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| a21
Reports 94% Revenue Increase Q2 2006 vs. Q2 2005 Revenues Increase 85% from Acquisitions and 9% from Organic Growth Fourth Consecutive Quarter of Revenue Growth Company Continues to Strengthen Organization Jacksonville, FL—August 22, 2006—a21, Inc. ("a21")(OTCBB: ATWO), a leading online digital content marketplace, today reported its financial results for the second quarter ending June 30, 2006. Highlights for the quarter include:
Revenue for the second quarter of 2006 was $4.5 million, compared to $2.3 million for the same prior year period. The increase in revenue is primarily attributable to contributions from the Company's ArtSelect and Ingram acquisitions (85%) and also organic growth (9%). Net loss for the second quarter of 2006 was $2.2 million, or $0.03 per fully diluted share, versus net loss of $985,000, or $0.02 per fully diluted share, for the same prior year period. The second quarter results also reflect other incremental operating expenses including approximately $470,000 of non-cash amortization and depreciation charges associated with the ArtSelect and Ingram acquisitions along with corporate legal and audit costs compared to the same prior year period. On January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment," ("SFAS 123R") which requires the recognition of compensation expense for all share-based payment awards made to employees and directors. The results of the second quarter of 2006 include non-cash stock-based compensation expense of $283,000. At June 30, 2006, the Company's cash position was $7.0 million, compared to $1.2 million at December 31, 2005. This increase was due to the private placement of $15.5 million of Senior Secured Convertible Notes with institutional and accredited investors, including Morgan Stanley, in April 2006, which was partially offset by cash expended to repay existing debt and cash used in the acquisition of ArtSelect. Working capital at June 30, 2006 improved to $6.5 million, compared to a working capital deficit of $946,000 at December 31, 2005. Cash used in operations for the second quarter of 2006 was $916,000. Thomas Costanza, Vice President and Chief Financial Officer of a21, stated, "Our strategy includes establishing a strong financial foundation to support our growth and improving fundamentals. At the end of the second quarter, we had over $7 million in unrestricted cash available for working capital and additional acquisition opportunities. We see compelling organic revenue growth opportunities for both SuperStock and ArtSelect. We also maintain an ongoing review of strategic merger and acquisition prospects that can add value to our company and shareholders. Our goal is to move closer to profitability during the remainder of 2006 by improving cost efficiencies so that we can leverage these additional revenues and absorb needed corporate overhead." About a21 a21 (www.a21group.com) is a leading online digital content marketplace for the professional creative community. Through SuperStock (www.superstock.com; www.superstock.co.uk and www.purestockx.com) Ingram Publishing (www.ingrampublishing.com), and ArtSelect (www.artselect.com) a21 delivers high quality images, art framing, and exceptional customer service. a21 and its companies, with offices in Florida, Iowa, New York, and the United Kingdom, provide a valuable and viable choice to photographers, artists, photography agencies and other customers in the stock image, art and wall decor industries. (Tables Follow)
a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands except per share amounts)
(unaudited)
Three Months Ended
June 30,
2006 2005
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Revenue $ 4,511 $ 2,327
COSTS AND EXPENSES
Cost of revenue (excludes related
amortization for three months of $383 and
$174, six months of $766 and $348) 1,701 716
Selling, general and administrative 3,800 1,954
Depreciation and amortization 830 359
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TOTAL OPERATING EXPENSES 6,331 3,029
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OPERATING LOSS (1,820) (702)
------------ ------------
Interest expense (447) (332)
Warrant expense 118 ---
Other (expense) income, net (77) 49
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NET LOSS BEFORE INCOME TAX EXPENSE (2,226) (985)
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Income tax expense (44) ---
------------ ------------
NET LOSS (2,270) (985)
------------ ------------
Disproportionate deemed dividends --- ---
------------ ------------
NET LOSS ATTRIBUTED TO COMMON
STOCKHOLDERS $ (2,270) $ (985)
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NET LOSS ATTRIBUTED TO COMMON STOCKHOLDERS
PER SHARE, BASIC AND DILUTED $ (0.03) $ (0.02)
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, BASIC AND DILUTED 77,671,527 40,112,391
