Vancouver: On July 20, Working Opportunity Fund (wof) and Royal Bank Capital Corporation (rbc) confirmed their combined $9-million financial stake in Mainframe Entertainment, the fourth Vancouver film industry company to gain their investment trust.

The announcement from rbc and wof, a labor-sponsored b.c. venture capital fund, was combined with news that Imax Corporation had also completed its own $16-million investment in Mainframe, and confirmation that co-founder, ceo and vice-chair Chris Brough had left the company.

However, the news about Brough – who had actually left as early as June – was buried deep in the official Mainframe release that announced the new investment and changes to the board of directors that reflect the new power structure.

In separate interviews, Brough and Mainframe cfo Brett Gannon insist that the former company chief was not fired or pushed out by the new investors.

Instead, they maintain Brough left seven years after starting the company because he wanted to pursue other interests and because his vision for Mainframe was starting to veer away from that of co-founder Ian Pearson, Mainframe’s new ceo.

‘Mainframe was destined to make features,’ says Brough, who still holds 10% of Mainframe’s outstanding shares. ‘I make successful television. I’m going to stay in that arena and allow Ian to go off with a billion-dollar partner to make feature films. [The investment] is an excellent move for Imax and Mainframe. I leave in good spirits – no acrimony, no shouting.’

‘There is no personal conflict,’ echoes Gannon, who adds that Brough’s departure had been planned since this spring. ‘Chris and Ian decided to go their separate ways.’

Pearson was not available for comment.

It was in March, however, when Imax and other unnamed investors first indicated their interest in acquiring financial stakes in Mainframe. The July 20 release is the first to officially identify wof and rbc as the unnamed investors.

‘We invest or don’t invest [in a company] based on how we like or don’t like a certain management team,’ says Yad Garcha, vp of GrowthWorks Capital, the management company that administers wof. ‘We just invested today [July 20], but we had been looking at it for a long time.’

The guts of the

transactions

In the wof/rbc deal, wof pays $5 million and rbc pays $4 million to acquire convertible notes in Mainframe, which a bullish Garcha expects to convert into equity. wof has similar investments in Vancouver’s Red Sky Entertainment, Peach Arch Entertainment (formerly Vidatron Entertainment) and International Keystone Entertainment.

Imax, meanwhile, invested $8 million to acquire a 19% equity stake in Mainframe and $8 million to acquire convertible senior debt which, if converted, could bring Imax’s ownership up to 30%.

As announced in March, Imax and Mainframe will continue to co-produce 3D computer-generated animated films for release to IMAX Theatres and other markets. The first film, Gulliver’s Travels, is in production and is scheduled to be released by summer 2001. Other animated projects currently in development include films based on The Pied Piper and Pandora’s Box.

‘We are convinced more than ever that 3D animation will play a significant role in Imax’s future,” said Imax co-ceos Brad Wechsler and Rich Gelfond.

Disney’s Fantasia 2000 will screen exclusively on Imax screens for four months starting Jan. 1 and Cyberworld – a collection of cgi shorts in 3D – will open next summer. ‘Our relationship with Mainframe allows us to create, produce and distribute our own large-format 3D animation content cost-effectively and to then cross-platform that content into other markets. We’re delighted to be partnered with Ian Pearson and the team at Mainframe in this meaningful venture.”

In the investment transition, Wechsler, Gelfond, Garcha and Vincent Lum from rbc have been appointed to Mainframe’s board. Out are Brough, Mark Ralston and Rowland Perkins.

The feature promise

Meanwhile, a source familiar with Tuesday’s investment announcement indicates Brough had lost the confidence of the investment community by not delivering on promises, such as delivery of Mainframe’s first cgi feature film.

Shareholder value, says the source, will come from Mainframe’s new focus on Imax features that are expected to foster the long-awaited cgi theatrical features able to compete with Disney, Pixar and Dreamworks for screen space.

According to Mainframe, Sign of the Seahorse – the cgi feature that was touted by Brough as the feature film salvation of Mainframe – is still in development without a major studio attached.

Mainframe’s Gannon adds that more value will be realized by developing a catalogue of cgi characters, settings, and other animation elements for feature films that can be repurposed for other media. As an example, he cites the Gulliver’s Travels Imax movie, which may become a Gulliver’s Travels television series with lowered animation costs.

This strategy, Gannon notes, has also been used in the creation of the ReBoot Ridefilms, which borrow from the groundbreaking ReBoot series that set cgi standards for series television.

And in yet another announcement July 20, Mainframe pointed out an addition to its roster of television productions including the new series Weird-Ohs.

Mainframe has an option agreement with Sirius Entertainment to develop a computer-animated television and direct-to-video series based on the children’s novels and comic books, Scary Godmother, by u.s. author Jill Thompson.

Shares on the Toronto Stock Exchange closed July 20 at $1.94 per share compared with the company’s per share high of $6 and low of $1.21 for this year.

Brough’s next steps

Chris Brough, meantime, has formed Pan Pacific Productions, which he describes as a holding investment company for associated entertainment companies.

‘It’s about time we had a United Artists [style of organization] for Canada,’ says Brough, who says he’s doing due diligence on the acquisition of four western Canadian companies, including one or more that may be public.

He promises to announce more details about the acquisitions in August.