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Item 7. Management’s Discussion and Analysis

2025-02-19 compared with 2024-02-27 · 428 added, 2214 removed, 447 unchanged (86% of the section changed)

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Top filmmakers, movie studios, artists, and creators utilize the cutting-edge visual and sound technology of IMAX to connect with audiences in innovative ways.

As a result, IMAX is among the most important and successful global distribution platforms.

The Company’s global content portfolio includes blockbuster films, both from Hollywood and local language film industries worldwide;

IMAX documentaries, both original and acquired (“IMAX Documentaries”);

and IMAX events and experiences in emerging verticals including music, gaming, and sports.

The Company leverages its proprietary technology and engineering in all aspects of its business, which principally consists of the IMAX film remastering (“IMAX Film Remastering” and formerly known as “IMAX DMR”) and the sale or lease of premium IMAX theater systems (“IMAX System(s)”).

IMAX Systems are based on proprietary and patented image, audio and other technology developed over the course of the Company’s history since its founding in 1967.

The customers for IMAX Systems are principally theatrical exhibitors that operate commercial multiplex theaters, and, to a much lesser extent, museums, science centers and destination entertainment sites.

The Company does not own the locations in the IMAX network, except for one, and is not an exhibitor, but instead sells or leases the IMAX System to exhibitor customers along with a license to use its trademarks and ongoing maintenance services for which there is an annual payment by the exhibitor to IMAX.

As a result, IMAX is among the most important and successful global distribution platforms for domestic and international tentpole films.

The Company leverages its proprietary technology and engineering in all aspects of its business, which principally consists of the digital remastering of films and other content into the IMAX format for distribution across the IMAX network (“IMAX Film Remastering”) and the sale or lease of premium IMAX theater systems (“IMAX System(s)”).

IMAX Systems are based on proprietary and patented image, audio and other technology developed over the course of the Company’s history.

The customers for IMAX Systems are principally exhibitors that operate commercial multiplex theaters, and, to a much lesser extent, institutional locations, including museums and science centers, and destination entertainment sites.

The Company does not own the locations in the IMAX network, except for one, and is not an exhibitor, but instead sells or leases the IMAX System to exhibitor customers along with licenses to use its trademarks and ongoing maintenance services for which there are annual payments by the exhibitors to IMAX.

IMAX has the largest global premium format network, more than double the size of its nearest competitor.

As of December 31, 2024, there were 1,807 IMAX Systems operating in 90 countries and territories, including 1,735 commercial multiplexes, 11 commercial destinations, and 61 institutional locations in the Company’s global network.

This compares to 1,716 IMAX Systems in 87 countries and territories as of December 31, 2022, including 1,633 commercial multiplexes, 12 commercial destinations, and 71 institutional locations in the Company’s global network.

Additional information on the composition of the IMAX network is provided in the discussion of IMAX Network and Backlog.

This compares to 1,772 IMAX Systems operating in 90 countries and territories as of December 31, 2023, including 1,693 commercial multiplexes, 12 commercial destinations, and 67 institutional locations in the Company’s global network.

Additional information on the composition of the IMAX network is provided in the discussion of “Marketing and Customers” in Part I, Item 1.

IMAX Systems provide the Company’s exhibitor customers with a combination of the following benefits:

• the ability to exhibit content that has been enhanced through the IMAX Film Remastering, which results in higher image and sound fidelity than conventional cinema experiences;

• the ability to exhibit content that has been enhanced through the IMAX Film Remastering process, which results in higher image and sound fidelity than conventional cinema experiences;

• advanced, high-resolution projectors with specialized equipment and automated theater control systems, which generate significantly more contrast and brightness than conventional theater systems;

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• advanced sound system components, which deliver more expansive sound imagery and pinpointed origination of sound to any specific spot in an auditorium equipped with an IMAX System;

• specialized theater acoustics, which result in a four-fold reduction in background noise;

• specialized theater acoustics, which result in a four-fold reduction in background noise than conventional cinema experiences;

• ongoing maintenance and extended warranty services;

• a license to the globally recognized IMAX brand, as well as benefits from IMAX marketing of films being shown in its network and IMAX’s growing social media followership.

In addition, select movies shown in the IMAX network are filmed using proprietary IMAX film cameras or IMAX certified digital cameras, which offer filmmakers customized guidance and a workflow process to provide further enhanced and differentiated image quality and an IMAX-exclusive film aspect ratio that delivers up to 26% more image onto a standard IMAX movie screen.

In select IMAX locations worldwide, movies filmed with IMAX cameras have an IMAX-exclusive 1.43 film aspect ratio, with up to 67% more image.

Together, these components cause audiences in IMAX locations to feel as if they are a part of the on-screen action, creating a more intense, immersive, and exciting experience than a conventional cinematic format.

In addition, select movies shown in the IMAX network are filmed using proprietary IMAX film cameras or IMAX certified digital cameras, which along with IMAX’s customized guidance and a workflow process, provide filmmakers enhanced and differentiated image quality and an IMAX-exclusive film aspect ratio that delivers up to 26% more image onto a standard IMAX movie screen.

In select IMAX locations worldwide, movies filmed with IMAX cameras have an IMAX-exclusive 1.43 film aspect ratio, delivering up to 67% more image.

The Company believes that these components cause audiences in IMAX locations to feel as if they are a part of the on-screen action, creating a more intense, immersive, and awe-inspiring experience than a conventional cinematic format.

As a result of the engineering and scientific achievements that are a hallmark of The IMAX Experience , the Company’s exhibitor customers typically charge a premium for films released in IMAX’s format versus films exhibited in their other auditoriums.

The premium pricing, combined with the higher attendance levels associated with IMAX films, generates incremental box office for the Company’s exhibitor customers and for the movie studios releasing their films to the IMAX network.

The incremental box office generated by IMAX films combined with IMAX’s unmatched global network footprint and scale has helped establish IMAX as the key premium distribution and marketing platform for Hollywood and foreign local language movie studios.

The Company achieved its second highest grossing year at the global box office (“GBO”) and its highest grossing year at the Domestic, United States and Canada combined, box office in 2023.

The year was highlighted by the Company’s highest grossing year for local language films, the $180.4 million in IMAX box office generated by Christopher Nolan’s Oppenheimer , and strong indexing across titles including S uper Mario Bros., Guardians of the Galaxy Vol.

3, Spider-Man:

Across the Spider-Verse , and Mission Impossible:

Dead Reckoning.

A cornerstone of the IMAX brand for more than 50 years, IMAX recently relaunched its IMAX Documentaries unit to focus on a new generation of narrative-driven original and acquired documentary films, as well as downstream revenue opportunities through partnerships with leading streaming platforms.

Additional forthcoming IMAX original documentaries include The Blue Angels and The Elephant Odyssey .

The Company also continues to evolve its platform to bring new, innovative events and experiences to audiences worldwide.

During the year, the Company partnered with A24 for the IMAX Live TM 40 th anniversary screening of Jonathan Demme’s Stop Making Sense at the Toronto International Film Festival, which became the highest grossing IMAX Live event of all time.

In January 2024, the Company and Pathé Live in partnership with Mercury Studios and Queen Films released Queen Rock Montreal , a concert from 1981, exclusively in 450 IMAX locations globally.

As of December 31, 2023, the Company has a footprint of 252 connected locations in the IMAX network across North America, Europe, and Asia were configured with connectivity to deliver live and interactive content with low latency and superior sight and sound.

As a premier global technology platform for entertainment and events, the Company strives to remain at the forefront of advancements in entertainment technology.

The premium pricing, combined with the higher attendance levels associated with IMAX films, tends to generate incremental box office receipts (“box office”) for the Company’s exhibitor customers and for the movie studios releasing their films to the IMAX network.

The incremental box office generated by IMAX films combined with IMAX’s leading global network footprint and scale has helped establish IMAX as a key premium distribution and marketing platform for Hollywood and foreign local language movie studios.

The Company’s global content portfolio includes blockbuster films, both from Hollywood and local language film industries worldwide;

IMAX documentaries, both original and acquired (“IMAX Documentaries”);

and IMAX events and experiences in emerging verticals including music, gaming, and sports.

The Company achieved its second highest year for domestic (United States and Canada combined) box office in 2024.

The year was highlighted by blockbusters including Dune:

Part Two , Deadpool & Wolverine , Godzilla x Kong:

The New Empire and Alien:

Additionally, local language films exhibited across the Company’s global network represented 15% of its total box office, including the Chinese films Pegasus 2 and Yolo, the Japanese film Haikyu!!, and the Korean concert film, IM Hero:

The Stadium .

A cornerstone of the IMAX brand for almost 60 years, IMAX relaunched its IMAX Documentaries strategy to focus on a new generation of narrative-driven original and acquired documentary films, as well as downstream revenue opportunities through partnerships with leading streaming platforms.

In 2024, Amazon Content LLC (“Amazon Content”) acquired the worldwide rights to the Company’s original documentary, The Blue Angels .

Additional forthcoming IMAX Documentaries include The Elephant Odyssey , Stormbound, Patrouille de France, and The Last Wolves of Yellowstone.

The Company has also continued to evolve its platform to bring new, innovative events and experiences to audiences worldwide.

During the year ended December 31, 2024, the Company partnered with Pathé Live for the exclusive release of Queen Rock Montreal , which became one of its highest grossing concert films ever.

In addition, the Company entered into a partnership with A24 for a monthly one-night-only IMAX release of classic A24 titles, hosted multiple IMAX Live events, including screening the National Basketball Association (“NBA”) finals across select IMAX locations in the Asia Pacific region.

Additionally, in partnership with the NBC television network, the Company extended its live coverage of the 2024 Paris Olympics Opening Ceremony and the White Out Game Live in IMAX :

Washington vs.

Penn State to select IMAX locations throughout the United States.

In addition, IMAX programmed its first ever esports event by live streaming the League of Legends world championship, in partnership with CJ CGV Co.

Ltd., and Wanda Film (“Wanda”), to over 150 locations across China and South Korea, with an average capacity of over 90%.

As of December 31, 2024, the Company had a footprint of 265 connected locations in the IMAX network across North America, Europe, Africa, Australia and Asia configured with connectivity to deliver live and interactive events with low latency and superior sight and sound.

As a premier global technology platform for entertainment and events, the Company strives to remain at the forefront of advancements in technology.

The Company offers a suite of laser-based digital projection systems (“IMAX Laser Systems”), which deliver increased resolution, sharper and brighter images, deeper contrast, and the widest range of colors available to filmmakers today.

The Company further believes that its suite of IMAX Laser Systems are helping facilitate the next major renewal and upgrade cycle for the global IMAX network.

In September 2022, the Company acquired SSIMWAVE Inc.

(“SSIMWAVE”), a leader in artificial intelligence (“AI”)-driven video quality solutions for media and entertainment companies.

The acquisition of SSIMWAVE marks a significant expansion of the Company’s streaming and consumer technology strategy to deliver the highest quality images on any screen, while also creating cost efficiencies to streaming companies, broadcasters and other companies that transmit visual data to drive new, recurring revenue and grow its global leadership in entertainment technology.

In 2023, the Company formed a new business unit, Streaming and Consumer Technology to focus on in-home entertainment technology.

The business unit includes the streaming technology acquired in the SSIMWAVE acquisition as well as IMAX Enhanced ® products and services.

The Company further believes that its suite of IMAX Laser Systems is helping facilitate the next major renewal and upgrade cycle for the global IMAX network.

The Company’s Streaming and Consumer Technology business unit, formed in 2023, focuses on in-home entertainment technology.

Included in the product offerings are AI-driven video quality solutions for media and entertainment companies, to deliver the highest quality images on any screen, while also enabling cost efficiencies for streaming companies, broadcasters and other companies that transmit visual data — to create opportunities for new, recurring revenue and grow its global leadership in entertainment technology.

The business unit includes the streaming technology acquired in the SSIMWAVE Inc.

(“SSIMWAVE”) acquisition (completed in 2022) as well as IMAX Enhanced ® products.

The Company utilizes AI for image enhancement, streaming technology, and data analysis to improve various aspects of its business.

It is actively exploring other global use cases for AI to improve its products, operations, and efficiency.

Commencing in March 2022, in response to numerous sanctions imposed by the United States, Canada and the European Union on companies transacting in Russia and Belarus resulting from ongoing conflict between Russia and Ukraine, the Company suspended its operations in Russia and Belarus.

As of December 31, 2023, the IMAX network includes 54 systems in Russia, eight systems in Ukraine, and one system in Belarus, and the Company’s backlog includes 14 systems in Russia, one system in Ukraine, and five systems in Belarus with a total fixed contracted value of $22.9 million.

In 2022, the Company recorded provisions for potential credit losses against substantially all of its receivables in Russia due to uncertainties associated with the ongoing conflict.

These receivables relate to existing sale agreements as the Company is not party to any joint revenue sharing arrangements in these countries.

In addition, exhibitors in Russia, Ukraine, and Belarus were placed on nonaccrual status for maintenance revenue and finance income.

In 2023, due to the resumption of operations throughout Ukraine’s theatrical exhibition industry, as evidenced by the reopening of all IMAX Systems in Ukraine and payments received from exhibitor customers therein, the Company recognized maintenance revenue and finance income in connection with those theaters.

The Company closely monitors geopolitical conflicts (including any government sanctions imposed in response thereto) and its effects on the global economy and the Company.

(Refer to “Risk Factors — The Company conducts business internationally, which exposes it to uncertainties and risks that could negatively affect its operations, sales, and future growth prospects.” in Part I, Item 1A, and Note 2(b) to Consolidated Financial Statements in Part II, Item 8.)

On September 7, 2022, Cineworld Group plc (“Cineworld”), the parent company of Regal, and certain of its subsidiaries and Regal CineMedia Holdings, LLC, filed petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the Southern District of Texas.

The Court approved Cineworld’s Plan of Reorganization (the “Plan”) on June 28, 2023, in which Cineworld disclosed that it plans to emerge from the Chapter 11 proceedings on or about July 28, 2023.

On August 30, 2023, the Company and Cineworld entered into a Joint Stipulation and Agreed Order which was entered by the Court on September 21, 2023 (the “Stipulation”) pursuant to which Cineworld assumed its global agreement with IMAX (the “Global Agreement”).

The Stipulation provides that all amounts owed to IMAX will be paid by Cineworld and set out a revised timetable for all systems installations required of Cineworld under the Global Agreement.

Cineworld has emerged from the Chapter 11 proceedings and the Stipulation finalizes all matters between IMAX and Cineworld as a result of the restructuring.

The Company has determined that no additional provision for expected credit losses is required.

SOURCES OF REVENUE

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Content Solutions

The Content Solutions segment earns revenue principally from the digital remastering of films and other content into IMAX formats for distribution across the IMAX network.

The Content Solutions segment earns revenue principally from studios and other content creators for the digital remastering of films and other content into IMAX formats for distribution across the IMAX network.

To a lesser extent, the Content Solutions segment also earns revenue from the distribution of large-format documentary films and IMAX events and experiences including music, gaming, and sports, as well as the provision of film post-production services.

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IMAX Film Remastering is a proprietary technology that digitally remasters films and other content into IMAX formats for distribution across the IMAX network.

In a typical film remastering and distribution arrangement, the Company receives a percentage of the box office receipts from a movie studio in exchange for converting a commercial film into the IMAX format and distributing it across the IMAX network.

The fee earned by the Company in a typical film remastering and distribution arrangement averages approximately 12.5% of box office receipts (i.e., GBO less applicable sales taxes), except for within Greater China, where the Company receives a lower percentage of net box office receipts for certain Hollywood films due to an import tax.

IMAX Film Remastering digitally enhances the image resolution of films for projection on IMAX screens while maintaining or enhancing the visual clarity and sound quality to levels for which The IMAX Experience is known.

In addition, the original soundtrack of a film to be exhibited across the IMAX network is remastered for IMAX digital sound systems.

IMAX remastered soundtracks are uncompressed for full fidelity.

IMAX sound systems use proprietary loudspeaker systems and proprietary surround sound configurations that ensure every seat in an auditorium is an optimal listening position.

In a typical IMAX Film Remastering and distribution arrangement, the Company receives a percentage of the box office receipts from a movie studio in exchange for converting a commercial film into the IMAX format and distributing it through the IMAX network.

The fee earned by the Company in a typical IMAX Film Remastering and distribution arrangement averages approximately 12.5% of box office receipts (i.e., gross box office (“GBO”) less applicable sales taxes), except for within Greater China, where the Company receives a lower percentage of net box office receipts for certain Hollywood films due to an import tax.

IMAX Film Remastering digitally enhances the image quality and/or resolution for projection on IMAX screens while maintaining or enhancing the visual clarity and sound quality to levels for which The IMAX Experience is known.

IMAX Film Remastering is completed for the image of films released to the IMAX network, creating a unique IMAX version that is optimized for IMAX’s proprietary digital projection systems and format.

In addition, the original soundtrack of a film to be exhibited across the IMAX locations is remastered into a unique IMAX digital audio format.

IMAX sound systems use proprietary loudspeaker systems, designs and proprietary surround sound configurations to ensure every seat in an auditorium is an optimal listening position.

IMAX films also benefit from enhancements made by individual filmmakers exclusively for the IMAX release of the film.

Collectively, the Company refers to these enhancements as “IMAX DNA.” Filmmakers and movie studios have sought IMAX-specific enhancements in recent years to generate interest in and excitement for their films.

Collectively, the Company refers to these enhancements as “IMAX DNA.” Filmmakers and movie studios increasingly seek to infuse more IMAX DNA in theatrical releases to realize a filmmaker’s creative vision more fully, while generating interest and excitement among moviegoers.

Such enhancements include shooting films with IMAX cameras to increase the audience’s immersion in the film and to take advantage of the unique dimensions of the IMAX screen by projecting the film in a larger aspect ratio that delivers up to 26% more image onto a standard IMAX movie screen.

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The Company has a Filmed For IMAX ® program for select films under which filmmakers craft films from their inception in numerous ways to optimize The IMAX Experience .

The program includes incremental and bespoke marketing support, which box office metrics demonstrate audiences respond extremely favorably to, and drives higher market share for IMAX.

Management believes that growth in international box office remains an important driver of growth for the Company.

To support continued growth in international markets, the Company is focused on the expansion of the IMAX network and has sought to elevate its international film strategy, supplementing its slate of Hollywood films with appealing local language films released in select markets, including China, Japan, India, France and South Korea.

More recently, the Company has further diversified its strategy by distributing local language films in both native and foreign markets.

The following table provides detailed information about the films that were released to the Company’s global network during the years ended December 31, 2023 and 2022:

For the Years Ended December 31,

The program includes incremental and bespoke marketing support, which box office metrics demonstrate audiences respond extremely favorably to, and drives a higher market share for IMAX.

Management believes that growth in international box office represents an important growth opportunity for the Company.

The Company’s strategy to capitalize on this opportunity includes expanding the IMAX network into underpenetrated international markets and growing the number of local language films released, particularly in China, Japan, India, France, and South Korea.

As the popularity of local language films has continued to increase, the Company has extended its content strategy to distribute local language content beyond native markets.

The following table provides the number of new films and other content released to the Company’s global network during the years ended December 31, 2024 and 2023:

Years Ended December 31,

Hollywood film releases

Local language film releases:

South Korea 6 9

Indonesia 1 —

Total local language film releases

Other Content Solutions

The Company distributes large-format documentary films, primarily to institutional theaters.

The Company receives as its distribution fee either a fixed amount or a fixed percentage of the box office receipts and, following the recoupment of its costs, is typically entitled to receive an additional percentage as participation revenues.

The Company continues to believe that the IMAX network serves as a valuable platform to launch and distribute original content.

The Company distributes large-format documentary feature films through its global commercial network and institutional theaters.

Traditionally, the Company receives as its distribution fee either a fixed amount or a fixed percentage of the theater box office receipts and, following the recoupment of its costs, is typically entitled to receive an additional percentage of gross revenues as participation revenues.

The Company continues to believe that the IMAX network is a valuable global platform to launch and distribute original content, including documentaries.

The ownership rights to such films may be held by the film sponsors, the film investors and/or the Company.

As of December 31, 2023, the Company has distribution rights with respect to approximately 60 films, which cover subjects such as space, wildlife, music, sports, history and natural wonders.

In May 2023, the Company announced that Amazon Studios acquired worldwide rights to the Company’s original documentary, The Blue Angels , filmed with IMAX digital certified cameras, and produced in collaboration with Dolphin Entertainment, Bad Robot Productions, and Zipper Bros Films.

The documentary is expected to be delivered in the second quarter of 2024.

In October 2023, Deep Sky , a documentary on NASA’s Webb Telescope in collaboration with Crazy Boat Pictures Ltd.

and filmmaker Nathaniel Kahn, was released to the IMAX network.

In July 2023, the Company also announced the start of production of The Elephant Odyssey, a documentary in collaboration with Beach House Pictures Pte Ltd and China International Communications Group, which is expected to be released in 2025.

As of December 31, 2024, the Company had distribution rights with respect to approximately 62 films, which cover subjects such as space, wildlife, music, sports, history and natural wonders.

In May 2024, Amazon Content completed its acquisition of the worldwide rights to the Company’s original documentary, The Blue Angels , filmed with IMAX certified digital cameras and produced in collaboration with Dolphin Entertainment, Bad Robot Productions, and Zipper Bros Films.

The feature-length documentary was released to select commercial locations across the IMAX network and, in January 2025, a 40-minute 3D version was released to IMAX institutional locations.

Additionally, in 2024, the Company had limited commercial network releases of the documentaries Skywalkers:

A Love Story The IMAX Experience and Fly:

The IMAX Experience , in partnership with XYZ Films and National Geographic, respectively.

Upcoming documentaries, which are currently in production, include Stormbound , a feature documentary produced by Academy Award ® -winning producer, Adam McKay, The Lost Wolves of Yellowstone , and Patrouille de France, all of which are expected to be released in 2025, and The Elephant Odyssey , a documentary in collaboration with Beach House Pictures Pte Ltd and China International Communications Group, which is expected to be released in 2026.

In addition, the Company continues to evolve its platform to bring new, innovative IMAX events and experiences to audiences worldwide.

As of December 31, 2023, the Company has a footprint of 252 connected locations in the IMAX network across the United States, Canada, Europe, and Asia configured with connectivity to deliver live and interactive events with low latency and superior sight and sound.

In 2023, the Company partnered with Metro-Goldwyn-Studios Inc.

(“MGM”) for an IMAX premiere event, consisting of red carpet interviews and behind the scenes footage, followed by a special advanced screening of Creed III , which was released across the IMAX global network.

The Company also hosted a reunion of the iconic band Talking Heads at the Toronto International Film Festival, followed by a screening of Stop Making Sense , before the movie was released to the IMAX network more broadly.

This became the highest grossing IMAX Live event of all time.

These events were broadcast live to much of the IMAX Domestic connected network.

In January 2024, the Company and Pathé Live in partnership with Mercury Studios and Queen Films released Queen Rock Montreal , a concert from 1981, exclusively in 450 IMAX locations globally.

The Company also provides film post-production and quality control services for large-format films, whether produced by IMAX or third parties, and digital post-production services.

As of December 31, 2024, the Company had a footprint of 265 connected locations in the IMAX network across the United States, Canada, Europe, Africa, Australia, and Asia configured with connectivity to deliver live and interactive events with low latency and superior sight and sound.

Furthermore, the Company used its live streaming technologies to deliver events to an additional 166 locations around the world in 2024.

In 2024, the Company partnered with Pathé Live, Mercury Studios, and Queen Films for the exclusive release of Queen Rock Montreal , which became one of the Company’s highest grossing concert films.

In addition, the Company entered into a partnership with A24 for a monthly one-night-only IMAX release of classic A24 titles, including Midsommar , Hereditary , and Alex Garland’s highly-acclaimed film Stop Making Sense .

In 2024, the Company hosted numerous IMAX Live screening events including:

• Andre 3000:

New Blue Sun;

• the NBA finals across select IMAX locations in the Asia Pacific region;

• The Beach Boys:

IMAX Live Experience ;

• a special advance screening and live event for Megalopolis:

The Ultimate IMAX Experience ;

• a live pre-show Q&A with the cast of Twisters ;

• live coverage of the 2024 Paris Olympics Opening Ceremony in partnership with the NBC television network;

• the White Out Game Live in IMAX:

Washington vs.

Penn State for select IMAX locations throughout the United States.

In addition, IMAX programmed its first ever esports event by live streaming the League of Legends world championship, in partnership with CJ CGV Co.

and Wanda, to over 150 locations across China and South Korea, capturing an average attendance capacity of over 90%.

The Company provides film post-production and quality control services for films, whether produced by IMAX or third parties, and digital post-production services.

In addition, the Company also provides IMAX film and digital cameras to content creators under the IMAX certified camera program.

Technology Products and Services

The Technology Product and Services segment earns revenue principally from the sale or lease of IMAX Systems, as well as from the maintenance of IMAX Systems.

To a lesser extent, the Technology Product and Services segment also earns revenue from certain ancillary theater business activities, including after-market sales of IMAX System parts and 3D glasses.

The Technology Products and Services segment earns revenue principally from the sale or lease of IMAX Systems, as well as from the maintenance of IMAX Systems.

To a lesser extent, the Technology Products and Services segment also earns revenue from certain ancillary theater business activities, including after-market sales of IMAX Systems parts and 3D glasses.

Sales Arrangements

The C ompany provides IMAX Systems to exhibitors through sale arrangements or long-term lease arrangements that for accounting purposes are classified as sales-type leases.

The Company provides IMAX Systems to exhibitors through sale arrangements or long-term lease arrangements that for accounting purposes are classified as sales-type leases.

Under these arrangements, in exchange for providing the IMAX System, the Company earns initial fees and ongoing consideration, which can include fixed annual minimum payments and contingent fees in excess of the minimum payments, as well as maintenance and extended warranty fees (see “IMAX Maintenance” below).

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Under the traditional form of these arrangements, the Company provides the IMAX System under a long-term lease in which the Company assumes the majority of the equipment and installation costs.

In exchange for its upfront investment, the Company, primarily, earns rent based on a percentage of contingent box office receipts rather than a fixed upfront fee or fixed annual minimum payments.

In exchange for its upfront investment, the Company, primarily, earns rent based on a percentage of contingent box office receipts rather than requiring the customer to pay a fixed upfront fee or fixed annual minimum payments.

Rental payments from the customer are required throughout the term of the arrangement and are typically due either monthly or quarterly.

The Company retains title to the IMAX System equipment components throughout the lease term, and the equipment is returned to the Company at the conclusion of the arrangement.

Under certain other joint revenue sharing arrangements, known as hybrid arrangements, the customer is responsible for making fixed upfront payments prior to the delivery and installation of the IMAX System in an amount that is typically half of what the Company would receive from a typical sale transaction.

As with a traditional joint revenue sharing arrangement, the customer also pays the Company a percentage of contingent box office receipts over the term of the arrangement, although this percentage is typically half that of a traditional joint revenue sharing arrangement.

Hybrid joint revenue sharing arrangements take the form of a sale.

The fixed upfront payment is recognized when the lease term commences and is recorded within Revenues – Technology Sales.

The contingent rent is recognized as revenue over the lease term and is recorded within Revenues – Technology Rentals.

Under most joint revenue sharing arrangements (both traditional and hybrid), the initial non-cancellable term is 10 years or longer and is renewable by the customer for one to two additional terms of between three to five years.

Under certain other JRSAs, known as hybrid arrangements, the customer is responsible for making fixed upfront payments prior to the delivery and installation of the IMAX System in an amount that is typically half of what the Company would receive from a typical sale transaction.

As with a traditional JRSA, the customer also pays the Company a percentage of contingent box office receipts over the term of the arrangement, although this percentage is typically half that of a traditional JRSA.

Under most JRSAs (both traditional and hybrid), the initial non-cancellable term is 10 years or longer and is renewable by the customer for one to two additional terms of between three to five years.

The Company has the right to remove the equipment for non-payment or other defaults by the customer.

The contracts are non-cancellable by the customer unless the Company fails to perform its obligations.

The revenue earned from customers under the Company’s joint revenue sharing arrangements can vary from quarter-to-quarter and year-to-year based on a number of factors that drive box office levels including film performance, the mix of IMAX System configurations, the timing of installation of IMAX Systems, the nature of the arrangement, the location, size and management of the theater and other factors specific to individual arrangements.

Joint revenue sharing arrangements also require IMAX to provide maintenance and extended warranty services to the customer over the term of the lease in exchange for a separate fixed annual fee.

The revenue earned from customers under the Company’s JRSA can vary from quarter-to-quarter and year-to-year based on a number of factors that drive box office levels including film performance, the mix of IMAX System configurations, the timing of installation of IMAX Systems, the nature of the arrangement, the location, size and management of the theater and other factors specific to individual arrangements.

JRSAs also require IMAX to provide maintenance and extended warranty services to the customer over the term of the lease in exchange for a separate fixed annual fee.

These fees are reported within IMAX Maintenance, as discussed below.

Joint revenue sharing arrangements have been an important factor in the expansion of the Company’s commercial system network.

Joint revenue sharing arrangements allow commercial theater exhibitors to install IMAX Systems without the significant initial capital investment required in a sale or sales-type lease arrangement.

Joint revenue sharing arrangements drive recurring cash flows and earnings for the Company as customers under these arrangements pay the Company a portion of their ongoing box office receipts.

The Company funds its investment in equipment for joint revenue sharing arrangements through cash flows from operations.

As of December 31, 2023, the Company had 924 locations under joint revenue sharing arrangements in its global commercial multiplex network.

The Company also had contracts in backlog for 286 systems under joint revenue sharing arrangements as of December 31, 2023, including 234 new locations and 52 upgrades to existing locations.

JRSAs have been an important factor in the expansion of the Company’s commercial system network.

JRSAs allow commercial theater exhibitors to install IMAX Systems without the significant initial capital investment required in a sale or sales-type lease arrangement.

JRSAs drive recurring cash flows and earnings for the Company as customers under these arrangements pay the Company a portion of their ongoing box office receipts.

The Company funds its investment in equipment for JRSAs through cash flows from operations.

As of December 31, 2024, the Company had 897 locations under JRSAs in its global commercial multiplex network.

The Company also had contracts in backlog for 276 systems under JRSAs as of December 31, 2024, including 202 new locations and 74 upgrades to existing locations.

IMAX Maintenance

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Streaming and Consumer Technology

Streaming and Consumer Technology includes the Company’s Streaming Technology software offerings and IMAX Enhanced product services.

Streaming and Consumer Technology includes the Company’s Streaming Technology software offerings and IMAX Enhanced products and services.

Streaming Technology consists of several software products including:

• IMAX Stream Smart – works within existing video compression workflows to reduce bitrates and retain picture quality across all devices and formats and deliver significant cost savings.

• IMAX StreamSmart – works within existing video compression workflows to reduce bitrates and retain picture quality across all devices and formats and deliver significant cost savings for both on-demand and live content.

• IMAX StreamAware On-Demand – all-in-one quality assurance and quality control to automate and standardize checks for comprehensive content integrity and regulatory compliance for third-party content libraries, across an entire video compression workflow.

