provision for doubtful accounts
  37 
Accounts written off
  (61)
Balance, December 31, 2020
 $4 
 
As of December 31, 2020 and 2019, our two largest customers accounted for approximately 90% and 92% of our total accounts receivable, respectively. No other customers accounted for 10% or more of our total accounts receivable as of December 31, 2020 and 2019.
 
 
 
17
 
 
Property and Equipment
 
Property and equipment are stated at cost, less accumulated depreciation and amortization which is determined using the straight-line method over the estimated useful lives of two to five years for computer equipment and software, three years for furniture and fixtures, and the shorter of the estimated useful lives or the lease term for leasehold improvements. Repairs and maintenance costs are expensed as they are incurred.
 
Intangible Assets
 
In December 2006, we acquired the use of a toll-free telephone number for cash consideration of $250,000. This asset had an indefinite useful life. The intangible asset is tested for impairment annually or more often if events or changes in circumstances indicate that the carrying value may not be recoverable. During the year ended December 31, 2020, we determined this indefinite-lived intangible asset was fully impaired, and we recognized a non-cash impairment loss as an operating expense in our consolidated statement of operations.
 
Long-Lived Assets
 
We assess long-lived assets, which includes property and equipment and identifiable intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when the sum of the future net cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. If our estimates regarding future cash flows derived from such assets were to change, we may record an impairment charge to the value of these assets. Such impairment loss would be measured as the difference between the carrying amount of the asset and its fair value.
 
Leases
 
We account for leases in accordance with Accounting Standards Codification (“ASC”) 842. We recognize operating and finance lease liabilities and corresponding right-of-use (“ROU”) assets on the consolidated balance sheets and provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. We determine if an arrangement is a lease at inception. Operating leases are included in operating lease ROU assets and short- and long-term lease liabilities in our consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our consolidated balance sheets.
 
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The implicit rate is used when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. We account for the lease and non-lease components as a single lease component.
 
We have entered into various non-cancelable operating lease agreements for certain offices and certain equipment. The Louisville, Colorado and Sunnyvale, California office leases were both renewed during the year ended December 31, 2020, and will expire on April 30, 2021 and March 31, 2021, respectively.
 
Revenue Recognition
 
Disaggregation of Revenue
 
We generate revenue from the sale of services and sale of software fees for end-user software products provided through direct customer downloads and through the sale of these end-user software products via partners. Revenue is disaggregated by type as presented in the consolidated statements of operations and is consistent with how we evaluate our financial performance.
 
 
18
 
 
 
Under ASC 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
 
We determine revenue recognition through the following steps:
 
identification of the contract, or contracts, with a customer;
 
 
identification of the performance obligations in the contract;
 
 
determination of the transaction price;
 
 
allocation of the transaction price to the performance obligations in the contract; and
 
 
recognition of revenue when, or as, we satisfy a performance obligation.
 
 
Services Revenue
 
Services revenue is primarily comprised of fees for customer support and technology support services. Our service programs are designed for enterprise clients, as well as the consumer and small and medium business (“SMB”) markets, and include customer service, sales support, and technical support, including computer and mobile device set-up, security and support, virus and malware removal, wireless network set-up, and automation system onboarding and support.
 
We offer customer support, technical support, and technology services to large corporations, consumers and SMBs, directly and through our partners (which include communications providers, retailers, technology companies and others) and, to a lesser degree, directly through our website at www.support.com. We transact with customers via reseller programs, referral programs and direct transactions. In reseller programs, the partner generally executes the financial transactions with the customer and pays a fee to us which we recognize as revenue when the service is delivered. In referral programs, we transact with the customer directly and pay a referral fee to the referring party. In direct transactions, we sell directly to the customer at the retail price.
 
The services described above include four types of offerings:
 
Hourly-Based Services – In connection with the provisions of certain services programs, fees are calculated based on contracted hourly rates with partners. For these programs, we recognize revenue as services are performed, based on billable hours of work delivered by our technology experts. These service programs also include performance standards, which may result in incentives or penalties, which are recognized as earned or incurred.
 
