IMAX
Annual Report 2019

Plain-text annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 Form 10-K (Mark One)☒☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2019 ☐☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file Number 001-35066 IMAX Corporation(Exact name of registrant as specified in its charter) Canada98-0140269(State or other jurisdiction ofincorporation or organization)(I.R.S. EmployerIdentification Number) 2525 Speakman Drive,Mississauga, Ontario, Canada L5K 1B1(905) 403-6500902 Broadway, Floor 20New York, New York, USA 10010(212) 821-0100(Address of principal executive offices, zip code, telephone numbers) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registeredCommon Shares, no par value IMAX The New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act:None(Title of class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (orfor such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of thischapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth Company. See thedefinitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.: Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accountingstandards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒ The aggregate market value of the common shares of the registrant held by non-affiliates of the registrant, computed by reference to the last sale price of such shares as of the close oftrading on June 30, 2019 was $1,045.9 million. As of January 31, 2020, there were 61,362,872 common shares of the registrant outstanding. Document Incorporated by ReferencePortions of the registrant’s definitive Proxy Statement to be filed within 120 days of the close of IMAX Corporation’s fiscal year ended December 31, 2019, with the Securities andExchange Commission pursuant to Regulation 14A involving the election of directors and the annual meeting of the stockholders of the registrant (the “Proxy Statement”) are incorporated byreference in Part III of this Form 10-K to the extent described therein. IMAX CORPORATION December 31, 2019 Table of Contents PagePART IItem 1. Business 4Item 1A. Risk Factors 16Item 1B. Unresolved Staff Comments 25Item 2. Properties 25Item 3. Legal Proceedings 25Item 4. Mine Safety Disclosures 25 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 26Item 6. Selected Financial Data 30Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 31Item 7A. Quantitative and Qualitative Disclosures about Market Risk 66Item 8. Financial Statements and Supplementary Data 68Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 136Item 9A. Controls and Procedures 136Item 9B. Other Information 136 PART III Item 10. Directors, Executive Officers and Corporate Governance 137Item 11. Executive Compensation 137Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 137Item 13. Certain Relationships and Related Transactions, and Director Independence 137Item 14. Principal Accounting Fees and Services 137 PART IV Item 15. Exhibits, Financial Statement Schedules 138Item 16. Form 10-K Summary 141Signatures 142 2IMAX CORPORATIONEXCHANGE RATE DATAUnless otherwise indicated, all dollar amounts in this document are expressed in United States (“U.S.”) dollars. The following table sets forth, for the periodsindicated, certain exchange rates based on the noon buying rate in the City of New York for cable transfers in foreign currencies as certified for customs purposesby the Bank of Canada (the “Noon Buying Rate”). Such rates quoted are the number of U.S. dollars per one Canadian dollar and are the inverse of rates quoted bythe Bank of Canada for Canadian dollars per U.S. $1.00. The average exchange rate is based on the average of the exchange rates on the last day of each monthduring such periods. The Noon Buying Rate on December 31, 2019 was U.S. $0.7699. Years Ended December 31, 2019 2018 2017 2016 2015 Exchange rate at end of period 0.7699 0.7330 0.7971 0.7448 0.7225 Average exchange rate during period 0.7536 0.7718 0.7712 0.7558 0.7748 High exchange rate during period 0.7699 0.8138 0.8245 0.7972 0.8527 Low exchange rate during period 0.7353 0.7330 0.7276 0.6854 0.7148 SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATIONCertain statements included in this annual report may constitute "forward-looking statements" within the meaning of the United States Private SecuritiesLitigation Reform Act of 1995. These forward-looking statements include, but are not limited to, references to future capital expenditures (including the amountand nature thereof), business and technology strategies and measures to implement strategies, competitive strengths, goals, expansion and growth of business,operations and technology, plans and references to the future success of IMAX Corporation together with its consolidated subsidiaries (the "Company") andexpectations regarding the Company's future operating, financial and technological results. These forward-looking statements are based on certain assumptions andanalyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well asother factors it believes are appropriate in the circumstances. However, whether actual results and developments will conform with the expectations and predictionsof the Company is subject to a number of risks and uncertainties, including, but not limited to, risks associated with investments and operations in foreignjurisdictions and any future international expansion, including those related to economic, political and regulatory policies of local governments and laws andpolicies of the United States and Canada; risks related to the Company’s growth and operations in China, including the adverse impact of the coronavirus outbreakin China; the performance of IMAX DMR® films; the signing of theater system agreements; conditions, changes and developments in the commercial exhibitionindustry; risks related to currency fluctuations; the potential impact of increased competition in the markets within which the Company operates; competitiveactions by other companies; the failure to respond to change and advancements in digital technology; risks relating to recent consolidation among commercialexhibitors and studios; risks related to new business initiatives; conditions in the in-home and out-of-home entertainment industries; the opportunities (or lackthereof) that may be presented to and pursued by the Company; risks related to cyber-security and data privacy; risks related to the Company’s inability to protectthe Company’s intellectual property; general economic, market or business conditions; the failure to convert theater system backlog into revenue; changes in lawsor regulations; the failure to fully realize the projected cost savings and benefits from any of the Company’s restructuring initiatives and other factors, many ofwhich are beyond the control of the Company. Consequently, all of the forward-looking statements made in this annual report are qualified by these cautionarystatements, and actual results or anticipated developments by the Company may not be realized, and even if substantially realized, may not have the expectedconsequences to, or effects on, the Company. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking information,whether as a result of new information, future events or otherwise.IMAX®, IMAX® Dome, IMAX® 3D, IMAX® 3D Dome, Experience It In IMAX®, The IMAX Experience®, An IMAX Experience®, An IMAX 3D Experience®,IMAX DMR®, DMR®, IMAX nXos® and Films To The Fullest™ are trademarks and trade names of the Company or its subsidiaries that are registered orotherwise protected under laws of various jurisdictions.3PART IItem 1. BusinessThe Company is a Canadian corporation that was formed in March 1994 as a result of an amalgamation between WGIM Acquisition Corp. and the formerIMAX Corporation (“Predecessor IMAX”). Predecessor IMAX was incorporated in 1967.GENERALThe Company, together with its consolidated subsidiaries, is one of the world’s leading entertainment technology companies, specializing in technologicalinnovations powering the presentation of some of today’s most immersive entertainment experiences. Through its proprietary software, theater architecture,patented intellectual property and specialized equipment, IMAX offers a unique end-to-end cinematic solution to create the highest-quality, most immersivemotion picture and other event experiences for which the IMAX® brand has become known globally. Top filmmakers and studios utilize the cutting-edge visualand sound technology of IMAX to connect with audiences in innovative ways, and as a result, IMAX’s network is among the most important and successfuldistribution platforms for major films and other events around the world.The Company leverages its innovative technology and engineering in all aspects of its business, which consists of: •the Digital Re-Mastering (“DMR”) of films and other presentations into the IMAX format by enhancing their image resolution and sound quality forexhibition in the IMAX network in exchange for a certain percentage of contingent box office receipts from studios; and •the provision of IMAX premium theater systems (“IMAX theater systems”) to exhibitor customers through sales, long-term leases or joint revenuesharing arrangements.IMAX theater systems are based on proprietary and patented image, audio and other technology developed over the course of the Company’s 52-year history.The Company’s customers who purchase, lease or otherwise acquire the IMAX theater systems through joint revenue sharing arrangements are theater exhibitorsthat operate commercial theaters (particularly multiplexes), museums, science centers, or destination entertainment sites. The Company generally does not ownIMAX theaters, but licenses the use of its trademarks along with the sale, lease or contribution of the IMAX theater system. The Company refers to all theatersusing the IMAX theater system as “IMAX theaters.”IMAX theater systems combine: •the ability to exhibit content that has undergone IMAX DMR® conversion, which results in higher image and sound fidelity than conventionalcinema experiences; •advanced, high-resolution projectors with specialized equipment and automated theater control systems, which generate significantly more contrastand brightness than conventional theater systems; •large screens and proprietary theater geometry, which result in a substantially larger field of view so that the screen extends to the edge of a viewer’speripheral vision and creates more realistic images; •sound system components, which deliver more expansive sound imagery and pinpointed origination of sound to any specific spot in an IMAX theater; •specialized theater acoustics, which result in a four-fold reduction in background noise; and •a license to the globally recognized IMAX brand. In addition, some IMAX movies are filmed using proprietary IMAX film and IMAX certified digital cameras, which offer filmmakers customized guidance andworkflow process to provide further enhanced and differentiated image quality and a film aspect ratio that delivers up to 26% more image onto a movie screen.Together these components cause audiences in IMAX theaters to feel as if they are a part of the on-screen action, creating a more intense, immersive andexciting experience than in a traditional theater.As a result of the engineering and scientific achievements that are a hallmark of The IMAX Experience®, the Company’s exhibitor customers typically charge apremium for IMAX DMR films over films exhibited in their other auditoriums. The premium pricing, combined with the higher attendance levels associated withIMAX DMR films, generates incremental box office for the Company’s exhibitor customers and for the movie studios releasing their films to the IMAX theaternetwork. The incremental box office generated by IMAX DMR films has helped establish IMAX as a key premium distribution and marketing platform forHollywood blockbuster films.4As one of the world’s leaders in entertainment technology, the Company strives to remain at the forefront of advancements in cinema technology. The Companyrecently introduced IMAX with Laser, the Company’s next-generation laser projection system designed for IMAX theaters in commercial multiplexes, whichrepresents a further evolution of IMAX’s proprietary technology. The Company believes that IMAX with Laser delivers increased resolution, sharper and brighterimages, deeper contrast as well as the widest range of colors available to filmmakers today. The Company further believes that IMAX with Laser can help facilitatethe next major contract renewal and upgrade cycle for the global commercial IMAX network.To date the Company has signed IMAX with Laser agreements with leading, global exhibitors such as AMC Entertainment Holdings, Inc. (“AMC”), CineworldGroup PLC (“Cineworld”), CGV Holdings Limited (“CGV”) and Les Cinémas Pathé Gaumont (“Pathé”) (among others) for a total of 139 new theaters, 147upgrades to existing IMAX theaters, and 52 upgrades to existing backlog arrangements. As at December 31, 2019, the Company’s backlog had 144 new IMAXwith Laser systems and 92 upgrades to IMAX with Laser systems and has installed 130 IMAX with Laser systems.The Company is also experimenting with new technologies and new content as a way to deepen consumer engagement and brand loyalty, which includescurating unique, differentiated alternative content to be exhibited in IMAX theaters, particularly during those periods when Hollywood blockbuster film content isnot available. In 2019, the Company has piloted filmed events including Anima, a one-night only event in June featuring music from Radiohead’s Thom Yorke,and Soundgarden: Live from the Artist’s Den: The IMAX Experience, in July and August, in select IMAX theaters. During the fourth quarter of 2019, IMAXreleased the Kanye West film Jesus is King: The IMAX Experience in select IMAX theaters.In early 2020, in response to the public health risks associated with an outbreak of coronavirus in Wuhan, China, Chinese exhibitors temporarily closed morethan 70,000 movie theaters, including all of the approximately 700 IMAX theaters in mainland China. The theaters have been closed since late January 2020,including over the Lunar New Year holiday, and have not yet reopened as of the date of this report. Chinese movie studios also postponed the release of multiplefilms, including those originally scheduled to be released over this holiday, five of which were scheduled to be shown in IMAX theaters. See “Risk Factors – TheCompany’s results of operations are expected to be adversely impacted by the recent coronavirus outbreak in China” in Item 1A of this 2019 Form 10-K,“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Impact of Coronavirus” in Item 7 of this 2019 Form 10-K and note 29to the accompanying audited consolidated financial statements in Item 8 of this 2019 Form 10-K.IMAX THEATER NETWORKThe Company believes the IMAX theater network is one of the most extensive premium theater networks in the world with 1,624 theater systems (1,529commercial multiplex, 14 commercial destination, 81 institutional) operating in 81 countries and territories as at December 31, 2019.The Company believes that over time its commercial multiplex theater network could grow to approximately 3,318 IMAX theaters worldwide from the 1,529commercial multiplex IMAX theaters in operation as at December 31, 2019. While the Company continues to grow in the United States and Canada, it believesthat the majority of its future growth will come from international markets. As at December 31, 2019, 71.9% of IMAX theater systems in operation were locatedwithin international markets (defined as all countries other than the United States and Canada), up from 70.1% as at December 31, 2018, and approximately 85.7%of the new IMAX theater systems in backlog are scheduled to be installed in international markets, compared to 86.2% as at December 31, 2018. Revenues andgross box office derived from outside the United States and Canada continue to exceed revenues and gross box-office from within the United States and Canada.Greater China is currently the Company’s largest market, measured by revenues, with approximately 31% of overall revenues generated from the Company’sChina operations in 2019. As at December 31, 2019, the Company had 717 theaters operating in Greater China and an additional 252 new theaters (plus 1 upgrade)in backlog that are scheduled to be installed in Greater China by 2023. The Company’s backlog in Greater China represents 47.6% of the Company’s currentbacklog for new and upgraded IMAX theater systems. The Company’s largest single international partnership is in China with Wanda Film, formerly WandaCinema Line Corporation (“Wanda”). Wanda’s total commitment to the Company, including both installed and backlog theaters, is for 359 theater systems, ofwhich 345 theater systems are under the parties’ joint revenue sharing arrangement.The Company indirectly owns approximately 69.74% of IMAX China Holding, Inc. (“IMAX China”), whose shares trade on the Hong Kong Stock Exchange.IMAX China remains a consolidated subsidiary of the Company.5PRINCIPAL PRODUCTS AND SERVICESThe Company believes it is the world’s largest designer and manufacturer of specialty premium projection and sound system components for large-formattheaters around the world, and it is also a significant distributor of large-format films. The Company’s theater systems include specialized IMAX projectors,advanced sound systems and specialty screens.The Company’s principal products and services are as follows: •IMAX DMR: The Digital Re-Mastering of films into the IMAX format for exhibition in the IMAX theater network. •IMAX Theater Systems: The provision of IMAX premium theater systems to exhibitor customers. •New Business: New business initiatives that are in the development, start-up and/or wind-up phases. •Other: The distribution of documentary films, the provision of film post-production, owning and operating certain IMAX theaters, camera rentals andother miscellaneous items.These product lines do not reflect the nature and sources of revenue, or the manner in which management reviews financial information. The Company’ssegmented information is provided in Item 7 and note 21 to the accompanying audited consolidated financial statements in Item 8 of this Annual Report on Form10-K for the Fiscal Year ended December 31, 2019 (this “2019 Form 10-K”), which is incorporated by reference into this Item I.Digital Re-Mastering (IMAX DMR)The Company has developed a proprietary technology, known as IMAX DMR, to digitally re-master Hollywood films into IMAX digital cinema packageformat or 15/70-format film for exhibition in IMAX theaters. IMAX DMR digitally enhances the image resolution of motion picture films for projection on IMAXscreens while maintaining or enhancing the visual clarity and sound quality to levels for which The IMAX Experience is known. The original soundtrack of a filmto be exhibited in the IMAX theater network is re-mastered for the IMAX digital sound systems in connection with the IMAX DMR release. Unlike thesoundtracks played in conventional theaters, IMAX re-mastered soundtracks are uncompressed and full fidelity. IMAX sound systems use proprietary loudspeakersystems and proprietary surround sound configurations that ensure every theater seat is in an optimal listening position.The IMAX DMR process involves the following: •in certain instances, scanning, at the highest possible resolution, each individual frame of the movie and converting it into a digital image; •optimizing the image using proprietary image enhancement tools; •enhancing the digital image using techniques such as sharpening, color correction, grain and noise removal and the elimination of unsteadiness andremoval of unwanted artifacts; •recording the enhanced digital image into an IMAX digital cinema package (“DCP”) format or onto IMAX 15/70-format film; and •specially re-mastering the sound track to take full advantage of the unique sound system of IMAX theater systems.IMAX films also benefit from enhancements made by individual filmmakers exclusively for the IMAX release, and filmmakers and studios have sought IMAX-specific enhancements in recent years to generate interest in and excitement for their films. Such enhancements include shooting films with IMAX cameras toincrease the audience’s immersion in the film and taking advantage of the unique dimensions of the IMAX screen by projecting the film in a larger aspect ratio thatdelivers up to 26% more image onto a movie screen. Avengers: Endgame, the highest-grossing film in history, released in April 2019, was shot entirely usingIMAX cameras. Collectively, the Company refers to those enhancements as “IMAX DNA”. In addition, in 2019 Alita: Battle Angel, Captain Marvel and Disney’sThe Lion King were all released with select scenes specifically formatted for IMAX screens.6In 2019, 60 films were converted through the IMAX DMR process and released to theaters in the IMAX network by film studios as compared to 70 films in2018.To date, the Company has announced the following 22 DMR titles to be released in 2020 to the IMAX theater network. The following dates noted for filmrelease are subject to change and may vary by territory. •Invasion: The IMAX Experience (Art Pictures Studio, January 2020, Russia); •1917: The IMAX Experience (Universal Pictures (domestic) and eOne International (international), January 2020) IMAX expanded aspect ratio; •Bad Boys For Life: The IMAX Experience (Sony Pictures, January 2020); •Dolittle: The IMAX Experience (Universal Pictures, January 2020); •Birds of Prey: The IMAX Experience (Warner Bros. Pictures, February 2020); •The Invisible Man: The IMAX Experience (Universal Pictures, February 2020); •Bloodshot: The IMAX Experience (Sony Pictures, February 2020/Domestic March 2020); •Onward: The IMAX Experience (Walt Disney Studios, March 2020); •I Still Believe: The IMAX Experience (Lionsgate, March 2020); •A Quiet Place: Part II: The IMAX Experience (Paramount Pictures, March 2020); •Mulan: The IMAX Experience (Walt Disney Studios, March 2020); •Beastie Boys Story: The IMAX Experience (Apple, April 2020, select global markets); •No Time to Die: The IMAX Experience (United Artists Releasing (domestic) and Universal Pictures (international), April 2020) filmed with IMAXcameras; •Black Widow: The IMAX Experience (Walt Disney Studios, May 2020); •Fast & Furious 9: The IMAX Experience (Universal Pictures, May 2020); •Wonder Woman 1984: The IMAX Experience (Warner Bros. Pictures, June 2020) filmed with IMAX cameras; •Top Gun: Maverick: The IMAX Experience (Paramount Pictures, June 2020) filmed with IMAX cameras; •Tenet: The IMAX Experience (Warner Bros. Pictures, July 2020) filmed with IMAX cameras; •Detective Chinatown 3: The IMAX Experience (Wanda Studios, TBD 2020, China) filmed with IMAX cameras; •The Rescue: The IMAX Experience (Maoyan, TBD 2020, China); •Vanguard: The IMAX Experience (Tencent, TBD 2020, China); and •Leap: The IMAX Experience (Lian Ray Pictures, TBD 2020, China).In addition, the Company will be releasing an IMAX original production, Asteroid Hunters, in April 2020.The Company remains in active negotiations with all of the major Hollywood studios for additional films to fill out its short and long-term film slate for theIMAX theater network in 2020.As noted above, the Company is also engaged in discussions regarding new technologies and new content in connection with bringing unique events outside offilms to the global IMAX theater network.7IMAX SystemsThe Company’s primary products are its theater systems. The Company’s digital projection systems include a projector that offers superior image quality andstability and a digital theater control system; a digital audio system delivering up to 12,000 watts of sound; a screen with a proprietary coating technology, and, ifapplicable, 3D glasses cleaning equipment. IMAX’s digital projection system also operates without the need for analog film prints. As part of the arrangement tosell or lease its theater systems, the Company provides extensive advice on theater planning and design and supervision of installation services. Theater systemsare also leased or sold with a license for the use of the globally recognized IMAX brand.The Company’s digital projection system provides a premium and differentiated experience to moviegoers that is consistent with what they have come to expectfrom the IMAX brand, while providing for the compelling economics and flexibility that digital technology affords.The terms of each arrangement vary according to the configuration of the theater system provided, the cinema market and the film distribution market relevantto the geographic location of the customer.Revenue from theater business arrangements is recognized at a different time from when cash is collected. See “Critical Accounting Policies and Estimates” inItem 7 and note 20 in Item 8 of this 2019 Form 10-K for further discussion on the Company’s revenue recognition policies.IMAX Theater Backlog and NetworkThe Company’s sales backlog is as follows: December 31, 2019 December 31, 2018 Number of Dollar Value Number of Dollar Value Systems (in thousands) Systems (in thousands) Sales and sales-type lease arrangements 178 $218,448 177 $229,027 Joint revenue sharing arrangements Hybrid lease arrangements 140 103,296 118 67,176 Traditional arrangements 213 (1) 6,200 (2) 269 (3) 8,100 (2) 531 (4) $327,944 564 (5) $304,303 (1)Includes 47 theater systems where the customer has the option to convert from a joint revenue sharing arrangement to a sales arrangement.(2)Reflects contractual upfront payments. Future contingent payments are not reflected as these are based on negotiated shares of box office results.(3)Includes 46 theater systems where the customer has the option to convert from a joint revenue sharing arrangement to a sales arrangement.(4)Includes 153 new laser projection system configurations (144 of which are IMAX with Laser projection system configurations and 9 of which are GT Lasers)and 97 upgrades of existing locations to laser projection system configurations (92 of which are for the IMAX with Laser projection system configurationsand 5 of which are GT Lasers).(5)Includes 83 new laser projection system configurations (73 of which are IMAX with Laser projection system configurations and 10 of which are GT Lasers)and 100 upgrades of existing locations to laser projection system configurations (98 of which are for the IMAX with Laser projection system configurationsand 2 of which are GT Lasers).8The number of theater systems in the backlog reflects the minimum number of commitments under signed contracts. The dollar value fluctuates depending onthe number of new theater system arrangements signed from year to year, which adds to backlog and the installation and acceptance of theater systems and thesettlement of contracts, both of which reduce backlog. Sales backlog typically represents the fixed contracted revenue under signed theater system sale and leaseagreements that the Company believes will be recognized as revenue upon installation and acceptance of the associated theater, as well as a variable considerationestimate, however it excludes amounts allocated to maintenance and extended warranty revenues. The value of sales backlog does not include revenue fromtheaters in which the Company has an equity interest, operating leases or long-term conditional theater commitments. The value of theaters under joint revenuesharing arrangements is excluded from the dollar value of sales backlog, although certain theater systems under joint revenue sharing arrangements provide forcontracted upfront payments and therefore carry a backlog value based on those payments. The Company believes that the contractual obligations for theatersystem installations that are listed in sales backlog are valid and binding commitments.From time to time, in the normal course of its business, the Company will have customers who are unable to proceed with a theater system installation for avariety of reasons, including the inability to obtain certain consents, approvals or financing. Once the determination is made that the customer will not proceed withinstallation, the agreement with the customer is terminated or amended. If the agreement is terminated, once the Company and the customer are released from alltheir future obligations under the agreement, all or a portion of the initial rents or fees that the customer previously made to the Company are recognized asrevenue.The following chart shows the number of the Company’s theater systems by configuration, opened theater network and backlog as at December 31: 2019 2018 Theater Theater Network New Upgrade Network New Upgrade Base Backlog Backlog Base Backlog Backlog Flat Screen (2D) 5 — — 5 — — Dome Screen (2D) 34 — — 37 — — IMAX 3D Dome (3D) 1 — — 2 — — IMAX 3D GT (3D) 10 — — 12 — — IMAX 3D SR (3D) 7 — — 7 — — IMAX Digital: Xenon (3D) 1,374 281 — 1,346 381 — IMAX Digital: GT Laser (3D) 63 9 5 59 10 2 IMAX Digital: IMAX with Laser (3D) 130 144 92 37 73 98 Total 1,624 434 97 1,505 464 100 IMAX theater systems consist of the following configurations:IMAX Flat Screen and IMAX Dome Theater Systems IMAX flat screen and IMAX dome systems primarily have been installed in institutions such as museums and science centers. Flat screen IMAX theaters wereintroduced in 1970, while IMAX dome theaters, which are designed for tilted dome screens, were introduced in 1973. There have been several significantproprietary and patented enhancements to these systems since their introduction. As at December 31, 2019, there were 40 IMAX flat screen and IMAX dometheater systems in the IMAX network, as compared to 44 IMAX flat screen and IMAX dome theater systems as at December 31, 2018. With the introduction ofthe IMAX digital theater systems, there has been a decrease in the number of IMAX flat screen and IMAX dome theater systems in the network. With theintroduction of laser-based digital systems, the Company has been able to create a new Laser Dome solution for its institutional customers. As at December 31,2019, the Company had installed four IMAX with Laser Domes, which are included in the above numbers.9IMAX 3D GT and IMAX 3D SR Theater Systems IMAX 3D theaters utilize a flat screen 3D system, which produces realistic 3D images on an IMAX screen. As at December 31, 2019, there were 17 IMAX 3DGT and IMAX 3D SR theater systems in operation compared to 19 IMAX 3D GT and IMAX 3D SR theater systems in operation as at December 31, 2018. Thedecrease in the number of 3D GT and 3D SR theater systems is largely attributable to the conversion of existing 3D GT and 3D SR theater systems to IMAX digitaltheater systems.IMAX Digital: Xenon Theater Systems The vast majority of the Company’s theater system signings have been for the Company’s proprietary xenon-based digital systems. The Company believes thatits xenon-based digital projection system delivers high quality imagery compared with other xenon systems. Although the Company has introduced a new laser-based digital projection solution, the Company does not believe this will decrease the number of xenon-based digital theater systems installed in the immediatefuture. As at December 31, 2019, the Company had 1,374 xenon-based digital theater systems in the theater network and has an additional 281 xenon-based digitaltheater systems in its backlog.IMAX Digital: Laser Theater SystemsAt the end of 2014, the Company introduced its laser-based digital projection system. As a result of continued research and development aimed at creating asolution that is more affordable for its commercial multiplex partners, the Company rolled out IMAX with Laser in 2018, the Company’s next-generation laserprojection system designed for IMAX theaters in commercial multiplexes. The Company believes IMAX laser-based digital projectors present greater brightnessand clarity, higher contrast, a wider color gamut and deeper blacks, consume less power and last longer than other digital projection technologies, and are capableof illuminating the largest screens in the IMAX theater network. As at December 31, 2019, the Company had 63 GT laser-based digital systems as compared to 59as at December 31, 2018 in the theater network. As at December 31, 2019, the Company had 130 IMAX with Laser systems as compared to 37 as at December 31,2018 in the theater network.New Business InitiativesIn recent years, the Company has been exploring several new lines of business and new initiatives to leverage its proprietary innovative technologies, itsleadership position in the entertainment technology space and its unique relationship with content creators.IMAX EnhancedIn September 2018, the Company announced a new home entertainment licensing and certification program called IMAX Enhanced. This initiative waslaunched along with audio leader DTS (an Xperi subsidiary), capitalizing on the companies’ decades of combined expertise in image and sound science. Thecertification program combines high-end consumer electronics products with IMAX digitally re-mastered 4K high dynamic range (HDR) content and DTS audiotechnologies to offer consumers immersive sight and sound experiences for the home.To be accepted into the program, leading consumer electronics manufacturers must design 4K HDR televisions, A/V receivers, sound systems and other hometheater equipment to meet a carefully prescribed set of audio and video performance standards, set by a certification committee of IMAX and DTS engineers andsome of Hollywood’s leading technical specialists.The program will digitally re-master content to produce more vibrant colors, greater contrast and sharper clarity, and will also deliver an IMAX signature soundexperience.IMAX Enhanced Program currently includes device partners such as Sony Electronics, Denon, Marantz, Pioneer, TCL (among others), studio partners such asSony Pictures and Paramount Pictures and streaming platforms such as Fandango Now, Rakuten TV and Sony.10Connected Theaters The Company is currently exploring new technologies and forms of content as a way to deepen consumer engagement and brand loyalty. As such, theCompany is currently engaged in discussions regarding new technologies to further connect the IMAX theater network and to facilitate bringing more uniquecontent, including broadcasts of live events, to IMAX theater audiences. The Company believes such additional connectivity can provide more innovative contentto the IMAX theater network and in turn permit the Company to engage audiences in new ways.The Company continues to believe that the IMAX network serves as a valuable platform to launch and distribute original content, especially during shoulderperiods.Original ContentThe Company has created two film funds to help finance the production of original content. The Company formed the IMAX China Film Fund (the “ChinaFilm Fund”), with its subsidiary IMAX China as General Partner, to help fund Mandarin language commercial films. No investments in Mandarin language filmswere made in 2019.In addition, the Company’s IMAX Original Film Fund (the “Original Film Fund”) was established in 2014 to co-finance a portfolio of 10 original large formatfilms. The initial investment in the Film Fund was committed to by a third party in the amount of $25.0 million, with the possibility of contributing additionalfunds. The Company has contributed $9.0 million to the Original Film Fund since 2014, and has reached its maximum contribution. The Company sees theOriginal Film Fund as a vehicle designed to generate a continuous, steady flow of high-quality documentary content. As at December 31, 2019, the Original FilmFund has invested $22.3 million toward the development of original films. The related production, financing and distribution agreement includes put and callrights relating to change of control of the rights, title and interest in the co-financed pictures.The Company continues to believe that the IMAX network serves as a valuable platform to launch and distribute a broad variety of original content, especiallyduring shoulder periods.Virtual RealityIn 2017, the Company piloted a virtual reality (“VR”) initiative which included several pilot IMAX VR Centers located in a number of multiplexes, as well as astand-alone venue, each outfitted with proprietary VR pods that permitted interactive, moveable VR experiences.The Company also established its VR Fund among the Company, its subsidiary IMAX China and other strategic investors to help finance the creation ofinteractive VR content experiences for use across all VR platforms, including in the pilot IMAX VR Centers.In December 2018, the Company announced, in connection with its strategic review of its VR pilot initiative, that it had decided to close its remaining VRlocations and write-off certain VR content investments. In January 2019, the Company decided to dissolve the VR Fund. For the year ended December 31, 2018,the Company has recognized asset impairment and exit costs related to its VR investments of $7.2 million. No such charge was recorded in the year endedDecember 31, 2019. For additional information refer to note 26 in Item 8 of this 2019 Form 10-K.OtherThe Company is also a distributor of large-format films, primarily for its institutional theater partners. The Company generally distributes films which itproduces or for which it has acquired distribution rights from independent producers. The Company receives either a percentage of the theater box office receiptsor a fixed amount as a distribution fee.The ownership rights to such films may be held by the film sponsors, the film investors and/or the Company. As at December 31, 2019, the Company currentlyhas distribution rights with respect to 48 of such films, which cover subjects such as space, wildlife, music, history and natural wonders.11Several more recent large-format films that have been distributed by the Company include: Superpower Dogs, which was released in March 2019 and hasgrossed over $9.0 million as at the end of 2019; Pandas, which was released in April 2018 and has grossed over $9.4 million as at the end of 2019; A BeautifulPlanet, which was released in April 2016 and has grossed over $25.5 million as at the end of 2019; Island of Lemurs: Madagascar, which was released in April2014 and has grossed over $14.1 million as at the end of 2019; Journey to the South Pacific, which was released in 2013 and has grossed $14.4 million as at theend of 2019. Large-format films have significantly longer exhibition periods than conventional commercial films and many of the films in the large-format libraryhave remained popular for many decades, including the films SPACE STATION, Hubble 3D and T-REX: Back to the Cretaceous.In addition, the Company also provides film post-production and quality control services for large-format films (whether produced internally or externally), anddigital post-production services. The Company derives a small portion of its revenues from other sources including: one owned and operated IMAX theater; acommercial arrangement with one theater resulting in the sharing of profits and losses; the provision of management services to four other theaters; renting itsproprietary 2D and 3D large-format film and digital cameras to third-party production companies; and also offering production advice and technical assistance toboth documentary and Hollywood filmmakers. In January 2019, the Company closed its owned and operated theater in Minneapolis, Minnesota to better focus onother parts of its business. The Company now has one remaining owned and operated theater in Sacramento, California.MARKETING AND CUSTOMERSThe Company markets its theater systems through a direct sales force and marketing staff located in offices in Canada, the United States, Greater China, Europeand Asia. In addition, the Company has agreements with consultants, business brokers and real estate professionals to locate potential customers and theater sitesfor the Company on a commission basis.The commercial multiplex theater segment of the IMAX theater network is the Company’s largest segment, comprising 1,529 IMAX theaters, or 94.2%, of the1,624 IMAX theaters open or operational as at December 31, 2019. The Company’s institutional customers include science and natural history museums, zoos,aquaria and other educational and cultural centers. The Company also sells or leases its theater systems to theme parks, private home theaters, tourist destinationsites, fairs and expositions (the Commercial Destination segment). At December 31, 2019, approximately 71.9% of all opened IMAX theaters were in locationsoutside of the United States and Canada.The following table outlines the breakdown of the theater network by type and geographic location as at December 31: 2019 Theater Network Base 2018 Theater Network Base CommercialMultiplex CommercialDestination Institutional Total CommercialMultiplex CommercialDestination Institutional Total United States 371 4 33 408 365 4 33 402 Canada 39 2 7 48 39 2 7 48 Greater China(1) 702 — 15 717 624 — 15 639 Western Europe 115 4 10 129 101 4 10 115 Asia (excluding Greater China) 119 2 2 123 112 2 3 117 Russia & the CIS 68 — — 68 62 — — 62 Latin America(2) 50 1 12 63 47 1 12 60 Rest of the World 65 1 2 68 59 1 2 62 Total 1,529 14 81 1,624 1,409 14 82 1,505 (1)Greater China includes the People’s Republic of China, Hong Kong, Taiwan and Macau.(2)Latin America includes South America, Central America and Mexico.For information on revenue breakdown by geographic area, see note 21 to the accompanying audited consolidated financial statements in Item 8 of this 2019Form 10-K. The Company’s foreign operations are subject to certain risks. See “Risk Factors – The Company conducts business internationally, which exposes itto uncertainties and risks that could negatively affect its operations, sales and future growth prospects” and “Risk Factors – The Company faces risks in connectionwith the continued expansion of its business in China” in Item 1A. The Company’s largest customer, Wanda, as at December 31, 2019, represents 33.9% of theCompany’s network of theaters, 25.6% of the Company’s theater system backlog and 16.5% of revenues.12INDUSTRY OVERVIEWCompetitionThe out-of-home entertainment industry is very competitive, and the Company faces a number of competitive challenges. In recent years, for instance,exhibitors and entertainment technology companies have introduced their own branded, large-screen 3D auditoriums or other proprietary theater systems, some ofwhich include laser-based projectors, and in many cases, have marketed those auditoriums or theater systems as having similar quality or attributes as an IMAXtheater. The Company believes that all of these alternative formats deliver images and experiences that are inferior to The IMAX Experience. The Company may continue to face competition in the future from companies in the entertainment industry with new technologies and/or substantially greatercapital resources to develop and support them. The Company also faces in-home competition from a number of alternative motion picture distribution channelssuch as home video, pay-per-view, streaming services, video-on-demand, Blu-ray Disc, Internet and syndicated and broadcast television. The Company furthercompetes for the public’s leisure time and disposable income with other forms of entertainment, including gaming, sporting events, concerts, live theater, socialmedia and restaurants.The Company believes that its competitive strengths include the value of the IMAX brand name, the premium IMAX consumer experience, the design, qualityand historic reliability rate of IMAX theater systems, the return on investment of an IMAX theater, the number and quality of IMAX films that it distributes, therelationships the Company maintains with prominent Hollywood and international filmmakers, a number of whom desire to film their movies with IMAX cameras,the quality of the sound system components included with the IMAX theater, the availability of Hollywood and international event films to IMAX theaters throughIMAX DMR technology, consumer loyalty and the level of the Company’s service and maintenance and extended warranty efforts. The Company believes that itslaser-based projection system increases further the technological superiority of the consumer experience it delivers. As a result, the Company believes thatvirtually all of the best performing premium theaters in the world are IMAX theaters.Exhibitor ConsolidationThe Company’s primary customers are commercial multiplex exhibitors. The commercial exhibition industry has undergone significant consolidation in recentyears, with Dalian Wanda’s acquisitions of AMC and Hoyts Group in 2012 and 2015, respectively, and AMC’s acquisition of Carmike Cinemas and Odeon & UCICinemas Group (“Odeon”), which includes Nordic Cinema Group (“Nordic”), in 2016. In recent years, the industry has continued to consolidate, as evidenced byCineworld Group’s acquisition of Regal Entertainment Group (“Regal”), the Company’s second largest customer, and Cineworld’s planned acquisition of CineplexInc. announced late in 2019.The Company believes that recent exhibitor consolidation has helped facilitate the growth of the Company’s theater network. The Company has historicallyenjoyed strong relationships with large commercial exhibitor chains, which have greater capital to purchase, lease or otherwise acquire IMAX theater systems. Aslarger commercial chains such as AMC have purchased smaller chains, those smaller chains have in turn become part of the IMAX theater network. For instance,following AMC’s acquisition of Odeon and Nordic, the Company and AMC entered into an agreement for 25 new IMAX theater systems across the Odeon andNordic theater network. The Company believes that continued consolidation could facilitate further signings and other strategic benefits going forward.However, exhibitor consolidation has also resulted in individual exhibitor chains constituting a material portion of the Company’s revenue and network.Continued industry consolidation (as well as consolidation in the movie studio industry) may present risks to the Company. See “Risk Factors - Recentconsolidation among commercial exhibitors and studios reduces the breadth of the Company’s customer base, and could result in a narrower market for theCompany’s products and reduced negotiating leverage. A deterioration in the Company’s relationship with key partners could materially, adversely affect theCompany’s business, financial condition or results of operation. In addition, an adverse economic impact on a significant customer’s business operations couldhave a corresponding material adverse effect on the Company” in Item 1A of this 2019 Form 10-K.13THE IMAX BRANDIMAX is a world leader in entertainment technology. The Company relies on its brand to communicate its leadership and singular goal of creatingentertainment experiences that exceed all expectations. Top filmmakers and studios use the IMAX brand to message that a film will connect with audiences inunique and extraordinary ways. The IMAX brand is a promise to deliver what today’s movie audiences crave — a memorable, more emotionally engaging, morethrilling and shareable experience. Consumer research conducted in six countries worldwide by a leading third-party research firm shows that the IMAX brand hasnear universal awareness, creates a special experience and is one of the most differentiated movie-going brands. On a standardized measure of brand equity, theIMAX brand ranged from two to 10 times more powerful than other entertainment technology brands. The Company believes that its strong brand equity supportsconsumers’ predisposition to choose IMAX over competing brands and to pay a premium for The IMAX Experience now and into the future.RESEARCH AND DEVELOPMENTThe Company believes that it is one of the world’s leading entertainment technology companies with significant proprietary expertise in digital and film-basedprojection and sound system component design, engineering and imaging technology, particularly in laser-based technology. The Company increased its level ofresearch and development in order to develop laser-based projection systems. The Company rolled out its laser-based projection system at the end of 2014, whichis capable of illuminating the largest screens in the Company’s network. The laser-based projection system 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 toprovide the highest quality, premier movie going experience available to consumers. In 2018, the Company rolled-out IMAX with Laser, the Company’s nextgeneration laser-based projection system, which is targeted primarily for screens in commercial multiplexes. With most of the laser development completed, therelated research and development spending has declined in recent years.The Company plans to continue research and development activity in the future in other areas considered important to the Company’s continued commercialsuccess, including further improving the reliability of its projectors; enhancing its image quality; expanding the applicability of its digital technology in boththeater and home entertainment; developing IMAX theater systems’ capabilities; and improving its proprietary DMR process. Furthermore, due to the increasingsuccess major Hollywood filmmakers have experienced with IMAX cameras, the Company has identified the development and manufacture of additional IMAXcameras as an important research and development project and is working with other parties on this initiative. The Company expects their research anddevelopment efforts to center around innovation projects and DMR enhancements in 2020.As at December 31, 2019, 52 of the Company’s employees were connected with research and development projects, compared to 86 employees as atDecember 31, 2018.MANUFACTURING AND SERVICEProjector Component ManufacturingThe Company assembles the projector of its theater systems at its office in Mississauga, Ontario, Canada (near Toronto). The Company develops and designsall of the key elements of the proprietary technology involved in this component. Fabrication of a majority of parts and sub-assemblies is subcontracted to a groupof carefully pre-qualified third-party suppliers. Manufacture and supply contracts are signed for the delivery of the component on an order-by-order basis. TheCompany believes its significant suppliers will continue to supply quality products in quantities sufficient to satisfy its needs. The Company inspects all parts andsub-assemblies, completes the final assembly and then subjects the projector to comprehensive testing individually and as a system prior to shipment. In 2019,these projectors, including both the Company’s xenon and laser-based projection systems, had reliability rates based on scheduled shows of approximately 99.8%.Sound System Component ManufacturingThe Company develops, designs and assembles the key elements of its theater sound system component. The standard IMAX theater sound system componentcomprises parts from a variety of sources, with approximately 50% of the materials of each sound system attributable to proprietary parts provided under originalequipment manufacturers agreements with outside vendors. These proprietary parts include custom loudspeaker enclosures and horns, specialized amplifiers, andsignal processing and control equipment. The Company inspects all parts and sub-assemblies, completes the final assembly and then subjects the sound system tocomprehensive testing as a system.14Screen and Other ComponentsThe Company purchases its screen component and glasses cleaning equipment from third parties. The standard screen system component is comprised of aprojection screen manufactured to IMAX specifications and a frame to hang the projection screen. The proprietary glasses cleaning machine is a stand-alone unitthat is connected to the theater’s water and electrical supply to automate the cleaning of 3D glasses.Maintenance and Extended Warranty ServicesThe Company also provides ongoing maintenance and extended warranty services to IMAX theater systems. These arrangements are usually for a separate fee,although the Company often includes free service in the initial year of an arrangement. The maintenance and extended warranty arrangements include service,maintenance and replacement parts for theater systems.To support the IMAX theater network, the Company has personnel stationed in major markets throughout the world who provide periodic and emergencymaintenance and extended warranty services on existing theater systems. The Company provides various levels of maintenance and warranty services, which arepriced accordingly. Under full service programs, Company personnel typically visit each theater every six months to provide preventative maintenance, cleaningand inspection services and emergency visits to resolve problems and issues with the theater system. Under some arrangements, customers can elect to participatein a service partnership program whereby the Company trains a customer’s technician to carry out certain aspects of maintenance. Under such shared maintenancearrangements, the Company participates in certain of the customer’s maintenance checks each year, provides a specified number of emergency visits and providesspare parts, as necessary. For both xenon and laser-based digital systems, the Company provides pre-emptive maintenance, remote system monitoring and anetwork operations center that provides continuous access to product experts.PATENTS AND TRADEMARKSThe Company’s inventions cover various aspects of its proprietary technology and many of these inventions are protected by Letters of Patent or applicationsfiled throughout the world, most significantly in the United States, Canada, China, Belgium, Japan, France, Germany and the United Kingdom. The subject mattercovered by these patents, applications and other licenses encompasses theater design and geometry, electronic circuitry and mechanisms employed in projectorsand projection equipment (including 3D projection equipment), a method for synchronizing digital data, a method of generating stereoscopic (3D) imaging datafrom a monoscope (2D) source, a process for digitally re-mastering 35mm films into large-format, a method for increasing the dynamic range and contrast ofprojectors, a method for visibly seaming or superimposing images from multiple projectors and other inventions relating to digital projectors. The Company hassecured the exclusive license rights from The Eastman Kodak Company (“Kodak”) to a portfolio of more than 50 patent families covering laser projectiontechnology as well as certain exclusive rights to a broad range of Kodak patents in the field of digital cinema. The Company has been and will continue to bediligent in the protection of its proprietary interests.As at December 31, 2019, the Company holds 107 patents, has 9 patents pending in the United States and has corresponding patents or filed applications inmany countries throughout the world. While the Company considers its patents to be important to the overall conduct of its business, it does not consider anyparticular patent essential to its operations. Certain of the Company’s patents for improvements to the IMAX projection system components expire between 2020and 2038.The Company owns or otherwise has rights to trademarks and trade names used in conjunction with the sale of its products, systems and services. The followingtrademarks are considered significant in terms of the current and contemplated operations of the Company: IMAX®, IMAX® Dome, IMAX® 3D, IMAX® 3DDome, Experience It In IMAX®, The IMAX Experience®, An IMAX Experience®, An IMAX 3D Experience®, IMAX DMR®, DMR®, IMAX nXos® and FilmsTo The Fullest™. These trademarks are widely protected by registration or common law throughout the world.EMPLOYEESThe Company had 673 employees as at December 31, 2019, compared to 660 employees as at December 31, 2018. Both employee counts exclude hourlyemployees at the Company’s owned and operated theaters and certain other new business initiatives.15AVAILABLE INFORMATIONThe Company makes available, free of charge, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and anyamendments to such reports, as soon as reasonably practicable after such filings have been made with the United States Securities and Exchange Commission (the“SEC”). Reports may be obtained free of charge through the SEC’s website at www.sec.gov and through the Company’s website at www.imax.com or by callingthe Company’s Investor Relations Department at 212-821-0100. No information included on the Company's website shall be deemed included or otherwiseincorporated into this 2019 Form 10-K, except where expressly indicated.Item 1A. Risk FactorsIf any of the risks described below occurs, the Company’s business, operating results and financial condition could be materially adversely affected.The risks described below are not the only ones the Company faces. Additional risks not presently known to the Company or that it deems immaterial, may alsoimpair its business or operations.The Company conducts business internationally, which exposes it to uncertainties and risks that could negatively affect its operations, sales and futuregrowth prospects.A significant portion of the Company’s revenues and gross box office are generated by customers located outside the United States and Canada. Approximately66%, 66% and 61% of the Company’s revenues were derived outside of the United States and Canada in 2019, 2018 and 2017, respectively. As at December 31,2019, approximately 73.6% of IMAX theater systems arrangements in backlog are scheduled to be installed in international markets. The Company’s networkspanned 81 different countries as at December 31, 2019, and the Company expects its international operations to continue to account for an increasingly significantportion of its revenues in the future. There are a number of risks associated with operating in international markets that could negatively affect the Company’soperations, sales and future growth prospects. These risks include: •new restrictions on access to markets, both for theater systems and films; •unusual or burdensome foreign laws or regulatory requirements or unexpected changes to those laws or requirements, including censorship of contentthat may restrict what films our theaters can present; •fluctuations in the value of foreign currency versus the U.S. dollar and potential currency devaluations; •new tariffs, trade protection measures, import or export licensing requirements, trade embargoes, sanctions and other trade barriers; •difficulties in obtaining competitively priced key commodities, raw materials and component parts from various international sources that are neededto manufacture quality products on a timely basis; •imposition of foreign exchange controls in such foreign jurisdictions; •dependence on foreign distributors and their sales channels; •reliance on local partners, including in connection with joint revenue sharing arrangements; •difficulties in staffing and managing foreign operations; •inability to complete installations of or collect full payment on installations of theater systems; •local business practices that can present challenges to compliance with applicable anti-corruption and bribery laws; •difficulties in establishing market-appropriate pricing; •less accurate and/or less reliable box office reporting; •adverse changes in monetary and/or tax policies, and/or difficulties in repatriating cash from foreign jurisdictions (including with respect to China,where approval of the State Administration of Foreign Exchange is required); •poor recognition of intellectual property rights; •difficulties in enforcing contractual rights; •inflation; •requirements to provide performance bonds and letters of credit to international customers to secure system component deliveries; •harm to the IMAX brand from operating in countries with records of controversial government action, including human rights abuses; and •political, economic and social instability.16In addition, changes in United States or Canadian foreign policy can present additional risks or uncertainties as the Company continues to expand itsinternational operations. The Company recently entered into an agreement with AMC and the sovereign wealth fund of Saudi Arabia for a 12-theater deal. TheCompany previously announced a partnership with VOX Cinemas to open at least four theaters in Saudi Arabia. Opening and operating theaters in markets thathave experienced geopolitical or sociopolitical unrest or controversy, including through partnerships with local entities, exposes the Company to the risks listedabove as well as additional risks of operating in a volatile region. Such risks may negatively impact our business operations in such regions and may also harm ourbrand. Moreover, a deterioration of the diplomatic relations between the United States or Canada and a given country may impede our ability to operate theaters insuch countries and have a negative impact on our financial condition and future growth prospects.The Company faces risks in connection with the continued expansion of its business in China.At present, Greater China is the Company’s largest market, by revenue. In recent years, the Company’s Greater China operations have accounted for anincreasingly significant portion of its overall revenues, with nearly 31% of overall revenues generated from the Company’s China operations in 2019. As atDecember 31, 2019, the Company had 717 theaters operating in Greater China with an additional 253 theaters in backlog, which represent 47.6% of theCompany’s current backlog and which are scheduled to be installed in Greater China by 2023. Of the systems currently scheduled to be installed in Greater China,71.5% are under joint revenue sharing arrangements, which further increase the Company’s ongoing exposure to box office performance in this market.The China market faces a number of risks, including changes in laws and regulations, currency fluctuations, increased competition and changes in economicconditions, including the risk of an economic downturn or recession, trade embargoes, restrictions or other barriers, as well as other conditions that may impact theCompany’s exhibitor and studio partners, as well as consumer spending. Adverse developments in any of these areas could impact the Company’s future revenuesand cash flows and could cause the Company to fail to achieve anticipated growth.Moreover, certain risks and uncertainties of doing business in China are solely within the control of the Chinese government, and Chinese law regulates both thescope of the Company’s continued expansion in China and the business conducted by it within China. For instance, the Chinese government regulates both thenumber and timing or terms of Hollywood films released to the China market. The Company cannot provide assurance that the Chinese government will continueto permit the release of IMAX films in China or that the timing or number of IMAX releases will be favorable to the Company. There are also uncertaintiesregarding the interpretation and application of laws and regulations and the enforceability of intellectual property and contract rights in China. If the Companywere unable to navigate China’s regulatory environment, or if the Company were unable to enforce its intellectual property or contract rights in China, theCompany’s business could be adversely impacted.The Company’s results of operations are expected to be adversely impacted by the recent coronavirus outbreak in China. In early 2020, in response to the public health risks associated with an outbreak of coronavirus in Wuhan, China, Chinese exhibitors temporarily closed morethan 70,000 movie theaters, including all of the approximately 700 IMAX theaters in mainland China. The theaters have been closed since late January 2020,including over the Lunar New Year holiday and have not yet reopened as of the date of this report. Chinese movie studios also postponed the release of multiplefilms, including those originally scheduled to be released over this holiday, five of which were scheduled to be shown in IMAX theaters. The repercussions of thishealth crisis in China will have a material adverse impact on the revenues generated by IMAX theater systems in the first quarter of 2020 and could impact otherareas of the Company’s business in China, including but not limited to the timely installation of theater systems in our backlog in China. Given the dynamic natureof the circumstances, it is difficult to predict whether the impact of the coronavirus outbreak on the Company’s financial condition in future reporting periods mayalso be material as this will depend on future developments, including but not limited to the timing of theaters reopening, if and when delayed films are released,consumer behaviour and any potential construction or installation delays involving our exhibitor partners which are highly uncertain and cannot be accuratelyforecast.The success of the IMAX theater network is directly related to the availability and success of IMAX DMR films for which there can be no guarantee.An important factor affecting the growth and success of the IMAX theater network is the availability and strategic selection of films for IMAX theaters and thebox office performance of such films. The Company itself produces only a small number of such films and, as a result, the Company relies principally on filmsproduced by third party filmmakers and studios, including both Hollywood and local language features converted into the Company’s large format using theCompany’s IMAX DMR technology. In 2019, 60 IMAX DMR films were released by studios to the worldwide IMAX theater network. There is no guarantee thatfilmmakers and studios will continue to release films to the IMAX theater network, or that the films selected for release to the IMAX theater network will becommercially successful. The Company is directly impacted by the box office results for the films released to the IMAX network17through its joint revenue sharing arrangements as well as through the percentage of the box office receipts the Company receives from the studios releasing IMAXDMR films, and the Company’s continued ability to secure films, find suitable partners for joint revenue share arrangements and to sell IMAX theater systems alsodepends on the number and commercial success of films released to its network. The commercial success of films released to IMAX theaters depends on a numberof factors outside of the Company’s control, including whether the film receives critical acclaim, the timing of its release, the success of the marketing efforts ofthe studio releasing the film, consumer preferences and trends in cinema attendance. Moreover, films can be subject to delays in production or changes in releaseschedule, which can negatively impact the number, timing and quality of IMAX DMR and IMAX original films released to the IMAX theater network.In addition, as the Company’s international network has expanded, the Company has signed deals with studios in other countries to convert their films to theCompany’s large format and release them to IMAX theaters. The Company may be unable to select films which will be successful in international markets or maybe unsuccessful in selecting the right mix of Hollywood and local DMR films for a particular country or region, notably Greater China, the Company’s largestmarket. Also, conflicts in international release schedules may make it difficult to release every IMAX film in certain markets.The Company depends principally on commercial movie exhibitors to purchase or lease IMAX theater systems, to supply box office revenue under jointrevenue sharing arrangements and under its sales and sales-type lease agreements and to supply venues in which to exhibit IMAX DMR films. The Company canmake no assurances that exhibitors will continue to do any of these things.The Company is unable to predict the pace at which exhibitors will purchase or lease IMAX theater systems or enter into joint revenue sharing arrangementswith the Company, or whether any of the Company’s existing exhibitor customers will continue to do any of the foregoing. If exhibitors choose to reduce theirlevels of expansion, negotiate less favorable economic terms, or decide not to enter into transactions with the Company, the Company’s revenues would notincrease at an anticipated rate and motion picture studios may be less willing to convert their films into the Company’s format for exhibition in commercial IMAXtheaters. As a result, the Company’s future revenues and cash flows could be adversely affected.Recent consolidation among commercial exhibitors and studios reduces the breadth of the Company’s customer base, and could result in a narrowermarket for the Company’s products and reduced negotiating leverage. A deterioration in the Company’s relationship with key partners could materially,adversely affect the Company’s business, financial condition or results of operation. In addition, an adverse economic impact on a significant customer’sbusiness operations could have a corresponding material adverse effect on the Company.The Company’s primary customers are commercial multiplex exhibitors. The commercial exhibition industry has undergone significant consolidation in recentyears, with Dalian Wanda’s acquisitions of AMC and Hoyts Group in 2012 and 2015, respectively, and AMC’s acquisition of Carmike Cinemas and Odeon & UCICinemas Group, which includes Nordic Cinema Group, in 2016. In recent years, the industry has continued to consolidate, as evidenced by Cineworld Group’sacquisition of Regal Entertainment Group in 2018 and its planned acquisition of Cineplex Inc. announced late in 2019. Exhibitor concentration has resulted inindividual exhibitor chains constituting a material portion of the Company’s network and revenue. For instance, Wanda and AMC continue to be the Company’slargest exhibitor customer, representing approximately, 16.5%, 17.1% and 16.4% of the Company’s total revenues in 2019, 2018 and 2017, respectively. Wanda’scurrent commitment to the Company stands at 359 IMAX theater systems, and Wanda and AMC together represented approximately 33.9% of the commercialnetwork and 25.6% of the Company’s backlog as at December 31, 2019. The share of the Company’s revenue that is generated by Wanda and AMC is expected tocontinue to grow as the number of Wanda theater systems currently in backlog are opened. No assurance can be given that significant customers such as Wandaand/or AMC will continue to purchase theater systems and/or enter into joint revenue sharing arrangements with the Company and if so, whether contractual termswill be affected. If the Company does business with either Wanda and/or AMC or other large exhibitor chains less frequently or on less favorable terms thancurrently, the Company’s business, financial condition or results of operations may be adversely affected. In addition, an adverse economic impact on a significantcustomer’s business operations could have a corresponding material adverse effect on the Company.The Company also receives revenues from studios releasing IMAX DMR films. Hollywood studios have also experienced recent consolidation, as evidencedby the Walt Disney Company’s acquisition of certain studio assets from Twenty First Century Fox in 2019. Studio consolidation could result in individual studioscomprising a greater percentage of the Company’s film slate and overall DMR revenue, and could expose the Company to the same risks described above inconnection with exhibitor consolidation.18General political, social and economic conditions can affect the Company’s business by reducing both revenue generated from existing IMAX theatersystems and the demand for new IMAX theater systems.The Company’s success depends in part on general political, social and economic conditions and the willingness of consumers to purchase tickets to IMAXmovies. If movie-going becomes less popular globally, the Company’s business could be adversely affected, especially if such a decline occurs in Greater China.In addition, the Company’s operations could be adversely affected if consumers' discretionary income falls as a result of an economic downturn. In recent years,the majority of the Company’s revenue has been directly derived from the box office revenues of its films. Accordingly, a decline in attendance at commercialIMAX theaters could materially and adversely affect several sources of key revenue streams for the Company.The Company also depends on the sale and lease of IMAX theater systems to commercial movie exhibitors to generate revenue. Commercial movie exhibitorsgenerate revenues from consumer attendance at their theaters, which depends on the willingness of consumers to visit movie theaters and spend discretionaryincome at movie theaters. In the event of declining box office and concession revenues, commercial exhibitors may be less willing to invest capital in new IMAXtheaters. In addition, a significant portion of theaters in the Company’s backlog are expected to be installed in newly built multiplexes. An economic downturncould impact developers’ ability to secure financing and complete the buildout of these locations, thereby negatively impacting the Company’s ability to grow itstheater network.The Company may experience adverse effects due to exchange rate fluctuations.A substantial portion of the Company’s revenues are denominated in U.S. dollars, while a substantial portion of its expenses are denominated in Canadiandollars. The Company also generates revenues in Chinese Yuan Renminbi, Euros and Japanese Yen. While the Company periodically enters into forward contractsto hedge its exposure to exchange rate fluctuations between the U.S. and the Canadian dollar, the Company may not be successful in reducing its exposure to