3-21-06 Why Cancel The DVD Avenue Agreement
Question: Mr. Fleming, On Feb. 10th. you sent out a press release stating GameZnflix acquired DVDavenue.com. Chip Gallent was quoted as saying: "This is a great acquisition for GameZnFlix as this will result in increasing our membership base, acquiring thousands of titles and adding a new distribution facility," said Donald "Chip" Gallent, President of GameZnFlix. In the same article you were quoted saying: GameZnFlix Chairman and CEO John Fleming added, "As we grow our business model we will continue to look for acquisitions where there is a solid business fit. The DVDavenue acquisition met our requirements and the management of both companies see the benefits for members of both services." By todays press release this acquisition has fallen apart along with todays stock price, therefore my question to you Mr. Fleming is, why on earth would you state you had "acquired DVDavenue" instead of stating you "were in talks to acquire DVDavenue?" Also, as a large shareholder in your company I would like to know what positive steps your making to offset this disappointing news.
Answer: GameZnFlix signed an agreement to purchase DVD Avenue and that agreement included a clause which allowed us to cancel the purchase if all that was presented to GameZnFlix did not hold up to our outside inventory inspection and audit of the company records by our auditors. We choose to exercise that clause after the outside inventory was completed and our auditors reported to us. In the end, it was not a match for GameZnFlix family based members nor the DVD Avenue members.
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