• IMAX StreamAware On-Air – real-time monitoring software for live streams, which enables users to monitor video quality across their networks and to identify and address streaming issues.

These AI-powered products allow streaming platforms and broadcasters to automate workflows.

These products are powered by IMAX VisionScience ® , an AI technology that allows streaming platforms and broadcasters to automate workflows.

The Company believes that these products allow users to deliver the highest quality viewing experiences to their subscribers while reducing costs.

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IMAX Enhanced provides end-to-end premium technology across streaming content and best-in-class entertainment devices, offering consumers high-fidelity playback of image and sound in the home and beyond, including the following features:

• IMAX’s expanded aspect ratio, which is available on select titles and streaming platforms, including Disney+;

• IMAX’s expanded aspect ratio, which is available on select titles and streaming platforms;

• IMAX’s proprietary remastering technology, which produces more vivid, higher-fidelity 4K HDR images on premium televisions;

• IMAX’s signature sound, which was specially recreated and calibrated for the home to unlock more immersive audio.

To be certified as IMAX Enhanced, leading consumer electronics manufacturers spanning 4K/8K televisions, projectors, A/V receivers, loudspeakers, soundbars, smartphones, personal computers, tablets, and more must meet a carefully prescribed set of audiovisual performance standards, set by a certification committee, along with some of Hollywood's leading technical specialist.

At present, certified global device partners include Sony Electronics, Hisense, TCL, LG, Phillips, Hewlett Packard, Xiaomi, Sound United and Honor, among others.

As of December 31, 2023, more than 300 IMAX Enhanced titles have been released across five of the biggest streaming platforms worldwide:

Disney+, Sony Bravia CORE, Tencent Video, iQiyi and Rakuten TV.

Over 15 million IMAX Enhanced certified devices are estimated to be in the market today .

The Company's collaboration with Disney allows fans to stream 20 Disney titles in IMAX's expanded aspect ratio at home on Disney+.

The presence of IMAX Enhanced on Disney+ provides strong brand exposure for IMAX by expanding the Company’s in-home entertainment footprint to Disney+ and most of its 150 million global subscribers.

The Company believes that IMAX Enhanced enables an elevated end-to-end experience on Disney+, with IMAX signature sound coming to subscribers with IMAX Enhanced certified devices.

IMAX Enhanced is part of the Company's next evolutionary step to extend the IMAX brand and technology further into new use cases, including streaming entertainment and the consumer electronics market.

(Refer to “Risk Factors ― Failure to respond adequately or in a timely fashion to changes and advancements in technology could negatively affect the Company’s business.”)

As of December 31, 2024, more than 300 IMAX Enhanced titles had been released across six of the biggest streaming platforms worldwide:

Disney+, Sony Pictures CORE, Tencent Video, iQiyi, Yonku and Rakuten TV.

Over 15 million IMAX Enhanced certified devices are estimated to be in use today.

IMAX Streaming and Consumer Technology is part of the Company’s next evolutionary step to extend the IMAX brand and technology further into new use cases, including streaming entertainment and the consumer electronics market.

(Refer to “Risk Factors ― Failure to respond adequately or in a timely fashion to changes and advancements in technology could negatively affect the Company’s business.” and “― The Company is undertaking brand extensions and new business initiatives, and the Company’s investments and efforts in such business evolution may not be successful.”)

All Other also includes revenues from sources including one owned and operated IMAX System in Sacramento, California;

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renting the Company’s proprietary 2D and 3D large-format film cameras;

and also offering production advice and technical assistance to both documentary and Hollywood filmmakers.

and offering production advice and technical assistance to both documentary and Hollywood filmmakers.

IMAX NETWORK AND BACKLOG

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United States 370 4 24 398 363 4 24 391

Canada 44 1 5 50 42 1 7 50

Greater China (1)

Asia (excluding Greater China)

796 — 13 809 791 — 16 807

Asia (excluding

Greater China)

185 1 2 188 166 2 2 170

Western Europe

135 4 8 147 126 4 8 138

Latin America (2)

62 1 7 70 60 1 8 69

Rest of the World

143 — 2 145 145 — 2 147

1,735 11 61 1,807 1,693 12 67 1,772

(1) Greater China includes China, Hong Kong, Taiwan, and Macau.

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The Company believes that the majority of its future growth will come from international markets.

As of December 31, 2023, 76% of IMAX Systems in operation were located within international markets (defined as all countries other than the United States and Canada) (2022 ― 74%).

As of December 31, 2024, 76% of IMAX Systems in the global commercial multiplex network were located within international markets (defined as all countries other than the United States and Canada) (2023 ― 76%).

Revenues and GBO derived from international markets continue to exceed revenues and GBO from the United States and Canada.

For the year ended December 31, 2023, the Company’s revenues generated from its Greater China operations represents 25% of consolidated revenue, compared to 24% in 2022 and 44% in 2021.

Restrictions resulting from the COVID-19 pandemic significantly impacted operations in China in 2022 and 2023.

As of December 31, 2023, the Company had 807 IMAX Systems operating in Greater China with an additional 206 systems in backlog.

The Company’s backlog in Greater China represents 46% of its total current backlog, including system upgrades.

The following tables provide detailed information about the commercial multiplex locations in operation within the IMAX network by arrangement type and geographic location as of December 31, 2024 and 2023:

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Commercial Multiplex Locations in IMAX Network

Sales Arrangements (1)

Arrangements (1)

Domestic Total (United States & Canada)

275 6 133 414

International:

Greater China

385 105 306 796

Asia (excluding Greater China)

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International Total

496 120 705 1,321

Worldwide Total (2)

771 126 838 1,735

(1) Includes Sales, Hybrid Sales and Sales-Type Lease deal types.

(2) Period-to-period changes in the tables above are reported net of permanently closed systems.

December 31, 2023

Commercial Multiplex Locations in IMAX Network

Sales Arrangements (1)

Arrangements (1)

Domestic Total (United States & Canada)

272 6 127 405

International:

Greater China

410 109 272 791

Asia (excluding Greater China)

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International Total

514 132 642 1,288

Worldwide Total (2)

786 138 769 1,693

(1) Includes Sales, Hybrid Sales and Sales-Type Lease deal types.

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December 31, 2023

Systems Dollar

Values Number of

Systems Dollar

(In thousands of U.S.

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Sales Arrangements (1)

153 11 $ 151,913 $ 9,340 148 16 $ 158,318 $ 16,068

Hybrid JRSA (2)

94 — 71,723 — 102 1 76,173 910

Traditional JRSA (2)(3)(4)

108 74 425 3,601 132 51 425 1,975

Total 355 85 $ 224,061 $ 12,941 382 68 $ 234,916 $ 18,953

(1) Includes Sales, Hybrid Sales, and Sales-Type Lease deal types.

(2) The consideration owed under traditional joint revenue sharing arrangements is typically a percentage of contingent box office receipts rather than a fixed upfront fee or fixed annual minimum payments.

(2) The consideration owed under traditional JRSAs is typically a percentage of contingent box office receipts rather than a fixed upfront fee or fixed annual minimum payments.

Accordingly, such arrangements do not usually have a dollar value in backlog;

however, hybrid joint revenue sharing arrangements typically provide for contracted upfront payments and therefore carry a backlog value based on those payments.

(3) Includes 30 IMAX Systems (2022 ― 38) where certain of the Company’s contracts contain options for the customer to elect to upgrade system type or to alter the contract structure (for example, from a joint revenue sharing arrangement to a sale) after signing, but before installation.

however, hybrid JRSAs typically provide for contracted upfront payments and therefore carry a backlog value based on those payments.

(3) Includes 31 IMAX Systems (2023 ― 30) where certain of the Company’s contracts contain options for the customer to elect to upgrade system type or to alter the contract structure (for example, from a JRSA to a sale) after signing, but before installation.

Current backlog information reflects all known elections.

The backlog reflects the minimum number of commitments for IMAX Systems according to the signed contracts.

(4) Includes one IMAX System that will be donated in the first quarter of 2025 to the University of Southern California’s School of Cinematic Arts.

The IMAX System will give students the opportunity to learn about the latest innovations in filmmaking, set design, sound and post-production.

The backlog reflects the minimum number of commitments for IMAX Systems according to signed contracts.

The dollar value fluctuates depending on the number of new arrangements signed from year-to-year, which adds to backlog, and the installation and acceptance of IMAX Systems and the settlement of contracts, both of which reduce backlog.

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IMAX System Backlog

Sales Arrangements (1)

Arrangements (1)

Domestic Total (United States & Canada) 54 2 13 69

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Worldwide Total (2)

182 94 164 440

(1) Includes Sales, Hybrid Sales and Sales-Type Lease deal types.

(2) Worldwide Total of 440 includes 250 new IMAX Laser Systems and 85 upgrades of existing locations to IMAX Laser Systems.

December 31, 2023

IMAX System Backlog

Sales Arrangements (1)

Arrangements (1)

Domestic Total (United States & Canada) 81 2 12 95

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Worldwide Total (2)

183 103 164 450

(1) Includes Sales, Hybrid Sales and Sales-Type Lease deal types.

(2) Includes 239 new IMAX Laser Systems and 73 upgrades of existing locations to IMAX Laser Systems.

(3) Includes 200 new IMAX Laser Systems and 89 upgrades of existing locations to IMAX Laser Systems.

(2) Worldwide Total of 450 includes 239 new IMAX Laser Systems and 73 upgrades of existing locations to IMAX Laser Systems.

Approximately 84% of IMAX System arrangements in backlog as of December 31, 2024 are scheduled to be installed in international markets (2023 ― 79%).

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Total IMAX System Signings (2)

(1) Includes Sales, Hybrid Sales and Sales-Type Lease deal types.

(2) Includes 73 IMAX System upgrades (2023 ― 21 upgrades).

Years Ended December 31,

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Total IMAX System Installations (3)

(1) Includes Sales, Hybrid Sales and Sales-Type Lease deal types.

(2) Includes 21 IMAX System upgrades (2022 ― 17 upgrades).

(3) Three IMAX Xenon Systems were relocated from their original location (2022 ― 12).

(1) Seven IMAX Systems were relocated from their original location (2023 ― three).

When a system under a sale or sales-type lease arrangement is relocated, the amount of revenue earned by the Company may vary from transaction-to-transaction and is usually less than the amount earned for a new sale.

In certain situations when a system is relocated, the original location is upgraded to an IMAX Laser System.

(2) Includes Sales, Hybrid Sales and Sales-Type Lease deal types

(3) Includes 69 IMAX System upgrades (2023 ― 42 upgrades).

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The Company considers multiple factors including its historical pricing practices, product class, market competition and geography.

The initial revenue recognized in a sales arrangement consists of a lump-sum payment typically received before and in connection with the installation of the IMAX System plus the present value of any future payments, including ongoing fixed minimum payments, which are subject to indexed increases over the term of the arrangement, and potential additional payments owed by the customer if certain minimum box office receipt thresholds are exceeded.

Constraints on the Recognition of Variable Consideration

The transaction price for the System Obligation, other than for IMAX Systems delivered pursuant to joint revenue sharing arrangements, consists of upfront or initial payments made before and after the final installation of the system and ongoing payments throughout the term of the arrangement.

The transaction price for the System Obligation, other than for IMAX Systems delivered pursuant to JRSAs, consists of upfront or initial payments made before and after the final installation of the system and ongoing payments throughout the term of the arrangement.

The Company estimates the transaction price, including an estimate of future variable consideration, received in exchange for the goods delivered or services rendered.

In addition, hybrid sales arrangements include amounts owed by the customer based on a percentage of their box office receipts over the term of the arrangement.

The arrangement for the sale of an IMAX System includes indexed minimum payment increases over the term of the arrangement, as well as the potential for additional payments owed by the customer if certain minimum box office receipt thresholds are exceeded or where no minimum is required, based on a percentage of their box office receipts over the term of the arrangement.

These contract provisions are considered to be variable consideration.

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Variable consideration related to indexed minimum payment increases is outside of the Company’s control, but the movement in the rates is historically well documented and economic trends in inflation are easily accessible.

Accordingly, for each contract subject to an indexed minimum payment increase, the Company estimates the most likely amount using published indices.

Accordingly, for each contract subject to an indexed minimum payment increase, the Company estimates the most likely amount using published indices, subject to collectability.

The average change over time in the consumer price index can significantly impact the Company’s estimates should inflation change at a higher level due to government policy and the impact of other events outside of its control.

The amount of the estimated minimum payment increase is then recorded at its present value as of the date of recognition using the customer’s implied borrowing rate.

(Refer to “Risk Factors - The Company conducts business internationally, which exposes it to uncertainties and risks that could negatively affect its operations, sales, and future growth prospects”).

Variable consideration related to the level of the customer’s box office receipts is outside of the Company’s control as it is dependent upon the future commercial success of the films released to the IMAX network.

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In cases where direct historical experience can be observed, average historical box office results, eliminating significant outliers, are used.

The resulting amount of variable consideration is then recorded at its present value as of the date of recognition using a risk-weighted discount rate.

The resulting amount of variable consideration is then recorded at its present value as of the date of recognition using a risk-weighted discount rate, subject to collectability.

The Company reviews its variable consideration assets on at least a quarterly basis considering recent box office performance and, when applicable, updated box office projections for future periods.

(Refer to “Risk Factors - The Company’s systems revenue can vary significantly from its cash flows under IMAX System sales or lease arrangements”).

Current Expected Credit Losses

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Share-Based Compensation

The Company issues share-based compensation to eligible employees, directors, and consultants under the IMAX Corporation Second Amended and Restated Long-Term Incentive Plan (as may be amended, the “IMAX LTIP”) and the China Long-Term Incentive Plan (the “China LTIP”) as summarized below.

The Company issues share-based compensation to eligible employees, directors, and consultants under the IMAX Corporation Second Amended and Restated Long-Term Incentive Plan (as amended from time to time, the “IMAX LTIP”) and the IMAX China Long-Term Incentive Plan (the “China LTIP”), a separate share-based compensation plan adopted by a subsidiary of the Company for its employees in Greater China.

The IMAX LTIP is the Company’s governing document and awards to employees, directors, and consultants under this plan may consist of stock options, restricted share units (“RSUs”), performance stock units (“PSUs”) and other awards.

A separate share-based compensation plan, the China LTIP, was adopted by a subsidiary of the Company in October 2012.

The Company measures share-based compensation expense using the grant date fair value of the award (as defined below), which is recognized as an expense in the Consolidated Statements of Operations on a straight-line basis over the requisite service period.

Share- based compensation expense is not adjusted for estimated forfeitures, but is instead adjusted when and if actual forfeitures occur.

The Company grants two types of PSU awards, one which vests based on a combination of employee service and the achievement of certain Adjusted EBITDA targets, and one which vests based on a combination of employee service and the achievement of total shareholder return (“TSR”) targets.

The Company grants two types of PSU awards, one which vests based on a combination of employee service and the achievement of certain Adjusted Earnings Before Interest, Income Taxes, Depreciation, and Amortization (“EBITDA”) targets, and one which vests based on a combination of employee service and the achievement of total shareholder return (“TSR”) targets.

The achievement of the Adjusted EBITDA and TSR targets in these PSUs is determined over a three-year performance period.

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These variables include, but are not limited to, market conditions as of the grant date, the Company’s expected share price volatility over the term of the award, and other relevant data.

The compensation expense is fixed on the date of grant based on the dollar value of the PSUs granted.

The compensation expense is fixed on the date of grant based on the fair value of the PSUs granted, and therefore not attached to the number of PSUs that may ultimately vest.

In the instance when the service criteria is not met, any expense previously recognized is reversed.

The amount and timing of compensation expense recognized for PSUs with Adjusted EBITDA targets is dependent upon management’s assessment of the likelihood of achieving these targets.

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Conversely, if, as a result of management’s assessment, it is projected that a lower number of PSUs will vest than previously anticipated, a life-to-date adjustment to decrease compensation expense is recorded in the period that such determination is made.

(Refer to Note 17(b) to Consolidated Financial Statements in Part II, Item 8.)

(Refer to “Capital Stock — Shared-Based Compensation ” in Note 16 to “Consolidated Financial Statements” in Part II, Item 8.)

Deferred Income Tax Assets

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As a result, an additional valuation allowance could be required, which would have an adverse impact on the Company’s effective income tax rate and results.

Conversely, if, after recording a valuation allowance, management determines that sufficient positive evidence exists in the jurisdiction in which a valuation allowance

is recorded, the Company may reverse all or a portion of the valuation allowance in that jurisdiction.

Conversely, if, after recording a valuation allowance, management determines that sufficient positive evidence exists in the jurisdiction in which a valuation allowance is recorded, the Company may reverse all or a portion of the valuation allowance in

that jurisdiction.

In such situations, the adjustment made to the deferred tax asset would have a favorable impact on the Company’s effective income tax rate and results in the period such determination was made.

(Refer to Notes 12(d) and 12(g) of Notes to Consolidated Financial Statements in Part II, Item 8.)

(Refer to “Income Taxes — Deferred Tax Assets and Deferred Tax Liabilities and Valuation Allowance ” in Note 11 to “Consolidated Financial Statements” in Part II, Item 8.)

Uncertain Tax Positions

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Some of these adjustments require significant judgment in estimating the timing and amount of the additional tax expense.

(Refer to Note 12(h) to Consolidated Financial Statements in Part II, Item 8.)

(Refer to “Income Taxes — Uncertain Tax Positions ” in Note 11 to “Consolidated Financial Statements” in Part II, Item 8.)

RECENTLY ISSUED ACCOUNTING STANDARDS

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Gelfond, its Chief Executive Officer (“CEO”), using a variety of factors and financial and operational metrics including:

(i) IMAX box office performance and the securing of new films and other events to be exhibited across the IMAX network;

(ii) the signing, installation, and financial performance of IMAX System arrangements, particularly those involving laser-based projection systems;

(iii) the success of the Company's investments in business evolution and brand extensions, including the integration and performance of SSIMWAVE, the distribution of live events to the IMAX network, and IMAX Enhanced, (iv) revenues and gross margins earned by the Company's segments, as discussed below;

(i) IMAX box office performance and the securing of new IMAX films and alternative content to be exhibited across the IMAX network;

(ii) the signing, installation, and financial performance of IMAX System arrangements;

(iii) the success of the Company’s investments in business evolution and brand extensions into streaming and consumer technology;

(iv) revenues and gross margins earned by the Company’s segments;

(v) consolidated earnings (loss) from operations, as adjusted for unusual items;

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and (viii) short- and long-term cash flow projections.

The CEO is the Company’s Chief Operating Decision Maker (“CODM”), as such term is determined under U.S.

The CODM, along with other members of management, assesses segment performance based on segment revenues and gross margins.

The CEO is the Company’s Chief Operating Decision Maker (“CODM”), as such term is defined under United States Generally Accepted Accounting Principles (“U.S.

The CODM assesses segment performance based on segment revenues and gross margins.

Selling, general and administrative expenses, research and development costs, the amortization of intangible assets, provision for (reversal of) current expected credit losses, certain write-downs, interest income, interest expense, and income tax (expense) benefit are not allocated to the Company’s segments.

In the first quarter of 2023, the Company revised its internal segment reporting, including information provided to the CODM to assess performance and allocate resources.

Accordingly, the Company has two reportable segments:

The Company has two reportable segments:

(i) Content Solutions, which principally includes content enhancement and distribution services, and (ii) Technology Products and Services, which principally includes the sale, lease, and maintenance of IMAX Systems.

The Company’s activities that do not meet the criteria to be considered a reportable segment are reported within All Other.

Prior period comparatives have been revised to conform with the current year presentation.

Additional information on segment reporting is provided in Note 20 to “Consolidated Financial Statements” in Part II, Item 8.

The discussion of the Company’s results of operations below compares results for the years ended December 31, 2023 and 2022 as well as for the years ended December 31, 2022 and 2021.

Results of Operations for the Years Ended December 31, 2024 and 2023

The Company believes that its 2023 results of operations showed the strength of IMAX’s business model and the increasing global demand for The IMAX Experience by consumers, exhibitors, filmmakers, and studios.

In 2023, the Company achieved a number of significant box office records reflecting the growing demand for IMAX.

This contributed to the Company’s installation of 128 IMAX Systems compared to 92 in 2022, system signings of 129 IMAX Systems compared to 47 in 2022, and generating $58.6 million in net cash provided by the Company’s operating activities, compared to $17.3 million in the prior year.

Net Income (Loss) and Adjusted Net Income Attributable to Common Shareholders

The following table presents the Company’s net income (loss) attributable to common shareholders and the associated per share amounts, as well as adjusted net income attributable to common shareholders* and adjusted net income attributable to common shareholders per share* for the years ended December 31, 2023 and 2022:

The Company’s 2024 results of operations reflected the diversity of content and strength of IMAX's business model as well as the recognition of IMAX as a premium, global, out-of-home partner for filmmakers and content owners.

The Company achieved revenues of $352.2 million, a gross margin of 54% and net income attributable to common shareholders of $26.1 million.

In addition, the Company achieved the high end of its system installation target with 146 IMAX Systems installed in 2024, compared to 128 system installations in 2023, an increase of 14%.

The Company signed agreements for 130 IMAX Systems in 2024, with 89% in international markets, and generated $70.8 million in net cash from operations, compared to $58.6 million in the prior year, an increase of 21%.

Net Income and Adjusted Net Income Attributable to Common Shareholders

The following table presents the Company’s net income attributable to common shareholders and the associated per-share amounts, as well as adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per share for the years ended December 31, 2024 and 2023:

Years Ended December 31,

(In thousands of U.S.

Dollars, except per share amounts)

Dollars, except per diluted share amounts)

Per Diluted Share

Net (Loss) Income

Per Diluted Share

Net income (loss) attributable to common shareholders

Net income attributable to common shareholders

$ 26,059 $ 0.48 $ 25,335 $ 0.46

Adjusted net income attributable to common shareholders*

* Refer to “Non-GAAP Financial Measures” below for a description of this non-GAAP financial measure and a reconciliation to the most comparable GAAP amount.

$ 51,010 $ 0.95 $ 52,079 $ 0.94

*Refer to “Non-GAAP Financial Measures” for a description of this non-GAAP financial measure and a reconciliation to the most comparable GAAP amount.

Revenues and Gross Margin

For the year ended December 31, 2023, the Company’s revenues and gross margin increased by $74.0 million or 25% and $58.0 million or 37%, respectively, from 2022 principally due to the strength of the IMAX GBO performance through the distribution of films such as Oppenheimer, Avatar:

The Way of Water, The Super Mario Bros.

Movie, The Wandering Earth 2, Guardians of the Galaxy Vol.3, Mission:

Impossible - Dead Reckoning Part One, Ant-Man and the Wasp:

Quantumania, Creation of the Gods I:

Kingdom of Storms, and Spider-Man:

Across the Spider-Verse and record performance of local language content coupled with higher system sales and renewals in the current period.

For the year ended December 31, 2024, the Company’s revenues and gross margin decreased by $22.6 million, or 6%, and $24.1 million, or 11%, respectively, when compared to same period in 2023, principally due to a lower level of IMAX box office driven in part by the impact of the 2023 Hollywood actors’ and writers’ strike on the 2024 film slate and a less favorable mix of content across the Company’s global network, predominantly in China (see below).

These year-over-year impacts were partially offset by higher revenues from alternative content, including the sale of commercial and streaming rights for the IMAX documentary The Blue Angels .

A main factor in the Company’s global box office being lower in 2024 versus 2023 was the weaker-than-expected performance of films in China, particularly with regard to local language blockbuster titles.

Less than two months into 2025, however, the movie industry has seen a very significant turnaround in China.

Led by the Mandarin-language blockbuster Ne Zha 2 , IMAX screens in China have broken all previous box office records for the Chinese New Year period, and have already surpassed the Company’s best-ever Q1 box office in China (from 2019).

In fact, in less than 3 weeks in February 2025, IMAX screens in China generated more local language box office than IMAX China did in the entire year of 2024.

The following table presents the Company’s revenue, gross margin and gross margin percentage by reportable segment for the years ended December 31, 2024 and 2023:

Gross Margin %

Revenue Gross Margin Gross Margin %

(In thousands of U.S.

2024 2023 2024 2023 2024 2023

Content Solutions

$ 124,731 $ 126,698 $ 66,523 $ 74,106 53 % 58 %

Technology Products and Services

216,062 234,303 115,553 129,946 53 % 55 %

Sub-total for reportable segments

340,793 361,001 182,076 204,052 53 % 57 %

All Other (1)

11,415 13,838 8,124 10,289 71 % 74 %

Total $ 352,208 $ 374,839 $ 190,200 $ 214,341 54 % 57 %

(1) All Other includes the results from Streaming and Consumer Technology and other ancillary activities.

Segment Operating Results

The Company’s segment operating results are presented based on how the Company assesses operating performance and internally reports financial information.

The Company’s segment operating results are presented based on how the CODM assesses operating performance and internally reports financial information.

See Note 20 to “Consolidated Financial Statements” in Part II, Item 8 for additional information on the Company’s reportable segments.

Content Solutions

Content Solutions segment results are influenced by the level of commercial success and box office performance of the films and other content released to the IMAX network, as well as other factors including the timing of the releases, the length of play across the IMAX network, the box office share take rates under the Company’s film remastering and distribution arrangements, the level of marketing spend associated with the releases in the year and the fluctuations in the value of foreign currencies versus the U.S.

For the year ended December 31, 2023, Content Solutions segment revenues and gross margin increased by $24.9 million or 24% to $126.7 million from $101.8 million and $22.9 million or 45% to $74.1 million from $51.2 million, respectively, when compared to the same period in 2022 principally due to better performance of the films distributed throughout the global IMAX network in 2023 including IMAX China, following the Chinese government relaxing its dynamic zero-COVID policies and easing capacity restrictions at the end of 2022.

For the year ended December 31, 2023, GBO generated by IMAX films totaled $1.1 billion, a $209.3 million or 25% increase versus $849.7 million in 2022.

The 2023 GBO was generated by the exhibition of 105 films, which consisted of 95 new films (2022 — 63), 10 carryovers (2022 — 10) and one re-release (2022 — five).

The impact of changes in foreign currency valuations versus the U.S.

Dollar led to a decrease in GBO of $23.0 million in 2023 as compared to prior year rates.

The Company believes that if foreign currency exchange rates were consistent in 2023 and 2019 that IMAX GBO in 2023 would have exceeded its best box office year ever in 2019.

In addition, for the year ended December 31, 2023, local language films exhibited across the Company’s global IMAX network generated over $227.2 million in IMAX GBO, representing 21% of the Company’s total box office.

Leading local language titles distributed across the IMAX network during 2023 included the Chinese Filmed For IMAX title The Wandering Earth 2, which generated IMAX GBO of $48.6 million, the Chinese film Creation of the Gods I:

Kingdom of Storms ($32.5 million), the Chinese film No More Bets ($11.2 million), and the Japanese anime film The First Slam Dunk ($10.8 million).

Despite accounting for approximately 1% of all Domestic screens and less than 1% of all screens globally in 2023, the IMAX network had a Domestic market share of 4.4% and a global market share of 3.2% in 2023.

In addition to the higher level of revenues, Content Solutions segment gross margin is also influenced by the costs associated with the films and other content exhibited in the period and can vary from period-to-period, especially with respect to marketing expenses, which are expensed as incurred, for films and the costs incurred to produce, market and distribute live events and documentary content during the period.

For the year ended December 31, 2023, marketing expenses incurred towards films were $14.2 million compared to $17.3 million in 2022.

Gross margin percent for the year ended December 31, 2023 was 58% compared to 50% for the same period in 2022 with the increase being driven by the operating leverage that results from achieving higher levels of box office with relatively fixed film distribution costs and strategic deployment of marketing dollars.

Content Solutions segment results are influenced by the level of commercial success and box office performance of the films and other content released to the IMAX network, as well as other factors including the timing of the releases, the length of play across the IMAX network, the box office share take rates under the Company’s Film Remastering and distribution arrangements, the level of marketing spend associated with the releases in the year, and fluctuations in the value of foreign currencies versus the U.S.

For the year ended December 31, 2024, Content Solutions segment revenues and gross margin decreased by $2.0 million, or 2%, to $124.7 million from $126.7 million and $7.6 million, or 10%, to $66.5 million from $74.1 million, respectively, when compared to the same period in 2023.

For the year ended December 31, 2024, GBO generated by IMAX films totaled $900.7 million, a 15% decrease from $1.1 billion in 2023, driven mostly by lower international GBO reflecting fewer local language blockbusters as well as the negative impact of the 2023 Hollywood actors’ and writers’ strike on the 2024 film slate.

IMAX’s 2024 GBO was generated by the exhibition of 129 films, which consisted of 118 new films (2023 — 95), and 11 re-releases (2023 — one), including Dune:

Part Two ($145 million).

Deadpool & Wolverine ($84 million) , Godzilla x Kong:

The New Empire ($41 million) , Alien:

Romulus ($39 million), Inside Out 2 ($39 million), Gladiator ($31 million), and the IMAX exclusive re-release of Interstellar ($22 million) .

In addition, for the year ended December 31, 2024, the local language films exhibited across the IMAX network generated over $134.5 million in GBO, representing 15% of the Company’s total GBO.

Leading local language titles distributed across the IMAX network during 2024 included the Chinese films Pegasus 2 and Yolo , the Japanese film Haikyu!!

, and the Korean concert film, IM HERO:

The Stadium .

The impact on revenues from the lower box office earned year-over-year was mostly offset by $10.5 million in revenue earned from the sale of worldwide rights to the Company’s original documentary, The Blue Angels , to Amazon Content.

In addition to the level of revenues, Content Solutions segment gross margin is also influenced by the costs associated with the films and other content exhibited in the period.

The costs associated with films and other content can include production, post-production, distribution, and marketing, which are expensed as incurred.

For the year ended December 31, 2024, gross margin percent was 53% compared to 58% for the same period in 2023 with the decrease being primarily driven by the lower level of GBO earned in the year, coupled with higher production and marketing costs .

Additionally, in 2024, the Company had a higher mix of self-produced content being released, including The Blue Angels, which carries a lower gross margin.

Technology Products and Services

The primary drivers of Technology Products and Services segment results are the number of IMAX Systems installed in a period, the costs associated with each installation, lease payments tied to the box office performance of the films released to the IMAX network, as well as the associated maintenance contracts that accompany each installation.

The average revenue and gross margin per IMAX System under sale and sales-type lease arrangements varies depending upon the number of IMAX System commitments with a single respective exhibitor, an exhibitor’s location, the type of system sold and various other factors.

The average revenue and gross margin per IMAX System under sale and sales-type lease arrangements vary depending upon the number of IMAX System commitments with a single respective exhibitor, an exhibitor’s location, the type of IMAX System sold, and various other factors.

The installation of IMAX Systems in theaters or multiplexes, which make up a large portion of the Company’s system backlog, depends primarily on the timing of the construction of those projects, which is not under the Company’s control.

For the year ended December 31, 2023, Technology Products and Services segment revenue and gross margin increased by $41.9 million or 22% to $234.3 million from $192.4 million and $28.9 million or 29% to $129.9 million from $101.1 million, respectively, when compared to the prior year.

