10-Q

UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

 Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2017

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.)

1200 Crossman Avenue, Suite 210

Sunnyvale, CA, 94089

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s Telephone Number, Including Area Code: (650) 556-9440

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 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 x  (Do not check if a smaller reporting company)	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 submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒    No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    Yes  ☐     No  ☒

On October 31, 2017, 18,713,580 shares of the Registrant’s Common Stock, $0.0001 par value, were outstanding.

SUPPORT.COM, INC.

FORM 10-Q

QUARTERLY PERIOD ENDED September 30, 2017

INDEX

		Page
Part I. Financial Information
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets at September 30, 2017 and December 31, 2016	3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2017 and 2016	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	26
Part II. Other Information
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 6.	Exhibits	38
Signature		38
Exhibit Index		39

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

 SUPPORT.COM, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	September 30, 2017			December 31, 2016
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	21,254		$	16,890
Short-term investments		28,138			36,519
Accounts receivable, net		11,755			9,567
Prepaid expenses and other current assets		646			1,211
Total current assets		61,793			64,187
Property and equipment, net		1,259			1,706
Intangible assets, net		250			266
Other assets		981			1,070
Total assets	$	64,283		$	67,229
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	792		$	1,085
Accrued compensation		2,338			2,974
Other accrued liabilities		1,905			2,496
Short-term deferred revenue		2,170			2,759
Total current liabilities		7,205			9,314
Long-term deferred revenue		31			106
Other long-term liabilities		446			501
Total liabilities		7,682			9,921
Commitments and contingencies (Note 3)
Stockholders’ equity:
Common stock; par value $0.0001, 50,000,000 shares authorized; 19,196,412 issued and 18,713,498 outstanding at September 30, 2017; 19,030,024 issued and 18,548,180 outstanding at December 31, 2016		2			2
Additional paid-in capital		267,722			267,400
Treasury stock, at cost (482,914 shares at September 30, 2017 and 481,844 shares at December 31, 2016)		(5,297	)		(5,295	)
Accumulated other comprehensive loss		(2,136	)		(2,329	)
Accumulated deficit		(203,690	)		(202,470	)
Total stockholders’ equity		56,601			57,308
Total liabilities and stockholders’ equity	$	64,283		$	67,229

See accompanying notes.

3

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

SUPPORT.COM, INC.

(in thousands, except per share amounts)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenue:
Services	$	13,682		$	14,163		$	39,744		$	43,055
Software and other		1,350			1,364			4,085			3,998
Total revenue		15,032			15,527			43,829			47,053
Cost of revenue:
Cost of services		11,559			11,847			33,760			38,403
Cost of software and other		66			120			252			377
Total cost of revenue		11,625			11,967			34,012			38,780
Gross profit		3,407			3,560			9,817			8,273
Operating expenses:
Research and development		631			1,336			2,429			4,464
Sales and marketing		621			1,463			2,011			5,401
General and administrative		1,996			2,703			6,847			10,186
Amortization of intangible assets and other		0			267			16			801
Restructuring		128			-			128			423
Total operating expenses		3,376			5,769			11,431			21,275
Income (loss) from operations		31			(2,209	)		(1,614	)		(13,002	)
Interest income and other, net		164			124			451			383
Income (loss) from continuing operations, before income taxes		195			(2,085	)		(1,163	)		(12,619	)
Income tax (benefit) provision		(36	)		44			57			132
Income (loss) from continuing operations, after income taxes		231			(2,129	)		(1,220	)		(12,751	)
Income from discontinued operations, after income taxes		-			-			-			284
Net income (loss)	$	231		$	(2,129	)	$	(1,220	)	$	(12,467	)
Basic and diluted income (loss) per share:
Income (loss) from continuing operations	$	0.01		$	(0.12	)	$	(0.07	)	$	(0.69	)
Income (loss) from discontinued operations		0.00			(0.00	)		(0.00	)		0.01
Basic and diluted income (loss) per share	$	0.01		$	(0.12	)	$	(0.07	)	$	(0.68	)
Shares used in computing basic net income (loss) per share		18,692			18,446			18,613			18,372
Shares used in computing diluted net income (loss) per share		18,714			18,446			18,613			18,372

See accompanying notes.

4

SUPPORT.COM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(Unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017			2016
Net Income (loss)	$	231	$	(2,129	)	$	(1,220	)	$	(12,467	)
Change in foreign currency translation adjustment		9		25			175			(13	)
Change in net unrealized gain (loss) on investments		12		(40	)		18			82
Other comprehensive income (loss)		21		(15	)		193			69
Comprehensive income (loss)	$	252	$	(2,144	)	$	(1,027	)	$	(12,398	)

See accompanying notes.

5

SUPPORT.COM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2017			2016
Operating Activities:
Net loss	$	(1,220	)	$	(12,467	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		479			530
Amortization of premiums and discounts on investments		65			244
Amortization of intangible assets and other		16			801
Stock-based compensation		295			1,776
Changes in assets and liabilities:
Accounts receivable, net		(2,188	)		(176	)
Prepaid expenses and other current assets		572			122
Other long-term assets		123			(5	)
Accounts payable		(292	)		350
Accrued compensation		(632	)		(363	)
Other accrued liabilities		(585	)		(1,534	)
Other long-term liabilities		(48	)		(324	)
Deferred revenue		(664	)		444
Net cash used in operating activities		(4,079	)		(10,602	)
Investing Activities:
Purchases of property and equipment		(32	)		(481	)
Purchases of investments		(14,939	)		(22,901	)
Maturities of investments		23,273			22,109
Net cash provided by (used in) investing activities		8,302			(1,273	)
Financing Activities:
Proceeds from employee stock purchase plan		27			45
Repurchase of common stock		(2	)		(72	)
Net cash provided by (used in) financing activities		25			(27	)
Effect of exchange rate changes on cash and cash equivalents		116			35
Net increase (decrease) in cash and cash equivalents		4,364			(11,867	)
Cash and cash equivalents at beginning of period		16,890			27,598
Cash and cash equivalents at end of period	$	21,254		$	15,731
Supplemental schedule of cash flow information:
Income taxes paid	$	85		$	132

See accompanying notes.

6

SUPPORT.COM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements include the accounts of Support.com, Inc. (the “Company”, “Support.com”, “We” or “Our”) and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. The condensed consolidated balance sheet as of September 30, 2017 and the consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2017 and 2016 and the consolidated statements of cash flows for the nine months ended September 30, 2017 and 2016 are unaudited. In the opinion of management, these unaudited interim condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of the results for, and as of, the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for the full fiscal year or for any future period. The condensed consolidated balance sheet information as of December 31, 2016 is derived from audited financial statements as of that date. These financial statements have been prepared based upon Securities and Exchange Commission (“SEC”) rules that permit reduced disclosure for interim periods. For a more complete discussion of significant accounting policies and certain other information, these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 7, 2017.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed 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.

Revenue Recognition

For all transactions, we recognize revenue only when all of the following criteria are met:

· Persuasive evidence of an arrangement exists;

· Delivery has occurred;

· Collection is considered probable; and

· The fees are fixed or determinable.

We consider all arrangements with payment terms longer than 90 days not to be fixed or determinable. If the fee is considered not to be fixed or determinable, revenue is recognized as payment becomes due from the customer provided all other revenue recognition criteria have been met.

Services Revenue

Services revenue is comprised primarily of fees for technology support services. Our service programs are designed for both the consumer and small and medium business (“SMB”) markets, and include computer and mobile device set-up, security and support, virus and malware removal and wireless network set-up, and automation system onboarding and support.

7

We offer technology services to consumers and SMBs, primarily 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. Referral fees are generally expensed in the period in which revenues are recognized.  In such referral programs, since we are the primary obligor and bear substantially all risks associated with the transaction, we record the gross amount of revenue. In direct transactions, we sell directly to the customer at the retail price.

The technology services described above include three 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 specialists. These services programs also include performance standards, which may result in incentives or penalties, which are recognized as earned or incurred.

· Subscription-Based Services - 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.

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 nine months ended September 30, 2017 and 2016, services breakage revenue was less than 1% of our total revenue.

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.

We generally provide a refund period on services, during which refunds may be granted to customers under certain circumstances, including inability to resolve certain support issues. For our partnerships, the refund period varies by partner, but is generally between 5 and 14 days. For referral programs and direct transactions, the refund period is generally 5 days. For all channels, we recognize revenue net of refunds and cancellations during the period. Refunds and cancellations have not been material.

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.

Software and Other Revenue

8

Software and other revenue is comprised primarily of fees for end-user software products provided through direct customer downloads and through the sale of these end-user software products via partners.  Our software is sold to customers as a perpetual license or as a fixed period subscription. We act as the primary obligor and generally control fulfillment, pricing, product requirements, and collection risk and therefore we record the gross amount of revenue. We provide a 30-day money back guarantee for the majority of our end-user software products.

For certain end-user software products, we sell perpetual licenses.  We provide a limited amount of free technical support to customers. Since the cost of providing this free technical support is insignificant and free product enhancements are minimal and infrequent, we do not defer the recognition of revenue associated with sales of these products.

For certain of our end-user software products (principally SUPERAntiSpyware), we sell licenses for a fixed subscription period.  We provide regular, significant updates over the subscription period and therefore recognize revenue for these products ratably over the subscription period.

Other revenue consists primarily of revenue generated through partners advertising to our customer base in various forms, including toolbar advertising, email marketing, and free trial offers. We recognize other revenue in the period in which our partners notify us that the revenue has been earned.

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 condensed consolidated statements of operations.

Our cash equivalents and short-term investments are classified as available-for-sale, and are reported at fair value with unrealized gains/losses included in accumulated other comprehensive loss within stockholders’ equity on the condensed consolidated balance sheets. We view our available-for-sale portfolio as available for use in our current operations, and therefore we present our marketable securities as short-term assets.

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, the Company’s intent to sell the security and the Company’s belief that it 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 September 30, 2017, we evaluated our unrealized gains/losses on available-for-sale securities 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 September 30, 2017 and December 31, 2016, the fair value of cash, cash equivalents and investments was $49.4 million and $53.4 million, respectively.

The following is a summary of cash, cash equivalents and investments at September 30, 2017 and December 31, 2016 (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
As of September 30, 2017
Cash	$	7,654	$	—	$	—		$	7,654
Money market funds		13,600		—		—			13,600
Certificates of deposit		1,211		—		(1	)		1,210
Commercial paper		997		—		—			997
Corporate notes and bonds		20,036		1		(19	)		20,018
U.S. government agency securities		5,917		—		(4	)		5,913
	$	49,415	$	1	$	(24	)	$	49,392
Classified as:
Cash and cash equivalents	$	21,254	$	—	$	—		$	21,254
Short-term investments		28,161		1		(24	)		28,138
	$	49,415	$	1	$	(24	)	$	49,392

9

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
As of December 31, 2016
Cash	$	7,593	$	—	$	—		$	7,593
Money market funds		9,297		—		—			9,297
Certificates of deposit		1,273		—		—			1,273
Commercial paper		4,989		—		—			4,989
Corporate notes and bonds		19,357		—		(40	)		19,317
U.S. government agency securities		10,941		1		(2	)		10,940
	$	53,450	$	1	$	(42	)	$	53,409
Classified as:
Cash and cash equivalents	$	16,890	$	—	$	—		$	16,890
Short-term investments		36,560		1		(42	)		36,519
	$	53,450	$	1	$	(42	)	$	53,409

The following table summarizes the estimated fair value of our available-for-sale securities classified by the stated maturity date of the security (in thousands):

	September 30, 2017		December 31, 2016
Due within one year	$	21,647	$	27,730
Due within two years		6,491		8,789
	$	28,138	$	36,519

Fair Value Measurements

Accounting Standards Codification (“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.

In accordance with ASC 820, 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 September 30, 2017 and December 31, 2016 (in thousands):

As of September 30, 2017	Level 1		Level 2		Level 3		Total
Money market funds	$	13,600	$	—	$	—	$	13,600
Certificates of deposit		—		1,210		—		1,210
Commercial paper		—		997		—		997
Corporate notes and bonds		—		20,018		—		20,018
U.S. government agency securities		—		5,913		—		5,913
Total	$	13,600	$	28,138	$	—	$	41,738

10

As of December 31, 2016	Level 1		Level 2		Level 3		Total
Money market funds	$	9,297	$	—	$	—	$	9,297
Certificates of deposit		—		1,273		—		1,273
Commercial paper		—		4,989		—		4,989
Corporate notes and bonds		—		19,317		—		19,317
U.S. government agency securities		—		10,940		—		10,940
Total	$	9,297	$	36,519	$	—	$	45,816

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 to recognize the transfer of financial instruments between levels at the end of our quarterly reporting period.

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. 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.

For the three months ended September 30, 2017, Comcast accounted for 62% of our total revenue.  For the three months ended September 30, 2016, Comcast and Office Depot accounted for 60% and 15%, respectively, of our total revenue.  For the nine months ended September 30, 2017, Comcastaccounted for 63% of our total revenue.  For the nine months ended September 30, 2016, Comcast and Office Depot accounted for 59% and 16%, respectively, of our total revenue.  There were no other customers that accounted for 10% or more of total revenue for the three and nine months ended September 30, 2017 and 2016.

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.  As of September 30, 2017 and December 31, 2016, Comcast accounted for 74% and 70% of our total accounts receivable, respectively. There were no other customers that accounted for 10% or more of our total accounts receivable as of September 30, 2017 and December 31, 2016.

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.  Reserves are made based on a specific review of all significant outstanding invoices. For those invoices not specifically provided for, reserves 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.  We had an allowance for doubtful accounts of $5,000 and $19,000 at September 30, 2017 and December 31, 2016, respectively.

Self-Funded Health Insurance

The Company maintains a self-funded health insurance program with a stop-loss umbrella policy with a third party insurer to limit the maximum potential liability for medical claims. With respect to this program, the Company considers historical and projected medical utilization data when estimating its health insurance program liability and related expense. As of September 30, 2017, the Company had approximately $711,000 in reserve for its self-funded health insurance program. As of December 31, 2016, the Company had approximately $911,000 in reserve for its self-funded health insurance program. The reserve is included in “other accrued liabilities” in the condensed consolidated balance sheets.

11

The Company regularly analyzes its reserves for incurred but not reported claims and for reported but not paid claims related to its self-funded insurance program. The Company believes its reserves are adequate. However, significant judgment is involved in assessing these reserves such as assessing historical paid claims, average lags between the claims’ incurred date, reported dates and paid dates, and the frequency and severity of claims. There may be differences between actual settlement amounts and recorded reserves and any resulting adjustments are included in expense once a probable amount is known.

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, which relate entirely to accumulated foreign currency translation losses associated with our foreign subsidiaries and unrealized losses on investments, consisted of the following (in thousands):

	Foreign Currency Translation Losses			Unrealized Losses on Investments			Total
Balance as of December 31, 2016	$	(2,288	)	$	(41	)	$	(2,329	)
Current-period other comprehensive income		175			18			193
Balance as of September 30, 2017	$	(2,113	)	$	(23	)	$	(2,136	)

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.

The amounts noted in the condensed consolidated statements of comprehensive loss are shown before taking into account the related income tax impact.  The income tax effect allocated to each component of other comprehensive loss for each of the periods presented is not significant.

Stock-Based Compensation

We apply the provisions of ASC 718, Compensation - Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based payment awards, including grants of stock, restricted stock awards and options to purchase stock, made to employees and directors based on estimated fair values.

The fair value of our stock-based awards was estimated using the following weighted average assumptions for the three and nine months ended September 30, 2017 and 2016. There were no stock option grants during the three month period ended September 30, 2017.

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017			2016
Stock Option Plan:
Risk-free interest rate		—		0.99	%		1.43	%		0.92	%
Expected term		—	3.90 years			3.58 years			3.89 years
Volatility		—		48.89	%		46.21	%		48.34	%
Expected dividend		—		0	%		0	%		0	%
Weighted average fair value (per share)		—	$	0.99		$	0.96		$	0.96

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	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Employee Stock Purchase Plan:
Risk-free interest rate		1.02	%		0.38	%		1.02	%		0.38	%
Expected term	0.5 years			0.5 years			0.5 years			0.5 years
Volatility		33.66	%		48.86	%		33.66	%		48.86	%
Expected dividend		0	%		0	%		0	%		0	%
Weighted average fair value (per share)	$	.59		$	0.84		$	.59		$	0.84

We recorded the following stock-based compensation expense for the three and nine months ended September 30, 2017 and 2016 (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017		2016
Stock-based compensation expense related to grants of:
Stock options	$	27		$	266	$	86	$	679
Employee Stock Purchase Plan (“ESPP”)		5			10		16		32
Restricted Stock Units (“RSU”)		(4	)		385		193		1,065
	$	28		$	661	$	295	$	1,776
Stock-based compensation expense recognized in:
Cost of services	$	19		$	43	$	83	$	134
Cost of software and other		—			1		3		4
Research and development		(18	)		156		62		346
Sales and marketing		12			79		34		121
General and administrative		15			382		113		1,171
	$	28		$	661	$	295	$	1,776

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed using our net income (loss) and the weighted average number of common shares outstanding during the reporting period. Diluted earnings (loss) per share is computed using our net income (loss) and the weighted average number of common shares outstanding, including the effect of the potential issuance of common stock such as stock issuable pursuant to the exercise of stock options and warrants and vesting of RSUs using the treasury stock method when dilutive.

The following table sets forth the computation of basic and diluted loss per share (in thousands, except per share amounts):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017			2016
Net income (loss)	$	231	$	(2,129	)	$	(1,220	)	$	(12,467	)
Basic:
Weighted-average shares of common stock outstanding		18,692		18,446			18,613			18,372
Shares used in computing basic income (loss) per share		18,692		18,446			18,613			18,372
Basic income (loss) per share		0.01		(0.12	)		(0.07	)		(0.69	)
Diluted:
Weighted-average shares of common stock outstanding		18,692		18,446			18,613			18,372
Add: Common equivalent shares outstanding		22		-			-			-
Shares used in computing diluted income (loss) per share		18,714		18,446			18,613			18,372
Diluted income (loss) per share	$	0.01	$	(0.12	)	$	(0.07	)	$	(0.69	)

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The following potential common shares outstanding were excluded from the computation of diluted loss per share because including them would have been antidilutive (in thousands):

	As of September 30,
	2017		2016
Stock options		417		4,475
RSUs		-		1,375
Warrants		-		324
Total common share equivalents		417		6,174

Warranties and Indemnifications

We generally provide a refund period on sales, during which refunds may be granted to consumers under certain circumstances, including our inability to resolve certain support issues.  For our partnerships, the refund period varies by partner, but is generally between 5-14 days.  For referral programs and direct transactions, the refund period is generally 5 days.  For the majority of our end-user software products, we provide a 30-day money back guarantee. For all channels, we recognize revenue net of refunds and cancellations during the period.  Refunds and cancellations have not been material to date.

We generally agree to indemnify our customers against legal claims that our end-user software products infringe certain third-party intellectual property rights.  As of September 30, 2017, we have not been required to make any payment resulting from infringement claims asserted against our customers and have not recorded any related accruals.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which provides guidance for revenue recognition and has been further clarified and amended in 2015 and 2016. ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to customers at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current U.S. GAAP. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.  ASU 2014-09 is effective in the first quarter of 2018.  Early adoption is permitted although the Company does not intend to early adopt the standard.  In adopting ASU 2014-09, companies may use either a full retrospective approach or a modified retrospective approach.  Under the modified retrospective approach, the Company would not restate the prior financial statements presented. This guidance requires a company to provide additional disclosures of the amount by which each financial statement line item is affected in the current reporting period during 2018 as compared to the guidance that was in effect before the change, and an explanation of the reasons for significant changes, if any.  The Company has selected the modified retrospective transition method and is currently evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes (Topic 740), which simplifies the presentation of deferred income taxes. Under ASU 2015-17, deferred tax assets and liabilities are required to be classified as noncurrent, eliminating the prior requirement to separate deferred tax assets and liabilities into current and noncurrent. The new guidance is effective for the Company beginning on January 1, 2017.  The adoption of ASU 2015-17 did not have a material effect on our consolidated financial statements or disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which provides guidance for accounting for leases. Under ASU 2016-02, the Company will be required to recognize the assets and liabilities for the rights and obligations created by leased assets. ASU 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We are currently evaluating the impact of the adoption of ASU 2016-02 on our consolidated financial statements. While we have not yet quantified the impact, we may be required to recognize certain assets and liabilities for our leases which would result in a change to interest expense and depreciation and amortization expenses while reducing rent expense upon adoption.

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In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting which includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. Excess tax benefits for share-based payments will be recorded as a reduction of income taxes and reflected in operating cash flows upon the adoption of this ASU. Excess tax benefits were previously recorded in equity and as financing activity under the prior rules. ASU 2016-09 is effective for annual and interim reporting periods beginning after December 15, 2016. The adoption of ASU 2016-09 did not have a material effect on our consolidated financial statements or disclosures.

