Stamps.com 2001 Annual Report Download - page 32

severance, reserves established for exiting contractual arrangements and leases, and property and equipment write-offs.
Interest Income (Expense), Net. Interest income (expense), net consists of income from cash equivalents and investments, net of interest
expense related to financing obligations. Net interest income for the years ended December 31, 2001 and 2000 were $10.1 million and $18.4
million, respectively. This decrease is due to declining interest rates in 2001 and a reduction in the cash invested.
Years Ended December 31, 2000 and 1999
Revenue. Revenue is derived primarily from two sources: (1) service fees charged to customers for the ability to print postage directly from
their printer, and (2) professional contract revenue, received from Mail Boxes Etc. USA, Inc., for shipping tools used by Mail Boxes Etc. USA,
Inc. franchise locations. Total revenue increased from $358,400 to $15.2 million for the years ended December 31, 1999 and 2000,
respectively. The increase in service revenue is primarily due to a growth in the customer base from approximately 187,000 to 307,000, at
December 31, 1999 and 2000, respectively, and recognizing a full year's worth of revenue in 2000, as opposed to two months in 1999 (the
postage service product was launched on October 22, 1999). The professional contract revenue in 2000 relates to the Mail Boxes Etc. USA,
Inc. agreement that was initiated in 2000. Other revenue consists primarily of bounties and commissions on sales of products to our customers
by third parties. The bounty and commission agreements were also initiated in 2000.
Cost of Sales. Cost of sales principally consists of customer service, free postage and system operating costs. Cost of sales was $23.7 million
for the year ended December 31, 2000, compared to $2.4 million for the year ended December 31, 1999. The increase is primarily attributable
to conducting operations for twelve months in 2000 as opposed to two months in 1999. During 2000 we significantly increased customer
service capacity and initiated promotional programs that included a free postage offering, both of which are recognized as cost of sales.
Sales and Marketing. Sales and marketing expenses principally consist of costs associated with strategic relationships, advertising and
promotional expenditures, and compensation and related expenses for personnel engaged in marketing and business development activities.
Sales and marketing expenses were approximately $73.0 million compared to $35.2 million for the years ended December 31, 2000 and 1999,
respectively. The increase in sales and marketing expenses is principally due to the marketing campaign and advertising subsequent to the
launch of the Internet Postage solution in October 1999.
Research and Development. Research and development expenses principally consist of compensation for personnel involved in the
development of the Internet Postage and enterprise shipping service and expenditures for consulting services and third-party software. Research
and development expenses for the year ended December 31, 2000 were $33.1 million compared to $7.4 million for the year ended December
31, 1999. The increase is due to higher personnel and consulting costs and other expenses associated with the ongoing development of the
Internet Postage and enterprise shipping services.
General and Administrative. General and administrative expenses principally consist of compensation and related costs for executive and
administrative personnel, facility costs, fees for legal and other professional services, and amortization of deferred compensation. General and
administrative expenses for the years ended December 31, 2000 and 1999 were $102.2 million and $14.3 million, respectively. The increase is
principally due to the increased number of employees, the expansion of facilities related to the growth of the business, legal fees and, most
significantly, the amortization of goodwill related to the iShip.com, Inc. acquisition and the amortization of deferred compensation.
Interest Income (Expense), Net. Interest income (expense), net consists of income from cash equivalents and short term investments, net of
interest expense related to financing obligations. Net interest income for the
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2002. EDGAR Online, Inc.