AdStar Reports Operating Results for Second Quarter

Net revenues for the three months ended June 30, 2008 totaled $1,038,000, compared with net revenues of $1,168,000 in 2007. ASP revenues declined by $91,000, or 18%, and Customization and other revenues declined $35,000, or 29%. The decline in ASP revenues is generally a result of the recent declines in classified advertising impacting the newspaper publishing industry as a whole, resulting in the loss of several customers and reduced processing volume in several others. The revenue reductions have been partially offset by revenue increases from four new ASP customers in 2008.

AdStar reported a net loss applicable to common shareholders of $217,000, or $0.01 per share, during the three months ended June 30, 2008, versus a net loss of $630,000, or $0.03 per share, in 2007. The loss in 2008 was primarily due to abandoned acquisition costs. During the first fiscal quarter ended March 31, 2008, the Company suspended incurring additional costs for its mobile advertising development initiative, resulting in a significant reduction in expenses reflected during the second fiscal quarter ended June 30, 2008. Excluding non-cash charges and direct abandoned acquisition costs, the Company earned a positive margin on operations (a non-GAAP measure) of $47,000 during the quarter ended June 30, 2008 (See table at end of this release for further non-GAAP information).

"Newspaper print advertising has undergone unprecedented declines that are beyond analyst expectations for the industry," stated Leslie Bernhard, president and chief executive officer of AdStar, Inc. "This has caused our revenues to decline in a corresponding magnitude. AdStar has responded by dramatically reducing costs. We have postponed our mobile advertising initiative, along with the attendant costs, as well as the significant costs relating to our SEC reporting; which has resulted in a level of stability in our cash flow. We are not aware of any significant pending customer cancellations at this time, and we are at the same time adding new customers to our payment processing software and to our web-based ad services. We believe that there are opportunities arising from the adversity in the industry, whereby publishers are seeking efficiencies in their operations that can be facilitated by AdStar. Our payment processing software remains the premier solution in the industry for processing both circulation and advertising costs, and we are exploring wider applications for this sophisticated solution. We believe that AdStar has a platform for growth as the industry reaches a new equilibrium."

As a part of the Company's current efforts to conserve cash, AdStar has determined that it will suspend its quarterly filings on Form 10-Q. The Company intends to continue to report to its stockholders its quarterly and annual financial results in press releases and to maintain the corporate governance improvements the Company has made in recent years.

About AdStar, Inc.

AdStar, Inc. is a leading provider of e-commerce transaction services and payment processing solutions for the digital and print advertising and publishing industries. AdStar's proprietary suite of e-commerce services includes remote ad-entry software, web-based ad transaction and campaign management services, and payment processing and content processing solutions. AdStar is headquartered in Marina del Rey, Calif. and its Edgil Associates subsidiary is located inBillerica, Mass. For more information on AdStar, 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.

     AdStar Company Contact: Jeff Baudo, 760-308-0423, jbaudo@adstar.com


                          Financial Tables to Follow



                         AdStar, Inc. and Subsidiary
                    Consolidated Statements of Operations
                         For the Three and Six Months
                         Ended June 30, 2008 and 2007

                                  Three months ended       Six months ended
                                       June 30,                 June 30,
                                   2008        2007        2008        2007
    ASP, net                     $401,000    $492,000   $822,000     $951,000
    Licensing and software        550,000     554,000  1,101,000    1,188,000
    Customization and other        87,000     122,000    167,000      394,000
    Net revenues                1,038,000   1,168,000  2,090,000    2,533,000

    Total cost of revenues        322,000     528,000    757,000    1,107,000

        Gross profit              716,000     640,000  1,333,000    1,426,000

    General and administrative
     expense                      481,000     518,000  1,126,000    1,082,000
    Product maintenance and
     development costs            249,000     286,000    636,000      604,000
    Selling and marketing expense 181,000     468,000    523,000    1,353,000
    Amortization of customer list  22,000      22,000     44,000       44,000

        Loss from operations     (217,000)   (654,000)  (996,000)  (1,657,000)

    Interest income                 4,000      28,000     10,000       38,000
    Interest expense               (2,000)     (1,000)    (3,000)      (3,000)

        Loss before income taxes (215,000)   (627,000)  (989,000)  (1,622,000)

