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Announces Fourth Quarter 2007 Results Jacksonville, FL—March 31, 2008—a21, Inc. ("a21") (OTCBB: ATWO), a leading online digital content marketplace, today reported its financial results for the fourth quarter and year ended December 31, 2007. Revenue for the fourth quarter of 2007 was $6.1 million compared to $6.3 million for the same prior year period. Total cost of sales for the fourth quarter of 2007 were $2.7 million, or 44% of revenues, compared $2.6 million, or 41% of revenues, for the same prior year period. Fourth quarter 2007 selling, general, and administrative expenses of $3.3 million were reduced by $1.7 million, or 34%, compared to the same prior year period through a continued focus on expense reduction. Depreciation expense was $617,000 and 762,000 for the 2007 and 2006 fourth quarters, respectively. In the fourth quarter of 2007, the Company recognized $111,000 in restructuring expenses. In the fourth quarter of 2006, the Company recognized a $1.7 million extraordinary charge due to the impairment of intangible assets. The net loss for the fourth quarter of 2007 was $1.1 million, or $0.01 per fully diluted share, compared to a net loss of $2.3 million, or $0.03 per fully diluted share, for the same prior year period. At December 31, 2007, the Company’s cash position was $2.1 million and working capital was $1.5 million. Revenue for the full year of 2007 was $23.3 million compared to $19.6 million for 2006, reflecting a full year contribution of the ArtSelect acquisition, which closed during May 2006. Total cost of sales for 2007 were $9.5 million, or 41% of revenues, compared to $7.4 million, or 38% of revenues for 2006. Selling, general, and administrative expenses in 2007 of $13.9 million were reduced by $1.2 million compared to 2006. Depreciation expense was $2.5 million and $3.0 million for 2007 and 2006, respectively. During 2007, the Company recognized $426,000 in restructuring expenses. In 2006, the Company recognized a $1.7 million extraordinary charge due to the impairment of intangible assets. The net loss for 2007 was $4.7 million, or $0.05 per fully diluted share, compared to a net loss of $9.1 million, or $0.12 per fully diluted share for 2006. John Ferguson, Chief Executive Officer of a21, said, "Our strategic initiatives are continuing to help improve operating performance despite a challenging market." About a21 a21 (www.a21group.com) is a leading online digital content company. Through SuperStock (www.superstock.com; www.superstock.co.uk; and www.purestockx.com), and ArtSelect (www.artselect.com), a21 delivers high quality images, art framing, and exceptional customer service. a21 and its companies, with offices in Florida, Iowa, New York City, and London, provide valuable and viable choices to key business partners and customers in the stock image, art and wall decor industries. Financial Exhibits
a21, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts)
December 31, December 31,
2007 2006
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,090 $ 5,455
Accounts receivable, net allowance for
doubtful accounts of $237 and $108, at
December 31, 2007 and 2006, respectively 3,008 2,773
Inventory 874 844
Prepaid expenses and other current assets 437 441
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Total current assets 6,409 9,513
Property, plant and equipment, net 6,832 7,300
Goodwill 8,778 8,648
Intangible assets, net 4,921 5,232
Restricted cash 750 750
Other 2,431 3,171
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Total assets $ 30,121 $ 34,614
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LIABILITIES AND STOCKHOLDERS' (CAPITAL
DEFICIT) EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 2,761 $ 3,200
Royalties payable 1,232 1,288
Wages payable 278 359
Deferred revenue 389 242
Restructure liability 138 ---
Other 99 124
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Total current liabilities 4,897 5,213
LONG-TERM LIABILITIES
Senior secured convertible notes payable,
net - related party 15,500 15,500
Secured notes payable, net - related party
(ArtSelect Sellers) 2,555 2,499
Loan payable from sale-leaseback of
building, less current portion 7,347 7,403
Other 67 112
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Total liabilities 30,366 30,727
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a21, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS (continued)
($ in thousands, except per share amounts)
December 31, December 31,
2007 2006
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COMMITMENTS AND CONTINGENCIES
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MINORITY INTEREST 1,071 2,254
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STOCKHOLDERS' EQUITY (CAPITAL DEFICIT)
Common stock; $.001 par value; 200,000,000
