Rainmaker Entertainment Inc.
TSX VENTURE : RNK

Rainmaker Entertainment Inc.

August 14, 2009 18:44 ET

Rainmaker Reports Results for the Three and Six Months Ended June 30, 2009

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 14, 2009) - Rainmaker Entertainment Inc. (TSX:RNK) announces its results for the three and six months ended June 30, 2009.

"The results of the second quarter of 2009 were disappointing but showed an improvement over the first quarter of 2009 as expected," said Warren Franklin, Chief Executive Officer of Rainmaker Entertainment Inc.

"External production delays have caused both revenue and earnings to be below expected levels. We are continuing to implement a revised production schedule as previously announced and expect to see production levels increase over the next few months to full production in the fall of this year."

"We are continuing to develop our service based business on both feature films and DVD projects and to develop the classic series Reboot as a proprietary Rainmaker film. Rainmaker also recently completed a trailer for the Ubisoft game Splinter Cell: Conviction, the latest in a franchise of games based on Tom Clancy's fiction. The trailer which was produced primarily for the Internet and for trade shows, but was produced in very high resolution so it could also be shown on television or in movie theatres. This is one example of how we're looking at new ways to deliver animation. In addition, during the second quarter we continued our proven track record of delivering high quality DVD productions with the delivery of two feature length DVDs to our existing clients."

Selected Information

Below is selected information derived from the unaudited interim consolidated financial statements which have been prepared in accordance with Canadian generally accepted accounting principles.



All amounts are in 000's of dollars, except per share / unit figures

Three months Six months
ended June 30, ended June 30,
2009 2008 2009 2008
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Note 1 Note 1

Revenue
Rainmaker Entertainment - Animation 3,581 8,740 7,510 15,980
EP Canada - Payroll processing (Note 1) - 1,896 - 3,000
Canada Film Capital - Tax credit
services (Note 1) - 392 - 903
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3,581 11,028 7,510 19,883
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Expenses
Operating 4,371 10,064 9,331 17,528
General and administration 161 471 406 1,034
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4,532 10,535 9,737 18,562
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EBITDA (951) 493 (2,227) 1,321
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Depreciation and amortization 666 941 1,350 1,823
Amortization of intangible assets 213 475 409 935
Amortization of deferred gain on sale
of business interests (75) - (149) -
Equity investment (earnings) loss (81) - 294 -
Gain on settlement of accounts payable - (4) - (315)
Restructuring costs - 232 - 232
Interest expense 211 234 427 438
Foreign exchange (gain) loss (223) 35 (102) 63
Other (income) expense (18) (114) (48) (176)
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693 1,799 2,181 3,000
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Loss before non-controlling interest
and discontinued operations (1,644) (1,306) (4,408) (1,679)

Non-controlling interest - 19 - (40)
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Net loss from continuing operations (1,644) (1,287) (4,408) (1,719)

Gain on sale of discontinued operations 59 - 84 7,628
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Net earnings (loss) and comprehensive
income (loss) for the period (1,585) (1,287) (4,324) 5,909
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Loss from continuing operations per
unit / share - basic and diluted ($0.09) ($0.07) ($0.25) ($0.10)
Net (loss) earnings per share / unit
- basic ($0.09) ($0.07) ($0.25) $0.34
Net (loss) earnings per share / unit
- diluted ($0.09) ($0.07) ($0.25) $0.33
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Note 1: The 2009 results do not include the operations of EP and CFC as
Rainmaker sold 70% of its interests in EP and CFC on November 13,
2008.

EBITDA is not a term defined under generally accepted accounting principles.
Rainmaker defines EBITDA as earnings from operations before interest
expense, interest income, income taxes, depreciation and amortization on
property, plant and equipment, amortization and write-down of intangible
assets, loss on sale of property, plant and equipment, restructuring costs
and non-cash compensation costs.


