[LOGO] Investor Contact: Media Contact:
SmartServ Robert Pons Neil Vineberg
Chief Executive Officer Vineberg Communications
SmartServ Online, Inc. 631-288-6933
610-397-0689, Ext. 202 Neil@VinebergCommunications.com
rpons@smartserv.com
SMARTSERV REPORTS SECOND QUARTER 2004 RESULTS;
FINANCIAL RESULTS IMPROVED OVER 2003
Plymouth Meeting, PA - August 16 - SmartServ Online, Inc. (OTCBB: SSRV), a
value-added marketer of prepaid wireless products and mobile content, announced
results of operations for the second quarter ended June 30, 2004. SmartServ
reported improved financial results reflecting a shift from mobile content
distribution to the launch of UPHONIA(TM), a new brand of prepaid wireless
service.
Robert Pons, President and CEO of SmartServ commented, "This was an exciting
quarter for SmartServ as we narrowed our net loss and finalized our branding,
marketing, distribution and mobile content strategy. As we deploy our new
prepaid wireless strategy in Q3 and Q4, we expect to see significant revenue
improvement. While we expect to retain and grow revenues derived through
existing channels, we believe that there is a substantial opportunity to grow
additional revenue through the bundling of our existing and planned future
premium content with wireless voice services in ways targeted to specific
segments of the consumer market, providing a set of products that bundle cell
phone airtime with premium content, such as ringtones, images and games,
delivered through our current technology infrastructure."
Revenues were $114,000 for the three months ended June 30, 2004, compared to
$238,000 for the comparable quarter in 2003. The net loss for the second quarter
was $616,000 before an accrued preferred stock dividend of $1,102,000 and
$1,718,000 thereafter, or $0.60 loss per share, compared to $4,370,000 or $2.18
loss per share in the second quarter of 2003. SmartServ completed the second
quarter of 2004 with cash of $4,527,000.
The 2004 second quarter net loss included $155,000 for interest and other
financing costs that the Company paid for by issuing stock and not cash. These
costs were incurred in connection with the $10 million private placement.
Excluding these charges, the Company reported a net loss of $461,000 before an
accrued preferred stock dividend and $1,563,000 thereafter. During the second
quarter of 2003, the Company recorded charges for interest and other financing
costs of $874,000 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 $3,496,000 for the second quarter of 2003.
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Page 2 - SMARTSERV REPORTS SECOND QUARTER 2004 RESULTS
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Mr. Pons further commented, "UPHONIA(TM) will feature low cost, `pay-as-you-go'
cell phone service bundled with thousands of free ring tones, images, and
graphics. The brand will marry the latest in prepaid wireless plans with the
best in mobile entertainment giving consumers an exciting new way to customize
their phones. UPHONIA(TM) pre-paid wireless customers will be able to acquire
mobile content anytime; online at the UPHONIA(TM) Web site (www.uphonia.com),
in-stores at UPHONIA(TM) mobile content kiosks, or directly from UPHONIA(TM)
phones."
As we reported in a press release issued on July 23, 2004, SmartServ has signed
a Letter of Intent to acquire KPCCD, Inc., a New York City based distributor of
international prepaid calling cards. KPCCD distributes international prepaid
calling cards through a network of hundreds of retail outlets along the East
Coast. We believe that the acquisition of KPCCD will expand our existing
distribution network for our wireless products, services and mobile content. 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 the proposed transaction
will be completed.
For the six months ended June 30, 2004, revenues were $188,000 compared to
$469,000 for the comparable period in 2003. The net loss for the first six
months of 2004 was $5,216,000 before an accrued preferred stock dividend of
$2,016,000 and $7,232,000 thereafter, or $2.72 loss per share, compared to
$6,725,000 or $3.40 loss per share in the first six months of 2003. SmartServ
completed the six months of 2004 with cash of $4,527,000.
The 2004 first six months net loss included $2,092,000 for interest and other
financing costs that the Company paid for by issuing stock and not cash. These
costs were incurred in connection with the $10 million private placement.
Excluding these charges, the Company reported a net loss of $3,124,000 before an
accrued preferred stock dividend and $5,140,000 thereafter. During the first six
months of 2003, the Company recorded charges for interest and other financing
costs of $1,249,000 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 $5,476,000 for the first six months of 2003.
# # #
page 3 - SMARTSERV REPORTS SECOND QUARTER 2004 RESULTS
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SmartServ Online, Inc.
SmartServ delivers innovative products and services to the mobile marketplace.
