UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-Q
 
 (Mark
One)
  þ
                QUARTERLY REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934.For the quarterly period ended
      September 30, 2009
  OR
   ̈
                TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period from ____________ to
  ____________
  Commission
file number: 000-26427
 
 Stamps.com
Inc.
 (Exact
name of registrant as specified in its charter)
 
 Delaware
                77-0454966(State
      or other jurisdiction of
                (I.R.S.
      Employerincorporation
      or organization)
                Identification
      No.)
 
 12959
Coral Tree Place
 Los
Angeles, California 90066
 (Address
of principal executive offices, including zip code)
 
 (310)
482-5800
 (Registrant’s telephone
number, including area code)
  
 Indicate
by check mark whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes þ   No
 ̈
  Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).    Yes  ̈   No
 ̈
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
  Large
      accelerated filer   ̈
                      Accelerated
      filer  þNon-accelerated filer   ̈ (Do not check if a smaller reporting company)
                      Smaller reporting company   ̈
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes  ̈   No
þ
  As of
October 31, 2009, there were approximately 15,781,000 shares of the Registrant’s
Common Stock issued and outstanding.
  
  STAMPS.COM
INC.
  FORM
10-Q QUARTERLY REPORT FOR THE QUARTER ENDED SEPTEMBER 30, 2009
  TABLE
OF CONTENTS
  PagePART
      I - FINANCIAL INFORMATION
                                            2ITEM
      1.
                                            FINANCIAL
      STATEMENTS
                                            2ITEM
      2.
                                            MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
                                            13ITEM
      3.
                                            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                                            20ITEM
      4.
                                            CONTROLS
      AND PROCEDURES
                                            21PART
      II – OTHER INFORMATION
                                            22ITEM
      1.
                                            LEGAL
      PROCEEDINGS
                                            22ITEM
      1A.
                                            RISK
      FACTORS
                                            22ITEM
      2.
                                            UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
                                            22ITEM
      3.
                                            DEFAULTS
      UPON SENIOR SECURITIES
                                            23ITEM
      4.
                                            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
                                            23ITEM
      5.
                                            OTHER
      INFORMATION
                                            23ITEM
      6.
                                            EXHIBITS
                                            23
  1
 
 PART
I - FINANCIAL INFORMATION
  ITEM
      1.
              FINANCIAL
      STATEMENTS
  STAMPS.COM
INC.
 BALANCE
SHEETS
 (In
thousands, except per share data)
  September
      30,
                                          
                                          
                                          December
      31,2009
                                          
                                          
                                          2008(unaudited)AssetsCurrent
      assets:Cash and cash
      equivalents
                                          
                                          $
                                          42,815
                                          
                                          
                                          $
                                          52,576Restricted cash
                                          
                                          
                                          554
                                          
                                          
                                          
                                          554Short-term
    investments
                                          
                                          
                                          2,443
                                          
                                          
                                          
                                          16,235Trade accounts receivable,
      net
                                          
                                          
                                          2,806
                                          
                                          
                                          
                                          2,962Other accounts
      receivable
                                          
                                          
                                          2,316
                                          
                                          
                                          
                                          1,201Other current
    assets
                                          
                                          
                                          3,438
                                          
                                          
                                          
                                          4,426Total current
    assets
                                          
                                          
                                          54,372
                                          
                                          
                                          
                                          77,954Property
      and equipment, net
                                          
                                          
                                          2,358
                                          
                                          
                                          
                                          3,086Intangible
      assets, net
                                          
                                          
                                          499
                                          
                                          
                                          
                                          505Long-term
      investments
                                          
                                          
                                          24,066
                                          
                                          
                                          
                                          4,694Deferred
      income taxes.
                                          
                                          
                                          3,671
                                          
                                          
                                          
                                          3,671Other
      assets
                                          
                                          
                                          3,022
                                          
                                          
                                          
                                          3,348Total assets
                                          
                                          $
                                          87,988
                                          
                                          
                                          $
                                          93,258Liabilities
      and Stockholders’ EquityCurrent
      liabilities:Accounts payable and accrued
      expenses
                                          
                                          $
                                          10,346
                                          
                                          
                                          $
                                          11,174Deferred revenue
                                          
                                          
                                          4,206
                                          
                                          
                                          
                                          3,743Total
      current liabilities
                                          
                                          
                                          14,552
                                          
                                          
                                          
                                          14,917Commitments
      and contingenciesStockholders’
      equity:Common
      stock, $.001 par value Authorized
      shares: 47,500 in 2009 and 2008 Issued
      shares: 24,421 in 2009 and 24,368 in 2008 Outstanding
      shares: 15,804 in 2009 and 17,242 in
    2008
                                          
                                          
                                          47
                                          
                                          
                                          
                                          47Additional paid-in
      capital
                                          
                                          
                                          629,579
                                          
                                          
                                          
                                          626,810Accumulated
deficit
                                          
                                          
                                          (452,386
                                          )
                                          
                                          
                                          (456,391
                                          )Treasury
      stock, at cost, 8,617 shares in 2009 and 7,126 shares in
    2008
                                          
                                          
                                          (103,162
                                          )
                                          
                                          
                                          (90,613
                                          )Accumulated other comprehensive
      loss
                                          
                                          
                                          (642
                                          )
                                          
                                          
                                          (1,512
                                          )Total
      stockholders’ equity
                                          
                                          
                                          73,436
                                          
                                          
                                          
                                          78,341Total liabilities and
      stockholders’ equity
                                          
                                          $
                                          87,988
                                          
                                          
                                          $
                                          93,258
 
 The
accompanying notes are an integral part of these financial
statements.
  2
  STAMPS.COM
INC.
 STATEMENTS
OF INCOME
 (In
thousands, except per share data)
 (Unaudited)
  Three
      Months Ended
                        September
      30,
                      
                      
                      Nine
      Months Ended
                        September
      30,2009
                      
                      
                      2008
                      
                      
                      2009
                      
                      
                      2008Revenues:Service
                      
                      $
                      15,401
                      
                      
                      $
                      15,435
                      
                      
                      $
                      45,922
                      
                      
                      $
                      46,209Product
                      
                      
                      2,536
                      
                      
                      
                      2,326
                      
                      
                      
                      7,733
                      
                      
                      
                      7,392Insurance
                      
                      
                      377
                      
                      
                      
                      375
                      
                      
                      
                      1,176
                      
                      
                      
                      1,140PhotoStamps
                      
                      
                      1,901
                      
                      
                      
                      2,020
                      
                      
                      
                      5,609
                      
                      
                      
                      7,897Other
                      
                      
                      1
                      
                      
                      
                      —
                      
                      
                      
                      6
                      
                      
                      
                      —Total
      revenues
                      
                      
                      20,216
                      
                      
                      
                      20,156
                      
                      
                      
                      60,446
                      
                      
                      
                      62,638Cost
      of revenues:Service
                      
                      
                      2,926
                      
                      
                      
                      2,626
                      
                      
                      
                      8,806
                      
                      
                      
                      7,630Product
                      
                      
                      940
                      
                      
                      
                      809
                      
                      
                      
                      2,915
                      
                      
                      
                      2,637Insurance
                      
                      
                      116
                      
                      
                      
                      124
                      
                      
                      
                      364
                      
                      
                      
                      363PhotoStamps
                      
                      
                      1,542
                      
                      
                      
                      1,489
                      
                      
                      
                      4,363
                      
                      
                      
                      5,708Total
      cost of revenues
                      
                      
                      5,524
                      
                      
                      
                      5,048
                      
                      
                      
                      16,448
                      
                      
                      
                      16,338Gross
      profit
                      
                      
                      14,692
                      
                      
                      
                      15,108
                      
                      
                      
                      43,998
                      
                      
                      
                      46,300Operating
      expenses:Sales
      and marketing
                      
                      
                      7,359
                      
                      
                      
                      7,654
                      
                      
                      
                      23,650
                      
                      
                      
                      25,057Research
      and development
                      
                      
                      2,198
                      
                      
                      
                      2,243
                      
                      
                      
                      6,624
                      
                      
                      
                      6,288General
      and administrative
                      
                      
                      3,391
                      
                      
                      
                      3,420
                      
                      
                      
                      9,961
                      
                      
                      
                      11,820Total
      operating expenses
                      
                      
                      12,948
                      
                      
                      
                      13,317
                      
                      
                      
                      40,235
                      
                      
                      
                      43,165Income
      from operations
                      
                      
                      1,744
                      
                      
                      
                      1,791
                      
                      
                      
                      3,763
                      
                      
                      
                      3,135Other
      income:Interest
      income
                      
                      
                      208
                      
                      
                      
                      697
                      
                      
                      
                      797
                      
                      
                      
                      2,350Other
      income
                      
                      
                      —
                      
                      
                      
                      5
                      
                      
                      
                      —
                      
                      
                      
                      26Total
      other income
                      
                      
                      208
                      
                      
                      
                      702
                      
                      
                      
                      797
                      
                      
                      