In October 2016, the FASB issued ASU No. 2016-16,  Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory (Topic 740),which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transaction occurs as opposed to deferring tax consequences and amortizing them into future periods. This update is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. A modified retrospective approach with a cumulative-effect adjustment directly to retained earnings at the beginning of the period of adoption is required. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial position or results of operations.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations – Clarifying the Definition of a Business (Topic 805), with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The new guidance is effective for annual and interim periods beginning after December 15, 2017. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial position and results of operations.

Note 2. Income Taxes

We recorded an income tax provision (benefit) of $(36,000) and $57,000 for the three and nine months ended September 30, 2017, respectively.  We recorded an income tax provision of $44,000 and $132,000 for the three and nine months ended September 30, 2016, respectively.  The provision (benefit) for income taxes is comprised of estimates of current taxes due in domestic and foreign jurisdictions as well as changes in tax reserves.  This provision (benefit) reflects tax expense associated with state income tax and foreign taxes as well as a release of a tax reserve.

As of September 30, 2017, our deferred tax assets are fully offset by a valuation allowance except in those jurisdictions where it is determined that a valuation allowance is not required. ASC 740, Income Taxes, provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Based upon the weight of available evidence, which includes historical operating performance, reported cumulative net losses since inception and difficulty in accurately forecasting our future results, we provided a full valuation allowance against our net U.S. deferred tax assets and a partial valuation allowance against our foreign deferred tax assets.  We reassess the need for our valuation allowance on a quarterly basis. If it is later determined that a portion or all of the valuation allowance is not required, it generally will be a benefit to the income tax provision in the period such determination is made.

During Q1 2016, ASC 740-10 reserves and related interest were released in the amount of $284,000 due to the expiration of statutes which resulted in a tax benefit to discontinued operations.

The Company anticipates a material change of $134,000 in the total amount of its unrecognized tax benefits within 12 months of September 30, 2017.  The change is expected to result from a refund of all withholding taxes and interest paid to the Canadian Revenue Agency (CRA) relating to an intercompany receivable that had existed on our Canadian subsidiary’s books but was subsequently repaid.  The refund is expected once CRA has processed the Company’s previously submitted voluntary disclosure.

Note 3. Commitments and Contingencies

Legal contingencies

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On October 11, 2016, the Wage and Hour Division of the U.S. Department of Labor (the “DOL”) notified the Company that it would be conducting an audit of the Company relating to compliance with the Fair Labor Standards Act (“FLSA”).  The DOL has indicated that the focus of the audit is directed to compliance with overtime requirements related to our technology specialists who work from home providing technical support services.  The audit commenced on October 20, 2016, and is ongoing as of the date of this report.  While a loss may be reasonably possible, an estimate of loss, if any, cannot reasonably be determined as of the date of this report. On January 24, 2017, the DOL notified the Company that it would be conducting an audit of the Company relating to compliance with the Family and Medical Leave Act of 1993.  As of the date of this report, the audit has not commenced and on May 5, 2017 the DOL verbally notified the Company that it would not proceed with such audit.

On December 20, 2016, the Federal Trade Commission (“FTC”) issued a Civil Investigative Demand to the Company requiring the Company to produce certain documents and materials and to answer certain interrogatories relating to PC Healthcheck, a software program provided by the Company to certain third parties.  The FTC has not alleged a factual basis underlying the issuance of the Civil Investigative Demand. On January 17, 2017, the Consumer Protection Division of the Office of Attorney General, State of Washington (“Washington AG”), issued a Civil Investigative Demand to the Company requiring the Company to produce certain documents and materials and to answer certain interrogatories relating to PC Healthcheck.  The Washington AG has not alleged a factual basis underlying the issuance of the Civil Investigative Demand. On May 30, 2017, the Consumer Protection Division of the Office of Attorney General, State of Texas (“Texas AG”), issued a Civil Investigative Demand to the Company requiring the Company to produce certain documents and materials and to answer certain interrogatories relating to PC Healthcheck.  The Texas AG has not alleged a factual basis underlying the issuance of the Civil Investigative Demand. The Company is in the process of responding to these Civil Investigative Demands and cooperating with the FTC, Washington AG and Texas AG with respect to these matters.

We are also subject to other routine legal proceedings, as well as demands, claims and threatened litigation, that arise in the normal course of our business, potentially including assertions that we may be infringing patents or other intellectual property rights of others. We currently do not believe that the ultimate amount of liability, if any, for any pending claims of any type (alone or combined) will materially affect our financial position, results of operations or cash flows. The ultimate outcome of any litigation is uncertain, however, 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.

Guarantees

We have identified guarantees in accordance with ASC 450, Contingencies. This guidance stipulates that an entity must recognize an initial liability for the fair value, or market value, of the obligation it assumes under the guarantee at the time it issues such a guarantee, and must disclose that information in its interim and annual financial statements. We have entered into various service level agreements with our partners, in which we may guarantee the maintenance of certain service level thresholds. Under some circumstances, if we do not meet these thresholds, we may be liable for certain financial costs. We evaluate costs for such guarantees under the provisions of ASC 450. We consider such factors as the degree of probability that we would be required to satisfy the liability associated with the guarantee and the ability to make a reasonable estimate of the resulting cost. During the nine months ended September 30, 2017, we did not incur any costs as a result of such obligations. We have not accrued any liabilities related to such obligations in the condensed consolidated financial statements as of September 30, 2017 and December 31, 2016.

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Note 4.  Intangible Assets

The Company amortizes intangible assets, which consist of purchased technologies that have estimated useful lives ranging from 1 to 6 years, using the straight-line method when the consumption pattern of the asset is not apparent. The Company reviews such assets for impairment whenever an impairment indicator exists and continually monitors events and changes in circumstances that could indicate carrying amounts of the intangible assets may not be recoverable. When such events or changes in circumstances occur, the Company assesses recoverability by determining whether the carrying value of such assets exceed the estimates of future undiscounted future cash flows expected to be generated by such assets. Should impairment exist, the impairment loss would be measured based on the excess carrying value of the asset over the asset’s estimated fair value. There was no impairment of intangible assets recorded for the nine months ended September 30, 2017.

Amortization of intangible assets and other for the three and nine months ended September 30, 2017 was zero and $16,000 respectively.  Amortization of intangible assets and other for the three and nine months ended September 30, 2016 was $267,000 and $801,000, respectively.

The following table summarizes the components of intangible assets (in thousands):

	Non- compete			Partner Relationships			Customer Base			Technology Rights			Tradenames			Indefinite Life Intangibles		Total
As of September 30, 2017
Gross carrying value	$	593		$	145		$	641		$	5,330		$	760		$	250	$	7,719
Accumulated amortization		(593	)		(145	)		(641	)		(5,330	)		(760	)		—		(7,469	)
Net carrying value	$	—		$	—		$	—		$	—		$	—		$	250	$	250
As of December 31, 2016
Gross carrying value	$	593		$	145		$	641		$	5,330		$	760		$	250	$	7,719
Accumulated amortization		(581	)		(145	)		(637	)		(5,330	)		(760	)		—		(7,453	)
Net carrying value	$	12		$	—		$	4		$	—		$	—		$	250	$	266

In December 2006, we acquired the use of a toll-free telephone number for cash consideration of $250,000.  This asset has an indefinite useful life.

As of September 30, 2017, all intangible assets have been fully amortized with the exception of the indefinite-life intangibles.

Note 5. Other Accrued Liabilities

Other accrued liabilities consist of the following (in thousands):

	September 30, 2017		December 31, 2016
Accrued expenses	$	999	$	842
Self-insurance accruals		711		911
Customer deposits		—		556
Restructuring obligations		71		81
Other accrued liabilities		124		106
Total other accrued liabilities	$	1,905	$	2,496

Note 6. Stockholder’s Equity

Stock Options

The following table represents the stock option activity for the nine months ended September 30, 2017:

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	Number of Shares			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding options at December 31, 2016		1,381,843		$	5.88		4.95	$	50
Granted		2,000		$	2.57
Exercised		—			—
Forfeited		(966,751	)	$	6.03
Outstanding options at September 30, 2017		417,092		$	5.50		6.03	$	0
Options vested and expected to vest		405,254		$	5.58		5.95	$	0
Exercisable at September 30, 2017		267,171		$	7.08		4.57	$	0

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value that would have been received by the option holders had they all exercised their options on September 30, 2017.  This amount changes based on the fair market value of our stock.  The aggregate intrinsic value of options exercised under our stock option plans was zero during the three and nine months ended September 30, 2017, and zero during the three and nine months ended September 30, 2016.  Total fair value of options vested was $36,000 and $169,000 during the three and nine months ended September 30, 2017, respectively, and $270,000 and $689,000 during the three and nine months ended September 30, 2016, respectively.

At September 30, 2017, there was $135,000 of unrecognized compensation cost related to existing options outstanding which is expected to be recognized over a weighted average period of 2.1 years.

During the first quarter of 2017, as a result of the resignation of the Company’s Chief Financial Officer (CFO), 50,000 total market-based stock options granted in 2014 and 2016 were forfeited.  Previously recognized Stock-based compensation expense of approximately $58,000 was reversed in Q1 2017, related to the portion of those market-based grants unvested at the time of the CFO’s resignation.

Employee Stock Purchase Plan

In the second quarter of 2011, to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward eligible employees and by motivating such persons to contribute to the growth and profitability of the Company, the Company’s Board of Directors (the “Board”) and stockholders approved an ESPP and reserved 333,333 shares of our common stock for issuance effective as of May 15, 2011. The ESPP continues in effect for ten (10) years from its effective date unless terminated earlier by the Company. The ESPP consists of six-month offering periods during which employees may enroll in the plan.  The purchase price on each purchase date shall 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.  During the nine months ended September 30, 2017, 14,542 shares were purchased under ESPP.

Restricted Stock Units

The following table represents RSU activity for the nine months ended September 30, 2017:

	Number of Shares			Weighted Average Grant-Date Fair Value per Share		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding RSUs at December 31, 2016		351,921		$	4.59		1.06	$	908
Awarded		102,880		$	2.43
Released		(151,886	)	$	3.41
Forfeited		(146,165	)	$	6.01
Outstanding RSUs at September 30, 2017		156,750		$	3.00		0.95	$	368

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At September 30, 2017, there was $203,000 of unrecognized compensation cost related to RSUs which is expected to be recognized over a weighted average period of 1.1 years.

Stock Repurchase Program

On April 27, 2005, our Board authorized the repurchase of up to 666,666 outstanding shares of our common stock.  As of September 30, 2017 the maximum number of shares remaining that can be repurchased under this program was 602,467.  The Company does not intend to repurchase shares without further approval from its Board.

Note 7. Restructuring Obligations and Charges

Severance

For the three and nine months ended September 30, 2017, the Company recorded $86,000 of severance and benefit related costs, included in restructuring costs in the condensed consolidated statement of operations, related to cost reduction efforts, principally in the Company’s subsidiary India office.  As of September 30, 2017, $57,000 of these costs have been paid and $29,000 of unpaid costs are included in accrued liabilities in the condensed consolidated balance sheet.

Relocation

For the three and nine months ended September 30, 2017, the Company recorded $42,000 of relocation costs included in restructuring related costs in the condensed consolidated statement of operations, related to the relocation of several employees from the Company’s subsidiary India office to US corporate headquarters.  As of September 30, 2017, none of these costs have been paid and $42,000 of remaining unpaid costs are included in accrued liabilities in the condensed consolidated balance sheet.

The Company expects the remaining $71,000 of relocation and severance obligations to be fully paid by December 31, 2017.

	Relocation		Severance			Total
Restructuring obligations, June 30, 2017		-		-			-
Restructuring costs incurred		42,000		86,000			128,000
Cash payments		-		(57,000	)		(57,000	)
Restructuring obligations, September 30, 2017		42,000		29,000			71,000

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ITEM 2. 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 condensed consolidated financial statements and the related notes included elsewhere in this Form 10-Q (the “Report”) and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2016. The following discussion includes forward-looking statements. Please see “Risk Factors” in Item 1A of this Report for important information to consider when evaluating these statements.

Overview

Support.com, Inc. is a leading provider of services and software that enable technology support for a connected world. Support.com is the choice of leading communications providers, top retailers, and other important brands in software, consumer and business electronics, and connected technology.  Our technology support services programs help leading brands create new revenue streams and deepen customer relationships. We offer turnkey, outsourced support services for service providers, retailers, IoT (Internet of Things) solution providers and technology companies. Our technology support services programs are designed for both the consumer and small and medium business (“SMB”) markets, and include computer and mobile device set-up, security and support, virus and malware removal, wireless network set-up, and home security and automation system support.

Total revenue for the third quarter of 2017 decreased 3% year-over-year. Revenue from services decreased 3% year-over-year primarily due to the reduction of the Office Depot services program. Revenue from software and other, including new and expiring subscriptions, remained relatively flat year-over-year.

Cost of services for the third quarter of 2017 decreased 2% year-over-year primarily a result of lower employee and employee benefits related costs and lower consulting charges. Cost of software and other for the third quarter of 2017 was not significant in either period.  Total gross margin remained flat with the year-ago period at 23%.

Operating expenses for the third quarter of 2017 decreased 41% from the same period in 2016, primarily driven by a decrease in salary and employee related costs due to a decrease in headcount as a result of our cost reduction efforts initiated during the second half of 2016 somewhat offset by $128 thousand in restructuring charges associated with the down-sizing of our India operations incurred in the current period.

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.

 Critical Accounting Policies and Estimates

In preparing our interim condensed consolidated financial statements, we make estimates, assumptions and judgments that can have a significant impact on our net revenue, operating income or loss and net income or loss, as well as on the value of certain assets and liabilities on our condensed consolidated balance sheet. We believe that the estimates, assumptions and judgments involved in the accounting policies described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 have the greatest potential impact on our interim condensed consolidated financial statements, so we consider them to be our critical accounting policies and estimates.  There have been no significant changes in these critical accounting policies and estimates during the three and nine months ended September 30, 2017.

 RESULTS OF OPERATIONS

The following table sets forth the results of operations for the three and nine months ended September 30, 2017 and 2016 expressed as a percentage of total revenue:

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	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenue:
Services		91	%		91	%		91	%		92	%
Software and other		9			9			9			8
Total revenue		100			100			100			100
Costs of revenue:
Cost of services		77			76			77			81
Cost of software and other		0			1			1			1
Total cost of revenue		77			77			78			82
Gross profit		23			23			22			18
Operating expenses:
Research and development		4			9			6			9
Sales and marketing		4			9			5			11
General and administrative		13			17			16			22
Amortization of intangible assets and other		—			2			—			2
Restructuring		1			—			—			1
Total operating expenses		22			37			27			45
Income (loss) from operations		1			(14	)		(5	)		(27	)
Interest and other income, net		1			0			1			0
Income (loss) from continuing operations, before income taxes		2			(14	)		(4	)		(27	)
Income tax provision		—			—			—			—
Income (loss) from continuing operations, after income taxes		2			(14	)		(4	)		(27	)
Income (loss) from discontinued operations, after income taxes		—			—			—			1
Net income (loss)		2	%		(14	)%		(4	)%		(26	)%

REVENUE

	Three Months Ended September 30,												Nine Months Ended September 30,
In thousands, except percentages	2017			2016			$ Change			% Change			2017			2016			$ Change			% Change
Services		$	13,682		$	14,163	$	(481	)		(3	)%		$	39,744		$	43,055	$	(3,311	)		(8	)%
Software and other			1,350			1,364		(14	)		(1	)%			4,085			3,998		87			1	%
Total revenue		$	15,032		$	15,527	$	(495	)		(3	)%		$	43,829		$	47,053	$	(3,224	)		(7	)%

Services.  Services revenue consists primarily of fees for technology services generated from our partners.  We provide these services remotely, generally using service delivery personnel who utilize our proprietary technology to deliver the services. Services revenue is also comprised of licensing of our Support.com Cloud applications. Services revenue for the three months and nine months ended September 30, 2017 decreased by $0.5 million and $3.3 million, respectively, from the same periods in 2016.  These decreases were mainly due to Office Depot reducing some of the service programs that we offer to their in-store customers, which reduced call volumes and service incidents.  For the three months ended September 30, 2017, services revenue generated from our partnerships was $12.7 million compared to $13.2 million for the same period in 2016 and direct services revenue was $1.0 million for the three months ended September 30, 2017 and September 30, 2016.  For the nine months ended September 30, 2017, services revenue generated from our partnerships was $36.6 million compared to $40.1 million for the same period in 2016 and direct services revenue was $3.2 million compared to $3.0 million for the same period in 2016.  On July 28, 2017, Office Depot provided written notice of its intent not to renew the Professional Services Agreement between the Company and Office Depot dated July 26. 2007, and such Agreement terminated on September 30, 2017.  Revenue attributed to Office Depot, Inc. for 2016 was $8.9 million. Revenue attributed to Office Depot for the nine months ended September 30, 2017 was $2.9 million.  As with any market that is undergoing shifts, timing of downward pressures and growth opportunities in our services programs are difficult to predict. We are experiencing downward pressure with some of our services programs as PC and certain retail markets are seeing some seasonal or other sector specific softness.  However, we still see opportunity in the market for growth with our service partners as a result of the evolving support market trends.

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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 three and nine months ended September 30, 2017 remained at approximately the same levels when compared with the same periods in 2016 reflecting a generally equal balance between new and expiring subscriptions.  For the three-month periods ended September 30, 2017 and 2016, revenue from software and other generated from our direct sales was $0.7 million for both periods and software and other revenue generated from our partnerships was $0.7 million and $0.7 million for each of the respective periods.    For the nine-month periods ended September 30, 2017 and 2016, revenue from software and other generated from our direct sales was $2.1 million and $2.2 million, respectively, and software and other revenue generated from our partnerships was $2.0.million and $1.8 million, respectively.

COST OF REVENUE

	Three Months Ended September 30,													Nine Months Ended September 30,
In thousands, except percentages	2017			2016			$ Change				% Change			2017			2016			$ Change				% Change
Cost of services		$	11,559		$	11,847		$	(288	)		(2	)%		$	33,760		$	38,403		$	(4,643	)		(12	)%
Cost of software and other			66			120			(54	)		(45	)%			252			377			(125	)		(33	)%
Total cost of revenue		$	11,625		$	1,967		$	(342	)		(3	)%		$	34,012		$	38,780		$	(4,768	)		(12	)%

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. Cost of services for the three months ended September 30, 2017 remained relatively stable at $11.6 million as compared to $11.8 million for the same period of 2016.  The decrease of $4.6 million in cost of services for the nine months ended September 30, 2017 compared to the same period in 2016 includes a decrease in compensation and benefits charges of $4.9 million and lower consulting and technology related charges of $0.5 million, offset by a $0.9 million increase of outside consulting costs primarily attributable to our Philippines operation.

Cost of software and other.  Cost of software and other fees consists primarily of third-party royalty and processing 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. The decrease of $54,000 and $125,000 in cost of software and other for the three and nine months ended September 30, 2017, respectively, compared to the same periods in 2016 was mainly driven by lower 3^rd party processing fees.

OPERATING EXPENSES

	Three Months Ended September 30,													Nine Months Ended September 30,
In thousands, except percentages	2017			2016			$ Change				% Change			2017			2016			$ Change				% Change
Research and development		$	631		$	1,336		$	(705	)		(53	)%		$	2,429		$	4,464		$	(2,035	)		(46	)%
Sales and marketing		$	621		$	1,463		$	(842	)		(58	)%		$	2,011		$	5,401		$	(3,390	)		(63	)%
General and administrative		$	1,996		$	2,703		$	(707	)		(26	)%		$	6,847		$	10,186		$	(3,339	)		(33	)%
Amortization of intangibles assets and other		$	-		$	267		$	(267	)		(100	)%		$	16		$	801		$	(785	)		(98	)%
Restructuring		$	128		$	-		$	128			100	%		$	128		$	423		$	(295	)		(70	)%

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Research and development.  Research and development expense consists primarily of compensation costs, third-party consulting expenses and related overhead costs for research and development personnel. Research and development costs are expensed as they are incurred.  The decreases of $0.7 million and $2.0 million in research and development expense for the three and nine months ended September 30, 2017, respectively, compared to the same periods in 2016 were primarily the result of a decrease in salary and employee related expenses due to cost reduction efforts mainly related to the development of Support.com Cloud applications which also impacted travel, consulting and related stock compensation charges.

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, advertising and marketing.  The decrease of $0.8 million in sales and marketing expense for the three months ended September 30, 2017 compared to the same period in 2016 resulted from a decrease in salary and employee related expenses of $0.4 million and lower travel expenses of $0.1 million due to a decrease in headcount in connection with cost-reduction efforts, and lower third-party marketing program costs of approximately $0.3 million.  Similarly, the decrease of $3.4 million in sales and marketing expense for the nine months ended September 30, 2017 compared to the same period in 2016 resulted from a decrease in salary and employee related expenses of $1.9 million and lower travel expenses of $0.3 million due to a decrease in headcount in connection with cost-reduction efforts, and lower third-party marketing program costs of nearly $1.0 million.

