JACKSONVILLE, Fla.--(BUSINESS WIRE)--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:
Revenues were up for the fifth consecutive quarter, with total revenue
increasing nearly 190% compared to the third quarter 2005 with the
proportion of the increase in total revenue that was attributable to
acquisitions 90% and the proportion attributable to organic growth 10%.
A second sequential reduction in quarterly cash consumed in operations
as progress is achieved in move toward profitability.
Significantly strengthened the management team with the appointments
of Philip N. Garfinkle to Executive Chairman and John Z. Ferguson to
Chief Executive Officer.
Sustained business momentum at both SuperStock, where the library of
images was expanded and ArtSelect, where new, key customer
relationships were established.
“The third quarter was a period of progress
in the transition of the Company’s business
and leadership,” said Phil Garfinkle,
Executive Chairman of a21. “This past quarter
we solidified our new leadership team, completing a transition for a21
that included raising capital to support our growth initiatives and
expanding our business through a major acquisition. Now, with both the
leadership and resources to support our growth in place, our energy will
increasingly be focused on leveraging our strong brands and industry
experience to capitalize on the growth opportunities throughout the
online digital media marketplace.”
“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 $6.5 million. Cash used in
operations for the third quarter of 2006 was down significantly on a
sequential basis from cash used in operations during the second quarter
of 2006.
Thomas Costanza, Vice President and Chief Financial Officer of a21,
stated, “With the capital raised during 2006
and the contributions being realized from our combined businesses, we
are in good position to drive further operating improvements through
revenue growth and operating leverage. In the third quarter, we reduced
cash used in operations. We aim to further strengthen our financial
position and operational results to create significant value for our
shareholders.”
About a21
a21 (www.a21group.com) is a
leading online digital content marketplace for the professional creative
community. Through SuperStock (www.superstock.com;
www.superstock.co.uk; and www.purestockx.com),
Ingram Publishing (www.ingrampublishing.com),
and ArtSelect (www.artselect.com),
a21 delivers high quality images, art framing, and exceptional customer
service. a21 and its companies, with offices in Florida, Iowa, New York,
and the United Kingdom, provide a valuable and viable choice to
photographers, artists, photography agencies and other customers in the
stock image, art and wall decor industries.
The statements contained in this press release contain certain
forward-looking statements, including statements regarding a21, Inc.'s
expectations, intentions, strategies, and beliefs regarding the future.
All statements contained herein are based upon information available to
a21, Inc.'s management as of the date hereof and actual results may vary
based upon future events, both within and without the control of a21,
Inc.'s management.
a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
($ 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
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)