                      2,376Income
      before income taxes
                      
                      
                      1,952
                      
                      
                      
                      2,493
                      
                      
                      
                      4,560
                      
                      
                      
                      5,511Provision
      (benefit) for income taxes
                      
                      
                      221
                      
                      
                      
                      430
                      
                      
                      
                      555
                      
                      
                      
                      (3,056
                      )Net
      income
                      
                      $
                      1,731
                      
                      
                      $
                      2,063
                      
                      
                      $
                      4,005
                      
                      
                      $
                      8,567Net
      income per shareBasic
                      
                      $
                      0.11
                      
                      
                      $
                      0.11
                      
                      
                      $
                      0.24
                      
                      
                      $
                      0.44Diluted
                      
                      $
                      0.11
                      
                      
                      $
                      0.10
                      
                      
                      $
                      0.24
                      
                      
                      $
                      0.43Weighted
      average shares outstandingBasic
                      
                      
                      16,035
                      
                      
                      
                      19,410
                      
                      
                      
                      16,397
                      
                      
                      
                      19,505Diluted
                      
                      
                      16,162
                      
                      
                      
                      19,726
                      
                      
                      
                      16,527
                      
                      
                      
                      19,796
 
 The
accompanying notes are an integral part of these financial
statements.
  3
  STAMPS.COM
INC.
 STATEMENTS
OF CASH FLOWS
 (In
thousands)
 (Unaudited)
  Nine
      Months Ended
                    September
      30,2009
                
                
                2008Operating
      activities:Net income
                
                $
                4,005
                
                
                $
                8,567Adjustments to reconcile net
      income to net cash provided by operating activities:Depreciation and
      amortization
                
                
                925
                
                
                
                1,574Stock-based
      compensation expense
                
                
                2,387
                
                
                
                2,562Deferred
      income taxes
                
                
                —
                
                
                
                (3,671
                )Changes in operating assets and
      liabilities:Trade accounts
      receivable
                
                
                156
                
                
                
                (137
                )Other accounts
      receivable
                
                
                (1,115
                )
                
                
                (1,139
                )Other
      current assets
                
                
                988
                
                
                
                (1,228
                )Other
      assets
                
                
                326
                
                
                
                (548
                )Deferred
      revenue
                
                
                463
                
                
                
                1,582Accounts payable and accrued
      expenses
                
                
                (828
                )
                
                
                1,243Net
      cash provided by operating activities
                
                
                7,307
                
                
                
                8,805Investing
      activities:Sale of short-term
      investments
                
                
                15,746
                
                
                
                26,139Purchase of short-term
      investments
                
                
                (2,012
                )
                
                
                (21,536
                )Sale of long-term
      investments
                
                
                3,542
                
                
                
                22,052Purchase
      of long-term investments
                
                
                (21,986
                )
                
                
                (7,695
                )Purchase
      of property and equipment
                
                
                (191
                )
                
                
                (606
                )Net
      cash (used in) provided by investing activities
                
                
                (4,901
                )
                
                
                18,354Financing
      activities:Proceeds from exercise of stock
      options
                
                
                82
                
                
                
                334Issuance
      of common stock under ESPP
                
                
                300
                
                
                
                349Repurchase of common
      stock
                
                
                (12,549
                )
                
                
                (5,674
                )Net
      cash used in financing activities
                
                
                (12,167
                )
                
                
                (4,991
                )Net
      (decrease) increase in cash and cash equivalents
                
                
                (9,761
                )
                
                
                22,168Cash
      and cash equivalents at beginning of period
                
                
                52,576
                
                
                
                43,667Cash
      and cash equivalents at end of period
                
                $
                42,815
                
                
                $
                65,835
 
 The
accompanying notes are an integral part of these financial
statements.
  4
  STAMPS.COM
 NOTES
TO FINANCIAL STATEMENTS
 (ALL
INFORMATION WITH RESPECT TO SEPTEMBER 30, 2009 AND 2008 IS
UNAUDITED)
 
 1.
              Summary
      of Significant Accounting Policies
  Basis
of Presentation
  We
prepared the financial statements included herein without audit pursuant to the
rules and regulations of the Securities and Exchange Commission (“SEC”). Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with United States (“US”) generally accepted accounting
principles (“GAAP”) have been condensed or omitted pursuant to such rules and
regulations. We believe that the disclosures are adequate to make the
information presented not misleading. We recommend that these financial
statements be read in conjunction with the audited financial statements and the
notes thereto included in our latest annual report on Form 10-K.
  In
June 2009 the Financial Accounting Standards Board (“FASB”) established the
Accounting Standards Codification (“ASC” or “Codification”) as the source of
authoritative GAAP recognized by the FASB. The Codification is effective in the
first interim and annual periods ending after September 15, 2009. The adoption
of the Codification did not have a material impact on our financial
statements.
  In our
opinion, these unaudited financial statements contain all adjustments
(consisting of normal recurring adjustments) necessary to present fairly our
financial position as of September 30, 2009, the results of operations for the
three and nine months ended September 30, 2009 and cash flows for the nine
months ended September 30, 2009.  The results of operations for the
interim periods are not necessarily indicative of the results that may be
expected for the year ending December 31, 2009.
  Use
of Estimates and Risk Management
  The
preparation of financial statements in conformity with US generally accepted
accounting principles 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, and deferred
income taxes and estimates regarding the useful lives of patents and other
amortizable intangibles.
  We are
involved in various 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 probable and estimable. Amounts recorded are
based on reviews by outside counsel, in-house counsel and management. Actual
results could differ from estimates.
  Subsequent
Events
  We have
evaluated subsequent events and transactions through November 6, 2009, which is
the date these financial statements were issued. We are not aware of any
material subsequent events or transactions that have occurred that would require
recognition in the financial statements or disclosure in the notes to the
financial statements.
  Revenue
Recognition
  We
recognize revenue from product sales or services rendered, as well as
commissions from the advertising or sale of products by third party vendors to
our customer base, when the following four revenue recognition criteria are met:
persuasive evidence of an arrangement exists, delivery has occurred or services
have been rendered, the selling price is fixed or determinable, and
collectability is reasonably assured.
  Service
revenue is based on monthly convenience fees and is recognized in the period
that services are provided. Product sales, net of return allowances, are
recorded when the products are shipped and title passes to customers. Sales of
our products, including PhotoStamps, to customers are made pursuant to a sales
contract that provides for transfer of both title and risk of loss upon our
delivery to the carrier. Return allowances for expected product returns, which
reduce product revenue by our best estimate of expected product returns, are
estimated using historical experience. Commissions from the advertising or sale
of products by third party vendors to our customer base are recognized when the
revenue is earned and collection is deemed probable.
  5
  STAMPS.COM
 NOTES
TO FINANCIAL STATEMENTS
 (ALL
INFORMATION WITH RESPECT TO SEPTEMBER 30, 2009 AND 2008 IS
UNAUDITED)
  Customers
who purchase postage for use through our NetStamps, shipping label or mailing
features, pay face value, and the funds are transferred directly from the
customers to the United States Postal Service (“USPS”). We do not recognize
revenue for this postage as it is purchased by our customers directly from the
USPS. PhotoStamps revenue includes the price of postage.
  On a
limited basis, we allow third parties to offer products and promotions to our
customer base. These arrangements generally provide payment in the form of a
flat fee or revenue sharing arrangements where we receive payment upon customers
accessing third party products and services. Total revenue from such advertising
arrangements is currently immaterial.
  We
provide our customers with the opportunity to purchase parcel insurance directly
through our software. Insurance revenue represents the gross amount charged to
the customer for purchasing insurance and the related cost represents the amount
paid to the insurance broker, Parcel Insurance Plan.  We recognize
revenue on insurance purchases upon the ship date of the insured
package.
  Revenue
from gift cards, which is recognized at the time of redemption, is currently
immaterial to our financial statements. Because we do not yet have meaningful
historical data upon which to base estimates for gift cards that will never be
redeemed (“breakage”), we have not recorded any breakage income related to our
gift card program.
  2.
              Legal
      Proceedings
  Please
refer to "Part II - Other Information - Item 1 - Legal Proceedings" of this
report for a discussion of our current legal proceedings.
  3.
              Net
      Income per Share
  Net
income per share represents net income attributable to common stockholders
divided by the weighted average number of common shares outstanding during a
reported period. The diluted net income per share reflects the potential
dilution that could occur if securities or other contracts to issue common
stock, including stock options (commonly and hereafter referred to as “common
stock equivalents”), were exercised or converted into common stock. Diluted net
income per share is calculated by dividing net income during a reported period
by the sum of the weighted average number of common shares outstanding plus
common stock equivalents for the period.  The following table
reconciles share amounts utilized to calculate basic and diluted net income per
share (in thousands, except per share data):
  Three
      Months Ended
                      September
      30,
                    
                    
                    Nine
      Months Ended
                      September
      30,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Net
      income
                    
