Stamps.com 2014 Annual Report Download - page 26

Our operating results could be impaired if we or the Internet become subject to additional government regulation.
Changes in the laws and regulations applicable to the Internet or us, including those relating to user privacy, pricing, content, copyrights,
distribution, characteristics and quality of products and services, and export controls, could seriously harm our business, financial condition and
results of operations. Moreover, the applicability of existing laws to the Internet is uncertain with regard to many issues, including property
ownership, export of specialized technology, sales tax, state income taxes, libel and personal privacy, and changes in their interpretation could
similarly harm us. The application of laws and regulations from jurisdictions whose laws do not currently apply to our business, or the
application of existing laws and regulations to the Internet and other online services could also harm our business.
We have employees and offer our services in multiple states, and we may in the future expand internationally. These jurisdictions may claim that
we are required to qualify to do business as a foreign corporation in each state or foreign country. Our failure to qualify as a foreign corporation
in a jurisdiction where we are required to do so could subject us to taxes and penalties. Other states and foreign countries may also attempt to
regulate our services or prosecute us for violations of their laws.
We do not collect sales or consumption taxes in some jurisdictions
U.S. Supreme Court decisions restrict the imposition of obligations to collect state and local sales taxes with respect to remote sales. However,
an increasing number of states have considered or adopted laws or administrative practices that attempt to impose obligations on out-of-state
retailers to collect taxes on their behalf. A successful assertion by one or more states or foreign countries requiring us to collect taxes where we
do not do so could result in substantial tax liabilities, including for past sales, as well as penalties and interest.
Risks Related to Our Stock
The tax value of our net operating losses could be impaired if we trigger a change of control pursuant to Section 382 of the Internal
Revenue Code.
We currently have federal and state NOL carry-forwards of approximately $165 million and $8 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, 2014 we were at approximately a 11% level compared with the 50% level that would trigger impairment of our NOL asset.
Under our certificate of incorporation, any person or entity, including company or 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 or
entity, including any company or 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. These NOL Protective Measures are more particularly discussed in our Definitive Proxy
Statement filed with the SEC 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, as of the date of filing of this Annual Report on Form 10-K, 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 27, 2014, we had 16,318,208 shares outstanding, and therefore ownership of approximately 815,000 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.
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