ATWO - a21 Results Improve Significantly; Revenues Increase 109% Q1 2007 vs. Q1 2006
Bottom Line Improves $1.1 Million From Year Ago Seventh Consecutive Quarter of Revenue Growth
May 15, 2007 10:45:00 AM
Copyright Business Wire 2007
JACKSONVILLE, Fla.--(BUSINESS WIRE)--
a21, Inc. ("a21") (OTCBB:ATWO), a leading online digital content marketplace, today reported its financial results for the first quarter ending March 31, 2007.
Recent highlights include:
-- Net loss improved by $1.1 million for the quarter ended March
31, 2007 compared to the same prior year period and improved
by nearly $3.0 million on a sequential basis compared to the
fourth quarter of 2006.
-- Positive EBITDA achieved.
-- Revenues were up for the seventh consecutive quarter, with
total first quarter revenue increasing 109% compared to the
same prior year quarter, primarily as a result of the
acquisition of ArtSelect.
-- New business development initiatives launched, led by Pixsy
and MyNuMo.
"We are off to a solid start in 2007. Our investments in people, technology, and new markets are yielding improvements to our performance," said John Ferguson, Chief Executive Officer of a21. "With this momentum, we can now more aggressively pursue our growth strategy to capitalize on the many opportunities we see in our marketplace. SuperStock is expanding and strengthening its market presence by teaming with other brands, such as Pixsy and MyNuMo, to increase customer traffic and develop new revenue streams. At ArtSelect, we are launching new direct marketing channels and introducing new collateral products to meet the growing demand for framed art and related offerings online. We now have the team and resources in place to explore and execute new opportunities that we believe will drive future success and growth. We also continue an ongoing review of strategic merger and acquisition prospects that we believe can add value to our company and stockholders."
Tom Costanza, Chief Financial Officer of a21, added, "With the progress we have achieved so far integrating operations and streamlining processes, we were able to generate positive EBITDA in the first quarter. We will continue to pursue opportunities to realize improving operational efficiencies and leverage."
Revenue for the first quarter of 2007 was $6.1 million, up 109% from the same prior year period. Revenues rose as a result of the Company's ArtSelect acquisition, which was completed during May 2006, with the balance attributable to 8% organic growth. Cost of sales for the first quarter of 2007 were $2.3 million, compared to $903,000 for the same prior year period. The increase is due primarily to the Company's ArtSelect acquisition. Selling, general, and administrative expenses increased $858,000 reflecting the net effect of ArtSelect's additional expenses, offset by a reduction in overhead.
Operating performance for the first quarter of 2007 improved significantly to a loss of $505,000, compared to an operating loss of $1.4 million for the same prior year period. The net loss for the first quarter of 2007 was reduced by over $1.1 million to $962,000, or $0.01 per fully diluted share, compared to a net loss of $2.0 million, or $0.03 per fully diluted share, for the same prior year period.
At March 31, 2007, the Company's cash position was $4.7 million and working capital $4.2 million with no short-term principal debt obligations.
About a21
a21 (www.a21group.com) is a leading online digital content company. Through SuperStock (www.superstock.com; www.superstock.co.uk; and www.purestockx.com), and ArtSelect (www.artselect.com), a21 delivers high quality images, art framing, and exceptional customer service. a21 and its companies, with offices in Florida, Iowa, New York City, and London, we provide valuable and viable choices to key business partners and customers in the stock image, art and wall decor industries.
The statements contained in this press release contain certain forward-looking statements, including statements regarding a21, Inc.'s expectations, intentions, strategies, and beliefs regarding the future. All statements contained herein are based upon information available to a21, Inc.'s management as of the date hereof and actual results may vary based upon future events, both within and without the control of a21, Inc.'s management.
