ADSTW Adstar Wts 12/16/2004 (MM)

AdStar Releases Operating Results for 2003, Reports Sharp Increase in ASP Revenues MARINA DEL REY, Calif., March 30 /PRNewswire-FirstCall/ -- AdStar, Inc. , a leading software and application service provider (ASP) for the classified advertising industry, today reported its operating results for the fourth quarter and year ended December 31, 2003. For the year ended December 31, 2003, AdStar reported a 26 percent increase in net revenues to $2.83 million compared with $2.24 million in 2002. The company continued to experience significant growth in its transaction-based ASP revenues, reporting an increase of 61 percent in net ASP revenues to $1.47 million for 2003 compared with $915,819 in 2002. AdStar's net ASP revenues were also supported by slight increase for the year in licensing, software, and customization services. In addition, AdStar experienced a more than $880,000 one-time write-down of capitalized software and related customer support fees. As a result, AdStar's net loss increased to $2.84 million, or $0.31 per share, compared with a net loss of $2.36 million, or $0.29 per share in 2002. "Our firm commitment to our ASP model continues to support our revenue growth," stated Leslie Bernhard, president and chief executive officer of AdStar, Inc. "We are encouraged by the events of 2003 despite the net loss for the year. The acquisition of profitable Edgil Associates and our new service agreements with the Los Angeles Times and The Dallas Morning News will contribute significantly to our revenue in 2004. Our notable progress with new and existing customers positions us several steps ahead of our nearest competition, and as transactions and revenues continue to increase, we have only scratched the surface of our technological capabilities." Classified ad transactions processed by AdStar increased by 92 percent to more than 409,000 during 2003, compared with 214,000 in 2002. The total value of ads placed through AdStar's ASP model increased by more than 150 percent to $68.7 million in 2003, versus $27.3 million in 2002. "The future of classified advertising rest with the Internet, and as the leading provider of e-commerce transaction services for the publishing industry, we are in a prime position to take advantage ofthe Web's potential," added Bernhard. "In the near future, we will be able to provide our customers with a variety of value-added services, including sound, text messaging, voice recognition, auction functions and order fulfillment. All of these capabilities will ultimately be provided as part of our ever-expanding suite of products." "The acquisition of Edgil Associates in the fourth quarter of 2003, the introduction of our XML Gateway product, as well as our steady growth in remote and Web-basedtransactions, should have significant positive affects on operating results in 2004. In addition, as a result of two successful private placements, we are in a better financial position than we have been in recent years, and we are optimistic about AdStar's future," concluded Bernhard. As of December 31, 2003, AdStar had cash and cash equivalents of approximately $2,092,000 compared to $1,115,000, including $175,000 in restricted cash, as of December 31, 2002; a combined net increase of $977,000. About AdStar, Inc. AdStar, Inc. (NASDAQ:ADSTNASDAQ:ADSTW) is a leading provider of e-commerce transaction software and services for the advertising and publishing industries. AdStar's proprietary suite of e-commerce services includes remote ad entry software, web-based ad transaction services, and payment processing and content processing solutions, which were acquired from Edgil Associates in October 2003. Today, AdStar's ad transaction infrastructure powers classified ad sales for more than 40 ofthe largest newspapers in the United States, the Newspaper Association of America's bonafideclassifieds.com, CareerBuilder, and a growing number of other online and print media companies. EdgCapture, Edgil's automated payment process solution, is currently employed by call centers in more than 100 of the nation's leading newspaper and magazines. AdStar is headquartered in Marina del Rey, Calif., and its Edgil office is in North Chelmsford, Mass. Forward Looking Statements This release contains forward-looking statements concerning the business and products of the company. Actual results may differ from those projected or implied by such forward-looking statements depending on a number of risks and uncertainties including, but not limited to, the following: historical business has already matured, new online business is unproven and may not generate expected revenues, and Internet security risks. Other risks inherent in the business of the company are described in Securities and Exchange Commission filings, including the company's annual report on Form 10-KSB. The company undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this