This section and other parts of this Quarterly Report on Form 10-Q may contain
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements provide current
expectations of future events based on certain assumptions regarding our
business and future performance. Such forward-looking statements are based on
information that involve a number of uncertainties and risks that may cause
actual events or results to differ materially from those indicated by such
forward-looking statements. 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. We undertake no obligation to publicly update or
revise any forward-looking statement, whether as a result of new information,
future events or otherwise, except as required by law. We caution and advise
readers that these statements are based on assumptions that may not be realized
and involve risks and uncertainties that could cause actual results to differ
materially from the expectations and beliefs contained herein. For a summary of
these risks, see the risk factors included in our Annual Report on Form 10-K for
the year ended
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 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
OVERVIEW
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 quarter to quarter, and the primary factors that accounted for those changes, as well as how certain accounting principles, policies and estimates affect our consolidated financial statements.
21 Table of Contents RECENT DEVELOPMENTS Merger
As previously disclosed, on
The Merger is subject to certain closing conditions, including the Stockholder
Approval. A special meeting of stockholders of the Company has been scheduled
for
Since the announcement of the Merger, six complaints have been filed by alleged
individual stockholders of the Company against the Company, the individual
directors of the Company and, in two of the cases, Greenidge and Merger Sub, in
various
RESULTS OF OPERATIONS
Three and Six Months Ended
REVENUE 22 Table of Contents Three Months Ended June 30, 2021 2020 $ Change % Change In thousands, except percentages Services$ 7,979 $ 10,606 $ (2,627 ) -25 % Software and other 533 428 105 25 % Total revenue$ 8,512 $ 11,034 $ (2,522 ) Six Months Ended June 30, 2021 2020 $ Change % Change In thousands, except percentages Services$ 17,117 $ 22,117 $ (5,000 ) -23 % Software and other 1,026 866 160 18 % Total revenue$ 18,143 $ 22,983 $ (4,840 )
Services. Service revenue consists primarily of fees for customer support services generated from our partners. We provide these services remotely, generally using service delivery personnel who utilize our proprietary technology to deliver the services. Service revenue also includes licensing of our Support.com Cloud applications.
Service revenue for the three months ended
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 six months ended
23 Table of Contents COST OF REVENUE Three Months Ended June 30, 2021 2020 $ Change % Change In thousands, except percentages Cost of services$ 5,401 $ 7,136 $ (1,735 ) -24 % Cost of software and other 91 36 55 153 % Total cost of revenue$ 5,492 $ 7,172 $ (1,680 ) Six Months Ended June 30, 2021 2020 $ Change % Change In thousands, except percentages Cost of services$ 11,406 $ 14,821 $ (3,415 ) -23 % Cost of software and other 181 65 116 178 % Total cost of revenue$ 11,587 $ 14,886 $ (3,299 )
Cost of services. Cost of services consists primarily of compensation costs and
contractor expenses for people providing services, technology and
telecommunication expenses related to the delivery of services and other
personnel-related expenses in service delivery. The decreases of
Cost of software and other. Cost of software and other consists primarily of
third-party royalty fees for our end-user software products. Certain of these
products were developed using third-party research and development resources,
and the third party receives royalty payments on sales of products it developed.
Software and other costs increased
OPERATING EXPENSES Three Months Ended June 30, 2021 2020 $ Change % Change In thousands, except percentages Engineering and IT$ 555 $ 968 $ (413 ) -43 % Sales and marketing 334 517 (183 ) -35 % General and administrative 2,980 1,904 1,076 57 % Total operating expenses$ 3,869 $ 3,389 $ 480 24 Table of Contents Six Months Ended June 30, 2021 2020 $ Change % Change In thousands, except percentages Engineering and IT$ 1,479 $ 2,008 $ (529 ) -26 % Sales and marketing 759 1,330 (571 ) -43 % General and administrative 7,186 3,957 3,229 82 % Total operating expenses$ 9,424 $ 7,295 $ 2,129
Engineering and IT. Engineering and IT expense consists primarily of
compensation costs, third-party consulting expenses and related overhead costs
for engineering and IT personnel and are expensed as they are incurred.
Engineering and IT costs for the three months ended
Sales and marketing. Sales and marketing expense consists primarily of
compensation costs of business development, program management and marketing
personnel, as well as expenses for lead generation and promotional activities,
including public relations, website design, advertising and marketing. Sales and
marketing costs for the three months ended
General and administrative. General and administrative expense consists
primarily of compensation costs and related overhead costs for administrative
personnel and professional fees for legal, accounting and other professional
services. General and administrative costs for the three months ended
INTEREST INCOME AND OTHER, NET
Three Months Ended June 30, 2021 2020 $ Change % Change In thousands, except percentages Interest income and other, net$ 75 $ 173 $ (98 ) -57 % Six Months Ended June 30, 2021 2020 $ Change % Change In thousands, except percentages Interest income and other, net$ 117 $ 257 $ (140 ) -54 %
Interest income and other, net. Interest income and other, net consists
primarily of interest income on our cash, cash equivalents and short-term
investments. Interest income and other, net for the three months ended
25 Table of Contents INCOME TAX PROVISION Three Months Ended June 30, 2021 2020 $ Change % Change In thousands, except percentages Income tax provision$ 25 $ 29 $ (4 ) -14 % Six Months Ended June 30, 2021 2020 $ Change % Change In thousands, except percentages Income tax provision$ 42 $ 78 $ (36 ) -46 %
Income tax provision. For the three and six months ended
LIQUIDITY AND CAPITAL RESOURCES
Total cash, cash equivalents and investments at
Operating Activities
Net cash provided by operating activities was
Net cash provided by operating activities during the six months ended
Investing Activities
Net cash provided by investing activities was
26 Table of Contents Financing Activities
Net cash provided by financing activities was
Working Capital and Capital Expenditure Requirements
At
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 2021. 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.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
In preparing the interim condensed consolidated financial statements, we make
estimates, assumptions and judgments that can have a significant impact on 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 base our estimates, assumptions and judgments on historical experience
and various other factors that we believe to be reasonable under the
circumstances. Actual results could differ materially from these estimates under
different assumptions or conditions. On a regular basis, we evaluate our
estimates, assumptions and judgments, and make changes accordingly. We believe
that the estimates, assumptions and judgments involved in the accounting for
revenue recognition, fair value measurements, purchase accounting in business
combinations, self-insurance accruals, accounting for intangible assets,
stock-based compensation and accounting for income taxes have the greatest
potential impact on our consolidated financial statements, so we consider these
to be our critical accounting policies. For further information on our critical
accounting policies and estimates, see Note 1 to our consolidated financial
statements on Form 10-K for the year ended
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