[SmartServOnline]
Company Contact: Investor Contact: Media Contact:
Robert Pons Harvey Goralnick Neil Vineberg
Chief Executive Officer FOCUS Partners LLC Vineberg Communications
610-397-0689 x202 212-752-9445 631-288-6933
SMARTSERV REPORTS THIRD QUARTER 2004 RESULTS;
FINANCIAL RESULTS IMPROVE OVER 2003
Plymouth Meeting, PA - November 16 - SmartServ Online, Inc. (OTCBB: SSRV), a
Mobile Virtual Network Operator (MVNO) that provides mobile phone service with
the best in low cost pre-paid minute plans and the latest in mobile content,
today announced results of operations for the third quarter ended September 30,
2004.
Robert Pons, President and CEO of SmartServ commented, "We have improved our
financial operations and taken critical steps towards transforming our business
model. Our losses have narrowed significantly as we have restructured in
preparation for our MVNO launch - the new UPHONIA(TM)mobile phone service. We
expect our revenues will further improve in the fourth quarter of 2004 if we
complete the pending acquisition of KPCCD, a New York City-based distributor of
international calling cards, which is expected to add approximately $2.0 million
in monthly revenue." Mr. Pons added, "Our recently announced carrier agreement
with Sprint for the launch of UPHONIA will position us to add additional revenue
beginning in the first quarter of 2005."
Revenues were $80,000 for the quarter ended September 30, 2004, compared to
$145,000 for the comparable quarter in 2003. The net loss for the third quarter
of 2004 was $1,120,000 before an accrued preferred stock dividend of $1,115,000
and $2,235,000 thereafter, or $0.74 loss per share, compared to a net loss of
$7,641,000 or $3.69 per share in the third quarter of 2003.
The 2004 third quarter net loss included $539,000 for interest and other
financing costs that the Company accrued for costs in connection with its $10
million private placement. Excluding these charges, the Company reported a net
loss of $581,000 before an accrued preferred stock dividend and $1,696,000
thereafter. During the third quarter of 2003, the Company recorded charges for
interest and other financing costs of $6,532,000 incurred primarily in
connection with the issuance of convertible notes issued in the 2003 bridge
financings. The Company paid for these transactions by issuing stock and not
cash. Excluding these charges, the Company reported a net loss of $1,109,000 for
the third quarter of 2003.
- MORE -
Page 2 - SMARTSERV REPORTS THIRD QUARTER 2004 RESULTS
For the nine months ended September 30, 2004, revenues were $268,000 compared to
$614,000 for the comparable period in 2003. The net loss for the first nine
months of 2004 was $6,337,000 before an accrued preferred stock dividend of
$3,130,000 and $9,467,000 thereafter, or $3.41 loss per share, compared to a net
loss of $14,366,000 or $7.15 per share in the first nine months of 2003.
The 2004 first nine months net loss included $2,631,000 for interest and other
financing costs that the Company paid for primarily by issuing stock and not
cash. These costs were incurred primarily in connection with the $10 million
private placement. Excluding these charges, the Company reported a net loss of
$3,706,000 before an accrued preferred stock dividend and $6,836,000 thereafter.
During the first nine months of 2003, the Company recorded charges for interest
and other financing costs of $7,781,000 incurred primarily in connection with
the issuance of convertible notes in the 2003 bridge financings. The Company
paid for these transactions by issuing stock and not cash. Excluding these
charges, the Company reported a net loss of $6,585,000 for the first nine months
of 2003.
As reported in a press release issued in July, 2004, SmartServ signed a letter
of intent to acquire KPCCD, Inc., a New York City-based distributor of
international prepaid calling cards. KPCCD distributes its products through a
network of hundreds of retail outlets along the East Coast. "The acquisition of
KPCCD will expand our existing distribution network for our wireless products
and services and expand our revenue base as early as December 2004," added Mr.
Pons.
SmartServ is in the process of completing financial, accounting and legal due
diligence with respect to KPCCD and its financial results and operations. The
closing of this transaction is subject to customary closing conditions for these
types of transactions, including: (i) negotiation and execution of a definitive
purchase agreement, (ii) our satisfaction with the results of our due diligence
investigation of KPCCD, and (iii) execution of employment agreements with key
individuals in KPCCD. There can be no assurance that SmartServ will close the
contemplated transaction.
SmartServ will be hosting a conference call on Wednesday, November 17, 2004 at
2:00 PM EST. Management will provide an update on its business and discuss third
quarter results. The call in number is 877-366-0714 and the verbal pass code is
vt478921. A replay will be available 30 minutes after the end of the call and
will be available for replay for 14 days. The call in number for the replay will
be 877-366-0714 and the replay pass code will be 478921..It is recommended that
participants log onto this conference call at least 15 minutes prior to the
call.
###
page 3 - SMARTSERV REPORTS THIRD QUARTER 2004 RESULTS
About SmartServ
SmartServ, headquartered in Plymouth Meeting, PA is a Mobile Virtual Network
Operator (MVNO) that provides mobile phone service with the best in low cost,
pre-paid minute plans, discounted international long distance, and the latest in
mobile content, such as ringtones, mobile games, and images. SmartServ products
and services are marketed under the UPHONIA(TM)brand. For more information
please visit: www.SmartServ.com.