 
Tier-Based Services – In connection with the provisions of certain services programs, fees are calculated on partner subscription tiers based on number of subscribers. For these programs, we recognize revenue as services are performed, and are billed based on the tier level of number of subscribers supported by our experts.
 
 
Subscriptions – Customers purchase subscriptions or “service plans” under which certain services are provided over a fixed subscription period. Revenues for subscriptions are recognized ratably over the respective subscription periods.
 
 
Incident-Based Services – Customers purchase a discrete, one-time service. Revenue recognition occurs at the time of service delivery. Fees paid for services sold but not yet delivered are recorded as deferred revenue and recognized at the time of service delivery.
 
 
 
 
19
 
 
 
In certain cases, we are paid for services that are sold but not yet delivered. We initially record such balances as deferred revenue, and recognize revenue when the service has been provided or, on the non-subscription portion of these balances, when the likelihood of the service being redeemed by the customer is remote (“services breakage”). Based on our historical redemption patterns for these relationships, we believe that the likelihood of a service being delivered more than 90 days after sale is remote. We therefore recognize non-subscription deferred revenue balances older than 90 days as services revenue. For the years ended December 31, 2020 and 2019, services breakage revenue accounted for less than 1% of total services revenue.
 
The following table represents deferred revenue activity for the years ended December 31, 2020 and 2019 (in thousands):
 
 
 
Amount
 
Balance, December 31, 2018
 $1,135 
Deferred revenue
  1,887 
Recognition of unearned revenue
  (1,829)
Balance, December 31, 2019
  1,193 
Deferred revenue
  1,243 
Recognition of unearned revenue
  (1,555)
Balance, December 31, 2020
 $881 
 
 
Partners are generally invoiced monthly. Fees from customers via referral programs and direct transactions are generally paid with a credit card at the time of sale. Revenue is recognized net of any applicable sales tax.
 
Services revenue also includes fees from licensing of Support.com cloud-based software. In such arrangements, customers receive a right to use our Support.com Cloud applications in their own support organizations. We license our cloud-based software using a software-as-a-service (“SaaS”) model under which customers cannot take possession of the technology and pay us on a per-user or usage basis during the term of the arrangement. In addition, services revenue includes fees from implementation services of our cloud-based software. Currently, revenues from implementation services are recognized ratably over the customer life, which is estimated as the term of the arrangement once the Support.com Cloud services are made available to customers. We generally charge for these services on a time and material basis. For the years ended December 31, 2020 and 2019, revenue from implementation services was not material.
 
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 primarily on an annual subscription with automatic renewal. We provide regular, significant upgrades over the subscription period and therefore recognize revenue for these products ratably over the subscription period. Management has determined that these upgrades are not distinct, as the upgrades are an input into a combined output. In addition, management has determined that the frequency and timing of the software upgrades are unpredictable and therefore we recognize revenue consistent with the sale of the subscription. We 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.
 
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.
 
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 control transfers to our partners.
 
 
20
 
 
Engineering and IT Costs
 
Engineering and IT expenditures are charged to operations as they are incurred.
 
Software Development Costs
 
We expense software development costs before technological feasibility is reached. Based on our product development process, technological feasibility is established on the completion of a working model. We determined that technological feasibility is reached shortly before the product is ready for general release and therefore capitalized development costs incurred are immaterial during the periods presented.
 
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.
 
Advertising Costs
 
Advertising costs are recorded as sales and marketing expense in the period in which they are incurred. Advertising expense was $0.2 million and $24,000 for the years ended December 31, 2020 and 2019, respectively.
 
Earnings Per Share
 
Basic earnings per share is computed using our net income and the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share is computed using our net income 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 warrants and vesting of RSUs using the treasury stock method when dilutive.
 