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. The decrease of $0.7 million in general and administrative expense for three months ended September 30, 2017 as compared to the year-ago period was the result of $0.6 million in lower headcount related charges, including stock compensation, and $0.1 million of lower facility costs including rent and utilities.  The decrease of $3.4 million in general and administrative expense for the nine months ended September 30, 2017 as compared to the same period a year ago were primarily the result of $1.8 million in lower headcount related  charges, including stock compensation, $1.3 million in lower professional services and reimbursement of stockholder expenses that were incurred in the 2016 period as a result of the proxy contest, and an additional $0.2 million lower costs related to facilities and technology support costs.

Amortization of intangible assets and other.The decrease in amortization of intangibles assets and other of $0.3 million and $0.8 million for the three and nine months ended September 30, 2017, respectively, compared to the same periods in 2016 were primarily attributable to the Company’s intangible assets being fully amortized at the end of 2016 and early 2017.

Restructuring.  During the third quarter of 2017, the Company incurred restructuring charges of approximately $128,000 associated with the down-sizing of its Bangalore, India facilities.  These cost reductions were primarily headcount related and, to a lesser degree, attributable to property, plant and equipment.

During the second quarter of 2016, the Company implemented a cost reduction plan.  In connection with implementing the plan, we incurred one-time restructuring costs of $0.4 million.  The restructuring costs consisted of severance costs for terminated employees and contract termination costs.  Substantially all costs associated with the plan were completed during the second quarter of 2016.

INTEREST INCOME AND OTHER, NET

	Three Months Ended September 30,												Nine Months Ended September 30,
In thousands, except percentages	2017			2016			$ Change			% Change			2017			2016			$ Change			% Change
Interest income and other, net		$	164		$	124		$	40		32	%		$	451		$	383		$	68		18	%

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Interest income and other, net.  Interest income and other, net consists primarily of interest income on our cash, cash equivalents and short-term investments and was consistent between periods.

INCOME TAX PROVISION

	Three Months Ended September 30,														Nine Months Ended September 30,
In thousands, except percentages	2017				2016			$ Change				% Change			2017			2016			$ Change				% Change
Income tax (benefit) provision		$	(36	)		$	44		$	(80	)		(182	)%		$	57		$	132		$	(75	)		(57	)%

Income tax provision.  The income tax provision is comprised of estimates of current taxes due in domestic and foreign jurisdictions. For the three and nine months ended September 30, 2017 and 2016, the income tax provision primarily consisted of state income tax and foreign taxes.

 LIQUIDITY AND CAPITAL RESOURCES

Total cash, cash equivalents and investments at September 30, 2017 and December 31, 2016 were $49.4 million and $53.4 million, respectively. The decrease in cash, cash equivalents and investments was primarily due to the use of cash in operating activities.

Operating Activities

Net cash used in operating activities was $4.1 million and $10.6 million for the nine months ended September 30, 2017 and 2016, respectively.  Net cash used in operating activities primarily reflects the net loss for the period, adjusted for non-cash items such as depreciation, amortization of premiums and discounts on investments, stock-based compensation expense and amortization of intangible assets, and changes in operating assets and liabilities.

Net cash used in operating activities was $4.1 million for the nine months ended September 30, 2017 and resulted primarily from a net loss for the period of $1.2 million adjusted for non-cash items totaling $855,000 offset by net changes in operating assets and liabilities of $3.7 million.  Adjustments for non-cash items primarily consisted of stock-based compensation expense of $295,000, amortization of intangible assets and other of $16,000, amortization of premiums and discounts on investments of $65,000, and depreciation of $479,000.  The changes in operating assets and liabilities primarily consisted of an increase in accounts receivable of $2.2 million and decreases of $292,000, $632,000, $585,000, $664,000 in accounts payable, accrued compensation, other accrued liabilities, and deferred revenue, respectively, offset by decreases of $572,000 in prepaid expenses and other current assets and $123,000 in other long-term assets.

Net cash used in operating activities of $10.6 million for the nine months ended September 30, 2016 resulted primarily from a net loss for the period of $12.5 million, adjusted for non-cash items totaling $3.4 million and changes in operating assets and liabilities of $1.5 million.  Adjustments for non-cash items primarily consisted of stock-based compensation expense of $1.8 million, amortization of intangible assets and other of $801,000, amortization of premiums and discounts on investments of $244,000, and depreciation of $530,000.  The changes in operating assets and liabilities primarily consisted of increases of $350,000 in accounts payable and $444,000 in deferred revenue and decreases in prepaid and other current assets of $122,000, offset by an increase in accounts receivable of $176,000 and decreases of $363,000, $1.5 million, and $324,000 in accrued compensation, other accrued liabilities, and other long-term liabilities, respectively.

Investing Activities

Net cash provided by (used in) investing activities was $8.3 million and $(1.3) million for the nine months ended September 30, 2017 and 2016, respectively.  Net cash provided by investing activities for the nine months ended September 30, 2017 was primarily due to purchases of property and equipment of $32,000 and purchases of investments of $14.9 million offset by maturities of investments of $23.3 million. Net cash used in investing activities for the nine months ended September 30, 2016 was primarily due to purchases of property and equipment of $481,000 and purchases of investments of $22.9 million, offset by maturities of investments of $22.1 million.

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Financing Activities

Net cash provided by (used in) financing activities was $25,000 and $(27,000) for the nine months ended September 30, 2017 and 2016, respectively. Net cash provided by financing activities for the nine months ended September 30, 2017 was from the proceeds of purchase of common stock under the Company’s ESPP of $27,000, offset by repurchases of common stock of $2,000.  Net cash used in financing activities for the nine months ended September 30, 2016 was from the proceeds of purchase of common stock under the Company’s ESPP of $45,000 offset by repurchase of common stock of $72,000.

Working Capital and Capital Expenditure Requirements

At September 30, 2017, we had stockholders’ equity of $56.6 million and working capital of $54.6 million. We believe that our existing cash balances will be sufficient to meet our working capital requirements, as well as our planned capital expenditures, 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 current economic environment, however, could limit our ability to raise capital by issuing new equity or debt securities on acceptable terms, and lenders may be unwilling to lend funds on acceptable terms that would be required to support operations.  The sale of additional equity or convertible debt securities could result in dilution to our existing stockholders.  The issuance of debt securities would result in increased interest expenses, and could impose new restrictive covenants that would limit our operating flexibility.

We plan to continue to make investments in our business during 2017. We believe these investments are essential to creating sustainable growth in our business in the future. Additionally, we may choose to acquire other businesses or complimentary technologies to enhance our product capabilities and such acquisitions would likely require the use of cash.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate and Market Risk

The value and liquidity of the securities in which we invest could deteriorate rapidly and the issuers of such securities could be subject to credit rating downgrades. We actively monitor market conditions and developments specific to the securities and security classes in which we invest. While we believe we take prudent measures to mitigate investment related risks, such risks cannot be fully eliminated, as there are circumstances outside of our control.

The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive from our investments without significantly increasing risk. To achieve this objective, we invest our excess cash in a variety of securities, including U.S. government agency securities, corporate notes and bonds, commercial paper and money market funds. These securities are classified as available-for-sale. Consequently, our available-for-sale securities are recorded on the consolidated balance sheets at fair value with unrealized gains or losses reported as a separate component of accumulated other comprehensive loss within stockholder’s equity. Our holdings of the securities of any one issuer, except government agencies, do not exceed 10% of our portfolio. We do not utilize derivative financial instruments to manage our interest rate risks.

As of September 30, 2017, we held $28.1 million in short-term investments (excluding cash and cash equivalents), which consisted primarily of certificates of deposits, government debt securities, corporate notes and bonds, and commercial paper. The weighted average interest rate of our portfolio was approximately 1.13% at September 30, 2017. A decline in interest rates over time would reduce our interest income from our investments. A hypothetical 10% increase or decrease in interest rates, however, would not have a material impact on our financial condition.

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Impact of Foreign Currency Rate Changes

The functional currencies of our international operating subsidiaries are the local currencies. We translate the assets and liabilities of our foreign subsidiaries at the exchange rates in effect on the balance sheet date. We translate their income and expenses at the average rates of exchange in effect during the period. We include translation gains and losses in the stockholders’ equity section of our consolidated balance sheets. We include net gains and losses resulting from foreign exchange transactions in interest income and other in our consolidated statements of operations. Since we translate foreign currencies (primarily Canadian dollars and Indian rupees) into U.S. dollars for a small portion of our operations, currency fluctuations have had an immaterial impact on our consolidated statements of operations. We have both revenue and expenses that are denominated in foreign currencies. Neither a weaker or stronger U.S. dollar environment would have a material impact on our consolidated statement of operations. The historical impact of currency fluctuations on our consolidated statements of operations has generally been immaterial. As of September 30, 2017, we did not engage in foreign currency hedging activities.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet, and management believes they meet, reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Our Chief Executive Officer and our Principal Financial Officer, after evaluating the effectiveness of our “disclosure controls and procedures” as of the end of the period covered by this quarterly report, have concluded that our disclosure controls and procedures are effective based on their evaluation of these controls and procedures required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On October 11, 2016 the Wage and Hour Division of the U.S. Department of Labor (“DOL”) notified the Company that it would be conducting an audit of the Company relating to compliance with the Fair Labor Standards Act (“FLSA”).  The DOL has indicated that the focus of the audit is directed to compliance with overtime requirements related to our technology specialists who work from home providing technical support services.  The audit commenced on October 20, 2016 and is ongoing as of the date of this report.  On January 24, 2017, the DOL notified the Company that it would be conducting an audit of the Company relating to compliance with the Family and Medical Leave Act of 1993.  As of the date of this report the audit has not commenced and on May 5, 2017 the DOL verbally notified the Company that it would not proceed with such audit.

On December 20, 2016 the Federal Trade Commission (“FTC”) issued a Civil Investigative Demand to the Company requiring the Company to produce certain documents and materials and to answer certain interrogatories relating to PC Healthcheck, a software program provided by the Company to certain third parties.  The FTC has not alleged a factual basis underlying the issuance of the Civil Investigative Demand. On January 17, 2017 the Consumer Protection Division of the Office of Attorney General, State of Washington (“Washington AG”), issued a Civil Investigative Demand to the Company requiring the Company to produce certain documents and materials and to answer certain interrogatories relating to PC Healthcheck. The Washington AG has not alleged a factual basis underlying the issuance of the Civil Investigative Demand. On May 30, 2017, the Consumer Protection Division of the Office of Attorney General, State of Texas (“Texas AG”), issued a Civil Investigative Demand to the Company requiring the Company to produce certain documents and materials and to answer certain interrogatories relating to PC Healthcheck.  The Texas AG has not alleged a factual basis underlying the issuance of the Civil Investigative Demand. The Company is in the process of responding to these Civil Investigative Demands and cooperating with the FTC, Washington AG and Texas AG with respect to these matters.

From time to time, we are subject to routine legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business, potentially including assertions that we may be infringing patents or other intellectual property rights of others. We currently do not believe that the ultimate amount of liability, if any, for such routine legal proceedings (alone or combined) will materially affect our financial position, results of operations or cash flows. The ultimate outcome of any litigation is uncertain, however, and unfavorable outcomes could have a material negative impact on our financial condition and operating results. Regardless of outcome, litigation can have an adverse impact on us because of defense costs, negative publicity, diversion of management resources and other factors.

ITEM 1A. RISK FACTORS

This report contains forward-looking statements regarding our 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. We are subject to many risks and uncertainties that may materially affect our business and future performance and cause those forward-looking statements to be inaccurate. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “forecasts,” “estimates,” “seeks,” “may result in,” “focused on,” “continue to,” “on-going” and similar expressions often identify forward-looking statements. In this report, forward-looking statements include, without limitation, statements regarding the following:

● Our expectations and beliefs regarding future financial results;

● Our expectations regarding partners, renewal of contracts with these partners and the anticipated timing and magnitude of revenue from programs with these partners;

● Our ability to offer subscriptions to our services in a profitable manner;

● Our expectations regarding our ability to deliver technology services efficiently and through arrangements that are profitable, including both in SKU-based and time-based pricing models and other pricing models we may employ;

● Our ability to successfully license, implement and support our Support.com Cloud offering;

● Our expectations regarding sales of our end-user software products, and our ability to source, develop and distribute enhanced versions of these products;

● Our ability to successfully monetize customers who receive free versions of our end-user software products;

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● Our ability to expand and diversify our customer base;

● Our ability to execute effectively in the SMB market;

● Our ability to attract and retain qualified management and employees;

● Our ability to hire, train, manage and retain technology specialists in a home-based model in quantities sufficient to meet forecast requirements, and our ability to continue to enhance the flexibility of our staffing model;

● Our ability to match staffing levels with service volume in a cost-effective manner;

● Our ability to manage contract labor as a component of our workforce;

● Our ability to operate successfully in a time-based billing model;

● Our ability to adapt to changes in the market for technology support services;

● Our ability to manage sales costs in programs where we are responsible for sales;

● Our ability to successfully manage marketing costs associated with our software products;

● Our beliefs and expectations regarding the introduction of new services and products, including additional cloud application software products and service offerings for devices beyond computers and routers;

● Our expectations regarding revenues, cash flows, expenses, including cost of revenue, sales and marketing, research and development efforts, and administrative expenses, and profits, including the expected effects of our cost reduction plans;

● Our assessment of seasonality, mix of revenue, and other trends for our business and the business of our partners;

● Our ability to deliver projected levels of profitability;

● Our expectations regarding the costs and other effects of acquisition and disposition transactions;

● Our expectations regarding unit volumes, pricing and other factors in the market for computers and other technology devices, and the effects of such factors on our business;

● Our ability to successfully operate in markets that are subject to extensive regulation, such as support for home security systems;

● Our expectations regarding the results of pending, threatened or future litigation;

● Our expectations regarding the results of pending, threatened or future government investigations and audits, including, without limitation, those investigations and audits described in Item 1 Legal Proceedings of this report;

● The assumptions underlying our Critical Accounting Policies and Estimates, including our assumptions regarding revenue recognition; assumptions used to estimate self-insurance accruals, assumptions used to estimate the fair value of stock-based compensation; assumptions regarding the impairment of goodwill and intangible assets; and expected accounting for income taxes; and

An investment in our stock involves risk, and we caution investors that forward-looking statements are only predictions based on our current expectations about future events and are not guarantees of future performance. We encourage you to read carefully all information provided in this report and in our other filings with the SEC before deciding to invest in our stock or to maintain or change your investment.  Forward-looking statements are based on information as of the filing date of this report, and we undertake no obligation to publicly revise or update any forward-looking statement for any reason.

Because forward-looking statements involve risks and uncertainties, there are important factors that may cause actual results to differ materially from our stated expectations.  While a number of these factors are described below, this list does not include all risks that could affect our business. If these or any other risks or uncertainties materialize, or if our underlying assumptions prove to be inaccurate, actual results could differ materially from past results and from our expected future results.

Recently, our business has not been profitable and may not achieve profitability in future periods.

Since the first quarter of fiscal 2014 we have experienced significant losses each quarter. We have sustained significant changes in our largest partner programs that have continued to materially affect our revenue and margins and have made significant investments in support of our Support.com Cloud offering. We may continue to experience periods of losses in the future. Future losses may continue to result in usage of cash to fund our operating activities and a corresponding reduction in our cash balance.

Our business is based on a relatively new and evolving business model.

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We are executing a plan to grow our business by providing technology support services, licensing our Support.com Cloud applications, and providing end-user consumer software products. We may not be able to offer these services and software products successfully. Our technology specialists are generally home-based, which requires a high degree of coordination and quality control of employees working from diverse and remote locations. We have been experiencing financial losses in our business and we expect to use cash and incur losses in the future to support our growth initiatives. Our investments, which typically are made in advance of revenue, may not yield increased revenue to offset these expenses. As a result of these factors, the future revenue and income potential of our business is uncertain. Any evaluation of our business and our prospects must be considered in light of these factors and the risks and uncertainties often encountered by companies in our stage of development. Some of these risks and uncertainties relate to our ability to do the following:

● Maintain our current relationships and service programs, and develop new relationships, with service partners and licensees of our Support.com Cloud offering on acceptable terms or at all;

● Reach prospective customers for our software products in a cost-effective fashion;

● Reduce our dependence on a limited number of partners for a substantial majority of our revenue;

● Successfully license and grow our revenue related to our Support.com Cloud and other software offerings;

● Attract and retain qualified management and employees in competitive markets for talent;

● Hire, train, manage and retain our home-based technology specialists and enhance the flexibility of our staffing model in a cost-effective fashion and in quantities sufficient to meet forecast requirements;

● Manage substantial headcount changes, including in connection with our cost reduction plan, over short periods of time;

● Manage contract labor efficiently and effectively;

● Meet revenue targets;

● Maintain gross and operating margins;

● Match staffing levels with demand for services and forecast requirements;

● Obtain bonuses and avoid penalties in contractual arrangements;

● Operate successfully in a time-based pricing model;

● Operate effectively in the SMB market;

● Offer subscriptions to our products and services in a profitable manner;

● Successfully introduce new, and adapt our existing, services and products for consumers and businesses;

● Respond effectively to changes in the market for technology support services;

● Respond effectively to changes in the online advertising markets in which we participate;

● Respond effectively to competition;

● Respond to changes in macroeconomic conditions as they affect our and our partners’ operations;

● Realize benefits of any acquisitions we make;

● Adapt to changes in the markets we serve, including the decline in sales of  personal computers, the proliferation of tablets and other mobile devices and the introduction of new devices into the connected home and the “Internet of Things”;

● Adapt to changes in our industry, including consolidation;

● Respond to government regulations relating to our current and future business;

● Manage and respond to present, threatened, and future litigation;

● Manage and respond to present, threatened or future government investigations and audits, including, without limitation, those audits and investigations described in Item 1 Legal Proceedings of this report; and

● Manage our operations and implement and improve our operational, financial and management controls.

If we are unable to address these risks, our business, results of operations and prospects could suffer.

Our quarterly results have in the past, and may in the future, fluctuate significantly.

Our quarterly revenue and operating results have in the past and may in the future fluctuate significantly from quarter to quarter. As a result, we believe that quarter-to-quarter and year-to-year comparisons of our revenue and operating results may not be accurate indicators of future performance.

Several factors that have contributed or may in the future contribute to fluctuations in our operating results include:

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● Demand for our services and products;

● The performance of our partners;

● Change, or reduction in or discontinuance of our principal programs with partners;

● Our reliance on a small number of partners for a substantial majority of our revenue;

● Instability or decline in the global macroeconomic climate and its effect on our and our partners’ operations;

● Our ability to successfully license and grow revenue related to our Support.com Cloud and other software offerings;

● The availability and cost-effectiveness of advertising placements for our software products and our ability to respond to changes in the online advertising markets in which we participate;

● Our ability to serve the SMB market;

● Our ability to attract and retain qualified management and employees in competitive markets;

● The efficiency and effectiveness of our technology specialists;

● Our ability to effectively match staffing levels with service volumes on a cost-effective basis;

● Our ability to manage contract labor;

● Our ability to hire, train, manage and retain our home-based technology specialists and enhance the flexibility of our staffing model in a cost-effective fashion and in quantities sufficient to meet forecast requirements;

● Our ability to manage substantial headcount changes over short periods of time;

● Our ability to manage costs under our self-funded health insurance program;

● Our ability to manage sales costs in programs where we are responsible for sales;

● Our ability to operate successfully in a time-based pricing model;

● Our ability to attract and retain partners;

● The price and mix of products and services we or our competitors offer;

● Pricing levels and structures in the market for technology support services;

● Usage rates on the subscriptions we offer;

● The rate of expansion of our offerings and our investments therein;

● Changes in the markets for computers and other technology devices relating to unit volume, pricing and other factors, including changes driven by declines in sales of personal computers and the growing popularity of tablets, and other mobile devices and the introduction of new devices into the connected home;

● Our ability to adapt to our customers’ needs in a market space defined by frequent technological change;

● The amount and timing of operating costs and capital expenditures in our business;

● Diversion of management’s attention from other business concerns, incurrence of costs and disruption of our ongoing business activities as a result of acquisitions or divestitures by us;

● Costs related to the defense and settlement of litigation which can also have an additional adverse impact on us because of negative publicity, diversion of management resources and other factors;

● Costs related to the defense and settlement of government investigations and audits which can also have an additional adverse impact on us because of negative publicity, diversion of management resources and other factors, including, without limitation, those audits and investigations described in Item 1 Legal Proceedings of this report;

● Potential losses on investments, or other losses from financial instruments we may hold that are exposed to market risk; and

● The exercise of judgment by our management in making accounting decisions in accordance with our accounting policies.

Because a small number of partners have historically accounted for, and for the foreseeable future will account for, the substantial majority of our revenue, under-performance of specific programs or loss of certain partners or programs have reduced and could continue to reduce our revenue substantially.