The higher level of revenue is driven in part by an increase of $16.9 million in system sales revenue as a result of 29 additional IMAX System installations under sales arrangements, including upgrades, partially offset by the impact of higher interest rates on future minimum payments and estimated variable consideration, the mix of contract types and lower aftermarket sales of 3D glasses.

Also contributing to the higher level of revenue was an increase of $13.8 million in Revenues — Technology Rentals, as a result of IMAX GBO earned from IMAX Systems under joint revenue sharing arrangements, which increased by $181.7 million or 42% in 2023 when compared to the prior year, from $433.1 million to $614.8 million, resulting from the higher level of box office performance discussed above.

The Technology Products and Services segment gross margin increase of 29% year-over-year is primarily reflective of a higher number of IMAX System installations and higher Revenues — Technology Rentals earned through the Company’s joint revenue sharing arrangements, driven by the stronger box office performance, which led to incremental profit flow-through.

The following table provides detailed information about IMAX Systems installed and the associated revenue recognized at that time, except for traditional joint revenue sharing arrangement as revenue is recognized over the lease term, during the years ended December 31, 2023 and 2022:

The following table provides detailed information about IMAX Systems installed and the associated revenue recognized at that time, except for traditional JRSAs as revenue is recognized over the lease term, during the years ended December 31, 2024 and 2023:

Years Ended December 31,

(In thousands of U.S.

Dollars, except number of systems)

Systems Revenue Number of

Systems Revenue

New IMAX Systems 48 $ 43,152 64 $ 56,508

Upgraded IMAX Systems 15 19,108 11 9,376

For the year ended December 31, 2023, All Other revenue and gross margin increased by $7.2 million and $6.2 million, respectively, when compared to the same period in 2022 principally due to growth in revenues earned by the Company’s Streaming and Consumer Technology business.

Full year 2023 reflects the inclusion of both SSIMWAVE’s revenues as that acquisition was completed in late September 2022 and growth in the consumer technology business of IMAX Enhanced.

Total 63 $ 62,260 75 $ 65,884

Included in the table above are seven IMAX Systems which were relocated from their original locations (2023 ― two IMAX Systems).

When an IMAX System under a sale or sales-type lease arrangement is relocated, the amount of revenue earned by the Company may vary from transaction-to-transaction and is usually less than the amount earned for a new sale.

In certain situations when an IMAX System is relocated, the original location is upgraded to an IMAX Laser System.

For the year ended December 31, 2024, Technology Products and Services segment revenue and gross margin decreased by $18.2 million or 8% to $216.1 million from $234.3 million and $14.4 million or 11% to $115.6 million from $129.9 million, respectively, when compared to the prior year.

The lower level of revenue is primarily driven by a decrease of $13.2 million in Revenues — Technology Rentals, as a result of less IMAX GBO earned from IMAX Systems under JRSAs.

For the year ended December 31, 2024, GBO earned from IMAX Systems under JRSAs was $540.7 million, which decreased by $74.1 million or 12% from the prior year of $614.8 million.

Also contributing to the lower level of revenue was a decrease in the number of IMAX Systems recognized under sales arrangements, as well as a lower level of IMAX System renewals and after-market sales.

These decreases in revenue were partially offset by higher maintenance revenue recognized during the period and a higher average revenue recognized per system due to the mix of IMAX System configurations.

For the year ended December 31, 2024 gross margin percent was 53% compared to 55% in the prior period with the decrease being driven by the lower level of IMAX box office year-over-year, mostly offset by the higher average revenue per system for the current year IMAX Systems installed under sales and sales-type arrangements.

For the year ended December 31, 2024, All Other revenue and gross margin decreased by $2.4 million and $2.2 million, respectively, when compared to the same period in 2023, which principally reflects a decrease in revenue related to IMAX Enhanced offerings.

Selling, General and Administrative Expenses

The following table presents information about the Company’s Selling, General and Administrative Expenses for the years ended December 31, 2024 and 2023:

Years Ended December 31,

Years Ended December 31, Variance

(In thousands of U.S.

Total selling, general and administrative expenses

$ 132,701 $ 144,406 $ (11,705) (8 %)

Share-based compensation (1)

(20,897) (22,534) 1,637 (7 %)

Total selling, general and administrative expenses, excluding share-based compensation (2)

$ 111,804 $ 121,872 $ (10,068) (8 %)

(1) A portion of total share-based compensation expense is also recognized within Cost and Expenses Applicable to Revenue and Research and Development.

Refer to Note 17(c) to Consolidated Financial Statements in Part II, Item 8.

The increase in Selling, General and Administrative Expenses reflects the inclusion of $5.2 million related to the Company’s Streaming Technology operation of SSIMWAVE, which was not included to the same extent in the prior year comparative as the acquisition was completed in late September 2022, and $3.3 million in non-recurring transaction expenses associated with the proposal to acquire the outstanding shares in IMAX China.

As a percentage of revenue, Selling, General and Administrative Expenses excluding share-based compensation improved to 33% as compared to 37% in 2022, which reflected strong operating leverage coupled with management's continued focus on cost discipline.

Refer to “Capital Stock — Shared-Based Compensation” in Note 16 to “Consolidated Financial Statements” in Part II, Item 8.

(2) See “Non-GAAP Financial Measures” for a description of this non-GAAP financial measure and a reconciliation to the most comparable GAAP amount.

The lower level of Selling, General and Administrative Expenses year-over-year reflects management’s continued focus on operational efficiencies, including workforce reductions, as well as adjustments in certain estimates relating to compensation payouts in connection with our Streaming and Consumer Technology division and the Company’s overall performance in respect of its corporate targets, which were partially offset by the impact of higher cost of operations.

For the year ended December 31, 2023, Selling, General and Administrative Expenses included $3.3 million in non-recurring transaction expenses associated with the proposal to acquire the outstanding shares in IMAX China.

As a percentage of revenue, Selling, General and Administrative Expenses excluding share-based compensation improved to 32% as compared to 33% in 2023, which reflected management’s continued focus on cost discipline that enabled the 2024 percentage to slightly improve even while revenues declined 6% year-over-year.

Research and Development

The Company believes that it is a premier global technology platform for awe-inspiring entertainment and events with significant proprietary expertise in digital and film-based projection and sound system component design, engineering, and imaging technology, particularly in laser-based technology.

A significant portion of the Company’s research and development efforts have been focused on the IMAX Laser Systems, which the Company believes is capable of illuminating the largest screens in the IMAX network and provides greater brightness and clarity, higher contrast, a wider color gamut and deeper blacks, while consuming less power and lasting longer than existing digital technology, to ensure that the Company continues to provide the highest quality, premier cinematic experience available to consumers.

A significant portion of the Company’s research and development efforts has been focused on the IMAX Laser Systems, which the Company believes are capable of illuminating the largest screens in the IMAX network and provides greater brightness and clarity, higher contrast, a wider color gamut and deeper blacks, while consuming less power and lasting longer than existing digital technology, to ensure that the Company continues to provide the highest quality, premier cinematic experience available to consumers.

The Company has continued research and development aimed at creating more affordable laser-based solutions with various screen sizes for its commercial multiplex customers.

For the year ended December 31, 2023, Research and Development expenses were $10.1 million, representing an increase of $4.8 million or 91% when compared to $5.3 million during the same period in the prior year, primarily driven by increased compensation expense of $1.0 million in Streaming and Consumer Technology business and $3.5 million in the Company’s other research and innovation initiatives.

For the year ended December 31, 2023, expenses include $1.4 million specifically related to the Company’s Streaming and Consumer Technology activities.

The Company also continues to invest in new film cameras and other technologies to bring bespoke capabilities and innovative technology to its differentiated 15/65mm camera fleet.

The Company recently produced the first of its all-new fleet of IMAX 65mm film cameras.

The Company’s engineering team has spent two years developing new film cameras that offer spectacular image quality while incorporating new electronics and software, a more modern design, improved functionality and reduced noise by 30%.

For the year ended December 31, 2024, Research and Development expenses were $5.1 million, representing a decrease of $5.0 million, or 50%, when compared to $10.1 million during the same period in the prior year.

The reduction year-over-year was primarily

driven by the capitalization of film camera costs in accordance with the achievement of technological feasibility in 2024.

The Company continues to expense its investment in other projects, including in the development of new Streaming and Technology product offerings and improvements to its existing IMAX System product suite.

The Company intends to continue research and development to further evolve its end-to-end technology.

This includes bringing connectivity to the Company’s global network to support live and interactive events worldwide;

developing new IMAX film cameras and certifying additional digital cameras;

further improving its proprietary film remastering and distribution process for the delivery of content for both theatrical (including local language content) and home entertainment;

and further improving the reliability of its projectors, as well as enhancing the Company’s image and sound quality.

This includes research and development related to film and digital camera development, film remastering software enhancements, global IMAX network connectivity and projector technology image and sound innovation.

Within the Company’s Streaming and Consumer Technology business, there is ongoing research and development in perceptual metrics involving novel measurement and optimization techniques.

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As of December 31, 2024 and 2023, 89 and 86 of the Company’s employees were connected with research and development projects, respectively.

Credit Loss Expense, Net

For the year ended December 31, 2023, the Company recorded current expected credit losses of $1.8 million, as compared to credit losses of $8.5 million recognized in the prior year.

The prior period expense was principally due to reserves established against substantially all of the Company’s receivables in Russia due to uncertainties associated with the ongoing Russia-Ukraine conflict and resulting sanctions, partially offset by the reversal of provisions associated with the COVID-19 pandemic as the outlook for the theatrical exhibition industry improved.

Credit Loss (Reversal) Expense, Net

For the year ended December 31, 2024, the Company recorded a credit loss reversal of $1.0 million, as compared to a credit loss expense of $1.8 million recognized in the prior year.

This reversal of the credit loss provision in 2024 resulted from an increase in collections of the Company’s account receivables as exhibition partners continue to improve their cash position post pandemic.

Consolidated Financial Statements are prepared and involve estimates about the future.

As a result, the Company’s judgments and associated estimates of credit losses may ultimately prove, with the benefit of hindsight, to be incorrect.

Asset Impairments

For the year ended December 31, 2023, the Company recorded asset impairments of $0.4 million principally related to the write-down of content-related assets which became impaired in the year.

On January 10, 2022, IMAX (Shanghai) Culture and Technology Co., Ltd, a wholly-owned subsidiary of IMAX China, entered into a joint film investment agreement with Wanda Film (Horgos) Co.

to invest RMB 30.0 million ($4.7 million) in the movie Mozart from Space , which was released on July 15, 2022.

Pursuant to the investment agreement, IMAX (Shanghai) Culture and Technology Co., Ltd.

has the right to receive a share of the profits or losses of the film distribution.

IMAX (Shanghai) Culture and Technology Co., Ltd.’s commitment is limited to its investment and has no further obligation if the actual movie production cost exceeds the original budget.

The investment met the criteria for classification as a financial asset.

The investment was measured at amortized cost less impairment losses and was recorded within Other Assets in the Consolidated Balance Sheets.

For the year ended December 31, 2022, the Company recorded a full impairment of its RMB 30.0 million ($4.5 million) investment in Mozart from Space based on projected box office results and distribution costs.

Interest Expense

Restructuring and other charges

For the year ended December 31, 2024, the Company recorded restructuring and other charges of $3.7 million, representing an increase of $0.8 million, or 27%, when compared to $2.9 million during the same period in the prior year.

These charges are associated with strategic initiatives aimed at enhancing operational efficiency, reducing costs, and optimizing the Company’s organizational structure.

R estructuring and other charges are presented as a separate line item in the Consolidated Statements of Operations to enhance transparency and provide stakeholders with a better understanding of the Company’s financial performance.

Specifically, in 2024, the Company incurred $2.4 million, compared to $1.3 million in the prior year, in connection with the assessment of its organizational structure and implementation of such plan, including the elimination of redundant roles and addressing spans and layers to capture efficiencies and centralize certain operational roles.

Additionally, the Company incurred $1.3 million of non-recurring fees related to the assessment of its corporate structure and the resulting internal asset sale.

In 2023, the Company recognized executive transition costs of $1.4 million associated with the departure of the President, IMAX Entertainment and Executive Vice President of the Company.

In 2024, there were no expenses recorded associated with executive transition costs.

Interest Expense, net

For the year ended December 31, 2024, interest expense was $8.1 million, with $269.1 million of year-end total debt, representing an increase of $1.3 million, or 19%, when compared to interest expense of $6.8 million with $257.2 million of year-end total debt in the prior year.

This increase is primarily due to cash flows as well as timing of borrowings and repayments of revolving credit facility borrowings made during the year in support of investments in the business, including capital expenditures to invest in equipment for joint revenue sharing arrangements as well as share repurchases, and the impact of higher interest rates in 2023.

(Refer to Note 14 to Consolidated Financial Statements in Part II, Item 8.)

This increase primarily reflects a higher average level of outstanding borrowings under the Credit Facility during the year.

(Refer to Note 13 to “Consolidated Financial Statements” in Part II, Item 8.) For the year ended December 31, 2024, interest income was $2.2 million compared to $2.5 million in the prior year.

For the year ended December 31, 2024, the Company recorded an income tax expense of $5.0 million (2023 — $13.1 million).

The Company’s effective tax rate for year ended December 31, 2023 of 28.3% differs from the Canadian statutory tax rate of 26.5%, primarily due to tax rate differences in foreign jurisdictions, a reduction in tax reserves of $0.4 million (2022 — $1.6 million) and a net decrease in the valuation allowance related to deferred taxes of $0.7 million (2022 — increase of $16.8 million).

This was offset by withholding taxes of $5.2 million (2022 — $3.8 million).

The Company’s effective tax rate for year ended December 31, 2024 of 13.3% differs from the Canadian statutory tax rate of 26.5%, primarily due to tax rate differences in foreign jurisdictions, a tax benefit related to an internal asset sale of $4.0 million, a reduction in tax reserves of $1.4 million (2023 — $0.4 million), a tax benefit related to investment tax credits of $1.2 million (2023 — $0.4 million) and other tax adjustments of $3.6 million (2023 — expense of $0.3 million).

This was offset by a net increase in the valuation allowance related to deferred taxes of $3.5 million (2023 — decrease of $0.7 million) and withholding taxes of $3.9 million (2023 — $5.2 million).

The remainder of the difference was due to normal course movements and non-material items.

For the year ended December 31, 2023, the deferred tax liability for the applicable foreign withholding taxes decreased by $2.4 million (2022 — $2.7 million).

During the year ended December 31, 2023, $24.0 million (2022 — $27.4 million) of historical earnings from a subsidiary in China were distributed and, as a result, $2.4 million (2022 — $2.7 million) of foreign withholding taxes were paid

to the relevant tax authorities.

The remaining deferred tax liability on the Company’s Consolidated Balance Sheets as of December 31, 2023 is $12.5 million (2022 — $14.9 million).

During the year ended December 31, 2024, the Company completed an internal asset sale to more closely align its intellectual property rights with its operations.

The tax expense on the capital gains was offset by deferred tax benefits resulting in a net tax benefit

of $4.0 million.

The valuation allowance also includes a $2.3 million net tax benefit related to the internal asset sale, resulting in a total net tax benefit of $6.3 million recognized in Income Tax Expense of the Consolidated Statements of Operations.

The Company’s deferred tax liability of $12.5 million as of December 31, 2024 (2023 — $12.5 million) relates to the estimated applicable foreign withholding taxes associated with historical earnings that were not indefinitely reinvested, which become payable upon the repatriation of any such earnings.

During the year ended December 31, 2024, $nil (2023 — $24.0 million) of historical earnings from a subsidiary in China were distributed and, as a result, $nil (2023 — $2.4 million) of foreign withholding taxes were paid to the relevant tax authorities.

(Refer to Note 11 to “Consolidated Financial Statements” in Part II, Item 8 for more information on the Company’s tax position.)

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The Company’s Consolidated Financial Statements include the non-controlling interest in the net income or loss of IMAX China, as well as the impact of non-controlling interests in the activity of its Original Film Fund subsidiary.

For the year ended December 31, 2023, the net income attributable to non-controlling interests of the Company’s subsidiaries was $7.7 million (2022 — $2.9 million), an increase of 164.5% or $4.8 million year-over-year.

The increase reflects the recovery of IMAX China’s box office following the Chinese government relaxing its dynamic zero-COVID policies and easing capacity restrictions at the end of 2022 and an increasing level of consumer confidence in attending public gatherings.

Results of Operations for the Years Ended December 31, 2022 and 2021

In the first quarter of 2023, the Company updated its reportable segments.

See Note 21 to Consolidated Financial Statements in Part II, Item 8.

The following discussion and analysis related to the Company’s segment results for the years ended December 31, 2022 and 2021 have been revised to conform with the current year presentation.

The discussion of the Company’s results of operations comparing results for the years ended December 31, 2022 and 2021 that was not impacted by the segment change is included under the section entitled “Results of Operations” in Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and is incorporated by reference into this Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Net Loss and Adjusted Net Income (Loss) Attributable to Common Shareholders

The following table presents the Company’s net loss attributable to common shareholders and the associated per share amounts, as well as adjusted net income (loss) attributable to common shareholders* and adjusted net income (loss) attributable to common shareholders per share* for the years ended December 31, 2022 and 2021:

For the year ended December 31, 2024, the net income attributable to non-controlling interests of the Company’s subsidiaries was $6.6 million (2023 — $7.7 million), a decrease of 14%, or $1.1 million, year-over-year.

The decrease was primarily due to the lower IMAX box office earned in Greater China year-over-year, which decreased by 33% from $298 million in 2023 to $199 million in 2024.

CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

The discussion below summarizes our cash flows from operating, investing, and financing activities as reflected in the Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023.

Years Ended December 31,

(In thousands of U.S.

Dollars, except per share amounts)

Net (Loss) Income

Net loss attributable to common shareholders

Adjusted net income (loss) attributable to common shareholders*

For the year ended December 31, 2022, the Company recorded a net non-cash provision of $6.9 million, or $0.12 per share, due to an increase in reserves given the uncertainty of collecting receivables in Russia.

This provision was taken due to the ongoing conflict and resulting sanctions in Ukraine and covers substantially all of the Company’s net receivable exposure in the Russian market.

Excluding the impact of this provision, net loss attributable to common shareholders* was $(15.9) million, or $(0.28) per share, and adjusted net income attributable to common shareholders* was $10.1 million, or $0.18 per share.

Over the past five years, Russia has represented on average approximately 3% of the GBO generated by IMAX films.

* See “Non-GAAP Financial Measures” below for a description of this non-GAAP financial measure and a reconciliation to the most comparable GAAP amount.

Revenues and Gross Margin

For the year ended December 31, 2022, the Company’s revenues and gross margin increased by $45.9 million or 18% and $21.9 million or 16%, respectively, when compared to the same period in 2021 principally due to the strength of the GBO performance through the distribution of films such as Avatar:

The Way of Water, Top Gun:

Maverick , Doctor Strange in the Multiverse of Madness , Jurassic World Dominion , The Batman , Black Panther:

Wakanda Forever, Thor:

Love and Thunder, The Battle at Lake Changjin 2 , and Spider-Man:

No Way Home .

The following table presents the Company’s revenue, gross margin and gross margin percentage by reportable segment for the years ended December 31, 2022 and 2021:

Gross Margin %

(In thousands of U.S.

Content Solutions

Technology Products and Services

Sub-total for reportable segments

All Other (1)

(1) All Other includes the results from Streaming and Consumer Technology and other ancillary activities.

Segment Operating Results

The Company’s segment operating results are presented based on how the Company assesses operating performance and internally report financial information.

See Note 21 to Consolidated Financial Statements in Part II, Item 8 for additional information on the segments.

Content Solutions

For the year ended December 31, 2022, Content Solutions segment revenues and gross margin increased by $24.8 million or 32% to $101.8 million from $77.0 million and $6.0 million or 13% from $51.2 million from $45.3 million, respectively, when compared to the prior year.

The performance of the films distributed through the IMAX network resulted in a $211.5 million or 33% increase in GBO, from $638.2 million in 2021 to $849.7 million in 2022, despite a 32% decline in Greater China box office driven by the COVID-19 restrictions instituted as part of China’s dynamic zero-COVID policy.

This overall improvement in GBO earned through the global IMAX network for the year was partially offset by unfavorable foreign currency exchange rate movements.

For the year ended December 31, 2022, GBO was generated by the exhibition of 78 films (63 new, 10 carryovers, and five re-releases), including Avatar:

The Way of Water , which generated GBO of $140.2 million (or 11% market share) and Top Gun:

Maverick , which generated GBO of $110.7 million (or 7% market share) in the year.

During the year ended December 31, 2021, GBO was generated by the exhibition of 73 films (63 new, six carryovers and four re-releases).

In addition to the higher level of revenues, Content Solutions segment gross margin is also influenced by the costs associated with the films and other content exhibited in the period, and can vary from period-to-period, especially with respect to marketing expenses, which are expensed as incurred, for films and the costs incurred to produce, market and distribute live events and documentary content during the period.

For the year ended December 31, 2022, the impact of the higher level of Content Solutions Segment revenues was partially offset by higher marketing expenses of $17.3 million, as compared to $8.2 million in the prior year reflecting investments to drive higher levels of box office and enable the achievement of the Company’s highest global and domestic market share of 3% and 5%, respectively, in 2022.

The Content Solutions segment gross margin was also impacted by investments in infrastructure costs, depreciation expense and network connection fees of $3.3 million to operate the IMAX connected network for the year ended December 31, 2022.

Technology Products and Services

For the year ended December 31, 2022, Technology Products and Services segment revenue increased by $19.4 million or 11% to $192.4 million from $173.0 million while gross margin increased by $15.0 million or 17% to $101.1 million from $86.0 million, when compared to the prior year.

The increase in revenue was primarily reflective of an increase of $15.6 million in Technology Rentals and $3.3 million in recurring maintenance revenue partially offset by a $2.7 million decrease in IMAX Systems revenue related to a lower number of system installations year-over-year.

The increase in Technology rentals revenue earned through the Company’s joint revenue sharing arrangements, was driven by the stronger box office performance which led to incremental profit flow-through.

IMAX GBO earned from IMAX Systems under joint revenue sharing arrangements increased by $94.0 million or 28% in 2022 when compared to the prior year, from $339.1 million to $433.1 million, resulting from the higher level of box office performance discussed above.

The increase in IMAX Maintenance revenue was due to the continued global reopening of the IMAX network amidst the ongoing recovery of the theatrical exhibition industry from earlier stages of the COVID-19 pandemic, partially offset by a decrease of $1.2 million in revenue associated with systems in Russia, Ukraine, and Belarus, which were placed on nonaccrual status due to the ongoing Russia-Ukraine conflict and resulting sanctions.

The year-over-year lower level of IMAX Systems revenue in 2022 was the result of four fewer IMAX System installations, including upgrades, in 2022 under sale and sales-type lease arrangements and a decrease of $1.1 million in Finance Income associated with locations in Russia, Ukraine, and Belarus, which were placed on nonaccrual status due to the ongoing Russia-Ukraine conflict and resulting sanctions.

These factors were partially offset by an increase of $5.0 million from the impact of amendments to existing IMAX System arrangements, as well as an increase of $3.3 million as the Company ended the temporary relief on annual minimum payment obligations for exhibitor customers during the COVID-19 pandemic.

The increase in Technology Products and Services segment gross margin of $15.0 million, when compared to the prior year as costs Rentals including depreciation expense, advertising, marketing and system commission costs grew at a lower rate than revenue.

This increase was partially offset by lower year-over-year profit contribution from maintenance revenue due to the profit flowthrough of $2.5 million in maintenance revenue recognized in 2021 that had been deferred from 2020 due to uncertainties associated with the COVID-19 pandemic.

For the year ended December 31 2022, Technology Products and Services segment depreciation expense of $22.6 million was consistent with the prior year and advertising, marketing and commission costs of $2.2 million, compared to $4.3 million in the prior year.

(In thousands of U.S.

Dollars, except number of systems)

New IMAX Systems

Upgraded IMAX Systems

For the year ended December 31, 2022, All Other revenue and gross margin increased by $1.7 million and $1.0 million, respectively, when compared to the same period in 2021 principally due to the inclusion of SSIMWAVE’s revenues for three months as the acquisition was completed in late September 2022 as well as growth in the IMAX Enhanced consumer technology business.

CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

The discussion below compares the Company’s cash flows for the years ended December 31, 2023 and 2022.

A comparison of the Company’s cash flows for the years ended December 31, 2022 and 2021 is included in the section entitled “Cash Flows” in Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and is incorporated by reference into this Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Dollars) 2024 2023

Net cash provided by (used in)

Operating activities

The net cash used in or provided by the Company’s operating activities is affected by a number of factors, including:

(i) the level of cash collections from customers in respect of existing IMAX System sale and lease agreements, (ii) the amount of upfront payments collected in respect of IMAX System sale and lease agreements in backlog, (iii) the box office performance of films and other content distributed by the Company and/or released to IMAX locations, (iv) the level of inventory purchases and investment in joint revenue sharing arrangements, and (v) the level of the Company’s operating expenses, including expenses for research and development and new business initiatives.

For the year ended December 31, 2023, the net cash provided by the Company’s operating activities totaled $58.6 million, as compared to $17.3 million in the prior year, an improvement of $41.3 million.

In 2023, the net cash provided by the Company’s operating activities is principally a result of revenue growth attributable to the record box office performance of the films distributed through the IMAX network, revenue from the installation of IMAX Systems and revenue associated with the amendments and renewals of IMAX Systems arrangements.

This is partially offset by $20.3 million of variable consideration receivables resulting from incremental sales arrangements, including upgrades and amendments, and change in variable consideration estimate, and $20.4 million of expenditures incurred in connection with the development of Film Assets.

For the year ended December 31, 2022, the net cash inflow from operating activities of $17.3 million was principally a function of the Company’s cash earnings, as well as Financing Receivables, partially offset by the increase in Accounts Receivable of $29.0 million resulting from revenue growth attributable to the strength of the box office performance of the films distributed through the IMAX network during the last quarter of the year and $19.6 million spent in connection with the development of Film Assets.

$ 70,837 $ 58,615

Investing activities

For the year ended December 31, 2023, the net cash used in the Company’s investing activities totaled $31.8 million, as compared to $53.3 million in 2022.

In 2023, the net cash used in investing activities is driven by $18.0 million invested in equipment contributed to the Company’s joint revenue sharing arrangements with exhibitor customers, $6.5 million related to the purchase of property, plant and equipment, and $8.3 million of intangible assets acquired, principally related to the continued development or purchase of internal use software.

The Company considers its investment in joint revenue sharing arrangements to be reflective of growth capital expenditures.

In 2022, the net cash used in investing activities is driven by $15.9 million paid for the acquisition of SSIMWAVE, net of cash and cash equivalents acquired, $19.8 million invested in equipment to be used in the Company’s joint revenue sharing arrangements with exhibitor customers, $4.7 million invested by IMAX (Shanghai) Culture and Technology Co., Ltd, a wholly-owned subsidiary of IMAX China, in the movie Mozart from Space (see “Asset Impairment” above), $8.4 million related to the purchase of property, plant and equipment, and $4.4 million of intangible assets acquired, principally related to the development of internal use software.

Capital expenditures, including the Company’s investment in joint revenue sharing arrangements, the purchase of property, plant and equipment, the acquisition of other intangible assets, and investments in films were $53.2 million in 2023 as compared to $57.0 million in 2022.

Based on management’s operating plan for 2023, the Company expects to continue to use cash to deploy additional IMAX Systems under joint revenue sharing arrangements.

( 41,216 ) ( 31,790 )

Financing activities

For the year ended December 31, 2023, the net cash used in the Company’s financing activities totaled $48.5 million, as compared to $58.5 million used by financing activities in the prior year.

In 2023, the net cash used in financing activities is principally due to $13.5 million in net repayments of revolving credit facility borrowings, $26.8 million used to repurchase common shares of the Company, $6.5 million in taxes withheld on vested employee equity awards, and $1.4 million of dividends paid to the non-controlling interests of IMAX China.

In 2022, the net cash used in financing activities is principally due to $83.2 million used to repurchase common shares of the Company ($80.1 million) and IMAX China ($3.0 million), $3.7 million paid to purchase treasury stock for the settlement of RSUs and related taxes, $2.7 million of dividends paid to the non-controlling interests of IMAX China, and $2.3 million in fees paid in relation to the Sixth Amended and Restated Credit Agreement entered into by the Company during the first quarter of 2022, partially offset by $34.3 million in net cash inflow from revolving credit facility borrowings.

(Refer to Note 14(b) to Consolidated Financial Statements in Part II, Item 8.)

( 6,041 ) ( 48,530 )

Effect of exchange rate changes on cash

Net change in cash

24,392 ( 21,201 )

Net cash provided by operating activities increased $12.2 million in 2024, primarily due to an increase in cash collections, mostly from exhibitor customers, leading to a reduction in the Company’s average outstanding receivables.

This increase was partially offset by an increase in Variable Consideration receivables which includes estimates for IMAX Systems installed in 2024 and an increase in cash used for working capital expenditures.

(Refer to Note 18 to “Consolidated Financial Statements” in Part II, Item 8 for more information on the Company’s change in other operating assets and liabilities.)

Net cash used in investing activities increased $9.4 million in 2024, primarily due to an increase in the level of investment in equipment contributed to the Company’s JRSAs with exhibitor customers.

The Company installed 83 systems under JRSAs in 2024, compared to 53 systems in 2023.

Net cash used in financing activities decreased $42.5 million in 2024, mainly driven by an increase in net borrowings under the revolving credit facilities, a decrease in cash used to repurchase common shares, and cash received resulting from employee equity transactions.

No dividends were paid in 2024.

LIQUIDITY AND CAPITAL RESOURCES

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(ii) the anticipated collection of trade accounts receivable, which includes amounts owed under joint revenue sharing arrangements and film remastering agreements with movie studios;

(iii) the anticipated collection of financing receivables due in the next 12 months under sale and sales-type lease arrangements for systems currently in operation;

(iii) the anticipated collection of financing receivables due in the next 12 months under sale and sales-type lease arrangements for IMAX Systems currently in operation;

and (iv) installment payments expected in the next 12 months under sale and sales-type lease arrangements in backlog.

Under the terms of the Company’s typical sale and sales-type lease agreements, the Company receives substantial cash payments before it completes the performance of its contractual obligations.

In addition, as of December 31, 2023, the Company also had $276.0 million in available borrowing capacity under its Sixth Amended and Restated Credit Agreement, with Wells Fargo Bank, National Association (the “Credit Agreement”), $26.8 million in available borrowing capacity under the IMAX (Shanghai) Multimedia Technology Co., Ltd.

As of December 31, 2024, the Company had $263.0 million in available borrowing capacity under its Sixth Amended and Restated Credit Agreement, with Wells Fargo Bank, National Association (the “Credit Agreement”), $26.4 million in available borrowing capacity under the IMAX (Shanghai) Multimedia Technology Co., Ltd.

