UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2009

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

IMAX Corporation

Canada		98-0140269
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)
2525 Speakman Drive,		L5K 1B1
Mississauga, Ontario, Canada		(Postal Code)
(Address of principal executive offices)

N/A
(Former name or former address, if changed since last report)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer   o (Do not check if a smaller reporting company)		Smaller Reporting Company o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     Indicate the number of shares of each of the issuer’s classes of common stock, as of the latest practicable date:

Class		Outstanding as of April 30, 2009
Common stock, no par value		43,730,631

 

 

IMAX CORPORATION

Table of Contents

		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements			4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			37
Item 3. Quantitative and Qualitative Factors about Market Risk			61
Item 4. Controls and Procedures			62
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			62
Item 1A. Risk Factors			62
Item 4. Submission of Matters to a Vote of Security Holders			63
Item 5. Other Information			63
Item 6. Exhibits			63
Signatures			64
EX-10.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

IMAX CORPORATION

SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

     Certain statements included in this quarterly report may constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, references to future capital expenditures (including the amount and nature thereof), business and technology strategies and measures to implement strategies, competitive strengths, goals, expansion and growth of business, operations and technology, plans and references to the future success of IMAX Corporation together with its wholly-owned subsidiaries (the “Company”) and expectations regarding the Company’s future operating, financial and technological results. These forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. However, whether actual results and developments will conform with the expectations and predictions of the Company is subject to a number of risks and uncertainties, including, but not limited to: general economic, market or business conditions, including the length and severity of the current economic downturn; the effect of the current economic downturn and credit market disruption on the Company’s ability to refinance its existing indebtedness and on the Company’s movie exhibitor customers; the opportunities (or lack thereof) that may be presented to and pursued by the Company; competitive actions by other companies; the performance of IMAX DMR films; conditions in the in-home and out-of-home entertainment industries; the signing of theater system agreements; changes in laws or regulations; conditions, changes and developments in the commercial exhibition industry; the failure to convert theater system backlog into revenue; risks associated with the Company’s transition to a digitally-based projector; risks associated with investments and operations in foreign jurisdictions and any future international expansion, including those related to economic, political and regulatory policies of local governments and laws and policies of the United States and Canada; the potential impact of increased competition in the markets the Company operates within; risks related to foreign currency fluctuations; risks related to the Company’s prior restatements and the related litigation and ongoing inquiries by the Securities and Exchange Commission (the “SEC”) and the Ontario Securities Commission; and other factors, many of which are beyond the control of the Company. Consequently, all of the forward-looking statements made in this annual report are qualified by these cautionary statements, and actual results or anticipated developments by the Company may not be realized, and even if substantially realized, may not have the expected consequences to, or effects on, the Company. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking information, whether as a result of new information, future events or otherwise.

IMAX^®, IMAX^® Dome, IMAX^® 3D, IMAX^® 3D Dome, Experience It In IMAX^®, The IMAX Experience ^®, An IMAX Experience^®,
IMAX DMR^®, DMR^®, IMAX MPX^®, IMAX think big^® and think big^® are trademarks and trade names of the Company or its
subsidiaries that are registered or otherwise protected under laws of various jurisdictions.

IMAX CORPORATION

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

		Page
The following Condensed Consolidated Financial Statements are filed as part of this Report:
Condensed Consolidated Balance Sheets as at March 31, 2009 and December 31, 2008			5
Condensed Consolidated Statements of Operations for the three month period ended March 31, 2009 and 2008			6
Condensed Consolidated Statements of Cash Flows for the three month period ended March 31, 2009 and 2008			7
Notes to Condensed Consolidated Financial Statements			8

IMAX CORPORATION

		March 31,				December 31,
		2009				2008
		(unaudited)
Assets
Cash and cash equivalents		$	18,721			$	27,017
Accounts receivable, net of allowance for doubtful accounts of $2,808 (December 31, 2008 — $2,901)			24,822				22,982
Financing receivables (note 3)			57,452				56,138
Inventories (note 4)			15,863				19,822
Prepaid expenses			3,071				1,998
Film assets			3,629				3,923
Property, plant and equipment (note 5)			45,237				39,405
Other assets (note 19(c))			16,945				16,074
Goodwill			39,027				39,027
Other intangible assets (note 6)			2,214				2,281
Total assets		$	226,981			$	228,667
Liabilities
Bank indebtedness (note 8)		$	20,000			$	20,000
Accounts payable			16,205				15,790
Accrued liabilities (notes 9(a), 9(c), 10, 15(a), 17(a), 17(c), 19(c))			64,108				58,199
Deferred revenue			65,187				71,452
Senior Notes due December 2010 (note 7)			160,000				160,000
Total liabilities			325,500				325,441
Commitments and contingencies (notes 9 and 10)
Shareholders’ deficiency
Capital stock (note 15) common shares — no par value. Authorized — unlimited number. Issued and outstanding — 43,730,631 (December 31, 2008 — 43,490,631)			142,430				141,584
Other equity			5,728				5,183
Deficit			(249,651	)			(247,009	)
Accumulated other comprehensive income			2,974				3,468
Total shareholders’ deficiency			(98,519	)			(96,774	)
Total liabilities and shareholders’ deficiency		$	226,981			$	228,667

(the accompanying notes are an integral part of these condensed consolidated financial statements)

IMAX CORPORATION

		Three Months
		Ended March 31,
		2009				2008
Revenues
Equipment and product sales		$	13,360			$	6,698
Services (note 11(c))			14,887				14,207
Rentals (note 11(c))			3,247				1,544
Finance income			1,012				1,071
Other			1,216				—
			33,722				23,520
Costs and expenses applicable to revenues
Equipment and product sales (note 11(a))			7,241				2,965
Services (note 11(a))			9,940				9,689
Rentals (note 11(a))			2,166				730
Other			245				—
			19,592				13,384
Gross margin			14,130				10,136
Selling, general and administrative expenses (note 11(b))			10,904				12,387
Research and development			547				2,488
Amortization of intangibles			145				133
Receivable provisions net of recoveries (note 13)			510				748
Income (loss) from operations			2,024				(5,620	)
Interest income			21				126
Interest expense			(4,427	)			(4,496	)
Loss from continuing operations before income taxes			(2,382	)			(9,990	)
Provision for income taxes			(260	)			(269	)
Net loss		$	(2,642	)		$	(10,259	)
Loss per share — basic & diluted:
Net loss		$	(0.06	)		$	(0.25	)
Comprehensive loss consists of:
Net loss		$	(2,642	)		$	(10,259	)
Amortization of prior service cost (credits) (net of income tax provision of $10 and recovery of $17 for the three months ended March 31, 2009 and 2008, respectively)			26				(45	)
Amortization of actuarial gain on defined benefit plan (net of income tax recovery of $47 for the three months ended March 31, 2009)			(123	)			—
Unrealized hedging loss (net of income tax recovery of $47 for the three months ended March 31, 2009)			(482	)			—
Realization of hedging losses upon settlement (net of income tax provision of $nil for the three months ended March 31, 2009)			85				—
		$	(3,136	)		$	(10,304	)

(the accompanying notes are an integral part of these condensed consolidated financial statements)

IMAX CORPORATION

		Three Months
		Ended March 31,
		2009				2008
Cash provided by (used in):
Operating Activities
Net loss		$	(2,642	)		$	(10,259	)
Items not involving cash:
Depreciation and amortization (note 12(c))			3,993				4,203
Write-downs net of recoveries (note 13)			510				748
Change in deferred income taxes			84				17
Stock and other non-cash compensation			855				1,257
Foreign currency exchange loss			814				191
Change in cash surrender value of life insurance			(19	)			(13	)
Investment in film assets			(2,169	)			(2,445	)
Changes in other non-cash operating assets and liabilities (note 12(a))			(3,358	)			9,443
Net cash (used in) provided by operating activities			(1,932	)			3,142
Investing Activities
Purchase of property, plant and equipment			(343	)			(1,766	)
Investment in joint revenue sharing equipment			(7,022	)			—
Acquisition of other assets			(187	)			(78	)
Acquisition of other intangible assets			(78	)			(95	)
Net cash used in investing activities			(7,630	)			(1,939	)
Financing Activities
Common shares issued — stock options exercised			846				266
Net cash provided by financing activities			846				266
Effects of exchange rate changes on cash			420				(309	)
(Decrease) increase in cash and cash equivalents, during the period			(8,296	)			1,160
Cash and cash equivalents, beginning of period			27,017				16,901
Cash and cash equivalents, end of period		$	18,721			$	18,061

(the accompanying notes are an integral part of these condensed consolidated financial statements)

IMAX CORPORATION

1. Basis of Presentation

     IMAX Corporation, together with its wholly-owned subsidiaries (the “Company”), reports its results under United States Generally Accepted Accounting Principles (“U.S. GAAP”).

     The condensed consolidated financial statements include the accounts of the Company, except for subsidiaries which the Company has identified as variable interest entities (“VIEs”) where the Company is not the primary beneficiary. The nature of the Company’s business is such that the results of operations for the interim periods presented are not necessarily indicative of results to be expected for the fiscal year. In the opinion of management, the information contained herein reflects all adjustments necessary to make the results of operations for the interim periods a fair statement of such operations.

     The Company has evaluated its various variable interests to determine whether they are VIEs in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 46R, “Consolidation of Variable Interest Entities” (“FIN 46R”). The Company has 7 film production companies that are VIEs. As the Company is exposed to the majority of the expected losses for 2 of the film production companies, the Company has determined that it is the primary beneficiary of these entities. The Company continues to consolidate these entities, with no material impact on the operating results or financial condition of the Company, as these production companies have total assets and total liabilities of less than $0.1 million as at March 31, 2009 (December 31, 2008 — less than $0.1 million). For the other 5 film production companies which are VIEs, the Company did not consolidate these film entities since it does not bear the majority of the expected losses or expected residual returns. The Company equity accounts for these entities. As at March 31, 2009, these 5 VIEs have total assets of $0.3 million (December 31, 2008 — less than $0.1 million) and total liabilities of $0.3 million (December 31, 2008 — less than $0.1 million). Earnings of the investees included in the Company’s condensed consolidated statement of operations amounted to $nil for the three months ended March 31, 2009 (March 2008 — $nil). The carrying value of these investments in VIEs that are not consolidated is $nil at March 31, 2009 (December 31, 2008 — $nil). A loss in value of an investment other than a temporary decline is recognized as a charge to the consolidated statement of operations.

     All significant intercompany accounts and transactions, including all unrealized intercompany profits on transactions with equity-accounted investees, have been eliminated.

     The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP.

