Rainmaker Reports Results for the Three and Six Months Ended June 30, 2011

Rainmaker Reports Results for the Three and Six Months Ended June 30,
2011 Image

VANCOUVER, BRITISH COLUMBIA, Aug 15, 2011 (MARKETWIRE via COMTEX) –Rainmaker Entertainment Inc. /quotes/zigman/42163 CA:RNK 0.00% announced today its resultsfor the three and six months ended June 30, 2011.

During the quarter, Rainmaker was in various stages of production onthree DVD films and continued in full production on the feature filmEscape from Planet Earth. An all-star voice cast list was recentlyannounced for the film which includes; Brendan Fraser, Sarah JessicaParker, Jessica Alba, Rob Corddry, James Gandolfini and CraigRobinson.

Warren Franklin, CEO of the Company, is quoted, "We are continuing toevolve into a highly creative, multifaceted animation studioproducing work-for-hire productions and developing severalproprietary properties including; The Upgrade and two othertheatrical movies Ogo and Ting & Juma: The Movie based on Rainmaker'sproprietary characters."

The financial results for the three and six months ended June 30,2011 reflected certain improvements from the same periods in 2010.

Highlights for the Three Months Ended June 30, 2011:

— Total comprehensive earnings for the quarter improved by $0.4 million resulting in comprehensive earnings for the quarter of $0.1 million compared to a loss of $0.3 in 2010. — Revenues decreased $0.4 million over the same period in 2010; however these were offset by reduced operating costs related to increased tax credit filings. — Adjusted EBITDA for the quarter was $0.5 million a nominal $0.1 million reduction from 2010. — Adjusted EBITDA and Comprehensive earnings for the quarter included a one time reduction of operating costs of $0.4 million related to certain film tax credit filings.

Highlights for the Six Months Ended June 30, 2011:

— Total comprehensive earnings for the quarter improved $1.3 million to $0.6 million from a loss of $0.7 million in 2010. — Revenues decreased $1.3 million over the same period in 2010; however these were offset by reduced operating costs and increased tax credit filings. — Adjusted EBITDA for the six months ended June 30, 2011 was $1.2 million an increase of $0.1 million from 2010. — Adjusted EBITDA and Comprehensive Earnings for the six months ended 2011 included a one time reduction of operating costs of $1.1 million related to certain film tax credit filings.

Selected Information

Below is selected information derived from the unaudited condensedconsolidated interim financial statements which have been prepared inaccordance with IFRS.

All amounts are in thousands of Canadian dollars, except per share figures Three months ended Six months ended June 30, June 30, 2011 2010 2011 2010 ————- ————- ————- ————- Revenue $ 4,774 $ 5,228 $ 9,047 $ 10,304 —————————————————————————- Expenses Operating 3,936 4,303 7,308 8,719 Depreciation and amortization 450 725 954 1,597 General and administration 354 337 569 498 —————————————————————————- 4,740 5,365 8,831 10,814 —————————————————————————- Earnings (loss) from operations 34 (137) 216 (510) —————————————————————————- Gain on sale to Base 10 Group Inc. – - (590) (274) Share of loss (income) from investment in Base 10 Group Inc. (131) 14 76 239 Gain on sale of property, plant and equipment – - – (1) Interest expense 108 93 198 185 Interest income – (14) (22) (28) —————————————————————————- (23) 93 (338) 121 —————————————————————————- Earnings (loss) from continuing operations 57 (230) 554 (631) Gain on sale of discontinued operations 22 (23) 65 (22) —————————————————————————- Total comprehensive earnings (loss) for the period $ 79 $ (253) $ 619 $ (653) —————————————————————————- —————————————————————————- Earnings (loss) from continuing operations per share – basic and diluted $ 0.00 ($0.01) $ 0.03 ($0.04) —————————————————————————- —————————————————————————- Total comprehensive earnings (loss) per share – basic and diluted $ 0.00 ($0.01) $ 0.04 ($0.04) —————————————————————————- —————————————————————————- Weighted average number of shares outstanding Basic and diluted 17,485,175 17,485,175 17,485,175 17,485,175 —————————————————————————- —————————————————————————-

Non-IFRS Financial Measure

Earnings before interest, taxes, depreciation and amortization("EBITDA") is not a recognized measure under IFRS. Rainmaker believesthat adjusted EBITDA is a measure used by investors in assessing theperformance of Rainmaker and its ability to generate sufficient cashflow. As adjusted EBITDA is a term not defined under IFRS it may notbe comparable to a similar term used in documents of other publicentities.