                    $
                    1,731
                    
                    
                    $
                    2,063
                    
                    
                    $
                    4,005
                    
                    
                    $
                    8,567Basic
      - weighted average common shares
                    
                    
                    16,035
                    
                    
                    
                    19,410
                    
                    
                    
                    16,397
                    
                    
                    
                    19,505Diluted
      effect of common stock equivalents
                    
                    
                    127
                    
                    
                    
                    316
                    
                    
                    
                    130
                    
                    
                    
                    291Diluted
      - weighted average common shares
                    
                    
                    16,162
                    
                    
                    
                    19,726
                    
                    
                    
                    16,527
                    
                    
                    
                    19,796Earnings
      per share:Basic
                    
                    $
                    0.11
                    
                    
                    $
                    0.11
                    
                    
                    $
                    0.24
                    
                    
                    $
                    0.44Diluted
                    
                    $
                    0.11
                    
                    
                    $
                    0.10
                    
                    
                    $
                    0.24
                    
                    
                    $
                    0.43
  6
  STAMPS.COM
 NOTES
TO FINANCIAL STATEMENTS
 (ALL
INFORMATION WITH RESPECT TO SEPTEMBER 30, 2009 AND 2008 IS
UNAUDITED)
  The
calculation of dilutive shares excludes the effect of the following options that
are considered anti-dilutive (in thousands):
  Three
      Months Ended
                    September
      30,
                  
                  
                  Nine
      Months Ended
                    September
      30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Anti-dilutive
      stock option shares
                  
                  
                  2,674
                  
                  
                  
                  2,192
                  
                  
                  
                  2,714
                  
                  
                  
                  2,241
 
 4.
              Stock-Based
      Employee Compensation
  We are
required to estimate the fair value of share-based payment awards on the date of
grant using an option-pricing model and to recognize stock-based compensation
expense during each period based on the value of that portion of share-based
payment awards that is ultimately expected to vest during the period, reduced
for estimated forfeitures. We estimate forfeitures at the time of grant based on
historical data and revise, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. Compensation expense recognized for all
employee stock options granted is recognized using the straight-line single
method over their respective vesting periods of three to five
years.
  The
following table sets forth the stock-based compensation expense that we
recognized for the periods indicated (in thousands):
  Three
      Months Ended
                          September
      30,
                        
                        
                        Nine
      Months Ended
                          September
      30,2009
                        
                        
                        2008
                        
                        
                        2009
                        
                        
                        2008Stock-based
      compensation expense relating to:Employee
      and director stock options
                        
                        $
                        747
                        
                        
                        $
                        786
                        
                        
                        $
                        2,334
                        
                        
                        $
                        2,438Employee
      stock purchases
                        
                        
                        28
                        
                        
                        
                        94
                        
                        
                        
                        53
                        
                        
                        
                        124Total
      stock-based compensation expense
                        
                        $
                        775
                        
                        
                        $
                        880
                        
                        
                        $
                        2,387
                        
                        
                        $
                        2,562Stock-based
      compensation expense relating to:Cost
      of revenues
                        
                        $
                        71
                        
                        
                        $
                        84
                        
                        
                        $
                        211
                        
                        
                        $
                        228Sales
      and marketing
                        
                        
                        197
                        
                        
                        
                        204
                        
                        
                        
                        586
                        
                        
                        
                        552Research
      and development
                        
                        
                        175
                        
                        
                        
                        182
                        
                        
                        
                        503
                        
                        
                        
                        480General
      and administrative
                        
                        
                        332
                        
                        
                        
                        410
                        
                        
                        
                        1,087
                        
                        
                        
                        1,302Total
      stock-based compensation expense
                        
                        $
                        775
                        
                        
                        $
                        880
                        
                        
                        $
                        2,387
                        
                        
                        $
                        2,562
  We use
the Black-Scholes option valuation model to estimate the fair value of
share-based payment awards on the date of grant, which requires us to make a
number of highly complex and subjective assumptions, including stock price
volatility, expected term, risk-free interest rates and actual and projected
employee stock option exercise behaviors. In the case of options we grant, our
assumption of expected volatility was based on the historical volatility of our
stock price. We base the risk-free interest rate on U.S. Treasury zero-coupon
issues with a remaining term equal to the expected life assumed at the date of
grant.  The estimated expected life represents the weighted-average
period the stock options are expected to remain outstanding determined based on
an analysis of historical exercise behavior.
  7
  STAMPS.COM
 NOTES
TO FINANCIAL STATEMENTS
 (ALL
INFORMATION WITH RESPECT TO SEPTEMBER 30, 2009 AND 2008 IS
UNAUDITED)
  The
following are the weighted average assumptions used in the Black-Scholes
valuation model for the periods indicated:
  Three
      Months Ended
                      September
      30,
                    
                    
                    Nine
      Months Ended
                      September
      30,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Expected
      dividend yield
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —Risk-free
      interest rate
                    
                    
                    —
                    
                    
                    
                    3.19
                    %
                    
                    
                    2.20
                    %
                    
                    
                    3.02
                    %Expected
      volatility
                    
                    
                    —
                    
                    
                    
                    50
                    %
                    
                    
                    53
                    %
                    
                    
                    51
                    %Expected
      life (in years)
                    
                    
                    —
                    
                    
                    
                    5
                    
                    
                    
                    4.5
                    
                    
                    
                    5Expected
      forfeiture rate
                    
                    
                    —
                    
                    
                    
                    16
                    %
                    
                    
                    20
                    %
                    
                    
                    16
                    %
 
 We did
not grant any stock options in the third quarter of 2009
 
 5.
              Intangible
      Assets
  Our
intangible assets consist of patents, trademarks and other intellectual property
with a gross carrying value of approximately $8.3 million and accumulated
amortization of approximately $7.8 million as of each of September 30, 2009 and
December 31, 2008. The expected useful lives of our amortizable intangible
assets range from 4 to 17 years. During 2008, 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 2008 and
determined that the fair value of our intangible assets were in excess of their
carrying value as of December 31, 2008. Aggregate amortization expense on
patents and trademarks was approximately $1,000 and $6,000 for the three and
nine months ended September 30, 2009, respectively, and $3,000 and $365,000 for
the three and nine months ended September 30, 2008, respectively.
  6.
              Comprehensive
      Income
  The
following table provides the data required to calculate comprehensive income (in
thousands):
  Three
      Months Ended
                      September
      30,
                    
                    
                    Nine
      Months Ended
                      September
      30,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Net
      income
                    
                    $
                    1,731
                    
                    
                    $
                    2,063
                    
                    
                    $
                    4,005
                    
                    
                    $
                    8,567Unrealized
      gain (loss) on investments
                    
                    
                    44
                    
                    
                    
                    52
                    
                    
                    
                    870
                    
                    
                    
                    (453
                    )Comprehensive
      income
                    
                    $
                    1,775
                    
                    
                    $
                    2,115
                    
                    
                    $
                    4,875
                    
                    
                    $
                    8,114
 
 7.
              Income
      Taxes
  During
the three and nine months ended September 30, 2009, our income tax expense
consisted of alternative minimum federal tax and state income tax. Our effective
income tax rate differs from the statutory income tax rate primarily as a result
of our use of federal net operating losses (“NOLs”) to offset current federal
tax expense. A valuation allowance was originally recorded against our deferred
tax assets as we determined the realization of these assets did not meet the
more likely than not criteria. During the first quarter of 2008, we determined
that a full valuation allowance against our deferred tax assets was not
necessary and recorded a partial reversal of the deferred tax valuation
allowance of $3.7 million. During the first quarter of 2009, we re-evaluated our
future operating income projections and determined that the realization of our
net deferred tax asset continues to be more likely than not.  In
making such determination, we considered all available positive and negative
evidence, including our recent earnings trend and expected continued future
taxable income.  We continue to maintain a valuation allowance for the
remainder of our deferred tax assets. In September 2008, the State of California
passed legislation temporarily suspending the use of NOLs to offset current
state income tax expense. As a result of not being able to use our state NOLs,
we incurred approximately $210,000 and $468,000 of additional California state
income tax expense during the three and nine months ended September 30, 2009,
respectively. During the three and nine months ended September 30, 2009, we
recorded a current tax provision for corporate alternative minimum federal taxes
and state taxes of approximately $221,000 and $555,000,
respectively.
  8
  STAMPS.COM
 NOTES
TO FINANCIAL STATEMENTS
 (ALL
INFORMATION WITH RESPECT TO SEPTEMBER 30, 2009 AND 2008 IS
UNAUDITED)
  We are
required to determine whether it is more likely than not that a tax position
will be sustained upon examination based on the technical merits of the
position. A tax position that meets the more likely than not recognition
threshold is measured to determine the amount of benefit to recognize in the
financial statements. We have concluded that there are no significant uncertain
tax positions requiring recognition in our financial statements. Our policy is
to recognize interest and penalties expense, if any, related to unrecognized tax
benefits as a component of income tax expense.  As of September 30, 2009,
we have not recorded any interest and penalty expense.
  8.
              Fair
      Value Measurements
  Financial
assets measured at fair value on a recurring basis are classified in one of the
three following categories, which are described below:
  Level
      1 -
                Valuations
      based on unadjusted quoted prices for identical assets in an active
      market
  Level
      2  -
                Valuations
      based on quoted prices in markets where trading occurs infrequently or
      whose values are based on quoted prices of instruments with similar
      attributes in active markets
  Level
      3 -
                Valuations
      based on inputs that are unobservable and involve management judgment and
      our own assumptions about market participants and
  pricing
  The
following table summarizes our financial assets measured at fair value on a
recurring basis (in thousands):
  Fair
      Value Measurement at Reporting Date UsingDescription
                  
