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Press release from Marketwire

Rainmaker Entertainment Announces June 30th, 2012 Second Quarter Results

Friday, August 10, 2012

Rainmaker Entertainment Announces June 30th, 2012 Second Quarter Results15:55 EDT Friday, August 10, 2012VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 10, 2012) - Rainmaker Entertainment Inc. (TSX:RNK) announced today its results for the three and six months ended June 30, 2012.Second Quarter HighlightsHighlights for the three months ended June 30, 2012:Revenues decreased $810,435 to $3,962,657 in the second quarter of 2012 compared to $4,773,092 in the second quarter of 2011 Loss from operations was $962,449 compared to $74,258 in the second quarter of 2011 Comprehensive loss for the quarter was $943,612 compared to earnings of $147,582 in 2011Highlights for the six months ended June 30, 2012:Revenues increased $97,669 to $9,143,884 compared to $9,046,215 in 2011 Loss from operations was $1,936,385 compared to earnings of $39,171 in 2011 Comprehensive loss was $1,901,903 compared to earnings of $767,007 in 2011Sale of Animation BusinessOn June 27, 2012, the Company entered into an asset purchase agreement (the "Agreement") with Rainmaker Studios Inc. (the "Purchaser"), a wholly-owned subsidiary of a digital animation company located in Beijing. Pursuant to the Agreement, the Company has agreed to sell to the Purchaser certain assets comprising substantially all of the assets used to undertake the Company's animation business in consideration of the Purchaser assuming the Company's existing book liabilities and all real property leases. In addition, under the terms of the Agreement, the Company has agreed to enter into a loan agreement with the Purchaser on the closing date of the transaction pursuant to which the Company shall provide to the Purchaser a $5,000,000 interest bearing loan.On July 31, 2012, the Shareholders of the Company approved the transaction contemplated in the Agreement at the Company's annual general and special meeting. Closing of this transaction is also subject to approval from Heritage Canada under the Investment Canada Act, which has not yet been received.Subsequent to the transaction, management will implement a business strategy of seeking strategic partners and considering strategic alternatives to leverage the Company's remaining assets including production credits of $5,732,184, as well as accumulated non-capital tax losses of $30,296,167 and temporary differences of $12,164,950 (as at December 31, 2011). In particular the Board of Directors, with the assistance of management, will seek to develop new opportunities to create shareholder value and continue the operations of the Company within its current industry.Selected Financial InformationThe selected financial information provided below has been derived from Rainmaker's condensed interim consolidated financial statements which were prepared under IFRS.Three months ended June 30,Six months ended June 30,2012201120122011Revenue$3,962,657$4,773,092$9,143,884$9,046,215ExpensesOperating3,861,2703,935,4499,216,6337,308,048Depreciation and amortization355,727449,400719,122954,103General and administration592,341354,236923,489568,932Gain on sale of property, plant and equipment(2,174)-(3,400)-Interest expense135,390108,522264,430198,103Interest income(17,448)(257)(40,005)(22,142)4,925,1064,847,35011,080,2699,007,044Earnings (loss) from operations(962,449)(74,258)(1,936,385)39,171Gain on sale of investment in Base 10 Group Inc.-74,377-739,047Share of income (loss) from investment in Base 10 Group Inc.-126,053-(76,121)-200,430-662,926Earnings (loss) from continuing operations(962,449)126,172(1,936,385)702,097Gain on sale of discontinued operations18,83721,41034,48264,910Earnings (loss) and comprehensive income (loss) for the period$(943,612)$147,582$(1,901,903)$767,007Earnings (loss) from continuing operations per share- basic and diluted$(0.06)$0.01$(0.11)$0.04Earnings (loss) per share- basic and diluted$(0.05)$0.01$(0.11)$0.04Weighted average number of shares outstandingBasic and diluted17,485,17517,485,17517,485,17517,485,175Overall PerformanceThe $ 2,135,528 decrease in total assets is due to a $907,487 decrease in accounts receivable, of which $607,304 is attributable to a decrease in tax credits receivable, coupled with a $674,820 decrease in cash. The remainder of the difference is primarily due to the depreciation of property, plant and equipment and amortization of prepaid expenses.Operating activities required cash of $2,710,467 in the first half of 2012 compared to requiring cash of $5,280,900 in the first half of 2011. This improvement is due to changes in non-cash working capital which required cash of $1,502,089 in 2012 compared to requiring cash of $6,282,439 in 2011. Financing activities provided cash of $2,421,266 in 2012, which is an increase of $370,497 over the same period in 2011 due to the net increase in the amount drawn on the production loan credit facilities in excess of finance lease repayments. Investing activities used cash of $385,619 in the first half of the year compared to providing cash of $2,057,939 in 2011. In 2012 $398,819 was spent on additions to investment in film and television properties and property, plant and equipment compared to $352,354 in 2011; however, in the first quarter of 2011 cash distributions of $1,320,000, a revenue target earn-out of $590,293 and repayment of a $500,000 note receivable were received in relation to the investment in Base 10. The investment in Base 10 was disposed of at the end of 2011; therefore, no cash flows were received in relation to this investment in 2012.Earnings from continuing operations decreased $1,088,621 from $126,172 in the second quarter of 2011 to a loss of $962,449 in 2012. The decrease is primarily due to a 17% decrease in revenue with only a 2% decrease in operating costs. Similarly, in the first half of 2012 earnings from continuing operations decreased $2,638,482 from $702,097 in the first half of 2011 to a loss of $1,936,385 in 2012. The decrease is primarily due to a 26% increase in operating costs with only a 1% increase in revenue.OtherRainmaker Entertainment Inc., a multifaceted animation studio, is one of Canada's largest producers of CG animation. With an innovative history that spans over 18 years, Rainmaker today continues to tell engaging stories and create compelling characters for all media. The studio's 200 creatively-inspired artists and storytellers are currently in development on the company's first slate of proprietary projects and in production on the 3D animated family comedy Escape From Planet Earth, voiced by Brendan Fraser, Rob Corddry, Sarah Jessica Parker, Jessica Alba, James Gandolfini. The film, to be distributed by The Weinstein Company in 2013, is directed by Cal Brunker (Despicable Me). Rainmaker has also produced the award-winning short LUNA. Originally established as Mainframe Entertainment, the company broke ground by producing the first ever CGI animation series ReBoot. In addition to developing its own properties, Rainmaker also produces feature length DVD's for many top international brands including Barbie, Max Steel and Tony Hawk, and more. Rainmaker's clients include Mattel, The Weinstein Company, Lionsgate, Sony, Ubisoft, Electronic Arts and MTV. Circle of Confusion, the leading management firm, is repping the company in Hollywood. For more information, go to FURTHER INFORMATION PLEASE CONTACT: Darren BattersbyRainmaker Entertainment Inc.(604) 714-2600(604) 714-5990 (FAX)