~~0000921582 imax:WesternEuropeMember 2020-01-01 2020-09-30~~

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended September 30, ~~2021~~2022

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

For the transition period from to

Commission File Number 001-35066

IMAX Corporation

(Exact name of registrant as specified in its charter)


Canada	98-0140269
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

2525 Speakman Drive, Mississauga, Ontario, CanadaL5K 1B1 (905)403-6500	902 Broadway, Floor 20 New York, New York, USA10010 (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 registered
Common Shares, no par value	IMAX	The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ 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 this chapter) 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 the definitions of ~~“large~~"large accelerated filer,~~” “accelerated filer”~~" "accelerated filer", ~~“smaller~~"smaller reporting ~~company”~~company" and ~~“emerging~~"emerging growth ~~company”~~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 accounting standards 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 Exchange Act). Yes ☐ No ☒

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


Class		Outstanding as of September 30, ~~2021~~2022
Common Shares, no par value		~~59,081,999~~55,973,443

IMAX CORPORATION

Table of Contents


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	3
Item 2.	~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations	4849
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	8281
Item 4.	Controls and Procedures	8482

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	8583
Item 1A.	Risk Factors	8583
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8886
Item 6.	Exhibits	8987
Signatures		9088

IMAX CORPORATION

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements


	Page
The following unaudited Condensed Consolidated Financial Statements are filed as part of this Report:

Condensed Consolidated Balance Sheets as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021	4
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021	5
Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021	6
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021	7
Condensed Consolidated Statements of ~~Shareholders’~~Shareholders' Equity for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021	8
Notes to Condensed Consolidated Financial Statements	9

IMAX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. Dollars, except share amounts)

(Unaudited)


	September 30,			December 31,			September 30,			December 31,
	2021			2020			2022			2021
Assets
Cash and cash equivalents	$	193,008		$	317,379		$	87,151		$	189,711
Accounts receivable, net		82,728			56,300
Financing receivables, net		135,202			131,810
Variable consideration receivables, net		42,540			40,526
Accounts receivable, net of allowance for credit losses								125,686			110,050
Financing receivables, net of allowance for credit losses								122,618			141,049
Variable consideration receivables, net of allowance for credit losses								43,643			44,218
Inventories		38,245			39,580			36,378			26,924
Prepaid expenses		11,863			10,420			13,145			11,802
Film assets, net		5,347			5,777
Property, plant and equipment, net		260,852			277,397
Film assets, net of accumulated amortization								4,535			4,241
Property, plant and equipment, net of accumulated depreciation								251,518			260,353
Investment in equity securities		1,089			13,633			1,095			1,087
Other assets		18,514			21,673			16,294			17,799
Deferred income tax assets, net		18,652			17,983
Deferred income tax assets, net of valuation allowance								14,369			13,906
Goodwill		39,027			39,027			61,718			39,027
Other intangible assets, net		24,094			26,245
Other intangible assets, net of accumulated amortization								22,077			23,080
Total assets	$	871,161		$	997,750		$	800,227		$	883,247
Liabilities
Accounts payable	$	15,584		$	20,837		$	22,607		$	15,943
Accrued and other liabilities		98,272			99,354			119,138			111,896
Revolving credit facility borrowings, net		9,486			305,676
Convertible notes, net		223,265			—
Deferred revenue		86,442			87,982			76,461			81,281
Revolving credit facility borrowings, net of unamortized debt issuance costs								2,660			2,472
Convertible Notes and other borrowings, net								226,527			223,641
Deferred income tax liabilities		17,642			19,134			14,900			17,642
Total liabilities		450,691			532,983			462,293			452,875
Commitments and contingencies (see Note 8)
Commitments and contingencies (see Note 9)
Non-controlling interests		760			759			736			758
Shareholders' equity
Capital stock common shares — no par value. Authorized — unlimited number.
59,082,275 issued and 59,081,999 outstanding (December 31, 2020 — 58,921,731 issued and 58,921,008 outstanding)		413,531			407,031
Less: Treasury stock, 276 shares at cost (December 31, 2020 — 723)		(4	)		(11	)
55,973,443 issued and outstanding (December 31, 2021 — 58,653,642 issued and outstanding)								388,953			409,979
Other equity		161,524			180,330			179,571			174,620
Statutory surplus reserve		3,932			—			3,932			3,932
Accumulated deficit		(241,440	)		(202,849	)		(282,944	)		(234,975	)
Accumulated other comprehensive (loss) income		(637	)		988			(16,173	)		2,527
Total shareholders' equity attributable to common shareholders		336,906			385,489			273,339			356,083
Non-controlling interests		82,804			78,519			63,859			73,531
Total shareholders' equity		419,710			464,008			337,198			429,614
Total liabilities and shareholders' equity	$	871,161		$	997,750		$	800,227		$	883,247

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

IMAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of U.S. Dollars, except per share amounts)

(Unaudited)


		Three Months Ended						Nine Months Ended									Three Months Ended						Nine Months Ended
		September 30,						September 30,									September 30,						September 30,
		2021			2020			2021				2020					2022			2021			2022				2021
Revenues
Technology sales		$	13,160		$	15,753			$	34,508			$	24,102			$	18,065		$	13,160			$	35,270			$	34,508
Image enhancement and maintenance services			30,588			14,589				76,914				39,109				36,233			30,588				117,285				76,914
Technology rentals			10,219			4,473				26,708				10,307				12,540			10,219				43,726				26,708
Finance income			2,635			2,441				8,181				7,495				1,917			2,635				6,478				8,181
			56,602			37,256				146,311				81,013				68,755			56,602				202,759				146,311
Costs and expenses applicable to revenues
Technology sales			6,230			9,222				17,779				15,637				10,061			6,230				20,264				17,779
Image enhancement and maintenance services			16,461			16,989				38,582				42,049				20,563			16,461				56,259				38,582
Technology rentals			6,424			7,216				19,579				22,100				6,430			6,424				18,728				19,579
			29,115			33,427				75,940				79,786				37,054			29,115				95,251				75,940
Gross margin			27,487			3,829				70,371				1,227				31,701			27,487				107,508				70,371
Selling, general and administrative expenses			28,377			24,815				82,393				83,247				32,905			28,377				100,181				82,393
Research and development			2,025			1,130				5,696				4,562				1,115			2,025				3,667				5,696
Amortization of intangibles			1,255			1,349				3,586				4,014
Credit loss (reversal) expense, net			(3,317	)		3,925				(4,884	)			15,582
Asset impairments			0			0				0				1,151
Legal judgment and arbitration awards (see Note 8)			0			0				(1,770	)			0
Amortization of intangible assets																		1,111			1,255				3,412				3,586
Credit loss expense (reversal), net																		808			(3,317	)			8,149				(4,884	)
Asset impairments (see Note 17(e))																		—			—				4,470				—
Legal judgment and arbitration awards (see Note 9)																		—			—				—				(1,770	)
Loss from operations			(853	)		(27,390	)			(14,650	)			(107,329	)			(4,238	)		(853	)			(12,371	)			(14,650	)
Realized and unrealized investment gains (losses)			30			1,575				5,311				(939	)
Realized and unrealized investment gains																		35			30				99				5,311
Retirement benefits non-service expense			(117	)		(186	)			(347	)			(432	)			(140	)		(117	)			(417	)			(347	)
Interest income			538			586				1,680				1,842				257			538				1,176				1,680
Interest expense			(1,540	)		(2,391	)			(5,534	)			(4,620	)			(1,323	)		(1,540	)			(4,354	)			(5,534	)
Loss before taxes			(1,942	)		(27,806	)			(13,540	)			(111,478	)			(5,409	)		(1,942	)			(15,867	)			(13,540	)
Income tax expense			(4,402	)		(19,349	)			(9,416	)			(24,606	)			(2,348	)		(4,402	)			(8,091	)			(9,416	)
Equity in losses of investees, net of tax			0			(1,329	)			0				(1,858	)
Net loss			(6,344	)		(48,484	)			(22,956	)			(137,942	)			(7,757	)		(6,344	)			(23,958	)			(22,956	)
Less: Net (income) loss attributable to non-controlling interests			(2,034	)		1,275				(9,473	)			15,412
Less: net income attributable to non-controlling interests																		(1,196	)		(2,034	)			(1,455	)			(9,473	)
Net loss attributable to common shareholders		$	(8,378	)	$	(47,209	)		$	(32,429	)		$	(122,530	)		$	(8,953	)	$	(8,378	)		$	(25,413	)		$	(32,429	)

Net loss per share attributable to common shareholders - basic and diluted:	Net loss per share attributable to common shareholders - basic and diluted:															Net loss per share attributable to common shareholders - basic and diluted:
Net loss per share — basic and diluted		$	(0.14	)	$	(0.80	)		$	(0.55	)		$	(2.06	)		$	(0.16	)	$	(0.14	)		$	(0.44	)		$	(0.55	)

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

IMAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands of U.S. Dollars)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Net loss

$
(6,344
)

$
(48,484
)

$
(22,956
)

$
(137,942
)
Other comprehensive (loss) income, before tax

Unrealized net (loss) gain from cash flow hedging instruments

(759
)

591

(159
)

(935
)
Realized net (gain) loss from cash flow hedging instruments

(312
)

110

(1,367
)

805

Reclassification of unrealized gain from ineffective cash flow hedging instruments

(25
)

—

(318
)

—

Foreign currency translation adjustments

(1,325
)

2,387

(531
)

1,772

Defined benefit and postretirement benefit plans

48

19

144

36

Total other comprehensive (loss) income, before tax

(2,373
)

3,107

(2,231
)

1,678

Income tax benefit (expense) related to other comprehensive (loss) income

276

(189
)

446

64

Other comprehensive (loss) income, net of tax

(2,097
)

2,918

(1,785
)

1,742

Comprehensive loss

(8,441
)

(45,566
)

(24,741
)

(136,200
)
Comprehensive (income) loss attributable to non-controlling interests

(1,636
)

553

(9,313
)

14,876

Comprehensive loss attributable to common shareholders

$
(10,077
)

$
(45,013
)

$
(34,054
)

$
(121,324
)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022				2021
Net loss	$	(7,757	)	$	(6,344	)		$	(23,958	)		$	(22,956	)
Other comprehensive loss, before tax
Unrealized net loss from cash flow hedging instruments		(1,567	)		(759	)			(1,862	)			(159	)
Realized net loss (gain) from cash flow hedging instruments		80			(312	)			175				(1,367	)
Reclassification of unrealized gain from ineffective cash flow hedging instruments		—			(25	)			—				(318	)
Foreign currency translation adjustments		(11,703	)		(1,325	)			(24,644	)			(531	)
Defined benefit and postretirement benefit plans		46			48				138				144
Total other comprehensive loss, before tax		(13,144	)		(2,373	)			(26,193	)			(2,231	)
Income tax benefit related to other comprehensive loss		380			276				408				446
Other comprehensive loss, net of tax		(12,764	)		(2,097	)			(25,785	)			(1,785	)
Comprehensive loss		(20,521	)		(8,441	)			(49,743	)			(24,741	)
Comprehensive loss (income) attributable to non-controlling interests		2,150			(1,636	)			5,630				(9,313	)
Comprehensive loss attributable to common shareholders	$	(18,371	)	$	(10,077	)		$	(44,113	)		$	(34,054	)