Financial Exhibits
a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands except per share amounts)
(unaudited)
Three Months Ended
March 31,
2007 2006
----------- -----------
REVENUE
Licensing revenue $3,168 $2,935
Product revenue 2,956 ---
----------- -----------
TOTAL REVENUE 6,124 2,935
COSTS AND EXPENSES
Cost of licensing revenue (excludes related
amortization of $279 and $362 for three
months ended March 31, 2007 and 2006,
respectively) 950 903
Cost of product revenue (excludes related
amortization of $44 for three months ended
March 31, 2007) 1,397 ---
Selling, general and administrative 3,663 2,805
Depreciation and amortization 619 603
----------- -----------
TOTAL OPERATING EXPENSES 6,629 4,311
----------- -----------
OPERATING LOSS (505) (1,376)
----------- -----------
Interest expense (442) (353)
Warrant expense (1) (265)
Other income(expense), net 13 (14)
----------- -----------
NET LOSS BEFORE INCOME TAX EXPENSE (935) (2,008)
----------- -----------
Income tax expense (27) (27)
----------- -----------
----------- -----------
NET LOSS (962) (2,035)
----------- -----------
Disproportionate deemed dividends --- (157)
----------- -----------
NET LOSS ATTRIBUTED TO COMMON
STOCKHOLDERS $(962) $(2,192)
----------- -----------
NET LOSS ATTRIBUTED TO COMMON STOCKHOLDERS PER
SHARE, BASIC AND DILUTED $(0.01) $(0.03)
----------- -----------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, BASIC AND DILUTED 84,084,622 71,847,091
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts)
(unaudited)
March 31, December 31,
2007 2006
----------------------------------------------- --------- ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $4,740 $5,455
Accounts receivable, net allowance for
doubtful accounts of $144 and $108, at
March 31, 2007 and December 31, 2006,
respectively 2,626 2,773
Inventory 765 844
Prepaid expenses and other current assets 660 441
--------- ------------
Total current assets 8,791 9,513
Property, plant and equipment, net 7,149 7,300
Photo collection, net 1,577 1,520
Goodwill 8,732 8,648
Contracts with photographers, net 666 718
Deferred rent receivable 521 549
Intangible assets, net 5,001 5,232
Restricted cash 750 750
Other 94 384
--------- ------------
Total assets $33,281 $34,614
========= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $1,974 $2,770
Accrued compensation 254 359
Accrued expenses 503 430
Royalties payable 1,386 1,288
Warrant obligation --- 18
Deferred revenue 373 242
Other 93 106
--------- ------------
Total current liabilities 4,583 5,213
LONG-TERM LIABILITIES
Senior secured convertible notes payable,
net - related party 15,500 15,500
Secured notes payable, net - related party
(ArtSelect Sellers) 2,537 2,499
Loan payable from sale-leaseback of
building, less current portion 7,391 7,403
Other 107 112
--------- ------------
Total liabilities 30,118 30,727
--------- ------------
a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
($ in thousands, except per share amounts)
(unaudited)
March 31, December 31,
2007 2006
----------------------------------------------- --------- ------------
COMMITMENTS AND CONTINGENCIES
--------- ------------
MINORITY INTEREST 1,071 2,254
--------- ------------
STOCKHOLDERS' EQUITY
Common stock; $.001 par value; 200,000,000
shares authorized; 89,565,821 and
87,191,575 shares issued and 85,886,046
and 83,511,800 shares outstanding at March
31, 2007 and December 31, 2006,
respectively 89 87
Treasury stock (at cost, 3,679,775 shares) --- ---
Additional paid-in capital 25,739 24,341
Accumulated deficit (24,248) (23,286)
Accumulated other comprehensive income 512 491
--------- ------------
Total stockholders' equity 2,092 1,633
--------- ------------
Total liabilities and stockholders' equity $33,281 $34,614
========= ============
a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2007 2006
----------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(962) $(2,035)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 619 603
Amortization of finance costs 27 30
Loss on disposal of equipment 38 65
Change in fair value of warrant obligation (18) 265
Share-based compensation 170 670
Changes in assets and liabilities:
Accounts receivable 147 (245)
Prepaid expenses and other current assets 21 (52)
Inventory 79 ---
Accounts payable and accrued expenses (807) 121
Deferred revenue 131 84
Deferred rent receivable 28 ---
Foreign income tax payable 15 (178)
Other 30 9
------- --------
NET CASH USED IN OPERATING ACTIVITIES (482) (663)
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property, plant and equipment (4) (96)
Investment in software (68) (36)
SuperStock acquisition earn-out --- (67)
Investment in photo collection (208) (76)
Other (3) (40)
------- --------
NET CASH USED IN INVESTING ACTIVITIES (283) (315)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from the exercise of stock options 29 31
Net proceeds from the exercise of stock warrants 19 1,200
Payment of SuperStock seller promissory note
payable (33) ---
Other 31 (7)
------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 46 1,224
------- --------
EFFECT OF EXCHANGE RATES ON CASH AND CASH
EQUIVALENTS 4 2
------- --------
NET (DECREASE) INCREASE IN CASH (715) 248
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,455 1,194
------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $4,740 $1,442
------- --------
Source: a21, Inc.
----------------------------------------------
Gregory FCA Communications
Joseph Hassett
610-642-8253
JoeH@gregoryfca.com
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