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Reports nearly 190% Revenue Increase Q3 2006 vs. Q3 2005 Revenues Increase approximately 90% from Acquisitions and 10% from Organic Growth Fifth Consecutive Quarter of Revenue Growth New Executive Chairman, CEO Solidify Management Team Jacksonville, FL—November 21, 2006—a21, Inc. ("a21")(OTCBB: ATWO), a leading online digital content marketplace, today reported its financial results for the third quarter ending September 30, 2006. Highlights for the quarter include:
"I am extremely pleased to see our organic growth in the double digits," said John Ferguson, Chief Executive Officer of a21. "Considering the management transition, the operating teams remained focused on our customers." Revenue for the third quarter of 2006 was $5.9 million, up nearly 190% from the same prior year period primarily due to contributions from the Company's ArtSelect and Ingram acquisitions. Net loss for the third quarter of 2006 was $1.4 million, or $0.02 per fully diluted share, compared to a net loss of $1.3 million, or $0.03 per fully diluted share, for the same prior year period. Included in third quarter 2006 results were approximately $400,000 in non-cash amortization and depreciation charges associated with the ArtSelect and Ingram acquisitions that the Company did not have in the third quarter of 2005 as well as higher corporate legal and audit costs. Additionally, the Company recorded a one-time, non-cash deemed dividend of $336,000 associated with a beneficial conversion feature of the convertible preferred stock issued as partial consideration for the ArtSelect acquisition. The deemed dividend was recognized during the third quarter as a result of the share authorization contingency being met during the quarter. At September 30, 2006, the Company's cash position was $6.2 million and working capital $6.5 million. Cash used in operations for the third quarter of 2006 was down significantly on a sequential basis from cash used in operations during the second quarter of 2006. Thomas Costanza, Vice President and Chief Financial Officer of a21, stated, "With the capital raised during 2006 and the contributions being realized from our combined businesses, we are in good position to drive further operating improvements through revenue growth and operating leverage. In the third quarter, we reduced cash used in operations. We aim to further strengthen our financial position and operational results to create significant value for our shareholders." About a21 a21 (www.a21group.com) is a leading online digital content marketplace for the professional creative community. Through SuperStock (www.superstock.com; www.superstock.co.uk and www.purestockx.com) Ingram Publishing (www.ingrampublishing.com), and ArtSelect (www.artselect.com) a21 delivers high quality images, art framing, and exceptional customer service. a21 and its companies, with offices in Florida, Iowa, New York, and the United Kingdom, provide a valuable and viable choice to photographers, artists, photography agencies and other customers in the stock image, art and wall decor industries. a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts)
(unaudited)
September 30, December 31,
2006 2005
------------------------------------------ ------------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $6,241 $1,194
Accounts receivable, net allowance for
doubtful accounts of $71 and $57 2,684 1,840
Inventory 822 156
Prepaid expenses and other current
assets 723 277
------------- -------------
Total current assets 10,470 3,467
Property, plant and equipment, net 7,763 7,602
Photo collection, net 1,665 1,715
Goodwill 8,518 2,263
Contracts with photographers, net 771 929
Deferred rent receivable 564 541
Intangible assets, net 6,844 3,882
Restricted cash 750 ---
Other 111 115
------------- -------------
Total assets $37,456 $20,514
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable, unsecured $--- $1,050
Accounts payable 2,272 850
Accrued compensation 324 154
Accrued expenses 346 569
Royalties payable 1,355 1,180
Warrant obligation 34 187
Deferred revenue 209 151
Other 131 272
------------- -------------
Total current liabilities 4,671 4,413
LONG-TERM LIABILITIES
Senior secured convertible notes
payable, net - related party 15,500 ---
Secured notes payable, net - related
party 2,461 ---
Loan payable from sale-leaseback of
building, less current portion 7,414 7,438
Senior secured notes payable, net -
related party --- 2,316
Other 103 126
------------- -------------
Total liabilities 30,149 14,293
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a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
($ in thousands, except per share amounts)
(unaudited)
September 30, December 31,
2006 2005
------------------------------------------ ------------- -------------
COMMITMENTS AND CONTINGENCIES
------------- -------------
MINORITY INTEREST 2,254 2,800
------------- -------------
------------- -------------
STOCKHOLDERS' EQUITY
Preferred stock; $.001 par value;
100,000 shares authorized; 0 and
14,180 shares issued and outstanding
at September 30, 2006 and December 31,
2005, respectively --- ---
Common stock; $.001 par value;
200,000,000 and 100,000,000 shares