Founded in 1993, SmartServ, a value-added marketer of prepaid wireless products
and mobile content, helped launch the mobile marketplace with its breakthrough
content and enabling applications. Through its enhanced prepaid wireless model,
its www.UPHONIA.com mobile entertainment web site, and its mobile content
kiosks, SmartServ continues to innovate and provide consumers with a better
choice in cell phone service.
SmartServ products seamlessly integrate the latest cell phone technology,
flexible pay-as-you-go minute plans, and an online mobile entertainment
destination that provides consumers thousands of ringtones, images, games, and
graphics to customize their phones. SmartServ provides mobile consumers more
choices, more freedom, and the ability to customize their cell phones online,
in-stores, or right from their phones. 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
June 30, December 31,
2004 2003
---------- ----------
(Unaudited)
Assets
Current assets
Cash $4,526,790 $ 139,178
Accounts receivable 100,079 103,230
Accrued interest receivable -- 47,004
Prepaid compensation -- 133,127
Prepaid expenses 85,229 86,798
Deferred financing costs -- 322,192
---------- ----------
Total current assets 4,712,098 831,529
---------- ----------
Property and equipment, net 102,762 --
Other assets
Goodwill and intangible assets 1,814,889 --
Security deposits 18,237 5,156
---------- ----------
Total Assets $6,647,986 $ 836,685
========== ==========
SmartServ Online, Inc.
Consolidated Balance Sheets
June 30, December 31,
2004 2003
------------ ------------
(Unaudited)
Liabilities and Stockholders' Equity
(Deficiency)
Current liabilities
Current portion of notes payable $ 32,973 $ --
Accounts payable 1,296,274 1,702,768
Accrued liabilities 967,659 928,393
Accrued salaries 15,565 78,133
Accrued interest payable -- 218,848
------------ ------------
Total current liabilities 2,312,471 2,928,142
------------ ------------
Deferred revenues -- 37,500
Notes payable 33,952 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 as of 1,591,008 --
June 30, 2004, aggregate liquidation preference
of $13,584,888 and $0 as of December 31, 2003,
respectively
Common stock - $.01 par value
Authorized - 40,000,000 shares
Issued - 2,904,577; outstanding - 2,870,230 shares 29,046 22,613
at June 30, 2004 and 2,261,300 shares at December
31, 2003
Additional paid-in capital 99,201,111 85,160,306
Notes receivable from former officers (187,525) (255,525)
Unearned compensation (650,893) --
Accumulated deficit (95,613,184) (90,396,781)
------------ ------------
4,369,563 (5,469,387)
Treasury stock, 34,347 shares at cost (68,000) --
------------ ------------
Total stockholders' equity (deficiency) 4,301,563 (5,469,387)
------------ ------------
Total Liabilities and Stockholders' Equity (Deficiency) $ 6,647,986 $ 836,685
============ ============
SmartServ Online, Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Six Months
Ended June 30 Ended June 30
-------------------------- --------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Revenues $ 114,004 $ 238,028 $ 187,715 $ 469,015
----------- ----------- ----------- -----------
Costs and expenses:
Costs of services (674,729) (2,574,543) (981,595) (3,791,374)
Sales and marketing expenses (98,514) (103,496) (142,220) (380,030)
General and administrative expenses (704,185) (1,360,913) (1,365,134) (2,360,093)
Stock-based compensation 893,034 (73,750) (639,107) (101,944)
----------- ----------- ----------- -----------
Total costs and expenses (584,394) (4,112,702) (3,128,056) (6,633,441)
----------- ----------- ----------- -----------
Loss from operations (470,390) (3,874,674) (2,940,341) (6,164,426)
----------- ----------- ----------- -----------
Other income (expense):
Interest income 9,546 4,360 12,767 8,892
Interest expense and other financing costs (154,948) (873,510) (2,092,029) (1,249,396)
Legal settlement -- -- (196,800) --
Gain from extinguishment of debt -- -- -- 305,822
Insurance recovery -- 374,000 -- 374,000
Foreign exchange gains (losses) -- (43) -- 50
----------- ----------- ----------- -----------
(145,402) (495,193) (2,276,062) (560,632)
----------- ----------- ----------- -----------
Net loss $ (615,792) $(4,369,867) $(5,216,403) $(6,725,058)
=========== =========== =========== ===========
Preferred stock dividend accrued (1,102,254) -- (2,016,094) --
----------- ----------- ----------- -----------
Net loss applicable to common shareholders $(1,718,046) $(4,369,867) $(7,232,497) $(6,725,058)
=========== =========== =========== ===========
Basic and diluted loss per share $ (0.60) $ (2.18) $ (2.72) $ (3.40)
=========== =========== =========== ===========
Weighted average shares outstanding - basic and
diluted 2,870,230 2,000,243 2,658,889 1,978,476
=========== =========== =========== ===========