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

IMAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. Dollars)

(Unaudited)


	Nine Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2022			2021
Operating Activities
Net loss	$	(22,956	)	$	(137,942	)	$	(23,958	)	$	(22,956	)
Adjustments to reconcile net loss to cash used in operating activities:
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
Depreciation and amortization		40,570			40,699			42,663			40,570
Amortization of deferred financing costs		1,749			595			2,465			1,749
Credit loss (reversal) expense, net		(4,884	)		15,582
Credit loss expense (reversal), net								8,149			(4,884	)
Write-downs		878			13,339			5,707			878
Deferred income tax (benefit) expense		(1,687	)		23,142
Deferred income tax benefit								(3,374	)		(1,687	)
Share-based and other non-cash compensation		18,558			16,345			19,510			18,558
Unrealized foreign currency exchange loss (gain)		555			(394	)
Realized and unrealized investment (gains) losses		(5,311	)		939
Equity in losses of investees		—			1,858
Unrealized foreign currency exchange loss								1,310			555
Realized and unrealized investment gains								(99	)		(5,311	)
Changes in assets and liabilities:
Accounts receivable		(24,336	)		30,350			(18,050	)		(24,336	)
Inventories		653			(10,278	)		(10,131	)		653
Film assets		(10,035	)		(6,177	)		(14,174	)		(10,035	)
Deferred revenue		(1,434	)		5,233			(5,989	)		(1,434	)
Changes in other operating assets and liabilities		(11,902	)		(24,109	)		(3,548	)		(11,902	)
Net cash used in operating activities		(19,582	)		(30,818	)
Net cash provided by (used in) operating activities								481			(19,582	)
Investing Activities
Acquisition of SSIMWAVE, net of cash and cash equivalents acquired								(12,639	)		—
Purchase of property, plant and equipment		(2,353	)		(658	)		(5,248	)		(2,353	)
Investment in equipment for joint revenue sharing arrangements		(5,361	)		(5,289	)		(14,543	)		(5,361	)
Interest in film classified as a financial instrument								(4,731	)		—
Acquisition of other intangible assets		(3,399	)		(1,661	)		(3,246	)		(3,399	)
Proceeds from sale of equity investment		17,769			—
Net cash provided by (used in) investing activities		6,656			(7,608	)
Proceeds from sale of equity securities								—			17,769
Net cash (used in) provided by investing activities								(40,407	)		6,656
Financing Activities
Proceeds from issuance of convertible notes, net		223,675			—			—			223,675
Debt issuance costs related to convertible notes		(1,163	)		—			—			(1,163	)
Purchase of capped calls related to convertible notes		(19,067	)		—			—			(19,067	)
Revolving credit facility borrowings		3,600			280,244			4,890			3,600
Repayments of revolving credit facility borrowings		(300,243	)		—			(3,600	)		(300,243	)
Credit facility amendment fees paid		(474	)		(1,026	)		(2,277	)		(474	)
Repurchase of common shares		(4,610	)		(36,624	)
Repurchase of common shares, IMAX Corporation								(53,581	)		(4,610	)
Repurchase of common shares, IMAX China		(5,016	)		(1,534	)		(3,043	)		(5,016	)
Treasury stock purchased for future settlement of restricted share units		—			(3,086	)
Taxes withheld and paid on employee stock awards vested		(3,045	)		(251	)		(3,393	)		(3,045	)
Common shares issued - stock options exercised		883			—			—			883
Principal payment under finance lease obligations								(890	)		—
Dividends paid to non-controlling interests		(5,027	)		(4,214	)		(2,701	)		(5,027	)
Net cash (used in) provided by financing activities		(110,487	)		233,509
Effects of exchange rate changes on cash		(958	)		630
(Decrease) increase in cash and cash equivalents during period		(124,371	)		195,713
Net cash used in financing activities								(64,595	)		(110,487	)
Effects of exchange rate changes on cash and cash equivalents								1,961			(958	)
Decrease in cash and cash equivalents during period								(102,560	)		(124,371	)
Cash and cash equivalents, beginning of period		317,379			109,484			189,711			317,379
Cash and cash equivalents, end of period	$	193,008		$	305,197		$	87,151		$	193,008

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

IMAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF ~~SHAREHOLDERS’~~SHAREHOLDERS' EQUITY

(In thousands of U.S. Dollars)

(Unaudited)


		Three Months Ended						Nine Months Ended								Three Months Ended						Nine Months Ended
		September 30,						September 30,								September 30,						September 30,
		2021			2020			2021				2020				2022			2021			2022			2021
Adjustments to capital stock:
Balance, beginning of period		$	415,849		$	405,254			$	407,020			$	419,348		$	391,107		$	415,849		$	409,979		$	407,020
Change in shares held in treasury			4			58				7				3,767			—			4			—			7
Employee stock options exercised			—			—				883				—
Employee stock options exercised, net of shares withheld for employee tax obligations																	—			—			—			883
Grant date fair value of stock options exercised			—			—				272				—			—			—			—			272
Average carrying value of repurchased and retired common shares			(2,380	)		—				(2,380	)			(17,803	)		(4,161	)		(2,380	)		(32,929	)		(2,380	)
Restricted share units vested, net of shares withheld for employee tax obligations			54			—				7,725				—			60			54			9,956			7,725
Issuance of common shares in acquisition																	1,947			—			1,947			—
Balance, end of period			413,527			405,312				413,527				405,312			388,953			413,527			388,953			413,527
Adjustments to other equity:
Balance, beginning of period			160,658			172,690				180,330				171,789			174,668			169,050			174,620			188,845
Amortization of share-based payment expense - stock options			294			1,034				951				2,137			132			282			502			908
Amortization of share-based payment expense - restricted share units			4,331			3,337				13,327				11,099			4,232			4,161			14,444			12,732
Amortization of share-based payment expense - performance stock units	Amortization of share-based payment expense - performance stock units		1,315			514				3,519				1,307			1,697			1,275			5,414			3,413
Restricted share units vested			(58	)		(463	)			(12,249	)			(7,688	)		(302	)		(58	)		(14,010	)		(11,850	)
Grant date fair value of stock options exercised			—			—				(271	)			—			—			—			—			(271	)
Common shares repurchased, IMAX China			(5,016	)		(2	)			(5,016	)			(1,534	)
Change in ownership interest related to IMAX China common share repurchases																	(856	)		(3,645	)		(1,399	)		(3,645	)
Purchase of capped calls related to convertible notes			—			—				(19,067	)			—			—			—			—			(19,067	)
Balance, end of period			161,524			177,110				161,524				177,110			179,571			171,065			179,571			171,065
Adjustments to statutory surplus reserve:
Balance, beginning of period			—			—				—				—			3,932			—			3,932			—
Establishment of statutory surplus reserve, IMAX China			3,932			—				3,932				—			—			3,932			—			3,932
Balance, end of period			3,932			—				3,932				—			3,932			3,932			3,932			3,932
Adjustments to accumulated deficit:
Balance, beginning of period			(226,900	)		(134,395	)			(202,849	)			(40,253	)		(272,022	)		(226,900	)		(234,975	)		(202,849	)
Net loss attributable to common shareholders			(8,378	)		(47,209	)			(32,429	)			(122,530	)		(8,953	)		(8,378	)		(25,413	)		(32,429	)
Statutory surplus reserve deducted from retained earnings, IMAX China			(3,932	)		—				(3,932	)			—			—			(3,932	)		—			(3,932	)
Common shares repurchased and retired			(2,230	)		—				(2,230	)			(18,821	)		(1,969	)		(2,230	)		(22,556	)		(2,230	)
Balance, end of period			(241,440	)		(181,604	)			(241,440	)			(181,604	)		(282,944	)		(241,440	)		(282,944	)		(241,440	)
Adjustments to accumulated other comprehensive (loss) income:	Adjustments to accumulated other comprehensive (loss) income:
Balance, beginning of period			1,062			(4,180	)			988				(3,190	)		(6,755	)		1,062			2,527			988
Other comprehensive (loss) income, net of tax			(1,699	)		2,196				(1,625	)			1,206
Other comprehensive loss, net of tax																	(9,418	)		(1,699	)		(18,700	)		(1,625	)
Balance, end of period			(637	)		(1,984	)			(637	)			(1,984	)		(16,173	)		(637	)		(16,173	)		(637	)
Adjustments to non-controlling interests:
Balance, beginning of period			84,090			74,723				78,519				89,493			66,555			75,698			73,531			70,004
Net income (loss) attributable to non-controlling interests			2,040			2,186				9,472				(10,280	)
Other comprehensive (loss) income, net of tax			(398	)		722				(160	)			536
Establishment of statutory surplus reserve			1,699			—				1,699				—
Statutory surplus reserve deducted from retained earnings			(1,699	)		—				(1,699	)			—
Dividends paid to non-controlling shareholders			(2,928	)		(2,096	)			(5,027	)			(4,214	)
Net income attributable to non-controlling interests																	1,202			2,040			1,477			9,472
Other comprehensive loss, net of tax																	(3,346	)		(398	)		(7,085	)		(160	)
Dividends paid to non-controlling shareholders of IMAX China																	(91	)		(2,928	)		(2,701	)		(5,027	)
Share-based compensation attributable to non-controlling interests																	(118	)		222			281			345
Change in ownership interest related to IMAX China common share repurchases																	(343	)		(1,371	)		(1,644	)		(1,371	)
Balance, end of period			82,804			75,535				82,804				75,535			63,859			73,263			63,859			73,263
Total Shareholders' Equity		$	419,710		$	474,369			$	419,710			$	474,369		$	337,198		$	419,710		$	337,198		$	419,710

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

IMAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands of U.S. Dollars, unless otherwise stated)

(Unaudited)

1. Basis of Presentation

Accounting Principles

IMAX Corporation, together with its consolidated subsidiaries (the ~~“Company”~~"Company"), prepares its financial statements in accordance with United States Generally Accepted Accounting Principles (“("U.S. ~~GAAP”~~GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. In the ~~Company’s~~Company's opinion, the unaudited Condensed Consolidated Financial Statements reflect all adjustments of a normal recurring nature that are necessary for a fair statement of the results for the interim periods presented. The Condensed Consolidated Balance Sheet at December 31, 2021 was derived from the Company's audited annual Consolidated Financial Statements, but does not contain all of the footnote disclosures included in the annual financial statements. The interim results presented in the ~~Company’s~~Company's Condensed Consolidated Statements of Operations are not necessarily indicative of results for a full ~~year, particularly in this interim period due to the impacts of the COVID-19 global pandemic (see Note 2).~~year.

These Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements included in the ~~Company’s 2020~~Company's 2021 Annual Report on Form 10-K (the ~~“2020~~"2021 Form ~~10-K”~~10-K"), which should be consulted for a summary of the significant accounting policies utilized by the Company. The Condensed Consolidated Financial Statements are prepared following the same accounting policies disclosed in the ~~2020~~2021 Form 10-K.