Rainmaker defines adjusted EBITDA as earnings from continuingoperations before interest expense, interest income, income taxes,depreciation and amortization of property, plant and equipment,amortization of intangible assets, equity investment loss (earnings),gain on sale of property, plant and equipment and compensation costsrelated to stock options.

The following is a reconciliation of adjusted EBITDA to earnings forthe period as calculated in accordance with IFRS:

All amounts in thousands of Canadian dollars Three months Six months ended June 30, ended June 30, 2011 2010 2011 2010 ——— ——— ——— ——— Earnings (loss) from continuing operations $ 57 $ (230) $ 554 $ (631) Add / (deduct): Depreciation and amortization 349 501 740 1,129 Amortization of intangible assets 101 224 214 468 Interest expense 108 93 198 185 Interest income – (14) (22) (28) —————————————————————————- EBITDA $ 615 $ 574 $ 1,684 $ 1,123 —————————————————————————- Share of loss (gain) from Base 10 Group Inc. investment (131) 14 76 239 Gain on sale to Base 10 Group Inc. – - (590) (274) Stock-based compensation 5 3 8 6 Loss (gain) on sale of property, plant and equipment – 23 – 22 —————————————————————————- Adjusted EBITDA $ 489 $ 614 $ 1,178 $ 1,116 —————————————————————————- —————————————————————————-

Results of Operations

Three months ended June 30, 2011 compared to 2010

Revenue decreased $0.5 million to $4.7 million in 2011 from $5.2million in 2010. The decrease in revenue was due to production timingdifferences and the delivery of one less short film completed in2011.

Operating and general and administration expenses

Operating expenses decreased $0.4 million to $3.9 million in 2011from $4.3 million in 2010. The decrease in operating costs is theresult of a one time reduction related to a successful application ofproduction tax credits for a single production from a prior periodthat was previously thought to be unavailable.

General and administration expenses for both 2011 and 2010 were $0.3million. Included in general and administration expenses is a foreignexchange gain of $0.03 million in 2011 and a foreign exchange loss of$0.08 million in 2010.

Depreciation and amortization of property, plant and equipment

Depreciation and amortization of property, plant and equipmentdecreased $0.2 million in 2011 to $0.3 million as compared to $0.5million in 2010 due to decreasing book value of tangible assets in2011 from 2010.

Amortization of intangible assets

Amortization of intangible assets decreased $0.1 million in 2011 to$0.1 million as compared to $0.2 million in 2010. This decrease wasdue to decreasing book value of depreciating assets in 2011 from2010.

Interest expense for both 2011 and 2010 was $0.1 million.

Foreign exchange gain

There was an increase in the foreign exchange gain to $0.03 millionin 2011 from a loss of $0.08 million in 2010. Foreign exchange gainsand losses are grouped with general and administrative expenses onthe consolidated statements of operations and comprehensive income(loss).

Gain from investment in Base 10 Group Inc.

Rainmaker's interest in Base 10 Group Inc. ("Base 10") is reportedusing the equity method. For the three months ended June 30, 2011,Rainmaker reported an equity gain of $0.1 million from thisinvestment compared to nil for 2010. Base 10 reported net income of$0.5 million for the quarter.

Gain on sale to Base 10 Group Inc.

The gain on sale to Base 10 was nil for 2011 and 2010. These gainsare the result of certain revenue targets being met resulting in anearn-out for Rainmaker. Details of the earn-outs are more fullydescribed in Note 6 of the accompanying financial statements.

Earnings from continuing operations

Earnings from continuing operations increased $0.3 million in 2011 to$0.1 million from a loss of $0.2 million in 2010. This increase wasthe result of the Company's reduced operating expenses during thequarter and the Company's share of income from Base 10.

Gain (loss) on sale of discontinued operations

The gain on sale of discontinued operations increased $0.04 millionin 2011 to a gain of $0.02 million from a loss of $0.02 million in2010. This represents the use of service credits more fully describedin Note 5 of the accompanying financial statements.

Total comprehensive earnings for the period

The total comprehensive earnings for the three months ended June 30,2011 increased $0.4 million to $0.1 million from a loss of $0.3million in 2010.

