ANIMATION SENSATION: Mainframe Entertainment and Imax will make films like ReBoot (above) with sight and sound sensations.

Companies to produce 3D films for theatres

In a darkened Los Angeles theatre, Ian Pearson watched with awe as massive images from one of his company's films flashed across a large-format screen.

Then he saw the future.

It was about 18 months ago, and Pearson, the president of Vancouver-based Mainframe Entertainment Inc. had accepted a test offer from Imax Corp. of Toronto to transform his 35-mm The Sign of The Seahorse into 70-mm format.

``They had me by the heart,'' recalled Pearson yesterday from his hotel room in Los Angeles. ``I just thought it was the most fantastic thing I had ever seen.''

That screening led to a series of conversations between company executives, culminating in yesterday's announcement: Imax is investing $16 million in Mainframe through the purchase of equity and convertible senior debt.

The two companies said they will co-produce and co-finance 3D, computer-generated films for Imax theatres and other markets. Mainframe also said a group of prominent Canadian institutional investors is buying $10 million of the company's stock.

``This deal provides Imax with a good source of content and gives Mainframe certainty with respect to the production of their films,'' said Karen Fisman, an analyst with First Marathon Securities in Toronto.

With its large-format, giant-screen theatres mushrooming in cities across the planet, Imax has been in search of 3D, animated creative content.

Yesterday's co-production deal will initially involve three films that were already in development at Mainframe, including The Pied Piper, Pandora's Box, and Gulliver's Travels (scheduled to be released in the summer of 2001).

``This wasn't a scatter-shot approach. This was a sniper attack,'' said Pearson, who has meetings planned with executives from Universal, Paramount and Fox studios this week.

With Mainframe's merchandising, toy licensing, home video, direct-to-video, and television capabilities, Pearson believes the company will be able to leverage the Imax brand into new markets. ``This is going to be gangbusters - this is going to be huge.''

Huge. Not unlike the computer-generated film industry itself, which started in 1995 with the seminal release of Pixar's Toy Story. Then the first full-length computer-generated movie, it earned more than $350 million (U.S.) at the box office, raising eyebrows throughout the industry.

In the related realm of animation, four of last year's six animated features soared to the Top 20 for total box-office receipts: Mulan, A Bug's Life, Antz and The Rugrats Movie.

Mainframe's television series include ReBoot, Beasties and Shadowraiders, which air on YTV, Time Warner's Cartoon Network, and the Fox Family Channel in the United States.

Founded in 1993, Mainframe employs more than 240 animators, technicians and production personnel.

The company went public in 1997 with a share issue that raised $63 million, and now trades on the Toronto Stock Exchange.

Financial results released yesterday for the third quarter ended Dec. 31, showed revenue up 66 per cent to $12.1 million from $7.3 million a year earlier. Earnings per share were 6 cents, compared with a net loss of 17 cents a year earlier.

Last month, Imax announced a deal with Walt Disney Co. for an exclusive four-month release of Disney's Fantasia 2000, which will hit Imax theatres beginning next January.

Imax, which had its world debut at Expo 67 in Montreal, now has more than 180 theatres in 25 countries, with more than 75 theatre systems scheduled to open in 15 new countries.

Mainframe shares closed down 15 cents to $2.30 on the TSE yesterday. Imax gained 35 cents to $27.25.