Revision of Prior Period Amounts

In the Condensed Consolidated Statements of Shareholders' Equity, the Company revised the September 30, 2021 balances of Total Shareholders' Equity Attributable to Common Shareholders and Non-Controlling Interests. The revisions were principally made to properly reflect changes in the Company's ownership interest in IMAX China Holding, Inc. ("IMAX China") as a result of common share repurchases made by IMAX China and the amortization of share-based compensation related to IMAX China. The revisions resulted in a reclassification of $9.5 million between the balances of Other Equity and Non-Controlling Interests as of September 30, 2021. There is no change in Total Shareholders' Equity as a result of the revisions. (See Note 3(a) of Notes to Consolidated Financial Statements in Part II, Item 8 of the Company's 2021 Form 10-K).

Principles of Consolidation

These Condensed Consolidated Financial Statements include the accounts of the Company together with its consolidated subsidiaries, except for subsidiaries which have been identified as variable interest entities ~~(“VIEs”~~("VIEs") where the Company is not the primary beneficiary. All intercompany accounts and transactions have been eliminated. The Company has evaluated its various variable interests to determine whether they are VIEs as required by U.S. GAAP.

The Company has interests in ten film production companies, which have been identified as VIEs. The Company is the primary beneficiary of and consolidates five of these entities as it has the power to direct the activities that most significantly impact the economic performance of the VIE, and it has the obligation to absorb losses or the right to receive benefits from the respective VIE that could potentially be significant. The majority of the assets relating to these production companies are held by the IMAX Original Film Fund (the ~~“Original~~"Original Film ~~Fund”~~Fund") as described in Note ~~17(b)~~18(b). The Company does not consolidate the other five film production companies because it does not have the power to direct their activities and it does not have the obligation to absorb the majority of the expected losses or the right to receive expected residual returns. The Company uses the equity method of accounting for these entities, which are not material to the ~~Company’s~~Company's Condensed Consolidated Financial Statements. A loss in the value of an equity method investment that is other than temporary is recognized as a charge in the Condensed Consolidated Statement of Operations.

~~Total~~As of September 30, 2022 and December 31, 2021, total assets and liabilities of the ~~Company’s~~Company's consolidated VIEs are as follows:


	September 30,		December 31,		September 30,		December 31,
(In thousands of U.S. Dollars)	2021		2020		2022		2021
Total assets	$	1,575	$	1,543	$	1,542	$	1,576
Total liabilities	$	259	$	230	$	256	$	259

In October 2021, the Company and Maximus Technologies Limited dissolved its previously announced joint venture, IMAX AI, and the intellectual property assets contributed to the joint venture were returned to each party.

Estimates and Assumptions

In preparing the ~~Company’s~~Company's Condensed Consolidated Financial Statements, management makes judgments in applying various accounting policies. The areas of policy judgment are consistent with those reported in Note ~~3(b)~~3(c) of the Company's audited Consolidated Financial Statements included in ~~the 2020~~its 2021 Form 10-K. In addition, management makes assumptions about the ~~Company’s~~Company's future operating results and cash flows in deriving critical accounting estimates used in preparing the Condensed Consolidated Financial Statements. The significant estimates made by management include, but are not limited to: (i) the allocation of the transaction price in an IMAX Theater System arrangement to distinct performance obligations; (ii) ~~estimates~~the amount of variable consideration ~~related~~ to be earned on sales of IMAX Theater Systems based on projections of future box office ~~performance~~;performance; (iii) expected credit losses on accounts receivable, financing receivables, and variable consideration receivables; (iv) provisions for the write-down of excess and obsolete inventory; (v) the fair values of the reporting units used in assessing the recoverability of goodwill; (vi) the cash flow ~~estimates~~projections used in testing the recoverability of long-lived assets such as the theater system equipment supporting joint revenue sharing arrangements; (vii) the economic lives of the theater system equipment supporting joint revenue sharing arrangements; (viii) the useful lives of intangible assets; (ix) the ultimate revenue forecasts used to test the recoverability of film assets; (x) the discount rates used to determine the present value of financing receivables and lease ~~liabilities;~~liabilities, as well as to determine the fair values of the Company's reporting units for the purpose of assessing the recoverability of goodwill; (xi) pension plan assumptions; (xii) estimates related to the fair value and projected vesting of share-based payment awards; (xiii) the valuation of deferred income tax assets; and (xiv) reserves related to uncertain tax positions.

The ~~Company’s operations have been significantly impacted by~~impact of the COVID-19 pandemic is complex and continuously evolving, resulting in significant disruption to the Company's business and the global ~~pandemic,~~economy, as described in Note 2. The impact of the COVID-19 global pandemic on the Company’s business and financial results will continue to depend on numerous evolving factors that cannot be accurately predicted and that will vary by jurisdiction and market, including the duration and scope of the pandemic, the emergence of variants of the virus, the progress made on administering vaccines, the continuing impact of the pandemic on global economic conditions and ongoing government responses to the pandemic, which could lead to further theater closures, theater capacity restrictions and/or delays in the release of films. ~~However,~~Although management is encouraged by the broad reopening of the IMAX theater network, the continued progress towards the resumption of normal theater operations, normal film release schedules, and recent box office results. Accordingly, during the three and nine months ended September 30, 2021, the Company reversed $3.3 million and $4.9 million, respectively, of its allowance for current expected credit losses, reflecting the improving outlook for theater operators as the theatrical exhibition industry continues to recover from the COVID-19 global pandemic. Despite the improving environment,results, there continues to be ~~a degree of~~ risk and uncertainty relating to ~~future~~the judgments, assumptions, and estimates used by management in preparing the Company's Condensed Consolidated Financial Statements.

In response to the ongoing conflict between Russia and Ukraine, a number of countries in which the Company operates, including Canada and the United States, have imposed broad sanctions and other restrictive actions against governmental and other entities in Russia, which in turn have and may continue to have an adverse impact on the Company's business and results of operations in the affected regions. Commencing in March 2022, in response to the conflict and resulting sanctions, the Company suspended its operations in Russia and Belarus. As of September 30, 2022, the IMAX network includes 54 theaters in Russia, nine theaters in Ukraine, and one theater in Belarus, and the Company's backlog includes 14 theaters in Russia, one theater in Ukraine, and five theaters in Belarus with a total fixed contracted value of $22.9 million. As a result of the ongoing conflict, there is risk and uncertainty relating to the judgments, assumptions, and estimates used by management in preparing the Company's Condensed Consolidated Financial Statements, including estimates related to expected credit losses on accounts receivables, ~~inventory write downs, impairments~~financing receivables, and variable consideration receivables, as discussed in Note 5. In the first quarter of ~~film assets, impairments~~2022, the Company recorded provisions for potential credit losses against substantially all of ~~long-lived assets (including~~its receivables in Russia due to uncertainties associated with the ~~theater system equipment supporting~~ongoing conflict. These receivables relate to existing sale agreements as the ~~Company’s~~Company is not party to any joint revenue sharing ~~arrangements), impairments~~arrangements in these countries. In addition, beginning in the first quarter of ~~goodwill, a further valuation allowance against deferred tax assets,~~2022, exhibitors in Russia, Ukraine, and Belarus were placed on nonaccrual status for maintenance revenue and finance income. The Company continues to monitor the evolving impacts of this conflict and its effects on the global economy and the ~~reversal~~Company. Given the global nature of ~~variable consideration receivables that are based~~the Company's operations, any protracted conflict or the broader macroeconomic impact of the Russia-Ukraine conflict and sanctions imposed on ~~estimates~~Russia could have further adverse impacts on the Company's business, results of ~~future box office performance. In~~operations, and financial condition.

On September 7, 2022, Cineworld Group plc ("Cineworld"), the ~~current environment, assumptions about box office results, IMAX Theater System installations,~~parent company of Regal Entertainment Group, and ~~customer creditworthiness have greater variability than normal, which could~~certain of its subsidiaries and Regal CineMedia Holdings, LLC, filed petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the ~~future significantly~~ ~~impact~~ ~~management’s estimates~~Southern District of Texas. Based on its evaluation of its contracts with Cineworld, its assessment of the reorganization and ~~judgments relating~~its discussions with Cineworld to date, the Company has determined that no additional provision for expected credit losses is required. The Company also does not expect to see a material impact on its network of theaters with Cineworld resulting from this reorganization. There can, however, be no guarantees as to the ~~recoverability~~ultimate outcome of a Chapter 11 proceeding. The Company has an unsecured claim of $11.4 million related to receivables from the ~~Company’s financial and non-financial assets.~~entities included in the reorganization proceeding.

2. Impact of COVID-19 Pandemic

The impact of the COVID-19 pandemic is complex and continuously evolving, resulting in significant disruption to the ~~Company’s~~Company's business and the global economy. At various points during the pandemic, authorities around the world imposed measures intended to control the spread of COVID-19, including stay-at-home orders and restrictions on large public gatherings, which caused movie theaters in countries around the world to temporarily close, including the IMAX theaters in those countries. As a result of ~~the~~these theater closures, movie studios postponed the theatrical release of most films originally scheduled for release in 2020 and early 2021, including many of the films scheduled to be shown in IMAX theaters, while several other films were released directly or concurrently to streaming platforms. ~~More recently,~~Beginning in the third quarter of 2020, stay-at-home orders and capacity restrictions ~~have been~~were lifted in ~~almost all~~many key markets and ~~beginning in the third quarter of 2020,~~ movie theaters throughout the IMAX network gradually reopened. However, following the emergence of the Omicron variant and the rise of COVID-19 cases in China in the first quarter of 2022, the Chinese government reinstituted capacity restrictions and safety protocols on large public gatherings, which has led to the temporary closure of theaters in several cities. As of September 30, ~~2021, 93%~~2022, approximately 92% of the IMAX theaters in ~~the global IMAX commercial multiplex network~~Greater China were open at various ~~capacities, spanning 70 countries. This included 100%~~capacities. On average, during the third quarter of ~~Domestic theaters (i.e., in~~2022, approximately 82% of the ~~United States and Canada), 93% of the~~IMAX theaters in Greater China ~~and 87% of the theaters in Rest of World markets.~~were open at various capacities.

The impact of the COVID-19 global pandemic has resulted in significantly lower levels of revenues, earnings and operating cash flows for the Company during 2020 and, to a lesser extent, during the nine months ended September 30, 2021, when compared to periods prior to the onset of the pandemic, as gross box office (“GBO”) results from the Company’s theater customers declined, the installation of certain theater systems was delayed, and maintenance services were generally suspended for theaters that were closed. In response to uncertainties associated with the pandemic, the Company took significant steps to preserve cash by eliminating non-essential costs, temporarily furloughing certain employees, reducing the working hours of other employees and reducing all non-essential capital expenditures to minimum levels. The Company also implemented an active cash management process, which, among other things, required senior management approval of all outgoing payments. In addition, as a result of the financial difficulties faced by certain of the Company’s exhibition customers arising out of pandemic-related closures, although improving, the Company has experienced and may continue to experience delays in collecting payments due under existing theater sale or lease arrangements. The Company has provided temporary relief to certain exhibitor customers by waiving or reducing maintenance fees during periods when theaters are closed or operating with reduced capacities and, in certain situations, by providing extended payment terms on annual minimum payment obligations in exchange for a corresponding or longer extension of the term of the underlying sale or lease arrangement.

