216324--6/29/2009--IMAGE_ENTERTAINMENT

related topics

{capital, credit, financial}

{customer, product, revenue}

{stock, price, share}

{product, market, service}

{debt, indebtedness, cash}

{condition, economic, financial}

{loan, real, estate}

{operation, natural, condition}

{personnel, key, retain}

{regulation, change, law}

{control, financial, internal}

{operation, international, foreign}

{property, intellectual, protect}

{cost, operation, labor}

Our liquidity substantially depends on our ability to borrow against our revolving line of credit. Our credit facility contains covenants that may limit the way we conduct business. We have a history of losses and may incur additional losses and have limited working capital and limited access to financing. We will need additional funding to continue acquiring desirable programming or to continue as a going concern. We rely on a third-party to manufacture, warehouse and distribute our products and are significantly past due the related agreements payment terms. If this service provider terminates our replication and fulfillment agreement upon notice of default by us, our business would be adversely affected. If we are unable to renegotiate or refinance the payment terms under our senior convertible note, we will trigger cross-defaults under our other debt agreements, face liquidity issues and be unable to continue as a going concern. We generate significant amounts of net revenue for programming from one content supplier. If this content provider terminates our exclusive distribution agreement due to a default by us or otherwise, our business would be adversely impacted. The current economic slowdown has and may continue to adversely impact our business, results of operations and financial condition. A further tightening of the credit markets may have an adverse effect on our ability to obtain financing. Failure to secure DVD distribution rights may adversely impact our business, results of operations and financial condition. We have a high concentration of sales to relatively few customers, the loss of which may adversely impact our liquidity, business, results of operations and financial condition. Our high concentration of sales to relatively few customers may result in significant uncollectible accounts receivable exposure, which may adversely impact our liquidity, business, results of operations and financial condition. We have a high concentration of sales from relatively few titles, which may impact future net revenues if we do not acquire additional titles. We may not be successful in acquiring cast-driven finished feature film content or selling feature film content, which could adversely impact our business, results of operations and financial condition. Our inability to gauge and predict the commercial success of our programming could adversely impact our business, results of operations and financial condition. Our current DVD and CD genre revenue concentrations may become unpopular with our retail customers and end-consumers, which may adversely impact our business. Inventory obsolescence may adversely impact our business, results of operations and financial condition. We may be unable to recoup advances paid to secure exclusive distribution rights. Risks associated with distributing our programming internationally may adversely impact our business, results of operations and financial condition. Inability to maintain relationships with our program suppliers and vendors may adversely impact our business. We may not be able to keep pace with technological advances, which may adversely impact our business, results of operations and financial condition. Failure by third parties to promote our programming may adversely impact our business. An increase in product returns may adversely impact our business, results of operations and financial condition. We may not possess satisfactory rights in our properties, which may adversely impact our business, results of operations and financial condition. Protecting and defending against intellectual property claims may have a material adverse impact on our business, results of operations and financial condition. The full exploitation of our rights requires us to conduct business in areas where our expertise is limited. We depend on key and highly skilled personnel to operate our business, and if we are unable to retain our current personnel or hire additional personnel our ability to develop and successfully market our business could be harmed. The occurrence of uninsured events may adversely impact our business, results of operations and financial condition. We face direct and indirect foreign currency exchange risk. We depend on third-party shipping and fulfillment companies for the delivery of our products. If these companies experience operational difficulties or disruptions, our business could be adversely impacted. Legislative actions, higher director and officer insurance costs and potential new accounting pronouncements are likely to cause our general and administrative expenses to increase and impact our future financial condition and results of operations. Risks Relating to Our Industry The standard DVD format has matured. Decreasing retail prices for DVDs may negatively impact our revenues and gross profit margins. Decreasing retail shelf space for our industry may limit sales of our programming, which may adversely impact our business, results of operations and financial condition Illegal piracy may reduce our revenues and adversely impact our results of operation. If DVD cannot compete successfully with other formats of home entertainment, our revenues may be adversely impacted. The motion picture industry is rapidly evolving, and recent trends have shown that audience response to both traditional and emerging distribution channels is volatile and difficult to predict. Risks Relating to Our Stock Our stock price may be subject to substantial volatility, and you may lose all or a substantial part of your investment. We may be delisted from The NASDAQ Stock Market if we do not satisfy continued listing requirements. If our common stock were delisted from The NASDAQ Stock Market, you may find it difficult to dispose of your shares. If our common stock were delisted from The NASDAQ Stock Market, the delisting would trigger default of a listing requirement covenant under our senior convertible note. Any future sales of equity may significantly impact the market price of our common stock. If we are unable to conclude that our internal control over financial reporting is effective, our stock price may be negatively impacted.

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216324--6/29/2009--IMAGE_ENTERTAINMENT_INC