Digital images company a21 files for bankruptcy

Dec 05, 2008 (The Florida Times-Union - McClatchy-Tribune Information Services via COMTEX) -- ATWO | Quote | Chart | News | PowerRating -- Jacksonville-based a21 Inc. filed Thursday for Chapter 11 bankruptcy reorganization but also announced agreements to sell its two major subsidiaries to companies that are expected to keep the businesses in operation.

The two subsidiaries are SuperStock Inc., which provides photos and art images to the design community (such as advertising agencies), and ArtSelect Inc., which sells framed art to retailers and consumers. Toronto-based Masterfile Corp., another stock image company, has agreed to buy SuperStock's assets for $1.5 million, while Hamilton, N.J.-based Metaverse Corp. agreed to buy ArtSelect's assets for $700,000. Metaverse, which does business under the name Fulcrum Gallery, also sells art to the public.

Both deals need bankruptcy court approval and are subject to higher bids submitted to the court. Because of that, a21 chief executive John Ferguson said he couldn't say for sure what the buyers plan to do with a21's two subsidiaries. But, he said, "we hope that the new owners will keep most, if not all, the positions here in Jacksonville.

"These are businesses run by very talented employees that can add value to the companies going forward." The company employs about 50 people in Jacksonville, including the SuperStock operations. It also employs nearly 50 at ArtSelect's facility in Iowa, although not all of those employees are full time, Ferguson said.

Representatives reached by phone Thursday at both Masterfile and Metaverse said there was no one available to talk about the planned purchases.

A21 is a publicly traded company that was formed as an investment company in 2000. It acquired its first operating business in 2004 when it bought SuperStock in Jacksonville. The company has lost money every year since acquiring SuperStock, with a net loss of $2.6 million in the first nine months of the year.

The company's stock has been below $1 a share since 2004 and has been listed at less than a penny per share recently in the over-the- counter market.

But Gardner Davis, a Jacksonville attorney representing a21 in its Chapter 11 case, said it was the nation's credit crunch that forced a21 into bankruptcy. The company has been looking for a buyer, but potential purchasers had difficulty getting financing.

"In a less chilling economic environment, this company would have never filed for bankruptcy," Davis said.

A21 announced an agreement in July for Vermont-based Applejack Art Partners Inc. to acquire a majority interest in the company, but that deal was called off in September.

Davis said the costs of operating a public company were hurting a business of a21's size. According to the bankruptcy filing, SuperStock operated at a net loss of about $16,000 on revenue of $5.9 million in the first nine months of the year, and ArtSelect had a loss of $324,000 on revenue of $7 million. But corporate expenses made a21's overall net loss higher.

A21 filed Thursday morning for Chapter 11 reorganization in U.S. Bankruptcy Court in Jacksonville. SuperStock and ArtSelect also filed bankruptcy petitions, but the cases are being administered together.

Davis is hopeful the case will proceed smoothly.

"Their secured creditors have been very supportive of the process," he said.

Ferguson said the court will take any potentially higher bids on the two subsidiaries during the next 45 to 50 days, and he is hopeful the sale of the businesses can be completed relatively quickly.

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