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Image Metrics results

Facial animation outfit rakes in $4.0 million during first half of year.

SANTA MONICA, CA - May 24, 2010 - Image Metrics, Inc. (OTC BB: IMGX), a leading provider of facial animation software and services for the entertainment industry, today reported financial results for its fiscal second quarter ended March 31, 2010 ("Q2 '10") and highlighted its recent progress. Image Metrics is hosting a conference call and webcast to review its results today at 11:00 a.m. ET. The call is open to all investors.

Live Webcast/Replay URL: http://www.image-metrics.com/investors or www.earnings.com;

available for 30 days

Conference Call Dial-In Number: (212) 231-2921

Recent Progress:

• $9 million fundraising and going public transaction completed in March

• Introduced FACEWARE™ facial animation software with launch customer Bungie

• Strong revenue growth in Q2 '10 and 1H '10 coupled with improving profitability

• Order backlog of $2.9 million and order pipeline of over $20.0 million as of March 31, 2010

• Image Metrics' work during 1H '10 included the following "triple A" titles:

o Assassins Creed II

o Blur

o God of War III

o GTA IV: The Lost and Damned

o GTA IV: The Ballad of Gay Tony

o Red Dead Redemption

• Michael Crigler named VP North American Sales; brings 10+ years of video game sales experience

Image Metrics' Q2 '10 revenue rose to $1.6 million from $0.2 million in the year-ago period due principally to the Company's growing customer base and an expanding pipeline of full-service facial animation work for clients largely in the video game industry. This growth is directly attributable to the Company's efforts to substantially expand its internal sales and marketing team over the past year. Revenue for the first half of fiscal 2010 rose 154% to $4.0 million from $1.6 million in the prior year, slightly exceeding full-year revenue in fiscal 2009.

IMGX's Q2 '10 gross profit rose to $0.8 million, representing a gross profit margin of 47.6%, compared to a modest negative gross profit in Q2 '09. The gross profit increase is directly attributable to both the increase in work in support of several high-profile titles as well as growing production efficiencies being realized as the production process matures.

Michael Starkenburg, Image Metrics' CEO, commented, "Our first half results clearly demonstrate the ability of our unique animation technology to deliver impressive top-line growth and improving profitability as we scale the business. Our investment in building out a sales force over the past year is clearly paying dividends as we have landed new customers and as existing customers have been signing new contracts, thereby dramatically reducing our sales cycle. We believe this activity, combined with our order backlog and pipeline, set the stage for sustainable growth going forward. Our unique facial animation process is proven to improve both quality and time to market for a range of entertainment forms including video games, feature film and television. To satisfy increasingly discerning consumer audiences, creative professionals must work even harder to create facial animation that captures the true subtleties of human facial motion and is 'believable.' Image Metrics uniquely addresses this creative challenge while delivering important business benefits such as speed and competitive pricing."

Total Q2 '10 operating expenses rose 16% to $2.6 million while 1H '10 operating expenses rose 28% to $5.4 million, principally reflecting the impact of $0.6 million and $1.4 million in legal and audit fees, respectively, related to the capital raise and simultaneous exchange offer which brought the Company public. Excluding these fees, total operating expenses for 1H '10 actually declined 6% to $4.0 million, as the Company trimmed costs in both sales & marketing and in R&D. Image Metrics' sales team is actively engaged in identifying potential engagements that can be added to its pipeline and, eventually, to is order backlog. Reflecting these efforts, the pipeline of potential customer opportunities has more than doubled to over $20.0 million at March 31, 2010. The Company's order backlog, which represents contracts Image Metrics expects to complete and book as revenue by September 30, 2010, was $2.9 million.

Despite higher transaction-driven operating costs, IMGX's Q2 '10 operating loss improved to $1.8 million compared to an operating loss of $2.2 million in Q2 '09. After accounting for higher interest expense as well as foreign exchange impacts, the Company reported a Q2 '10 net loss of $2.8 million compared to a net loss of $2.5 million in Q2 '09.

Mr. Starkenburg added, "To further leverage and expand the reach of our animation technology, in March we introduced FACEWARE, a one-of-a-kind software package that lets customers add our powerful facial animation technology directly into their existing 3D applications. Developers using FACEWARE submit their live-action video files to Image Metrics for processing and analysis before completing the animation process in their own pipeline. We are excited that Bungie, developer of the blockbuster HALO franchise, is our launch customer in games, joining Double Negative as our film business launch customer in adding FACEWARE to their in-house production pipeline. We are now beginning to see our first meaningful FACEWARE-related revenues, demonstrating the enhanced margin contribution possible in the software as a service business model.

"Looking out at the balance of our fiscal year, Image Metrics has good visibility to generate significant revenue growth and improved bottom line performance compared to fiscal 2009. We entered our third quarter with an order backlog totaling $2.9 million and expect to convert the bulk of that into revenue by the end of our fiscal year. We are actively prosecuting dozens of tests with leading developers and hope to convert a significant portion of these tests into backlog. While seasonality and the variability of contract timing will likely drive revenue and backlog fluctuations over the coming quarters, our team is working very hard to convert a portion of our pipeline of over $20.0 million in order prospects as of March 31, 2010, into signed contracts and ultimately revenue."

As of March 31, 2010 Image Metrics had 15,851,637 common shares outstanding. Inclusive of shares underlying the Company's Series A Preferred Stock, Image Metrics has 25,170,735 common and common equivalent shares outstanding.

About Image Metrics

Image Metrics, Inc. provides facial animation software and services to the interactive entertainment and film industries. Developed by a team of computer vision Ph.D.s, Image Metrics' proprietary software utilizes video of an actor's performance to drive the animation of a facial performance without markers or makeup. This patented process achieves unparalleled levels of realism and fidelity faster and more efficiently than alternative methods such as motion capture or frame-by-frame animation. Image Metrics' clients include Activision-Blizzard, Rockstar, Microsoft, 2K, Electronic Arts, Ubisoft, Sega, Sony, Bethesda, DNeg, Motion Theory and Moving Picture Company. Image Metrics is based in Santa Monica, CA and Manchester, UK. www.image-metrics.com

Safe Harbor for Forward Looking Statements - This press release contains forward-looking statements about the Company's business prospects that involve substantial risks and uncertainties. Actual results may differ materially from the statements made as a result of various factors, including, but not limited to the market acceptance of the Company's products and services, the Company's ability to maintain client relationships and deliver projects in a timely manner, concentration of the Company's business with certain customers, the impact of technological changes, competition or other factors within the facial animation market, the ability of the Company to establish and protect its intellectual property, the ability of the Company to execute its expanded sales and marketing and product development strategy, and other risks, including those identified in the most recent documents filed by Image Metrics with the U.S. Securities and Exchange Commission. All information in this press release is as of its published date and Image Metrics undertakes no duty to update this information.

Investor Contacts:

James Leahy, David Collins

Jaffoni & Collins

(212) 835-8500


Media Contacts:

Bender/Helper Impact

Shannon McPhee, Jessie Comstock

(310) 473-4147



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