M8 Entertainment Inc. (“M8” or the “Corporation”) (TSE: MEE.MV.A and MEE.SV.B), a leading Canadian film entertainment company engaged in the financing, development, production, and worldwide licensing of theatrical feature films, reported today financial results of operations for the three months ended December 31, 2004.
For the three months ended December 31, 2004, net loss was $2.0 million as compared to net earnings of $0.5 million for the three months ended December 31, 2003. Loss before income taxes was $2.0 million for the three months ended December 31, 2004, as compared to earnings before income taxes of $0.7 million for the three months ended December 31, 2003.
“While no Corporation relishes reporting a loss after so many consecutively profitable quarters,” stated Jenna Sanz-Agero, President of the Corporation, “it is important to recognize the variable nature of this business, where the timing of the availability of a single picture can have a dramatic impact on revenue and earnings for a period. We are confident that the additional sales pending for Havoc, along with sales on our coming slate of films, will be reflected in subsequent financial statements.”
Operating revenue decreased from $9.9 million for the three months ended December 31, 2003 to $4.6 million for the three months ended December 31, 2004.
Production and distribution expenses decreased from $8.1 million for the three months ended December 31, 2003 to $5.3 million for the three months ended December 31, 2004.
“The decrease in revenue was caused primarily by lower than expected revenue recognized for the film Havoc, which, at the time of the financial statements, did not have a North American distributor in place,” stated Devin Cutler, Vice President of Finance and Controller of the Corporation. “In addition, the Corporation took a writedown of approximately $0.5 million on 11:14 and The United States of Leland to bring its ultimate revenue projections in line with current expectations.”
“Despite this first quarterly loss for the Corporation in nine quarters, we are looking forward to the remainder of our fiscal year,” continued Mr. Cutler, “which should see additional revenue recognized from Havoc, as well as substantial revenue from the Corporation's impressive film slate, which includes Lovewrecked, Santa's Slay, Running Scared, and Man About Town.”
Total assets of the Corporation decreased from $104.8 million as of September 30, 2004 to $87.8 million as of December 31, 2004. Likewise, total liabilities of the Corporation decreased by $12.2 million, from $68.2 million as of September 30, 2004 to $56.0 million as of December 31, 2004.
“The decrease in assets mostly involved the payment of certain contractual obligations of the Corporation relating to equity investors in its films, including Monster, Santa's Slay, and The Upside of Anger,” stated Mr. Cutler. “This is evidenced by the decrease in cash and equivalents during the three months ended December 31, 2004 and a corresponding decrease in contractual obligations for the same period. In addition, the Corporation has continued to invest in its current film slate, as evidenced by the increase in film costs for the same three-month period.”
Shareholder's Equity decreased by $4.8 million for the first three months of fiscal year 2005, from $36.6 million as at September 30, 2004 to $31.8 million as at December 31, 2004. However, Shareholder's Equity would have decreased by only $2.1 million if the effects of exchange rate fluctuations between the US Dollar, which is the primary functional currency of the Corporation's continuing business operations, and the Canadian Dollar, which is the reporting currency for the Corporation's consolidated financial statements, were removed. During the first three months of fiscal 2005, the US Dollar fell by nearly 5% against the Canadian Dollar, resulting in a cumulative currency translation adjustment, which reduced Shareholders' Equity by a total of $8.8 million.
“We are very excited about the impending exploitation of the slate of films that the Corporation has invested in over the last year,” stated Sammy Lee, Chairman of the Corporation. “It is gratifying to see the fruits of our labor becoming realized, and we look forward to our financial results reflecting these efforts in coming periods.” |