     These interim financial statements should be read in conjunction with the consolidated financial statements included in the Company’s 2008 Annual Report on Form 10-K for the year ended December 31, 2008 (the “2008 Form 10-K”) which should be consulted for a summary of the significant accounting policies utilized by the Company. These interim financial statements are prepared following accounting policies consistent with the Company’s financial statements for the year ended December 31, 2008, except as noted below.

2. Changes in Accounting Policies

     In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”) which defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States of America, and expands disclosures about fair value measurements. In February 2008, the FASB issued FASB Staff Position 157-2, “Effective Date of FASB Statement No. 157” (“FSP FAS 157-2”). FSP FAS 157-2 delayed the effective date of SFAS 157 for all non-financial assets and non-financial liabilities that are not remeasured at fair value on a recurring basis until fiscal years beginning after November 15, 2008. In October 2008, the FASB issued FASB Staff Position 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active” (“FSP FAS 157-3”). FSP FAS 157-3 clarifies the application of SFAS 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. For financial assets and financial liabilities, SFAS 157 was effective for the Company on January 1, 2008, on a prospective basis. The application of SFAS 157, as amended by SFAS 157-3, to the financial assets and financial liabilities did not have a material effect on the Company’s financial condition or results of operations as of January 1, 2008. For non-financial assets and non-financial liabilities, SFAS 157 was effective for the Company on January 1, 2009, on a prospective basis. The application of SFAS 157, as amended, to the non-financial assets and non-financial liabilities did not have a material effect on the Company’s financial condition or results of operations.

     In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”), which identifies a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. GAAP for nongovernmental entities. SFAS 162 is effective 60 days following the Securities and Exchange Commission’s (“SEC’s”) approval of the Public Company Accounting Oversight Board (“PCAOB”) amendments to Proposed Auditing Standard Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles”. In 2008, the Company adopted SFAS 162. The application of SFAS 162 had no impact on the Company’s financial condition or results of operations as the accounting principles used to prepare its financial statements are in accordance with the SFAS 162 framework and therefore in conformance with U.S. GAAP.

     In December 2008, the FASB issued FASB Staff Position Financial Accounting Standard 140-4 and FASB Interpretation No. 46R-8, “Disclosures by Public Entities (Enterprises) about Interests in Variable Interest Entities” (“FSP FAS 140-4 and FIN 46(R)-8”), to require public enterprises to provide additional disclosures about their involvement with variable interest entities as defined in FIN 46R. Additional disclosures include disclosures of the significant judgments and assumptions made in determining whether or not to consolidate a variable interest entity, the nature of restrictions on the consolidated variable interest entity’s assets, the nature of, and changes in, the risks associated with the Company’s involvement with the variable interest entity and how the Company’s involvement affects its financial position, financial performance, and cash flows. FSP FAS 140-4 and FIN 46(R)-8 is effective for the first reporting period ending after December 15, 2008. In 2008, the Company adopted FSP FAS 140-4 and FIN 46(R)-8. The application of FSP FAS 140-4 and FIN 46(R)-8 had no material impact on the Company’s financial condition or results of operations as presented in note 1.

     In December 2007, the FASB issued Statement of Financial Accounting Standard No. 160, “Non-controlling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51” (“SFAS 160”). The objective of SFAS 160 is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The Company adopted SFAS 160 on January 1, 2009. The application of SFAS 160 did not have an effect on the Company’s financial condition or results of operations.

     In December 2007, the FASB ratified the Emerging Issues Task Force consensus No. 07-01, “Accounting for Collaborative Arrangements” (“EITF 07-01”). The objective of the EITF 07-01 is to define collaborative arrangements and establish reporting requirements for transactions between participants in a collaborative arrangement and between participants in the arrangement and third parties that are not specifically addressed within the scope of other authoritative accounting literature. EITF 07-01 also establishes the appropriate income statement presentation and classification for joint operating activities and payments between participants, as well as the sufficiency of the disclosures related to these arrangements. EITF 07-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2008. EITF 07-01 is to be applied as a change in accounting principle through retrospective application to all prior periods presented for all collaborative arrangements existing as of the effective date, unless it is impracticable to do so. The Company adopted EITF 07-01 on January 1, 2009. The application of EITF 07-01 did not have an effect on the Company’s financial condition or results of operations. In accordance with EITF 07-01, the Company has expanded its disclosures as presented in note 11(c).

     In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an Amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 amends and expands the disclosure requirements of SFAS 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”), in order to provide users of financial statements with an enhanced understanding of (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations; and (c) how derivative instruments and related hedge items affect an entity’s financial position, financial performance, and cash flows. The statement requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts and gains and losses on derivative instruments, and disclosures about credit-risk related contingent features in derivative agreements. SFAS 161 is effective for fiscal years beginning after November 15, 2008. On January 1, 2009, the Company adopted SFAS 161 and, accordingly, has expanded its disclosures as presented in note 19.

     In April 2008, the FASB issued FASB Staff Position 142-3, “Determination of the Useful Lifes of Intangible Assets”, (“FSP 142-3”). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. The intent of the FSP is to improve the consistency between the useful life of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”) and the period of expected cash flows used to measure the fair value of the asset. Specifically, the Company is required to use its own historical experience in renewing or extending the estimated life of an intangible asset as opposed to legal, regulatory or contractual provisions that enable renewal or extension of the asset’s legal or contractual life without substantial cost. FSP 142-3 is effective for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years, on a prospective basis. Early adoption is prohibited. Intangible assets acquired after January 1, 2009 are accounted for in accordance with SFAS 142, as amended by FSP 142-3, and the required disclosure is presented in note 6.

3. Financing Receivables

     Financing receivables, consisting of net investment in sales-type leases and receivables from financed sales of theater systems are as follows:

		March 31,				December 31,
		2009				2008
Gross minimum lease payments receivable		$	71,059			$	72,100
Unearned finance income			(22,901	)			(23,558	)
Minimum lease payments receivable			48,158				48,542
Accumulated allowance for uncollectible amounts			(5,001	)			(4,884	)
Net investment in leases			43,157				43,658
Gross receivables from financed sales			21,123				18,515
Unearned financed income			(6,828	)			(6,035	)
Net financed sale receivables			14,295				12,480
Total financing receivables		$	57,452			$	56,138
Net financed sale receivables due within one year		$	2,518			$	1,948
Net financed sale receivables due after one year		$	11,777			$	10,532

     As at March 31, 2009, the financed sale receivables had a weighted average effective interest rate of 9.8% (December 31, 2008 — 9.5%).

4. Inventories

		March 31,				December 31,
		2009				2008
Raw materials		$	5,369			$	6,392
Work-in-process			949				1,863
Finished goods			9,545				11,567
		$	15,863			$	19,822

     At March 31, 2009, finished goods inventory for which title had passed to the customer and revenue was deferred amounted to $6.1 million (December 31, 2008 — $5.5 million).

     Inventories at March 31, 2009 include provisions for excess and obsolete inventory based upon current estimates of net realizable value considering future events and conditions of $5.3 million (December 31, 2008 — $5.3 million).

5. Property, Plant and Equipment

		As at March 31, 2009
						Accumulated				Net Book
		Cost				Depreciation				Value
Equipment leased or held for use
Theater system components(1)(2)		$	53,076			$	27,520			$	25,556
Camera equipment			5,954				5,954				—
			59,030				33,474				25,556
Assets under construction(3)			5,375				—				5,375
Other property, plant and equipment
Land			1,593				—				1,593
Buildings			14,723				8,028				6,695
Office and production equipment(4)			28,213				24,854				3,359
Leasehold improvements			8,272				5,613				2,659
			52,801				38,495				14,306
		$	117,206			$	71,969			$	45,237

		As at December 31, 2008
						Accumulated				Net Book
		Cost				Depreciation				Value
Equipment leased or held for use
Theater system components(1)(2)		$	48,474			$	29,007			$	19,467
Camera equipment			5,954				5,953				1
			54,428				34,960				19,468
Assets under construction(3)			5,063				—				5,063
Other property, plant and equipment
Land			1,593				—				1,593
Buildings			14,723				7,902				6,821
Office and production equipment(4)			28,006				24,371				3,635
Leasehold improvements			8,272				5,447				2,825
			52,594				37,720				14,874
		$	112,085			$	72,680			$	39,405

6. Other Intangible Assets

		As at March 31, 2009
						Accumulated				Net Book
		Cost				Amortization				Value
Patents and trademarks		$	6,435			$	4,279			$	2,156
Intellectual property rights			100				42				58
Other			250				250				—
		$	6,785			$	4,571			$	2,214

		As at December 31, 2008
						Accumulated				Net Book
		Cost				Amortization				Value
Patents and trademarks		$	6,357			$	4,137			$	2,220
Intellectual property rights			100				39				61
Other			250				250				—
		$	6,707			$	4,426			$	2,281

     The Company expects to amortize approximately $0.4 million of other intangible assets for the remainder of 2009 and $0.5 million for each of the next 5 years, respectively. Fully amortized other intangible assets are still in use by the Company.

     During the quarter ended March 31, 2009, the Company acquired less than $0.1 million in patents and trademarks. The residual value of these patents and trademarks was less than $0.1 million as at March 31, 2009. The weighted average amortization period for these additions was 10 years.

     During the quarter ended March 31, 2009, the Company did not incur costs to renew or extend the term of acquired other intangible assets.

7. Senior Notes due December 2010

     As at March 31, 2009 the Company had outstanding $160.0 million (December 31, 2008 — $160.0 million) in principal amount of Senior Notes due December 1, 2010 (the “Senior Notes”).

     The Senior Notes bear interest at a rate of 9.625% per annum and are unsecured obligations that rank equally with any of the Company’s existing and future senior indebtedness and senior to all of the Company’s existing and future subordinated indebtedness. The payment of principal, premium, if any, and interest on the Senior Notes is unconditionally guaranteed, jointly and severally, by certain of the Company’s wholly-owned subsidiaries. Interest is paid on a semi-annual basis on June 1 and December 1. The Senior Notes are subject to redemption for cash by the Company, in whole or in part, from April 1, 2009 to November 30, 2009 at 102.406%, together with accrued and unpaid interest thereon to the redemption date. Beginning December 1, 2009, and thereafter, the Senior Notes will be redeemable by the Company at 100.000%, together with accrued and unpaid interest thereon to the redemption date. If certain changes were to result in the imposition of withholding taxes under Canadian law, the Senior Notes are subject to redemption at the Company’s option, in whole but not in part, at a redemption price of 100% of the principal amount thereof plus accrued and unpaid interest to the date of redemption. In the event of a change in control, the Company will be required to make an offer to repurchase the Senior Notes at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase.

     The terms of the Company’s Senior Notes impose certain restrictions on its operating and financing activities, including certain restrictions on the Company’s ability to: incur certain additional indebtedness; make certain distributions or certain other restricted payments; grant liens; make certain dividends and other payment restrictions affecting the Company’s subsidiaries; sell certain assets or merge with or into other companies; and enter into certain transactions with affiliates. The Company believes these restrictions will not have a material impact on its financial condition or results of operations.