thesefluctuations. The use of derivative contracts is intended to mitigate or reduce transactional level volatility in the results of foreign operations, but does notcompletely eliminate volatility. Even in jurisdictions in which the Company does not accept local currency or requires minimum payments in U.S. dollars,significant local currency issues may impact the profitability of the Company’s arrangements for the Company’s customers, which ultimately affect the Company’sability to negotiate cost-effective arrangements and, therefore, the Company’s results of operations. In addition, because IMAX films generate box office in 81different countries, unfavorable exchange rates between applicable local currencies and the U.S. dollar could affect the Company’s reported gross box office andrevenues, further impacting the Company’s results of operations.The Company may not be able to adequately protect its intellectual property, and competitors could misappropriate its technology or brand, which couldweaken its competitive position.The Company depends on its proprietary knowledge regarding IMAX theater systems and digital and film technology. The Company relies principally upon acombination of copyright, trademark, patent and trade secret laws, restrictions on disclosures and contractual provisions to protect its proprietary and intellectualproperty rights. These laws and procedures may not be adequate to prevent unauthorized parties from attempting to copy or otherwise obtain the Company’sprocesses and technology or deter others from developing similar processes or technology, which could weaken the Company’s competitive position and requirethe Company to incur costs to secure enforcement of its intellectual property rights. The protection provided to the Company’s proprietary technology by the lawsof foreign jurisdictions may not protect it as fully as the laws of Canada or the United States. The lack of protection afforded to intellectual property rights incertain international jurisdictions may be increasingly problematic given the extent to which future growth of the Company is anticipated to come from foreignjurisdictions. Finally, some of the underlying technologies of the Company’s products and system components are not covered by patents or patent applications.The Company owns patents issued and patent applications pending, including those covering its digital projector, digital conversion technology and laserillumination technology. The Company’s patents are filed in the United States, often with corresponding patents or filed applications in other jurisdictions, such asCanada, China, Belgium, Japan, France, Germany and the United Kingdom. The patent applications pending may not be issued or the patents may not provide theCompany with any competitive advantage. The patent applications may also be challenged by third parties. Several of the Company’s issued patents forimprovements to IMAX projection system components expire between 2020 and 2038. Any claims or litigation initiated by the Company to protect its proprietarytechnology could be time consuming, costly and divert the attention of its technical and management resources.The IMAX brand stands for the highest quality and most immersive motion picture entertainment. Protecting the IMAX brand is a critical element inmaintaining the Company’s relationships with studios and its exhibitor clients. Though the Company relies on a combination of trademark and copyright law aswell as its contractual provisions to protect the IMAX brand, those protections may not be adequate to prevent erosion of the brand over time, particularly inforeign jurisdictions. Erosion of the brand could threaten the demand for the Company’s products and services and impair its ability to grow future revenuestreams.19The Company faces cyber-security and similar risks, which could result in the disclosure, theft or loss of confidential or other proprietary information,including intellectual property, damage to the Company’s brand and reputation, legal exposure and financial losses. The Company must also comply with avariety of data privacy regulations and failure to comply with such regulations may affect the Company’s financial performance.The nature of the Company’s business involves access to and storage of confidential and proprietary content and other information, including its ownintellectual property and the intellectual property of certain movie studios or partners it may work with, as well as certain information regarding the Company’scustomers, employees, licensees and suppliers. Although the Company maintains robust procedures, internal policies and technological security measures tosafeguard such content and information, as well as a cyber-security insurance policy, the Company’s information technology systems could be penetrated byinternal or external parties intent on extracting information, corrupting information, stealing intellectual property or trade secrets, or disrupting business processes.Information security risks have increased in recent years because of the proliferation of new technologies and the increased sophistication and activities ofperpetrators of cyber-attacks. The Company’s information technology infrastructure may be vulnerable to such attacks, including through the use of malware,software bugs, computer viruses, ransomware, social engineering and denial of service. It is possible that such attacks could compromise the Company’s securitymeasures or the security measures of parties with whom the Company does business, and thereby could result in obtaining the confidential or proprietaryinformation of the Company or its customers, employees, licensees and suppliers. Because the techniques that may be used to circumvent the Company’ssafeguards change frequently and may be difficult to detect, the Company may be unable to anticipate any new techniques or implement sufficient preventivesecurity measures. The Company seeks to monitor such attempts and incidents and to prevent their recurrence through modifications to the Company’s internalprocedures and information technology infrastructure, but in some cases preventive action might not be successful. Moreover, the development and maintenance ofthese security measures may be costly and will require ongoing updates as technologies evolve and techniques to overcome the Company’s security measuresbecome more sophisticated. Any such breach or unauthorized access could result in a disruption of the Company’s operations, the theft, unauthorized use orpublication of the Company’s intellectual property, other proprietary information or the personal information of customers, employees, licensees or suppliers, areduction of the revenues the Company is able to generate from its operations, damage to the Company’s brand and reputation, a loss of confidence in the securityof the Company’s business and products, and significant legal and financial exposure, each of which could potentially have an adverse effect on the Company’sbusiness.In addition, a variety of laws and regulations at the international, national and state level govern the Company’s collection, use, protection and processing ofpersonal data. These laws, including the General Data Protection Regulation and the California Consumer Privacy Act, are constantly evolving and may result inincreasing regulatory oversight and public scrutiny in the future. The Company’s actual or perceived failure to comply with such regulations could result in fines,investigations, enforcement actions, penalties, sanctions, claims for damages by affected individuals, and damage to the Company’s reputation, among othernegative consequences, any of which could have a material adverse effect on its financial performance.The introduction of new, competing products and technologies could harm the Company’s business.The out-of-home entertainment industry is very competitive, and the Company faces a number of competitive challenges. According to the NationalAssociation of Theater Owners, as at December 31, 2019, there were approximately 44,000 conventional-sized screens in North American multiplexes. TheCompany faces competition both in the form of technological advances in in-home entertainment as well as those within the theater-going experience. In recentyears, for instance, exhibitors and entertainment technology companies have introduced their own branded, large-screen 3D auditoriums or other proprietarytheater systems, and in many cases have marketed those auditoriums or theater systems as having similar quality or attributes as an IMAX theater. The Companymay continue to face competition in the future from companies in the entertainment industry with new technologies and/or substantially greater capital resources todevelop and support them. If the Company is unable to continue to deliver a premium movie-going experience, or if other technologies surpass those of theCompany, the Company may be unable to continue to produce theater systems which are premium to, or differentiated from, other theater systems.As noted above, the Company faces in-home competition from a number of alternative motion picture distribution channels such as home video, pay-per-view,streaming services, video-on-demand, Blu-ray Disc, Internet and syndicated and broadcast television. The Company further competes for the public’s leisure timeand disposable income with other forms of entertainment, including gaming, sporting events, concerts, live theater, social media and restaurants.If the Company is unable to continue to produce a differentiated theater experience, consumers may be unwilling to pay the price premiums associated with thecost of IMAX theater tickets and box office performance of IMAX films may decline. Declining box-office performance of IMAX films could materially andadversely harm the Company’s business and prospects.20The Company is undertaking new lines of business and these new business initiatives may not be successful.The Company is undertaking new lines of business. These initiatives represent new areas of growth for the Company and could include the offering of newproducts and services that may not be accepted by the market. The Company has recently explored initiatives in the fields of original content and in-homeentertainment technology, both of which are intensively competitive businesses and which are dependent on consumer demand, over which the Company has nocontrol. The Company is also exploring new technologies to connect the IMAX theater network to facilitate bringing more unique content, including broadcasts oflive events, to IMAX theater audiences. If any new business in which the Company invests or attempts to develop does not progress as planned, the Company maybe adversely affected by investment expenses that have not led to the anticipated results, by write-downs of its equity investments, by the distraction ofmanagement from its core business or by damage to its brand or reputation.In addition, these initiatives may involve the formation of joint ventures and business alliances. While the Company seeks to employ the optimal structure foreach such business alliance, the alliance may require a high level of cooperation with and reliance on the Company’s partners and there is a possibility that theCompany may have disagreements with its relevant partner with respect to financing, technological management, product development, management strategies orotherwise. Any such disagreement may cause the joint venture or business alliance to be terminated.The Company’s revenues from existing customers are derived in part from financial reporting provided by its customers, which may be inaccurate orincomplete, resulting in lost or delayed revenues.The Company’s revenue under its joint revenue sharing arrangements, a portion of the Company’s payments under lease or sales arrangements and its filmdistribution fees are based upon financial reporting provided by its customers. If such reporting is inaccurate, incomplete or withheld, the Company’s ability toreceive the appropriate payments in a timely fashion that are due to it may be impaired. The Company’s contractual ability to audit IMAX theaters may not rectifypayments lost or delayed as a result of customers not fulfilling their contractual obligations with respect to financial reporting.There is collection risk associated with payments to be received over the terms of the Company’s theater system agreements.The Company is dependent in part on the viability of its exhibitors for collections under long-term leases, sales financing agreements and joint revenue sharingarrangements. Exhibitors or other operators may experience financial difficulties that could cause them to be unable to fulfill their contractual payment obligationsto the Company. As a result, the Company’s future revenues and cash flows could be adversely affected.The Company may not convert all of its backlog into revenue and cash flows.At December 31, 2019, the Company’s sales backlog included 531 theater systems, consisting of 178 systems under sales or lease arrangements and 353 theatersystems under joint revenue sharing arrangements. The Company lists signed contracts for theater systems for which revenue has not been recognized as salesbacklog prior to the time of revenue recognition. The total value of the sales backlog represents all signed theater system sale or lease agreements that are expectedto be recognized as revenue in the future and includes initial fees along with the estimated present value of contractual ongoing fees due over the term, and avariable consideration estimate for the theater systems under sales arrangements, but it excludes amounts allocated to maintenance and extended warrantyrevenues. Notwithstanding the legal obligation to do so, some of the Company’s customers with which it has signed contracts may not accept delivery of theatersystems that are included in the Company’s backlog. An economic downturn may further exacerbate the risk of customers not accepting delivery of theatersystems, especially in places such as Greater China that represent a large portion of the Company’s backlog. Any reduction in backlog could adversely affect theCompany’s future revenues and cash flows. In addition, customers with theater system obligations in backlog sometimes request that the Company agree to modifyor reduce such obligations, which the Company has agreed to in the past under certain circumstances. Customer-requested delays in the installation of theatersystems in backlog remain a recurring and unpredictable part of the Company’s business.21The Company’s operating results and cash flow can vary substantially from period to period and could increase the volatility of its share price.The Company’s operating results and cash flow can fluctuate substantially from period to period. In particular, fluctuations in theater system installations andgross box office performance of IMAX DMR content can materially affect operating results. Factors that have affected the Company’s operating results and cashflow in the past, and are likely to affect its operating results and cash flow in the future, include, among other things: •the timing of signing and installation of new theater systems (particularly for installations in newly-built multiplexes, which can result in delays thatare beyond the Company’s control); •the timing and commercial success of films distributed to the Company’s theater network; •the demand for, and acceptance of, its products and services; •the recognition of revenue of sales and sales-type leases; •the classification of leases as sales-type versus operating leases; •the volume of orders received and that can be filled in the quarter; •the level of its sales backlog; •the signing of film distribution agreements; •the financial performance of IMAX theaters operated by the Company’s customers; •financial difficulties faced by customers, particularly customers in the commercial exhibition industry; •the magnitude and timing of spending in relation to the Company’s research and development efforts and related investments as well as new businessinitiatives; and •the number and timing of joint revenue sharing arrangement installations, related capital expenditures and timing of related cash receipts.Most of the Company’s operating expenses are fixed in the short term. The Company may be unable to rapidly adjust its spending to compensate for anyunexpected shortfall in sales, joint revenue sharing arrangements revenue or IMAX DMR revenue which would harm operating results for a particular period,although the results of any particular period are not necessarily indicative of the Company’s results for any other period.The Company’s theater system revenue can vary significantly from its cash flows under theater system sales or lease agreements.The Company’s theater systems revenue can vary significantly from the associated cash flows. The Company often provides financing to customers for theatersystems on a long-term basis through long-term leases or notes receivables. The terms of leases or notes receivable are typically 10 to 12 years. The Company’ssale and lease-type agreements typically provide for three major sources of cash flow related to theater systems: •initial fees, which are paid in installments generally commencing upon the signing of the agreement until installation of the theater systems; •ongoing fees, which are paid monthly after all theater systems have been installed and are generally equal to the greater of a fixed minimum amountper annum and a percentage of box office receipts; and •ongoing annual maintenance and extended warranty fees, which are generally payable commencing in the second year of theater operations.Initial fees generally make up the vast majority of cash received under theater system sales or lease agreements for a theater arrangement.For sales and sales-type leases, the revenue recorded is generally equal to the sum of initial fees and the present value of any future initial payments, fixedminimum ongoing payments and sales arrangements also include an estimate of future variable consideration due under the agreement. Cash received from initialfees in advance of meeting the revenue recognition criteria for the theater systems is recorded as deferred revenue.Leases that do not transfer substantially all of the benefits and risks of ownership to the customer are classified as operating leases. For these leases, initial feesand fixed minimum ongoing payments are recognized as revenue on a straight-line basis over the lease term. Contingent payments in excess of fixed minimumongoing payments are recognized as revenue when reported by theater operators, provided collectability is reasonably assured.22As a result of the above, the revenue set forth in the Company’s financial statements does not necessarily correlate with the Company’s cash flow or cashposition. Revenues include the present value of future contracted cash payments and there is no guarantee that the Company will receive such payments under itslease and sale agreements if its customers default on their payment obligations.The Company’s stock price has historically been volatile and declines in market price, including as a result of a market downturn, may negatively affect itsability to raise capital, issue debt, secure customer business and retain employees.The Company is listed on the New York Stock Exchange (“NYSE”) and its publicly traded shares have in the past experienced, and may continue toexperience, significant price and volume fluctuations. This market volatility could reduce the market price of its common stock, regardless of the Company’soperating performance. A decline in the capital markets generally, or an adjustment in the market price or trading volumes of the Company’s publicly tradedsecurities, may negatively affect its ability to raise capital, issue debt, secure customer business or retain employees. These factors, as well as general economic andgeopolitical conditions, may have a material adverse effect on the market price of the Company’s publicly traded securities.The credit agreement governing the Company’s senior secured credit facility contains significant restrictions that limit its operating and financialflexibility.The credit agreement governing the Company’s senior secured credit facility contains certain restrictive covenants that, among other things, limit its ability to: •incur additional indebtedness; •pay dividends and make distributions; •repurchase stock; •make certain investments; •transfer or sell assets; •create liens; •enter into transactions with affiliates; •issue or sell stock of subsidiaries; •create dividend or other payment restrictions affecting restricted subsidiaries; and •merge, consolidate, amalgamate or sell all or substantially all of its assets to another person.These restrictive covenants impose operating and financial restrictions on the Company that limit the Company’s ability to engage in acts that may be in theCompany’s long-term best interests.The Company may be subject to impairment losses on its film assets if such assets do not meet management’s estimates of total revenues.The Company amortizes its film assets, including IMAX DMR costs capitalized using the individual film forecast method, whereby the costs of film assets areamortized and participation costs are accrued for each film in the ratio of revenues earned in the current period to management’s estimate of total revenuesultimately expected to be received for that title. Management regularly reviews, and revises when necessary, its estimates of ultimate revenues on a title-by-titlebasis, which may result in a change in the rate of amortization of the film assets and write-downs or impairments of film assets. Results of operations in futureyears include the amortization of the Company’s film assets and may be significantly affected by periodic adjustments in amortization rates.The Company may be subject to impairment losses on its inventories if they become obsolete.The Company records write-downs for excess and obsolete inventory based upon current estimates of future events and conditions, including the anticipatedinstallation dates for the current backlog of theater system contracts, technological developments, signings in negotiation and anticipated market acceptance of theCompany’s current and pending theater systems.23If the Company’s goodwill or long-lived assets become impaired, the Company may be required to record a significant charge to earnings.Under United States Generally Accepted Accounting Principles (“U.S. GAAP”), the Company reviews its long-lived assets for impairment when events orchanges in circumstances indicate the carrying value may not be recoverable. Goodwill is required to be qualitatively assessed at least annually and when events orchanges in circumstances arise or can be quantitatively tested for impairment. Factors that may be considered a change in circumstances include (but are notlimited to) a decline in stock price and market capitalization, declines in future cash flows, and slower growth rates in the Company’s industry. The Company maybe required to record a significant charge to earnings in its financial statements during the period in which any impairment of its goodwill or long-lived assets isdetermined.Changes in accounting and changes in management’s estimates may affect the Company’s reported earnings and operating income.U.S. GAAP and accompanying accounting pronouncements, implementation guidelines and interpretations for many aspects of the Company’s business, suchas revenue recognition, film accounting, accounting for pensions and other postretirement benefits, accounting for income taxes, and treatment of goodwill or long-lived assets, are highly complex and involve many subjective judgments. Changes in these rules, their interpretation, management’s estimates, or changes in theCompany’s products or business could significantly change its reported future earnings and operating income and could add significant volatility to thosemeasures, without a comparable underlying change in cash flow from operations. See “Critical Accounting Policies and Estimates” in Item 7.Failure to respond adequately or in a timely fashion to changes and advancements in digital technology could negatively affect the Company’s business.There have been a number of advancements in the digital cinema field in recent years. In order to keep pace with these changes and in order to continue toprovide an experience which is premium to and differentiated from conventional cinema experiences, the Company has made, and expects to continue to make,significant investments in digital technology in the form of research and development and the acquisition of third party intellectual property and/or proprietarytechnology. In recent years, the Company has made significant investments in laser technology as part of the development of its next-generation laser-based digitalprojection system, which it began rolling out to the largest theaters in the IMAX network at the end of 2014. The Company continued research and developmentthroughout 2018 to support the further development and roll-out of IMAX with Laser projection system, which is targeted primarily for screens in commercialmultiplexes. The process of developing new technologies is inherently uncertain and subject to certain factors that are outside of the Company’s control, includingreliance on third party partners and suppliers, and the Company can provide no assurance its investments will result in commercially viable advancements to theCompany’s existing products or in commercially successful new products, or that any such advancements or products will improve upon existing technology orwill be developed within the timeframe expected. The Company may not realize cost savings or other benefits from any of its restructuring initiatives and the failure to do so may have an adverse impact onits business, financial condition or results of operations.In connection with the ongoing analysis and evaluation of its business operations, the Company has implemented, and may from time to time implement,initiatives that it believes will position the Company for future success and long-term sustainable growth, including the elimination of certain business ventures,consolidation of properties, staff reductions and the realignment of resources. Although the Company expects its restructuring initiatives to result in cost savingsaimed at increasing efficiency, profitability, operating leverage and free cash flow, there can be no assurances that these benefits will be realized to the full extentprojected. Some of these initiatives may also result in unintended consequences, such as additional employee attrition, business disruptions and distraction ofmanagement. If the Company does not achieve projected savings as a result of these initiatives or incurs higher than expected or unanticipated costs inimplementing these initiatives, its business, financial condition or results of operations could be adversely impacted.The Company relies on its key personnel, and the loss of one or more of those personnel could harm its ability to carry out its business strategy.The Company’s operations and prospects depend in large part on the performance and continued service of its senior management team. The Company may notfind qualified replacements for any of these individuals if their services are no longer available. The loss of the services of one or more members of the Company’ssenior management team could adversely affect its ability to effectively pursue its business strategy.24Because the Company is incorporated in Canada, it may be difficult for plaintiffs to enforce against the Company liabilities based solely upon U.S. federalsecurities laws.The Company is incorporated under the federal laws of Canada, some of its directors and officers are residents of Canada and a substantial portion of its assetsand the assets of such directors and officers are located outside the United States. As a result, it may be difficult for U.S. plaintiffs to effect service within theUnited States upon those directors or officers who are not residents of the United States, or to realize against them or the Company in the United States uponjudgments of courts of the United States predicated solely upon the civil liability under the U.S. federal securities laws. In addition, it may be difficult for plaintiffsto bring an original action outside of the United States against the Company to enforce liabilities based solely on U.S. federal securities laws.Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesThe Company’s principal executive offices are located in Mississauga, Ontario, Canada, New York, New York, and Playa Vista, California. The Company’sprincipal facilities are as follows: Operation Own/Lease ExpirationMississauga, Ontario(1) Headquarters, Administrative, Assembly and Research and Development Own N/APlaya Vista, California Sales, Marketing, Film Production and Post-Production Own N/ANew York, New York Executive Lease 2029Tokyo, Japan Sales, Marketing and Maintenance Lease 2021Shanghai, China Sales, Marketing, Maintenance and Administrative Lease 2022Dublin, Ireland Sales, Marketing, Administrative and Research and Development Lease 2026Moscow, Russia Sales Lease 2020London, United Kingdom Sales Lease 2020 (1)This facility is subject to a charge in favor of Wells Fargo Bank in connection with a secured term and revolving credit facility (see note 13 to theaccompanying audited consolidated financial statements in Item 8 of this 2019 Form 10-K ).The Company believes that its existing facilities and equipment are in good operating condition and are suitable for the conduct of its business.Item 3. Legal ProceedingsSee note 15 to the accompanying audited consolidated financial statements in Item 8 of this 2019 Form 10-K.Item 4. Mine Safety DisclosuresNot applicable.25PART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity SecuritiesThe Company’s common shares are listed for trading under the trading symbol “IMAX” on the New York Stock Exchange.As at January 31, 2020, the Company had approximately 221 registered holders of record of the Company’s common shares.Over the last two years, the Company has not paid, nor does the Company have any current plans to pay, cash dividends on its common shares. The payment ofdividends by the Company is subject to certain restrictions under the terms of the Company’s indebtedness (see note 13 to the accompanying audited consolidatedfinancial statements in Item 8 and “Liquidity and Capital Resources” in Item 7 of this 2019 Form 10-K). The payment of any future dividends will be determinedby the Board of Directors in light of conditions then existing, including the Company’s financial condition and requirements, future prospects, restrictions infinancing agreements, business conditions and other factors deemed relevant by the Board of Directors.In 2020, the Company expanded its stock-based compensation program to includes the issuance of performance share units (“PSUs”). Performance share unitsvest only if certain profitability and market targets are achieved. The amount of compensation expense recognized for such performance-based share awards isdependent upon an assessment of the likelihood of achieving these defined future profitability or market targets. These assessments could result in a change to thenumber of PSUs that will ultimately vest as compared to the units granted.Equity Compensation PlansThe following table sets forth information regarding the Company’s Equity Compensation Plan as at December 31, 2019: Number of Securities tobe Issued Upon Exerciseof Outstanding Options,Warrants and Rights Weighted AverageExercise Price ofOutstanding Options,Warrants and Rights Number of SecuritiesRemaining Available forFuture Issuance UnderEquity CompensationPlans (ExcludingSecurities Reflectedin Column (a)) Plan Category (a) (b) (c) Equity compensation plans approved by security holders 6,797,556 $ 22.62 2,147,443 Equity compensation plans not approved by security holders nil nil nil Total 6,797,556 $ 22.62 2,147,443 26Performance GraphThe following graph compares the total cumulative shareholder return for $100 invested on December 31, 2014 (assuming that all dividends were reinvested) incommon shares of the Company against the cumulative total return of the NYSE Composite Index, the S&P/TSX Composite Index and the IMAX Peer Group tothe end of the most recently completed fiscal year. The IMAX Peer Group consists of Ambarella, Inc., Avid Technologies, Inc., Cinemark Holdings, Inc., CineplexInc., Dolby Laboratories, Inc., Glu Mobile Inc., Harmonic Inc., Lions Gate Entertainment Corp., The Marcus Corporation, TiVo Corporation, World WrestlingEntertainment, Inc., and Zynga Inc. Issuer Purchases of Equity SecuritiesIn 2017, the Company’s Board of Directors approved a new $200.0 million share repurchase program for shares of the Company’s common stock. The sharerepurchase program expires on June 30, 2020. The repurchases may be made either in the open market or through private transactions, subject to marketconditions, applicable legal requirements and other relevant factors. The Company has no obligation to repurchase shares and the share repurchase program maybe suspended or discontinued by the Company at any time. In 2019, the Company repurchased 134,384 common shares at an average price of $19.76 per share,excluding commissions. As at December 31, 2019, the Company has $125.9 million available under its approved repurchase program.27The Company’s common stock repurchase program activity for the three months ended December 31, 2019 was as follows: Total number ofshares purchased Average price paidper share Total number ofshares purchasedas part of publiclyannounced program Maximum value ofshares that may yetbe purchased underthe program October 1 through October 31, 2019 — $ — — $ 125,935,013 November 1 through November 30, 2019 — — — 125,935,013 December 1 through December 31, 2019 — — — 125,935,013 Total — $ — — In 2018, IMAX China announced that its shareholders granted its Board of Directors a general mandate authorizing the Board, subject to applicable laws, tobuy back shares of IMAX China in an amount not to exceed 10% of the total number of issued shares of IMAX China as at May 3, 2018 (35,818,112 shares). Theshare repurchase program expired on June 6, 2019. In 2019, IMAX China announced that its shareholders granted its Board of Directors a general mandateauthorizing the Board, subject to applicable laws, to repurchase shares of IMAX China in an amount not to exceed 10% of the total number of issued shares ofIMAX China as at June 6, 2019 (35,605,560 shares). The share repurchase program expires on the date of the 2020 annual general meeting of IMAX China. Therepurchases 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 theshare repurchase program may be suspended or discontinued by IMAX China at any time. In 2019, IMAX China repurchased 8,051,500 common shares at anaverage price of HKD $18.63 per share (U.S. $2.38).The total number of shares purchased during the twelve months ended December 31, 2019, under both the Company and IMAX China’s repurchase plans, doesnot include any shares received in the administration of employee share-based compensation plans.CERTAIN INCOME TAX CONSIDERATIONS United States Federal Income Tax ConsiderationsThe following discussion is a general summary of the material U.S. federal income tax consequences of the ownership and disposition of the common shares bya holder of common shares that is an individual resident of the United States or a United States corporation (a “U.S. Holder”). This discussion does not discuss allaspects of U.S. federal income taxation that may be relevant to investors subject to special treatment under U.S. federal income tax law (including, for example,owners of 10.0% or more of the voting shares of the Company).Distributions on Common SharesIn general, distributions (without reduction for Canadian withholding taxes) paid by the Company with respect to the common shares will be taxed to aU.S. Holder as dividend income to the extent that such distributions do not exceed the current and accumulated earnings and profits of the Company (as determinedfor U.S. federal income tax purposes). Subject to certain limitations, under current law dividends paid to non-corporate U.S. Holders may be eligible for a reducedrate of taxation as long as the Company is considered to be a “qualified foreign corporation”. A qualified foreign corporation includes a foreign corporation that iseligible for the benefits of an income tax treaty with the United States or a foreign corporation the stock of which is regularly tradable on an established securitiesmarket in the United States. The amount of a distribution that exceeds the current and accumulated earnings and profits of the Company will be treated first as anon-taxable return of capital to the extent of the U.S. Holder’s tax basis in the common shares and thereafter as taxable capital gain. Corporate holders generallywill not be allowed a deduction for dividends received in respect of distributions on common shares. Subject to the limitations set forth in the U.S. InternalRevenue Code of 1986, as amended, as modified by the U.S.-Canada Income Tax Treaty, U.S. Holders may elect to claim a foreign tax credit against theirU.S. federal income tax liability for Canadian income tax withheld from dividends. Alternatively, U.S. Holders may claim a deduction for such amounts ofCanadian tax withheld.Disposition of Common SharesUpon the sale or other disposition of common shares, a U.S. Holder generally will recognize capital gain or loss equal to the difference between the amountrealized on the sale or other disposition and such holder’s tax basis in the common shares. Gain or loss upon the sale or other disposition of the common shares willbe long-term if, at the time of the sale or other disposition, the common shares have been held for more than one year. Long-term capital gains of non-corporateU.S. Holders may be eligible for a reduced rate of taxation. The deduction of capital losses is subject to limitations for U.S. federal income tax purposes.28Canadian Federal Income Tax ConsiderationsThis summary is applicable to a holder or prospective purchaser of common shares who, for the purposes of the Income Tax Act (Canada) and any applicabletreaty and at all relevant times, is not (and is not deemed to be) resident in Canada, does not (and is not deemed to) use or hold the common shares in, or in thecourse of, carrying on a business in Canada, and is not an insurer that carries on an insurance business in Canada and elsewhere.This summary is based on the current provisions of the Income Tax Act (Canada), the regulations thereunder, all specific proposals to amend such Act andregulations publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof and the Company’s understanding of the administrativepolicies and assessing practices published in writing by the Canada Revenue Agency prior to the date hereof. This summary does not otherwise take into accountany change in law or administrative policy or assessing practice, whether by judicial, governmental, legislative or administrative decision or action, nor does ittake into account other federal or provincial, territorial or foreign tax consequences, which may vary from the Canadian federal income tax considerationsdescribed herein.Dividends on Common SharesCanadian withholding tax at a rate of 25.0% (subject to reduction under the provisions of any applicable tax treaty) will be payable on dividends (or amountspaid or credited on account or in lieu of payment of, or in satisfaction of, dividends) paid or credited to a holder of common shares. Under the Canada-U.S. IncomeTax Convention (1980), as amended (the “Canada - U.S. Income Tax Treaty”) the withholding tax rate is generally reduced to 15.0% for a holder entitled to thebenefits of the Canada - U.S. Income Tax Treaty who is the beneficial owner of the dividends (or 5.0% if the holder is a company that owns at least 10.0% of thecommon shares).Capital Gains and LossesSubject to the provisions of any relevant tax treaty, capital gains realized by a holder on the disposition or deemed disposition of common shares held as capitalproperty will not be subject to Canadian tax unless the common shares are taxable Canadian property (as defined in the Income Tax Act (Canada)), in which casethe capital gains will be subject to Canadian tax at rates which will approximate those payable by a Canadian resident. Common shares generally will not betaxable Canadian property to a holder provided that, at the time of the disposition or deemed disposition, the common shares are listed on a designated stockexchange (which currently includes the NYSE) unless at any time within the 60 month period immediately preceding such time (a) any combination of (i) suchholder, (ii) persons with whom such holder did not deal at arm’s length or (iii) a partnership in which such holder or any such persons holds a membership interesteither directly or indirectly through one or more partnerships, owned 25.0% or more of the issued shares of any class or series of shares of the Company and (b)more than 50% of the fair market value of the common shares was derived directly or indirectly from one or any combination of (i) real or immovable propertysituated in Canada, (ii) Canadian resource properties, (iii) timber resource properties, and (iv) options in respect of, or interests in, or for civil law rights in, propertydescribed in any of paragraphs (i) to (iii), whether or not the property exists. In certain circumstances set out in the Income Tax Act (Canada), the common sharesmay be deemed to be taxable Canadian property. Under the Canada-U.S. Income Tax Treaty, a holder entitled to the benefits of the Canada - U.S. Income TaxTreaty and to whom the common shares are taxable Canadian property will not be subject to Canadian tax on the disposition or deemed disposition of the commonshares unless at the time of disposition or deemed disposition, the value of the common shares is derived principally from real property situated in Canada.29Item 6. Selected Financial DataThe selected financial data set forth below is derived from the consolidated financial statements of the Company which has been prepared in accordance withU.S. GAAP. All financial information referred to herein is expressed in U.S. dollars unless otherwise noted. Years Ended December 31, (In thousands of U.S. dollars, except per share amounts) 2019 2018 2017 2016 2015 Statements of Operations Data: Revenue $ 395,664 $ 374,401 $ 380,767 $ 377,334 $ 373,805 Costs and expenses applicable to revenues 181,492 166,472 195,521 174,656 154,517 Gross margin $ 214,172 $ 207,929 $ 185,246 $ 202,678 $ 219,288 Net income $ 58,571 $ 33,595 $ 12,518 $ 39,320 $ 64,624 Net income attributable to common shareholders $ 46,866 $ 22,844 $ 2,344 $ 28,788 $ 55,844 Net income per share attributable to common shareholders Net income per share – basic & diluted $ 0.76 $ 0.36 $ 0.04 $ 0.43 $ 0.79 As at December 31, (in thousands of U.S. dollars) 2019 (1) 2018 (2) 2017 (3) 2016 2015 Balance Sheet Data Cash and cash equivalents $ 109,484 $ 141,590 $ 158,725 $ 204,759 $ 317,449 Total assets $ 889,069 $ 873,600 $ 866,612 $ 857,334 $ 930,629 Total bank indebtedness $ 18,229 $ 37,753 $ 25,357 $ 27,316 $ 29,276 Total shareholders' equity $ 637,187 $ 592,918 $ 602,257 $ 621,574 $ 673,850 (1)On January 1, 2019, the Company adopted ASC Topic 842 “Leases”. The standard was issued to help investors and other financial statements users betterunderstand the amount, timing and uncertainty of cash flows arising from leases. The impact from the adoption was reflected in the Company’s consolidatedfinancial statements on a modified retrospective basis resulting in an increase to Property, plant and equipment of $17.5 million, a decrease to Prepaidexpenses of $0.1 million and an increase to Accrued and other liabilities of $17.4 million. (2)On January 1, 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The standard outlines a five-step modelwhereby revenue is recognized as performance obligations within a contract are satisfied. The standard also requires new, expanded disclosures regardingrevenue recognition. The impact from the adoption was reflected in the Company’s consolidated financial statements on a modified retrospective basisresulting in an increase to opening retained earnings of $27.2 million, net of tax, as at January 1, 2018, with the impact primarily related to revenue from itstheater system business. (3)On January 1, 2017, the Company adopted ASU No. 2016-16, “Income Taxes (Topic 740)”. The purpose of ASU 2016-16 is to eliminate the exception foran intra-entity transfer of an asset other than inventory. The amendments require the recognition of the income tax consequences of an intra-entity transfer ofan asset, other than inventory, when the transfer occurs. The Company elected to early adopt ASU 2016-16 during the first quarter of 2017. The impact fromthe adoption was reflected in the Company’s consolidated financial statements on a modified retrospective basis resulting in an increase to Accumulateddeficit of $8.3 million, a decrease to Other assets of $14.8 million, an increase to Deferred taxes of $7.9 million and an increase to Accrued and otherliabilities of $1.4 million.30Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsOVERVIEW IMAX Corporation, together with its consolidated subsidiaries (the “Company”), is one of the world’s leading entertainment technology companies,specializing in technological innovations powering the presentation of some of today’s most immersive entertainment experiences. Through its proprietarysoftware, theater architecture, patented intellectual property and specialized equipment, IMAX offers a unique end-to-end cinematic solution to create the highestquality, most immersive motion picture and other event experiences for which the IMAX® brand has become known globally. Top filmmakers and studios utilizethe cutting-edge visual and sound technology of IMAX to connect with audiences in innovative ways, and, as a result, IMAX’s network is among the mostimportant and successful distribution platforms for major films and other events around the world. The Company refers to all theaters using the IMAX theatersystem as “IMAX theaters”. There were 1,624 IMAX theater systems (1,529 commercial multiplexes, 14 commercial destinations, 81 institutional) operating in81 countries and territories as at December 31, 2019. This compares to 1,505 theater systems (1,409 commercial multiplexes, 14 commercial destinations, 82institutional) operating in 80 countries and territories as at December 31, 2018.The Company leverages its innovative technology and engineering in all aspects of its core business, which consists of: •the Digital Re-Mastering (“DMR”) of films and other presentations into the IMAX format by enhancing their image resolution and sound quality forexhibition in the IMAX network in exchange for a certain percentage of contingent box office receipts from studios; and •the provision of IMAX premium theater systems (“IMAX theater systems”) to exhibitor customers through sales, long-term leases or joint revenuesharing arrangements.IMAX theater systems are based on proprietary and patented image, audio and other technology developed over the course of the Company’s 52-year historyand combine: •the ability to exhibit content that has undergone IMAX DMR® conversion, which results in higher image and sound fidelity than conventional cinemaexperiences; •advanced, high-resolution projectors with specialized equipment and automated theater control systems, which generate significantly more contrast andbrightness than conventional theater systems; •large screens and proprietary theater geometry, which result in a substantially larger field of view so that the screen extends to the edge of a viewer’speripheral vision and creates more realistic images; •sound system components, which deliver more expansive sound imagery and pinpointed origination of sound to any specific spot in an IMAX theater; •specialized theater acoustics, which result in a four-fold reduction in background noise; and •a license to the globally recognized IMAX brand.In addition, some IMAX movies are filmed using proprietary IMAX film and IMAX certified digital cameras, which offer filmmakers customized guidance andworkflow process to provide further enhanced and differentiated image quality and a film aspect ratio that delivers up to 26% more image onto a movie screen.Together these components cause audiences in IMAX theaters to feel as if they are a part of the on-screen action, creating a more intense, immersive andexciting experience than in a traditional theater.As a result of the engineering and scientific achievements that are a hallmark of The IMAX Experience®, the Company’s exhibitor customers typically charge apremium for IMAX DMR films over films exhibited in their other auditoriums. The premium pricing, combined with the higher attendance levels associated withIMAX DMR films, generates incremental box office for the Company’s exhibitor customers and for the movie studios releasing their films to the IMAX theaternetwork. The incremental box office generated by IMAX DMR films has helped establish IMAX as a key premium distribution and marketing platform forHollywood blockbuster films.31As one of the world’s leaders in entertainment technology, the Company strives to remain at the forefront of advancements in cinema technology. The Companyrecently introduced IMAX with Laser, the Company’s next-generation laser projection system designed for IMAX theaters in commercial multiplexes, whichrepresents a further evolution of IMAX’s proprietary technology. The Company believes that IMAX with Laser delivers increased resolution, sharper and brighterimages, deeper contrast as well as the widest range of colors available to filmmakers today. The Company further believes that IMAX with Laser can help facilitatethe next major lease renewal and upgrade cycle for the global commercial IMAX network.To date the Company has signed IMAX with Laser agreements with leading, global exhibitors such as AMC Entertainment Holdings, Inc. (“AMC”), CineworldGroup PLC (“Cineworld”), CGV Holdings Limited (“CGV”) and Les Cinémas Pathé Gaumont (“Pathé”) (among others) for a total of 139 new theaters, 147upgrades to existing IMAX theaters, and 52 upgrades to existing backlog arrangements. As at December 31, 2019, the Company’s backlog had 144 new IMAXwith Laser systems and 92 upgrades to IMAX with Laser systems and has installed 130 IMAX with Laser systems.The Company is also experimenting with new technologies and new content as a way to deepen consumer engagement and brand loyalty, which includescurating unique, differentiated alternative content to be exhibited in IMAX theaters, particularly during those periods when Hollywood blockbuster film content isnot available. In 2019, the Company has piloted filmed events including Anima, a one-night only event in June featuring music from Radiohead’s Thom Yorke,and Soundgarden: Live from the Artist’s Den: The IMAX Experience, in July and August, in select IMAX theaters. During the fourth quarter of 2019, IMAXreleased the Kanye West film Jesus is King: The IMAX Experience in select IMAX theaters.SOURCES OF REVENUEThe primary revenue sources for the Company can be categorized into four main groups: network business, theater business, new business and other.The network business includes variable revenues that are primarily derived from film studios and exhibitors. Under the Company’s DMR arrangements, theCompany provides DMR services to studios in exchange for a percentage of contingent box office receipts. Under joint revenue sharing arrangements, theCompany provides IMAX theater systems to exhibitors and also receives a percentage of contingent box office receipts.The theater business includes revenues that are primarily derived from theater exhibitors through either a sale or sales-type lease arrangement for IMAX theatersystems. Sales and sales-type lease arrangements typically require fixed upfront and annual minimum payments. The theater business side also includes fixedrevenues that are required under the Company’s hybrid theater systems from the joint revenue sharing arrangements segment. The arrangements for the sale ofprojection systems include indexed minimum payment increases over the term of the arrangement, as well as provision for additional payments in excess of theminimum agreed payments in situations where the theater exceeds certain box office thresholds. In addition, theater exhibitors also pay for associatedmaintenance, extended warranty services and the provision of aftermarket parts of its system components, and these revenues are included in the theater business.New business includes revenue from content licensing and distribution fees associated with the Company’s original content investments, virtual realityinitiatives, IMAX Home Entertainment and other business initiatives that are in the development and/or start-up phase. The Company is currently exploring new technologies and forms of content as a way to deepen consumer engagement and brand loyalty. As such, theCompany is currently engaged in discussions regarding new technologies to further connect the IMAX theater network and to facilitate bringing more uniquecontent, including live events, to IMAX theater audiences. The Company believes such additional connectivity can provide more innovative content to the IMAXtheater network and in turn permit the Company to engage audiences in new ways.The Company also derives a small portion of other revenues from the film studios for provision of film production services, operation of its owned and operatedtheaters and camera rentals.The Company believes that separating the fixed price revenues from the variable sources of revenue, as well as isolating its non-core new business initiatives,provides greater transparency into the Company's performance.32Network Business: Digital Re-Mastering (IMAX DMR) and Joint Revenue Sharing ArrangementsDigital Re-Mastering (IMAX DMR)The Company has developed a proprietary technology, known as IMAX DMR, to digitally re-master Hollywood films into IMAX digital cinema packageformat or 15/70-format film for exhibition in IMAX theaters. IMAX DMR digitally enhances the image resolution of motion picture films for projection on IMAXscreens while maintaining or enhancing the visual clarity and sound quality to levels for which The IMAX Experience is known. The original soundtrack of a filmto be exhibited in the IMAX theater network is re-mastered for the IMAX digital sound systems in connection with the IMAX DMR release. Unlike thesoundtracks played in conventional theaters, IMAX re-mastered soundtracks are uncompressed and full fidelity. IMAX sound systems use proprietary loudspeakersystems and proprietary surround sound configurations that ensure every theater seat is in an optimal listening position. In a typical IMAX DMR film arrangement,the Company receives a percentage, which in recent years has averaged approximately 12.5%, of net box office receipts, defined as gross box office receipts lessapplicable sales taxes, of any commercial films released outside of Greater China in return for converting them to the IMAX DMR format and distributing themthrough the IMAX theater network. Within Greater China, the Company receives a lower percentage of box office receipts for certain Hollywood films.IMAX films also benefit from enhancements made by individual filmmakers exclusively for the IMAX release, and filmmakers and studios have sought IMAX-specific enhancements in recent years to generate interest in and excitement for their films. Such enhancements include shooting films with IMAX cameras toincrease the audience’s immersion in the film and taking advantage of the unique dimensions of the IMAX screen by projecting the film in a larger aspect ratio thatdelivers up to 26% more image onto a movie screen. Avengers: Endgame, the highest-grossing film in history, released in April 2019, was shot entirely usingIMAX cameras. Collectively, the Company refers to those enhancements as “IMAX DNA”. In addition, in 2019 Alita: Battle Angel, Captain Marvel and Disney’sThe Lion King were all released with select scenes specifically formatted for IMAX screens.The Company believes that the growth in international box office remains an important driver of future growth for the Company. During the year endedDecember 31, 2019, 67.2%of the Company’s gross box office from IMAX DMR films was generated in international markets, as compared to 65.0% in the yearended December 31, 2018. To support continued growth in international markets, the Company has sought to bolster its international film strategy, supplementingthe Company’s film slate of Hollywood DMR titles with appealing local IMAX DMR releases in select markets (particularly in China). During 2019, 18 locallanguage IMAX DMR films including 14 in China and one in each of Japan, South Korea, India and Russia, were released to the IMAX theater network. Theblockbuster Ne Zha: the IMAX experience was released in China in July 2019 and it is the Company’s first Chinese animated local language film title. TheCompany expects to announce additional local language IMAX DMR films to be released to the IMAX theater network in 2020 and beyond. In March 2019, theCompany released an IMAX original production, Superpower Dogs.To date, the Company has announced the following 22 DMR titles to be released in 2020 to the IMAX theater network. The following dates noted for filmrelease are subject to change and may vary by territory. •Invasion: The IMAX Experience (Art Pictures Studio, January 2020, Russia); •1917: The IMAX Experience (Universal Pictures (domestic) and eOne International (international), January 2020) IMAX expanded aspect ratio; •Bad Boys For Life: The IMAX Experience (Sony Pictures, January 2020); •Dolittle: The IMAX Experience (Universal Pictures, January 2020); •Birds of Prey: The IMAX Experience (Warner Bros. Pictures, February 2020); •The Invisible Man: The IMAX Experience (Universal Pictures, February 2020); •Bloodshot: The IMAX Experience (Sony Pictures, February 2020/Domestic March 2020); •Onward: The IMAX Experience (Walt Disney Studios, March 2020); •I Still Believe: The IMAX Experience (Lionsgate, March 2020); •A Quiet Place: Part II: The IMAX Experience (Paramount Pictures, March 2020); •Mulan: The IMAX Experience (Walt Disney Studios, March 2020); •Beastie Boys Story: The IMAX Experience (Apple, April 2020, select global markets); •No Time to Die: The IMAX Experience (United Artists Releasing (domestic) and Universal Pictures (international), April 2020) filmed with IMAXcameras; •Black Widow: The IMAX Experience (Walt Disney Studios, May 2020); •Fast & Furious 9: The IMAX Experience (Universal Pictures, May 2020);33 •Wonder Woman 1984: The IMAX Experience (Warner Bros. Pictures, June 2020) filmed with IMAX cameras; •Top Gun: Maverick: The IMAX Experience (Paramount Pictures, June 2020) filmed with IMAX cameras; •Tenet: The IMAX Experience (Warner Bros. Pictures, July 2020) filmed with IMAX cameras; •Detective Chinatown 3: The IMAX Experience (Wanda Studios, TBD 2020, China) filmed with IMAX cameras; •The Rescue: The IMAX Experience (Maoyan, TBD 2020, China); •Vanguard: The IMAX Experience (Tencent, TBD 2020, China); and •Leap: The IMAX Experience (Lian Ray Pictures, TBD 2020, China).In addition, the Company will be releasing an IMAX original production, Asteroid Hunters, in April 2020.The Company remains in active negotiations with all of the major Hollywood studios for additional films to fill out its short and long-term film slate for theIMAX theater network in 2020. As noted above, the Company is also engaged in discussions regarding new technologies and new content in connection with bringing unique events outside ofmovies to the global IMAX theater network.Joint Revenue Sharing Arrangements – Contingent RentThe Company provides IMAX theater systems to certain of its exhibitor customers under joint revenue sharing arrangements (“JRSA”). The Company has twobasic types of joint revenue sharing arrangements: traditional and hybrid.Under a traditional joint revenue sharing arrangement, the Company provides an IMAX theater system to a customer in return for a portion of the customer’sIMAX box office receipts and, in some cases, concession revenues, rather than requiring the customer to pay a fixed upfront payment or annual minimumpayments, as would be required under a sales or sales-type lease arrangement (which is discussed below under “Theater Business”). Payments, which are based onbox office receipts, are required throughout the term of the arrangement and are due either monthly or quarterly. Certain maintenance and extended warrantyservices are provided to the customer for a separate fixed annual fee. The Company retains title to the theater system equipment components, and the equipment isreturned to the Company at the conclusion of the arrangement.Under a hybrid joint revenue sharing arrangement, by contrast, the customer is responsible for making upfront payments prior to the delivery and installation ofthe IMAX theater system in an amount that is typically half of what the Company would receive from a straight sale transaction. As with a traditional jointrevenue sharing arrangement, the customer also pays the Company a portion of the customer’s IMAX box office receipts over the term of the arrangement,although the percentage of box office receipts owing to the Company is typically half that of a traditional joint revenue sharing arrangement.Hybrid joint revenue sharing arrangements that take the form of leases report their fixed revenues in the Company’s theater business operations, while thecontingent box office receipts are included in the Company’s network business operations in the period they are earned. Hybrid joint revenue sharingarrangements that take the form of sales arrangements, which occur when title is transferred to the customer at transfer of control of the system, record their fixedrevenues and an estimate of the ongoing contingent box office revenue in the Company’s theater business operations at the point of revenue recognition.Adjustments to the estimated contingent rent flow through theater business operations as they occur over the life of the contracts.Under the majority of joint revenue sharing arrangements (both traditional and hybrid), the initial non-cancellable term of IMAX theater systems is 10 years orlonger, 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 fornon-payment or other defaults by the customer. The contracts are non-cancellable by the customer unless the Company fails to perform its obligations.The introduction of joint revenue sharing arrangements has been an important factor in the expansion of the Company’s commercial theater network. Jointrevenue sharing arrangements allow commercial theater exhibitors to install IMAX theater systems without the significant initial capital investment required in asale or sales-type lease arrangement. Joint revenue sharing arrangements drive recurring cash flows and earnings for the Company, as customers under jointrevenue sharing arrangements pay the Company a portion of their ongoing box office. The Company funds its joint revenue sharing arrangements through cashflows from operations. As at December 31, 2019, the Company had 870 theaters in operation under joint revenue sharing arrangements, a 9.0% increase ascompared to the 798 theaters in operations under joint revenue sharing arrangements as at December 31, 2018. The Company also had contracts in backlog for 353theaters under joint revenue sharing arrangements as at December 31, 2019, including 87 upgrades to existing theater locations and 266 new theater locations.34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 anumber of factors including film performance, the mix of theater system configurations, the timing of installation of these theater systems, the nature of thearrangement, the location, size and management of the theater and other factors specific to individual arrangements.IMAX Systems – Contingent RentCertain sales-type lease arrangements include contingent rent in excess of fixed minimum ongoing payments. This contingent rent, which is included in theCompany’s network business operations, is recognized after the fixed minimum amount per annum is exceeded as driven by box office performance. Contingentpayments in excess of fixed minimum ongoing payments of sales or sales-type lease arrangements are recognized as revenue when reported by theater operators,provided collectability is reasonably assured. In addition, contingent rent includes amounts realized for changes in rent and maintenance payments which areindexed to a local consumer price index.Theater Business: IMAX Systems, Theater System Maintenance and Fixed Fees from Joint Revenue Sharing ArrangementsIMAX SystemsThe Company also provides IMAX theater systems to customers on a sales or long-term lease (sales-type lease) basis, typically with an initial 10-year term.These agreements typically require the payment of initial fees and ongoing fees (which can include a fixed minimum amount per annum and contingent fees inexcess of the minimum payments), as well as maintenance and extended warranty fees. The initial fees vary depending on the system configuration and location ofthe theater. Initial fees are paid to the Company in installments between the time of system signing and the time of system installation, which is when the total ofthese fees, in addition to the present value of future annual minimum payments, are recognized as revenue. Ongoing fees are paid over the term of the contract,commencing after the theater system has been installed, and is a fixed minimum amount per annum. Finance income is derived over the term of a financed sale orsales-type lease arrangement as the unearned income on that financed sale or sales-type lease is earned. Certain maintenance and extended warranty services areprovided to the customer for a separate fixed annual fee.Sales of IMAX theater systems, which include the proprietary IMAX technology embedded in its projectors, patented software, specialized equipment andautomated theater control systems, represent another segment of the Company’s business. Under the Company’s sales agreements, title to the theater systemequipment components passes to the customer. In certain instances, however, the Company retains title or a security interest in the equipment until the customerhas made all payments required under the agreement. Under the terms of a sales-type lease agreement, title to the theater system equipment components remainswith the Company. The Company has the right to remove the equipment for non-payment or other defaults by the customer.The revenue earned from customers under the Company’s theater system sales or lease agreements varies from quarter to quarter and year to year based on anumber of factors, including the number and mix of theater system configurations sold or leased, the timing of installation of the theater systems, the nature of thearrangement and other factors specific to individual contracts.Under hybrid joint revenue sharing arrangements that take the form of sales arrangements, title and control of the projection system transfer to the customer atthe point of revenue recognition, which is the earlier of client acceptance of the theater installation, including projectionist training, and theater opening to thepublic. Under the new revenue recognition standard, the percentage payment is considered variable consideration that must be estimated and recognized at thetime of initial revenue recognition. Using box office projections and the Company’s history with theater and box office experience in different territories, theCompany estimates the amount of percentage payment earned over the life of the arrangement, subject to sufficient constraint such that there is not a risk ofsignificant revenue reversal. Under the previous recognition standard, these amounts were recognized as reported by exhibitors (or customers) in future periods. Asa result, the Company’s hybrid sales arrangements are grouped with the traditional sales segment since the total consideration received and the revenue recognitiontiming at transfer of control of the assets now resemble those of the traditional sale arrangements.35Joint Revenue Sharing Arrangements – Fixed FeesAs discussed in joint revenue sharing arrangements above, under a hybrid joint revenue sharing arrangement that takes the form of a lease arrangement, thecustomer is responsible for making upfront payments prior to the delivery and installation of the IMAX theater system for an amount that is typically half of whatthe Company would receive from a straight sale transaction. These fixed upfront payments are included in the Company’s theater business operations.Theater System MaintenanceFor all IMAX theaters, theater owners or operators are also responsible for paying the Company an annual maintenance and extended warranty fee. Under thesearrangements, the Company provides proactive and emergency maintenance services to every theater in its network to ensure that each presentation is up to thehighest IMAX quality standard. Annual maintenance fees are paid throughout the duration of the term of the theater agreements.Other Theater RevenuesAdditionally, the Company generates revenues from the sale of after-market parts and 3D glasses.Revenues from theater business arrangements are recognized at a different time from when cash is collected. See note 2 in Item 8 of this 2019 Form 10-K forfurther discussion on the Company’s revenue recognition policies.New BusinessIn recent years, the Company has been exploring several new lines of business and new initiatives outside of its core business to leverage its proprietary,innovative technologies, its leadership position in the entertainment technology space and its unique relationship with content creators. IMAX EnhancedIn September 2018, the Company announced a new home entertainment licensing and certification program called IMAX Enhanced. This initiative waslaunched along with audio leader DTS (an Xperi subsidiary), capitalizing on the companies’ decades of combined expertise in image and sound science. Thecertification program combines high-end consumer electronics products with IMAX digitally re-mastered 4K high dynamic range (HDR) content and DTS audiotechnologies to offer consumers immersive sight and sound experiences for the home.To be accepted into the program, leading consumer electronics manufacturers must design 4K HDR televisions, A/V receivers, sound systems and other hometheater equipment to meet a carefully prescribed set of audio and video performance standards, set by a certification committee of IMAX and DTS engineers andsome of Hollywood’s leading technical specialists.The program will digitally re-master content to produce more vibrant colors, greater contrast and sharper clarity, and will also deliver an IMAX signature soundexperience.IMAX Enhanced Program device partners include Sony Electronics, Denon, Marantz, Pioneer, TCL (among others) and studio partners include Sony Picturesand Paramount Pictures.Connected Theaters The Company is currently exploring new technologies and forms of content as a way to deepen consumer engagement and brand loyalty. As such, theCompany is currently engaged in discussions regarding new technologies to further connect the IMAX theater network and to facilitate bringing more uniquecontent, including live events, to IMAX theater audiences. The Company believes such additional connectivity can provide more innovative content to the IMAXtheater network and in turn permit the Company to engage audiences in new ways.The Company continues to believe that the IMAX network serves as a valuable platform to launch and distribute original content, especially during shoulderperiods.36OtherThe Company is also a distributor of large-format films, primarily for its institutional theater partners. The Company generally distributes films which itproduces or for which it has acquired distribution rights from independent producers. The Company receives either a percentage of the theater box office receiptsor a fixed amount as a distribution fee.In addition, the Company also provides film post-production and quality control services for large-format films (whether produced internally or externally), anddigital post-production services. The Company derives a small portion of its revenues from other sources including: one owned and operated IMAX theater; acommercial arrangement with one theater resulting in the sharing of profits and losses; the provision of management services to four other theaters; renting itsproprietary 2D and 3D large-format film and digital cameras to third-party production companies; and also offering production advice and technical assistance toboth documentary and Hollywood filmmakers. In January 2019, the Company closed its owned and operated theater in Minneapolis, Minnesota to better focus onother parts of its business. The Company now has one remaining owned and operated theater in Sacramento, California.IMAX Theater Network and BacklogIMAX Theater NetworkThe following table outlines the breakdown of the IMAX theater network by type and geographic location as at December 31: 2019 Theater Network Base 2018 Theater Network Base CommercialMultiplex CommercialDestination Institutional Total CommercialMultiplex CommercialDestination Institutional Total United States 371 4 33 408 365 4 33 402 Canada 39 2 7 48 39 2 7 48 Greater China(1) 702 — 15 717 624 — 15 639 Western Europe 115 4 10 129 101 4 10 115 Asia (excluding Greater China) 119 2 2 123 112 2 3 117 Russia & the CIS 68 — — 68 62 — — 62 Latin America(2) 50 1 12 63 47 1 12 60 Rest of the World 65 1 2 68 59 1 2 62 Total 1,529 14 81 1,624 1,409 14 82 1,505 (1)Greater China includes China, Hong Kong, Taiwan and Macau.