SmartDisk Reports First Quarter 2002 Financial Results.

Business Editors

NAPLES, Fla.--(BUSINESS WIRE)--May 15, 2002

SmartDisk Corporation (Nasdaq:SMDK), a company that develops portable products that enable people to capture, organize, use and preserve digital content in easy and enjoyable ways, today reported financial results for

For the quarter ended March 31, 2002, SmartDisk reported revenue of $11.1 million, compared to revenue of $17.3 million for the corresponding quarter in 2001.

The Company's net loss for the first quarter 2002 was $13.5 million, or $0.76 per share, compared to a net loss of $8.4 million or $0.48 per share, for the corresponding quarter in 2001.

The first quarter 2002 loss includes non-cash inventory write-downs of $4.8 million, non-recurring business restructuring charges of $0.8 million relating to employee separation costs and the restructuring of the Company's European operations and non-cash goodwill and other intangible asset impairment charges of $2.7 million.

Excluding the impact of the amortization of goodwill, inventory write-downs, non-recurring business restructuring charges and goodwill and other intangible asset impairment charges, the Company recorded a loss of $0.29 per share compared to a loss of $0.32 per share in the corresponding quarter in 2001. See table hereunder.

                                                  Three Months Ended
                                                      March 31,
                                                   2002        2001
                                               ---------------------
                                             (in thousands, except per
                                                  share amounts)

Net loss applicable to common stock holders     $(13,536)   $ (8,381)

Amortization of goodwill                              --       2,426
   Inventory write-downs                           4,803         469
   Impairment of goodwill and
    other intangible assets                        2,729         --
   Business restructuring charges                    841         --
                                                --------    --------
   Subtotal                                        8,373       2,895
                                                --------    --------
Net loss applicable to common stock holders
    excluding one time items                    $ (5,163)   $ (5,486)
                                                ========    ========

Basic and diluted earnings per share
Loss per share excluding one time items         $  (0.29)   $  (0.32)
                                                ========    ========

"During the first quarter we forged significant new sales and marketing partnerships, launched new products, adjusted operations and reduced costs," said Michael S. Battaglia, President and CEO. Specifically, SmartDisk:

-- Announced and began shipping its new FireLite(TM) high performance FireWire
hard drive, which was favorably received in press reviews and by consumers and
professionals at trade events.

-- Launched DVDMotion(TM) software to the burgeoning professional and
"prosumer" DVD title authoring market.

-- Established new sales channels through Dell Computer Corporation and
Hewlett-Packard Company for SmartDisk products.

-- Expanded product lines at Best Buy, Circuit City, CompUSA and other major
retailers.

About SmartDisk Corporation

SmartDisk is a developer, manufacturer and marketer of a range of advanced consumer electronic products and software solutions designed to enable the digital age and simplify the digital lifestyle. The Company's innovative products help users transfer, store, manage and share digital music, video, pictures and data. Headquartered in the U.S., with operations in Europe and Asia, SmartDisk sells its products worldwide. SmartDisk's partners include Apple, Fujifilm, Olympus, Sony, Toshiba and others. For more information, go to http://www.smartdisk.com.

This press release includes statements that may constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although SmartDisk believes the expectations contained in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove correct. These statements may involve risks and uncertainties that could cause actual results to differ materially from the expected results. Such risks include, but are not limited to, SmartDisk's dependence on a limited number of contract and offshore manufacturers, its dependence on OEMs to promote its products, its ability to develop commercially viable products on a timely basis, and other risk factors, all as more fully described in SmartDisk's periodic and other filings made with the Securities and Exchange Commission. SmartDisk assumes no obligation to update the statements contained in this release.

All trade names are either trademarks or registered trademarks of their respective holders.

                         SmartDisk Corporation
                 Condensed Consolidated Balance Sheets
                            (in thousands)

                                                March 31, December 31,
                                                 2002       2001
                                               ------------------
                                              (Unaudited)
                  ASSETS

Current assets:
   Cash and cash equivalents                   $ 9,196   $14,517
   Accounts and notes receivable, net            4,902     4,924
   Inventories                                   5,740     8,332
   Prepaid expenses and other current assets       889       920
                                               -------   -------
                  Total current assets          20,727    28,693

Property and equipment, net                      1,421     1,869
Goodwill and other intangible assets, net          339     5,344
Deposits and other assets                          166       172
                                               -------   -------
TOTAL ASSETS                                   $22,653   $36,078
                                               =======   =======


       LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable                          $   6,948 $   6,585
   Bank line of credit                              --        76
   Income taxes payable                            582       662
   Other accrued liabilities                     3,309     2,850
                                             ---------  ---------
                  Total current liabilities     10,839    10,173

Deferred income taxes and other                     --       791

Stockholders' equity:
   Common stock                                     18        18
   Capital in excess of par                    146,724   146,716
   Treasury stock                                  (99)      (99)
   Accumulated other comprehensive income         (414)     (634)
   Notes receivable from stockholders             (295)     (299)
   Unearned compensation                            --        (3)
   Accumulated deficit                        (134,120) (120,585)
                                             ---------  ---------
                  Total stockholders' equity    11,814    25,114
                                             ---------  ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $   22,653 $  36,078
                                             =========  ========


                         SmartDisk Corporation
            Condensed Consolidated Statements of Operations
               (in thousands, except per share amounts)

                                               Three Months Ended
                                                    March 31,
                                              --------------------
                                                2002        2001
                                              --------    --------
                                                   (Unaudited)
Revenues:
     Product sales, net                       $ 11,144    $ 16,832
     Royalty income and license fees              --           430
                                              --------    --------
         Total revenues                         11,144      17,262

Cost of revenues:
      Cost of product sales                      8,816      11,960
      Inventory write-downs                      4,803         469
                                              --------    --------
             Total cost of revenues             13,619      12,429

Gross (loss) profit                             (2,475)      4,833

Operating expenses:
     Research and development                      904       2,194
     Sales and marketing                         1,800       2,269
     General and administrative                  2,874       2,574
      Amortization and depreciation              2,553       8,180
      Impairment of goodwill and other
       intangible assets                         2,729        --
      Business restructuring charges               841        --
                                              --------    --------
         Total operating expenses               11,701      15,217

Operating loss                                 (14,176)    (10,384)

Interest and other income, net                     (47)        440
                                              --------    --------

Net loss before income taxes                  (14,223)     (9,944)

Income tax benefit                                 687       1,563
                                              --------    --------

Net loss applicable to common stock holders   $(13,536)   $ (8,381)
                                              ========    ========

Basic and diluted earnings per common share
        Loss per share                        $  (0.76)   $  (0.48)
                                              ========    ========

Weighted average shares used to compute
 loss per share - Basic and diluted             17,723      17,328
                                              ========    ========