8. Credit Facility

     Under the indenture, dated as at December 4, 2003, and as thereafter amended and supplemented, governing the Company’s Senior Notes due December 2010 (the “Indenture”), the Company is permitted to incur indebtedness on a secured basis pursuant to a credit agreement, or the refinancing or replacement of a credit facility, provided that the aggregate principal amount of indebtedness thereunder outstanding at any time does not exceed the greater of: (a) $30.0 million minus the amount of any such indebtedness retired with the proceeds of an Asset Sale (as defined in the Indenture); and (b) 15% of Total Assets (as defined in the Indenture) of the Company. Amongst other indebtedness, the Indenture also permits the Company to incur indebtedness solely in respect of performance, surety or appeal bonds, letters of credit and letters of guarantee as required in the ordinary course of business in accordance with customary industry practices.

     On February 6, 2004, the Company entered into a Loan Agreement for a secured revolving credit facility, as amended on June 30, 2005, May 16, 2006, November 7, 2007, December 5, 2007 and May 5, 2008 (the “Credit Facility”). The Credit Facility is a revolving credit facility expiring on October 31, 2010.

     The Credit Facility permits maximum aggregate borrowings equal to the lesser of:

	(i)		$40.0 million,
	(ii)		a collateral calculation based on percentages of the book values for the Company’s net investment in sales-type leases, financing receivables, finished goods inventory allocated to backlog contracts and the appraised values of the expected future cash flows related to operating leases and of the Company’s owned real property, reduced by certain accruals and accounts payable, and
	(iii)		a minimum level of trailing cash collections in the preceding twenty-six week period ($63.4 million as at March 31, 2009),

reduced for outstanding letters of credit and advance payment guarantees and subject to maintaining a minimum Excess Availability (as defined in the Credit Facility) of $5.0 million.

     The Credit Facility, which is collateralized by a first priority security interest in all of the current and future assets of the Company, contains typical affirmative and negative covenants, including covenants that restrict the Company’s ability to: incur certain additional indebtedness; make certain loans, investments or guarantees; pay dividends; make certain asset sales; incur certain liens or other encumbrances; conduct certain transactions with affiliates and enter into certain corporate transactions. In addition, the Credit Facility agreement contains customary events of default, including upon an acquisition or a change of control that may have a material adverse effect on the Company or a guarantor. As at March 31, 2009, the Company was in compliance with all covenants under the agreement.

     On May 5, 2008, the Company entered into an amendment to the Credit Facility, effective January 1, 2008, whereby the minimum Cash and Excess Availability (as defined in the Credit Facility) requirement was reduced from $15.0 million to $7.5 million. The Credit Facility had previously required the Company to maintain, over a period of time, a minimum level of adjusted earnings before interest, taxes, depreciation and amortization including film asset amortization, stock and non-cash compensation, write downs (recoveries), asset impairment charges, and other non-cash uses of funds on a trailing four quarter basis calculated quarterly, of not less than $20.0 million (the “EBITDA Requirement”). Under the current terms of Credit Facility, the Company shall not be subject to an EBITDA Requirement so long as the Company is in compliance with the Cash and Excess Availability requirement. The amendment also provided for a one-year extension of the expiration of the Credit Facility to October 31, 2010 and adjusted the collateral calculation for certain finished goods inventory items to be installed under joint revenue sharing arrangements, which could result in an increase to maximum aggregate borrowings of up to $3.0 million in the future. Under the amended terms of the Credit Facility, in the event that the Company’s Excess Availability falls below the $5.0 million requirement, the excess borrowings above the minimum availability requirement must be remedied immediately. Failure to remedy would result in a Cash Dominion Event and an Event of Default (as defined in the Credit Facility). The failure to comply with the Cash and Excess Availability requirement of $7.5 million would also result in an immediate Cash Dominion Event and an Event of Default. If the Credit Facility were to be terminated by either the Company or the lender, the Company would have the right to pursue another source of secured financing pursuant to the terms of the Indenture.

     As at March 31, 2009, the Company’s current borrowing capacity under the Credit Facility (which is also limited under the terms of the Indenture) was $11.6 million after deduction for outstanding borrowings of $20.0 million, letters of credit and advance payment guarantees of $0.3 million and the minimum Excess Availability of $5.0 million, compared with a borrowing capacity, as at December 31, 2008, of $10.5 million after deduction for outstanding borrowings of $20.0 million, letters of credit and advanced payment guarantees of $1.4 million and the minimum excess availability reserve of $5.0 million.

     The Credit Facility bears interest at the applicable prime rate per annum or LIBOR plus a margin as specified therein. As at March 31, 2009, outstanding borrowings bear interest at the LIBOR rate plus an applicable margin. The effective interest rate for the three months ended March 31, 2009 was 2.27% under the Credit Facility.

Bank of Montreal Facilities

     As at March 31, 2009, the Company has available a $10.0 million facility (December 31, 2008 — $10.0 million) with the Bank of Montreal for use solely in conjunction with the issuance of performance guarantees and letters of credit fully insured by Export Development Canada (the “Bank of Montreal Facility”). As at March 31, 2009, the Company also has letters of credit outstanding of $5.7 million as compared to $5.2 million as at December 31, 2008, under the Bank of Montreal Facility.

     As at March 31, 2009, the Company has available a $5.0 million (December 31, 2008 — $5.0 million) facility solely used to cover the Company’s settlement risk on its purchased foreign currency forward contracts. The facility is fully insured by Export Development Canada. As at March 31, 2009, the settlement risk on its foreign currency forward contracts was $0.6 million (December 31, 2008 — $nil) as notional value exceeded the fair value of the forward contracts.

9. Commitments

     (a) The Company’s lease commitments consist of rent and equipment under operating leases. The Company accounts for any incentives provided over the term of the lease. Total minimum annual rental payments to be made by the Company under operating leases as at March 31, 2009 for each of the years ended December 31, are as follows:

2009 (nine months remaining)		$	4,434
2010			6,072
2011			6,047
2012			5,917
2013			2,129
Thereafter			3,114
		$	27,713

     Rent expense was $1.3 million for three months ended March 31, 2009 (2008 — $1.4 million) net of sublease rental of $0.1 million
(2008 — less than $0.1 million).

     Recorded in the accrued liabilities balance as at March 31, 2009 is $6.1 million (December 31, 2008 — $6.2 million) related to lease inducements and accrued rent.

     Purchase obligations under long-term supplier contracts as at March 31, 2009 were $7.0 million (December 31, 2008 — $4.8 million).

     (b) As at March 31, 2009, the Company has letters of credit and advance payment guarantees of $0.3 million (December 31, 2008 — $1.4 million) outstanding, of which the entire balance has been secured by the Credit Facility. As at March 31, 2009, the Company also has letters of credit outstanding of $5.7 million as compared to $5.2 million as at December 31, 2008, under the Bank of Montreal Facility.

     (c) The Company compensates its sales force with both fixed and variable compensation. Commissions on the sale or lease of the Company’s theater systems are payable in graduated amounts from the time of collection of the customer’s first payment to the Company up to the collection of the customer’s last initial payment. At March 31, 2009, $0.6 million (December 31, 2008 —$0.5 million) of commissions have been accrued and will be payable in future periods.

10. Contingencies and Guarantees

     The Company is involved in lawsuits, claims, and proceedings, including those identified below, which arise in the ordinary course of business. In accordance with Statements of Financial Accounting Standards No. 5, “Accounting for Contingencies,” the Company will make a provision for a liability when it is both probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company believes it has adequate provisions for any such matters. The Company reviews these provisions in conjunction with any related provisions on assets related to the claims at least quarterly and adjusts these provisions to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other pertinent information related to the case. Should developments in any of these matters outlined below cause a change in the Company’s determination as to an unfavorable outcome and result in the need to recognize a material provision, or, should any of these matters result in a final adverse judgment or be settled for significant amounts, they could have a material adverse effect on the Company’s results of operations, cash flows, and financial position in the period or periods in which such a change in determination, settlement or judgment occurs.

     The Company expenses legal costs relating to its lawsuits, claims and proceedings as incurred.

     (a) In March 2005, the Company, together with Three-Dimensional Media Group, Ltd. (“3DMG”), filed a complaint in the U.S. District Court for the Central District of California, Western Division, against In-Three, Inc. (“In-Three”) alleging patent infringement. On March 10, 2006, the Company and In-Three entered into a settlement agreement settling the dispute between the Company and In-Three. On June 12, 2006, the U.S. District Court for the Central District of California, Western Division, entered a stay in the proceedings against In-Three pending the arbitration of disputes between the Company and 3DMG. Arbitration was initiated by the Company against 3DMG on May 15, 2006 before the International Centre for Dispute Resolution in New York, alleging breaches of the license and consulting agreements between the Company and 3DMG. On June 15, 2006, 3DMG filed an answer denying any breaches and asserting counterclaims that the Company breached the parties’ license agreement. On June 21, 2007, the Arbitration Panel unanimously denied 3DMG’s Motion for Summary Judgment filed on April 11, 2007 concerning the Company’s claims and 3DMG’s counterclaims. On October 5, 2007, 3DMG amended its counterclaims and added counterclaims from UNIPAT.ORG relating to fees allegedly owed to UNIPAT.ORG by the Company. An evidentiary hearing on liability issues originally scheduled for June 2008 has been postponed until a later date to be set by the Arbitration Panel. The proceeding was suspended on May 4, 2009 due to failure of 3DMG to pay fees associated with the proceeding. Further proceedings on damages issues will be scheduled if and when necessary. The Company will continue to pursue its claims vigorously and believes that all allegations made by 3DMG are without merit. The Company further believes that the amount of loss, if any, suffered in connection with the counterclaims would not have a material impact on the financial position or results of operations of the Company, although no assurance can be given with respect to the ultimate outcome of the arbitration.

     (b) In January 2004, the Company and IMAX Theatre Services Ltd., a subsidiary of the Company, commenced an arbitration seeking damages before the International Court of Arbitration of the International Chambers of Commerce (the “ICC”) with respect to the breach by Electronic Media Limited (“EML”) of its December 2000 agreement with the Company. In June 2004, the Company commenced a related arbitration before the ICC against EML’s affiliate, E-CITI Entertainment (I) PVT Limited (“E-Citi”), seeking damages as a result of E-Citi’s breach of a September 2000 lease agreement. An arbitration hearing took place in November 2005 against E-Citi which considered all claims by the Company. On February 1, 2006, the ICC issued an award on liability finding unanimously in the Company’s favor on all claims. Further hearings took place in July 2006 and December 2006. On August 24, 2007, the ICC issued an award unanimously in favor of the Company in the amount of $9.4 million, consisting of past and future rents owed to the Company under its lease agreements, plus interest and costs. In the award, the ICC upheld the validity and enforceability of the Company’s theater system contract. The Company thereafter submitted its application to the arbitration panel for interest and costs. On March 27, 2008, the Panel issued a final award in favor of the Company in the amount of $11,309,496, plus an additional $2,512 each day in interest from October 1, 2007 until the date the award is paid, which the Company is seeking to enforce and collect in full.

