Image Entertainment 10-K 2011
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Amendment No. 1)
Commission File Number000-11071
IMAGE ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
20525 Nordhoff Street, Suite 200, Chatsworth, California 91311
(Address of principal executive offices, including zip code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.0001
Name of each exchange on which registered: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES £ NO R
Indicate by check mark if the registrant is not required to file report pursuant to Section 13 or Section 15(d) of the Act. YES £ NO R
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES R NO £
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES £ NO £
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. £
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES £ NO R
The aggregate market value of the common stock held by non-affiliates of the registrant, based upon the closing price of $0.15 for shares of the registrant’s common stock on September 30, 2010, the last business day of the registrant’s most recently completed second fiscal quarter as reported by the over-the-counter market on the OTCQB marketplace, was approximately $4,130,743. In calculating such aggregate market value, shares of common stock owned of record or beneficially by officers, directors and persons known to the registrant to own more than five percent of the registrant’s voting securities (other than such persons of whom the registrant became aware only through the filing of a Schedule 13G filed with the Securities and Exchange Commission) were excluded because such persons may be deemed to be affiliates.
The number of shares outstanding of the registrant’s common stock as of July 12, 2011: 255,602,133
DOCUMENTS INCORPORATED BY REFERENCE
IMAGE ENTERTAINMENT, INC.
Form 10-K/A Annual Report (Amendment No. 1)
For The Fiscal Year Ended March 31, 2011
Image Entertainment, Inc. (or Image, the Company, we, us, or our) is filing this Amendment No. 1 (or Amendment) on Form 10-K/A to amend its Annual Report on Form 10-K for the fiscal year ended March 31, 2011, as filed with the Securities and Exchange Commission (or SEC) on June 29, 2011 (or the 2011 Form 10-K), for purposes of including the information required by Part III that was to be incorporated by reference to its definitive proxy statement relating to its 2011 Annual Meeting of Stockholders.
Form 10-K General Instruction G(3) requires the information contained herein be included in the Form 10-K filing or incorporated by reference from a definitive proxy statement if such statement is filed no later than 120 days after our last fiscal year end. We do not expect to file a definitive proxy statement containing the above referenced items within such 120-day period and therefore the Part III information is filed hereby as an amendment to our 2011 Form 10-K.
Except as otherwise expressly stated herein, this Amendment does not reflect events occurring after the date of the 2011 Form 10-K, nor does it modify or update the disclosure contained in the 2011 Form 10-K in any way other than as required to reflect the amendments discussed above and reflected below. Accordingly, this Amendment should be read in conjunction with the 2011 Form 10-K and Image’s other filings made with the SEC on or subsequent to June 29, 2011.
ITEM10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
As of July 29, 2011, our board of directors (or Board) was comprised of five members, divided into three classes as set forth in the table below. Each director elected will hold office for a three-year term, until a successor is duly elected and qualified or until his earlier death, resignation or removal from office. The directors were elected into the classes below at the 2010 Annual Meeting of Stockholders, with the Class I directors elected for a three-year term, the Class II director for an initial one-year term, and the Class III directors for an initial two-year term. The Class II director will be up for election at the 2011 Annual Meeting of Stockholders (or 2011 Annual Meeting), the Class III directors will be up for election at the 2012 Annual Meeting and the Class I directors will be up for election at the 2013 Annual Meeting.
All of the directors’ nominations were agreed to by the JH Investors (as defined below). In addition to the matters affecting our directors and their election to the Board described in Certain Relationships and Related Transactions and Director Independence below, on April 14, 2010, the JH Investors agreed to cause the election of Mr. Hyde as a director of the Company by September 30, 2010 and to cause him to stay on the Board for so long as he is an employee or consultant of the Company.
The following table sets forth the name, age and position of each of our executive officers as of July 29, 2011.
* Executive Officers were appointed effective January 8, 2010 in connection with the transactions with the JH Investors described in Certain Relationships and Related Transactions and Director Independence below.
