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Gold/Mining/Energy : Mainframe Entertainment (ReBoot/Beasties)
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To: Richard Lam who wrote (23)5/8/1997 10:27:00 AM
From: D.E. Shetland   of 459
 
Cash flow is very strong. When they bought themselves out from Alliance Communications last year, they also raised a few extra million.

They're in a no-lose situation on the production of the TV shows. They get 100% of the production fees and various parts of the back-end (ownership). I believe they own ReBoot's US rights and a portion of non-US/non-Can rights, a portion of non-US/non-Japan Beast Wars rigths etc... They charge a per episode fee that incorporates a reasonable operating profit, so they can't lose money at the operating level, hence strong cash-flow. given that they depreciate the equipment and software immediately (in less than a year), they cut net profits back.

Net Income for year ended Mar97 was C$200,000 and depreciation was C$2.893 million on revenue of C$19.5mil. So cash flow was in the order of C$3.1mil, 15% of revenues. My guess is that "real" depreciation was probably around half that amount, so "real" earnings would have been $1.4 mil higher (pre-tax).

EBITDA was C$4.879. It looks like they have reasonable cash flow and now they'll have a chunk of cash spinning off a little interest too. The majority of the equity is new shares, Alliance is selling off a bit (which is good) and there is a small amount of management selling, but they will still own a huge chunk of the company.

NEW NEWS: I heard that at the IMAX annual meeting last week, the president touted Mainframe as one of their partners in a number of ventures including a new movie they're contemplating. I don't know what it is, but I'll try to find out from IMAX.
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