a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts)
(unaudited)
June 30, December 31,
2006 2005
------------------------------------------- ------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 7,018 $ 1,194
Accounts receivable, net allowance for
doubtful accounts of $66 and $57 2,831 1,840
Inventory 852 156
Prepaid expenses and other current
assets 708 277
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Total current assets 11,409 3,467
Property, plant and equipment, net 8,135 7,602
Photo collection, net 1,655 1,715
Goodwill 7,478 2,263
Contracts with photographers, net 824 929
Deferred rent receivable 553 541
Intangible assets, net 9,416 3,882
Restricted cash 750 ---
Other 110 115
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Total assets $ 40,330 $ 20,514
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable, unsecured $ --- $ 1,050
Accounts payable 1,717 850
Accrued compensation 540 154
Accrued expenses 1,008 569
Royalties payable 1,356 1,180
Warrant obligation 63 187
Deferred revenue 237 151
Other 112 272
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Total current liabilities 5,033 4,413
LONG-TERM LIABILITIES
Senior secured convertible notes
payable, net - related party 15,500 ---
Senior secured notes payable, net -
related party 2,368 ---
Loan payable from sale-leaseback of
building, less current portion 7,425 7,438
Senior secured notes payable, net -
related party --- 2,316
Other 119 126
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Total liabilities 30,345 14,293
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a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
($ in thousands, except per share amounts)
(unaudited)
June 30, December 31,
2006 2005
------------------------------------------- ------------ ------------
COMMITMENTS AND CONTINGENCIES
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MINORITY INTEREST 2,590 2,800
------------ ------------
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CONVERTIBLE PREFERRED STOCK, $.001 par
value; 3,150 shares issued and outstanding 4,830 ---
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STOCKHOLDERS' EQUITY
Preferred stock; $.001 par value;
100,000 shares authorized; no shares
and 14,480 shares issued and
outstanding at June 30, 2006 and
December 31, 2005, respectively --- ---
Common stock; $.001 par value;
100,000,000 shares authorized;
81,735,620 and 74,115,012 shares issued
at June 30, 2006 and December 31, 2005,
respectively and 78,055,845 and
70,435,237 shares outstanding at June
30, 2006 and December 31, 2005,
respectively 82 74
Treasury stock (at cost, 3,679,775
shares) --- ---
Additional paid-in capital 20,913 17,583
Deferred compensation --- (115)
Accumulated deficit (18,871) (14,185)
Accumulated comprehensive income 341 64
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Total stockholders' equity 2,465 3,421
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Total liabilities and stockholders'
equity $ 40,330 $ 20,514
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a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
($ in thousands)
(unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2006 2005
------------------------------------------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of ArtSelect (4,476) ---
Investment in property, plant and
equipment (284) (261)
SuperStock earnout (206) ---
Investment in photo collection (195) (9)
Restricted cash for lease deposit (750) ---
Other (9) ---
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NET CASH USED IN INVESTING ACTIVITIES (5,920) (270)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from senior secured convertible
notes payable - related party 15,500 ---
Payment of 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 ---
Redeemed financing warrants 56 ---
Payment of promissory note payable (33) (33)
Other 37 3
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NET CASH PROVIDED BY FINANCING
ACTIVITIES 13,560 970
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EFFECT OF EXCHANGE RATES ON CASH AND
CASH EQUIVALENTS 22 96
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NET INCREASE IN CASH 5,824 (403)
CASH AT BEGINNING OF PERIOD 1,194 717
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CASH AT END OF PERIOD $ 7,018 $ 314
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Foreign income taxes paid $ 178 $ ---
Interest paid 635 405
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING AND INVESTING ACTIVITIES:
Issuance of convertible preferred stock
as part of ArtSelect acquisition 4,830 $ ---
Issuance of senior secured note payable
as part of ArtSelect acquisition 2,368 ---
Issuance of warrants as part of
ArtSelect acquisition 375 ---
Deferred compensation --- 369
Contacta21, Inc. by Gregory 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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