For the nine months ended September 30, 2017, Comcast accounted for 63% of our total revenue.For the twelve months ended December 31, 2016, Comcast and Office Depot accounted for 60% and 15%, respectively, of our revenues.  On July 28, 2017, Office Depot provided written notice of its intent not to renew the Professional Services Agreement between the Company and Office Depot dated July 26, 2007 and such Agreement will terminate on September 30, 2017.  Revenue attributed to Office Depot for 2016 was $8.9 million. Revenue attributed to Office Depot for the nine months ended September 30, 2017 was $2.9 million. The loss of these or other significant relationships, the change of the terms or terminations of our arrangements with any of these firms, the reduction or discontinuance of programs with any of these firms, or the failure of any of these firms to achieve their targets has in the past adversely affected, and could in the future adversely affect our business.  For example, we have experienced in past quarters, and may experience in future quarters, reductions in our call volume and revenue related to Comcast’s efforts to improve its Wireless Gateway customer experience.  Generally, the agreements with our partners do not require them to conduct any minimum amount of business with us, and therefore they have decided in the past and could decide at any time in the future to reduce or eliminate their programs or the use of our services in such programs. They may also enter into multi-sourcing arrangements with other vendors for services previously provided exclusively by us. Further, we may not successfully obtain new partners or customers. There is also the risk that, once established, our programs with these and other partners may take longer than we expect to produce revenue or may not produce revenue at all, and the revenue produced may not be profitable if the costs of performing under the program are greater than anticipated or the program terminates before up-front investments can be recouped. One or more of our key partners may also choose not to renew their relationship with us, discontinue certain programs, offer them only on a limited basis or devote insufficient time and attention to promoting them to their customers. Some of our key partners may prefer not to work with us if we also partner with their competitors. If any of these key partners merge with one of their competitors (as occurred with Office Depot and OfficeMax in 2013), all of these risks could be exacerbated.

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Each of these risks could reduce our sales and have a material adverse effect on our operating results. Further risks associated with the loss or decline in a significant partner are detailed in “Our failure to establish and expand successful partnerships to sell our services and products would harm our operating results” below.

Our failure to establish and expand successful partnerships to sell our services and products would harm our operating results.

Our current services business model requires us to establish and maintain relationships with partners who market and sell our services and products. Failure to establish or maintain such relationships could materially and adversely affect the success of our business. We sell to numerous customers through each of these partners, and therefore a delay in the launch or rollout of our services or the reduction or discontinuance of a program with even one of these partners may cause us to miss revenue or other financial targets. The process of establishing or renewing a relationship with a partner can be complex and time consuming, and we must pass multiple levels of review in order to be selected or renewed. If we are unable to establish a sufficient number of new partners or renewals on a timely basis our sales will suffer.

Our Support.com Cloud offering is in its early stages and failure to market, sell and develop the offering effectively and competitively could result in a lack of growth.

A number of competitive offerings exist in the market, providing various feature sets that may overlap with our Support.com Cloud offering today or in the future.  Some competitors in this market far exceed our spending on sales and marketing activities and benefit from greater existing brand awareness, channel relationships and existing customer relationships.  We may not be able to reach the market effectively and adequately or convey our differentiation as needed to grow our customer base.  To reach our target market effectively, we may be required to continue to invest substantial resources in sales and marketing and research and development activities, which could have a material adverse effect on our financial results. In addition, if we fail to develop and maintain competitive features, deliver high-quality products and satisfy existing customers, our Support.com Cloud offering could fail to grow.  Growth in Support.com Cloud license revenue also depends on scaling our multi-tenant technology flexibly and cost-effectively to meet changing customer demand.  Disruptions in infrastructure operations as described below could impair our ability to deliver our Support.com Cloud offering to customers, thereby affecting our reputation with existing and prospective customers and possibly resulting in monetary penalties or financial losses.

Our business depends on our ability to attract and retain talented employees.

Our business is based on successfully attracting and retaining talented employees. The market for highly skilled workers and leaders in our industry is extremely competitive. If we are not successful in our recruiting efforts, or if we are unable to retain key employees and executive management, particularly after our recently announced cost reduction plan, our ability to develop and deliver successful products and services may be adversely affected. Effective succession planning is also important to our long-term success. Failure to ensure effective transfer of knowledge and smooth transitions involving key employees and executive management could hinder our strategic planning and execution.

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If we fail to attract, train and manage our technology specialists in a manner that meets forecast requirements and provides an adequate level of support for our customers, our reputation and financial performance could be harmed.

Our business depends in part on our ability to attract, manage and retain our technology specialists and other support personnel. If we are unable to attract, train and manage in a cost-effective manner adequate numbers of competent technology specialists and other support personnel to be available as service volumes vary, particularly as we seek to expand the breadth and flexibility of our staffing model, our service levels could decline, which could harm our reputation, result in financial losses under contract terms, cause us to lose customers and partners, and otherwise adversely affect our financial performance. Our ability to meet our need for support personnel while controlling our labor costs is subject to numerous external factors, including the level of demand for our products and services, the availability of a sufficient number of qualified persons in the workforce, unemployment levels, prevailing wage rates, changing demographics, health and other insurance costs and the cost of compliance with labor and wage laws and regulations. In the case of programs with time-based pricing models, the impact of failing to attract, train and manage such personnel could directly and adversely affect our revenue and profitability. Although our service delivery and communications infrastructure enables us to monitor and manage technology specialists remotely, because they are typically home-based and geographically dispersed, we could experience difficulties meeting services levels and effectively managing the costs, performance and compliance of these technology specialists and other support personnel. Any problems we encounter in effectively attracting, managing and retaining our technology specialists and other support personnel could seriously jeopardize our service delivery operations and our financial results.

Changes in the market for computers and other consumer electronics and in the technology support services market could adversely affect our business.

Reductions in unit volumes of sales for computers and other devices we support, or in the prices of such equipment, could adversely affect our business. We offer both services that are attached to the sales of new computers and other devices, and services designed to fix existing computers and other devices. Declines in the unit volumes sold of these devices or declines in the pricing of such devices could adversely affect demand for our services or our revenue mix, either of which would harm our operating results. Further, we do not support all types of computers and devices, meaning that we must select and focus on certain operating systems and technology standards for computers, tablets, smart phones, and other devices.  We may not be successful in supporting new devices in the connected home and “Internet of Things,” and consumers and SMBs may prefer equipment we do not support, which may decrease the market for our services and products if customers migrate away from platforms we support.  In addition, the structures and pricing models for programs in the technology support services market may change in ways that reduce our revenues and our margins.

Our failure to effectively manage third-party service providers would harm our operating results.

We enter into relationships with third parties to provide certain elements of our service offerings. We may be less able to manage the quality of services provided by third-party service providers as directly as we would our own employees. In addition, providing these services may be more costly. We also face the risk that disruptions or delays in the communications and information technology infrastructure of these third parties could cause lengthy interruptions in the availability of our services. Any of these risks could harm our operating results.

Disruptions in our information technology and service delivery infrastructure and operations, including interruptions or delays in service from third-party web hosting providers, could impair the delivery of our services and harm our business.

We depend on the continuing operation of our information technology and communication systems and those of our third-party service providers. Any damage to or failure of those systems could result in interruptions in our service, which could reduce our revenues and damage our reputation. The technology we use to serve partners and the Support.com Cloud offering we license are hosted at a third-party facility located in the United States, and we use a separate, independent third-party facility in the United States for emergency back-up and failover services in support of the hosted site.  These two facilities are operated by unrelated publicly held companies specializing in operating such facilities, and we do not control the operation of these facilities.  These facilities may experience unplanned outages and other technical difficulties in the future, and are vulnerable to damage or interruption from fires, floods, earthquakes, telecommunications and connectivity failures, power failures, and similar events. These facilities are also subject to risks from vandalism, break-ins, intrusion, and other malicious attacks. Despite substantial precautions taken, such as disaster recovery planning and back-up procedures, a natural disaster, act of terrorism or other unanticipated problem could cause a loss of information and data and lengthy interruptions in the availability of our services and technology platform offerings, as our backup systems may not be able to meet our needs for an extended period of time. We rely on hosted systems maintained by third-party providers to deliver technology services and our Support.com Cloud service which is delivered in a “SaaS” model to customers, including taking customer orders, handling telecommunications for customer calls, tracking sales and service delivery and making platform functionality available to customers. Any interruption or failure of our internal or external systems could prevent us or our service providers from accepting orders and delivering services, or cause company and consumer data to be unintentionally disclosed. Our continuing efforts to upgrade and enhance the security and reliability of our information technology and communications infrastructure could be very costly, and we may have to expend significant resources to remedy problems such as a security breach or service interruption. Interruptions in our services resulting from labor disputes, telephone or Internet failures, power or service outages, natural disasters or other events, or a security breach could reduce our revenue, increase our costs, cause customers and partners and licensees to fail to renew or to terminate their use of our offerings, and harm our reputation and our ability to attract new customers.  We maintain insurance programs with highly rated carriers using policies that are designed for businesses in the technology sector and that expressly address, among other things, cyber-attacks and potential harm resulting from incidents such as data privacy breaches; but depending on the type of damages, the amount, and the cause, all or part of any financial losses experienced may be excluded by the policies resulting in material financial losses for us.

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We must compete successfully in the markets in which we operate or our business will suffer.

We compete in markets that are highly competitive, subject to rapid change and significantly affected by new product introductions and other market activities of industry participants. We compete with a number of companies in the markets for technology services, end-user software products and technology support software. In addition, our partners may develop similar offerings internally.

The markets for our services and software products are still rapidly evolving, and we may not be able to compete successfully against current and potential competitors. Our ability to expand our business will depend on our ability to maintain our technological advantage, introduce timely enhanced products and services to meet growing support needs, deliver on-going value to our customers, scale our business cost-effectively, and develop complimentary relationships with other companies providing services or products to our partners. Competition in our markets could reduce our market share or require us to reduce the price of products and services, which could harm our business, financial condition and operating results.

The competitors in our markets for services and software can have some or all of the following comparative advantages: longer operating histories, greater economies of scale, greater financial resources, greater engineering and technical resources, greater sales and marketing resources, stronger strategic alliances and distribution channels, lower labor costs, larger user bases, products with different functions and feature sets and greater brand recognition than we have. We expect new competitors to continue to enter the markets in which we operate.

 Our future service and product offerings may not achieve market acceptance.

If we fail to develop new and enhanced versions of our services and products in a timely manner or to provide services and products that achieve rapid and broad market acceptance, we may not maintain or expand our market share. We may fail to identify new service and product opportunities for our current market or new markets. In addition, our existing services and products may become obsolete if we fail to introduce new services and products that meet new customer demands or support new standards. While we are developing new services and products, there can be no assurance that they will be timely released or ever be completed, and if they are, that they will gain market acceptance or generate material revenue for us. We have limited control over factors that affect market acceptance of our services and products, including the willingness of partners to offer our services and products and customer preferences for competitor services, products and delivery models.

We may make acquisitions that deplete our resources and do not prove successful.

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We have made acquisitions in the past and may make additional acquisitions in the future. We may not be able to identify suitable acquisition candidates at prices we consider appropriate. If we do identify an appropriate acquisition candidate, we may not be able to successfully negotiate the terms of the acquisition. Our management may not be able to effectively implement our acquisition program and internal growth strategy simultaneously. The integration of acquisitions involves a number of risks and presents financial, managerial and operational challenges. We may have difficulty, and may incur unanticipated expenses related to, integrating management and personnel from these acquired entities with our management and personnel. Our failure to identify, consummate or integrate suitable acquisitions could adversely affect our business and results of operations. We cannot readily predict the timing, size or success of our future acquisitions. Even successful acquisitions could have the effect of reducing our cash balances. Acquisitions could involve a number of other potential risks to our business, including the following, any of which could harm our business results:

● Unanticipated costs and liabilities and unforeseen accounting charges or fluctuations;

● Delays and difficulties in delivery of services and products;

● Failure to effectively integrate or separate management information systems, personnel, research and development, marketing, sales and support operations;

● Loss of key employees;

● Economic dilution to gross and operating profit;

● Diversion of management’s attention from other business concerns and disruption of our ongoing business;

● Difficulty in maintaining controls and procedures;

● Uncertainty on the part of our existing customers about our ability to operate after a transaction;

● Loss of customers;

● Loss of partnerships;

● Inability to execute our growth plans;

● Declines in revenue and increases in losses;

● Declines in cash balances as a result of cash usage on any acquisitions;

● Failure to realize the potential financial or strategic benefits of the acquisition or divestiture; and

● Failure to successfully further develop the combined or remaining technology, resulting in the impairment of amounts recorded as goodwill or other intangible assets.

Our systems collect, access, use, and store personal customer information and enable customer transactions, which poses security risks, requires us to invest significant resources to prevent or correct problems caused by security breaches, and may harm our business.

A fundamental requirement for online communications, transactions and support is the secure collection, storage and transmission of confidential information. Our systems collect and store confidential and personal information of our individual customers as well as our partners and their customers’ users, including personally identifiable information and payment card information, and our employees and contractors may access and use that information in the course of providing services. In addition, we collect and retain personal information of our employees in the ordinary course of our business. We and our third-party contractors use commercially available technologies to secure this information. Despite these measures, parties may attempt to breach the security of our data or that of our customers. In addition, errors in the storage or transmission of data could breach the security of that information. We may be liable to our customers for any breach in security and any breach could subject us to governmental or administrative proceedings or monetary penalties, damage our relationships with partners and harm our business and reputation. Also, computers are vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which could lead to interruptions, delays or loss of data. We may be required to expend significant capital and other resources to comply with mandatory privacy and security standards required by law, industry standard, or contract, and to further protect against security breaches or to correct problems caused by any security breach.

We are exposed to risks associated with payment card and payment fraud and with payment card processing.

Certain of our customers use payment cards to pay for our services and products. We may suffer losses as a result of orders placed with fraudulent payment cards or other payment data. Our failure to detect or control payment fraud could have an adverse effect on our results of operations. We are also subject to payment card association operating standards and requirements, as in effect from time to time. Compliance with those standards requires us to invest in network and systems infrastructure and processes. Failure to comply with these rules or requirements may subject us to fines, potential contractual liabilities, and other costs, resulting in harm to our business and results of operations.

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Privacy concerns and laws or other domestic or foreign regulations may require us to incur significant costs and may reduce the effectiveness of our solutions, and our failure to comply with those laws or regulations may harm our business and cause us to lose customers.

Our software and services contain features that allow our technology specialists and other personnel to access, control, monitor and collect information from computers and other devices. Federal, state and foreign government bodies and agencies, however, have adopted or are considering adopting laws and regulations restricting or otherwise regulating the collection, use and disclosure of personal information obtained from consumers and individuals. Those regulations could require costly compliance measures, could reduce the efficiency of our operations, or could require us to modify or cease to provide our systems or services. Liability for violation of, costs of compliance with, and other burdens imposed by such laws and regulations may limit the use and adoption of our services and reduce overall demand for them. Even the perception of privacy concerns, whether or not valid, may harm our reputation and inhibit adoption of our solutions by current and future customers. In addition, we may face claims about invasion of privacy or inappropriate disclosure, use, storage, or loss of information obtained from our customers. Any imposition of liability could harm our reputation, cause us to lose customers and cause our operating results to suffer.

We rely on third-party technologies in providing certain of our software and services. Our inability to use, retain or integrate third-party technologies and relationships could delay service or software development and could harm our business.

We license technologies from third parties, which are integrated into our services, technology and end user software. Our use of commercial technologies licensed on a non-exclusive basis from third parties poses certain risks. Some of the third-party technologies we license may be provided under “open source” licenses, which may have terms that require us to make generally available our modifications or derivative works based on such open source code. Our inability to obtain or integrate third-party technologies with our own technology could delay service development until equivalent compatible technology can be identified, licensed and integrated. These third-party technologies may not continue to be available to us on commercially reasonable terms or at all. If our relationship with third parties were to deteriorate, or if such third parties were unable to develop innovative and saleable products, or component features of our products, we could be forced to identify a new developer and our future revenue could suffer. We may fail to successfully integrate any licensed technology into our services or software, or maintain it through our own development work, which would harm our business and operating results. Third-party licenses also expose us to increased risks that include:

● Risks of product malfunction after new technology is integrated;

● Risks that we may be unable to obtain or continue to obtain support, maintenance and updates from the technology supplier;

● The diversion of resources from the development of our own proprietary technology; and

● Our inability to generate revenue from new technology sufficient to offset associated acquisition and maintenance costs.

Our business operates in regulated industries.

Our current and anticipated service offerings operate in industries, such as home security, that are subject to various federal, state, provincial and local laws and regulations in the markets in which we operate.  In certain jurisdictions, we may be required to obtain licenses or permits in order to comply with standards governing employee selection and training and to meet certain standards or licensing requirements in the conduct of our business. The loss of such licenses or permits or the imposition of conditions to the granting or retention of such licenses or permits could have a material adverse effect on us.

Changes in laws or regulations could require us to change the way we operate or to utilize resources to maintain compliance, which could increase costs or otherwise disrupt operations. In addition, failure to comply with any applicable laws or regulations could result in substantial fines or revocation of our operating permits and licenses for us or our partners. If laws and regulations were to change, or if we or our products and services we deemed not to comply with them, our business, financial condition, results of operations and cash flows could be materially and adversely affected.

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In some cases, we are exposed to greater risks of liability for employee acts or omissions or system failure than may be typical in other businesses.

We expect to support, among other programs, partners offering home security services and other devices and programs for use in the connected home.  Because these services related to programs intended to help protect the lives and property, real and personal, of consumers, we may have greater exposure to liability and litigation risks than businesses that provide support for other consumer and SMB products and services.  Our ability to limit our liability for the acts or omissions of our employees in our contract terms with partners and consumers in relation to such programs may be substantially less than in other markets we serve, which is to say, we may have much greater inherent legal liability exposure in such programs than is customarily seen in programs for markets we have offered historically.  In the event of litigation with respect to such matters, it is possible that our risk-mitigationprovisions in contracts may be deemed not applicable or unenforceable exposing us to substantial liability exposure, and, regardless of the ultimate outcome, we may incur significant costs of defense that could materially and adversely affect our business, financial condition, results of operations and cash flows.

If our services are used to commit fraud or other similar intentional or illegal acts, we may incur significant liabilities, our services may be perceived as not secure and customers may curtail or stop using our services.

Certain software and services we provide, including our Support.com Cloud applications, enable remote access to and control of third-party computer systems and devices. We generally are not able to control how such access may be used or misused by licensees of our SaaS offerings. If our software is used by others to commit fraud or other illegal acts, including, but not limited to, violating data privacy laws, proliferating computer files that contain a virus or other harmful elements, interfering or disrupting third-party networks, infringing any third party’s copyright, patent, trademark, trade secret or other rights, transmitting any unlawful, harassing, libelous, abusive, threatening, vulgar, obscene or otherwise objectionable material, or committing unauthorized access to computers, devices, or protected information, third parties may seek to hold us legally liable. As a result, defending such claims could be expensive and time-consuming regardless of the merits, and we could incur significant liability or be required to undertake expensive preventive or remedial actions. As a result, our operating results may suffer and our reputation may be damaged.

We rely on intellectual property laws to protect our proprietary rights, and if these rights are not sufficiently protected or we are not able to obtain sufficient protection for our technology, it could harm our ability to compete and to generate revenue.

We rely on a combination of laws, such as those applicable to patents, copyrights, trademarks and trade secrets, and contractual restrictions, such as confidentiality agreements and licenses, to establish and protect our proprietary rights. Our ability to compete and grow our business could suffer if these rights are not adequately protected. Our proprietary rights may not be adequately protected because:

● Laws and contractual restrictions may not adequately prevent infringement of our proprietary rights and misappropriation of our technologies or deter others from developing similar technologies; and

● Policing infringement of our patents, trademarks and copyrights, misappropriation of our trade secrets, and unauthorized use of our products is difficult, expensive and time-consuming, and we may be unable to determine the existence or extent of this infringement or unauthorized use.

Intellectual property litigation is expensive and time-consuming and could divert management’s attention from our business. The outcome of any litigation is uncertain and could significantly impact our financial results. Also, the laws of other countries in which we market our products may offer little or no protection of our proprietary technologies. Reverse engineering, unauthorized copying or other misappropriation of our proprietary technologies could enable third parties to benefit from our technologies without paying us for them, which would harm our competitive position and market share.

Our success and ability to compete depend to a significant degree on the protection of our solutions and other proprietary technology. It is possible that:

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● We may not be issued patents we may seek to protect our technology;

● Competitors may independently develop similar technologies or design around any of our patents;

● Patents issued to us may not be broad enough to protect our proprietary rights; and

● Our issued patents could be successfully challenged.

We may face intellectual property infringement claims that could be costly to defend and result in our loss of significant rights.