Consolidated Balance Sheet Data

June 30, December 31,
2009 2008
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Cash 5,096 6,886
Total assets 24,119 35,266
Total debt 2,500 6,997
Total liabilities 17,925 24,780
Shareholder equity 6,194 10,486
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Results of Operations

Three months ended June 30, 2009 compared to 2008

Revenue

Revenue decreased $7.4 million to $3.6 million in 2009 from $11.0 million in 2008. This decrease was due in part to the sale of Rainmaker's interests in EP Canada and Canada Film Capital on November 13, 2008, therefore no revenue was reported from either of these divisions in 2009. For the three months ending June 30, 2008 EP Canada and Canada Film Capital reported revenues of $1.9 million and $0.4 million, respectively. In 2009 Rainmaker's 30% interest in Canfilm Solutions Inc. (formerly 7028831 Canada Inc.) is reported on an equity basis.

Rainmaker Animation reported a decrease in revenue of $5.1 million to $3.6 million in 2009 from $8.7 million in 2008. The decrease in revenue was due to fewer projects in the DVD division and external production delays on a feature film.

Operating and general and administration expenses

Operating expenses decreased $5.7 million to $4.4 million in 2009 from $10.1 million in 2008. As a result of the sale of Rainmaker's interests in EP Canada and Canada Film Capital on November 13, 2008, there were no operating expenses reported from either of these divisions in 2009. For 2008 EP Canada and Canada Film Capital reported operating expenses of $1.5 million and $0.3 million, respectively.

The decrease in expenses was also the result of lower revenues offset by higher operating costs as a result of external production delays. Operating expenses which do not relate directly to the operating segments decreased $0.5 million to $0.3 million from $0.8 million in 2008. This decrease was due to severance paid to a former employee in 2008.

General and administration expenses decreased $0.3 million to $0.2 million in 2009 from $0.5 million in 2008. The decrease was the result of the sale of EP Canada and Canada Film Capital.

Depreciation and amortization of property, plant and equipment

Depreciation and amortization of property, plant and equipment decreased $0.2 million in 2009 to $0.7 million as compared to $0.9 million in 2008.

EP Canada and Canada Film Capital reported depreciation expenses of $0.2 million in 2008.

Amortization of intangible assets

Amortization of intangible assets decreased $0.3 million in 2009 to $0.2 million as compared to $0.5 million in 2008. This decrease was the result of the sale of EP Canada and Canada Film Capital.

Interest expense

Interest expense for both 2009 and 2008 was $0.2 million. While the interest on long-term debt and bank indebtedness decreased $0.05 million, interest on capital lease obligations increased by a corresponding amount.

Foreign Exchange Gain (Loss)

There was an increase in the foreign exchange gain of $0.2 million to $0.2 million in 2009 from a loss of $0.03 million in 2008. The 2009 exchange gain is due to a $0.2 million unrealized gain from the write-up of derivative contracts that expire later in 2009 and 2010.

Equity Earnings

Rainmaker's 30% interest in Canfilm Solutions Inc. is reported on an equity basis. For 2009 Rainmaker reported equity earnings of $0.1 million from its investment in Canfilm Solutions Inc.

Earnings (Loss) from continuing operations

The loss from continuing operations for 2009 increased $0.3 million to $1.6 million from $1.3 million in 2008.

As a result of the sale of Rainmaker's interests in EP Canada and Canada Film Capital on November 13, 2008 there were no earnings or losses from either of these divisions in 2009. For 2008 EP Canada reported a loss of $0.2 million and Canada Film Capital reported earnings of $0.04 million.

Net earnings (loss) for the period

The net loss for 2009 increased $0.3 million to $1.6 million from $1.3 million in 2008.

Six months ended June 30, 2009 compared to 2008

Revenue

Revenue decreased $12.0 million to $8.0 million in 2009 from $20.0 million in 2008. This decrease was due in part to the sale of Rainmaker's interests in EP Canada and Canada Film Capital on November 13, 2008, therefore no revenue was reported from either of these divisions in 2009. For 2008 EP Canada and Canada Film Capital reported revenues of $3.0 million and $1.0 million, respectively. In 2009 Rainmaker's 30% interest in Canfilm Solutions Inc. (formerly 7028831 Canada Inc.) is reported on an equity basis.