(2)Latin America includes South America, Central America and Mexico.37The Company currently believes that over time its commercial multiplex theater network could grow to approximately 3,318 IMAX theaters worldwide from1,529 commercial multiplex IMAX theaters operating as at December 31, 2019. The Company believes that the majority of its future growth will come frominternational markets. As at December 31, 2019, 71.9% of IMAX theater systems in operation were located within international markets (defined as all countriesother than the United States and Canada), up from 70.1% as at December 31, 2018. Revenues and gross box office derived from outside the United States andCanada continue to exceed revenues and gross box office from the United States and Canada. Risks associated with the Company’s international business areoutlined in “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 Item 1A of Part I of this 2019 Form 10-K.Greater China is currently the Company’s largest market, measured by revenues, with approximately 31% of overall revenues generated from the Company’sChina operations in 2019. As at December 31, 2019, the Company had 717 theaters operating in Greater China with an additional 253 theaters in backlog that arescheduled to be installed by 2023. The Company’s backlog in Greater China represents 47.6% of the Company’s current backlog including upgrades. TheCompany’s largest single international partnership is in China with Wanda Film (“Wanda”). Wanda’s total, commitment to the Company is for 359 theater systemsin Greater China (of which 345 theater systems are under the parties’ joint revenue sharing arrangement). See “Risk Factors – The Company faces risks inconnection with the continued expansion of its business in China” and “Risk Factors – General political, social and economic conditions can affect the Company’sbusiness by reducing both revenue generated from existing IMAX theater systems and the demand for new IMAX theater systems” in Item 1A of Part I of this2019 Form 10-K.The following table outlines the breakdown of the Commercial Multiplex theater network by arrangement type and geographic location as at December 31: 2019 IMAX Commercial Multiplex Theater Network TraditionalJRSA HybridJRSA Sale / Sales-type lease Total Domestic Total (United States & Canada) 277 5 128 410 International: Greater China 357 106 239 702 Asia (excluding Greater China) 34 1 84 119 Western Europe 46 27 42 115 Russia & the CIS — — 68 68 Latin America 2 — 48 50 Rest of the World 15 — 50 65 International Total 454 134 531 1,119 Worldwide Total 731 139 659 1,529 2018 IMAX Commercial Multiplex Theater Network TraditionalJRSA HybridJRSA Sale / Sales-type lease Total Domestic Total (United States & Canada) 273 5 126 404 International: Greater China 316 94 214 624 Asia (excluding Greater China) 30 1 81 112 Western Europe 40 24 37 101 Russia & the CIS — — 62 62 Latin America 1 — 46 47 Rest of the World 14 — 45 59 International Total 401 119 485 1,005 Worldwide Total 674 124 611 1,409 As at December 31, 2019, 277 (2018 ― 273) of the 731 (2018 ― 674) theaters under traditional joint revenue sharing arrangements in operation, or 37.9%(2018 ― 40.5%) were located in the United States and Canada, with the remaining 454 (2018 ― 401) or 62.1% (2018 ― 59.5%) of arrangements being located ininternational markets.38Sales BacklogThe Company’s current sales backlog is as follows: December 31, 2019 December 31, 2018 Number of Dollar Value Number of Dollar Value Systems (in thousands) Systems (in thousands) Sales and sales-type lease arrangements 178 $218,448 177 $229,027 Joint revenue sharing arrangements Hybrid lease arrangements 140 103,296 118 67,176 Traditional arrangements 213 (1) 6,200 (2) 269 (3) 8,100 (2) 531 (4) $327,944 564 (5) $304,303 (1)Includes 47 theater systems where the customer has the option to convert from a joint revenue sharing arrangement to a sales arrangement.(2)Reflects contractual upfront payments. Future contingent payments are not reflected as these are based on negotiated shares of box office results.(3)Includes 46 theater systems where the customer has the option to convert from a joint revenue sharing arrangement to a sales arrangement.(4)Includes 153 new laser projection system configurations (144 of which are IMAX with Laser projection system configurations and 9 of which are GT Lasers)and 97 upgrades of existing locations to laser projection system configurations (92 of which are for the IMAX with Laser projection system configurationsand 5 of which are GT Lasers).(5)Includes 83 new laser projection system configurations (73 of which are IMAX with Laser projection system configurations and 10 of which are GT Lasers)and 100 upgrades of existing locations to laser projection system configurations (98 of which are for the IMAX with Laser projection system configurationsand 2 of which are GT Lasers).The number of theater systems in the backlog reflects the minimum number of commitments under signed contracts. The dollar value fluctuates depending onthe number of new theater system arrangements signed from year to year, which adds to backlog and the installation and acceptance of theater systems and thesettlement of contracts, both of which reduce backlog. Sales backlog typically represents the fixed contracted revenue under signed theater system sale and leaseagreements that the Company believes will be recognized as revenue upon installation and acceptance of the associated theater, as well as a variable considerationestimate, however it excludes amounts allocated to maintenance and extended warranty revenues. The value of sales backlog does not include revenue fromtheaters in which the Company has an equity interest, operating leases or long-term conditional theater commitments. The value of theaters under joint revenuesharing arrangements is excluded from the dollar value of sales backlog, although certain theater systems under joint revenue sharing arrangements provide forcontracted upfront payments and therefore carry a backlog value based on those payments. The Company believes that the contractual obligations for theatersystem installations that are listed in sales backlog are valid and binding commitments.From time to time, in the normal course of its business, the Company will have customers who are unable to proceed with a theater system installation for avariety of reasons, including the inability to obtain certain consents, approvals or financing. Once the determination is made that the customer will not proceed withinstallation, the agreement with the customer is terminated or amended. If the agreement is terminated, once the Company and the customer are released from alltheir future obligations under the agreement, all or a portion of the initial rents or fees that the customer previously made to the Company are recognized asrevenue.Certain of the Company’s contracts contain options for the customer to elect to upgrade system type during the term or to alter the contract structure (forexample, from JRSA to sale model) after signing but before installation. Current backlog information reflects all known elections.39The following table outlines the breakdown of the total backlog by arrangement type and geographic location as at December 31: 2019 IMAX Theater Backlog TraditionalJRSA HybridJRSA Sale / Lease Total Domestic Total (United States & Canada) 128 3 9 140 International: Greater China 58 124 71 253 Asia (excluding Greater China) 9 — 35 44 Western Europe 11 13 7 31 Russia & the CIS — — 12 12 Latin America 3 — 11 14 Rest of the World 4 — 33 37 International Total 85 137 169 391 Worldwide Total 213 140 178 531 (1) 2018 IMAX Theater Backlog TraditionalJRSA HybridJRSA Sale / Lease Total Domestic Total (United States & Canada) 145 3 7 155 International: Greater China 98 98 76 272 Asia (excluding Greater China) 4 — 38 42 Western Europe 17 17 9 43 Russia & the CIS — — 17 17 Latin America 1 — 10 11 Rest of the World 4 — 20 24 International Total 124 115 170 409 Worldwide Total 269 118 177 564 (2) (1)Includes 144 new IMAX with Laser projection system configurations and 92 upgrades of existing locations to IMAX with Laser projection systemconfigurations.(2)Includes 73 new IMAX with Laser projection system configurations and 98 upgrades of existing locations to IMAX with Laser projection systemconfigurations.Approximately 73.6% of IMAX theater system arrangements in backlog as at December 31, 2019 are scheduled to be installed in international markets (2018― 72.5%).40Signings and InstallationsThe following reflects the Company’s theater system signings and installations: Years Ended December 31, 2019 2018 Theater System Signings: Full new sales and sales-type lease arrangements 49 57 New traditional joint revenue sharing arrangements 7 55 New hybrid joint revenue sharing lease arrangements 48 10 Total new theaters 104 122 Upgrades of IMAX theater systems 39 112 (1)Total theater signings 143 234 Years Ended December 31, 2019 2018 Theater System Installations: Full new sales and sales-type lease arrangements 55 (2) 63 New traditional joint revenue sharing arrangements 54 72 New hybrid joint revenue sharing lease arrangement 20 14 Total new theaters 129 149 Upgrades of IMAX theater systems 57 23 Total theater installations 186 172 (1)Includes 105 theater systems related to existing AMC, Regal and Pathé theaters to be upgraded to IMAX with Laser projection systems on new lease termsranging from 10 to 12 years.(2) Includes one IMAX digital theater system that was relocated from a previous location. This installation is incremental to the IMAX theater network but fullrevenue for the digital theater system was not received.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe Company prepares its consolidated financial statements in accordance with U.S. GAAP.The preparation of these consolidated financial statements requires management to make estimates and judgments under its accounting policies that affect thefinancial results. The precision of these estimates and the likelihood of future changes depend on a number of underlying variables and a range of possibleoutcomes. Management bases its estimates on historical experience, future expectations and other assumptions that are believed to be reasonable at the date of theconsolidated financial statements. Actual results may differ from these estimates due to uncertainty involved in measuring, at a specific point in time, events whichare continuous in nature, and differences may be material. The Company’s significant accounting policies are discussed in note 2 to its audited consolidatedfinancial statements in Item 8 of this 2019 Form 10-K. Management considers an accounting policy to be critical if it is important to its financial condition andresults, and requires significant judgments and estimates.41The Company considers the following significant estimates, assumptions and judgments to have the most significant effect on its results:Revenue RecognitionApplication of the various accounting principles under U.S. GAAP related to the measurement and recognition of revenue requires the Company to makejudgments and estimates. Contract arrangements with nonstandard terms and conditions may require significant contract interpretation to determine the appropriateaccounting. The Company believes that revenue recognition is critical for its financial statements because consolidated net income is directly affected by the timingof revenue recognition.On January 1, 2018, the Company adopted ASC Topic 606, utilizing the modified retrospective transition method with a cumulative catch-up adjustment. TheCompany applied the new revenue standard only to contracts not completed as at the date of initial application, referred to as open contracts. All system sales andmaintenance contracts with the existing network of IMAX theaters and the backlog of sales contracts make up a significant majority of the Company’s opencontracts at any point in time. DMR arrangements where the film continues to be shown by the Company’s exhibitor partners, film distribution arrangements withremaining terms, aftermarket sales orders that have been received but for which control of the assets has not yet transferred to the customer are all also consideredopen contracts.The Company’s revenues from the sales of projection systems, provision of maintenance services, sale of aftermarket 3D glasses and parts, conversion of filmcontent into the IMAX DMR format, distribution of documentary film content and the provision of post- production services are within the scope of the standard.The Company’s joint revenue sharing revenue arrangements, with the exception of those where the title transfers to the customer prior to recognition of the systemrevenue (hybrid sales arrangements), are not in scope of the standard due to their classification as leases. Similarly, any system revenue transactions classified assales-type leases are excluded from the provisions of the new standard.The Company’s “System Obligation” consists of a theater system (projector, sound system, screen system and, if applicable, 3D glasses cleaning machine);services associated with the theater system including theater design support, supervision of installation services, and projectionist training; a license to use theIMAX brand to market the theater; 3D glasses; maintenance and extended warranty services; and potentially the licensing of films. The Company evaluates all ofthe performance obligations in an arrangement to determine which are considered distinct, either individually or in a group, for accounting purposes and which ofthe deliverables represent separate units of accounting based on the applicable accounting guidance in ASC Topic 842 “Leases”; ASC Topic 460 “Guarantees”;and ASC Topic 606 “Revenue from Contracts with Customers”. If separate units of accounting are either required under the relevant accounting standards ordetermined to be applicable under the Revenue Recognition Topic, the total transaction price received or receivable in the arrangement is allocated based on theapplicable guidance in the above noted standards.The Company estimates the transaction price, including an estimate of future variable consideration, received in exchange for the goods delivered or servicesrendered. The arrangements for the sale of projection systems include indexed minimum payment increases over the term of the arrangement, as well as provisionfor additional payments in excess of the minimum agreed payments in situations where the theater exceeds certain box office thresholds. Both of these contractprovisions constitute variable consideration that, subject to constraints to ensure reversal of revenues do not occur, require estimation and recognition upon transferof control of the System Obligation to the customer, when control transfers, which is at the earlier of client acceptance of the installation of the system, includingprojectionist training, and the theater’s opening to the public. As this variable consideration extends through the entire term of the arrangement, which typicallylast 10 years, the Company applies constraints to its estimates and recognizes the variable consideration on a discounted present value basis at recognition.In certain joint revenue sharing arrangements, specifically the Company’s hybrid sales arrangements, the Company’s arrangements call for sufficient upfrontrevenues to cover the cost of the arrangement, with monthly payments calculated based on the theater’s net box office earned. Title and control of the projectionsystem transfer to the customer at the earlier of client acceptance of the theater installation, including projectionist training, and theater opening to the public. Thepercentage payment is considered variable consideration that must be estimated and recognized at the time of initial revenue recognition. Using box officeprojections and the Company’s history with theater and box office experience in different territories, the Company estimates the amount of percentage paymentearned over the life of the arrangement, subject to sufficient constraint such that there is not a risk of significant revenue reversal. The Company includes thehybrid sales arrangements with the traditional sales segment since the transaction price received and the revenue recognition timing at transfer of control of theassets now very closely resemble those of the traditional sale arrangements.42The Company’s arrangements include a requirement for the provision of maintenance services over the life of the arrangement, subject to a consumer priceindex increase on renewal each year. The Company has included the future consideration from the provision of maintenance services in the allocation of thetransaction price to separate performance obligations at the inception of the arrangement. As the maintenance services are a stand ready obligation, revenue isrecognized evenly over the contract term.The Company’s DMR and Film Distribution revenue streams fall under the variable consideration exemption for sales- or usage-based royalties. While theCompany does not hold rights to the intellectual property in the form of the DMR film content, the Company is being reimbursed for the application of itsintellectual property in the form of its patented DMR processes used in the creation of new intellectual property in the form of an IMAX DMR version of film. TheCompany’s Film Distribution revenues are strictly from the license of its intellectual property in the form of documentary film content to which the Companyholds distribution rights.The Company’s remaining revenue streams do not call for variable consideration and recognition of revenues transfer at the time of provision of service ortransfer of control of goods as appropriate. Constraints on the Recognition of Variable ConsiderationThe recognition of variable consideration involves a significant amount of judgment. Variable consideration is to be recognized subject to appropriateconstraints to avoid a significant reversal of revenue in future periods. The Company will review the variable consideration receivable on an ongoing basis. ASCTopic 606 requires variable consideration to be recognized subject to appropriate constraints to avoid a significant reversal of revenue in future periods. Thestandard identifies several examples of situations where constraining variable consideration would be 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; and •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 similarcircumstances.The Company’s significant streams of variable consideration relate to indexed increases to its sales arrangements’ minimum payments and additional paymentsin excess of the minimum payments, and to its hybrid sales arrangements’ percentage payment of box office over the term of the arrangement. Increases to payments indexed to a consumer price index are outside of the Company’s control, but the movement in the rates are historically well documentedand economic trends in inflation are easily accessible. The Company has applied a most likely amount estimate to each of the contracts subject to an indexedincrease. These estimated amounts are present valued back to the recognition date, or date of transition as appropriate, using the customer’s implied borrowing rate.Additional payments in excess of minimum payments and payments based on a percentage of box office over the term are driven by the acceptance of filmcontent in future periods that is outside of the Company’s direct influence. The Company tracks numerous performance statistics for theater performance inregions worldwide and applies its understanding of theater markets to develop a most likely amount estimate for each theater impacted by these provisions.Performance projections are discounted by reducing projections by a percentage factor for theaters with no or limited historical experience. In cases where directhistorical experience can be observed, average experience, eliminating significant outliers, is used. Amounts are then discounted back to the recognition date, ordate of transition, as appropriate using a risk-weighted rate.43Arrangements with Multiple Performance ObligationsThe Company’s revenue arrangements with certain customers may involve performance obligations consisting of the delivery of a theater system (projector,sound system, screen system and, if applicable, 3D glasses cleaning machine); services associated with the theater system including theater design support,supervision of installation, and projectionist training; a license to use the IMAX brand; 3D glasses; maintenance and extended warranty services; and licensing offilms. The Company evaluates all of the performance obligations in an arrangement to determine which are considered distinct, either individually or in a group,for accounting purposes and which of the deliverables represent separate units of accounting based on the applicable accounting guidance in ASC Topic 842“Leases”; ASC Topic 460 “Guarantees”; and ASC Topic 606 “Revenue from Contracts with Customers”. If separate units of accounting are either required underthe relevant accounting standards or determined to be applicable under the Revenue Recognition Topic, the total consideration received or receivable in thearrangement is allocated based on the applicable guidance in the above noted standards.Theater SystemsThe Company has identified the projection system, sound system, screen system and, if applicable, 3D glasses cleaning machine, theater design support,supervision of installation, projectionist training and the use of the IMAX brand to be, as a group, a distinct performance obligation, and a single unit of accounting(the “System Obligation”). When an arrangement does not include all the performance obligations of a System Obligation, the performance obligations of theSystem Obligation included in the arrangement are considered by the Company to be a grouped distinct performance obligation and a single unit of accounting.The Company is not responsible for the physical installation of the equipment in the customer’s facility; however, the Company supervises the installation by thecustomer. The customer has the right to use the IMAX brand from the date the Company and the customer enter into an arrangement.The Company’s System Obligation arrangements involve either a lease or a sale of the theater system. The transaction price for the System Obligation, otherthan for those delivered pursuant to joint revenue sharing arrangements, consist of upfront or initial payments made before and after the final installation of thetheater system equipment and ongoing payments throughout the term of the lease or over a period of time, as specified in the arrangement. The ongoing paymentsare the greater of an annual fixed minimum amount or a certain percentage of the theater box-office. Amounts received in excess of the annual fixed minimumamounts are considered contingent payments. The Company’s arrangements are non-cancellable, unless the Company fails to perform its obligations. In theabsence 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 theCompany 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 materialdefault and only if the Company does not cure the default within a specified period.Transaction price is allocated to each separate performance obligation for each good or service based on estimated standalone selling prices. The Company usesobservable prices when the Company sells the deliverable separately and is the price actually charged by the Company for that deliverable. Standalone prices areestablished for the Company’s System Obligation, maintenance and extended warranty services and film license arrangements. The Company uses an adjustedmarket assessment approach for separate performance obligations that do not have standalone selling prices or third-party evidence of estimated standalone sellingprice. The Company considers multiple factors including the Company’s historical pricing practices, product class, market competition and geography. Film Production and IMAX DMR ServicesIn certain film arrangements, the Company produces a film financed by third parties whereby the third party retains the copyright and the Company obtainsexclusive distribution rights. Under these arrangements, the Company is entitled to receive a fixed fee or to retain as a fee the excess of funding over cost ofproduction (the “production fee”). The third parties receive a portion of the revenues received by the Company from distributing the film, which is charged to costsand expenses applicable to revenues-services. The production fees are deferred and recognized as a reduction in the cost of the film based on the ratio of theCompany’s distribution revenues recognized in the current period to the ultimate distribution revenues expected from the film. Film exploitation costs, includingadvertising and marketing are recorded in costs and expenses applicable to revenues-services as incurred.Revenues from digitally re-mastering (“IMAX DMR”) films where third parties own or hold the copyrights and the rights to distribute the film are derived inthe form of processing fees for the application of the Company’s patented processes calculated as a percentage of box-office receipts generated from the re-mastered films. Since these fees are subject to the sales-based royalty exception, they are recognized as Services revenues when box office receipts are reported bythe third party that owns or holds the related film rights.44Losses on film production and IMAX DMR services are recognized as costs and expenses applicable to revenues-services in the period when it is determinedthat 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 filmproduction and the cost of IMAX DMR services.Allowances for Accounts Receivable and Financing ReceivablesAllowances for doubtful accounts receivable are based on the Company’s assessment of the collectability of specific customer balances, which is based upon areview of the customer’s credit worthiness, past collection history and the underlying asset value of the equipment, where applicable. Interest on overdue accountsreceivable is recognized as income as the amounts are collected.The Company monitors the performance of the theaters to which it has leased or sold theater systems which are subject to ongoing payments. When facts andcircumstances indicate that there is a potential impairment in the accounts receivable, net investment in lease or a financing receivable, the Company will evaluatethe potential outcome of either a renegotiation involving changes in the terms of the receivable or defaults on the existing lease or financed sale agreements. TheCompany will record a provision if it is considered probable that the Company will be unable to collect all amounts due under the contractual terms of thearrangement or a renegotiated lease amount will cause a reclassification of the sales-type lease to an operating lease.These provisions are adjusted when there is a significant change in the amount or timing of the expected future cash flows or when actual cash flows differ fromcash flow previously expected. While such credit losses have historically been within the Company’s expectations and the provisions established, the Companycannot guarantee that it will continue to experience the same credit loss rates that it has in the past. Changes in the underlying financial condition of its customerscould result in a material impact on the Company’s consolidated results of operation and financial position.InventoriesThe Company records write-downs for excess and obsolete inventory based upon current estimates of future events and conditions, including the anticipatedinstallation dates for the current backlog of theater system contracts, technological developments, signings in negotiation, growth prospects within the customers’ultimate marketplace and anticipated market acceptance of the Company’s current and pending theater systems.Asset ImpairmentsThe Company performs a qualitative, and when necessary quantitative, impairment test on its goodwill on an annual basis, coincident with the year-end, as wellas in quarters where events or changes in circumstances suggest that the carrying amount may not be recoverable.Goodwill impairment is assessed at the reporting unit level by comparing the unit’s carrying value, including goodwill, to the fair value of the unit. Thecarrying values of each unit are subject to allocations of certain assets and liabilities that the Company has applied in a systematic and rational manner. The fairvalue of the Company’s units is assessed using a discounted cash flow model. The model is constructed using the Company’s budget and long-range plan as abase. The Company performs a qualitative assessment of its reporting units and certain select quantitative calculations against its current long range plan todetermine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount(Step 0).Long-lived asset impairment testing is performed at the lowest level of an asset group at which identifiable cash flows are largely independent. In performingits review for recoverability, the Company estimates the future cash flows expected to result from the use of the asset or asset group and its eventual disposition. Ifthe sum of the expected future cash flows is less than the carrying amount of the asset or asset group, an impairment loss is recognized in the consolidatedstatement of operations. Measurement of the impairment loss is based on the excess of the carrying amount of the asset or asset group over the fair value calculatedusing discounted expected future cash flows.The recoverability of film assets is dependent upon commercial acceptance of the films. If events or circumstances indicate that the recoverable amount of afilm asset is less than the unamortized film costs, the film asset is written down to its fair value. The Company determines the fair value of its film assets using adiscounted cash flow model.45The Company’s estimates of future cash flows involve anticipating future revenue streams, which contain many assumptions that are subject to variability, aswell as estimates for future cash outlays, the amounts of which, and the timing of which are both uncertain. Actual results that differ from the Company’s budgetand long-range plan could result in a significantly different result to an impairment test, which could impact earnings.The Company's investment in debt securities classified as an available-for-sale investment has unrealized holding gains and losses which is excluded fromearnings and reported in other comprehensive income until realized. Realization occurs upon the sale of a portion of or the entire investment. The investment isimpaired if the value is not expected to recover based on the length of time and extent to which the market value has been less than cost. Furthermore, when theCompany intends to sell a specifically identified beneficial interest, a write-down for other-than-temporary impairment shall be recognized in earnings.Pension Plan AssumptionsThe Company’s pension plan obligations and related costs are calculated using actuarial concepts, within the framework of the Compensation – RetirementBenefits Topic of the FASB ASC. A critical assumption to this accounting is the discount rate. The Company evaluates this critical assumption annually or whenotherwise required to by accounting standards. Other assumptions include factors such as expected retirement date, mortality rate, rate of compensation increase,and estimates of inflation.The discount rate enables the Company to state expected future cash payments for benefits as a present value on the measurement date. The guideline for settingthis rate is a high-quality long-term corporate bond rate. A lower discount rate increases the present value of benefit obligations and increases pension expense.The Company’s discount rate was determined by considering the average of pension yield curves constructed from a large population of high-quality corporatebonds. The resulting discount rate reflects the matching of plan liability cash flows to the yield curves.The discount rate used to present value the pension plan obligation is a key assumption in the determination of the pension benefit obligation and expense. A1.0% change in the discount rate used would result in a $0.6 million reduction or a $0.7 million increase in the pension benefit obligation with a correspondingbenefit or charge recognized in the consolidated statement of operations.Deferred Tax Asset ValuationAs at December 31, 2019, the Company had net deferred income tax assets of $23.9 million. The Company’s management assesses realization of its deferredtax assets based on all available evidence in order to conclude whether it is more likely than not that the deferred tax assets will be realized. Available evidenceconsidered by the Company includes, but is not limited to, the Company’s historical operating results, projected future operating results, reversing temporarydifferences, contracted sales backlog at December 31, 2019, changing business circumstances, and the ability to realize certain deferred tax assets through loss andtax credit carry-back and carry-forward strategies.When there is a change in circumstances that causes a change in judgment about the realizability of the deferred tax assets, the Company would adjust theapplicable valuation allowance in the period when such change occurs.Tax ExposuresThe Company is subject to ongoing tax exposures, examinations and assessments in various jurisdictions. Accordingly, the Company may incur additional taxexpense based upon the outcomes of such matters. In addition, when applicable, the Company adjusts tax expense to reflect the Company’s ongoing assessments ofsuch matters which require judgment and can materially increase or decrease its effective rate as well as impact operating results. The Company provides for suchexposures in accordance with Income Taxes Topic of the FASB ASC.Stock-Based CompensationThe Company’s stock-based compensation generally includes stock options, restricted share units (“RSUs”) and performance share units (“PSUs”). Stock-based compensation is recognized in accordance with the FASB ASC Topic 505, “Equity” and Topic 718, “Compensation-Stock Compensation.” The Companymeasures stock-based compensation cost based on the grant date fair value of the award, which is recognized as an expense in the Consolidated Statement ofOperations on a straight-line basis over the requisite service period. Stock-based compensation expense is not adjusted for estimated forfeitures, but is insteadadjusted upon the actual forfeiture of the award.46Stock-based compensation expense includes compensation cost for employee stock-based payment awards granted and all modified, repurchased or cancelledemployee awards. In addition, compensation expense includes the compensation cost, based on the grant-date fair value calculated for pro forma disclosures underASC 718-10-55, for the portion of awards for which required service had not been rendered that were outstanding. Compensation expense for these employeeawards is recognized using the straight-line single-option method. The Company utilizes the market yield on U.S. treasury securities (also known as nominal rate)over the contractual term of the instrument being issued. Stock OptionsThe Company utilizes a lattice-binomial option-pricing model (“Binomial Model”) to determine the fair value of stock option awards on the grant date. The fairvalue determined by the Binomial Model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjectivevariables. These variables include, but are not limited to, the Company’s expected stock price volatility over the term of the award, and actual and projectedemployee stock option exercise behaviors. The Binomial Model also considers the expected exercise multiple which is the multiple of exercise price to grant price.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 thesubjective assumptions can materially affect the estimated value, in management’s opinion, the Binomial Model best provides a fair measure of the fair value of theCompany’s employee stock options. See note 16(c) for the assumptions used to determine the fair value of stock-based payment awards.As the Company stratifies its employees into homogeneous groups in order to calculate the grant date fair value of options using the Binomial Model, ranges ofassumptions used are presented for the expected life of the option. The Company uses historical data to estimate option exercise behavior within the valuationmodel; various groups of employees that have similar historical exercise behavior are grouped together for valuation purposes. The expected volatility rate isestimated based on a blended volatility method which takes into consideration the Company’s historical share price volatility, the Company’s implied volatilitywhich is implied by the observed current market prices of the Company’s traded options and the Company’s peer group volatility. The Company utilizes theBinomial Model to determine expected option life based on such data as vesting periods of awards, historical data that includes past exercise and post-vestingcancellations and stock price history.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.Restricted Share UnitsThe fair value of RSU awards is equal to the closing price of the Company’s common stock on the date of grant. The value of the portion of the award that isultimately expected to vest is recognized as compensation expense over the requisite service periods in the Company’s Consolidated Statements of Operations.The Company’s RSUs have been classified as equity in accordance with Topic 505.Performance Share UnitsThe Company grants two types of PSU awards, one which vests based on a combination of employee service and the achievement of certain EBITDA-basedtargets and one which vests based on a combination of employee service and the achievement of certain stock-price targets. The fair value of the PSUs withEBITDA-based targets is equal to the closing price of the Company’s common stock on the date of grant. The fair value of the PSUs with stock-price targets isdetermined on the grant date using a Monte Carlo simulation, which is a valuation model which takes into account the likelihood of achieving the stock-pricetargets embedded in the award (“Monte Carlo Model”). The compensation expense attributable to each type of PSU is recognized on a straight-line basis over therequisite service period.The fair value determined by the Monte Carlo Model is affected by the Company’s stock price as well as assumptions regarding a number of highly complexand subjective variables. These variables include, but are not limited to, the Company’s expected stock price volatility over the term of the awards, and actual andprojected employee stock option exercise behaviors.47The amount and timing of compensation expense recognized for PSUs with EBITDA-based targets is dependent upon management's quarterly assessment of thelikelihood 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 previouslyanticipated, a life-to-date adjustment to increase compensation expense is recorded in the period such determination is made. Conversely, if, as a result ofmanagement’s assessment, it is projected that a lower number of PSUs will vest than previously anticipated, a life-to-date adjustment to decrease compensationexpense is recorded in the period such determination is made.The Company’s PSUs have been classified as equity in accordance with Topic 505.Awards to Non-EmployeesStock-based awards for services provided by non-employees within the scope of ASC Topic 718 are measured at grant date fair value of the equity instrumentsthat the Company is obligated to issue when service has been rendered and any other conditions necessary to earn the right to benefit from the instruments havebeen 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 stock-basedawards. When there are performance conditions related to the vesting of the stock-based awards, the Company assesses the probability of vesting at each reportingdate and adjusts the compensation costs based on the probability assessment.Impact of Recently Issued Accounting PronouncementsPlease see note 3 to the audited consolidated financial statements in Item 8 of this 2019 Form 10-K for information regarding the Company’s recent changes inaccounting policies and recently issued accounting pronouncements impacting the Company.ASSET IMPAIRMENTS AND OTHER CHARGES The following table identifies the Company’s charges (recoveries) relating to the impairment of assets: (in thousands of U.S. dollars) Years Ended December 31, 2019 2018 Asset impairments Property, plant and equipment $ 96 $ 3,725 Other assets — 2,565 Prepaid expenses — 121 Other intangible assets — 66 Impairment of investments — — Film assets 1,379 — Other charges: Accounts receivable (net of recoveries) 2,354 3,030 Financing receivables 76 100 Inventories 446 250 Property, plant and equipment 2,360 1,762 Other intangible assets 95 151 Other assets — — Total asset impairments and other charges $ 6,806 $ 11,770 48Asset ImpairmentsIn 2019, the Company reviewed the carrying value of certain documentary film assets as a result of lower than expected revenue being generated during theperiod and revised expectations for future revenues based on the latest information available. An impairment of $1.4 million was recorded based on the carryingvalue of these documentary films as compared to the related estimated future box office and revenues that would ultimately be generated by these films. No suchcharge was recorded in the year ended 2018.In 2018, in connection with the strategic review of the Company’s VR initiative, the Company has decided to close its remaining VR locations and as a resultrecord a one-time impairment charge of $3.7 million in property, plant and equipment, $2.6 million in other assets which includes a $2.5 million impairment of theVR content asset, and $0.1 million in intangible assets. The VR fund is consolidated by the Company and has a third party non-controlling interest. TheCompany’s share of this impairment after non-controlling interest is $0.8 million. No such charge was recorded in 2019. Additional details of the Company’srestructuring activities are discussed in note 26 to its audited consolidated financial statements in Item 8 of this 2019 Form 10-K.The Company records asset impairment charges for property, plant and equipment after an assessment of the carrying value of certain asset groups in light oftheir future expected cash flows. During 2019, the Company recorded asset impairment charges of $0.1 million (2018 ― less than $0.1 million) as the Companyrecognized that the carrying values for the assets exceeded the expected undiscounted future cash flows.Other ChargesThe Company recorded a net provision of $2.4 million in 2019 (2018 — $3.0 million) in accounts receivable. The current year charges include a provision of$3.2 million based on the Company’s ongoing assessment of the collectability of specific customer balances, offset by recoveries of previously provisionedamounts of $0.8 million.In 2019, the Company recorded a net provision of $0.1 million in financing receivables (2018 —$0.1 million). Provisions of the Company’s financingreceivables is recorded when the collectability associated with certain financing receivables is uncertain. These provisions are adjusted when there is a significantchange in the amount or timing of the expected future cash flows or when actual cash flows differ from cash flows previously expected.The Company recorded a $0.4 million provision (2018 —$0.3 million) in costs and expenses applicable to revenues due to a reduction in the net realizablevalue of its inventories. These charges primarily resulted from a reduction in the net realizable value of its theater system equipment inventories and certain servicepart inventories due to normal operational activity.In 2019, the Company recorded a charge of $0.2 million (2018 — $0.8 million) reflecting property, plant and equipment that were no longer in use. In 2019,the Company recorded a charge of $2.2 million (2018 — $0.6 million) in cost of sales applicable to Rentals upon the upgrade of xenon-based digital systems underjoint revenue sharing arrangements to laser-based digital systems.In 2019, the Company recorded a charge of $0.1 million (2018 — $0.2 million) reflecting other intangible assets that were no longer in use. 49NON-GAAP FINANCIAL MEASURESIn this report, the Company presents certain data which are not recognized under U.S. GAAP and are considered “non-GAAP financial measures” under U.S.Securities and Exchange Commission rules. Specifically, the Company presents the following non-GAAP financial measures as supplemental measures of itsperformance: •Adjusted net income; •Adjusted net income per diluted share; •Adjusted net income attributable to common shareholders; •Adjusted net income attributable to common shareholders per diluted share; and •EBITDA and Adjusted EBITDA per Credit Facility.The Company presents adjusted net income and adjusted net income per diluted share, which excludes stock-based compensation, exit costs, restructuringcharges and associated impairments, legal arbitration award, executive transition costs and the related tax impact of these adjustments, because it believes that theyare important supplemental measures of the Company’s comparable controllable operating performance. Although stock-based compensation is an importantaspect of the Company’s employee and executive compensation packages, it is mostly a non-cash expense and is excluded from certain internal businessperformance measures, and the Company wants to ensure that its investors fully understand the impact of its stock-based compensation (net of any related taximpact) and other one-time charges on net income.In addition, the Company presents adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders perdiluted share because it believes that they are important supplemental measures of its comparable financial results. The Company believes by adjusting certainitems that impact trends in business performance it helps ensure that its investors fully understand the impact of net income attributable to non-controllinginterests, its stock-based compensation, exit costs, restructuring charges and associated impairments and legal arbitration award and executive transition costs (netof any related tax impact) in determining net income attributable to common shareholders.Management uses these measures for internal reporting and forecasting purposes in order to review operating performance on a comparable basis from period toperiod. However, these non-GAAP measures may not be comparable to similarly titled amounts reported by other companies. The Company’s non-GAAPmeasures should be considered in addition to, and not as a substitute for, or superior to, net income and net income attributable to common shareholders and othermeasures of financial performance reported in accordance with U.S. GAAP.In addition, management uses “EBITDA”, as such term is defined in the Company’s credit agreement (and which is referred to herein as “Adjusted EBITDAper Credit Facility”, as the credit agreement includes additional adjustments beyond interest, taxes, depreciation and amortization) to evaluate, assess andbenchmark the Company’s operational results. The Company believes that Adjusted EBITDA per Credit Facility presents relevant and useful information widelyused by analysts, investors and other interested parties in the Company’s industry. Accordingly, the Company is disclosing this information to provide additionalinformation with respect to the Company’s ability to comply with its credit agreement requirements. EBITDA is defined as net income with adjustments fordepreciation and amortization, interest income (expense)-net, and income tax provision (benefit). Adjusted EBITDA per Credit Facility is defined as EBITDA plusadjustments for loss from equity accounted investments, stock and other non-cash compensation, exit costs, restructuring charges and associated impairments,legal arbitration award, executive transition costs and adjusted EBITDA attributable to non-controlling interests. 50RESULTS OF OPERATIONSImportant factors that the Company’s Chief Executive Officer (“CEO”) Richard L. Gelfond uses in assessing the Company’s business and prospects include: •the signing, installation and financial performance of theater system arrangements (particularly its joint revenue sharing arrangements and new laser-based projection systems); •film performance and the securing of new film projects (particularly IMAX DMR films); •the continuing ability to invest in and improve the Company’s technology to enhance its differentiation of presentation versus other cinematicexperiences; •revenue and gross margins from the Company’s segments; •earnings from operations as adjusted for unusual items; •the overall execution, reliability and consumer acceptance of The IMAX Experience; •the success of new business initiatives; and •short- and long-term cash flow projections.Management, including the Company’s CEO, who is the Company’s Chief Operating Decision Maker (“CODM”) (as defined in the Segment Reporting Topicof the FASB ASC), assesses segment performance based on segment revenues, gross margins. Selling, general and administrative expenses, research anddevelopment costs, amortization of intangibles, receivables provisions (recoveries), write-downs net of recoveries, interest income, interest expense and tax(provision) recovery are not allocated to the segments. The Company has the following eight reportable segments: IMAX DMR; joint revenue sharingarrangements; IMAX systems; theater system maintenance; other theater; new business; film distribution; and film post-production. The Company organizes itsreportable segments into the following four primary groups: Network Business, Theater Business, New Business and Other. The Company is presenting thefollowing information at a disaggregated level to provide more relevant information to readers, as permitted by the standard, and adjusted for the adoption of thenew revenue recognition standard: •Network Business oThe IMAX DMR segment consists of variable revenues from studios for the conversion of films into the IMAX DMR format generated by the boxoffice results from the exhibition of those films in the IMAX theater network. oJoint revenue sharing arrangements – contingent rent, consists of variable rent revenues from box office exhibited in IMAX theaters in exchangefor the provision of IMAX theater projection system equipment to exhibitors. This excludes fixed hybrid revenues and upfront installation costsfrom the Company’s hybrid joint revenue sharing arrangements, which are included in theater business. Effective January 1, 2018, the Companyno longer includes hybrid joint revenue sharing arrangements which take the form of a sale under the joint revenue sharing arrangement reportablesegment. These arrangements are now reflected under the IMAX systems segment of Theater Business. oIMAX systems – contingent rent, consists of variable payments from the Company’s sales-type leases in excess of certain fixed minimum ongoingpayments, under arrangements in the IMAX systems segment, which are recognized when reported by theater operators, provided collectability isreasonably assured. •Theater Business oThe IMAX systems segment consists of the design, manufacture and installation of IMAX theater projection system equipment under sales orsales-type lease arrangements for fixed upfront and ongoing consideration (including ongoing fees and finance income) and contingent rent onsales arrangements. oJoint revenue sharing arrangements – fixed fee, consists of fixed hybrid revenues and upfront installation costs from the joint revenue sharingarrangements segment for all arrangements which take the form of a lease. oThe theater system maintenance segment consists of the provision of IMAX theater projection system equipment maintenance services to theIMAX theater network and the associated costs of those services. oOther theater includes after-market sales of IMAX theater projection system parts and 3D glasses from the other segment. •New Business oThe new business segment consists of content licensing and distribution fees associated with the Company’s IMAX Home Entertainment, andother new business initiatives that are in the development, start-up and/or wind-up phases.51 •Other oThe film distribution segment consists of revenues and costs associated with the distribution of documentary films for which the Company hasdistribution rights. oThe film post-production segment consists of the provision of film post-production, and their associated costs. oThe other segment consists of certain IMAX theaters that the Company owns and operates, camera rentals and other miscellaneous items.The Company’s Management’s Discussion and Analysis (“MD&A”) of Financial Condition and Results of Operations has been organized by the Company intofour primary groups – Network Business, Theater Business, New Business and Other. Each of the Company’s reportable segments, as identified above, has beenclassified into one of these broader groups for purposes of MD&A discussion. The Company believes that this approach is consistent with how the CODM reviewsthe financial performance of the business and makes strategic decisions regarding resource allocation and investments to meet long-term business goals.Management believes that a discussion and analysis based on these groups is significantly more relevant and useful to readers, as the Company’s consolidatedstatements of operations captions combine results from several segments.The following table sets forth the breakdown of revenue and gross margin by segment: (In thousands of U.S. dollars) Revenue Gross Margin 2019 2018 2019 2018 Network business IMAX DMR $120,765 $110,793 $78,592 $72,773 Joint revenue sharing arrangements – contingent rent 75,932 73,371 47,935 48,856 IMAX systems – contingent rent(1) 139 — 139 — 196,836 184,164 126,666 121,629 Theater business IMAX systems Sales and sales-type leases(1) 96,310 88,432 47,118 47,986 Ongoing fees and finance income(2) 11,613 12,224 11,422 12,033 Joint revenue sharing arrangements – fixed fees 11,014 9,706 2,613 1,982 Theater system maintenance 53,151 49,684 23,010 21,991 Other theater 8,390 8,358 2,624 1,806 180,478 168,404 86,787 85,798 New business 2,754 5,769 2,106 (350)Other Film distribution and post-production 12,210 12,962 (1,262) 1,763 Other 3,386 3,102 (125) (911) 15,596 16,064 (1,387) 852 $395,664 $374,401 $214,172 $207,929 (1) Includes initial payments and the present value of fixed minimum payments from equipment, sales and sales-type lease transactions and the present value ofestimates of variable consideration from equipment sales transactions.(2)Includes rental income from operating leases and finance income. 52Results of Operations Discussion for the Two Years Ended December 31, 2019Securities and Exchange Commission amended Regulation S-K Item 303 to allow the elimination of discussion of the earliest of the three-year period presentedin the MD&A if such discussion is already included in the prior filings. The results of operations discussion below is for fiscal 2019 compared with fiscal 2018. SeeItem 7 of the Annual Report on Form 10-K for the Fiscal Year ended December 31, 2018 for the results of operations discussion for fiscal 2018 compared withfiscal 2017.OverviewThe Company reported net income of $58.6 million, or $0.95 per basic and diluted share, for the year ended December 31, 2019, as compared to net income of$33.6 million, or $0.53 per basic and diluted share, for the year ended December 31, 2018.Net income for the year ended December 31, 2019 includes a $22.8 million charge, or $0.37 per diluted share (2018 — $22.2 million, or $0.35 per dilutedshare) for stock-based compensation, a $0.9 million charge, or $0.01 per diluted share for exit costs, restructuring charges and associated impairments (2018 —$9.5 million, or $0.15 per diluted share) and a $0.5 million charge, or $0.01 per diluted share (2018 — $nil) for the change in fair value of equity securities. In2018, the Company also recognized a $11.7 million or $0.19 per diluted share, for a legal arbitration award related to one of the Company’s litigation matters from2006 and a $3.0 million charge, or $0.05 per diluted share, for executive transition costs.Adjusted net income, which consists of net income excluding the impact of stock-based compensation, exit costs, restructuring charges and associatedimpairments, the legal arbitration award, executive transition costs, the change in fair value of equity securities, the related tax impact of these adjustments, and taxcharge from the provisional re-measurement of U.S. deferred tax assets and liabilities given changes enacted by the Tax Act, was $77.2 million, or $1.25 perdiluted share, for the year ended December 31, 2019 as compared to adjusted net income of $70.2 million, or $1.11 per diluted share, for the year ended December31, 2018.The Company reported net income attributable to common shareholders of $46.9 million, or $0.76 per basic share and diluted share for the year endedDecember 31, 2019 (2018 — $22.8 million, or $0.36 per basic share and diluted share).Adjusted net income attributable to common shareholders, which consists of net income attributable to common shareholders excluding the impact attributableto common shareholders of stock-based compensation, exit costs, restructuring charges and associated impairments, the legal arbitration award, executivetransition costs, the change in fair value of equity securities, the related tax impact of these adjustments, and tax charge from the provisional re-measurement ofU.S. deferred tax assets and liabilities given changes enacted by the Tax Act, was $64.8 million, or $1.05 per diluted share, for the year ended December 31, 2019as compared to adjusted net income attributable to common shareholders of $57.8 million, or $0.91 per diluted share, for the year ended December 31, 2018.Impact of Coronavirus In early 2020, in response to the public health risks associated with an outbreak of coronavirus in Wuhan, China, Chinese exhibitors temporarily closed morethan 70,000 movie theaters, including all of the approximately 700 IMAX theaters in mainland China. The theaters have been closed since late January 2020,including over the Lunar New Year holiday and have not yet reopened as of the date of this report. Chinese movie studios also postponed the release of multiplefilms, including those originally scheduled to be released over this holiday, five of which were scheduled to be shown in IMAX theaters. The repercussions of thishealth crisis in China will have a material adverse impact on the revenues generated by IMAX theater systems in the first quarter of 2020. Given the dynamicnature of the circumstances, it is difficult to predict whether the impact of the coronavirus outbreak on the Company’s financial condition in future reportingperiods may also be material as this will depend on future developments, including but not limited to the timing of theaters reopening, if and when delayed filmsare released, consumer behaviour and any potential construction or installation delays involving our exhibitor partners which are highly uncertain and cannot beaccurately forecast. However, assuming the resumption of business in the near future, we believe that a portion of these revenues may be recovered later in 2020when we anticipate the films are scheduled to ultimately be released, although there can be no guarantees of the timing or extent of such recovery. See “RiskFactors – The Company’s results of operations are expected to be adversely impacted by the recent coronavirus outbreak in China” in Item 1A of this 2019 Form10-K and note 29 to the accompanying audited consolidated financial statements in Item 8 of this 2019 Form 10-K. 53Reconciliation of non-GAAP financial measuresA reconciliation of net income and net income attributable to common shareholders, the most directly comparable U.S. GAAP measure, to adjusted net income,adjusted net income per diluted share, adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders perdiluted share is presented in the table below: (In thousands of U.S. dollars, except per share amounts) Years Ended December 31, 2019 2018 Net Income Diluted EPS Net Income Diluted EPS Reported net income $58,571 $0.95 $33,595 $0.53 Adjustments: Stock-based compensation 22,830 0.37 22,211 0.35 Exit costs, restructuring charges and associated impairments 850 0.01 9,542 0.15 Legal arbitration award — — 11,737 0.19 Executive transition costs — — 2,994 0.05 Change in fair value of equity investment 517 0.01 — — Impact of enactment of U.S Tax Cut and Jobs Act — — — — Tax impact on items listed above (5,614) (0.09) (9,873) (0.16) Adjusted net income 77,154 1.25 70,206 1.11 Net income attributable to non-controlling interests(1) (11,705) (0.19) (10,751) (0.17) Stock-based compensation (net of tax of $0.1 million and$0.1 million, respectively) (1) (480) (0.01) (394) (0.01) Exit costs, restructuring charges and associated impairments (net of tax of $nil and$0.4 million, respectively) (1) — — (1,262) (0.02) Change in fair value of equity investment (184) — — — Adjusted net income attributable to common shareholders $64,785 $1.05 $57,799 $0.91 Weighted average diluted shares outstanding 61,489 63,207 (1)Reflects amounts attributable to non-controlling interests.Revenues and Gross MarginThe Company’s revenues for the year ended December 31, 2019 increased 5.7% to $395.7 million from $374.4 million in 2018, primarily due to an increase inrevenue from the Company’s network and theater business segments, partially offset by a decrease in the new business and other segments. The gross marginacross all segments in 2019 was $214.2 million, or 54.1% of total revenue, compared to $207.9 million, or 55.5% of total revenue in 2018.Network BusinessGross box office generated by IMAX DMR films increased 7.4% to $1,108.5 million in 2019 from $1,032.1 million in 2018. In 2019, gross box office wasgenerated primarily from the exhibition of 72 films (60 new and 12 carryover), as compared to 80 films (70 new and 10 carryover) exhibited in 2018.54Network business revenue increased by 6.9% to $196.8 million in the year ended December 31, 2019 from $184.2 million in the year ended December 31,2018. In 2019, the Company had stronger film performance and an increase in number of theaters in the network compared to the prior year. The gross marginexperienced by the Company’s network business in 2019 was $126.7 million, or 64.4% of network business revenue, compared to $121.6 million, or 66.0% in2018. The Company’s network business performance is impacted by box office performance, as well as other factors including the timing of a film release to theIMAX theater network, the commercial success of the film, the Company’s take rates under its DMR and joint revenue sharing arrangements, and the distributionwindow for the exhibition of films in the IMAX theater network. Other factors impacting performance include fluctuations in the value of foreign currenciesversus the U.S. dollar and potential currency devaluations.IMAX DMR revenues increased 9.0% to $120.8 million in the year ended December 31, 2019 from $110.8 million in the year ended December 31, 2018, dueto stronger film performances in 2019. The gross margin from the IMAX DMR segment was $78.6 million, $72.8 million in the years ended December 31, 2019and 2018, respectively. Margin is a function of the costs associated with the respective films exhibited in the period and can vary particularly with respect tomarketing expenses.Contingent rent revenues from joint revenue sharing arrangements increased to $75.9 million in the year ended December 31, 2019 from $73.4 million in theyear ended December 31, 2018, largely due to stronger box-office performance and continued network growth. The Company ended 2019 with 870 theatersoperating under total joint revenue sharing arrangements (traditional and hybrid), an increase of 9.0%, as compared to 798 theaters at the end of 2018. Gross boxoffice generated by the joint revenue sharing arrangements was 4.2% higher at $560.3 million in the year ended December 31, 2019 from $537.8 million in theyear ended December 31, 2018.The gross margin from joint revenue sharing arrangements decreased to $47.9 million in the year ended December 31, 2019 from $48.9 million in the yearended December 31, 2018. Included in the calculation of gross margin for the year ended December 31, 2019 were certain advertising, marketing and commissioncosts primarily associated with new theater launches of $3.3 million, as compared to $3.0 million in 2018. Contingent rent revenue from IMAX systems consists of variable payments received in excess of the fixed minimum ongoing payments which are primarilydriven by box office performance reported by theater operators. The Company expects this revenue stream to be minimal on a go-forward basis and was $0.1million and $nil recognized in the years ended December 31, 2019 and 2018, respectively.Theater BusinessThe primary drivers of this line of business are theater system installations and the Company’s maintenance contract that accompanies each theater installation. For the year ended December 31, 2019, theater business revenue increased $12.1 million, or 7.2%, to $180.5 million as compared to the year ended December 31,2018. The increase in theater business revenue in 2019 as compared to 2018 was primarily due to: •11 additional installations of system upgrades; •6 additional installations of systems contracted as hybrid joint revenue sharing arrangements; partially offset by •8 fewer installations of systems under a sales and sales-type lease arrangement. Gross margin increased 1.2% to $86.8 million in 2019 as compared to $85.8 million in 2018, primarily due to the mix of systems installed under sales and sales-type leases and joint revenue sharing lease arrangements. As well, there has been an increase to sustained engineering costs related to IMAX with Laser roll-outand continued development and support. The costs associated with ongoing fees are minimal as it usually consists of depreciation on the Company’s theaters underoperating lease arrangements and/or marketing. The theater business gross margin was 48.1% in 2019 compared to 50.9% in 2018. The decrease in margin wasprimarily due to the installation of more hybrid joint revenue sharing arrangements which come with lower average revenue, resulting in significantly lowermargins on recognition than a traditional sale and fewer sales and sales type installation with average revenue of $1.3 million in 2019 as compared to 2018.55The installation of theater systems in newly built theaters or multiplexes, which make up a large portion of the Company’s theater system backlog, dependsprimarily on the timing of the construction of those projects, which is not under the Company’s control. The breakdown in mix of sales and sales-type lease andjoint revenue sharing arrangements installations by theater system configuration for 2019 and 2018 is outlined in the table below: Years Ended December 31, 2019 2018 Number ofSystems Revenue Number ofSystems Revenue New IMAX theater systems — installed and recognized Sales and sales-types lease arrangements 55 $70,367 (1) 63 $83,850 Joint revenue sharing arrangements — hybrid 20 10,610 14 6,613 Total new theater systems 75 80,977 77 90,463 IMAX theater system upgrades — installed and recognized Sales and sales-types lease arrangements 17 19,630 6 5,379 Total theater systems installed and recognized 92 $100,607 83 $95,842 (1)Includes one IMAX digital theater system that was relocated from a previous location. This installation is incremental to the IMAX theater network but fullrevenue for the digital theater system was not received.Average revenue per full, new theater system under a sales and sales-type lease arrangement was $1.3 million for the years ended December 31, 2019 and 2018.The average revenue per full, new theater system under a sales and sales-type lease arrangement varies depending upon the number of theater system commitmentswith a single respective exhibitor, an exhibitor’s location or other various factors.Theater system maintenance revenue increased 7.0% to $53.2 million in the year ended December 31, 2019 from $49.7 million in the year ended December 31,2018 due to the growth of the network. Theater system maintenance gross margin was $23.0 million in the year ended December 31, 2019 versus $22.0 million inthe year ended December 31, 2018. The Company recorded a write-down of $0.5 million and $0.3 million for certain service parts inventories in the years endedDecember 31, 2019 and 2018, respectively. Maintenance margins vary depending on the mix of theater system configurations in the theater network, volume-pricing related to larger relationships and the timing and the date(s) of installation and/or service.Ongoing fees and finance income were $11.6 million in the year ended December 31, 2019 compared to $12.2 million in the year ended December 31, 2018.Gross margin for ongoing rent and finance income decreased to $11.4 million in the year ended December 31, 2019 from $12.0 million in the year endedDecember 31, 2018. The costs associated with ongoing fees are minimal as it usually consists of depreciation on the Company’s theaters under operating leaseagreements and/or marketing.56Other theater revenue was $8.4 million in the years ended December 31, 2019 and 2018, respectively. Other theater revenue primarily includes revenuegenerated from the Company’s after-market sales of projection system parts and 3D glasses. The gross margin recognized from other theater revenue was $2.6million in the year ended December 31, 2019 as compared to $1.8 million in the year ended December 31, 2018.New BusinessRevenue earned from the Company’s new business initiatives was $2.8 million in the year ended December 31, 2019, as compared to $5.8 million in the yearended December 31, 2018. In the year ended December 31, 2019, revenue in the new business segment is attributable to the IMAX Enhanced program which waslaunched at the end of 2018 and started generating revenue in the current year compared to the prior year where the income was primarily derived from IMAX VRand the final contractual payment owed to IMAX related to the IMAX VR camera.The gross margin recognized from the new business segment was $2.1 million in the year ended December 31, 2019 as compared to a loss of $0.4 million in theyear ended December 31, 2018. The increase in gross margin is primarily attributable to the better performance of the IMAX Enhanced program.The Company is evaluating its new business initiatives separately from its core business as the nature of its activities is separate and distinct from its ongoingoperations. The Company recognized net earnings from its new business initiatives for the year ended December 31, 2019 of $1.4 million, which includes exitcosts, restructuring charges and associated impairments of $0.1 million and amortization of $0.1 million. In addition, the net earnings include selling, general andadministrative costs of $0.5 million and research and development costs of $0.1 million. Net loss before tax from its new business initiatives for the year endedDecember 31, 2018 was $9.5 million, which includes asset impairment charges of $7.2 million, amortization of $2.5 million and an equity loss of $0.5 million.OtherFilm distribution and post-production revenues were $12.2 million in the year ended December 31, 2019, as compared to $13.0 million in the year endedDecember 31, 2018, primarily due to a decrease in post-production revenue, partially offset by an increase film distribution revenue from IMAX original films.The film distribution and post-production segments gross margin was a loss of $1.3 million in the year ended December 31, 2019 as compared to a gross profit of$1.8 million in the year ended December 31, 2018. The Company reviewed the carrying value of certain documentary film assets as a result of lower thanexpected revenue being generated during the year and revised expectations for future revenues based on the latest information available. In 2019, an impairment of$1.4 million was recorded based on the carrying value of these documentary films as compared to the related estimated future box office and revenues that wouldultimately be generated by these films. There were no such charges in the year ended December 31, 2018.Other revenue increased to $3.4 million in the year ended December 31, 2019, as compared to $3.1 million in the year ended December 31, 2018. Otherrevenue primarily includes revenue generated from the Company’s theater operations and camera rental business.The gross margin recognized from other revenue was a loss of $0.1 million in the year ended December 31, 2019, as compared to loss of $0.9 million in theyear ended December 31, 2018.Selling, General and Administrative ExpensesSelling, general and administrative expenses were $123.5 million in 2019, as compared to $117.5 million in 2018. The staff costs in 2019 increased $5.3 millioncompared to 2018, driven primarily by additional employees and higher executive severance. In 2018, the Company invested in and deployed a new globalmarketing campaign, which increased the marketing expenses as compared to 2019. Selling, general and administrative expenses excluding the impact of stock-based compensation were $102.7 million in 2019, as compared to $97.4 million in 2018.57The following reflects the significant items impacting selling, general and administrative expenses for the years ended December 31, 2019 and 2018. 