A21 Buys Art Supplier . . . Stock Asylum Staff Report The Stock Asylum May, 16 2006 Why just compete in a $2 billion industry when you can also function in a $35 billion one? This clearly is part of the thinking behind a21's acquisition of ArtSelect, Inc., a player in the consumer market for custom-framed art and wall decor. A21 announced on this date that it paid about $10 million for the Iowa-based company that collected about $12 million in revenues last year. The acquisition will more than double a21's projected revenues for 2006 and move the Jacksonville, FL, company closer to profitability, said Haim Ariav, a21's chief creative officer. He also is president and chief creative officer of a21's SuperStock stock photography division. Though ArtSelect does sell directly to consumers, the bulk of its business is through third parties, according to Ariav. The Iowa company provides online technology and product fulfillment for retailers like Home Depot, the QVC shopping network, JoAnn.com, Target Direct, Staples and Office Depot. The art and decor products are priced between $49.95 and hundreds of dollars each. For example, a print of Vincent van Gogh's La Nuit Étoilée, Arles (The Starlit Night, Arles) can cost from $49.95 to $649.95, depending on size, frame and other factors, according the the ArtSelect web site. For most images, however, prices for the largest sizes with the nicest frames range from $179 to $449. To acquire ArtSelect, a21 paid $4.5 million in cash, $2.35 million in three-year interest only notes, $3.15 million in a21 Series A convertible preferred shares (with a conversion floor of $0.75 per a21 common share), and a four-year warrant to purchase 750,000 a21 common shares at $1 per share. Ariav said ArtSelect will continue to function as a free-standing company, though the ArtSelect product is now also available through a link on the SuperStock home page. The ArtSelect management team will stay with the company, Ariav noted. ArtSelect employs 65 people in Fairfield Iowa. The company was founded in 1998. A21, reported $9.6 million in total revenue for 2005. Net loss for the year, excluding a "deemed dividend," was $4.8 million or $0.10 per share. The company reported first quarter 2006 revenues of $2.9 million, compared to $2.3 million during the same period in 2005. Net loss for the first quarter of 2006, excluding a "deemed dividend" of $157,000, was $2.4 million or $0.03 per share. The loss includes more than $1 million in non-operating expenses, the company said. A21 entered the stock photography business a little over two years ago with the purchase of SuperStock. It also licenses the Purestock royalty-free brand and owns Ingram Publishing, which operates a stock photo subscription service. The a21 web site is at: http://www.a21group.com. ArtSelect is at: http://www.artselect.com. SuperStock is at: http://www.superstock.com. © Stock Asylum, LLC