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STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stamps.com Inc. and Subsidiaries (“the Company” or “we”) are 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®, Priority Mail Express®, Media Mail®, Parcel Select®, and
others. Customers using our service receive discounted postage rates compared to USPS retail rates on certain mail pieces such as First Class
letters and domestic and international Priority Mail and Priority Mail Express packages. 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 mailing and shipping in a software-only business model in 1999. In addition, we now offer multi-carrier
shipping solutions under the brand names ShipStation and ShipWorks as a result of our recent acquisitions.
Principles of Consolidation
The consolidated financial statements include the accounts of Stamps.com Inc., Auctane LLC, Interapptive, Inc. and PhotoStamps Inc. In June
2014, we completed our acquisition of 100% of the outstanding equity of Auctane LLC, the Texas limited liability company that operates
ShipStation (“Auctane LLC” or “ShipStation”) in a cash and contingent stock transaction. ShipStation, based in Austin, Texas, offers monthly
subscription based e-commerce shipping software primarily under the brands ShipStation and Auctane. In August 2014, we completed our
acquisition of 100% of the outstanding equity of Interapptive, Inc., the Missouri corporation that operates ShipWorks (“Interapptive, Inc.” or
“ShipWorks”) in a cash transaction. ShipWorks, based in St. Louis, Missouri, offers monthly subscription based e-commerce shipping
software. See Note 3 – “Acquisitions” for further discussion of our acquisitions.
Because 100% of the voting control of Auctane LLC and Interapptive, Inc. is held by us, we have consolidated ShipStation and ShipWorks from
the date we obtained control in the accompanying consolidated financial statements. Similarly, due to our 100% control, PhotoStamps Inc. is
also consolidated in the accompanying consolidated financial statements from the date of its inception. All significant intercompany accounts
and transactions have been eliminated.
Use of Estimates and Risk Management
The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts
reported in the financial statements and the accompanying notes. Actual results could differ from those estimates, and such differences may be
material to the financial statements. Examples include estimates of loss contingencies, promotional coupon redemptions, the number of
PhotoStamps retail boxes that will not be redeemed, deferred income taxes, the estimates and assumptions used to calculate the allocation of the
purchase price related to our acquisitions, including related contingent consideration, and estimates regarding the useful lives of our building,
patents and other amortizable intangible assets.
Contingencies and Litigation
We are subject to various routine litigation matters as a claimant and a defendant. We record any amounts recovered in these matters when
received. We record liabilities for claims against us when the loss is both probable and estimable. Amounts recorded are based on reviews by
outside counsel, in-house counsel and management. Actual results could differ from estimates.
F-7
Table of Contents
1.
Description of Business
2.
Summary of Significant Accounting Policies