Biographical information for Messrs. Green and Hyde is set forth above under "Board Composition."
From 2004 to 2009, Mr. Avagliano was President of Britannia Holdings providing strategic and financial management services to the film, music, video and apparel industries. Clients of Britannia Holdings included Live Nation Entertainment, Ticketmaster Entertainment, Frontline Management, Palm Pictures (an integrated film and music company founded by Chris Blackwell, the former Chairman of Island Records), CAK Entertainment (a joint venture music publishing company funded by GTCR, a private equity firm based in Chicago), Menichetti, Ltd. (high-end apparel manufacturer/distributor), Pacific Connections, Inc. (mass market apparel and accessory distributor) and DIC Entertainment. From 1999 to 2004, Mr. Avagliano worked in various positions for Time Warner Inc. From 2001 to 2004, Mr. Avagliano worked for Warner Music Group as SVP of Financial Operations, where he was responsible for financial oversight of the global manufacturing, distribution and print businesses, worldwide financial planning and analysis, U.S. advertising procurement, real estate management, office services support and U.S. purchasing activities. From 1999 to 2001, Mr. Avagliano was CFO of Warner Home Entertainment, the leading global manufacturer and distributor of DVD and VHS products, where he was responsible for managing the overall finance function, leading negotiations in acquiring and distributing independent theatrical and TV content and managing the Video-On-Demand activities as related to the Warner Bros. film release schedule. Previously Mr. Avagliano was employed at companies such as Revlon, Playtex Products, Avon, Sanofi Beaute and PolyGram Distribution.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires Image’s directors, executive officers and the beneficial holders of more than 10% of a registered class of Image’s equity securities to file initial reports of ownership and changes in ownership of common stock and other equity securities of Image with the Securities and Exchange Commission (or SEC). Based solely on our records and written representations from certain of these persons, we believe that during fiscal year 2011 all applicable Section 16(a) filing requirements were met, with certain exceptions previously disclosed in our definitive proxy statement for our 2010 Annual Meeting of Stockholders, filed with the SEC on October 12, 2010.
Code of Ethics and Governance Guidelines
We have a Code of Ethics Policy that applies to all of our employees, including our principal executive officer and principal financial and principal accounting officer, and a Code of Conduct that applies to our directors, officers and employees. We have posted the Code of Ethics Policy and the Code of Conduct under the menu “Investors – Corporate Governance” on our website at www.image-entertainment.com. If we waive any material portion of our Code of Ethics Policy that applies to our principal executive officer, principal financial officer or principal accounting officer or amend the Code of Ethics Policy (other than technical, administrative or other non-substantive amendments), we will disclose that fact on our website at www.image-entertainment.com within four business days.
Committees of the Board
From the beginning of fiscal year 2011 until August 5, 2010 when Ms. George and Messrs. Heiberg and Hyde were elected to the Board and Michael John (who joined the Board in January 2010 as a part of the JH Partners transaction) resigned from the Board, our Board did not have separate Audit, Compensation and Nominations and Governance Committees, and the full Board acted in the capacity of all three committees.
For the remainder of fiscal year 2011 through the date of this Amendment, our Audit Committee was comprised of Ms. George, and Messrs. Collins, Green, Heinberg and Hyde (Chairman), our Compensation Committee was comprised of Ms. George (Chairman) and Mr. Heinberg and our Nominations and Governance Committee was comprised of Messrs. Collins (Chairman) and Green.
Because we are not listed on NASDAQ, the New York Stock Exchange or any other applicable stock exchange, we are not required to have an Audit Committee consisting solely of independent directors, and so our full Board acts as the Audit Committee. Similarly, because we are not currently subject to applicable stock exchange independence requirements, we have composed our Nominations and Governance Committee based on considerations other than independence, and the members of this committee have not been deemed independent. Our Compensation Committee consists solely of directors who have been deemed independent. Our Board determined that each of Ms. George and Mr. Hyde qualified as an "audit committee financial expert" as that term is defined in Item 407(d)(5) of Regulation S-K under the Securities Exchange Act of 1934, as amended (or the Exchange Act). As discussed below under Certain Relationships and Related Transactions and Director Independence, although we are not currently listed on Nasdaq, we consider Nasdaq independence standards with regard to our Board members and have considered Ms. George and Mr. Heinberg independent.