Six months ended June 30, 2011 compared to 2010

Revenue decreased $1.3 million to $9.0 million in 2011 from $10.3million in 2010. The decrease in revenue was due to lower exchangerates on contracts denominated in US currency and one less short filmproduced in 2011.

Operating and general and administration expenses

Operating expenses decreased $1.4 million to $7.3 million in 2011from $8.7 million in 2010. A one time reduction of $1.1 million ofoperating costs was recognized in the first quarter of 2011. Thisreduction was related to a successful application of production taxcredits relating to productions from prior periods that werepreviously thought to be unavailable.

General and administration expenses increased $0.1 million to $0.6million in 2011 from $0.5 million in 2010. Included in general andadministration expenses is a foreign exchange gain of $0.07 millionin 2011 and $0.03 million in 2010.

Depreciation and amortization of property, plant and equipment

Depreciation and amortization of property, plant and equipmentdecreased $0.4 million in 2011 to $0.7 million as compared to $1.1million in 2010 due to decreasing book value of the assets in 2011from 2010.

Amortization of intangible assets

Amortization of intangible assets decreased $0.3 million in 2011 to$0.2 million as compared to $0.5 million in 2010. This decrease wasdue to decreasing book value of depreciating assets in 2011 from2010.

Interest expense for both 2011 and 2010 was $0.2 million.

Foreign exchange gain

There was an increase in the foreign exchange gain of $0.02 millionto $0.07 million in 2011 from $0.03 million in 2010. Foreign exchangegains and losses are grouped with general and administrative expenseson the consolidated statements of operations and comprehensive income(loss).

Loss from investment in Base 10 Group Inc.

Rainmaker's interest in Base 10 is reported on an equity basis. Forthe six months ended June 30, 2011, Rainmaker reported an equity lossof $0.08 million from this investment compared to $0.3 million for2010.

In February 2011 Base 10 repurchased 130,000 shares from one of itsshareholders. On March 31, 2011 Base 10 issued 919,500 new commonshares under option agreements reducing Rainmaker's investment to29.07%. These two equity adjustments resulted in an equity loss of$0.1 million being charged to the consolidated statements ofoperations. Base 10 reported net income of $0.5 million for thequarter.

Gain on sale to Base 10 Group Inc.

The gain on sale to Base 10 increased $0.3 million to $0.6 million in2011 from $0.3 million in 2010. These gains are the result of certainrevenue targets being met resulting in an earn-out for Rainmaker.Details of the earn-outs are more fully described in Note 6 of theaccompanying financial statements.

Earnings from continuing operations

Earnings from continuing operations increased $1.2 million in 2011 to$0.6 million from a loss of $0.6 million in 2010. This increase wasthe result of the Company's reduced operating expenses during thequarter and the increase in the gain on sale as a result of theearn-out from Base 10.

Gain (loss) on sale of discontinued operations

The gain on sale of discontinued operations increased $0.08 millionto a gain of $0.06 million in 2011 from a loss of $0.02 million in2010. This represents the use of service credits more fully describedin Note 5 of the accompanying financial statements.

Total comprehensive earnings for the period

The total comprehensive earnings for the six months ended June 30,2011 increased $1.2 million to $0.6 million from a loss of $0.6million in 2010.

Additional information and other publicly filed documents relating toRainmaker, including the Annual Information Form, are availablethrough 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 containforward-looking statements that involve a number of risks anduncertainty. Among the important factors that could cause actualresults to differ materially from those indicated by suchforward-looking statements are market and general economic conditionsand the risk factors detailed from time to time in the periodicreports and documents filed by the Company with The Toronto StockExchange and other regulatory authorities. Forward-looking statementsare based on the estimates and opinions of management on the date thestatements are made, and the Company undertakes no obligation toupdate the forward-looking statements should there be a change inconditions, or in management's estimates or opinions.

Further information available at: www.rainmaker.com .

The contents of this press release have neither been approved nordisapproved by any regulatory authority.

Contacts: Rainmaker Entertainment Inc. Bryant Pike (604) 714-2600 (604) 714-5990 (FAX) investor@rainmaker.com www.rainmaker.com

SOURCE: Rainmaker Entertainment Inc.

mailto:investor@rainmaker.com http://www.rainmaker.com

Rainmaker Reports Results for the Three and Six Months Ended June 30,
2011