(“IMAX Shanghai”) revolving credit facility with the Bank of China (the “Bank of China Facility”), and $27.8 million in available borrowing capacity under IMAX Shanghai’s revolving credit facility with HSBC Bank (China) Company Limited, Shanghai Branch (the “HSBC China Facility”).

(Refer to Note 14(a) to Consolidated Financial Statements in Part II, Item 8 for a description of the material terms of the Credit Agreement, the Bank of China Facility, and the HSBC Facility.)

(Refer to “Borrowings — Revolving Credit Facility Borrowings, Net ” in Note 13 to “Consolidated Financial Statements” in Part II, Item 8 for a description of the material terms of the Credit Agreement, the Bank of China Facility, and the HSBC Facility.)

The Company’s $100.6 million balance of cash and cash equivalents as of December 31, 2024 (December 31, 2023 — $76.2 million) includes $85.4 million in cash held outside of Canada (December 31, 2023 — $68.5 million), of which $47.5 million was held in the People’s Republic of China (“PRC”) (December 31, 2023 — $30.0 million).

Management reassessed its strategy with respect to the most efficient means of deploying the Company’s capital resources globally and determined that historical earnings of certain foreign subsidiaries in excess of amounts required to sustain business operations would no longer be indefinitely reinvested.

During the year ended December 31, 2023, $24.0 million of historical earnings from a subsidiary in China were distributed (December 31, 2022 — $27.4 million) and, as a result, $2.4 million of foreign withholding taxes were paid to the relevant tax authorities (December 31, 2022 — $2.7 million).

In a prior year, management reassessed its strategy with respect to the most efficient means of deploying the Company’s capital resources globally and determined that historical earnings of certain foreign subsidiaries in excess of amounts required to sustain business operations would no longer be indefinitely reinvested.

During the year ended December 31, 2024, $nil of historical earnings from a subsidiary in China were distributed (2023 — $24.0 million) and, as a result, $nil of foreign withholding taxes were paid to the relevant tax authorities (2023 — $2.4 million).

As of December 31, 2024, the Company’s Consolidated Balance Sheets include a deferred tax liability of $12.5 million (December 31, 2023 — $12.5 million) for the applicable foreign withholding taxes associated with the remaining balance of unrepatriated historical earnings that will not be indefinitely reinvested outside of Canada.

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In particular, the Company’s operating cash flows and cash balances will be adversely impacted if management’s projections of future signings and installations of IMAX Systems and box office performance of remastered content distributed to the IMAX network are not realized.

For the year ended December 31, 2023, the Company had $76.2 million balance of cash and cash equivalents and net cash provided by the Company’s operating activities of $58.6 million which improved $41.3 million from 2022.

Based on the Company’s current cash balances and operating cash flows, management expects to have sufficient capital and liquidity to fund its anticipated operating needs and capital requirements during the next twelve-month period following the date of this report.

CONTRACTUAL OBLIGATIONS

Payments to be made by the Company under contractual obligations as of December 31, 2024 are as follows:

Payments Due by Period

Payments Due by Years

(In thousands of U.S.

Less Than One Year

Purchase obligations (1)

$ 26,603 $ 24,136 $ 2,258 $ 39 $ 170

Pension obligations (2)

20,298 — 20,298 — —

Operating lease obligations (3)

Finance lease obligations

13,582 2,872 8,205 2,227 278

Wells Fargo Facility

37,000 37,000 — — —

Federal Economic Development Loan (4)

2,056 1,026 1,030 — —

Convertible Notes (5)

231,725 1,150 230,575 — —

Postretirement benefits obligations

1,809 90 209 212 1,298

$ 333,073 $ 66,274 $ 262,575 $ 2,478 $ 1,746

(1) Represents total payments to be made under binding commitments with suppliers and outstanding payments to be made for supplies ordered, but yet to be invoiced.

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(3) Represents total minimum annual rental payments due under the Company’s operating leases.

(4) The Federal Economic Development Loan will be repayable over 36 months, with repayments estimated to begin in January 2024.

(Refer to Note 14(b) to Consolidated Financial Statements in Part II, Item 8.)

(4) The Federal Economic Development Loan is repayable over 36 months, with repayments commencing January 2024.

(Refer to “Borrowings — Convertible Notes and Other Borrowings, Net” in Note 13 to “Consolidated Financial Statements” in Part II, Item 8.)

(5) The Convertible Notes bear interest at a rate of 0.500% per annum on the principal of $230.0 million, payable semi-annually in arrears on April 1 and October 1 of each year.

The Convertible Notes will mature on April 1, 2026, unless earlier repurchased, redeemed or converted.

(Refer to Note 14(b) Consolidated Financial Statements in Part II, Item 8.)

(Refer to “Borrowings — Convertible Notes and Other Borrowings, Net” in Note 13 to “Consolidated Financial Statements” in Part II, Item 8.)

OFF-BALANCE SHEET ARRANGEMENTS

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(i) share-based compensation;

(ii) COVID-19 government relief benefits;

(iii) realized and unrealized investment gains or losses;

(iv) transaction-related expenses;

and (v) restructuring and executive transition costs, as well as the related tax impact of these adjustments.

The Company believes that these non-GAAP financial measures are important supplemental measures that allow management and users of the Company’s financial statements to view operating trends and analyze controllable operating performance on a comparable basis between periods without the after-tax impact of share-based compensation and certain unusual items included in net loss attributable to common shareholders.

(ii) realized and unrealized investment gains or losses;

(iii) transaction-related expenses;

and (iv) restructuring and other charges, as well as the related tax impact of these adjustments.

Although share-based compensation is an important aspect of the Company’s employee and executive compensation packages, it is a non-cash expense and is excluded from certain internal business performance measures.

Reconciliations of net income (loss) attributable to common shareholders and the associated per share amounts to adjusted net income (loss) attributable to common shareholders and adjusted net income attributable to common shareholders per basic and diluted share are presented in the table below.

Reconciliations of net income attributable to common shareholders and the associated per share amounts to adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per basic and diluted share are presented in the table below.

Years Ended December 31,

(In thousands of U.S.

Dollars, except per share amounts)

Dollars, except per diluted share amounts)

Per Diluted Share

Net income (loss) attributable to common shareholders

Net income attributable to common shareholders

$ 26,059 $ 0.48 $ 25,335 $ 0.46

Adjustments (1) :

Share-based compensation

22,454 0.42 23,184 0.42

Unrealized investment gains

(127) — (558) (0.01)

Transaction-related expenses

Restructuring and executive transition costs (3)

COVID-19 government relief benefits, net

— — 3,361 0.06

Restructuring and other charges (2)

3,749 0.07 2,688 0.05

Tax impact on items listed above

(1,125) (0.02) (1,931) (0.04)

Adjusted net income (1)

Weighted average shares outstanding - basic

Weighted average shares outstanding - diluted

$ 51,010 $ 0.95 $ 52,079 $ 0.94

Weighted average shares outstanding (in thousands):

52,650 54,310

53,864 55,146

(1) Reflects amounts attributable to common shareholders.

(2) Reflects costs in connection with the Company’s proposal to acquire the outstanding 96.3 million shares in IMAX China in 2023 and costs incurred associated with the acquisition of SSIMWAVE in 2022.

(3) Reflects costs in connection with the departure of the President, IMAX Entertainment and Executive Vice President of the Company and other employees to capture efficiencies and centralize certain operational roles.

(2) Reflects restructuring related costs in connection with capturing efficiencies, centralizing certain operational roles and costs incurred in connection with the Company’s internal asset sale.

(Refer to Note 25 to “Consolidated Financial Statements” in Part II, Item 8.)

In addition to the non-GAAP financial measures discussed above, management also uses “EBITDA,” as such term is defined in the Credit Agreement, and which is referred to herein as “Adjusted EBITDA per Credit Facility.” As allowed by the Credit Agreement, Adjusted EBITDA per Credit Facility includes adjustments in addition to the exclusion of interest, taxes, depreciation and amortization.

Accordingly, this non-GAAP financial measure is presented to allow a more comprehensive analysis of the Company’s operating performance and to provide additional information with respect to the Company’s compliance with its Credit Agreement requirements, when applicable.

Accordingly, this non-GAAP financial measure is presented to allow a more comprehensive analysis of the Company’s

operating performance and to provide additional information with respect to the Company’s compliance with its Credit Agreement requirements, when applicable.

In addition, the Company believes that Adjusted EBITDA per Credit Facility presents relevant and useful information widely used by analysts, investors and other interested parties in the Company’s industry to evaluate, assess and benchmark the Company’s results.

8 unchanged sentences

(iii) transaction-related expenses;

(iv) restructuring and executive transition costs;

and (v) write-downs, net of recoveries, including asset impairments and credit loss expense.

(iv) restructuring and other charges costs;

and (v) write- downs, net of recoveries, including asset impairments and credit loss expense or reversal.

Reconciliations of net income attributable to common shareholders, which is the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA per Credit Facility are presented in the table below.

For the Twelve Months Ended December 31, 2023

Attributable to

Non-controlling

Interests and

Attributable to

Twelve Months Ended December 31, 2024

(In thousands of U.S.

Common Shareholders

Non-controlling Interests

Common Shareholders

Attributable to

Non-controlling Interests Attributable to Common Shareholders

Reported net income

$ 32,702 $ 6,643 $ 26,059

Add (subtract):

3 unchanged sentences

Amortization of deferred financing costs (1)

1,969 — 1,969

EBITDA 109,106 13,244 95,862

Share-based and other non-cash compensation 23,209 423 22,786

Unrealized investment gains

Transaction-related expenses (2)

Write-downs, including asset impairments and credit loss expense

Restructuring and executive transition costs (3)

(127) — (127)

Write-downs, including asset impairments and credit loss reversal

2,999 524 2,475

Restructuring and other charges (2)

3,749 — 3,749

Adjusted EBITDA per Credit Facility $ 138,936 $ 14,191 $ 124,745

(1) The amortization of deferred financing costs is recorded within Interest Expense in the Consolidated Statements of Operations.

(2) Reflects costs incurred resulting from the Company’s proposal to acquire the outstanding 96.3 million shares in IMAX China.

(2) Reflects restructuring related costs in connection with capturing efficiencies, centralizing certain operational roles and costs incurred in connection with the Company’s internal asset sale.

(Refer to Note 25 to “Consolidated Financial Statements” in PART II, Item 8.)

The Company cautions users of its financial statements that these non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies.

Additionally, the non-GAAP financial measures used by the Company should not be considered in isolation, or as a substitute for, or superior to, the comparable GAAP amounts.

Quantitative and Quali tative Factors about Market Risk

The Company is exposed to market risk from foreign currency exchange rates and interest rates, which could affect operating results, financial position and cash flows.

Market risk is the potential change in an instrument’s value caused by, for example, fluctuations in interest and currency exchange rates.

The Company’s primary market risk exposure is the risk of unfavorable movements in exchange rates between the U.S.

Dollar, the Canadian Dollar (“CAD”), and Chinese Renminbi (“RMB”).

The Company does not use financial instruments for trading or other speculative purposes.

Foreign Exchange Rate Risk

A majority of the Company’s revenue is denominated in U.S.

Dollars while a significant portion of its costs and expenses is denominated in Canadian Dollars.

A portion of the Company’s net U.S.

Dollar cash flows is converted to Canadian Dollars to fund Canadian Dollar expenses through the spot market.

In addition, IMAX films generate box office in 90 different countries, and therefore unfavorable exchange rates between applicable local currencies and the U.S.

Dollar could have an impact on the GBO generated by the Company’s exhibitor customers and its revenues.

The Company has incoming cash flows from its revenue generating IMAX network and ongoing operating expenses in China through its majority-owned subsidiary IMAX Shanghai.

In Japan, the Company has ongoing Yen-denominated operating expenses related to its Japanese operations.

Net RMB and Japanese Yen cash flows are converted to U.S.

Dollars through the spot market.

The Company also has cash receipts under leases denominated in RMB, Japanese Yen, British Pound Sterling, Euros and Canadian Dollars.

The Company manages its exposure to foreign exchange rate risks through its regular operating and financing activities and, when appropriate, through the use of derivative financial instruments.

These derivative financial instruments are utilized to hedge economic exposures as well as reduce earnings and cash flow volatility resulting from shifts in market rates.

Certain of the Company’s PRC subsidiaries held approximately RMB 213.0 million or $30.0 million in cash and cash equivalents as of December 31, 2023 (December 31, 2022 — RMB 303.8 million or $43.6 million) and are required to transact locally in RMB.

Foreign currency exchange transactions, including the remittance of any funds into and out of the PRC, are subject to controls and require the approval of the China State Administration of Foreign Exchange to complete.

Any developments relating to the Chinese economy and any actions taken by the Chinese government are beyond the control of the Company;

however, the Company monitors and manages its capital and liquidity requirements to ensure compliance with local regulatory and policy requirements.

(Refer to “Risk Factors – The Company faces risks in connection with its significant presence in China and the continued expansion of its business there”)

For the year ended December 31, 2023, the Company recorded a foreign exchange net loss of $0.7 million as compared to a foreign exchange net loss of $3.2 million in 2022, associated with the translation of foreign currency denominated monetary assets and liabilities, primarily due to the slower pace of RMB weakening against the U.S.

Dollar throughout 2023 compared to 2022.

The impact of changes in foreign currency valuations versus the U.S.

Dollar led to a decrease in GBO of $30.4 million in 2023 as compared to prior year rates.

The Company has entered into a series of foreign currency forward contracts to manage the risks associated with the volatility of foreign currencies.

These foreign currency forward contracts met the criteria required for hedge accounting under the Derivatives and Hedging Topic of the FASB ASC at inception, and continue to meet hedge effectiveness tests as of December 31, 2023, with settlement dates throughout 2024 and 2025.

Foreign currency derivatives are recognized and measured in the Consolidated Balance Sheets at fair value.

Changes in the fair value (i.e., gains or losses) are recognized in the Consolidated Statements of Operations except for derivatives designated and qualifying as foreign currency cash flow hedging instruments.

The Company currently has cash flow hedging instruments associated with Selling, General and Administrative Expenses.

For foreign currency cash flow hedging instruments related to Selling, General and Administrative Expenses, the effective portion of the gain or loss in a hedge of a forecasted transaction is reported within Accumulated Other Comprehensive Loss and reclassified to the Consolidated Statements of Operations when the forecasted transaction occurs.

Any ineffective portion is recognized immediately in the Consolidated Statements of Operations.

The notional value of foreign currency cash flow hedging instruments that qualify for hedge accounting as of December 31, 2023 was $40.6 million (December 31, 2022 — $24.7 million).

A gain of $0.6 million was recorded to Other Comprehensive (Loss) Income with respect to the change in fair value of these contracts in 2023 (2022 — loss of $1.3 million;

2021 — gain of $0.5 million ).

A loss of $0.9 million was reclassified from Accumulated Other Comprehensive Loss to Selling, General and Administrative Expenses in 2023 (2022 — loss of $0.6 million;

2021 — gain of $1.7 million), primarily due to the fairly stabilized CAD against the U.S.

Dollar through most of 2023 compared to 2022, when the CAD weakened against the U.S.

In 2023, there were no gains or losses resulting from a change in the classification of certain forward contracts no longer meeting the requirements for hedge accounting were reclassified from Accumulated Other Comprehensive Loss to Selling, General and Administrative Expenses (2022 — $nil).

The notional value of forward contracts that do not qualify for hedge accounting as of December 31, 2023 was $nil (December 31, 2022 — $nil).

For all derivative instruments, the Company is subject to counterparty credit risk to the extent that the counterparty may not meet its obligations to the Company.

To manage this risk, the Company enters into derivative transactions only with major financial institutions.

As of December 31, 2023, the Company’s Financing Receivables and working capital items denominated in Canadian Dollars, RMB, Japanese Yen, Euros and other foreign currencies translated into U.S.

Dollars was $172.7 million, of which $172.5 million was denominated in RMB.

Assuming a 10% appreciation or depreciation in foreign currency exchange rates from the quoted foreign currency exchange rates as of December 31, 2023, the potential change in the fair value of foreign currency-denominated financing receivables and working capital items would have been $17.3 million.

A significant portion of the Company’s Selling, General, and Administrative Expenses is denominated in Canadian Dollars.

Assuming a 1% change appreciation or depreciation in foreign currency exchange rates as of December 31, 2023, the potential change in the amount of Selling, General, and Administrative Expenses would be $0.2 million.

Interest Rate Risk Management

The Company’s earnings may also be affected by changes in interest rates and the resulting impact of those changes on its interest income from cash, and its interest expense from variable-rate borrowings.

For the year ended December 31, 2023 the Company had drawn down $24.0 million on its Credit Facility (December 31, 2022 — $25.0 million), $nil on its HSBC China Facility (December 31, 2022 — $12.5 million) and $nil on its Bank of China Facility (December 31, 2022 — $0.4 million), which are all subject to variable effective interest rates.

The Company’s variable rate debt instruments were $24.0 million as of December 31, 2023 or 37% less than $37.9 million as of December 31 2022.

Variable rate debt instruments represented 5% and 8% of its total liabilities as of December 31, 2023 and 2022, respectively.

If the interest rates available to the Company increased by 10%, the Company’s interest expense would increase by $0.2 million and interest income from cash would increase by $0.2 million.

These amounts are determined by considering the impact of the hypothetical interest rates on the Company’s variable rate debt and cash balances as of December 31, 2023.

Financial Stateme nts and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB Firm ID 271 )

Consolidated Balance Sheets as of December 31, 2023 and 2022

Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021

Consolidated Statements of Comprehensive income (loss) for the years ended December 31, 2023, 2022 and 2021

Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2023, 2022 and 2021

Notes to Consolidated Financial Statements

Report of Independent Register ed Public Accounting Firm

To the Shareholders and Board of Directors of IMAX Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of IMAX Corporation and its subsidiaries (together, the Company) as of December 31, 2023 and 2022, and the related consolidated statements of operations, comprehensive income(loss), shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Annual Report on Internal Control over Financial Reporting appearing under Item 9A of this Annual Report on Form 10-K.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition - IMAX Systems

As described in notes 2(o) and 20(a) to the consolidated financial statements, the Company recognized revenue from System Sales related to the IMAX Technology Products and Services segment of $93.3 million for the year ended December 31, 2023 ($65.5 million for the year ended December 31, 2022).

Management evaluates whether a system arrangement involves either a sale or a lease of a system, and for those arrangements that are accounted for as a sale of a system, determines the transaction price and the allocation thereof to each separate performance obligation based on estimated standalone selling prices.

For arrangements accounted for as a sale of a system, the transaction price allocated to the performance obligation is recognized when the conditions signifying transfer of control have been met.

For system arrangements, management applied significant judgement in (i) determining whether the system arrangement related to either a sale or a lease by considering the terms of the arrangement including title to the system equipment and payment consideration;

(ii) estimating the transaction price which may include the discounted present value of fixed ongoing payments and variable consideration (such as indexed minimum payment increases and additional payments owed by the customer if certain minimum box office receipt thresholds are exceeded);

(iii) allocating the transaction price to each separate performance obligation based on estimated standalone selling prices;

and (iv) determining the timing of revenue recognition based on when performance obligations are met.

The principal considerations for our determination that performing procedures relating to the revenue recognition of System Sales is a critical audit matter are that management identified the matter as a critical accounting estimate, and there was significant judgement required by management in (i) determining whether the system arrangement related to a sale or a lease, and based on the type of sale or lease each arrangement represents, whether it falls in the scope of ASC 606 or ASC 842;

(ii) estimating the transaction price which may include the discounted present value of fixed ongoing payments and variable consideration;

(iii) allocating the transaction price to each separate performance obligation;

and (iv) determining the timing of revenue recognition.

This in turn led to a high degree of auditor judgement, subjectivity and effort in performing procedures and evaluating audit evidence relating to the revenue recognition of System Sales.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over management’s review and approval of revenue recognition memoranda produced for each system arrangement which include the determination of the type of system arrangement, the estimate of the transaction price and allocation thereof and the timing of the related revenue recognition.

These procedures also included, among others, evaluating the reasonableness of management’s assessment of whether the system arrangement related to either a sale or a lease by considering the contractual terms and conditions of the executed contracts.

Procedures were also performed to test management’s process for estimating the transaction price for a sample of contracts with customers, including (i) evaluating the appropriateness of management’s discounted present value method;

(ii) testing the completeness, accuracy and relevance of the data used in estimating the transaction price;

and (iii) evaluating the reasonableness of significant assumptions used by management, including the discount rate and expected future performance of underlying theatres associated with the arrangement.

Evaluating management’s assumption related to the discount rate involved evaluating whether the assumption was reasonable considering consistency with external market data.

Evaluating management’s assumption related to expected future performance of underlying theatres associated with the arrangement involved evaluating whether the assumption was reasonable considering the current and past performance of the underlying theatres.

Procedures were also performed to test management’s process for allocating the transaction price to each separate performance obligation, including (i) evaluating the appropriateness of management’s method of allocating the transaction price;

(ii) testing the completeness, accuracy and relevance of the data used in allocating the transaction price;

and (iii) evaluating the reasonableness of significant assumptions used by management, including estimated standalone selling prices.

Evaluating management’s assumption related to estimated standalone selling prices involved evaluating whether the assumption was reasonable by comparing the estimate to current and historical transactions.

Evaluating the appropriateness of management’s assessment of the timing of revenue recognition involved inspecting the customers’ certificates of acceptance and theatre openings during the year.

/s/ PricewaterhouseCoopers LLP

Chartered Professional Accountants, Licensed Public Accountants

Toronto, Canada

February 27, 2024

We have served as the Company’s auditor since 1987, which includes periods before the Company became subject to SEC reporting requirements.

IMAX CORPORATION

CONSOLIDATED B ALANCE SHEETS

(In thousands of U.S.

Dollars except share amounts)

As of December 31,

Cash and cash equivalents

Accounts receivable, net of allowance for credit losses

Financing receivables, net of allowance for credit losses

Variable consideration receivables, net of allowance for credit losses

Prepaid expenses

Film assets, net of accumulated amortization

Property, plant and equipment, net of accumulated depreciation

Investment in equity securities

Deferred income tax assets, net of valuation allowance

Other intangible assets, net of accumulated amortization

Accounts payable

Accrued and other liabilities

Deferred revenue

Revolving credit facility borrowings, net of unamortized debt issuance costs

Convertible notes and other borrowings, net of unamortized discounts and debt issuance costs

Deferred income tax liabilities

Total liabilities

Commitments, contingencies and guarantees (see Notes 15 and 16)

Non-controlling interests

Shareholders’ equity

Capital stock common shares — no par value.

Authorized — unlimited number.

53,260,276 issued and outstanding (December 31, 2022 — 54,148,614 issued and outstanding)

Statutory surplus reserve

Accumulated deficit

Accumulated other comprehensive loss

Total shareholders’ equity attributable to common shareholders

Non-controlling interests

Total shareholders’ equity

Total liabilities and shareholders’ equity

(See the accompanying notes, which are an integral part of these Consolidated Financial Statements)

IMAX CORPORATION

CONSOLIDATED STATEM ENTS OF OPERATIONS

(In thousands of U.S.

Dollars, except per share amounts)

Years Ended December 31,

Technology sales

Image enhancement and maintenance services

Technology rentals

Finance income

Costs and expenses applicable to revenues

Technology sales

Image enhancement and maintenance services

Technology rentals

Selling, general and administrative expenses

Research and development

Amortization of intangible assets

Credit loss expense (reversal), net

Asset impairments

Legal judgment and arbitration awards

Restructuring and executive transition costs

Income (loss) from operations

Realized and unrealized investment gains

Retirement benefits non-service expense

Interest income

Interest expense

Income (loss) before taxes

Income tax expense

Net income (loss)

Net income attributable to non-controlling interests

Net income (loss) attributable to common shareholders

Net income (loss) per share attributable to common shareholders:

Weighted average shares outstanding (in thousands):

(See the accompanying notes, which are an integral part of these Consolidated Financial Statements)

IMAX CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands of U.S.

Years Ended December 31,

Net income (loss)

Other comprehensive (loss) income, before tax

Unrealized defined benefit plan actuarial (loss) gain

Unrealized postretirement benefit plans actuarial (loss) gain

Amortization of defined benefit and postretirement benefit plans net gain

Amortization of prior service cost

Unrealized net gain (loss) from cash flow hedging instruments

Realized net loss (gain) from cash flow hedging instruments

Reclassification of unrealized gain from ineffective cash flow hedging instruments

Foreign currency translation adjustments

Total other comprehensive (loss) income, before tax

Income tax (expense) benefit related to other comprehensive income

Other comprehensive (loss) income, net of tax

Comprehensive income (loss)

Comprehensive (income) loss attributable to non-controlling interests

Comprehensive income (loss) attributable to common shareholders

(See the accompanying notes, which are an integral part of these Consolidated Financial Statements)

IMAX CORPORATION

CONSOLIDATED STATEM ENTS OF CASH FLOWS

(In thousands of U.S.

Years Ended December 31,

Operating Activities

Net income (loss)

Adjustments to reconcile net income (loss) to cash provided by operating activities:

Depreciation and amortization

Amortization of deferred financing costs

Credit loss expense (reversal), net

Write-downs, including asset impairments

Deferred income tax (benefit) expense

Share-based and other non-cash compensation

Unrealized foreign currency exchange (gain) loss

Realized and unrealized investment gain

Changes in assets and liabilities:

Accounts receivable

Deferred revenue

Changes in other operating assets and liabilities

Net cash provided by operating activities

Investing Activities

Purchase of property, plant and equipment

Investment in equipment for joint revenue sharing arrangements

Interest in film classified as a financial instrument

Acquisition of other intangible assets

Proceeds from sale of equity securities

Acquisition of SSIMWAVE Inc., net of cash and cash equivalents acquired

Net cash used in investing activities

Financing Activities

Proceeds from issuance of convertible notes, net

Debt issuance costs related to convertible notes

Purchase of capped calls related to convertible notes

Proceeds from revolving credit facility borrowings

Repayments of revolving credit facility borrowings

Proceeds from other borrowings

Repayment of other borrowings

Credit facility amendment fees paid

Repurchase of common shares, IMAX Corporation

Repurchase of common shares, IMAX China

Taxes withheld and paid on employee stock awards vested

Common shares issued - stock options exercised

Principal payment under finance lease obligations

Dividends paid to non-controlling interests

Net cash used in by financing activities

Effects of exchange rate changes on cash

Decrease in cash and cash equivalents during year

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

(See the accompanying notes, which are an integral part of these Consolidated Financial Statements)

IMAX CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands of U.S.

Dollars except share amounts)

The Company also adjusts Selling, General and Administrative Expenses to exclude a portion of share-based compensation and related payroll taxes.

Management uses non-U.S.

GAAP and other financial measures such as this, internally for financial and operational decision-making and as a means to evaluate period-to-period comparisons.

IMAX believes that this non-U.S.

GAAP measure provides useful information about operating results, enhances the overall understanding of past financial performance and future prospects, and allows for greater transparency with respect to key metrics used by management and its financial and operational decision making.

A reconciliation of Selling, General and Administrative Expenses, the most directly comparable U.S.

GAAP measure presented in the Condensed Consolidated Statement of Operations in Part I, Item 1, to Adjusted Selling, General and Administrative Expenses is presented in the table below.

Years Ended December 31,

Adjustments to capital stock:

Balance, beginning of year

Change in shares held in treasury

Restricted share units vested, net of shares withheld for employee tax obligations

Employee stock options exercised, net of shares withheld for employee tax obligations

Grant date fair value of stock options exercised

Average carrying value of repurchased and retired common shares

Issuance of common shares in acquisition

Balance, end of year

Adjustments to other equity:

Balance, beginning of year

Amortization of share-based payment expense - stock options

Amortization of share-based payment expense - restricted share units

Amortization of share-based payment expense - performance stock units

Restricted share units vested

Grant date fair value of stock options exercised

Change in ownership interest related to IMAX China common share repurchases

Purchase of capped calls related to convertible notes

Balance, end of year

Adjustments to statutory surplus reserve:

Balance, beginning of year

Establishment of statutory surplus reserve, IMAX China

Balance, end of period

Adjustments to accumulated deficit:

Balance, beginning of year

Net income (loss) attributable to common shareholders

Statutory surplus reserve deducted from retained earnings, IMAX China

Common shares repurchased and retired

Balance, end of year

Adjustments to accumulated other comprehensive (loss) income:

Balance, beginning of year

Other comprehensive (loss) income, net of tax

Balance, end of year

Adjustments to non-controlling interests:

Balance, beginning of year

Net income attributable to non-controlling interests

Other comprehensive (loss) income, net of tax

Share-based compensation attributable to non-controlling interests

Establishment of statutory surplus reserve, IMAX China

Statutory surplus reserve deducted from IMAX China retained earnings

Dividends paid to non-controlling shareholders of IMAX China

Change in ownership interest related to IMAX China common share repurchases

Balance, end of year

Total Shareholders’ Equity

Common shares issued and outstanding:

Balance, beginning of year

Employee stock options exercised

Restricted share units and stock option exercises settled from treasury shares purchased on open market

Performance stock units settled with new treasury shares

Restricted share units settled with new treasury shares

Repurchase of common shares

Issuance of common shares in acquisition

Balance, end of year

(See the accompanying notes, which are an integral part of these Consolidated Financial Statements)

IMAX CORPORATION

NOTES TO CONSO LIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands of U.S.

Dollars, unless otherwise stated)

Description of the Business

IMAX Corporation, together with its consolidated subsidiaries (the “Company” or “IMAX”) is a Canadian corporation that was formed in March 1994 as a result of an amalgamation between WGIM Acquisition Corp.

and the former IMAX Corporation (“Predecessor IMAX”).

Predecessor IMAX was incorporated in 1967.

As of December 31, 2023, IMAX Corporation indirectly owns 71.55 % of IMAX China Holding, Inc.

(“IMAX China”), whose shares trade on the Hong Kong Stock Exchange.

IMAX China is a consolidated subsidiary of the Company.

IMAX is a premier global technology platform for entertainment and events.

Through its proprietary software, auditorium architecture, patented intellectual property, and specialized equipment, IMAX offers a unique end-to-end solution to create superior, immersive content experiences for which the IMAX ® brand is globally renowned.

Top filmmakers, movie studios, artists, and creators utilize the cutting-edge visual and sound technology of IMAX to connect with audiences in innovative ways.

As a result, IMAX is among the most important and successful global distribution platforms.

The Company’s global content portfolio includes blockbuster films, both from Hollywood and local language film industries worldwide;

IMAX documentaries, both original and acquired (“IMAX Documentaries”);

and IMAX events and experiences in emerging verticals including music, gaming, and sports.

IMAX Systems are based on proprietary and patented image, audio and other technology developed over the course of the Company’s history since its founding in 1967.

As of December 31, 2023, there were 1,772 IMAX Systems operating in 90 countries and territories, including 1,693 commercial multiplexes, 12 commercial destinations and 67 institutional locations in the Company’s global network.

This compares to 1,716 IMAX Systems operating in 87 countries and territories as of December 31, 2022 including 1,633 commercial multiplexes, 12 commercial destinations, and 71 institutional locations in the Company’s global network.

The Company also distributes large-format documentary films, primarily to institutional theaters, and distributes exclusive IMAX events and experiences.

