Stamps.com 2010 Annual Report Download - page 31

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TABLE OF CONTENTS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with
Item 6. “Selected Financial Data” of this Report and our financial statements and the related notes thereto included in this
Report. This discussion contains forward-looking statements that involve risks and uncertainties that could cause actual results
to differ materially from historical results or anticipated results including those set forth in Item 1A. “Risk Factors” of this
Report. See the discussion of forward-looking statements on page 1 of Part I of this Report.
Overview
Stamps.com® is the leading provider of Internet-based postage solutions. Our customers use our service to mail and ship a
variety of mail pieces, including postcards, envelopes, flats and packages, using a wide range of United States Postal Service (the
“USPS”) mail classes, including First Class Mail®, Priority Mail®, Express Mail®, Media Mail®, Parcel Post®, and others. Our
customers include individuals, small businesses, home offices, medium-size businesses and large enterprises, and within these
segments we target both mailers and shippers. We were the first ever USPS-licensed vendor to offer PC Postage® in a software-
only business model in 1999.
Section 382 Update
We currently have federal and state net operating loss (“NOL”) carry-forwards of approximately $226 million and $148
million, respectively. Under Internal Revenue Code Section 382 rules, if a “change of ownership” is triggered, our NOL asset
may be impaired. A change in ownership can occur whenever there is a shift in ownership by more than 50 percentage points by
one or more “5% shareholders” within a three-year period. We estimate that as of December 31, 2010 we were at approximately
a 22% level compared with the 50% level that would trigger impairment of our NOL asset.
Under our certificate of incorporation, any person or entity, including any company and investment firm, that wishes to
become a “5% shareholder” (as defined in our certificate of incorporation) must first obtain a waiver from our board of directors.
In addition, any person, including any company and investment firm, that is already a “5% shareholder” of ours cannot make any
additional purchases of our stock without a waiver from our board of directors. The NOL Protective Measures contained in our
certificate of incorporation are more specifically described in our Definitive Proxy Statement filed with the Securities and
Exchange Commission on April 2, 2008.
On July 22, 2010, our Board of Directors suspended the NOL Protective Measures by approving a waiver from the
NOL Protective Measures to all persons and entities, including companies and investment firms. As a result, our
stockholders are now allowed to become “5% shareholders” and existing “5% shareholders” are allowed to make
additional purchases of our stock each without having to comply with the restrictions contained in the NOL Protective
Measures. This waiver may be revoked by our Board of Directors at any time if the Board deems the revocation
necessary to protect against a Section 382 “change of ownership” that would limit our ability to utilize future NOLs. For
complete details about this waiver from the NOL Protective Measures, please see our Form 8-K filed on July 28, 2010.
As of February 28, 2011, we had 14,542,481 shares outstanding, and therefore ownership of approximately 727,000 shares or
more would currently constitute a “5% shareholder”. We strongly urge that any stockholder contemplating becoming a 5%
or more shareholder contact us before doing so.
Results of Operations
Years Ended December 31, 2010 and 2009
Total revenue in 2010 was $85.5 million, an increase of 4% from $82.1 million in 2009. PC Postage revenue, including
service revenue, product revenue and insurance revenue, in 2010 was $78.4 million, an increase of 6% compared to $73.6
million in 2009. PhotoStamps revenue in 2010 was $7.2 million, a decrease of 16% compared to $8.5 million in 2009. Other
revenue in 2010 was $27,000, an increase of 69% compared to $16,000 in 2009. The following table sets forth the breakdown of
revenue for 2009 and 2010 and the resulting percent change (revenue in $000s):
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
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