     (c) In June 2004, Robots of Mars, Inc. (“Robots”) initiated an arbitration proceeding against the Company in California with the American Arbitration Association pursuant to an arbitration provision in a 1994 film production agreement between Robots’ predecessor-in-interest and a subsidiary of the Company, asserting claims for breach of contract, fraud, breach of fiduciary duty and intentional interference with the contract. Robots is seeking an accounting of the Company’s revenues and an award of all sums alleged to be due to Robots under the production agreement, as well as punitive damages. The Company recently filed a dispositive motion with respect to Robots’ tort causes of action, as well as its claims for an accounting and punitive damages. The arbitration hearing of this matter is scheduled to commence June 1, 2009. The Company intends to vigorously defend the arbitration proceeding and believes the amount of the loss, if any, that may be suffered in connection with this proceeding will not have a material impact on the financial position or results of operations of the Company, although no assurance can be given with respect to the ultimate outcome of such arbitration.

     (d) The Company and certain of its officers and directors were named as defendants in eight purported class action lawsuits filed between August 11, 2006 and September 18, 2006, alleging violations of U.S. federal securities laws. These eight actions were filed in the U.S. District Court for the Southern District of New York. On January 18, 2007, the Court consolidated all eight class action lawsuits and appointed Westchester Capital Management, Inc. as the lead plaintiff and Abbey Spanier Rodd & Abrams, LLP as lead plaintiff’s counsel. On October 2, 2007, plaintiffs filed a consolidated amended class action complaint. The amended complaint, brought on behalf of shareholders who purchased the Company’s common stock between February 27, 2003 and July 20, 2007, alleges primarily that the defendants engaged in securities fraud by disseminating materially false and misleading statements during the class period regarding the Company’s revenue recognition of theater system installations, and failing to disclose material information concerning the Company’s revenue recognition practices. The amended complaint also added PricewaterhouseCoopers LLP, the Company’s auditors, as a defendant. The lawsuit seeks unspecified compensatory damages, costs, and expenses. The defendants filed a motion to dismiss the amended complaint on December 10, 2007. On September 16, 2008, the Court issued a memorandum opinion and order, denying the motion. On October 6, 2008, the defendants filed an answer to the amended complaint. On October 31, 2008, the plaintiffs filed a motion for class certification. Fact discovery on the merits commenced on November 14, 2008 and is ongoing. On March 13, 2009, the Court granted a second prospective lead plaintiff’s request to file a motion for reconsideration of the Court’s order naming Westchester Capital Management, Inc. as the lead plaintiff and issued an order denying without prejudice plaintiff’s class certification motion pending resolution of the motion for reconsideration. The lawsuit is at an early stage and as a result the Company is not able to estimate a potential loss exposure at this time. The Company will vigorously defend the matter, although no assurances can be given with respect to the outcome of such proceedings. The Company’s directors and officers insurance policy provides for reimbursement of costs and expenses incurred in connection with this lawsuit as well as potential damages awarded, if any, subject to certain policy limits and deductibles.

     (e) A class action lawsuit was filed on September 20, 2006 in the Ontario Superior Court of Justice against the Company and certain of its officers and directors, alleging violations of Canadian securities laws. This lawsuit was brought on behalf of shareholders who acquired the Company’s securities between February 17, 2006 and August 9, 2006. The lawsuit is in an early stage and seeks unspecified compensatory and punitive damages, as well as costs and expenses. As a result, the Company is unable to estimate a potential loss exposure at this time. The plaintiffs require leave of the Court before they are permitted to proceed with certain claims they have made pursuant to the Securities Act (Ontario). They have filed a motion to obtain leave, along with a separate motion for certification of the action as a class proceeding. The Company has opposed both of these motions and a hearing on the motions took place during the week of December 15, 2008. It is not known when the Court will render a decision on these motions. The Company believes the allegations made against it in the statement of claim are meritless and will vigorously defend the matter, although no assurance can be given with respect to the ultimate outcome of such proceedings. The Company’s directors and officers insurance policy provides for reimbursement of costs and expenses incurred in connection with this lawsuit as well as potential damages awarded, if any, subject to certain policy limits and deductibles.

     (f) On September 7, 2007, Catalyst Fund Limited Partnership II (“Catalyst”), a holder of the Company’s Senior Notes, commenced an application against the Company in the Ontario Superior Court of Justice for a declaration of oppression pursuant to sections 229 and 241 of the Canada Business Corporations Act (“CBCA”) and for a declaration that the Company is in default of the Indenture governing its Senior Notes. The allegations of oppression are substantially the same as allegations Catalyst made in a May 10, 2007 complaint filed against the Company in the Supreme Court of the State of New York, and subsequently withdrawn on October 12, 2007, wherein Catalyst challenged the validity of the consent solicitation through which the Company requested and obtained a waiver of any and all defaults arising from a failure to comply with the reporting covenant under the Indenture and alleged common law fraud. Catalyst has also requested the appointment of an inspector and an order that an investigation be carried out pursuant to section 229 of the CBCA. In addition, between March 2007 and October 2007, Catalyst sent the Company eight purported notices of default or acceleration under the Indenture. It is the Company’s position that no event of default (as that term is defined in the Indenture) has occurred and, accordingly, that Catalyst’s purported acceleration notice is of no force or effect. On September 26, 2008, on the Company’s motion, the Ontario Superior Court stayed Catalyst’s application in Canada pending a further order of the court, and ordered Catalyst to pay the Company’s costs associated with the motion. The stay was issued on the basis of Catalyst having brought similar claims in the state of New York. At this stage of the litigation, the Company is not able to estimate a potential loss exposure. The Company believes this application is entirely without merit and plans to contest it vigorously and seek costs from Catalyst, although no assurances can be given with respect to the outcome of the proceedings. The Company’s directors and officers insurance policy provides for reimbursement of costs and expenses incurred in connection with this lawsuit as well as potential damages awarded, if any, subject to certain policy limits and deductibles.

     (g) In a related matter, on December 21, 2007, U.S. Bank National Association, trustee under the Indenture, filed a complaint in the Supreme Court of the State of New York against the Company and Catalyst, requesting a declaration that the theory of default asserted by Catalyst before the Ontario Superior Court of Justice is without merit and further that Catalyst has failed to satisfy certain prerequisites to bondholder action, which are contained in the Indenture (the “U.S. Bank’s New York Action”). As a result of this action, on January 10, 2008, the Company filed a motion with the Ontario Superior Court of Justice seeking a stay of all or part of the action Catalyst initiated before that court. On February 6, 2008, the Company served a Verified Answer to U.S. Bank’s New York Action. On February 22, 2008, Catalyst filed a Verified Answer to U.S. Bank’s New York Action and Cross-Claims against the Company in the same proceeding. The Cross-Claims repeat the allegations and seek substantially the same relief as in Catalyst’s application in the Ontario Superior Court of Justice and as were raised in Catalyst’s May 10, 2007 complaint filed against the Company in the Supreme Court of the State of New York. Catalyst moved for summary judgment on the Cross-Claims. The Company opposed this motion and requested that summary judgment be granted in its favor. In December 2008, discovery closed. On January 16, 2009, the Company moved for summary judgment, seeking a ruling that the Company satisfies the terms of the declaratory relief requested by the Trustee and the dismissal of the Cross-Claims. The Court heard oral argument to the Company’s motion on February 26, 2009.

     On April 27, 2009, the Court denied Catalyst’s motion for partial summary judgment and granted the Company’s motion for summary judgment, disposing of the Cross-Claims. Specifically, the Court held that the consent solicitation conducted by the Company in April 2007 was “valid, effective, and not tainted by fraud,” and that the Annual Report on Form 10-K for the year-ended December 31, 2006 was filed “in accord with the terms of the Indenture, and made in good faith.” The Court further found that “no Event of Default occurred under the Indenture, and thus no acceleration of maturity has occurred.” The Court considered all of the other arguments made by Catalyst and deemed them to be “without merit.” Catalyst has indicated an intent to appeal the Court’s ruling on summary judgment. The Company believes that any appeal would be taken without merit. The Company is unable to comment on the outcome of such an appeal, if taken, or estimate the potential loss exposure, if any.

     (h) Since June 2006, the Company has been subject to ongoing informal inquiries by the U.S. Securities and Exchange Commission and the Ontario Securities Commission. The Company has been cooperating with these inquiries and believes that they principally relate to the timing of recognition of the Company’s theater system installation revenue in 2005 and related matters. Although the Company cannot predict the timing of developments and outcomes in these inquiries, they could result at any time in developments (including charges or settlement of charges) that could have material adverse effects on the Company. These effects could include payments of fines or disgorgement or other relief with respect to the Company or its officers or employees that could be material to the Company. Such developments could also have an adverse effect on the Company’s defense of the class action lawsuits referred to above. See “Risk Factors” in Item 1A in the Company’s 2008 10-K for further discussion of these inquiries and their potential impact on the Company, including the ongoing expenses incurred in connection with cooperating with the authorities.

     (i) In addition to the matters described above, the Company is currently involved in other legal proceedings which, in the opinion of the Company’s management, will not materially affect the Company’s financial position or future operating results, although no assurance can be given with respect to the ultimate outcome of any such proceedings.

     (j) In the normal course of business, the Company enters into agreements that may contain features that meet the FIN 45 definition of a guarantee. FIN 45 defines a guarantee to be a contract (including an indemnity) that contingently requires the Company to make payments (either in cash, financial instruments, other assets, shares of its stock or provision of services) to a third party based on (a) changes in an underlying interest rate, foreign exchange rate, equity or commodity instrument, index or other variable, that is related to an asset, a liability or an equity security of the counterparty, (b) failure of another party to perform under an obligating agreement or (c) failure of another third party to pay its indebtedness when due.

     Financial Guarantees

     The Company has provided no significant financial guarantees to third parties.