                  September
      30,
                      2009
                  
                  
                  Quoted
      Prices
                      in
      Active
                      Markets
      for
                      Identical
      Assets
                      (Level
      1)
                  
                  
                  Significant
                      Other
                      Observable
                      Inputs
                      (Level
      2)
                  
                  
                  Significant
                      Unobservable
                      Inputs
                      (Level
      3)Cash
      and cash equivalents
                  
                  $
                  42,815
                  
                  
                  $
                  42,815
                  
                  
                  $
                  —
                  
                  
                  $
                  —Available-for-sale
      debt securities
                  
                  
                  27,063
                  
                  
                  
                  —
                  
                  
                  
                  27,063
                  
                  
                  
                  —Total
                  
                  $
                  69,878
                  
                  
                  $
                  42,815
                  
                  
                  $
                  27,063
                  
                  
                  $
                  —
  The fair
value of our available-for-sale debt securities included in the Level 2 category
is based on the market values obtained from an independent pricing service that
were evaluated using pricing models that vary by asset class and may incorporate
available trade, bid and other market information and price quotes from well
established independent pricing vendors and broker-dealers.
  There
were no non-financial assets or liabilities that were required to be measured at
fair value as of September 30, 2009.
  9
  STAMPS.COM
 NOTES
TO FINANCIAL STATEMENTS
 (ALL
INFORMATION WITH RESPECT TO SEPTEMBER 30, 2009 AND 2008 IS
UNAUDITED)
  9.
              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
September 30, 2009 and December 31, 2008. 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. Realized gains and losses are reflected in other income
using the specific identification method. There was no material realized gain or
loss with respect to our investments during the third quarter of 2009.
Unrealized gains and losses are included as a separate component of
stockholders' equity. We have ten securities with a total fair value of
approximately $4.4 million that have unrealized losses of approximately $927,000
as of September 30, 2009. The following table summarizes realized gains and
losses for the period indicated (in thousands):
  Three
      Months Ended
                      September
      30,
                    
                    
                    Nine
      Months Ended
                      September
      30,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Realized
      gain
                    
                    $
                    0.4
                    
                    
                    $
                    9.0
                    
                    
                    $
                    36.4
                    
                    
                    $
                    16.0Realized
      loss
                    
                    
                    (0.1
                    )
                    
                    
                    (0.0
                    )
                    
                    
                    (5.1
                    )
                    
                    
                    (21.0
                    )Net
      realized gain (loss)
                    
                    $
                    0.3
                    
                    
                    $
                    9.0
                    
                    
                    $
                    31.3
                    
                    
                    $
                    (5.0
                    )
 
 On at
least a quarterly basis, we evaluate our available for sale securities, and
record an “other-than-temporary impairment” (“OTTI”) if we believe their fair
value is less than historical cost, and it is probable that we will not collect
all contractual cash flows. We did not record any OTTI as of the end of the
three and nine months ended September 30, 2009, after evaluating a number of
factors including, but not limited to:
  ·
              How
      much fair value has declined below amortized
  cost
 ·
              The
      financial condition of the issuers
 ·
              Significant
      rating agency changes on the issuer
 ·
              Our
      intent and ability to hold the security for a period of time sufficient to
      allow for any anticipated recovery in fair
value
  10
  STAMPS.COM
 NOTES
TO FINANCIAL STATEMENTS
 (ALL
INFORMATION WITH RESPECT TO SEPTEMBER 30, 2009 AND 2008 IS
UNAUDITED)
  The
following table summarizes our cash, cash equivalents, restricted cash and
investments as of September 30, 2009 and December 31, 2008 (in
thousands):
  September 30, 2009Cost
      or
                    
                    
                    Gross
                    
                    
                    GrossAmortized
                    
                    
                    Unrealized
                    
                    
                    Unrealized
                    
                    
                    EstimatedCost
                    
                    
                    Gains
                    
                    
                    Losses
                    
                    
                    Fair
      ValueCash
      and cash equivalents:Cash
                    
                    $
                    6,844
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    6,844Money
      market
                    
                    
                    35,971
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    35,971Cash
      and cash equivalents
                    
                    
                    42,815
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    42,815Restricted
      cash:Corporate
      notes and bonds
                    
                    
                    554
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    554Restricted
      cash
                    
                    
                    554
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    554Short-term
      investments:Corporate
      notes and bonds
                    
                    
                    2,553
                    
                    
                    
                    8
                    
                    
                    
                    (118
                    )
                    
                    
                    2,443Short-term
      investments
                    
                    
                    2,553
                    
                    
                    
                    8
                    
                    
                    
                    (118
                    )
                    
                    
                    2,443Long-term
      investments:Corporate
      bonds and asset backed securities
                    
                    
                    24,598
                    
                    
                    
                    277
                    
                    
                    
                    (809
                    )
                    
                    
                    24,066Long-term
      investments
                    
                    
                    24,598
                    
                    
                    
                    277
                    
                    
                    
                    (809
                    )
                    
                    
                    24,066Cash
      and equivalents, restricted cash and investments
                    
                    $
                    70,520
                    
                    
                    
                    285
                    
                    
                    
                    (927
                    )
                    
                    $
                    69,878
  December 31, 2008Cost
      or
                    
                    
                    Gross
                    
                    
                    GrossAmortized
                    
                    
                    Unrealized
                    
                    
                    Unrealized
                    
                    
                    EstimatedCost
                    
                    
                    Gains
                    
                    
                    Losses
                    
                    
                    Fair
      ValueCash
      and cash equivalents:Cash
                    
                    $
                    6,762
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    6,762Money
      market
                    
                    
                    45,814
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    45,814Cash
      and cash equivalents
                    
                    
                    52,576
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    52,576Restricted
      cash:Corporate
      notes and bonds
                    
                    
                    554
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    554Restricted
      cash
                    
                    
                    554
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    554Short-term
      investments:Corporate
      notes and bonds
                    
                    
                    14,285
                    
                    
                    
                    -
                    
                    
                    
                    (48
                    )
                    
                    
                    14,237U.S.
      Government and agency securities
                    
                    
                    2,002
                    
                    
                    
                    -
                    
                    
                    
                    (4
                    )
                    
                    
                    1,998Short-term
      investments
                    
                    
                    16,287
                    
                    
                    
                    -
                    
                    
                    
                    (52
                    )
                    
                    
                    16,235Long-term
      investments:Corporate
      bonds and asset backed securities
                    
                    
                    6,154
                    
                    
                    
                    -
                    
                    
                    
                    (1,460
                    )
                    
                    
                    4,694Long-term
      investments
                    
                    
                    6,154
                    
                    
                    
                    -
                    
                    
                    
                    (1,460
                    )
                    
                    
                    4,694Cash
      and equivalents, restricted cash and investments
                    
                    $
                    75,571
                    
                    
                    
                    -
                    
                    
                    
                    (1,512
                    )
                    
                    $
                    74,059
  11
  STAMPS.COM
 NOTES
TO FINANCIAL STATEMENTS
 (ALL
INFORMATION WITH RESPECT TO SEPTEMBER 30, 2009 AND 2008 IS
UNAUDITED)
  The
following table summarizes contractual maturities of our marketable fixed-income
securities as of September 30, 2009 (in thousands):
  Amortized
                      Cost
                  
                  
                  Estimated
                      Fair
      ValueDue
      within one year
                  
                  $
                  3,107
                  
                  
                  $
                  2,997Due
      after one year through five years
                  
                  
                  24,584
                  
                  
                  
                  24,053Due
      after five years through ten years
                  
                  
                  14
                  
                  
                  
                  13Total
                  
                  $
                  27,705
                  
                  
                  $
                  27,063
  Total
restricted cash of approximately $554,000 as of September 30, 2009 and December
31, 2008 is related to a letter of credit for a facility leased by us under a
lease that will expire in March 2010.
  12
  ITEM
      2.
              MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
  This
Quarterly Report on Form 10-Q contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”),  and Section 21E of the Securities Exchange Act of
1934, as amended (the “Exchange Act”).  These statements relate to
expectations concerning matters that are not historical
facts.   You can find many (but not all) of these statements by
looking for words such as “approximates,” “believes,” “expects,” “anticipates,”
“estimates,” “intends,” “plans,” “would,” “may” or other similar expressions in
this report.  We claim the protection of the safe harbor contained in
the Private Securities Litigation Reform Act of 1995.  We caution
investors that any forward-looking statements presented in this report, or that
we may make orally or in writing from time to time, are based on beliefs and
assumptions made by, and information currently available to, us.  Such
statements are based on assumptions, and the actual outcome will be affected by
known and unknown risks, trends, uncertainties and factors that are beyond our
control or ability to predict. Although we believe that our assumptions are
reasonable, they are not guarantees of future performance, and some will
inevitably prove to be incorrect. As a result, our actual future results may
differ from our expectations, and those differences may be material. We are not
undertaking any obligation to update any forward-looking statements.
Accordingly, investors should use caution in relying on past forward-looking
statements, which are based on known results and trends at the time they are
made, to anticipate future results or trends.
  Please
refer to the risk factors under “Item 1A. Risk Factors” of our Form 10-K for the
year ended December 31, 2008 as well as those described elsewhere in our public
filings.  The risks included are not exhaustive, and additional
factors could adversely affect our business and financial
performance.  We operate in a very competitive and rapidly changing
environment. New risk factors emerge from time to time, and it is not possible
for management to predict all such risk factors, nor can it assess the impact of
all such risk factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.
 