In addition, the Company provides film post-production and quality control services for large-format films, whether produced by IMAX or third parties, and digital post-production services.

Summary of Significant Accounting Policies

The Company prepares its Consolidated Financial Statements in accordance with United States Generally Accepted Accounting Principles (“U.S.

GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

The significant accounting policies used by the Company are summarized below.

(a) Principles of Consolidation

The Consolidated Financial Statements include the accounts of the Company together with its consolidated subsidiaries, except for subsidiaries which have been identified as variable interest entities (“VIEs”) where the Company is not the primary beneficiary.

All intercompany accounts and transactions have been eliminated.

The Company has evaluated its various variable interests to determine whether they are VIEs as required by U.S.

The Company has interests in 10 film production companies, which have been identified as VIEs.

The Company is the primary beneficiary of and consolidates five of these entities as it has the power to direct the activities that most significantly impact the economic performance of the VIE, and it has the obligation to absorb losses or the right to receive benefits from the respective VIE that could potentially be significant.

The majority of the assets relating to these production companies are held by the IMAX Original Film Fund (the “Original Film Fund”) as described in Note 25 (b).

The Company does not consolidate the other five film production companies because it does not have the power to direct their activities and it does not have the obligation to absorb the majority of the expected losses or the right to receive expected residual returns.

The Company uses the equity method of accounting for these entities, which are not material to the Company’s Consolidated Financial Statements.

A loss in value of an equity method investment that is other than temporary is recognized as a charge in the Consolidated Statements of Operations.

As of December 31, 2023 and 2022, total assets and liabilities of the Company’s consolidated VIEs are as follows:

(In thousands of U.S.

Total liabilities

(b) Estimates and Assumptions

The preparation of financial statements and related disclosures in accordance with U.S.

GAAP requires management to make judgments, assumptions, and estimates that affect the amounts reported in the Company’s Consolidated Financial Statements and accompanying notes.

Management’s judgments, assumptions, and estimates are based on historical experience, future expectations and other factors that are believed to be reasonable as of the date of the Consolidated Financial Statements.

Actual results may ultimately differ from management’s original estimates, as future events and circumstances sometimes do not develop as expected, and the differences may be material.

Significant estimates made by management include, but are not limited to:

(i) the allocation of the transaction price in an IMAX System arrangement to distinct performance obligations;

(ii) the amount of variable consideration to be earned on sales of IMAX Systems based on projections of future box office performance;

(iii) expected credit losses on accounts receivable, financing receivables, and variable consideration receivables;

(iv) provisions for the write-down of excess and obsolete inventory;

(v) the fair values of the reporting units used in assessing the recoverability of goodwill;

(vi) the cash flow projections used in testing the recoverability of long-lived assets such as the IMAX System equipment supporting joint revenue sharing arrangements;

(vii) the economic lives of the IMAX System equipment supporting joint revenue sharing arrangements;

(viii) the useful lives of intangible assets;

(ix) the ultimate revenue forecasts used to test the recoverability of film assets;

(x) the discount rates used to determine the present value of financing receivables and lease liabilities, as well as to determine the fair values of the Company’s reporting units for the purpose of assessing the recoverability of goodwill;

(xi) pension plan assumptions;

(xii) estimates related to the fair value and projected vesting of share-based payment awards;

(xiii) the valuation of deferred income tax assets;

(xiv) reserves related to uncertain tax positions;

and (xv) the allocation of the purchase price for the acquisition of SSIMWAVE Inc.

and its wholly-owned subsidiary (together, “SSIMWAVE”).

In 2022, the Company recorded provisions for potential credit losses against substantially all of its receivables in Russia due to uncertainties associated with the ongoing conflict and resulting sanctions.

These receivables relate to existing sale agreements as the Company is not party to any joint revenue sharing arrangements in these countries.

In addition, exhibitors in Russia, Ukraine, and Belarus were placed on nonaccrual status for maintenance revenue and finance income.

The Company closely monitors geopolitical conflicts (including any government sanctions imposed in response thereto) and its effects on the global economy and the Company.

On August 30, 2023, the Company and Cineworld entered into a Joint Stipulation and Agreed Order, which was entered by the Court on September 21, 2023 (the “Stipulation”), pursuant to which Cineworld assumed its global agreement with IMAX (the “Global Agreement”).

The Stipulation provides that all amounts owed to IMAX will be paid by Cineworld and set out a revised timetable for all systems installations required of Cineworld under the Global Agreement.

Cineworld has emerged from the Chapter 11 proceedings, and the Stipulation finalizes all matters between IMAX and Cineworld as a result of the restructuring.

The Company has determined that no additional provision for expected credit losses is required.

The Company considers all highly liquid investments convertible to a known amount of cash and with an original maturity of three months or less to be cash equivalents.

(d) Receivables

The Company develops an estimate of expected credit losses by class of receivable and customer type through a calculation that utilizes historical loss rates which are then adjusted for specific receivables that are judged to have a higher-than-normal risk profile after considering management’s internal credit quality classifications, as well as macro-economic and industry risk factors.

The write-off of any billed receivable balance requires the approval of management.

(Refer to Note 5 for more information related to the Company’s receivables and current expected credit losses.)

(e) Inventories

Inventories are carried at the lower of cost, determined on an average cost basis, and net realizable value except for raw materials, which are carried at the lower of cost and replacement cost.

Finished goods and work-in-process includes the cost of raw materials, direct labor, theater design costs, and an applicable share of manufacturing overhead costs.

The costs related to IMAX Systems under sale and sales-type lease arrangements are transferred from Inventories to Costs and Expenses Applicable to Revenues – Technology Sales in the period when the sale is recognized in the Consolidated Statements of Operations.

The costs related to IMAX Systems under joint revenue sharing arrangements are transferred from Inventories to assets under construction in Property, Plant and Equipment when allocated to a signed joint revenue sharing arrangement.

The Company records write-downs for excess and obsolete inventory based upon management’s judgments regarding future events and business conditions, including the anticipated installation dates for the current backlog of theater system contracts, contracts in negotiation, technological developments, growth prospects within the customers’ ultimate marketplace and anticipated market acceptance of the Company’s current and pending theater IMAX Systems.

Finished goods inventories includes IMAX Systems for which title has passed to the Company’s customer in situations when the IMAX System has been delivered to the customer, but the criteria for revenue recognition were not met as of the balance sheet date.

(f) Film Assets

Film Assets consist of:

(i) capitalized costs associated with the digital remastering of films where the copyright is owned by a third party, including labor and allocated overhead, and (ii) capitalized costs associated with the production of films, including labor, allocated overhead, and the cost of acquiring film rights.

Production financing provided by third parties that acquire substantive rights in the film is recorded as a reduction of the cost of the film.

Capitalized film costs are amortized and participation costs are accrued to Costs and Expenses Applicable to Revenues using the individual-film-forecast method, which amortizes such costs in the same ratio as the associated ultimate revenue.

Estimates of ultimate revenues are prepared on a title-by-title basis and reviewed regularly by management and revised where necessary to reflect the most current information.

Ultimate revenues reflect management’s estimates of future revenue over a period not to exceed 10 years following the date of the film’s initial release.

The recoverability of the Company’s film assets is dependent upon the commercial acceptance of the underlying films and the resulting level of box office results and, in certain situations, ancillary revenues.

If management’s projections of future net cash flows resulting from the exploitation of a film indicate that the carrying value of the film asset is not recoverable, the film asset is written down to its fair value.

Film exploitation costs, including advertising and marketing, are recorded in Costs and Expenses Applicable to Revenues – Image Enhancement and Maintenance Services as incurred, except for those costs that are made after recognizing revenue, which are recorded when the related revenues are recognized.

(g) Property, Plant and Equipment

Property, Plant and Equipment is recorded at cost and is depreciated on a straight-line basis over the estimated useful lives of the underlying assets as follows:

IMAX System components (1)

Over the equipment’s expected useful life ( 7 to 20 years)

Camera equipment and connectivity equipment

Over a period between 5 to 10 years

Over a period between 20 to 25 years

Office and production equipment

Over a period between 3 to 5 years

Leasehold improvements

Over the shorter of the initial term of the underlying lease plus any reasonably

assured renewal periods, and the useful life of the asset

(1) Includes equipment under joint revenue sharing arrangements.

The cost of IMAX System components and related equipment expected to be used in future joint revenue sharing arrangements, including related direct labor costs and an allocation of direct production costs, are recorded within assets under construction until the underlying IMAX System is installed and in working condition.

These assets are depreciated to Costs and Expenses Applicable to Revenues on a straight-line basis over the lesser of the term of the joint revenue sharing arrangement and the equipment’s expected useful life.

The estimated useful lives of the system components and related equipment used in joint revenue sharing arrangements are reviewed periodically to determine if any adjustments are required.

Property, Plant and Equipment is grouped at the lowest level for which identifiable cash flows are largely independent and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset (or asset group) may not be recoverable.

In such situations, the asset (or asset group) is considered impaired when estimated future cash flows (undiscounted and without interest charges) resulting from the use of the asset (or asset group) and its eventual disposition are less than the carrying value of the asset (or asset group).

In such situations, the asset (or asset group) is written down to its fair value, which is the present value of the estimated future cash flows.

Factors that are considered when evaluating such assets for impairment include a current expectation that it is more likely than not that the long-lived asset will be sold significantly before the end of its useful life, a significant decrease in the market price of the long-lived asset, and a significant change in the extent or manner in which the long-lived asset is being used.

(h) Investment in Equity Securities

Equity securities with readily determinable fair values are reported at fair value with changes in fair value recorded within Realized and Unrealized Investment Gains (Losses) in the Consolidated Statements of Operations.

(i) Other Assets

Other Assets principally includes lease incentives provided to certain exhibitor customers under joint revenue sharing arrangements classified as an operating lease, as well as sales commissions and other deferred selling expenses that directly relate to the acquisition of the revenue generating contract and are incremental to the Company’s other expenses.

To a much lesser extent, Other Assets also includes various investments and foreign currency derivatives.

Capitalized lease incentives are amortized on a straight-line basis over the term of the lease and are recorded within Costs and Expenses Applicable to Revenues — Technology Rentals.

Sales commissions and other selling expenses paid prior to the recognition of the related revenue are deferred and recognized within Costs and Expenses Applicable to Revenues upon the client acceptance of the IMAX System or the abandonment of the sale arrangement.

Foreign currency derivatives are accounted for at fair value using quoted prices in active markets.

In periods when there are no outstanding borrowings under the Company’s revolving credit facility arrangements, any related debt issuance costs are recorded within Other Assets and amortized on a straight-line basis over the term of the facility.

In periods when there are outstanding borrowings under the Company’s revolving credit facility arrangements, any related debt issuance costs are reclassified to reduce the principal amount of outstanding borrowings and amortized on a straight-line basis over the term of the facility.

(Refer to Note 14 for information related to the Company’s borrowings.)

Goodwill represents the excess of the purchase price paid over the fair value of net assets acquired in a business combination.

Goodwill is not amortized, but is tested annually for impairment at the reporting unit level in the fourth quarter of the year and between annual tests if indicators of potential impairment exist.

These indicators could include a decline in the Company’s stock price and market capitalization, a significant change in the outlook for the reporting unit's business, including projections of future box office results and IMAX System installations, lower than expected operating results, increased competition, legal factors, or the sale or disposition of a significant portion of a reporting unit.

For reporting units with goodwill, an impairment loss is recognized for the amount by which the reporting unit's carrying value, including goodwill, exceeds its fair value.

The carrying value of each reporting unit is based on a systematic and rational allocation of certain assets and liabilities.

The fair value of each reporting unit is assessed using a discounted cash flow model based on management’s current short-term forecast and estimated long-term projections, against which various sensitivity analyses are performed.

The discount rates used in the cash flow model are derived based on the Company’s estimated weighted average cost of capital.

These estimates and the likelihood of future changes in these estimates depend on a number of underlying variables and a range of possible outcomes.

(k) Other Intangible Assets

Other intangible assets with finite lives are generally amortized on a straight-line basis over estimated useful lives ranging from 3 to 20 years, except for intangible assets that have an identifiable pattern of consumption of the economic benefit of the asset.

Such intangible assets are amortized over the consumption pattern.

Research and development acquired in a business combination is measured at fair value using market-participant assumptions and is initially classified as an indefinite-lived intangible asset.

The in-process intangible research and development (“IPR&D”) assets are considered indefinite-lived until the abandonment or completion of the associated research and development efforts.

If the acquired IPR&D project is abandoned, the related intangible would be written off or impaired.

Once the IPR&D activities are completed, management would determine the useful lives and the methods of amortization of the related intangible assets.

The Company capitalizes costs associated with internally developed and/or purchased software systems for internal use that have reached the application development stage.

Capitalized costs include external direct costs of materials and services utilized in developing or obtaining internal-use software and payroll and payroll-related expenses for employees who are directly associated with and allocate time to the internal-use software project.

Capitalization of such costs begins when the preliminary project stage is complete and ceases no later than the point at which the project is substantially complete and ready for its intended purpose.

Costs incurred during the preliminary project and post-implementation stages are charged to expense.

These capitalized costs are amortized on a straight-line basis over the estimated useful life.

Intangible Assets are grouped at the lowest level for which identifiable cash flows are largely independent and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset (or asset group) may not be recoverable.

In such situations, the asset (or asset group) is written down to its fair value, which is the present value of the estimated future cash flows.

Factors that are considered when evaluating intangible assets for impairment include a current expectation that it is more likely than not that the intangible asset will be sold significantly before the end of its useful life, a significant decrease in the market price of the intangible asset, and a significant change in the extent or manner in which the intangible asset is being used.

(l) Deferred Revenue

In instances where the Company receives consideration prior to satisfying its performance obligations, the recognition of revenue is deferred.

The majority of the Deferred Revenue balance relates to payments received by the Company for IMAX Systems where control of the system has not transferred to the customer.

The Deferred Revenue balance related to an individual location increases as progress payments are made and is then derecognized when control of the system is transferred to the customer.

To a lesser extent, the Deferred Revenue balance also relates to situations when an exhibitor customer pays the contractual maintenance fee prior to the recognition of revenue.

(m) Statutory Surplus Reserve

Pursuant to the corporate law of the People’s Republic of China (“PRC”), entities registered in the PRC are required to maintain certain statutory reserves, which are appropriated from after-tax profits, after offsetting accumulated losses from prior year and before dividends can be declared or paid to equity holders.

The Company’s PRC subsidiaries are required to appropriate 10 % of statutory net profits to statutory surplus reserves, upon distribution of their after-tax profits.

The Company’s PRC subsidiaries may discontinue the appropriation of statutory surplus reserves when the aggregate sum of the statutory surplus reserve is more than 50 % of their registered capital.

The statutory surplus reserve is non-distributable other than during liquidation and may only be used to fund losses from prior years, to expand production operations, or to increase the capital of the subsidiaries.

In addition, the subsidiaries may make further contribution to a discretionary surplus reserve using post-tax profits in accordance with resolutions of the Board of Directors.

(n) Income Taxes

Income taxes are accounted for under the liability method whereby deferred income tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the accounting and tax bases of assets and liabilities.

Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled.

The effect on deferred income tax assets and liabilities of a change in tax rates or laws is recognized in the Company’s Consolidated Financial Statements in the period in which the change is enacted.

Investment tax credits are recognized as a reduction of income tax expense.

The Company assesses the realization of deferred income tax assets and based on all available evidence, concludes whether it is more likely than not that the net deferred income tax assets will be realized.

A valuation allowance is provided for the amount of deferred income tax assets not considered to be realizable in the current period.

In assessing the need for a valuation allowance, management considers, among other things, projections of future taxable income and ongoing prudent and feasible tax planning strategies.

If management determines that sufficient negative evidence exists, then management will consider recording a valuation allowance against a portion or all of the deferred tax assets in that jurisdiction.

If, after recording a valuation allowance, management’s projections of future taxable income and other positive evidence considered in evaluating the need for a valuation allowance prove, with the benefit of hindsight, to be inaccurate, it could prove more difficult to support the realization of these deferred tax assets.

As a result, an additional valuation allowance could be required, which would have an adverse impact on the Company’s effective income tax rate and results.

In such situations, the adjustment made to the deferred tax asset would have a favorable impact on the Company’s effective income tax rate and results in the period such determination was made.

The Company is subject to ongoing tax exposures, examinations and assessments in various jurisdictions.

Tax benefits are recognized only when it is more likely than not, based on the technical merits, that the benefits will be sustained on examination.

Tax benefits that meet the more likely than not recognition threshold are measured using a probability weighting of the largest amount of tax benefit that has greater than 50% likelihood of being realized upon settlement.

Whether the more likely than not recognition threshold is met for a particular tax benefit is a matter of judgment based on the individual facts and circumstances evaluated in light of all available evidence as of the balance sheet date.

Although management believes that the Company has adequately accounted for its uncertain tax positions, tax audits can result in subsequent assessments where the ultimate resolution may result in the Company owing additional taxes above what was originally recognized in its financial statements.

Tax reserves for uncertain tax positions are adjusted by the Company to reflect its best estimate of the outcome of examinations and assessments and in light of changing facts and circumstances, such as the completion of a tax audit, expiration of a statute of limitations, the refinement of an estimate, and interest accruals associated with the uncertain tax positions until they are resolved.

Some of these adjustments require significant judgment in estimating the timing and amount of the additional tax expense.

(o) Revenue Recognition

The Company evaluates each of the performance obligations in an IMAX System arrangement to determine which are considered distinct, either individually or in a group, for accounting purposes and which of the deliverables represent separate performance obligations.

The Company’s “System Obligation” consists of the following:

(i) an IMAX System, which includes the projector, sound system, screen system and, if applicable, a 3D glasses cleaning machine;

(ii) services associated with the IMAX System, including auditorium design support, the supervision of installation services, and projectionist training;

and (iii) a license to use the IMAX brand to market the auditorium.

The System Obligation, as a group, is a distinct performance obligation.

The Company is not responsible for the physical installation of the equipment in the customer’s facility;

however, it supervises the installation by the customer.

The customer has the right to use the IMAX brand from the date the Company and the customer enter into an arrangement.

IMAX System arrangements also include a requirement for the Company to provide maintenance services and an extended warranty over the life of the arrangement in exchange for an annual maintenance fee, which is subject to a consumer price index increase on renewal each year.

Consideration related to the provision of maintenance services is included in the allocation of the transaction price to the separate performance obligations in the arrangement at contract inception, as discussed in more detail below.

The Company’s maintenance services are a stand ready obligation and, as a result, are recognized on a straight-line basis over the contract term.

The transaction price in an IMAX System arrangement is allocated to each good or service that is identified as a separate performance obligation based on estimated standalone selling prices.

This allocation is based on observable prices when the Company sells the goods or services separately.

The Company has established standalone prices for the System Obligation and maintenance and extended warranty services, as well as for film license arrangements.

The Company uses an adjusted market assessment approach for separate performance obligations that do not have standalone selling prices or third-party evidence of estimated standalone selling prices.

The Company considers multiple factors including its historical pricing practices, product class, market competition and geography.

IMAX System arrangements involve either the lease or the sale of an IMAX System.

The transaction price for the System Obligation, other than for IMAX Systems delivered pursuant to joint revenue sharing arrangements, consist of upfront or initial payments made before and after the final installation of the system and ongoing payments throughout the term of the arrangement.

The Company estimates the transaction price, including an estimate of future variable consideration, received in exchange for the goods delivered or services rendered.

The arrangement for the sale of an IMAX System includes indexed minimum payment increases over the term of the arrangement, as well as the potential for additional payments owed by the exhibitor customer if certain minimum box office receipt thresholds are exceeded.

In addition, hybrid sales arrangements include amounts owed by the exhibitor customer based on a percentage of their box office receipts over the term of the arrangement.

These contract provisions are considered to be variable consideration.

An estimate of the present value of such variable consideration is recognized as revenue upon the transfer of control of the System Obligation to the customer, subject to constraints to ensure that there is not a risk of significant revenue reversal.

This estimate is based on management’s box office projections for the individual location, which are developed using historical data for the location and, if necessary, comparable theaters and territories (see “Constraints on the Recognition of Variable Consideration” below).

Transfer of control of the System Obligation occurs at the earlier of client acceptance of the installation of the IMAX System, including projectionist training, and the opening of the location to the public, as discussed in more detail below.

IMAX System arrangements are non-cancellable unless the Company fails to perform its obligations.

In the absence of a material default by the Company, there is no right to any remedy for the customer under the Company’s arrangements.

If a material default by the Company exists, the customer has the right to terminate the arrangement and seek a refund only if the customer provides notice to the Company of a material default and only if the Company does not cure the default within a specified period.

Sales Arrangements

For IMAX System arrangements that qualify as a sale, the transaction price allocated to the System Obligation is recognized in the Consolidated Statements of Operations upon the transfer of control of the system to the customer, which is when all of the following conditions have been met:

(i) the projector, sound system, and screen system have been installed and are in full working condition, (ii) the 3D glasses cleaning machine, if applicable, has been delivered, (iii) projectionist training has been completed, and (iv) the earlier of (a) the receipt of written customer acceptance certifying the completion of installation and run-in testing of the equipment and the completion of projectionist training or (b) the public opening of the IMAX System.

The initial revenue recognized in a sales arrangement consists of payments made before and in connection with the installation of the IMAX System and the present value of any future payments, including ongoing fixed minimum payments, which are subject to indexed increases over the term of the arrangement, and potential additional payments owed by the customer if certain minimum box office receipt thresholds are exceeded.

In addition, hybrid sales arrangements include amounts owed by the customer based on a percentage of their box office receipts over the term of the arrangement.

Potential payments based on the future box office receipts of the customer are considered to be variable consideration.

The Company has also agreed, on occasion, to sell equipment under lease or at the end of a lease term.

The transaction price agreed to for these lease buyouts is reflected in the Company’s Consolidated Statements of Operations within Revenues – Technology Sales.

Taxes assessed by governmental authorities that are both imposed on and concurrent with the specific revenue-producing transactions and collected by the Company have been excluded from the measurement of the transaction prices discussed above.

Constraints on the Recognition of Variable Consideration

The recognition of variable consideration involves a significant amount of judgment.

Variable consideration is recognized subject to appropriate constraints to avoid a significant reversal of revenue in future periods.

The Company reviews its variable consideration assets on at least a quarterly basis considering recent box office performance and, when applicable, updated box office projections for future periods.

The relevant accounting guidance identifies the following examples of situations when constraining the amount of variable consideration is appropriate:

• The amount of consideration is highly susceptible to factors outside the entity’s influence;

• The uncertainty about the amount of consideration is not expected to be resolved for a long period of time;

• The Company’s experience (or other evidence) with similar types of contracts is limited, or that experience has limited predictive value;

• The entity has a practice of either offering a broad range of price concessions or changing the payment terms and conditions of similar contracts in similar circumstances.

As discussed above, the Company’s significant streams of variable consideration relate to arrangements for the sale of IMAX Systems which include indexed minimum payment increases over the term of the arrangement, as well as the potential for additional payments owed by the customer if certain minimum box office receipt thresholds are exceeded.

In addition, hybrid sales arrangements include variable consideration based on a percentage of the customer’s box office receipts over the term of the arrangement.

For each contract subject to an indexed minimum payment increase, the Company estimates the most likely amount using published indices.

The amount of the estimated minimum payment increase is then recorded at its present value as of the date of recognition using the customer’s implied borrowing rate.

The estimated variable consideration initially recognized by the Company is based on management’s box office projections for the location, which are developed using historical box office data for that location and, if necessary, comparable locations and territories.

Using this data, management applies its understanding of these exhibition markets to estimate the most likely amount of variable consideration to be earned over the term of the arrangement.

Management then applies a constraint to this estimate by reducing the projection by a percentage factor for locations or markets with no or limited historical box office experience.

In cases where direct historical experience can be observed, average historical box office results, eliminating significant outliers, is used.

The resulting amount of variable consideration is then recorded at its present value as of the date of recognition using a risk-weighted discount rate.

Lease Arrangements

As a lessor, the Company provides IMAX Systems to customers through long-term lease arrangements.

Under these arrangements, in exchange for providing the IMAX System, the Company earns fixed upfront and ongoing consideration.

A lease arrangement that transfers substantially all of the benefits and risks incident to ownership of the IMAX System is classified as a sales-type lease;

otherwise the lease is classified as an operating lease.

Prior to commencement of the lease term, the Company may modify certain payment terms or make concessions.

If these circumstances occur, the Company reassesses the classification of the lease based on the modified terms and conditions.

For sales-type leases, the revenue allocated to the System Obligation is recognized when the lease term commences, which the Company deems to be when all of the following conditions have been met:

(i) the projector, sound system, and screen system have been installed and are in full working condition, (ii) the 3D glasses cleaning machine, if applicable, has been delivered, (iii) projectionist training has been completed, and (iv) the earlier of (a) the receipt of the written customer acceptance certifying the completion of installation and run-in testing of the equipment and the completion of projectionist training or (b) the public opening of the theater, provided collectability is reasonably assured.

The initial revenue recognized for sales-type leases consists of the initial payments received and the present value of future initial payments and fixed minimum ongoing payments computed at the interest rate implicit in the lease.

Contingent payments in excess of the fixed minimum payments are recognized when reported by theater operators, provided collectability is reasonably assured.

For joint revenue sharing arrangements that are classified as operating leases, initial payments and fixed minimum ongoing payments are recognized as revenue on a straight-line basis over the lease term.

For these leases, the lease term is considered to commence when all of the following conditions have been met:

(i) the projector, sound system and screen system have been installed and are in full working condition;

(ii) the 3D glasses cleaning machine, if applicable, has been delivered;

(iii) projectionist training has been completed;

and (iv) the earlier of (a) the receipt of written customer acceptance certifying the completion of installation and run-in testing of the equipment and the completion of projectionist training or (b) the public opening of the theater.

Contingent payments in excess of fixed minimum ongoing payments are recognized as revenue when reported by theater operators, provided collectability is reasonably assured.

Finance Income

Finance Income is recognized over the term of the sales-type lease or financed sale receivable, provided collectability is reasonably assured.

A theater operator that is classified within the “All Transactions Suspended” category under the Company’s internal credit quality guidelines is placed on nonaccrual status and Finance Income recognition related to the location is stopped.

While the recognition of Finance Income is suspended, payments received from a customer are applied against the outstanding balance owed.

If payments are sufficient to cover any unreserved receivables, a recovery of provision taken on the billed amount, if applicable, is recorded to the extent of the residual cash received.

Once the collectability issues are resolved and the customer has returned to being in good standing, the Company will resume recognition of Finance Income.

Improvements and Modifications

Improvements and modifications to an IMAX System after installation are treated as a separate performance obligation, if and when the Company is requested to perform these services.

Revenue is recognized for these services once they have been provided.

Costs and Expenses Applicable to Revenues – Technology Sales

Costs and Expenses Applicable to Revenues – Technology Sales relates to sale and sales-type leases of IMAX Systems and other equipment, and includes the cost of the equipment and costs related to project management, design, delivery and installation supervision services, as applicable.

The costs related to IMAX Systems under sale and sales-type lease arrangements are transferred from Inventories to Costs and Expenses Applicable to Revenues in the period when the sale is recognized in the Consolidated Statements of Operations.

Sales commissions and other selling expenses that directly relate to the acquisition of the revenue generating contract and are incremental to the Company’s other expenses are deferred and recognized in the Consolidated Statements of Operations upon the client acceptance of the IMAX System.

The Company may have warranty obligations at or after the time revenue is recognized which require the replacement of certain parts that do not affect the functionality of the theater system or services.

The costs for warranty obligations for known issues are accrued as charges to Costs and Expenses Applicable to Revenues – Technology Sales at the time revenue is recognized based on the Company’s past historical experience and cost estimates.

Costs and Expenses Applicable to Revenues – Technology Rentals

Costs and Expenses Applicable to Revenues – Technology Rentals relates to joint revenue sharing arrangements classified as operating leases, and primarily includes the depreciation of IMAX System components and related equipment used in the joint revenue sharing arrangement.

Impairment losses, if any, are also included in Costs and Expenses Applicable to Revenues – Technology Rentals.

Sales commissions related to these arrangements are deferred and recognized as Costs and Expenses Applicable to Revenues – Technology Rentals in the month they are earned by the salesperson, which is typically the month of installation.

Direct advertising and marketing costs for each location are charged to Costs and Expenses Applicable to Revenues – Technology Rentals as incurred.

Terminations, Consensual Buyouts and Concessions

The Company enters into IMAX System arrangements with customers that contain customer payment obligations prior to the scheduled installation of the IMAX System.

During the period of time between signing and the installation of the IMAX System, which may extend several years, certain customers may be unable to, or may elect not to, proceed with the system installation for a number of reasons including business considerations, or the inability to obtain certain consents, approvals or financing.

Once the determination is made that the customer will not proceed with installation, the arrangement may be terminated under the default provisions of the arrangement or by mutual agreement between the Company and the customer (a “consensual buyout”).

Terminations by default are situations when a customer does not meet the payment obligations under an arrangement and the Company retains the amounts paid by the customer.

Under a consensual buyout, the Company and the customer agree, in writing, to a settlement and to release each other of any further obligations under the arrangement or an arbitrated settlement is reached.

Any initial payments retained or additional payments received by the Company are recognized as revenue when the settlement arrangements are executed and the cash is received, respectively.

In addition, the Company may agree with a customer to convert its obligations for one type of IMAX System configuration that has not yet been installed to an arrangement to acquire or lease a different type of IMAX System.

The Company considers these situations to be the termination of the original arrangement and the origination of a new arrangement.

The Company may offer certain incentives to customers to complete IMAX System transactions including payment concessions or free services and products such as film licenses or 3D glasses.

Reductions in, and deferral of, payments are taken into account in determining the transaction price either by a direct reduction in the sales price or a reduction of payments to be discounted.

Free products and services are accounted for as separate performance obligations.

Maintenance and Extended Warranty Services

Maintenance and extended warranty services may be provided under an arrangement with multiple performance obligations or as a separately priced contract.

Revenues related to these services are deferred and recognized on a straight-line basis over the contract period and are recognized within Revenues – Image Enhancement and Maintenance Services in the Consolidated Statements of Operations.

Maintenance and extended warranty services include maintenance of the customer’s equipment and replacement parts.

Under certain maintenance arrangements, maintenance services may include additional training services to the customer’s technicians.

All costs associated with this maintenance and extended warranty program are expensed as incurred.

A loss on maintenance and extended warranty services is recognized if the expected cost of providing the services under the contract exceeds the related deferred revenue.

As the maintenance services are a stand ready obligation with the cost of providing the service expected to increase throughout the term, revenue is recognized over the term of the arrangement such that increased amounts are recognized in later periods.

IMAX Film Remastering Services

In a film remastering arrangement, the Company receives a percentage of the box-office receipts from a third party who owns the copyright to a film in exchange for converting the film into an IMAX Film Remastering format and distributing it through the IMAX network.

In these arrangements, although the Company does not hold rights to the intellectual property in the form of the film content, it is compensated for the application of its intellectual property in the form of its patented film remastering processes to create new intellectual property in the form of an IMAX Film Remastering version of film.

