Image Innovations issues common stock, convertible preferreds in swap

By Sheri Kasprzak

New York, Feb. 24 - Image Innovations, Inc. said it issued common stock and series A convertible preferred stock as part of an equity swap.

For the 1,500,003 common shares and 263,793 preferreds, Image Innovations will receive from investor Cogent Investments Inc. $9 million in U.S. Treasury notes and Strips.

Cogent agreed to place the U.S. securities into escrow as collateral until the earlier of 42 months after the agreement date or until all of the shares to be issued in the swap are registered.

Under the agreement, 27 months after issuance, provided Image Innovations has registered at least 3,103,450 common shares, the company will have the right to have one-sixth of the value of the U.S. securities released from escrow on a quarterly basis.

Image Innovations has the right to call 3,103,450 shares on the second anniversary of closing at a price equal to the fair market value at the exercise date.

Cogent will receive interest on the $9 million at Libor plus 175 basis points.

As an initial exchange in the swap, Image Innovations paid $270,000, issued 500,000 shares and granted warrants for 400,000 shares, exercisable at $5.00 each for five years.

Each of the preferreds issued in the swap is convertible into 10 common shares after Feb. 17, 2008.

Based in New York, Image Innovations sells fine art and sports memorabilia.

The stock lost 15 cents, or 6.67%, on Friday to close at $2.10 (OTCBB: IMGV).

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