 Stamps.com,
NetStamps, PhotoStamps, Hidden Postage, Stamps.com Internet postage and the
Stamps.com logo are our trademarks.  This report also references
trademarks of other entities.
  SPECIAL
NOTICE REGARDING PURCHASES OF MORE THAN 5% OF OUR STOCK
  We
currently have federal and state net operating loss (“NOL”) carry-forwards of
approximately $235 million and $150 million, respectively, with potential value
of up to approximately $95 million in tax savings over the next 15 years. 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
September 30, 2009 we were at approximately a 28% level compared with the 50%
level that would trigger impairment of our NOL asset.
  Under our
certificate of incorporation, any person, company or investment firm that wishes
to become a “5% shareholder” (as defined in our certificate of incorporation) of
Stamps.com must first obtain a waiver from our board of directors. In addition,
any person, company or investment firm that is already a “5% shareholder” of
Stamps.com cannot make any additional purchases of Stamps.com stock without a
waiver from our board of directors.  The NOL protective provisions
contained in our certificate of incorporation are more specifically described in
our Definitive Proxy filed with the Securities and Exchange Commission on April
2, 2008.
  As of
October 31, 2009, we had approximately 15,781,000 shares outstanding, and
therefore ownership of approximately 789,000 shares or more would currently
constitute a “5% shareholder”. We strongly urge that any stockholder
contemplating owning more than 650,000 shares contact us before doing
so.
  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 (“USPS”) mail classes including First Class Mail®, Priority Mail®,
Express Mail®, Media Mail®, Parcel Post®, and others. Our customers include home
businesses, small businesses, corporations and individuals. We were the first
ever USPS-licensed vendor to offer PC Postage® in a software-only business model
in 1999.
  13
  Our
Services and Products
 
 We offer
the following products and services to our customers:
  PC Postage
Service
  Our
USPS-approved PC Postage service enables users to print “electronic stamps”
directly onto envelopes, plain paper, or labels using only a standard personal
computer, printer and Internet connection. Our service currently supports a
variety of USPS and international mail classes. Customers can also add USPS
Special Services such as Delivery ConfirmationTM,
Signature ConfirmationTM,
Registered Mail, Certified Mail, Insured Mail, Return Receipt, Collect on
Delivery and Restricted Delivery to their mail pieces. After installing our free
software and completing the registration process, customers can purchase and
print postage 24 hours a day, seven days a week. When a customer purchases
postage for use through our service, the customer pays face value, and the funds
are transferred directly from the customer’s account to the USPS’s account.
Currently the majority of new customers signing up for our service pay a monthly
convenience fee ranging from $15.99 to $34.99.
  Our
customers can print postage (i) on NetStamps® labels, which can be used just
like regular stamps, (ii) directly on envelopes or on other types of mail or
labels, in a single-step process that saves time and provides a professional
look, (iii) on plain 8.5” x 11” paper or on special labels for packages, and
(iv) on integrated customs forms for international mail.  For added
convenience, our PC Postage services incorporate address verification technology
that verifies each destination address for mail sent using our service against a
database of all known addresses in the United States and can be integrated into
common small business and productivity software applications such as word
processing, contact and address management, and accounting and financial
applications. We also offer several different versions of NetStamps such as
Themed NetStamps and Photo NetStamps that allow customers to add stock or full
custom designs to their mail while still providing the same NetStamps
convenience of printing and using postage whenever it is needed.
  PhotoStamps®
  In May
2009, we successfully completed the market test for our PhotoStamps product.
PhotoStamps is a patented form of postage that allows consumers to turn digital
photos, designs or images into valid US postage. With this product, individuals
or businesses can now create customized US postage using pictures of their
children, pets, vacations, celebrations, business logos and more. PhotoStamps
can be used as regular postage to send letters, postcards or packages. The
product is available via our separately-marketed website at www.photostamps.com.
Customers upload a digital photograph or image file, customize the look and feel
by choosing a border color to complement the photo, select the value of postage,
and place the order online. Each sheet includes 20 individual PhotoStamps, and
orders arrive via US Mail in a few business days. We do not include our
PhotoStamps business when we refer to our PC Postage business.
  Mailing
& Shipping Supplies Store
  Our
Mailing & Shipping Supplies Store (our “Supplies Store”) is available to our
customers from within our PC Postage software and sells NetStamps labels,
shipping labels, other mailing labels, dedicated postage printers, OEM and
private label inkjet and laser toner cartridges, scales, and other mailing and
shipping-focused office supplies. Our Supplies Store features a store catalog,
same day shipping capabilities, messaging of our free or discounted shipping
promotions, cross sell during checkout, product search capabilities, and
expedited and rush shipping options.
  Branded
Insurance
  We offer
Stamps.com branded insurance to our customers so that they may insure their mail
or packages in a fully integrated, online process that eliminates any trips to
the post office or the need to complete any special forms. Our branded insurance
is provided in partnership with Parcel Insurance Plan and is underwritten by
Fireman's Fund. We also offer official USPS insurance alongside our branded
insurance product.
  14
  Results
of Operations
  Total
revenue was $20.2 million both for the third quarter of 2009 and 2008. Total
revenue during the nine months ended September 30, 2009 was $60.4 million, a
decrease of 3% from $62.6 million for the nine months ended September 30, 2008.
PC Postage subscriber related revenue, including service revenue, product
revenue and insurance revenue, in the third quarter of 2009 was $18.3 million,
an increase of 1% from $18.1 million in the third quarter of 2008, and was $54.8
million in the nine months ended September 30, 2009, an increase of less than 1%
from $54.7 million in the nine months ended September 30, 2008. PhotoStamps
revenue in the third quarter of 2009 was $1.9 million, a decrease of 6% from
$2.0 million in the third quarter of 2008, and was $5.6 million in the nine
months ended September 30, 2009, a decrease of 29% from $7.9 million in the nine
months ended September 30, 2008.
  We use
several PC Postage marketing channels to acquire customers, including
partnerships, online advertising, affiliate channel, direct mail, traditional
media advertising, enhanced promotion online channel, and others. In the
enhanced promotion channel, we work with various companies to advertise our
service in a variety of sites on the Internet. These companies typically offer
an additional promotion (beyond what we typically offer) directly to the
customer in order to get the customer to try our service. Because our enhanced
promotion channel is characterized by higher customer attrition rates and lower
customer acquisition costs than our other channels, we decided in the first
quarter of 2008 to shift our marketing strategy and customer acquisition
spending to focus on our non-enhanced promotion channels.
  Primarily
as a result of this decision, we estimate that subscriber related revenue for
customers acquired through our non-enhanced promotion channels in the third
quarter of 2009 was $16.8 million, an increase of 5% from $16.0 million in the
third quarter of 2008, and $50.0 million in the nine months ended September 30,
2009, an increase of 5% from $47.7 million in the nine months ended September
30, 2008, while subscriber related revenue for customers acquired through our
enhanced promotion channel in the third quarter of 2009 was $1.6 million, a
decrease of 27% from $2.1 million in the third quarter of 2008, and $4.9 million
in the nine months ended September 30, 2009, a decrease of 31% from $7.0 million
in the nine months ended September 30, 2008.
  We define
paid customers as ones from whom we successfully collected service fees at least
once during the quarter. Total number of paid customers originally acquired
through our non-enhanced promotion channels in the third quarter of 2009 was
315,000, an increase of 1% from 312,000 in the third quarter of
2008.
  We
believe that the slight increase in paid customers in the third quarter of 2009
was attributable to our increased customer acquisition spending on our
non-enhanced promotional channels. For customers originally acquired through our
non-enhanced promotion channels, our average subscriber related monthly revenue
per paid customer in the third quarter of 2009 was $17.72, an increase of 4%
from $17.07 in the third quarter of 2008. This increase is primarily
attributable to more customers on higher priced subscription
plans.
  15
  The
following table sets forth our results of operations as a percentage of total
revenue for the periods indicated:
  Three
      Months Ended
                          September
      30,
                        