Summary Compensation Table for Fiscal Year 2011
The following table sets forth compensation paid to those persons who served as our principal executive officer and our other most highly compensated executive officers (collectively, the Named Executive Officers) for fiscal year 2011, which ended on March 31, 2011:
Fiscal year 2010 includes:
We have entered into employment agreements with each of Messrs. Green and Avagliano and have entered into a consulting agreement with Mr. Hyde and his wholly owned consulting business, PSO, effective as of April 14, 2010. Certain terms of these agreements, as amended as of July 12, 2010, are summarized below.
Term. Each of the agreements is for a term of three years beginning on April 14, 2010, and, subject to advance-notice termination provisions, renews automatically for successive one-year terms.
Base Compensation. The agreements provide for minimum annual base salaries or annual consulting fees of $300,000 to each executive officer, to be reviewed annually by our Board.
Cash Bonus Opportunity. Each executive officer is eligible for an annual cash bonus opportunity targeted at 50% of base compensation, subject to the Company achieving specified earnings before interest, taxes, depreciation and amortization (or EBITDA) goals, with partial bonus eligibility if at least 85% of the applicable goal is achieved. For the 2011 fiscal year, targeted EBITDA was $10.3 million, with certain adjustments permitted for material acquisitions of a company or business. In the case of Mr. Avagliano, this bonus is guaranteed to be at least $50,000 for the year ending March 31, 2011. The minimum EBITDA goal was not met for the 2011 fiscal year and, except for Mr. Avagliano, no executive officer received a cash bonus for such year.
Reimbursements. Messrs. Green and Avagliano will be reimbursed for expenses related to commuting from New York to Los Angeles, including the cost of business class air travel exceeding three hours, temporary housing and auto use. Mr. Avagliano will be reimbursed for reasonable expenses, not to exceed $120,000 related to relocation of his home and family from New York to Los Angeles, as well as a tax gross-up for income taxes arising from such reimbursement, not to exceed $75,000.
Severance Benefits. Each executive officer will be entitled to specified severance benefits, subject to execution of a customary general release of claims, if his employment or consulting engagement is terminated without "cause" or he terminates his employment or consulting engagement for "good reason" including: (i) a payment equal to 12 months of salary or consulting fees, as applicable, and a pro rata bonus; (ii) in the case of Messrs. Green and Avagliano, continuation of healthcare benefits for 12 months; and (iii) reimbursement of incurred expenses, and in the case of Mr. Avagliano, reimbursement for relocation expenses actually incurred by Mr. Avagliano on or six months prior to termination of employment (up to an aggregate cap of $120,000 and a tax gross-up cap on any such amounts of $75,000).
For purposes of the agreements, “cause” generally means an executive officer’s (i) conviction of a felony or of any crime involving moral turpitude, dishonesty, fraud, embezzlement, theft or misrepresentation; (ii) gross neglect or gross misconduct in connection with the performance of the executive officer’s duties (other than due to the executive officer’s physical or mental illness); (iii) material breach of the employment or consulting agreement, the Company’s proprietary information agreement or certain other Company material policies, rules and regulations; or (iv) willful engagement in any other conduct that involves a material breach of a fiduciary obligation or that would reasonably be expected to have a material and adverse economic effect upon the Company and its subsidiaries, subject to certain notice and opportunity to cure provisions set forth in the agreements.
