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Cinar Releases Six Month Financial Report

Cinar Corporation has released a letter to shareholders providing its financial information for the six-month period ended May 31, 2001. President and chief executive officer Barrie Usher stressed in the opening of the letter that the report is unaudited because "current senior management cannot presently provide the required assurances with respect to financial periods prior to its appointment." The troubled firm had some positive developments in the past six months, including the okay by Telefilm Canada, a Canadian government funding organization, to develop official co-productions. The company had been previously sanctioned by Telefilm due to fraudulent actions by Cinar to obtain government tax credits. In addition, Cinar is slowly regaining funds that were previously invested in Globe-X Management by former officials without board approval. Since April 6, 2001, the company has received US$2.1 million, leaving a balance of US$43.1 million still owed. Consolidated revenues for the six-month period ended May 31, 2001 were CA$66.1 million, an increase of 5% over the $62.8 million of revenues earned the year before. Entertainment revenues decreased from $25.3 million in 2000 to $21.6 million in 2001, largely due to a drop in the current level of production. Education revenues increased from $37.5 million to $44.6 million, a 19% increase. Gross margin increased from $27 million to $31.4 million. Selling, general and administrative expenses increased from $22.4 million to $31.8 million largely due to foreign taxes paid in prior periods, which the company will not likely be able to recoup, as well as an increase in employment expenses in both the Entertainment and Education divisions. In addition, the increase is attributable to the acquisition of Twin Sisters in February of 2000. During the six months, Cinar has commenced production on new episodes of their series ARTHUR, CAILLOU and MONA THE VAMPIRE. On the licensing front, Cinar has signed a deal with Irwin Toys to introduce U.S. retailers to the CAILLOU product line.

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