SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): JANUARY 11, 1999
IMAGE ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 000-11071 84-0685613
(State or Other (Commission File (IRS Employer
Jurisdiction of Number) Identification No.)
Incorporation)
9333 OSO AVENUE, CHATSWORTH, CALIFORNIA 91311
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818)407-9100
NOT APPLICABLE.
(Former name or former address, if changed since last report.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On January 11, 1999, Image Entertainment, Inc.
("Image"), through Image Newco, Inc. ("Image Newco"), a wholly-owned
subsidiary of Image, completed its acquisition of certain assets and
liabilities of the digital video disc (DVD) and laserdisc (LD) retail
sales business (the "Acquired Business") of Ken Crane's Magnavox City,
Inc. ("Ken Crane's") pursuant to an Asset Purchase Agreement dated as
of August 20, 1998 between Ken Crane's and Image Newco (as amended, the
"Purchase Agreement"). The Acquired Business is engaged in
Internet/direct-to-consumer retailing of DVD and LD entertainment
software. The assets acquired by Image Newco included the
"kencranes.com" website, a mail-order business, an approximately 8,000
square foot retail store (located in leased premises in Westminster,
California), DVD and LD inventory, and fixed assets and certain other
assets used in the operation of the Acquired Business's Internet,
mail-order and retail store businesses. In addition, Image Newco
assumed certain trade accounts payable of the Acquired Business.
The acquisition purchase price paid to Ken Crane's included:
(1) $3,000,000 in cash and (2) 258,370 shares of Image common stock,
valued at $2,000,000. The value of the 258,370 shares issued to Ken
Crane's was based upon the average closing price for the 20 days
preceding the August 20, 1998 signing of the Purchase Agreement. The
purchase price may be subject to adjustment following a post-closing
audit of the Acquired Business. The purchase price was determined
through arms-length negotiations between executives of Image and
representatives of Ken Crane's. In its determination of the purchase
price, Image considered the Acquired Business's reputation and goodwill,
the revenues and results of operations of the Acquired Business in
recent periods, the business potential of the Acquired Business, the
advantages of offering Internet and direct-to-consumer retail sales and
other synergies of the two businesses. In connection with the
acquisition, Image Newco entered into (1) a five-year employment
agreement with Charles K. Crane, II ("Ken Crane, Jr.") (and paid a
signing bonus of $1,500,000 pursuant to that agreement) and (2) one-year
consulting agreements with Pamela Crane and Casey Crane (and made a
one-time payment of $250,000 to each in connection with those agreements).
Ken Crane, Jr. will serve as Vice President - General Manager of
Image Newco.
Image funded the purchase price and other related payments
with a portion of the $10,920,000 net proceeds (excluding professional
services fees) raised in the sale of 2,400,000 shares of Image common
stock that closed on January 6, 1999.
The acquisition will be accounted for as a purchase;
therefore, the Acquired Business's operating results will be included
in Image's operations from the date of the acquisition. Prior to the
acquisition, the Acquired Business was one of Image's largest
customers. During the year ended March 31, 1998, sales by Image to the
Acquired Business totaled $8.1 million.
Copies of the Purchase Agreement, the first amendment to the
Purchase Agreement and the press release issued by Image on January 12,
1999 relating to the acquisition are attached hereto as Exhibits 2.1,
2.2 and 99.1, respectively, and are incorporated herein by this reference.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired. The following
financial information is not included herewith and will be filed by
amendment not later than 60 days after the date on which this Current
Report on Form 8-K is required to be filed:
(1) Audited financial statements of Acquired Business for
the fiscal year ended July 31, 1998 and the independent
auditors' report of KPMG LLP with respect thereto.
(b) Pro forma financial information. The following pro forma
financial information is not included with this filing and will be
filed by amendment not later than 60 days after the date on which this
Current Report on Form 8-K is required to be filed:
(1) Pro forma statement of operations for Image (for the
year ended March 31, 1998) and the Acquired Business (for the
year ended June 30, 1998), as if the acquisition had
occurred on the first day of the period presented. A June
30, 1998 year end date will be utilized for the Acquired
Business pro forma financial statements to comply with Rule
11-02(c)(3) of Regulation S-X of the Securities and Exchange
Commission rules and regulations.
(2) Pro forma statement of operations for Image and the
Acquired Business for the nine months ended December 31,
1998, as if the acquisition had occurred on the first day
of the period presented.
(3) Pro forma balance sheets of Image and the Acquired
Business as of December 31, 1998, as if the acquisition had
occurred on the balance sheet date.
(4) Notes supporting the pro forma financial statements
referred to in (1), (2) and (3) above.
(c) Exhibits.
Exhibit Description
Number
2.1 Asset Purchase Agreement dated as of August 20, 1998 by
and between Image Newco, Inc. and Ken Crane's Magnavox City,
Inc. Filed as Exhibit 2.1 of Image's Registration Statement
on Form S-2 (Registration No. 333-65611) and incorporated
herein by this reference.
2.2 First Amendment to Asset Purchase Agreement dated as of
October 3, 1998 by and between Image Newco, Inc. and Ken
Crane's Magnavox City, Inc. Filed as Exhibit 2.2 of Image's
Registration Statement on Form S-2 (Registration No. 333-65611)
and incorporated herein by this reference.
99.1 Press release issued January 12, 1999.
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Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
IMAGE ENTERTAINMENT, INC.
By: /s/ Jeff M. Framer
Jeff M. Framer
Chief Financial Officer
Date: January 21, 1999
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Exhibit 99.1
Tuesday January 12, 8:01 am Eastern Time
Company Press Release
SOURCE: Image Entertainment, Inc.
Image Entertainment, Inc. Completes Acquisition of Ken Crane's DVD And
Laserdisc Operations
Acquisition Moves Image Into Internet and Direct-to-Consumer Retailing
CHATSWORTH, Calif., Jan. 12 /PRNewswire/ -- Image Entertainment, Inc.
(Nasdaq: DISK - news), a leading licensee and distributor of optical
disc programming, today announced that it has closed the previously
announced acquisition of certain assets and liabilities of the DVD and
LD entertainment software retail sales business of Ken Crane's Magnavox
City, Inc. for $5 million cash and 258,370 shares of the Company's
common stock (valued at $2 million at the time of signing the asset
purchase agreement in August 1998). The acquired business specializes
in Internet/direct-to-consumer entertainment software retailing. The
acquisition was funded with a portion of the $10,920,000 net proceeds
raised in a recent public offering of 2.4 million shares of the
Company's common stock.
Image Entertainment, Inc. has exclusive DVD license and distribution
agreements with a number of program suppliers, including Universal,
Orion and Playboy. The Company is also the largest licensee and
distributor of laserdiscs with the most extensive library of laserdisc
titles in the industry. Some of Image's exclusive laserdisc program
suppliers include Disney's Buena Vista Home Video, Twentieth Century
Fox Home Entertainment, Warner Home Video, MGM Home Entertainment, New
Line Home Video, Orion Home Video, The Criterion Collection and Playboy
Home Video.
Visit Image on-line at http://www.image-entertainment.com for corporate
and marketing information, DTS information and the latest in DVD and
laserdisc releases.
SOURCE: Image Entertainment, Inc.
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