Stamps.com 2005 Annual Report Download - page 25

In July 2005, we introduced Stamps.com Enterprise and Premier plans. Stamps.com Enterprise allows businesses to easily view and
manage their corporate-wide mailing and shipping expenses by aggregating data from multiple accounts and across multiple geographies, and
making that information available from a web-based interface. The Premier plan includes all of the features available in our entry level Pro
service, but adds several new capabilities and new functionality including faster print speeds, higher meter/account balances, more costs codes
for tracking, support for USPS certified mail, and the ability to print FedEx shipping labels directly from the Premier interface.
In January 2005, Craig Ogg, our VP of R&D, resigned from the Company in order to pursue other endeavors. Immediately following that
event, JP Leon, our VP of Advanced Technology, assumed the leadership role for the R&D team. In September 2005, Richard Stables, our VP
of IT, resigned from the Company in order to pursue other endeavors. Immediately following that event, Michael Biswas, VP of Operations,
assumed responsibility for this area.
As of December 31, 2005, we had 155 employees not including temporary or contract workers. Our employees work in various
departments including customer support, research and development, sales and marketing, information technology and general administration.
None of our employees is represented by a labor union. We believe that our relationship with our employees is good.
On January 24, 2006 we announced that President Bush signed a new law which clarified a longstanding law around advertising on U.S.
currency called 18 US Code Section 475. The new law, signed on January 5, 2006, amends section 475 to clarify that the earlier law does not
apply to products that are officially approved by the US Postal Service. Owing to the original law, the Postal Service restricted our ability to
accept business advertising for usage on PhotoStamps during the second market test. The new amendment clears the way for the Postal Service
to remove this restriction once they feel it is appropriate. If and when they do remove the restriction, we expect to begin marketing the
PhotoStamps product for business use.
Critical Accounting Policies
General. The discussion and analysis of our financial condition and results of operations are based on our Company’s financial statements
which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure
of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to patents, contingencies and
litigation. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our
financial statements.
Revenue Recognition. We recognize revenue from product sales or services rendered when the following four revenue recognition criteria
are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or
determinable, and collectibility is reasonably assured.
Service revenue is based on monthly convenience fees and is recognized in the period that services are provided. Product sales, net of
return allowances, are recorded when the products are shipped and title passes to customers. Items, including PhotoStamps, sold to customers
are made pursuant to a sales contract that provides for transfer of both title and risk of loss upon our delivery to the carrier. Return allowances,
which reduce product revenue by our best estimate of expected product returns, are estimated using historical experience. Licensing revenue is
recognized ratably over the contract period. Commissions from the advertising or sale of products by a third party vendor to our customer base
are recognized when the revenue is earned and collection is deemed probable.
Customers who purchase postage for use through our NetStamps, shipping label or mailing features, pay face value, and the funds are
transferred directly from the customers to the US Postal Service. No revenue is recognized for this postage as it is purchased by our customers
directly from the US Postal Service.
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