2019 2018 2019 versus 2018Staff costs $71,132 $65,816 $5,316 8.1 %Stock-based compensation 20,750 20,102 $648 3.2 %Consulting and professional fees 11,729 9,642 $2,087 21.6 %Marketing 7,638 11,069 $(3,431) (31.0)%Foreign exchange loss (gain) 946 1,705 $(759) (44.5)%Other general corporate expenditures 11,261 9,143 $2,118 23.2 %Total $123,456 $117,477 $5,979 The Company’s net foreign exchange gains/losses are related to the translation of foreign currency denominated monetary assets and liabilities. Other general corporate expenditures include professional fees and travel and entertainment. Selling, general and administrative expenses also includes assetimpairment charges and write-offs, if any, and miscellaneous items, other than interest.Research and DevelopmentResearch and development expenses decreased to $5.2 million in 2019 compared to $13.7 million in 2018. The decrease is primarily attributable to the lowerspending on new business initiatives compared to the prior year and completeness of most of the laser development.A significant portion of the Company’s research and development efforts over the past several years have been focused on IMAX with Laser, the Company’snext-generation laser-based projection system, which the Company believes delivers increased resolution, sharper and brighter images, deeper contrast as well asthe widest range of colors available to filmmakers today. The Company expects that research and development expense will continue to decrease in 2020.The Company also intends to continue research and development in other areas considered important to the Company’s continued commercial success,including further improving the reliability of its projectors, certifying more IMAX cameras, enhancing the Company’s image quality, expanding the applicabilityof the Company’s digital technology in both theater and home entertainment and improvements to the DMR process.Receivable Provisions, Net of RecoveriesReceivable provisions, net of recoveries for accounts receivable and financing receivables amounted to a net provision of $2.4 million in 2019, as compared to$3.1 million in 2018.The Company’s accounts receivables and financing receivables are subject to credit risk, as a result of geographical location, exchange rate fluctuations, andother unforeseeable financial difficulties. These receivables are concentrated with the leading theater exhibitors and studios in the film entertainment industry. Tominimize the Company’s credit risk, the Company retains title to underlying theater systems leased, performs initial and ongoing credit evaluations of itscustomers and makes ongoing provisions for its estimate of potentially uncollectible amounts. Accordingly, the Company believes it has adequately protecteditself against exposures relating to receivables and contractual commitments.Asset Impairments and Other ChargesThe Company records asset impairment charges for property, plant and equipment after an assessment of the carrying value of certain asset groups in light oftheir future expected cash flows. During 2019, the Company recorded asset impairment charges of $0.1 million (2018 ― less than $0.1 million) as the Companyrecognized that the carrying values for the assets exceeded the expected undiscounted future cash flows.In 2019, the Company reviewed the carrying value of certain documentary film assets as a result of lower than expected revenue being generated during the periodand revised expectations for future revenues based on the latest information available. An impairment of $1.4 million was recorded based on the carrying value ofthese documentary films as compared to the related estimated future box office and revenues that would ultimately be generated by these films. No such chargewas recorded in the year ended 2018.58Interest Income and ExpenseInterest income was $2.1 million in 2019, as compared to $1.8 million in 2018.Interest expense was $2.8 million in 2019, as compared to $2.9 million in 2018. Included in interest expense is the amortization of deferred finance costs in theamount of $0.5 million and $1.1 million in 2019 and 2018, respectively. Included in 2018 was $0.3 million of deferred finance costs relating to the prior CreditFacility written off as a result of the new Credit Facility and an additional $0.3 million related to the extinguishment of the Playa Vista Loan. Consistent with itshistorical financial reporting, the Company has elected to classify interest and penalties related to income tax liabilities, when applicable, as part of the interestexpense in its consolidated statements of operations rather than income tax expense. The Company expensed $0.2 million in potential interest and penaltiesassociated with its provision for uncertain tax positions for the years ended December 31, 2019 (2018 — less than $0.1 million). The Company’s policy is to deferand amortize all the costs relating to debt financing which are paid directly to the debt provider, over the life of the debt instrument.Change in fair value of equity investmentIn the first quarter of 2019, IMAX China (Hong Kong), Limited, a wholly-owned subsidiary of IMAX China, entered into a cornerstone investment agreementwith Maoyan Entertainment (“Maoyan”), a market-leading mobile ticketing platform providing innovative internet-empowered entertainment services in China,and purchased equity securities for $15.2 million. These equity securities are traded on the Hong Kong Stock Exchange, and the Company is required to adjust thefair value of the securities each period to reflect the current market value. This adjustment will fluctuate based on the closing market price at the end of each period.In 2019, a loss of $0.5 million was recognized in the consolidated statements of operations. IMAX China also seeks to develop strategic collaborations withMaoyan and enable the Company to leverage Maoyan’s technical advantages to, among other things, more effectively market future content to consumers.Legal arbitration awardIn the year ended December 31, 2018, the Company recorded a charge of $11.7 million for a legal arbitration award related to one of the Company’s litigationmatters from 2006. No such charges were incurred in 2019.Executive transition costsIn the year ended December 31, 2018, the Company recognized executive transition costs of $3.0 million associated with the separation of the former CEO ofIMAX Entertainment and Senior Executive Vice President of the Company. The costs include $1.9 million of accelerated costs related to retirement benefits whichbecame vested in full. Additional expenses of $1.1 million have been recorded for severance, bonus and stock-based compensation which relate to the exit of theexecutive and other executives. No such charges were incurred in 2019.Exit costs, restructuring charges and associated impairmentsExit costs, restructuring charges and associated impairments were $0.9 million in the year ended December 31, 2019, for employee severance costs and costsincurred to exit operating lease, as compared to $9.5 million in the year ended December 31, 2018 which is comprised of employee severance costs, costs incurredto exit operating lease and asset impairments related to the closure of the Company’s VR locations and write-downs of VR content assets, which is comprised ofcosts incurred to exit an existing operating lease, employee severance costs, costs of consolidating facilities and contract termination costs.Income TaxesThe Company’s effective tax rate differs from the statutory tax rate and varies from year to year primarily as a result of numerous permanent differences,investment and other tax credits, the provision for income taxes at different rates in foreign and other provincial jurisdictions, enacted statutory tax rate increasesor reductions in the year, including the impact of the Tax Act, changes due to foreign exchange, changes in the Company’s valuation allowance based on theCompany’s recoverability assessments of deferred tax assets, and favorable or unfavorable resolution of various tax examinations.As at December 31, 2019, the Company had a gross deferred income tax asset of $24.1 million, against which the Company is carrying a $0.2 million valuationallowance. For the year ended December 31, 2019, the Company recorded an income tax provision of $16.8 million, which included a recovery of $1.4 millionrelated to its uncertain tax positions. In addition, included in the provision for income taxes was a $0.4 million provision to recognize the reduced tax benefitavailable on stock based compensation costs recognized in the period.59The Company recorded a gross deferred income tax asset of $31.5 million for 2018, against which the Company is carrying a $0.2 million valuationallowance. For the year ended December 31, 2018, the Company recorded an income tax provision of $9.5 million, which included a provision of $0.2 millionrelated to its uncertain tax positions. In addition, included in the provision for income taxes was a $1.2 million provision to recognize the reduced tax benefitavailable on stock-based compensation costs recognized in the period.During the year ended December 31, 2019, after considering all available evidence, both positive (including recent profits, projected future profitability,backlog, carry forward periods for, and utilization of net operating loss carryovers and tax credits, discretionary deductions and other factors) and negative(including cumulative losses in past years and other factors), the Company concluded that the valuation allowance against the Company’s deferred tax assets wasadequate. The remaining $0.2 million balance in the valuation allowance as at December 31, 2019 is primarily attributable to certain U.S. state net operating losscarryovers that may expire without being utilized.The Company’s Chinese subsidiary has taken a deduction for certain stock-based compensation issued by the Chinese subsidiary’s parent company, IMAXChina and has set up related deferred tax assets of $1.4 million (December 31, 2018 ─ $1.2 million). Chinese regulatory authorities responsible for capital andexchange controls will need to review and approve the proposed settlement of these transactions before they can be completed. There may be a requirement forfuture investment of funds into China in order to secure the deduction. Should the Company proceed, any such future investment would come from existingcapital invested in the IMAX China group of companies being redeployed amongst the IMAX China group of companies, including the Chinese subsidiary.Equity-Accounted InvestmentsThe Company accounts for investments in new business ventures using the guidance of the FASB ASC Topic 323. At December 31, 2019, the equity method ofaccounting is being utilized for investments with a total carrying value of $nil (December 31, 2018 ─ $nil). The Company’s accumulated losses in excess of itsequity investment were $1.5 million as at December 31, 2019 and $1.6 million as at December 31, 2018 and are classified in Accrued and other liabilities. For theyear ended December 31, 2019, gross revenues, cost of revenue and net loss for these investments were $2.0 million, $1.2 million and $1.5 million, respectively(2018 ─ $1.9 million, $3.0 million and $1.8 million, respectively). The Company recorded its proportionate share of the income which amounted to less than $0.1million for 2019 as compared to loss of $0.5 million in 2018.Non-Controlling InterestsThe Company’s consolidated financial statements include the non-controlling interest in the net income of IMAX China resulting from the IMAX ChinaInvestment and the IMAX China IPO as well as the impact of non-controlling interests in its subsidiaries created for the Film Fund and VR Content Fund activity.For the year ended December 31, 2019, the net income attributable to non-controlling interests of the Company’s subsidiaries was $11.7 million (2018 ─ $10.8million).Pension PlanThe Company has an unfunded defined benefit pension plan, the Supplemental Executive Retirement Plan (the “SERP”), covering the Company’s CEO, Mr.Gelfond. As at December 31, 2019, the Company had an unfunded and accrued benefit obligation of approximately $18.8 million (December 31, 2018 — $18.0million) in respect of the SERP.The components of net periodic benefit cost were as follows: Years ended December 31, 2019 2018 Interest cost $ 564 $ 422 Pension expense $ 564 $ 422 The plan experienced an actuarial gain of $0.2 million during 2019, as compared to $1.4 million in 2018, resulting primarily from the continuing change in thePension Benefit Guaranty Corporation (“PBGC”) published annuity interest rates year-over-year used to determine the lump sum payment under the plan.60Under the terms of the SERP, if Mr. Gelfond’s employment is terminated other than for cause (as defined in his employment agreement), he is entitled toreceive SERP benefits in the form of a lump sum payment. SERP benefit payments to Mr. Gelfond are subject to a deferral for six months after the termination ofhis employment, at which time Mr. Gelfond will be entitled to receive interest on the deferred amount credited at the applicable federal rate for short-termobligations. Pursuant to an amendment dated November 1, 2019 to the employment agreement, the term of Mr. Gelfond’s employment was extended throughDecember 31, 2022, although Mr. Gelfond has not informed the Company that he intends to retire at that time. Under the terms of the amendment to hisemployment agreement, the total amount of benefit payable to Mr. Gelfond under the SERP has been fixed at $20.3 million. The increase in the SERP obligationunder the amendment was accounted for as prior service costs arising during the year and recognized in other comprehensive income. The prior service costsarising from the amendment are being amortized over the remaining employment agreement term of 36 months on a straight-line basis. The amortization expenseassociated with the prior service costs are recorded within the retirement benefits non-service expense in the consolidated statements of operations.The Company has a postretirement plan to provide health and welfare benefits to Canadian employees meeting certain eligibility requirements. As at December31, 2019, the Company had an unfunded benefit obligation of $1.6 million (December 31, 2018 — $1.5 million). For the year ended December 31, 2019 theCompany contributed and expensed an aggregate of $0.1 million (2018 — $0.1 million).In July 2000, the Company agreed to maintain health benefits for Messrs. Gelfond and Bradley J. Wechsler, the Company’s former Co-CEO and currentChairman of its Board of Directors, upon retirement. As at December 31, 2019, the Company had an unfunded benefit obligation recorded of $0.7 million(December 31, 2018 — $0.6 million). For the year ended December 31, 2019 the Company contributed and expensed an aggregate of less than $0.1 million(2018 — less than $0.1 million).The Company maintained a Retirement Plan covering former CEO of IMAX Entertainment and Senior Executive Vice President of the Company. Under theterms of his agreement with the Company, the plan will vest in full if he incurs a separation of service (as defined therein). In the fourth quarter of 2018, heincurred a separation from service, and as such, his Retirement Plan benefits became fully vested as at December 31, 2018 and the accelerated costs wererecognized and reflected in the executive transition costs line on the consolidated statement of operations. As at December 31, 2019, the Company had a fundedbenefit obligation recorded of $3.6 million (December 31, 2018 — $3.6 million). During 2018, the Company expensed an aggregate of $2.6 million, of which $0.7million was recorded in selling, general and administrative expenses as it relates to service performed in 2018, the remaining $1.9 million is recorded in executivetransition costs. No such expense was recorded in the year ended December 31, 2019.Stock-Based CompensationThe Company estimates the fair value of stock option awards on the date of grant using fair value measurement techniques. The fair value of RSU awards isequal to the closing price of the Company’s common stock on the date of grant. The following reflects the Company’s stock-based compensation expense recognized under FASB ASC 718, “Compensation – Stock Compensation” (“ASC718”) in the respective financial statement line items in: Years Ended December 31, 2019 2018 Cost and expenses applicable to revenues $ 1,709 $ 1,657 Selling, general and administrative expenses 20,750 20,102 Research and development 371 452 Executive transition costs — 320 Exit costs, restructuring charges and associated impairments — 54 $ 22,830 $ 22,585 61LIQUIDITY AND CAPITAL RESOURCESCredit FacilityOn June 28, 2018, the Company entered into a Fifth Amended and Restated Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, NationalAssociation (“Wells Fargo”), as agent, and a syndicate of lenders party thereto. The Credit Agreement expands the Company’s revolving borrowing capacity from$200.0 million to $300.0 million, and also contains an uncommitted accordion feature allowing the Company to further expand its borrowing capacity to$440.0 million or greater, depending on the mix of revolving and term loans comprising the incremental facility. The new facility (the “Credit Facility”) matures onJune 28, 2023.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 the assets of the Company and the Guarantors.The Credit Facility, coupled with recurring cash generated by the Company’s theater network, is expected to provide enhanced flexibility as the Companycontinues with the global expansion of its business and pursues other avenues to increase shareholder value.Total amounts drawn and available under the Credit Facility at December 31, 2019 were $20.0 million and $280.0 million, respectively (December 31, 2018 —$40.0 million and $260.0 million, respectively). The effective interest rate for the year ended December 31, 2019 was 3.43% (December 31, 2018 — 3.41%).The Credit Facility requires that the Company maintain a Senior Secured Net Leverage Ratio (as defined in the Credit Agreement) as of the last day of anyFiscal Quarter (as defined in the Credit Agreement) of no greater than 3.25:1.00. The Company was in compliance with this requirement at December 31, 2019.The Senior Secured Net Leverage Ratio (as defined in the Credit Agreement) was 0.00:1 as at December 31, 2019 where Total Debt (as defined in the CreditAgreement) is the sum of all obligations evidenced by notes, bonds, debentures or similar instruments, net of up to $75.0 million in unrestricted cash and cashequivalents outside of the People’s Republic of China (“PRC”) was $nil. Adjusted EBITDA per Credit Facility is calculated as follows: Adjusted EBITDA per Credit Facility: (In thousands of U.S. Dollars) Net income $ 58,571 Add (subtract): Provision for income taxes 16,768 Interest expense, net of interest income 423 Depreciation and amortization, including film asset amortization(1) 63,487 EBITDA $ 139,249 Stock and other non-cash compensation 23,570 Change in fair value of equity investment 517 Write-downs, net of recoveries including asset impairments and receivable provisions (1) 6,806 Exit costs, restructuring charges and associated impairments 850 Income from equity accounted investments (3)Adjusted EBITDA before non-controlling interests $ 170,989 Adjusted EBITDA attributable to non-controlling interests(2) (21,661)Adjusted EBITDA per Credit Facility $ 149,328 (1)Senior Secured Net Leverage Ratio calculated using twelve months ended Adjusted EBITDA per Credit Facility.(2)The Adjusted EBITDA per Credit Facility calculation includes the reduction in Adjusted EBITDA per Credit Facility from the Company’s non-controllinginterests.62Working Capital LoanOn July 5, 2018, IMAX (Shanghai) Multimedia Technology Co., Ltd. (“IMAX Shanghai”), the Company’s majority-owned subsidiary in China, entered intoan unsecured revolving facility for up to 200.0 million Renminbi (approximately $30.0 million USD) to fund ongoing working capital requirements. On July 24,2019, this facility was renewed. The total amounts drawn and available under the working capital loan at December 31, 2019 and 2018 were nil and 200.0 millionRenminbi, respectively ($nil and approximately $30.0 million U.S. Dollars, respectively).Letters of Credit and Other CommitmentsAs at December 31, 2019 and 2018, the Company did not have any letters of credit and advance payment guarantees outstanding under the Credit Facility.Prior to September 30, 2019, the Company had a $10.0 million facility with the Bank of Montreal for use solely in conjunction with the issuance ofperformance guarantees and letters of credit fully insured by Export Development Canada (the “Bank of Montreal Facility”). The Bank of Montreal Facility wasunsecured and included typical affirmative and negative covenants, including delivery of annual consolidated financial statements within 120 days of the end of thefiscal year. The Bank of Montreal Facility which was subject to periodic annual reviews expired as of September 30, 2019 and was not renewed.On October 28, 2019, the Company entered into a $5.0 million facility for advance payment guarantees and letters of credit through the National Bank ofCanada for use solely in conjunction with guarantees fully insured by Export Development Canada (the “NBC Facility”) to replace the Bank of Montreal Facility.The NBC Facility contains substantially the same terms as the Bank of Montreal Facility. As such, the NBC Facility is unsecured and includes typical affirmativeand negative covenants, including delivery of annual consolidated financial statements within 120 days of the end of the fiscal year. As at December 31, 2019, theCompany did not have any letters of credit or advance payment guarantees outstanding under the NBC Facility.Cash and Cash EquivalentsAs at December 31, 2019, the Company’s principal sources of liquidity included cash and cash equivalents of $109.5 million, the Credit Facility, anticipatedcollection from trade accounts receivable of $99.5 million including receivables from theaters under joint revenue sharing arrangements and DMR agreementswith studios, anticipated collection from financing receivables due in the next 12 months of $29.9 and payments expected in the next 12 months on existingbacklog deals. As at December 31, 2019, the Company had drawn $20.0 million on the Credit Facility (remaining availability of $280.0 million). Cash heldoutside of North America as at December 31, 2019 was $89.9 million (December 31, 2018 — $121.9 million), of which $67.6 million was held in the People’sRepublic of China (“PRC”) (December 31, 2018 — $54.7 million). The Company's intent is to permanently reinvest these amounts outside of Canada and theCompany does not currently anticipate that it will need funds generated from foreign operations to fund North American operations. In the event funds fromforeign operations are needed to fund operations in North America and if withholding taxes have not already been previously provided, the Company would berequired to accrue and pay these additional withholding tax amounts on repatriation of funds from China to Canada. The Company currently estimates this amountto be $21.9 million.During the year ended December 31, 2019, the Company used cash of $32.1 million. The Company used cash of $66.0 million to fund investing activities, ofwhich $40.5 million was invested in equipment for use in the Company’s joint revenue sharing arrangements with exhibitors, and $15.2 million was used topurchase an investment in equity securities of Maoyan. In addition, $10.3 million was used to purchase other intangible assets and to purchase property, plant andequipment. Based on management’s current operating plan for 2020, the Company expects to continue to use cash to deploy additional theater systems under jointrevenue sharing arrangements, to fund DMR agreements with studios, and to potentially make share repurchases. Cash flows from joint revenue sharingarrangements are derived from the theater box office and concession revenues and the Company invested directly in the roll out of 54 new theater systems underjoint revenue sharing arrangements in the year ending December 31, 2019, which were capitalized by the Company.In 2017, the Company's Board of Directors announced a new share repurchase program which authorizes the repurchase of up to $200.0 million of its commonshares by June 30, 2020. The repurchases may be made either in the open market or through private transactions, subject to market conditions, applicable legalrequirements and other relevant factors. The Company has no obligation to repurchase shares and the share repurchase program may be suspended or discontinuedby the Company at any time. During the year ended December 31, 2019, the Company repurchased 134,384 common shares (December 31, 2018 — 3,436,783) atan average price of $19.76 per share, excluding commissions. The retired shares were repurchased for $2.7 million.63The Company’s operating cash flow will be adversely affected if management’s projections of future signings for theater systems and film performance, theaterinstallations and film productions are not realized. The Company forecasts its short-term liquidity requirements on a quarterly and annual basis. Since theCompany’s future cash flows are based on estimates and there may be factors that are outside of the Company’s control (see “Risk Factors” in Item 1A of this2019 Form 10-K), there is no guarantee that the Company will continue to be able to fund its operations through cash flows from operations. Under the terms ofthe Company’s typical sale and sales-type lease agreement, the Company receives substantial cash payments before the Company completes the performance of itsobligations. Similarly, the Company receives cash payments for some of its film productions in advance of related cash expenditures. Based on the Company’scash flow from operations and facilities, it expects to have sufficient capital and liquidity to fund its operations in the normal course for the next 12 months.Operating ActivitiesThe Company’s net cash provided by operating activities is affected by a number of factors, including the proceeds associated with new signings of theatersystem lease and sale agreements during the year, costs associated with contributing systems under joint revenue sharing arrangements, the box-office performanceof films distributed by the Company and/or released to IMAX theaters, increases or decreases in the Company’s operating expenses, including research anddevelopment and new business initiatives, and the level of cash collections received from its customers.Cash provided by operating activities amounted to $90.4 million for the year ended December 31, 2019 (2018 — $110.0 million). Changes in other non-cashoperating assets and liabilities as compared to December 31, 2018 include: Decrease (increase) in: Accounts receivable (1)$ (8,621)Financing receivables (320)Inventories 1,942 Prepaid expenses (290)Variable consideration receivable (4,056)Other assets (2,063)Increase (decrease) in: Accounts payable (11,774)Accrued and other liabilities (2) (8,505)Deferred revenue (3) (12,242) $ (45,929) (1)Amounts billed partially offset by cash receipts in the year(2)Excluded the $17.4 million non-cash impact of adopting ASC Topic 842 in 2019(3)Amounts relieved due to theater system installationsInvesting ActivitiesCapital expenditures, including the Company’s investment in joint revenue sharing equipment, purchase of property, plant and equipment, other intangibleassets and investments in film assets were $74.3 million in 2019 as compared to $80.1 million in 2018. The Company expects its investment in capital expendituresto remain fairly consistent as the nature of these cash outlays in particular, joint revenue sharing arrangements and film assets, exist to strengthen operationalperformances.Net cash used in investing activities amounted to $66.0 million in the year ended December 31, 2019 (2018 — $56.9 million) which includes an investment injoint revenue sharing equipment of $40.5 million (2018 — $34.8 million), purchases of $7.4 million in property, plant and equipment (2018 — $13.4 million) andan investment in other intangible assets of $2.9 million (2018 — $8.7 million), and the purchase by IMAX China (Hong Kong), Limited, a wholly-ownedsubsidiary of IMAX China of equity securities in Maoyan for $15.2 million.Financing ActivitiesNet cash used in financing activities in the year ended December 31, 2019 amounted to $57.1 million as compared to $70.9 million in the year ended December31, 2018.64In the year ended December 31, 2019, the Company made repayments of $55.0 million, partially offset by borrowings of $35.0 million under the Company’sCredit Facility.In 2018, the Company borrowed $65.0 million from its Credit Facility, which was offset by repayments of $50.7 million under its Credit Facility and the PlayaVista Loan and paid $1.9 million in fees related to the Credit Facility.In addition, the Company paid $2.7 million for the repurchase of common shares under the Company’s share repurchase program (2018 — $71.5 million),$19.2 million for the repurchase of common shares under the IMAX China share repurchase program (2018 — $6.1 million ), $13.8 million to purchase treasurystock for the settlement of restricted share units and options and $0.6 million of taxes withheld and paid on vested employee stock option awards (2018 — $6.2million and $1.4 million, respectively). The Company also paid $4.4 million in dividends to the non-controlling interest shareholders of IMAX China (2018 —$6.9 million). These cash outlays were offset by $2.4 million received from the issuance of common shares resulting from stock option exercises and $1.1 millionreceived from third party capital contributions to the Original Film Fund (2018 — $7.8 million and $1.0 million, respectively).CONTRACTUAL OBLIGATIONSPayments to be made by the Company under contractual obligations as at December 31, 2019 are as follows: Payments Due by Period (In thousands of U.S. Dollars) TotalObligation 1 Year > 1 - 3 years > 3 - 5 years Thereafter Purchase obligations(1) $41,779 $41,440 $339 $— $— Pension obligations(2) 20,298 — — 20,298 — Operating lease obligations(3) 22,170 2,108 7,685 4,361 8,016 Credit Facility(4) 20,000 — — 20,000 — Postretirement benefits obligations 2,246 108 227 246 1,665 $106,493 $43,656 $8,251 $44,905 $9,681 (1)The Company’s total payments to be made under binding commitments with suppliers and outstanding payments to be made for supplies ordered but yet to beinvoiced.(2)The SERP assumptions are that Mr. Gelfond will receive a lump sum payment six months after retirement at the end of the current term of his employmentagreement (December 31, 2022), although Mr. Gelfond has not informed the Company that he intends to retire at that time.(3)The Company’s total minimum annual rental payments to be made under operating leases, mostly consisting of rent at the Company’s property in New Yorkand at the various owned and operated theaters.(4)The Company is not required to make any minimum payments on its Credit Facility.Pension and Postretirement ObligationsThe Company has an unfunded defined benefit pension plan, the SERP, covering Mr. Gelfond. As at December 31, 2019, the Company had an unfunded andaccrued benefit obligation of approximately $18.8 million (December 31, 2018 — $18.0 million) in respect of the SERP.Pursuant to an amendment dated November 1, 2019 to the existing employment agreement, the term of Mr. Gelfond’s employment was extended throughDecember 31, 2022, although Mr. Gelfond has not informed the Company that he intends to retire at that time. Under the terms of the amendment to hisemployment agreement, the total amount of benefit payable to Mr. Gelfond under the SERP has been fixed at $20.3 million. The Company has a postretirement plan to provide health and welfare benefits to Canadian employees meeting certain eligibility requirements. As at December31, 2019, the Company had an unfunded benefit obligation of $1.6 million (December 31, 2018 — $1.5 million).65In July 2000, the Company agreed to maintain health benefits for Messrs. Gelfond and Bradley J. Wechsler, the Company’s former Co-CEO and currentChairman of its Board of Directors, upon retirement. As at December 31, 2019, the Company had an unfunded benefit obligation of $0.7 million (December 31,2018 — $0.6 million).The Company maintained a nonqualified deferred compensation benefit plan (the “Retirement Plan”) covering the former CEO of IMAX Entertainment andSenior Executive Vice President of the Company. Under the terms of his agreement with the Company, the plan will vest in full if he incurs a separation of service(as defined therein). In the fourth quarter of 2018, he incurred a separation from service, and as such, his Retirement Plan benefits became fully vested as atDecember 31, 2018 and the accelerated costs were recognized and reflected in the executive transition costs line on the consolidated statement of operations. As atDecember 31, 2019, the Company had a funded benefit obligation recorded of $3.6 million (December 31, 2018 — unfunded benefit obligation of $3.6 million).During 2018, the Company expensed an aggregate of $2.6 million (2017 — $0.5 million), of which $0.7 million was recorded in selling, general andadministrative expenses as it relates to service performed in 2018, the remaining $1.9 million is recorded in executive transition costs. The Company did notrecognize any additional expenses in the year ended December 31, 2019.OFF-BALANCE SHEET ARRANGEMENTSThere are currently no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on the Company’s financialcondition.Item 7A. Quantitative and Qualitative Factors about Market RiskThe Company is exposed to market risk from foreign currency exchange rates and interest rates, which could affect operating results, financial position andcash flows. Market risk is the potential change in an instrument’s value caused by, for example, fluctuations in interest and currency exchange rates. TheCompany’s primary market risk exposure is the risk of unfavorable movements in exchange rates between the U.S. dollar, the Canadian dollar and the ChineseYuan Renminbi. The Company does not use financial instruments for trading or other speculative purposes.Foreign Exchange Rate RiskA 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. Aportion 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, IMAXfilms generate box office in 81 different countries, and therefore unfavorable exchange rates between applicable local currencies and the U.S. dollar could have animpact on the Company’s reported gross box office and revenues. The Company has incoming cash flows from its revenue generating theaters and ongoingoperating expenses in China through its majority-owned subsidiary IMAX (Shanghai) Multimedia Technology Co., Ltd. In Japan, the Company has ongoing Yen-denominated operating expenses related to its Japanese operations. Net Renminbi and Japanese Yen cash flows are converted to U.S. dollars through the spotmarket. The Company also has cash receipts under leases denominated in Renminbi, Japanese Yen, Euros and Canadian dollars.The Company manages its exposure to foreign exchange rate risks through the Company’s 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 andcash flow volatility resulting from shifts in market rates.Certain of the Company’s subsidiaries held approximately 471.6 million Renminbi ($67.6 million U.S dollars) in cash and cash equivalents as at December 31,2019 (December 31, 2018 — 375.7 million Renminbi or $54.7 million U.S. dollars) and are required to transact locally in Renminbi. Foreign currency exchangetransactions, 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 ofForeign Exchange to complete. Any developments relating to the Chinese economy and any actions taken by the China government are beyond the control of theCompany; however, the Company monitors and manages its capital and liquidity requirements to ensure compliance with local regulatory and policy requirements.For the year ended December 31, 2019, the Company recorded a foreign exchange net loss of $0.9 million as compared to a foreign exchange net loss of $1.7million in 2018, associated with the translation of foreign currency denominated monetary assets and liabilities.66The Company entered into a series of foreign currency forward contracts to manage the Company’s risks associated with the volatility of foreign currencies.The forward contracts have settlement dates throughout 2020 and 2021. Foreign currency derivatives are recognized and measured in the balance sheet at fairvalue. Changes in the fair value (gains or losses) are recognized in the consolidated statements of operations except for derivatives designated and qualifying asforeign currency cash flow hedging instruments. All foreign currency forward contracts held by the Company as at December 31, 2019, are designated and qualifyas foreign currency cash flow hedging instruments. The Company currently has cash flow hedging instruments associated with selling, general and administrativeexpenses, inventory and capital expenditures. For foreign currency cash flow hedging instruments related to selling, general and administrative expenses, theeffective portion of the gain or loss in a hedge of a forecasted transaction is reported in other comprehensive income and reclassified to the consolidated statementsof operations when the forecasted transaction occurs. For foreign currency cash flow hedging instruments related to inventory, the effective portion of the gain orloss in a hedge of a forecasted transaction is reported in other comprehensive income and reclassified to inventory on the balance sheet when the forecastedtransaction occurs. For foreign currency cash flow hedging instruments related to capital expenditures, the effective portion of the gain or loss in a hedge of aforecasted transaction is reported in other comprehensive income and reclassified to property, plant and equipment on the balance sheet when the forecastedtransaction occurs. The notional value of foreign currency hedging instruments at December 31, 2019 was $36.1 million (December 31, 2018 — $50.8 million). Again of $0.6 million was recorded to Other Comprehensive Income with respect to the depreciation/appreciation in the value of these contracts in 2019 (2018 —aloss of $2.2 million). A loss of $1.2 million was reclassified from accumulated other comprehensive income to selling, general and administrative expenses,inventory and property, plant and equipment in 2019 (2018 — gain of $0.4 million). Appreciation or depreciation on forward contracts not meeting therequirements for hedge accounting in the Derivatives and Hedging Topic of the FASB Accounting Standards Codification are recorded to selling, general andadministrative expenses.For all derivative instruments, the Company is subject to counterparty credit risk to the extent that the counterparty may not meet its obligations to theCompany. To manage this risk, the Company enters into derivative transactions only with major financial institutions.At December 31, 2019, the Company’s financing receivables and working capital items denominated in Canadian dollars, Renminbi, Yen and Euros translatedinto U.S. dollars was $116.6 million. Assuming a 10% appreciation or depreciation in foreign currency exchange rates from the quoted foreign currency exchangerates at December 31, 2019, the potential change in the fair value of foreign currency-denominated financing receivables and working capital items would havebeen $11.7 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 at December 31, 2019, the potential change in the amount of selling, general, andadministrative expenses would be $0.2 million.Interest Rate Risk ManagementThe Company’s earnings are also affected by changes in interest rates due to the impact those changes have on its interest income from cash, and its interestexpense from variable-rate borrowings under the Credit Facility. As at December 31, 2019, the Company had drawn down $20.0 million on its Credit Facility (December 31, 2018 — $40.0 million).The Company’s largest exposure with respect to variable rate debt comes from changes in LIBOR. The Company had variable rate debt instrumentsrepresenting 8.1% and 14.6% of its total liabilities at December 31, 2019 and 2018, respectively. If the interest rates available to the Company increased by 10%,the Company’s interest expense would increase by approximately $0.1 million and interest income from cash would increase by approximately $0.2 million. Theseamounts are determined by considering the impact of the hypothetical interest rates on the Company’s variable rate debt and cash balances at December 31, 2019.On July 27, 2017, the Chief Executive of the U.K. Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that the FCA will no longercompel banks to submit rates for the calculation of the LIBOR benchmark after 2021. This announcement indicates that the continuation of LIBOR on the currentbasis cannot and will not be guaranteed after 2021, and it appears likely that LIBOR will be discontinued or modified by 2021. Loans under the Credit Facilitybear interest, at the Company’s option, at (i) LIBOR plus a margin ranging from 1.00% to 1.75% per annum; or (ii) the U.S. base rate plus a margin ranging from0.25% to 1.00% per annum, in each case depending on the Company’s Total Leverage Ratio (as defined in the Credit Agreement). The Credit Facility also allowsfor the selection of a replacement rate in the event of the discontinuation of LIBOR, subject to the approval of the administrative agent. The Company expects thatthe Credit Facility will transition to the Secured Overnight Financing Rate (“SOFR”) as the replacement rate. Given the Company’s current level of indebtednessand based on the historic differences between LIBOR and SOFR, the Company does not expect that the future discontinuation of LIBOR will have a materialimpact on future interest expense. 67Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageReport of Independent Registered Public Accounting Firm 69Consolidated Balance Sheets as at December 31, 2019 and 2018 72Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017 73Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017 74Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017 75Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2019, 2018 and 2017 76Notes to Consolidated Financial Statements 77 ************68 Report of Independent Registered Public Accounting FirmTo the Shareholders and Board of Directors of IMAX Corporation Opinions on the Financial Statements and Internal Control over Financial ReportingWe have audited the accompanying consolidated balance sheets of IMAX Corporation and its subsidiaries (the Company) as of December 31, 2019 and 2018, andthe related consolidated statements of operations, comprehensive income, cash flows and shareholders' equity for each of the three years in the period endedDecember 31, 2019, including the related notes and the schedule of valuation and qualifying accounts for each of the three years in the period ended December 31,2019, appearing on page 143 (collectively referred to as the consolidated financial statements). We also have audited the Company's internal control over financialreporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of SponsoringOrganizations 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 December31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in conformity withaccounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internalcontrol over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO.Change in Accounting PrincipleAs discussed in notes 3 and 4 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019. Basis for OpinionsThe Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and forits assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over FinancialReporting appearing under Item 9A of this Annual Report on Form 10-K. Our responsibility is to express opinions on the Company’s consolidated financialstatements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public CompanyAccounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federalsecurities 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 reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internalcontrol 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 financialstatements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidenceregarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significantestimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financialreporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing andevaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as weconsidered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financialreporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactionsand dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.69Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Critical Audit MattersThe critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated orrequired to be communicated to the audit committee and that (i) relate 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 theconsolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the criticalaudit matters or on the accounts or disclosures to which they relate.Revenue Recognition - Theater Systems Revenue As described in notes 2(n) and 21 to the consolidated financial statements, the Company recognized revenue from theater systems of $107.9 million whichrepresents a large portion of total revenues of $395.7 million for the year ended December 31, 2019. Management evaluates whether a theater system arrangementinvolves either a sale or a lease of a theater system, and for those arrangements that are accounted for as a sale of a theater system, determines the transaction priceand the allocation thereof to each separate performance obligation based on estimated standalone selling prices. For arrangements accounted for as a sale of atheater system, the revenue allocated to the performance obligation is recognized when the conditions signifying transfer of control have been met. For theatersystem arrangements, management applied significant judgment in (i) determining whether the theater system arrangement related to either a sale or a lease byconsidering the terms of the arrangement including title to the theater system equipment and payment consideration; (ii) estimating the transaction price which mayinclude the discounted present value of fixed ongoing payments and variable consideration; (iii) allocating the transaction price to each separate performanceobligation 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 theater systems revenue is a critical auditmatter are that management identified the matter as a critical accounting estimate, and there was significant judgment required by management in (i) determiningwhether the theater system arrangement related to a sale or a lease; (ii) estimating the transaction price which may include the discounted present value of fixedongoing payments and variable consideration; (iii) allocating the transaction price to each separate performance obligation; and (iv) determining the timing ofrevenue recognition. This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relatingto the revenue recognition of theater systems revenue.Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financialstatements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over management’sreview and approval of revenue recognition memorandums produced for each theater system arrangement which include the determination of the type of theatersystem 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 theater system arrangement related to either a sale or a lease byconsidering the contractual terms and conditions of the executed contracts. Procedures were also performed to test management’s process for estimating thetransaction 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 significantassumptions used by management, including the discount rate and expected future performance of underlying theaters associated with the arrangement. Evaluatingmanagement’s assumption related to the discount rate involved evaluating whether the assumption was reasonable considering consistency with external marketdata. Evaluating management’s assumption related to expected future performance of underlying theaters associated with the arrangement involved evaluatingwhether the assumption was reasonable considering the current and past performance of the underlying theaters. Procedures were also performed to testmanagement’s process for allocating the transaction price to each separate performance obligation, including (i) evaluating the appropriateness of management’smethod of allocating the70transaction price; (ii) testing the completeness, accuracy and relevance of the data used in allocating the transaction price; and (iii) evaluating the reasonableness ofsignificant assumptions used by management, including estimated standalone selling prices. Evaluating management’s assumption related to estimated standaloneselling prices involved evaluating whether the assumption was reasonable by comparing the estimate to current and historical transactions. Evaluating theappropriateness of management’s assessment of the timing of revenue recognition involved inspecting the customers’ certificates of acceptance and theateropenings during the year.Uncertain Tax PositionsAs described in notes 2(m) and 11 to the consolidated financial statements, the Company had total tax reserves of $14.7 million as of December 31, 2019 related touncertain tax positions. The Company is subject to ongoing tax examinations and assessments in various jurisdictions. As disclosed by management, tax benefitsare 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 themore-likely-than-not recognition threshold are measured using a probability weighting of the largest amount of tax benefit. As management has further disclosed,tax audits can result in subsequent assessments where the ultimate resolution may result in the Company owing additional taxes above what was provided for. Taxreserves for uncertain tax positions are adjusted by management to reflect (i) their best estimate of the outcome of examinations and assessments and changingfacts and circumstances, such as the completion of a tax audit, expiration of a statute of limitations, the refinement of an estimate, and (ii) interest accrualsassociated with the uncertain tax positions until they are resolved. The estimate of the Company’s tax reserves relating to uncertain tax positions requiredmanagement to assess uncertainties and to make significant judgments about the application of complex tax laws.The principal considerations for our determination that performing procedures relating to uncertain tax positions is a critical audit matter are (i) there wassignificant judgment required by management in determining uncertain tax positions, including a high degree of estimation uncertainty relative to the numerousand complex tax laws, frequency of tax audits, and potential for significant adjustments as a result of such audits; this in turn led to (ii) a high degree of auditorjudgment, subjectivity and effort in performing procedures to evaluate the recognition and measurement of uncertain tax positions. Also, the evaluation of auditevidence available to support the tax reserves for uncertain tax positions required significant auditor judgment as the nature of the evidence is often subjective, andthe audit effort involved the use of professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained.Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financialstatements. These procedures included testing the effectiveness of controls relating to the recognition of the tax reserves for uncertain tax positions, and controlsaddressing the completeness of the uncertain tax positions, as well as controls over measurement of the tax reserves. These procedures also included, among others,(i) testing the information used in the calculation of the tax reserves for uncertain tax positions; (ii) testing the calculation of the tax reserves for uncertain taxpositions by jurisdiction; and (iii) evaluating the status and results of income tax audits with the relevant tax authorities, as applicable. Professionals withspecialized skill and knowledge were used to assist in the evaluation of the completeness and measurement of the Company’s uncertain tax positions, includingevaluating the reasonableness of management’s assessment of whether tax positions are more-likely-than-not of being sustained and the amount of potential benefitto be realized, the application of relevant tax laws, and estimated interest and penalties. /s/ PricewaterhouseCoopers LLPChartered Professional Accountants, Licensed Public AccountantsToronto, CanadaFebruary 19, 2020We have served as the Company's auditor since 1987, which includes periods before the entity became subject to SEC reporting requirements. 71IMAX CORPORATIONCONSOLIDATED BALANCE SHEETS(In thousands of U.S. dollars except share amounts) As at December 31, 2019 2018 Assets Cash and cash equivalents $109,484 $141,590 Accounts receivable, net of allowance for doubtful accounts of $5,138 (December 31, 2018 — $3,174) 99,513 93,309 Financing receivables, net of allowance for uncollectible amounts (notes 5 and 22(c)) 128,038 127,432 Variable consideration receivable from contracts (note 6) 40,040 35,985 Inventories (note 7) 42,989 44,560 Prepaid expenses 10,237 10,294 Film assets (note 8) 17,921 16,367 Property, plant and equipment (note 9) 306,849 280,658 Investment in equity securities (note 22(e)) 15,685 1,022 Other Assets (notes 10 and 22(e)) 25,034 17,997 Deferred income taxes (note 11) 23,905 31,264 Other intangible assets (note 12) 30,347 34,095 Goodwill 39,027 39,027 Total assets $889,069 $873,600 Liabilities Bank indebtedness (note 13) $18,229 $37,753 Accounts payable 20,414 32,057 Accrued and other liabilities (notes 8, 14, 15, 16, 22(d), 23 and 26) 112,779 97,724 Deferred revenue 94,552 106,709 Total liabilities 245,974 274,243 Commitments and contingencies (notes 14 and 15) Non-controlling interests (note 24(b)) 5,908 6,439 Shareholders' equity Capital stock (note 16) common shares — no par value. Authorized — unlimited number 61,362,872 issued and 61,175,852 outstanding (December 31, 2018 — 61,478,168 issued and 61,433,589 outstanding) 423,386 422,455 Less: Treasury stock, 187,020 shares at cost (December 31, 2018 — 44,579) (4,038) (916)Other equity 171,789 179,595 Accumulated deficit (40,253) (85,385)Accumulated other comprehensive loss (3,190) (3,588)Total shareholders' equity attributable to common shareholders 547,694 512,161 Non-controlling interests (note 24(a)) 89,493 80,757 Total shareholders' equity 637,187 592,918 Total liabilities and shareholders' equity $889,069 $873,600 Subsequent event (note 29) (the accompanying notes are an integral part of these consolidated financial statements) 72IMAX CORPORATIONCONSOLIDATED STATEMENTS OF OPERATIONS(In thousands of U.S. dollars, except per share amounts) Years Ended December 31, 2019 2018 2017 Revenues Equipment and product sales (notes 17(b) and 20) $118,245 $106,591 $103,294 Services (note 20) 188,547 181,740 195,594 Rentals (notes 17(b) and 20) 77,961 74,472 72,281 Finance income 10,911 11,598 9,598 395,664 374,401 380,767 Costs and expenses applicable to revenues (note 2(n)) Equipment and product sales 63,627 54,853 48,172 Services (note 17(b)) 88,175 84,236 120,629 Rentals 29,690 27,383 26,720 181,492 166,472 195,521 Gross margin 214,172 207,929 185,246 Selling, general and administrative expenses (note 16(c)) 123,456 117,477 109,882 Research and development 5,203 13,728 20,855 Asset impairments (note 22(e)) — — 1,225 Amortization of intangibles 4,955 4,145 3,019 Receivable provisions, net of recoveries (note 18) 2,430 3,130 2,647 Legal arbitration award (note 15) — 11,737 — Executive transition costs (note 25) — 2,994 — Exit costs, restructuring charges and associated impairments (note 26) 850 9,542 16,174 Income from operations 77,278 45,176 31,444 Change in fair value of equity securities (note 22(e)) (517) — — Retirement benefits non-service expense (note 23) (737) (499) (518)Interest income 2,105 1,844 1,027 Interest expense (2,793) (2,916) (1,942)Income before income taxes and income (loss) from equity-accounted investments, net oftax 75,336 43,605 30,011 Provision for income taxes (note 11) (16,768) (9,518) (16,790)Income (loss) from equity-accounted investments, net of tax 3 (492) (703)Net income 58,571 33,595 12,518 Less: net income attributable to non-controlling interests (note 24(a)) (11,705) (10,751) (10,174)Net income attributable to common shareholders $46,866 $22,844 $2,344 Net income per share attributable to common shareholders -basic and diluted: (note 16(d)) Net income per share — basic and diluted $0.76 $0.36 $0.04 (the accompanying notes are an integral part of these consolidated financial statements) 73IMAX CORPORATIONCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In thousands of U.S. dollars) Years Ended December 31, 2019 2018 2017 Net income $58,571 $33,595 $12,518 Unrealized defined benefit plan actuarial gain (note 23(a)) 157 1,448 1,004 Unrealized postretirement benefit plans actuarial (loss) gain (note 23(c) and 23(d)) (153) 85 125 Prior service cost arising during the period (note 23(a)) (456) — — Unrealized net gain (loss) from cash flow hedging instruments (note 22(d)) 552 (2,219) 2,545 Realization of cash flow hedging net loss (gain) upon settlement (note 22(d)) 1,183 (408) (824)Foreign currency translation adjustments (note 2) (729) (3,170) 3,618 Other comprehensive income (loss), before tax 554 (4,264) 6,468 Income tax (expense) recovery related to other comprehensive (loss) income (note 11(h)) (378) 286 (746)Other comprehensive income (loss), net of tax 176 (3,978) 5,722 Comprehensive income 58,747 29,617 18,240 Less: Comprehensive income attributable to non-controlling interests (11,483) (9,735) (11,322)Comprehensive income attributable to common shareholders $47,264 $19,882 $6,918 (the accompanying notes are an integral part of these consolidated financial statements) 74IMAX CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands of U.S. dollars) Years Ended December 31, 2019 2018 2017 Cash provided by (used in): Operating Activities Net income $ 58,571 $ 33,595 $ 12,518 Adjustments to reconcile net income to cash from operations: Depreciation and amortization (notes 19(c) and 21(a)) 63,487 57,437 66,807 Write-downs, net of recoveries (notes 19(d) and 21(a)) 6,806 11,770 29,568 Deferred income taxes 6,762 (6,923) (4,017)Stock and other non-cash compensation 23,570 23,723 24,075 Unrealized foreign currency exchange loss (gain) 32 631 (502)Change in fair value of equity securities (note 22(e)) 517 — — Loss from equity-accounted investments 730 95 306 (Gain) loss on non-cash contribution to equity-accounted investees (733) 397 397 Investment in film assets (23,437) (23,200) (34,645)Changes in other non-cash operating assets and liabilities (note 19(a)) (45,929) 12,447 (9,141)Net cash provided by operating activities 90,376 109,972 85,366 Investing Activities Purchase of property, plant and equipment (7,421) (13,368) (24,143)Investment in joint revenue sharing equipment (40,489) (34,810) (42,634)Acquisition of other intangible assets (2,931) (8,696) (5,214)Investment in equity securities (note 22(e)) (15,153) — (1,606)Net cash used in investing activities (65,994) (56,874) (73,597)Financing Activities Increase in bank indebtedness (note 13) 35,000 65,000 — Repayment of bank indebtedness (note 13) (55,000) (50,667) (2,000)Treasury stock repurchased for future settlement of restricted share units (note 16) (4,038) (916) (5,133)Settlement of restricted share units and options (note 16) (9,795) (5,249) (20,331)Repurchase of common shares, IMAX China (note 16) (19,162) (6,084) — Taxes withheld and paid on employee stock awards vested (590) (1,437) (600)Common shares issued - stock options exercised 2,404 1,017 16,668 Repurchase of common shares (2,659) (71,479) (46,140)Issuance of subsidiary shares to non-controlling interests (net of return on capital) 1,106 7,796 — Dividends paid to non-controlling interests (4,384) (6,934) — Credit facility amendment fees paid — (1,909) — Net cash used in financing activities (57,118) (70,862) (57,536)Effects of exchange rate changes on cash 630 629 (267)Decrease in cash and cash equivalents during year (32,106) (17,135) (46,034)Cash and cash equivalents, beginning of year 141,590 158,725 204,759 Cash and cash equivalents, end of year $ 109,484 $ 141,590 $ 158,725 (the accompanying notes are an integral part of these consolidated financial statements) 75IMAX CORPORATIONCONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY(In thousands of U.S. dollars except share amounts) Years Ended December 31, 2019 2018 2017 Adjustments to capital stock: Balance, beginning of year $421,539 $440,664 $437,274 Change in shares held in treasury (3,122) 4,216 (3,194)Employee stock options exercised 1,752 218 14,652 Fair value of stock options exercised at the grant date 104 70 3,542 Average carrying value of repurchased and retired common shares (925) (23,629) (11,884)Issuance of common shares for vested restricted share units — — 274 Balance, end of year 419,348 421,539 440,664 Adjustments to other equity: Balance, beginning of year 179,595 175,300 177,304 Paid-in-capital for employee stock options granted 8,910 5,907 5,496 Paid-in-capital for restricted share units granted 13,985 16,325 17,157 Paid-in-capital for restricted share units vested (10,525) (12,582) (14,756)Cash received from the issuance of common shares in excess of par value 651 799 2,017 Fair value of stock options exercised at the grant date (104) (70) (3,542)Common shares repurchased, IMAX China (19,162) (6,084) — Paid-in-capital for non-employee stock options granted and vested — — 17 Stock options exercised from treasury shares purchased on open market (1,561) — (8,393)Balance, end of year 171,789 179,595 175,300 Adjustments to accumulated deficit: Balance, beginning of year (85,385) (87,592) (47,366)Retrospective adoption of ASC Topic 606, Revenue from Contracts with Customers — 27,213 — Retrospective adoption of ASC Topic 740, Intra-entity transfers — — (8,314)Net income attributable to common shareholders 46,866 22,844 2,344 Common shares repurchased and retired (1,734) (47,850) (34,256)Balance, end of year (40,253) (85,385) (87,592)Adjustments to accumulated other comprehensive loss: Balance, beginning of year (3,588) (626) (5,200)Other comprehensive income (loss), net of tax 398 (2,962) 4,574 Balance, end of year (3,190) (3,588) (626)Adjustments to non-controlling interests: Balance, beginning of year 80,757 74,511 59,562 Retrospective adoption of ASC Topic 606, Revenue from Contracts with Customers — 735 — Net income attributable to non-controlling interests 13,343 13,461 13,801 Other comprehensive (loss) income, net of tax (223) (1,016) 1,148 Dividends paid to non-controlling shareholders (4,384) (6,934) — Balance, end of year 89,493 80,757 74,511 Total Shareholders' Equity $637,187 $592,918 $602,257 Common shares issued and outstanding: Balance, beginning of year 61,433,589 64,695,550 66,159,902 Employee stock options exercised 19,088 12,750 405,229 Restricted share units vested (net of shares withheld for tax) — — 7,127 Restricted share units and stock option exercises settled from treasury shares purchased on open market 44,579 206,651 66,093 Repurchase of common shares (134,384) (3,436,783) (1,736,150)Shares held in treasury (187,020) (44,579) (206,651)Balance, end of year 61,175,852 61,433,589 64,695,550 (The accompanying notes are an integral part of these consolidated financial statements) 76IMAX CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts in thousands of U.S. dollars, unless otherwise stated) 1. Description of the BusinessIMAX Corporation, together with its consolidated subsidiaries (the “Company”), is an entertainment technology company specializing in digital and film-basedmotion picture technologies, whose principal activities are the: •design, manufacture, sale and lease of proprietary theater systems for IMAX theaters principally owned and operated by commercial and institutionalcustomers located in 81 countries and territories as at December 31, 2019; •production, digital re-mastering, post-production and/or distribution of certain films shown throughout the IMAX theater network; •provision of other services to the IMAX theater network, including ongoing maintenance and extended warranty services for IMAX theater systems; •operation of certain theaters primarily in the United States; and •other activities, which includes short-term rental of cameras and aftermarket sales of projector system components.The Company refers to all theaters using the IMAX theater system as “IMAX theaters.”The Company’s revenues from equipment and product sales include the sale and sales-type leasing of its theater systems and sales of their associated parts andaccessories, contingent rentals on sales-type leases and contingent additional payments on sales transactions.The Company’s revenues from services include the provision of maintenance and extended warranty services, digital re-mastering services, film production andfilm post-production services, film distribution, and the operation of certain theaters.The Company’s rentals include revenues from the leasing of its theater systems that are operating leases, contingent rentals on operating leases, joint revenuesharing arrangements and the rental of the Company’s cameras and camera equipment.The Company’s finance income represents interest income and accretion of variable consideration arising from the sales-type leases and financed sales of theCompany’s theater systems.2. Summary of Significant Accounting PoliciesSignificant accounting policies are summarized as follows:The Company prepares its consolidated financial statements in accordance with U.S. GAAP. (a)Basis of ConsolidationThe consolidated financial statements include the accounts of the Company together with its consolidated subsidiaries, except for subsidiaries which theCompany has identified as variable interest entities (“VIEs”) where the Company is not the primary beneficiary.The Company has evaluated its various variable interests to determine whether they are VIEs as required by the Consolidation Topic of the FinancialAccounting Standards Board (“FASB”) Accounting Standards Codification (“ASC” or “Codification”).The Company has ten film and content related companies that are VIEs. For five of the Company’s film production companies, the Company has determinedthat it is the primary beneficiary of these entities as the Company has the power to direct the activities of the respective VIE that most significantly impact therespective VIE’s economic performance and has the obligation to absorb losses of the VIE that could potentially be significant to the respective VIE or the right toreceive benefits from the respective VIE that could potentially be significant to the respective VIE. The majority of these consolidated assets are held by the IMAXOriginal Film Fund (the “Original Film Fund”) as described in note 24(b). For the other five film production companies which are VIEs, the Company did notconsolidate these film entities since it does not have the power to direct activities and does not absorb the majority of the expected losses or expected residualreturns. The Company equity accounts for these entities. A loss in value of an investment other than a temporary decline is recognized as a charge to theconsolidated statements of operations.77Total assets and liabilities of the Company's consolidated VIEs are as follows: December 31, December 31, 2019 2018 Total assets $9,677 $12,203 Total liabilities $15,528 $11,573 Total assets and liabilities of the VIE entities which the Company does not consolidate are as follows: December 31, December 31, 2019 2018 Total assets $448 $447 Total liabilities $372 $362 The Company accounts for investments in new business ventures using the guidance of the FASB ASC 323 “Investments – Equity Method and Joint Ventures”(“ASC 323”) and ASC 320 “Investments in Debt and Equity Securities” (“ASC 320”), as appropriate.All intercompany accounts and transactions, including all unrealized intercompany profits on transactions with equity-accounted investees, have beeneliminated. (b)Use of EstimatesThe preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect thereported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of consolidated financial statements and the reportedamounts of revenues and expenses during the reporting period. Actual results could be materially different from these estimates. Significant estimates made bymanagement include, but are not limited to: estimated transaction price related to distinct performance obligations; economic lives of joint revenue sharingequipment; allowances for potential uncollectability of accounts receivable, financing receivables and net investment in leases; provisions for inventoryobsolescence; ultimate revenues for film assets; impairment provisions for film assets, long-lived assets and goodwill; depreciable lives of property, plant andequipment and right-of-use assets; discount rates of lease liabilities; useful lives of intangible assets; pension plan assumptions; accruals for contingenciesincluding uncertain tax positions; valuation allowances for deferred income tax assets; and, estimates of the fair value of stock-based payment awards. (c)Cash and Cash EquivalentsThe Company considers all highly liquid investments convertible to a known amount of cash and with an original maturity to the Company of three months orless to be cash equivalents. (d)Accounts Receivable and Financing ReceivablesAllowances for doubtful accounts receivable are based on the Company’s assessment of the collectability of specific customer balances, which is based upon areview of the customer’s credit worthiness, past collection history and the underlying asset value of the equipment, where applicable. Interest on overdue accountsreceivable is recognized as income as the amounts are collected.For trade accounts receivable that have characteristics of both a contractual maturity of one year or less, and arose from the sale of other goods or services, theCompany charges off the balance against the allowance for doubtful accounts when it is known that a provided amount will not be collected.The Company monitors the performance of the theaters to which it has leased or sold theater systems which are subject to ongoing payments. When facts andcircumstances indicate that there is a potential impairment in the net investment in lease or a financing receivable, the Company will evaluate the potential outcomeof either a renegotiation involving changes in the terms of the receivable or defaults on the existing lease or financed sale agreements. The Company will record aprovision if it is considered probable that the Company will be unable to collect all amounts due under the contractual terms of the arrangement or a renegotiatedlease amount will cause a reclassification of the sales-type lease to an operating lease.78When the net investment in lease or the financing receivable is impaired, the Company will recognize a provision for the difference between the carrying valuein the investment and the present value of expected future cash flows discounted using the effective interest rate for the net investment in the lease or the financingreceivable. If the Company expects to recover the theater system, the provision is equal to the excess of the carrying value of the investment over the fair value ofthe equipment.When the minimum lease payments are renegotiated and the lease continues to be classified as a sales-type lease, the reduction in payments is applied to reduceunearned finance income.These provisions are adjusted when there is a significant change in the amount or timing of the expected future cash flows or when actual cash flows differ fromcash flow previously expected.Once a net investment in lease or financing receivable is considered impaired, the Company does not recognize finance income until the collectability issues areresolved. When finance income is not recognized, any payments received are applied against outstanding gross minimum lease amounts receivable or grossreceivables from financed sales. Once the collectability issues are resolved, the Company will once again commence the recognition of interest income. (e)InventoriesInventories 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 lowerof cost and replacement cost. Finished goods and work-in-process include the cost of raw materials, direct labor, theater design costs, and an applicable share ofmanufacturing overhead costs.The costs related to theater systems under sales and sales-type lease arrangements are relieved from inventory to costs and expenses applicable to revenues-equipment and product sales when revenue recognition criteria are met. The costs related to theater systems under operating lease arrangements and joint revenuesharing arrangements are transferred from inventory to assets under construction in property, plant and equipment when allocated to a signed joint revenue sharingarrangement or when the arrangement is first classified as an operating lease.The Company records provisions for excess and obsolete inventory based upon current estimates of future events and conditions, including the anticipatedinstallation dates for the current backlog of theater system contracts, technological developments, signings in negotiation, growth prospects within the customers’ultimate marketplace and anticipated market acceptance of the Company’s current and pending theater systems.Finished goods inventories can contain theater systems for which title has passed to the Company’s customer (as the theater system has been delivered to thecustomer) but the revenue recognition criteria as discussed in note 2(n) have not been met. (f)Film AssetsCosts of producing films, including labor, allocated overhead, capitalized interest, and costs of acquiring film rights are recorded as film assets and accountedfor in accordance with Entertainment-Films Topic of the FASB ASC. Production financing provided by third parties that acquire substantive rights in the film isrecorded as a reduction of the cost of the production. Film assets are amortized and participation costs are accrued using the individual-film-forecast method in thesame ratio that current gross revenues bear to current and anticipated future ultimate revenues. Estimates of ultimate revenues are prepared on a title-by-title basisand reviewed regularly by management and revised where necessary to reflect the most current information. Ultimate revenues for films include estimates ofrevenue over a period not to exceed ten years following the date of initial release.Film exploitation costs, including advertising costs, are expensed as incurred.Costs, including labor and allocated overhead, of digitally re-mastering films where the copyright is owned by a third party and the Company shares in therevenue of the third party are included in film assets. These costs are amortized using the individual-film-forecast method in the same ratio that current grossrevenues bear to current and anticipated future ultimate revenues from the re-mastered film.The recoverability of film assets is dependent upon commercial acceptance of the films. If events or circumstances indicate that the recoverable amount of afilm asset is less than the unamortized film costs, the film asset is written down to its fair value. The Company determines the fair value of its film assets using adiscounted cash flow model.79 (g)Property, Plant and EquipmentProperty, plant and equipment are recorded at cost and are depreciated on a straight-line basis over their estimated useful lives as follows: Theater system components(1)—over the equipment’s anticipated useful life (7 to 20 years)Camera equipment—5 to 10 yearsBuildings—20 to 25 yearsOffice and product equipment—3 to 5 yearsLeasehold improvements—over the shorter of the initial term of the underlying leases plus any reasonably assured renewal terms, and the useful life of the asset (1)Includes equipment under joint revenue sharing arrangements.Equipment and components allocated to be used in future operating leases and joint revenue sharing arrangements, as well as direct labor costs and an allocationof direct production costs, are included in assets under construction until such equipment is installed and in working condition, at which time the equipment isdepreciated on a straight-line basis over the lesser of the term of the joint revenue sharing arrangement and the equipment’s anticipated useful life. The estimateduseful life is periodically reviewed for the equipment and components used in joint revenue sharing arrangements to determine if any adjustments need to be madeto the current amortization. The Company reviews the carrying values of its property, plant and equipment for impairment whenever events or changes in circumstances indicate that thecarrying amount of an asset or asset group might not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows are largelyindependent when testing for, and measuring for, impairment. In performing its review of recoverability, the Company estimates the future cash flows expected toresult from the use of the asset or asset group and its eventual disposition. If the sum of the expected undiscounted future cash flows is less than the carryingamount of the asset or asset group, an impairment loss is recognized in the consolidated statements of operations. Measurement of the impairment loss is based onthe excess of the carrying amount of the asset or asset group over the fair value calculated using discounted expected future cash flows.A liability for the fair value of an asset retirement obligation associated with the retirement of tangible long-lived assets and the associated asset retirementcosts are recognized in the period in which the liability and costs are incurred if a reasonable estimate of fair value can be made using a discounted cash flowmodel. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset and subsequently amortized over the asset’suseful life. The liability is accreted over the period to expected cash outflows. (h)Investment in Equity SecuritiesEquity securities with readily determinable fair values are reported at fair value with changes in fair value recorded within the change in fair value of equitysecurities in the consolidated statements of operations. (i)Other AssetsOther assets include lease incentives, deferred selling costs that are direct and incremental to the acquisition of sales contracts, various investments, insurancerecoverable and foreign currency derivatives.When no amounts have been drawn down on the related debt instrument, the costs of debt financing are deferred and amortized over the term of the debt usingthe effective interest rate method. When amounts are drawn on the debt instrument, the deferred financing fees are reclassified to net against the outstanding debtamount and amortized over the life of the debt instrument and recognized in interest expense.Selling costs related to an arrangement incurred prior to recognition of the related revenue are deferred and expensed to costs and expenses applicable torevenues upon: (i) recognition of the contract’s theater system revenue; or (ii) abandonment of the sale arrangement.Foreign currency derivatives are accounted for at fair value using quoted prices in closed exchanges (Level 2 input in accordance with the Fair ValueMeasurements Topic of the FASB ASC hierarchy).80The Company may provide lease incentives to certain exhibitors which are essential to entering into the respective lease arrangement. Lease incentives includepayments made to or on behalf of the exhibitor. These lease incentives are recognized as a reduction in rental revenue on a straight-line basis over the term of thelease.Investments in new business ventures are accounted for using ASC 323 as described in note 2(a). The Company currently accounts for its joint ventureinvestment with TCL Multimedia Technology Holdings Limited (“TCL”), using the equity method of accounting. The Company accounts for in-kind contributionsto its equity investment in accordance with ASC 845 “Non-Monetary Transactions” (“ASC 845”) whereby if the fair value of the asset or assets contributed isgreater than the carrying value a partial gain shall be recognized.The Company’s investment in debt securities is classified as an available-for-sale investment in accordance with ASC 320. Unrealized holding gains and lossesfor this investment is excluded from earnings and reported in other comprehensive income until realized. Realization occurs upon sale of a portion of or the entireinvestment. The investment is impaired if the fair value is less than cost, which is assessed in each reporting period. When the Company intends to sell aspecifically identified beneficial interest, a write-down for other-than-temporary impairment shall be recognized in earnings. The Company’s investment in preferred shares, which meets the criteria for classification as an equity security in accordance with ASC 325, is accounted for atcost. The Company records the related warrants at fair value upon recognition date. Warrants are recognized over the term of the agreement. (j)GoodwillGoodwill represents the excess of purchase price over the fair value of net identifiable assets acquired in a purchase business combination. Goodwill is notsubject to amortization and is tested for impairment annually (on September 30th) or more frequently if events occur or circumstances change that indicate that theasset might be impaired. The Company performs a qualitative assessment of its reporting units and certain select quantitative calculations against its current long-range plan to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than itscarrying amount. Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fairvalue of the reporting unit. The fair value of the reporting unit is estimated using a discounted cash flow approach. Any impairment loss is expensed in theconsolidated statement of operations and is not reversed if the fair value subsequently increases. (k)Other Intangible AssetsPatents, trademarks and other intangibles are recorded at cost and are amortized on a straight-line basis over estimated useful lives ranging from 4 to 10 yearsexcept for intangible assets that have an identifiable pattern of consumption of the economic benefit of the asset, which are amortized over the consumptionpattern.The Company reviews the carrying values of its other intangible assets for impairment whenever events or changes in circumstances indicate that the carryingamount of an asset or asset group might not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows are largely independent whentesting for, and measuring for, impairment. In performing its review for recoverability, the Company estimates the future cash flows expected to result from theuse of the asset or asset group and its eventual disposition. If the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset orasset group, an impairment loss is recognized in the consolidated statement of operations. Measurement of the impairment loss is based on the excess of thecarrying amount of the asset or asset group over the fair value calculated using discounted expected future cash flows. (l)Deferred RevenueDeferred revenue represents cash received prior to revenue recognition criteria being met for theater system sales or leases, film contracts, maintenance andextended warranty services, film related services and film distribution. (m)Income TaxesIncome taxes are accounted for under the liability method whereby deferred income tax assets and liabilities are recognized for the expected future taxconsequences of temporary differences between the accounting and tax bases of assets and liabilities. Deferred income tax assets and liabilities are measured usingenacted 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 deferredincome tax assets and liabilities of a change in tax rates or laws is recognized in the consolidated statement of operations in the period in which the change isenacted. Investment tax credits are recognized as a reduction of income tax expense.81The Company assesses realization of deferred income tax assets and, based on all available evidence, concludes whether it is more likely than not that the netdeferred income tax assets will be realized. A valuation allowance is provided for the amount of deferred income tax assets not considered to be realizable.The Company is subject to ongoing tax exposures, examinations and assessments in various jurisdictions. The Company follows the provisions of ASC 740-10-25 that provide a recognition threshold and measurement criteria for the financial statement recognition of a tax benefit taken in a tax return. Tax benefits arerecognized 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 beingrealised 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 individualfacts and circumstances evaluated in light of all available evidence as of the balance sheet date. Although we believe we have adequately accounted for ouruncertain tax positions, tax audits can result in subsequent assessments where the ultimate resolution may result in us owing additional taxes above what wasprovided for.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 ofchanging facts and circumstances, such as the completion of a tax audit, expiration of a statute of limitations, the refinement of an estimate, and interest accrualsassociated with the uncertain tax positions until they are resolved. Some of these adjustments require significant judgment in estimating the timing and amount ofthe additional tax expense. (n)Revenue RecognitionContracts with Multiple Performance ObligationsThe Company’s revenue arrangements with certain customers may involve performance obligations consisting of the delivery of a theater system (projector,sound system, screen system and, if applicable, 3D glasses cleaning machine); services associated with the theater system including theater design support,supervision of installation, and projectionist training; a license to use the IMAX brand; 3D glasses; maintenance and extended warranty services; and licensing offilms. The Company evaluates all of the performance obligations in an arrangement to determine which are considered distinct, either individually or in a group,for accounting purposes and which of the deliverables represent separate units of accounting based on the applicable accounting guidance in ASC Topic 842“Leases”; ASC Topic 460 “Guarantees”; and ASC Topic 606 “Revenue from Contracts with Customers”. If separate units of accounting are either required underthe relevant accounting standards or determined to be applicable under the Revenue Recognition Topic, the total transaction price received or receivable in thearrangement is allocated based on the applicable guidance in the above noted standards.Theater SystemsThe Company has identified the projection system, sound system, screen system and, if applicable, 3D glasses cleaning machine, theater design support,supervision of installation, projectionist training and the use of the IMAX brand to be, as a group, a distinct performance obligation, and a single unit of accounting(the “System Obligation”). When an arrangement does not include all the performance obligations of a System Obligation, the performance obligations of theSystem Obligation included in the arrangement are considered by the Company to be a grouped distinct performance obligation and a single unit of accounting.The Company is not responsible for the physical installation of the equipment in the customer’s facility; however, the Company supervises the installation by thecustomer. The customer has the right to use the IMAX brand from the date the Company and the customer enter into an arrangement.The Company’s System Obligation arrangements involve either a lease or a sale of the theater system. The transaction price for the System Obligation, otherthan for those delivered pursuant to joint revenue sharing arrangements, consist of upfront or initial payments made before and after the final installation of thetheater system equipment and ongoing payments throughout the term of the lease or over a period of time, as specified in the arrangement. The ongoing paymentsare the greater of an annual fixed minimum amount or a certain percentage of the theater box-office. Amounts received in excess of the annual fixed minimumamounts are considered contingent payments. The Company’s arrangements are non-cancellable, unless the Company fails to perform its obligations. In theabsence 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 theCompany 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 materialdefault and only if the Company does not cure the default within a specified period.82Transaction price is allocated to each separate performance obligation for each good or service based on estimated standalone selling prices. The Company usesobservable prices when the Company sells the deliverable separately and is the price actually charged by the Company for that deliverable. Standalone prices areestablished for the Company’s System Obligation, maintenance and extended warranty services and film license arrangements. The Company uses an adjustedmarket assessment approach for separate performance obligations that do not have standalone selling prices or third-party evidence of estimated standalone sellingprice. The Company considers multiple factors including the Company’s historical pricing practices, product class, market competition and geography. Sales ArrangementsFor arrangements qualifying as sales, the revenue allocated to the System Obligation is recognized in accordance with the Revenue Recognition Topic of theFASB ASC, when all of the following conditions signifying transfer of control have been met: (i) the projector, sound system and screen system have beeninstalled and are in full working condition, (ii) the 3D glasses cleaning machine, if applicable, has been delivered, (iii) projectionist training has been completedand (iv) the earlier of (a) receipt of written customer acceptance certifying the completion of installation and run-in testing of the equipment and the completion ofprojectionist training or (b) public opening of the theater.The initial revenue recognized consists of the initial payments received and the present value of any future initial payments, fixed minimum ongoing paymentsand an estimate of future variable consideration (future CPI and additional payments in excess of the minimums in the case of full sale arrangements or apercentage of ongoing box office in the case of hybrid sales arrangements) that have been attributed to this performance obligation.The Company has also agreed, on occasion, to sell equipment under lease or at the end of a lease term. Transaction price agreed to for these lease buyouts isincluded in revenues from equipment and product sales.Taxes assessed by governmental authorities that are both imposed on and concurrent with the specific revenue-producing transactions and collected by theCompany have been excluded from the measurement of the transaction prices discussed above.Lease ArrangementsAs a lessor, for lease arrangements, the Company determines the classification of the lease in accordance with ASC Topic 842. The Company adopted ASCTopic 842 as of January 1, 2019, which with respect to lessor arrangements is consistent with ASC 840, which was applied in prior periods. A lease arrangementthat transfers substantially all of the benefits and risks incident to ownership of the equipment is classified as a sales-type lease based on the criteria established bythe accounting standard; otherwise the lease is classified as an operating lease. Prior to commencement of the lease term for the equipment, the Company maymodify certain payment terms or make concessions. If these circumstances occur, the Company reassesses the classification of the lease based on the modifiedterms 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 allof 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 3Dglasses cleaning machine, if applicable, has been delivered; (iii) projectionist training has been completed; and (iv) the earlier of (a) receipt of the written customeracceptance certifying the completion of installation and run-in testing of the equipment and the completion of projectionist training or (b) public opening of thetheater, 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 minimumongoing payments computed at the interest rate implicit in the lease. Contingent payments in excess of the fixed minimum payments are recognized when reportedby theater operators, provided collectability is reasonably assured.For operating leases, initial payments and fixed minimum ongoing payments are recognized as revenue on a straight-line basis over the lease term. Foroperating leases, the lease term is considered to commence when all of the following conditions have been met: (i) the projector, sound system and screen systemhave been installed and in full working condition; (ii) the 3D glasses cleaning machine, if applicable, has been delivered; (iii) projectionist training has beencompleted; and (iv) the earlier of (a) receipt of written customer acceptance certifying the completion of installation and run-in testing of the equipment and thecompletion of projectionist training or (b) public opening of the theater. Contingent payments in excess of fixed minimum ongoing payments are recognized asrevenue when reported by theater operators, provided collectability is reasonably assured.83Revenues from joint revenue sharing arrangements with upfront payments that qualify for classification as sales-type leases are recognized in accordance withthe sales and sales-type lease criteria discussed above. Contingent revenues from joint revenue sharing arrangements are recognized as box-office results andconcessions revenues are reported by the theater operator, provided collectability is reasonably assured.Finance IncomeFinance income, which includes the accretion of variable consideration under ASC Topic 606, is recognized over the term of the sales-type lease or financedsales receivable, provided collectability is reasonably assured. Finance income recognition ceases when the Company determines that the associated receivable isnot collectible.Finance income is suspended when the Company identifies a theater that is delinquent, non-responsive or not negotiating in good faith with the Company. Oncethe collectability issues are resolved the Company will resume recognition of finance income.Improvements and ModificationsImprovements and modifications to the theater system after installation are treated as separate performance obligations, if and when the Company is requestedto perform these services. Revenue is recognized for these services once they have been provided.Cost of Equipment and Product SalesTheater systems and other equipment subject to sales-type leases and sales arrangements includes the cost of the equipment and costs related to projectmanagement, design, delivery and installation supervision services as applicable. The costs related to theater systems under sales and sales-type lease arrangementsare relieved from inventory to costs and expenses applicable to revenues-equipment and product sales when revenue recognition criteria are met. In addition, theCompany defers direct selling costs such as sales commissions and other amounts related to these contracts until the related revenue is recognized. These costsincluded in costs and expenses applicable to revenues-equipment and product sales, totaled $2.0 million in 2019 (2018 — $2.0 million; 2017 — $2.7 million). Thecost of equipment and product sales prior to direct selling costs was $63.6 million in 2019 (2018 — $52.9 million; 2017 — $45.5 million). The Company mayhave warranty obligations at or after the time revenue is recognized which require replacement of certain parts that do not affect the functionality of the theatersystem or services. The costs for warranty obligations for known issues are accrued as charges to costs and expenses applicable to revenues-equipment and productsales at the time revenue is recognized based on the Company’s past historical experience and cost estimates.Cost of RentalsFor theater systems and other equipment subject to an operating lease or placed in a theater operators’ venue under a joint revenue sharing arrangement, the costof equipment and those costs that result directly from and are essential to the arrangement, is included within property, plant and equipment. Depreciation andimpairment losses, if any, are included in cost of rentals based on the accounting policy set out in note 2(g). After the adoption of ASC Topic 606, commissionscontinue to be deferred and recognized as costs and expenses applicable to revenues-rentals in the month they are earned, which is typically the month ofinstallation. These costs totaled $0.4 million in 2019 (2018 — $0.9 million; 2017 — $1.6 million). Direct advertising and marketing costs for each theater arecharged to costs and expenses applicable to revenues-rentals as incurred. These costs totaled $3.0 million in 2019 (2018 — $2.1 million; 2017 — $2.6 million).Terminations, Consensual Buyouts and ConcessionsThe Company enters into theater system arrangements with customers that contain customer payment obligations prior to the scheduled installation of thetheater system. During the period of time between signing and the installation of the theater system, which may extend several years, certain customers may beunable to, or may elect not to, proceed with the theater system installation for a number of reasons including business considerations, or the inability to obtaincertain consents, approvals or financing. Once the determination is made that the customer will not proceed with installation, the arrangement may be terminatedunder the default provisions of the arrangement or by mutual agreement between the Company and the customer (a “consensual buyout”). Terminations by defaultare situations when a customer does not meet the payment obligations under an arrangement and the Company retains the amounts paid by the customer. Under aconsensual buyout, the Company and the customer agree, in writing, to a settlement and to release each other of any further obligations under the arrangement oran arbitrated settlement is reached. Any initial payments retained or additional payments received by the Company are recognized as revenue when the settlementarrangements are executed and the cash is received, respectively.84In addition, the Company could agree with customers to convert their obligations for other theater system configurations that have not yet been installed toarrangements to acquire or lease the IMAX digital theater system. The Company considers these situations to be a termination of the previous arrangement andorigination of a new arrangement for the IMAX digital theater system.The Company may offer certain incentives to customers to complete theater system transactions including payment concessions or free services and productssuch 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 reductionin the sales price or a reduction of payments to be discounted in accordance with the Leases or Interests Topic of the FASB ASC. Free products and services areaccounted for as separate units of accounting. Other consideration given by the Company to customers are accounted for in accordance with ASC Topic 606“Revenue from Contracts with Customers”.Maintenance and Extended Warranty ServicesMaintenance 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 in Services revenues.Maintenance and extended warranty services includes 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 warrantyprogram are expensed as incurred. A loss on maintenance and extended warranty services is recognized if the expected cost of providing the services under thecontracts exceeds the related deferred revenue. As the maintenance services are a stand ready obligation with the cost of providing the service expected to increasethroughout the term, revenue is recognized over the term of the arrangement such that increased amounts are recognized in later periods.Film Production and IMAX DMR ServicesIn certain film arrangements, the Company produces a film financed by third parties whereby the third party retains the copyright and the Company obtainsexclusive distribution rights. Under these arrangements, the Company is entitled to receive a fixed fee or to retain as a fee the excess of funding over cost ofproduction (the “production fee”). The third parties receive a portion of the revenues received by the Company from distributing the film, which is charged to costsand expenses applicable to revenues-services. The production fees are deferred, and recognized as a reduction in the cost of the film based on the ratio of theCompany’s distribution revenues recognized in the current period to the ultimate distribution revenues expected from the film. Film exploitation costs, includingadvertising and marketing totaled $22.5 million in 2019 (2018 — $16.5 million; 2017 — $15.4 million) and are recorded in costs and expenses applicable torevenues-services as incurred.Revenue from film production services where the Company does not hold the associated distribution rights are recognized in Services revenues whenperformance obligations associated with the contractual service are satisfied.Revenues from digitally re-mastering (IMAX DMR) films where third parties own or hold the copyrights and the rights to distribute the film are derived in theform of processing fees and recoupments calculated as a percentage of box-office receipts generated from the re-mastered films. Processing fees are recognized asServices revenues when the performance obligations of the related re-mastering service are satisfied. Recoupments, calculated as a percentage of box-officereceipts, are recognized as Services revenue when box-office receipts are reported by the third party that owns or holds the related film rights.Losses on film production and IMAX DMR services are recognized as costs and expenses applicable to revenues-services in the period when it is determinedthat 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 filmproduction and the cost of IMAX DMR services.Film DistributionRevenue from the licensing of films is recognized in Services revenues when all performance obligations have been satisfied, which includes the completionand delivery of the film and the commencement of the license period. When license fees are based on a percentage of box-office receipts, revenue is recognizedwhen box-office receipts are reported by exhibitors. Film exploitation costs, including advertising and marketing, totaled an expense of $0.4 million in 2019 (2018— an expense of $2.2 million; 2017 — a recovery of $0.7 million) and are recorded in costs and expenses applicable to revenues-services as incurred.85Film Post-Production ServicesRevenues from post-production film services are recognized in Services revenues when performance of the contracted services are satisfied.OtherThe Company recognizes revenue in Services revenues from its owned and operated theaters resulting from box-office ticket and concession sales as tickets aresold, films are shown and upon the sale of various concessions. The sales are cash or credit card transactions with theater goers based on fixed prices per seat or perconcession item.In addition, the Company enters into commercial arrangements with third party theater owners resulting in the sharing of profits and losses which arerecognized in Services revenues when reported by such theaters. The Company also provides management services to certain theaters and recognizes revenue overthe term of such services.Revenues on camera rentals are recognized in Rental revenues over the rental period.Revenue from the sale of 3D glasses is recognized in Equipment and product sales revenue when the 3D glasses have been delivered to the customer.Other service revenues are recognized in Service revenues when the performance of contracted services is complete. (o)LeasesThe Company adopted ASC Topic 842 on January 1, 2019 (see note 4), utilizing the modified retrospective transition method, which allowed the Company toadopt the standard as of the date of initial application. Prior year comparative amounts are not required to be restated and are presented in accordance with ASCTopic 840, “Leases” or other applicable standards prior to January 1, 2019.For the year ended December 31, 2019, the Company uses ASC Topic 842 to evaluate whether an arrangement is a lease within the scope of the accountingstandard. Transactions accounted for under ASC Topic 842 are not within the scope of ASC Topic 606. Arrangements not within the scope of the accountingstandard are accounted for either as a sales or services arrangement, as applicable.As a lessee, the Company mainly leases office and warehouse storage space which are classified as operating leases. The operating lease right-of-use (“ROU”)assets and liabilities are included in Property, Plant and Equipment and Accrued and other liabilities in the Company’s consolidated balance sheet. ROU assetsrepresent the Company’s right to use an underlying asset for the lease term and liabilities are recognized at commencement date based on the present value of leasepayments over the lease term. As most of the leases do not provide an implicit rate, the incremental borrowing rate used in the calculation of the lease liability isbased on the location of each leased property. None of the Company’s leases include options to purchase the leased property. The implicit rate is used when readilydeterminable. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to 5 years or more. The Companydetermined that it was reasonably certain that the renewal options on its warehouse leases would be exercised based on previous history and knowledge, currentunderstanding of future business needs and level of investment in leasehold improvements, among other considerations. The depreciable life of ROU assets andleasehold improvements are limited by the expected lease term. The Company’s lease agreements do not contain any material residual value guarantees or materialrestrictive covenants. The Company rents or subleases certain office space to third parties, which have a remaining term of less than 12 months and are notexpected to be renewed. When there are modifications to the lease agreements, the Company remeasures the lease liabilities to reflect changes to lease paymentsand recognizes the amount of remeasurement of the lease liability as an adjustment to the ROU assets. The Company reviews the carrying values of the ROUassets for impairment whenever events or changes in circumstances indicate that the carrying amount might not be recoverable. Impairment loss is recognized inthe consolidated statement of operations. Amortization of ROU assets and interest on lease liabilities are included in the selling, general and administrativeexpenses in the consolidated statement of operations. (p)Research and DevelopmentResearch and development costs are expensed as incurred and primarily include projector and sound parts, labor, consulting fees, allocation of overheads andother related materials which pertain to the Company’s development of ongoing product and services. Research and development costs pertaining to fixed andintangible assets that have alternative future uses are capitalized and amortized under their related policies.86 (q)Foreign Currency TranslationMonetary assets and liabilities of the Company’s operations which are denominated in currencies other than the functional currency are translated into thefunctional currency at the exchange rates prevailing at the end of the period. In 2013, the Company determined that the functional currency of one of itsconsolidated subsidiaries had changed from the Company’s reporting currency to the currency of the nation in which it is domiciled. As a result, in accordancewith the FASB ASC 830 “Foreign Currency Matters”, the adjustment attributable to current-rate translation of non-monetary assets as of the date of the change wasreported in other comprehensive income (“OCI”). The functional currency of its other consolidated subsidiaries continues to be the United States dollar. Foreignexchange translation gains and losses are included in the determination of earnings in the period in which they arise.Foreign currency derivatives are recognized and measured in the balance sheet at fair value. Changes in the fair value (gains or losses) are recognized in theconsolidated statement of operations except for derivatives designated and qualifying as foreign currency hedging instruments. For foreign currency hedginginstruments, the effective portion of the gain or loss in a hedge of a forecasted transaction is reported in other comprehensive income (loss) and reclassified to theconsolidated statement of operations when the forecasted transaction occurs. Any ineffective portion is recognized immediately in the consolidated statement ofoperations. (r)Stock-Based CompensationThe Company’s stock-based compensation generally includes stock options, restricted share units (“RSUs”) and performance share units (“PSUs”). Stock-based compensation is recognized in accordance with the FASB ASC Topic 505, “Equity” and Topic 718, “Compensation-Stock Compensation.” The Companymeasures stock-based compensation cost based on the grant date fair value of the award, which is recognized as an expense in the consolidated statement ofoperations on a straight-line basis over the requisite service period. Stock-based compensation expense is not adjusted for estimated forfeitures, but is insteadadjusted upon the actual forfeiture of the award.Stock-based compensation expense includes compensation cost for employee stock-based payment awards granted and all modified, repurchased or cancelledemployee awards. In addition, compensation expense includes the compensation cost, based on the grant-date fair value calculated for pro forma disclosures underASC 718-10-55, for the portion of awards for which required service had not been rendered that were outstanding. Compensation expense for these employeeawards is recognized using the straight-line single-option method. The Company utilizes the market yield on U.S. treasury securities (also known as nominal rate)over the contractual term of the instrument being issued. Stock OptionsThe Company utilizes a lattice-binomial option-pricing model (“Binomial Model”) to determine the fair value of stock option awards on the grant date. The fairvalue determined by the Binomial Model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjectivevariables. These variables include, but are not limited to, the Company’s expected stock price volatility over the term of the award, and actual and projectedemployee stock option exercise behaviors. The Binomial Model also considers the expected exercise multiple which is the multiple of exercise price to grant price.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 thesubjective assumptions can materially affect the estimated value, in management’s opinion, the Binomial Model best provides a fair measure of the fair value of theCompany’s employee stock options. See note 16(c) for the assumptions used to determine the fair value of stock-based payment awards.As the Company stratifies its employees into homogeneous groups in order to calculate the grant date fair value of options using the Binomial Model, ranges ofassumptions used are presented for the expected life of the option. The Company uses historical data to estimate option exercise behavior within the valuationmodel; various groups of employees that have similar historical exercise behavior are grouped together for valuation purposes. The expected volatility rate isestimated based on a blended volatility method which takes into consideration the Company’s historical share price volatility, the Company’s implied volatilitywhich is implied by the observed current market prices of the Company’s traded options and the Company’s peer group volatility. The Company utilizes theBinomial Model to determine expected option life based on such data as vesting periods of awards, historical data that includes past exercise and post-vestingcancellations and stock price history.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.87Restricted Share UnitsThe fair value of RSU awards is equal to the closing price of the Company’s common stock on the date of grant. The value of the portion of the award that isultimately expected to vest is recognized as compensation expense over the requisite service periods in the Company’s consolidated statements of operations.The Company’s RSUs have been classified as equity in accordance with Topic 505.Performance Share UnitsThe Company grants two types of PSU awards, one which vests based on a combination of employee service and the achievement of certain EBITDA-basedtargets and one which vests based on a combination of employee service and the achievement of certain stock-price targets. The fair value of the PSUs withEBITDA-based targets is equal to the closing price of the Company’s common stock on the date of grant. The fair value of the PSUs with stock-price targets isdetermined on the grant date using a Monte Carlo simulation, which is a valuation model which takes into account the likelihood of achieving the stock-pricetargets embedded in the award (“Monte Carlo Model”). The compensation expense attributable to each type of PSU is recognized on a straight-line basis over therequisite service period.The fair value determined by the Monte Carlo Model is affected by the Company’s stock price as well as assumptions regarding a number of highly complexand subjective variables. These variables include, but are not limited to, the Company’s expected stock price volatility over the term of the awards, and actual andprojected employee stock option exercise behaviors.The amount and timing of compensation expense recognized for PSUs with EBITDA-based targets is dependent upon management's quarterly assessment of thelikelihood 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 previouslyanticipated, a life-to-date adjustment to increase compensation expense is recorded in the period such determination is made. Conversely, if, as a result ofmanagement’s assessment, it is projected that a lower number of PSUs will vest than previously anticipated, a life-to-date adjustment to decrease compensationexpense is recorded in the period such determination is made.The Company’s PSUs have been classified as equity in accordance with Topic 505.Awards to Non-EmployeesStock-based awards for services provided by non-employees within the scope of ASC Topic 718 are measured at grant date fair value of the equity instrumentsthat the Company is obligated to issue when service has been rendered and any other conditions necessary to earn the right to benefit from the instruments havebeen 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 stock-basedawards. When there are performance conditions related to the vesting of the stock-based awards, the Company assesses the probability of vesting at each reportingdate and adjusts the compensation costs based on the probability assessment. (s)Pension Plans and Postretirement BenefitsThe Company has a defined benefit pension plan, the Supplemental Executive Retirement Plan (the “SERP”). As the Company’s SERP is unfunded, as atDecember 31, 2019, 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 currentconditions. 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 costare recognized as a component of other comprehensive income. Amounts recognized in accumulated other comprehensive income including unrecognizedactuarial gains or losses and prior service costs are adjusted as they are subsequently recognized in the consolidated statement of operations as components of netperiodic benefit cost. Prior service costs resulting from the pension plan inception or amendments are amortized over the expected future service life of theemployees, cumulative actuarial gains and losses in excess of 10% of the projected benefit obligation are amortized over the expected average remaining servicelife of the employees, and current service costs are expensed when earned. The remaining weighted average future service life of the employee used in computingthe defined benefit obligation for the year ended December 31, 2019 was 3.0 year.For defined contribution pension plans, required contributions by the Company are recorded as an expense.88A liability is recognized for the unfunded accumulated benefit obligation of the postretirement benefits plan. Assumptions used in computing the accumulatedbenefit obligation are reviewed by management in consultation with its actuaries and adjusted for current conditions. Net benefit cost is split between operatingincome and non-operating income, where only the service cost is included in income from operations and the non-service components are included in Retirementbenefits non-service expenses. Actuarial gains and losses are recognized as a component of other comprehensive income (loss). Amounts recognized inaccumulated other comprehensive income (loss) including unrecognized actuarial gains or losses are adjusted as they are subsequently recognized in theconsolidated statement of operations as components of net periodic benefit cost. (t)GuaranteesThe ASC Topic 460 “Guarantees” requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of certain guarantees.Disclosures as required under the accounting guidance have been included in note 15(f).3. New Accounting Standards and Accounting ChangesAdoption of New Accounting PoliciesThe Company adopted several standards including the following on January 1, 2019.In 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASC Topic 842”). The Company adopted 2016-02 and several associated ASUs on January 1,2019. See note 4 for a further discussion of the Company’s adoption of ASC Topic 842.In January 2017, the FASB issued ASU No. 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU2017-04”). The adoption of this standard was applied prospectively and did not have an impact on the Company’s consolidated financial statements.In December 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities”(“ASU 2017-12”). The adoption of this standard was applied prospectively and did not have an impact on the Company. See note 22(d) for additional disclosureregarding the Company’s hedging arrangements.In June 2018, the FASB issued ASU No. 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based PaymentAccounting. The adoption of this standard was applied prospectively and did not have a material impact on the Company’s consolidated financial statements.In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirementsfor Fair Value Measurement” (“ASU 2018-13”). The adoption of this standard was applied prospectively and did not have a material impact on the Company’sconsolidated financial statements.Recently Issued FASB Accounting Standard Codification Updates Not Yet AdoptedIn December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the accounting for income taxes” (“ASU 2019-12”). Thepurpose of ASU 2019-12 is to simplify the accounting for income taxes. For public business entities, the amendments in ASU 2019-12 are effective for fiscalyears, and interim periods within those fiscal years, beginning after December 15, 2020. The Company is currently assessing the impact of ASU 2019-12 on itsconsolidated financial statements.In November 2019, the FASB issued ASU No. 2019-11, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses” (“ASU 2019-11”).The purpose of ASU 2019-11 is to clarify or address stakeholders’ specific issues about certain aspects of the amendments in ASU 2016-13. As the Company hasnot yet adopted ASU 2016-13, the effective date and transition requirements for the amendments in ASU 2019-11 related to amendments in 2016-13, have thesame effective date and transition requirements as ASU 2016-13. ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15,2019 (see below). The Company is currently assessing the impact of the codification improvements on its consolidated financial statements.89In May 2019, the FASB issued ASU No. 2019-05, “Financial Instruments – Credit Losses (Topic 326)” (“ASU 2019-05”). The purpose of ASU 2019-05 is toprovide the option to irrevocably elect the fair value option applied on an instrument-by-instrument basis for certain financial assets upon adoption of ASU 2016-13. Adoption of ASU 2019-05 coincides with the adoption of ASU 2016-13 and will therefore be effective for interim and annual reporting periods beginningafter December 15, 2019. The Company’s Accounts receivable, Financing receivables, Variable consideration receivable from contracts and certain small loansreceivable are within the scope of ASU 2019-05. The Company has concluded that historical data, adjusted for any current events and expected future economicfactors, is the most appropriate modelling information to determine the Company’s expected credit losses. The Company is in the process of completing thenecessary analysis for its adoption of ASU 2019-05 in the first quarter of 2020.In April 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivativesand Hedging, and Topic 825, Financial Instruments” (“ASU 2019-04”). The purpose of ASU 2019-04 is to provide clarification and improve the guidanceprovided by ASU 2016-01, ASU 2016-13, and ASU 2017-12. Adoption of these amendments are required at the time of adopting ASU 2016-01, ASU 2016-13,and ASU 2017-12. As the Company has not yet adopted ASU 2016-13, the effective date and transition requirements for the amendments in ASU 2019-04 relatedto amendments in 2016-13, have the same effective date and transition requirements as ASU 2016-13. ASU 2016-13 is effective for interim and annual reportingperiods beginning after December 15, 2019 (see below). The Company is currently assessing the impact of the codification improvements on its consolidatedfinancial statements. The Company has previously adopted ASU 2016-01 and ASU 2017-12. As a result, the effective date for adoption of ASU 2019-04 as itpertains to ASU 2016-01 is the fiscal year beginning after December 15, 2019 and ASU 2017-12 is the beginning of the first annual period beginning after theissuance date. The Company is currently assessing the potential impacts of the codification improvements in ASU 2019-04 relating to ASU 2016-01 and 2017-12on its consolidated financial statements.In March 2019, the FASB issued ASU No. 2019-02, “Entertainment—Films—Other Assets—Film Costs (Subtopic 926-20) and Entertainment—Broadcasters—Intangibles—Goodwill and Other (Subtopic 920-350)” (“ASU 2019-02”). The purpose of ASU 2019-02 is to align the accounting for production costs of anepisodic television series with the accounting for production costs of films by removing the content distinction for capitalization, as well as requiring an entity toreassess estimates of the use of a film in a film group. In addition, ASU 2019-02 will require an entity to test for impairment at a film group level if it ispredominantly monetized with other films. Amendments in this update would be applied prospectively, and for public entities, the amendments in ASU 2019-02are effective for interim and annual reporting periods beginning after December 15, 2019. The Company is currently assessing the impact of ASU 2019-02 on itsconsolidated financial statements.In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on FinancialInstruments” (“ASU 2016-13”). The purpose of ASU 2016-13 is to require a financial asset measured on the amortized cost basis to be presented at the net amountexpected to be collected. Credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses. For public entities,the amendments in ASU 2016-13 are effective for interim and annual reporting periods beginning after December 15, 2019. The Company is currently assessingthe impact of ASU 2016-13 on its consolidated financial statements.The Company considers the applicability and impact of all recently issued FASB accounting standard codification updates. Accounting standards updates thatare not noted above were assessed and determined to be not applicable or not significant to the Company’s consolidated financial statements for the period endedDecember 31, 2019.4. Adoption of ASC Topic 842, Leases, effective January 1, 2019On January 1, 2019, the Company adopted ASC Topic 842 “Leases”. The standard was issued to help investors and other financial statement users betterunderstand the amount, timing, and uncertainty of cash flows arising from leases.As a lessee, the adoption of the standard resulted in the Company recording a net increase to net lease assets and lease liabilities of approximately $17.4 millionas at January 1, 2019. The gross right-of-use assets and lease liabilities amounted to $20.0 million, while prepaid expenses of less than $0.1 million andunamortized lease inducements and other accruals of $2.5 million were reclassed from accrued liabilities to offset the applicable right-of-use asset. The Companymainly leases office and warehouse storage space. Office equipment is generally purchased outright. Adoption of ASC Topic 842 did not change the leaseclassification of its leases. The leases continue to be classified as operating leases similar to the guidance under ASC Topic 840. The adoption of ASC Topic 842did not materially impact the Company’s net earnings and had no impact on cash flows.90As a lessor, several of the Company’s leases of IMAX theater systems are classified as sales-type leases. The accounting treatment of its lease arrangements forIMAX theater systems has not changed under Topic ASC 842 as compared to guidance under ASC Topic 840, as the Company has very few sales-type leases withvariable consideration tied to an index.The Company adopted ASC Topic 842, utilizing the modified retrospective transition method, which allowed the Company to adopt the standard as of the dateof initial application. Prior year comparative amounts are not required to be restated and are presented in accordance with ASC Topic 840, “Leases” or otherapplicable standards effective prior to January 1, 2019. The Company has elected the ‘package of practical expedients’ permitted under the transition guidancewithin ASC Topic 842, which permits the Company to carry forward the historical lease classification and not reassess whether any expired or existing contractsare or contain leases. In addition, the Company is not required to reassess initial direct costs for any existing leases. The Company did not elect the land easementsand the use of hindsight practical expedients in determining the lease term for existing leases. ASC Topic 842 also provides practical expedients for an entity’songoing accounting. The Company has elected the short-term lease recognition exemption for all leases that qualify. As a result, for those leases with a term of lessthan 12 months, it will not recognize right-of-use assets or lease liabilities. The Company also elected the practical expedient to not separate lease and non-leasecomponents for all its leases regardless of whether the Company is the lessee or a lessor to the lease.The following table presents the impact from the adoption of ASC Topic 842 on the Company’s assets and liabilities in the consolidated balance sheet: Balance at Balance at December 31, ASC Topic 842 January 1, 2018 Adjustments 2019 Assets Property, plant and equipment $280,658 $17,462 $298,120 Prepaid expenses 10,294 (36) 10,258 Liabilities Accrued and other liabilities 97,724 17,426 115,150 5. Lease Arrangements and Financing ReceivablesIMAX Corporation as a Lessor:Several of the Company’s leases are classified as sales-type leases for transactions related to the lease of IMAX theater systems. Certain arrangements that arelegal 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 tothe system. The customer’s rights under the Company’s lease arrangements are described in note 2(n) in the Company’s 2019 Form 10-K. The Company classifiesits lease arrangements at inception of the arrangement and, if required, after a modification of the lease arrangement, to determine whether they are sales-typeleases or operating leases. Under the Company’s lease arrangements, the customer has the ability and the right to operate the hardware components or direct othersto 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 renewalprovisions from inception. Except for those sales arrangements that are classified as sales-type leases, the Company’s leases generally do not contain an automatictransfer of title at the end of the lease term. The Company’s lease arrangements do not contain a guarantee of residual value at the end of the lease term. Thecustomer is required to pay for executory costs such as insurance and taxes and is required to pay the Company for maintenance and extended warranty generallyafter the first year of the lease until the end of the lease term. The customer is responsible for obtaining insurance coverage for the theater systems commencing onthe date specified in the arrangement’s shipping terms and ending on the date the theater systems are delivered back to the Company.The Company has assessed the nature of its joint revenue sharing arrangements and concluded that, based on the guidance in the Revenue Recognition Topic ofthe ASC, the arrangements contain a lease. Under joint revenue sharing arrangements, the customer has the ability and the right to operate the hardwarecomponents 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 equipment under joint revenue sharing arrangements does not transfer to the customer. TheCompany’s joint revenue sharing arrangements do not contain a guarantee of residual value at the end of the term. The customer is required to pay for executorycosts such as insurance and taxes and is required to pay the Company for maintenance and extended warranty throughout the term. The customer is responsible forobtaining insurance coverage for the theater systems commencing on the date specified in the arrangement’s shipping terms and ending on the date the theatersystems are delivered back to the Company. The Company91monitors the performance of the theaters to which it has leased theater systems. When facts and circumstances indicate that there is a potential impairment in thenet investment in lease, the Company will evaluate the potential outcome of either a renegotiation involving changes in the terms of the receivable or defaults onthe existing lease. The Company will record a provision if it is considered probable that the Company will be unable to collect all amounts due under thecontractual terms of the arrangement or a renegotiated lease amount will cause a reclassification of the sales-type lease to an operating lease. See additional detailsregarding the Company’s traditional and hybrid joint revenue sharing arrangements as described in note 2(n) in the Company’s 2019 Form 10-K.Financing receivables, consisting of net investment in sales-type leases and receivables from financed sales of theater systems are as follows: As at December 31, 2019 2018 Gross minimum lease payments receivable $16,766 $10,499 Unearned finance income (1,005) (902)Minimum lease payments receivable 15,761 9,597 Accumulated allowance for uncollectible amounts (155) (155)Net investment in leases 15,606 9,442 Gross financed sales receivables 146,660 155,044 Unearned finance income (33,313) (36,215)Financed sales receivables 113,347 118,829 Accumulated allowance for uncollectible amounts (915) (839)Net financed sales receivables 112,432 117,990 Total financing receivables $128,038 $127,432 Net financed sales receivables due within one year $27,595 $26,911 Net financed sales receivables due after one year $84,837 $91,079 As at December 31, 2019 2018 Weighted-average remaining lease term (years) Sales-type lease arrangements 8.1 7.3 Weighted-average interest rate Sales-type lease arrangements 6.68 % 8.00 %Financed sales receivables 9.00 % 9.10 % IMAX Corporation as a Lessee:The Company mainly leases office and warehouse storage space and office equipment is generally purchased outright. Leases with an initial term of less than12 months are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Most leasesinclude one or more options to renew, with renewal terms that can extend the lease term from one to 5 years or more. The Company determined that it wasreasonably certain that the renewal options on its warehouse leases would be exercised based on previous history and knowledge, current understanding of futurebusiness needs and level of investment in leasehold improvements, among other considerations. The incremental borrowing rate used in the calculation of the leaseliability is based on the location of each leased property. None of the Company’s leases include options to purchase the leased property. The depreciable life ofassets and leasehold improvements are limited by the expected lease term. The Company’s lease agreements do not contain any material residual value guaranteesor 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 arenot expected to be renewed. 92The components of lease expense are as follows: Years Ended December 31, 2019 2018 2017 Operating lease cost (1) Selling, general and administrative expenses $850 $4,863 $6,059 Amortization of lease assets Selling, general and administrative expenses 2,370 — — Interest on lease liabilities Selling, general and administrative expenses 1,102 — — Total lease cost $4,322 $4,863 $6,059 (1) Includes short-term leases and variable lease costs, which are not significant for the December 31, 2019Supplemental cash flow information related to leases are as follows: Year Ended December 31,2019 Cash paid for amounts included in the measurement of lease liabilities $3,607 Right-of-use assets obtained in exchange for lease obligations $17,147Supplemental balance sheet information related to leases are as follows: As at December 31, January 1, 2019 2019 Assets Operating LeasesProperty, plant and equipment $16,262 $17,462 Liabilities Operating Leases(1)Accrued and other liabilities $18,677 $19,960 (1)The Company recorded lease liabilities of approximately $20.0 million as at January 1, 2019 upon initial adoption of ASC Topic 842. In addition,unamortized lease inducements and other accruals of $2.5 million were reclassified from accrued liabilities to offset against the applicable right-of-use asset. As at December 31, January 1, 2019 2019 Weighted-average remaining lease term (years) Operating Leases 8.1 8.3 Weighted-average discount rate Operating Leases 5.90 % 5.80 %Maturities of lease liabilities are as follows: Operating Leases 2020 $3,732 2021 3,308 2022 2,387 2023 2,268 2024 2,220 Thereafter 10,060 Total lease payments $23,975 Less: interest expense (5,298)Present value of lease liabilities $18,67793As of December 31, 2018, under ASC Topic 840, minimum lease payments under non-cancelable operating leases by period were expected to be as follows: Operating Leases 2019 $3,847 2020 2,790 2021 2,491 2022 1,843 2023 1,759 Thereafter 9,657 Total lease payments $22,387 6. Variable Consideration Receivable from ContractsASC Topic 606 requires the Company to estimate the transaction price, including an estimate of future variable consideration, received in exchange for thegoods delivered or service rendered. The arrangements for the sale of projection systems include indexed minimum payment increases over the term of thearrangement, as well as provision for additional payments in excess of the minimum agreed payments in situations where the theater exceeds certain box officethresholds. Both of these contract provisions constitute variable consideration under the new standard that, subject to constraints to ensure reversal of revenues donot occur, require estimation and recognition upon transfer of control of the System Obligation to the customer, which is at the earlier of client acceptance of theinstallation of the system, including projectionist training, and the theater’s opening to the public. As this variable consideration extends through the entire term ofthe arrangement, which typically last 10 years, the Company applies constraints to its estimates and recognizes the variable consideration on a discounted presentvalue basis at recognition.In certain joint revenue sharing arrangements, specifically the Company’s hybrid sales arrangements, the Company’s arrangements call for sufficient upfrontrevenues to cover the cost of the arrangement, with monthly payments calculated based on the theater’s net box office earned. Title and control of the projectionsystem transfer to the customer at the earlier of client acceptance of the theater installation, including projectionist training, and theater opening to thepublic. Under ASC Topic 606, the percentage payment is considered variable consideration that must be estimated and recognized at the time of initial revenuerecognition. Using box office projections and the Company’s history with theater and box office experience in different territories, the Company estimates theamount of percentage payment earned over the life of the arrangement, subject to sufficient constraint such that there is not a risk of significant revenue reversal.The recognition of variable consideration involves a significant amount of judgment. ASC Topic 606 requires variable consideration to be recognized subject toappropriate constraints to avoid a significant reversal of revenue in future periods. The Company will review the variable consideration receivable on an ongoingbasis. The standard identifies several examples of situations where constraining variable consideration would be 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 Company has a practice of either offering a broad range of price concessions or changing the payment terms and conditions of similar contractsin similar circumstances94The following table sets forth a summary of activities in variable consideration receivable from contracts for the year ended December 31: Variable ConsiderationReceivable from Contracts Balance as at December 31, 2018 $ 35,985 Recognition of variable consideration 9,948 Accretion to finance income 1,936 True-up of variable consideration receivable 979 Payments received (8,808)Balance as at December 31, 2019 $ 40,040 7. Inventories As at December 31, 2019 2018 Raw materials $26,538 $29,705 Work-in-process 4,608 4,733 Finished goods 11,843 10,122 $42,989 $44,560 At December 31, 2019, finished goods inventory for which title had passed to the customer, however control has not yet been transferred, and revenue wasdeferred amounted to $0.7 million (December 31, 2018 — $1.9 million).Inventories at December 31, 2019 include impairments and write-downs for excess and obsolete inventory based upon current estimates of net realizable valueconsidering future events and conditions of $0.4 million (December 31, 2018 — $0.3 million).8. Film Assets As at December 31, 2019 2018 Completed and released films, net of accumulated amortization of $7,193 $5,958 $192,999 (2018 ― $173,812) Films in production 4,250 4,500 Films in development 6,478 5,909 $17,921 $16,367The Company expects to amortize film costs of $11.4 million for released films within three years from December 31, 2019 (December 31, 2018— $11.4million), including $7.3 million (December 31, 2018 — $6.8 million), which reflects the portion of the costs of the Company’s completed films that are expected tobe amortized within the next year. The amount of participation payments to third parties related to these films that the Company expects to pay during 2020, whichis included in accrued liabilities at December 31, 2019, is $1.6 million (2018 — $1.9 million).In 2019, the Company considered the lower than expected revenues and revised expectations for future revenues based on the latest information. Animpairment of $1.4 million was recorded based on the carrying value of certain documentary films as compared to the related estimated future box office andrevenues that would ultimately be generated by these films. No such charge was recorded in the year ended 2018. 959. Property, Plant and Equipment As at December 31, 2019 Accumulated Net Book Cost Depreciation Value Equipment leased or held for use Theater system components(1)(2)(3) $ 322,492 $ 133,739 $ 188,753 Camera equipment 5,192 4,239 953 327,684 137,978 189,706 Assets under construction(4) 14,483 — 14,483 Right-of-use assets(5) 17,147 885 16,262 Other property, plant and equipment Land 8,203 — 8,203 Buildings 80,850 22,931 57,919 Office and production equipment(6) 41,673 25,654 16,019 Leasehold improvements 7,614 3,357 4,257 138,340 51,942 86,398 $ 497,654 $ 190,805 $ 306,849 As at December 31, 2018 Accumulated Net Book Cost Depreciation Value Equipment leased or held for use Theater system components(1)(2)(3) $ 287,066 $ 120,273 $ 166,793 Camera equipment 5,080 3,839 1,241 292,146 124,112 168,034 Assets under construction(4) 24,327 — 24,327 Other property, plant and equipment Land 8,203 — 8,203 Buildings 77,468 20,012 57,456 Office and production equipment(6) 42,252 24,295 17,957 Leasehold improvements 7,583 2,902 4,681 135,506 47,209 88,297 $ 451,979 $ 171,321 $ 280,658 (1)Included in theater system components are assets with costs of $7.6 million (2018 — $8.5 million) and accumulated depreciation of $6.7 million (2018 —$7.4 million) that are leased to customers under operating leases.(2)Included in theater system components are assets with costs of $297.4 million (2018 —$269.8 million) and accumulated depreciation of $121.3 million(2018 — $108.4 million) that are used in joint revenue sharing arrangements.(3)In 2019, the Company recorded a charge of $2.2 million (2018 — $0.6 million ) in cost of sales applicable to Rentals upon the upgrade of xenon-based digitalsystems under joint revenue sharing arrangements to laser-based digital systems.(4)Included in assets under construction are components with costs of $13.2 million (2018 — $15.3 million) that will be utilized to construct assets to be used injoint revenue sharing arrangements. (5)The right-of-use assets mainly include operating leases for office and warehouse storage space. See note 4 for further discussion of the adoption impact ofASC Topic 842 on the Company’s consolidated financial statements.(6)Fully amortized office and production equipment is still in use by the Company. In 2019, the Company identified and wrote off $4.9 million (2018 — $1.3million) of office and production equipment that is no longer in use and fully amortized.In 2019, the Company recorded a charge of $0.2 million (2018 — $0.8 million; 2017 — $1.2 million) reflecting property, plant and equipment that were nolonger in use.The Company recognized asset impairment charges of $0.1 million (2018 — less than $0.1 million; 2017 — $0.3 million) against property, plant andequipment after an assessment of the carrying value of certain assets in light of their future expected cash flows.96In addition, as a result of the Company’s restructuring activities in 2018 and 2017, certain long-lived assets were deemed to be impaired as the Company’s exitfrom certain activities limited the future revenue associated with these assets. In 2018, the Company recognized property, plant and equipment charges of $3.7million (2017 — $3.7 million). No such charge was recorded in the year ended 2019.10. Other Assets As at December 31, 2019 2018 Lease incentives provided to theaters 19,125 10,550 Commissions and other deferred selling expenses 1,501 2,796 Other investments 2,500 2,500 Investment in content 955 1,073 Foreign currency derivatives 602 649 Other 351 429 $ 25,034 $ 17,997 11. Income Taxes (a)Income (loss) before income taxes by tax jurisdiction are comprised of the following: Years Ended December 31, 2019 2018 2017 Canada $ 884 $ (14,749) $ (17,261)United States (234) (6,079) (11,895)China 51,809 50,446 50,410 Ireland 17,630 8,071 3,632 Other 5,247 5,916 5,125 $ 75,336 $ 43,605 $ 30,011 (b)The (provision) recovery of income taxes is comprised of the following: Years Ended December 31, 2019 2018 2017 Current: Canada $ 2,369 $ (4,893) $ (6,898)United States 595 1,300 267 China (11,789) (11,259) (12,724)Ireland (762) (1,095) (735)Other (419) (494) (717) (10,006) (16,441) (20,807)Deferred:(1) Canada (3,913) 5,993 8,748 United States (949) 2,386 (7,109)China (18) (6) 1,405 Ireland (1,923) (1,423) 1,085 Other 41 (27) (112) (6,762) 6,923 4,017 Provision for income taxes $ (16,768) $ (9,518) $ (16,790) (1) For the year ended December 31, 2019, the Company has not adjusted the valuation allowance from the prior year (2018 — $nil) relating to thefuture utilization of deductible temporary differences, tax credits, and certain net operating loss carryforwards. Included in the provision for income taxes isthe deferred tax related to amounts recorded in and reclassified from other comprehensive income in the year of $0.4 million (2018 — $0.3 million).97(c)The provision for income taxes from operations differs from the amount that would have resulted by applying the combined Canadian federal andprovincial statutory income tax rates to earnings due to the following: Years Ended December 31, 2019 2018 2017 Income tax provision at combined statutory rates $ (19,964) $ (11,555) $ (7,954)Adjustments resulting from: Non-deductible stock based compensation (276) (363) (295)Other non-deductible/non-includable items 93 202 (717)Changes to tax reserves 1,418 (204) (1,435)U.S. federal and state taxes (300) 30 (373)Withholding taxes (1,071) (1,418) (1,217)Income tax at different rates in foreign and other provincial jurisdictions 5,019 3,477 4,147 Investment and other tax credits (non-refundable) 701 783 1,570 Changes to deferred tax assets and liabilities resulting from audit and other tax returnadjustments (1,998) 768 (532)(Reduction of) excess tax benefit from realized stock-based compensation awards (374) (1,232) (591)Impact of changes due to U.S. Tax Act — — (9,323)Other (16) (6) (70)Provision for income taxes $ (16,768) $ (9,518) $ (16,790) (d)The net deferred income tax asset is comprised of the following: As at December 31, 2019 2018 Net operating loss carryforwards $ 888 $ 3,389 Investment tax credit and other tax credit carryforwards 3,650 4,829 Write-downs of other assets 1,220 1,218 Excess of tax accounting basis in property, plant and equipment, inventories and other assets 6,257 8,243 Accrued pension liability 6,393 6,125 Accrued stock-based compensation 5,360 2,054 Other accrued reserves 4,617 11,423 Total deferred income tax assets 28,385 37,281 Income recognition on net investment in leases (4,283) (5,820) 24,102 31,461 Valuation allowance (197) (197)Net deferred income tax asset $ 23,905 $ 31,264 The gross deferred tax assets include a liability of $0.4 million (December 31, 2018 — $0.1 million) relating to the remaining tax effect resulting from theCompany’s defined benefit pension plan, the related actuarial gains and losses, and unrealized net gains and losses on cash flow hedging instruments recorded inaccumulated other comprehensive income.The Company recorded income tax expense of $16.8 million for the year-ended December 31, 2019. The effective tax rate for the year of 22.3% was lowerthan the Canadian statutory combined Federal and Provincial rate of 26.22% primarily due to income earned in Greater China and Ireland at lower effective rates.The effective tax rate for the year ended December 31, 2019 was consistent with the effective tax rate for the year ended December 31, 2018 of 21.8%.98The effective tax rate for the year ended December 31, 2018 was significantly lower than the effective tax rate for December 31, 2017 of 55.9% due to theimpact of the Tax Cuts and Jobs Act (the “Tax Act”), which was enacted on December 22, 2017 by the U.S. government. The Tax Act made broad and complexchanges to the U.S. tax code including, but not limited to reducing the U.S. federal corporate tax rate from 35% to 21%, imposing other limitations and changesthat limit or eliminate various deductions, including interest expense, performance-based compensation for certain executives, and other deductions and requiredthe re-measurement of deferred tax assets and liabilities. U.S. GAAP requires that the impact of changes to tax legislation be recognized in the period in which thelaw was enacted. As a result, the Company recorded a discrete tax provision charge of $9.3 million for the year ended December 31, 2017 increasing the effectivetax rate for 2017 by 31.1%.The Tax Act also includes a number of other changes including: (a) the imposition of a one-time deemed repatriation tax on accumulated foreign earnings (the“Transition Tax”), (b) a 100% dividends received deduction on dividends from foreign affiliates, (c) a current inclusion in U.S. federal taxable income of earningsof foreign affiliates that are determined to be global intangible low taxed income or “GILTI”, (d) creation of the base erosion anti-abuse tax, or “BEAT”, (e)provision for an effective tax rate of 13.125% for certain income derived from outside of the U.S. (referred to as foreign derived intangible income or “FDII”) and(f) 100% expensing of qualifying fixed assets acquired after September 27, 2017.Given that the Company is a Canadian based multinational with subsidiary operations in the US and other foreign jurisdictions a number of these changes didnot impact the Company. The Company is not expecting to be subject to the BEAT, Transition Tax or GILTI given its current legal and tax structures. TheCompany is eligible to expense qualifying fixed assets acquired after September 27, 2017, and was subject to the additional limitations imposed on thedeductibility of executive compensation. The Company is not adversely impacted by the limitations placed on the deductibility of interest expense.In 2018, the Company finalised its accounting related to changes in the Tax Act. Among other things, the Company has finalised provisional estimates and taxcalculations made under SAB 118, which included an evaluation of recent interpretations and new guidance issued. No adjustments were recognised during theyear ended December 31, 2018, and the provisional re-measurement effect on deferred taxes recorded in the year 2017 year reflects the total effect of the changesin the Tax Act. No U.S. income taxes have been provided for any undistributed foreign earnings, or any additional outside basis differences inherent in these foreign entities, asthe Company is a Canadian corporation and these amounts continue to be indefinitely reinvested in foreign operations which are owned directly or indirectly.Further, the Company has not provided for Canadian taxes on cumulative earnings of non-Canadian affiliates and associated companies that have beenreinvested indefinitely. Taxes are provided for earnings of non-Canadian affiliates and associated companies when the Company determines that such earnings areno longer indefinitely reinvested.