Our business relies on the use and licensing of technology. Other parties may assert intellectual property infringement claims against us or our customers, and our products may infringe the intellectual property rights of third parties. For example, our products may infringe patents issued to third parties. In addition, as is increasingly common in the technology sector, we may be confronted with the aggressive enforcement of patents by companies whose primary business activity is to acquire patents for the purpose of offensively asserting them against other companies. From time to time, we have received allegations or claims of intellectual property infringement, and we may receive more claims in the future. We may also be required to pursue litigation to protect our intellectual property rights or defend against allegations of infringement. Intellectual property litigation is expensive and time-consuming and could divert management’s attention from our business. The outcome of any litigation is uncertain and could significantly impact our financial results. If there is a successful claim of infringement, we may be required to develop non-infringing technology or enter into royalty or license agreements, which may not be available on acceptable terms, if at all. Our failure to develop non-infringing technologies or license proprietary rights on a timely basis would harm our business.

We may face class actions and similar claims that could be costly to defend or settle and result in negative publicity and diversion of management resources.

Our business involves direct sale and licensing of services and software to consumers and SMBs, and we typically include customary indemnification provisions in favor of our partners in our agreements for the distribution of our services and software.  As a result we can be subject to consumer litigation and legal proceedings related to our services and software, including putative class action claims and similar legal actions.  As our employee count grows and consists mostly of hourly (“non-exempt”) employees working from home, we can also be subject to employee litigation and legal proceedings related to our employment practices attempted on a class or representative basis.  Such litigation can be expensive and time-consuming regardless of the merits of any action, and could divert management’s attention from our business.  The cost of defense can be large as can any settlement or judgment in an action. The outcome of any litigation is uncertain and could significantly impact our financial 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.

Delaware law and our certificate of incorporation and bylaws contain anti-takeover provisions, and our Board adopted a Section 382 Tax Benefits Preservation Plan, any of which could delay or discourage takeover attempts that some stockholders may consider favorable.

Delaware law and our certificate of incorporation and amended and restated bylaws contain certain provisions, any of which could render more difficult, or discourage a merger, tender offer, or assumption of control of the Company that is not approved by our Board of Directors that some stockholders may consider favorable.  In addition, on April 20, 2016, our Board acted to preserve the potential benefits of our NOLs from being limited pursuant to Section 382 of the Code by adopting a Section 382 Tax Benefits Preservation Plan (the “Section 382 Tax Benefits Preservation Plan”). The principal reason our Board adopted the Section 382 Tax Benefits Preservation Plan is that we believe that the NOLs are a potentially valuable asset and the Board believes it is in the Company’s best interests to attempt to protect this asset by preventing the imposition of limitations on their use. While the Section 382 Tax Benefits Preservation Plan is not principally intended to prevent a takeover, it does have a potential anti-takeover effect because an “acquiring person” thereunder may be diluted upon the occurrence of a triggering event. Accordingly, the overall effects of the Section 382 Tax Benefits Preservation Plan may be to render more difficult, or discourage a merger, tender offer, or assumption of control by a substantial holder of our securities. The Section 382 Tax Benefits Preservation Plan, however, should not interfere with any merger or other business combination approved by the Board.

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ITEM 6. EXHIBITS

10.1	Change Management Form, between Comcast and Company, signed August 10, 2017 (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on August 23, 2017)
10.2	Change Management Form to Statement of Work 3, between Comcast and Company, signed August 10, 2017 (incorporated by reference to Exhibit 10.2 of the Company’s current report on Form 8-K filed with the SEC on August 23, 2017) (1)
10.3	Letter from BDO USA, LLP dated September 15, 2017 to the Securities and Exchange Commission (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on September 18, 2017)
31.1	Chief Executive Officer Section 302 Certification
31.2	Principal Financial Officer Section 302 Certification
32.1	Statement of the Chief Executive Officer under 18 U.S.C. § 1350 (2)
32.2	Statement of the Principal Financial Officer under 18 U.S.C. § 1350 (2)

(1) Confidential treatment has been requested for portions of this exhibit.

(2) The certifications filed as Exhibits 32.1 and 32.2 are not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of the Company under the Securities Exchange Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof irrespective of any general incorporation by reference language contained in any such filing, except to the extent that the registrant specifically incorporates it by reference.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

November 9, 2017	SUPPORT.COM, INC.
	By:	/s/ Richard Bloom
		Richard Bloom
		Interim President and Chief ExecutiveOfficer

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EXHIBIT INDEX TO SUPPORT.COM, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2017

10.1	Change Management Form, between Comcast and Company, signed August 10, 2017 (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on August 23, 2017)
10.2	Change Management Form to Statement of Work 3, between Comcast and Company, signed August 10, 2017 (incorporated by reference to Exhibit 10.2 of the Company’s current report on Form 8-K filed with the SEC on August 23, 2017) (1)
10.3	Letter from BDO USA, LLP dated September 15, 2017 to the Securities and Exchange Commission (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on September 18, 2017)
31.1	Chief Executive Officer Section 302 Certification
31.2	Principal Financial Officer Section 302 Certification
32.1	Statement of the Chief Executive Officer under 18 U.S.C. § 1350 (2)
32.2	Statement of the Chief Financial Officer under 18 U.S.C. § 1350 (2)

(1) Confidential treatment has been requested for portions of this exhibit.

(2) The certifications filed as Exhibits 32.1 and 32.2 are not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of the Company under the Securities Exchange Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof irrespective of any general incorporation by reference language contained in any such filing, except to the extent that the registrant specifically incorporates it by reference.

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EX-31.1

EXHIBIT 31.1

CHIEF EXECUTIVE OFFICER SECTION 302 CERTIFICATION

I, Richard Bloom, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Support.com, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2017	By:	/s/ RICHARD BLOOM
		Richard Bloom
		Interim President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

PRINCIPAL FINANCIAL OFFICER SECTION 302 CERTIFICATION

I, Richard Bloom, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Support.com, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2017	By:	/s/ Richard Bloom
		Richard Bloom
		Principal Financial Officer

EX-32.1

EXHIBIT 32.1₍₂₎

STATEMENT OF CHIEF EXECUTIVE OFFICER UNDER 18 U.S.C. § 1350

I, Richard Bloom, the Interim President and Chief Executive Officer of Support.com, Inc. (the “Company”), certify for the purposes of section 1350 of chapter 63 of title 18 of the United States Code that, to the best of my knowledge,

(i) the Quarterly Report of the Company on Form 10-Q for the quarter ended September 30, 2017 (the “Report”), fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934, and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 9, 2017	/s/ RICHARD BLOOM
	Richard Bloom
	Interim President and Chief Executive Officer

A signed original of this written statement required by 18 U.S.C. § 1350 has been provided to Support.com, Inc. and will be retained by Support.com, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

(2) The material contained in this Exhibit 32.1 is not deemed “filed” with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing, except to the extent that the registrant specifically incorporates it by reference.

EX-32.2

EXHIBIT 32.2₍₂₎

STATEMENT OF PRINCIPAL FINANCIAL OFFICER UNDER 18 U.S.C. § 1350

I, Richard Bloom, the Principal Financial Officer of Support.com, Inc. (the “Company”), certify for the purposes of section 1350 of chapter 63 of title 18 of the United States Code that, to the best of my knowledge,

(i) the Quarterly Report of the Company on Form 10-Q for the quarter ended September 30, 2017 (the “Report”), fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934, and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 9, 2017	/s/ Richard Bloom
	Richard Bloom
	Principal Financial Officer

A signed original of this written statement required by 18 U.S.C. § 1350 has been provided to Support.com, Inc. and will be retained by Support.com, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

(2) The material contained in this Exhibit 32.2 is not deemed “filed” with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing, except to the extent that the registrant specifically incorporates it by reference.

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Oct. 31, 2017
Document and Entity Information [Abstract]
Entity Registrant Name	Support.com, Inc.
Entity Central Index Key	0001104855
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		18,713,580
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2017

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 21,254	$ 16,890
Short-term investments	28,138	36,519
Accounts receivable, net	11,755	9,567
Prepaid expenses and other current assets	646	1,211
Total current assets	61,793	64,187
Property and equipment, net	1,259	1,706
Intangible assets, net	250	266
Other assets	981	1,070
Total assets	64,283	67,229
Current liabilities:
Accounts payable	792	1,085
Accrued compensation	2,338	2,974
Other accrued liabilities	1,905	2,496
Short-term deferred revenue	2,170	2,759
Total current liabilities	7,205	9,314
Long-term deferred revenue	31	106
Other long-term liabilities	446	501
Total liabilities	7,682	9,921
Commitments and contingencies (Note 3)
Stockholders' equity:
Common stock; par value $0.0001, 50,000,000 shares authorized; 19,196,412 issued and 18,713,498 outstanding at September 30, 2017; 19,030,024 issued and 18,548,180 outstanding at December 31, 2016	2	2
Additional paid-in capital	267,722	267,400
Treasury stock, at cost (482,914 shares at September 30, 2017 and 481,844 shares at December 31, 2016)	(5,297)	(5,295)
Accumulated other comprehensive loss	(2,136)	(2,329)
Accumulated deficit	(203,690)	(202,470)
Total stockholders' equity	56,601	57,308
Total liabilities and stockholders' equity	$ 64,283	$ 67,229

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
Stockholders' equity:
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	50,000,000	50,000,000
Common stock, shares issued (in shares)	19,196,412	19,030,024
Common stock, shares outstanding (in shares)	18,713,498	18,548,180
Treasury stock (in shares)	482,914	481,844

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Revenue:
Services	$ 13,682	$ 14,163	$ 39,744	$ 43,055
Software and other	1,350	1,364	4,085	3,998
Total revenue	15,032	15,527	43,829	47,053
Cost of revenue:
Cost of services	11,559	11,847	33,760	38,403
Cost of software and other	66	120	252	377
Total cost of revenue	11,625	11,967	34,012	38,780
Gross profit	3,407	3,560	9,817	8,273
Operating expenses:
Research and development	631	1,336	2,429	4,464
Sales and marketing	621	1,463	2,011	5,401
General and administrative	1,996	2,703	6,847	10,186
Amortization of intangible assets and other	0	267	16	801
Restructuring	128	0	128	423
Total operating expenses	3,376	5,769	11,431	21,275
Income (loss) from operations	31	(2,209)	(1,614)	(13,002)
Interest income and other, net	164	124	451	383
Income (loss) from continuing operations, before income taxes	195	(2,085)	(1,163)	(12,619)
Income tax (benefit) provision	(36)	44	57	132
Income (loss) from continuing operations, after income taxes	231	(2,129)	(1,220)	(12,751)
Income from discontinued operations, after income taxes	0	0	0	284
Net income (loss)	$ 231	$ (2,129)	$ (1,220)	$ (12,467)
Basic and diluted income (loss) per share:
Income (loss) from continuing operations (in dollars per share)	$ 0.01	$ (0.12)	$ (0.07)	$ (0.69)
Income (loss) from discontinued operations (in dollars per share)	0	0	0	0.01
Basic and diluted income (loss) per share (in dollars per share)	$ 0.01	$ (0.12)	$ (0.07)	$ (0.68)
Shares used in computing basic net income (loss) per share (in shares)	18,692	18,446	18,613	18,372
Shares used in computing diluted net income (loss) per share (in shares)	18,714	18,446	18,613	18,372

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) [Abstract]
Net Income (loss)	$ 231	$ (2,129)	$ (1,220)	$ (12,467)
Change in foreign currency translation adjustment	9	25	175	(13)
Change in net unrealized gain (loss) on investments	12	(40)	18	82
Other comprehensive income (loss)	21	(15)	193	69
Comprehensive income (loss)	$ 252	$ (2,144)	$ (1,027)	$ (12,398)

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Operating Activities:
Net loss	$ (1,220)	$ (12,467)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	479	530
Amortization of premiums and discounts on investments	65	244
Amortization of intangible assets and other	16	801
Stock-based compensation	295	1,776
Changes in assets and liabilities:
Accounts receivable, net	(2,188)	(176)
Prepaid expenses and other current assets	572	122
Other long-term assets	123	(5)
Accounts payable	(292)	350
Accrued compensation	(632)	(363)
Other accrued liabilities	(585)	(1,534)
Other long-term liabilities	(48)	(324)
Deferred revenue	(664)	444
Net cash used in operating activities	(4,079)	(10,602)
Investing Activities:
Purchases of property and equipment	(32)	(481)
Purchases of investments	(14,939)	(22,901)
Maturities of investments	23,273	22,109
Net cash provided by (used in) investing activities	8,302	(1,273)
Financing Activities:
Proceeds from employee stock purchase plan	27	45
Repurchase of common stock	(2)	(72)
Net cash provided by (used in) financing activities	25	(27)
Effect of exchange rate changes on cash and cash equivalents	116	35
Net increase (decrease) in cash and cash equivalents	4,364	(11,867)
Cash and cash equivalents at beginning of period	16,890	27,598
Cash and cash equivalents at end of period	21,254	15,731
Supplemental schedule of cash flow information:
Income taxes paid	$ 85	$ 132

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Significant Accounting Policies

9 Months Ended

Sep. 30, 2017

Significant Accounting Policies [Abstract]

Significant Accounting Policies

Note 1. Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements include the accounts of Support.com, Inc. (the "Company", "Support.com", "We" or "Our") and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. The condensed consolidated balance sheet as of September 30, 2017 and the consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2017 and 2016 and the consolidated statements of cash flows for the nine months ended September 30, 2017 and 2016 are unaudited. In the opinion of management, these unaudited interim condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of the results for, and as of, the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for the full fiscal year or for any future period. The condensed consolidated balance sheet information as of December 31, 2016 is derived from audited financial statements as of that date. These financial statements have been prepared based upon Securities and Exchange Commission ("SEC") rules that permit reduced disclosure for interim periods. For a more complete discussion of significant accounting policies and certain other information, these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 7, 2017.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed 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.

Revenue Recognition

For all transactions, we recognize revenue only when all of the following criteria are met:

· Persuasive evidence of an arrangement exists;

· Delivery has occurred;

· Collection is considered probable; and

· The fees are fixed or determinable.

We consider all arrangements with payment terms longer than 90 days not to be fixed or determinable. If the fee is considered not to be fixed or determinable, revenue is recognized as payment becomes due from the customer provided all other revenue recognition criteria have been met.

Services Revenue

Services revenue is comprised primarily of fees for technology support services. Our service programs are designed for both the consumer and small and medium business ("SMB") markets, and include computer and mobile device set-up, security and support, virus and malware removal and wireless network set-up, and automation system onboarding and support.

We offer technology services to consumers and SMBs, primarily 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. Referral fees are generally expensed in the period in which revenues are recognized.  In such referral programs, since we are the primary obligor and bear substantially all risks associated with the transaction, we record the gross amount of revenue. In direct transactions, we sell directly to the customer at the retail price.

The technology services described above include three 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 specialists. These services programs also include performance standards, which may result in incentives or penalties, which are recognized as earned or incurred.

· Subscription-Based Services - 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.

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 nine months ended September 30, 2017 and 2016, services breakage revenue was less than 1% of our total revenue.

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.

We generally provide a refund period on services, during which refunds may be granted to customers under certain circumstances, including inability to resolve certain support issues. For our partnerships, the refund period varies by partner, but is generally between 5 and 14 days. For referral programs and direct transactions, the refund period is generally 5 days. For all channels, we recognize revenue net of refunds and cancellations during the period. Refunds and cancellations have not been material.

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.

Software and Other Revenue

Software and other revenue is comprised primarily of fees for end-user software products provided through direct customer downloads and through the sale of these end-user software products via partners.  Our software is sold to customers as a perpetual license or as a fixed period subscription. We act as the primary obligor and generally control fulfillment, pricing, product requirements, and collection risk and therefore we record the gross amount of revenue. We provide a 30-day money back guarantee for the majority of our end-user software products.

For certain end-user software products, we sell perpetual licenses.  We provide a limited amount of free technical support to customers. Since the cost of providing this free technical support is insignificant and free product enhancements are minimal and infrequent, we do not defer the recognition of revenue associated with sales of these products.

For certain of our end-user software products (principally SUPERAntiSpyware), we sell licenses for a fixed subscription period.  We provide regular, significant updates over the subscription period and therefore recognize revenue for these products ratably over the subscription period.

Other revenue consists primarily of revenue generated through partners advertising to our customer base in various forms, including toolbar advertising, email marketing, and free trial offers. We recognize other revenue in the period in which our partners notify us that the revenue has been earned.

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 condensed consolidated statements of operations.

Our cash equivalents and short-term investments are classified as available-for-sale, and are reported at fair value with unrealized gains/losses included in accumulated other comprehensive loss within stockholders' equity on the condensed consolidated balance sheets. We view our available-for-sale portfolio as available for use in our current operations, and therefore we present our marketable securities as short-term assets.

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, the Company's intent to sell the security and the Company's belief that it 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 September 30, 2017, we evaluated our unrealized gains/losses on available-for-sale securities 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 September 30, 2017 and December 31, 2016, the fair value of cash, cash equivalents and investments was $49.4 million and $53.4 million, respectively.

The following is a summary of cash, cash equivalents and investments at September 30, 2017 and December 31, 2016 (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
As of September 30, 2017
Cash	$	7,654	$	—	$	—		$	7,654
Money market funds		13,600		—		—			13,600
Certificates of deposit		1,211		—		(1	)		1,210
Commercial paper		997		—		—			997
Corporate notes and bonds		20,036		1		(19	)		20,018
U.S. government agency securities		5,917		—		(4	)		5,913
	$	49,415	$	1	$	(24	)	$	49,392
Classified as:
Cash and cash equivalents	$	21,254	$	—	$	—		$	21,254
Short-term investments		28,161		1		(24	)		28,138
	$	49,415	$	1	$	(24	)	$	49,392

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
As of December 31, 2016
Cash	$	7,593	$	—	$	—		$	7,593
Money market funds		9,297		—		—			9,297
Certificates of deposit		1,273		—		—			1,273
Commercial paper		4,989		—		—			4,989
Corporate notes and bonds		19,357		—		(40	)		19,317
U.S. government agency securities		10,941		1		(2	)		10,940
	$	53,450	$	1	$	(42	)	$	53,409
Classified as:
Cash and cash equivalents	$	16,890	$	—	$	—		$	16,890
Short-term investments		36,560		1		(42	)		36,519
	$	53,450	$	1	$	(42	)	$	53,409

The following table summarizes the estimated fair value of our available-for-sale securities classified by the stated maturity date of the security (in thousands):

	September 30, 2017		December 31, 2016
Due within one year	$	21,647	$	27,730
Due within two years		6,491		8,789
	$	28,138	$	36,519

Fair Value Measurements

Accounting Standards Codification ("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.

In accordance with ASC 820, 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 September 30, 2017 and December 31, 2016 (in thousands):

As of September 30, 2017	Level 1		Level 2		Level 3		Total
Money market funds	$	13,600	$	—	$	—	$	13,600
Certificates of deposit		—		1,210		—		1,210
Commercial paper		—		997		—		997
Corporate notes and bonds		—		20,018		—		20,018
U.S. government agency securities		—		5,913		—		5,913
Total	$	13,600	$	28,138	$	—	$	41,738

As of December 31, 2016	Level 1		Level 2		Level 3		Total
Money market funds	$	9,297	$	—	$	—	$	9,297
Certificates of deposit		—		1,273		—		1,273
Commercial paper		—		4,989		—		4,989
Corporate notes and bonds		—		19,317		—		19,317
U.S. government agency securities		—		10,940		—		10,940
Total	$	9,297	$	36,519	$	—	$	45,816

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 to recognize the transfer of financial instruments between levels at the end of our quarterly reporting period.

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. 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.

For the three months ended September 30, 2017, Comcast accounted for 62% of our total revenue.  For the three months ended September 30, 2016, Comcast and Office Depot accounted for 60% and 15%, respectively, of our total revenue.  For the nine months ended September 30, 2017, Comcastaccounted for 63% of our total revenue.  For the nine months ended September 30, 2016, Comcast and Office Depot accounted for 59% and 16%, respectively, of our total revenue.  There were no other customers that accounted for 10% or more of total revenue for the three and nine months ended September 30, 2017 and 2016.

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.  As of September 30, 2017 and December 31, 2016, Comcast accounted for 74% and 70% of our total accounts receivable, respectively. There were no other customers that accounted for 10% or more of our total accounts receivable as of September 30, 2017 and December 31, 2016.

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.  Reserves are made based on a specific review of all significant outstanding invoices. For those invoices not specifically provided for, reserves 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.  We had an allowance for doubtful accounts of $5,000 and $19,000 at September 30, 2017 and December 31, 2016, respectively.

Self-Funded Health Insurance

The Company maintains a self-funded health insurance program with a stop-loss umbrella policy with a third party insurer to limit the maximum potential liability for medical claims. With respect to this program, the Company considers historical and projected medical utilization data when estimating its health insurance program liability and related expense. As of September 30, 2017, the Company had approximately $711,000 in reserve for its self-funded health insurance program. As of December 31, 2016, the Company had approximately $911,000 in reserve for its self-funded health insurance program. The reserve is included in "other accrued liabilities" in the condensed consolidated balance sheets.

The Company regularly analyzes its reserves for incurred but not reported claims and for reported but not paid claims related to its self-funded insurance program. The Company believes its reserves are adequate. However, significant judgment is involved in assessing these reserves such as assessing historical paid claims, average lags between the claims' incurred date, reported dates and paid dates, and the frequency and severity of claims. There may be differences between actual settlement amounts and recorded reserves and any resulting adjustments are included in expense once a probable amount is known.