shares authorized; 90,740,851 and
87,191,575 shares issued and 87,061,076
and 83,511,800 shares outstanding at
December 31, 2007 and 2006, respectively 91 87
Treasury stock (at cost, 3,679,775 shares) --- ---
Additional paid-in capital 26,121 24,341
Accumulated deficit (27,961) (23,286)
Accumulated other comprehensive income 433 491
------------ ------------
Total stockholders' (capital deficit)
equity (1,316) 1,633
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Total liabilities and stockholders'
(capital deficit) equity $ 30,121 $ 34,614
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a21, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands except per share amounts)
For the Years Ended
December 31,
2007 2006
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REVENUE
Licensing revenue $ 11,907 $ 11,976
Product revenue 11,399 7,657
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TOTAL REVENUE 23,306 19,633
COSTS AND EXPENSES
Cost of licensing revenue (excludes related
amortization of $1.1 million and $1.6
million for years ended December 31, 2007
and 2006, respectively) 3,768 3,835
Cost of product revenue (excludes related
amortization of $176 and $512 for years
ended December 31, 2007 and 2006,
respectively) 5,730 3,596
Selling, general and administrative 13,879 15,040
Restructure costs, including severance 426 ---
Depreciation and amortization 2,508 2,984
Impairment of intangible assets --- 1,658
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TOTAL OPERATING EXPENSES 26,311 27,113
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OPERATING LOSS (3,005) (7,480)
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Interest expense (1,783) (1,691)
Warrant income expense (1) (47)
Other income, net 211 265
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NET LOSS BEFORE INCOME TAX EXPENSE (4,578) (8,953)
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Income tax expense (97) (148)
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NET LOSS (4,675) (9,101)
Disproportionate deemed dividends --- (157)
Deemed dividend on convertible preferred
stock --- (336)
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NET LOSS ATTRIBUTED TO COMMON STOCKHOLDERS $ (4,675) $ (9,594)
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NET LOSS ATTRIBUTED TO COMMON STOCKHOLDERS
PER SHARE, BASIC AND DILUTED $ (0.05) $ (0.12)
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, BASIC AND DILUTED 86,953,066 78,740,959
a21, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
FOR THE YEARS ENDED DECEMBER 31, 2007 2006
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(4,675) $(9,101)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 2,508 2,984
Impairment of intangible assets --- 1,658
Share-based compensation 554 1,302
Other 137 562
Changes in assets and liabilities:
Accounts receivable (235) (449)
Prepaid expenses and other current assets 163 (272)
Inventory (30) (54)
Accounts payable and accrued expenses (332) 1,086
Deferred revenue 147 92
Other (35) (607)
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NET CASH USED IN OPERATING ACTIVITIES (1,798) (2,799)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of ArtSelect, net of cash acquired of
$231 --- (4,521)
Investment in property, plant and equipment (145) (248)
Investment in technology (765) (281)
SuperStock acquisition earn-out (285) (206)
Investment in photo collection (349) (333)
Restricted cash for lease deposit --- (750)
Other (8) (32)
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NET CASH USED IN INVESTING ACTIVITIES (1,552) (6,371)
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a21, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
($ in thousands)
FOR THE YEARS ENDED DECEMBER 31, 2007 2006
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from senior secured convertible notes
payable - related party, net --- 15,285
Payment of senior secured notes payable - related
party --- (2,250)
Payment of unsecured notes payable --- (1,050)
Net proceeds from the exercise of stock options 29 111
Net proceeds from the exercise of stock warrants 19 1,200
Payment of SuperStock seller promissory note
payable (33) (33)
Other 11 126
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NET CASH PROVIDED BY FINANCING ACTIVITIES 26 13,389
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EFFECT OF EXCHANGE RATES ON CASH AND CASH
EQUIVALENTS (41) 42
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NET (DECREASE) INCREASE IN CASH (3,365) 4,261
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,455 1,194
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,090 $ 5,455
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Press Contact:Joseph Hassett Gregory FCA Communications 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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