For the three and nine months ended September 30, 2021, GBO receipts generated by IMAX DMR films totaled $141.9 million and $360.7 million, respectively, surpassing the totals for the same periods in 2020 by $71.7 million (102%) and $192.6 million (115%), respectively. Moreover, GBO receipts for September 2021 approximated the levels achieved prior to the onset of the COVID-19 global pandemic. Management is encouraged by these box office results, the return of the prevalence of exclusive theatrical windows beginning with the release of ~~Shang-Chi and the Legend of the Ten Rings~~ ~~in September 2021, and the strong pipeline of Hollywood movies scheduled to be released for theatrical exhibition during the remainder of 2021 and in 2022. However, the impact of the COVID-19 global~~ pandemic on the ~~Company’s~~Company's business and financial results will continue to depend on numerous evolving factors that cannot be accurately predicted and that will vary by jurisdiction and market, including the duration and scope of the pandemic, the emergence of new and the spread of existing variants of the virus, the progress made on administering vaccines and developing treatments and the effectiveness of such vaccines and treatments, the continuing impact of the pandemic on global economic conditions and ongoing government responses to the pandemic, which could lead to further theater closures, theater capacity restrictions and/or delays in the release of films.

3. Recently Issued Accounting Standards

In March 2020, the Financial Accounting Standards Board ~~(“FASB”~~("FASB") issued Accounting Standards Update ~~(“ASU”~~("ASU") No. 2020-04, ~~“Reference~~"Reference Rate Reform (Topic 848): Facilitation of the ~~effects~~Effects of Reference Rate Reform on Financial ~~Reporting” (“~~Reporting" ("ASU ~~2020-04”~~2020-04"). The purpose of ASU 2020-04 is to provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ~~The amendments are~~ASU 2020-04 is effective for all entities from the beginning of an interim period that includes the issuance date of the ASU. An entity may elect to apply ~~the amendments~~ASU 2020-04 prospectively through December 31, 2022. ~~The only contract held by~~In October 2022, the FASB extended the temporary accounting relief to December 31, 2024 from the current sunset date of December 31, 2022. As of September 30, 2022, the Company is not party to any third party contracts that ~~references~~reference the London Interbank Offered Rate (LIBOR) is the Credit Agreement (as defined in Note 7), which utilizes USD LIBOR to determine the interest rate applicable to borrowings. The Credit Agreement matures on June 28, 2023, prior to the date that USD LIBOR rates will cease publication on June 30, 2023.(LIBOR). Accordingly, the Company does not expect ASU 2020-04 to have a material effect on its Condensed Consolidated Financial Statements.

In ~~July~~October 2021, the FASB issued ASU No. ~~2021-05, “Leases~~2021-08, "2021-08: Business Combinations (Topic ~~842)~~850): ~~Lessors - Certain Leases~~Accounting for Contract Assets and Contract Liabilities from Contracts with ~~Variable Lease Payments” (“~~Customers" ("ASU ~~2021-05”~~2021-08"). ASU 2021-08 requires that an acquirer recognize and measure contract assets and contract liabilities (e.g., ~~which requires sales-type or direct financing leases that have variable payments (that do not depend on a rate or an index) and result~~deferred revenue) acquired in a ~~day-one loss~~business combination in accordance with Topic 606, as opposed to ~~be classified as operating leases. When a lease~~at fair value. ASU 2021-08 is classified as operating, the lessor does not recognize a net investment in the lease, does not derecognize the underlying asset, and, therefore, does not recognize a selling profit or loss. The amendments are effective for ~~annual periods~~fiscal years beginning after December 15, ~~2021~~2022, including interim periods within those periods. Early adoption is permitted. The Company ~~has not yet adopted~~elected to early adopt ASU ~~2021-05, but has determined~~2021-08 in the third quarter of 2022 in connection with its acquisition of SSIMWAVE Inc. (see Note 4).

In November 2021, the FASB issued ASU No. 2021-10, "2021-10: Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance" ("ASU 2021-10"). ASU 2021-10 requires annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. ASU 2021-10 is effective for annual periods beginning after December 15, 2021. Early adoption is permitted. The Company will adopt ASU 2021-10 for the year ending December 31, 2022 and will provide the required disclosures, if material.

In March 2022, the FASB issued ASU No. 2022-02, "2022-02: Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures" ("ASU 2022-02"). ASU 2022-02 amends and eliminates the accounting guidance for Troubled Debt Restructurings by creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty and requires for public business entities, to disclose current-period gross write offs by year of origination for financing receivables and net investments in leases. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. The Company will adopt ASU 2022-02 for the first quarter of 2023 and is in the process of evaluating the accounting and disclosure impact, ~~of adopting this guidance will not have a material impact~~if any, on ~~its~~the Company's Condensed Consolidated Financial Statements.

The Company considers the applicability and impact of all FASB ASUs that are recently issued, ~~FASB ASUs.~~but not yet effective. ASUs that are not noted above were assessed and determined to be not applicable or not significant to the ~~Company’s~~Company's Condensed Consolidated Financial Statements for the period ended September 30, ~~2021.~~2022.

4. Acquisition

~~4. Current Expected Credit Losses~~On September 22, 2022 (the "Closing Date"), the Company acquired all of the issued and outstanding shares of SSIMWAVE Inc. ("SSIMWAVE") pursuant to a share purchase agreement by and among the Company, SSIMWAVE, and related shareholders (the "Sellers"). SSIMWAVE provides perceptual quality measurement and optimization solutions based on artificial intelligence technologies for leading media and entertainment companies. Following the acquisition, SSIMWAVE became a wholly-owned subsidiary of the Company.

~~The Company’s accounts receivable, financing receivables and variable~~As consideration ~~receivables are~~ for the acquisition of SSIMWAVE, the Company is paying an aggregate purchase price of approximately $~~measured~~23.1 million, comprised of: (i) $19.4 million in cash, of which $16.2 million was paid on the ~~amortized cost basis~~Closing Date, (ii) 160,547 common shares of the Company with a fair value of $1.9 million (the "IMAX Share Consideration"), and ~~presented at~~(iii) contingent consideration with a fair value of $1.8 million (the "Earn-Out Payment"). The fair value of the ~~net~~IMAX Share Consideration is reduced to reflect the fair value of certain restrictions on the future transfer of the shares. The Earn-Out Payment may be paid to certain Sellers in an aggregate amount ~~expected~~of up to ~~be collected~~$.2.0 million in cash, contingent upon and following the achievement of certain commercial and financial milestones during the period from January 1, 2023 to December 31, 2024. The fair value of the Earn-Out Payment is based on management's assessment of the likelihood of achieving these milestones.

~~Accounts Receivable~~

~~Accounts receivable principally includes amounts currently due~~The revenues and earnings of SSIMWAVE were not material to the three and nine months ended September 30, 2022. In the third quarter of 2022, the Company ~~under theater sale~~incurred $1.0 million of professional fees in connection with the acquisition of SSIMWAVE, which were recorded within Selling, General and ~~sales-type lease arrangements, contingent fees owed by~~Administrative Expenses on the Company's Condensed Consolidated Statements of Operations.

The Company is accounting for the acquisition of SSIMWAVE as a business combination and is in the process of valuing the assets acquired, such as technology-related and customer-related intangible assets, and liabilities assumed. The Company will complete the allocation of the purchase price during the twelve-month measurement period following the date of the acquisition. The table below summarizes the preliminary allocation of the purchase price to the SSIMWAVE assets acquired and liabilities assumed. This allocation is subject to revision upon completion of the Company's valuation procedures.


(In thousands of U.S. Dollars)
Purchase Price:
Cash payments	$	19,448
IMAX Share Consideration		1,947
Earn-Out Payment		1,750
Total Purchase Price	$	23,145
Allocation of Purchase Price:
Cash and cash equivalents	$	3,582
Accounts receivable		158
Property, plant and equipment		409
Other assets		442
Accounts payable and accrued liabilities		(1,091	)
Deferred revenue		(1,274	)
Federal economic development loan, net of unaccreted interest benefit		(1,772	)
Goodwill		22,691
Total Purchase Price	$	23,145

5. Receivables

Theability of the Company to collect its receivables is principally dependent on the viability and solvency of individual theater operators ~~as a~~which is significantly influenced by consumer behavior and general economic conditions. Theater operators, or other customers, may experience financial difficulties that could result ~~of box office performance and fees for theater maintenance services. Accounts receivable also includes amounts due~~in their being unable to fulfill their payment obligations to the ~~Company from movie studios and other content creators for digitally remastering films into IMAX formats, as well as for film distribution and post-production services.~~Company.

In order to mitigate the credit risk associated with ~~accounts receivable,~~its receivables, management performs an initial credit evaluation prior to entering into an arrangement with a customer and then regularly monitors the credit quality of each customer through an analysis of collections history and aging. This monitoring process includes meetings on at least a monthly basis to identify credit concerns and potential changes in credit quality classification. A customer may improve their credit quality classification once a substantial payment is made on an overdue balance or when the customer has agreed to a payment plan and payments have commenced in accordance with that plan. Changes in credit quality classification are dependent upon management approval. The ~~Company’s~~Company's internal credit quality classifications for theater operators are as follows:

•

~~Good Standing — The theater operator continues to be in good standing as payments and reporting are up to date.~~

•

Good Standing — The theater operator continues to be in good standing as payments and reporting are received on a regular basis.

•

Credit Watch — The theater operator has demonstrated a delay in payments, but continues to be in active communication with the Company. Theater operators placed on Credit Watch are subject to enhanced monitoring. In addition, depending on the size of the outstanding balance, length of time in arrears and other factors, future transactions may need to be approved by management. These receivables are in better condition than those in the Pre-Approved Transactions Only category, but are not in as good condition as the receivables in the Good Standing category.

•

Pre-Approved Transactions Only — The theater operator has demonstrated a delay in payments with little or no communication with the Company. All services and shipments to the theater operator must be reviewed and approved by management. These receivables are in better condition than those in the All Transactions Suspended category, but are not in as good condition as the receivables in the Credit Watch category. In certain situations, depending on the individual facts and circumstances related to each customer, finance income recognition may be suspended for the net investment in lease and financed sale receivable balances for customers in the Pre-Approved Transactions Only category. See below for a discussion of the Company’s net investment in leases and financed sale receivables.

•

All Transactions Suspended — The theater operator is severely delinquent, non-responsive or not negotiating in good faith with the Company. Once a theater operator is classified within the All Transactions Suspended category, the theater is placed on nonaccrual status and all revenue recognitions related to the theater are stopped.

~~The ability~~ of the ~~Company~~outstanding balance, length of time in arrears, and other factors, future transactions may need to ~~collect its accounts receivable balances is heavily dependent on~~be approved by management. These receivables are in better condition than those in the ~~viability~~Pre-Approved Transactions Only category, but are not in as good condition as the receivables in the Good Standing category.

