ADSTW Adstar Wts 12/16/2004 (MM)

AdStar Reports 77 Percent Increase in First Quarter Revenues Gross Profits Rise 144 Percent to Record $630,000 MARINA DEL REY, Calif., May 17 /PRNewswire-FirstCall/ -- AdStar, Inc. , a leading applications service provider of e-commerce transaction technology for the advertising and publishing industries, today reported operating results for the first quarter of 2004. Revenue for the three months ended March 31, 2004 increased 77 percent to $1.05 million, compared with $593,000 in the first quarter of 2003. The increase in revenue resulted primarily from the acquisition of Edgil Associates and a 23 percent increase in the company's ASP revenues. Gross profit margins for the quarter increased from 44 percent to 60 percent of net revenues, with gross profits rising 144 percent to $630,000, versus $258,000 in the prior-year quarter. For the quarter, AdStar reported a net loss of $542,000 or $0.04 per share, compared with a net loss of $445,000 or $0.05 per share, in the first quarter of 2003. "With Edgil Associates now fully integrated into the AdStar family, we are beginning to see the benefits from last year's acquisition," said Leslie Bernhard, president and chief executive officer of AdStar, Inc. "We are also pleased with the continued growth in ASP revenues and record gross profits for the quarter, and we are confident that our business model will continue to produce positive results over the next several quarters. We continue to anticipate positive operating cash flows in the second quarter and profitability by the end of the year." Primarily as a result of the Edgil acquisition, AdStar reported increases in the first quarter of 2004 for general and administrative expenses, selling and marketing expenses, and maintenance and development costs. General and administrative expenses increased 52 percent from $289,000 in the first quarter of 2003 to $438,000 in the most recent quarter. Selling and marketing expenses increased to $328,000 from $161,000, and maintenance and development costs increased to $376,000 from $253,000. The total number of ad transactions increased more than 13 percent, and ad transaction value rose by more than 16 percent to $19.2 million, compared with $16.5 million in the first quarter of 2003. For the quarter ended March 31, 2004, AdStar processed more than 102,000 classified advertisements using its licensed and ASP technology infrastructure. "We have clearly shown that our technology and ASP business model can empower publishers to efficiently and affordably integrate their online and print advertising strategies," continued Bernhard. "As we move forward in 2004, we will continue to aggressively develop and implement our strategic marketing plan, while building upon our solid relationships with Tribune Company, Knight-Ridder, CareerBuilder, Manheim Interactive, and other potential strategic partners. Shortly after the end of the first quarter, we announced the completion of a private placement that raised an additional $1.5 million in equity capital and the signing of an expanded technology contract with The Atlanta Journal-Constitution. We are currently working on several new contracts and anticipate the addition of several new customers as the year progresses." About AdStar, Inc. AdStar, Inc. (NASDAQ:ADSTNASDAQ:ADSTW) is the 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, and web-based ad transaction services, as well as payment processing and content processing solutions provided through AdStar subsidiary, Edgil Associates, the industry's largest supplier of automated payment processing. Today, AdStar's ad transaction infrastructure powers classified ad sales for more than 40 of the 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, +1-310-577-8255, ; or media, Kevin Wilson, +1-513-885-5520, , or brokers, RJ Falkner & Company, Inc., +1-800-377-9893, , both for AdStar. AdStar, Inc. and Subsidiary Consolidated Balance Sheet As of March 31, 2004 Assets Current assets: Cash and cash equivalents $1,882,774 Accounts receivable, net of allowance for doubtful accounts of $84,470 294,645 Notes receivable from officers - current portion 7,695 Prepaid and other current assets 195,668 Total current assets 2,380,782 Notes receivable from officers, net of current portion 230,391 Property and equipment, net 130,684 Capitalized and purchased software, net 1,926,759 Intangible assets, net 1,465,671 Goodwill 2,246,454 Security Deposits 37,656 Total assets $8,418,397 Liabilities and Equity Current liabilities: Due to publications $1,453,970 Accounts payable and accrued expenses 1,003,708 Deferred revenue and customer deposits - current portion 270,259 Loans from Shareholders, current portion 21,000 Capital lease obligations - current portion 31,658 Total current liabilities 2,780,595 Deferred revenue, net of current portion 52,772 Capital lease obligations, net of current portion 10,086 Loans from shareholders, net of current portion 42,000 Total liabilities 2,885,453 Stockholder's equity $5,532,944 Total liabilities and stockholder's equity $8,418,397 AdStar, Inc. and Subsidiary Consolidated Statements of Operations For the Quarters ended March 31, 2003 and 2004 2003 2004 ASP, net $322,259 $395,672 Licensing and software 215,702 547,989 Customization and other 55,132 103,825 Net Revenues 593,093 1,047,486 Cost of revenues, including depreciation and amortization of $144,417 and $186,188 334,911 417,321 Gross profit 258,182 630,165 General and administrative expense 288,990 437,859 Selling and marketing expense 161,138 327,618 Maintenance and development costs 252,841 375,658 Amortization of customer list -- 22,116 Loss from operations (444,787) (533,086) Interest income, net 935 (1,153) Loss before taxes (443,852) (534,239) Provision for income taxes (963) (7,620) Net loss $(444,815) $(541,859) Loss per share - basic and diluted $(0.05) $(0.04) Weighted average number of shares - basic and diluted 8,197,324 12,772,767 AdStar, Inc. Statements of Cash Flows For the Quarters ended March 31, 2004 (unaudited) 2003 2004 Cash flows from operating activities: Net Loss $(444,815) $(541,859) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 180,519 208,304 Stock based vendor payments 53,751 17,175 Changes in assets and liabilities: Accounts receivable 1,111 45,227 Prepaids and other assets (16,032) (73,931) Due to publications 426,513 369,997 Accounts payable and accrued expenses (299,089) (189,718) Deferred revenue and customer deposits 28,727 133,258 Net cash used in operating activities (69,315) (31,546) Cash flows from investing activities: Purchase of Edgil Associates, Inc. -- (85,000) Purchase of property and equipment (19,891) (9,044) Additions to Capitalized and Purchased Software (230,436) (157,516) Additions to intangible assets -- (4,000) Principal repayments of shareholder notes receivable 1,758 1,859 Net cash used in investing activities (248,569) (253,701) Cash flows from financing activities: Proceeds from issuance of note payable 200,000 -- Repayment of note payable (200,000) -- Proceeds from issuance of Series B preferred stock 534,578 -- Proceeds from exercises of options and warrants -- 83,801 Principal repayments on capital leases (6,344) (8,256) Net cash provided by financing activities 528,234 75,545 Net increase (decrease) in cash and cash equivalents 210,350 (209,703) Cash and cash equivalents at beginning of period 940,378 2,092,477 Cash and cash equivalents at end of period $1,150,728 $1,882,774 DATASOURCE: AdStar CONTACT: Jeff Baudo of AdStar, +1-310-577-8255, ; or media, Kevin Wilson, +1-513-885-5520, , or brokers, RJ Falkner & Company, Inc., +1-800-377-9893, , both for AdStar

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