(e)Estimated U.S. and Canadian net operating loss carryforwards of $13.7 million can be carried forward to reduce taxable income through to 2037and the remaining $2.9 million can be carried forward indefinitely. Investment tax credits and other tax credits can be carried forward to reduce income taxespayable through to 2039.(f)Valuation allowanceThe provision for income taxes in the year ended December 31, 2019 does not include an adjustment to the valuation allowance (2018 — $nil) in continuingoperations. During the year ended December 31, 2019, after considering all available evidence, both positive (including recent and historical profits, projectedfuture profitability, backlog, carryforward periods for, and utilization of net operating loss carryovers and tax credits, discretionary deductions and other factors)and negative (including cumulative losses in past years and other factors), it was concluded that the existing valuation allowance against the Company’s deferredtax assets was appropriate (2018 — $nil). The $0.2 million (2018 — $0.2 million) balance in the valuation allowance as at December 31, 2019 is primarilyattributable to certain U.S. state net operating loss carryovers that may expire unutilized.(g)Uncertain tax positionsThe Company recorded a net decrease of $1.4 million related to reserves for income taxes, of which $nil was recorded directly to retained earnings. As atDecember 31, 2019 and December 31, 2018, the Company had total tax reserves (including interest and penalties) of $14.7 million and $16.1 million, respectively,for various uncertain tax positions. While the Company believes it has adequately provided for all tax positions, amounts asserted by taxing authorities could differfrom the Company's accrued position. Accordingly, additional provisions on federal, provincial, state and foreign tax-related matters could be recorded in the futureas revised estimates are made or the underlying matters are settled or otherwise resolved.99A reconciliation of the beginning and ending amount of tax reserves (excluding interest and penalties) for the years ended December 31 is as follows: Years Ended December 31, 2019 2018 2017 Balance at beginning of the year $ 16,136 $ 15,927 $ 12,593 Additions based on tax positions related to the current year 812 4,329 3,639 Reductions for tax positions of prior years (2,230) (170) (195)Reductions resulting from lapse of applicable statute of limitations and administrative practices — (3,950) (110)Balance at the end of the year $ 14,718 $ 16,136 $ 15,927 The Company has elected to classify interest and penalties related to income tax liabilities, when applicable, as part of the interest expense in its consolidatedstatements of operations rather than income tax expense. The Company expensed $0.2 million in potential interest and penalties associated with its provision foruncertain tax positions for the years ended December 31, 2019 (2018 — less than $0.1 million; 2017 — less than $0.1 million).The number of years with open tax audits varies depending on the tax jurisdiction. The Company's major taxing jurisdictions include Canada, the province ofOntario, the United States (including multiple states), Ireland and China.The Company's 2015 through 2019 tax years remain subject to examination by the IRS for U.S. federal tax purposes, and the 2015 through 2019 tax yearsremain subject to examination by the appropriate governmental agencies for Canadian federal tax purposes. There are other on-going audits in various otherjurisdictions that are not material to the financial statements.Cash held outside of North America as at December 31, 2019 was $89.9 million (December 31, 2018 — $121.9 million), of which $67.6 million was held inthe People’s Republic of China (“PRC”) (December 31, 2018 — $54.7 million). The Company's intent is to permanently reinvest these amounts outside of Canadaand does not currently anticipate that it will need funds generated from foreign operations to fund North American operations. In the event funds from foreignoperations are needed to fund operations in North America and if withholding taxes have not already been previously provided, the Company would be required toaccrue and pay these additional withholding tax amounts on repatriation of funds from China to Canada. The Company currently estimates this amount to be $21.9million.(h)Income tax effect on comprehensive incomeThe income tax benefit (expense) related to the following items included in other comprehensive income (loss) are: Years Ended December, 31 2019 2018 2017 Unrecognized actuarial gain (loss) on defined benefit plan $ (42) $ (379) $ (262)Unrecognized actuarial gain or loss on postretirement benefit plans — (23) (32)Prior service cost arising during the period 145 — — Amortization of prior service cost included in net income (26) — — Unrealized change in cash flow hedging instruments (145) 581 (667)Realized change in cash flow hedging instruments upon settlement (310) 107 215 $ (378) $ 286 $ (746) 10012. Other Intangible Assets As at December 31, 2019 Accumulated Net Book Cost Amortization Value Patents and trademarks $ 12,779 $ 8,587 $ 4,192 Licenses and intellectual property 26,168 10,747 15,421 Internal use software 23,791 13,239 10,552 Other 576 394 182 $ 63,314 $ 32,967 $ 30,347 As at December 31, 2018 Accumulated Net Book Cost Amortization Value Patents and trademarks $ 12,266 $ 7,871 $ 4,395 Licenses and intellectual property 26,168 8,972 17,196 Internal use software 21,528 9,264 12,264 Other 548 308 240 $ 60,510 $ 26,415 $ 34,095 Fully amortized other intangible assets are still in use by the Company. In 2019, the Company identified and wrote off $0.1 million (2018 ─ $0.2 million) ofpatents and trademarks that are no longer in use.During 2019, the Company acquired $2.9 million in other intangible assets, which is mainly an investment in the Company’s internal use software. Theweighted average amortization period for these additions is 4.7 years. The net book value of the internal use software was $1.9 million as at December 31, 2019.During 2019, 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 (2018 ─ $0.3 million).The estimated amortization expense for each of the years ended December 31, are as follows: 2020 $ 6,553 2021 6,553 2022 6,553 2023 6,553 2024 6,553 13. Credit Facility and Other Financing ArrangementsCredit FacilityOn June 28, 2018, the Company entered into a Fifth Amended and Restated Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, NationalAssociation (“Wells Fargo”), as agent, and a syndicate of lenders party thereto. The Credit Agreement expands the Company’s revolving borrowing capacity from$200.0 million to $300.0 million, and also contains an uncommitted accordion feature allowing the Company to further expand its borrowing capacity to$440.0 million or greater, depending on the mix of revolving and term loans comprising the incremental facility. The facility (the “Credit Facility”) matures onJune 28, 2023.Loans under the Credit Facility will bear interest, at the Company’s option, at (i) LIBOR plus a margin ranging from 1.00% to 1.75% per annum; or (ii) theU.S. base rate plus a margin ranging from 0.25% to 1.00% per annum, in each case depending on the Company’s Total Leverage Ratio (as defined in the CreditAgreement).101The Credit Agreement provides that the Company is required to maintain a Senior Secured Net Leverage Ratio (as defined in the Credit Agreement) as of thelast day of any fiscal quarter (as defined in the Credit Agreement) of no greater than 3.25:1.00. In addition, the Credit Agreement contains customary affirmativeand negative covenants for a transaction of this type, including covenants that limit indebtedness, liens, capital expenditures, asset sales, investments and restrictedpayments, in each case subject to negotiated exceptions and baskets. The Credit Agreement also contains representations, warranties and event of defaultprovisions customary for a transaction of this type.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 the assets of the Company and the Guarantors.The Company was in compliance with all of its requirements at December 31, 2019.Total amounts drawn and available under the Credit Facility at December 31, 2019 were $20.0 million and $280.0 million, respectively (December 31, 2018 —$40.0 million and $260.0 million, respectively). The effective interest rate for the year ended December 31, 2019 was 3.43% (2018 — 3.41%).As at December 31, 2019 and 2018, the Company did not have any letters of credit and advance payment guarantees outstanding under the Credit Facility.Working Capital LoanOn July 5, 2018, IMAX (Shanghai) Multimedia Technology Co., Ltd. (“IMAX Shanghai”), one of the Company’s majority-owned subsidiaries in China,entered into an unsecured revolving facility for up to 200.0 million Renminbi (approximately $30.0 million U.S. Dollars) to fund ongoing working capitalrequirements. On July 24, 2019, this facility was renewed. The total amounts drawn and available under the working capital loan at December 31, 2019 and 2018were nil and 200.0 million Renminbi, respectively ($nil and approximately $30.0 million U.S. Dollars, respectively).Bank indebtedness includes the following: December 31, December 31, 2019 2018 Credit Facility $20,000 $40,000 Deferred charges on debt financing (1,771) (2,247) $18,229 $37,753 Wells Fargo Foreign Exchange FacilityWithin the Credit Facility, the Company is able to purchase foreign currency forward contracts and/or other swap arrangements. The net settlement gain on itsforeign currency forward contracts was $0.5 million at December 31, 2019, as the fair value of the forward contracts exceeded the notional value (December 31,2018 — $1.2 million net settlement risk). As at December 31, 2019, the Company has $36.1 million in notional value of such arrangements outstanding(December 31, 2018 — $50.8 million).102Bank of Montreal FacilityPrior to September 30, 2019, the Company had available a $10.0 million facility (December 31, 2018 — $10.0 million) with the Bank of Montreal for usesolely in conjunction with the issuance of performance guarantees and letters of credit fully insured by Export Development Canada (the “Bank of MontrealFacility”). The Bank of Montreal Facility expired as of September 30, 2019 and was not renewed. NBC FacilityOn October 28, 2019, the Company entered into a $5.0 million facility with the National Bank of Canada for use solely in conjunction with the issuance ofperformance guarantees and letters of credit fully insured by Export Development Canada (the “NBC Facility”) to replace the Bank of Montreal Facility. TheCompany did not have any letters of credit and advance payment guarantees outstanding as at December 31, 2019 under the NBC Facility.14. CommitmentsIn the ordinary course of business, the Company enters into contractual agreements with third parties that include non-cancelable payment obligations, forwhich it is liable in future periods. These arrangements can include terms binding the Company to minimum payments and/or penalties if it terminates theagreement for any reason other than an event of default as described by the agreement. The following table presents a summary of the Company’s contractualobligations and commitments as at December 31, 2019: Payments Due by Fiscal Year Total Obligations 2020 2021 2022 2023 2024 Thereafter Purchase obligations $ 41,779 $ 41,440 $ 339 $ — $ — $ — $ — Pension obligations 20,298 — — — 20,298 — — Operating lease obligations 22,170 4,215 3,260 2,318 2,203 2,158 8,016 Credit Facility 20,000 — — — 20,000 — — Postretirement benefits obligations 2,246 108 114 113 123 123 1,665 $ 106,493 $ 45,763 $ 3,713 $ 2,431 $ 42,624 $ 2,281 $ 9,681 Operating Lease ObligationsThe Company’s lease commitments consist of rent and equipment under operating leases. The Company accounts for any incentives provided over the term ofthe lease. The following table summarizes information about the Company’s total rental expenses under operating leases: Years Ended December 31, 2019 2018 2017 Total rent expense $ 3,753 $ 4,303 $ 5,685 Recorded in the accrued liabilities balance as at December 31, 2019 is $0.3 million (December 31, 2018—$3.0 million) related to accrued rent and leaseinducements being recognized as an offset to rent expense over the term of the respective leases.Purchase ObligationsPurchase obligations primarily consist of the Company’s commitments made under long-term supplier contracts.Pension and Postretirement Benefits ObligationsThe Company has an unfunded defined benefit pension plan, covering certain individuals and a postretirement plan to provide health and welfare benefits toCanadian employees meeting certain eligibility requirements. See note 23 for further information.Credit FacilityThe Company is not required to make any minimum payments on its Credit Facility. See note 13 for further information.103Letters of Credit and Advance Payment GuaranteesAs at December 31, 2019 the Company did not have any letters of credit and advance payment guarantees outstanding (December 31, 2018 — $nil), under theCredit Facility, the Bank of Montreal Facility or the NBC Facility. See note 13 for further information.CommissionsThe Company compensates its sales force with both fixed and variable compensation. Commissions on the sale or lease of the Company’s theater systems arepayable in graduated amounts from the time of collection of the customer’s first payment to the Company up to the collection of the customer’s last initial payment.At December 31, 2019, $0.6 million (December 31, 2018 — $1.8 million ) of commissions have been accrued and will be payable in future periods.15. Contingencies and GuaranteesThe Company is involved in lawsuits, claims, and proceedings, including those identified below, which arise in the ordinary course of business. In accordancewith the Contingencies Topic of the FASB ASC, the Company will make a provision for a liability when it is both probable that a loss has been incurred and theamount of the loss can be reasonably estimated. The Company believes it has adequate provisions for any such matters. The Company reviews these provisions inconjunction with any related provisions on assets related to the claims at least quarterly and adjusts these provisions to reflect the impacts of negotiations,settlements, rulings, advice of legal counsel and other pertinent information related to the case. Should developments in any of these matters outlined below causea change in the Company’s determination as to an unfavorable outcome and result in the need to recognize a material provision, or, should any of these mattersresult in a final adverse judgment or be settled for significant amounts, they could have a material adverse effect on the Company’s results of operations, cashflows, and financial position in the period or periods in which such a change in determination, settlement or judgment occurs.The Company expenses legal costs relating to its lawsuits, claims and proceedings as incurred.(a)In January 2004, the Company and IMAX Theatre Services Ltd., a subsidiary of the Company, commenced an arbitration seeking damages beforethe International Court of Arbitration of the International Chamber of Commerce (the “ICC”) with respect to the breach by Electronic Media Limited (“EML”) ofits December 2000 agreement with the Company. In June 2004, the Company commenced a related arbitration before the ICC against EML’s affiliate, E-CityEntertainment (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 million,consisting of past and future rents owed to the Company, plus interest and costs, as well as an additional $2,512 each day in interest from October 1, 2007 until thedate the award is paid. In July 2008, E-City commenced a proceeding in Mumbai, India seeking an order that the ICC award may not be recognized in India andon June 10, 2013, the Bombay High Court ruled that it had jurisdiction over the proceeding filed by E-City. The Company appealed that ruling to the SupremeCourt of India, and on March 10, 2017, the Supreme Court set aside the Bombay High Court’s judgement and dismissed E-City’s petition. On March 29, 2017, theCompany filed an Execution Application in the Bombay High Court seeking to enforce the ICC award against E-City and several related parties. That matter iscurrently pending. The Company has also taken steps to enforce the ICC final award outside of India. In December 2011, the Ontario Superior Court of Justiceissued 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 October 2015, the NewYork Supreme Court recognized the Canadian judgment and entered it as a New York judgment. The Company intends to continue pursuing its rights and seekingto enforce the award, although no assurances can be given with respect to the ultimate outcome.(b)On November 11, 2013, Giencourt Investments, S.A. (“Giencourt”) initiated arbitration before the International Centre for Dispute Resolution inMiami, Florida, based on alleged breaches by the Company of its theater agreement and related license agreement with Giencourt. An arbitration hearing forwitness testimony was held during the week of December 14, 2015. At the hearing, Giencourt’s expert identified monetary damages of up to approximately $10.4million, which Giencourt sought to recover from the Company. The Company asserted a counterclaim against Giencourt for breach of contract and sought torecover lost profits in excess of $24.0 million under the agreements. Subsequently, in December 2015, Giencourt made a motion to the panel seeking to enforce apurported settlement of the matter based on negotiations between Giencourt and the Company. The panel held a final hearing with closing arguments in October2016. On February 7, 2017, the panel issued a Partial Final Award and on July 21, 2017, the panel issued a Final Award (collectively, the “Award”), which heldthat the parties had reached a binding settlement, and therefore the panel did not reach the merits of the dispute. The Company strongly disputes that discussionsabout a potential resolution of this matter amounted to an enforceable settlement. In October 2017, the Company filed a petition to vacate the arbitration award inthe United States Court for the Southern District of Florida on various grounds, including that the panel exceeded its jurisdiction, and a hearing was held on June27, 2019. On September 27, 2019, a Magistrate Judge filed a non-binding recommendation that the104Company’s petition be dismissed. On October 14, 2019, the Company filed an objection to that recommendation. The Company’s petition to vacate the arbitrationaward was denied by the District Judge on January 10, 2020. The Company plans to appeal this decision to the Eleventh Circuit Court of Appeals. At this time, theCompany is unable to determine the amounts that it may owe pursuant to the Award, or the timing of any such payments, and therefore no assurances can be givenwith respect to the ultimate outcome of the matter.(c)In addition to the matters described above, the Company is currently involved in other legal proceedings or governmental inquiries which, in theopinion of the Company’s management, will not materially affect the Company’s financial position or future operating results, although no assurance can be givenwith respect to the ultimate outcome of any such proceedings.(d)In the normal course of business, the Company enters into agreements that may contain features that meet the definition of a guarantee. TheGuarantees Topic of the FASB ASC defines a guarantee to be a contract (including an indemnity) that contingently requires the Company to make payments(either in cash, financial instruments, other assets, shares of its stock or provision of services) to a third party based on (a) changes in an underlying interest rate,foreign exchange rate, equity or commodity instrument, index or other variable, that is related to an asset, a liability or an equity security of the counterparty, (b)failure of another party to perform under an obligating agreement or (c) failure of another third party to pay its indebtedness when due.Financial GuaranteesThe Company has provided no significant financial guarantees to third parties.Product WarrantiesThe Company’s accrual for product warranties, that was recorded as part of accrued and other liabilities in the consolidated balance sheets is $0.2 million and$0.2 million as at December 31, 2019 and 2018, respectively.Director/Officer IndemnificationsThe Company’s General By-law contains an indemnification of its directors/officers, former directors/officers and persons who have acted at its request to be adirector/officer of an entity in which the Company is a shareholder or creditor, to indemnify them, to the extent permitted by the Canada Business CorporationsAct, against expenses (including legal fees), judgments, fines and any amounts actually and reasonably incurred by them in connection with any action, suit orproceeding 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 theCompany. In addition, the Company has entered into indemnification agreements with each of its directors in order to effectuate the foregoing. The nature of theindemnification prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay to counterparties. TheCompany has purchased directors’ and officers’ liability insurance. No amount has been accrued in the consolidated balance sheet as at December 31, 2019 andDecember 31, 2018 with respect to this indemnity.Other Indemnification AgreementsIn the normal course of the Company’s operations, the Company provides indemnifications to counterparties in transactions such as: theater system lease andsale agreements and the supervision of installation or servicing of the theater systems; film production, exhibition and distribution agreements; real property leaseagreements; and employment agreements. These indemnification agreements require the Company to compensate the counterparties for costs incurred as a resultof litigation claims that may be suffered by the counterparty as a consequence of the transaction or the Company’s breach or non-performance under theseagreements. While the terms of these indemnification agreements vary based upon the contract, they normally extend for the life of the agreements. A smallnumber of agreements do not provide for any limit on the maximum potential amount of indemnification; however, virtually all of the Company’s system lease andsale agreements limit such maximum potential liability to the purchase price of the system. The fact that the maximum potential amount of indemnificationrequired by the Company is not specified in some cases prevents the Company from making a reasonable estimate of the maximum potential amount it could berequired to pay to counterparties. Historically, the Company has not made any significant payments under such indemnifications and no amounts have beenaccrued in the consolidated financial statements with respect to the contingent aspect of these indemnities.10516. Capital Stock (a)AuthorizedCommon SharesThe authorized capital of the Company consists of an unlimited number of common shares. The following is a summary of the rights, privileges, restrictionsand conditions of the common shares.The holders of common shares are entitled to receive dividends if, as and when declared by the directors of the Company, subject to the rights of the holders ofany 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)Changes during the YearDuring the year, the Company settled common shares pursuant to the exercise of stock options for cash proceeds and vesting of RSUs. The settlement ofcommon shares can be either settled through newly issued common shares from treasury or through the purchase of common shares in the open market by theIMAX Long-Term Incentive Plan trustee. The following table summarizes the settlement of stock option and RSU transactions: Years Ended December 31, 2019 2018 2017 Stock options Issued from treasury 19,088 12,750 405,229 Plan trustee purchases 67,840 — 263,112 Total stock options exercised 86,928 12,750 668,341 Cash proceeds on stock option exercises $ 1,752 $ 218 $ 14,652 RSUs Issued from treasury — — 7,127 Plan trustee purchases 404,719 462,137 422,022 Shares withheld for tax withholdings 29,577 72,056 27,630 Total RSUs vested 434,296 534,193 456,779 (c)Stock-Based CompensationThe Company issues stock-based compensation to eligible employees, directors, and consultants under the IMAX Corporation Amended and Restated Long-Term Incentive Plan (the “IMAX LTIP”) and the China Long-Term Incentive Plan (the “China LTIP”) as summarized below.The IMAX LTIP is the Company’s governing document and awards to employees, directors, and consultants under this plan may consist of stock options,RSUs, PSUs and other awards. Stock options are no longer granted under the Company’s previous approved Stock Option Plan (“SOP”).A separate stock option plan, the China LTIP, was adopted by a subsidiary of the Company in October 2012.106Compensation costs recorded in the consolidated statements of operations for the Company’s stock-based compensation plans were $22.8 million (2018 —$22.6 million; 2017 —$23.0 million). The following reflects the stock-based compensation expense recorded to the respective financial statement line items: Years Ended December 31, 2019 2018 2017 Cost and expenses applicable to revenues $ 1,709 $ 1,657 $ 1,704 Selling, general and administrative expenses 20,750 20,102 20,393 Research and development 371 452 556 Executive transition costs — 320 — Exit costs, restructuring charges and associated impairments — 54 357 $ 22,830 $ 22,585 $ 23,010 As at December 31, 2019, the Company has reserved a total of 8,944,999 (December 31, 2018 — 9,767,307) common shares for future issuance under theIMAX LTIP. Of the common shares reserved for issuance, there are options in respect of 5,732,209 (December 31, 2018 — 5,465,046) common shares and RSUsin respect of 1,065,347 (December 31, 2018 — 1,033,871) common shares outstanding at December 31, 2019. At December 31, 2019 options in respect of4,801,272 (December 31, 2018 — 3,990,970) common shares were vested and exercisable.Stock Option PlanThe 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 utilizes a Binomial Model to determine the fair value of stock-based payment awards. The fair value determined by the Binomial Model isaffected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are notlimited to, the Company’s expected stock price volatility over the term of the awards, and employee stock option exercise behaviors. The Binomial Model alsoconsiders the expected exercise multiple which is the multiple of exercise price to grant price at which exercises are expected to occur on average. Option-pricingmodels were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. Because theCompany’s employee stock options have certain characteristics that are significantly different from traded options, and because changes in the subjectiveassumptions can materially affect the estimated value, in management’s opinion, the Binomial Model best provides a fair measure of the fair value of theCompany’s employee stock options.All awards of stock options are made at fair market value of the Company’s common shares on the date of grant. The fair market value of a common share on agiven date means the higher of the closing price of a common share on the grant date (or the most recent trading date if the grant date is not a trading date) on theNew York Stock Exchange (“NYSE”) or such national exchange as may be designated by the Company’s Board of Directors (the “Fair Market Value”). The stockoptions vest within 4 years and expire 10 years or less from the date granted. The SOP and IMAX LTIP provide for double-trigger accelerated vesting in the eventof a change in control, as defined in each plan.The Company recorded the following expenses related to stock option grants issued to employees and directors in the IMAX LTIP and SOP plans. Years Ended December 31, 2019 2018 2017 Stock option expense $ 8,329 $ 5,950 $ 4,462 An income tax benefit is recorded in the consolidated statement of operations of $1.9 million for the year ended December 31, 2019 (2018 —$1.2 million;2017 —$1.0 million) related to stock option expenses.Total stock-based compensation expense related to non-vested employee stock options not yet recognized at December 31 are as follows: Years Ended December 31, 2019 2018 2017 Expense related to non-vested employee stock options not yet recognized $ 4,073 $ 8,482 $ 7,441107 The weighted average period over which the awards are expected to be recognized are as follows: Years Ended December 31, 2019 2018 2017 Weighted average period awards are expected to be recognized (in years) 2.7 1.9 2.3 The weighted average fair value of all stock options granted to employees and directors at the measurement date and the assumptions used to estimate theaverage fair value of the stock option are as follows: Years Ended December 31, 2019 2018 2017 Weighted average fair value per share $6.65 $6.74 $8.31 Average risk-free interest rate 2.64% 2.67% 2.34% Expected option life (in years) 6.73 - 10.00 5.06 - 7.00 4.71 - 5.83 Expected volatility 31% 30% 30% Dividend yield 0% 0% 0% Stock Options to Non-EmployeesThere were no common share options issued to non-employees in 2019, 2018 or 2017. In 2019, the Company did not record a charge (2018 — $nil; 2017 — less than $0.1 million) to selling, general and administrative expenses related to the non-employee stock options. There were no accrued liabilities related to non-employee stock options as at December 31, 2019 (December 31, 2018 — $nil).China Long-Term Incentive PlanEach stock option (“China Option”), RSU or cash settled share-based payment (“CSSBP”) issued under the China LTIP represents an opportunity to participateeconomically in the future growth and value creation of IMAX China.The CSSBPs represent the right to receive cash payments in an amount equal to a certain percentage of the excess of the total equity value of IMAX Chinabased on the per share price in the IMAX China initial public offering (the “IMAX China IPO”) over the strike price of the CSSBPs. The CSSBPs were issued inconjunction with the China LTIP, with similar terms and conditions as the China Options. The CSSBP awards are accounted as liability awards, however the fairvalue of the liability was fixed at the time of the initial public offering. During 2017, the remaining balance of the CSSBPs vested and were settled in cash for $0.6million. 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 restrictedstock unit plan. Pursuant to these plans, IMAX China has issued additional China Options and China LTIP Restricted Share Units (“China RSUs”).The following table summarizes the expense related to China Options, China RSUs, CSSBPs and any accrued liability related to CSSBPs: Years Ended December 31, 2019 2018 2017 Expense China Options $ 320 $ 217 $ 1,034 China RSUs 1,664 1,229 1,124 CSSBPs — — 353 CSSBPs liability $ — $ — $ — 108Stock Option SummaryThe following table summarizes certain information in respect of option activity under the SOP and IMAX LTIP: Weighted Average Exercise Number of Shares Price Per Share 2019 2018 2017 2019 2018 2017 Options outstanding, beginning of year 5,465,046 5,082,100 5,190,542 $ 27.63 $ 29.31 $ 28.35 Granted 1,016,882 1,082,123 854,764 20.66 21.95 30.07 Exercised (86,928) (12,750) (668,341) 20.16 17.08 21.92 Forfeited (336,493) (69,332) (108,551) 23.63 29.99 32.42 Expired (299,134) (507,977) (89,958) 25.82 31.69 32.29 Cancelled (27,164) (109,118) (96,356) 31.13 30.44 29.28 Options outstanding, end of year 5,732,209 5,465,046 5,082,100 26.82 27.63 29.31 Options exercisable, end of year 4,801,272 3,990,970 3,913,088 27.40 28.48 28.96 As at December 31, 2019, 5,732,209 options included both fully vested and unvested options with a weighted average exercise price of $26.82, aggregateintrinsic value of $0.9 million and weighted average remaining contractual life of 4.5 years. As at December 31, 2019, options that are exercisable have anintrinsic value of $0.9 million and a weighted average remaining contractual life of 4.3 years. The intrinsic value of options exercised in 2019 was $0.2 million(2018 — $0.1 million; 2017 — $6.8 million).Restricted Share UnitsRSUs have been granted to employees and directors under the IMAX LTIP. Each RSU represents a contingent right to receive one common share and is theeconomic 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. TheCompany recorded the following expenses related to RSU grants issued to employees and directors in the plan: Years Ended December 31, 2019 2018 2017 RSU expenses $ 12,394 $ 15,189 $ 16,033 The Company’s actual tax benefits realized for the tax deductions related to the vesting of RSUs was $1.6 million for the year ended December 31, 2019 (2018— $1.4 million; 2017 — $3.6 million).The Company’s accrued liability for RSUs, deemed as granted, was $0.4 million as at December 31, 2019 (December 31, 2018 — $nil).Total stock-based compensation expense related to non-vested RSUs not yet recognized and the weighted average period over which the awards are expected tobe recognized are as follows: Years Ended December 31, 2019 2018 2017 Expense related to non-vested RSUs not yet recognized $ 23,548 $ 18,597 $ 22,440 Weighted average period awards are expected to be recognized (in years) 2.7 2.2 2.1 The following table summarizes certain information in respect of RSU activity under the IMAX LTIP: Number of Awards Weighted Average Grant Date FairValue Per Share 2019 2018 2017 2019 2018 2017 RSUs outstanding, beginning of year 1,033,871 995,329 1,124,180 $ 25.70 $ 32.68 $ 33.01 Granted 687,475 659,282 463,010 22.30 20.99 30.47 Vested and settled (434,296) (534,193) (456,779) 27.54 32.33 31.66 Forfeited (221,703) (86,547) (135,082) 23.68 29.19 32.03 RSUs outstanding, end of year 1,065,347 1,033,871 995,329 23.17 25.70 32.68109 Historically, RSUs granted under the IMAX LTIP have vested between immediately and four years from the grant date. In connection with the amendment andrestatement of the IMAX LTIP at the Company’s annual and special meeting of the shareholders on June 6, 2016, the IMAX LTIP plan was amended to impose aminimum one-year vesting period on future RSU grants, with a carve-out for 300,000 RSUs that may vest on a shorter schedule. Vesting of the RSUs is subject tocontinued employment or service with the Company. The following table summarizes the number of RSUs issued from the carve-out balance: Outstanding, December 31, 2017 213,661 Issued during 2018 (65,838)Outstanding, December 31, 2018 147,823 Issued during 2019 (64,053)Outstanding, December 31, 2019 83,770 Restricted Share Units to Non-EmployeesThe Company issued 12,580 RSU awards to a certain advisor of the Company which were granted, vested, and settled in the year ended December 31, 2019(2018 and 2017 ― nil, respectively). The Company recorded an expense of $0.1 million for the year ended December 31, 2019 (2018 and 2017 ― $nil,respectively) related to RSU grants issued to advisors and strategic partners of the Company. Issuer Purchases of Equity SecuritiesIn 2017, the Company’s Board of Directors approved a $200.0 million share repurchase program for shares of the Company’s common stock. The sharepurchase program expires on June 30, 2020. The repurchases may be made either in the open market or through private transactions, 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 suspendedor discontinued by the Company at any time. In 2019, the Company repurchased 134,384 (2018 ― 3,436,783) common shares at an average price of $19.76 pershare (2018 ― $20.78 per share), excluding commissions.In 2018, IMAX China announced that its shareholders granted its Board of Directors a general mandate authorizing the Board, subject to applicable laws, tobuy back shares of IMAX China in an amount not to exceed 10% of the total number of issued shares of IMAX China as at May 3, 2018 (35,818,112 shares). Theshare repurchase program expired on June 6, 2019. In 2019, IMAX China announced that its shareholders granted its Board of Directors a general mandateauthorizing the Board, subject to applicable laws, to repurchase shares of IMAX China in an amount not to exceed 10% of the total number of issued shares ofIMAX China as at June 6, 2019 (35,605,560 shares). The share purchase program expires on the date of the 2020 annual general meeting of IMAX China. Therepurchases 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 theshare repurchase program may be suspended or discontinued by IMAX China at any time. In 2019, IMAX China repurchased 8,051,500 common shares at anaverage price of HKD $18.63 per share (U.S. $2.38).The total number of shares purchased during the year ended December 31, 2019 and 2018 does not include 615,000 and 300,000 common shares, purchased inthe administration of employee share-based compensation plans, at an average price of $22.49 and $20.55 per share, respectively.As at December 31, 2019, the IMAX LTIP trustee held 187,020 shares purchased for $4.0 million in the open market to be issued upon the settlement of RSUsand certain stock options. The shares held with the trustee are recorded at cost and are reported as a reduction against capital stock on the consolidated balancesheet.(d)Net income per shareReconciliations of the numerator and denominator of the basic and diluted per-share computations are comprised of the following:110 Years Ended December 31, 2019 2018 2017 Net income attributable to common shareholders $ 46,866 $ 22,844 $ 2,344 Weighted average number of common shares (000's): Issued and outstanding, beginning of period 61,434 64,696 66,160 Weighted average number of shares repurchased during the period, net (124) (1,621) (780)Weighted average number of shares used in computing basic earnings per share 61,310 63,075 65,380 Assumed exercise of stock options and RSUs, net of shares assumed repurchased 179 132 160 Weighted average number of shares used in computing diluted earnings per share 61,489 63,207 65,540 The calculation of diluted earnings per share exclude 5,809,468 (2018 and 2017 ― 5,666,976 and 4,993,014, respectively) shares that are issuable uponexercise of 77,259 (2018 and 2017 ― 277,543 and 579,808, respectively) RSUs and 5,732,209 (2018 and 2017 ― 5,389,433 and 4,413,206, respectively) stockoptions for the years ended December 31, 2019, 2018 and 2017, as the impact of these exercises would be antidilutive.17. Consolidated Statements of Operations Supplemental Information (a)Selling ExpensesThe Company defers direct selling costs such as sales commissions and other amounts related to its sales and sales-type lease arrangements until the relatedrevenue is recognized. These costs and direct advertising and marketing, included in costs and expenses applicable to Revenues – Equipment and product sales,totaled $3.1 million for the year ended December 31, 2019 (2018 — $2.9 million; 2017 — $3.6 million).Film exploitation costs, including advertising and marketing, totaled $22.9 million for the year ended December 31, 2019 (2018 — $21.2 million; 2017 —$14.7 million), and are recorded in costs and expenses applicable to revenues-services as incurred.Commissions are recognized as costs and expenses applicable to Revenues – Rentals in the month they are earned. These costs totaled an expense of $0.4million for the year ended December 31, 2019 (2018 — $0.9 million; 2017 — $1.6 million). Direct advertising and marketing costs for each theater are charged tocosts and expenses applicable to Revenues – Rentals as incurred. These costs totaled an expense of $3.0 million for the year ended December 31, 2019 (2018 —$2.1 million; 2017 — $2.6 million). (b)Foreign ExchangeIncluded in selling, general and administrative expenses for the year ended December 31, 2019 is $0.9 million for a net foreign exchange loss related to thetranslation of foreign currency denominated monetary assets and liabilities as compared to a net loss of $1.7 million and a net gain of $1.0 million for the yearsended December 31, 2018 and 2017, respectively. See note 22(d) for additional information. (c)Collaborative ArrangementsJoint Revenue Sharing ArrangementsIn a joint revenue sharing arrangement, the Company receives a portion of a theater’s box-office and concession revenues, and in some cases a small upfront orinitial payment, in exchange for placing a theater system at the theater operator’s venue. Under joint revenue sharing arrangements, the customer has the abilityand 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 sharingarrangements are typically non-cancellable for 10 years or longer with renewal provisions. Title to equipment under joint revenue sharing arrangements generallydoes not transfer to the customer. The Company’s joint revenue sharing arrangements do not contain a guarantee of residual value at the end of the term. Thecustomer is required to pay for executory costs such as insurance and taxes and is required to pay the Company for maintenance and extended warranty throughoutthe term. The customer is responsible for obtaining insurance coverage for the theater systems commencing on the date specified in the arrangement’s shippingterms and ending on the date the theater systems are delivered back to the Company.111The Company has signed traditional and hybrid joint revenue sharing agreements with 39 exhibitors (2018 — 35) for a total of 1,223 theater systems (2018 —1,185), of which 870 theaters (2018 — 798) were operating as at December 31, 2019. The terms of the Company’s joint revenue sharing arrangements are similarin nature, rights and obligations. The accounting policy for the Company’s joint revenue sharing arrangements is disclosed in note 2(n).Amounts attributable to transactions arising between the Company and its customers under joint revenue sharing arrangements are included in Equipment andProduct Sales and Rentals revenue under ASC Topic 606 and for the year ended December 31, 2019 amounted to $92.0 million (2018 — $86.6 million; 2017 —$80.6 million).IMAX DMRIn an IMAX DMR arrangement, the Company transforms conventional motion pictures into the Company’s large screen format, allowing the release ofHollywood content to the global IMAX theater network. In a typical IMAX DMR film arrangement, the Company will absorb its costs for the digital re-masteringand then recoup this cost from a percentage of the box-office receipts of the film, which in recent years has averaged approximately 12.5% outside of GreaterChina and a lower percentage for certain films within Greater China. The Company does not typically hold distribution rights or the copyright to these films.In 2019, the majority of IMAX DMR revenue was earned from the exhibition of 72 IMAX DMR films (2018 — 80) throughout the IMAX theater network. Theaccounting policy for the Company’s IMAX DMR arrangements is disclosed in note 2(n).Amounts attributable to transactions arising between the Company and its customers under IMAX DMR arrangements are included in Services revenues andfor the year ended December 31, 2019 amounted to $120.8 million (2018 — $110.8 million; 2017 — $108.9 million).Co-Produced Film ArrangementsIn certain film arrangements, the Company co-produces a film with a third party whereby the third party retains the copyright and rights to the film except thatthe Company obtains exclusive theatrical distribution rights to the film. Under these arrangements, both parties contribute funding to the Company’s wholly-owned company for the production of the film or content and for associated exploitation costs. Clauses in the film arrangements generally provide for the thirdparty to take over the production of the film if the cost of the production exceeds its approved budget or if it appears as though the film will not be delivered on atimely basis.As at December 31, 2019, the Company has two significant co-produced arrangements which primarily represents the VIE total assets balance of $9.7 millionand liabilities balance of $15.5 million and three 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(n).In 2019, an expense of $0.6 million (2018 — recovery of $0.5 million; 2017 — expense of $1.2 million) attributable to transactions between the Company andother parties involved in the production of the films have been included in cost and expenses applicable to revenues-services.In 2017, the Company participated in one significant co-produced television arrangement. This arrangement was not a VIE.For the year ended December 31, 2019, revenues of $0.4 million (2018 — $0.3 million; 2017 — $20.4 million) and costs and expenses applicable to revenuesof less than $0.1 million (2018 — $0.3 million; 2017 — $33.4 million), attributable to this collaborative arrangement have been recorded in Revenue – Servicesand Costs and expenses applicable to revenues – Services, respectively. In 2017, included therein are net revenues attributable to transactions between theCompany and other parties involved in the production of the episodic content of $20.1 million. 18. Receivable Provisions, Net of RecoveriesThe following table reflects the Company’s receivable provisions net of recoveries recorded in the consolidated statements of operations: Years Ended December 31, 2019 2018 2017 Accounts receivable provisions, net of recoveries $ 2,354 $ 3,030 $ 1,967 Financing receivable provisions, net of recoveries 76 100 680 Receivable provisions, net of recoveries $ 2,430 $ 3,130 $ 2,647 11219. Consolidated Statements of Cash Flows Supplemental Information (a)Changes in other non-cash operating assets and liabilities are comprised of the following: Years Ended December 31, 2019 2018 2017 Decrease (increase) in: Accounts receivable$ (8,621) $ 33,942 $ (37,807)Financing receivables (320) 1,325 (7,253)Inventories 1,942 (14,022) 10,832 Prepaid expenses (290) (3,703) (924)Variable consideration receivable (4,056) — — Other assets (2,063) (3,084) (457)Increase (decrease) in: Accounts payable (11,774) 7,749 4,204 Accrued and other liabilities (1) (8,505) (3,266) (642)Deferred revenue (12,242) (6,494) 22,906 $ (45,929) $ 12,447 $ (9,141) (1)Excluded the $17.4 million non-cash impact of adopting ASC Topic 842 in 2019 (b)Cash payments made on account of: Years Ended December 31, 2019 2018 2017 Income taxes$ 17,298 $ 12,684 $ 22,829 Interest$ 1,231 $ 502 $ 826 (c)Depreciation and amortization are comprised of the following: Years Ended December 31, 2019 2018 2017 Film assets(1)$ 19,176 $ 15,679 $ 31,031 Property, plant and equipment Joint revenue sharing arrangements 23,153 20,739 18,112 Other property, plant and equipment 12,477 13,164 11,803 Other intangible assets 6,290 5,507 4,319 Other assets 1,882 1,242 980 Deferred financing costs 509 1,106 562 $ 63,487 $ 57,437 $ 66,807 (1)Included in film asset amortization is a charge of $nil (2018 — $nil; 2017 — $1.5 million) relating to changes in estimates based on the ultimaterecoverability of future films.113 (d)Write-downs, net of recoveries, are comprised of the following: Years Ended December 31, 2019 2018 2017 Asset impairments Property, plant and equipment$ 96 3,725 $ 3,966 Other assets — 2,565 2,533 Prepaid expenses — 121 — Other intangible assets — 66 — Impairment of investments — — 1,225 Film assets 1,379 — 17,363 Other charges Accounts receivable (net of recoveries) 2,354 3,030 1,967 Financing receivables 76 100 680 Inventories 446 250 500 Property, plant and equipment (1) 2,360 1,762 1,224 Other intangible assets 95 151 63 Other assets — — 47 $ 6,806 $ 11,770 $ 29,568 Inventory charges Recorded in costs and expenses applicable to revenues - product & equipment sales$ 276 $ 250 $ 500 Recorded in costs and expenses applicable to revenues - services 170 — — $ 446 $ 250 $ 500 (1)In 2019, the Company recorded a charge of $0.2 million (2018 — $0.8 million; 2017 — $1.2 million) reflecting property, plant and equipment that were nolonger in use. In 2019, the Company recorded a charge of $2.2 million in cost of sales applicable to Rentals upon the upgrade of xenon-based digital systemsunder joint revenue sharing arrangements to laser-based digital systems. In 2018, the Company also recorded a charge of $0.6 million in cost of salesapplicable to Rentals, and $0.4 million in revenue applicable to Rentals upon the upgrade of xenon-based digital systems under operating lease arrangementsto laser-based digital systems under sales or sales-type lease arrangements. No such charge was recorded in the year ended December 31, 2017. (e)Significant non-cash investing and financing activities are comprised of the following: Years Ended December 31, 2019 2018 Net accruals related to: Purchases of property, plant and equipment$ 496 $ 227 Investment in joint revenue sharing arrangements (2,013) (61)Acquisition of other intangible assets (51) 89 $ (1,568) $ 255 11420. Revenue from Contracts with CustomersThe following tables present a breakdown of the Company’s revenues between fixed and variable consideration and lease arrangements: Years Ended December 31, 2019 Subject to the Revenue Subject to the Recognition Standard Lease Standard Fixedconsideration Variableconsideration Leasearrangements Total Network business IMAX DMR$ — $ 120,765 $ — $ 120,765 Joint revenue sharing arrangements – contingent rent — — 75,932 75,932 IMAX systems – contingent rent — — 139 139 — 120,765 76,071 196,836 Theater business IMAX systems Sales and sales-type leases 86,202 10,108 — 96,310 Ongoing fees and finance income 11,613 — — 11,613 Joint revenue sharing arrangements – fixed fees — — 11,014 11,014 Theater system maintenance 53,151 — — 53,151 Other theater 8,390 — — 8,390 159,356 10,108 11,014 180,478 New business 2,754 — — 2,754 Other Film post-production 7,392 — — 7,392 Film distribution — 4,818 — 4,818 Other — 2,123 1,263 3,386 7,392 6,941 1,263 15,596 Total$ 169,502 $ 137,814 $ 88,348 $ 395,664 115 Year Ended December 31, 2018 Subject to the Revenue Subject to the Recognition Standard Lease Standard Fixedconsideration Variableconsideration Leasearrangements Total Network business IMAX DMR$ — $ 110,793 $ — $ 110,793 Joint revenue sharing arrangements – contingent rent — — 73,371 73,371 IMAX systems – contingent rent — — — — — 110,793 73,371 184,164 Theater business IMAX systems Sales and sales-type leases 82,128 6,304 — 88,432 Ongoing fees and finance income 12,224 — — 12,224 Joint revenue sharing arrangements – fixed fees 9,706 — — 9,706 Theater system maintenance 49,684 — — 49,684 Other theater 8,358 — — 8,358 162,100 6,304 — 168,404 New business 4,050 1,719 — 5,769 Other Film post-production 9,516 — — 9,516 Film distribution — 3,446 — 3,446 Other 50 3,052 — 3,102 9,566 6,498 — 16,064 Total$ 175,716 $ 125,314 $ 73,371 $ 374,401 The Company’s arrangements include a requirement for the provision of maintenance services over the life of the arrangement, subject to a consumer priceindex increase on renewal each year. In circumstances where customers prepay the entire term’s maintenance arrangement, payments are due to the Company forthe years after the extended warranty and maintenance services offered as part of the System performance obligations expire. Payments upon renewal each yearcan be either in arrears or in advance and can vary in frequency from monthly to annually. At December 31, 2019, $17.7 million of consideration has beendeferred in relation to outstanding stand ready performance obligations related to these maintenance services (December 31, 2018 — $21.9 million). As themaintenance services are a stand ready obligation, revenue, subject to appropriate constraint, is recognized evenly over the contract term.In instances where consideration is received prior to performance obligations being satisfied, it is deferred. The majority of the Company’s deferred revenuebalance relates to payments for theater systems that have not yet been recognized. The deferred revenue related to an individual theater increases as progresspayments are made and is recognized at the time the system obligation is satisfied. Recognition dates are variable and depend on numerous factors, including someoutside of the Company’s control. 11621. Segmented InformationManagement, including the Company’s Chief Executive Officer (“CEO”) who is the Company’s Chief Operating Decision Maker (as defined in the SegmentReporting Topic of the FASB ASC), assesses segment performance based on segment revenues and gross margins. Selling, general and administrative expenses,research and development costs, amortization of intangibles, receivables provisions (recoveries), write-downs net of recoveries, interest income, interest expenseand tax (provision) recovery are not allocated to the segments.The Company’s reportable segments are organized under four primary groups identified by nature of product sold or service provided: (1) Network Business,representing variable revenue generated by box office results and which includes the reportable segment of IMAX DMR and contingent rent from the joint revenuesharing arrangements and IMAX systems segments (hybrid joint revenue sharing arrangements, which take the form of a sale are reflected under the IMAXsystems segment of Theater Business); (2) Theater Business, representing revenue generated by the sale and installation of theater systems and maintenanceservices, primarily related to the IMAX Systems and Theater System Maintenance reportable segments, and also includes hybrid (fixed and contingent) revenuesand upfront installation costs from sales arrangements previously reported in the joint revenue sharing arrangements segment and after-market sales of projectionsystem parts and 3D glasses from the other segment; (3) New Business, which includes which includes home entertainment, and other new business initiatives thatare in the development, start-up and/or wind-up phases, and (4) Other; which includes the film post-production and distribution segments, certain IMAX theatersthat the Company owns and operates, camera rentals and other miscellaneous items. The Company is presenting information at a disaggregated level to providemore relevant information to readers, as permitted by the standard. The accounting policies of the segments are the same as those described in note 2.Transactions between the film production and IMAX DMR segment and the film post-production segment are valued at exchange value. Inter-segment profitsare eliminated upon consolidation, as well as for the disclosures below. 117 (a)The Company has the following eight reportable segments: IMAX DMR, joint revenue sharing arrangements, IMAX systems, theater systemmaintenance, other theater, new business, film distribution and film post-production. The Company organizes its reportable segments into the followingfour primary groups: Network Business, Theater Business, New Business and Other. Years Ended December 31, 2019 2018 2017 Revenue(1) Network business IMAX DMR $120,765 $110,793 $108,853 Joint revenue sharing arrangements – contingent rent 75,932 73,371 70,444 IMAX systems – contingent rent 139 — 3,890 196,836 184,164 183,187 Theater business IMAX systems 107,923 100,656 90,347 Joint revenue sharing arrangements – fixed fees 11,014 9,706 10,118 Theater system maintenance 53,151 49,684 45,383 Other theater 8,390 8,358 9,145 180,478 168,404 154,993 New business 2,754 5,769 24,522 Other Film post-production 7,392 9,516 10,382 Film distribution 4,818 3,446 2,790 Other 3,386 3,102 4,893 15,596 16,064 18,065 Total revenues $395,664 $374,401 $380,767 Gross Margin Network business IMAX DMR(2) $78,592 $72,773 $71,789 Joint revenue sharing arrangements – contingent rent(2) 47,935 48,856 47,337 IMAX systems – contingent rent 139 — 3,890 126,666 121,629 123,016 Theater business IMAX systems(2)(3) 58,540 60,019 57,734 Joint revenue sharing arrangements – fixed fees(2) 2,613 1,982 2,349 Theater system maintenance(3) 23,010 21,991 18,275 Other theater 2,624 1,806 1,965 86,787 85,798 80,323 New business 2,106 (350) (16,176)Other Film post-production 1,680 3,107 4,791 Film distribution(2) (2,942) (1,344) (5,797)Other (125) (911) (911) (1,387) 852 (1,917) Total segment margin $214,172 $207,929 $185,246118 Years Ended December 31, 2019 2018 2017 Depreciation and amortization Network business IMAX DMR $16,117 $13,602 $15,779 Joint revenue sharing arrangements - contingent rent 25,036 21,970 19,092 Theater business IMAX systems 3,878 3,615 3,551 Theater system maintenance 299 164 173 New business 58 2,519 15,365 Other Film post-production 1,301 1,500 1,845 Film distribution 3,894 2,225 2,128 Other 747 790 911 Corporate and other non-segment specific assets 12,157 11,052 7,963 Total $63,487 $57,437 $66,807 Years Ended December 31, 2019 2018 2017 Asset impairments and write-downs, net of recoveries Network business IMAX DMR — $15 $— Joint revenue sharing arrangements - contingent rent 2,207 1,193 944 Theater business IMAX systems 276 250 2,930 Theater system maintenance 170 — — New business 96 7,399 16,400 Other Film post-production — — — Film distribution 1,379 — 5,865 Corporate and other non-segment specific assets 2,678 2,913 3,429 Total $6,806 $11,770 $29,568 Years Ended December 31, 2019 2018 2017 Purchase of property, plant and equipment Network business IMAX DMR $99 $55 $518 Joint revenue sharing arrangements - contingent rent 40,489 34,810 42,634 Theater business IMAX systems 452 2,813 4,537 Theater system maintenance 311 527 206 New business — 342 4,487 Other Film post-production 1,210 1,067 810 Other 504 193 367 Corporate and other non-segment specific assets 4,845 8,371 13,218 Total $47,910 $48,178 $66,777119 As at December 31 2019 2018 Assets Network business IMAX DMR $46,417 $38,117 Joint revenue sharing arrangements - contingent rent 231,626 223,799 IMAX systems - contingent rent — — Theater business IMAX systems 277,720 266,290 Joint revenue sharing arrangements - fixed fees 27,189 18,044 Theater system maintenance 22,869 26,225 Other theater 2,042 2,197 New business — 1,677 Other Film post-production 36,562 36,998 Film distribution 14,831 15,601 Other 23,809 26,519 Corporate and other non-segment specific assets 206,004 218,133 Total $889,069 $873,600 (1)The Company’s largest customer represents 16.5% of total revenues as at December 31, 2019, (2018 —17.1%; 2017 —16.4%).(2)IMAX DMR segment margins include marketing costs of $22.5 million, $16.5 million and $15.4 million in 2019, 2018 and 2017, respectively. Joint revenuesharing arrangements segment margins include advertising, marketing, and commission costs of $4.5 million, $3.6 million and $4.5 million in 2019, 2018 and2017, respectively. IMAX systems segment margins include marketing and commission costs of $2.0 million, $2.4 million and $2.9 million in 2019, 2018and 2017, respectively. Film distribution segment margins includes marketing expense of $0.4 million, expense of $2.2 million and recovery of $0.7 millionin 2019, 2018 and 2017, respectively.(3)In 2019, the Company recorded a charge of $0.4 million (2018 — $0.3 million; 2017 — $0.5 million, respectively) in costs and expenses applicable torevenues, primarily for its film-based projector inventories. Specifically, IMAX systems include an inventory charge of $0.3 million (2018 — $0.3 million;2017 — $0.5 million). Theater system maintenance includes inventory write-downs of $0.2 million (2018 — $nil; 2017 — $nil).(4)Goodwill is allocated on a relative fair market value basis to the IMAX systems segment, theater system maintenance segment and joint revenue sharingsegment. There has been no change in the allocation of goodwill from the prior year. (b)Geographic InformationRevenue by geographic area is based on the location of the customer. Revenue related to IMAX DMR is presented based upon the geographic location of thetheaters that exhibit the re-mastered films. IMAX DMR revenue is generated through contractual relationships with studios and other third parties and these maynot be in the same geographical location as the theater. Years Ended December 31, 2019 2018 2017 Revenue Greater China $124,294 $117,520 $126,474 United States 121,264 118,495 135,153 Canada 9,220 10,507 12,812 Asia (excluding Greater China) 48,386 46,858 35,896 Western Europe 46,911 40,497 32,765 Russia & the CIS 16,124 10,133 11,054 Latin America 9,438 12,952 10,963 Rest of the World 20,027 17,439 15,650 Total $395,664 $374,401 $380,767 120No single country in the Rest of the World, Western Europe, Latin America and Asia (excluding Greater China) classifications comprise more than 10% oftotal revenue. As at December 31 2019 2018 Property, plant and equipment United States $109,240 $97,843 Greater China 105,312 93,494 Canada 47,837 48,275 Western Europe 27,748 26,566 Asia (excluding Greater China) 9,948 8,084 Rest of the World 6,764 6,396 Total $306,849 $280,658 22. Financial Instruments (a)Financial InstrumentsThe Company maintains cash with various major financial institutions. The Company’s cash is invested with highly rated financial institutions.The Company’s accounts receivables and financing receivables are subject to credit risk. The Company’s accounts receivable and financing receivables areconcentrated with the theater exhibition industry and film entertainment industry. To minimize the Company’s credit risk, the Company retains title to underlyingtheater systems leased, performs initial and ongoing credit evaluations of its customers and makes ongoing provisions for its estimate of potentially uncollectibleamounts. The Company believes it has adequately provided for related exposures surrounding receivables and contractual commitments. (b)Fair Value MeasurementsThe carrying values of the Company’s cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities due within one-year approximatefair values due to the short-term maturity of these instruments. The Company’s other financial instruments at December 31, are comprised of the following: As at December 31, 2019 As at December 31, 2018 CarryingAmount EstimatedFair Value CarryingAmount EstimatedFair Value Level 1 Cash and cash equivalents(1) $109,484 109,484 $141,590 $141,590 Equity securities (3) 15,685 15,685 1,022 1,022 Level 2 Net financed sales receivables(2) $112,432 $111,441 $117,990 $117,428 Net investment in sales-type leases (2) 15,606 15,309 9,442 9,529 Convertible loan receivable(2) 1,500 1,500 1,500 1,500 Equity securities(1) 1,000 1,000 1,000 1,000 Foreign exchange contracts — designated forwards(3) 530 530 (1,202) (1,202)Borrowings under the Credit Facility(1) (20,000) (20,000) (40,000) (40,000) (1)Recorded at cost, which approximates fair value.(2)Estimated based on discounting future cash flows at currently available interest rates with comparable terms.