Exhibit 99.1
a21 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 $4.0 million, or $0.05 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 $0.12 per fully diluted share for 2006.
John Ferguson, Chief Executive Officer of a21, said, “Our strategic initiatives are continuing to help improve operating performance despite a challenging market.”
About a21
a21 (www.a21group.com) is a leading online digital content company. Through SuperStock (www.superstock.com; www.superstock.co.uk; and www.purestockx.com), and ArtSelect (www.artselect.com), a21 delivers high quality images, art framing, and exceptional customer service. a21 and its companies, with offices in Florida, Iowa, New York City, and London, provide valuable and viable choices to key business partners and customers in the stock image, art and wall decor industries.
The statements contained in this press release contain certain forward-looking statements, including statements regarding a21, Inc.'s expectations, intentions, strategies, and beliefs regarding the future. All statements contained herein are based upon information available to a21, Inc.'s management as of the date hereof and actual results may vary based upon future events, both within and without the control of a21, Inc.'s management.
Tables Follow
Financial Exhibits
| a21, Inc. and Subsidiaries | |
| CONSOLIDATED BALANCE SHEETS | |
| ($ in thousands, except per share amounts) | |
| | |
| | | | | | | |
| | | December 31, | | | December 31, | |
| | | 2007 | | | 2006 | |
| 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 | |
| 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 | |
| Total assets | | $ | 30,121 | | | $ | 34,614 | |
| | | | | | | | | |
| 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 | |
| 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 | |
| Total liabilities | | | 30,366 | | | | 30,727 | |
| a21, Inc. and Subsidiaries | |
| CONSOLIDATED BALANCE SHEETS (continued) | |
| ($ in thousands, except per share amounts) | |
| | |
| | | | | | | |
| | | December 31, | | | December 31, | |
| | | 2007 | | | 2006 | |
| COMMITMENTS AND CONTINGENCIES | | | | | | |
| | | | | | | |
| MINORITY INTEREST | | | 1,071 | | | | 2,254 | |
| | | | | | | | | |
| 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 | |
| | | | | | | | | |
| Total liabilities and stockholders' (capital deficit) equity | | $ | 30,121 | | | $ | 34,614 | |
| | | | | | | | | |
| | | | | | | | | |
| | |
| a21, Inc. and Subsidiaries |
| CONSOLIDATED STATEMENTS OF OPERATIONS |
| ($ in thousands except per share amounts) |
| |
| | | | |
| | | For the Years Ended |
| | | December 31, |
| | | 2007 | | | 2006 |
| REVENUE | | | | | |
| Licensing revenue | | $ | 11,907 | | | $ | 11,976 | |
| Product revenue | | | 11,399 | | | | 7,657 | |
| 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 | |
| TOTAL OPERATING EXPENSES | | | 26,311 | | | | 27,113 | |
| | | | | | | | | |
| OPERATING LOSS | | | (3,005 | ) | | | (7,480 | ) |
| | | | | | | | | |
| Interest expense | | | (1,783 | ) | | | (1,691 | ) |
| Warrant income expense | | | (1 | ) | | | (47 | ) |
| Other income, net | | | 211 | | | | 265 | |
| NET LOSS BEFORE INCOME TAX EXPENSE | | | (4,578 | ) | | | (8,953 | ) |
| | | | | | | | | |
| Income tax expense | | | (97 | ) | | | (148 | ) |
| NET LOSS | | | (4,675 | ) | | | (9,101 | ) |
| | | | | | | | | |
| Disproportionate deemed dividends | | | --- | | | | (157 | ) |
| Deemed dividend on convertible preferred stock | | | --- | | | | (336 | ) |
| NET LOSS ATTRIBUTED TO COMMON STOCKHOLDERS | | $ | (4,675 | ) | | $ | (9,594 | ) |
| | | | | | | | | |
| NET LOSS ATTRIBUTED TO COMMON STOCKHOLDERS PER SHARE, BASIC AND DILUTED | | $ | (0.05 | ) | | $ | (0.12 | ) |
| | | | | | | | | |
| 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 | |
| | | | | | | |
| 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 | ) |
| NET CASH USED IN OPERATING ACTIVITIES | | | (1,798 | ) | | | (2,799 | ) |
| | | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | |
| Acquisition of ArtSelect, net of cash acquired of $231 | | | --- | | | | (4,521 | ) |
| Investment in property, plant and equipment | | | (145 | ) | | | (248 | ) |
| Investment in technology | | | (765 | ) | | | (281 | ) |
| SuperStock acquisition earn-out | | | (285 | ) | | | (206 | ) |
| Investment in photo collection | | | (349 | ) | | | (333 | ) |
| Restricted cash for lease deposit | | | --- | | | | (750 | ) |
| Other | | | (8 | ) | | | (32 | ) |
| NET CASH USED IN INVESTING ACTIVITIES | | | (1,552 | ) | | | (6,371 | ) |
| | | | | | | | | |
| a21, Inc. and Subsidiaries | |
| CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) | |
| ($ in thousands) | |
| | |
| | |
| FOR THE YEARS ENDED DECEMBER 31, | | 2007 | | 2006 | |
| 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 | |
| NET CASH PROVIDED BY FINANCING ACTIVITIES | | | 26 | | | | 13,389 | |
| | | | | | | | | |
| EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS | | | (41 | ) | | | 42 | |
| NET (DECREASE) INCREASE IN CASH | | | (3,365 | ) | | | 4,261 | |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | | | 5,455 | | | | 1,194 | |
| | | | | | | | | |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | | $ | 2,090 | | | $ | 5,455 | |
| | | | | | | | | |
Ex. 99.1 Page 7