release. For further information, please contact: Jeff Baudo of AdStar, Inc., +1-310-577-8255, ; or Media, Kevin Wilson, +1-513-885-5520, , for AdStar, Inc.; or Brokers, RJ Falkner & Company, Inc., +1-800-377-9893, , for AdStar, Inc. AdStar, Inc. and Subsidiary Consolidated Statements of Operations For the Two Years Ended December 31, 2003 2002 2003 ASP, net $915,819 $1,470,260 Licensing and software 1,070,341 1,087,097 Customization and other 255,332 276,168 Net revenues 2,241,492 2,833,525 Cost of revenues, including Amortization of $400,023 and $683,300 1,106,502 1,296,883 Loss on write-down of capitalized software -- 883,060 Total cost of revenues 1,106,502 2,179,943 Gross profit 1,134,990 653,582 General and administrative expense 1,440,376 1,343,395 Product maintenance and development costs 852,312 1,241,957 Selling and marketing expense 749,766 750,128 Restructuring costs 322,604 124,774 Amortization of customer list -- 17,315 Loss from operations (2,230,068) (2,823,987) Other income (expense) 62,796 (10,000) Interest income (expense), net 14,389 5,472 Loss before taxes (2,152,883) (2,828,515) Provision for income taxes (6,760) (13,850) Net loss (2,159,643) (2,842,365) Deemed dividends on issuance of series B-1 preferred stock (204,000) -- Net loss applicable to common stockholders $(2,363,643) $(2,842,365) Loss per share -- basic and diluted $(0.29) $(0.31) Weighted average number of shares -- basic and diluted 8,193,132 9,030,764 AdStar, Inc. and Subsidiary Consolidated Balance Sheet As of December 31, 2003 Assets Current assets: Cash and cash equivalents $2,092,477 Accounts receivable, net of allowance for doubtful accounts of $84,470 339,872 Notes receivable from officers -- current portion 7,589 Prepaids and other assets 121,737 Total current assets 2,561,675 Notes receivable from officers, net of current portion 232,356 Property and equipment, net 142,451 Capitalized and purchased software, net 1,927,969 Intangible assets, net 1,490,439 Goodwill 2,161,454 Security deposits 37,656 Total assets $8,554,000 Liabilities and Equity Current liabilities: Accounts payable $164,513 Due to publications 1,083,973 Accrued expenses 1,028,914 Deferred revenue and customer deposits -- current portion 83,904 Loans from stockholders -- current portion 19,608 Capital lease obligations -- current portion 31,715 Total current liabilities 2,412,627 Deferred revenue and customer deposits, net of current portion 105,869 Loans from stockholders, net of current portion 43,392 Capital lease obligations, net of current portion 18,285 Total liabilities 2,580,173 Stockholders' equity $5,973,827 Total liabilities and stockholders' equity $8,554,000 AdStar, Inc. Statements of Cash Flows For the two years ended December 31, 2003 2002 2003 Cash flows from operating activities: Net loss $(2,159,643) $(2,842,365) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 612,425 877,947 Allowance for doubtful accounts 34,672 (15,202) Stock based charges 94,771 137,000 Kodak shares returned (67,796) -- Loss in write-down of capitalized software -- 883,060 Loss on disposal of equipment and purchased software 128,379 -- Changes in assets and liabilities: Accounts receivable 20,539 63,211 Prepaid and other assets 23,953 3,459 Accounts payable 511,925 44,808 Due to publications 197,764 59,298 Accrued expenses 109,188 (84,800) Deferred revenue and customer deposits (39,642) 76,202 Net cash used in operating activities (533,465) (797,382) Cash flows from investing activities: Purchase of Edgil Associates, Inc., net of cash received -- (1,558,388) Additions to capitalized and purchased software (1,232,112) (634,145) Purchase of property and equipment (100,394) (95,406) Notes from officers (210,434) -- Repayments of officer receivable 6,430 7,179 Net cash used in investing activities (1,536,510) (2,280,760) Cash flows from financing activities: (Increase) decrease to restricted cash (129,461) 174,918 Proceeds from issuance of note payable 300,000 200,000 Repayment of note payable (300,000) (200,000) Net proceeds from sale of stock in private placements 151,562 3,302,566 Net proceeds from issuance of Series A preferred stock 1,697,840 -- Net proceeds from issuance of Series B-2 preferred stock 813,720 528,683 Proceeds from exercises of options and warrants -- 252,861 Proceeds from capital leases 79,752 -- Principal repayments on capital leases (14,599) (28,787) Net cash provided by financing activities 2,598,814 4,230,241 Net increase (decrease) in cash and cash equivalents 528,839 1,152,099 Cash and cash equivalents at beginning of period 411,539 940,378 Cash and cash equivalents at end of period $940,378 $2,092,477 DATASOURCE: AdStar, Inc. CONTACT: Jeff Baudo of AdStar, Inc., +1-310-577-8255, ; or Media, Kevin Wilson, +1-513-885-5520, , for AdStar, Inc.; or Brokers, RJ Falkner & Company, Inc., +1-800-377-9893, , for AdStar, Inc.

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