a21 2005 Results

8

April 27, 2006

a21, Inc. has reported $2,859,000 in revenues for the fourth quarter of 2005 and $9,563,000 in total revenue for the entire year. The net loss for 2005, excluding $219,000 for a "deemed dividend", was $4.8 million or $0.10 per share. It is difficult to compare 2005 revenue with 2004 because A21 did not own Superstock until the end of the first quarter 2004. The following lists revenue per quarter for the last seven quarters. .

Operating expenses for 2005 were $12,174,000. Approximately 83% of the revenue was generated by domestic sales. Another 15.5% was from the UK with the remaining 1.1%, or $143,000 was generated by some 50 distributors around the world operating in 100 countries. On December 31, 2005 a21 had 77 full time employees.

a21 showed a $795,000 jump in revenue in the Q4 compared to Q3, but part of that came from the October 12, 2005 acquisition of Ingram Publishing Ltd. (see Story 768). Ingram is a UK-based provider of subscription, CD-ROM and individual royalty-free images as well as vector graphics and fonts, vehicle online templates, and print price guides for the worldwide graphics design, printing, sign making, advertising and publishing communities. Ingram's primary assets include approximately 100,000 images that it licenses from third parties, receivables from its customers and cash. It is impossible tell how much of the additional revenue should be attributed to Ingram and thus how much, if any, organic growth there was in the Superstock brand.

According to SEC filings the "cost of revenues was $3.1 million for 2005 compared to $2.2 million for 2004. This increase was attributable to a full year of cost of sales for SuperStock for 2005 compared to partial 2004 impact resulting in approximately $500,000 of the increase. As a percentage of revenues, cost of sales was 32% and 30% for 2005 and 2004, respectively. Cost of sales as a percentage of revenues may vary in any period depending on the relative mix of stock photography distributed that is either licensed from third parties or owned by us. The increase in cost of sales as a percentage of revenues is primarily attributable to an increase in the sale of stock imagery from third parties as compared to stock imagery that we own."

Selling, general and administrative (SG&A) expenses were $7.4 million for 2005 compared to $5.9 million for 2004. The increase was primarily attributable to SG&A expenses for SuperStock for the full year 2005 and to incremental SG&A expenses resulting from the Ingram acquisition from October through December 2005.

Also reported in the SEC filing was that "the company has sustained significant recurring losses and at December 31, 2005, had an accumulated deficit of $14.2 million and a working capital deficit of $946,000 that raise substantial doubt about its ability to continue as a going concern and as such caused the Company's independent registered public accounting firm to include a going concern explanatory paragraph in their report in connection with their audit of the Company's financial statements for the year ended December 31, 2005. The Company estimates it will generate and require approximately $14 million substantially from operations in 2006. Should the Company need more or generate less cash, it will need additional funding to cover any potential shortfall. In addition, the Company will need to raise cash from equity and debt financings in order to fund any acquisitions or shortfall from cash from operations. If the Company is unable to secure any required funding, it will not be able to implement its business plan and may not be able to conduct business as a going concern. Our consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts or classification of liabilities that might be necessary should we be unable to continue as a going concern."