•

Pre-Approved Transactions Only — The theater operator has demonstrated a delay in payments with little or no communication with the Company. All services and solvency of individual theater operators which is significantly influenced by consumer behavior and general economic conditions. Theater operators, or other customers, may experience financial difficulties, such as those caused by the COVID-19 global pandemic, that could result in their being unable to fulfill their payment obligationsshipments to the theater operator must be reviewed and approved by management. These receivables are in better condition than those in the All Transactions Suspended category, but are not in as good condition as the receivables in the Credit Watch category. In certain situations, a theater operator may be placed on nonaccrual status and all revenue recognition related to the theater may be suspended, including the accretion of Finance Income for Financing Receivables.

•

During the period when the accretion of Finance Income is suspended for Financing Receivables, any payments received from a customer are applied against the outstanding balance owed. If payments are sufficient to cover any unreserved receivables, a reversal of the provision is recorded to the extent of the residual cash received. Once the collectability issues are resolved and the customer has returned to being in good standing, the Company will resume recognition of Finance Income.

When a customer's aging exceeds 90 days, the Company's policy is to perform an enhanced review to assess collectability of the theater's past due accounts. The over 90 days past due category may be an indicator of potential impairment as up to 90 days outstanding is considered to be a reasonable time to resolve any issues.

The Company develops ~~its~~an estimate of expected credit losses by class of receivable and customer type through a calculation that utilizes historical loss rates, which are then adjusted for specific receivables that are judged to have a higher-than-normal risk profile after ~~taking into account management’s~~considering management's internal credit quality ~~classifications, as well as~~classifications. Additional credit loss provisions are also recorded taking into account macro-economic and industry risk factors. The write-off of any billed receivable balance requires the approval of management.

On September 7, 2022, Cineworld, the parent company of Regal Entertainment Group, and certain of its subsidiaries and Regal CineMedia Holdings, LLC, filed petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the Southern District of Texas. Based on its evaluation of its contracts with Cineworld, its assessment of the reorganization and its discussions with Cineworld to date, the Company has determined that no additional provision for expected credit losses is required. The Company also does not expect to see a material impact on its network of theaters with Cineworld resulting from this reorganization. There can, however, be no guarantees as to the ultimate outcome of a Chapter 11 proceeding. The Company has an unsecured claim of $11.4 million related to receivables from the entities included in the reorganization proceeding.

Management's judgments regarding expected credit losses are based on the facts available to management and involve estimates about the future. Due to the unprecedented nature of the COVID-19 pandemic, its effect on the Company's customers and their ability to meet their financial obligations to the Company is difficult to predict. As a result, the Company's judgments and associated estimates of credit losses may ultimately prove, with the benefit of hindsight, to be incorrect (see Note 2). The impacts of inflation, and rising interest rates may also impact future credit losses. The Company will continue to monitor for economic trends and conditions and portfolio performance and adjust its allowance for credit loss accordingly.

Accounts Receivable

Accounts receivable principally includes amounts currently due to the Company under theater sale and sales-type lease arrangements, contingent fees owed by theater operators as a result of box office performance, and fees for theater maintenance services. Accounts receivable also includes amounts due to the Company from movie studios and other content creators principally for digitally remastering films into IMAX formats, as well as for film distribution and post-production services.

The following tables summarize the activity in the ~~Allowance~~allowance for ~~Credit Losses~~credit losses related to Accounts Receivable for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

	Three Months Ended September 30, 2021												Nine Months Ended September 30, 2021
(In thousands of U.S. Dollars)	Theater Operators			Studios			Other			Total			Theater Operators			Studios			Other			Total
Beginning balance	$	8,597		$	2,517		$	1,192		$	12,306		$	8,368		$	4,481		$	1,446		$	14,295
Current period reversal, net		(489	)		(251	)		(24	)		(764	)		(111	)		(1,928	)		(269	)		(2,308	)
Write-offs		(43	)		(270	)		—			(313	)		(278	)		(522	)		—			(800	)
Foreign exchange		(89	)		2			—			(87	)		(3	)		(33	)		(9	)		(45	)
Ending balance	$	7,976		$	1,998		$	1,168		$	11,142		$	7,976		$	1,998		$	1,168		$	11,142

	Three Months Ended September 30, 2020												Nine Months Ended September 30, 2020												Three Months Ended September 30, 2022												Nine Months Ended September 30, 2022
(In thousands of U.S. Dollars)	Theater Operators			Studios			Other			Total			Theater Operators			Studios			Other			Total			Theater Operators			Studios			Other			Total			Theater Operators			Studios			Other			Total
Beginning balance	$	6,317		$	5,455		$	838		$	12,610		$	3,302		$	893		$	942		$	5,137		$	10,704		$	1,744		$	907		$	13,355		$	8,867		$	1,994		$	1,085		$	11,946
Current period provision (reversal), net		1,623			(262	)		468			1,829			4,718			4,424			364			9,506			211			30			382			623			2,326			(68	)		598			2,856
Write-offs		(614	)		—			—			(614	)		(614	)		—			—			(614	)		—			(4	)		—			(4	)		(43	)		(128	)		(394	)		(565	)
Foreign exchange		133			184			(9	)		308			53			60			(9	)		104			(216	)		(21	)		—			(237	)		(451	)		(49	)		—			(500	)
Ending balance	$	7,459		$	5,377		$	1,297		$	14,133		$	7,459		$	5,377		$	1,297		$	14,133		$	10,699		$	1,749		$	1,289		$	13,737		$	10,699		$	1,749		$	1,289		$	13,737

																									Three Months Ended September 30, 2021												Nine Months Ended September 30, 2021
(In thousands of U.S. Dollars)																									Theater Operators			Studios			Other			Total			Theater Operators			Studios			Other			Total
Beginning balance																									$	8,597		$	2,517		$	1,192		$	12,306		$	8,368		$	4,481		$	1,446		$	14,295
Current period reversal, net																										(489	)		(251	)		(24	)		(764	)		(111	)		(1,928	)		(269	)		(2,308	)
Write-offs																										(43	)		(270	)		—			(313	)		(278	)		(522	)		—			(800	)
Foreign exchange																										(89	)		2			—			(87	)		(3	)		(33	)		(9	)		(45	)
Ending balance																									$	7,976		$	1,998		$	1,168		$	11,142		$	7,976		$	1,998		$	1,168		$	11,142

For the three months ended September 30, 2022, the Company's allowance for current expected credit losses related to Accounts Receivable increased by $0.4 million, principally due to the provision for certain receivables partially offset by foreign currency exchange rate movements. For the three months ended September 30, 2022, the Company recorded write-downs of $0.1 million directly to Credit Loss Expenses in the Company's Condensed Consolidated Statements of Operations for Studio-related receivables for which the Company did not have a previously established provision. For the nine months ended September 30, 2022, the Company's allowance for current expected credit losses related to Accounts Receivable increased by $1.8 million, principally due to reserves established against its receivables in Russia due to uncertainties associated with the ongoing Russia-Ukraine conflict, partially offset by the reversal of provisions associated with the COVID-19 pandemic as the outlook for the theatrical exhibition industry in Domestic and Rest of World markets continues to improve.

For the three and nine months ended September 30, 2021, the ~~Company’s~~Company's allowance for current expected credit losses related to Accounts Receivable decreased by ~~$1.2~~$1.2 million and ~~$3.2~~$3.2 million, ~~respectively. These decreases are~~respectively, principally due to the reversal of previously recorded credit loss expense as a result of an improving outlook for theater operators following the reopening of theaters and the resumption of normal film release schedules as the theatrical exhibition industry ~~continues~~began to recover from the COVID-19 global pandemic, as well as better than anticipated collection experience with respect to foreign theater and studio receivable balances.

For the three and nine months ended September 30, 2020, the Company’s allowance for current expected credit losses related to Accounts Receivable increased by $1.5 million and $9.0 million, respectively, principally reflecting a reduction in the credit quality of and heightened collection risk associated with theater and foreign movie studio accounts receivable primarily due to the COVID-19 global pandemic.

Management believes that the September 30, 2021 allowance for current expected credit losses related to Accounts Receivable adequately addresses the risk of not collecting these receivables in full. Management’s judgments regarding expected credit losses are based on the facts available to management and involve estimates about the future. Due to the unprecedented nature of the COVID-19 pandemic, its effect on the Company’s customers and their ability to meet their financial obligations to the Company is difficult to predict. As a result, the Company’s judgments and associated estimates of credit losses may ultimately prove, with the benefit of hindsight, to be incorrect (see Note 2).

Financing Receivables

Financing receivables are due from theater operators and consist of the ~~Company’s~~Company's net investment in sales-type leases and receivables associated with financed sales of IMAX Theater Systems. Similar to accounts receivable, management performs an initial credit evaluation prior to entering into an arrangement with a customer and then regularly monitors the credit quality of each customer through an analysis of collections history and aging. This monitoring process includes meetings on at least a monthly basis to identify credit concerns and potential changes in credit quality classification. A customer may improve their credit quality classification once a substantial payment is made on an overdue balance or when the customer has agreed to a payment plan and payments have commenced in accordance with that plan. Changes in credit quality classification are dependent upon management approval. The internal credit quality classifications utilized by the Company for accounts receivable, as described above, are also used for financing receivables.

The ability of the Company to collect its financing receivable balances is heavily dependent on the viability and solvency of individual theater operators which is significantly influenced by consumer behavior and general economic conditions. Theater operators may experience financial difficulties, such as those caused by the COVID-19 global pandemic, that could result in their being unable to fulfill their payment obligations to the Company.

The Company develops its estimate of credit losses by class of receivable and customer type through a calculation that utilizes historical loss rates which are then adjusted for specific receivables that are judged to have a higher-than-normal risk profile after taking into account management’s internal credit quality classifications, as well as macro-economic and industry risk factors.

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, financing receivables consist of the following:


	September 30,			December 31,			September 30,			December 31,
(In thousands of U.S. Dollars)	2021			2020			2022			2021
Net investment in leases
Gross minimum payments due under sales-type leases	$	23,284		$	20,830		$	26,322		$	29,953
Unearned finance income		(788	)		(859	)		(661	)		(763	)
Present value of minimum payments due under sales-type leases		22,496			19,971			25,661			29,190
Allowance for credit losses		(494	)		(557	)		(670	)		(798	)
Net investment in leases		22,002			19,414			24,991			28,392
Financed sales receivables
Gross minimum payments due under financed sales		150,964			150,917			137,586			152,315
Unearned finance income		(32,199	)		(31,247	)		(29,000	)		(34,244	)
Present value of minimum payments due under financed sales		118,765			119,670			108,586			118,071
Allowance for credit losses		(5,565	)		(7,274	)		(10,959	)		(5,414	)
Net financed sales receivables		113,200			112,396			97,627			112,657
Total financing receivables	$	135,202		$	131,810		$	122,618		$	141,049

Net financed sales receivables due within one year	$	32,154		$	34,937		$	30,360		$	29,115
Net financed sales receivables due after one year		81,046			77,459			67,267			83,542
Total financed sales receivables	$	113,200		$	112,396		$	97,627		$	112,657

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the weighted-average remaining lease term and weighted-average interest rate associated with the ~~Company’s~~Company's sales-type lease arrangements and financed sale receivables, as applicable, are as follows:


		September 30,			December 31,				September 30,			December 31,
		2021			2020				2022			2021
Weighted-average remaining lease term (in years)	Weighted-average remaining lease term (in years)							Weighted-average remaining lease term (in years)
Sales-type lease arrangements			9.0			8.3				8.8			9.6
Weighted-average interest rate
Sales-type lease arrangements			6.55	%		6.56	%			6.83	%		6.56	%
Financed sales receivables			8.75	%		8.92	%			8.82	%		8.79	%

The tables below provide information on the ~~Company’s~~Company's net investment in leases by credit quality indicator as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The amounts disclosed for each credit quality classification are determined on a customer-by-customer basis and include both billed and unbilled amounts.


