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| a21 Reports Second Quarter Financial Results Jacksonville, FL—September 21, 2005—a21, Inc. ("a21") (OTCBB: ATWO), a leading online digital content marketplace for creative professionals, today announced financial results for the second quarter ended June 30, 2005. Gross revenues for the second quarter of 2005 were $2,327,000 compared to $2,527,000 for the same period in 2004. Net loss for the second quarter of 2005 was $985,000 or $0.02 per share, versus a net loss of $312,000, or $0.01 per share, for the same period in 2004. Earnings per share for the second quarter of 2005 was calculated on the basis of 40,112,391 weighted average shares outstanding, compared to 38,095,001 weighted average shares outstanding for the same period in 2004. The second quarter 2005 results include non-cash charges of $511,000 primarily for compensation, depreciation and amortization expenses. Gross revenues were $4,639,000 in the six months ended June 30, 2005 compared to $3,325,000 in the six months ended June 30, 2004. Net loss was $1,967,000, or $0.05 per share in the six months ended June 30, 2005 as compared to a net loss of $951,000, or $0.03 per share, in the six month period ended June 30, 2004. Earnings per share for the six months ended June 30, 2005 was calculated on the basis of 39,129,773 weighted average shares outstanding, compared to 31,910,458 weighted shares outstanding for the same period in 2004. The results for the six months ended June 30, 2005 include non-cash charges of $1,349,000 primarily for compensation, depreciation and amortization expenses, and loss on extinguishment of debt. "Second quarter revenues are up over the first quarter of 2005," said Albert H. Pleus, Chairman and CEO of a21. "Additionally, revenues for the first two quarters of 2005 are up 12% sequentially over the prior six month period. With persistent focus on new product development, technology enhancements, broader distribution, and the leveraging of our core assets, we are making steady progress toward our long-term goals. Given these investments, we remain confident in our ability to capitalize on the market's overall growth. Also, to enhance our technology efforts, we added A.D. "Bud" Albers, Senior Vice President and Chief Technology Officer for MusicNet and former SVP and CTO of Getty Images (NYSE: GYI - News), to our Board of Directors." "Operationally, we made important strides toward positioning the Company in what is becoming a rapidly consolidating market," said Thomas V. Butta, Vice Chairman and President of a21 and CEO of SuperStock. "We aggregated and created new and compelling content in both our Rights-Managed and Royalty-Free collections, we continued to improve our customer-facing technology and we enhanced our distribution network globally." "During the last quarter, we introduced "Purestock," a Royalty-Free brand designed to provide the professional creative community with quality images at the highest resolutions and at competitive pricing. The collection launched internationally in more than 100 countries, and the second wave of Purestock content will be available in September 2005, followed by a full schedule of releases in 2006," Butta added. The company also announced that it has amended its Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004 and Quarterly Report on Form 10-QSB for the period ended March 31, 2005 to reflect additional debt discount and additional paid-in capital due to a beneficial conversion feature contained in the company's convertible notes issued in February 2004 in connection with the SuperStock acquisition and a loss on extinguishment when they were subsequently repaid in February 2005, and to reduce the amounts of deferred tax liability and goodwill recorded in connection with the SuperStock acquisition. Both adjustments are non-cash items. An additional deferred tax liability, which was previously reflected as income tax expense during the quarter ended March 31, 2005 has also been offset against the deferred tax assets. The amendments reflect an increase of approximately $944,000 in debt discount and additional paid-in capital attributable to the convertible notes and result in a non-cash charge to earnings of approximately $393,000 for the year ended December 31, 2004 and $281,000 for the quarter ended March 31, 2005. The amendments also reflect a reduction of approximately $1,234,000 in deferred tax liability and goodwill. About a21/SuperStock a21 (http://www.a21group.com) is a leading digital content marketplace for the professional creative community. Through SuperStock (http://www.superstock.com), a21 delivers high quality images and exceptional customer service. Together a21 and SuperStock provide a whole new level of image access to photographers, artists, photography agencies and other customers, offering a valuable and viable choice in the stock image industry.