For purposes of the agreements, “good reason” generally means, without the executive officer’s consent, (i) a material diminution in the executive officer’s salary or consulting fees, as applicable; (ii) a material diminution in the executive officer’s authority, duties or responsibilities, including a material adverse change in the executive officer’s reporting relationships; (iii) a material breach of the employment or consulting agreement by the Company; (iv) the failure of the Company to issue certain equity awards to the executive officer by November 30, 2010; or (v) except for Mr. Green, requiring the executive officer to change the principal location of his employment or engagement outside the Los Angeles, California area, subject to certain notice and opportunity to cure provisions set forth in the agreements. Mr. Green’s employment agreement also provides that “good reason” means (x) the failure of the Company or its stockholders to reelect or to reappoint him as Chairman of the Board, unless cause for removal exists or (y) the appointment of a co-chairman of the Board. Mr. Hyde's consulting agreement also provides that "good reason" means the termination of employment of Mr. Green.
Each executive officer will receive a tax gross-up to the extent that payments under the employment or consulting agreements are “parachute payments” under Section 280G of the Internal Revenue Code of 1986, as amended (or the Code) and subject to an excise tax under Section 4999 of the Code, subject to specified limitations, including an aggregate cap of $1 million on total gross-up payments to the executive officers under their employment and consulting agreements.
The agreements also contain non-competition and non-solicitation covenants. Timing of severance payments under the agreements may be adjusted in certain circumstances to the extent necessary for compliance with or exemption from Section 409A of the Code.
Equity Awards. The employment and consulting agreements contemplate the issuance of stock options and restricted stock awards to the executive officers covering an aggregate of 34,621,411 shares of common stock (14,698,071 shares for awards to Mr. Green, 7,097,923 shares for awards to Mr. Avagliano and 12,825,417 shares for awards to Mr. Hyde). These grants were awarded to the executive officers on November 19, 2010 under our 2010 Equity Incentive Award Plan (or the 2010 Plan) and are included in the “Outstanding Equity Awards at Fiscal Year End 2011” table below. As described in that table, a portion of the awards vest over a four-year vesting period and a portion vest based on the Company’s achievement of specific stock prices over certain time periods, subject to a continued employment or service relationship and subject to certain restrictions on transfer.
Treatment of Stock Options and Restricted Stock Awards upon a Change in Control:
Unless otherwise provided in an award agreement or other written agreement between an executive officer and us, if a change in control occurs and outstanding awards held by the executive officers under the 2010 Plan are not continued, converted, assumed or replaced by Image or a successor company (or a parent or subsidiary thereof) in the change in control, the awards will become fully exercisable and/or payable, as applicable, and all forfeiture, repurchase and other restrictions on the awards will lapse. Upon, or in anticipation of, a change in control, the administrator of the 2010 Plan may cause outstanding awards to terminate at a specific time in the future, including but not limited to the date of such change in control, and each executive officer will have the right to exercise such awards during a period of time determined by the administrator. In addition, certain of the executive officer’s outstanding stock options and restricted stock awards will become fully vested in the event of a change in control in which the stock's equity value equals or exceeds certain threshold prices. A description of these vesting terms is provided in the footnotes to the “Outstanding Equity Awards at Fiscal Year End 2011” table below.
“Change in control” generally means under the 2010 Plan the occurrence of any of the following events:
Outstanding Equity Awards at Fiscal Year End 2011
The table below sets forth information regarding the outstanding option awards and unvested restricted stock awards held by the Named Executive Officers as of March 31, 2011. All equity awards reported in the table below were granted on November 19, 2010 under the 2010 Plan.
For fiscal year 2011, our non-employee and non-affiliate directors, Mary George and Marshall Heinberg, received an annual retainer of $30,000, prorated for the length of service provided during the fiscal year, to compensate them for attending up to eight Board meetings and up to four committee meetings. For fiscal year 2011, our non-employee and non-affiliate directors were also eligible to receive an additional $2,000 per additional Board or committee meeting attended where attendance was expected. In addition, our non-employee and non-affiliate directors were reimbursed for reasonable travel expenses to attend Board or committee meetings. Employee or affiliate directors receive no compensation for their service as directors.
For fiscal year 2011, our non-employee and non-affiliate directors were each granted a restricted stock award for 100,000 shares of our common stock. The restricted stock awards were granted under our 2008 Stock Awards and Incentive Plan on September 17, 2010 and vest as to 1/12th after each three-month period of continuous director service following August 5, 2010.