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, which relate entirely to accumulated foreign currency translation losses associated with our foreign subsidiaries and unrealized losses on investments, consisted of the following (in thousands):

	Foreign Currency Translation Losses			Unrealized Losses on Investments			Total
Balance as of December 31, 2016	$	(2,288	)	$	(41	)	$	(2,329	)
Current-period other comprehensive income		175			18			193
Balance as of September 30, 2017	$	(2,113	)	$	(23	)	$	(2,136	)

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.

The amounts noted in the condensed consolidated statements of comprehensive loss are shown before taking into account the related income tax impact.  The income tax effect allocated to each component of other comprehensive loss for each of the periods presented is not significant.

Stock-Based Compensation

We apply the provisions of ASC 718, Compensation - Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based payment awards, including grants of stock, restricted stock awards and options to purchase stock, made to employees and directors based on estimated fair values.

The fair value of our stock-based awards was estimated using the following weighted average assumptions for the three and nine months ended September 30, 2017 and 2016. There were no stock option grants during the three month period ended September 30, 2017.

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017				2016
Stock Option Plan:
Risk-free interest rate		—		0.99	%			1.43	%			0.92	%
Expected term		—	3.90 years			3.58 years				3.89 years
Volatility		—		48.89	%			46.21	%			48.34	%
Expected dividend		—		0	%			0	%			0	%
Weighted average fair value (per share)		—	$	0.99			$	0.96			$	0.96

	Three Months Ended September 30,								Nine Months Ended September 30,
	2017				2016				2017				2016
Employee Stock Purchase Plan:
Risk-free interest rate			1.02	%			0.38	%			1.02	%			0.38	%
Expected term	0.5 years				0.5 years				0.5 years				0.5 years
Volatility			33.66	%			48.86	%			33.66	%			48.86	%
Expected dividend			0	%			0	%			0	%			0	%
Weighted average fair value (per share)		$	.59			$	0.84			$	.59			$	0.84

We recorded the following stock-based compensation expense for the three and nine months ended September 30, 2017 and 2016 (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017		2016
Stock-based compensation expense related to grants of:
Stock options	$	27		$	266	$	86	$	679
Employee Stock Purchase Plan ("ESPP")		5			10		16		32
Restricted Stock Units ("RSU")		(4	)		385		193		1,065
	$	28		$	661	$	295	$	1,776
Stock-based compensation expense recognized in:
Cost of services	$	19		$	43	$	83	$	134
Cost of software and other		—			1		3		4
Research and development		(18	)		156		62		346
Sales and marketing		12			79		34		121
General and administrative		15			382		113		1,171
	$	28		$	661	$	295	$	1,776

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed using our net income (loss) and the weighted average number of common shares outstanding during the reporting period. Diluted earnings (loss) per share is computed using our net income (loss) and the weighted average number of common shares outstanding, including the effect of the potential issuance of common stock such as stock issuable pursuant to the exercise of stock options and warrants and vesting of RSUs using the treasury stock method when dilutive. 

The following table sets forth the computation of basic and diluted loss per share (in thousands, except per share amounts):

	Three Months					Nine Months
	Ended					Ended
	September 30,					September 30,
	2017		2016			2017			2016
Net income (loss)	$	231	$	(2,129	)	$	(1,220	)	$	(12,467	)
Basic:
Weighted-average shares of common stock outstanding		18,692		18,446			18,613			18,372
Shares used in computing basic income (loss) per share		18,692		18,446			18,613			18,372
Basic income (loss) per share		0.01		(0.12	)		(0.07	)		(0.69	)
Diluted:
Weighted-average shares of common stock outstanding		18,692		18,446			18,613			18,372
Add: Common equivalent shares outstanding		22		-			-			-
Shares used in computing diluted income (loss) per share		18,714		18,446			18,613			18,372
Diluted income (loss) per share	$	0.01	$	(0.12	)	$	(0.07	)	$	(0.69	)

The following potential common shares outstanding were excluded from the computation of diluted loss per share because including them would have been antidilutive (in thousands):

	As of September 30,
	2017		2016
Stock options		417		4,475
RSUs		-		1,375
Warrants		-		324
Total common share equivalents		417		6,174

Warranties and Indemnifications

We generally provide a refund period on sales, during which refunds may be granted to consumers under certain circumstances, including our inability to resolve certain support issues.  For our partnerships, the refund period varies by partner, but is generally between 5-14 days.  For referral programs and direct transactions, the refund period is generally 5 days.  For the majority of our end-user software products, we provide a 30-day money back guarantee. For all channels, we recognize revenue net of refunds and cancellations during the period.  Refunds and cancellations have not been material to date.

We generally agree to indemnify our customers against legal claims that our end-user software products infringe certain third-party intellectual property rights.  As of September 30, 2017, we have not been required to make any payment resulting from infringement claims asserted against our customers and have not recorded any related accruals.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which provides guidance for revenue recognition and has been further clarified and amended in 2015 and 2016. ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to customers at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current U.S. GAAP. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.  ASU 2014-09 is effective in the first quarter of 2018.  Early adoption is permitted although the Company does not intend to early adopt the standard.  In adopting ASU 2014-09, companies may use either a full retrospective approach or a modified retrospective approach.  Under the modified retrospective approach, the Company would not restate the prior financial statements presented. This guidance requires a company to provide additional disclosures of the amount by which each financial statement line item is affected in the current reporting period during 2018 as compared to the guidance that was in effect before the change, and an explanation of the reasons for significant changes, if any.  The Company has selected the modified retrospective transition method and is currently evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes (Topic 740), which simplifies the presentation of deferred income taxes. Under ASU 2015-17, deferred tax assets and liabilities are required to be classified as noncurrent, eliminating the prior requirement to separate deferred tax assets and liabilities into current and noncurrent. The new guidance is effective for the Company beginning on January 1, 2017.  The adoption of ASU 2015-17 did not have a material effect on our consolidated financial statements or disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which provides guidance for accounting for leases. Under ASU 2016-02, the Company will be required to recognize the assets and liabilities for the rights and obligations created by leased assets. ASU 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We are currently evaluating the impact of the adoption of ASU 2016-02 on our consolidated financial statements. While we have not yet quantified the impact, we may be required to recognize certain assets and liabilities for our leases which would result in a change to interest expense and depreciation and amortization expenses while reducing rent expense upon adoption.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting which includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. Excess tax benefits for share-based payments will be recorded as a reduction of income taxes and reflected in operating cash flows upon the adoption of this ASU. Excess tax benefits were previously recorded in equity and as financing activity under the prior rules. ASU 2016-09 is effective for annual and interim reporting periods beginning after December 15, 2016. The adoption of ASU 2016-09 did not have a material effect on our consolidated financial statements or disclosures.

In October 2016, the FASB issued ASU No. 2016-16,  Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory (Topic 740),which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transaction occurs as opposed to deferring tax consequences and amortizing them into future periods. This update is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. A modified retrospective approach with a cumulative-effect adjustment directly to retained earnings at the beginning of the period of adoption is required. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial position or results of operations.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations – Clarifying the Definition of a Business (Topic 805), with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The new guidance is effective for annual and interim periods beginning after December 15, 2017. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial position and results of operations.

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Income Taxes

9 Months Ended

Sep. 30, 2017

Income Taxes [Abstract]

Income Taxes

Note 2. Income Taxes

We recorded an income tax provision (benefit) of $(36,000) and $57,000 for the three and nine months ended September 30, 2017, respectively.  We recorded an income tax provision of $44,000 and $132,000 for the three and nine months ended September 30, 2016, respectively.  The provision (benefit) for income taxes is comprised of estimates of current taxes due in domestic and foreign jurisdictions as well as changes in tax reserves.  This provision (benefit) reflects tax expense associated with state income tax and foreign taxes as well as a release of a tax reserve.

As of September 30, 2017, our deferred tax assets are fully offset by a valuation allowance except in those jurisdictions where it is determined that a valuation allowance is not required. ASC 740, Income Taxes, provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Based upon the weight of available evidence, which includes historical operating performance, reported cumulative net losses since inception and difficulty in accurately forecasting our future results, we provided a full valuation allowance against our net U.S. deferred tax assets and a partial valuation allowance against our foreign deferred tax assets.  We reassess the need for our valuation allowance on a quarterly basis. If it is later determined that a portion or all of the valuation allowance is not required, it generally will be a benefit to the income tax provision in the period such determination is made.

During Q1 2016, ASC 740-10 reserves and related interest were released in the amount of $284,000 due to the expiration of statutes which resulted in a tax benefit to discontinued operations.

The Company anticipates a material change of $134,000 in the total amount of its unrecognized tax benefits within 12 months of September 30, 2017.  The change is expected to result from a refund of all withholding taxes and interest paid to the Canadian Revenue Agency (CRA) relating to an intercompany receivable that had existed on our Canadian subsidiary's books but was subsequently repaid.  The refund is expected once CRA has processed the Company's previously submitted voluntary disclosure.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 3. Commitments and Contingencies

Legal contingencies

On October 11, 2016, the Wage and Hour Division of the U.S. Department of Labor (the "DOL") notified the Company that it would be conducting an audit of the Company relating to compliance with the Fair Labor Standards Act ("FLSA").  The DOL has indicated that the focus of the audit is directed to compliance with overtime requirements related to our technology specialists who work from home providing technical support services.  The audit commenced on October 20, 2016, and is ongoing as of the date of this report.  While a loss may be reasonably possible, an estimate of loss, if any, cannot reasonably be determined as of the date of this report. On January 24, 2017, the DOL notified the Company that it would be conducting an audit of the Company relating to compliance with the Family and Medical Leave Act of 1993.  As of the date of this report, the audit has not commenced and on May 5, 2017 the DOL verbally notified the Company that it would not proceed with such audit.

On December 20, 2016, the Federal Trade Commission ("FTC") issued a Civil Investigative Demand to the Company requiring the Company to produce certain documents and materials and to answer certain interrogatories relating to PC Healthcheck, a software program provided by the Company to certain third parties.  The FTC has not alleged a factual basis underlying the issuance of the Civil Investigative Demand. On January 17, 2017, the Consumer Protection Division of the Office of Attorney General, State of Washington ("Washington AG"), issued a Civil Investigative Demand to the Company requiring the Company to produce certain documents and materials and to answer certain interrogatories relating to PC Healthcheck.  The Washington AG has not alleged a factual basis underlying the issuance of the Civil Investigative Demand. On May 30, 2017, the Consumer Protection Division of the Office of Attorney General, State of Texas ("Texas AG"), issued a Civil Investigative Demand to the Company requiring the Company to produce certain documents and materials and to answer certain interrogatories relating to PC Healthcheck.  The Texas AG has not alleged a factual basis underlying the issuance of the Civil Investigative Demand. The Company is in the process of responding to these Civil Investigative Demands and cooperating with the FTC, Washington AG and Texas AG with respect to these matters.

We are also subject to other routine legal proceedings, as well as demands, claims and threatened litigation, that arise in the normal course of our business, potentially including assertions that we may be infringing patents or other intellectual property rights of others. We currently do not believe that the ultimate amount of liability, if any, for any pending claims of any type (alone or combined) will materially affect our financial position, results of operations or cash flows. The ultimate outcome of any litigation is uncertain, however, 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.

Guarantees

We have identified guarantees in accordance with ASC 450, Contingencies. This guidance stipulates that an entity must recognize an initial liability for the fair value, or market value, of the obligation it assumes under the guarantee at the time it issues such a guarantee, and must disclose that information in its interim and annual financial statements. We have entered into various service level agreements with our partners, in which we may guarantee the maintenance of certain service level thresholds. Under some circumstances, if we do not meet these thresholds, we may be liable for certain financial costs. We evaluate costs for such guarantees under the provisions of ASC 450. We consider such factors as the degree of probability that we would be required to satisfy the liability associated with the guarantee and the ability to make a reasonable estimate of the resulting cost. During the nine months ended September 30, 2017, we did not incur any costs as a result of such obligations. We have not accrued any liabilities related to such obligations in the condensed consolidated financial statements as of September 30, 2017 and December 31, 2016.

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Intangible Assets

9 Months Ended

Sep. 30, 2017

Intangible Assets [Abstract]

Intangible Assets

Note 4.  Intangible Assets

The Company amortizes intangible assets, which consist of purchased technologies that have estimated useful lives ranging from 1 to 6 years, using the straight-line method when the consumption pattern of the asset is not apparent. The Company reviews such assets for impairment whenever an impairment indicator exists and continually monitors events and changes in circumstances that could indicate carrying amounts of the intangible assets may not be recoverable. When such events or changes in circumstances occur, the Company assesses recoverability by determining whether the carrying value of such assets exceed the estimates of future undiscounted future cash flows expected to be generated by such assets. Should impairment exist, the impairment loss would be measured based on the excess carrying value of the asset over the asset's estimated fair value. There was no impairment of intangible assets recorded for the nine months ended September 30, 2017.

Amortization of intangible assets and other for the three and nine months ended September 30, 2017 was zero and $16,000 respectively.  Amortization of intangible assets and other for the three and nine months ended September 30, 2016 was $267,000 and $801,000, respectively.

The following table summarizes the components of intangible assets (in thousands):

	Non- compete			Partner Relationships			Customer Base			Technology Rights			Tradenames			Indefinite  Life Intangibles		Total
As of September 30, 2017
Gross carrying value	$	593		$	145		$	641		$	5,330		$	760		$	250	$	7,719
Accumulated amortization		(593	)		(145	)		(641	)		(5,330	)		(760	)		—		(7,469	)
Net carrying value	$	—		$	—		$	—		$	—		$	—		$	250	$	250
As of December 31, 2016
Gross carrying value	$	593		$	145		$	641		$	5,330		$	760		$	250	$	7,719
Accumulated amortization		(581	)		(145	)		(637	)		(5,330	)		(760	)		—		(7,453	)
Net carrying value	$	12		$	—		$	4		$	—		$	—		$	250	$	266

In December 2006, we acquired the use of a toll-free telephone number for cash consideration of $250,000.  This asset has an indefinite useful life.

As of September 30, 2017, all intangible assets have been fully amortized with the exception of the indefinite-life intangibles.

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Other Accrued Liabilities

9 Months Ended

Sep. 30, 2017

Other Accrued Liabilities [Abstract]

Other Accrued Liabilities

Note 5. Other Accrued Liabilities

Other accrued liabilities consist of the following (in thousands):

	September 30, 2017		December 31, 2016
Accrued expenses	$	999	$	842
Self-insurance accruals		711		911
Customer deposits		—		556
Restructuring obligations		71		81
Other accrued liabilities		124		106
Total other accrued liabilities	$	1,905	$	2,496

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Stockholder's Equity

9 Months Ended

Sep. 30, 2017

Stockholder's Equity [Abstract]

Stockholders' Equity

Note 6. Stockholder's Equity

Stock Options

The following table represents the stock option activity for the nine months ended September 30, 2017:

	Number of Shares			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding options at December 31, 2016		1,381,843		$	5.88		4.95	$	50
Granted		2,000		$	2.57
Exercised		—			—
Forfeited		(966,751	)	$	6.03
Outstanding options at September 30, 2017		417,092		$	5.50		6.03	$	0
Options vested and expected to vest		405,254		$	5.58		5.95	$	0
Exercisable at September 30, 2017		267,171		$	7.08		4.57	$	0

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value that would have been received by the option holders had they all exercised their options on September 30, 2017.  This amount changes based on the fair market value of our stock.  The aggregate intrinsic value of options exercised under our stock option plans was zero during the three and nine months ended September 30, 2017, and zero during the three and nine months ended September 30, 2016.  Total fair value of options vested was $36,000 and $169,000 during the three and nine months ended September 30, 2017, respectively, and $270,000 and $689,000 during the three and nine months ended September 30, 2016, respectively.

At September 30, 2017, there was $135,000 of unrecognized compensation cost related to existing options outstanding which is expected to be recognized over a weighted average period of 2.1 years.

During the first quarter of 2017, as a result of the resignation of the Company's Chief Financial Officer (CFO), 50,000 total market-based stock options granted in 2014 and 2016 were forfeited.  Previously recognized Stock-based compensation expense of approximately $58,000 was reversed in Q1 2017, related to the portion of those market-based grants unvested at the time of the CFO's resignation.

Employee Stock Purchase Plan

In the second quarter of 2011, to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward eligible employees and by motivating such persons to contribute to the growth and profitability of the Company, the Company's Board of Directors (the "Board") and stockholders approved an ESPP and reserved 333,333 shares of our common stock for issuance effective as of May 15, 2011. The ESPP continues in effect for ten (10) years from its effective date unless terminated earlier by the Company. The ESPP consists of six-month offering periods during which employees may enroll in the plan.  The purchase price on each purchase date shall 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.  During the nine months ended September 30, 2017, 14,542 shares were purchased under ESPP.

Restricted Stock Units

The following table represents RSU activity for the nine months ended September 30, 2017:

	Number of Shares			Weighted Average Grant-Date Fair Value per Share		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding RSUs at December 31, 2016		351,921		$	4.59		1.06	$	908
Awarded		102,880		$	2.43
Released		(151,886	)	$	3.41
Forfeited		(146,165	)	$	6.01
Outstanding RSUs at September 30, 2017		156,750		$	3.00		0.95	$	368

At September 30, 2017, there was $203,000 of unrecognized compensation cost related to RSUs which is expected to be recognized over a weighted average period of 1.1 years.

Stock Repurchase Program

On April 27, 2005, our Board authorized the repurchase of up to 666,666 outstanding shares of our common stock.  As of September 30, 2017 the maximum number of shares remaining that can be repurchased under this program was 602,467.  The Company does not intend to repurchase shares without further approval from its Board.

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Restructuring Obligations and Charges

9 Months Ended

Sep. 30, 2017

Restructuring Obligations and Charges [Abstract]

Restructuring Obligations and Charges

Note 7. Restructuring Obligations and Charges

Severance

For the three and nine months ended September 30, 2017, the Company recorded $86,000 of severance and benefit related costs, included in restructuring costs in the condensed consolidated statement of operations, related to cost reduction efforts, principally in the Company's subsidiary India office.  As of September 30, 2017, $57,000 of these costs have been paid and $29,000 of unpaid costs are included in accrued liabilities in the condensed consolidated balance sheet.

Relocation

For the three and nine months ended September 30, 2017, the Company recorded $42,000 of relocation costs included in restructuring related costs in the condensed consolidated statement of operations, related to the relocation of several employees from the Company's subsidiary India office to US corporate headquarters.  As of September 30, 2017, none of these costs have been paid and $42,000 of remaining unpaid costs are included in accrued liabilities in the condensed consolidated balance sheet.

The Company expects the remaining $71,000 of relocation and severance obligations to be fully paid by December 31, 2017.

	Relocation		Severance			Total
Restructuring obligations, June 30, 2017		-		-			-
Restructuring costs incurred		42,000		86,000			128,000
Cash payments		-		(57,000	)		(57,000	)
Restructuring obligations, September 30, 2017		42,000		29,000			71,000

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Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2017

Significant Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements include the accounts of Support.com, Inc. (the "Company", "Support.com", "We" or "Our") and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. The condensed consolidated balance sheet as of September 30, 2017 and the consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2017 and 2016 and the consolidated statements of cash flows for the nine months ended September 30, 2017 and 2016 are unaudited. In the opinion of management, these unaudited interim condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of the results for, and as of, the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for the full fiscal year or for any future period. The condensed consolidated balance sheet information as of December 31, 2016 is derived from audited financial statements as of that date. These financial statements have been prepared based upon Securities and Exchange Commission ("SEC") rules that permit reduced disclosure for interim periods. For a more complete discussion of significant accounting policies and certain other information, these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 7, 2017.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed 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.

Revenue Recognition

Revenue Recognition

For all transactions, we recognize revenue only when all of the following criteria are met:

· Persuasive evidence of an arrangement exists;

· Delivery has occurred;

· Collection is considered probable; and

· The fees are fixed or determinable.

We consider all arrangements with payment terms longer than 90 days not to be fixed or determinable. If the fee is considered not to be fixed or determinable, revenue is recognized as payment becomes due from the customer provided all other revenue recognition criteria have been met.

Services Revenue

Services revenue is comprised primarily of fees for technology support services. Our service programs are designed for both the consumer and small and medium business ("SMB") markets, and include computer and mobile device set-up, security and support, virus and malware removal and wireless network set-up, and automation system onboarding and support.

We offer technology services to consumers and SMBs, primarily 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. Referral fees are generally expensed in the period in which revenues are recognized.  In such referral programs, since we are the primary obligor and bear substantially all risks associated with the transaction, we record the gross amount of revenue. In direct transactions, we sell directly to the customer at the retail price.

The technology services described above include three 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 specialists. These services programs also include performance standards, which may result in incentives or penalties, which are recognized as earned or incurred.

· Subscription-Based Services - 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.