The following table sets forth the computation of basic and diluted net earnings per share (in thousands, except per share amounts):
 
 
 
Years Ended December 31,
 
 
 
2020
 
 
2019
 
Net income
 $446 
 $3,846 
 
    
    
Basic:
    
    
Weighted-average common shares outstanding
  19,192 
  18,977 
Basic earnings per share
 $0.02 
 $0.20 
Diluted
    
    
Weighted-average common shares outstanding
  19,192 
  18,977 
Effect of dilutive securities:
    
    
Stock options and restricted stock units
  177 
  49 
Diluted weighted-average commons shares outstanding
  19,369 
  19,026 
Diluted earnings per share
 $0.02 
 $0.20 
 
Accumulated Other Comprehensive Income
 
The components of accumulated other comprehensive loss relate entirely to accumulated foreign currency translation gain (losses) associated with our foreign subsidiaries and unrealized gains (losses) on investments.
 
Realized gains/losses on investments reclassified from accumulated other comprehensive loss are reported as interest income and other, net in our consolidated statements of operations.
 
 
21
 
 
The amounts noted in the consolidated statements of comprehensive income are shown before taking into account the related income tax impact. The income tax effect allocated to each component of other comprehensive income for each of the periods presented is not material.
 
Stock-Based Compensation
 
We apply the provisions of Accounting Standards Codification (“ASC”) 718, Compensation – Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based payment awards, including grants of restricted stock units (“RSUs”) and options to purchase stock, made to employees and directors based on estimated fair values.
 
In accordance with ASC 718, Compensation – Stock Compensation, we recognize stock-based compensation by measuring the cost of services to be rendered based on the grant date fair value of the equity award. We recognize stock-based compensation over the period an employee is required to provide service in exchange for the award, generally referred to as the requisite service period. For awards with market-based performance conditions, the cost of the awards is recognized as the requisite service is rendered by employees, regardless of when, if ever, the market-based performance conditions are satisfied.
 
The Black-Scholes option pricing model is used to estimate the fair value of service-based stock options and shares purchased under our Employee Stock Purchase Plan (“ESPP”). The determination of the fair value of options is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. We use historical data for estimating the expected volatility. For certain stock options awards, we use historical data for estimating the expected life of stock options and for others, we use the simplified method for estimating the expected life. The simplified method was used during 2020 for “plain vanilla” (as defined by the SEC) stock option awards. The risk-free interest rate assumption is based on observed interest rates appropriate for the expected terms of the stock options.
 
The Monte-Carlo simulation model is used to estimate fair value of market-based performance stock options. The Monte-Carlo simulation model calculates multiple potential outcomes for an award and establishes a fair value based on the most likely outcome. Key assumptions for the Monte-Carlo simulation model include the risk-free rate, expected volatility, expected dividends and the correlation coefficient.
 
The fair value of restricted stock grants is based on the closing market price of our stock on the date of grant less the expected dividend yield.
 
Income Taxes
 
Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be reversed or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets, if it is more likely than not, that such assets will not be realized. Our deferred tax asset and related valuation allowance decreased by $2.6 million to $43 million. As the deferred tax asset is fully allowed for, this change had no impact on our financial position or results of operations.
 
Warranties and Indemnifications
 
We generally provide a refund period on sales, during which refunds may be granted to consumers under certain circumstances. During the years ended December 31, 2020 and 2019, any refunds granted to consumers were immaterial to the financial statements.
 
 
 
22
 
 
 
Fair Value Measurements
 
ASC 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value according to ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:
 
Level 1 – Quoted prices in active markets for identical assets or liabilities.
 