Director Compensation Table for Fiscal Year 2011
The following table sets forth information regarding the compensation earned by our non-employee and non-affiliate directors in fiscal year 2011:
The following table sets forth certain information as of July 12, 2011, with respect to the beneficial ownership of shares of our common stock owned by (i) each person, who, to our knowledge based on Schedules 13D filed with the SEC, is the beneficial owner of more than 5% of our outstanding common stock, (ii) each person who is currently a director, (iii) each Named Executive Officer, and (iv) all of our current directors and executive officers as a group.
*Less than 1%
Notes to Beneficial Ownership Table:
Change in Control
Please refer to the description of the Stockholders’ Agreement in Certain Relationships and Related Transactions, and Director Independence below, which is incorporated herein by reference.
Equity Compensation Plan Information
The following table sets forth certain information as of March 31, 2011 with respect to our equity compensation plans (including individual compensation arrangements) under which our equity securities are authorized for issuance, aggregated by (i) all compensation plans previously approved by our security holders, and (ii) all compensation plans not previously approved by our security holders:
Notes to Equity Compensation Plan Information Table:
Our policy on related-person transactions is included in our revised Code of Conduct, which has been reviewed and approved by the Board effective as of June 19, 2007. Our policy states that each executive officer, director or nominee for director will disclose to the Audit Committee of the Board the following information regarding a related-person transaction for review, approval or ratification by the Audit Committee: (i) the name of the related-person (as defined by Item 404(a) of Regulation S-K under the Exchange Act), and if he or she is an immediate family member of an executive officer, director or nominee for director, the nature of such relationship; (ii) the related-person’s interest in the transaction; (iii) the approximate dollar value of the amount involved in the transaction; (iv) the approximate dollar value of the amount of the related-person’s interest in the transaction; and (v) in the case of indebtedness, the largest total amount of principal outstanding since the beginning of our last fiscal year, the amount of principal outstanding as of the latest practicable date, the amount of principal paid since the beginning of our last fiscal year, and the rate or amount of interest payable on the indebtedness.
The Audit Committee’s decision whether or not to approve or ratify the related-person transaction is made in light of its determination as to whether consummation of the transaction is believed by the Audit Committee to not be or have been contrary to our best interests. The Audit Committee may take into account the effect of a director’s related-person transaction on such person’s status as an independent member of our Board and eligibility to serve on Board committees under SEC and stock exchange rules, as applicable.
The January 8, 2010 investment and recapitalization transaction with JH Evergreen, JHIP III and JHIP GP III (or JH Investors) resulted in a variety of related-person transactions with the JH Investors (and certain affiliates), which became the holders of approximately 88.6% of our post-transaction outstanding voting securities. The transaction included, among other things, the purchase from Image by JH Investors of 22,000 shares of our series of Series B Preferred Stock and 196,702 shares of our series of Series C Preferred Stock (together with the Series B Preferred Stock, the Preferred Shares (and the Series C Preferred Stock since converted into 196,702,000 shares of common stock)), for an aggregate purchase price of $22.0 million. These transactions included payment to the JH Partners of a $1.0 million transaction fee, akin to an investment banking fee, and reimbursement of $650,000 of the JH Investors’ expenses and payment of other transaction-related expenses. In fiscal 2011, the Company reimbursed additional JH Investors’ legal expenses of $538,000 related to the January 2010 transaction. Pursuant to the stock purchase agreement regarding the Preferred Shares (or SPA), we agreed to pay the JH Partners or its designee a management fee of $300,000 on each of December 31, 2010 and December 31, 2011.
