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| a21 Revenues Increase 120% Q4 2006 vs. Q4 2005 Revenues Increase from Acquisition Sixth Consecutive Quarter of Revenue Growth Jacksonville, FL—April 3, 2007—a21, Inc. ("a21")(OTCBB: ATWO), a leading online digital content marketplace, today reported its financial results for the fourth quarter ending December 31, 2006. Recent highlights include:
John Ferguson, Chief Executive Officer of a21, added, "With six consecutive quarters of overall revenue growth, our strategic plan is progressing. Our goal is to use this momentum to accelerate growth in both established as well as emerging markets by investing in our businesses, by leveraging our outstanding brands in the U.S. as well as around the world, and by introducing innovative new products. By building a platform that can quickly respond to the dynamic nature of our markets, we believe we can profitably grow and create value for our stockholders." Revenue for the fourth quarter of 2006 was $6.3 million, up 120% from the same prior year period revenue of $2.9 million primarily due to the contribution from the Company's ArtSelect acquisition. Net loss for the fourth quarter of 2006 was $4.0 million, or $0.05 per fully diluted share, compared to a net loss of $1.5 million, or $0.02 per fully diluted share, for the same prior year period. The fourth quarter results reflect certain non-cash expenses, including an approximately $1.7 million non-cash impairment charge associated with the Company's 2005 Ingram acquisition. In addition, the Company incurred non-cash stock-based compensation expense of $429,000 as a result of the Company's adoption Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment," ("SFAS 123R"), and amortization and depreciation charges associated with the ArtSelect acquisition. The fourth quarter selling, general, and administrative expenses also included incremental corporate, legal and audit costs. Revenue for the full-year 2006 was $19.6 million, more than double 2005 revenue of $9.6 million primarily due to the contribution from the Company's ArtSelect and Ingram acquisitions. Net loss for 2006 was $9.6 million, or $0.12 per fully diluted share, compared to a net loss of $5.0 million, or $0.10 per fully diluted share, for 2005. 2006 full-year results reflect certain non-cash expenses, including the $1.7 million non-cash impairment charge. In addition, the Company incurred non-cash stock-based compensation expense of $1.3 million as a result of the Company's adoption of SFAS 123R, and incremental amortization and depreciation charges associated with the ArtSelect and Ingram acquisitions. 2006 selling, general, and administrative expenses also included incremental corporate, legal and audit costs. At December 31, 2006, the Company's cash position was $5.5 million and working capital $4.3 million with no current principal debt obligations due in the next twelve months. About a21 a21 (www.a21group.com) is a leading online digital content marketplace for the professional creative community. Through SuperStock (www.superstock.com; www.superstock.co.uk and www.purestockx.com), and ArtSelect (www.artselect.com) a21 delivers high quality images, art framing, and exceptional customer service. a21 and its companies, with offices in Florida, Iowa, New York, and the United Kingdom, provide a valuable and viable choice to photographers, artists, photography agencies and other customers in the stock image, art and wall decor industries.
a21, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per share amounts)
Year Ended
December 31,
2006 2005
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REVENUE
Licensing revenue $ 11,976 $ 9,563
Product revenue 7,657 ---
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TOTAL REVENUE 19,633 9,563
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COSTS AND EXPENSES
Cost of licensing revenue (excludes related
amortization of $1.6 million and $696) 3,835 3,090
Cost of product revenue (excludes related
amortization of $512 and zero) 3,596 ---
Selling, general and administrative 15,040 7,401
Depreciation and amortization 2,984 1,683
Impairment of intangible assets 1,658 ---
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TOTAL OPERATING EXPENSES 27,113 12,174
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OPERATING LOSS (7,480) (2,611)
Interest expense (1,691) (1,380)
Warrant expense (47) (173)
Other income (expense), net 265 (505)
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NET LOSS BEFORE INCOME TAX EXPENSE (8,953) (4,669)
Income tax expense 148 105
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NET LOSS (9,101) (4,774)
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Disproportionate deemed dividends (157) (219)
Deemed dividend on convertible preferred
stock (336) ---
NET LOSS ATTRIBUTED TO COMMON STOCKHOLDERS $ (9,594) $ (4,993)
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NET LOSS ATTRIBUTED TO COMMON STOCKHOLDERS
PER SHARE, BASIC AND DILUTED $ (0.12) $ (0.10)
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, BASIC AND DILUTED 78,740,959 47,723,202
a21, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
FOR THE YEAR ENDED DECEMBER 31, 2006 2005
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(9,101) $(4,774)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 2,984 1,683
Impairment of intangible assets 1,658 ---
Amortization of finance costs 56 82
Bad debts 100 ---
Write-down of inventory 123 ---
Loss on disposal of equipment 76 69
Change in fair value of warrant obligation 92 173
Gain on exchange of debt for cancelled warrants (46) ---
Stock based compensation 1,083 ---
Compensation from the prior issuance of
variable options --- 139
Compensation from the issuance of restricted
stock 219 18
Deferred compensation --- 288