 
Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
 
 
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
 
 
The following table represents our fair value hierarchy for our financial assets (cash equivalents and investments) measured at fair value on a recurring basis as of December 31, 2020 and 2019 (in thousands):
 
As of December 31, 2020
 
Level 1
 
 
Level 2
 
 
Level 3
 
 
Total
 
Money market funds
 $1,258 
 $ 
 $ 
 $1,258 
Certificates of deposit
   
  492 
   
  492 
Commercial paper
   
  3,273 
   
  3,273 
Corporate notes and bonds
   
  9,427 
   
  9,427 
U.S. government agency securities
   
  4,599 
   
  4,599 
Total
 $1,258 
 $17,791 
 $ 
 $19,049 
 
As of December 31, 2019
 
Level 1
 
 
Level 2
 
 
Level 3
 
 
Total
 
Money market funds
 $1,137 
 $ 
 $ 
 $1,137 
Certificates of deposit
   
  475 
   
  475 
Commercial paper
   
  6,911 
   
  6,911 
Corporate notes and bonds
   
  7,933 
   
  7,933 
U.S. government agency securities
   
  2,144 
   
  2,144 
Total
 $1,137 
 $17,463 
 $ 
 $18,600 
 
For short-term investments, measured at fair value using Level 2 inputs, we review trading activity and pricing for these investments as of the measurement date. When sufficient quoted pricing for identical securities is not available, we use market pricing and other observable market inputs for similar securities obtained from various third-party data providers. These inputs either represent quoted prices for similar assets in active markets or have been derived from observable market data. Our policy is that the end of our quarterly reporting period determines when transfers of financial instruments between levels are recognized. No transfers were made between level 1, level 2 and level 3 for the years ended December 31, 2020 and 2019.
 
Segment Information
 
We report our operations as a single operating segment and has a single reporting unit. Our Chief Operating Decision Maker (“CODM”), our Chief Executive Officer, manages our operations on a consolidated basis for purposes of allocating resources. When evaluating performance and allocating resources, the CODM reviews financial information presented on a consolidated basis.
 
 
23
 
 
Revenue from customers located outside the United States was immaterial for the years ended December 31, 2020 and 2019.
 
For the years ended December 31, 2020 and 2019, our largest customer accounted for 44% and 63% of our total revenue, respectively. For the years ended December 31, 2020 and 2019, our second largest customer accounted for 43% and 25% of our total revenue, respectively. There were no other customers that accounted for 10% or more of our total revenue in any of the periods presented.
 
Long-lived assets are attributed to the geographic location in which they are located. We include in long-lived assets all tangible assets. Long-lived assets by geographic areas are as follows (in thousands):
 
 
 
December 31,
 
 
 
2020
 
 
2019
 
United States
 $1,110 
 $532 
Philippines
  4 
  1 
India
  1 
   
Total
 $1,115 
 $533 
 
 
Recent Accounting Pronouncements
 
Recently Adopted Accounting Standards
 
In August 2018, the FASB issued Accounting Standard Update (“ASU”) No. 2018-13, Changes to Disclosure Requirements for Fair Value Measurements (Topic 820) (ASU 2018-13), which improved the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements. We adopted the new standard effective January 1, 2020 and the standard did not have an impact on the consolidated financial statements.
 
New Accounting Standards to be adopted in Future Periods
 
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. This guidance will be effective in the first quarter of 2021 on a prospective basis, and early adoption is permitted. We do not expect the new standard to have a material impact on the consolidated financial statements.
 
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard's main goal is to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets in scope. The effective date for all public companies, except smaller reporting companies, is fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The effective date for all other entities is fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We do not expect the new standard to have a material impact on the consolidated financial statements.
 
Note 2. Property and Equipment
 
Property and equipment are stated at cost, less accumulated depreciation, and consist of the following as of December 31, 2020 and 2019 (in thousands):
 
 
 
December 31,
 
 
 
2020
 
 
2019
 
Computer equipment and software
 $8,114 
 $7,233 
Furniture and office equipment
  140 
  142 
Leasehold improvements
  348 
  348 
Construction in progress
  50 
  32 
Accumulated depreciation
  (7,537)
  (7,222)
Total property and equipment, net
 $1,115 
 $533 
 
Depreciation expense was $0.3 million and $0.3 million for the years ended December 31, 2020 and 2019, respectively.
 