a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands)
June 30, December 31,
2005 2004
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $314 $717
Accounts receivable, net 1,384 1,302
Inventory 35 ---
Prepaid expenses and other current assets 190 200
Income tax receivable 107 108
-------------- ------------
Total current assets 2,030 2,327
-------------- ------------
Land and building, net 7,359 7,329
Photo collection, net 1,962 2,198
Property and equipment, net 424 547
Goodwill 1,049 1,049
Contracts with photographers 1,031 1,133
Long-term accounts receivable 427 160
Long-term notes receivable 16 18
Intangible assets, net 77 92
Other long-term assets 110 101
Restricted cash 634 600
-------------- ------------
Total assets $15,119 $15,554
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
(CAPITAL DEFICIT)
CURRENT LIABILITIES
Current portion of promissory note
payable $9 $---
Accounts payable 462 872
Accrued wages and payroll taxes 135 147
Accrued interest, current 236 187
Accrued purchase price payable 201 201
Current portion of promissory note
payable 33 32
Royalties payable 1,171 979
-------------- ------------
Total current liabilities 2,247 2,418
-------------- ------------
LONG-TERM LIABILITIES
Promissory note payable, long-term
portion 33 67
Other long-term liabilities 61 61
Loan payable 7,450 7,458
Senior secured notes payable, net 2,273 520
Unsecured notes payable to others, net 1,050 1,040
-------------- ------------
Total liabilities 13,114 11,564
The accompanying notes are an integral part of these Condensed
Consolidated Financial Statements.
a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands)
June 30, December 31,
2005 2004
(Unaudited)
-------------------------------------------- ------------ ------------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 2,800 2,800
------------ ------------
STOCKHOLDERS' EQUITY (CAPITAL DEFICIT)
Preferred stock; $.001 par value;
100,000 shares authorized; no shares
issued and outstanding --- ---
Common stock; $.001 par value;
100,000,000 shares authorized;
44,831,012 and 41,816,012 shares issued
at June 30, 2005 and December 31, 2004,
respectively, and 41,151,237 and
38,136,237 shares outstanding at June
30, 2005 and December 31, 2004,
respectively 45 42
Treasury stock (at cost, 3,679,775
shares) --- ---
Additional paid-in capital 10,731 10,599
Deferred compensation (249) ---
Accumulated deficit (11,378) (9,411)
Accumulated comprehensive income 56 (40)
------------ ------------
Total stockholders' equity (capital
deficit) (795) 1,190
------------ ------------
Total liabilities and stockholders'
equity (capital deficit) $15,119 $15,554
============ ============
The accompanying notes are an integral part of these Condensed
Consolidated Financial Statements.
a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
($ in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
REVENUE $2,327 $2,527 $4,639 $3,325
COST OF REVENUE 716 775 1,428 987
----------- ----------- ----------- -----------
GROSS PROFIT 1,611 1,752 3,211 2,338
----------- ----------- ----------- -----------
EXPENSES
Selling, general and
administrative 1,954 1,312 3,520 2,398
Depreciation and
amortization 359 325 712 424
----------- ----------- ----------- -----------
TOTAL OPERATING
EXPENSES 2,313 1,637 4,232 2,822
----------- ----------- ----------- -----------
OPERATING (LOSS) /
INCOME (702) 115 (1,021) (484)
----------- ----------- ----------- -----------
Interest expense, net (332) (379) (729) (519)
Other
income/(expense), net 49 (48) (217) 52
----------- ----------- ----------- -----------
NET LOSS (985) (312) (1,967) (951)
----------- ----------- ----------- -----------
COMPREHENSIVE LOSS
Foreign currency
translation
adjustment 45 18 96 18
----------- ----------- ----------- -----------
TOTAL COMPREHENSIVE
LOSS $(940) $(294) $(1,871) $(933)
----------- ----------- ----------- -----------
NET LOSS PER SHARE,
BASIC AND DILUTED $(0.02) $(0.01) $(0.05) $(0.03)
----------- ----------- ----------- -----------
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING,
BASIC AND DILUTED 40,112,391 38,095,001 39,129,773 31,910,458
----------- ----------- ----------- -----------
The accompanying notes are an integral part of these Condensed
Consolidated Financial Statements.
