A21, Inc - Condensed Consolidated Statements of Operations for...

A21, Inc - Recent Material Event

Item 1. FINANCIAL STATEMENTS (unaudited)		2
Condensed Consolidated Balance Sheets at September 30, 2007 and December 31, 2006		2
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2007 and 2006		4
Condensed Consolidated Statement of Changes in Stockholders’ Equity (Capital Deficit) for the nine months ended September 30, 2007		5
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2007 and 2006		6
Notes to Condensed Consolidated Financial Statements		8
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)		26
ITEM 3. CONTROLS AND PROCEDURES		30

PART II – OTHER INFORMATION		31
ITEM 1. LEGAL PROCEEDINGS		31
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		31
ITEM 3. DEFAULTS UPON SENIOR SECURITIES		31
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		31
ITEM 5. OTHER INFORMATION		31
ITEM 6. EXHIBITS		32

Page 1

a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts)
(unaudited)

	September 30,		December 31,
	2007		2006
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	2,810	$	5,455
Accounts receivable, net allowance for doubtful accounts of $243 and $108, at September 30, 2007 and December 31, 2006, respectively		2,652		2,773
Inventory
Prepaid expenses and other current assets
Total current assets		6,919		9,513

Property, plant and equipment, net		6,883		7,300
Goodwill		8,778		8,648
Intangible assets, net		4,858		5,232
Restricted cash
Other		2,456		3,171
Total assets	$	30,644	$	34,614

LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	2,271	$	3,559
Royalties payable		1,308		1,288
Deferred revenue
Restructure liability				---
Other
Total current liabilities		4,344		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		7,364		7,403
Other
Total liabilities	$	29,831	$	30,727

Page 2

a21, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
($ in thousands, except per share amounts)
(unaudited)

	September 30,			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; 90,399,711 and 87,191,575 shares issued and 86,719,936 and 83,511,800 shares outstanding at September 30, 2007 and December 31, 2006, respectively
Treasury stock (at cost, 3,679,775 shares)		---			---
Additional paid-in capital		26,055			24,341
Accumulated deficit		(26,871	)		(23,286	)
Accumulated other comprehensive income
Total stockholders' equity (capital deficit)		(258	)		1,633

Total liabilities and stockholders' equity (capital deficit)	$	30,644		$	34,614


The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Page 3

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,
	2007		2006		2007		2006
REVENUE
Licensing revenue	$	2,765	$	2,986	$	8,971	$	8,943
Product revenue		2,622		2,918		8,236		4,407
TOTAL REVENUE		5,387		5,904		17,207