     Product Warranties

     The following summarizes the accrual for product warranties that was recorded as part of accrued liabilities in the consolidated balance sheets:

Balance as at December 31, 2008		$	33
Payments			(5	)
Warranties issued			50
Revisions			(16	)
Balance as at March 31, 2009		$	62

     Director/Officer Indemnifications

     The Company’s General By-law contains an indemnification of its directors/officers, former directors/officers and persons who have acted at its request to be a director/officer of an entity in which the Company is a shareholder or creditor, to indemnify them, to the extent permitted by the Canada Business Corporations Act, against expenses (including legal fees), judgments, fines and any amount actually and reasonably incurred by them in connection with any action, suit or proceeding in which the directors and/or officers are sued as a result of their service, if they acted honestly and in good faith with a view to the best interests of the Company. The nature of the indemnification prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay to counterparties. The Company has purchased directors’ and officers’ liability insurance. No amount has been accrued in the condensed consolidated balance sheet as at March 31, 2009 with respect to this indemnity.

     Other Indemnification Agreements

     In the normal course of the Company’s operations, the Company provides indemnifications to counterparties in transactions such as: theater system lease and sale agreements and the supervision of installation or servicing of the theater systems; film production, exhibition and distribution agreements; real property lease agreements; and employment agreements. These indemnification agreements require the Company to compensate the counterparties for costs incurred as a result of litigation claims that may be suffered by the counterparty as a consequence of the transaction or the Company’s breach or non-performance under these agreements. While the terms of these indemnification agreements vary based upon the contract, they normally extend for the life of the agreements. A small number of agreements do not provide for any limit on the maximum potential amount of indemnification however, virtually all of the Company’s system lease and sale agreements limit such maximum potential liability to the purchase price of the system. The fact that the maximum potential amount of indemnification required by the Company is not specified in some cases prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay to counterparties. Historically, the Company has not made any significant payments under such indemnifications and no amount has been accrued in the accompanying condensed consolidated financial statements with respect to the contingent aspect of these indemnities.

11. Condensed Consolidated Statements of Operations Supplemental Information

  (a) Selling Expenses

     The Company defers direct selling costs such as sales commissions and other amounts related to its sale and sales-type lease arrangements until the related revenue is recognized. These costs included in costs and expenses applicable to revenues-equipment and product sales, totaled $0.3 million for the three months ended March 31, 2009 (2008 — $0.1 million).

     Film exploitation costs, including advertising and marketing totaled $0.5 million for the three months ended March 31, 2009 (2008 — $0.1 million) and are recorded in costs and expenses applicable to revenues-services as incurred.

     Commissions are recognized as costs and expenses applicable to revenues-rentals in the month they are earned. These costs totaled $0.4 million for the three months ended March 31, 2009 (2008 — $nil). Direct advertising and marketing costs for each theater are charged to costs and expenses applicable to revenues-rental as incurred. These costs totaled $0.3 million for the three months ended March 31, 2009 (2008 — $nil).

   (b) Foreign Exchange

     Included in selling, general and administrative expenses for the three months ended March 31, 2009 is $1.2 million (2008 —less than $0.1 million) for net foreign exchange losses related to the translation of foreign currency denominated monetary assets, liabilities and integrated subsidiaries. See note 19(c) for additional information.

   (c) Collaborative Arrangements

   Joint Revenue Sharing Arrangements

     In a joint revenue sharing arrangement, the Company receives a portion of a theater’s box-office and concession revenues in exchange for placing a theater system at the theater operator’s venue. Under joint revenue sharing arrangements, the customer has the ability and the right to operate the hardware components or direct others to operate them in a manner determined by the customer. The Company’s joint revenue sharing arrangements are typically non-cancellable for 7 to 10 years with renewal provisions. Title to equipment under joint revenue sharing arrangements does not transfer to the customer. The Company’s joint revenue sharing arrangements do not contain a guarantee of residual value at the end of the term. The customer is required to pay for executory costs such as insurance and taxes and is required to pay the Company for maintenance and extended warranty throughout the term. The customer is responsible for obtaining insurance coverage for the theater systems commencing on the date specified in the arrangement’s shipping terms and ending on the date the theater systems are delivered back to the Company.

     At March 31, 2009, the Company has signed 6 joint revenue sharing agreements for a total of 156 theater systems, the terms of which are similar in nature, rights and obligations. The accounting policy for the Company’s joint revenue sharing arrangements is disclosed in note 2(n) of the Company’s 2008 Form 10-K.

     Amounts attributable to transactions arising between the Company and its customers under joint revenue sharing arrangements are included in Rentals revenue and for the three months ended March 31, 2009 amounted to $1.9 million (2008 — $0.3 million).

   IMAX DMR

     In an IMAX DMR arrangement, the Company transforms 35mm film into the Company’s large screen film format, allowing the release of Hollywood content to the IMAX theater network. In a typical IMAX DMR film arrangement, the Company will absorb its costs for the digital re-mastering and then recoup this cost from a percentage of the gross box-office receipts of the film, which generally range from 10-15%. The Company does not typically hold distribution rights or the copyright to these films.

     For the period ended March 31, 2009, the Company exhibited 6 IMAX DMR titles through the network and is scheduled to release 6 more in the remainder of 2009, the terms of which are similar in nature, rights and obligations. The accounting policy for the Company’s IMAX DMR arrangements is disclosed in note 2(n) of the Company’s 2008 Form 10-K.

     Amounts attributable to transactions arising between the Company and its customers under IMAX DMR arrangements are included in Services revenue and for the three months ended March 31, 2009 amounted to $3.7 million (2008 — $2.9 million).

     Co-Produced Film Arrangements

     In certain film arrangements, the Company co-produces a film with a third party whereby the third party retains the copyright and rights to the film, except that the Company obtains exclusive theatrical distribution rights to the film. Under these arrangements, both parties contribute funding to the Company’s wholly-owned production company for the production of the film and for associated exploitation costs. Clauses in the film arrangements generally provide for the third party to take over the production of the film if the cost of the production exceeds its approved budget or if it appears as though the film will not be delivered on a timely basis.

     The accounting policies relating to co-produced film arrangements are disclosed in notes 2(a) and 2(n) of the Company’s 2008 Form 10-K.

     At March 31, 2009, the Company has 4 significant co-produced film arrangements, the terms of which are similar.

     For the three months ended March 31, 2009, amounts totaling $1.8 million (2008 — $1.0 million) attributable to transactions between the Company and other parties involved in the production of the films have been included in cost and expenses applicable to revenues-services.

12. Condensed Consolidated Statements of Cash Flows Supplemental Information

     (a) Changes in other non-cash operating assets and liabilities are comprised of the following:

		Three Months
		Ended March 31,
		2009				2008
Decrease (increase) in:
Accounts receivable		$	(564	)		$	4,144
Financing receivables			(2,072	)			1,141
Inventories			2,934				534
Prepaid expenses			(1,072	)			(1,534	)
Commissions and other deferred selling expenses			(5	)			(332	)
Insurance recoveries			(1,413	)			1,050
Increase (decrease) in:
Accounts payable			924				(3,526	)
Accrued and other liabilities			4,175				(2	)
Deferred revenue			(6,265	)			7,968
		$	(3,358	)		$	9,443

     (b) Cash payments made on account of:

		Three Months
		Ended March 31,
		2009				2008
Income taxes		$	86			$	138
Interest		$	172			$	97

     (c) Depreciation and amortization are comprised of the following:

		Three Months
		Ended March 31,
		2009				2008
Film assets(1)		$	1,460			$	2,311
Property, plant and equipment
Joint revenue sharing arrangements			887				308
Other property, plant and equipment			1,148				1,093
Other intangible assets			145				133
Deferred financing costs			353				358
		$	3,993			$	4,203

13. Receivable Provisions, Net of Recoveries

		Three Months
		Ended March 31,
		2009				2008
Accounts receivable provisions, net of recoveries		$	19			$	730
Financing receivables, net of recoveries			491				18
Receivable provisions, net of recoveries		$	510			$	748

14. Income Taxes

     The Company’s effective tax rate differs from the statutory tax rate and will vary from year to year primarily as a result of numerous permanent differences, investment and other tax credits, the provision for income taxes at different rates in foreign and other provincial jurisdictions, enacted Statutory tax rate increases or reductions in the year, changes in the Company’s valuation allowance based on the Company’s recoverability assessments of deferred tax assets, and favourable or unfavourable resolution of various tax examinations. There was no change in the Company’s estimates of projected future earnings and the recoverability of its deferred tax assets based on an analysis of both positive and negative evidence.

     On March 12, 2009, the Government of Canada enacted Bill C-10, which included legislation allowing corporations to elect to file their Canadian corporate tax returns in the corporation’s functional currency. The Company has submitted an election to file the 2008 and subsequent Canadian corporate tax returns in U.S. dollars. As a result of the election and its impact on the Company’s opening 2008 tax return balances in Canada, the Company has recorded an increase in the gross deferred tax asset of $15.6 million, which has been fully offset by a corresponding valuation allowance.

     As at March 31, 2009, the Company had net deferred income tax assets of $nil (December 31, 2008 — $nil). As at March 31, 2009, the Company had a gross deferred income tax asset of $78.8 million (December 31, 2008 — $62.4 million), against which the Company is carrying a $78.8 million valuation allowance (December 31, 2008 — $62.4 million).

     As at March 31, 2009 and December 31, 2008, the Company had total unrecognized tax benefits of $4.5 million and $4.4 million for international withholding taxes, respectively. All of the unrecognized tax benefits could impact the Company’s effective tax rate if recognized. While the Company believes it has adequately provided for all tax positions, amounts asserted by taxing authorities could differ from the Company’s accrued position. Accordingly, additional provisions on federal, state, provincial and foreign tax-related matters could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved.

     Consistent with its historical financial reporting, the Company has elected to classify interest and penalties related to income tax liabilities, when applicable, as part of the interest expense in its condensed consolidated statement of operations rather than income tax expense. The Company recognized approximately $0.1 million in potential interest and penalties associated with uncertain tax positions for the three months ended March 31, 2009 and 2008, respectively.

15. Capital Stock

     The Company has 5 stock-based compensation plans that are described below. The compensation costs recorded in the condensed consolidated statement of operations for these plans were $0.5 million and $0.8 million for the three months ended March 31, 2009 and 2008, respectively. No income tax benefit is recorded in the condensed consolidated statement of operations for these costs.

Stock Option Plan

     The Company’s Stock Option Plan, which is shareholder approved, permits the grant of options to employees, directors and consultants. The Company recorded an expense of $0.4 million for the three months ended March 31, 2009 (2008 — $0.2 million), related to grants issued to employees and directors in the plan.

     The Company’s policy is to issue new shares from treasury to satisfy stock options which are exercised.

     The Company utilizes a lattice-binomial option-pricing model (“Binomial Model”) to determine the fair value of stock-based payment awards. The fair value determined by the Binomial Model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The Binomial Model also considers the expected exercise multiple which is the multiple of exercise price to grant price at which exercises are expected to occur on average. Option-pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. Because the Company’s employee stock options have certain characteristics that are significantly different from traded options, and because changes in the subjective assumptions can materially affect the estimated value, in management’s opinion, the Binomial Model best provides a fair measure of the fair value of the Company’s employee stock options.

