Stamps.com 2003 Annual Report Download - page 25

Table of Contents
On April 13, 2003, we launched the first of many new product features with the release of our new shipping capability called Hidden
Postage™. This new feature enhances our service, resulting in a more powerful shipping solution for businesses, e-commerce sites and online
auctioneers. Hidden Postage allows the customers to print a shipping label without printing the actual value of the postage on the label. By
hiding the postage amount of the shipment, businesses can more easily cover their full shipping and handling costs without causing customer
complaints.
On October 28, 2003 we launched version 3.5 of our client software, which provided enhanced integration with Microsoft® Office System
2003, our Stamps.com package insurance, broader support for shipping and an expanded online store platform. We worked in collaboration
with Microsoft to improve integration with Microsoft Word and Outlook®. The enhanced integration allows users to add postage to an
envelope or a mail merge without leaving the familiar Microsoft Office environment. Our insurance offering allows users to insure their
packages in a fully integrated, online process that eliminates any trips to the post office or the need to complete any forms. Further, customers
on select plans currently receive a 10% discount over USPS insurance rates. Other shipping improvements include the ability to send shipment
notification emails with a tracking link, the ability to print shipping labels for Express Mail® and Bound Printed Matter, and support for
additional USPS services such as Collect on Delivery (COD). Finally, we expanded and redesigned our online store in order to support a larger
selection of items. We made available for sale new labels for use with our Internet Postage and Shipping Labels features.
In October 2003, we completed a study to understand the status of our net operation losses (NOL or NOLs). Based on that study, we believe
that we have not undergone an Internal Revenue Code (IRC) Section 382 change of control that would trigger an impairment of the use of our
NOLs since our secondary offering in December 1999. Under the complicated IRC Section 382 rules, a change in ownership can occur
whenever there is a shift in ownership by more than 50 percentage points by one or more five-percent shareholders within a three-year period.
When a change of ownership is triggered, the NOLs may be impaired. As of December 31, 2003 we estimate that we are currently 12% below
the 50% level that would trigger impairment of our NOL asset. Therefore,
we request that all of our investors contact us prior to allowing their
respective ownership interest to reach a five-percent level.
In December 2003, we reached a settlement in all patent infringement litigation with Pitney Bowes. The settlement included a five-year
patent cross-
licensing agreement. In addition, there will be no material financial payment between the companies. For further discussion, please
refer to the “Legal Proceedings” section of this Report.
On January 28, 2004 our Board of Directors declared a one-
time return of capital cash dividend of $1.75 per share, to shareholders of record
as of the close of business on February 9, 2004, which dividend was paid on February 23, 2004. Based on the number of common shares
outstanding as of February 9, 2004, the total amount of the dividend was approximately $78 million. In addition, our Board of Directors also
has authorized a reverse stock split of our common stock, subject to shareholder approval. At the annual meeting of shareholders to be held on
April 23, 2004, shareholder of Stamps.com will be asked to grant the Board of Directors the authority to select the exact exchange ratio of
either one-for-two (1:2), one-for-three (1:3) or one-for-four (1:4), with the exact ratio to be determined by our Board of Directors at the time it
elects to effect a split. The par value of our common stock would remain unchanged at $0.001 per share, and the number of authorized shares of
common stock and preferred stock would be reduced proportionately, by the reverse split ratio, from 95,000,000 and 5,000,000, respectively.
On April 18, 2002 and July 18, 2003, Lloyd I. Miller and Kevin Douglas joined our board of directors, respectively. On January 7, 2004,
Kyle Huebner was appointed Chief Financial Officer. On January 21, 2004, James Bortnak was appointed Vice President, Sales and Marketing.
Our Services
Service fee revenues for our offerings are generated from a monthly fee that we charge our customers under various pricing plans. The two
main pricing plans are the Simple Plan and Power Plan. Under the Simple Plan, a user purchases and prints postage at face value for a monthly
convenience fee of 10% of the value of postage printed with a monthly minimum of $4.49. For some newer customers, we recently raised the
Simple Plan monthly minimum to $4.99. Under the Power Plan, a customer may purchase and print unlimited postage at face value, for a flat
monthly fee ranging from $15.99 to $19.95 depending on their promotional offer. We ended 2003 with
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