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Reports Fourth Quarter and Full Year Financial Results Fourth Quarter Revenue Increases 38% Driven by Strong Organic Growth Jacksonville, FL—April 26, 2006—a21, Inc. ("a21")(OTCBB: ATWO), a leading online digital content marketplace for creative professionals, today reported its financial results for the fourth quarter and year ended December 31, 2005. Revenue for the fourth quarter of 2005 was $2.9 million, compared to $2.1 million for the same prior year period. The increase in revenue reflects an increase in revenue from SuperStock, Inc., in addition to incremental revenue from the Ingram acquisition. Net loss for the fourth quarter of 2005, excluding a deemed dividend of $219,000, was $1.5 million or $0.02 per share, versus net loss of $494,000, or $0.01 per share, for the same prior year period as higher incremental margins were offset by higher operating expenses including approximately $270,000 in incremental, non-cash amortization and depreciation charges associated with the Ingram acquisition along with corporate legal and audit costs. The results for the fourth quarter of 2005 also included approximately $173,000 of non-cash charges related to debt and equity transactions. In addition, the results for the fourth quarter of 2004 included a one-time tax benefit of $450,000 which arose principally upon the sale of the SuperStock building during 2004. Cash used in operations for the fourth quarter of 2005 was $314,000, compared to $583,000 for the same prior year period. Revenue for 2005 was $9.6 million, compared to $7.5 million for 2004. The increase in revenue reflects a full year of sales for SuperStock, which a21 acquired in February 2004, versus ten months during 2004, plus incremental revenue from the Ingram acquisition. Net loss for 2005, excluding the deemed dividend of $219,000, was $4.8 million or $0.10 per share, versus net loss of $2.5 million, or $0.07 per share, for 2004 as higher, incremental margins were offset by higher operating expenses along with incremental non-cash investment and finance related costs and a lower tax benefit. Higher 2005 operating expenses included approximately $560,000 incremental, non-cash amortization and depreciation charges associated with the SuperStock and Ingram acquisitions along with corporate legal and audit costs. 2005's results also included approximately $550,000 of non-cash charges related to debt and equity transactions. In addition, 2004's net results included a one-time tax benefit of $730,000 which arose principally upon the sale of the SuperStock building during 2004. Cash used in operations for 2005 was $1.9 million, compared to $2.0 million for the same prior year period. "In our second year of operating SuperStock, we have continued to make significant operational improvements in content, technology, sales, and marketing, and it is now beginning to be reflected in our results," said Albert H. Pleus, Chairman and CEO of a21. "In addition, we strengthened our balance sheet during this period, raising $7.5 million through the private sale of securities. The acquisition of Ingram Publishing in October 2005 has allowed us to add a subscription service to our portfolio of products, address the SOHO market, and expand our European presence, which we believe will help drive revenue growth and improve operating results in 2006." Thomas V. Butta, Vice Chairman and President of a21 and CEO of SuperStock, further stated, "We have more than tripled our content since the acquisition of SuperStock to well over the one million image mark, and continue to search for and aggregate highly marketable images. We have further updated our website and e-commerce engine, www.superstock.com, improved our key wording, accessibility and search options, and added store fronts for all of our major product lines. Our global channel network now exceeds 120 distributors and was critically important to the successful launch of our new Royalty Free brand Purestock and the development of our subscription brand, PurestockX. Our direct sales team now operates in New York and London as well as our headquarters in Jacksonville. We have also added significant strength to our management team with the addition, among others, of seasoned senior sales, content, and financial executives." "We believe the company is now well positioned to take advantage of opportunities to grow organically, as well as via acquisition, and we will strive to keep adding the most creative, professional and enthusiastic people to our team to continue our progress," Butta concluded. 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 Ingram Publishing (www.ingrampublishing.com), its most recent acquisition, a21 delivers high quality images and exceptional customer service. a21 and its companies, with offices in New York, Florida, and the United Kingdom, provide a whole new level of image access to photographers, artists, photography agencies and other customers, offering a valuable and viable choice in the stock image industry. a21, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per share amounts)
Twelve Months Ended
December 31,
-------------------------
2005 2004
Revenue $ 9,563 $ 7,475
----------- -----------
Cost of revenue (excludes amortization
expense of $941 and $580) 3,090 2,241
Selling, general and administrative 7,401 5,929
Depreciation and amortization 1,683 1,127
----------- -----------
TOTAL OPERATING EXPENSES 12,174 9,297
----------- -----------
OPERATING LOSS (2,611) (1,822)
Interest expense (1,380) (1,443)
Warrant expense (173) ---
Other (expense) income, net (505) 45
----------- -----------
NET LOSS BEFORE INCOME TAX (EXPENSE)
BENEFIT (4,669) (3,220)
Income tax (expense) benefit (105) 729
----------- -----------
NET LOSS (4,774) (2,491)
Disproportionate deemed dividends (219) ---
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NET LOSS ATTRIBUTED TO COMMON STOCKHOLDERS $ (4,993) $ (2,491)
----------- -----------
NET LOSS ATTRIBUTED TO COMMON STOCKHOLDERS
PER SHARE, BASIC AND DILUTED $ (0.10) $ (0.07)
----------- -----------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, BASIC AND DILUTED 47,723,202 35,031,876
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a21, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
($ in thousands)
DECEMBER 31, 2005 2004
