AdStar Reports Second Quarter Results, Including 120 Percent
Increase in Net Revenues Company Records Second Straight Quarter
With Triple-Digit Growth in Gross Profits MARINA DEL REY, Calif.,
Aug. 16 /PRNewswire-FirstCall/ -- AdStar, Inc. (Nasdaq: ADST;
ADSTW), a leading applications service provider of e-commerce
transaction technology for the advertising and publishing
industries, today reported operating results for the second quarter
and first half of 2004. For the three months ended June 30, 2004,
AdStar reported an increase of 120 percent in net revenues to $1.39
million, compared with net revenues of $632,000 in the second
quarter of 2003. The increase in net revenue for 2004 is primarily
comprised of a net increase of $353,528, or 166.5 percent, in
licensing and software revenues; a net increase of $353,093, or 898
percent, in customization and other revenues; and continued growth
in ASP revenues. The increase in licensing and software revenues is
primarily related to the addition of EdgCapture and EdgFlow to the
company's suite of e-commerce services for the newspaper publishing
industry, while the increase in customization and other revenues
was augmented by major contracts with The Washington Post and The
Atlanta Journal-Constitution. No revenues from EdgCapture or
EdgFlow and related customization services were reflected in
AdStar's 2003 results as they were not part of the company's
service offering until the acquisition of Edgil Associates in
October 2003. AdStar reported earnings before interest, taxes,
depreciation and amortization (EBITDA -- a non-GAAP measure) of
($9,962) for the quarter ended June 30, 2004. In comparison, AdStar
reported EBITDA of ($324,784) for the first quarter of 2004. The
company reported a second quarter net loss of $388,000 or $0.03 per
share, compared with a net loss of $504,000 or $0.06 per share, in
the second quarter of 2003. Gross profit margin improved to 63
percent of net revenues during the second quarter of 2004, from 54
percent during the second quarter of 2003, and gross profits for
the quarter increased by more than 150 percent to $871,000,
compared with $341,000 in the prior-year period. The $227,000
increase in cost of revenues during the most recent quarter was
primarily comprised of a net increase of $158,000, or 70 percent,
in costs underlying the EdgCapture and EdgFlow services that were
not part of AdStar's service offerings during the comparable period
in 2003. "We are very encouraged by our growth in revenues and
gross profits, and our achievement of near-breakeven EBITDA during
the most recent quarter," stated Leslie Bernhard, president and
chief executive officer of AdStar, Inc. "These results demonstrate
that our ASP model, combined with our successful acquisition
strategy, have positioned AdStar to achieve its strategic
objectives in coming quarters. Edgil continues to lead the industry
in automated payment processing services, and our XML Gateway
technology continues to produce innovative ASP solutions for our
customers, as demonstrated by several recent customization service
contracts with leading U.S. newspapers." "The technological
applications that we are developing and implementing for
publications such as The Atlanta Journal-Constitution and The
Washington Post can address important needs in a variety of
publishing environments," continued Bernhard. "Our technology and
ASP model provide AdStar with the flexibility to tailor solutions
to the needs of individual publishers as they seek to truly
integrate their print and Web advertising strategies." General and
administrative expenses increased 44 percent during the second
quarter of 2004, to $467,000, from $324,000 during the prior-year
quarter. Selling expenses increased 67 percent to $328,000 (vs.
$196,000), while product maintenance and development expenses
decreased 18 percent to $265,000 (vs. $325,000). The total number
of ad transactions that were processed utilizing AdStar's
technology infrastructure increased more than 11 percent in the
most recent quarter, to more than 118,000, and ad transaction value
rose by 15 percent to $19.5 million (vs. $16.5 million in the
second quarter of 2003). "We had a very active second quarter,
solidifying new contracts with The Washington Post, Los Angeles
Times and The Atlanta Journal-Constitution; announcing sales and
marketing agreements with Innovectra and Data Based Ads; and
strengthening our product and service offerings," Bernhard added.