                        
                        Nine
      months ended
                          September
      30,2009
                        
                        
                        2008
                        
                        
                        2009
                        
                        
                        2008Total
      RevenuesService
                        
                        
                        76.2
                        %
                        
                        
                        76.6
                        %
                        
                        
                        76.0
                        %
                        
                        
                        73.8
                        %Product
                        
                        
                        12.5
                        %
                        
                        
                        11.5
                        %
                        
                        
                        12.8
                        %
                        
                        
                        11.8
                        %Insurance
                        
                        
                        1.9
                        %
                        
                        
                        1.9
                        %
                        
                        
                        1.9
                        %
                        
                        
                        1.8
                        %PhotoStamps
                        
                        
                        9.4
                        %
                        
                        
                        10.0
                        %
                        
                        
                        9.3
                        %
                        
                        
                        12.6
                        %Other
                        
                        
                        0.0
                        %
                        
                        
                        0.0
                        %
                        
                        
                        0.0
                        %
                        
                        
                        0.0
                        %Total
      revenues
                        
                        
                        100.0
                        %
                        
                        
                        100.0
                        %
                        
                        
                        100.0
                        %
                        
                        
                        100.0
                        %Cost
      of revenuesService
                        
                        
                        14.5
                        %
                        
                        
                        13.0
                        %
                        
                        
                        14.6
                        %
                        
                        
                        12.2
                        %Product
                        
                        
                        4.6
                        %
                        
                        
                        4.0
                        %
                        
                        
                        4.8
                        %
                        
                        
                        4.2
                        %Insurance
                        
                        
                        0.6
                        %
                        
                        
                        0.6
                        %
                        
                        
                        0.6
                        %
                        
                        
                        0.6
                        %PhotoStamps
                        
                        
                        7.6
                        %
                        
                        
                        7.4
                        %
                        
                        
                        7.2
                        %
                        
                        
                        9.1
                        %Total
      cost of revenues
                        
                        
                        27.3
                        %
                        
                        
                        25.0
                        %
                        
                        
                        27.2
                        %
                        
                        
                        26.1
                        %Gross
      profit
                        
                        
                        72.7
                        %
                        
                        
                        75.0
                        %
                        
                        
                        72.8
                        %
                        
                        
                        73.9
                        %Operating
      expenses:Sales
      and marketing
                        
                        
                        36.4
                        %
                        
                        
                        38.0
                        %
                        
                        
                        39.1
                        %
                        
                        
                        40.0
                        %Research and
      development
                        
                        
                        10.9
                        %
                        
                        
                        11.1
                        %
                        
                        
                        11.0
                        %
                        
                        
                        10.0
                        %General and
      administrative
                        
                        
                        16.8
                        %
                        
                        
                        17.0
                        %
                        
                        
                        16.5
                        %
                        
                        
                        18.9
                        %Total operating
      expenses
                        
                        
                        64.1
                        %
                        
                        
                        66.1
                        %
                        
                        
                        66.6
                        %
                        
                        
                        68.9
                        %Income
      from operations
                        
                        
                        8.6
                        %
                        
                        
                        8.9
                        %
                        
                        
                        6.2
                        %
                        
                        
                        5.0
                        %Other
      income (expense), net
                        
                        
                        1.0
                        %
                        
                        
                        3.5
                        %
                        
                        
                        1.3
                        %
                        
                        
                        3.8
                        %Income
      before income taxes
                        
                        
                        9.6
                        %
                        
                        
                        12.4
                        %
                        
                        
                        7.5
                        %
                        
                        
                        8.8
                        %Income
      tax expense (benefit)
                        