     There were no common share options granted to employees for the three months ended March 31, 2008. The weighted average fair value of all common share options, granted to employees for the three months ended March 31, 2009 at the measurement date was $2.21 per share. The following assumptions were used:

		Three Months
		Ended March 31,
		2009		2008
Average risk-free interest rate		2.33%		N/A
Expected option life (in years)		5.45 - 5.85		N/A
Expected volatility		62%		N/A
Annual termination probability		0% - 10.01%		N/A
Dividend yield		0%		N/A

     As at March 31, 2009, the Company has reserved a total of 8,746,126 (December 31, 2008— 8,698,126) common shares for future issuance under the Stock Option Plan, of which options in respect of 6,492,830 common shares are outstanding at March 31, 2009. All awards of stock options are made at fair market value of the Company’s Common Shares on the date of grant. “Fair Market Value” of a Common Share on a given date means the higher of the closing price of a Common Share on the grant date (or the most recent trading date if the grant date is not a trading date) on the NASDAQ/National Market System, The Toronto Stock Exchange (the “TSX”) and such national exchange, as may be designated by the Company’s Board of Directors. The options generally vest between one and 5 years and expire 10 years or less from the date granted. The Stock Option Plan provides that vesting will be accelerated if there is a change of control, as defined in the plan. At March 31, 2009, options in respect of 4,198,491 common shares were vested and exercisable.

     The following table summarizes certain information in respect of option activity under the Stock Option Plan for the periods ended March 31:

										Weighted Average Exercise Price
		Number of Shares								per Share
		2009				2008				2009				2008
Options outstanding, beginning of year			6,686,182				5,908,080			$	5.97			$	6.71
Granted			128,398				—				4.18				—
Exercised			(240,000	)			(87,333	)			3.53				3.04
Forfeited			(22,750	)			(15,338	)			5.94				7.20
Expired			(53,000	)			(57,500	)			5.11				26.83
Cancelled			(6,000	)			(7,662	)			24.53				11.04
Options outstanding, end of period			6,492,830				5,740,247				6.01				6.56
Options exercisable, end of period			4,198,491				4,472,010				6.64				6.79

     During the three months ended March 31, 2009, the Company cancelled 6,000 stock options from its Stock Option Plan (2008 — 7,662) surrendered by Company employees for $nil consideration. Compensation cost recognized up to the cancellation date was not reversed for options cancelled.

     As at March 31, 2009, 6,067,208 options were fully vested or are expected to vest with a weighted average exercise price of $6.06, aggregate intrinsic value of $1.2 million and weighted average remaining contractual life of 4.3 years. As at March 31, 2009, options that are exercisable have an intrinsic value of $0.1 million and a weighted average remaining contractual life of 3.2 years. The intrinsic value of options exercised in the three months ended March 31, 2009 was $0.3 million (2008 — $0.3 million).

   Options to Non-Employees

     During the three months ended March 31, 2009, an aggregate of 100,000 common share options to purchase the Company’s common stock with an average exercise price of $4.05 were granted to certain advisors and strategic partners of the Company. These options have a maximum contractual life of 6 years. The option vesting ranges from immediately to 5 years. These options were granted under the Stock Option Plan. There were no common share options granted to non-employees during the three months ended March 31, 2008.

     As at March 31, 2009, non-employee options outstanding amounted to 423,314 options (2008 — 315,804) with a weighted average exercise price of $5.79 (2008 — $6.53). 317,615 options (2008 — 238,979) were exercisable with an average weighted exercise price of $6.35 (2008 — $6.98) and the vested options have an aggregate intrinsic value of less than $0.1 million (2008 — $0.2 million). The weighted average fair value of options granted to non-employees during the three months ended March 31, 2009 at the measurement date was $2.34 per share utilizing a Binomial Model with the following underlying assumptions for periods ended March 31:

		Three Months
		Ended March 31,
		2009		2008
Average risk-free interest rate		2.03%		N/A
Contractual option life		6 years		N/A
Average expected volatility		62%		N/A
Dividend yield		0%		N/A

     For the three months ended March 31, 2009, the Company recorded a charge of less than $0.1 million (2008 — less than $0.1 million) to cost and expenses applicable to revenues — services related to the non-employee stock options.

   Restricted Common Shares

     Under the terms of certain employment agreements dated July 12, 2000, the Company is required to issue either 160,000 restricted common shares or pay their cash equivalent. The restricted shares are required to be issued, or payment of their cash equivalent, upon request by the employees at any time. The aggregate intrinsic value of the awards outstanding at March 31, 2009 is $0.7 million (December 31, 2008 — $0.7 million). The Company accounts for the obligation as a liability, which is classified within accrued liabilities. The Company has recorded a recovery of less than $0.1 million and an expense of less than $0.1 million for the three months ended March 31, 2009 and 2008, respectively, due to the changes in the Company’s stock price during the period.

   Stock Appreciation Rights

     There were no stock appreciation rights (“SARs”) granted during the first quarters of 2008 and 2009. During 2007, 2,280,000 SARs with a weighted average exercise price of $6.20 per right were granted to certain Company executives. As at March 31, 2009, all 2,280,000 SARs were outstanding, of which 1,266,000 SARs were exercisable. The SARs vesting ranges from immediately to 5 years, with a remaining contractual life ranging from 4.75 to 8.75 years at March 31, 2009. The SARs were measured at fair value at the date of grant and are remeasured each period until settled. At March 31, 2009, the SARs had an average fair value of $1.16 per right (December 31, 2008 — $1.22). The Company accounts for the obligation of these SARs as a liability (March 31, 2009 — $2.0 million, December 31, 2008 — $1.9 million), which is classified within accrued liabilities. The Company has recorded a $0.1 million expense for the three months ended March 31, 2009 (2008 — $0.6 million expense) to selling, general and administrative expenses related to these SARs. None of the SARs have been exercised. The following assumptions were used for measuring the fair value of the SARs:

		As at		As at
		March 31,		December 31,
		2009		2008
Average risk-free interest rate		2.18%		1.95%
Expected option life (in years)		3.50 - 5.78		3.54 - 5.82
Expected volatility		62%		62%
Annual termination probability		0% - 10.01%		0% - 10.01%
Dividend yield		0%		0%

Warrants

     There were no warrants issued during the three months ended or outstanding as at March 31, 2009 and 2008.

   (b) Loss per Share

     Reconciliations of the numerator and denominator of the basic and diluted per-share computations are comprised of the following:

		Three Months
		Ended March 31,
		2009				2008
Net loss from continuing operations applicable to common shareholders		$	(2,642	)		$	(10,259	)
Weighted average number of common shares (000’s):
Issued and outstanding, beginning of period			43,491				40,423
Weighted average number of shares issued during the period			190				21
Weighted average number of shares used in computing basic loss per share			43,681				40,444
Weighted average number of shares used in computing diluted loss per share			43,681				40,444

     The calculation of diluted loss per share for the three months ended March 31, 2009 and 2008 excludes all shares that are issuable upon exercise of options as the impact of these exercises would be antidilutive.

   (c) Shareholders’ Deficiency

     The following summarizes the movement of Shareholders’ Deficiency for the three months ended March 31, 2009:

Balance as at December 31, 2008		$	(96,774	)
Issuance of common shares			846
Net loss			(2,642	)
Adjustment to other equity for employee stock options granted			411
Adjustment to other equity for non-employee stock options granted			134
Adjustments to accumulated other comprehensive income to amortize the prior service costs related to pensions and record the prior service cost			26
Adjustments to accumulated other comprehensive income to amortize the defined benefit pension plan actuarial gain			(123	)
Adjustments to accumulated other comprehensive income to record unrealized hedging losses			(482	)
Adjustments to accumulated other comprehensive income to record the realization of hedging losses upon settlement			85
Balance as at March 31, 2009		$	(98,519	)

16. Segmented Information

     The Company has eight reportable segments identified by category of product sold or service provided: IMAX systems; theater system maintenance; joint revenue sharing arrangements; film production and IMAX DMR; film distribution; film post-production; theater operations; and other. The IMAX systems segment designs, manufactures, sells or leases IMAX theater projection system equipment. The theater system maintenance segment maintains IMAX theater projection system equipment in the IMAX theater network. The joint revenue sharing arrangements segment provides IMAX theater projection system equipment to an exhibitor in exchange for a share of the box-office and concession revenues. The film production and IMAX DMR segment produces films and performs film re-mastering services. The film distribution segment distributes films for which the Company has distribution rights. The film post-production segment provides film post-production and film print services. The theater operations segment owns and operates certain IMAX theaters. The Company refers to all theater using the IMAX theater system as “IMAX theaters.” The other segment includes camera rentals and other miscellaneous items. The accounting policies of the segments are the same as those described in note 2 to the audited consolidated financial statements included in the Company’s 2008 Form 10-K.

     The Company’s Chief Operating Decision Maker (“CODM”), as defined in Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“SFAS 131”), assess segment performance based on segment revenues and gross margins. Selling, general and administrative expenses, research and development costs, amortization of intangibles, receivables provisions (recoveries), interest revenue, interest expense and tax provision (recovery) are not allocated to the segments.

     In the fourth quarter of 2008, based on the guidance in SFAS 131, the Company identified a change in internal reporting and business activities resulting in theater system maintenance and joint revenue sharing arrangements becoming new reportable segments, separate and distinct from the IMAX systems reportable segment. Prior year amounts have been restated to conform to the current reportable segment presentation.

     Transactions between the film production and IMAX DMR segment and the film post-production segment are valued at exchange value. Inter-segment profits are eliminated upon consolidation, as well as for the disclosures below.

     Transactions between the other segments are not significant.