 
 
24
 
 
 
Note 3. Commitments and Contingencies
 
Legal contingencies
 
Federal Trade Commission Consent Order. As previously disclosed, on December 20, 2016 the Federal Trade Commission (“FTC”) issued a confidential Civil Investigative Demand, or CID, requiring us to produce certain documents and materials and to answer certain interrogatories relating to PC Healthcheck, an obsolete software program that we developed on behalf of a third party for their use with their customers. The investigation relates to us providing software like PC Healthcheck to third parties for their use prior to December 31, 2016, when we were under management of the previous board and executive team. Since issuing the CID, the FTC has sought additional written and testimonial evidence. We have cooperated fully with the FTC’s investigation and provided all requested information. In addition, we have not used PC Healthcheck nor provided it to any customers since December 2016.
 
On March 9, 2018, the FTC notified us that it was willing to engage in settlement discussions. On November 6, 2018, Support.com and the FTC entered into a proposed Stipulation to Entry of Order for Permanent Injunction and Monetary Judgment (the “Consent Order”). The Consent Order was approved by the Commission on March 26, 2019 and entered by the U.S. District Court for the Southern District of Florida on March 29, 2019. Entry of the Consent Order by the Court resolved the FTC’s multi-year investigation of Support.com.
 
Pursuant to the Consent Order, under which we neither admitted nor denied the FTC’s allegations (except as to the Court having jurisdiction over the matter), the FTC agreed to accept a payment of $10 million in settlement of the matter, subject to the factual accuracy of the information we provided as part of our financial representations. The $10 million payment was made on April 1, 2019 and was recognized in operating expenses within our consolidated statements of operations for the year ended December 31, 2018.
 
Additionally, pursuant to the Consent Order, we agreed to implement certain new procedures and enhance certain existing procedures. For example, the Consent Order necessitates that we cooperate with representatives of the Commission on associated investigations if needed; imposes requirements on Support.com regarding obtaining acknowledgements of the Consent Order and compliance certification, including record creation and maintenance; and prohibits us from making misrepresentations and misleading claims or providing the means for others to make such claims regarding, among other things, detection of security or performance issues on consumer’s Electronic Devices. Electronic Devices include, but are not limited to, cell phones, tablets and computers. We continue to monitor the impact of the Consent Order regularly. If we are unable to comply with the Consent Order, then this could result in a material and adverse impact to the results of operations and financial condition.
 
Verizon Media. As previously disclosed, 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. 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. 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 made no agreement to fund such a program, Verizon Media commenced its rebate program.
 
 
25
 
 
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 (the “Dispute”). Subsequently, the parties entered into negotiations toward a settlement of any potential claims, which culminated in the execution of a Confidential Settlement and Release Agreement dated September 29, 2020, pursuant to which the Company issued a one-time payment to Verizon Media in exchange for a full and complete release from any claims related to or arising out of the Dispute. The Company admitted no liability and incurred no financial impact from the settlement, as the payment was funded by the Company’s insurance carrier.
 
Other Matters
 
We have received and may in the future receive additional requests for information, including subpoenas, from other governmental agencies relating to the subject matter of the Consent Order and the Civil Investigative Demands described above. We intend to cooperate with these information requests and is not aware of any other legal proceedings against us by governmental authorities at this time.
 
We are also subject to other routine legal proceedings, as well as demands, claims and threatened litigation, that arise in the normal course of 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, any 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 4. Other Accrued and Other Long-Term Liabilities
 
Other accrued liabilities consist of the following (in thousands):
 
 
 
December 31,
 
 
 
2020
 
 
2019
 
Accrued expenses
 $369 
 $536 
Self-insurance accruals
  270 
  404 
Payroll tax deferral
  240 
   
Total other accrued liabilities
 $879 
 $940 
 
Other long-term liabilities consist of the following (in thousands):
 
 
 
December 31,
 
 
 
2020
 
 
2019
 
Deferred tax liability, net
  443 
  428 
Long-term income tax payable
  223 
  355 
Payroll tax deferral
  240 
   
Other long-term liabilities
  5 
  9 
Total other long-term liabilities
 $911 
 $792 
 
Note 5. Stockholders’ Equity
 
During the year ended December 31, 2020, 0.1 million shares of common stock were issued as a result of the exercise of stock options. During the year ended December 31, 2019, no shares of common stock were issued as a result of the exercise of stock options.
 