                        
                        1.1
                        %
                        
                        
                        2.1
                        %
                        
                        
                        0.9
                        %
                        
                        
                        (4.9
                        %)Net
      income
                        
                        
                        8.5
                        %
                        
                        
                        10.2
                        %
                        
                        
                        6.6
                        %
                        
                        
                        13.7
                        %
  16
  Revenue
  Our
revenue is derived primarily from five sources: (1) service fees charged to
customers for use of our PC Postage service; (2) product revenue from the direct
sale of consumables and supplies through our Supplies Store; (3) insurance
revenue from our branded insurance offering; (4) PhotoStamps revenue from our
PhotoStamps business; and (5) other revenue, consisting of advertising revenue
derived from advertising programs with our existing customers.
  Service
revenue was essentially unchanged at $15.4 million in both the third
quarter of 2009 and 2008 and decreased 1% to $45.9 million in the nine months
ended September 30, 2009 from $46.2 million in the nine months ended September
30, 2008. The decrease in service revenue was primarily due to a strategic
reduction in marketing spending on our enhanced promotion channel. As noted
above, the decrease during the nine months ended September 30, 2009 consisted of
a 27% decrease in subscriber related revenue from customers acquired through our
enhanced promotional channels largely offset by a 5% increase in subscriber
related revenue from customers acquired through our non-enhanced promotional
channels. As a percentage of total revenue, service revenue decreased by
approximately one percentage point to 76% in the third quarter of 2009 from 77%
in the third quarter of 2008 and increased approximately two percentage points
to 76% in the nine months ended September 30, 2009 from 74% in the nine months
ended September 30, 2008, primarily as a result of the decrease in revenue from
our PhotoStamps product.
  Product
revenue increased 9% to $2.5 million in the third quarter of 2009 from $2.3
million in the third quarter of 2008, and increased 5% to $7.7 million in the
nine months ended September 30, 2009 from $7.4 million in the nine months ended
September 30, 2008. The increase was primarily attributable to the following:
(1) growth in our paid customer base; (2) marketing our Supplies Store to our
existing customer base; (3) the additional SKUs we added to our Supplies Store;
and (4) growth in postage printed, which helps drive sales of consumable
supplies such as labels. Total postage printed by customers using our service
during the third quarter of 2009 was $86 million, a 12% increase from the $77
million printed during the third quarter of 2008. As a percentage of total
revenue, product revenue increased one percentage point to approximately 13%
both in the third quarter of 2009 and the nine months ended September 30, 2009
from approximately 12% in the third quarter of 2008 and the nine months ended
September 30, 2008.
  Insurance
revenue increased 1% to $377,000 in the third quarter of 2009 from $375,000 in
the third quarter of 2008 and increased 3% to $1.2 million in the nine months
ended September 30, 2009 from $1.1 million in the nine months ended September
30, 2008, primarily as a result of an increase in the average of the dollar
value insured per transaction. As a percentage of total revenue, insurance
revenue remained at approximately 2% during each of the third quarter of 2009
and 2008 and the nine months ended September 30, 2009 and 2008.
  As
previously announced, we reduced our PhotoStamps sales and marketing spending in
the third quarter of 2009 compared with the third quarter of 2008 and plan to
continue to reduce our sales and marketing spending on PhotoStamps in future
periods to improve profitability in that business.  As a result of
this decision, PhotoStamps revenue decreased 6% to $1.9 million in the
third quarter of 2009 from $2.0 million in the third quarter of 2008 and
decreased 29% to $5.6 million in the nine months ended September 30, 2009 from
$7.9 million in the nine months ended September 30, 2008. As a percentage of
total revenue, PhotoStamps revenue decreased approximately one percentage point
to 9% in the third quarter of 2009 from 10% in the third quarter of 2008 and
decreased approximately four percentage points to 9% in the nine months ended
September 30, 2009 from 13% in the nine months ended September 30, 2008. Total
PhotoStamps sheets shipped during the third quarter of 2009 was approximately
114,000, a 5% decrease compared to 120,000 in the third quarter of 2008. Average
revenue per sheet shipped in the third quarter of 2009 was $16.70 compared to
$16.77 in the third quarter of 2008.
  Other
revenue consisting of commissions from the advertising or sale of products by
third party vendors to our customer base was $1,000 in the third quarter of 2009
and $6,000 in the nine months ended September 30, 2009 compared to $0 in both
the third quarter of 2008 and the nine months ended September 30, 2008.
Commission revenue is currently not material to our financial
statements.
  17
  Cost
of Revenue
  Cost of
revenue principally consists of the cost of customer service, certain
promotional expenses, system operating costs, credit card processing fees, the
cost of postage for PhotoStamps, image review, printing and fulfillment costs
for PhotoStamps, parcel insurance offering costs, customer misprints and
products sold through our Supplies Store and the related costs of shipping and
handling. Total cost of revenue increased 9% to $5.5 million in the third
quarter of 2009 from $5.0 million in the third quarter of 2008 and increased 1%
to $16.4 million in the nine months ended September 30, 2009 from $16.3 million
in the nine months ended September 30, 2008. As a percentage of total revenue,
total cost of revenue increased approximately two percentage points to 27% in
the third quarter of 2009 from 25% in the third quarter of 2008 and increased
approximately one percentage point to 27% in the nine months ended September 30,
2009 from 26% in the nine months ended September 30, 2008.
  Cost of
service revenue increased 11% to $2.9 million in the third quarter of 2009 from
$2.6 million in the third quarter 2008. The increase during the quarter is
primarily attributable to an increase in customer service costs aimed at
improving our overall customer experience. Cost of service revenue increased 15%
to $8.8 million in the nine months ended September 30, 2009 from $7.6 million in
the nine months ended September 30, 2008. This increase is primarily
attributable to a change in our assumption of future coupon redemptions relating
to our promotional expense, which provided a one-time benefit during the second
quarter of 2008 of approximately $266,000. Promotional expense, which represents
a material portion of total cost of service revenue, is expensed in the period
in which a customer qualifies for the promotion, while the revenue associated
with the acquired customer is earned over the customer's lifetime. As a result,
promotional expense for newly acquired customers may exceed the revenue earned
from those customers in that period. Promotional expense was $449,000 and
$287,000 in the three months ended September 30, 2009 and 2008, respectively,
and $1.2 million and $486,000 in the nine months ended September 30, 2009 and
2008, respectively. As a percentage of total revenue, cost of service revenue
increased approximately two percentage points to 15% in the third quarter of
2009 from 13% in the third quarter of 2008 and increased approximately three
percentage points to 15% in the nine months ended September 30, 2009 from 12% in
the nine months ended September 30, 2008.
  Cost of
product revenue increased 16% to $940,000 in the third quarter of 2009 from
$809,000 in the third quarter of 2008 and increased 11% to $2.9 million in the
nine months ended September 30, 2009 from $2.6 million in the nine months ended
September 30, 2008. As a percentage of total revenue, cost of product revenue
increased approximately one percentage point to 5% in the three and nine months
ended September 30, 2009 from 4% in the three and nine months ended September
30, 2008. The increase, on an absolute basis, is mainly attributable to the
increase in fulfillment cost, as we added an east coast fulfillment center to
reduce delivery times and increase store sales.
  Cost of
insurance revenue decreased 6% to $116,000 in the third quarter of 2009 from
$124,000 in the third quarter of 2008 and increased less than 1% to $364,000 in
the nine months ended September 30, 2009 from $363,000 in the nine months ended
September 30, 2008. As a percentage of total revenue, cost of insurance revenue
was unchanged at approximately 1% in the three and nine months ended September
30, 2009 and 2008.
  Cost of
PhotoStamps revenue was $1.5 million in both the third quarter of 2009 and
2008 and decreased 24% to $4.4 million in the nine months ended September 30,
2009 from $5.7 million in the nine months ended September 30, 2008,
corresponding to the decrease in PhotoStamps revenue. The gross margin from
PhotoStamps is significantly lower than that of our other sources of revenue
because we include the stated value of USPS postage as part of our cost of
PhotoStamps revenue. As a percentage of total revenue, cost of PhotoStamps
revenue increased less than one percentage point to 8% in the third quarter of
2009 from 7% in third quarter of 2008 and decreased approximately two percentage
points to 7% in the nine months ended September 30, 2009 from 9% in the nine
months ended September 30, 2008.
  18
  Sales
and Marketing
  Sales and
marketing expense principally consists of spending to acquire new customers and
compensation and related expenses for personnel engaged in sales, marketing and
business development activities. Sales and marketing expense decreased 4% to
$7.4 million in the third quarter of 2009 from $7.7 million in the third quarter
of 2008 and decreased 6% to $23.7 million in the nine months ended September 30,
2009 from $25.1 million in the nine months ended September 30, 2008. As a
percentage of total revenue, sales and marketing expenses decreased
approximately two percentage points to 36% in the third quarter of 2009 from 38%
in the third quarter of 2008 and decreased approximately one percentage point to
39% in the nine months ended September 30, 2009 from 40% in the nine months
ended September 30, 2008. The decrease, both on an absolute basis and as a
percentage of total revenue, is primarily due to our decision to decrease our
enhanced promotion marketing program expenditures and to decrease our marketing
expenditures related to PhotoStamps, partially offset by an increase in
marketing program expenditures relating to the acquisition of customers outside
the enhanced promotion channel for our PC Postage business. Ongoing marketing
programs include the following: traditional advertising, partnerships, customer
referral programs, customer re-marketing efforts, telemarketing, direct mail,
and online advertising.
  Research
and Development
  Research
and development expense principally consists of compensation for personnel
involved in the development of our services, depreciation of equipment and
software and expenditures for consulting services and third party software.
Research and development was $2.2 million in both the third quarter of 2009 and
2008 and increased 5% to $6.6 million in the nine months ended September 30,
2009 from $6.3 million in the nine months ended September 30, 2008. The increase
during the nine months ended September 30, 2009 is primarily due to higher
headcount related expenses as we continued to invest in the development and
enhancement of our PC postage solutions. As a percentage of total revenue,
research and development expense was approximately 11% in both the third quarter
of 2009 and 2008 and increased one percentage point to 11% in the nine months
ended September 30, 2009 from 10% in the nine months ended September 30,
2008.
  General and
Administrative
  General
and administrative expense principally consists of compensation and related
costs for executive and administrative personnel, fees for legal and other
professional services, depreciation of equipment and software used for general
corporate purposes and amortization of intangible assets. General and
administrative expense was $3.4 million in both the third quarter of 2009 and
2008 and decreased 16% to $10.0 million in the nine months ended September 30,
2009 from $11.8 million in the nine months ended September 30, 2008. As a
percentage of total revenue, general and administrative expense was
approximately 17% in both the third quarter of 2009 and 2008 and decreased
approximately two percentage points to 17% in the nine months ended September
30, 2009 from 19% in the nine months ended September 30, 2008. The decrease,
both on an absolute basis and as a percentage of total revenue, is primarily due
to the decrease in legal expenses, as we incurred the cost of going to trial for
the Kara Technologies lawsuit in the second quarter of 2008. Additionally, we
incurred a one-time litigation charge of $710,000 during the second quarter of
2008 relating to a lawsuit by Sterling Reality Organization Co. stemming from
our iShip business, which we divested in 2001.
  Other
Income, Net
  Other
income, net primarily consists of interest income from cash equivalents,
short-term investments and long-term investments. Other income decreased 70% to
$208,000 in the third quarter of 2009 from $702,000 in the third quarter of 2008
and decreased 66% to $797,000 in the nine months ended September 30, 2009 from
$2.4 million in the nine months ended September 30, 2008. As a percentage of
total revenue, other income, net decreased approximately three percentage points
to 1% in the third quarter of 2009 and the nine months ended September 30, 2009
from 4% in the third quarter of 2008 and the nine months ended September 30,
2008. The decrease, both on an absolute basis and as a percentage of total
revenue, is primarily due to lower interest rates and lower investment balances,
as we sold certain investments and used the cash to repurchase shares of our
common stock.
  Liquidity
and Capital Resources
  As of
September 30, 2009 and December 31, 2008 we had approximately $70 million and
$74 million, respectively, in cash, restricted cash and short-term and long-term
investments. We invest available funds in short-term and long-term securities,
including money market funds, corporate bonds, asset backed securities, and
government and agency bonds, and do not engage in hedging or speculative
activities.
  There
have been no material changes to our contractual obligations and commercial
commitments included in Item 7 “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in our Annual Report on Form 10-K
for the year ended December 31, 2008.
  19
  Net cash
provided by operating activities was $7.3 million and $8.8 million during
the nine months ended September 30, 2009 and 2008, respectively.  The
decrease in net cash provided by operating activities is primarily attributable
to the decrease in PhotoStamps gross profit and lower interest
income.
  Net cash
used in investing activities was $4.9 million during the nine months ended
September 30, 2009.  Net cash provided by investing activities was
$18.4 million during the nine months ended September 30, 2008. The increase in
net cash used in investing activities is primarily due to the purchase of
long-term investment securities.
  Net cash
used in financing activities was $12.2 million and $5.0 million during the
nine months ended September 30, 2009 and 2008, respectively. This increase is
mainly due to our use of cash to repurchase our stock.
  We
believe our available cash and marketable securities, together with the cash
flow from operations, will be sufficient to fund our business for at least the
next twelve months.
  Critical
Accounting Policies
  Management’s
discussion and analysis of our financial condition and results of operations is
based on our unaudited financial statements. The preparation of these financial
statements is based on the selection of accounting policies and the application
of significant accounting estimates, some of which require management to make
judgments, estimates and assumptions that affect the amounts reported in the
financial statements and notes. For more information regarding our critical
accounting estimates and policies, see Part II, Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations—Critical Accounting Estimates and Policies” of our Form 10-K for the
year ended December 31, 2008.
  Recent
Accounting Pronouncements
  In June
2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-01
(Topic 105), “Generally Accepted Accounting Principles, which establishes the
FASB Codification as the official single source of authoritative United States
GAAP. All existing accounting standards are superseded. All other accounting
guidance not included in the Codification will be considered non-authoritative.
The Codification also includes all relevant SEC guidance organized using the
same topical structure in separate sections within the Codification. This update
is effective for financial statements issued for interim and annual reports
ending after September 15, 2009. The adoption of this update did not have a
material impact on our financial statements.
  In August
2009, the FASB issued ASU No. 2009-05, “Fair Value Measurements and Disclosures
(Topic 820) – Measuring Liabilities at Fair Value”. This update provides
clarification for the fair value measurement of liabilities in circumstances in
which a quoted price in an active market for an identical liability is not
available. This update is effective for interim periods beginning after August
28, 2009. The adoption of this update did not have a material impact on our
financial statements.
  ITEM
      3.
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
  Our
exposure to market rate risk for changes in interest rates relates primarily to
our investment portfolio. We have not used derivative financial instruments in
our investment portfolio. None of the instruments in our investment portfolio
are held for trading purposes. At September 30, 2009, our cash equivalents and
investments consist of money market, U.S. government obligations, asset-backed
securities and public corporate debt securities with duration of 345 days. At
September 30, 2009 our cash equivalents and investments, net of restricted cash,
approximated $69.3 million and had a related weighted average interest rate of
approximately 1.3%. Interest rate fluctuations impact the carrying value of the
portfolio. The fair value of our portfolio of marketable securities would not be
significantly affected by either a 10 % increase or decrease in the rates of
interest due primarily to the short duration nature of the portfolio. We do not
believe that the future market risks related to the above securities will have a
material adverse impact on our financial position, results of operations or
liquidity.
  As
we do not have any operations outside of the United States, we are not exposed
to foreign currency risks.
  20
  ITEM
      4.
              CONTROLS
      AND PROCEDURES
  Evaluation
of Disclosure Controls and Procedures
  We
maintain disclosure controls and procedures (as such term is defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934), designed to
ensure that information required to be disclosed by us in the reports that we
file or submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms.
  Our
management evaluated, with the participation of our Principal Executive Officer
and Principal Financial Officer, the effectiveness of our disclosure controls
and procedures as of the end of the period covered by this report. Based on that
evaluation, our Principal Executive Officer and Principal Financial Officer have
concluded, as of that time, that our disclosure controls and procedures were
effective in ensuring that information required to be disclosed by us in reports
filed or submitted under the Securities Exchange Act of 1934 (i) is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission’s rules and forms and (ii) is
accumulated and communicated to our management, including our Principal
Executive Officer and our Principal Financial Officer, to allow timely decisions
regarding required disclosure.
  Changes
in Internal Controls
  During
the quarter ended September 30, 2009, there has been no change in our internal
control over financial reporting (as defined in Rule 13a-15(f) under the
Securities Exchange Act of 1934) that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
  21
  PART
II – OTHER INFORMATION
  ITEM
      1.
              LEGAL
      PROCEEDINGS
  On
October 22, 2004, Kara Technology Incorporated filed suit against us in the
United States District Court for the Southern District of New York, alleging,
among other claims, that we infringed certain Kara Technology patents and that
we misappropriated trade secrets owned by Kara Technology, most particularly
with respect to our NetStamps feature. Kara Technology seeks an injunction,
unspecified damages, and attorneys’ fees. The suit was transferred to the United
States District Court for the Central District of California. On August 23,
2006, the court granted our summary judgment motions on the trade secret and
other non-patent claims. On April 3, 2008, the court granted our summary
judgment motion that PhotoStamps does not infringe. On June 27, 2008, at the
conclusion of trial, the jury issued its verdict in our favor, finding that
NetStamps does not infringe. On September 24, 2009, the United States Court of
Appeals for the Federal Circuit vacated-in-part and reversed-in-part our final
judgment.  In particular, the Court vacated the jury verdict that
NetStamps does not infringe and reversed the grant of summary judgment on the
breach of contract claim. Each are remanded for further proceedings. Our grants
of summary judgment that PhotoStamps does not infringe and on the trade secret
claim remain in effect.
  On
November 22, 2006, we filed a lawsuit against Endicia, Inc. and PSI Systems,
Inc. in the United States District Court for the Central District of California
for infringement of eleven of our patents covering, among other things, Internet
postage technology. We seek an injunction, unspecified damages, and attorneys’
fees. On January 8, 2007, Endicia, Inc. and PSI Systems, Inc. filed
counterclaims asking for a declaratory judgment that all eleven patents are
invalid, unenforceable and not infringed. On November 10, 2008, we selected
fifteen claims from eight of the patents to be the subject of the claim
construction hearing and trial. The Court issued a claim construction order on
June 15, 2009 and trial is scheduled to begin February 2, 2010.
  On
August 8, 2008, PSI Systems, Inc. filed a lawsuit against us in the same court,
alleging that we infringed three PSI Systems patents related to Internet postage
technology. PSI Systems seeks an injunction, unspecified damages, and attorneys’
fees. On September 16, 2008, we filed counterclaims for infringement of four
more of our patents. In our counterclaim, we seek an injunction, unspecified
damages, and attorneys’ fees. This lawsuit is in the discovery stage. The Court
has not scheduled a trial commencement date.
  In
2001, we were named, together with certain of our current and former board
members and/or officers, as a defendant in several purported class-action
lawsuits, filed in the U.S. District Court for the Southern District of New
York. The lawsuits allege violations of the Securities Act of 1933 and the
Securities Exchange Act of 1934 in connection with our initial public offering
and a secondary offering of our common stock.  Plaintiffs seek damages
and statutory compensation, including interest, costs and expenses (including
attorneys' fees).  In October 2009, the court approved a settlement of
this action, which does not require us to make any payments. The court approval
has been appealed.
  We
are subject to various other routine legal proceedings and claims incidental to
our business, or that involve primarily a claim for damages that does not exceed
10% of our consolidated assets. We believe that the ultimate results from these
actions will not have a material adverse effect on our financial position,
results of operations or cash flows.
  ITEM
      1A.
              RISK
      FACTORS
  We are
not aware of any material changes to the risk factors included in Item 1A “Risk
Factors” in our Annual Report on Form 10-K for the year ended December 31,
2008.
  ITEM
      2.
              UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
  We did
not have any unregistered sales of common stock during the quarter ended
September 30, 2009.
  22
  Issuer
Purchases of Equity Securities
  During
the third quarter of 2009, we purchased our common stock as described in the
following table:
  Period
                      