Revenues associated with film remastering arrangements qualify for the variable consideration exemption for sales- or usage-based royalties in the relevant accounting guidance and are recognized within Revenues – Image Enhancement and Maintenance Services in the period when the corresponding box office sales occur.

Losses on IMAX Film Remastering services are recognized as Costs and Expenses Applicable to Revenues – Image Enhancement and Maintenance Services in the period when it is determined that the Company’s estimate of total revenues to be realized by the remastered film will not exceed the corresponding cost of IMAX Film Remastering services.

Film Production Services

In certain film arrangements, the Company produces a film financed by third parties whereby the third party retains the copyright, and the Company obtains exclusive distribution rights.

Under these arrangements, the Company is entitled to receive a fixed fee or retain, as a fee, the excess of gross revenue over the cost of the production (the “production fee”).

The third party receives a portion of the revenues received by the Company from distributing the film, which is charged to Costs and Expenses Applicable to Revenues – Image Enhancement and Maintenance Services.

Production fees are deferred and recognized as a reduction in the cost of the film based on the ratio of the Company’s distribution revenues recognized in the current period to the ultimate distribution revenues expected from the film.

Revenue from film production services where the Company does not hold the associated distribution rights are recognized in Revenues – Image Enhancement and Maintenance Services when performance obligations associated with the contractual service are satisfied.

Losses on film production services are recognized as Costs and Expenses Applicable to Revenues – Image Enhancement and Maintenance Services in the period when it is determined that the Company’s estimate of total revenues to be realized by the Company will not exceed estimated total production costs to be expended on the film production.

Film Distribution Services

In a Film Distribution arrangement, the Company distributes large-format documentary films, primarily to institutional locations, and distributes exclusive entertainment experiences ranging from live performances to interactive events with leading artists and creators.

Revenue from the licensing of films qualifies for the variable consideration exemption for sales- or usage-based royalties in the relevant accounting guidance and is recognized within Revenues – Image Enhancement and Maintenance Services when all performance obligations have been satisfied, which includes the completion and delivery of the film and the commencement of the license period.

In situations when film license fees are based on a percentage of box-office receipts, revenue is recognized when box-office receipts are reported by the exhibitor.

Film exploitation costs, including advertising and marketing, are expensed as incurred within Costs and Expenses Applicable to Revenues – Image Enhancement and Maintenance Services.

Film Post-Production Services

Revenues from post-production film services are recognized within Revenues – Image Enhancement and Maintenance Services when performance of the contracted services is completed.

Software License and Subscription Services

Through SSIMWAVE, the Company provides term licenses, which give customers the right to use its software for a specific period, and perpetual licenses, which give customers the right to use its software for an indefinite period.

For both types of licenses, the associated revenue is recognized at the point in time when the customer can use and benefit from the software, which is generally upon delivery to the customer or upon commencement of the renewal term.

For licenses that are deployed and hosted at the customer site, revenue is recognized upon delivery of the software to the customer or upon commencement of the renewal term.

For licenses where the software is provided through a hosting arrangement, if the customer does not have a contractual right to take possession of the underlying software without significant penalty, or it is not feasible for the customer to run the software on its own hardware or contract a third party to host the services, the arrangement is accounted for as a service transaction whereby the Company has a stand-ready obligation to provide the software over the license period.

Therefore, the related revenue is recognized ratably over the license period, as control of service is transferred to the customer.

SSIMWAVE’s software license arrangements for both term and perpetual licenses typically include maintenance and support services which provide technical support and unspecified updates and upgrades on a when-and-if-available basis.

The contractual term of the arrangement to provide maintenance and support services for perpetual licenses is renewable, generally on an annual basis, at the option of the customer.

Maintenance and support services represent stand-ready obligations for which revenue is recognized ratably over the term of the arrangements.

Revenues from licenses and maintenance and support services are recognized within Revenues – Image Enhancement and Maintenance Services.

As a lessee, the Company’s lease arrangements principally involve office and warehouse space, which are classified as operating leases.

The corresponding operating lease right-of-use (“ROU”) assets and liabilities are recorded within Property, Plant and Equipment and Accrued and Other Liabilities in the Company’s Consolidated Balance Sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term.

Operating lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

The incremental borrowing rate used in the calculation of the Company’s lease liabilities is based on the location of each leased property.

None of the Company’s leases include options to purchase the leased property.

Most of the Company’s leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years or more.

The Company has determined that it is reasonably certain that the renewal options on its warehouse leases will be exercised based on previous history, its current understanding of future business needs, and its level of investment in the leasehold improvements, among other factors.

The depreciable lives of ROU assets and related leasehold improvements are limited by the expected lease term.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company rents or subleases certain office space to third parties, which have a remaining term of less than 12 months and are not expected to be renewed.

When there are modifications to the lease agreements, the Company remeasures the lease liabilities to reflect changes to lease payments and recognizes the amount of the remeasurement of the lease liability as an adjustment to the ROU assets.

Amortization of ROU assets and interest on lease liabilities are included within Selling, General and Administrative Expenses in the Company’s Consolidated Statements of Operations.

(Refer to Note 6 for additional information related to the Company’s operating leases.)

(q) Research and Development

Research and development costs, which are expensed as incurred, primarily include projector and sound parts, labor, consulting fees, allocation of overheads, and other related materials which pertain to the Company’s development of new products and services.

Research and development costs pertaining to fixed and intangible assets that have alternative future uses are capitalized and amortized under their related policies.

(r) Foreign Currency Translation

Monetary assets and liabilities that are denominated in a currency other than the Company’s functional currency are translated into the relevant functional currency using the exchange rate prevailing at the end of the period.

Foreign exchange translation gains and losses are included in the determination of earnings in the period in which they arise.

Assets and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet date.

Revenues, expenses, gains, and losses recorded in foreign currencies are translated using the exchange rates prevailing during the period in which they are recognized.

Translation adjustments resulting from this process are recorded to Other Comprehensive Income (Loss) and reported on the Company’s Consolidated Balance Sheets within Accumulated Other Comprehensive Loss until the subsidiary is sold or liquidated, at which point the adjustments are recognized in Consolidated Statements of Operations.

Foreign currency derivatives are recognized and measured in the Consolidated Balance Sheets at their fair value.

Changes in the fair value (i.e., gains or losses) are recognized in the Consolidated Statements of Operations except for derivatives designated and qualifying as foreign currency hedging instruments.

For foreign currency hedging instruments, the gain or loss related to the effective portion of the hedge of a forecasted transaction is reported within Other Comprehensive (Loss) Income and reclassified to the Consolidated Statements of Operations when the forecasted transaction occurs.

Any ineffective portion is recognized immediately in the Consolidated Statements of Operations.

(s) Share-Based Compensation

A separate share-based compensation plan, the China LTIP, was adopted by a subsidiary of the Company in October 2012.

The Company measures share-based compensation expense using the grant date fair value of the award (see below), which is recognized as an expense in the Consolidated Statements of Operations on a straight-line basis over the requisite service period.

Share-based compensation expense is not adjusted for estimated forfeitures but is instead adjusted when and if actual forfeitures occur.

Stock Options

The Company utilizes a lattice-binomial option-pricing model (“Binomial Model”) to determine the fair value of stock option awards on the grant date.

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 award, 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.

The Company stratifies its employees into homogeneous groups in order to calculate the grant date fair value of stock options using the Binomial Model.

As a result, ranges of assumptions are used for the expected life of the option.

The Company uses historical data to estimate option exercise behavior within the Binomial Model and various groups of employees that have similar historical exercise behavior are grouped together for valuation purposes.

The expected volatility rate is estimated based on a blended volatility method which takes into consideration the Company’s historical share price volatility, the Company’s implied volatility which is determined in reference to observed current market prices for the Company’s traded options and the Company’s peer group volatility.

The Company no longer issues stock options as a form of employee compensation.

(Refer to Note 17(c) for the assumptions used to determine the fair value of the Company’s stock options.)

Restricted Share Units

The fair value of RSU awards is equal to the closing price of the Company’s common stock on the date of grant or the average closing price of the Company’s common shares for five days prior to the date of grant.

The value of the portion of the award that is ultimately expected to vest is recognized as compensation expense over the requisite service period in the Company’s Consolidated Statements of Operations.

The Company’s RSUs are classified as equity.

Performance Stock Units

The Company grants two types of PSU awards, one which vests based on a combination of employee service and the achievement of certain Adjusted EBITDA targets and one which vests based on a combination of employee service and the achievement of total shareholder return (“TSR”) targets.

The achievement of the Adjusted EBITDA and TSR targets in these PSUs is determined over a three-year performance period.

At the conclusion of the three-year performance period, the number of PSUs that ultimately vest can range from 0 % to a maximum vesting opportunity of 175 % of the initial Adjusted EBITDA PSU award or 150 % of the initial TSR PSU award depending upon actual performance versus the established Adjusted EBITDA and TSR targets, respectively.

The Company’s PSUs are classified as equity.

The grant date fair value of PSUs with Adjusted EBITDA targets is equal to the closing price of the Company’s common shares on the date of grant or the average closing price of the Company’s common shares for five days prior to the date of grant.

The grant date fair value of PSUs with TSR targets is determined on the grant date using a Monte Carlo simulation, which is a valuation model that considers the likelihood of achieving the TSR targets embedded in the award (“Monte Carlo Model”).

The compensation expense attributable to each type of PSU is recognized on a straight-line basis over the requisite service period.

The fair value determined by the Monte Carlo Model is affected by the Company’s share price, as well as assumptions regarding a number of highly complex and subjective variables.

These variables include, but are not limited to, market conditions as of the grant date, the Company’s expected share price volatility over the term of the awards, and other relevant data.

The compensation expense is fixed on the date of grant based on the dollar value of the PSUs granted.

The amount and timing of compensation expense recognized for PSUs with Adjusted EBITDA targets is dependent upon management’s assessment of the likelihood and timing of achieving these targets.

If, as a result of management’s assessment, it is projected that a greater number of PSUs will vest than previously anticipated, a life-to-date adjustment to increase compensation expense is recorded in the period such determination is made.

Share-Based Payment Awards to Non-Employees

Share-based payment awards for services provided by non-employees are measured at grant date fair value of the equity instruments that the Company is obligated to issue when the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied.

The grant date is the date which the Company and the non-employees reach a mutual understanding of the key terms and conditions of the share-based payment awards.

When there are performance conditions related to the vesting of the share-based awards, the Company assesses the probability of vesting at each reporting date and adjusts the compensation costs based on the probability assessment.

(t) Pension Plans and Postretirement Benefits

The Company has a defined benefit pension plan, the Supplemental Executive Retirement Plan (the “SERP”).

As the Company’s SERP is unfunded, as of December 31, 2023, a liability is recognized for the benefit obligation.

Assumptions used in computing the defined benefit obligations are reviewed annually by management in consultation with its actuaries and adjusted for current conditions.

Actuarial gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefits cost are recognized as a component of Other Comprehensive (Loss) Income.

Amounts recognized in Accumulated Other Comprehensive Loss including unrecognized actuarial gains or losses and prior service costs are adjusted as they are subsequently recognized in the Consolidated Statements of Operations as components of net periodic benefit cost.

Prior service costs resulting from the pension plan inception or amendments are amortized over the expected future service life of the employees, cumulative actuarial gains and losses in excess of 10 % of the projected benefit obligation are amortized over the expected average remaining service life of the employees, and current service costs are expensed when earned.

The remaining weighted average future service life of the employee used in computing the defined benefit obligation for the year ended December 31, 2023 was two years .

For defined contribution pension plans, required contributions by the Company are recorded as an expense within Selling, General and Administrative Expenses in the Company’s Consolidated Statements of Operations.

A liability is recognized for the unfunded accumulated benefit obligation of the postretirement benefits plan.

Assumptions used in computing the accumulated benefit obligation are reviewed by management in consultation with its actuaries and adjusted for current conditions.

Net benefit cost is split between operating income and non-operating income, where only the service cost is included in income from operations and the non-service components are included in Retirement Benefits Non-Service Expenses.

Actuarial gains and losses are recognized as a component of Other Comprehensive (Loss) Income.

Amounts recognized in Accumulated Other Comprehensive Loss including unrecognized actuarial gains or losses are adjusted as they are subsequently recognized within Retirement Benefits Non-Service Expense in the Consolidated Statements of Operations.

(u) Guarantees

In situations when the Company acts as a guarantor, at the inception of a guarantee, it recognizes a liability for the fair value of the underlying guarantee.

Disclosures as required under the relevant accounting guidance have been included in Note 16 .

New Accounting Standards and Accounting Changes

Adoption of New Accounting Policies

In March 2022, the FASB issued ASU No.

Total Selling, general and administrative expenses

132,701 144,406

Financial Instruments — Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”).

ASU 2022-02 amends and eliminates the accounting guidance for Troubled Debt Restructurings by creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty and requires public business entities to disclose current-period gross write offs by year of origination for financing receivables and net investments in leases.

The Company adopted ASU 2022-02 on January 1, 2023 .

The adoption of ASU 2022-02 did no t have a material impact on the Company’s Consolidated Financial Statements.

In September 2022, the FASB issued ASU No.

Share-based compensation

(20,897) (22,534)

Liabilities — Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations” (“ASU 2022-04”).

ASU 2022-04 requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude.

The Company adopted ASU 2022-04 on January 1, 2023 .

The adoption of ASU 2022-04 did no t have a material impact on the Company’s Consolidated Financial Statements.

Recently Issued FASB Accounting Standard Codification Updates Not Yet Adopted

In March 2020, the FASB issued ASU No.

2020-04, “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”).

The purpose of ASU 2020-04 is to provide optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

ASU 2020-04 is effective for all entities from the beginning of an interim period that includes the issuance date of the ASU.

In October 2022, the FASB extended the temporary accounting relief to December 31, 2024 from the current sunset date of December 31, 2022.

As of December 31, 2023, the Company is not party to any third party contracts that reference the London Interbank Offered Rate (LIBOR).

Accordingly, the Company does not expect ASU 2020-04 to have a material effect on its Consolidated Financial Statements.

In October 2023, the FASB issued Accounting Standards Update No.

2023-06, Disclosure Improvements:

Codification Amendments in response to the SEC’s Disclosure Update and Simplification Initiative (“ASU 2023-06”).

This ASU incorporates into U.S.

GAAP certain presentation and disclosure requirements currently included in the SEC’s regulations.

Each amendment will become effective prospectively from the date the SEC withdrawals the corresponding SEC regulatory requirement.

The Company is still evaluating this ASU, however, given that it is subject to the corresponding SEC regulatory requirements, it does not expect the ASU to have a material impact on its Consolidated Financial Statements.

In November 2023, the FASB issued Accounting Standards Update No.

2023-07, Segment Reporting (Topic 820):

Improvements to Reportable Segment Reporting ( “ ASU 2023-07 ” ).

The purpose of ASU 2023-07 is to enhance the interim disclosure requirements by more closely aligning them with the annual requirements.

ASU 2023-07 requires interim and annual disclosures to include information about the company's significant segment expenses.

ASU 2023-07 will be effective for the Company ’ s year ended December 31, 2024 and all interim periods thereafter.

The Company is still evaluating the impact of this ASU on its financial statements.

In December 2023, the FASB issued Accounting Standard Update 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures ( “ ASU 2023-09 ” ).

The amendments improve the transparency of income tax disclosures by requiring (i) consistent categories and greater disaggregation of information in the rate reconciliation, and (ii) income taxes paid disaggregated by jurisdiction.

ASU 2023-09 will be effective for the Company ’ s year ended December 31, 2025.

The Company is still evaluating the impact of this ASU on its financial statements.

The Company considers the applicability and impact of all recently issued FASB accounting standard codification updates.

Accounting standard updates that are not noted above were assessed and determined to be not applicable or not significant to the Company’s Consolidated Financial Statements for the year ended December 31, 2023.

On September 22, 2022 , the Company acquired all of the issued and outstanding shares of SSIMWAVE pursuant to a share purchase agreement by and among the Company, SSIMWAVE, and related shareholders (the “Sellers”).

SSIMWAVE provides perceptual quality measurement and optimization solutions based on artificial intelligence technologies for leading media and entertainment companies.

Following the acquisition, SSIMWAVE became a wholly-owned subsidiary of the Company.

As consideration for the acquisition of SSIMWAVE, the Company paid an aggregate purchase price of $ 23.2 million, consisted of:

(i) $ 19.5 million in cash, (ii) 160,547 common shares of the Company with a fair value of $ 1.9 million (the “IMAX Share Consideration”), and (iii) contingent consideration with a fair value of $ 1.8 million (the “Earn-Out Payment”).

The fair value of the IMAX Share Consideration, which is based on the share price on the date of the acquisition, is reduced to reflect the fair value of certain restrictions on the future transfer of the shares.

The Earn-Out Payment may be paid to certain Sellers in an aggregate amount of up to $ 2.0 million in cash, contingent upon and following the achievement of certain commercial and financial milestones during the period from January 1, 2023 to December 31, 2024, or under certain terms March 31, 2025.

The fair value of the Earn-Out Payment is based on management’ s assessment of the likelihood of achieving these milestones.

The revenues and earnings of SSIMWAVE for the period post-acquisition through December 31, 2022 were included in All Other for segment reporting and were not material to the Company’s Consolidated Financial Statements.

During the year ended December 31, 2022 , the Company incurred $ 1.1 million of professional fees in connection with the acquisition of SSIMWAVE, which were recorded within Selling, General and Administrative Expenses on the Company ’s Consolidated Statements of Operations.

The Company accounted for the acquisition of SSIMWAVE as a business combination.

The following table summarizes the allocation of the purchase price to the assets acquired and liabilities assumed as of December 31, 2022.

(In thousands of U.S.

Purchase Price :

Cash payments

IMAX Share Consideration

Earn-Out Payment

Total Purchase Price

Allocation of Purchase Price :

Cash and cash equivalents

Accounts receivable

Property, plant and equipment

Intangible assets (see Note 13)

Accounts payable and accrued liabilities

Deferred revenue

Federal economic development loan, net of unaccreted interest benefit

Deferred tax liability

Goodwill (see Note 13)

Total Purchase Price

The allocation of the fair value of identified intangible assets is as follows:

(In thousands of U.S.

Weighted Average Useful Life

Patent and trademarks

Customer relationships

Developed technology

In-process research and development

Not yet in use

Non-compete agreement

Total identifiable intangible assets

Goodwill is the excess of the consideration transferred over the net assets recognized and primarily represents future economic benefits arising from assets acquired that are not individually identified and separately recognized, including synergies and assembled workforce inherent in the acquired business.

The goodwill recorded is not expected to be deductible for income tax purposes.

The ability of the Company to collect its receivables is principally dependent on the viability and solvency of individual theater operators which is significantly influenced by consumer behavior and general economic conditions.

Theater operators, or other customers, may experience financial difficulties that could result in them being unable to fulfill their payment obligations to the Company.

In order to mitigate the credit risk associated with its receivables, management performs an initial credit evaluation prior to entering into an arrangement with a customer and then regularly monitors the credit quality of each customer through an analysis of collections history and aging.

This monitoring process includes meetings on at least a monthly basis to identify credit concerns and potential changes in credit quality classification.

A customer may improve their credit quality classification once a substantial payment is made on an overdue balance or when the customer has agreed to a payment plan and payments have commenced in accordance with that plan.

Changes in credit quality classification are dependent upon management approval.

The Company’s internal credit quality classifications are as follows:

• Good Standing — The theater operator continues to be in good standing as payments and reporting are received on a regular basis.

• Credit Watch — The theater operator has demonstrated a delay in payments, but continues to be in active communication with the Company.

Theater operators placed on Credit Watch are subject to enhanced monitoring.

In addition, depending on the size of the outstanding balance, length of time in arrears, and other factors, future transactions may need to be approved by management.

These receivables are in better condition than those in the Pre-Approved Transactions Only category, but are not in as good condition as the receivables in the Good Standing category.

• Pre-Approved Transactions Only — The theater operator has demonstrated a delay in payments with little or no communication with the Company.

All services and shipments to the theater operator must be reviewed and approved by management.

These receivables are in better condition than those in the All Transactions Suspended category, but are not in as good condition as the receivables in the Credit Watch category.

In certain situations, a theater operator may be placed on nonaccrual status and all revenue recognition related to the theater may be suspended, including the accretion of Finance Income for Financing Receivables.

• All Transactions Suspended — The theater operator is severely delinquent, non-responsive or not negotiating in good faith with the Company.

Once a theater operator is classified within the All Transactions Suspended category, the theater is placed on nonaccrual status and all revenue recognitions related to the theater are suspended, including the accretion of Finance Income for Financing Receivables.

During the period when the accretion of Finance Income is suspended for Financing Receivables, any payments received from a customer are applied against the outstanding balance owed.

If payments are sufficient to cover any unreserved receivables, a reversal of the provision is recorded to the extent of the residual cash received.

Once the collectability issues are resolved and the customer has returned to being in good standing, the Company will resume recognition of Finance Income.

When a customer’s aging exceeds 90 days, the Company’s policy is to perform an enhanced review to assess collectability of the theater’s past due accounts.

The over 90 days past due category may be an indicator of potential impairment as up to 90 days outstanding is considered to be a reasonable time to resolve any issues.

Additional credit loss provisions are also recorded taking into account macro-economic and industry risk factors.

The write-off of any billed receivable balance requires the approval of management.

Management’s judgments regarding expected credit losses are based on the facts available to management and involve estimates about the future.

As a result, the Company’s judgments and associated estimates of credit losses may ultimately prove, with the benefit of hindsight, to be incorrect.

The impacts of inflation, and rising interest rates may impact future credit losses.

The Company will continue to monitor economic trends and conditions and portfolio performance and adjust its allowance for credit loss accordingly.

Refer to Note 2(b), Estimates and Assumptions, for information regarding Cineworld and theater operators in Russia, Ukraine, and Belarus.

Accounts Receivable

Accounts receivable principally includes amounts currently due to the Company under IMAX System sale and sales-type lease arrangements, contingent fees owed by theater operators as a result of box office performance, and fees for maintenance services.

Accounts receivable also includes amounts due to the Company from movie studios and other content creators principally for digitally remastering films into IMAX formats, as well as for film distribution and post-production services.

The following tables summarize the activity in the allowance for credit losses related to Accounts Receivable for the years ended December 31, 2023 and 2022:

Year Ended December 31, 2023

(In thousands of U.S.

Beginning balance

Current period provision (reversal), net

Write-offs, net of recoveries

Foreign exchange

Ending balance

Year Ended December 31, 2022

(In thousands of U.S.

Beginning balance

Current period provision (reversal), net

Write-offs, net of recoveries

Foreign exchange

Ending balance

For the year ended December 31, 2023, the Company’s allowance for current expected credit losses related to Accounts Receivable increased by $ 1.9 million , largely the result of an increase in aged receivables.

In the fourth quarter of 2023, the $ 1.5 million COVID-19 reserve for China was released of which $ 0.3 million related to Accounts Receivable and $ 1.2 million to Financing Receivables.

For the year ended December 31, 2022, the Company’s allowance for current expected credit losses related to Accounts Receivable increased by $ 2.2 million principally due to reserves established against its receivables in Russia due to uncertainties associated with the ongoing Russia-Ukraine conflict and resulting sanctions, partially offset the reversal of provisions associated with the COVID-19 pandemic as the outlook for the theatrical exhibition industry in Domestic and Rest of World markets continues to improve.

As of December 31, 2022, there remains a $ 1.5 million of COVID-19 additional reserve for China.

Financing Receivables

Financing receivables are due from theater operators and consist of the Company’s net investment in sales-type leases and receivables associated with financed sales of IMAX Systems.

As of December 31, 2023 and 2022, financing receivables consist of the following:

(In thousands of U.S.

Net investment in leases

Gross minimum payments due under sales-type leases

Unearned finance income

Present value of minimum payments due under sales-type leases

Allowance for credit losses

Net investment in leases

Financed sales receivables

Gross minimum payments due under financed sales

Unearned finance income

Present value of minimum payments due under financed sales

Allowance for credit losses

Net financed sales receivables

Total financing receivables

Net financed sales receivables due within one year

Net financed sales receivables due after one year

Total financed sales receivables

As of December 31, 2023 and 2022, the weighted-average remaining lease term and weighted-average interest rate associated with the Company’s sales-type lease arrangements and financed sales receivables, as applicable, are as follows:

Weighted-average remaining lease term (in years)

Sales-Type lease arrangements

Weighted-average interest rate

Sales-Type lease arrangements

Financed sales receivables

The tables below provide information on the Company’s net investment in leases by credit quality indicator as of December 31, 2023 and 2022.

The amounts disclosed for each credit quality classification are determined on a customer-by-customer basis and include both billed and unbilled amounts.

(In thousands of U.S.

By Origination Year

As of December 31, 2023

Net investment in leases:

Credit quality classification:

In good standing

Pre-approved transactions

Transactions suspended

Total net investment in leases

(In thousands of U.S.

By Origination Year

As of December 31, 2022

Net investment in leases:

Credit quality classification:

In good standing

Pre-approved transactions

Transactions suspended

Total net investment in leases

The tables below provide information on the Company’s financed sales receivables by credit quality indicator as of December 31, 2023 and 2022.

The amounts disclosed for each credit quality classification are determined on a customer-by-customer basis and include both billed and unbilled amounts.

(In thousands of U.S.

By Origination Year

As of December 31, 2023

Financed sales receivables:

Credit quality classification:

In good standing

Pre-approved transactions

Transactions suspended

Total financed sales receivables

(In thousands of U.S.

By Origination Year

As of December 31, 2022

Financed sales receivables:

Credit quality classification:

In good standing

Pre-approved transactions

Transactions suspended

Total financed sales receivables

The balance of financed sales receivables classified within the Transactions Suspended category as of December 31, 2023 includes amounts due from exhibitors in Russia, Ukraine, and Belarus which were reclassified from other credit quality classifications in 2022 as a result of the ongoing Russia-Ukraine conflict and resulting sanctions.

The following tables provide an aging analysis for the Company’s net investment in leases and financed sales receivables as of December 31, 2023 and 2022:

As of December 31, 2023

(In thousands of U.S.

Net investment in leases

Financed sales receivables

As of December 31, 2022

(In thousands of U.S.

Net investment in leases

Financed sales receivables

The following tables provide information about the Company’s net investment in leases and financed sales receivables with billed amounts past due for which it continues to accrue finance income as of December 31, 2023 and 2022.

The amounts disclosed for each credit quality classification are determined on a customer-by-customer basis and include both billed and unbilled amounts.

As of December 31, 2023

(In thousands of U.S.

Net investment in leases

Financed sales receivables

As of December 31, 2022

(In thousands of U.S.

Net investment in leases

Financed sales receivables

The following table provides information about the Company’s net investment in leases and financed sales receivables that are on nonaccrual status as of December 31, 2023 and 2022:

As of December 31, 2023

As of December 31, 2022

(In thousands of U.S.

Net investment in leases

Net financed sales receivables

For the year ended December 31, 2023, the Company recognized less than $ 0.1 million (2022 — $ 0.1 million ;

2021 —$ 0.1 million) in Finance Income related to the net investment in leases with billed amounts past due.

For the years ended December 31, 2023, 2022 and 2021, the Company did no t recognize any Finance Income related to the net investment in leases in nonaccrual status.

For the year ended December 31, 2023, the Company recognized $ 2.7 million (2022 — $ 3.6 million ;

2021 — $ 3.7 million) in Finance Income related to the financed sales receivables with billed amounts past due.

For the year ended December 31, 2023, the Company recognized $ 0.2 million (2022 — $ 0.5 million ;

2021 — $ 0.2 million) in Finance Income related to the financed sales receivables in nonaccrual status.

The following tables summarize the activity in the allowance for credit losses related to the Company’s net investment in leases and financed sales receivables for years ended December 31, 2023 and 2022:

Year Ended December 31, 2023

Net Investment

(In thousands of U.S.

Sales Receivables

Beginning balance

Current period reversal, net

Foreign exchange

Ending balance

Year Ended December 31, 2022

Net Investment

(In thousands of U.S.

Sales Receivables

Beginning balance

Current period provision, net

Foreign exchange

Ending balance

For the year ended December 31, 2023, the Company’s allowance for current expected credit losses related to its net investment in leases and financed sales receivables decreased by $ 1.7 million .

This decrease is principally due to the release of China’ s COVID-19 pandemic provision of $ 1.5 million, of which $ 1.2 million relates to its net investment in leases and financed sales receivables.

For the year ended December 31, 2022, the Company’s allowance for current expected credit losses related to its net investment in leases and financed sales receivables increased by $ 5.5 million .

This decrease is principally due to reserves established against its receivables in Russia due to uncertainties associated with the ongoing Russia-Ukraine conflict and resulting sanctions, partially offset by the reversal of provisions associated with the COVID-19 pandemic as the outlook for the theatrical exhibition industry in Domestic and Rest of World markets continues to improve.

Variable Consideration Receivables

In sale arrangements, variable consideration may become due to the Company from theater operators if certain annual minimum box office receipt thresholds are exceeded.

Such variable consideration is recorded as revenue in the period when the sale is recognized and adjusted in future periods based on actual results and changes in estimates.

Variable consideration is only recognized to the extent the Company believes there is not a risk of significant revenue reversal.

The following table summarizes the activity in the Allowance for Credit Losses related to Variable Consideration Receivables for the years ended December 31, 2023 and 2022:

Year Ended December 31,

(In thousands of U.S.

Beginning balance

Current period provision (reversal), net

Foreign Exchange

Ending balance

For the year ended December 31, 2023, the Company’s allowance for current expected credit losses relate d to Variable Consideration Receivables remained consistent at $ 0.6 million .

As of December 31, 2023, there was no COVID-19 pandemic provision remaining.

For the year ended December 31, 2022, the Company’s allowance for current expected credit losses related to Variable Consideration Receivables decreased by $ 0.5 million .

This decrease is principally due to the reversal of provisions associated with the COVID-19 pandemic as the outlook for the theatrical exhibition industry in Domestic and Rest of World markets continues to improve.

Lease Arrangements

(a) IMAX Corporation as a Lessee

The Company’s operating lease arrangements principally involve office and warehouse space.

Office equipment is generally purchased outright.

Leases with an initial term of less than 12 months are not recorded on the Consolidated Balance Sheets and the related lease expense is recognized on a straight-line basis over the lease term.

Most of the Company’s leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years or more.

The incremental borrowing rate used in the calculation of the Company’s lease liabilities is based on the location of each leased property.

None of the Company’s leases include options to purchase the leased property.

The depreciable lives of right-of-use assets and related leasehold improvements are limited by the expected lease term.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company rents or subleases certain office space to third parties, which have a remaining term of less than 12 months and are not expected to be renewed.

In 2022, the Company entered into a finance lease arrangement involving equipment used to facilitate the delivery of live events to certain IMAX locations.

The lease arrangement includes an option for the Company to purchase the equipment at the end of the lease term that is reasonably certain to be exercised.

The resulting right-of-use assets are being depreciated from the lease commencement dates over the useful life of the underlying equipment.