During the year ended December 31, 2020, 0.2 million shares of common stock were issued as a result of RSU releases. During the year ended December 31, 2019, 0.1 million shares of common stock were issued as a result of RSU releases.
 
 
26
 
 
During the year ended December 31, 2020, 44,000 shares of common stock were issued under the ESPP. During the year ended December 30, 2019, 26,000 shares of common stock were issued under the ESPP.
 
Stock Repurchase Program
 
On April 27, 2005, our Board of Directors (“Board”) authorized the repurchase of up to 666,666 outstanding shares of our common stock. As of September 30, 2020, the maximum number of shares remaining that can be repurchased under this program was 602,467. No shares were repurchased during the year ended December 31, 2020. We do not intend to repurchase shares without further approval from the Board.
 
2019 Cash Dividend
 
As a part of the board of directors’ ongoing capital allocation review, on December 6, 2019 the board of directors authorized and declared a special cash distribution of $1.00 per share on each outstanding share of our common stock. The record date for this distribution was December 17, 2019 and the payment date was December 26, 2019. Accordingly, we paid $19.1 million to shareholders on December 26, 2019. In connection with the special cash distribution of $1.00 per share, the exercise price on all outstanding options as of December 27, 2019 was reduced by $1.00 as permitted under the 2010 and 2014 Plans which includes an anti-dilution feature designed to equalize the fair value of options as a result of a transaction such as this special distribution. This adjustment did not affect the fair value, vesting conditions or classification of the outstanding options.
 
Stockholder Rights Agreement and Tax Benefits Preservation Plan
 
Our board adopted a Section 382 Tax Benefits Preservation Plan in an effort to diminish the risk that our ability to utilize net operating loss carryovers (collectively, the “NOLs”) to reduce potential future federal income tax obligations may become substantially limited. Our stockholders approved the Section 382 Tax Benefits Preservation Plan at our annual meeting of stockholders held on June 5, 2020. Under the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations promulgated thereunder by the U.S. Treasury Department, these NOLs may be “carried forward” in certain circumstances to offset any current and future taxable income and thus reduce federal income tax liability, subject to certain requirements and restrictions. However, if we experience an “ownership change,” within the meaning of Section 382 of the Code (“Section 382”), our ability to utilize the NOLs may be substantially limited, and the timing of the usage of the NOLs could be substantially delayed, which could therefore significantly impair the value of those assets. Section 382 and the Treasury regulations thereunder make our commercial risk from a Section 382 limitation triggering event particularly acute given the relative size of current cash on hand to market capitalization. As applied to our current cash position and current market capitalization, if we were to experience an ownership change, it would be subject to Section 382’s “non-business asset” limitation, which would result in permanently losing all $145.6 million of our NOLs.
 
The Section 382 Tax Benefits Preservation Plan is intended to act as a deterrent to any person or group acquiring beneficial ownership of 4.99% or more of the outstanding Common Stock without the approval of the board (such person, an “Acquiring Person”). A person who acquires, without the approval of the board, beneficial ownership (other than as a result of repurchases of stock by the Company, dividends or distributions by the Company or certain inadvertent actions by stockholders) of 4.99% or more of the outstanding common stock (including any ownership interest held by that person's Affiliates and Associates as defined under the Section 382 Tax Benefits Preservation Plan) could be subject to significant dilution. Stockholders who beneficially own 4.99% or more of the outstanding common stock prior to the first public announcement by the Company of the board’s adoption of the Section 382 Tax Benefits Preservation Plan will not trigger the Section 382 Tax Benefits Preservation Plan so long as they do not acquire beneficial ownership of additional shares of the Common Stock (other than pursuant to a dividend or distribution paid or made by the Company on the outstanding shares of Common Stock or pursuant to a split or subdivision of the outstanding shares of Common Stock) at a time when they still beneficially own 4.99% or more of such stock. In addition, the board retains the sole discretion to exempt any person or group from the penalties imposed by the Section 382 Tax Benefits Preservation Plan.
 