		Three Months
		Ended March 31,
		2009				2008
Revenue
IMAX systems		$	16,452			$	8,158
Theater system maintenance			4,360				3,983
Joint revenue sharing arrangements			1,908				348
Films
Production and IMAX DMR			3,700				2,916
Distribution			3,242				2,753
Post-production			872				1,724
Theater operations			2,714				2,831
Other			474				807
Total		$	33,722			$	23,520
Gross margins
IMAX systems(1)		$	8,895			$	5,559
Theater system maintenance			2,312				1,588
Joint revenue sharing arrangements(1)			344				40
Films
Production and IMAX DMR(1)			1,770				306
Distribution(1)			336				1,374
Post-production			640				1,551
Theater operations			(110	)			(302	)
Other			(57	)			20
Total		$	14,130			$	10,136

		March 31,				December 31,
		2009				2008
Assets
IMAX systems		$	105,266			$	107,640
Theater system maintenance			13,638				14,120
Joint revenue sharing arrangements			44,079				37,145
Films
Production and IMAX DMR			13,253				14,891
Distribution			7,723				5,106
Post-production			4,350				3,086
Theater operations			904				873
Other			813				845
Corporate and other non-segment specific assets			36,955				44,961
Total		$	226,981			$	228,667

17. Employees Pension and Postretirement Benefits

   (a) Defined Benefit Plan

     The Company has an unfunded U.S. defined benefit pension plan, the SERP, covering Richard L. Gelfond, Chief Executive Officer (“CEO”) of the Company and Bradley J. Wechsler, Chairman of the Company’s Board of Directors. The SERP provides for a lifetime retirement benefit from age 55 determined as 75% of the member’s best average 60 consecutive months of earnings over the member’s employment history. The benefits were 50% vested as at July 2000, the SERP initiation date. The vesting percentage increases on a straight-line basis from inception until age 55. As at March 31, 2009, the benefits of Mr. Wechsler were 100% vested while the benefits of Mr. Gelfond were approximately 93.4% vested. The vesting percentage of a member whose employment terminates other than by voluntary retirement or upon a change in control shall be 100%.

     Under the terms of the SERP, if Mr. Gelfond’s employment terminates other than for cause prior to August 1, 2010, he is entitled to receive SERP benefits in the form of monthly annuity payments until the earlier of a change of control or August 1, 2010, at which time he is entitled to receive remaining benefits in the form of a lump sum payment. If Mr. Gelfond’s employment terminates other than for cause on or after August 1, 2010, he is entitled to receive SERP benefits in the form of a lump sum payment. SERP benefit payments to Mr. Gelfond are subject to a deferral for six months after the termination of his employment, at which time Mr. Gelfond will be entitled to receive interest on the deferred amount credited at the applicable federal rate for short-term obligations.

     Under the terms of the SERP, annuity payments payable thereunder to Mr. Wechsler, whose employment as Co-CEO terminated effective April 1, 2009, shall be deferred for six months after the termination of his employment and paid on the first date of the seventh month following such termination, at which time Mr. Wechsler will be entitled to receive interest on the deferred amount credited at the applicable federal rate for short term obligations. Thereafter, in accordance with the terms of the SERP, Mr. Wechsler is entitled to receive monthly annuity payments until the earlier of a change of control or August 1, 2010, at which time he is entitled to receive remaining benefits in the form of a lump sum payment.

     On May 4, 2007, the Company amended the SERP to provide for the determination of benefits to be 75% of the member’s best average 60 consecutive months of earnings over the member’s employment history from 75% of the member’s best average 60 consecutive months of earnings over the past 120 months. The actuarial liability was remeasured to reflect this amendment. The amendment resulted in a $1.0 million increase to the pension liability and a corresponding $1.0 million charge to other comprehensive income.

     The amounts accrued for the SERP are determined as follows:

		Three Months
		Ended March 31,
		2009
Projected benefit obligation:
Obligation, beginning of period		$	26,381
Service cost			161
Interest cost			335
Amendments			—
Actuarial (gain) loss			—
Obligation, end of period and unfunded status		$	26,877

     The following table provides disclosure of pension expense for the SERP:

		Three Months Ended March 31,
		2009				2008
Service cost		$	161			$	198
Interest cost			335				313
Amortization of prior service cost (credit)			36				(62	)
Amortization of actuarial gain			(170	)			—
Pension expense		$	362			$	449

     The accumulated benefit obligation for the SERP was $26.9 million at March 31, 2009 and $26.4 million at December 31, 2008.

     The following amounts were included in accumulated other comprehensive income (“AOCI”) and will be recognized as components of net periodic benefit cost in future periods:

		As at				As at
		March 31,				December 31,
		2009				2008
Prior service cost		$	109			$	145
Unrecognized actuarial gain			(3,698	)			(3,868	)
		$	(3,589	)		$	(3,723	)

     No contributions are expected to be made for the SERP during 2009 except to meet benefit payment obligations as they come due. The Company expects prior service costs of $0.1 million and amortization of actuarial gains of $0.5 million to be recognized as a component of net periodic benefit cost during the remainder of 2009.

     The following benefit payments are expected to be made as per the current SERP assumptions and the terms of the SERP in each of the next 5 years, and in the aggregate:

2009 (nine months remaining)		$	861
2010			15,342	(1)
2011			13,970
2012			—
2013			—
Thereafter			—
		$	30,173

     At the time the Company established the SERP, it also took out life insurance policies on Messrs. Gelfond and Wechsler with coverage amounts of $21.5 million in aggregate to which the Company is the beneficiary. The Company may use the cash surrender value or the proceeds of the life insurance policies taken on Messrs. Gelfond and Wechsler to be applied towards the benefits due and payable under the SERP, although there can be no assurance that the Company will ultimately do so. At March 31, 2009, the cash surrender value of the insurance policies is $6.4 million (December 31, 2008 — $6.2 million) and has been included in other assets.

   (b) Defined Contribution Plan

     The Company also maintains defined contribution pension plans for its employees, including its executive officers. The Company makes contributions to these plans on behalf of employees in an amount up to 5% of their base salary subject to certain prescribed maximums. During the three months ended March 31, 2009 and 2008, the Company contributed and expensed an aggregate of $0.2 million and $0.2 million, respectively, to its Canadian plan and an aggregate of $0.1 million and $0.1 million, respectively, to its defined contribution employee pension plan under Section 401(k) of the U.S. Internal Revenue Code.

   (c) Postretirement Benefits

     The Company has an unfunded postretirement plan covering Messrs. Gelfond and Wechsler. The plan provides that the Company will maintain health benefits for Messrs. Gelfond and Wechsler until they become eligible for medicare and, thereafter, the Company will provide Medicare supplement coverage as selected by Messrs. Gelfond and Wechsler. The postretirement benefits obligation as at March 31, 2009 is $0.4 million (December 31, 2008 — $0.4 million). The Company has expensed less than $0.1 million for the three months ended March 31, 2009, and 2008, respectively.

     The following benefit payments are expected to be made as per the current plan assumptions in each of the next 5 years:

2009 (nine months remaining)		$	10
2010		$	14
2011		$	30
2012		$	34
2013		$	37

18. Impact of Recently Issued Accounting Pronouncements

     In April 2009, the FASB issued Staff Position 107-1 “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1”). FSP FAS 107-1 amends FASB Statement No. 107, “Disclosures about Fair Value of Financial Instruments” (“SFAS 107”), to require disclosures about fair value of financial instruments for interim financial reporting periods of publicly traded companies as well as in annual financial statements. FSP FAS 107-1 also amends Accounting Principle Board (“APB”) Opinion No. 28, “Interim Financial Reporting,” (“APB 28-1”) to require the disclosures under FSP FAS 107-1 in all interim financial statements. FSP FAS 107-1 and APB 28-1 are effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009, on a prospective basis. The Company will adopt the required disclosures in its June 30, 2009 interim condensed consolidated financial statements.

     In April 2009, the FASB issued Staff Position 157-4, “Determining Whether a Market is Not Active and a Transaction is Not Distressed” (“FSP FAS 157-4”). FSP FAS 157-4 provides guidelines for making fair value measurements more consistent with the principles presented in SFAS 157. The Staff Position applies to financial assets within the scope of accounting pronouncements that require or permit fair value measurements in accordance with SFAS 157 and is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009, on a prospective basis. The Company is currently evaluating the potential impact of FSP FAS 157-4 on its condensed consolidated financial statements.

     In April 2009, the FASB issued Staff Position 115-2 and 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP FAS 115-2 and FAS 124-2”) which provides additional guidance designed to create greater clarity and consistency in accounting for and presenting impairment losses on securities. The objective is to determine whether the holder of an investment in a debt or equity security for which changes in fair value are not regularly recognized in earnings should recognize a loss in earnings when the investment is impaired. FSP FAS 115-2 and FAS 124-2 is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009, on a prospective basis. The Company is currently evaluating the potential impact of FSP FAS 115-2 and FAS 124-2 on its condensed consolidated financial statements.

19. Financial Instruments

   (a) Financial Instruments

     The Company maintains cash with various major financial institutions. The Company’s cash is invested with highly rated financial institutions.

     The Company’s accounts receivables and financing receivables are subject to credit risk. The Company’s accounts receivable and financing receivables are concentrated with the theater exhibition industry and film entertainment industry. To minimize the Company’s credit risk, the Company retains title to underlying theater systems leased, performs initial and ongoing credit evaluations of its customers and makes ongoing provisions for its estimate of potentially uncollectible amounts. The Company believes it has adequately provided for related exposures surrounding receivables and contractual commitments. The Company’s policy is to not use any financial instruments for trading or other speculative purposes.

   (b) Fair Value Measurements

     The carrying values of the Company’s cash and cash equivalents, accounts receivable, borrowings under the Credit Facility, accounts payable and accrued liabilities due within one year approximate fair values due to the short-term maturity of these instruments. The Company’s other financial instruments are fair valued at each reporting period-end.

     The fair value of foreign currency derivatives are determined using quoted prices in active markets (Level 1 input in accordance with the SFAS 157 hierarchy) for identical instruments at the measurement date.

   (c) Foreign Exchange Risk Management

     The Company is exposed to market risk from changes in foreign currency rates. A majority portion of the Company’s revenues is denominated in U.S. dollars while a substantial portion of its costs and expenses are denominated in Canadian dollars. A portion of the net U.S. dollar cash flows of the Company is periodically converted to Canadian dollars to fund Canadian dollar expenses through the spot market. In Japan, the Company has ongoing operating expenses related to its operations. Net Japanese yen cash flows are converted to U.S. dollars generally through the spot market. The Company also has cash receipts under leases denominated in Japanese yen, Canadian dollar and Euros which are converted to U.S. dollars generally through the spot market.

     Beginning in the fourth quarter of 2008 and continuing in 2009, the Company entered into a series of foreign currency forward contracts to manage the Company’s risks associated with the volatility of foreign currencies. Certain of these foreign currency forward contracts met the criteria required for hedge accounting under SFAS 133 at inception, and continue to meet hedge effectiveness tests at March 31, 2009 (the “Foreign Currency Hedges”), with settlement dates throughout 2009 and 2010. In addition, at March 31, 2009, the Company held foreign currency forward contracts to manage foreign currency risk on future anticipated Canadian dollar expenditures that were not considered Foreign Currency Hedges by the Company. Foreign currency derivatives are recognized and measured in the balance sheet at fair value. Changes in the fair value (gains or losses) are recognized in the condensed consolidated statement of operations except for derivatives designated and qualifying as foreign currency hedging instruments. For foreign currency hedging instruments, the effective portion of the gain or loss in a hedge of a forecasted transaction is reported in other comprehensive income (“OCI”) and reclassified to the condensed consolidated statement of operations when the forecasted transaction occurs. Any ineffective portion is recognized immediately in the consolidated statement of operations.