Rainmaker Animation reported a decrease in revenue of $8.0 million to $8.0 million in 2009 from $16.0 million in 2008. The decrease in revenue was due to fewer projects in the DVD division and external production delays on a feature film.

Operating and general and administration expenses

Operating expenses decreased $8.2 million to $9.3 million in 2009 from $17.5 million in 2008. As a result of the sale of Rainmaker's interests in EP Canada and Canada Film Capital on November 13, 2008 there were no operating expenses reported from either of these divisions in 2009. For 2008 EP Canada and Canada Film Capital reported operating expenses $3.0 million and $0.6 million, respectively.

The decrease in expenses was also the result of lower revenues offset by higher operating costs as a result of external production delays and a one time severance cost to a former executive of $0.5 million. Operating expenses which do not relate directly to the operating segments decreased $0.4 million to $0.6 million from $1.0 million in 2008.

General and administration expenses decreased $0.6 million to $0.4 million in 2009 from $1.0 million in 2008. The decrease was the result of the sale of EP Canada and Canada Film Capital.

Depreciation and amortization of property, plant and equipment

Depreciation and amortization of property, plant and equipment decreased $0.5 million in 2009 to $1.3 million as compared to $1.8 million in 2008.

EP Canada and Canada Film Capital reported depreciation expenses of $0.5 million in 2008.

Amortization of intangible assets

Amortization of intangible assets decreased $0.5 million in 2009 to $0.4 million as compared to $0.9 million in 2008. This decrease was the result of the sale of EP Canada and Canada Film Capital.

Interest expense

Interest expense for both 2009 and 2008 was $0.4 million. While the interest on long-term debt and bank indebtedness decreased $0.07 million, interest on capital lease obligations increased by a corresponding amount.

Foreign Exchange Gain (Loss)

There was an increase in the foreign exchange gain of $0.16 million to $0.1 million in 2009 from a loss of $0.06 million in 2008. The 2009 exchange gain is due to an unrealized foreign exchange gain of $0.2 million offset against the exchange loss in Q1.

Equity Loss

Rainmaker's 30% interest in Canfilm Solutions Inc. is reported on an equity basis. For 2009 Rainmaker reported an equity loss of $0.3 million from its investment in Canfilm Solutions Inc.

Earnings (Loss) from continuing operations

The loss from continuing operations increased $2.7 million in 2009 to $4.4 million from $1.7 million in 2008.

As a result of the sale of Rainmaker's interests in EP Canada and Canada Film Capital on November 13, 2008 there were no earnings or losses from either of these divisions in 2009. For 2008 EP Canada reported a loss of $1.1 million and Canada Film Capital reported earnings of $0.1 million.

Gain on sale of discontinued operations

For 2008 there was a gain on sale of the post production and visual effects operations of $7.6 million.

Net earnings (loss) for the period

The net loss for 2009 increased $10.2 million for a loss of $4.3 million from earnings of $5.9 million in 2008.

Other

Additional information and other publicly filed documents relating to Rainmaker, including the annual audited consolidated financial statements and related management discussion and analysis plus the Annual Information Form are available through the internet on the Canadian Securities Administrators' System for Electronic Document Analysis and Retrieval ("SEDAR"), which can be accessed at www.sedar.com.

This press release and any related attachments may contain forward-looking statements that involve a number of risks and uncertainty. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are market and general economic conditions and the risk factors detailed from time to time in the periodic reports and documents filed by the Company with The Toronto Stock Exchange and other regulatory authorities. Forward-looking statements are based on the estimates and opinions of management on the date the statements are made, and the Company undertakes no obligation to update the forward-looking statements should there be a change in conditions, or in management's estimates or opinions.

The contents of this press release have neither been approved nor disapproved by any regulatory authority.

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