Struggling Image Entertainment Receives More Bad News

The accounting firm for Image Entertainment Inc. has raised doubts that the home entertainment programming distributor can continue in business due to debt and lack of money for its operations. Management of the Chatsworth-based company has begun to cut costs through layoffs and reducing the number of titles released to those that have historically sold well in the past. In May, Image retained the investment banking firm Houlihan Lokey Howard & Zukin Capital Inc. to analyze future moves for the company including potential financing or a sale. This bad news from BDO Seidman LLP is the latest for Image, which has faced two failed mergers and turnover in its executive ranks in the past 18 months. Add to that the recession that has cut into consumer spending and the bankruptcies of retailers further reducing shelf space for DVDs. That Seidman has doubts Image can continue in business could have a potential snowball affect. The company could find itself in default under an amended loan agreement with Wachovia Capital Finance Corp. Additionally, suppliers and customers may decide to cut its ties with Image worsening liquidity issues and causing the stock price to fall. “We will have to raise additional funds to meet our currently budgeted operating and debt requirements for the next 12 months,” the company reported in a June filing with the U.S. Securities and Exchange Commission. “There is a significant risk that we may not be able to generate and/or raise enough additional funds to remain operational for an indefinite period of time.” Shares in Image closed down at $0.85. Mark R. Madler