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 nine months ended September 30, 2017 and 2016, services breakage revenue was less than 1% of our total revenue.

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.

We generally provide a refund period on services, during which refunds may be granted to customers under certain circumstances, including inability to resolve certain support issues. For our partnerships, the refund period varies by partner, but is generally between 5 and 14 days. For referral programs and direct transactions, the refund period is generally 5 days. For all channels, we recognize revenue net of refunds and cancellations during the period. Refunds and cancellations have not been material.

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.

Software and Other Revenue

Software and other revenue is comprised primarily of fees for end-user software products provided through direct customer downloads and through the sale of these end-user software products via partners.  Our software is sold to customers as a perpetual license or as a fixed period subscription. We act as the primary obligor and generally control fulfillment, pricing, product requirements, and collection risk and therefore we record the gross amount of revenue. We provide a 30-day money back guarantee for the majority of our end-user software products.

For certain end-user software products, we sell perpetual licenses.  We provide a limited amount of free technical support to customers. Since the cost of providing this free technical support is insignificant and free product enhancements are minimal and infrequent, we do not defer the recognition of revenue associated with sales of these products.

For certain of our end-user software products (principally SUPERAntiSpyware), we sell licenses for a fixed subscription period.  We provide regular, significant updates over the subscription period and therefore recognize revenue for these products ratably over the subscription period.

Other revenue consists primarily of revenue generated through partners advertising to our customer base in various forms, including toolbar advertising, email marketing, and free trial offers. We recognize other revenue in the period in which our partners notify us that the revenue has been earned.

Cash, Cash Equivalents and Investments

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 condensed consolidated statements of operations.

Our cash equivalents and short-term investments are classified as available-for-sale, and are reported at fair value with unrealized gains/losses included in accumulated other comprehensive loss within stockholders' equity on the condensed consolidated balance sheets. We view our available-for-sale portfolio as available for use in our current operations, and therefore we present our marketable securities as short-term assets.

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, the Company's intent to sell the security and the Company's belief that it 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 September 30, 2017, we evaluated our unrealized gains/losses on available-for-sale securities 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 September 30, 2017 and December 31, 2016, the fair value of cash, cash equivalents and investments was $49.4 million and $53.4 million, respectively.

The following is a summary of cash, cash equivalents and investments at September 30, 2017 and December 31, 2016 (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
As of September 30, 2017
Cash	$	7,654	$	—	$	—		$	7,654
Money market funds		13,600		—		—			13,600
Certificates of deposit		1,211		—		(1	)		1,210
Commercial paper		997		—		—			997
Corporate notes and bonds		20,036		1		(19	)		20,018
U.S. government agency securities		5,917		—		(4	)		5,913
	$	49,415	$	1	$	(24	)	$	49,392
Classified as:
Cash and cash equivalents	$	21,254	$	—	$	—		$	21,254
Short-term investments		28,161		1		(24	)		28,138
	$	49,415	$	1	$	(24	)	$	49,392

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
As of December 31, 2016
Cash	$	7,593	$	—	$	—		$	7,593
Money market funds		9,297		—		—			9,297
Certificates of deposit		1,273		—		—			1,273
Commercial paper		4,989		—		—			4,989
Corporate notes and bonds		19,357		—		(40	)		19,317
U.S. government agency securities		10,941		1		(2	)		10,940
	$	53,450	$	1	$	(42	)	$	53,409
Classified as:
Cash and cash equivalents	$	16,890	$	—	$	—		$	16,890
Short-term investments		36,560		1		(42	)		36,519
	$	53,450	$	1	$	(42	)	$	53,409

The following table summarizes the estimated fair value of our available-for-sale securities classified by the stated maturity date of the security (in thousands):

	September 30, 2017		December 31, 2016
Due within one year	$	21,647	$	27,730
Due within two years		6,491		8,789
	$	28,138	$	36,519

Fair Value Measurements

Fair Value Measurements

Accounting Standards Codification ("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.

In accordance with ASC 820, 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 September 30, 2017 and December 31, 2016 (in thousands):

As of September 30, 2017	Level 1		Level 2		Level 3		Total
Money market funds	$	13,600	$	—	$	—	$	13,600
Certificates of deposit		—		1,210		—		1,210
Commercial paper		—		997		—		997
Corporate notes and bonds		—		20,018		—		20,018
U.S. government agency securities		—		5,913		—		5,913
Total	$	13,600	$	28,138	$	—	$	41,738

As of December 31, 2016	Level 1		Level 2		Level 3		Total
Money market funds	$	9,297	$	—	$	—	$	9,297
Certificates of deposit		—		1,273		—		1,273
Commercial paper		—		4,989		—		4,989
Corporate notes and bonds		—		19,317		—		19,317
U.S. government agency securities		—		10,940		—		10,940
Total	$	9,297	$	36,519	$	—	$	45,816

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 to recognize the transfer of financial instruments between levels at the end of our quarterly reporting period.

Concentrations of Credit Risk

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. 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.

For the three months ended September 30, 2017, Comcast accounted for 62% of our total revenue.  For the three months ended September 30, 2016, Comcast and Office Depot accounted for 60% and 15%, respectively, of our total revenue.  For the nine months ended September 30, 2017, Comcastaccounted for 63% of our total revenue.  For the nine months ended September 30, 2016, Comcast and Office Depot accounted for 59% and 16%, respectively, of our total revenue.  There were no other customers that accounted for 10% or more of total revenue for the three and nine months ended September 30, 2017 and 2016.

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.  As of September 30, 2017 and December 31, 2016, Comcast accounted for 74% and 70% of our total accounts receivable, respectively. There were no other customers that accounted for 10% or more of our total accounts receivable as of September 30, 2017 and December 31, 2016.

Trade Accounts Receivable and Allowance for Doubtful Accounts

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.  Reserves are made based on a specific review of all significant outstanding invoices. For those invoices not specifically provided for, reserves 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.  We had an allowance for doubtful accounts of $5,000 and $19,000 at September 30, 2017 and December 31, 2016, respectively.

Self-Funded Health Insurance

Self-Funded Health Insurance

The Company maintains a self-funded health insurance program with a stop-loss umbrella policy with a third party insurer to limit the maximum potential liability for medical claims. With respect to this program, the Company considers historical and projected medical utilization data when estimating its health insurance program liability and related expense. As of September 30, 2017, the Company had approximately $711,000 in reserve for its self-funded health insurance program. As of December 31, 2016, the Company had approximately $911,000 in reserve for its self-funded health insurance program. The reserve is included in "other accrued liabilities" in the condensed consolidated balance sheets.

The Company regularly analyzes its reserves for incurred but not reported claims and for reported but not paid claims related to its self-funded insurance program. The Company believes its reserves are adequate. However, significant judgment is involved in assessing these reserves such as assessing historical paid claims, average lags between the claims' incurred date, reported dates and paid dates, and the frequency and severity of claims. There may be differences between actual settlement amounts and recorded reserves and any resulting adjustments are included in expense once a probable amount is known.

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, which relate entirely to accumulated foreign currency translation losses associated with our foreign subsidiaries and unrealized losses on investments, consisted of the following (in thousands):

	Foreign Currency Translation Losses			Unrealized Losses on Investments			Total
Balance as of December 31, 2016	$	(2,288	)	$	(41	)	$	(2,329	)
Current-period other comprehensive income		175			18			193
Balance as of September 30, 2017	$	(2,113	)	$	(23	)	$	(2,136	)

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.

The amounts noted in the condensed consolidated statements of comprehensive loss are shown before taking into account the related income tax impact.  The income tax effect allocated to each component of other comprehensive loss for each of the periods presented is not significant.

Stock-Based Compensation

Stock-Based Compensation

We apply the provisions of ASC 718, Compensation - Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based payment awards, including grants of stock, restricted stock awards and options to purchase stock, made to employees and directors based on estimated fair values.

The fair value of our stock-based awards was estimated using the following weighted average assumptions for the three and nine months ended September 30, 2017 and 2016. There were no stock option grants during the three month period ended September 30, 2017.

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017				2016
Stock Option Plan:
Risk-free interest rate		—		0.99	%			1.43	%			0.92	%
Expected term		—	3.90 years			3.58 years				3.89 years
Volatility		—		48.89	%			46.21	%			48.34	%
Expected dividend		—		0	%			0	%			0	%
Weighted average fair value (per share)		—	$	0.99			$	0.96			$	0.96

	Three Months Ended September 30,								Nine Months Ended September 30,
	2017				2016				2017				2016
Employee Stock Purchase Plan:
Risk-free interest rate			1.02	%			0.38	%			1.02	%			0.38	%
Expected term	0.5 years				0.5 years				0.5 years				0.5 years
Volatility			33.66	%			48.86	%			33.66	%			48.86	%
Expected dividend			0	%			0	%			0	%			0	%
Weighted average fair value (per share)		$	.59			$	0.84			$	.59			$	0.84

We recorded the following stock-based compensation expense for the three and nine months ended September 30, 2017 and 2016 (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017		2016
Stock-based compensation expense related to grants of:
Stock options	$	27		$	266	$	86	$	679
Employee Stock Purchase Plan ("ESPP")		5			10		16		32
Restricted Stock Units ("RSU")		(4	)		385		193		1,065
	$	28		$	661	$	295	$	1,776
Stock-based compensation expense recognized in:
Cost of services	$	19		$	43	$	83	$	134
Cost of software and other		—			1		3		4
Research and development		(18	)		156		62		346
Sales and marketing		12			79		34		121
General and administrative		15			382		113		1,171
	$	28		$	661	$	295	$	1,776

Earnings (Loss) Per Share

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed using our net income (loss) and the weighted average number of common shares outstanding during the reporting period. Diluted earnings (loss) per share is computed using our net income (loss) and the weighted average number of common shares outstanding, including the effect of the potential issuance of common stock such as stock issuable pursuant to the exercise of stock options and warrants and vesting of RSUs using the treasury stock method when dilutive. 

The following table sets forth the computation of basic and diluted loss per share (in thousands, except per share amounts):

	Three Months					Nine Months
	Ended					Ended
	September 30,					September 30,
	2017		2016			2017			2016
Net income (loss)	$	231	$	(2,129	)	$	(1,220	)	$	(12,467	)
Basic:
Weighted-average shares of common stock outstanding		18,692		18,446			18,613			18,372
Shares used in computing basic income (loss) per share		18,692		18,446			18,613			18,372
Basic income (loss) per share		0.01		(0.12	)		(0.07	)		(0.69	)
Diluted:
Weighted-average shares of common stock outstanding		18,692		18,446			18,613			18,372
Add: Common equivalent shares outstanding		22		-			-			-
Shares used in computing diluted income (loss) per share		18,714		18,446			18,613			18,372
Diluted income (loss) per share	$	0.01	$	(0.12	)	$	(0.07	)	$	(0.69	)

The following potential common shares outstanding were excluded from the computation of diluted loss per share because including them would have been antidilutive (in thousands):

	As of September 30,
	2017		2016
Stock options		417		4,475
RSUs		-		1,375
Warrants		-		324
Total common share equivalents		417		6,174

Warranties and Indemnifications

Warranties and Indemnifications

We generally provide a refund period on sales, during which refunds may be granted to consumers under certain circumstances, including our inability to resolve certain support issues.  For our partnerships, the refund period varies by partner, but is generally between 5-14 days.  For referral programs and direct transactions, the refund period is generally 5 days.  For the majority of our end-user software products, we provide a 30-day money back guarantee. For all channels, we recognize revenue net of refunds and cancellations during the period.  Refunds and cancellations have not been material to date.

We generally agree to indemnify our customers against legal claims that our end-user software products infringe certain third-party intellectual property rights.  As of September 30, 2017, we have not been required to make any payment resulting from infringement claims asserted against our customers and have not recorded any related accruals.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which provides guidance for revenue recognition and has been further clarified and amended in 2015 and 2016. ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to customers at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current U.S. GAAP. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.  ASU 2014-09 is effective in the first quarter of 2018.  Early adoption is permitted although the Company does not intend to early adopt the standard.  In adopting ASU 2014-09, companies may use either a full retrospective approach or a modified retrospective approach.  Under the modified retrospective approach, the Company would not restate the prior financial statements presented. This guidance requires a company to provide additional disclosures of the amount by which each financial statement line item is affected in the current reporting period during 2018 as compared to the guidance that was in effect before the change, and an explanation of the reasons for significant changes, if any.  The Company has selected the modified retrospective transition method and is currently evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes (Topic 740), which simplifies the presentation of deferred income taxes. Under ASU 2015-17, deferred tax assets and liabilities are required to be classified as noncurrent, eliminating the prior requirement to separate deferred tax assets and liabilities into current and noncurrent. The new guidance is effective for the Company beginning on January 1, 2017.  The adoption of ASU 2015-17 did not have a material effect on our consolidated financial statements or disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which provides guidance for accounting for leases. Under ASU 2016-02, the Company will be required to recognize the assets and liabilities for the rights and obligations created by leased assets. ASU 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We are currently evaluating the impact of the adoption of ASU 2016-02 on our consolidated financial statements. While we have not yet quantified the impact, we may be required to recognize certain assets and liabilities for our leases which would result in a change to interest expense and depreciation and amortization expenses while reducing rent expense upon adoption.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting which includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. Excess tax benefits for share-based payments will be recorded as a reduction of income taxes and reflected in operating cash flows upon the adoption of this ASU. Excess tax benefits were previously recorded in equity and as financing activity under the prior rules. ASU 2016-09 is effective for annual and interim reporting periods beginning after December 15, 2016. The adoption of ASU 2016-09 did not have a material effect on our consolidated financial statements or disclosures.

In October 2016, the FASB issued ASU No. 2016-16,  Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory (Topic 740),which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transaction occurs as opposed to deferring tax consequences and amortizing them into future periods. This update is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. A modified retrospective approach with a cumulative-effect adjustment directly to retained earnings at the beginning of the period of adoption is required. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial position or results of operations.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations – Clarifying the Definition of a Business (Topic 805), with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The new guidance is effective for annual and interim periods beginning after December 15, 2017. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial position and results of operations.

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Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2017

Significant Accounting Policies [Abstract]

Summary of Cash, Cash Equivalents and Investments

The following is a summary of cash, cash equivalents and investments at September 30, 2017 and December 31, 2016 (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
As of September 30, 2017
Cash	$	7,654	$	—	$	—		$	7,654
Money market funds		13,600		—		—			13,600
Certificates of deposit		1,211		—		(1	)		1,210
Commercial paper		997		—		—			997
Corporate notes and bonds		20,036		1		(19	)		20,018
U.S. government agency securities		5,917		—		(4	)		5,913
	$	49,415	$	1	$	(24	)	$	49,392
Classified as:
Cash and cash equivalents	$	21,254	$	—	$	—		$	21,254
Short-term investments		28,161		1		(24	)		28,138
	$	49,415	$	1	$	(24	)	$	49,392

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
As of December 31, 2016
Cash	$	7,593	$	—	$	—		$	7,593
Money market funds		9,297		—		—			9,297
Certificates of deposit		1,273		—		—			1,273
Commercial paper		4,989		—		—			4,989
Corporate notes and bonds		19,357		—		(40	)		19,317
U.S. government agency securities		10,941		1		(2	)		10,940
	$	53,450	$	1	$	(42	)	$	53,409
Classified as:
Cash and cash equivalents	$	16,890	$	—	$	—		$	16,890
Short-term investments		36,560		1		(42	)		36,519
	$	53,450	$	1	$	(42	)	$	53,409

Summary of Estimated Fair Value of Available-for-sale Securities Classified by Stated Maturity Date

The following table summarizes the estimated fair value of our available-for-sale securities classified by the stated maturity date of the security (in thousands):

	September 30, 2017		December 31, 2016
Due within one year	$	21,647	$	27,730
Due within two years		6,491		8,789
	$	28,138	$	36,519

Financial Assets (Cash Equivalents and Investments) Measured at Fair Value on Recurring Basis

In accordance with ASC 820, 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 September 30, 2017 and December 31, 2016 (in thousands):

As of September 30, 2017	Level 1		Level 2		Level 3		Total
Money market funds	$	13,600	$	—	$	—	$	13,600
Certificates of deposit		—		1,210		—		1,210
Commercial paper		—		997		—		997
Corporate notes and bonds		—		20,018		—		20,018
U.S. government agency securities		—		5,913		—		5,913
Total	$	13,600	$	28,138	$	—	$	41,738

As of December 31, 2016	Level 1		Level 2		Level 3		Total
Money market funds	$	9,297	$	—	$	—	$	9,297
Certificates of deposit		—		1,273		—		1,273
Commercial paper		—		4,989		—		4,989
Corporate notes and bonds		—		19,317		—		19,317
U.S. government agency securities		—		10,940		—		10,940
Total	$	9,297	$	36,519	$	—	$	45,816

Components of Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, which relate entirely to accumulated foreign currency translation losses associated with our foreign subsidiaries and unrealized losses on investments, consisted of the following (in thousands):

	Foreign Currency Translation Losses			Unrealized Losses on Investments			Total
Balance as of December 31, 2016	$	(2,288	)	$	(41	)	$	(2,329	)
Current-period other comprehensive income		175			18			193
Balance as of September 30, 2017	$	(2,113	)	$	(23	)	$	(2,136	)

Fair Value of Stock-based Awards Valuation Assumptions

The fair value of our stock-based awards was estimated using the following weighted average assumptions for the three and nine months ended September 30, 2017 and 2016. There were no stock option grants during the three month period ended September 30, 2017.

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017				2016
Stock Option Plan:
Risk-free interest rate		—		0.99	%			1.43	%			0.92	%
Expected term		—	3.90 years			3.58 years				3.89 years
Volatility		—		48.89	%			46.21	%			48.34	%
Expected dividend		—		0	%			0	%			0	%
Weighted average fair value (per share)		—	$	0.99			$	0.96			$	0.96

	Three Months Ended September 30,								Nine Months Ended September 30,
	2017				2016				2017				2016
Employee Stock Purchase Plan:
Risk-free interest rate			1.02	%			0.38	%			1.02	%			0.38	%
Expected term	0.5 years				0.5 years				0.5 years				0.5 years
Volatility			33.66	%			48.86	%			33.66	%			48.86	%
Expected dividend			0	%			0	%			0	%			0	%
Weighted average fair value (per share)		$	.59			$	0.84			$	.59			$	0.84

Stock-based Compensation Expense

We recorded the following stock-based compensation expense for the three and nine months ended September 30, 2017 and 2016 (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017		2016
Stock-based compensation expense related to grants of:
Stock options	$	27		$	266	$	86	$	679
Employee Stock Purchase Plan ("ESPP")		5			10		16		32
Restricted Stock Units ("RSU")		(4	)		385		193		1,065
	$	28		$	661	$	295	$	1,776
Stock-based compensation expense recognized in:
Cost of services	$	19		$	43	$	83	$	134
Cost of software and other		—			1		3		4
Research and development		(18	)		156		62		346
Sales and marketing		12			79		34		121
General and administrative		15			382		113		1,171
	$	28		$	661	$	295	$	1,776

Computation of Basic and Diluted Net Earnings (Loss) per Share

The following table sets forth the computation of basic and diluted loss per share (in thousands, except per share amounts):

	Three Months					Nine Months
	Ended					Ended
	September 30,					September 30,
	2017		2016			2017			2016
Net income (loss)	$	231	$	(2,129	)	$	(1,220	)	$	(12,467	)
Basic:
Weighted-average shares of common stock outstanding		18,692		18,446			18,613			18,372
Shares used in computing basic income (loss) per share		18,692		18,446			18,613			18,372
Basic income (loss) per share		0.01		(0.12	)		(0.07	)		(0.69	)
Diluted:
Weighted-average shares of common stock outstanding		18,692		18,446			18,613			18,372
Add: Common equivalent shares outstanding		22		-			-			-
Shares used in computing diluted income (loss) per share		18,714		18,446			18,613			18,372
Diluted income (loss) per share	$	0.01	$	(0.12	)	$	(0.07	)	$	(0.69	)

Potential Common Shares Outstanding Excluded from Computation of Diluted Loss per Share

The following potential common shares outstanding were excluded from the computation of diluted loss per share because including them would have been antidilutive (in thousands):

	As of September 30,
	2017		2016
Stock options		417		4,475
RSUs		-		1,375
Warrants		-		324
Total common share equivalents		417		6,174

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Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2017

Intangible Assets [Abstract]

Summary of Components of Intangible Assets

The following table summarizes the components of intangible assets (in thousands):

	Non- compete			Partner Relationships			Customer Base			Technology Rights			Tradenames			Indefinite  Life Intangibles		Total
As of September 30, 2017
Gross carrying value	$	593		$	145		$	641		$	5,330		$	760		$	250	$	7,719
Accumulated amortization		(593	)		(145	)		(641	)		(5,330	)		(760	)		—		(7,469	)
Net carrying value	$	—		$	—		$	—		$	—		$	—		$	250	$	250
As of December 31, 2016
Gross carrying value	$	593		$	145		$	641		$	5,330		$	760		$	250	$	7,719
Accumulated amortization		(581	)		(145	)		(637	)		(5,330	)		(760	)		—		(7,453	)
Net carrying value	$	12		$	—		$	4		$	—		$	—		$	250	$	266

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Other Accrued Liabilities (Tables)

9 Months Ended

Sep. 30, 2017

Other Accrued Liabilities [Abstract]

Other Accrued Liabilities

Other accrued liabilities consist of the following (in thousands):

	September 30, 2017		December 31, 2016
Accrued expenses	$	999	$	842
Self-insurance accruals		711		911
Customer deposits		—		556
Restructuring obligations		71		81
Other accrued liabilities		124		106
Total other accrued liabilities	$	1,905	$	2,496

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Stockholder's Equity (Tables)

9 Months Ended

Sep. 30, 2017

Stockholder's Equity [Abstract]

Summary of Stock Option Activity

The following table represents the stock option activity for the nine months ended September 30, 2017:

	Number of Shares			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding options at December 31, 2016		1,381,843		$	5.88		4.95	$	50
Granted		2,000		$	2.57
Exercised		—			—
Forfeited		(966,751	)	$	6.03
Outstanding options at September 30, 2017		417,092		$	5.50		6.03	$	0
Options vested and expected to vest		405,254		$	5.58		5.95	$	0
Exercisable at September 30, 2017		267,171		$	7.08		4.57	$	0

Summary of Restricted Stock Units Activity

The following table represents RSU activity for the nine months ended September 30, 2017:

	Number of Shares			Weighted Average Grant-Date Fair Value per Share		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding RSUs at December 31, 2016		351,921		$	4.59		1.06	$	908
Awarded		102,880		$	2.43
Released		(151,886	)	$	3.41
Forfeited		(146,165	)	$	6.01
Outstanding RSUs at September 30, 2017		156,750		$	3.00		0.95	$	368

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Restructuring Obligations and Charges (Tables)

9 Months Ended

Sep. 30, 2017

Restructuring Obligations and Charges [Abstract]

Restructuring Obligations

The Company expects the remaining $71,000 of relocation and severance obligations to be fully paid by December 31, 2017.