(In thousands of U.S. Dollars)	By Origination Year
As of September 30, 2022	2022		2021		2020		2019		2018		Prior		Total
Net investment in leases:
Credit quality classification:
In good standing	$	1,027	$	9,855	$	3,570	$	7,171	$	1,939	$	1,273	$	24,835
Credit Watch		—		—		—		—		425		—		425
Pre-approved transactions		—		—		—		—		—		—		—
Transactions suspended		—		—		—		—		—		401		401
Total net investment in leases	$	1,027	$	9,855	$	3,570	$	7,171	$	2,364	$	1,674	$	25,661

(In thousands of U.S. Dollars)	By Origination Year
As of December 31, 2021	2021		2020		2019		2018		2017		Prior		Total
Net investment in leases:
Credit quality classification:
In good standing	$	11,030	$	3,991	$	7,973	$	2,574	$	823	$	1,928	$	28,319
Credit Watch		—		—		—		—		—		—		—
Pre-approved transactions		—		—		—		—		—		—		—
Transactions suspended		—		—		—		—		—		871		871
Total net investment in leases	$	11,030	$	3,991	$	7,973	$	2,574	$	823	$	2,799	$	29,190

(In thousands of U.S. Dollars)

By Origination Year

As of September 30, 2021

2021

2020

2019

2018

2017

Prior

Total

Net investment in leases:

Credit quality classification:

In good standing

$
959

$
2,747

$
2,245

$
—

$
—

$
1,150

$
7,101

Credit Watch

3,374

1,251

5,650

2,533

881

863

14,552

Pre-approved transactions

—

—

—

—

—

—

—

Transactions suspended

—

—

—

—

—

843

843

Total net investment in leases

$
4,333

$
3,998

$
7,895

$
2,533

$
881

$
2,856

$
22,496

(In thousands of U.S. Dollars)

By Origination Year

As of December 31, 2020

2020

2019

2018

2017

2016

Prior

Total

Net investment in leases:

Credit quality classification:

In good standing

$
2,143

$
1,190

$
2,730

$
—

$
—

$
1,826

$
7,889

Credit Watch

2,005

7,278

—

988

—

1,047

11,318

Pre-approved transactions

—

—

—

—

—

—

—

Transactions suspended

—

—

—

—

—

764

764

Total net investment in leases

$
4,148

$
8,468

$
2,730

$
988

$
—

$
3,637

$
19,971

The tables below provide information on the ~~Company’s~~Company's financed sale receivables by credit quality indicator as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The amounts disclosed for each credit quality classification are determined on a customer-by-customer basis and include both billed and unbilled amounts.


(In thousands of U.S. Dollars)	By Origination Year
As of September 30, 2022	2022		2021		2020		2019		2018		Prior		Total
Financed sales receivables:
Credit quality classification:
In good standing	$	4,517	$	10,506	$	7,659	$	8,466	$	11,248	$	44,289	$	86,685
Credit Watch		16		—		1		—		—		1,399		1,416
Pre-approved transactions		—		283		—		1,216		329		7,056		8,884
Transactions suspended		—		661		142		1,172		1,201		8,425		11,601
Total financed sales receivables	$	4,533	$	11,450	$	7,802	$	10,854	$	12,778	$	61,169	$	108,586

(In thousands of U.S. Dollars)	By Origination Year
As of December 31, 2021	2021		2020		2019		2018		2017		Prior		Total
Financed sales receivables:
Credit quality classification:
In good standing	$	12,520	$	8,251	$	10,593	$	13,278	$	12,615	$	47,950	$	105,207
Credit Watch		—		—		—		—		321		1,292		1,613
Pre-approved transactions		—		—		743		418		2,098		3,650		6,909
Transactions suspended		—		—		335		—		680		3,327		4,342
Total financed sales receivables	$	12,520	$	8,251	$	11,671	$	13,696	$	15,714	$	56,219	$	118,071

The balance of financed sale receivables classified within the Transactions Suspended category as of September 30, 2022 includes amounts due from exhibitors in Russia, Ukraine, and Belarus which were reclassified from other credit quality classifications in the first quarter of 2022 as a result of the ongoing Russia-Ukraine conflict.

(In thousands of U.S. Dollars)

By Origination Year

As of September 30, 2021

2021

2020

2019

2018

2017

Prior

Total

Financed sales receivables:

Credit quality classification:

In good standing

$
6,311

$
4,414

$
5,733

$
3,831

$
5,890

$
17,830

$
44,009

Credit Watch

1,911

4,108

6,046

9,847

7,733

35,739

65,384

Pre-approved transactions

—

—

—

309

1,420

2,285

4,014

Transactions suspended

—

—

—

—

1,315

4,043

5,358

Total financed sales receivables

$
8,222

$
8,522

$
11,779

$
13,987

$
16,358

$
59,897

$
118,765

(In thousands of U.S. Dollars)

By Origination Year

As of December 31, 2020

2020

2019

2018

2017

2016

Prior

Total

Financed sales receivables:

Credit quality classification:

In good standing

$
6,830

$
5,480

$
3,547

$
3,740

$
5,072

$
12,660

$
37,329

Credit Watch

1,986

6,501

11,356

12,520

11,446

34,351

78,160

Pre-approved transactions

—

—

—

—

613

755

1,368

Transactions suspended

—

—

—

987

728

1,098

2,813

Total financed sales receivables

$
8,816

$
11,981

$
14,903

$
17,247

$
17,859

$
48,864

$
119,670

The following tables provide an aging analysis for the ~~Company’s~~Company's net investment in leases and financed sale receivables as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


	As of September 30, 2022
(In thousands of U.S. Dollars)	Accrued and Current		30-89 Days		90+ Days		Billed		Unbilled		Recorded Receivable		Allowance for Credit Losses			Net
Net investment in leases	$	235	$	192	$	2,066	$	2,493	$	23,168	$	25,661	$	(670	)	$	24,991
Financed sales receivables		1,441		1,086		11,469		13,996		94,590	$	108,586		(10,959	)		97,627
Total	$	1,676	$	1,278	$	13,535	$	16,489	$	117,758	$	134,247	$	(11,629	)	$	122,618

	As of December 31, 2021
(In thousands of U.S. Dollars)	Accrued and Current		30-89 Days		90+ Days		Billed		Unbilled		Recorded Receivable		Allowance for Credit Losses			Net
Net investment in leases	$	225	$	156	$	1,267	$	1,648	$	27,542	$	29,190	$	(798	)	$	28,392
Financed sales receivables		1,750		989		8,378		11,117		106,954		118,071		(5,414	)		112,657
Total	$	1,975	$	1,145	$	9,645	$	12,765	$	134,496	$	147,261	$	(6,212	)	$	141,049

As of September 30, 2021

(In thousands of U.S. Dollars)

Accrued
and
Current

30-89
Days

90+
Days

Billed

Unbilled

Recorded
Receivable

Allowance
for Credit
Losses

Net

Net investment in leases

$
221

$
149

$
876

$
1,246

$
21,250

$
22,496

$
(494
)

$
22,002

Financed sales receivables

1,989

1,748

10,207

13,944

104,821

118,765

(5,565
)

113,200

Total

$
2,210

$
1,897

$
11,083

$
15,190

$
126,071

$
141,261

$
(6,059
)

$
135,202

As of December 31, 2020

(In thousands of U.S. Dollars)

Accrued
and
Current

30-89
Days

90+
Days

Billed

Unbilled

Recorded
Receivable

Allowance
for Credit
Losses

Net

Net investment in leases

$
298

$
180

$
689

$
1,167

$
18,804

$
19,971

$
(557
)

$
19,414

Financed sales receivables

3,307

1,943

10,699

15,949

103,721

119,670

(7,274
)

112,396

Total

$
3,605

$
2,123

$
11,388

$
17,116

$
122,525

$
139,641

$
(7,831
)

$
131,810

The Company considers Financing Receivables with an aging between 60-89 days as indications of theaters with potential collection concerns. At this point, the Company will begin to focus its review on these Financing Receivables and increase its discussions internally and with the theater regarding payment status. Once a theater’s aging exceeds 90 days, the Company’s policy is to perform an enhanced review to assess collectibility of the theater’s past due accounts. The over 90 days past due category may be an indicator of potential impairment as up to 90 days outstanding is considered to be a reasonable time to resolve any issues. Given the potential impacts of the COVID-19 global pandemic on the Company’s customers, management has enhanced its monitoring procedures with respect to overdue receivables.

The following ~~table provides~~tables provide information about the ~~Company’s~~Company's net investment in leases and financed sale receivables with billed amounts past due for which it continues to accrue finance income as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The amounts disclosed for each credit quality classification are determined on a customer-by-customer basis and include both billed and unbilled amounts.