    Provision for income taxes      2,000       3,000      5,000        6,000

    Net loss applicable to
     common stockholders        $(217,000)  $(630,000) $(994,000) $(1,628,000)

    Loss per share - basic and
     diluted                       $(0.01)     $(0.03)    $(0.05)      $(0.08)
    Weighted average number
     of shares - basic and
     diluted                   20,468,882  20,208,714 20,377,726   20,169,644



                         AdStar, Inc. and Subsidiary
                     Calculation of Margin on Operations

                                                                  Six Months
                                  Quarter ended   Quarter ended     ended
                                  March 30, 2008  June 30, 2008  June 30, 2008

    ASP, net                          $421,000       $401,000      $822,000
    Licensing and software             551,000        550,000     1,101,000
    Customization and other             80,000         87,000       167,000
      Net revenues                   1,052,000      1,038,000     2,090,000

      Total Cost of Revenues *         345,000        272,000       617,000
      General and administrative
       expense *                       463,000        336,000       799,000
      Development and maintenance
       costs *                         377,000        247,000       624,000
      Selling and marketing expense *  201,000        136,000       337,000
        Total Direct Costs *         1,386,000        991,000     2,377,000
      Margin on operations            (334,000)        47,000      (287,000)

      Depreciation & amortization      101,000         72,000       173,000
      Stock based charges              279,000         56,000       335,000
      Abandoned acquisition costs       65,000        136,000       201,000
    Income (loss) from operations     (779,000)      (217,000)     (996,000)

    Interest income                      6,000          4,000        10,000
    Interest expense                    (1,000)        (2,000)       (3,000)
    Net income (loss) before taxes    (774,000)      (215,000)     (989,000)

    Provision for income taxes           3,000          2,000         5,000
    Net income (loss)                $(777,000)     $(217,000)    $(994,000)

    * non-GAAP presentation excluding depreciation, amortization, stock-based
      charges, and abandoned acquisition costs; shown separately

The Company defines margin on operations as net loss before interest, taxes, depreciation and amortization, non-cash expense for securities, and direct abandoned acquisition costs. Other companies may calculate margin on operations differently. Management believes that the presentation of margin on operations provides a meaningful measure of performance that approximates cash flow before interest expense and one-time costs, and is meaningful to investors.

                         AdStar, Inc. and Subsidiary
                         Consolidated Balance Sheets

                                                       June 30,   December 31,
                                                         2008         2007
    Assets

    Current assets:
      Cash and cash equivalents                        $357,000      $717,000
      Accounts receivable, net of allowance for
       doubtful accounts of $71,000 for both periods    467,000       571,000
      Notes receivable from officers - current portion   10,000         9,000
      Prepaid and other current assets                   94,000       126,000
        Total current assets                            928,000     1,423,000

    Notes receivable from officers, net of current
     portion                                            193,000       197,000
    Property and equipment, net                          84,000       109,000
    Capitalized and purchased software, net             130,000       261,000
    Intangible assets, net                            1,088,000     1,133,000
    Goodwill                                          2,132,000     2,132,000
    Other assets                                         35,000        40,000

        Total assets                                 $4,590,000    $5,295,000

    Liabilities and Stockholders' Equity

    Current liabilities:
      Due to publications                            $1,192,000    $1,223,000
      Accounts payable and accrued expenses             586,000       630,000
      Deferred revenue and customer
       deposits - current portion                       145,000       113,000
      Capital lease obligations - current portion         7,000         6,000
        Total current liabilities                     1,930,000     1,972,000

    Deferred revenues, net of current portion            23,000        24,000
    Capital lease obligations, net of current portion    17,000        20,000

        Total liabilities                             1,970,000     2,016,000

    Commitments and contingencies

    Stockholders' equity:
      Preferred Stock, par value $0.0001; authorized
       5,000,000 shares; 0 issued and outstanding             -             -
      Common Stock, par value $0.0001; authorized
       40,000,000 shares; 20,543,675 and 20,209,648
       issued and outstanding, respectively               2,000         2,000
      Additional paid-in capital                     27,386,000    27,051,000
      Treasury stock; 67,796 shares, at cost,
       respectively                                     (68,000)      (68,000)
      Accumulated deficit                           (24,700,000)  (23,706,000)
        Total stockholders' equity                    2,620,000     3,279,000
        Total liabilities and stockholders' equity   $4,590,000    $5,295,000

SOURCE AdStar, Inc.

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