The incremental borrowing rate used in the calculation of the lease liabilities is based on the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar term.

For the years ended December 31, 2023, 2022, and 2021 the components of lease expense recorded within Selling, General and Administrative Expenses are as follows:

Years Ended December 31,

(In thousands of U.S.

Operating lease cost:

Amortization of operating lease assets

Interest on operating lease liabilities

Short-term and variable lease costs

Finance lease cost:

Amortization of finance lease assets

Interest on finance lease liabilities

Total lease cost

For the years ended December 31, 2023, 2022, and 2021, supplemental cash and non-cash information related to leases is as follows:

Years Ended December 31,

(In thousands of U.S.

Cash paid for amounts included in the measurement of lease liabilities:

Operating leases

Finance leases

Supplemental disclosure of non-cash leasing activities:

Right-of-use assets obtained in exchange for operating lease

Right-of-use assets obtained in exchange for finance lease obligations

As of December 31, 2023 and 2022, supplemental balance sheet information related to leases is as follows:

(In thousands of U.S.

Balance Sheet Location

Operating lease right-of-use assets

Property, plant and equipment

Finance lease right-of-use assets

Property, plant and equipment

Balance Sheet Location

Operating lease liabilities

Accrued and other liabilities

Finance lease liabilities (1)

Accrued and other liabilities

(1) Recorded net of $ nil (2022 — $ 0.9 million) upfront payment made upon execution of the finance lease arrangement.

As of December 31, 2023 and 2022, the weighted-average remaining lease term and weighted-average interest rate associated with the Company’s leases are as follows:

Operating leases:

Weighted-average remaining lease term (years)

Weighted-average discount rate

Finance leases:

Weighted-average remaining lease term (years)

Weighted-average discount rate

As of December 31, 2023, the maturities of the Company’s operating and finance lease liabilities are as follows:

(In thousands of U.S.

Operating Leases

Finance Leases

Total lease payments

interest expense

Present value of lease liabilities

(b) IMAX Corporation as a Lessor

The Company provides IMAX Systems to customers through long-term lease arrangements that for accounting purposes are classified as sales-type leases.

Under these arrangements, in exchange for providing the IMAX System, the Company earns fixed upfront and ongoing consideration.

Certain arrangements that are legal sales are also classified as sales-type leases as certain clauses within the arrangements limit transfer of title or provide the Company with conditional rights to the system.

The customer’s rights under the Company’s sales-type lease arrangements are described in Note 2 (o).

Under the Company’s sales-type lease 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 lease portfolio terms are typically non-cancellable for 10 to 20 years with renewal provisions from inception.

The Company’s sales-type lease arrangements do not contain a guarantee of residual value at the end of the lease 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 an extended warranty generally after the first year of the lease until the end of the lease term.

The customer is responsible for obtaining insurance coverage for the IMAX System commencing on the date specified in the arrangement’s shipping terms and ending on the date the IMAX System is returned to the Company.

The Company also provides IMAX Systems to customers through joint revenue sharing arrangements.

Under the traditional form of these arrangements, in exchange for providing the IMAX System under a long-term lease, the Company earns rent based on a percentage of contingent box office receipts and, in some cases, concession revenues, rather than a fixed upfront fee or annual minimum payments.

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 10 years or longer with renewal provisions.

Title to the IMAX System under a joint revenue sharing arrangement generally 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 lease 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 an extended warranty throughout the term.

The following lease payments are expected to be received by the Company for its sales-type leases and joint revenue sharing arrangements in each of the next five years and thereafter following the December 31, 2023 balance sheet date:

(In thousands of U.S.

Joint Revenue

Sharing Arrangements

(Refer to Note 6 for additional information related to the net investment in leases related to the Company’s sales-type lease arrangements.)

Variable Consideration from Contracts with Customers

In addition, hybrid sales arrangements include amounts owed by the customer based on a percentage of their box office receipts over the term of the arrangement.

These contract provisions are considered to be variable consideration.

This estimate is based on management’s box office projections for the individual IMAX System, which are developed using historical data for the location and, if necessary, comparable theaters and territories.

(Refer to Note 2(o) for a more detailed discussion of the Company’s accounting policy related to variable consideration.)

The following table summarizes the activity related to variable consideration from contracts with customers for the years ended December 31, 2023, 2022, and 2021:

(In thousands of U.S.

Balance as of January 1, 2021

Variable consideration for newly recognized sales

Accretion to finance income

Transferred to receivables from variable consideration assets

Movement in allowance for credit losses

Balance as of December 31, 2021

Variable consideration for newly recognized sales

Accretion to finance income

Transferred to receivables from variable consideration assets

Movement in allowance for credit losses (see Note 5)

Balance as of December 31, 2022

Variable consideration for newly recognized sales

Accretion to finance income

Transferred to receivables from variable consideration assets

Movement in allowance for credit losses (see Note 5)

Balance as of December 31, 2023

As of December 31,

(In thousands of U.S.

Raw materials

Work-in-process

Finished goods

As of December 31, 2023, Inventories include finished goods of $ 0.6 million (December 31, 2022 — $ 3.5 million ) for which title had passed to the customer, but the criteria for revenue recognition were not met as of the balance sheet date.

The following table summarizes the activity for the Company’s inventory valuation allowance account for the years ended December 31, 2023, 2022 and 2021:

Other deductions (2)

(In thousands of U.S.

Year ended December 31, 2023

Year ended December 31, 2022

Year ended December 31, 2021

(1) E xcludes an expense of $ 0.5 million charged directly to the Consolidated Statements of Operations during the year ended December 31, 2023 (2022 — recovery of $ 0.2 million ;

2021 — expense of $ 0.3 million ).

(2) Includes the w rite-off of amounts previously charged to valuation allowance.

As of December 31,

(In thousands of U.S.

Completed and released films, net of accumulated amortization of

Total Adjusted Selling, general and administrative expenses

$ 111,804 $ 121,872

Films in production

Films in development

The Company expects to amortize $ 5.0 million of the Film Assets balance within three years from December 31, 2023, including $ 3.2 million expected to be amortized in 2024, $ 0.9 million in 2025, and $ 0.9 million in 2026.

In certain film arrangements, the Company co-produces a film with a third party whereby the third party retaining certain rights to the film.

The amount of participation payments owed to third parties related to co-produced films as of December 31, 2023 is $ 3.8 million (December 31, 2022 — $ 3.8 million ) and is recorded on the Consolidated Balance Sheets within Accrued and Other Liabilities.

In 2023, the Company recorded impairment losses of $ 0.4 million related to the write-down of film assets (2022 — $ 0.8 million ;

2021 — $ 0.2 million).

Property, Plant and Equipment

As of December 31, 2023

(In thousands of U.S.

Equipment leased or held for use:

IMAX System components (1)(2)(3)

Camera and connectivity equipment

Assets under construction (4)

Right-of-use assets (5)

Other property, plant and equipment:

Office and production equipment (6)

Leasehold improvements

As of December 31, 2022

(In thousands of U.S.

Equipment leased or held for use:

IMAX System components (1)(2)(3)

Camera and connectivity equipment

Assets under construction (4)

Right-of-use assets (5)

Other property, plant and equipment:

Office and production equipment (6)

Leasehold improvements

(1) Included in system components are assets with costs o f $ 1.4 million (2022 — $ 1.6 million ) and accumulated depreciation of $ 1.2 million (2022 — $ 1.2 million ) that are leased to customers under operating leases.

(2) Included in system components are assets with costs of $ 317.8 million (2022 — $ 323.7 million ) and accumulated depreciation of $ 181.2 million (2022 — $ 177.9 million ) that are used in joint revenue shar ing arrangements.

(3) In 2023, the Company recorded charges of $ 0.8 million (2022 — $ 1.0 million ;

2021 — $0 .4 million) in Costs and Expenses Applicable to Technology Rentals mostly related to the write-down of leased xenon-based digital systems which were taken out of service in connection with customer upgrades to laser-based digital systems, as well as two IMAX Systems that was removed from their existing locations.

(4) Included in assets under construction are components with costs of $ 16.4 million (2022 — $ 9.1 million ) that will be utilized to construct assets to be used in joint revenue sharing arrangements.

(5) The right-of-use assets primarily include operating leases for office and warehouse space.

(6) Fully depreciated office and production equipment is still in use by the Company.

In 2023, the Company identified and wrote off $ 2.4 million (2022 — $ 3.5 million ) of office and production equipment that is fully depreciated and no longer in use.

As of December 31,

(In thousands of U.S.

Lease incentives provided to exhibitor customers, net of accumulated amortization

Commissions and other deferred selling expenses

Other investments

Foreign currency derivatives

(a) Income (loss) Before Taxes by Jurisdiction

Income (loss) before taxes by tax jurisdiction for the years ended December 31, 2023, 2022, and 2021 consists of the following:

Years Ended December 31,

(In thousands of U.S.

United States

(b) Income Tax Expense

Income tax expense for the years ended December 31, 2023, 2022, and 2021 consists of the following:

Years Ended December 31,

(In thousands of U.S.

Income tax expense – current:

United States

Income tax (expense) benefit – deferred:

United States

(1) A valuation allowance is recorded in jurisdictions where management has determined, based on the weight of all available evidence, bot h positive and negative, that a valuation allowance for deferred tax assets is required.

For the year ended December 31, 2023 , the Company recorded a $ 0.7 million net decrease (2022 — net increase of $ 16.8 million) in the valuation allowance against its deferred tax assets in Canada.

The $ 0.7 million net decrease in the valuation allowance recorded in 2023 is reflected within Income Tax Expense in the Company’s Consolidated Statements of Operations.

(2) The Company’s deferred tax liability of $ 14.9 million as of December 31, 2022 relates to the estimated applicable foreign withholding taxes associated with historical earnings that were not indefinitely reinvested which will become payable upon the repatriation of any such earnings.

During the year ended December 31, 2023, $ 24.0 million (2022 — $ 27.4 million) of historical earnings from a subsidiary in China were distributed and as a result, $ 2.4 million (2022 — $ 2.7 million) of foreign withholding taxes were paid to the re levant tax authorities.

The remaining deferred tax liability on the Company’s Consolidated Balance Sheets as of December 31, 2023 is $ 12.5 million (2022 — $ 14.9 million).

(3) For the year ended December 31, 2023, Income Tax Expense exclude s a tax expense of $ 0.2 million included in Other Comprehensive (Loss) Income (2022 — expense of $ 0.8 million;

2021 — benefit of $ 0.3 million ).

For the years ended December 31, 2023, 2022, and 2021, the Company’s effective tax rate and income tax expense differs from the combined Canadian federal and provincial statutory income tax rates due to the following factors:

Years Ended December 31,

(In thousands of U.S.

Dollars, except rates)

Income tax (expense) benefit at combined statutory rates

Adjustments resulting from:

Decrease (increase) in valuation allowance

Changes to tax reserves

federal and state taxes

Withholding taxes

Income tax at different rates in foreign and other provincial jurisdictions

Investment and other tax credits (non-refundable)

Changes to deferred tax assets and liabilities resulting from audit and other tax return adjustments

Other items included in tax benefit (expense)

Income tax expense

(d) Deferred Tax Assets and Deferred Tax Liability

As of December 31, 2023 and 2022, the Company’s deferred tax assets and deferred tax liability consists of the following:

As of December 31,

(In thousands of U.S.

Net operating loss carryforwards

Investment tax credit and other tax credit carryforwards

Write-downs of other assets

Excess of tax accounting basis in various assets

Accrued pension liability

Accrued share-based compensation

Income recognition on net investment in leases

Other accrued reserves

Total deferred income tax assets

Valuation allowance

Deferred income tax asset net of valuation allowance

Deferred tax liability

Net deferred tax liability

As of December 31, 2023, net deferred tax assets include a liability of $ 1.3 million (December 31, 2022 — liability of $ 1.1 million ) associated with amounts recognized within Accumulated Other Comprehensive Loss, including unrealized actuarial gains and losses related to the Company’s pension and other postretirement benefit plans and unrealized net gains and losses on cash flow hedging instruments.

(e) Net Operating Loss Carryforwards

Estimated Canadian net operating loss carryforwards of $ 123.3 million can be used to reduce taxable income through 2043 , China net operating losses of $ 5.3 million can be used to reduce taxable income through 2028 , and $ 14.4 million of Ireland net operating losses can be carried forward indefinitely.

Investment tax credits and other tax credits of $ 5.2 million can be carried forward to reduce income taxes payable through to 2043 .

(f) Indefinitely Reinvested Assertion

Income taxes are accrued for the earnings of non-Canadian affiliates and associated companies unless management determines that such earnings will be indefinitely reinvested outside of Canada.

In 2020, management completed a reassessment of its strategy with respect to the most efficient means of deploying the Company’s capital resources globally.

Based on the results of this reassessment, management concluded that the historical earnings of certain foreign subsidiaries in excess of amounts required to sustain business operations would no longer be indefinitely reinvested.

During the year ended December 31, 2023, $ 24.0 million (2022 — $ 27.4 million) of historical earnings from a subsidiary in China were distributed and, as a result, $ 2.4 million (2022 — $ 2.7 million) of foreign withholding taxes were paid to the relevant tax authorities.

The Company has a deferred tax liability of $ 12.5 million as of December 31, 2023 (2022 — $ 14.9 million) related to the estimated applicable foreign withholding taxes associated with these historical earnings.

(g) Valuation Allowance

As of December 31, 2023, the Company’s Consolidated Balance Sheets include net deferred income tax assets of $ 8.0 million , net of a valuation allowance of $ 62.1 million ( December 31, 2022 — $ 9.9 million , net of a valuation allowance of $ 62.9 million ).

For the year ended December 31, 2023, the Company recorded a net decrease in valuation allowance of $ 0.7 million (2022 — net increase of $ 16.8 million ).

The net decrease includes an increase of $ 2.0 million in reporting entities where it was concluded that it is more likely than not that the benefit from deferred tax assets will not be realized.

This was offset by a decrease of $ 1.3 million related to the recognition of certain losses in IMAX China that management now considers to be realizable and a decrease of $ 1.4 million related to uncertain tax positions .

The net decrease in the valuation allowance is reflected within Income Tax Expense in the Company’s Consolidated Statements of Operations.

The valuation allowance is expected to reverse at the point in time when management determines it is more likely than not that the Company will incur sufficient tax liabilities to allow it to utilize the deferred tax assets against which the valuation allowance is recorded.

(h) Uncertain Tax Positions

As of December 31, 2023, the Company had total tax reserves (including interest and penalties) of $ 12.0 million (2022 — $ 12.3 million ) for various uncertain tax positions.

While the Company believes it has adequately provided for all tax positions, amounts asserted by taxing authorities could differ from the Company’s accrued liability.

Accordingly, additional provisions on federal, provincial, state and foreign tax-related matters may be required in the future as revised estimates are made or the underlying matters are settled or otherwise resolved.

For the year ended December 31, 2023, the Company recorded a net decrease of $ 0.8 million (2022 — $ 2.2 million, 2021 —$ 2.1 million) related to tax reserves (excluding interest and penalties) primarily related to tax years becoming statute barred for purposes of future tax examinations by local tax jurisdictions, partially offset by additional tax positions related to prior years.

The Company has elected to classify interest and penalties related to income tax liabilities, when applicable, as part of the Income Tax Expense in its Consolidated Statements of Operations rather than Interest Expense.

The Company recorded a net increase of $ 0.6 million in potential interest and penalties associated with its provision for uncertain tax positions for the years ended December 31, 2023 (2022 — $ 0.6 million ;

2021 — $ 1.4 million ).

The following table presents a reconciliation of the beginning and ending amount of tax reserves (excluding interest and penalties) for the years ended December 31, 2023, 2022, and 2021:

Years Ended December 31,

(In thousands of U.S.

Balance at beginning of the year

Additions based on tax positions related to the current year

Additions (reductions) for tax positions of prior years

Reductions resulting from lapse of applicable statute of limitations and

administrative practices

Balance at the end of the year

The number of years with open tax audits varies depending on the tax jurisdiction.

The Company’s material taxing jurisdictions include Canada, the United States, Ireland, and China.

The Company’ s 2020 through 2023 tax years remain subject to examination by the IRS for United States federal tax purposes, and the 2016 through 2023 tax years remain subject to examination by the appropriate governmental agencies for Canadian federal tax purposes.

There are other on-going audits in various other jurisdictions that are not material to the Consolidated Financial Statements.

The Company is subject to audit by tax authorities in the various jurisdictions in which it operates in the ordinary course of its business and believes that it has adequately reserved for the expected exposures in its accounts.

During the fourth quarter of 2022, the Company received a Notice of Reassessment (the “Reassessment”) in the amount of $ 13.2 million (inclusive of interest).

A revised Reassessment was issued by the CRA in May 2023 to reduce the amount previously reassessed to $ 2.7 million (inclusive of interest).

The Company has filed a Notice of Objection with respect to this Reassessment and believes that the matter will be resolved on a basis that is consistent with its filing position.

(i) Income Tax Effect on Other Comprehensive (Loss) Income

For the years ended December 31, 2023, 2022, and 2021, Income Tax Expense related to the components of Other Comprehensive (Loss) Income is as follows:

Years Ended December 31,

(In thousands of U.S.

Unrealized change in defined benefit plan

Unrealized change in postretirement benefit plans

Amortization of defined benefit and postretirement benefit plans

Amortization of prior service cost

Unrealized change in cash flow hedging instruments

Realized change in cash flow hedging instruments

Reclassification of unrealized change in ineffective cash flow hedging instruments

Goodwill and Other Intangible Assets

As of December 31, 2023, the Company’s total Goodwill was $ 52.8 million , of which $ 13.8 million relates to the SSIMWAVE reporting unit, which was acquired on September 22, 2022, and $ 39.0 million relates to the Technology Products and Services reporting unit ( December 31, 2022 — $ 39.0 million) .

(Refer to Note 4 for additional information related to the Company’s acquisition of SSIMWAVE).

The Company performed a qualitative impairment test as of the annual assessment date, September 30, 2023, to evaluate whether it is more likely than not that the fair value of its reporting units was less than their respective carrying amounts.

Based on such assessment, the Company concluded, with respect to all reporting units other than SSIMWAVE, that it is not more likely than not that the fair value of any such reporting unit is less than its carrying value.

Accordingly, the Company performed the quantitative assessment of goodwill impairment for the SSIMWAVE reporting unit.

Based on the quantitative assessment, the Company concluded that there is no impairment in the year ended December 31, 2023 and the fair value of the SSIMWAVE reporting unit exceeded its carrying value.

The Company’s significant assumptions, including revenue growth rates, discount rate and other factors may change in the future based on the changing economic and competitive environment in which it operates.

Assuming that all other components of the Company’s fair value estimate remain unchanged, an increase of 100 basis points in discount rate decreases the goodwill headroom by $ 9.5 million, and a decrease of 10 % in the revenue growth rate decreases the goodwill headroom by $ 24.5 million, without triggering impairment charges of goodwill.

In the year ended December 31, 2022, the Company performed a qualitative impairment test as of the annual assessment date, September 30, 2022, to evaluate whether it is more likely than not that the fair value of its reporting units was less than their respective carrying amounts.

Based on its assessment, the Company concluded that it was not more likely than not that the fair value of a reporting unit is less than its carrying amount for all reporting units.

(b) Other Intangible Assets

As of December 31, 2023

(In thousands of U.S.

Licenses and intellectual property

Internal use software

Developed technology

In process research and development

Patents and trademarks

Customer relationships

Marketing-related intangibles

As of December 31, 2022

(In thousands of U.S.

Licenses and intellectual property

Internal use software

Developed technology

In process research and development

Patents and trademarks

Customer relationships

Marketing-related intangibles

During 2023, the Company capitalized $ 8.2 million related to the development of internal use software, marketing-related intangibles, as well as additions in patents and trademarks and other intangible assets (2022 — $ 5.1 million ).

The weighted average amortization period for these additions is 4.3 years (2022 — 4.7 years).

The net book value of the other intangible assets capitalized in 2023 was $ 8.1 million as of December 31, 2023 (2022 — $ 15.5 million ).

During 2022, the Company acquired $ 11.2 million of intangible assets through its acquisition of SSIMWAVE.

(Refer to Note 4.)

During 2023, the Company incurred costs of $ 0.4 million to renew or extend the term of acquired patents and trademarks which were recorded in Selling, General and Administrative expenses (2022 — $ 0.4 million );

2021 — $ 0.1 million).

Fully amortized other intangible assets are still in use by the Company.

In 2023, the Company identified and wrote off $ 1.0 million (2022 — $ 0.1 million ;

2021 —$ 0.1 million) of fully amortized patents and trademarks that are no longer in use.

The estimated amortization expense for each of the next five years following the December 31, 2023 balance sheet date is as follows:

(In thousands of U.S.

(a) Revolving Credit Facility Borrowings, Net

As of December 31, 2023 and 2022, Revolving Credit Facility Borrowings, Net includes the following:

(In thousands of U.S.

Wells Fargo Credit Facility borrowings

HSBC China Facility borrowings

Bank of China Facility borrowings

Unamortized debt issuance costs

Revolving Credit Facility Borrowings, net

Wells Fargo Credit Agreement

On March 25, 2022, the Company entered into a Sixth Amended and Restated Credit Agreement with Wells Fargo Bank, National Association, as agent (the “Agent”), and a syndicate of lenders party thereto (the “Credit Agreement”), which extended the maturity date of the credit facility under the Credit Agreement (the “Credit Facility”) from June 28, 2023 to March 25, 2027 .

The Company’ s obligations under the Credit Agreement are guaranteed by certain of the Company’s subsidiaries (the “Guarantors”), and are secured by first-priority security interests in substantially all of the assets of the Company and the Guarantors.

The Credit Agreement has a revolving borrowing capacity of $ 300.0 million, and contains an uncommitted accordion feature allowing the Company to further increase its borrowing capacity by the greater of $ 140.0 million, for a total of $ 440.0 million, or by the Company's EBITDA for the sum of the four most recently ended fiscal quarters, subject to certain conditions, depending on the mix of revolving loans and/or term loans under the incremental facility and subject to conditions set forth in the Credit Agreement.

The Credit Facility requires that the Company maintain a maximum Senior Secured Net Leverage Ratio (as defined in the Credit Agreement) of no greater than 3.25 :1.00, on the last day of each Fiscal Quarter.

The Senior Secured Net Leverage Ratio is the ratio of Total Debt (as defined in the Credit Agreement), secured by liens, net of unrestricted cash and cash equivalents held outside of the PRC to a maximum of $ 75.0 million, relative to Adjusted EBITDA per Credit Facility for the four prior quarters.

The Senior Secured Net Leverage Ratio is calculated using Adjusted EBITDA per Credit Facility determined on a trailing twelve-month basis.

The Company was in compliance with this requirement as of December 31, 2023 as the Senior Secured Net Leverage Ratio was 0.00 :1.00 .

Loans under the Credit Facility bear interest, at the Company’s option, at (i) Term Secure Overnight Financing Rate (“SOFR“), Eurocurrency Rate or Canadian Dollar Offered Rate (“CDOR” ) plus a margin ranging from 1.00 % to 1.75 % per annum;

or (ii) the U.S.

base rate or the Canadian prime rate plus a margin ranging from 0.25 % to 1.00 % per annum, in each case depending on the Company’s total leverage ratio.

In no event will Term SOFR, Eurocurrency Rate or CDOR be less than 0.00 % per annum.

As of December 31, 2023, borrowings under the Credit Facility were $ 24.0 million (December 31, 2022 — $ 25.0 million ) and bear interest at Term SOFR, plus a margin up to 1.75 % per annum (December 31, 2022 — 1.75 %) based on the Company ’s total leverage ratio.

The effective interest rate for the year ended December 31, 2023 was 6.83 % (2022 — 5.64 %).

The Credit Agreement contains customary affirmative and negative covenants, including covenants that limit indebtedness, liens, asset sales, investments and restricted payments, in each case subject to negotiated exceptions and baskets.

The Credit Agreement also contains customary representations, warranties and event of default provisions.

The Company incurred fees of approximately $ 2.5 million in connection with the March 2022 amendment of the Credit Agreement, which are being amortized on a straight-line basis over the term of the Credit Agreement.

In the first quarter of 2022, the Company expensed $ 0.4 million in unamortized deferred financing costs associated with lenders that are no longer parties to the Credit Agreement.

On May 25, 2022, the Company delivered a “Designated Period” suspension notice to the Agent, and the Company, the Agent and the lenders under the Credit Agreement entered into a limited consent, which notice and limited consent evidenced and effectuated the termination of the Designated Period under the Credit Agreement.

From and after the termination of the Designated Period, the $ 75.0 million minimum liquidity covenant in the Credit Agreement was no longer in effect.

In conjunction with the proposal to acquire the outstanding 96.3 million shares in IMAX China Holding, Inc.

(“IMAX China”) (the “China Transaction”), the Company obtained a consent on June 30, 2023 under the Credit Facility to temporarily increase the Letter of Credit (“LC”) Accommodations Sublimit from $ 25.0 million to $ 130.0 million.

On July 11, 2023, the Company obtained a LC in the amount of $ 130.0 million in favor of Morgan Stanley Asia Limited, the financial adviser for the China Transaction, to provide certainty of funds for the proposed proceeds and transaction costs payable with respect to the China Transaction.

At the Extraordinary General Meeting of IMAX China shareholders held on October 9, 2023, the vast majority voted in favor of the China Transaction;

however, the Company did not receive approval from 90 % of disinterested IMAX China shareholders as required by Hong Kong law and, as a result, the Company’s proposal to acquire IMAX China’s outstanding shares did not proceed.

Consequently, the LC and the temporary increase of the LC Accommodations Sublimit were canceled effective October 11, 2023.

As of December 31, 2023 and 2022, the Company had no l etters of credit or advance payment guarantees outstanding under the Credit Facility.

As of December 31, 2023, the amount available for future borrowings under the Credit Facility was $ 276.0 million .

Foreign Exchange Facility

Within the Credit Facility, the Company is able to purchase foreign currency forward contracts and/or other swap arrangements.

As of December 31, 2023, the net unrealized gain on the Company’s outstanding foreign currency forward contracts was $ 0.8 million , representing the amount by which the fair value of these forward contracts exceeded their nominal value ( 2022 — net unrealized loss of $ 0.6 million;

2021 — net unrealized gain of $ 0.1 million).

As of December 31, 2023, the notional value of the Company’s outstanding foreign currency forward contracts was $ 40.6 million (December 31, 2022 — $ 24.7 million ).

Bank of China Facility

In June 2022, IMAX (Shanghai) Multimedia Technology Co., Ltd.

(“IMAX Shanghai”), one of the Company ’ s majority-owned subsidiaries in China, renewed its unsecured revolving facility with Bank of China for up to 200.0 million Chinese Renminbi (“RMB”) ($ 28.2 million), including RMB 10.0 million ($ 1.4 million) for letters of guarantee, to fund ongoing working capital requirements (the “Bank of China Facility”).

The Bank of China Facility expired in September 2023 and has been renewed to February 21, 2025 .

As of December 31, 2023, no borrowings were outstanding under the Bank of China Facility and outstanding letters of guarantee were RMB 0.2 million ( less than $ 0.1 million ).

As of December 31, 2022, outstanding Bank of China Facility borrowings were RMB 2.6 million ( $ 0.4 million ) and outstanding letters of guarantee were RMB 2.8 million ( $ 0.4 million ).

As of December 31, 2023, the amount available for future borrowings under the Bank of China Facility was RMB 190.0 million ( $ 26.8 million ) and the amount available for letters of guarantee was RMB 9.8 million ( $ 1.4 million ).

The amount available for future borrowings under the Bank of China Facility is not subject to a standby fee.

The effective interest rate for the year ended December 31, 2023 was 3.85 % (2022 — 4.12 % ).

HSBC China Facility

In June 2022, IMAX Shanghai entered into an unsecured revolving facility for up to RMB 200.0 million ($ 28.2 million) with HSBC Bank (China) Company Limited, Shanghai Branch to fund ongoing working capital requirements (the “HSBC China Facility”).

As of December 31, 2023 , no borrowings were outstanding under the HSBC China facility (December 31, 2022 - RMB 87 million or $ 12.5 million).

As of December 31, 2023, the amount available for future borrowings under the HSBC China Facility was RMB 200.0 million ( $ 28.2 million ).

The effective interest rate for the year ended December 31, 2023 was 3.88 % (2022— 3.91 % ).

In October 2019, the Company entered into a $ 5.0 million facility with National Bank of Canada (the “NBC Facility”) fully insured by Export Development Canada for use solely in conjunction with the issuance of performance guarantees and letters of credit.

The NBC Facility has been renewed to August 21, 2024.

The NBC Facility is renewable on the same terms and conditions on an annual basis.

The Company did no t have any letters of credit or advance payment guarantees outstanding as of December 31, 2023 and 2022 under the NBC Facility.

(b) Convertible Notes and Other Borrowings, Net

As of December 31, 2023 and December 31, 2022, Convertible Notes and Other Borrowings, Net includes the following:

(In thousands of U.S.

Convertible Notes

Unamortized discounts and debt issuance costs

Convertible Notes, net

Federal Economic Development Loan

Unaccreted interest benefit

Federal Economic Development Loan, net

Convertible Notes and Other Borrowings, net

Convertible Notes

On March 19, 2021, the Company issued $ 230.0 million of 0.500 % Convertible Senior Notes due 2026 (the “Convertible Notes”) in a private placement conducted pursuant to Rule 144A under the Securities Act of 1933, as amended.

The net proceeds from the issuance of the Convertible Notes were $ 223.7 million, after deducting the initial purchasers’ discounts and commissions.

The Convertible Notes are senior unsecured obligations of the Company and bear interest at a rate of 0.500 % per annum on the principal of $ 230.0 million, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2021 .

The Convertible Notes will mature on April 1, 2026 , unless they are redeemed or repurchased by the Company or converted on an earlier date.

Holders of the Convertible Notes have the right to convert their Convertible Notes in certain circumstances and during specified periods.

Before January 1, 2026, holders of the Convertible Notes have the right to convert their Convertible Notes only upon the occurrence of certain events.

From and after January 1, 2026, holders of the Convertible Notes may convert their Convertible Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date.

Upon conversion, the Company will pay or deliver, as applicable, cash or a combination of cash (in an amount no less than the principal amount of the Convertible Notes being converted) and common shares, at its election, based on the applicable conversion rates.

The initial conversion rate is 34.7766 common shares per $ 1,000 principal amount of Convertible Notes, which represents an initial conversion price of approximately $ 28.75 per common share, and is subject to adjustment upon the occurrence of certain events.

The Convertible Notes are redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after April 6, 2024 and on or before the 40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, but only if the last reported sale price per share of the Company’s common stock exceeds 130 % of the conversion price for a specified period of time.

In addition, calling any Convertible Notes for redemption will constitute a “make-whole fundamental change” with respect to such notes, in which case the conversion rate applicable to the conversion of such notes will be increased in certain circumstances if such notes are converted after they are called for redemption .

In connection with the pricing of the Convertible Notes, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain financial institutions.