(3)Value determined using quoted prices in active markets.When a determination is made to classify an asset or liability within Level 3, the determination is based upon the significance of the unobservable inputs to theoverall fair value measurement. There were no transfers in or out of the Company’s Level 3 assets during the year ended December 31, 2019 and 2018.121 (c)Financing ReceivablesThe Company’s net investment in leases and its net financed sale receivables are subject to the disclosure requirements of ASC 310 “Receivables”. Due todiffering risk profiles of its net investment in leases and its net financed sales receivables, the Company views its net investment in leases and its net financed salereceivables as separate classes of financing receivables. The Company does not aggregate financing receivables to assess impairment.The Company monitors the credit quality of each customer on a frequent basis through collections and aging analyses. The Company also holds meetingsmonthly in order to identify credit concerns and whether a change in credit quality classification is required for the customer. A customer may improve in theircredit quality classification once a substantial payment is made on overdue balances or the customer has agreed to a payment plan with the Company and paymentshave commenced in accordance to the payment plan. The change in credit quality indicator is dependent upon management approval.The Company classifies its customers into four categories to indicate the credit quality worthiness of its financing receivables for internal purposes only:Good standing — Theater continues to be in good standing with the Company as the client’s payments and reporting are up-to-date.Credit Watch — Theater operator has begun to demonstrate a delay in payments, and has been placed on the Company's credit watch list for continuedmonitoring, but active communication continues with the Company. Depending on the size of outstanding balance, length of time in arrears and other factors,transactions may need to be approved by management. These financing receivables are considered to be in better condition than those receivables related totheaters in the "Pre-approved transactions" category, but not in as good of condition as those receivables in "Good standing." Pre-approved transactions only — Theater operator is demonstrating a delay in payments with little or no communication with the Company. All service orshipments to the theater must be reviewed and approved by management. These financing receivables are considered to be in better condition than thosereceivables related to theaters in the "All transactions suspended" category, but not in as good of condition as those receivables in "Credit Watch." Depending onthe individual facts and circumstances of each customer, finance income recognition may be suspended if management believes the receivable to be impaired.All transactions suspended — Theater is severely delinquent, non-responsive or not negotiating in good faith with the Company. Once a theater is classified as“All transactions suspended” the theater is placed on nonaccrual status and all revenue recognitions related to the theater are stopped.The following table discloses the recorded investment in financing receivables by credit quality indicator: As at December 31, 2019 As at December 31, 2018 MinimumLeasePayments FinancedSalesReceivables Total MinimumLeasePayments FinancedSalesReceivables Total In good standing $15,094 $102,450 $117,544 $8,701 $108,574 $117,275 Credit Watch 667 9,279 9,946 574 8,723 9,297 Pre-approved transactions — 830 830 322 565 887 Transactions suspended — 788 788 — 967 967 $15,761 $113,347 $129,108 $9,597 $118,829 $128,426 While recognition of finance income is suspended, payments received by a customer are applied against the outstanding balance owed. If payments aresufficient to cover any unreserved receivables, a recovery of provision taken on the billed amount, if applicable, is recorded to the extent of the residual cashreceived. Once the collectability issues are resolved and the customer has returned to being in good standing, the Company will resume recognition of financeincome.122The Company’s investment in financing receivables on nonaccrual status is as follows: As at December 31, 2019 As at December 31, 2018 RecordedInvestment RelatedAllowance RecordedInvestment RelatedAllowance Net investment in leases $— $— $— $— Net financed sales receivables 788 (732) 967 (739)Total $788 $(732) $967 $(739) The Company considers financing receivables with aging between 60-89 days as indications of theaters with potential collection concerns. The Company willbegin to focus its review on these financing receivables and increase its discussions internally and with the theater regarding payment status. Once a theater’s agingexceeds 90 days, the Company’s policy is to review and assess collectability on the theater’s past due accounts. Over 90 days past due is used by the Company asan indicator of potential impairment as invoices up to 90 days outstanding could be considered reasonable due to the time required for dispute resolution or for theprovision of further information or supporting documentation to the customer.The Company’s aged financing receivables are as follows: As at December 31, 2019 AccruedandCurrent 30-89Days 90+Days BilledFinancingReceivables RelatedUnbilledRecordedInvestment TotalRecordedInvestment RelatedAllowances RecordedInvestmentNet ofAllowances Net investment in leases $30 $68 $251 $349 $15,412 $15,761 $(155) $15,606 Net financed sales receivables 1,678 2,772 5,446 9,896 103,451 113,347 (915) 112,432 Total $1,708 $2,840 $5,697 $10,245 $118,863 $129,108 $(1,070) $128,038 As at December 31, 2018 AccruedandCurrent 30-89Days 90+Days BilledFinancingReceivables RelatedUnbilledRecordedInvestment TotalRecordedInvestment RelatedAllowances RecordedInvestmentNet ofAllowances Net investment in leases $52 $18 $253 $323 $9,274 $9,597 $(155) $9,442 Net financed sales receivables 1,442 2,066 5,241 8,749 110,080 118,829 (839) 117,990 Total $1,494 $2,084 $5,494 $9,072 $119,354 $128,426 $(994) $127,432 The Company’s recorded investment in financing receivables with billed amounts past due for which the Company continues to accrue finance income is asfollows: As at December 31, 2019 AccruedandCurrent 30-89 Days 90+ Days BilledFinancingReceivables RelatedUnbilledRecordedInvestment RelatedAllowance RecordedInvestmentPast DueandAccruing Net investment in leases $9 $19 $251 $279 $578 $— $857 Net financed sales receivables 1,146 1,290 5,523 7,959 29,173 — 37,132 Total $1,155 $1,309 $5,774 $8,238 $29,751 $— $37,989 As at December 31, 2018 AccruedandCurrent 30-89 Days 90+ Days BilledFinancingReceivables RelatedUnbilledRecordedInvestment RelatedAllowance RecordedInvestmentPast DueandAccruing Net investment in leases $28 $9 $246 $283 $1,523 $— $1,806 Net financed sales receivables 558 1,472 5,860 7,890 31,507 — 39,397 Total $586 $1,481 $6,106 $8,173 $33,030 $— $41,203123 The Company considers financing receivables to be impaired when it believes it to be probable that it will not recover the full amount of principal or interestowing under the arrangement. The Company uses its knowledge of the industry and economic trends, as well as its prior experiences to determine the amountrecoverable for impaired financing receivables. The following table discloses information regarding the Company’s impaired financing receivables: As at December 31, 2019 RecordedInvestment UnpaidPrincipal RelatedAllowance AverageRecordedInvestment InterestIncomeRecognized Recorded investment for which there is a related allowance: Net investment in leases $— $— $— $— $— Net financed sales receivables 708 80 (732) 818 — Recorded investment for which there is no related allowance: Net investment in leases — — — — — Net financed sales receivables — — — — — Total recorded investment in impaired loans: Net investment in leases $— $— $— $— $— Net financed sales receivables $708 $80 $(732) $818 $— As at December 31, 2018 RecordedInvestment UnpaidPrincipal RelatedAllowance AverageRecordedInvestment InterestIncomeRecognized Recorded investment for which there is a related allowance: Net investment in leases $— $— $— $— $— Net financed sales receivables 869 98 (739) 930 — Recorded investment for which there is no related allowance: Net investment in leases — — — — — Net financed sales receivables — — — — — Total recorded investment in impaired loans: Net investment in leases $— $— $— $— $— Net financed sales receivables $869 $98 $(739) $930 $— 124The Company’s activity in the allowance for credit losses for the period and the Company’s recorded investment in financing receivables is as follows: Year Ended December 31, 2019 Net Investment Net Financed in Leases Sales Receivables Allowance for credit losses: Beginning balance $155 $839 Charge-offs — — Recoveries — — Provision — 76 Ending balance $155 $915 Ending balance: individually evaluated for impairment $155 $915 Financing receivables: Ending balance: individually evaluated for impairment $15,761 $113,347 Year Ended December 31, 2018 Net Investment Net Financed in Leases Sales Receivables Allowance for credit losses: Beginning balance $155 $922 Charge-offs — (183)Recoveries — — Provision — 100 Ending balance $155 $839 Ending balance: individually evaluated for impairment $155 $839 Financing receivables: Ending balance: individually evaluated for impairment $9,597 $118,829 (d)Foreign Exchange Risk ManagementThe Company is exposed to market risk from changes in foreign currency rates. A significant portion of the Company’s revenues is denominated in U.S. dollarswhile a substantial portion of its costs and expenses is denominated in Canadian dollars. A portion of the net U.S. dollar cash flows of the Company is periodicallyconverted to Canadian dollars to fund Canadian dollar expenses through the spot market. In China and Japan, the Company has ongoing operating expenses relatedto its operations in Chinese Renminbi and Japanese yen, respectively. Net cash flows are converted to and from U.S. dollars through the spot market. TheCompany also has cash receipts under leases denominated in Chinese Renminbi, Japanese yen, Canadian dollars and Euros which are converted to U.S. dollarsthrough the spot market. In addition, because IMAX films generate box-office in 81 different countries, unfavourable exchange rates between applicable localcurrencies, and the U.S. dollar affect the Company’s reported gross box-office and revenues, further impacting the Company’s results of operations. TheCompany’s policy is to not use any financial instruments for trading or other speculative purposes.The Company entered into a series of foreign currency forward contracts to manage the Company’s risks associated with the volatility of foreign currencies.Certain of these foreign currency forward contracts met the criteria required for hedge accounting under the Derivatives and Hedging Topic of the FASB ASC atinception, and continue to meet hedge effectiveness tests at December 31, 2019 (the “Foreign Currency Hedges”), with settlement dates throughout 2020 and 2021.Foreign currency derivatives are recognized and measured in the balance sheet at fair value. Changes in the fair value (gains or losses) are recognized in theconsolidated statement of operations except for derivatives designated and qualifying as foreign currency hedging instruments. For foreign currency hedginginstruments, the effective portion of the gain or loss in a hedge of a forecasted transaction is reported in other comprehensive income and reclassified to theconsolidated statement of operations when the forecasted transaction occurs. The Company currently does not hold any derivatives which are not designated ashedging instruments and therefore no gain or loss pertaining to an ineffective portion has been recognized.125The following tabular disclosures reflect the impact that derivative instruments and hedging activities have on the Company’s consolidated financial statements:Notional value of foreign exchange contracts: As at December 31, 2019 2018 Derivatives designated as hedging instruments: Foreign exchange contracts — Forwards $36,052 $50,828 Fair value of derivatives in foreign exchange contracts: As at December 31, Balance Sheet Location 2019 2018 Derivatives designated as hedging instruments: Foreign exchange contracts — Forwards Other assets $602 $649 Accrued and other liabilities $(72) (1,851) $530 $(1,202) Derivatives in Foreign Currency Hedging relationships are as follows: Years Ended December 31, 2019 2018 2017 Foreign exchange contracts - Forwards Derivative Gain (Loss) Recognized in OCI(Effective Portion) $ 552 $ (2,219) $ 2,545 $ 552 $ (2,219) $ 2,545 Location of Derivative (Loss) Gain Reclassified from AOCI Years Ended December 31, into Income (Effective Portion) 2019 2018 2017 Foreign exchange contracts - Forwards Selling, general and administrativeexpenses $ (1,109) $ 408 $ 824 Inventory (42) — — Property, plant and equipment (32) — — $ (1,183) $ 408 $ 824 Years Ended December 31, 2019 2018 2017 Foreign exchange contracts - Forwards Derivative (Loss) Gain Recognized In and Outof OCI (Effective Portion) $(22) $21 $— The Company's estimated net amount of the existing gains as at December 31, 2019 is $0.4 million, which is expected to be reclassified to earnings within thenext twelve months.126 (e)Investments in New Business VenturesThe Company accounts for investments in new business ventures using the guidance of the FASB ASC 323 and the FASB ASC 320, as appropriate.As at December 31, 2019, the equity method of accounting is being utilized for investments with a total carrying value of $nil (December 31, 2018 — $nil). TheCompany’s accumulated losses in excess of its equity investment were $1.5 million as at December 31, 2019 (December 31, 2018 — $1.6 million) and areclassified in Accrued and other liabilities. For the year ended December 31, 2019, gross revenues, cost of revenue and net loss for the investment were $2.0 million,$1.2 million and $1.5 million, respectively (2018 — $1.9 million, $3.0 million, and $1.8 million, respectively). The Company has determined it is not the primarybeneficiary of this VIE, and therefore this entity has not been consolidated. In a prior year, the Company issued a convertible loan of $1.5 million to this entitywith a term of 3 years with an annual effective interest rate of 5.0%. The instrument is classified as an available-for-sale investment due to certain features thatallow for conversion to common stock in the entity in the event of certain triggers occurring.In addition, the Company has an investment in preferred stock of another business venture of $1.5 million which meets the criteria for classification as a debtsecurity under the FASB ASC 320 and is recorded at a fair value of $nil at December 31, 2019 (December 31, 2018 — $nil).Furthermore, the Company has an investment of $1.0 million (December 31, 2018 — $1.0 million) in the shares of an exchange traded fund. This investment isclassified as an equity investment.For the year ended December 31, 2019, the Company held investments with a total value of $3.5 million in the preferred shares of enterprises which meet thecriteria for classification as an equity security under FASB ASC 325, carried at historical cost, net of impairment charges. The carrying value of these equitysecurity investments was $1.0 million at December 31, 2019 (December 31, 2018 — $1.0 million).On January 17, 2019, IMAX China (Hong Kong), Limited, a wholly-owned subsidiary of IMAX China, as an investor entered into a cornerstone investmentagreement with Maoyan Entertainment (“Maoyan”) (as the issuer) and Morgan Stanley Asia Limited (as a sponsor, underwriter and the underwriters’representative). Pursuant to this agreement, IMAX China (Hong Kong), Limited agreed to invest $15.2 million to subscribe for a certain number of shares ofMaoyan at the final offer price pursuant to the global offering of the share capital of Maoyan, and this investment would be subject to a lock-up period of sixmonths following the date of the global offering. On February 4, 2019, Maoyan completed its global offering, upon which, IMAX China (Hong Kong), Limitedbecame a less than 1% shareholder in Maoyan. This investment is classified as an equity security under the FASB ASC 321, with a readily determinable marketvalue through the Hong Kong Stock Exchange. The changes in fair value are recorded in the Change in fair value of equity investment line item in the Company’sconsolidated statement of operations. For the year ended December 31, 2019, the Company has recorded a net unrealized loss of $0.5 million.The total carrying value of investments in new business ventures at December 31, 2019 and 2018 is $2.5 million and $2.5 million, respectively, and is recordedin Other Assets.The investment in shares of an exchange traded fund and the investment in Maoyan are recorded in Investment in equity securities.23. Employee's Pension and Postretirement Benefits (a)Defined Benefit PlanThe Company has an unfunded U.S. defined benefit pension plan, the SERP, covering Richard L. Gelfond, Chief Executive Officer (“CEO”) of the Company.The SERP provides for a lifetime retirement benefit from age 55 determined as 75% of Mr. Gelfond’s best average 60 consecutive months of earnings over hisemployment history. The benefits were 50% vested as at July 2000, the SERP initiation date. The vesting percentage increased on a straight-line basis frominception until age 55. The benefits of Mr. Gelfond are 100% vested. Upon a termination for cause, prior to a change of control, Mr. Gelfond shall forfeit any andall benefits to which he may have been entitled, whether or not vested. 127Under the terms of the SERP, if Mr. Gelfond’s employment terminated other than for cause (as defined in his employment agreement), he is entitled to receiveSERP benefits in the form of a lump sum payment. SERP benefit payments to Mr. Gelfond are subject to a deferral for six months after the termination of hisemployment, at which time Mr. Gelfond will be entitled to receive interest on the deferred amount credited at the applicable federal rate for short-term obligations.Pursuant to an amendment dated November 1, 2019 to the existing employment agreement, the term of Mr. Gelfond’s employment was extended throughDecember 31, 2022, although Mr. Gelfond has not informed the Company that he intends to retire at that time. Under the terms of the amendment to hisemployment agreement, the total amount of benefit payable to Mr. Gelfond under the SERP has been fixed at $20.3 million. The increase in SERP obligationunder the amendment was accounted for as prior service costs arising the during the year and recognized in other comprehensive income. The prior service costsarising from the amendment are amortized over the remaining employment agreement term of 36 months on a straight-line basis. The amortization expenses ofprior service costs are recorded within the retirement benefits non-service expense in the consolidated statements of operations.The following assumptions were used to determine the obligation and cost of the Company’s SERP at the plan measurement dates: As at December 31, 2019 2018 2017 Discount rate 2.00% 3.14% 2.22%Lump sum interest rate: First 25 years 2.12% — — First 20 years — 3.09% 2.39%Thereafter 2.26% 2.84% 2.60%Cost of living adjustment on benefits 1.20% 1.20% 1.20% The amounts accrued for the SERP are determined as follows: Years Ended December 31, 2019 2018 Obligation, beginning of period $17,977 $19,003 Prior service cost 456 — Interest cost 564 422 Actuarial gain (157) (1,448)Obligation, end of period and unfunded status $18,840 $17,977 The following table provides disclosure of the pension benefit obligation recorded in the consolidated balance sheets: As at December 31, 2019 2018 Accrued benefits cost $(18,840) $(17,977)Accumulated other comprehensive gain (988) (1,287)Net amount recognized in the consolidated balance sheets $(19,828) $(19,264) The following table provides disclosure of pension expense for the SERP for the years ended December 31: Years ended December 31, 2019 2018 2017 Interest cost $ 564 $ 422 $ 427 Pension expense $ 564 $ 422 $ 427 The accumulated benefit obligation for the SERP was $18.8 million at December 31, 2019 (2018 — $18.0 million).128The following amounts were included in accumulated other comprehensive income and will be recognized as components of net periodic benefit cost in futureperiods: As at December 31, 2019 2018 2017 Unrealized actuarial (gain) loss $ (1,444) $ (1,287) $ 161 Unamortized prior service cost 456 — — Net periodic benefit costs to be recognized in future periods $ (988) $ (1,287) $ 161 No contributions were made for the SERP during 2019. The Company expects interest costs of $0.6 million to be recognized as a component of net periodicbenefit cost in 2020.The following benefit payments are expected to be made as per the current SERP assumptions and the terms of the SERP in each of the next five years, and inthe aggregate: 2020 $ — 2021 — 2022 — 2023 20,298 2024 — Thereafter — $ 20,298 (b)Defined Contribution Pension PlanThe Company also maintains defined contribution pension plans for its employees, including its executive officers. The Company makes contributions to theseplans on behalf of employees in an amount up to 5% of their base salary subject to certain prescribed maximums. During 2019, the Company contributed andexpensed an aggregate of $1.2 million (2018 — $1.2 million; 2017 — $1.2 million) to its Canadian plan and an aggregate of $0.6 million (2018 —$0.5 million;2017 —$0.7 million) to its defined contribution employee pension plan under Section 401(k) of the U.S. Internal Revenue Code. (c)Postretirement Benefits - ExecutivesThe Company has an unfunded postretirement plan for Messrs. Gelfond and Bradley J. Wechsler, Chairman of the Company’s Board of Directors. The planprovides that the Company will maintain health benefits for Messrs. Gelfond and Wechsler until they become eligible for Medicare and, thereafter, the Companywill provide Medicare supplemental coverage as selected by Messrs. Gelfond and Wechsler.The amounts accrued for the plan are determined as follows: As at December 31, 2019 2018 Obligation, beginning of year $ 639 $ 698 Interest cost 26 24 Benefits paid — (24)Actuarial gain — (59)Obligation, end of year $ 665 $ 639 129The following details the net cost components, all related to continuing operations, and underlying assumptions of postretirement benefits other than pensions: Years Ended December 31, 2019 2018 2017 Interest cost $26 $24 $26 Pension expense $26 $24 $26 The following amounts were included in accumulated other comprehensive income and will be recognized as components of net periodic benefit cost in futureperiods: As at December 31, 2019 2018 2017 Unrealized actuarial (gain) loss $(50) $(50) $9 Weighted average assumptions used to determine the benefit obligation are: As at December 31, 2019 2018 2017 Discount rate 3.13% 4.15% 3.55% Weighted average assumption used to determine the net postretirement benefit expense are: Years Ended December 31, 2019 2018 2017 Discount rate 4.15% 3.55% 4.10% The following benefit payments are expected to be made as per the current plan assumptions in each of the next five years: 2020 $ 8 2021 9 2022 9 2023 19 2024 20 Thereafter 600 Total $ 665 (d)Postretirement Benefits – Canadian EmployeesThe Company has an unfunded postretirement plan for its Canadian employees upon meeting specific eligibility requirements. The Company will provideeligible participants, upon retirement, with health and welfare benefits.The amounts accrued for the plan are determined as follows: As at December 31, 2019 2018 Obligation, beginning of year $ 1,487 $ 1,678 Interest cost 49 53 Benefits paid (108) (104)Actuarial loss (gain) 153 (26)Unrealized foreign exchange (gain) loss 0 (114)Obligation, end of year $ 1,581 $ 1,487 130The following details the net cost components, all related to continuing operations, and underlying assumptions of postretirement benefits other than pensions: Years Ended December 31, 2019 2018 2017 Interest cost $49 $53 $65 Pension expense $49 $53 $65 The following amounts were included in accumulated other comprehensive income and will be recognized as components of net periodic benefit cost in futureperiods: As at December 31, 2019 2018 2017 Unrealized actuarial loss $309 $156 $182 The Company expects interest costs of less than $0.1 million to be recognized as a component of net periodic benefit cost in 2020.Weighted average assumptions used to determine the benefit obligation are: As at December 31, 2019 2018 2017 Discount rate 3.05% 3.35% 3.35% Weighted average assumptions used to determine the net postretirement benefit expense are: Years Ended December 31, 2019 2018 2017 Discount rate 3.80% 3.35% 3.65% The following benefit payments are expected to be made as per the current plan assumptions in each of the next five years: 2020 $100 2021 105 2022 104 2023 104 2024 103 Thereafter 1,065 Total $1,581 (e)Deferred Compensation Benefit PlanThe Company maintained a nonqualified deferred compensation benefit plan (the “Retirement Plan”) covering the former CEO of IMAX Entertainment andSenior Executive Vice President of the Company. Under the terms of his agreement with the Company, the plan will vest in full if he incurs a separation of service(as defined therein). In the fourth quarter of 2018, he incurred a separation from service, and as such, his Retirement Plan benefits became fully vested in 2018 andthe accelerated costs were recognized and reflected in the executive transition costs line on the consolidated statement of operations. As at December 31, 2019, theCompany had a funded benefit obligation recorded of $3.6 million (December 31, 2018 — unfunded benefit obligation of $3.6 million). Subsequent to year end,the retirement benefit obligation was fully funded. During 2018, the Company expensed an aggregate of $2.6 million (2017 — $0.5 million), of which $0.7million was recorded in selling, general and administrative expenses as it relates to service performed in 2018, the remaining $1.9 million is recorded in executivetransition costs. The Company did not recognize any additional expenses in the year ended December 31, 2019. 13124. Non-Controlling Interests (a)IMAX China Non-Controlling InterestThe Company indirectly owns approximately 69.74% of IMAX China, whose shares trade on the Hong Kong Stock Exchange. IMAX China remains aconsolidated subsidiary of the Company. The balance of non-controlling interest in IMAX China as at December 31, 2019 is $89.5 million. The net incomeattributable to non-controlling interest in IMAX China for the year ended December 31, 2019 is $13.3 million. (b)Other Non-Controlling InterestsThe Company’s Original Film Fund was established in 2014 to co-finance a portfolio of 10 original large-format films. The initial investment in the OriginalFilm Fund was committed to by a third party in the amount of $25.0 million, with the possibility of contributing additional funds. The Company has contributed$9.0 million to the Original Film Fund since 2014, and has reached its maximum contribution. The Company sees the Original Film Fund as a vehicle designed togenerate a continuous, steady flow of high-quality documentary content. As at December 31, 2019, the Original Film Fund invested $22.3 million toward thedevelopment of original films. The related production, financing and distribution agreement includes put and call rights relating to change of control of the rights,title and interest in the co-financed pictures.The Company also established its VR Fund among the Company, its subsidiary IMAX China and other strategic investors to help finance the creation ofinteractive VR content experiences for use across all VR platforms, including in the pilot IMAX VR Centers. The VR Fund helped finance the production of oneinteractive VR experience, which debuted exclusively in the pilot IMAX VR Centers in November 2017 before being made available to other VR platforms. As atDecember 31, 2018, the Company invested $4.0 million toward the development of VR content. In December 2018, the Company announced, in connection withits strategic review of its VR pilot initiative, that it had decided to close its remaining VR locations and write-off certain VR content investments. Subsequent toyear end, the Company has also decided dissolve the VR Fund and not actively pursue any additional VR opportunities at this time. For additional details see note26.The following summarizes the movement of the non-controlling interest in temporary equity, in the Company’s subsidiary for the years ended December 31,2019, 2018 and 2017. Balance as at January 1, 2017 $4,980 Net loss (3,627)Balance as at December 31, 2017 $1,353 Issuance of subsidiary shares to non-controlling interests 7,796 Net loss (2,710)Balance as at December 31, 2018 $6,439 Return of capital to non-controlling interests (243)Share issuance costs from the issuance of subsidiary shares to a non-controlling interest 1,350 Net loss (1,638)Balance as at December 31, 2019 $5,908 25. Executive Transition CostsIn 2018, the Company recognized executive transition costs of $3.0 million associated with the separation of the former CEO of IMAX Entertainment andSenior Executive Vice President of the Company. The costs include $1.9 million of accelerated costs related to retirement benefits which became vested in full.Additional expenses of $1.1 million have been recorded for severance, bonus and stock-based compensation which relate to the exit of the executive and otherexecutives. No such charges were incurred in the year ended December 31, 2019.13226. Exit Costs, Restructuring Charges and Associated ImpairmentsThe Company recognized the following charges in its consolidated statements of operations for the year ended December 31: 2019 2018 2017 Restructuring charges $628 $2,405 $9,895 Asset impairments — 6,432 5,553 Costs to exit lease and restore facilities 222 619 726 Other — 86 — $850 $9,542 $16,174 (a)Costs to exit an operating leaseIn December 2018, the Company announced that it would be closing all remaining VR locations. As the premises lease was non-cancellable until the end of theterm and pursuant to FASB ASC 420 “Exit or Disposal Cost Obligations”, the Company recognized a new business segment expense of $0.2 million and $0.6million for the years ended December 31, 2019 and December 31, 2018, respectively.In September 2017, the Company relocated its New York office employees and operations as the existing leased space was not suitable to accommodate allcurrent business needs. As the premises lease is non-cancellable to the end of the term, the Company entered into a sublease arrangement to reduce the expectedlosses over the remaining term of the lease. Pursuant to FASB ASC 420 “Exit or Disposal Cost Obligations”, the Company recognized a corporate segmentexpense of $0.7 million for the year ended December 31, 2017. (b)Restructuring chargesRestructuring charges are comprised of employee severance costs including benefits and stock-based compensation, costs of consolidating facilities andcontract termination costs. Restructuring charges are based upon plans that have been committed to by the Company but may be refined in subsequent periods.These charges are recognized pursuant to FASB ASC 420. A liability for a cost associated with an exit or disposal activity is recognized and measured at its fairvalue in the consolidated statement of operations in the period in which the liability is incurred. When estimating the value of facility restructuring activities,assumptions are applied regarding estimated sub-lease payments to be received, which can differ from actual results.In December 2018, the Company performed a strategic review of its virtual reality pilot initiative and has decided to close its remaining VR locations. Inaddition, as part of the Company’s ongoing efforts to decrease costs, the Company has reduced certain functions and has realigned resources.In June 2017, the Company implemented a cost reduction plan with the goal of increasing profitability, operating leverage and free cash flow. The costreduction plan included the exit from certain non-core businesses or initiatives, as well as a one-time reduction in workforce. In connection with the Company’s restructuring initiatives, the Company incurred $0.6 million (2018 — $2.4 million, 2017 — $9.9 million) in restructuringcharges for the year ended December 31, 2019. A summary of the restructuring costs by reporting groups identified by nature of product sold, or service providedas disclosed in note 21 recognized during the year ended December 31 are as follows: 2019 2018 2017 Corporate $628 $1,529 $5,369 New business — 611 1,699 Other — 215 930 IMAX DMR — 50 662 Theater system maintenance — — 546 IMAX systems — — 120 Joint revenue sharing arrangements — — 21 Film post-production — — 548 $628 $2,405 $9,895 133The following table sets forth a summary of restructuring accrual activities for the year ended December 31: EmployeeSeverance andBenefits Balance as at December 31, 2017 $ 2,221 Restructuring charges 2,405 Cash payments (2,690)Balance as at December 31, 2018 $ 1,936 Restructuring charges 628 Cash payments (2,211)Balance as at December 31, 2019 $ 353 (c)Associated ImpairmentsAs a result of the cost reduction plan discussed above, the Company recognized costs associated with the retirement of certain long-lived assets pursuant to theFASB ASC 410-20, “Asset retirement and environmental obligations” and ASC 360-10, “Property, plant and equipment”. The following impairments for theyears ended December 31, 2019, 2018 and 2017 are a direct result of the exit activities described in (a) above. 2019 2018 2017 Property, plant and equipment $ — $ 3,680 $ 3,696 Other assets — 2,565 1,522 Prepaid expenses — 121 — Intangible assets — 66 — Film assets — — 335 $ — $ 6,432 $ 5,553 In the year ended December 31, 2019, the Company did not recognize any exit costs or associated impairments.13427. Selected Quarterly Financial Information (Unaudited) (in thousands of U.S. dollars, except per share amounts) 2019 Q1 Q2 Q3 Q4 Revenues $80,198 $104,797 $86,390 $124,279 Costs and expenses applicable to revenues 35,058 45,244 39,270 61,920 Gross margin $45,140 $59,553 $47,120 $62,359 Net income $12,487 $13,836 $10,896 $21,352 Net income attributable to common shareholders $8,265 $11,397 $9,033 $18,171 Net income per share attributable to common shareholders: Net income per share - basic & diluted $0.13 $0.19 $0.15 $0.29 2018 Q1 Q2 Q3 Q4 Revenues $84,984 $98,345 $82,108 $108,964 Costs and expenses applicable to revenues 34,292 37,941 39,917 54,322 Gross margin $50,692 $60,404 $42,191 $54,642 Net income $12,067 $10,255 $7,502 $3,771 Net income attributable to common shareholders $8,505 $7,625 $5,020 $1,694 Net income per share attributable to common shareholders: Net income per share - basic & diluted $0.13 $0.12 $0.08 $0.03 28. Prior Period's FiguresIn the current year, the Company reclassified certain amounts from “Other Assets” on the consolidated balance sheet. Variable consideration receivable fromcontracts and Investment in equity securities are presented as separate lines on the consolidated balance sheet as at December 31, 2019 and 2018. 29. Subsequent event Subsequent to December 31, 2019, in response to the public health risks associated with an outbreak of coronavirus in Wuhan, China, Chinese exhibitorstemporarily closed more than 70,000 movie theaters, including all of the approximately 700 IMAX theaters in mainland China. The theaters have been closedsince late January 2020, including over the Lunar New Year holiday, and have not yet reopened as of the date of this report. Chinese movie studios also postponedthe release of multiple films, including those originally scheduled to be released over this holiday, five of which were scheduled to be shown in IMAX theaters.The repercussions of this health crisis in China will have a material adverse impact on the revenues generated by IMAX theatre systems in the first quarter of2020. 135Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNoneItem 9A. Controls and ProceduresEVALUATION OF DISCLOSURE CONTROLS AND PROCEDURESThe Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the SecuritiesExchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods and that such information is accumulatedand communicated to management, including the CEO and Chief Financial Officer (“CFO”), to allow timely discussions regarding required disclosure. There areinherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention oroverriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving theircontrol objectives.The Company’s management, with the participation of its CEO and its CFO, has evaluated the effectiveness of the Company’s “disclosure controls andprocedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) as at December 31, 2019 and has concluded that, as at the end of theperiod covered by this report, the Company’s disclosure controls and procedures were effective. The Company will continue to periodically evaluate its disclosurecontrols and procedures and will make modifications from time to time as deemed necessary to ensure that information is recorded, processed, summarized andreported within the time periods specified in the SEC’s rules and forms.MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTINGManagement is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.Management has used the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) framework in Internal Control-IntegratedFramework (2013) to assess the effectiveness of the Company’s internal control over financial reporting.Management has assessed the effectiveness of the Company’s internal control over financial reporting, as at December 31, 2019, and has concluded that suchinternal control over financial reporting were effective as at that date.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.PricewaterhouseCoopers LLP, an independent registered public accounting firm, audited the effectiveness of the Company’s internal control over financialreporting as of December 31, 2019, as stated in their report, which appears in Item 8 of Part II of this 2019 Form 10-K.CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTINGThere were no changes in the Company’s internal control over financial reporting which occurred during the three months ended December 31, 2019, that havematerially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.Item 9 B. Other InformationNone.136PART IIIItem 10. Directors, Executive Officers and Corporate GovernanceThe information required by Item 10 is incorporated by reference from the information under the following captions in the Company’s Proxy Statement: “ItemNo. 1 - Election of Directors;” “Executive Officers;” “Section 16(a) Beneficial Ownership Reporting Compliance;” “Code of Business Conduct and Ethics;” and“Audit Committee.”Item 11. Executive CompensationThe information required by Item 11 is incorporated by reference from the information under the following captions in the Company’s Proxy Statement:“Compensation Discussion and Analysis;” “Summary Compensation Table;” “Grants of Plan-Based Awards;” “Outstanding Equity Awards at Fiscal Year-End;”“Option Exercise and Stock Vested;” “Pension Benefits;” “Employment Agreements and Potential Payments upon Termination or Change-in-Control;”“Compensation of Directors;” and “Compensation Committee Interlocks and Insider Participation.”Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by Item 12 is incorporated by reference from the information under the following captions in the Company’s Proxy Statement:“Equity Compensation Plans;” “Principal Shareholders of Voting Shares;” and “Security Ownership of Directors and Management.”Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe information required by Item 13 is incorporated by reference from the information under the following caption in the Company’s Proxy Statement:“Certain Relationships and Related Transactions,” “Review, Approval or Ratification of Transactions with Related Persons,” and “Director Independence.”Item 14. Principal Accounting Fees and ServicesThe information required by Item 14 is incorporated by reference from the information under the following captions in the Company’s Proxy Statement: “AuditFees;” “Audit-Related Fees;” “Tax Fees;” “All Other Fees;” and “Audit Committee’s Pre-Approval Policies and Procedures.”137PART IVItem 15. Exhibits and Financial Statement Schedules(a)(1) Financial StatementsThe consolidated financial statements filed as part of this Report are included under Item 8 in Part II.Report of Independent Registered Public Accounting Firm, which covers the financial statements, the financial statement schedule in (a)(2) and the Company’sinternal control over financial reporting, is included under Item 8 in Part II of this 2019 Form 10-K.(a)(2) Financial Statement SchedulesFinancial statement schedule for each year in the three-year period ended December 31, 2019.II. Valuation and Qualifying Accounts.(a)(3) ExhibitsThe items listed as Exhibits 10.1 to 10.39, 10.43, 10.44 and 10.46 relate to management contracts or compensatory plans or arrangements. ExhibitNo. Description Form File No Exhibit FilingDate 3.1 Restated Articles of Incorporation of IMAX Corporation, dated July 30, 2013. 10-Q 001-35066 3.1 10/24/13 3.2 By-Law No. 1 of IMAX Corporation, enacted on June 2, 2014. 8-K 001-35066 3.2 6/3/14 4.1 Shareholders’ Agreement, dated as of January 3, 1994, among WGIM AcquisitionCorporation, the Selling Shareholders as defined therein, Wasserstein Perella Partners,L.P., Wasserstein Perella Offshore Partners, L.P., Bradley J. Wechsler, Richard L.Gelfond and Douglas Trumbull (the “Selling Shareholders’ Agreement”). 10-K 001-35066 4.1 2/21/13 4.2 Amendment, dated as of March 1, 1994, to the Selling Shareholders’ Agreement. 10-K 001-35066 4.2 2/21/13 4.3 Registration Rights Agreement, dated as of February 9, 1999, by and among IMAXCorporation, Wasserstein Perella Partners, L.P., Wasserstein Perella Offshore Partners,L.P., WPPN Inc., the Michael J. Biondi Voting Trust, Bradley J. Wechsler and RichardL. Gelfond. 10-K 001-35066 4.3 2/21/13 *4.4 Description of IMAX Corporation’s Securities Registered Pursuant to Section 12 of theSecurities Exchange Act of 1934. 10.1 Stock Option Plan of IMAX Corporation, dated June 18, 2008. 10-K 001-35066 10.1 2/24/16 10.2 IMAX Corporation Amended and Restated Long Term Incentive Plan, dated June 6,2016. 8-K 001-35066 10.1 6/7/16 10.3 IMAX Corporation Form of Stock Option Award Agreement. 10-Q 001-35066 10.41 7/20/16 *10.4 IMAX Corporation Form of Restricted Stock Unit Award Agreement. *10.5 IMAX Corporation Form of Performance Stock Unit Award Agreement. 10.6 IMAX Corporation Supplemental Executive Retirement Plan, as amended and restatedas of January 1, 2006. 10-K 001-35066 10.2 2/21/13 10.7 Employment Agreement, dated July 1, 1998, between IMAX Corporation and BradleyJ. Wechsler. 10-K 001-35066 10.3 2/21/13 138ExhibitNo. Description Form File No Exhibit FilingDate 10.8 Amended Employment Agreement, dated July 12, 2000, between IMAX Corporationand Bradley J. Wechsler. 10-K 001-35066 10.4 2/21/13 10.9 Amended Employment Agreement, dated March 8, 2006, between IMAX Corporationand Bradley J. Wechsler. 10-K 001-35066 10.5 2/24/12 10.10 Amended Employment Agreement, dated February 15, 2007, between IMAXCorporation and Bradley J. Wechsler. 10-K 001-35066 10.6 2/24/12 10.11 Amended Employment Agreement, dated December 31, 2007, between IMAXCorporation and Bradley J. Wechsler. 10-K 001-35066 10.8 2/20/14 10.12 Services Agreement, dated December 11, 2008, between IMAX Corporation andBradley J. Wechsler. 10-K 001-35066 10.9 2/19/15 10.13 Services Agreement Amendment, dated February 14, 2011, between IMAX Corporationand Bradley J. Wechsler. 10-K 001-35066 10.10 2/24/16 10.14 Services Agreement Amendment, dated April 1, 2013, between IMAX Corporation andBradley J. Wechsler. 10-K 001-35066 10.11 2/20/14 10.15 Employment Agreement, dated July 1, 1998, between IMAX Corporation and RichardL. Gelfond. 10-K 001-35066 10.10 2/21/13 10.16 Amended Employment Agreement, dated July 12, 2000, between IMAX Corporationand Richard L. Gelfond. 10-K 001-35066 10.11 2/21/13 10.17 Amended Employment Agreement, dated March 8, 2006, between IMAX Corporationand Richard L. Gelfond. 10-K 001-35066 10.12 2/24/12 10.18 Amended Employment Agreement, dated February 15, 2007, between IMAXCorporation and Richard L. Gelfond. 10-K 001-35066 10.13 2/24/12 10.19 Amended Employment Agreement, dated December 31, 2007, between IMAXCorporation and Richard L. Gelfond. 10-K 001-35066 10.16 2/20/14 10.20 Amended Employment Agreement, dated December 11, 2008, between IMAXCorporation and Richard L. Gelfond. 10-K 001-35066 10.17 2/19/15 10.21 Amended Employment Agreement, dated December 20, 2010, between IMAXCorporation and Richard L. Gelfond. 10-K 001-35066 10.18 2/24/16 10.22 Amended Employment Agreement, dated December 12, 2011, between IMAXCorporation and Richard L. Gelfond. 10-K 001-35066 10.17 2/24/12 10.23 Employment Agreement, dated January 1, 2014, between IMAX Corporation andRichard L. Gelfond. 10-Q 001-35066 10.12 10/23/14 10.24 First Amending Agreement, dated December 9, 2015, between IMAX Corporation andRichard L. Gelfond. 10-K 001-35066 10.21 2/24/16 10.25 Employment Agreement, dated November 8, 2016, between IMAX Corporation andRichard L. Gelfond. 10-K 001-35066 10.24 2/23/17 *10.26 Amendment to Employment Agreement, dated November 1, 2019, between IMAXCorporation and Richard L. Gelfond. 10.27 Employment Agreement, dated September 1, 2016, between IMAX Corporation andGreg Foster. 10-Q 001-35066 10.43 10/23/16 10.28 First Amending Agreement, dated January 25, 2018, between IMAX Corporation andGreg Foster. 10-K 001-35066 10.26 2/27/18139ExhibitNo. Description Form File No Exhibit FilingDate 10.29 Letter of Agreement, dated December 7, 2018, between IMAX Corporation and GregFoster. 10-Q 001-35066 10.40 4/26/19 10.30 Nonqualified Retirement Plan Agreement, dated June 6, 2017, between IMAXCorporation and Greg Foster. 10-Q 001-35066 10.42 7/26/17 10.31 Amendment No. 1 to Nonqualified Retirement Plan Agreement, dated September 27,2017, between IMAX Corporation and Greg Foster. 10-Q 001-35066 10.43 10/26/17 10.32 Split-Dollar Agreement, dated July 1, 2017, between IMAX Corporation and GregFoster. 10-Q 001-35066 10.44 10/26/17 10.33 Employment Agreement, dated December 18, 2017, between IMAX Corporation andRobert D. Lister. 10-K 001-35066 10.30 2/27/18 10.34 Employment Agreement, dated June 6, 2016 between IMAX Corporation and PatrickMcClymont. 10-Q 001-35066 10.40 7/20/16 10.35 Amendment to Employment Agreement, dated August 2, 2019, between IMAXCorporation and Patrick McClymont. 10-Q 001-35066 10.41 10/31/19 10.36 Second Amendment to Employment Agreement, dated October 21, 2019, betweenIMAX Corporation and Patrick McClymont. 10-Q 001-35066 10.42 10/31/19 *10.37 Third Amendment to Employment Agreement, dated December 5, 2019, betweenIMAX Corporation and Patrick McClymont. *10.38 Employment Agreement, dated December 17, 2019, between IMAX Corporation andPatrick McClymont. 10.39 Statement of Directors’ Compensation, dated June 11, 2013. 10-Q 001-35066 10.26 7/25/13 10.40 Construction Loan Agreement, dated October 6, 2014, between IMAX PVDevelopment, Inc., Wells Fargo Bank, National Association and the financialinstitutions referred to therein. 10-Q 001-35066 10.45 10/23/14 10.41 Securities Purchase Agreement, dated as of May 5, 2008, by and between IMAXCorporation, Douglas Family Trust, James Douglas and Jean Douglas IrrevocableDescendants’ Trust, James E. Douglas, III, and K&M Douglas Trust. 10-K 001-35066 10.43 2/20/14 10.42 Amendment No. 1 to Securities Purchase Agreement, dated December 1, 2008, by andbetween IMAX Corporation, Douglas Family Trust, James Douglas and Jean DouglasIrrevocable Descendants’ Trust, James E. Douglas, III, and K&M Douglas Trust. 10-K 001-35066 10.35 2/19/15 10.43 Employment Agreement, dated March 23, 2018, between IMAX Corporation and DonSavant. 10-Q 001-35066 10.37 5/1/1810.44 Amended Employment Agreement, dated September 28, 2018, between IMAXCorporation and Don Savant. 10-Q 001-35066 10.40 10/25/18 10.45 Fifth Amended and Restated Credit Agreement, dated June 28, 2018, by and betweenIMAX Corporation, the Guarantors referred to therein, the Lenders referred to therein,and Wells Fargo Bank, National Association, as Administrative Agent. 10-Q 001-35066 10.38 7/25/18 10.46 Form of Director Indemnification Agreement. 10-Q 001-35066 10.39 7/25/18 *21 Subsidiaries of IMAX Corporation. *23 Consent of PricewaterhouseCoopers LLP. *24 Power of Attorney of certain directors.140ExhibitNo. Description Form File No Exhibit FilingDate *31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated February 19, 2020, by Richard L. Gelfond. *31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated February 19, 2020, by Patrick McClymont. *32.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated February 19, 2020, by Richard L. Gelfond. *32.2 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated February 19, 2020, by Patrick McClymont. *101.INS XBRL Instance Document – The instance document does not appear in the interactive data file because its XBRL tags are embeddedwithin the Inline XBRL document. *101.SCH XBRL Taxonomy Extension Schema Document*101.CAL XBRL Taxonomy Extension Calculation Linkbase Document*101.DEF XBRL Taxonomy Extension Definition Linkbase Document *101.LAB XBRL Taxonomy Extension Label Linkbase Document*101.PRE XBRL Taxonomy Extension Presentation Linkbase Document *104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) *Filed herewithItem 16. Form 10-K SummaryNot applicable.141SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized. IMAX CORPORATION By/s/ PATRICK MCCLYMONTPatrick McClymontChief Financial Officer & Executive Vice President Date: February 19, 2020 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on February 19, 2020. /s/ RICHARD L. GELFOND/s/ PATRICK MCCLYMONT/s/ JEFFREY VANCERichard L. GelfondChief Executive Officer &Director(Principal Executive Officer)Patrick McClymontChief Financial Officer & Executive Vice President(Principal Financial Officer)Jeffrey VanceSenior Vice President, Finance(Principal Accounting Officer) ***Bradley J. WechslerChairman of the Board & DirectorNeil S. BraunDirectorEric A. DemirianDirector ***Kevin DouglasDirectorDavid W. LeebronDirectorMichael MacMillanDirector ** Dana SettleDirectorDarren D. ThroopDirector By /s/ PATRICK MCCLYMONTPatrick McClymont(as attorney-in-fact)142IMAX CORPORATIONSchedule IIValuation and Qualifying Accounts(In thousands of U.S. dollars) Balance atbeginningof year Additions/(recoveries)charged toexpenses Otheradditions/(deductions)(1) Balance atend of year Allowance for net investment in leases Year ended December 31, 2017 $672 $(517) $— $155 Year ended December 31, 2018 $155 $— $— $155 Year ended December 31, 2019 $155 $— $— $155 Allowance for financed sale receivables Year ended December 31, 2017 $494 $428 $— $922 Year ended December 31, 2018 $922 $(83) $— $839 Year ended December 31, 2019 $839 $76 $— $915 Allowance for doubtful accounts receivable Year ended December 31, 2017 $1,250 $1,967 $(1,604) $1,613 Year ended December 31, 2018 $1,613 $3,030 $(1,469) $3,174 Year ended December 31, 2019 $3,174 $2,354 $(390) $5,138 Inventories valuation allowance Year ended December 31, 2017 $3,342 $500 $44 $3,886 Year ended December 31, 2018 $3,886 $250 $(251) $3,885 Year ended December 31, 2019 $3,885 $446 $(1,115) $3,216 Deferred income tax valuation allowance Year ended December 31, 2017 $197 $— $— $197 Year ended December 31, 2018 $197 $— $— $197 Year ended December 31, 2019 $197 $— $— $197 (1)Deductions represent write-offs of amounts previously charged to the provision. 143 EXHIBIT 4.4 DESCRIPTION OF REGISTRANT’S SECURITIES REGISTERED UNDER SECTION 12 OF THE SECURITIESEXCHANGE ACT OF 1934 The following is a description of IMAX Corporation’s (the “Company,” “we” or “us”) shares of common stock, no parvalue per share (“Common Shares”) registered under Section 12 of the Securities Exchange Act of 1934, as amended. Thisdescription is a summary and does not purport to be complete. It is subject to and qualified in its entirety by reference to theCompany’s Restated Articles of Incorporation (the “Articles”) and the Company’s By-Law No. 1 (the “By-Laws”), each of which isincorporated by reference as an exhibit to the Annual Report on Form 10-K of which this Exhibit is a part. We encourage you toread the Articles, the By-Laws and the applicable provisions of the Canada Business Corporations Act (the “CBCA”), for additionalinformation. DESCRIPTION OF COMMON SHARES Our authorized capital shares include an unlimited number of Common Shares. The outstanding shares of our CommonShares are fully paid and nonassessable. Voting Rights Each holder of our Common Shares is entitled to one vote for each share on all matters submitted to a vote of ourstockholders, including the election of our directors. The rights attached to the Common Shares do not provide for cumulativevoting rights or preemptive rights. Accordingly, the holders of a majority of our outstanding Common Shares entitled to vote in anyelection of directors can elect all of the directors standing for election, if they should so choose. Subject to the Articles and the By-Laws, at all meetings of the Board, every question shall be decided by a majority of the votes cast. Dividend Rights The holders of Common Shares are entitled to receive dividends if, as and when declared by our Board of Directors (the“Board”), subject to the rights of the holders of any other class of our shares entitled to receive dividends in priority to the CommonShares. Certain of the instruments governing our existing indebtedness restrict our rights to pay dividends to the holders of theCommon Shares. Liquidation, Dissolution or Winding Up If we liquidate, dissolve or wind up, the holders of our Common Shares are entitled to share ratably in all assets legallyavailable for distribution to shareholders after payment of any liquidation or distribution preference payable with respect to any otherthen outstanding classes of stock entitled to such preference.  Rights and Preferences Our Common Shares have no preemptive, conversion or subscription rights. There are no redemption or sinking fundprovisions applicable to our Common Shares. Board Classification Under our Articles, members of our Board are elected on an annual basis. Our Board is not classified. Anti-Takeover Provisions of the Articles, By-Laws and the CBCA Provisions of the Articles, By-Laws and the CBCA may delay or discourage transactions involving an actual or potentialchange in control of the Company or change in its management, including transactions in which shareholders might otherwisereceive a premium for their Common Shares, or transactions that its shareholders might otherwise deem to be in their best interests.Among other things, such provisions include the following: •Under Canadian law, the affirmative vote of two-thirds of the votes cast in person or by proxy at a meeting ofshareholders is required for shareholder approval of an amalgamation (other than certain short form amalgamations),for any sale, lease or exchange of all, or substantially all, of our assets, if not in the ordinary course of our business,voluntary liquidation and dissolution and certain other fundamental changes including amendments to the Articles.Other shareholder action is generally decided by a majority of the votes cast at a meeting of shareholders. •Pursuant to the Articles, the Board may from time to time, without shareholder approval, issue one or more series ofspecial shares issuable in series, no par value per share (“Special Shares”) having rights, privileges, restrictions andconditions attaching thereto. The authorization of undesignated Special Shares in our Articles makes it possible for ourBoard to issue Special Shares with rights or preferences that could impede the success of any attempt to change controlof the Company. These and other provisions may have the effect of deterring hostile takeovers or delaying changes incontrol or management of the Company. •The CBCA requires that 25% of the directors of the Board be resident Canadians. Directors must be nominated inaccordance with the procedures set out in Section 4.1 of the By-Laws and are elected by a majority of the votes cast atmeeting of the shareholders. •There is no limitation imposed by the Articles or other charter documents on the right of a non-resident to hold or voteCommon Shares. However, notification and, in certain cases, advance review and approval by the Government ofCanada of the acquisition by a non-Canadian of control of a Canadian business may be required under Canadian law.  Listing The Common Shares are traded on The New York Stock Exchange under the trading symbol “IMAX.”  EXHIBIT 10.4 IMAX CORPORATIONAMENDED AND RESTATED LONG-TERM INCENTIVE PLANFORM OF RESTRICTED SHARE UNIT AWARD AGREEMENTTHIS RESTRICTED SHARE UNIT AGREEMENT (the “Agreement”) is made effective as of _________ (the “Date of Grant”) betweenIMAX Corporation, a Canadian corporation (the “Company”), and _________ (the “Participant”).This Agreement sets forth the general terms and conditions of Restricted Share Units (“RSUs”). By accepting the RSUs, the Participantagrees to the terms and conditions set forth in this Agreement and the IMAX Corporation Amended and Restated Long-Term Incentive Plan(the “IMAX LTIP”) as well as the Employment Agreement between _________ and the Company, dated as of _________ (the “EmploymentAgreement”).Capitalized terms not otherwise defined herein shall have the same meanings as in the IMAX LTIP.1.Grant of the RSUs. Subject to the provisions of this Agreement and the IMAX LTIP, the Company hereby grants to theParticipant an aggregate of _________ RSUs, subject to adjustment as set forth in the IMAX LTIP. Each RSU gives the Participant theunsecured right to receive, subject to the terms and conditions of the IMAX LTIP and this Agreement, one Common Share. The Participantshall not be required to pay any additional consideration for the issuance of the Common Shares upon settlement of the RSUs.2.Vesting Schedule. Subject to the terms and conditions hereof, the Participant shall vest in the RSUs as follows, unlesspreviously vested or cancelled in accordance with the provisions of the IMAX LTIP or this Agreement (each applicable date, a “ScheduledVesting Date”): Scheduled Vesting DateRSUs Vesting on Such DateFirst Vesting DateTBDSecond Vesting DateTBDThird Vesting DateTBDFourth Vesting DateTBD 3.Settlement. Each RSU shall be settled by delivery of one Common Share within thirty (30) days following theapplicable Scheduled Vesting Date or such earlier date on which the RSUs vest pursuant to Sections 4, 5 or 6 (each, a “Settlement Date”);provided, however, that in no event shall settlement occur later than March 15th of the year following the applicable vesting date.4.Termination of Employment Generally. In the event that the Participant’s employment with the Company terminates forany reason, including termination with or without Cause, resignation with or without Good Reason, death, Disability or retirement (each termas defined in the Employment Agreement), the RSUs shall be treated as set forth in the Employment Agreement. 1 5.Termination upon Achievement of Service Factor. If the Participant’s employment with the Company terminates priorto the Scheduled Vesting Date as a result of the Participant’s resignation after the achievement of the Service Factor, the RSUs shall continueto vest in accordance with the Scheduled Vesting Dates. For purposes of this Agreement, “Service Factor” shall mean the Participant’sresignation (i) at or after attaining age 55 and (ii) following the Participant’s continuous service with the Company or any of its Subsidiariesand Affiliates for at least ten (10) years, or such other resignation by the Participant that is deemed by the Committee to be an achievement ofthe Service Factor, provided that the Participant provides the Company a six (6)-month written notice of the Participant’s intent to resign.6.Change of Control. In the event of a Change of Control, the RSUs shall be treated as set forth in the EmploymentAgreement or the IMAX LTIP, as applicable.7.Nontransferability of RSUs. Unless otherwise determined by the Committee pursuant to the terms of the IMAX LTIP,the RSUs may not be transferred, pledged, alienated, assigned or otherwise attorned other than by last will and testament or by the laws ofdescent and distribution or pursuant to a domestic relations order, as the case may be.8.Rights as a Shareholder. The Participant shall have no rights as a shareholder with respect to the RSUs. Uponsettlement, the Participant shall have all rights as a shareholder with respect to the Common Shares delivered to the Participant, if any,including, without limitation, voting rights and the right to receive dividends.9.Dividend Equivalents. If, after the Date of Grant and prior to the applicable Settlement Date, dividends with respect tothe Common Shares are declared or paid by the Company, the Participant shall be entitled to receive dividend equivalents in an amount,without interest, equal to the cumulative dividends declared or paid on a Common Share, if any, during such period multiplied by the numberof RSUs being settled. Dividend equivalents will be subject to the same terms and conditions of this Agreement applicable to the RSUs. Thedividend equivalents will be paid on the applicable Settlement Date for the underlying RSUs in cash or Common Shares, as determined bythe Company in its discretion. If the underlying RSUs are cancelled prior to the applicable Settlement Date for any reason, any accrued andunpaid dividend equivalents shall be cancelled.10.No Entitlements.(a)No Right to Continued Employment. This Agreement does not constitute an employment agreement and nothing in theIMAX LTIP or this Agreement shall modify the terms of the Participant’s employment, including, without limitation, the Participant’s statusas an “at will” employee of the Company, if applicable. None of the IMAX LTIP, the Agreement, the grant of RSUs, nor any action taken oromitted to be taken shall be construed (i) to create or confer on the Participant any right to be retained in the employ of the Company, (ii) tointerfere with or limit in any way the right of the Company to terminate the Participant’s employment at any time and for any reason or (iii) togive the Participant any right to be reemployed by the Company following a termination of employment for any reason.(b)No Right to Future Awards. This award of RSUs and all other equity-based awards under the IMAX LTIP arediscretionary. This award does not confer on the Participant any right or entitlement to receive another award of RSUs or any other equity-based award at any time in the future or in respect of any future period.11.Taxes and Withholding. The Participant must satisfy any federal, state, provincial, local or foreign tax withholdingrequirements applicable with respect to the settlement of the RSUs. The Company may require or permit the Participant to satisfy such taxwithholding obligations through the Company withholding Common Shares that would otherwise be received by such individual uponsettlement of the RSUs. The obligations of the Company to deliver the Common Shares under this Agreement shall be conditioned upon theParticipant’s payment of all applicable taxes and the Company shall, to the extent permitted by law, have the right to deduct any such taxesfrom any payment of any kind otherwise due to the Participant.2 12.Breach of Restrictive Covenants. If the Participant materially breaches any of the restrictive covenants set forth in theEmployment Agreement or any other agreement with the Company or any of its Subsidiaries or Affiliates (including, without limitation, anyrestrictive covenants relating to non-competition, non-solicitation or confidentiality), then all of the RSUs (whether or not vested) shallterminate and be cancelled without consideration being paid therefor.13.Securities Laws. The Company shall not be required to issue Common Shares in settlement of or otherwise pursuant tothe RSUs unless and until (i) the Common Shares have been duly listed upon each stock exchange on which the Common Shares are thenregistered; (ii) a registration statement under the Securities Act of 1933, as amended, with respect to such Common Shares is then effective;and (iii) the issuance of the Common Shares would comply with such legal or regulatory provisions of such countries or jurisdictions outsidethe United States as may be applicable in respect of the RSUs. In connection with the grant or vesting of the RSUs, the Participant will makeor enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply withapplicable securities laws or with this Agreement.14.Miscellaneous Provisions.(a)Notices. Any notice necessary under this Agreement shall be addressed to the Company in care of its Corporate Secretaryat the principal executive office of the Company and to the Participant at the address appearing in the records of the Company for theParticipant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Notwithstanding theforegoing, the Company may deliver notices to the Participant by means of email or other electronic means that are generally used foremployee communications. Any such notice shall be deemed effective upon receipt thereof by the addressee.(b)Headings. The headings of sections and subsections are included solely for convenience of reference and shall not affectthe meaning of the provisions of this Agreement.(c)Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be anoriginal but all of which together will constitute one and the same instrument.(d)Incorporation of IMAX LTIP; Entire Agreement. This Agreement and the RSUs shall be subject to the IMAX LTIP, theterms of which are incorporated herein by reference, and in the event of any conflict or inconsistency between the IMAX LTIP and thisAgreement or the Employment Agreement, the IMAX LTIP shall govern. This Agreement, the Employment Agreement and the IMAX LTIPconstitute the entire agreement between the parties hereto with regard to the subject matter hereof. They supersede all other agreements,representations or understandings (whether oral or written and whether express or implied) that relate to the subject matter hereof. TheParticipant acknowledges receipt of the IMAX LTIP, and represents that the Participant is familiar with its terms and provisions.(e)Amendments. Subject to all applicable laws, rules and regulations, the Committee shall have the power to amend thisAgreement at any time provided that such amendment does not adversely affect, in any material respect, the Participant’s rights under thisAgreement without the Participant’s consent. Notwithstanding the foregoing, the Company shall have broad authority to alter or amend thisAgreement and the terms and conditions applicable to the RSUs without the consent of the Participant to the extent it deems necessary ordesirable in its sole discretion (i) to comply with or take into account changes in, or rescissions or interpretations of, applicable tax laws,securities laws, employment laws, accounting rules or standards and other applicable laws, rules, regulations, guidance, ruling, judicialdecision or legal requirement, (ii) to ensure that the RSUs are not subject to taxes, interest and penalties under Section 409A of the InternalRevenue Code of 1986, as amended (the “Code”), (iii) to take into account unusual or nonrecurring events or market conditions, or (iv) in anyother manner set forth in Section 15 of the IMAX LTIP. Any amendment, modification or termination shall, upon adoption, become and bebinding on all persons affected thereby without requirement for consent or other action with respect thereto by any such person. TheCommittee shall give written notice to the Participant in accordance with Section 13(a) of any such amendment, modification or terminationas promptly as practicable after the adoption thereof. The foregoing shall not restrict the3 ability of the Participant and the Company by mutual consent to alter or amend the terms of the RSUs in any manner that is consistent withthe IMAX LTIP and approved by the Committee.(f)Section 409A.(i)The RSUs are intended to constitute “short-term deferrals” for purposes of Section 409A of the Code and theregulations and guidance promulgated thereunder (“Section 409A”). If any provision of the IMAX LTIP or this Agreement would, inthe reasonable good faith judgment of the Committee, result or likely result in the imposition on the Participant, a beneficiary or anyother person of a penalty tax under Section 409A, the Committee may modify the terms of the IMAX LTIP or this Agreement,without the consent of the Participant, beneficiary or such other person, in the manner that the Committee may reasonably and in goodfaith determine to be necessary or advisable to avoid the imposition of such penalty tax. This Section 13(f) does not create anobligation on the part of the Company to modify the IMAX LTIP or this Agreement and does not guarantee that the RSUs will not besubject to taxes, interest and penalties under Section 409A.(ii)Notwithstanding anything to the contrary in the IMAX LTIP or this Agreement, to the extent that the RSUsconstitute deferred compensation for purposes of Section 409A and Participant is a “Specified Employee” (within the meaning of theCommittee’s established methodology for determining “Specified Employees” for purposes of Section 409A), no payment ordistribution of any amounts with respect to the RSUs that are subject to Section 409A may be made before the first business dayfollowing the six (6) month anniversary from the Participant’s Separation from Service from the Company Group (as defined inSection 409A) or, if earlier, the date of the Participant’s death.(g)Successor. Except as otherwise provided herein, this Agreement shall be binding upon and shall inure to the benefit of anysuccessor or successors of the Company, and to any Permitted Transferee pursuant to Section 7.(h)Choice of Law. Except as to matters of federal law, this Agreement and all actions taken thereunder shall be governed byand construed in accordance with the laws of the State of New York (other than its conflict of law rules). (i) Clawback. Any awards made pursuant to the IMAX LTIP shall be subject to clawback or recoupment as permitted ormandated in the Employment Agreement and by applicable law, rules, regulations or any Company policy as enacted, adopted or modifiedfrom time to time.[Signatures on Following Page]4 IMAX CORPORATION By: Name: Robert Lister Title: Chief Legal Officer and Senior Executive Vice President By: Name: Kenneth Weissman Title: Senior Vice President, Legal Affairs & Corporate Secretary The undersigned hereby acknowledges having read the IMAX LTIP and this Agreement, and hereby agrees to be bound by all the provisionsset forth in the IMAX LTIP and this Agreement. Name (Printed): Signature: Date: 5 EXHIBIT 10.5 IMAX CORPORATIONAMENDED AND RESTATED LONG-TERM INCENTIVE PLANFORM OF PERFORMANCE STOCK UNIT AWARD AGREEMENTTHIS PERFORMANCE STOCK UNIT AGREEMENT (the “Agreement”) is made effective as of _________ (the “Date of Grant”)between IMAX Corporation, a Canadian corporation (the “Company”), and _________ (the “Participant”). This Agreement sets forth the general terms and conditions of performance stock units that vest upon the achievement of performance criteria(“PSUs”). By accepting the PSUs, the Participant agrees to the terms and conditions set forth in this Agreement and the IMAX CorporationAmended and Restated Long-Term Incentive Plan (the “IMAX LTIP”) as well as the Employment Agreement between _________ and theCompany, dated as of _________ (the “Employment Agreement”).Capitalized terms not otherwise defined herein shall have the same meanings as in the IMAX LTIP.1.Grant of the PSUs. Subject to the provisions of this Agreement and the IMAX LTIP, the Company hereby grants tothe Participant a target award comprised of _________ PSUs subject to the performance measure or performance measures detailed inExhibit A (collectively, the “Target Award”), subject to adjustment as set forth in the IMAX LTIP. The number of PSUs to which theParticipant will be entitled as of the Scheduled Vesting Date (defined below) (the “Earned PSUs”) will be based on (i) the Target Award and(ii) the Company’s performance against the performance measures set forth on Exhibit A over a three-year performance period extendingfrom January 1 of the year of grant to December 31 of the second year following the year of grant (the “Performance Period”), as well asother terms and conditions of this Agreement. Each Earned PSU gives the Participant the unsecured right to receive, subject to the terms andconditions of the IMAX LTIP and this Agreement, one Common Share. The Participant shall not be required to pay any additionalconsideration for the issuance of the Common Shares upon settlement of the Earned PSUs.2.Vesting Schedule. Subject to the terms and conditions hereof, the Earned PSUs shall vest in full promptly followingthe public disclosure of the Company’s financial results for the second year following the year of grant (the “Scheduled Vesting Date”),unless previously cancelled or forfeited in accordance with the provisions of the IMAX LTIP or this Agreement.3.Settlement. Each Earned PSU shall be settled by delivery of one Common Share within thirty (30) days following theScheduled Vesting Date (the “Settlement Date”); provided, however, that in no event shall settlement occur later than March 15th of the yearfollowing the Scheduled Vesting Date.4.Termination of Employment Generally. In the event that the Participant’s employment with the Company terminatesfor any reason, including termination with or without Cause, resignation with or without Good Reason, death, Disability or retirement (eachterm as defined in the Employment Agreement), the Target Award shall be treated as set forth in the Employment Agreement. 5.Termination upon Achievement of Service Factor. If the Participant’s employment with the Company terminatesprior to the Scheduled Vesting Date as a result of the Participant’s resignation after the achievement of the1 Service Factor, the PSUs shall continue to vest in accordance with the Scheduled Vesting Dates. For purposes of this Agreement, “ServiceFactor” shall mean the Participant’s resignation (i) at or after attaining age 55 and (ii) following the Participant’s continuous service with theCompany or any of its Subsidiaries and Affiliates for at least ten (10) years, or such other resignation by the Participant that is deemed by theCommittee to be an achievement of the Service Factor, provided that the Participant provides the Company a six (6)-month written notice ofthe Participant’s intent to resign.6.Change of Control. In the event of a Change of Control, the Target Award shall be treated as set forth in theEmployment Agreement or the IMAX LTIP, as applicable.7.Nontransferability of PSUs. Unless otherwise determined by the Committee pursuant to the terms of the IMAX LTIP,the PSUs may not be transferred, pledged, alienated, assigned or otherwise attorned other than by last will and testament or by the laws ofdescent and distribution or pursuant to a domestic relations order, as the case may be.8.Rights as a Shareholder. The Participant shall have no rights as a shareholder with respect to the Common Sharesunderlying the PSUs. Upon settlement, the Participant shall have all rights as a shareholder with respect to the Common Shares delivered tothe Participant, if any, including, without limitation, voting rights and the right to receive dividends. 9.Dividend Equivalents. If, after the Date of Grant and prior to the applicable Settlement Date, dividends with respectto the Common Shares are declared or paid by the Company, the Participant, upon settlement of Earned PSUs in accordance with Section 3,shall be entitled to receive dividend equivalents in an amount, without interest, equal to the cumulative dividends declared or paid on aCommon Share, if any, during such period multiplied by the number of Earned PSUs. Dividend equivalents will be subject to the same termsand conditions of this Agreement applicable to the Earned PSUs. The dividend equivalents will be paid on the applicable Settlement Date forthe underlying Earned PSUs in cash or Common Shares, as determined by the Company in its discretion. If the underlying Earned PSUs arecancelled prior to the applicable Settlement Date for any reason, any accrued and unpaid dividend equivalents shall be cancelled.10.No Entitlements.(a)No Right to Continued Employment. This Agreement does not constitute an employment agreement and nothing inthe IMAX LTIP or this Agreement shall modify the terms of the Participant’s employment, including, without limitation, the Participant’sstatus as an “at will” employee of the Company, if applicable. None of the IMAX LTIP, the Agreement, the grant of the PSUs, nor any actiontaken or omitted to be taken shall be construed (i) to create or confer on the Participant any right to be retained in the employ of theCompany, (ii) to interfere with or limit in any way the right of the Company to terminate the Participant’s employment at any time and for anyreason or (iii) to give the Participant any right to be reemployed by the Company following a termination of employment for any reason. (b)No Right to Future Awards. This award of PSUs and all other equity‑based awards under the IMAX LTIP arediscretionary. This award does not confer on the Participant any right or entitlement to receive another award of PSUs or any other equity-based award at any time in the future or in respect of any future period.11.Taxes and Withholding. The Participant must satisfy any federal, state, provincial, local or foreign tax withholdingrequirements applicable with respect to the settlement of the Earned PSUs. The Company may require or permit the Participant to satisfy suchtax withholding obligations through the Company withholding Common Shares that would otherwise be received by such individual uponsettlement of the Earned PSUs. The obligations of the Company to deliver the Common Shares under this Agreement shall be conditionedupon the Participant’s payment of all applicable taxes and the Company shall, to the extent permitted by law, have the right to deduct anysuch taxes from any payment of any kind otherwise due to the Participant.2 12.Breach of Restrictive Covenants. If the Participant materially breaches any of the restrictive covenants set forth inthe Employment Agreement or any other agreement with the Company or any of its Subsidiaries or Affiliates (including, without limitation,any restrictive covenants relating to non-competition, non-solicitation or confidentiality), then all of the PSUs (whether or not vested) shallterminate and be cancelled without consideration being paid therefor.13.Securities Laws. The Company shall not be required to issue Common Shares in settlement of or otherwise pursuantto the Earned PSUs unless and until (i) the Common Shares have been duly listed upon each stock exchange on which the Common Sharesare then registered; (ii) a registration statement under the Securities Act of 1933, as amended, with respect to such Common Shares is theneffective; and (iii) the issuance of the Common Shares would comply with such legal or regulatory provisions of such countries orjurisdictions outside the United States as may be applicable in respect of the Earned PSUs. In connection with the grant of the PSUs orvesting of the Earned PSUs, the Participant will make or enter into such written representations, warranties and agreements as the Committeemay reasonably request in order to comply with applicable securities laws or with this Agreement.14.Miscellaneous Provisions.(a)Notices. Any notice necessary under this Agreement shall be addressed to the Company in care of its CorporateSecretary at the principal executive office of the Company and to the Participant at the address appearing in the records of the Company forthe Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Notwithstandingthe foregoing, the Company may deliver notices to the Participant by means of email or other electronic means that are generally used foremployee communications. Any such notice shall be deemed effective upon receipt thereof by the addressee.(b)Headings. The headings of sections and subsections are included solely for convenience of reference and shall notaffect the meaning of the provisions of this Agreement.(c)Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be anoriginal but all of which together will constitute one and the same instrument.