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To: Sleeperz who wrote (130)	8/9/1997 12:35:00 PM
From: JAMES BORECKI	of 459

CR, Great find. I'm a little confused by their suggestion of a release in the Summer of 98. I wonder if it is a summer replacement to run for 2 months or a test to see how it will be accepted. How many episodes are being made, does anyone know? The press release gives a great spin on both MDK and MFE. I just doubled my position in MFE @ 8.80 yesterday. A release date for next summer makes me wonder, however, if I was a little premature. Those profits will not show up for another 4Q's. I wonder what projects will show up in the next Q-presentation. <G>The stock just came out and we are already into watching Q to Q performance. I feel very naive right now, not knowing if this is or ever was a speculative stock. I'm pretty new to the market, only a year and a half, so if anyone can paint a picture for me of what we are looking for before we get a rise out of the stock price I would deeply appreciate it. JimBo

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To: JAMES BORECKI who wrote (131)	8/11/1997 2:58:00 PM
From: D.E. Shetland	of 459

Accounting vs. Reality On your question of earn ings impact, recognition of revenues etc... and stock price movement. I think it's important to seperate the two elements. entertainment is a bit like construction or engineering. You work on a project over a number of months or years and you it's not valuable until it's completed and delivered. You can either estimate the delivery time and what percentage of the project you are "complete" or you can book all the revenue and earnings when it is finished, delivered and finally sold (percentage completion vs. final delivery). MFE uses the more conservative FASB 53 which only recognizes revenues in the accounting statements when the "...finished product hsa been delivered to and accepted by the licensee." Anything received in advance is deferred revenue, offset by capitalized production costs. They attempt to match the expenses with the total future revenues. I don't know their policy, but I think they assume fairly small revenues other than those they already know from the sale of the shows, or in the case of Beast Wars, the sponsors. I suppose as additional revenue sources are developed (international licensing, games, merchandising, etc...) they can put some expenses against those to. I would guess they are being pretty conservative in applying these rules. So, Jimbo, you're correct. We won't see the actual revenues and income for MDK until 1998. However, neither will the expenses hit the income statement either. They will be matched. Also, we don't know have these contracts are worked out. One could try to get a chunk of the fee/episode considered a "production fee" --something like a consulting-type fee that is earned each month --or maybe a "computer/software" usage fee or something like that. In that way, you can recognize some of the revenue/income. I don't know exactly what they do, but I think they're pretty conservative and don't do much in that way. It would also mean that the JV partners would have to stump up some money up-front and along the way with no guarantee MDK would sell or be completed. I would think they will not spend a lot on MDK until they have some sponsorship to take that risk and the probability of MFE not producting a dozen episodes of something is low given their track record. But the key to the share price IMO is that these represent very predictable, profitable growth and further enhancement to the "intrinsic" value of MFE. They will be able to spread the cost base of 200 people, the CGI equip, the Production facilities etc.. over a much larger revenue base, build up their royalties and residuals and so on.... The share price should reflect future developments. Who cares when the accounting world lets you recognize income. Each show, movie, game, IMAX deal just builds it up more. It hasn't hurt Pixar to recognize income for Toy Story in one year even though it took them 4 years. MFE, I believe, will have smoother earnings and can hopefully dovetail a movie in ever 2-3 years. That's all it would take. Who knows? Anyway, I wouldn't worry that the accounting earnings hit in 98. The stock will move as they continue to develop projects. We just need an analyst or two to discover what these guys are doing in Vancouver.

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To: Sleeperz who wrote (134)	8/12/1997 9:00:00 AM
From: D.E. Shetland	of 459

MDK is new since the IPO and it appears to be a pretty good deal - no financial risk up front, possible royalties on spin-offs etc... I agree with CR --given the tightly held nature of the shares, the illiquidity, when (& if) they do announce either another TV series or movie or just keep adding on the production slate --it will significantly enhance the value fo the company. From what I've read and what I've been able to research with various other animators and H-wood producers, they're definately considered a major CGI animoator already. They are put in the league with a Pixar, PDI, ILM etc... in creativity and skill. They are a very new company and the name isn't always familiar. But the people who need to know, know MFE. My bet is the share will start to get support when more TV stuff comes out and will move strongly when the movie deal gets fully worked out. They have publicly discussed the Warner Bros/Sign of Seahorse movie --for all we know, they've got 2 or 3 others they're working on to develop with other people? CR is correct --we should be seeing some reports from the three bankers --First marathon, WoodGundy, Yorkton. Hopefully some other guys who follow media will pick up on it too. Given the success of Cinar etc... there must be a market for MFE too.

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To: Sleeperz who wrote (134)	8/12/1997 10:42:00 AM
From: D.E. Shetland	of 459

MAINFRAME ENTERTAINMENT, INC. APPOINTS NEW CHIEF FINANCIAL OFFICER VANCOUVER, Aug 12 /CNW/ - Brett Gannon has joined Canadian computer animation firm Mainframe Entertainment, Inc. as the company's new Chief Financial Officer, Mainframe President and CEO Christopher Brough announced today. Mr. Gannon will be responsible for all financial operations of the company including investor relations and public reporting. Over the past ten years Mr. Gannon has been the Chief Financial Officer for a number of publicly traded Canadian companies which operated in several sectors including distribution, manufacturing and research and development, including Kimpex International and Bionaire, Inc. This is Mr. Gannon's first posting in Vancouver. ``Mainframe is well-recognized as an industry leader in the computer animation field,'' said Gannon. ``I'm very pleased to be joining the company at this most exciting point in its unprecedented evolution in cyber-entertainment.'' Mainframe Entertainment, Inc., a world leader in 3D computer animation, produces state-of-the-art animation for television, motion pictures, interactive media and motion rides from its digital studio in Vancouver. Mainframe's staff has grown to over 200 since the company's start in 1993. The company produces the award-winning TV series ReBoot(TM), which was the first ever 100 per cent computer animated television series, now in its third season of production. Mainframe also produces the highly rated Beast Wars(TM) -- Transformers(TM), the company's second all CGI production, now in its second season. Both programs are seen in over 60 countries around the world. Additionally, Mainframe is producing two films, based on the ReBoot(TM) series, in conjunction with the IMAX(R) Ridefilm(TM) motion simulation system, due for worldwide release in Fall 1997 and early 1998. Mainframe and Electronic Arts, a world leader in the development of computer games, are producing a computer game based on the ReBoot(TM) property. Entitled ``Countdown to Chaos,'' the game features real-time animation produced at Mainframe. The game debuted at the E3 trade show and convention this summer in Atlanta, and will be released worldwide in the Fall of this year. Mainframe also develops and owns a number of proprietary software programs that enhance and accelerate animation production processes, and manages a highly successful merchandising and licensing program based on its properties. Mainframe Entertainment Inc. is publicly traded on The Toronto Stock Exchange under the trading symbol MFE. -30- For further information: Mairi Welman (604) 681-3595

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To: Richard Lam who wrote (137)	8/15/1997 1:22:00 PM
From: D.E. Shetland	of 459

I'm not sure when a full report will be out & neither does my contact up in Toronto. Maybe they'll wait for a few more developments before publishing a full report. It's nice to see it's on a "Focus List" though. Unfortunately in this type of market, no one will move on a new company like this until an analyst report lands on their desk showing them how to make 50-100% in the next 12 months. At least it looks like the silly hot money from the IPO is all out of the stock and it's settled around $9. There don't appear to be many sellers around. I continue to monitor the UseNet comments on ReBoot 3 and it's getting more good reviews. Hopefully there will be some fanfare when it's relaunched in N.America.

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