	As of September 30, 2021															As of September 30, 2022
(In thousands of U.S. Dollars)	Accrued and Current		30-89 Days		90+ Days		Billed		Unbilled		Allowance for Credit Losses			Net		Accrued and Current		30-89 Days		90+ Days		Billed		Unbilled		Allowance for Credit Losses			Net
Net investment in leases	$	180	$	144	$	458	$	782	$	13,770	$	(248	)	$	14,304	$	199	$	192	$	2,066	$	2,457	$	18,743	$	(255	)	$	20,945
Financed sales receivables		1,152		1,083		8,286		10,521		51,756		(2,870	)		59,407		1,099		937		9,533		11,569		46,826		(1,333	)		57,062
Total	$	1,332	$	1,227	$	8,744	$	11,303	$	65,526	$	(3,118	)	$	73,711	$	1,298	$	1,129	$	11,599	$	14,026	$	65,569	$	(1,588	)	$	78,007

	As of December 31, 2020															As of December 31, 2021
(In thousands of U.S. Dollars)	Accrued and Current		30-89 Days		90+ Days		Billed		Unbilled		Allowance for Credit Losses			Net		Accrued and Current		30-89 Days		90+ Days		Billed		Unbilled		Allowance for Credit Losses			Net
Net investment in leases	$	231	$	162	$	359	$	752	$	13,912	$	(310	)	$	14,354	$	143	$	132	$	825	$	1,100	$	12,619	$	(176	)	$	13,543
Financed sales receivables		2,026		1,551		10,249		13,826		62,602		(4,434	)		71,994		959		729		6,190		7,878		41,439		(1,413	)		47,904
Total	$	2,257	$	1,713	$	10,608	$	14,578	$	76,514	$	(4,744	)	$	86,348	$	1,102	$	861	$	7,015	$	8,978	$	54,058	$	(1,589	)	$	61,447

The following table provides information about the ~~Company’s~~Company's net investment in leases and financed sale receivables that are on nonaccrual status as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


	As of September 30, 2021							As of December 31, 2020								As of September 30, 2022							As of December 31, 2021
(In thousands of U.S. Dollars)	Recorded Receivable		Allowance for Credit Losses			Net			Recorded Receivable		Allowance for Credit Losses			Net		Recorded Receivable		Allowance for Credit Losses			Net		Recorded Receivable		Allowance for Credit Losses			Net
Net investment in leases	$	843	$	(16	)	$	827		$	764	$	(18	)	$	746	$	401	$	(47	)	$	354	$	871	$	(309	)	$	562
Net financed sales receivables		6,158		(1,276	)		4,882			2,813		(1,482	)		1,331		20,483		(9,653	)		10,830		8,642		(2,357	)		6,285
Total	$	7,001	$	(1,292	)	$	5,709		$	3,577	$	(1,500	)	$	2,077	$	20,884	$	(9,700	)	$	11,184	$	9,513	$	(2,666	)	$	6,847

~~A theater operator~~The balances of net investment in leases and financed sale receivables that ~~is classified within the “All Transactions Suspended” category is~~are on nonaccrual status as of September 30, 2022 include amounts due from exhibitors in Russia, Ukraine, and Belarus which were placed on nonaccrual status ~~and all revenue recognitions related to~~in the ~~theater are stopped. In certain cases,~~first quarter of 2022 as a theater operator classified within the “Pre-Approved Transactions” category may also be placed on nonaccrual status. While the recognition of Finance Income is suspended, payments received by a customer are applied against the outstanding balance owed. If payments are sufficient to cover any unreserved receivables, a recovery of provision taken on the billed amount, if applicable, is recorded to the extentresult of the ~~residual cash received. Once the collectibility issues are resolved and the customer has returned to being in good standing, the Company will resume recognition of Finance Income.~~ongoing Russia-Ukraine conflict.

For the three and nine months ended September 30, ~~2021,~~2022, the Company recognized less than ~~$0.1~~$0.1 million and ~~$0.1~~$0.1 million, respectively, ~~(2020~~(2021 — ~~$nil~~less than $0.1 million and ~~$0.1 million, respectively)~~$0.1 million) in Finance Income related to the net investment in leases with billed amounts past due. For the three and nine months ended September 30, 2022 and 2021, the Company did not recognize Finance Income related to the net investment in leases on nonaccrual status. For the three and nine months ended September 30, 2022, the Company recognized ~~$1.3~~$1.1 million and ~~$3.6~~$3.1 million, respectively, ~~(2020~~(2021 — ~~$1.4~~$1.3 million and ~~$4.2~~$3.6 million, respectively) in Finance Income related to the financed sale receivables with billed amounts past due. For the three and nine months ended September 30, 2022, the Company recognized $0.1 million and $0.4 million, respectively, (2021 — $0.1 million and $0.1 million, respectively) in Finance Income related to the financed sales receivables on nonaccrual status.

The following tables summarize the activity in the allowance for credit losses related to the ~~Company’s~~Company's net investment in leases and financed sale receivables for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


	Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021						Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
	Net Investment			Financed			Net Investment			Financed			Net Investment			Financed			Net Investment			Financed
(In thousands of U.S. Dollars)	in Leases			Sales Receivables			in Leases			Sales Receivables			in Leases			Sales Receivables			in Leases			Sales Receivables
Beginning balance	$	579		$	7,113		$	557		$	7,274		$	688		$	11,038		$	798		$	5,414
Current period reversal, net		(84	)		(1,536	)		(64	)		(1,741	)
Current period (reversal) provision, net														(1	)		72			(95	)		5,847
Write-offs														—			—			—			—
Foreign exchange		(1	)		(12	)		1			32			(17	)		(151	)		(33	)		(302	)
Ending balance	$	494		$	5,565		$	494		$	5,565		$	670		$	10,959		$	670		$	10,959

	Three Months Ended September 30, 2020						Nine Months Ended September 30, 2020						Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
	Net Investment			Net Financed			Net Investment			Net Financed			Net Investment			Net Financed			Net Investment			Net Financed
(In thousands of U.S. Dollars)	in Leases			Sales Receivables			in Leases			Sales Receivables			in Leases			Sales Receivables			in Leases			Sales Receivables
Beginning balance	$	459		$	3,709		$	155		$	915		$	579		$	7,113		$	557		$	7,274
Current period provision		105			1,201			409			4,014
Current period reversal, net														(84	)		(1,536	)		(64	)		(1,741	)
Write-offs		(69	)		(330	)		(69	)		(330	)		—			—			—			—
Foreign exchange		9			63			9			44			(1	)		(12	)		1			32
Ending balance	$	504		$	4,643		$	504		$	4,643		$	494		$	5,565		$	494		$	5,565

For the three and nine months ended September 30, ~~2021,~~2022, the ~~Company’s~~Company's allowance for current expected credit losses related to its net investment in leases and financed sale receivables decreased by ~~$1.6~~$0.1 million and ~~$1.8~~increased by $5.4 million, respectively. ~~These decreases are principally due to~~The increase in the reversal of previously recorded credit loss expense as a result of an improving outlook for theater operators following the reopening of theaters and the resumption of normal film release schedules as the theatrical exhibition industry continues to recover from the COVID-19 global pandemic.

~~For the three and~~ nine months ended September 30, ~~2020, the Company’s allowance for current expected credit losses related~~2022 is principally due to reserves established against its ~~investment~~receivables in ~~leases and financed sale receivables increased by $1.0 million and $4.1 million, respectively, principally reflecting a reduction in the credit quality of and heightened collection risk~~Russia due to uncertainties associated with ~~these receivables primarily due to~~ the ~~COVID-19 global pandemic.~~

~~Management believes that~~ongoing Russia-Ukraine conflict, partially offset by the ~~September 30, 2021 allowance for current expected credit losses related to Financing Receivables adequately addresses the risk~~reversal of not collecting these receivables in full. Management’s judgments regarding expected credit losses are based on the facts available to management and involve estimates about the future. Due to the unprecedented nature ofprovisions associated with the COVID-19 pandemic ~~its effect on~~as the ~~Company’s customers~~outlook for the theatrical exhibition industry in Domestic and ~~their ability~~Rest of World markets continues to meet their financial obligations to the Company is difficult to predict. As a result, the Company’s judgments and associated estimates of credit losses may ultimately prove, with the benefit of hindsight, to be incorrect (see Note 2).improve.

Variable Consideration Receivables

In sale arrangements, variable consideration may become due to the Company from theater operators if certain annual minimum box office receipt thresholds are exceeded. Such variable consideration is recorded as revenue in the period when the sale is recognized and adjusted in future periods based on actual results and changes in estimates. Variable consideration is only recognized to the extent the Company believes there is not a risk of significant revenue reversal.

The ability of the Company to collect its variable consideration receivables is heavily dependent on the viability and solvency of individual theater operators which is significantly influenced by consumer behavior and general economic conditions. Theater operators may experience financial difficulties, such as those caused by the COVID-19 global pandemic, that could result in their being unable to fulfill their payment obligations to the Company.18

The Company develops its estimate of credit losses by class of receivable and customer type through a calculation utilizing historical loss rates for financed sale receivables which are then adjusted for specific receivables that are judged to have a higher-than-normal risk profile after taking into account management’s internal credit quality classifications, as well as macro-economic and industry risk factors.

The following table summarizes the activity in the ~~Allowance~~allowance for ~~Credit Losses~~credit losses related to Variable Consideration Receivables for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


	Three Months Ended September 30,					Nine Months Ended September 30,					Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020		2021			2020		2022			2021			2022			2021
(In thousands of U.S. Dollars)	Theater Operators			Theater Operators		Theater Operators			Theater Operators		Theater Operators			Theater Operators			Theater Operators			Theater Operators
Beginning balance	$	2,028		$	863	$	1,887		$	—	$	501		$	2,028		$	1,082		$	1,887
Current period (reversal) provision, net		(933	)		790		(771	)		1,653
Foreign Exchange		(1	)		6		(22	)		6
Current period provision (reversal), net												57			(933	)		(515	)		(771	)
Write-offs												—			—			—			—
Foreign exchange												(24	)		(1	)		(33	)		(22	)
Ending balance	$	1,094		$	1,659	$	1,094		$	1,659	$	534		$	1,094		$	534		$	1,094

For the three and nine months ended September 30, ~~2021,~~2022, the ~~Company’s~~Company's allowance ~~for current expected credit losses related to~~ ~~Variable Consideration Receivables~~ decreased by $0.9 million and $0.8 million, respectively. These decreases are principally due to the reversal of previously recorded credit loss expense as a result of an improving outlook for theater operators following the reopening of theaters and the resumption of normal film release schedules as the theatrical exhibition industry begins to recover from the COVID-19 global pandemic.

~~For the three and nine months ended September 30, 2020, the Company’s allowance~~ for current expected credit losses related to Variable Consideration Receivables increased by less than $ ~~$0.8~~0.1 million and ~~$1.7~~decreased by $0.5 million, ~~respectively, principally reflecting a reduction~~respectively. The decrease in the ~~credit quality of and heightened collection risk associated with Variable Consideration Receivables primarily~~nine months ended September 30, 2022 is principally due to the ~~COVID-19 global pandemic.~~

~~Management believes that the September 30, 2021 allowance for current expected credit losses related to Variable Consideration Receivables adequately addresses the risk~~reversal of not collecting these receivables in full. Management’s judgments regarding expected credit losses are based on the facts available to management and involve estimates about the future. Due to the unprecedented nature ofprovisions associated with the COVID-19 pandemic ~~its effect on~~as the ~~Company’s customers~~outlook for the theatrical exhibition industry in Domestic and ~~their ability~~Rest of World markets continues to ~~meet their financial obligations to the Company is difficult to predict. As~~improve.

6. Lease Arrangements

(a)

IMAX Corporation as a ~~result, the Company’s judgments and associated estimates of credit losses may ultimately prove, with the benefit of hindsight, to be incorrect (see Note 2).~~

Lessee

~~5. Lease Arrangements~~

~~(a)~~

~~IMAX Corporation as a Lessee~~

The ~~Company’s~~Company's operating lease arrangements principally involve office and warehouse space. Office equipment is generally purchased outright. Leases with an initial term of less than 12 months are not recorded on the Condensed Consolidated Balance Sheets and the related lease expense is recognized on a straight-line basis over the lease term. Most of the ~~Company’s~~Company's leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years or more. The Company has determined that it is reasonably certain that the renewal options on its warehouse leases will be exercised based on previous history, its current understanding of future business needs and its level of investment in leasehold improvements, among other factors.The incremental borrowing rate used in the calculation of the ~~Company’s~~Company's lease ~~liability~~liabilities is based on the location of each leased property. ~~NaN~~None of the ~~Company’s~~Company's leases include options to purchase the leased property. The depreciable lives of right-of-use assets and related leasehold improvements are limited by the expected lease term. The ~~Company’s~~Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company rents or subleases certain office space to third parties, which have a remaining term of less than 1215 months and are not expected to be renewed.

