As of February 29, 2004, a21, Inc. ("a21") completed the acquisition of SuperStock, Inc.
SuperStock's primary assets include approximately 900,000 images, an approximately 73,000
square foot facility in Jacksonville, Florida, receivables from its customers and cash.
Approximately one-third of the images were wholly owned by SuperStock and the rest were
placed with the agency on consignment by various stock photographers around the world.
All of the SuperStock owned images are now the property of a21 and SuperStock is
subsidiary of a21.
Albert H. Pleus, Chairman of a21, indicated that SuperStock's annual sales were
approximately $10 million and the 8K form filed with the SEC says the aggregate purchase
price was up to $5,760,625, not all in cash.
The sellers received $2,600,625 in cash and a promissory note of $1,576,250 that pays an
interest rate of Libor (London Inter-bank Offering Rate) plus 1.9%. This note is callable
sometime after one year, but a21 says their goal is to pay off the note in a "reasonable
period of time." The sellers will also receive up to $1,500,000 in cash payable in four
consecutive annual installments if the images that were wholly owned by SuperStock meet or
exceed certain revenue projections.
In addition the 1,666,717 shares of non-voting participating preferred stock of SuperStock
held by the sellers is exchangeable into 5,000,151 shares of a21 common stock. At this writing
the a21 stock is valued at $.60 (60 cents) a share giving the stock a value of approximately
$3 million. The sellers also received warrants to purchase 160,000 shares of a21 stock at
a price of $.56 per share.
While co-founders Jim Ong and Bill Beermann will step down from their roles within the
company and will no longer be involved in direct management, their common stock ownership
position in a21 and their contingent cash payments of $1.5 million over the next four
years give them a huge incentive for the company to be successful. Pleus indicated that
a21 is very pleased that the former owners will continue to be involved in an advisory
capacity and pointed out that the compensation package was set up with that in mind.
It is expected that an 8KA (amended) form will be filed around the middle of May and at
that time we should have a clearer picture of SuperStock's income and expenses for the
latter half of 2003. a21's first quarter report will also be filed about the middle of
May and that will include the first month (March) of SuperStock income and expenses after
it became part of a21.
In addition to the purchase price, a21 repaid a $1,700,000 credit facility of SuperStock
and paid down $500,000 of a note secured by a first mortgage on the SuperStock Facility.
This reduced the principal balance on the note secured by a first mortgage to $4,047,504
at an interest rate of Libor plus 1.9% payable monthly plus principal.
There are two aspects of this acquisition that merit special note. First, the fact that
a21 wholly owns one-third of the images in their collection allows them to keep a much
higher percent of gross revenue than would be the case of agencies that are paying
royalties on all the images in their collection. It is also likely that the wholly owned
images are among the most productive images in the collection and that the revenue they
earn represents quite a bit more than one-third of the total revenue.
In addition, there is significant equity in the building that was built by SuperStock
almost a decade ago. A21 has indicated that they are not interested in owning property
and expect that they will sell the building and lease back a portion of it to meet their
needs. Such a transaction could provide a21 with significant cash, and was certainly an
important incentive in this deal.
A21 is looking at additional possibilities for acquisitions and joint ventures. They are
currently considering and exploring a variety of options that might help them add
additional content and grow revenue.
As part of the transaction the sellers and their advisors also purchased 573,589 common
shares of a21 for $149,535 - (giving them an additional equity position in the future of the
company.) The employees will also be participating in a stock option plan that is currently
being formulated.
Immediately after completing the acquisition and taking into account the related equity
and debt financing, a21 had 38,073,737 common shares issued and outstanding.