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Reports First Quarter 2006 Financial Results Revenue Increases 27% Company's Financial Condition is Strongest in Its History Jacksonville, FL—May 15, 2006—a21, Inc. ("a21")(OTCBB: ATWO), a leading online digital content marketplace for creative professionals, today reported its financial results for the first quarter ended March 31, 2006. Revenue for the first quarter of 2006 was $2.9 million, compared to $2.3 million for the same prior year period. The increase in revenue is largely attributable to the Ingram acquisition in addition incremental revenue growth from SuperStock, Inc. SuperStock Limited, a21's UK subsidiary, acquired Ingram Publishing Ltd. in October 2005. Net loss for the first quarter of fiscal 2006, excluding a deemed dividend of $157,000, was $2.4 million or $0.03 per share, versus net loss of $982,000, or $0.03 per share, for the same prior year period. The loss reflects more than $1.0 million of non-operating expenses. On January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment," ("SFAS 123®") which requires the recognition of compensation expense for all share-based payment awards made to employees and directors. The results of the first quarter of 2006 include non-cash stock-based compensation expense of $1.0 million or $0.01 per share. The first quarter results also reflect other incremental operating expenses including approximately $250,000 of incremental, non-cash amortization and depreciation charges associated with the Ingram acquisition along with corporate legal and audit costs. Cash used in operations for the first quarter of 2006 was $663,000, compared to $650,000 for the same prior year period. "We continued to make progress in the first quarter while again improving our balance sheet," said Albert H. Pleus, Chairman and CEO of a21. "We added additional equity capital in the first quarter, and in April, raised $15.5 million to pay off debt and add approximately $11 million of working capital to the Company for growth." Thomas V. Butta, Vice Chairman and President of a21 and CEO of SuperStock, further stated, "In the first quarter, we grew revenue while integrating the Ingram operation into SuperStock. In addition, we consolidated our UK presence in a new expanded location in London while opening a new market facing office in New York. On the product side, we launched a new, highly competitive Subscription offering, Purestock X, into our direct and distribution channels. And we continued to bolster our management team with the addition of industry veteran, Ellen Bough, as VP, Visual Content." "With a strong balance sheet and businesses demonstrating organic growth, we believe the Company continues to be well positioned to take advantage of opportunities to grow organically as well as via acquisition," Butta concluded. About a21 a21 (www.a21group.com) is a leading online digital content marketplace for the professional creative community. Through SuperStock (www.superstock.com; www.superstock.co.uk and www.purestockx.com) and Ingram Publishing (www.ingrampublishing.com), its most recent acquisition, a21 delivers high quality images and exceptional customer service. a21 and its companies, with offices in New York, Florida, and the United Kingdom, provide a whole new level of image access to photographers, artists, photography agencies and other customers, offering a valuable and viable choice in the stock image industry. a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per share amounts)
(unaudited)
Three Months Ended
March 31,
-----------------------
2006 2005
Revenue $2,935 $2,312
----------- -----------
Cost of revenue (excludes amortization expense
of $362 and $174) 903 712
Selling, general and administrative expenses 3,186 1,566
Depreciation and amortization expenses 603 353
----------- -----------
TOTAL OPERATING EXPENSES 4,692 2,631
----------- -----------
OPERATING LOSS (1,757) (319)
Interest expense (353) (397)
Warrant expense (265) ---
Other expense, net (14) (266)
----------- -----------
NET LOSS BEFORE INCOME TAX EXPENSE (2,389) (982)
Income tax expense (27) ---
----------- -----------
NET LOSS (2,416) (982)
Disproportionate deemed dividends (157) ---
NET LOSS ATTRIBUTED TO COMMON STOCKHOLDERS $(2,573) $(982)
NET LOSS ATTRIBUTED TO COMMON STOCKHOLDERS PER
SHARE, BASIC AND DILUTED $(0.04) $(0.03)
----------- -----------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, BASIC AND DILUTED 72,142,537 38,136,237
----------- -----------
