Stamps.com 2001 Annual Report Download - page 30

assets for the benefit of its creditors. EncrypTix took this action because it was not able to secure additional funding. We do not expect to be
impacted by any of EncrypTix's resulting liabilities. Additionally, we terminated our license agreement with EncrypTix and have received
limited licenses to some of EncrypTix's intellectual property. Due to this cessation in business, we wrote off the invested $1.0 million and took
a one-time gain to eliminate the cumulative loss from EncrypTix in the amount of $23.2 million in the first quarter of 2001.
On March 7, 2000, we completed the acquisition of iShip.com, Inc. (iShip), a development stage enterprise that developed Internet-based
shipping technology. The acquisition was accounted for as a purchase in accordance with the provisions of Accounting Principles Board
Opinion (APB) No. 16. Under the purchase method of accounting, the purchase price was allocated to the assets acquired and liabilities
assumed based on their estimated fair values at the date of acquisition.
On March 2, 2001, United Parcel Service and Mail Boxes Etc. USA, Inc. (MBE) jointly announced that United Parcel Service would acquire
MBE. MBE represented a significant future source of revenue and market leverage for the enterprise shipping service that we acquired in the
iShip acquisition. United Parcel Service also informed us at that time that it would be unlikely to continue to use our enterprise shipping
services at MBE in the future. As a result of the March 2001 events, we reduced goodwill and other intangibles associated with the purchase of
iShip to reflect the present value of future cash flows, net of estimated transaction costs. This resulted in a non-cash charge of $163.6 million in
the first quarter of 2001.
On May 18, 2001, we completed the sale of our iShip multi-carrier shipping service assets to United Parcel Service for $2.8 million. The
difference between the sale price of iShip and the value we attributed to the iShip assets resulted in non-cash charge of $9.1 million in the
second quarter of 2001. Additional legal costs associated with the sale of iShip of approximately $300,000 were charged in the third quarter of
2001 resulting in a total charge of $9.4 million.
In October 2001, we received preliminary approval from the United States Postal Service to begin beta testing a technology that allows
customers to print sheets of generic postage on ordinary inkjet or laser printers that are not tied to a destination address and have no expiration
date. We launched a beta test for this technology in January 2002. If commercially approved, this product could have a positive effect on future
customer acquisition and customer retention, as the technology removes two major inconveniences of our current service, the fact that the
postage must be tied to the destination address, and the fact that the postage expires in 24 hours time. We believe that the generic postage
technology is important to our ability to grow our future revenue.
Internet Postage Services. We offer an Internet postage service targeted at consumers, home offices and small businesses. Service fee revenues
for our Internet postage service are generated from a monthly convenience fee that we charge our customers, under two different pricing plans.
Under the Simple Plan, a user purchases postage at face value for a monthly convenience fee of 10% of the value of postage printed. Prior to
November 2000, there was a monthly minimum fee of $1.99 and a monthly maximum fee of $19.99 under the Simple Plan. Beginning in
November 2000, the monthly minimum fee was increased to $4.49 for new customers and the monthly maximum fee was discontinued.
Beginning in June of 2001, all $1.99 customers who existed at the time of the price increase were converted to the $4.49 minimum price plan.
The Power Plan was introduced at the beginning of our second quarter of 2000 in response to customer requests for a fixed monthly pricing
plan with unlimited usage. Under the Power Plan, a customer may purchase and use unlimited postage at face value, for a flat monthly fee that
ranges from $15.99 to $18.99. During 2001, approximately 50% of our service fee revenue was generated from Power Plan customers.
Revenues are also generated from controlled access advertising to our existing customer base, and revenue share and bounty arrangements. We
ended 2001 with approximately 280 thousand active customers, down from 315 thousand customers at the end of 2000. This decline in
customers was an expected result of the increased Simple Plan monthly minimum fee in June of 2001.
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2002. EDGAR Online, Inc.