	Relocation		Severance			Total
Restructuring obligations, June 30, 2017		-		-			-
Restructuring costs incurred		42,000		86,000			128,000
Cash payments		-		(57,000	)		(57,000	)
Restructuring obligations, September 30, 2017		42,000		29,000			71,000

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Significant Accounting Policies, Revenue Recognition (Details) - Type	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Deferred Revenue Arrangement [Line Items]
Payment terms for arrangements to be considered fixed or determinable	90 days
Number of types of offerings	3
Maximum [Member]
Deferred Revenue Arrangement [Line Items]
Services breakage revenue	1.00%	1.00%
End-User Software Products [Member]
Deferred Revenue Arrangement [Line Items]
Refund period	30 days
Partnerships [Member] | Minimum [Member]
Deferred Revenue Arrangement [Line Items]
Refund period	5 days
Partnerships [Member] | Maximum [Member]
Deferred Revenue Arrangement [Line Items]
Refund period	14 days
Referral Programs and Direct Transactions [Member]
Deferred Revenue Arrangement [Line Items]
Refund period	5 days

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Significant Accounting Policies, Cash, Cash Equivalents and Investments (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Available-for-sale Securities, Fair Value to Amortized Cost Basis [Abstract]
Amortized cost	$ 49,415	$ 53,450
Gross unrealized gains	1	1
Gross unrealized losses	(24)	(42)
Fair value	49,392	53,409
Short-term Investments [Member]
Available-for-sale Securities, Fair Value to Amortized Cost Basis [Abstract]
Amortized cost	28,161	36,560
Gross unrealized gains	1	1
Gross unrealized losses	(24)	(42)
Fair value	28,138	36,519
Commercial Paper [Member]
Available-for-sale Securities, Fair Value to Amortized Cost Basis [Abstract]
Amortized cost	997	4,989
Gross unrealized gains	0	0
Gross unrealized losses	0	0
Fair value	997	4,989
Corporate Notes and Bonds [Member]
Available-for-sale Securities, Fair Value to Amortized Cost Basis [Abstract]
Amortized cost	20,036	19,357
Gross unrealized gains	1	0
Gross unrealized losses	(19)	(40)
Fair value	20,018	19,317
U.S. Government Agency Securities [Member]
Available-for-sale Securities, Fair Value to Amortized Cost Basis [Abstract]
Amortized cost	5,917	10,941
Gross unrealized gains	0	1
Gross unrealized losses	(4)	(2)
Fair value	5,913	10,940
Cash and Cash Equivalents [Member]
Available-for-sale Securities, Fair Value to Amortized Cost Basis [Abstract]
Amortized cost	21,254	16,890
Gross unrealized gains	0	0
Gross unrealized losses	0	0
Fair value	21,254	16,890
Cash [Member]
Available-for-sale Securities, Fair Value to Amortized Cost Basis [Abstract]
Amortized cost	7,654	7,593
Gross unrealized gains	0	0
Gross unrealized losses	0	0
Fair value	7,654	7,593
Money Market Funds [Member]
Available-for-sale Securities, Fair Value to Amortized Cost Basis [Abstract]
Amortized cost	13,600	9,297
Gross unrealized gains	0	0
Gross unrealized losses	0	0
Fair value	13,600	9,297
Certificates of Deposit [Member]
Available-for-sale Securities, Fair Value to Amortized Cost Basis [Abstract]
Amortized cost	1,211	1,273
Gross unrealized gains	0	0
Gross unrealized losses	(1)	0
Fair value	$ 1,210	$ 1,273

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Significant Accounting Policies, Investment Maturity (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Summary of estimated fair value of available-for-sale securities classified by stated maturity date [Abstract]
Due within one year	$ 21,647	$ 27,730
Due within two years	6,491	8,789
Total fair value	$ 28,138	$ 36,519

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Significant Accounting Policies, Fair Value Measurements (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	$ 49,392	$ 53,409
Recurring [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	41,738	45,816
Recurring [Member] | Level 1 [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	13,600	9,297
Recurring [Member] | Level 2 [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	28,138	36,519
Recurring [Member] | Level 3 [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	0	0
Recurring [Member] | Money Market Funds [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	13,600	9,297
Recurring [Member] | Money Market Funds [Member] | Level 1 [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	13,600	9,297
Recurring [Member] | Money Market Funds [Member] | Level 2 [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	0	0
Recurring [Member] | Money Market Funds [Member] | Level 3 [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	0	0
Recurring [Member] | Certificates of Deposit [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	1,210	1,273
Recurring [Member] | Certificates of Deposit [Member] | Level 1 [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	0	0
Recurring [Member] | Certificates of Deposit [Member] | Level 2 [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	1,210	1,273
Recurring [Member] | Certificates of Deposit [Member] | Level 3 [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	0	0
Recurring [Member] | Commercial Paper [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	997	4,989
Recurring [Member] | Commercial Paper [Member] | Level 1 [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	0	0
Recurring [Member] | Commercial Paper [Member] | Level 2 [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	997	4,989
Recurring [Member] | Commercial Paper [Member] | Level 3 [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	0	0
Recurring [Member] | Corporate Notes and Bonds [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	20,018	19,317
Recurring [Member] | Corporate Notes and Bonds [Member] | Level 1 [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	0	0
Recurring [Member] | Corporate Notes and Bonds [Member] | Level 2 [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	20,018	19,317
Recurring [Member] | Corporate Notes and Bonds [Member] | Level 3 [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	0	0
Recurring [Member] | U.S. Government Agency Securities [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	5,913	10,940
Recurring [Member] | U.S. Government Agency Securities [Member] | Level 1 [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	0	0
Recurring [Member] | U.S. Government Agency Securities [Member] | Level 2 [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	5,913	10,940
Recurring [Member] | U.S. Government Agency Securities [Member] | Level 3 [Member]
Fair value hierarchy for financial assets measured at fair value [Abstract]
Fair value for financial assets	$ 0	$ 0

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Significant Accounting Policies, Concentrations of Credit Risk, Revenue (Details) - Revenue [Member] - Customer Concentration Risk [Member]	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Comcast [Member]
Concentration Risk [Line Items]
Customer concentration risk	62.00%	60.00%	63.00%	59.00%
Office Depot [Member]
Concentration Risk [Line Items]
Customer concentration risk		15.00%		16.00%

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Significant Accounting Policies, Concentrations of Credit Risk, Accounts Receivable (Details)	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Trade Accounts Receivable [Member] | Customer Concentration Risk [Member] | Comcast [Member]
Concentration Risk [Line Items]
Customer concentration risk	74.00%	70.00%

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Significant Accounting Policies, Trade Accounts Receivable and Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Receivables [Abstract]
Allowance for doubtful accounts	$ 5	$ 19

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Significant Accounting Policies, Self-Funded Health Insurance (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Self-Funded Health Insurance [Abstract]
Reserve for self-funded health insurance program	$ 711	$ 911

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Significant Accounting Policies, Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Components of accumulated other comprehensive loss [Roll Forward]
Balance, beginning of period			$ 57,308
Current-period other comprehensive income	$ 21	$ (15)	193	$ 69
Balance, end of period	56,601		56,601
Accumulated Other Comprehensive Loss [Member]
Components of accumulated other comprehensive loss [Roll Forward]
Balance, beginning of period			(2,329)
Balance, end of period	(2,136)		(2,136)
Foreign Currency Translation Losses [Member]
Components of accumulated other comprehensive loss [Roll Forward]
Balance, beginning of period			(2,288)
Current-period other comprehensive income			175
Balance, end of period	(2,113)		(2,113)
Unrealized Losses on Investments [Member]
Components of accumulated other comprehensive loss [Roll Forward]
Balance, beginning of period			(41)
Current-period other comprehensive income			18
Balance, end of period	$ (23)		$ (23)

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Significant Accounting Policies, Fair Value of Stock-based Awards Valuation Assumptions (Details) - $ / shares	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Stock Options [Member]
Weighted average assumptions used for estimating fair value of stock-based awards [Abstract]
Risk-free interest rate	0.00%	0.99%	1.43%	0.92%
Expected term	0 years	3 years 10 months 24 days	3 years 6 months 29 days	3 years 10 months 20 days
Volatility	0.00%	48.89%	46.21%	48.34%
Expected dividend	0.00%	0.00%	0.00%	0.00%
Weighted average fair value (per share) (in dollars per share)	$ 0	$ 0.99	$ 0.96	$ 0.96
Employee Stock Purchase Plan ("ESPP") [Member]
Weighted average assumptions used for estimating fair value of stock-based awards [Abstract]
Risk-free interest rate	1.02%	0.38%	1.02%	0.38%
Expected term	6 months	6 months	6 months	6 months
Volatility	33.66%	48.86%	33.66%	48.86%
Expected dividend	0.00%	0.00%	0.00%	0.00%
Weighted average fair value (per share) (in dollars per share)	$ 0.59	$ 0.84	$ 0.59	$ 0.84

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Significant Accounting Policies, Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	$ 28	$ 661	$ 295	$ 1,776
Cost of Services [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	19	43	83	134
Cost of Software and Other [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	0	1	3	4
Research and Development [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	(18)	156	62	346
Sales and Marketing [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	12	79	34	121
General and Administrative [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	15	382	113	1,171
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	27	266	86	679
Employee Stock Purchase Plan ("ESPP") [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	5	10	16	32
Restricted Stock Units ("RSU") [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	$ (4)	$ 385	$ 193	$ 1,065

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Significant Accounting Policies, Earnings (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Earnings (loss) per share [Abstract]
Net Income (loss)	$ 231	$ (2,129)	$ (1,220)	$ (12,467)
Basic [Abstract]
Weighted-average shares of common stock outstanding (in shares)	18,692	18,446	18,613	18,372
Shares used in computing basic income (loss) per share (in shares)	18,692	18,446	18,613	18,372
Basic income (loss) per share (in dollars per share)	$ 0.01	$ (0.12)	$ (0.07)	$ (0.69)
Diluted [Abstract]
Weighted-average shares of common stock outstanding (in shares)	18,692	18,446	18,613	18,372
Add: Common equivalent shares outstanding (in shares)	22	0	0	0
Shares used in computing diluted income (loss) per share (in shares)	18,714	18,446	18,613	18,372
Diluted income (loss) per share (in dollars per share)	$ 0.01	$ (0.12)	$ (0.07)	$ (0.69)
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potential common shares outstanding excluded from computation of diluted loss per share (in shares)			417	6,174
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potential common shares outstanding excluded from computation of diluted loss per share (in shares)			417	4,475
Restricted Stock Units (RSUs) [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potential common shares outstanding excluded from computation of diluted loss per share (in shares)			0	1,375
Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potential common shares outstanding excluded from computation of diluted loss per share (in shares)			0	324

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Significant Accounting Policies, Warranties and Indemnifications (Details)	9 Months Ended
	Sep. 30, 2017
End-User Software Products [Member]
Product Warranty Liability [Line Items]
Refund period	30 days
Partnerships [Member] | Minimum [Member]
Product Warranty Liability [Line Items]
Refund period	5 days
Partnerships [Member] | Maximum [Member]
Product Warranty Liability [Line Items]
Refund period	14 days
Referral Programs and Direct Transactions [Member]
Product Warranty Liability [Line Items]
Refund period	5 days

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Mar. 31, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Taxes [Abstract]
Income tax provision (benefit)	$ (36)	$ 44		$ 57	$ 132
Reserves and related interest released due to expiration of statues			$ 284
Unrecognized tax benefits	$ 134			$ 134

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Intangible Assets (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	Dec. 31, 2006	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Finite-Lived Intangible Assets [Line Items]
Impairment of intangible assets				$ 0
Amortization of intangible assets and other		$ 0	$ 267	16	$ 801
Finite-lived intangible assets [Abstract]
Accumulated amortization		(7,469)		(7,469)		$ (7,453)
Indefinite life intangible assets [Abstract]
Gross carrying value		250		250		250
Net carrying value		250		250		250
Intangible assets, total [Abstract]
Gross carrying value		7,719		7,719		7,719
Accumulated amortization		(7,469)		(7,469)		(7,453)
Net carrying value		250		250		266
Indefinite life intangibles acquired	$ 250
Non-compete [Member]
Finite-lived intangible assets [Abstract]
Gross carrying value		593		593		593
Accumulated amortization		(593)		(593)		(581)
Net carrying value		0		0		12
Intangible assets, total [Abstract]
Accumulated amortization		(593)		(593)		(581)
Partner Relationships [Member]
Finite-lived intangible assets [Abstract]
Gross carrying value		145		145		145
Accumulated amortization		(145)		(145)		(145)
Net carrying value		0		0		0
Intangible assets, total [Abstract]
Accumulated amortization		(145)		(145)		(145)
Customer Base [Member]
Finite-lived intangible assets [Abstract]
Gross carrying value		641		641		641
Accumulated amortization		(641)		(641)		(637)
Net carrying value		0		0		4
Intangible assets, total [Abstract]
Accumulated amortization		(641)		(641)		(637)
Technology Rights [Member]
Finite-lived intangible assets [Abstract]
Gross carrying value		5,330		5,330		5,330
Accumulated amortization		(5,330)		(5,330)		(5,330)
Net carrying value		0		0		0
Intangible assets, total [Abstract]
Accumulated amortization		(5,330)		(5,330)		(5,330)
Tradenames [Member]
Finite-lived intangible assets [Abstract]
Gross carrying value		760		760		760
Accumulated amortization		(760)		(760)		(760)
Net carrying value		0		0		0
Intangible assets, total [Abstract]
Accumulated amortization		$ (760)		$ (760)		$ (760)
Minimum [Member] | Purchased Technology [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated useful life				1 year
Maximum [Member] | Purchased Technology [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated useful life				6 years

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Other Accrued Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Other Accrued Liabilities [Abstract]
Accrued expenses	$ 999	$ 842
Self-insurance accruals	711	911
Customer deposits	0	556
Restructuring obligations	71	81
Other accrued liabilities	124	106
Total other accrued liabilities	$ 1,905	$ 2,496

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Stockholder's Equity, Stock Options (Details) - Stock Options [Member] - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended			9 Months Ended		12 Months Ended
	Sep. 30, 2017	Mar. 31, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Stock option activity, number of shares [Roll Forward]
Outstanding options, beginning of period (in shares)		1,381,843		1,381,843
Granted (in shares)				2,000
Exercised (in shares)				0
Forfeited (in shares)				(966,751)
Outstanding options, end of period (in shares)	417,092			417,092		1,381,843
Options vested and expected to vest (in shares)	405,254			405,254
Exercisable (in shares)	267,171			267,171
Weighted average exercise price per share [Roll Forward]
Outstanding options, beginning of period (in dollars per share)		$ 5.88		$ 5.88
Granted (in dollars per share)				2.57
Exercised (in dollars per share)				0
Forfeited (in dollars per share)				6.03
Outstanding options, end of period (in dollars per share)	$ 5.50			5.50		$ 5.88
Options vested and expected to vest (in dollars per share)	5.58			5.58
Exercisable (in dollars per share)	$ 7.08			$ 7.08
Additional disclosures [Abstract]
Options outstanding, weighted average remaining contractual term				6 years 11 days		4 years 11 months 12 days
Options vested and expected to vest, weighted average remaining contractual term				5 years 11 months 12 days
Options exercisable, weighted average remaining contractual term				4 years 6 months 25 days
Options outstanding, aggregate intrinsic value	$ 0			$ 0		$ 50
Options vested and expected to vest, aggregate intrinsic value	0			0
Options exercisable, aggregate intrinsic value	0			0
Options exercised in period, aggregate intrinsic value	0		$ 0	0	$ 0
Fair value of options vested	36		$ 270	169	$ 689
Compensation cost not yet recognized [Abstract]
Unrecognized compensation cost related to stock options	$ 135			$ 135
Weighted average period of recognition for unrecognized compensation cost				2 years 1 month 6 days
Chief Financial Officer [Member]
Stock option activity, number of shares [Roll Forward]
Forfeited (in shares)		(50,000)
Compensation cost not yet recognized [Abstract]
Reversal of previously recorded stock based compensation expense		$ 58

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Stockholder's Equity, Employee Stock Purchase Plan (Details) - Employee Stock Purchase Plan ("ESPP") [Member] - shares	3 Months Ended	9 Months Ended
	Jun. 30, 2011	Sep. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares reserved for issuance (in shares)	333,333
Term for employee stock purchase plan		10 years
Offering period of employee stock purchase plan		6 months
Minimum percentage of fair market value of the specified conditions used to determine purchase price of ESPP	85.00%
Employee stock purchase plan, shares purchased (in shares)		14,542

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Stockholder's Equity, Restricted Stock Units (Details) - Restricted Stock Units ("RSUs") [Member] $ / shares in Units, $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2017 USD ($) $ / shares shares	Dec. 31, 2016 USD ($) $ / shares shares
Restricted stock units, number of shares [Roll Forward]
Outstanding RSUs, beginning of period (in shares) | shares	351,921
Awarded (in shares) | shares	102,880
Released (in shares) | shares	(151,886)
Forfeited (in shares) | shares	(146,165)
Outstanding RSUs, end of period (in shares) | shares	156,750	351,921
Restricted stock units, weighted average grant-date fair value [Roll forward]
Outstanding RSUs, beginning of period (in dollars per share) | $ / shares	$ 4.59
Awarded (in dollars per share) | $ / shares	2.43
Released (in dollars per share) | $ / shares	3.41
Forfeited (in dollars per share) | $ / shares	6.01
Outstanding RSUs, end of period (in dollars per share) | $ / shares	$ 3.00	$ 4.59
Restricted stock units, additional disclosures [Abstract]
Outstanding RSUs, weighted average remaining contractual term	11 months 12 days	1 year 22 days
Outstanding RSUs, aggregate intrinsic value | $	$ 368	$ 908
Compensation cost not yet recognized [Abstract]
Unrecognized compensation cost related to restricted stock units | $	$ 203
Weighted average period of recognition for unrecognized compensation cost	1 year 1 month 6 days

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Stockholder's Equity, Stock Repurchase Program and Treasury Stock (Details) - shares	Sep. 30, 2017	Apr. 27, 2005
Stock Repurchase Program [Abstract]
Stock repurchase program, number of shares authorized to be repurchased (in shares)		666,666
Stock repurchase program, remaining number of shares authorized to be repurchased (in shares)	602,467

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Restructuring Obligations and Charges (Details)	3 Months Ended
	Sep. 30, 2017 USD ($)
Restructuring Reserve [Roll Forward]
Restructuring obligations, beginning of period	$ 0
Restructuring costs incurred	128,000
Cash payments	(57,000)
Restructuring obligations, end of period	71,000
Relocation [Member]
Restructuring Reserve [Roll Forward]
Restructuring obligations, beginning of period	0
Restructuring costs incurred	42,000
Cash payments	0
Restructuring obligations, end of period	42,000
Severance [Member]
Restructuring Reserve [Roll Forward]
Restructuring obligations, beginning of period	0
Restructuring costs incurred	86,000
Cash payments	(57,000)
Restructuring obligations, end of period	$ 29,000