Pursuant to the SPA, the JH Investors initially provided a $5.0 million irrevocable standby letter of credit as credit support for our revolving credit facility, which revolving credit facility was terminated on June 23, 2011 and replaced with a new revolving credit facility with PNC Bank, N.A. (under which certain affiliates of JH Partners provide a $3.0 million standby letter of credit as credit support). The obligations under the new revolving credit facility are secured by a lien on substantially all of the assets of Image and are guaranteed by one or more affiliates of JH Partners, with Messrs. Green, Hyde and Avagliano providing any applicable contribution to such guaranty in the portion of their ownership of the Series B Preferred Stock. The Company and JH Partners are in discussions regarding compensation JH Partners may receive for providing their guaranty and credit support.
On January 8, 2010, in connection with the Closing, we entered into a registration rights agreement (or RRA) with the JH Investors. Pursuant to the RRA, we agreed to register under the Securities Act of 1933 the shares of Common Stock issuable upon conversion of the Series C Preferred Stock under certain circumstances. In connection with the execution of the SPA and RRA, a previous rights agreement providing for preferred stock purchase rights for our stockholders was terminated pursuant to its terms. As a result of the termination of the previous rights agreement, the holders of the preferred stock purchase rights issued pursuant to the rights agreement were no longer entitled to the rights set forth in that rights agreement.
On April 14, 2010, Theodore S. Green, John Avagliano, Ray Gagnon and PSO, John Hyde's wholly-owned consulting business, purchased shares of the Company’s Series B Preferred Stock and Series C Preferred Stock from the JH Investors. Mr. Green purchased 1,000 shares of Series B Preferred Stock and 8,941 shares of Series C Preferred Stock for an aggregate purchase price of $1,029,589.04, Mr. Avagliano purchased 400 shares of Series B Preferred Stock and 3,576.4 shares of Series C Preferred Stock for an aggregate purchase price of $411,835.62, Mr. Gagnon purchased 50 shares of Series B Preferred Stock and 447.05 shares of Series C Preferred Stock for an aggregate purchase price of $51,479.452 and PSO purchased 850 shares of Series B Preferred Stock and 7,599.85 shares of Series C Preferred Stock for an aggregate purchase price of $875,150.69.
On April 14, 2010, in connection with this transaction, the JH Investors entered into a Stockholders’ Agreement (or the Stockholders’ Agreement) with Image, Messrs. Green, Avagliano and Gagnon, and PSO. Messrs. Green, Avagliano and Gagnon, and PSO are referred to herein as the Management Stockholders, and the Management Stockholders and the JH Investors are referred to herein as the Stockholders. In addition to imposing customary transfer restrictions on Company capital stock held by the Stockholders, the Stockholders’ Agreement includes agreements among the Stockholders regarding tag-along rights, whereby Stockholders have the right to participate in sales of the Company’s capital stock by other Stockholders, subject to specified exceptions.
The Stockholders’ Agreement also includes customary drag-along rights, which provide that if the holders of at least a majority of the Company’s common stock (on a fully diluted basis) elect to consummate a transaction or series of transactions resulting in the sale of at least a majority of the Company’s common stock (on a fully diluted basis) or assets, each other Stockholder shall take all action necessary to consummate such transaction or transactions. Furthermore, the JH Investors agreed to vote in favor of the Company’s 2010 Equity Incentive Award Plan pursuant to which the Management Stockholders received stock options and restricted stock awards at the 2010 Meeting of Stockholders.
In addition, the Stockholders’ Agreement gives the Company a call option on capital stock and vested options held by each of the Management Stockholders, exercisable within 90 days of the termination of employment or consulting engagement of the Management Stockholder. The exercise price of the call option is based on the fair market value of the underlying shares, except in the case of termination for “cause,” in which case shares underlying equity compensation awards may be purchased at the original acquisition price, if lower. The call option is assignable by the Company to the other Stockholders. We determined that the fair value of the call option is de minimis.
John Hyde, our Vice Chairman, owns PSO, who is one of Image’s content providers. PSO receives royalty payments based upon a contractual percentage of net revenues derived from the distribution of the entertainment programming licensed. The royalties paid in consideration for the content distribution, in the opinion of management, is fair and reasonable, and is on terms no less favorable than terms generally available to other third party content suppliers under the same or similar circumstances. The amount of royalties earned was $126,846 for fiscal 2011 and $25,965 for fiscal 2010.