"In light of our current cash on hand (approximately $2.9 million),
Edgil's positive cash flow contributions, our first quarter cost
reduction activities, and anticipated near-term growth, we are
confident that AdStar is moving steadily towards profitability. In
addition to our organic growth, the company is well-positioned to
take advantage of strategic acquisition and revenue sharing
opportunities that may become available." Net revenues for the six
months ended June 30, 2004 increased 99 percent, to $2.44 million,
versus $1.23 million in the first half of 2003. The increase in net
revenue during the first half of 2004 resulted primarily from the
acquisition of Edgil Associates and an increase in ASP,
customization and other revenues, partially offset by a slight
decrease in licensing and software revenues. The company reported a
net loss of $930,000, or $0.07 per share, in the first half of
2004, compared with a prior-year net loss of $948,000, or $0.12 per
share. Although the net losses improved slightly for the first half
of the year, the current period reflects $164,000 in beneficial
interest and amortization of financing fees on a convertible note,
a non-cash item, which AdStar did not have in the prior year. About
AdStar, Inc. AdStar, Inc. (Nasdaq: ADST; ADSTW) is the leading
provider of e-commerce transaction software and services for the
advertising and publishing industries. The company'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 that are provided through its
Edgil Associates subsidiary (the industry's largest supplier of
automated payment processing services). AdStar's ad transaction
infrastructure powers classified ad sales for more than 40 of the
largest newspapers in the United States, along with the Newspaper
Association of America's bonafideclassifieds.com web portal,
CareerBuilder.com, and a growing number of other online and print
media companies. EdgCapture, Edgil's automated payment process
solution, is currently employed by call centers at more than 100 of
the nation's leading newspaper and magazines. AdStar is
headquartered in Marina del Rey, Calif., and its Edgil office is
located in North Chelmsford, Mass. For additional information on
AdStar, Inc., visit http://www.adstar.com/. 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. AdStar, Inc. and Subsidiary Consolidated Balance Sheet
June 30, 2004 (unaudited) Assets Current assets: Cash and cash
equivalents $2,939,949 Accounts receivable, net of allowance for
doubtful accounts of $59,000 581,323 Notes receivable from officers
- current portion 7,802 Prepaid and other current assets 250,646
Total current assets 3,779,720 Notes receivable from officers, net
of current portion 228,400 Property and equipment, net 140,559
Capitalized and purchased software, net 1,920,978 Intangible
assets, net 1,443,287 Goodwill 2,246,454 Other assets 125,342 Total
assets $9,884,740 Liabilities and Stockholders' Equity Current
liabilities: Due to publications $1,717,503 Accounts payable and
accrued expenses 920,248 Deferred revenue and customer deposits -
current portion 105,824 Loans from Stockholders - current portion
21,000 Capital lease obligations - current portion 31,658
Convertible Note - current portion 157,876 Total current
liabilities 2,954,109 Deferred revenue - net of current portion
149,139 Capital lease obligations - net of current portion 602
Loans from Stockholders - net of current portion 31,500 Convertible
Note - net of current portion 536,367 Total liabilities 3,671,717
Commitments and contingencies Stockholders' equity: Convertible
Preferred stock, par value $0.0001; authorized 5,000,000 shares;
3,443,457 Issued, and outstanding: Series B-2, 2,000,000 issued and
outstanding; liquidation preference of $1,649,995 1,342,404 Common
stock, par value $0.0001; authorized 20,000,000 shares; 14,460,966
shares issued and outstanding 1,446 Additional paid-in capital
20,033,400 Treasury stock, par value $0.0001; 67,796 shares
(67,796) Accumulated deficit (15,096,431) Total stockholders'
equity 6,213,023 Total liabilities and stockholders' equity
