Noncontrolling Interest Liability

3 Months Ended

Jun. 30, 2011

Noncontrolling Interest Liability [Abstract]

Note 6.

Noncontrolling Interest Liability

In September 2010, Image and its then wholly-owned subsidiary Image/Madacy Home Entertainment, LLC (IMHE) entered into an Asset Purchase Agreement (Purchase Agreement) with Madacy Entertainment for certain home video division assets. Part of the purchase price included a 30% limited liability membership interest in IMHE (IMHE Noncontrolling Interest).

The IMHE Noncontrolling Interest is subject to a right of repurchase by Image on August 31, 2013 at a repurchase price calculated as the product of 2.25 times the operating income for four consecutive fiscal quarters ending on or prior to the repurchase date, multiplied by the IMHE Noncontrolling Interest. If Image does not repurchase the IMHE Noncontrolling Interest on August 31, 2013, then Image is required to repurchase such interest on August 31, 2014 at a repurchase price calculated as the product of 2.75 times the operating income for four consecutive fiscal quarters ending on or prior to the repurchase date. If Image undergoes a change of control on or prior to August 31, 2013, Seller may opt to have Image repurchase the IMHE Noncontrolling Interest substantially based on the formula for a repurchase at August 31, 2013.

The right to purchase IMHE Noncontrolling Interest is mandatorily redeemable by August 31, 2014, unless redeemed sooner at the Company's option. At acquisition and each reporting period thereafter, the IMHE Noncontrolling Interest is valued using the discounted cash flow method. Since the mandatory redemption is time certain and is not triggered by liquidation or termination of IMHE, the Noncontrolling Interest of $2,451,000 at June 30, 2011 and $2,603,000 at March 31, 2011 is recorded as a liability at its fair value. The change in the fair value of the noncontrolling interest liability during the three months ended June 30, 2011 was $92,000 and is included as a component of interest expense in the consolidated statement of operations. During the three months ended June 30, 2011, the Company paid a net $60,000 to the noncontrolling interest holder towards the amount due for its share in the net operating income of IMHE for the three months ended June 30, 2011.

- Definition

The entire disclosure for noncontrolling interest in consolidated subsidiaries, which could include the name of the subsidiary, the ownership percentage held by the parent, the ownership percentage held by the noncontrolling owners, the amount of the noncontrolling interest, the location of this amount on the balance sheet (when not reported separately), an explanation of the increase or decrease in the amount of the noncontrolling interest, the noncontrolling interest share of the net Income or Loss of the subsidiary, the location of this amount on the income statement (when not reported separately), the nature of the noncontrolling interest such as background information and terms, the amount of the noncontrolling interest represented by preferred stock, a description of the preferred stock, and the dividend requirements of the preferred stock.

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