(d)Incorporation of IMAX LTIP; Entire Agreement. This Agreement, the Target Award and the Earned PSUs shall besubject to the IMAX LTIP, the terms of which are incorporated herein by reference, and in the event of any conflict or inconsistency betweenthe IMAX LTIP and this Agreement or the Employment Agreement, the IMAX LTIP shall govern. This Agreement, the EmploymentAgreement and the IMAX LTIP constitute the entire agreement between the parties hereto with regard to the subject matter hereof. Theysupersede all other agreements, representations or understandings (whether oral or written and whether express or implied) that relate to thesubject matter hereof. The Participant acknowledges receipt of the IMAX LTIP, and represents that the Participant is familiar with its termsand provisions. (e)Amendments. Subject to all applicable laws, rules and regulations, the Committee shall have the power to amendthis Agreement at any time provided that such amendment does not adversely affect, in any material respect, the Participant’s rights underthis Agreement without the Participant’s consent. Notwithstanding the foregoing, the Company shall have broad authority to alter or amendthis Agreement and the terms and conditions applicable to the PSUs without the consent of the Participant to the extent it deems necessary ordesirable in its sole discretion (i) to comply with or take into account changes in, or rescissions or interpretations of, applicable tax laws,securities laws, employment laws, accounting rules or standards and other applicable laws, rules, regulations, guidance, ruling, judicialdecision or legal requirement, (ii) to ensure that the Earned PSUs are not subject to taxes, interest and penalties under Section 409A of theInternal Revenue Code of 1986, as amended (the “Code”), (iii) to take into account unusual or nonrecurring events or market conditions, or(iv) in any other manner set forth in Section 15 of the IMAX LTIP. Any amendment, modification or termination shall, upon adoption,become and be binding on all persons affected thereby without requirement for consent or other action with respect thereto by any suchperson. The Committee shall give written notice to the Participant in accordance with Section 13(a) of any such amendment, modification ortermination as promptly as practicable after the adoption thereof. The foregoing shall not restrict the ability of the Participant and3 the Company by mutual consent to alter or amend the terms of the PSUs in any manner that is consistent with the IMAX LTIP and approvedby the Committee. (f)Section 409A.(i)The PSUs are intended to constitute “short-term deferrals” for purposes of Section 409A of theCode and the regulations and guidance promulgated thereunder (“Section 409A”). If any provision of the IMAX LTIP or thisAgreement would, in the reasonable good faith judgment of the Committee, result or likely result in the imposition on theParticipant, a beneficiary or any other person of a penalty tax under Section 409A, the Committee may modify the terms of theIMAX LTIP or this Agreement, without the consent of the Participant, beneficiary or such other person, in the manner that theCommittee may reasonably and in good faith determine to be necessary or advisable to avoid the imposition of such penaltytax. This Section 13(f) does not create an obligation on the part of the Company to modify the IMAX LTIP or this Agreement anddoes not guarantee that the Earned PSUs will not be subject to taxes, interest and penalties under Section 409A. (ii)Notwithstanding anything to the contrary in the IMAX LTIP or this Agreement, to the extentthat the PSUs constitute deferred compensation for purposes of Section 409A and Participant is a “Specified Employee” (within themeaning of the Committee’s established methodology for determining “Specified Employees” for purposes of Section 409A), nopayment or distribution of any amounts with respect to the Earned PSUs that are subject to Section 409A may be made before thefirst business day following the six (6) month anniversary from the Participant’s Separation from Service from the Company Group(as defined in Section 409A) or, if earlier, the date of the Participant’s death.(g)Successor. Except as otherwise provided herein, this Agreement shall be binding upon and shall inure to the benefitof any successor or successors of the Company, and to any Permitted Transferee pursuant to Section 7.(h)Choice of Law. Except as to matters of federal law, this Agreement and all actions taken thereunder shall begoverned by and construed in accordance with the laws of the State of New York (other than its conflict of law rules).(i)Clawback. Any awards made pursuant to the IMAX LTIP shall be subject to clawback or recoupment as permitted ormandated in the Employment Agreement and by applicable law, rules, regulations or any Company policy as enacted, adopted or modifiedfrom time to time. [Signatures on Following Page]4 IMAX CORPORATION By: Name: Robert Lister Title: Chief Legal Officer and Senior Executive Vice President By: Name: Kenneth Weissman Title: Senior Vice President, Legal Affairs & Corporate Secretary The undersigned hereby acknowledges having read the IMAX LTIP and this Agreement, and hereby agrees to be bound by all the provisionsset forth in the IMAX LTIP and this Agreement. Name (Printed): Signature: Date: 5 Exhibit A: Performance Vesting Criteria[Note: To be included separately]6EXHIBIT 10.26Execution Version AMENDMENT TO EMPLOYMENT AGREEMENT This agreement (this “Amendment”) amends, effective as of January 1, 2020 (the Effective Date”), the employmentagreement between Richard L. Gelfond (the “Executive”) and IMAX Corporation (the “Company”), dated November 8, 2016 (the“Agreement”), in accordance with the provisions of Section 15 of the Agreement. Except as otherwise expressly set forth below inthis Amendment from and after the Effective Date, the Agreement shall continue in full force and effect on the same terms andconditions. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in theAgreement. 1.Term. Section 2 of the Agreement shall be amended to replace references to “December 31, 2019” with references to“December 31, 2022”. 2.Base Salary. Section 3(a) of the Agreement shall be deleted in its entirety and replaced with the following: “During the Term, the Company shall pay to the Executive an annual salary (the “Base Salary”) at the rate of no less than$1,200,000, subject to increases at the discretion of the Board, payable in substantially equal installments in accordancewith the Company’s ordinary payroll practices as established from time to time. 3.Annual Bonus. Section 3(b) of the Agreement shall be deleted in its entirety and replaced with the below: (b) Bonus. The Executive shall be eligible to receive an incentive bonus of up to 200% of his Base Salary for eachcalendar year during the Term (the “Bonus”). The Executive’s target bonus shall be 100% of his Base Salary (“TargetBonus”). For each year of the Term, as well as for 2019, 80% of Executive’s Bonus shall be calculated based onachievement of non-discretionary criteria (the “Formula Bonus”) established by the Compensation Committee of theBoard (the “Compensation Committee”) for the applicable year and 20% shall be determined at the end of the applicableyear in the discretion of the Compensation Committee. The discretionary component of the Bonus will be a judgment-based assessment by the Compensation Committee looking at performance in non-quantifiable areas of performance thatare clearly connected to the business strategy and strategic drivers of Company performance. The Formula Bonus shall becomprised of goals in quantifiable areas that are either financial metrics or drivers of financial performance, and shall beestablished and developed reasonably and in good faith by the Compensation Committee after meaningful consultationwith Executive and communicated to Executive within the first quarter of each calendar year. The Executive’sperformance against each such goal shall be measured on a sliding scale basis using linear interpolation, with performanceranges developed for each such measure; provided, that (i) 0% of the applicable portion of the Formula Bonus will be paidfor performance below threshold; (ii) 50% of the applicable portion of the Formula Bonus will be paid for performance atthreshold; (iii) 100% of the applicable portion1 Execution Versionof the Formula Bonus will be paid for performance at target; and (iv) a maximum of 200% of the applicable portion of theFormula Bonus will be paid for performance at or above maximum. Schedule A of the Amendment contains theperformance criteria that the Compensation Committee has developed for Executive for 2019. The Bonus (if any) shall bepaid on the date on which the Company pays out bonuses to Company management (but not later than March 15th of theyear following the year in respect of which the Bonus is earned), subject to the Executive’s continued employmentthrough such date except otherwise provided herein; provided, that the Bonus, if any is earned, for calendar year 2022shall be subject to the Executive’s continued employment only through December 31, 2022. 4.Prior Grants. Exhibit A of the Agreement is amended to read as attached hereto, effective as of the date hereof. 5.SERP. Section 3(g)(i) shall be deleted in its entirety and replaced with the following: The Executive shall continue to participate in the Company’s Supplemental Executive Retirement Plan (the “SERP”) inaccordance with the terms and conditions set forth therein, as amended from time to time. Notwithstanding anythingherein or in the SERP or otherwise to the contrary, the Company and the Executive agree that the total amount of benefitpayable to Executive under the SERP shall be fixed at $$20,298,168. 6.Annual Long-Term Incentive Compensation. A new Section 3(l) shall be added to the Agreement as follows: (l) As soon as practicable after each of January 1, 2020, January 1, 2021 and January 1, 2022, Executive shall be granteda total of $5,500,000 worth of stock-based awards, as follows: (i) Time-Based RSUs: The Executive shall be granted RSUs having a grant date value of $2,750,000 (the “Time-BasedRSUs”). The number of Time-Based RSUs granted shall be determined by dividing (i) $2,750,000 by (ii) the closingprice of the Company’s common stock on the New York Stock Exchange on the date thereof. The Time-Based RSU’sshall vest in three (3) equal installments on each of the first, second and third anniversaries of the grant date, subject toExecutive’s employment with the Company on each such date, except as otherwise provided in this Agreement. TheTime-Based RSUs shall be granted on the terms and conditions set forth in the LTIP, the grant agreement to be enteredinto between the Company and the Executive and otherwise in accordance with this Section 3(l)(i). (ii) PSUs: The Executive shall be granted RSUs that vest based upon the achievement of performance criteria (the“PSUs”) having a grant date value of $2,750,000. 60% of the PSUs, or $1,650,000 in value, shall be subject to the“EBITDA Performance Condition” and 40% of the PSUs, or $1,100,000 in grant date value, shall be subject to the“Relative TSR Performance Condition” (both as defined in Schedule B). The performance shall be measured as set forthon Schedule B on a sliding scale basis using linear2 Execution Versioninterpolation and based upon a three-year performance period extending from January 1 of the year of grant to December31 of the second year following the year of grant, except as otherwise provided in this Agreement, the LTIP or the grantagreement to be entered into. The number of EBITDA Performance Condition PSUs granted shall be determined bydividing (i) $1,650,000 by (ii) the closing price of the Company’s common stock on the New York Stock Exchange on thedate thereof. For determining the number of Relative TSR Performance Condition PSUs to be granted pursuant to thissection, the Company shall value the PSUs in manner consistent with the Company’s financial statement reporting and,specifically, pursuant to a “Monte Carlo” simulation. 7.Treatment of Equity Awards Upon Termination Without Cause; Resignation for Good Reason. The first paragraphof Section 4(c)(iii) of the Agreement shall be deleted in its entirety and replaced with the following: (iii) The Executive’s outstanding equity awards will be treated as follows: (1) with respect to outstanding UnvestedEquity Awards that are subject to time-based vesting only (including without limitation RSUs and stock options), theportion of each such Unvested Equity Award that shall vest upon the Executive’s Separation from Service under thisSection 4(c) shall be with respect to a number of Common Shares underlying such award equal to the excess of (A) over(B), where (A) is the total number of Common Shares underlying the original award multiplied by a fraction, thenumerator of which is the number of calendar days of the entire vesting period applicable to the award in which theExecutive was employed by the Company and the denominator of which is the total number of days in such period (suchfraction, the “Pro Rata Fraction”), and (B) is the number of Common Shares underlying the portion of the award thathas already vested as of the Executive’s Separation from Service; and (2) with respect to outstanding Unvested EquityAwards that are subject to performance-based vesting criteria (including without limitation the PSUs), the percentage ofeach such Unvested Equity Award that shall vest at the end of the applicable performance period shall equal the Pro RataFraction multiplied by the percentage corresponding to the achievement of the performance conditions enumerated inSchedule B, measured at the dates designated thereon. Any Unvested Equity Awards that do not vest in accordance withthe foregoing shall be forfeited and cancelled and the Executive shall have no further rights with respect thereto. Alloutstanding stock options granted to the Executive prior to Executive’s Separation from Service shall remain exercisableas follows: 8.Severance Upon Termination Without Cause; Resignation for Good Reason. Section 4(c)(iv) of the Agreement shallbe deleted in its entirety and replaced with the following: (iv) The Company shall pay the Executive an amount equal to 200% of Base Salary for each remaining year or partialyear of the Term, if any, but not to exceed two years (the “Severance Amount”) for the period (the “Severance Period”)beginning on the day following the Executive’s Separation from Service and continuing until the later of (x) December 31,2022 and (y) the first anniversary of the Executive’s Separation from Service, payable on the following schedule: (1)50% of the Severance Amount shall be3 Execution Versionpaid in equal installments over the Severance Period, in accordance with the Company’s ordinary payroll practices ineffect from time to time, and (2) the remaining 50% of the Severance Amount will be payable as follows: (A) if theExecutive’s Separation from Service occurs in the 2020 calendar year, one-sixth (1/6th) of the Severance Amount will bepayable on each of March 1, 2021, March 1, 2022 and March 1, 2023; (B) if the Executive’s Separation from Serviceoccurs in the 2021 calendar year, one-fourth (1/4th) of the Severance Amount will be payable on each of March 1, 2022and March 1, 2023; or (3) if the Executive’s Separation from Service occurs in the 2022 calendar year, one-half (1/2) ofthe Severance Amount will be payable on March 1, 2023. 9.Other Terminations. Section 4(d) of the Agreement shall be deleted in its entirety and replaced with the following: (d) Resignation without Good Reason; Death or Disability. If, prior to the expiration of the Term, the Executive incurs aSeparation from Service by reason of the Executive’s resignation other than for Good Reason, or as the result of theExecutive’s death or “disability,” as such term is defined in the Company’s long-term disability policy applicable to theExecutive, the following provisions shall apply: (i) the Executive will receive the Other Accrued Compensation andBenefits, payable in accordance with Company policies and practices and in no event later than thirty (30) days after theExecutive’s Separation from Service, unless otherwise expressly set forth in the applicable plan, program or agreement;(ii) (A) in the case of a Separation from Service resulting from the Executive’s resignation other than for Good Reason,all then outstanding Unvested Equity Awards shall be cancelled immediately, and the Executive will cease to have anyfurther right thereto, and (B) in the case of a Separation from Service resulting from the Executive’s death or disability,100% of the outstanding Unvested Equity Awards shall immediately vest (it being understood that with respect to anyPSUs, vesting shall be at target and the Executive will forfeit any right to additional vesting based on actual performance),and in either case all vested Options shall remain exercisable until the shorter of (x) their original term and (y) two (2)years from Executive’s Separation from Service; (iii) in the case of a Separation from Service resulting from theExecutive’s death or disability, the Target Bonus, paid when bonuses are otherwise paid to Company management; and(iv) other than pursuant to those provisions that survive termination of this Agreement, the Executive shall have no furtherright to receive any other compensation or benefits following his termination of employment pursuant to this Section 4(d). 10.Retirement. The first paragraph of Section 4(e) of the Agreement shall be deleted in its entirety and replaced with thefollowing: (e) Non-Renewal of Agreement; Retirement. If, upon the expiration of the Term, the Company does not offer tocontinue the Executive’s employment on substantially similar terms to those set forth herein, or if the Executive elects toretire from employment with the Company following expiration of the Term, and in either such case upon the expirationof the Term the Executive incurs a Separation from Service, the Executive shall be entitled to a pro-rated bonus, based onthe number of calendar days of such year4 Execution Versionthat have elapsed as of the Separation from Service, under the Company's annual bonus plan for the year in which thetermination occurs, to the extent not already paid, based upon actual performance and paid when annual bonuses areotherwise paid to Company management, and the Executive’s outstanding equity awards will be treated as follows: (1)with respect to outstanding Unvested Equity Awards that are subject to time-based vesting only (including withoutlimitation RSUs and stock options), the percentage of each such Unvested Equity Award that shall vest upon theExecutive’s Separation from Service shall equal 100%; and (2) with respect to outstanding Unvested Equity Awards thatare subject to performance-based vesting criteria (including without limitation the PSUs), the percentage of each suchUnvested Equity Awards that shall vest upon the end of the applicable performance period shall equal the Pro RataFraction multiplied by the percentage corresponding to the achievement of the performance conditions enumerated inSchedule B, measured at the dates designated thereon, and the remainder shall be forfeited and cancelled. All outstandingstock options granted to the Executive prior to Executive’s Separation from Service shall remain exercisable as follows: 11.Consultancy. Section 4(g) of the Agreement shall be deleted in its entirety and replaced with the following: (g) Consultancy. At the end of Executive’s employment (for whatever reason), Executive agrees to consult with theCompany on such issues and items as requested by the Company including, but not limited to, theatre signings,management issues, film strategy issues, technological issues and/or issues with respect to management transition, subjectto the Executive’s other commitments and the parties entering into a written agreement on terms to be negotiated by theCompany and the Executive in good faith; provided, that notwithstanding the foregoing, the parties agree that if Executiveincurs a Separation of Service by reason of the Company’s termination of the Executive’s employment without Cause orthe Executive’s Resignation for Good Reason, then the above-referenced consultancy shall be for a period of one (1) yearfrom the date of such Separation of Service at a total compensation for such year of $1,000,000, payable in accordancewith the Company’s ordinary payroll practices as established from time to time. 12.Change of Control. New Sections 5(e) and 5(f) shall be added to the Agreement as follows: (e) (i) Notwithstanding anything to the contrary in Section 4(c)(iii) or 4(e) of the Agreement, which shall be superseded,to the extent necessary, by this Section 5(e)(i), with respect to outstanding Unvested Equity Awards that are subject totime-based vesting only (including, without limitation, RSUs and stock options), 100% of each such Unvested EquityAward shall vest and be settled upon the Executive’s Separation from Service by reason of the Company’s termination ofthe Executive’s employment without Cause or the Executive’s resignation for Good Reason, in either case within twoyears following a Change of Control; and (ii) with respect to outstanding Unvested Equity Awards that are subject toperformance-based vesting (including, without limitation, PSUs), the number of each such Unvested Equity Award thatmay become vested and5 Execution Versionsettled in accordance with the terms thereof at the end of the applicable performance period shall be, with respect to eachof the EBITDA Performance Condition and the Relative TSR Performance Condition, the greater of performance (x) as ofthe last trading day immediately preceding the date upon which the Change of Control is consummated or (y) to the extentthe EBITDA Performance Condition and/or the Relative TSR Condition remains applicable to the Company following theChange of Control, as determined in good faith by the Board, actual performance as of the end of the applicableperformance period (it being understood that if the EBITDA Performance Condition or the Relative TSR PerformanceCondition does not remain applicable following the Change of Control, then clause (x) shall determine the number ofEBITDA Performance Condition PSUs or Relative TSR Performance Condition PSUs, as applicable, that may vest);provided, that, with respect to clause (ii), in the event Executive’s Separation from Service pursuant to either Sections 4(c)or 4(e) is within two years following a Change of Control that constitutes a “change in control event” under Section 409Aof the Code, the vesting and settlement of a number of PSUs as determined in clause (ii) hereof shall occur upon suchSeparation from Service and the references to “performance period” in this clause (ii) shall instead be a reference to thedate upon which the Separation from Service occurs. Any Unvested Equity Awards that do not vest in accordance withthe foregoing shall be forfeited and cancelled and the Executive shall have no further rights with respect thereto (f) Any Bonus payable with respect to the year in which a Change of Control occurs shall be paid based on achievementof the applicable metrics as of the consummation of such Change of Control, annualized over the full year, and excludingany costs incurred in connection with or otherwise attributable to such Change of Control. 13.Clawback; Stock Ownership Guidelines. Section 9 of the Agreement shall be deleted in its entirety and replaced withthe following: (a) Recovery of Compensation. All payments and benefits provided under this Agreement shall be subject to anycompensation recovery, clawback or similar policy as required under law and which is thereafter adopted by the Companyfrom time to time. Notwithstanding the foregoing, (a) if the Company is required to file a material adverse restatement ofits financials (regardless of whether such restatement is due to actions taken by the Executive or actions the Executiveknew or should have known) and (b) the original reporting of such financials resulted in compensation to the Executivewith respect to his Bonus or the vesting of his equity awards that otherwise would not have been earned, vested or paid,then the Company’s Board may require the Executive to repay (or may withhold from future payments to Executive to themaximum extent permitted by Section 409A, as defined below) the amount by which his Bonus or equity award vesting orpayment would have been reduced had the original financial statements not been reported. (b) Stock Ownership Guidelines. The Executive’s required share ownership under the Company’s share ownershiprequirement shall equal or exceed (i) 400% of Base Salary, following the grant pursuant to this Agreement of RSUs andPSUs in 2020, and (ii) 500%6 Execution Versionof Base Salary, following the grant pursuant to this Agreement of RSUs and PSUs in 2021. 14.The entering into this Amendment shall not prejudice any rights or waive any obligations under the Agreement or anyother agreement between the Executive and the Company. DATED as of November 1, 2019. AGREED AND ACCEPTED: /s/ Richard L. Gelfond Richard L. Gelfond IMAX CORPORATION Per: /s/ Darren Throop Name:Darren Throop Title: Director 7 Schedule A 2019 Formula Bonus Criteria I.FinancialWeightingTargetThresholdMax a. EPS (up 26% from 2018)25%$1.16down 15%Up 20% b. EBITDA (up 20% from 2018)25%$150MMdown 15%Up 20% c. Free Cash Flow (Budget)10%$50MMdown 10%Up 20% II. Backlog a. Signings of 12510%125down 10%Up 20%III.GBO a. GBO (up 7% from 2018)10%$1.lBdown 15%Up 25%  Schedule B EBITDA and TSR Performance Conditions •EBITDA (Applies to 60% of PSUs) Average AnnualEBITDA Growth OverPerformance Period# PSUs Earned as %of Target at end ofPerformance Cycle< 5%0%5%50%10%75%12.5%100%15.0%125%17.5%150%> 20%175% •Relative TSR vs. Russell 2000 (Applies to 40% of PSUs) 3-Year Relative TSR vs.Russell 2000 OverPerformance Period# PSUs Earned as %of Target at end ofPerformance Cycle< 40th Percentile0%40th Percentile37.5%50th Percentile50%60th Percentile75%70th Percentile100%80th Percentile125%> 90th Percentile175%  EXHIBIT 10.37THIRD AMENDMENT TO EMPLOYMENT AGREEMENTThis THIRD AMENDMENT TO EMPLOYMENT AGREEMENT (the “Third Amendment”) dated as ofDecember 5, 2019 is entered into by and between IMAX CORPORATION, a corporation organized under the laws of Canada (the“Company”), and PATRICK MCCLYMONT (the “Executive”).WHEREAS, the Company and the Executive wish to amend that certain Employment Agreement between themdated as of June 6, 2016, as previously amended by an Amendment to Employment Agreement dated as of August 2, 2019 and aSecond Amendment to Employment Agreement dated as of October 21, 2019 (collectively, the “Agreement”), as hereinafter setforth.NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereincontained, the parties hereto agree as follows:1.Term. Section 2 of the Agreement is hereby amended by deleting the first sentence thereof in itsentirety and replacing it with the following: “The Executive’s employment pursuant to this Agreement shall be effective as of August 8, 2016 (the “Effective Date”),and shall terminate upon the earlier to occur of (i) the Executive’s termination of employment pursuant to Section 4hereunder and (ii) January 8, 2020 (the “End Date”).”2.No Further Changes. Except with respect to the change made by Section 1 above, all of the terms andconditions of the Agreement remain in full force and effect.3.Counterparts. This Third Amendment may be executed by either of the parties hereto in counterparts,each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument.IN WITNESS WHEREOF, the Company and the Executive have duly executed this Third Amendment as ofDecember 5, 2019. IMAX CORPORATION PATRICK MCCLYMONT By:/s/ Kenneth Weissman /s/ Patrick McClymontName:Kenneth Weissman Title:Senior Vice President, Legal Affairs and Corporate Secretary By:/s/ Robert D. Lister Name:Robert D. Lister Title:Chief Legal Officer and Senior Executive Vice President  EXHIBIT 10.38EMPLOYMENT AGREEMENTEMPLOYMENT AGREEMENT (the “Agreement”), dated as of December 17, 2019, between IMAXCORPORATION, a corporation organized under the laws of Canada (the “Company”), and PATRICK MCCLYMONT (the“Executive”).WHEREAS, the Executive currently serves as Chief Financial Officer and Executive Vice President of theCompany pursuant to an Employment Agreement with the Company dated June 6, 2016, as amended by a First Amendment toEmployment Agreement dated as of August 2, 2019 by a Second Amendment to Employment Agreement dated as of October 21,2019, and by a Third Amendment to Employment Agreement dated as of December 5, 2019 (collectively, the “Prior Agreement”);andWHEREAS, the Company wishes to enter into this Agreement to continue to engage the Executive to provideservices to the Company, and the Executive wishes to be so engaged, pursuant to the terms and conditions hereinafter set forth.NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereincontained, the parties hereto agree as follows:1.Employment and Duties.(a)General. Subject to the terms and conditions hereof, the Executive shall serve as Chief FinancialOfficer and Executive Vice President, IMAX Corporation, reporting solely to the Company’s Chief Executive Officer (the“CEO”). The Executive shall perform the duties and services for the Company commensurate with the Executive’sposition as directed by the CEO from time to time. The Executive’s principal place of employment shall be the offices ofthe Company in New York, New York, subject to regular domestic and international travel as required by the performanceof his duties and the business of the Company.(b)Exclusive Services. For so long as the Executive is employed by the Company, the Executive shalldevote his full business working time to his duties hereunder, shall faithfully serve the Company, shall conform to andcomply with the lawful and good faith directions and instructions given to him by the CEO, and shall use his reasonablebest efforts to promote and serve the interests of the Company. Further, the Executive shall not, directly or indirectly,render material services to any other person or organization without the consent of the CEO or otherwise engage inactivities that would impede his ability to fully perform his obligations hereunder. The foregoing shall not restrict theExecutive from:(i)serving as a director for (x) the companies or charitable organizations listed on Exhibit Aattached hereto; or (y) with the CEO’s prior written consent (not to be unreasonably withheld), other companiesor charitable organizations;1  (ii)carrying on personal investments subject to the restrictions contained in Section 2 of theEmployee Confidentiality, Non-Competition and Intellectual Property Agreement dated as of June 6, 2016 byand between the Company and the Executive (the “Non- Competition Agreement”) and the Company’s Code ofEthics and Business Conduct; or(iii)engaging in charitable activities.2.Term. The Executive’s employment pursuant to this Agreement shall be effective as of August 8, 2019(the “Effective Date”), and shall terminate upon the earlier of (i) the Executive’s termination of employment pursuant to Section 4hereunder and (ii) August 8, 2022 (the “End Date”). The period commencing as of the Effective Date and ending on the End Dateis hereinafter referred to as the “Term”. The Company shall notify the Executive at least 180 days prior to the End Date of itsintentions with respect to renewing the Agreement; provided that, except for Other Accrued Compensation and Benefits (as definedin Section 4(a)) and rights to indemnification under Section 3(k), the Executive shall not be entitled to any additional compensationor benefits as a result of a non-renewal of this Agreement.3.Compensation and Other Benefits. Subject to the provisions of this Agreement, the Company shall payand provide the following compensation and other benefits to the Executive during the Term as compensation for services renderedhereunder:(a)Base Salary. The Company shall pay to the Executive an annual salary (the “Base Salary”) of$750,000, less applicable withholdings and deductions. The Base Salary will be payable in substantially equalinstallments in accordance with the Company’s regular payroll practices as established from time to time. The increase inthe Executive’s Base Salary for the period from the Effective Date through the date of this Agreement shall be paid to theExecutive in the first regular payroll cycle occurring after the date of this Agreement.(b)Bonus. The Executive shall be eligible to receive a discretionary incentive bonus as determined in thesole discretion of the Company (the “Bonus”). The target amount of the Bonus shall be 80% of the Base Salary (the“Target Bonus”), with the potential to overachieve. The Target Bonus shall apply to Executive’s 2019 Bonus, withoutproration. The 2019 Bonus shall be based on the performance goals and objectives and weightings established at thebeginning of the 2019 fiscal year under the Prior Agreement. Commencing with the 2020 Bonus, the actual amount of theBonus shall be based upon the attainment of individual and Company performance goals and objectives consistent withthe Company’s practices with respect to similarly-situated executives and approved by the Compensation Committee ofthe Board of Directors of the Company in its sole discretion. The Bonus (if any) shall be paid on the date on which theCompany pays out bonuses to senior executives generally; provided, however, that (i) the Bonus will be prorated forpartial years of service; and (ii) except as provided in Section 4, the Executive must remain employed by the Company onthe payout date.2  (c)Equity Awards.(i)Each year during the Term, commencing with the Company’s annual equity grant process in oraround March 2020, the Executive shall receive an equity award (the “Annual Grants”). The Annual Grants foreach of 2020, 2021, and 2022 will have an aggregate grant date fair market value equal to $1,450,000.(ii)The vehicles, mix of nonqualified stock options (“Options”), Performance Stock Units(“PSUs”), and Restricted Stock Units (“RSUs”), vesting schedules, and valuation for the Options, PSUs, and/orRSUs for the Annual Grants will be consistent with the Company’s standard process and grants given to othersenior executives at the time. The Annual Grants shall be granted on or about the time that awards are generallygranted to the Company’s senior executives. Except as otherwise provided herein, the Executive must beemployed by the Company on the date of grant in order to receive an Annual Grant. If the Executive’semployment ends for any reason, all Annual Grants that remain ungranted at that time will be forfeited withoutany compensation to the Executive.(iii)The Options, PSUs, and RSUs to be granted pursuant to this Section 3(c) shall be granted on theterms and conditions set forth in the IMAX Corporation Long-Term Incentive Plan (as amended from time totime, the “LTIP”), the grant agreements to be entered into between the Company and the Executive pursuant tothe LTIP, and this Agreement.(d)Benefit Plans. During the Term, the Executive shall be entitled to participate, on the same basis andat the same level as generally available to other senior executives of the Company, in any group insurance, hospitalization,medical, health and accident, disability, fringe benefit and deferred compensation plans or programs of the Company(including executive supplemental health benefits) now existing or hereafter established, as in effect from time to time. Inaddition, the Executive shall be entitled to participate in the Company’s lifestyle allowance program, pursuant to whichthe Executive shall be entitled to reimbursement of up to $2,500 annually for qualifying expenses.(e)Automobile. The Company shall provide the Executive with an automobile allowance of $1,100 permonth (the “Automobile Payment”). In addition, the Company shall reimburse Executive for the costs of gasoline,insurance, and reasonable operating expenses for that automobile, in accordance with Company policies in effect forsenior executives from time to time, up to a maximum of $11,800 per annum.(f)Vacation. The Executive shall be entitled to vacation time of twenty (20) days per year, subject toproration based on partial years of service.(g)Expenses. The Company shall reimburse the Executive for reasonable travel and other business-related expenses incurred by him in the fulfillment of his duties hereunder upon presentation of written documentationthereof, in accordance with the3  business expense reimbursement policies and procedures of the Company as in effect from time to time; provided,however, that the level of travel and hotel accommodations shall be no less favorable than those arrangements madeavailable to other senior executives of the Company. Payments with respect to reimbursements of expenses shall be madeconsistent with the Company’s reimbursement policies and procedures and in no event later than the last day of thecalendar year following the calendar year in which the relevant expense is incurred.(h)Life Insurance. The Company shall pay up to $10,000 per year toward a premium for a term lifeinsurance policy for the benefit of a beneficiary (or beneficiaries) designated by the Executive. This shall be a taxablebenefit to the Executive.(i)Charitable Contributions or Sponsorships. The Company shall pay up to $10,000 per year forcharitable contributions or sponsorships designated by the Executive. The recipients of such contributions or sponsorshipsshall be subject to the approval of the Company’s CEO. This shall not be a taxable benefit to the Executive.(j)Other Benefits. The Company shall reimburse the Executive for up to $15,000 per year for legal,financial, estate, and tax planning services. This shall be a taxable benefit to the Executive. (k)Indemnification. To the fullest extent permitted by law and the Company’s governing documents,the Company will indemnify and save the Executive harmless from and against all costs, charges and expenses, includingany amount paid to settle an action or satisfy a judgement, reasonably incurred by the Executive in respect of any civil,criminal, administrative, investigative or other proceeding in which the Executive is involved by reason of being or havingbeen a director or officer of the Company (or by reason of the fact that he is or was serving at the request of the Companyor any of its subsidiaries or affiliates as a director or officer, or an individual acting in a similar capacity, of another entity),whether before or during the Term, if: (i) the Executive acted honestly and in good faith with a view to the best interestsof the Company (or, as the case may be, to the best interests of the other entity for which the Executive acted as directoror officer or in a similar capacity at the Company’s request); and (ii) in the case of a criminal or administrative action orproceeding that is enforced by a monetary penalty, the Executive had reasonable grounds for believing that his conductwas lawful. The Company will advance moneys to the Executive for the costs, charges and expenses of a proceedingreferred to in the preceding sentence; provided, however, that the Executive will repay the moneys if he does not fulfill theconditions referred to in the preceding sentence. The Executive shall be entitled to coverage under the Company’sdirectors’ and officers’ liability insurance policies in effect from time to time on the same terms and conditions (including,without limitation, with respect to scope, exclusions, amounts and deductibles) as are available to other current seniorofficers of the Company. Nothing in this Agreement shall require the Company to purchase or maintain any suchinsurance policy. 4  4.Termination of Employment. Subject to this Section 4, the Company shall have the right to terminatethe Executive’s employment at any time, with or without Cause (as defined in Section 5), and the Executive shall have the right toterminate his employment at any time and for any reason.(a)Termination Due to Death or Disability. The Executive’s employment under this Agreement willterminate upon the Executive’s death or the Executive’s Disability (as defined in Section 5). In the event the Executive’semployment terminates as a result of the Executive’s death or Disability, the Company shall pay to the Executive (or hisestate, as applicable) (i) the Base Salary and Automobile Payment through and including the date of termination, (ii) anamount equal to the Executive’s accrued and unused vacation pay as of the date of termination, (iii) any other amounts orbenefits required to be paid or provided by law or under any plan, program, policy or practice of the Company (includingunreimbursed business expenses properly incurred through the date of termination) ((i) through (iii) collectively the“Other Accrued Compensation and Benefits”), (iv) any Bonus earned, but unpaid, for the year prior to the year oftermination, and (v) a prorated Target Bonus for the year in which the termination occurs. The Other AccruedCompensation and Benefits will be payable within thirty (30) days of the Executive’s termination of employment byreason of death or Disability (or as otherwise expressly set forth in the applicable plan, program or agreement). Items (iv)and (v) will be payable on the date on which the Company pays out bonuses to senior executives generally. Furthermore,upon a termination of employment as a result of the Executive’s death or Disability, a portion of the Executive’s Options,PSUs, and RSUs that have already been granted pursuant to this Agreement shall vest such that, when combined withpreviously vested Options, PSUs, and RSUs granted under this Agreement, an aggregate of 50% of all of the Options,PSUs, and RSUs that have been granted pursuant to this Agreement shall have vested. Any vested Options shall continueto be exercisable for a period of 180 days following the date of the Executive’s death or Disability (but in no event laterthan the expiration of the term of such Options). All Options not exercised within such 180-day period shall be cancelledand shall revert back to the Company for no consideration and the Executive or his estate, as applicable, shall have nofurther right or interest therein. Except for rights to indemnification under Section 3(k) or as provided in this Section 4(a),the Executive shall have no further right to receive any other compensation or benefits after a termination of employmentdue to the Executive’s death or Disability.(b)Termination for Cause; Resignation without Good Reason. The Executive’s employment may beterminated by the Company immediately at any time for Cause (as defined in Section 5). If the Executive’s employment isterminated by the Company for Cause or if the Executive resigns from his employment other than for Good Reason (asdefined in Section 5), (A) the Executive shall be entitled to payment of his Other Accrued Compensation and Benefits,payable within thirty (30) days after the Executive’s termination of employment (or as otherwise expressly set forth in theapplicable plan, program or agreement) and (B) all outstanding equity will be treated in accordance with the terms of theLTIP and/or the applicable award letters. Except for rights to indemnification under Section 3(k) and the rights set forth inthis Section 4(b),5  the Executive shall have no further right to receive any other compensation or benefits after his termination for Cause orresignation of employment other than for Good Reason. The Executive shall provide thirty (30) days’ written notice to theCompany prior to resigning his employment without Good Reason.(c)Termination Without Cause; Resignation for Good Reason.(i)If the Executive’s employment with the Company is terminated by the Company without Cause,or as a result of his resignation for Good Reason (as defined in Section 5), then the Executive shall receive theOther Accrued Compensation and Benefits, any Bonus earned, but unpaid, for the year prior to the year oftermination and, subject to Section 4(d):(A)the Company shall continue to pay the Executive the Base Salary in accordance withthe Company’s ordinary payroll practices in effect from time to time for a period equal to fourteen(14) months (such 14-month period, the “Severance Period”), with payments commencing on the60th day following the Executive’s termination of employment;(B)the Company shall provide the Executive with a cash amount equal to a proratedBonus, in an amount based on the Executive’s performance, in respect of the number of days, if any,worked by the Executive in the year of termination without Cause, or resignation for Good Reason,for which a bonus has not already been paid. The Company shall also provide the Executive with aTarget Bonus for the Severance Period. Both amounts described in this Section 4(c)(i)(B) will bepayable on the date on which the Company pays out bonuses to senior executives generally;(C)the Company shall continue to provide the Executive with the compensation andbenefits set forth in Sections 3(d), (e), (f), (g), (h), (i), and (j) for the duration of the SeverancePeriod. In the event that continued participation by the Executive and his eligible dependents in theCompany’s group medical plans during the Severance Period is not permitted, the Company willprovide the Executive with a cash payment equal to the value of the benefit continuation, payable inthree semi-annual installments beginning sixty (60) days following the Executive’s termination ofemployment. The Executive shall continue to be obligated to pay his share of premiums, deductiblesand co-payments which may be deducted from the payment made pursuant to this Section 4(c)(i)(C)in the same manner as if the Executive was actively employed. In the event that the Executive obtainssubsequent employment and is eligible to participate in the group medical plans of his new employer,the Executive agrees to notify the Company promptly, and any coverage provided under theCompany’s group medical plans shall terminate when coverage under the new employer’s medicalplans become effective; and6  (D)all outstanding equity will be treated in accordance with the terms of the LTIP or theapplicable award letters; provided, however, that (a) granted Options, PSUs and RSUs shall continueto vest on schedule during the Severance Period (in the case of PSUs, subject to the achievement ofthe applicable performance conditions), and (b) all vested Options shall remain exercisable until thefirst to occur of (i) the passage of six (6) months beyond the end of the Severance Period, and (ii) theexpiration of the remaining term of the vested Options.(ii)The Executive agrees that the provisions of Section 4(c) are fair and reasonable and that if hisemployment is terminated without Cause, or if the Executive resigns for Good Reason, except for rights toindemnification under Section 3(k) or as otherwise provided in this Agreement, he shall have no further right toreceive any other compensation or benefits.(d)Change in Control.(i)Notwithstanding anything to the contrary in Section 4(c)(i)(D) above, if the Executive isterminated without Cause or resigns with Good Reason within twenty-four (24) months following a Change inControl, then Executive’s outstanding equity will be treated in accordance with the terms of the LTIP or theapplicable award letters.(ii)If, within twenty-four (24) months following a Change in Control, the Company elects not torenew this Agreement and the Executive has not been earlier terminated for Cause or resigned without GoodReason, and Executive’s employment with the Company actually terminates on the End Date, then:(A)All of the Executive’s granted and outstanding Options and RSUs shall be subject toacceleration on the End Date.(B)With respect to Executive’s granted and outstanding PSUs, any requirement forcontinued service through the end of the applicable performance period shall be waived, and thenumber of Executive’s PSUs that may become vested and settled in accordance with the terms thereofat the end of the applicable performance period shall be measured by the greater of (x) theCompany’s performance on the last trading day immediately preceding the date upon which theChange in Control is consummated, or (y) to the extent that the performance conditions remainapplicable to the Company following the Change in Control, as determined in good faith by theBoard, then the actual performance of the Company against those performance conditions as of theend of the applicable performance period will determine the number of PSUs that vest. To the extentthat the performance conditions no longer apply to the Company following a Change of Control, thenclause (x) shall determine the number of PSUs that may vest. Any unvested PSUs that do not vest inaccordance with the foregoing shall be forfeited and canceled and the Executive shall have no furtherrights with respect thereto.7  (e)Execution and Delivery of Release; Restrictive Covenants. The Company shall not be required tomake the payments and provide the benefits under Section 4(c) (other than the Other Accrued Compensation and Benefitsand any Bonus earned, but unpaid, for the year prior to the year of termination) unless (i) the Executive executes anddelivers to the Company, within sixty (60) days following the Executive’s termination of employment, a mutual generalwaiver and release of claims substantially in the form attached hereto as Exhibit B and the release has become effectiveand irrevocable in its entirety, and (ii) the Executive remains in material compliance with the Non-CompetitionAgreement. The Executive’s failure or refusal to sign the release (or the revocation of such release in accordance withapplicable laws) or the Executive’s failure to materially comply with the Non-Competition Agreement shall result in theforfeiture of the payments and benefits payable under Section 4(c).(f)No Duty to Mitigate. The Executive shall have no obligation or duty to mitigate damages by seekingother employment or otherwise.(g)Notice of Termination. Any termination of employment by the Company or the Executive shall becommunicated by a written “Notice of Termination” to the other party hereto given in accordance with Section 22 of thisAgreement, except that the Company may waive the requirement for such Notice of Termination by the Executive.Subject to any applicable notice and cure rights, the date of the Executive’s termination of employment shall be the datespecified in the Notice of Termination.(h)Resignation from Directorships and Officerships. The termination of the Executive’s employment forany reason shall constitute the Executive’s resignation from(i)any director, officer or employee position the Executive has with the Company and itssubsidiaries and affiliates, and (ii) all fiduciary positions (including as a trustee) the Executive may hold withrespect to any employee benefit plans or trusts established by the Company and its subsidiaries andaffiliates. The Executive agrees that this Agreement shall serve as written notice of his resignation in thiscircumstance.5.Definitions.(a)Cause. For purposes of this Agreement, “Cause” shall mean the termination of the Executive’semployment because of:(i)the cessation of the Executive’s ability to work legally in the United States or Canada other thanfor reasons not within the Executive’s reasonable control;(ii)any act or omission that constitutes a material breach by the Executive of any of his materialobligations under this Agreement;8  (iii)the continued failure or refusal of the Executive to perform the duties reasonably required ofhim in his role (other than on account of illness or incapacity);(iv)the Executive's conviction of, or plea of nolo contendere to, (A) any felony or (B) any crimeinvolving dishonesty or moral turpitude or which has a material adverse effect on the Company or otherwisematerially impairs or impedes its operations;(v)the Executive's engaging in any willful misconduct, gross negligence, violence or threat ofviolence that is materially injurious to the Company and its subsidiaries and affiliates taken as a whole; or(vi)the Executive's material breach of the Non-Competition Agreement or any material writtenpolicy of the Company or any of its subsidiaries or affiliates; provided, however, that no event or conditiondescribed in clauses (i), (ii), (iii), (v) or (vi) shall constitute Cause unless (A) the Company first gives theExecutive written notice of its intention to terminate his employment for Cause and the grounds for suchtermination, (B) such grounds for termination (if susceptible to correction) are not corrected by the Executivewithin thirty (30) days of his receipt of such notice (or, in the event that such grounds cannot be correctedwithin such thirty (30)-day period, the Executive has not taken all reasonable steps within such thirty (30)-dayperiod to correct such grounds as promptly as practicable thereafter) and (C) the Company actually terminatesthe Executive’s employment with the Company within thirty (30) days following the expiration of the thirty(30) day cure period.(b)Disability. For purposes of this Agreement, “Disability” means a physical or mental disability orinfirmity of the Executive that prevents the normal performance of substantially all of his duties under this Agreement asan Executive of the Company, which disability or infirmity shall exist for any continuous period of 180 days.(c)Change in Control. For purposes of this Agreement, “Change in Control” shall have the meaning setforth in the LTIP.(d)Good Reason. For purposes of this agreement, “Good Reason” shall mean the Executive’sresignation as a result of (i) a reduction in the Executive’s Base Pay or Annual Grant amount ; (ii) a material reduction inthe Executive’s responsibilities, positions, titles or reporting responsibilities from those set forth in this Agreement; (iii)the Executive ceasing to serve as Chief Financial Officer of a publicly-traded company or ceasing to report solely to theCEO; (iv) the Company requiring the Executive to be based at any office or location more than fifty (50) miles from NewYork City; or (v) any act of omission that constitutes a material breach by the Company of any of its material obligationsunder this Agreement; provided, however, that no such event shall constitute Good Reason unless (A) the Executive firstgives the Company written notice of his intention to resign his employment for Good Reason and the grounds for suchresignation, (B) such grounds for resignation (if susceptible to correction) are not9  corrected by the Company within thirty (30) days of its receipt of such notice and (C) the Executive actually resigns hisemployment with the Company within thirty (30) days following the expiration of the thirty (30) day cure period.6.Nondisparagement. The Company and the Executive agree that at no time during the Executive'semployment by the Company or thereafter shall the Company or Executive make, or cause or assist any other person to make, anystatement or other communication to any third party that impugns or attacks, or is otherwise critical of, the reputation, business, orcharacter of (i) the Company, its subsidiaries and affiliates, and their respective directors, officers or employees (in the case of theExecutive); or (ii) the Executive (in the case of the Company). Nothing in this Section 6 shall bar the Company or the Executive, asthe case may be, from providing truthful testimony in any legal proceeding or in communicating with any governmental agency orrepresentative thereof or from making any truthful disclosure required under law or from making any statement in arbitration orcourt proceedings involving any dispute between the Company and its subsidiaries and affiliates, on the one hand, and Executive, onthe other hand.7.Recovery of Compensation. All payments and benefits provided under this Agreement shall be subjectto any compensation recovery or clawback as required under law.8.Section 409A of the Code.(a)The payments and benefits provided under this Agreement are intended to comply with, or be exemptfrom, Section 409A of the Internal Revenue Code (“Section 409A”) and shall be interpreted or construed consistent withthat intent. The Company shall not accelerate any payment or the provision of any benefits under this Agreement or makeor provide any such payment or benefits if such payment or provision of such benefits would, as a result, be subject to taxunder Section 409A. If, in the good faith judgment of the Company or the Executive, any provision of this Agreementcould cause the Executive to be subject to adverse or unintended tax consequences under Section 409A, such provisionshall be modified by the Company and the Executive to maintain, to the maximum extent practicable, the original intent ofthe applicable provision without contravening the requirements of Section 409A. This Section 8(a) does not guaranteethat the amounts or benefits owed under this Agreement will not be subject to tax, interest and penalties under Section409A.(b)Anything in this Agreement to the contrary notwithstanding, each payment of compensation made tothe Executive shall be treated as a separate and distinct installment payment from all other such payments for purposes ofSection 409A. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kindbenefits, except as permitted by Section 409A: (i) the right to reimbursement or in-kind benefits shall not be subject toliquidation or exchange for another benefit; (ii) the amount of expenses eligible for reimbursement, or in-kind benefits,provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to beprovided, in any other taxable year; and (iii) such payments shall be made on or before the last day of the Executive’staxable year following the taxable year in which the expense occurred, or such earlier date as required hereunder.10  (c)Any payment to be made under this Agreement upon a termination of employment shall only be madeupon a “separation from service” under Section 409A. Notwithstanding any other provision of this Agreement, to theextent that the right to any payment (including the provision of benefits) to be made hereunder upon the Executive’sseparation from service provides for the “deferral of compensation” within the meaning of Section 409A(d)(1), if theExecutive is a “Specified Executive” within the meaning of Section 409A(a)(2)(B)(i) on the date of the Executive’sseparation from service, then no such payment shall be made or commence during the period beginning on the date of theExecutive’s separation from service and ending on the date that is six (6) months following the Executive’s separationfrom service or, if earlier, on the date of the Executive’s death. The amount of any payment that would otherwise be paidto the Executive during this period shall instead be paid to the Executive on the fifteenth (15th) day of the first calendarmonth following the end of the six (6)-month period.9.Source of Payments. All payments provided under this Agreement, other than payments made pursuantto a plan which provides otherwise, shall be paid in cash from the general funds of the Company, and no special or separate fundshall be established, and no other segregation of assets shall be made, to assure payment. The Employee shall have no right, title orinterest whatsoever in or to any investments which the Company may make to aid the Company in meeting its obligationshereunder. To the extent that any person acquires a right to receive payments from the Company hereunder, such right shall be nogreater than the right of an unsecured creditor of the Company.10.Representation and Warranty. The Executive represents and warrants that he is not subject to anynon-competition covenant or any other agreement with any party that would in any manner restrict or limit his ability to render theservices required of him hereunder.11.Assignment. This Agreement may be assigned by the Company in connection with a sale of all orsubstantially all of the Company’s assets. The Executive may not assign or delegate his duties under this Agreement.12.Binding Agreement. This Agreement shall be binding upon and inure to the benefit of the partieshereto and their respective heirs, successors and permitted assigns.13.Withholding. Any payments made or benefits provided to the Executive under this Agreement shallbe reduced by any applicable withholding taxes or other amounts required or permitted to be withheld by law or contract.14.Amendment; Waiver. This Agreement may not be modified, amended or waived in any manner,except by an instrument in writing signed by both parties hereto. The waiver by either party of compliance with any provision of thisAgreement by the other party (including the failure to insist upon strict compliance with any term, covenant or condition) shall notoperate or be construed as a waiver of (i) any other provision of this Agreement, or (ii) any subsequent breach by such party of aprovision of this Agreement.11  15.Governing Law. All matters affecting this Agreement, including the validity thereof, are to be subjectto, and interpreted and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to beperformed in that State.16.Arbitration. Any dispute or controversy arising under or in connection with this Agreement orotherwise in connection with the Executive's employment by the Company that cannot be mutually resolved by the parties to thisAgreement and their respective advisors and representatives shall be settled exclusively by arbitration in New York County, NewYork in accordance with the rules of the American Arbitration Association before one arbitrator of exemplary qualifications andstature, who shall be selected jointly by an individual to be designated by the Company and an individual to be selected by theExecutive, or if such two individuals cannot agree on the selection of the arbitrator, who shall be selected by the AmericanArbitration Association. The prevailing party shall be entitled to recover fees and costs.17.Survival of Certain Provisions. The rights and obligations set forth in this Agreement that, by theirterms, extend beyond the Term shall survive the Term.18.Entire Agreement. This Agreement, together with the equity award agreements referenced in Section3(c) of this Agreement and the Non-Competition Agreement, contain the entire agreement and understanding of the parties heretowith respect to the matters covered herein, and supersede all prior or contemporaneous negotiations, commitments, agreements andwritings with respect to the subject matter hereof, including the Prior Agreement. All such other negotiations, commitments,agreements and writings shall have no further force or effect, and the parties to any such other negotiation, commitment, agreementor writing shall have no further rights or obligations thereunder. Notwithstanding the foregoing, no provision in this Agreementshall be construed to adversely affect (i) any of Executive’s rights to compensation, expense reimbursement or benefits (includingequity compensation) accrued under the terms of the Prior Agreement (and applicable equity award agreements) before the date ofthis Agreement, which shall remain payable in accordance with the terms of the Prior Agreement (and applicable equity awardagreements) or (ii) any of Executive’s rights to indemnification or coverage under applicable directors’ and officers’ insurancepolicies with respect to Executive’s service under the Prior Agreement, all of which are expressly agreed to survive the execution ofthis Agreement.19.Severability. In the event any provision or part of this Agreement is found to be invalid orunenforceable, only that particular provision or part so found, and not the entire Agreement, will be inoperative.20.Counterparts. This Agreement may be executed by either of the parties hereto in counterparts, each ofwhich shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument.21.Headings. The headings of sections herein are included solely for convenience of reference and shallnot control the meaning or interpretation of any of the provisions of this Agreement.12  22.Notices. All notices or communications hereunder shall be in writing, addressed as follows:if to the Company:IMAX Corporation 902 Broadway20th FloorNew York, NY 10010 Attention: Chief Legal Officerif to the Executive:Patrick McClymont[Address On File with the Company]All such notices shall be conclusively deemed to be received and shall be effective (i) if sent by hand delivery orovernight courier, upon receipt or (ii) if sent by electronic mail, upon receipt by the sender of confirmation of such transmission;provided, however, that any electronic mail will be deemed received and effective only if followed, within 48 hours, by a hard copysent by certified United States mail.[SIGNATURE PAGE FOLLOWS] 13  IN WITNESS WHEREOF, the Company and the Executive have duly executed this Agreement as of December17, 2019. IMAX CORPORATION By: /s/ Robert D. ListerName: Robert D. ListerTitle: Chief Legal Officer and Senior Executive Vice President By: /s/ Kenneth WeissmanName: Kenneth WeissmanTitle: Senior Vice President, Legal Affairs and Corporate Secretary PATRICK MCCLYMONT /s/ Patrick McClymont IMAX CORPORATIONExhibit 21 SUBSIDIARIES OF IMAX CORPORATION Company NamePlace ofIncorporationPercentageHeld - Indirect3183 Films Ltd.Canada10012582 Productions Inc.Delaware1001329507 Ontario Inc.Ontario1002328764 Ontario Ltd.Ontario1004507592 Canada Ltd.Canada1006822967 Canada Ltd.Canada1007096267 Canada Ltd.Canada1007103077 Canada Ltd.Canada1007109857 Canada Ltd.Canada1007214316 Canada Ltd.Canada1007550391 Canada Ltd.Canada1007550405 Canada Ltd.Canada1007742266 Canada Ltd.Canada1007742274 Canada Ltd.Canada1009733248 Canada Ltd.Canada100Animal Orphans 3D Ltd.Ontario100Arizona Big Frame Theatres, L.L.C.Arizona100Baseball Tour, LLCDelaware15.625ILW Productions Inc.Delaware100IMAX II U.S.A. Inc.Delaware100IMAX 3D TV Ventures, LLCDelaware100IMAX (Barbados) Holding, Inc.Barbados100IMAX Chicago Theatre LLCDelaware100IMAX China Holding, Inc.Cayman Islands69.74IMAX China (Hong Kong), LimitedHong Kong69.74IMAX Documentary Films Capital, LLCDelaware40.46IMAX Fei Er Mu (Shanghai) Investment Management Co., Ltd.People’s Republic of China34.87IMAX Fei Er Mu (Shanghai) Investment Partnership (LimitedPartnership).People’s Republic of China38.35IMAX Fei Er Mu YiKai (Shanghai) Equity Investment ManagementPartnership Enterprise (Limited Partnership)People’s Republic of China34.87IMAX Film Holding Co.Delaware100IMAX (Hong Kong) Holding, LimitedHong Kong100IMAX Indianapolis LLCIndiana100IMAX International Sales CorporationCanada100IMAX Investment Management, LLCDelaware100IMAX Japan Inc.Japan100IMAX Minnesota Holding Co.Delaware100IMAX Music Ltd.Ontario100IMAX Post/DKP Inc.Delaware100IMAX Providence General Partner Co.Delaware100IMAX Providence Limited Partner Co.Delaware100IMAX PV Development Inc.Delaware100IMAX Rhode Island Limited PartnershipRhode Island100IMAX (Rochester) Inc.Delaware100IMAX Scribe Inc.Delaware100IMAX (Shanghai) Commerce and Trade Co., Ltd.People’s Republic of China69.74IMAX (Shanghai) Multimedia Technology Co., Ltd.People’s Republic of China69.74IMAX (Shanghai) Digital Media Co., Ltd.People’s Republic of China69.74IMAX (Shanghai) Theatre Technology Services Co., Ltd.People’s Republic of China69.74IMAX Space Productions Ltd.Canada100Company NamePlace ofIncorporationPercentageHeld - IndirectIMAX Spaceworks Ltd.Canada100IMAX Theatre Holding (California I) Co.Delaware100IMAX Theatre Holding (California II) Co.Delaware100IMAX Theatre Holding Co.Delaware100IMAX Theatre Holdings (OEI), Inc.Delaware100IMAX Theatre Holding (Nyack I) Co.Delaware100IMAX Theatre Holding (Nyack II) Co.Delaware100IMAX Theatre Services Ltd.Ontario100IMAX Theatres International LimitedIreland100IMAX (Titanic) Inc. (50 % owned by 3183 Films Ltd.)Delaware100IMAX U.S.A. Inc.Delaware100IMAX VR, LLCDelaware100IMAX Virtual Reality Content Fund, LLCDelaware33.1IMAXSHIFT, LLCDelaware88Line Drive Films Inc.Delaware100Madagascar Doc 3D Ltd.Canada100Night Fog Productions Ltd.Canada100Nyack Theatre LLCNew York100Plymouth 135-139, LLCDelaware88Raining Arrows Productions Ltd.Canada100Ridefilm CorporationDelaware100Ruth Quentin Films Ltd.Canada100Sacramento Theatre LLCDelaware100Suzhou IMAX Fei Er Mu Project Investment Partnership Enterprise(Limited Partnership)People’s Republic of China52.31Sonics Associates, Inc.Alabama100Starboard Theatres Ltd.Canada100Strategic Sponsorship CorporationDelaware100Taurus-Littrow Productions Inc.Delaware100TCL-IMAX Entertainment Co., LimitedHong Kong50TCL-IMAX (Shanghai) Digital Technology Co. Ltd.People’s Republic of China50Walking Bones Pictures Ltd.Canada100 IMAX CORPORATION EXHIBIT 23 Consent of Independent Registered Public Accounting Firm We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-2076; No. 333-5720; No. 333-30970;No. 333-44412; No. 333-155262, No. 333-165400; No. 333-189274; No. 333-211888) of our report dated February 19, 2020 relating to the financialstatements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in IMAX Corporation’sAnnual Report on Form 10-K for the year ended December 31, 2019. /s/ PricewaterhouseCoopers LLPChartered Professional Accountants, Licensed Public AccountantsToronto, CanadaFebruary 19, 2020 IMAX CORPORATIONEXHIBIT 24POWER OF ATTORNEYEach of the persons whose signature appears below hereby constitutes and appoints Patrick McClymont and Robert D. Lister, andeach of them severally, as his true and lawful attorney or attorneys with power of substitution and re-substitution to sign in his name, placeand stead in any and all such capacities the Form 10-K, including the French language version thereof, and any and all amendments theretoand documents in connection therewith, and to file the same with the United States Securities Exchange Commission (the “SEC”) and suchother regulatory authorities as may be required, each of said attorneys to have power to act with and without the other, and to have full powerand authority to do and perform, in the name and on behalf of each of the directors of the Corporation, every act whatsoever which suchattorneys, or either of them, may deem necessary or desirable to be done in connection therewith as fully and to all intents and purposes assuch directors of the Corporation might or could do in person. Dated this 19th day of February, 2020. SignatureTitle /s/ Bradley Wechsler Chairman of the Board & DirectorBradley Wechsler /s/ Richard Gelfond Chief Executive Officer &DirectorRichard Gelfond(Principal Executive Officer) /s/ Neil Braun DirectorNeil Braun /s/ Eric Demirian DirectorEric Demirian /s/ Kevin Douglas DirectorKevin Douglas /s/ David Leebron DirectorDavid Leebron /s/ Michael MacMillan DirectorMichael MacMillan /s/ Dana Settle DirectorDana Settle /s/ Darren Throop DirectorDarren Throop /s/ Patrick McClymont Chief Financial OfficerPatrick McClymont(Principal Financial Officer) /s/ Jeffrey Vance Senior Vice President, FinanceJeffrey Vance(Principal Accounting Officer) IMAX CORPORATION EXHIBIT 31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Richard L. Gelfond, certify that: 1.I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2019 of the registrant, IMAX Corporation; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recentfiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and 5.The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controlover financial reporting. Date: February 19, 2020 By:/s/ Richard L. Gelfond Richard L. Gelfond Chief Executive Officer IMAX CORPORATION EXHIBIT 31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Patrick McClymont, certify that: 1.I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2019 of the registrant, IMAX Corporation; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recentfiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and 5.The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controlover financial reporting. Date: February 19, 2020 By:/s/ Patrick McClymont Patrick McClymont Chief Financial Officer & Executive Vice President IMAX CORPORATIONEXHIBIT 32.1CERTIFICATIONSPursuant to Section 906 of the Sarbanes-Oxley Act of 2002(Subsections (A) and (B) of Section 1350, Chapter 63 of Title 18, United States Code)Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), I, RichardL. Gelfond, Chief Executive Officer of IMAX Corporation, a Canadian corporation (the “Company”), hereby certify, to my knowledge, that:The Annual Report on Form 10-K for the year ended December 31, 2019 (the “Form 10-K”) of the Company fully complies with the requirements ofsection 13(a) or 15(d) of the Securities Exchange Act of 1934, and information contained in the Form 10-K fairly presents, in all material respects, the financialcondition and results of operations of the Company. Date: February 19, 2020/s/ Richard L. Gelfond Richard L. Gelfond Chief Executive Officer IMAX CORPORATIONEXHIBIT 32.2CERTIFICATIONSPursuant to Section 906 of the Sarbanes-Oxley Act of 2002(Subsections (A) and (B) of Section 1350, Chapter 63 of Title 18, United States Code)Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), I, PatrickMcClymont, Chief Financial Officer of IMAX Corporation, a Canadian corporation (the “Company”), hereby certify, to my knowledge, that:The Annual Report on Form 10-K for the year ended December 31, 2019 (the “Form 10-K”) of the Company fully complies with the requirements ofsection 13(a) or 15(d) of the Securities Exchange Act of 1934, and information contained in the Form 10-K fairly presents, in all material respects, the financialcondition and results of operations of the Company. Date: February 19, 2020/s/ Patrick McClymont Patrick McClymont Chief Financial Officer & Executive Vice President 

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