Vancouver: A $25-million investment in Mainframe Entertainment by Imax Corporation, Royal Bank Capital and b.c.’s labor-sponsored Working Opportunity Fund is being called a mark of the Vancouver cgi company’s turnaround.

‘It’s the best thing that has happened in awhile,’ says Karen Fisman, entertainment and broadcast analyst at Toronto’s First Marathon Securities.

‘We view both the strategic alliance with Imax and the reorganization of the board of directors as being extremely positive for Mainframe.’

In a flurry of deals sealed July 20, Imax completed its due diligence and 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 to up to 30%.

As part of the deal, originally announced in March, Imax and Mainframe will coproduce 3D computer-generated animated films for release to Imax Theatres and other markets.

Also, Working Opportunity Fund paid $5 million and Royal Bank Capital paid $4 million to acquire convertible notes in Mainframe.

New board members include Imax co-ceos Brad Wechsler and Rich Gelfond; Yad Garcha, vp of GrowthWorks Capital, the management company that administers wof; and Vincent Lum from rbc.

On the first day of trading with the news, Mainframe shares closed up about a dime at $2.04 on the Toronto Stock Exchange.

On the strength of these new developments and Mainframe’s existing animated tv slate, Fisman has put a buy recommendation on the company’s shares. ‘While we expect the company to report dismal fourth quarter results for the year ended March 31, fiscal 2000 will be a turnaround year for Mainframe with forecast earnings in the 15 cents-per-share range,’ said Fisman as the company prepared to post another dismal year in its annual report.

For fiscal 1999, revenue dropped 11% to $15.4 million while the net loss increased 46% to $17 million ($1.23 per share).

While losses are blamed on lower production revenue, writedowns and additional expenses, the drop in revenue is attributed to a reduction in the actual number of episodes delivered.

In fiscal 1999, Mainframe delivered 26 episodes (Beasties and Shadowraiders) compared to 29 episodes last year.

Among the writedowns and expenses are a $1.8-million writedown of the ReBoot series investment, a $900,000 writedown of the Imax Ridefilm investment and a $1.4-million expense for unabsorbed animation overhead.

One line item that has helped spark a 4% increase in overhead costs in 1999 is a $1.3-million payout to Chris Brough, former ceo and vice-chair, who left in June.