 
 
27
 
 
In the event that a person becomes an Acquiring Person, each holder of a Right, other than Rights that are or, under certain circumstances, were beneficially owned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a Right and payment of the Purchase Price, and subject to the terms, provisions and conditions of the Section 382 Tax Benefits Preservation Plan, a number of shares of the Common Stock having a market value of two times the Purchase Price.
 
Note 6. Stock-Based Compensation
 
Equity Compensation Plan
 
We adopted the amended and restated 2010 Equity and Performance Incentive Plan (the “2010 Plan”), effective as of May 19, 2010. Under the 2010 Plan, the number of shares of Common Stock that may be issued will not exceed in the aggregate 1,666,666 shares of Common Stock plus the number of shares of common stock relating to prior awards under the 2000 Omnibus Equity Incentive Plan that expire, are forfeited or are cancelled after the adoption of the 2010 Plan, subject to adjustment as provided in the 2010 Plan. Pursuant to approval from our shareholders, the number of shares of common stock that may be issued under the 2010 Plan was increased by 750,000 shares of common stock in May 2013 and 333,333 shares in June 2016. No grants will be made under the 2010 Plan after the tenth anniversary of its effective date. At the 2020 Annual Meeting, our stockholders approved the amendment and restatement of the 2010 Plan (such plan, after the amendment and restatement is now the Third Amended and Restated 2010 Equity and Performance Incentive Plan, referred to herein as the “Restated Plan”). The purpose of amending the 2010 Plan was (i) to increase the number of shares of common stock available for issuance under the Restated Plan by 2,000,000 shares, (ii) to extend the term of the 2010 Plan, which otherwise would have expired on May 19, 2020, so that the Restated Plan will continue until terminated by the Board in its discretion, and (iii) to eliminate obsolete provisions while adding other provisions consistent with certain compensation and governance best practices. As of December 31, 2020, approximately 4.0 million shares remain available for grant under the Restated Plan.
 
We adopted the 2014 Inducement Award Plan (the “Inducement Plan”), effective as of May 13, 2014. Under the Inducement Plan, the number of shares of common stock that may be issued will not exceed in the aggregate 666,666 shares of common stock. As of December 31, 2020, approximately 0.2 million shares remain available for grant under the Inducement Plan.
 
Employee Stock Purchase Plan
 
Effective May 15, 2011, our Board and stockholders approved an ESPP and reserved 333,333 shares of our common stock for issuance. The ESPP was established to advance our interests and our stockholders' interests by providing an incentive to attract, retain and reward eligible employees and by motivating such persons to contribute to our growth and profitability. At the 2020 Annual Meeting of stockholders, our stockholders approved a proposal amending and restating the 2011 ESPP to (i) increase the maximum number of shares of common stock available for future issuance under the ESPP by 1,000,000 shares, (ii) extend the term, which otherwise would have expired on May 15, 2021, so that the ESPP will continue until terminated by the Board in its discretion, and (iii) make certain other administrative changes.
 
The ESPP consists of six-month offering periods during which employees may enroll in the plan. Shares of common stock may be purchased under the ESPP at a price established by the Compensation Committee of the Board of Directors, provided that the price may not be less than eighty-five percent (85%) of the lesser of (a) the fair market value of a share of stock on the offering date of the offering period or (b) the fair market value of a share of stock on the purchase date. As of December 31, 2020, approximately 1.1 million shares remain available for issuance under the ESPP.
 