authorized; 86,985,621 and 74,115,012
shares issued and 83,305,846 and
70,435,237 shares outstanding at
September 30, 2006 and December 31,
2005, respectively 87 74
Treasury stock (at cost, 3,679,775
shares) --- ---
Additional paid-in capital 23,902 17,583
Deferred compensation --- (115)
Accumulated deficit (19,326) (14,185)
Accumulated other comprehensive income 390 64
------------- -------------
Total stockholders' equity 5,053 3,421
------------- -------------
Total liabilities and stockholders'
equity $37,456 $20,514
============= =============
a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
----------- ----------- ----------- -----------
REVENUE
Licensing revenue $2,986 $2,064 $8,943 $6,703
Product revenue 2,918 --- 4,407 ---
----------- ----------- ----------- -----------
TOTAL REVENUE 5,904 2,064 13,350 6,703
----------- ----------- ----------- -----------
COSTS AND EXPENSES
Cost of licensing
revenue (excludes
related amortization
for three months of
$383 and $174, nine
months of $1.1 million
and $522) 902 669 2,060 2,097
Cost of product revenue 1,366 --- 2,812 ---
Selling, general and
administrative 3,461 1,855 10,056 5,079
Depreciation and
amortization 789 363 2,222 1,075
----------- ----------- ----------- -----------
TOTAL OPERATING
EXPENSES 6,518 2,887 17,150 8,251
----------- ----------- ----------- -----------
OPERATING LOSS (614) (823) (3,800) (1,548)
----------- ----------- ----------- -----------
Interest expense (448) (316) (1,248) (1,045)
Warrant income
(expense) 29 --- (62) ---
Other expense, net (9) (204) (31) (717)
----------- ----------- ----------- -----------
NET LOSS (1,042) (1,343) (5,141) (3,310)
----------- ----------- ----------- -----------
Disproportionate deemed
dividends --- --- (157) ---
----------- ----------- ----------- -----------
Deemed dividend on
convertible preferred
stock (336) --- (336) ---
----------- ----------- ----------- -----------
NET LOSS ATTRIBUTED
TO COMMON
STOCKHOLDERS $(1,378) $(1,343) $(5,634) $(3,310)
----------- ----------- ----------- -----------
NET LOSS ATTRIBUTED TO
COMMON STOCKHOLDERS
PER SHARE, BASIC AND
DILUTED $(0.02) $(0.03) $(0.07) $(0.08)
----------- ----------- ----------- -----------
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING, BASIC AND
DILUTED 81,692,872 43,216,129 79,226,938 40,496,915
a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(unaudited)
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
2006 2005
----------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(5,141) $(3,310)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 2,222 1,075
Amortization of finance costs 35 41
Loss on disposal of equipment 85 16
Change in fair value of warrant
obligation 108 ---
Gain on exchange of debt for cancelled
warrants (46) ---
Stock based compensation 778 35
Compensation from the prior issuance of
variable options --- 28
Compensation from the issuance of
restricted stock 95 397
Deferred compensation --- (189)
Amortization of debt discount --- 106
Loss on extinguishment of debt --- 371
Settlement of claim expense paid with
common stock 139 ---
Other 34 (15)
Changes in assets and liabilities
exclusive of business combinations:
Accounts receivable (272) (331)
Prepaid expenses and other current
assets (528) 70
Inventory 91 (96)
Accounts payable and accrued expenses 621 289
Deferred revenue 58 ---
Foreign income tax payable (156) ---
Other (130) ---
------------ -------------
NET CASH USED IN OPERATING ACTIVITIES (2,007) (1,513)
------------ -------------
a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
($ in thousands)
(unaudited)
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
2006 2005
------------------------------------------- ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of ArtSelect, net of cash
acquired of $231 (4,542) ---
Investment in property, plant and
equipment (470) (278)
SuperStock earn-out (206) ---
Investment in photo collection (353) (9)
Restricted cash for lease deposit (750) (69)
Other (19) ---
------------ -------------
NET CASH USED IN INVESTING ACTIVITIES (6,340) (356)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from senior secured convertible
notes payable - related party, net 15,285 ---
(Payment) proceeds senior secured notes
payable - related party (2,250) 2,250
Payment of convertible subordinated notes
payable --- (1,250)
Payment of unsecured notes payable (1,050) ---
Net proceeds from the exercise of stock
options 100 ---
Net proceeds from the exercise of stock
warrants 1,200 ---
Proceeds from the issuance of common stock --- 1,204
Payment of promissory note payable (33) (33)
Other 111 23
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NET CASH PROVIDED BY FINANCING ACTIVITIES 13,363 2,194
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EFFECT OF EXCHANGE RATES ON CASH AND CASH
EQUIVALENTS 31 115
------------ -------------
NET INCREASE IN CASH 5,047 440
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 1,194 717
------------ -------------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $6,241 $1,157
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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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