a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts)
(unaudited)
March 31, December 31,
2006 2005
-------------------------------------------- ------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $1,442 $1,194
Accounts receivable, net allowance for
doubtful accounts of $55 and $57 2,085 1,840
Inventory 156 156
Prepaid expenses and other current assets 317 277
------------ ------------
Total current assets 4,000 3,467
Property, plant and equipment, net 7,527 7,602
Photo collection, net 1,667 1,715
Goodwill 2,340 2,263
Contracts with photographers, net 877 929
Deferred rent receivable 543 541
Intangible assets, net 3,631 3,882
Other 147 115
------------ ------------
Total assets $20,732 $20,514
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable, unsecured $1,050 $1,050
Accounts payable 1,086 1,200
Accrued expenses 519 373
Royalties payable 1,271 1,180
Warrant obligation 451 187
Deferred revenue 235 151
Other 99 272
------------ ------------
Total current liabilities 4,711 4,413
LONG-TERM LIABILITIES
Loan payable from sale-leaseback of
building, less current portion 7,431 7,438
Senior secured notes payable, net - related
party 2,341 2,316
Other 125 126
------------ ------------
Total liabilities 14,608 14,293
------------ ------------
a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
($ in thousands, except per share amounts)
(unaudited)
March 31, December 31,
2006 2005
-------------------------------------------- ------------ ------------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 2,800 2,800
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock; $.001 par value; 100,000
shares authorized; no shares and 14,480
shares issued and outstanding at March 31,
2006 and December 31, 2005, respectively --- 0
Common stock; $.001 par value; 100,000,000
shares authorized; 81,146,476 and
74,115,012 shares issued at March 31, 2006
and December 31, 2005, respectively and
77,466,701 and 70,435,237 shares
outstanding at March 31, 2006 and December
31, 2005, respectively 81 74
Treasury stock (at cost, 3,679,775 shares) --- ---
Additional paid-in capital 19,784 17,583
Deferred compensation (41) (115)
Accumulated deficit (16,601) (14,185)
Accumulated comprehensive income 101 64
------------ ------------
Total stockholders' equity 3,324 3,421
------------ ------------
Total liabilities and stockholders' equity $20,732 $20,514
============ ============
a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
($ in thousands)
(unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2006 2005
----------------------------------------------------------------------
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net loss $(2,416) $(982)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 603 353
Amortization of finance costs 30 106
Loss on disposal of equipment 65 ---
Change in fair value of warrant obligation 265 ---
Stock option compensation 977 ---
Deferred compensation 74 ---
Loss on extinguishment of debt --- 371
Changes in assets and liabilities:
Accounts receivable (245) (314)
Prepaid expenses and other current assets (52) ---
Accounts payable and accrued expenses 121 (184)
Deferred revenue 84 ---
Foreign income tax payable (178) ---
Other 9 ---
-------- ------
NET CASH USED IN OPERATING ACTIVITIES (663) (650)
-------- ------
a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (continued)
($ in thousands)
(unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2006 2005
------------------------------------------------------ ------- -------
CASH FLOWS USED IN INVESTING ACTIVITIES:
SuperStock acquisition earnout (67) ---
Investment in property, plant and equipment (132) (236)
Investment in photo collection (76) ---
Other (40) ---
------- -------
NET CASH USED IN INVESTING ACTIVITIES (315) (236)
------- -------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Proceeds from senior secured notes payable - related
party --- 2,250
Payment of convertible subordinated notes payable --- (1,250)
Net proceeds from the exercise of stock options 31 ---
Net proceeds from the exercise of stock warrants 1,200 ---
Payment of promissory note payable --- (33)
Other (7) 1
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,224 968
------- -------
EFFECT OF EXCHANGE RATES ON CASH AND CASH
EQUIVALANTS 2 51
------- -------
NET INCREASE IN CASH 248 133
CASH AT BEGINNING OF PERIOD 1,194 717
------- -------
CASH AT END OF PERIOD $1,442 $850
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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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