The Capped Call Transactions are expected to reduce potential dilution resulting from the common shares the Company is required to issue and/or to offset any potential cash payments the Company is required to make in excess of the principal amount of the Convertible Notes in the event that the market price per share of the Company’s common shares is greater than the strike price of the Capped Call Transactions with such reduction and/or offset subject to a cap.

The Capped Call Transactions have an initial cap price of $ 37.2750 per share of the Company’s common shares, which represents a premium of 75 % over the last reported sale price of the common shares when they were priced on March 16, 2021, and are subject to certain adjustments under the terms of the Capped Call Transactions.

Collectively, the Capped Call Transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes, the number of the Company’s common shares underlying the Convertible Notes.

The cost of the Capped Call Transactions was approximately $ 19.1 million.

The Capped Call Transactions are separate transactions, are not part of the terms of the Convertible Notes and will not affect any holder’s rights under the Convertible Notes.

Holders of the Convertible Notes will not have any rights with respect to the Capped Call Transactions.

The Capped Call Transactions meet all of the applicable criteria for equity classification in accordance with ASC 815-10-15-74(a), “Derivatives and Hedging — Embedded Derivatives — Certain Contracts Involving an Entity’s Own Equity,” and, as a result, the related $ 19.1 million cost was recorded as a reduction to Other Equity within Shareholders’ Equity on the Company’s Consolidated Statements of Shareholders’ Equity and Consolidated Balance Sheets.

In addition, upon the occurrence of a “fundamental change” (as defined below), holders may require the Company to repurchase their Convertible Notes at a cash repurchase price equal to the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest, if any.

Subject to the terms and conditions of the indenture governing the Convertible Notes, a “fundamental change” means, among other things, an event resulting in (i) a change of control, (ii) a transfer of all or substantially all of the assets of the Company, (iii) a merger, (iv) liquidation or dissolution of the Company, or (v) delisting of the Company’s common shares from a national securities exchange.

The Company recorded the Convertible Notes entirely as a liability in the Consolidated Balance Sheets, net of initial purchasers' discounts and commissions and other debt issuance costs, with interest expense reflecting the cash coupon plus the amortization of the discounts and capitalized costs.

Additionally, under the “if-converted” method, because the principal amount of the Convertible Notes is settled in cash and the conversion spread is settleable in the Company’s common shares, diluted earnings per share is calculated by including the net number of incremental shares that would be issued upon conversion of the Convertible Notes, using the average market price during the period.

Accordingly, the application of the “if-converted” method may reduce the Company’s reported diluted earnings per share.

Federal Economic Development Loan

The Company’s wholly-owned subsidiary, SSIMWAVE, entered into a contribution agreement with the Federal Economic Development Agency for Southern Ontario (the “Federal Economic Development Loan”) on May 29, 2019, under which SSIMWAVE received $ 4.2 million Canadian Dollar ( $ 3.2 million) by way of repayable contributions toward certain eligible projects costs.

The contributions under the agreement covered 35 % of the eligible and supported costs incurred by SSIMWAVE between January 10, 2019 and December 31, 2022.

The contributions were repayable over 60 months , with repayments to begin in January 2024 and an annual interest rate of 0 %.

As a result of SSIMWAVE amalgamating with the Company on January 1, 2024, the Federal Economic Development Loan was reassigned to the Company on January 4, 2024.

Under the reassigned and amended agreement, the contributions are repayable over 36 months beginning January 2024 , with an annual interest rate of 0 %.

The benefit of the interest-free loan has been determined by calculating the present value of the payments using a market-based interest rate and comparing this to the proceeds received.

The benefit is recorded as the interest-free benefit of government funding within Interest Income on the Company’s Consolidated Statements of Operations.

The obligation is being accreted to its maturity amount, resulting in an interest accretion expense of $ 0.5 million in 2023 (2022 — less than $ 0.1 million) which is being recorded within Interest Expense on the Company ’ Consolidated Statements of Operations.

As of December 31, 2023, the Federal Economic Development Loan has a carrying value of $ 2.5 million , net of unaccreted interest benefit and is recorded within Convertible Notes and Other Borrowings, Net on the Company’s Consolidated Balance Sheets.

In the ordinary course of its business, the Company enters into contractual agreements with third parties that include non-cancelable payment obligations, for which it is liable in future periods.

These arrangements can include terms binding the Company to minimum payments and/or penalties if it terminates the agreement for any reason other than an event of default as described by the agreement.

The following table presents a summary of the Company’s contractual obligations and commitments as of December 31, 2023:

Payments Due by Period

(In thousands of U.S.

Less Than One Year

Purchase obligations (1)

Pension obligations (2)

Operating lease obligations (3)

Finance lease obligations

Wells Fargo Facility

Federal Economic Development Loan (4)

Convertible Notes (5)

Postretirement benefits obligations

(1) Represents total payments to be made under binding commitments with suppliers and outstanding payments to be made for supplies ordered, but yet to be invoiced.

(2) The Company has an unfunded defined benefit pension plan covering its Chief Executive Officer.

(Refer to Note 23 .)

(3) Represents total minimum annual rental payments due under the Company’s operating leases.

(Refer to Note 6 .)

(4) The Federal Economic Development Loan will be repayable over 36 months, with repayments estimated to begin in January 2024.

(Refer to Note 14(b).

(5) The Convertible Notes bear interest at a rate of 0.500 % per annum on the principal of $ 230.0 million, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2021 .

The Convertible Notes will mature on April 1, 2026 , unless earlier repurchased, redeemed or converted.

(Refer to Note 14 (b).)

The Company compensates its sales force with both fixed and variable compensation.

Commissions on the sale or lease of IMAX 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.

As of December 31, 2023, $ 2.7 million (December 31, 2022 — $ 2.2 million ) of commissions have been accrued and will be payable in future periods.

Contingencies and Guarantees

The Company is involved in lawsuits, claims, and proceedings, including those identified below, which arise in the ordinary course of business.

Management is required to assess the likelihood of any adverse judgments or outcomes related to these legal contingencies, as well as potential ranges of probable or reasonably possible losses.

The Company records a provision for a liability when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated.

The determination of the amount of any liability recorded or disclosed is reviewed at least quarterly based on a careful analysis of each individual exposure with, in some cases, the assistance of outside legal counsel, taking into account the impact of negotiations, settlements, rulings, and other pertinent information related to the case.

The amount of liabilities recorded or disclosed for these contingencies may change in the future due to changes in management's judgments resulting from new developments or changes in settlement strategy.

Any resulting adjustment to the liabilities recorded by the Company could have a material adverse effect on its results of operations, cash flows, and financial position in the period or periods in which such changes in judgment occur.

The Company believes it has adequate provisions for any such matters.

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

(i) 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 Chamber 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-City Entertainment (I) PVT Limited (“E-City”).

On March 27, 2008, the arbitration panel issued a final award in favor of the Company in the amount of $ 11.3 millio n, as well as an additional $ 2,512 each day in interest from October 1, 2007 until the date the award is paid .

In July 2008, E-City commenced a proceeding in Mumbai, India seeking to prevent recognition of the ICC award in India.

On March 10, 2017, the Supreme Court of India dismissed E-City ’s petition.

On March 29, 2017, the Company filed an Execution Application in the Bombay High Court seeking to enforce the ICC award against E-City and several related parties, which award the Company calculates to be $ 26.2 mi llion, inclusive of interest, as of December 31, 2023.

That matter is currently pending.

The Company has also taken steps to enforce the ICC final award outside of India.

In December 2011, the Ontario Superior Court of Justice issued an order recognizing the final award and requiring E-City to pay the Company $ 30,000 to cover the costs of the application , and in May 2012, the New York Supreme Court recognized the Canadian judgment and entered it as a New York judgment.

The Company intends to continue pursuing its rights and seeking to enforce the award, although no assurances can be given with respect to the ultimate outcome.

(ii) In addition to the matters described above, the Company is currently involved in other legal proceedings or governmental inquiries 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.

(iii) In the normal course of business, the Company enters into agreements that may contain features that meet the definition of a guarantee.

A guarantee is 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

Certain subsidiaries of the Company have provided significant financial guarantees to third parties under the Credit Agreement (see Note 14).

Product Warranties

The Company’s accrual for product warranties, which is recorded within Accrued and Other Liabilities in the Consolidated Balance Sheets, was less than $ 0.1 million and $ nil as of December 31, 2023 and 2022, respectively.

Director/Officer Indemnifications

The Company’s by-laws contain 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 amounts 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.

In addition, the Company has entered into indemnification agreements with each of its directors in order to effectuate the foregoing.

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 Company ’s Consolidated Balance Sheets as of December 31, 2023 and December 31, 2022 with respect to this indemnity.

Other Indemnification Agreements

In the normal course of its operations, the Company provides indemnifications to counterparties in transactions such as:

IMAX System lease and sale agreements and the supervision of installation or servicing of IMAX 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 IMAX 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 no t made any significant payments under such indemnifications and no amounts have been accrued in the Consolidated Financial Statements with respect to the contingent aspect of these indemnities.

Capital Stock

(a) Authorized Common Shares

The authorized capital of the Company consists of an unlimited number of common shares.

The following is a summary of the rights, privileges, restrictions, and conditions of the common shares.

The holders of common shares are entitled to receive dividends, if and when declared by the directors of the Company, subject to the rights of the holders of any other class of shares of the Company entitled to receive dividends in priority to the common shares.

The holders of the common shares are entitled to one vote for each common share held at all meetings of the shareholders.

(b) Settlements of Share-Based Compensation

During the years ended December 31, 2023, 2022, and 2021 , the Company settled the exercise of stock options and the vesting of PSUs and RSUs with its common shares.

These settlements were either through newly issued common shares from treasury or through the purchase of common shares in the open market by the IMAX LTIP trustee.

The following table summarizes the settlement of stock option, PSU and RSU transactions:

Years Ended December 31,

Stock options

Issued from treasury

Total stock options exercised

Issued from treasury

Shares withheld for tax withholdings

Total PSUs vested

Issued from treasury

Plan trustee purchases

Shares withheld for tax withholdings

Total RSUs vested

The Company issues share-based compensation to eligible employees, directors, and consultants under the IMAX LTIP and the China LTIP, as summarized below.

On June 3, 2020, the Company’s shareholders approved the IMAX LTIP at its Annual and Special Meeting.

Awards under the IMAX LTIP may consist of stock options, RSUs, PSUs, and other awards.

Stock options are no longer granted under the Company’s previously approved Stock Option Plan (“SOP”).

For the year ended December 31, 2023, share-based compensation expense totaled $ 23.6 million (2022 — $ 27.0 million ;

2021 — $ 25.6 million ) and is reflected in the following accounts in the Consolidated Statements of Operations:

Years Ended December 31,

(In thousands of U.S.

Cost and expenses applicable to revenues

Selling, general and administrative expenses

Research and development

Exit costs, restructuring charges and associated impairments

As of December 31, 2023, the Company has reserved a total of 5,538,873 (December 31, 2022 — 5,788,499 ) common shares for future issuance under the IMAX LTIP.

Of this amount, 3,329,422 common shares are reserved for the future exercise of stock options (December 31, 2022 — 3,604,739 ), 922,621 common shares are reserved for the future vesting of PSUs (December 31, 2022 — 931,716 ), and 1,286,830 common shares are reserved for the future vesting of RSUs (December 31, 2022 — 1,252,044 ).

As of December 31, 2023, 3,329,422 stock options in respect of common shares (December 31, 2022 — 3,523,335 ) were vested and exercisable.

IMAX LTIP and SOP Stock Options

The Company’s policy is to issue new common shares from treasury or shares purchased in the open market to satisfy stock options which are exercised.

The Company no longer intends to issue new stock option awards.

The Company utilizes a Binomial Model to determine the fair value of stock option awards on the grant date.

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 award, 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.

All stock option awards are granted at the fair market value of the Company’s common shares on the date of grant.

The fair market value of a common share on a given date is based on the higher of the closing price of a common share on either:

(i) the grant date or (ii) the most recent trading date if the grant date is not a trading date on the New York Stock Exchange (“NYSE”) or such national exchange as may be designated by the Company’s Board of Directors.

All stock options have been vested and expire 10 years or less from the date of the grant.

The SOP and IMAX LTIP provide for double-trigger accelerated vesting in the event of a change in control, as defined in each plan.

The Company recorded the following expenses related to stock options issued to employees and directors under the IMAX LTIP and SOP:

Years Ended December 31,

(In thousands of U.S.

Stock option expense

For the year ended December 31, 2023, the Company’s Consolidated Statements of Operations includes an income tax benefit of $ nil related to stock option expense (2022 — $ 0.1 million ;

2021 — $ 0.1 million ).

As of December 31, 2023, 2022, and 2021, unrecognized share-based compensation expense related to non-vested employee stock options is as follows:

As of December 31,

(In thousands of U.S.

Expense not yet recognized related to non-vested employee stock options

As of 2023, 2022, and 2021, unrecognized share-based compensation expense related to non-vested employee stock options is expected to be recognized over the following weighted-average periods:

As of December 31,

Weighted average period (in years)

During the years ended December 31, 2023, 2022 and 2021, the Company did not grant any stock options.

The following table summarizes the stock option activity under the SOP and IMAX LTIP for the years ended December 31, 2023, 2022, and 2021:

Weighted Average Exercise

Number of Shares

Price Per Share

Stock options outstanding, beginning of year

Stock options outstanding, end of year

Stock options exercisable, end of year

As of December 31, 2023, 3,329,422 options outstanding included both fully vested and unvested options with a weighted average exercise price of $ 26.23 , an aggregate intrinsic value of $nil and a weighted average remaining contractual life of 2.4 years.

The intrinsic value of options exercised in 2023 was $ nil (2022 —$ nil ;

2021 — $ 0.1 million ).

IMAX LTIP Restricted Share Units

RSUs have been granted to employees and directors under the IMAX LTIP.

Each RSU represents a contingent right to receive a common share and is the economic equivalent of one common share.

The grant date fair value of each RSU is equal to the share price of the Company’s stock at the grant date or the average closing price of the Company’s common share for five days prior to the date of grant.

For the years ended December 31, 2023, 2022, and 2021, the Company recorded the following expenses related to RSUs issued to employees and directors in the IMAX LTIP:

Years Ended December 31,

(In thousands of U.S.

The Company’s actual tax benefits realized for the tax deductions related to the vesting of RSUs was $ 0.8 million for the year ended December 31, 2023 (2022 — $ 0.9 million ;

2021 — $ 0.6 million ).

The Company’s accrued liability for granted RSUs was $ 2.7 million as of December 31, 2023 (December 31, 2022 — $ 0.8 million ).

Total share-based compensation expense related to non-vested RSUs not yet recognized and the weighted average period over which the awards are expected to be recognized are as follows:

Years Ended December 31,

(In thousands of U.S.

Expense not yet recognized related to non-vested RSUs

Weighted average period awards are expected to be recognized (in years)

The following table summarizes the activity in respect of RSUs issued under the IMAX LTIP for the years ended December 31, 2023, 2022, and 2021:

Number of Awards

Weighted Average Grant Date Fair

Value Per Share

RSUs outstanding, beginning of year

Vested and settled

RSUs outstanding, end of year

Historically, RSUs granted under the IMAX LTIP have vested between immediately and three years from the grant date.

On June 3 2020, t he IMAX LTIP was amended to require a minimum vesting period of one year on future RSU grants, with a carve-out for an aggregate of no more than 5 % of the total number of common shares authorized for issuance under the plan that may vest on a shorter schedule.

Vesting of the RSUs is subject to continued employment or service with the Company.

The following table summarizes the number of RSUs issued from the carve-out balance:

Approved under the IMAX LTIP

Issued during previous years

Issued during 2023

Outstanding, December 31, 2023

Restricted Share Units to Non-Employees

During the years ended December 31, 2023, 2022 and 2021 , the Company did no t grant any restricted share units to non-employees.

The Company did no t record any expenses for the year ended December 31, 2023 related to RSU grants issued to non-employees of the Company (2022 ― $ nil ;

2021 ― $ nil ).

IMAX LTIP Performance Stock Units Summary

The Company grants two types of PSUs awards, one which vests based on a combination of employee service and the achievement of certain Adjusted EBITDA targets and one which vests based on a combination of employee service and the achievement of total TSR targets.

The achievement of the Adjusted EBITDA and TSR targets in these PSUs is determined over a three-year performance period.

At the conclusion of the three-year performance period, the number of PSUs that ultimately vest can range from 0 % to a maximum vesting opportunity of 175 % of the initial Adjusted EBITDA PSU award or 150 % of the initial TSR PSU award, depending upon actual performance versus the established Adjusted EBITDA and TSR targets, respectively.

The grant date fair value of PSUs with TSR targets is determined on the grant date using a Monte Carlo Model.

The compensation expense attributable to each type of PSU is recognized on a straight-line basis over the requisite service period.

The fair value determined by the Monte Carlo Model is affected by the Company’s share price, as well as assumptions regarding a number of highly complex and subjective variables.

These variables include, but are not limited to, market conditions as of the grant date, the Company’s expected share price volatility over the term of the awards, and other relevant data.

The compensation expense is fixed on the date of grant based on the fair value of the PSUs granted.

The amount and timing of compensation expense recognized for PSUs with Adjusted EBITDA targets is dependent upon management's assessment of the likelihood of achieving these targets.

For the years ended December 31, 2023, 2022, and 2021, the Company recorded the following expenses related to outstanding PSUs, which includes adjustments reflecting management’s estimate of the number of PSUs with Adjusted EBITDA targets expected to vest:

Years Ended December 31,

(In thousands of U.S.

The Company’s actual tax benefits realized for the tax deductions related to the vesting of PSUs was $ 0.3 million for the year ended December 31, 2023 (2022 ― $ nil ;

2021 ― $ nil ).

Total share-based compensation expense related to non-vested PSUs not yet recognized and the weighted average period over which the awards are expected to be recognized are as follows:

Years Ended December 31,

(In thousands of U.S.

Expense not yet recognized related to non-vested PSUs

Weighted average period awards are expected to be recognized (in years)

The following table summarizes the activity in respect of PSUs issued under the IMAX LTIP:

Number of Awards

Weighted Average Grant Date

Fair Value Per Share

PSUs outstanding, beginning of year

Vested and settled (1)

Forfeited (2)

PSUs outstanding, end of year (3)

(1) For the year ended December 31, 2023, the balance of shares granted includes 157,963 additional shares, at a weighted average grant date fair value per share of $ 16.92 , as PSUs granted in 2020 with Adjusted EBITDA targets vested at 175 % on account of full achievement of the targets.

(2) Forfeited PSUs include the TSR awards issued in 2020 which did not vest as the market condition was not satisfied.

The Company recorded an expense of $ 1.5 million associated with these 104,633 shares that were not adjusted at the time of forfeiture.

(3) Outstanding PSUs include the TSR awards issued in 2021 which are not anticipated to vest.

The Company recorded an expense of $ 1.5 million associated with these 68,850 shares that will not be adjusted at the time of forfeiture.

As of December 31, 2023, the maximum number of shares of common stock that may be issued with respect to PSUs outstanding is 1,591,329 , assuming full achievement of the Adjusted EBITDA and TSR targets.

China Long-Term Incentive Plan

Each stock option (“China Option”), RSU, or PSU issued under the China LTIP represents an opportunity to participate economically in the future growth and value creation of IMAX China.

In connection with the IMAX China IPO and in accordance with the China LTIP, IMAX China adopted a post-IPO share option plan and a post-IPO restricted stock unit plan.

Pursuant to these plans, IMAX China has issued additional China Options, China LTIP Performance Stock Units (“China PSUs”), and China LTIP Restricted Share Units (“China RSUs”).

For the years ended December 31, 2023, 2022, and 2021, share-based compensation expense related to China Options, China RSUs and China PSUs was as follows:

Years Ended December 31,

(In thousands of U.S.

China Options

In 2022, IMAX China modified the terms of certain fully vested stock options to extend their contractual life by one year and recorded an associated expense of $ 0.1 million ( 2021 ― $ 0.1 million).

No such charges were incurred in 2023.

Issuer Purchases of Equity Securities

On June 12, 2017, the Company announced that the Board of Directors approved a $ 200.0 million share repurchase program for its common shares that would have initially expired on June 30, 2020 , which was subsequently extended and increased in the total share repurchase authority to $ 400.0 million.

In 2023, the Company’s Board of Directors approved a 36-month extension to its share repurchase program through June 30, 2026.

As of December 31, 2023, the Company has $ 167.0 million authorized for repurchase under its approved repurchase program.

The repurchases may be made either in the open market or through private transactions, including repurchases made pursuant a plan intended to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, subject to market conditions, applicable legal requirements, and other relevant factors.

The Company has no obligation to repurchase shares and the share repurchase program may be suspended or discontinued by the Company at any time.

In 2023, the Company repurchased 1,604,420 (2022 ― 5,401,852 ) common shares at an average price of $ 16.45 per share (2022 ― $ 15.19 per share), for a total of $ 26.4 million (2022 ― $ 82.0 million ), excluding commissions, of which 108,393 w ere common shares (2022 ― 140,000 ) where settlement occurred subsequent to December 31, 2023, at an average price of $ 14.98 per share for a total of $ 1.6 million, excluding commissions.

The followin g table summarizes the Company’s share repurchases during the years ended December 31, 2023 and 2022:

Total Number of Shares Repurchased

Average Price Paid Per Share

(in thousands of U.S.

Shares repurchased

For the years ended December 31, 2023 and 2022 , there were no shares purchases in the administration of employee share based plans.

As of December 31, 2023, the IMAX LTIP trustee held nil shares.

Any shares held with the trustee are recorded at cost and are reported as a reduction against Capital Stock on the Company’s Consolidated Balance Sheets.

In 2022, IMAX China’s shareholders granted its Board of Directors (“IMAX China Board”) a general mandate authorizing the IMAX China Board, subject to applicable laws, to repurchase shares of IMAX China not to exceed 10 % of the total number of issued shares as of June 23, 2022 ( 34,063,480 shares).

This program expired on the date of the 2023 Annual General Meeting of IMAX China on June 7, 2023.

During the 2023 Annual General Meeting, shareholders approved the repurchase of shares of IMAX China not to exceed 10 % of the total number of shares as of June 7, 2023 ( 33,959,314 shares).

This program will be valid until the 2024 Annual General Meeting of IMAX China.

The repurchases may be made in the open market or through other means permitted by applicable laws.

IMAX China has no obligation to repurchase its shares and the share repurchase program may be suspended or discontinued by IMAX China at any time.

In 2023, IMAX China repurchased 16,800 (2022 ― 2,961,800 ) common shares at an average price of HKD 7.11 per share (U.S.

$ 0.91 per share) for a total of HKD 0.1 million or less than U.S.

$ 0.1 million (2022 ― HKD 8.0 per share or U.S.

$ 1.02 per share, for a total of HKD 23.7 million or U.S.

$ 3.0 million ).

The change in non-controlling interest as a result of common shares repurchased by IMAX China is recorded within Non-Controlling Interest in the Consolidated Balance Sheets and the Consolidated Statements of Shareholders’ Equity.

The difference between the consideration paid and the ownership interest obtained as a result of IMAX China share repurchases is recorded within Other Equity in the Consolidated Balance Sheets and the Consolidated Statements of Shareholders’ Equity (see Note 2(a)).

The following table summarizes the IMAX China’s share repurchases during the years ended December 31, 2023 and 2022:

Total Number of Shares Repurchased

Average Price Paid Per Share

(in thousands of U.S.

Shares repurchased

(d) Basic and Diluted Weighted Average Shares Outstanding

The following table reconciles the denominator of the basic and diluted weighted average share computations:

Years Ended December 31,

(In thousands)

Issued and outstanding, beginning of period

Weighted average number of shares issued (repurchased) , net

Weighted average number of shares outstanding - basic and diluted

Weighted average effect of potential common shares, if dilutive

Weighted average number of shares outstanding - diluted

For the year ended December 31, 2023, the calculation of diluted earnings per share excludes 3,380,142 (2022 ― 4,523,121 ;

2021 ― 6,131,792 ) shares that are issuable upon the vesting of 18,877 RSUs (2022 ― 637,120 ;

2021 ― 1,457,883 ), the vesting of 31,843 PSUs (2022 ― 281,262 ;

2021 ― 937,752 ), and the exercise of 3,329,422 stock options (2022 ― 3,604,739 ;

2021 ― 3,736,157 ), as the effect would be anti-dilutive.

The calculation of diluted weighted average shares outstanding for the year ended December 31, 2023 also excludes any shares potentially issuable upon the conversion of the Convertible Notes as the average market price of the Company’s common shares during the period of time they were outstanding was less than the conversion price of the Convertible Notes.

(Refer to Note 14(b).)

(e) Statutory Surplus Reserve

Pursuant to the corporate law of the PRC, entities registered in the PRC are required to maintain certain statutory reserves, which are appropriated from after-tax profits, after offsetting accumulated losses from prior years, before dividends can be declared or paid to equity holders.

The Company’s PRC subsidiaries are required to appropriate 10 % of statutory net profits to statutory surplus reserves, upon distribution of their after-tax profits.

The Company’s PRC subsidiaries may discontinue the contribution when the when the aggregate sum of the statutory surplus reserve is more than 50 % of their registered capital.

In addition, the subsidiaries may make further contribution to the discretional surplus reserve using post-tax profits in accordance with resolutions of the Board of Directors.

The statutory surplus reserve of RMB 36.4 million ($ 5.6 million) has reached 50 % of its PRC subsidiaries’ registered capital, as such no further contributions to the reserve are required.

Consolidated Statements of Operations Supplemental Information

(a) Selling Expenses

The following table summarizes the Company’s selling expenses, including sales commissions and marketing and other, which are recognized within Costs and Expenses Applicable to Revenues in the Consolidated Statements of Operations, for the years ended December 31, 2023, 2022 and 2021:

Years Ended December 31,

(In thousands of U.S.

Marketing and Other

Technology sales (1)

Image enhancement and maintenance services (2)

Technology rentals (3)

(1) Sales commissions paid prior to the recognition of the related revenue are deferred and recognized upon the client acceptance of the IMAX System.

Direct advertising and marketing costs for each IMAX System are expensed as incurred.

(2) Film exploitation costs, including advertising and marketing costs are expensed as incurred.

(3) Sales commissions related to joint revenue sharing arrangements accounted for operating leases are recognized in the month they are earned by the salesperson, which is typically the month in which the IMAX System is installed, and are subject to subsequent performance-based adjustments.

Direct advertising and marketing costs for each IMAX System are expensed as incurred.

(b) Foreign Exchange

Included in Selling, General and Administrative Expenses for the year ended December 31, 2023 is a foreign currency net loss of $ 0.7 million resulting from changes in exchange rates related to foreign currency denominated monetary assets and liabilities, primarily due to the slower pace of RMB weakening against the U.S.

Dollar throughout 2023, as compared to a net loss of $ 3.2 million and a net gain of $ 1.3 million for the years ended December 31, 2022 and 2021, respectively.

Refer to Note 22(c) for additional information.

Joint Revenue Sharing Arrangements

Refer to Note 6 for a description of the material terms of the Company’s collaborative joint revenue sharing arrangements.

The accounting policy for the Company’s joint revenue sharing arrangements is disclosed in Note 2(o).

Revenue attributable to transactions arising between the Company and its customers under joint revenue sharing arrangements are recorded within Revenues – Technology Sales (for hybrid joint revenue sharing arrangements) and Revenues – Technology Rentals (for traditional joint revenue sharing arrangements).

For the year ended December 31, 2023, such revenues totaled $ 78.2 million (2022 — $ 66.6 million ;

2021 — $ 51.6 million ).

(Refer to Note 20(a) for a disaggregated presentation of the Company’s revenues.)

Film Remastering and Distribution

In a film remastering and distribution arrangement, the Company receives a percentage of the box office receipts from a third party who owns the copyright to a film in exchange for converting the film into IMAX format and distributing it through the IMAX network .

The fee earned by the Company in a typical film remastering and distribution arrangement averages approximately 12.5 % of box office receipts (i.e., gross box office receipts less applicable sales taxes), except for within Greater China, where the Company receives a lower percentage of net box office receipts for certain Hollywood films.

The accounting policy for the Company ’s film remastering and distribution arrangements is disclosed in Note 2(o).

Revenue attributable to transactions arising between the Company and its customers under the Company’s film remastering and distribution arrangements are included in Revenues – Image Enhancement and Maintenance Services.

For the year ended December 31, 2023, such revenues totaled $ 118.6 million (2022 — $ 94.9 million ;

2021 — $ 70.7 million ).

(Refer to Note 20(a) for a disaggregated presentation of the Company’s revenues.)

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 certain other rights to the film.

In some cases, the Company obtains exclusive theatrical distribution rights to the film.

Under these arrangements, both parties contribute to the funding of the production, distribution and exploitation costs associated with the film.

As of December 31, 2023 , the Company is party to one co-produced film arrangement, which represents the VIE total assets balance of $ 1.4 million and liabilities balance of $ 0.2 million and four other co-produced film arrangements, the terms of which are similar.

The accounting policies relating to co-produced film arrangements are disclosed in Notes 2(a) and 2(o).

In 2023, an expense of $ 0.6 million (2022 — $ 0.8 million ;

2021 — $ 0.4 million ) attributable to transactions between the Company and other parties involved in the production of the films have been included in Costs and Expenses Applicable to Revenues – Image Enhancement and Maintenance Services.

Consolidated Statements of Cash Flows Supplemental Information

(a) Changes in other operating assets and liabilities

Years Ended December 31,

(In thousands of U.S.

Decrease (Increase) in:

Financing receivables

Prepaid expenses

Variable consideration receivables

Increase (Decrease) in:

Accounts payable

Accrued and other liabilities

(b) Cash payments made on account

Years Ended December 31,

(In thousands of U.S.

Income taxes (1)

(1) In 202 1 , the Canadian tax authorities denied the Company’s deduction of certain foreign taxes accrued in 2015, but not yet paid as discussions with the local authorities are ongoing.

This resulted in the payment of $ 8.9 million in income taxes and $ 1.6 million in associated interest to the Canadian tax authorities in the fourth quarter of 2021.

The Company has filed a waiver with the Canadian tax authorities in respect of 2015 so that when the foreign taxes are paid, the Company would be entitled to receive a refund of the $ 8.9 million in tax, which is recorded on the Company’s Consolidated Balance Sheets within Accounts Receivable, and the $ 1.6 million in associated interest.

Years Ended December 31,

(In thousands of U.S.

Property, plant and equipment:

Equipment supporting joint revenue sharing arrangements

Other property, plant and equipment (1)

Other intangible assets (2)

Other assets (3)

(1) Includes the amortization of laser projection systems, camera, and lens upgrades recorded in Research and Development on the Statements of Operations of $ 0.5 million in the year ended December 31, 2023 (2022 — $ 0.6 million;

2021 — $ 0.8 million).

(2) Includes the amortization of licenses and intellectual property recorded in Research and Development on the Consolidated Stateme

The Company cautions users of its financial statements that these non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies.

Additionally, the non-GAAP financial measures used by the Company should not be considered in isolation, or as a substitute for, or superior to, the comparable GAAP amounts.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis