Animation Firm Drawn Into Reverse-Merger Deal

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The executives of Image Metrics Ltd., a Santa Monica-based animation company that does work on video games and feature films, wanted to take their company public, but opted against a traditional IPO.

Instead, the company chose the reverse-merger route, which sped up the process. Image Metrics found a shell company – an inactive public company – and arranged for that company to buy it.

Image Metrics, an up-and-coming company that’s done facial animation work on prominent video games such as “Grand Theft Auto IV” and “Assassin’s Creed II,” and films such as “The Curious Case of Benjamin Button,” entered into a reverse-merger agreement with International Cellular Accessories on March 11. International Cellular was a distributor of cell phone products in North America, but it halted operations in April 2006 and had only a few thousand dollars of cash on hand at the time of the merger. Its stock traded over the counter under the symbol ICLA, and cost less than a penny per share.

International Cellular completed the acquisition March 16. The company’s name was changed to Image Metrics and its symbol was changed to IMGX. The stock trades over the counter and opened at just over $1. It now trades for about $1.75.

Chief Executive Michael Starkenburg said the company wanted to go public so that it could raise money from investors to expand operations. In fact, shortly after completing the deal, the company raised $8 million from investors who purchased preferred stock.

“We believe we have a very rich market in front of us,” Starkenburg said. “And if we’re right, this not only gives us money now, but potentially gives us ways to get lots of money in the future.”

Starkenburg said Image Metrics had $4 million in revenue last year, though the company had a net loss of $6.8 million in 2009. He said Image Metrics already has $5 million in contracts booked for the current fiscal year.

Counterfeit Chips

Electronics retailer Newegg Inc. inadvertently shipped some of its customers computers with counterfeit Intel chips.

City of Industry-based Newegg, which claims to be the second-largest Internet-only retailer in the United States behind Amazon.com Inc., sells everything from handbags to car door handles on its site, Newegg.com. But the company’s core market has been selling electronics and computer parts to tech-savvy consumers.

According to a statement issued by Newegg on March 8, the company shipped computers containing knockoff Intel Core i7 processors, which are some of the most advanced consumer electronics chips on the market.

Newegg had initially identified the chips as demo products, but subsequently stated that they were counterfeit. The company issued an apology and said it would send replacement units to those affected.

Newegg blamed the problem on one of its suppliers. The company said it terminated its relationship with the supplier in question.

Newegg did not return a request for comment. An Intel spokesman said the company was investigating the matter.

The problem comes at a sensitive time for Newegg. In October, the company announced it intended to raise $175 million through an initial public offering. Newegg appears to still be in the “quiet period” preceding an IPO.

Last month, Newegg was hit by a lawsuit from three former employees who allege, among other things, that the company engaged in unsavory business practices and wrongfully terminated them. Newegg said in a statement that the lawsuit was without merit.

As for the counterfeit chip case, it is unclear how many computers Newegg shipped containing them. In an e-mail to consumers in early March, the company said people who purchased items between March 1 and March 3 could be affected.

Adventure Dollars

AdventureLink Inc., an Altadena-based Internet startup that helps people plan outdoors-oriented trips, recently raised $1.3 million in funding, according to documents filed with the Securities and Exchange Commission.

AdventureLink helps people plan and research what it calls “adventure trips” – such as rafting expeditions, bike tours and photo safaris. The company can link users with travel agents or other travelers who are interested in such trips.

The $1.3 million fundraising round came from Allegis Capital LLC; Anthem Venture Partners; the Mail Room Fund; and the company’s chief executive, Jeff Dossett.

In a statement to the Business Journal, Dossett said the company’s plans include bolstering its international network of travel agents.

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