 
 
28
 
 
 
Stock-Based Compensation
 
We recorded the following stock-based compensation expense of $0.6 million and $0.3 million, respectively, for the fiscal years ended December 31, 2020 and 2019 as follows (in thousands):
 
 
 
Years Ended December 31,
 
 
 
2020
 
 
2019
 
Stock-based compensation expense related to grants of:
 
 
 
 
 
 
Stock options
 $224 
 $130 
RSU
  374 
  155 
ESPP
  36 
  19 
Total
 $634 
 $304 
Stock-based compensation expense recognized in:
    
    
Cost of service
 $28 
 $40 
Engineering and IT
  25 
  25 
Sales and marketing
  38 
  38 
General and administrative
  543 
  201 
Total
 $634 
 $304 
 
 
The fair value of our stock-based awards was estimated using the following weighted average assumptions for the years ended December 31, 2020 and 2019:
 
 
 
2010 Plan/Restated Plan
 
 
Employee Stock Purchase Plan
 
 
 
2020
 
 
2019
 
 
2020
 
 
2019
 
Risk-free interest rate
  0.4%
  1.7%
  0.2%
  2.0%
Expected term (in years)
  6.1 
  3.1 
  0.5 
  0.5 
Volatility
  42.5%
  35.6%
  74.4%
  42.4%
Expected dividend
  0.0%
  0.0%
  0.0%
  0.0%
Weighted-average grant date fair value
 $0.55 
 $0.52 
 $0.34 
 $0.43 
 
Stock Options
 
The following tables represent stock option activity for the years ended December 31, 2020 and 2019:
 
 
 
Number of shares
 
 
Weighted-average exercise price per share
 
 
Weighted-average remaining contractual term (in years)
 
 
Aggregate intrinsic value (in thousands)
 
Outstanding at December 31, 2018
  803 
 $2.89 
  8.43 
 $54 
Granted
  90 
  0.94 
    
    
Exercised
   
   
    
    
Forfeited
  (77)
  1.97 
    
    
Outstanding at December 31, 2019
  816 
 $1.77 
  7.49 
 $16 
Granted
  2,394 
  1.56 
    
    
Exercised
  (147)
  1.30 
    
  116 
Forfeited
  (434)
  1.58 
    
    
Outstanding at December 31, 2020
  2,629 
 $1.64 
  8.79 
 $1,605 
Exercisable at December 31, 2020
  724 
 $1.74 
  6.77 
 $468 
 
 
 
29
 
 
 
A summary of additional information related to the options outstanding as of December 31, 2020 under the 2010 and 2014 Plans are as follows:
 
Plan
 
Option plans ranges of exercise prices
 
 
Number of outstanding options
 
 
Weighted-average remaining contractual life
 
 
Weighted-average exercise price
 
2010 Plan/Restated Plan
 $  
 $1.29 – 16.67 
  2,029,176 
  8.61 
 $1.86 
Inducement Plan
 $  
 $0.56 – 16.67 
  600,000 
  9.37 
 $1.33 
 
    
    
  2,629,176 
    
    
 
As of December 31, 2020, $1.1 million of unrecognized compensation cost related to existing options was outstanding, which is expected to be recognized over a weighted average period of 3.0 years.
 
Restricted Stock Units
 
The following table represents RSU activity for the years ended December 31, 2020 and 2019:
 
 
 
Number of shares
 
 
Weighted-average exercise price per share
 
 
Weighted-average remaining contractual term (in years)
 
 
Aggregate intrinsic value (in thousands)
 
Outstanding at December 31, 2018
  96 
 $2.78 
  0.60 
 $227 
Granted
  243 
  1.39 
    
    
Vested
  (73)
  2.06 
    
    
Forfeited
  (17)
  2.75 
    
    
Outstanding at December 31, 2019
  249 
 $1.62 
  0.60 
 $271 
Granted
  127 
  1.97