---------------------------------------------------- -------- --------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,194 $ 717
Accounts receivable, net allowance for doubtful
accounts of $57 and $50. 1,840 1,462
Inventory 156 ---
Prepaid expenses and other current assets 277 200
Income tax receivable --- 108
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Total current assets 3,467 2,487
Land and building, net 7,153 7,329
Property and equipment, net 449 547
Photo collection, net 1,715 2,198
Goodwill 2,263 1,049
Contracts with photographers, net 929 1,133
Deferred rent receivable 541 ---
Long-term notes receivable 15 18
Intangible assets, net 3,882 92
Other 100 101
Restricted cash --- 600
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Total assets $20,514 $15,554
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable, unsecured $ 1,050 $ ---
Accounts payable 1,351 872
Accrued wages and payroll taxes 113 147
Accrued interest 104 187
Accrued purchase price payable 156 201
Royalties payable 1,180 979
Foreign income taxes payable 206 ---
Current portion of promissory note payable 33 32
Warrant liability 187 ---
Other 33 ---
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Total current liabilities 4,413 2,418
LONG-TERM LIABILITIES
Loan payable from sale-leaseback of building, less
current portion 7,438 7,458
Convertible subordinated notes payable, net -
Related party --- 520
Senior secured notes payable, net - Related party 2,316 ---
Notes payable, unsecured, net - Related party --- 1,040
Promissory note payable, less current portion 34 67
Other 92 61
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Total liabilities 14,293 11,564
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a21, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS (continued)
($ in thousands, except per share amounts)
DECEMBER 31, 2005 2004
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COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 2,800 2,800
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STOCKHOLDERS' EQUITY
Preferred stock; $.001 par value; 100,000 shares
authorized; 14,480 and 0 shares issued and
outstanding at December 31, 2005 and 2004,
respectively (aggregate liquidation value $1,448
at December 31, 2005) --- ---
Common stock; $.001 par value; 100,000,000 shares
authorized; 74,115,012 and 41,816,012 shares
issued at December 31, 2005 and 2004,
respectively and 70,435,237 and 38,136,237 shares
outstanding at December 31, 2005 and 2004,
respectively 74 42
Treasury stock (at cost, 3,679,775 shares) --- ---
Additional paid-in capital 17,583 10,599
Deferred compensation (115) ---
Accumulated deficit (14,185) (9,411)
Accumulated comprehensive income (loss) 64 (40)
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Total stockholders' equity 3,421 1,190
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Total liabilities and stockholders' equity $ 20,514 $15,554
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a21, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOW
($ in thousands)
FOR THE YEARS ENDED DECEMBER 31, 2005 2004
----------------------------------------------------- -------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(4,774) $(2,491)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 1,683 1,127
Loss from disposal of property and equipment 69 ---
Amortization of finance costs 82 787
Write-down of notes receivable and advance to
stockholder --- 64
Compensation from the prior issuance of variable
options 139 ---
Compensation from the issuance of options and
warrants 18 48
Deferred compensation 288 ---
Common stock issued for services 23 21
Amortization of debt discount related to notes
payable 106 ---
Loss on extinguishment of debt 371 ---
Deferred income taxes, net --- (729)
Changes in assets and liabilities excluding
business acquisitions:
Accounts receivable 160 (210)
Inventory (91) ---
Prepaid expenses and other current assets (7) (131)
Income tax receivable 108 (108)
Long-term assets --- 176
Deferred rent receivable (541) ---
Accounts payable and accrued expenses 355 (55)
Accrued interest (83) ---
Security deposit --- 61
Income tax payable 4 ---
Warrant liability 173 ---
Restricted cash --- (600)
Other 21 ---
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NET CASH USED IN OPERATING ACTIVITIES (1,896) (2,040)
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a21, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOW (continued)
($ in thousands)
FOR THE YEARS ENDED DECEMBER 31, 2005 2004
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CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of SuperStock, net of cash balance of
$1,151 of SuperStock at date of acquisition --- (1,417)
Restricted cash 600 ---
Acquisition of Ingram, net of cash balance of $76
of Ingram at date of acquisition (1,487) ---
Investment in building (232) (21)
Investment in property and equipment (107) (322)
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NET CASH USED IN INVESTING ACTIVITIES (1,226) (1,760)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale-leaseback of land and building
accounted for as a loan payable --- 7,516
Lease payments accounted for as repayment of loan
payable --- (60)
Proceeds from senior secured notes payable -
related party 2,250 ---
Payment of Ingram debt (1,548) ---
Payment of convertible subordinated notes payable (1,250) ---
Net proceeds from sale of common stock and warrants 4,371 2,790
Proceeds from issuance of unsecured notes payable
and warrants --- 1,050
Proceeds from issuance of convertible subordinated
notes payable and warrants --- 1,250
Payment of revolving credit line --- (1,700)
Payment of unsecured notes payable to affiliates --- (160)
Payment of seller note payable --- (1,576)
Payment on purchase price payable (201) ---
Payment of promissory note payable (33) ---
Payment of note payable to bank --- (4,554)
Other 16 ---
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,605 4,556
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EFFECT OF EXCHANGE RATES ON CASH AND CASH
EQUIVALENTS (6) (40)
------- -------
NET INCREASE IN CASH 477 716
CASH AT BEGINNING OF PERIOD 717 1
------- -------
CASH AT END OF PERIOD $ 1,194 $ 717
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a21 Investor RelationsDennis Early CEOcast 212.732.4300 dearly@ceocast.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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