Image Metrics Inc (OTC:IMGX)

Share structure post reverse merger

The financing consisted of 8.0 million Units priced at $1.00 each which are comprised of one share of Series A Convertible Preferred Stock and one detachable Warrant to purchase one-half share of Image Metrics Common Stock at $1.50 per share. The financing included a combination of new capital and the conversion of existing debt, and Image Metrics has the right, over the next 30 days, to sell up to an additional 4.8 million Units pursuant to the same terms.

ProForma for today’s transaction, Image Metrics has approximately 27.0 million shares of common stock outstanding (including shares underlying the Series A Preferred) and 35.5 million diluted shares outstanding as indicated in the table below. Proceeds from the funding will be used to accelerate the Company’s sales and marketing and product development efforts, as well as for working capital and general corporate purposes, including possible acquisitions.

Image Metrics reported revenue of $4.0 million in its fiscal year-ended September 30, 2009 and entered fiscal 2010 with a backlog of firm contracts of over $5 million. Image Metrics’ revenue grew to $2.5 million in its first quarter ended December 31, 2009, and the Company has already recorded revenue of over $800,000 in January 2010, the first month of its fiscal 2010 second quarter.

Seasonality and the variability of contract timing and scale will likely lead to fluctuations in year-over-year and sequential comparisons for the next few years. Nonetheless, the Company believes it is on track to deliver significant revenue growth and improved bottom line performance in fiscal 2010 and beyond.

With ramping revenue, Image Metrics anticipates improved gross profit margins on a relatively fixed overhead, though planned increases in sales & marketing, product development and some G&A expense could have an offsetting impact on profitability. While Image Metrics reported a net loss of $6.8 million for fiscal 2009, its net loss for Q1 ’10 improved to $1 million.