a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
($ in thousands)
Six Months Ended
June 30,
2005 2004
----------------------------------------------------- -------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,967) $(951)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 712 424
Amortization of finance costs 24 163
Loss on disposal of property and equipment 16 ---
Compensation from the prior issuance of variable
options --- 127
Compensation from the issuance of options --- 48
Compensation from the issuance of restricted stock 369 ---
Amortization of debt discount related to unsecured
notes payable to others 10 ---
Amortization of debt discount related to
convertible subordinated notes payable 96 208
Loss on extinguishment of debt 371 ---
Deferred compensation (249) ---
Deferred income taxes, net --- (62)
Other changes in long-term assets and liabilities 20 ---
Changes in:
Accounts receivable (349) (207)
Inventory (35) ---
Prepaid expenses and other current assets (2) (47)
Other assets --- (18)
Accounts payable and accrued expenses (230) 121
Accrued interest and other current liabilities 49 33
Restricted cash (34) ---
-------- -------
NET CASH USED IN OPERATING ACTIVITIES (1,199) (161)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of SuperStock, net of cash balance of
$1,151 of SuperStock at date of acquisition --- (1,417)
Addition to leasehold improvements (232) ---
Investment in photo collection (9) ---
Purchase of fixed assets (29) (101)
Long-term deposits, net --- (384)
-------- -------
NET CASH USED IN INVESTING ACTIVITIES (270) (1,902)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of land and building accounted
for as loan payable --- 7,516
Lease payments accounted for as repayment of loan
payable 3 ---
Net proceeds from senior secured notes payable 2,250 ---
Net proceeds from sale of common stock and warrants --- 2,790
Proceeds from issuance of unsecured notes payable
and warrants --- 1,050
Proceeds from issuance of convertible subordinated
notes payable and warrants --- 1,250
Payment of convertible subordinated notes payable (1,250) ---
Payment of revolving credit line --- (1,700)
Payment of unsecured notes payable to affiliates --- (160)
Payment of seller note payable --- (1,576)
Payment of promissory note payable (33) ---
Payment of note payable to bank --- (4,554)
-------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 970 4,616
-------- -------
a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
($ in thousands)
Six Months
Ended
June 30,
2005 2004
-------------------------------------------------------- ----- -------
NET EFFECT OF CUMULATIVE TRANSLATION ADJUSTMENTS $96 $(18)
----- -------
NET INCREASE (DECREASE) IN CASH (403) 2,535
CASH AT BEGINNING OF PERIOD 717 1
----- -------
CASH AT END OF PERIOD $314 $2,536
----- -------
----------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid $--- $---
Interest paid 405 63
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND
INVESTING ACTIVITIES:
Issuance of equity for payment of notes payable to
affiliates --- 424
Issuance of common stock for accrued interest on notes
payable to affiliates --- 51
Issuance of common stock for accrued compensation --- 136
Issuance of common stock for placement costs in
connection with the sale of common stock --- 13
Issuance of common stock to sellers as part of
acquisition cost of SuperStock --- 137
Deferred compensation 369 ---
Debt discount recorded for the issuance of warrants in
connection with unsecured note payable and convertible
subordinated notes payable 10 390
Debt discount recorded for the beneficial conversion
feature of convertible subordinated notes payable --- 1,105
Issuance of warrants as part of acquisition cost of
SuperStock --- 83
Note payable to sellers on acquisition of SuperStock --- 1,576
Accrued purchase price payable --- 300
Minority interest --- 2,800
Acquisition of SuperStock (See Note C) --- 7,477
The accompanying notes are an integral part of these Condensed
Consolidated Financial Statements.
The statements contained in this press release contain certain forward-looking statements, including statements regarding a21, Inc. expectations, intentions, strategies and beliefs regarding the future. All statements contained herein are based upon information available to a21, Inc. management as of the date hereof and actual results may vary based upon future events, both within and without the control of a21, Inc. management. |
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