Common stock issued for services --- 23
Amortization of debt discount --- 106
Loss on extinguishment of debt --- 371
Settlement of claim expense paid with common
stock 139 ---
Other 12 ---
Changes in assets and liabilities exclusive of
business combinations:
Accounts receivable (449) 160
Prepaid expenses and other current assets (272) (7)
Inventory (54) (91)
Income tax receivable --- 108
Accounts payable and accrued expenses 1,086 121
Deferred revenue 92 151
Deferred rent receivable (8) (541)
Foreign income tax payable (187) ---
Other (402) 25
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NET CASH USED IN OPERATING ACTIVITIES (2,799) (1,896)
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a21, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
($ in thousands)
FOR THE YEAR ENDED DECEMBER 31, 2006 2005
---------------------------------------------------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Ingram, net of cash acquired of $76 --- (1,487)
Acquisition of ArtSelect, net of cash acquired of
$231 (4,521) ---
Investment in property, plant and equipment (248) (330)
Investment in software (281) (9)
SuperStock earn-out (206) ---
Investment in photo collection (333) ---
Restricted cash for lease deposit (750) 600
Other (32) ---
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NET CASH USED IN INVESTING ACTIVITIES (6,371) (1,226)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from senior secured convertible notes
payable - related party, net 15,285 ---
(Payment of) proceeds from senior secured notes
payable - related party (2,250) 2,250
Payment of Ingram debt --- (1,548)
Payment of convertible subordinated notes payable --- (1,250)
Payment of unsecured notes payable (1,050) (201)
Net proceeds from the exercise of stock options 111 ---
Net proceeds from the exercise of stock warrants 1,200 3,166
Proceeds from the issuance of common stock --- 1,205
Payment of promissory note payable (33) (33)
Other 126 16
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NET CASH PROVIDED BY FINANCING ACTIVITIES 13,389 3,605
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EFFECT OF EXCHANGE RATES ON CASH AND CASH
EQUIVALENTS 42 (6)
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NET INCREASE IN CASH 4,261 477
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,194 717
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CASH AND CASH EQUIVALENTS AT END OF YEAR $ 5,455 $ 1,194
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a21, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts)
December 31, December 31,
2006 2005
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,455 $ 1,194
Accounts receivable, net allowance for
doubtful accounts of $108 and $57 2,773 1,840
Inventory 844 156
Prepaid expenses and other current assets 441 277
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Total current assets 9,513 3,467
Property, plant and equipment, net 7,300 7,503
Photo collection, net 1,520 1,715
Goodwill 8,648 2,263
Contracts with photographers, net 718 929
Deferred rent receivable 549 541
Intangible assets, net 5,232 3,981
Restricted cash 750 ---
Other 384 115
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Total assets $34,614 $20,514
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable, unsecured $ --- $ 1,050
Accounts payable 2,770 850
Accrued compensation 359 154
Accrued expenses 430 569
Royalties payable 1,288 1,180
Warrant obligation 18 187
Deferred revenue 242 151
Other 106 272
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Total current liabilities 5,213 4,413
LONG-TERM LIABILITIES
Senior secured convertible notes payable,
net - related party 15,500 ---
Secured notes payable, net - related party
(ArtSelect Sellers) 2,499 ---
Loan payable from sale-leaseback of
building, less current portion 7,403 7,438
Senior secured notes payable, net -
related party --- 2,316
Other 112 126
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Total liabilities 30,727 14,293
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a21, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS (continued)
($ in thousands, except per share amounts)
December 31, December 31,
2006 2005
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COMMITMENTS AND CONTINGENCIES
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MINORITY INTEREST 2,254 2,800
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STOCKHOLDERS' EQUITY
Preferred stock; $.001 par value; 100,000
shares authorized; 0 and 14,180 shares
issued and outstanding at December 31,
2006 and 2005, respectively --- ---
Common stock; $.001 par value; 200,000,000
and 100,000,000 shares authorized;
87,191,575 and 74,115,012 shares issued
and 83,511,800 and 70,435,237 shares
outstanding at December 31, 2006 and
2005, respectively 87 74
Treasury stock (at cost, 3,679,775 shares) --- ---
Additional paid-in capital 24,341 17,583
Deferred compensation --- (115)
Accumulated deficit (23,286) (14,185)
Accumulated other comprehensive income 491 64
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Total stockholders' equity 1,633 3,421
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Total liabilities and stockholders' equity $ 34,614 $ 20,514
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ContactGregory FCA Communications Joseph Hassett, 610-642-8253 JoeH@gregoryfca.com The statements contained in this press release contain certain forward-looking statements, including statements regarding a21, Inc.'s expectations, intentions, strategies and beliefs regarding the future. All statements contained herein are based upon information available to a21, Inc.'s management as of the date hereof and actual results may vary based upon future events, both within and without the control of a21, Inc.'s management. |
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