$9,884,740 AdStar, Inc. Statements of Operations For the three
month and six month periods ended June 30, 2003 and 2004
(unaudited) Three months ended Six months ended June 30, June 30,
2004 2003 2004 2003 ASP, net $428,531 $380,215 $824,204 $702,474
Licensing and software 565,865 212,337 1,113,853 428,039
Customization and other 394,628 39,535 498,453 94,667 Net Revenues
1,389,024 632,087 2,436,510 1,225,180 Cost of revenues, including
depreciation and amortization of $124,803, $235,613, $163,501 and
$349,689 517,863 291,226 935,183 626,137 Gross profit 871,161
340,861 1,501,327 599,043 General and administrative expense
466,837 323,952 904,695 612,942 Selling and marketing expense
327,845 196,236 655,464 357,374 Product maintenance and development
expenses 265,300 324,687 640,958 577,528 Amortization 21,997 --
44,113 -- Loss from operations (210,818) (504,014) (743,903)
(948,801) Beneficial interest and amortization of financing fees on
Convertible Note (163,670) -- (163,670) -- Interest income, net
(10,185) 1,345 (11,338) 2,280 Loss before taxes (384,673) (502,669)
(918,911) (946,521) Provision for income taxes 3,463 963 11,082
1,925 Net loss $(388,136) $(503,632) $(929,993) $(948,446) Loss per
share - basic and diluted $(0.03) $(0.06) $(0.07) $(0.12) Weighted
average number of shares - basic and diluted 14,361,348 8,265,194
13,585,883 8,241,446 AdStar, Inc. and Subsidiary Statements of Cash
Flows For the six month periods ended June 30, 2003 and 2004
(unaudited) 2004 2003 Cash flows from operating activities: Net
loss $(929,993) $(948,446) Adjustments to reconcile net loss to net
cash used in operating activities Depreciation and amortization
408,284 377,508 Beneficial interest and amortization of financing
fees on Convertible Note 163,670 -- Allowance for doubtful accounts
25,000 -- Stock based vendor payments 57,357 57,500 Changes in
assets and liabilities: Accounts receivable (266,451) (68,699)
Prepaid and other assets (79,971) (67,702) Due to publications
633,530 876,865 Accounts payable and accrued expenses (273,179)
(216,362) Deferred revenue and customer deposits 65,190 5,235 Net
cash provided by (used in) operating activities (196,563) 15,899
Cash flows from investing activities: Purchase of Edgil Associates,
Inc. (85,000) -- Purchase of property and equipment (38,137)
(35,760) Additions to capitalized and purchased software (310,112)
(392,092) Additions to intangible assets (4,000) -- Principal
repayments of shareholder notes receivable 3,743 3,550 Net cash
used in investing activities (433,506) (424,302) Cash flows from
financing activities: Decrease to restricted cash -- 154,918
Proceeds from issuance of convertible note payable 1,353,181 --
Proceeds from issuance of note payable -- 200,000 Repayment of note
payable -- (200,000) Proceeds from issuance of Series B-2 preferred
stock -- 528,683 Proceeds from exercises of options and warrants
167,579 -- Costs of conversion of Series A preferred stock (14,978)
-- Principal repayments on loans from shareholders (10,500) --
Principal repayments on capital leases (17,740) (13,457) Net cash
provided by financing activities 1,477,542 670,144 Net increase in
cash and cash equivalents 847,472 261,731 Cash and cash equivalents
at beginning of period 2,092,477 940,378 Cash and cash equivalents
at end of period $2,939,949 $1,202,109 Supplemental cash flow
disclosure: Taxes paid $965 $7,354 Interest paid $19,857 $7,747 Non
cash investing and financing activities Conversion of 1,443,457
shares of convertible preferred stock into equivalent shares of
common stock - Note X $1,697,000 $-- Conversion of $225,000 of
convertible note into 100,000 shares of common stock - Note X
$225,000 $-- Conversion of accrued legal fees to common stock $--
$50,000 Issuance of common stock to financial consultants $--
$30,000 DATASOURCE: AdStar, Inc. CONTACT: Jeff Baudo of AdStar,
Inc., +1-310-577-8255, ; or Media, Kevin Wilson, +1-513-885-5520, ,
for AdStar, Inc. Web site: http://www.adstar.com/
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