Forward-Looking Statements
This news release may contain forward-looking statements that involve risks and
uncertainties. Forward-looking statements in this document and those made from
time-to-time by the Company are made under the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
concerning future plans or results are necessarily only estimates and actual
results could differ materially from expectations. Certain factors that could
cause or contribute to such differences are described from time to time in the
Company's filings with the Securities and Exchange Commission, including but not
limited to, the "Risk Factors" described under the heading "Certain Factors That
May Affect Future Results" in the Company's Annual Report on Form 10-KSB/A for
the year ended December 31, 2003 and other SEC filings.
# # #
SmartServ Online, Inc.
Consolidated Balance Sheets
September 30, December 31,
2004 2003
-------------------- -------------------
(Unaudited)
Assets
Current assets
Cash $ 3,225,295 $ 139,178
Accounts receivable 105,821 103,230
Accrued interest receivable -- 47,004
Prepaid compensation -- 133,127
Prepaid expenses 66,914 86,798
Deferred financing costs -- 322,192
-------------------- -------------------
Total current assets 3,398,030 831,529
-------------------- -------------------
Property and equipment, net 97,008 --
Other assets
Goodwill and intangible assets 1,814,889 --
Security deposits 18,237 5,156
-------------------- -------------------
-------------------- -------------------
Total Assets $ 5,328,164 $ 836,685
==================== ===================
SmartServ Online, Inc.
Consolidated Balance Sheets
September 30, December 31,
2004 2003
-------------------- -------------------
-------------------- -------------------
(Unaudited)
Liabilities and Stockholders' Equity
(Deficiency)
Current liabilities
Current portion of notes payable $ 24,133 $ --
Accounts payable 1,277,580 1,702,768
Accrued liabilities 1,606,447 928,393
Accrued salaries 15,565 78,133
Accrued interest payable -- 218,848
-------------------- -------------------
Total current liabilities 2,923,725 2,928,142
-------------------- -------------------
Deferred revenues -- 37,500
Notes payable 34,687 3,340,430
Commitments and Contingencies
Stockholders' Equity (Deficiency)
Convertible Preferred stock - $0.01
par value
Authorized - 1,000,000 shares
Issued and outstanding - 876,491 shares,
aggregate 2,440,267 --
liquidation preference of $13,849,995 and $0
as of
September 30, 2004 and December
31, 2003, respectively
Common stock - $.01 par value
Authorized - 40,000,000 shares
Issued - 3,581,352; outstanding -
3,547,005 shares at September 30,
2004 and 2,261,300 shares
at December 31, 2003 35,814 22,613
Additional paid-in capital 96,790,924 85,160,306
Notes receivable from former officers -- (255,525)
Accumulated deficit (96,733,600) (90,396,781)
----------------- --------------
2,533,405 (5,469,387)
Treasury stock, 129,053 shares at cost (163,653) --
----------------- ---------------
Total stockholders' equity (deficiency) 2,369,752 (5,469,387)
----------------- ---------------
Total Liabilities and Stockholders' Equity
(Deficiency) $ 5,328,164 $ 836,685
=================== ===============
SmartServ Online, Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Nine Months
Ended September 30 Ended September 30
-------------------------------------- -------------------------------------
2004 2003 2004 2003
----------- -------------- ----------- ---------------
Revenues $ 80,474 $ 145,130 $ 268,189 $ 614,145
------------------ ----------------- ---------------- --------------------
Costs and expenses:
Costs of services (644,762) (289,055) (1,626,357) (4,080,429)
Sales and marketing expenses (156,705) (23,543) (298,925) (403,573)
General and administrative
expenses (506,308) (715,353) (1,871,442) (3,075,446)
Stock-based compensation 639,107 (229,124) -- (331,068)
------------------ ----------------- ---------------- -----------------
Total costs and expenses (668,668) (1,257,075) (3,796,724) (7,890,516)
------------------ ----------------- ---------------- -----------------
Loss from operations (588,194) (1,111,945) (3,528,535) (7,276,371)
------------------ ----------------- ---------------- -----------------
Other income (expense):
Interest income 6,520 2,709 19,287 11,601
Interest expense and other
financing costs (538,742) (6,531,633) (2,630,771) (7,781,029)
Legal settlement -- -- (196,800) --
Gain from extinguishment
of debt -- -- -- 305,822
Insurance recovery -- -- -- 374,000
Foreign exchange gains (losses) -- -- -- 50
------------------ ----------------- ----------------- --------------------
(532,222) (6,528,924) (2,808,284) (7,089,556)
Net loss $ (1,120,416) $ (7,640,869) $ (6,336,819) $ (14,365,927)
================== ================= ================= ====================
Preferred stock dividend accrued (1,114,366) -- (3,130,460) --
------------------ ----------------- ----------------- --------------------
Net loss applicable to common
shareholders $ (2,234,782) $ (7,640,869) $ (9,467,279) $ (14,365,927)
================== ================= ================= ====================
Basic and diluted loss per share $ (0.74) $ (3.69) $ (3.41) $ (7.15)
================== ================= ================= ====================
Weighted average shares
outstanding - basic and diluted 3,002,167 2,072,440 2,773,669 2,010,142
================== ================= ================= ====================