     The following tabular disclosures reflect the impact that derivatives instruments and hedging activities have on the Company’s condensed consolidated financial statements:

     Notional value of derivative instruments as at:

		Notional Value
		March 31,				December 31,
		2009				2008
Derivatives designated as hedging instruments:
Foreign exchange contracts — Forwards		$	14,190			$	13,072
Derivatives not designated as hedging instruments:
Foreign exchange contracts — Forwards			18,450				17,050
		$	32,640			$	30,122

     Fair value of derivative instruments as at:

						Fair Value
						March 31,				December 31,
		Balance Sheet Location					2009				2008
Derivatives designated as hedging instruments:
Foreign exchange contracts — Forwards		Other assets (Accrued liabilities)				$	(272	)		$	172
Derivatives not designated as hedging instruments:
Foreign exchange contracts — Forwards		Other assets (Accrued liabilities)				$	(349	)		$	226
						$	(621	)		$	398

     Derivatives in Foreign Currency Hedging relationships as at:

										Location of Derivative Gain
		Derivative Gain (Loss) Recognized								(Loss) Reclassified from				Loss Reclassified from AOCI
		in OCI (Effective Portion)								AOCI into Income				to Income (Effective Portion)
		March 31, 2009				March 31, 2008				(Effective Portion)				March 31, 2009				March 31, 2008
Foreign exchange contracts — Forwards		$	(529	)		$	—			Selling, general and administrative expenses				$	(85	)		$	—
		$	(529	)		$	—							$	(85	)		$	—

     Non Designated Derivatives in Foreign Currency relationships for the three months ended March 31:

						Three Months Ended
						March 31,
		Location of Derivative Loss				2009				2008
Foreign exchange contracts — Forwards		Selling, general and administrative expenses				$	(575	)		$	—
						$	(575	)		$	—

   (d) Other

     As at March 31, 2009, the Company’s principal sources of liquidity included cash and cash equivalents of $18.7 million, the Credit Facility, trade accounts receivable of $24.8 million and anticipated collection from financing receivables due in the next 12 months of $10.8 million. As at March 31, 2009, the Company has drawn down $20.0 million on the Credit Facility, and has letters of credit of $0.3 million outstanding under the Credit Facility and $5.7 million under the Bank of Montreal Facility.

     During the first quarter of 2009, the Company used cash of $1.9 million (including film assets) to fund its operations and $7.3 million to fund capital expenditures, principally to build equipment for use in joint revenue sharing arrangements. In addition, the Company has experienced an operating loss in the last 3 fiscal years. Based on management’s current operating plan for 2009, the Company expects to continue to use cash as it deploys additional theater systems under joint revenue sharing arrangements. Cash flows from joint revenue sharing arrangements are derived solely from the theater box-office and concession revenues and the Company invested directly in the roll out of 17 new theater systems and 5 digital upgrades under joint revenue sharing arrangements in the first quarter of 2009.

     In addition to uncertainties related to the global economy and credit environment, the Company faces many risks and uncertainties which could affect management’s operating plan. The Company believes that the following factors could have a material impact on the Company’s operating plan and future cash flows: (i) future signings for theater systems and film productions, (ii) volume of installations and (iii) box office performance of films.

     Under the terms of the Company’s sale and sales-type lease agreements, the Company receives substantial cash payments before the theater systems are delivered and operational. For the co-production or production of films, the Company receives cash payments in advance of related cash expenditures which may be utilized for other purposes. Management believes its assumptions with respect to future signings for theater systems and film productions are reasonable; however, there is a risk due to economic conditions that signings may be delayed or not achieved consistent with the assumptions used in management’s operating plan.

     A significant portion of the Company’s future cash flows are expected to be generated from box office performance of films. Under joint revenue sharing arrangements, the Company receives a portion of theater box-office and concession revenues. Under arrangements for IMAX DMR films, the Company receives participation fees from the film studios based on the revenues generated by the IMAX DMR films. The box office receipts are subject to consumer spending habits and acceptance and success of the respective films. It is possible that the estimated future cash flows arising from these sources assumed in management’s operating plan may not be achieved.

     In addition to the risks and uncertainties related to the 2009 operating plan, the Company has certain significant expected future payments. The Company’s Senior Notes and the Credit Facility mature on December 1, 2010 and October 31, 2010, respectively. In addition, the Company has an unfunded defined benefit pension plan covering Messrs. Gelfond and Wechsler (see note 17) with estimated cash payments of approximately $15.3 million due August 1, 2010, although Messrs. Gelfond and Wechsler have indicated a willingness to discuss potential deferment of the pension obligations if the Company were to initiate such discussions. The Company expects it will need to obtain financing in the future to settle the obligations noted above and there is no assurance that the Company will be successful in obtaining financing to settle these obligations on a timely basis, on satisfactory terms or at all. If the Company is unable to refinance its indebtedness or obtain other financing, the Company will face substantial liquidity challenges.

     The Company forecasts its short-term liquidity requirements on a quarterly and annual basis. In addition, management of the Company believes it could take additional actions to mitigate certain of the consequences if certain of its assumptions in the 2009 operating plan are not met. Notwithstanding the measures taken by management to monitor and manage the Company’s liquidity, the current global economic environment and other factors outside the Company’s control could place additional pressures on the Company’s short- and long-term liquidity.

20. Supplemental Consolidating Financial Information

     The Company’s Senior Notes are fully and unconditionally guaranteed, jointly and severally by specific wholly-owned subsidiaries of the Company (the “Guarantor Subsidiaries”). The main Guarantor Subsidiaries are David Keighley Productions 70MM Inc., Sonics Associates Inc., and the subsidiaries that own and operate certain theaters. These guarantees are full and unconditional. The information under the column headed “Non-Guarantor Subsidiaries” relates to the following subsidiaries of the Company: IMAX Japan Inc. and IMAX B.V. (the “Non-Guarantor Subsidiaries”) which have not provided any guarantees of the Senior Notes.

     Investments in subsidiaries are accounted for by the equity method for purposes of the supplemental consolidating financial data. Some subsidiaries may be unable to pay dividends due to negative working capital.

     Supplemental consolidating balance sheets as at March 31, 2009:

														Adjustments
		IMAX				Guarantor				Non-Guarantor				and				Consolidated
		Corporation				Subsidiaries				Subsidiaries				Eliminations				Total
Assets
Cash and cash equivalents		$	12,974			$	4,993			$	754			$	—			$	18,721
Accounts receivable			21,621				2,918				283				—				24,822
Financing receivables			56,867				585				—				—				57,452
Inventories			15,697				86				80				—				15,863
Prepaid expenses			2,792				257				22				—				3,071
Intercompany receivables			13,831				49,857				13,532				(77,220	)			—
Film assets			3,629				—				—				—				3,629
Property, plant and equipment			44,265				970				2				—				45,237
Other assets			16,945				—				—				—				16,945
Goodwill			39,027				—				—				—				39,027
Other intangible assets			2,214				—				—				—				2,214
Investments in subsidiaries			40,830				—				—				(40,830	)			—
Total assets		$	270,692			$	59,666			$	14,673			$	(118,050	)		$	226,981
Liabilities
Bank indebtedness		$	20,000			$	—			$	—			$	—			$	20,000
Accounts payable			8,755				7,447				3				—				16,205
Accrued liabilities			58,217				5,800				91				—				64,108
Intercompany payables			60,736				37,434				8,404				(106,574	)			—
Deferred revenue			61,923				3,214				50				—				65,187
Senior Notes due 2010			160,000				—				—				—				160,000
Total liabilities			369,631				53,895				8,548				(106,574	)			325,500
Shareholders’ deficit
Capital stock			142,430				—				117				(117	)			142,430
Other equity			4,695				46,959				—				(45,926	)			5,728
Retained earnings (deficit)			(249,651	)			(40,575	)			6,008				34,567				(249,651	)
Accumulated other comprehensive income (loss)			3,587				(613	)			—				—				2,974
Total shareholders’ equity (deficiency)			(98,939	)			5,771				6,125				(11,476	)			(98,519	)
Total liabilities & shareholders’ equity (deficiency)		$	270,692			$	59,666			$	14,673			$	(118,050	)		$	226,981

     In certain Guarantor Subsidiaries, accumulated losses have exceeded the original investment balance. As a result of applying equity accounting, the parent company has consequently offset its liability for the accumulated losses in excess of investment against intercompany receivable balances with respect to these Guarantor Subsidiaries in the amounts of $29.4 million as at March 31, 2009.

     Supplemental consolidating balance sheets as at December 31, 2008:

														Adjustments
		IMAX				Guarantor				Non-Guarantor				and				Consolidated
		Corporation				Subsidiaries				Subsidiaries				Eliminations				Total
Assets
Cash and cash equivalents		$	16,843			$	9,313			$	861			$	—			$	27,017
Accounts receivable			21,097				1,611				274				—				22,982
Financing receivables			55,536				602				—				—				56,138
Inventories			19,642				90				90				—				19,822
Prepaid expenses			1,760				212				26				—				1,998
Intercompany receivables			16,851				41,449				14,573				(72,873	)			—
Film assets			3,923				—				—				—				3,923
Property, plant and equipment			38,364				1,039				2				—				39,405
Other assets			16,074				—				—				—				16,074
Goodwill			39,027				—				—				—				39,027
Other intangible assets			2,281				—				—				—				2,281
Investments in subsidiaries			41,186				—				—				(41,186	)			—
Total assets		$	272,584			$	54,316			$	15,826			$	(114,059	)		$	228,667
Liabilities
Bank indebtedness		$	20,000			$	—			$	—			$	—			$	20,000
Accounts payable			11,368				4,419				3				—				15,790
Accrued liabilities			52,440				5,626				133				—				58,199
Intercompany payables			57,709				35,525				8,993				(102,227	)			—
Deferred revenue			68,261				3,053				138				—				71,452
Senior Notes due 2010			160,000				—				—				—				160,000
Total liabilities			369,778				48,623				9,267				(102,227	)			325,441
Shareholders’ deficiency
Capital stock			141,584				—				117				(117	)			141,584
Other equity			4,150				46,959				—				(45,926	)			5,183
Retained earnings (deficit)			(247,009	)			(40,653	)			6,442				34,211				(247,009	)
Accumulated other comprehensive income (loss)			4,081				(613	)			—				—				3,468
Total shareholders’ equity (deficiency)			(97,194	)			5,693				6,559				(11,832	)			(96,774	)
Total liabilities and shareholders’ equity (deficiency)		$	272,584			$	54,316			$	15,826			$	(114,059	)		$	228,667