On April 1, 2009, we entered into a consulting agreement (or Consulting Agreement) with EIM Capital Management, Inc. (or EIM), an entity wholly owned and managed by Martin W. Greenwald, the then-Chairman of our Board of Directors. Under the Consulting Agreement, EIM received a monthly fee of $35,000 in return for certain strategic consulting services provided to Image by Mr. Greenwald on a non-exclusive basis. In addition to the payment of a monthly fee, we agreed to reimburse Mr. Greenwald for out-of-pocket expenses reasonably incurred in connection with Mr. Greenwald’s services to Image. Mr. Greenwald was also provided the use of an Image company car from April 1, 2009 until May 31, 2009. Mr. Greenwald received $140,000 as the consulting fee from April 1, 2009 through the end of the Consulting Agreement term on July 31, 2009.
Although we are not currently listed on Nasdaq, we consider Nasdaq independence standards with regard to our Board members. Our Board reviewed the Nasdaq independence standards with regard to our directors in fiscal year 2011, including whether specified transactions or relationships existed during the past three years, between our directors, or certain family members or affiliates of our directors, and Image and our subsidiary, certain other affiliates, or our independent registered public accounting firm. As a result of the review, our Board determined for fiscal year 2011 that Mary George and Marshall Heinberg were deemed “independent” as that term is used in Nasdaq Marketplace Rule 5605(a)(2). No other current directors were considered independent. Mr. Green is our Chief Executive Officer, Mr. Hyde is our Vice Chairman and Mr. Collins is employed by our controlling shareholder. We do not know of any family relationships among or between any of our directors, executive officers or key employees. With regard to the independence of our directors regarding committee independence, see Directors, Executive Officers and Corporate Governance – Committees of the Board above, which is incorporated herein by reference.
The following table summarizes the aggregate fees for professional services provided by BDO USA, LLP related to the fiscal years ended March 31, 2011 and 2010:
Consisted of fees billed for professional services rendered for: (i) the audit of our consolidated financial statements; (ii) the review of interim consolidated financial statements for our quarterly filings; and (iii) any services that are normally provided by our principal accountant in connection with statutory and regulatory filings or engagements.
There were no audit-related fees during the fiscal years ended March 31, 2011; and consisted of fees for professional services related to the JH Partners transaction during the fiscal year ended March 31, 2010.
BDO USA, LLP did not perform professional services for tax compliance, tax advice or tax planning for us in fiscal years ended March 31, 2011 and 2010; however, beginning in May 2011, they began providing tax compliance services for us.
All Other Fees.
There were no other fees during the fiscal year ended March 31, 2011 and 2010.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm.
Our Audit Committee’s policy is to pre-approve the audit and non-audit services provided by the independent registered public accounting firm, in order to assure that the provision of such services does not impair the auditor’s independence. As provided in our Audit Committee Charter, our Audit Committee believes that the combination of general pre-approval of certain types of audit services (e.g., quarterly reviews, annual audit and review of certain other documents filed with the SEC) and specific pre-approval of other services results in an effective and efficient procedure to pre-approve services performed by the independent registered public accounting firm. Unless a type of service to be provided by the independent registered public accounting firm has received general pre-approval, it will require specific pre-approval by the Audit Committee. In determining whether to grant general or specific pre-approval, our Audit Committee will consider whether such services are consistent with the applicable rules and regulations on auditor independence. The term of any pre-approval is 12 months from the date of pre-approval, unless the Audit Committee specifically provides for a different period. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. With respect to each proposed pre-approved service, the independent registered public accounting firm is required to provide to the Audit Committee detailed back-up documentation regarding the specific services to be provided.
All of the fees paid to BDO USA, LLP in fiscal 2011 and 2010 were pre-approved by the Audit Committee. Our Audit Committee has considered whether the provision of services other than those described above under the heading of “Audit Fees” are compatible with maintaining the independence of BDO USA, LLP.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.