                      Total
      Number of
                        Shares
      Purchased
                      
                      
                      Average
      Price Paid
                        per
      Share
                      
                      
                      Total
      Number of
                        Shares
      Purchased as
                        Part
      of Publicly
                        Announced
      Plans or
                        Programs
                      
                      
                      Approximate
      Dollar
                        Value
      of Shares That
                        May
      Yet be
                        Purchased
      Under the
                        Plans
      or Programs
                        (in
      000’s)July
      1, 2009 –
                        July
      31, 2009
                      
                      
                      96,000
                      
                      
                      $
                      8.47
                      
                      
                      
                      96,000
                      (1)
                      
                      $
                      13,000August
      1, 2009 –
                        August
      31, 2009
                      
                      
                      212,000
                      
                      
                      $
                      8.71
                      
                      
                      
                      212,000
                      (2)
                      
                      $
                      21,000September
      1, 2009 –
                        September
      30, 2009
                      
                      
                      143,000
                      
                      
                      $
                      8.86
                      
                      
                      
                      143,000
                      (2)
                      
                      $
                      20,000
  (1) On
February 5, 2009 our board of directors approved a six month share repurchase
program authorizing us to purchase up to 2,500,000 shares of our stock as market
and business conditions warrant. This plan expired on August 16,
2009.
  (2) On
July 23, 2009, our board of directors approved a new six month share repurchase
program, authorizing us to purchase up to 2,500,000 shares of our stock
effective beginning in August 2009upon expiration of the prior
program.
  Our
repurchase of any of our shares will be subject to limitations that may be
imposed on such repurchases by applicable securities laws and regulations and
the rules of The NASDAQ Stock Market. Repurchases may be made in the open
market, or in privately negotiated transactions from time to time at our
discretion. We will consider repurchasing stock under our current repurchase
program by evaluating such factors as the price of the stock, the daily trading
volume and the availability of large blocks of stock and any additional
constraints related to material inside information we may possess. We have no
commitment to make any repurchases.
  ITEM
      3.
              DEFAULTS
      UPON SENIOR SECURITIES
  Not
applicable.
  ITEM
      4.
              SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
HOLDERS
  None.
  ITEM
      5.
              OTHER
      INFORMATION
  None.
  ITEM
      6.
              EXHIBITS
  31.1
              Certification
      Pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002.
  31.2
              Certification
      Pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002.
  32.1
              Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of
      the Sarbanes-Oxley Act of 2002.
  32.2
              Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of
      the Sarbanes-Oxley Act of 2002.
  23
  SIGNATURES
  Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
  STAMPS.COM
      INC.(Registrant)November
      6, 2009
                  By:
                  /s/ KEN MCBRIDEKen
      McBrideChief
      Executive OfficerNovember
      6, 2009
                  By:
                  /s/ KYLE HUEBNERKyle
      HuebnerChief
      Financial Officer