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TABLE OF CONTENTS
STAMPS.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies – (continued)
based on the financial data provided in our financial statements as a single operating segment. In addition, discrete financial
information is not generated, prepared or reviewed at any level that allow for the creation of an additional operating segment.
Website Development Costs
We develop and maintain our website. Costs associated with the operation of our website consist primarily of software and
hardware purchased from third parties, and the costs are capitalized based on our capitalization policy. These capitalized costs
are amortized based on their estimated useful life. Costs related to the maintenance and development of our website are expensed
as incurred.
Reclassifications
Certain reclassifications have been made to prior year amounts to conform to current year presentations.
Recent Accounting Pronouncements
In January 2010, the FASB issued Accounting Standard Update No. 2010-06 which amends Fair Value Measurements and
Disclosures — Overall (ASC Topic 820-10). This update requires a gross presentation of activities within the Level 3 roll
forward and adds a new requirement to disclose transfers in and out of Level 1 and 2 measurements. The update further clarifies
the existing disclosure requirements regarding: i) the level of disaggregation of fair value measurements; and ii) the disclosures
regarding inputs and valuation techniques. This update was effective for our fiscal year beginning January 1, 2010 except for the
gross presentation of the Level 3 roll forward information, which is effective for our fiscal year beginning January 1, 2011. The
adoption of this amended standard did not significantly impact our consolidated financial statements.
3. Intangible Assets
We have amortizable and non-amortizable intangible assets consisting of patents, trademarks and other intellectual property
with a gross carrying value of $8.7 million and $8.3 million as of December 31, 2010 and 2009 and accumulated amortization of
$7.8 million as of December 30, 2010 and 2009, respectively. During 2010 we purchased two patents for $400,000 in connection
with our settlement agreement with Kara Technology Incorporated and Mr. Salim Kara to resolve all outstanding litigation
among the parties. The expected useful lives of our amortizable intangible assets range from approximately 9 to 17 years. The
weighted average amortization period for our amortizable intangible assets is 9.3 years. During 2010, we assessed whether
events or changes in circumstances occurred that could potentially indicate that the carrying amount of our intangible assets may
not be recoverable. We concluded that there were no such events or changes in circumstances during 2010 and determined that
the fair value of our intangible assets was in excess of their carrying value as of December 31, 2010. Aggregate amortization
expense on patents and trademarks was approximately $13,000, $6,000 and $367,000 for the years ended December 31, 2010,
2009 and 2008, respectively. Our expected yearly amortization expense for the next five years is approximately $46,000.
4. Cash, Cash Equivalents and Investments
Our cash equivalents and investments consist of money market, U.S. government obligations, asset-backed securities and
public corporate debt securities at December 31, 2010 and 2009. We consider all highly liquid investments with an original or
remaining maturity of three months or less at the date of purchase to be cash equivalents. All investments are classified as
available for sale and are recorded at market value using the specific identification method. Unrealized gains and losses are
included as a separate component of stockholders' equity. We have six securities with a total fair value of $1.3 million that have
unrealized losses of approximately $40,000 as of December 31, 2010. We do not intend to sell investments with amortized cost
basis exceeding fair value and it is not likely that we will be required to sell the investments before recovery of their amortized
cost basis. Realized gains and losses are reflected in interest income and other income, net using the specific identification
method.
F-12