In the second quarter of 2022, the Company entered into a finance lease arrangement involving equipment used to facilitate the streaming of live events to IMAX theaters. The lease arrangement includes an option for the Company to purchase the equipment at the end of the lease term that is reasonably certain to be exercised. The resulting right-of-use assets are being depreciated from the lease commencement dates over the useful life of the underlying equipment. The incremental borrowing rate used in the calculation of the lease liabilities is based on the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar term.

For the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the components of lease expense recorded within Selling, General and Administrative expenses are as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands of U.S. Dollars)	2022		2021		2022		2021
Operating lease cost:
Amortization of operating lease assets	$	602	$	684	$	1,964	$	2,098
Interest on operating lease liabilities		194		242		610		715
Short-term and variable lease costs		144		163		472		546
Finance lease cost:
Amortization of finance lease assets		75	N/A			75	N/A
Interest on finance lease liabilities		9	N/A			9	N/A
Total lease cost	$	1,024	$	1,089	$	3,130	$	3,359

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands of U.S. Dollars)
2021

2020

2021

2020

Operating lease cost ⁽¹⁾
$
163

$
133

$
546

$
392

Amortization of lease assets

684

706

2,098

2,155

Interest on lease liabilities

242

258

715

765

Total lease cost
$
1,089

$
1,097

$
3,359

$
3,312

~~(1)~~

~~Includes short-term leases and variable lease costs, which are not significant for the three and nine months ended September 30, 2021 and 2020.~~

For the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, supplemental cash and non-cash information related to leases is as follows:


	Nine Months Ended September 30,
(In thousands of U.S. Dollars)		2022			2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating leases	$		2,554	$		2,907
Finance leases			890		N/A
Supplemental disclosure of noncash leasing activities:
Right-of-use assets obtained in exchange for operating lease obligations	$		2,997	$		1,047
Right-of-use assets obtained in exchange for finance lease obligations			1,882		N/A

Nine Months Ended

September 30,

(In thousands of U.S. Dollars)

2021

2020

Cash paid for amounts included in the measurement of lease liabilities
$

2,907

$

2,721

Right-of-use assets obtained in exchange for lease obligations
$

1,047

$

297

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, supplemental balance sheet information related to leases is as follows:


		September 30,		December 31,
(In thousands of U.S. Dollars)		2022		2021
Assets	Balance Sheet Location
Operating lease right-of-use assets	Property, plant and equipment	$	13,092	$	12,132
Finance lease right-of-use assets	Property, plant and equipment		1,805	N/A
Liabilities	Balance Sheet Location
Operating lease liabilities	Accrued and other liabilities	$	15,373	$	14,691
Finance lease liabilities(1)	Accrued and other liabilities		889	N/A

September 30,

December 31,

(In thousands of U.S. Dollars)

2021

2020

Assets
Balance Sheet Classification

Right-of-Use Assets
Property, plant and equipment

$
12,833

$
13,911

Liabilities
Balance Sheet Classification

Operating Leases
Accrued and other liabilities

$
15,388

$
16,634

(1)

Recorded net of a $0.9 million upfront payment made upon execution of the finance lease arrangement.

		September 30,			December 31,
		2021			2020				September 30,			December 31,
									2022			2021
Operating leases:								Operating leases:
Weighted-average remaining lease term (years)	Weighted-average remaining lease term (years)		7.0			7.6		Weighted-average remaining lease term (years)		6.1			7.0
Weighted-average discount rate			5.96	%		5.91	%	Weighted-average discount rate		5.91	%		5.97	%
Finance leases:								Finance leases:
Weighted-average remaining lease term (years)								Weighted-average remaining lease term (years)		5.0		N/A
Weighted-average discount rate								Weighted-average discount rate		6.00	%	N/A

As of September 30, ~~2021,~~2022, the maturities of the ~~Company’s~~Company's operating and finance lease liabilities are as follows:


(In thousands of U.S. Dollars)				Operating Leases			Finance Leases
2021 (three months remaining)	$	924
2022		3,360
2022 (three months remaining)				$	970		$	—
2023		2,454			3,441			480
2024		2,230			2,986			480
2025		2,078			2,410			—
2026					2,062			—
Thereafter		8,026			6,475			—
Total lease payments	$	19,072		$	18,344		$	960
Less: interest expense		(3,684	)		(2,971	)		(71	)
Present value of operating lease liabilities	$	15,388
Present value of lease liabilities				$	15,373		$	889

~~(b)~~

~~IMAX Corporation as a Lessor~~

(b)

IMAX Corporation as a Lessor

The Company provides IMAX Theater Systems to customers through long-term lease arrangements that for accounting purposes are classified as sales-type leases. Under these arrangements, in exchange for providing the IMAX Theater System, the Company earns fixed upfront and ongoing consideration. Certain arrangements that are legal sales are also classified as sales-type leases as certain clauses within the arrangements limit transfer of title or provide the Company with conditional rights to the system. The ~~customer’s~~customer's rights under the ~~Company’s~~Company's sales-type lease arrangements are described in Note ~~3(n)~~3(p) of the Company's audited Consolidated Financial Statements included in ~~the Company’s 2020~~its 2021 Form 10-K. Under the ~~Company’s~~Company's sales-type lease arrangements, the customer has the ability and the right to operate the hardware components or direct others to operate them in a manner determined by the customer. The ~~Company’s~~Company's lease portfolio terms are typically non-cancellable for 10 to 20 years with renewal provisions from inception. The ~~Company’s~~Company's sales-type lease arrangements do not contain a guarantee of residual value at the end of the lease term. The customer is required to pay for executory costs such as insurance and taxes and is required to pay the Company for maintenance and an extended warranty generally after the first year of the lease until the end of the lease term. The customer is responsible for obtaining insurance coverage for the IMAX Theater System commencing on the date specified in the ~~arrangement’s~~arrangement's shipping terms and ending on the date the IMAX Theater System is returned to the Company.

The Company also provides IMAX Theater Systems to customers through joint revenue sharing arrangements. Under the traditional form of these arrangements, in exchange for providing the IMAX Theater System under a long-term lease, the Company earns rent based on a percentage of contingent box office receipts and, in some cases, concession revenues, rather than requiring the customer to pay a fixed upfront fee or annual minimum payments. Under certain other joint revenue sharing arrangements, known as hybrid arrangements, the customer is responsible for making fixed upfront payments prior to the delivery and installation of the IMAX Theater System. Under joint revenue sharing arrangements, the customer has the ability and the right to operate the hardware components or direct others to operate them in a manner determined by the customer. The ~~Company’s~~Company's joint revenue sharing arrangements are typically non-cancellable for 10 years or longer with renewal provisions. Title to the IMAX Theater System under a joint revenue sharing arrangement generally does not transfer to the customer. The ~~Company’s~~Company's joint revenue sharing arrangements do not contain a guarantee of residual value at the end of the lease term. The customer is required to pay for executory costs such as insurance and taxes and is required to pay the Company for maintenance and an extended warranty throughout the term. The customer is responsible for obtaining insurance coverage for the IMAX Theater System commencing on the date specified in the ~~arrangement’s~~arrangement's shipping terms and ending on the date the IMAX Theater System is returned to the Company.

The following lease payments are expected to be received by the Company for its sales-type leases and joint revenue sharing arrangements in each of the next five years and thereafter following the September 30, 2022 balance sheet date:


	Sales-Type		Joint Revenue
(In thousands of U.S. Dollars)	Leases		Sharing Arrangements
2022 (three months remaining)	$	948	$	47
2023		2,897		128
2024		2,871		—
2025		2,723		—
2026		2,472		—
Thereafter		14,411		—
Total	$	26,322	$	175

(See Note 45 for additional information related to the net investment in leases related to the ~~Company’s~~Company's sales-type lease arrangements.)

7. Inventories

~~6. Inventories~~

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, Inventories consist of the following:


	September 30,		December 31,		September 30,		December 31,
(In thousands of U.S. Dollars)	2021		2020		2022		2021
Raw materials	$	27,172	$	30,096	$	28,386	$	20,551
Work-in-process		1,964		3,014		3,530		1,406
Finished goods		9,109		6,470		4,462		4,967
	$	38,245	$	39,580	$	36,378	$	26,924

AtAs of September 30, ~~2021,~~2022, Inventories include finished goods of ~~$2.2~~$3.2 million (December 31, ~~2020~~2021 — ~~$2.1~~$2.6 million) for which title had passed to the customer, but the criteria for revenue recognition were not met as of the balance sheet date.

During the three and nine months ended September 30, 2022, the Company recorded write-downs of $0.2 million and $0.5 million, respectively, in Costs and Expenses Applicable to Technology Sales. The write-downs recorded during the three and nine months ended September 30, 2022 include $0.2 million related to excess and damaged inventory. In addition, for the nine months ended September 30, 2022, write-downs include $0.3 million recorded to reduce the carrying value of service parts held in Russia. In the three and nine months ended September 30, 2021, the Company ~~recognized~~recorded write-downs of ~~$0.3~~$0.3 million and ~~$0.5~~$0.5 million, respectively, ~~(2020 — $0.6 million~~in Costs and ~~$0.7 million, respectively)~~Expenses Applicable to Technology Sales for excess and damaged inventory.

~~7. Debt~~8. Borrowings

(a)

Revolving Credit Facility Borrowings, Net

~~(a)~~

~~Revolving Credit Facility Borrowings~~

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, Revolving Credit Facility Borrowings, ~~consist of~~Net includes the following:


	September 30,			December 31,			September 30,			December 31,
(In thousands of U.S. Dollars)	2021			2020			2022			2021
Credit Facility borrowings	$	—		$	300,000		$	—		$	—
Working Capital Facility borrowings		10,974			7,643
Bank of China Facility borrowings								367			3,612
HSBC China Facility borrowings								4,396			—
Unamortized debt issuance costs		(1,488	)		(1,967	)		(2,103	)		(1,140	)
Revolving Credit Facility Borrowings, net	$	9,486		$	305,676		$	2,660		$	2,472

Credit Agreement

~~The~~On March 25, 2022, the Company ~~has~~entered into a ~~credit agreement, the Fifth~~Sixth Amended and Restated Credit Agreement with Wells Fargo Bank, National Association, ~~(“Wells Fargo”),~~ as agent (the "Agent"), and a syndicate of lenders party thereto (the ~~“Credit Agreement”~~"Credit Agreement"), which extended the maturity date of the credit facility under the Credit Agreement (the "Credit Facility") from June 28, 2023 to March 25, 2027. The ~~Company’s~~Company's obligations under the Credit Agreement are guaranteed by certain of ~~its~~the Company's subsidiaries (the ~~“Guarantors”~~"Guarantors"), and are secured by first-priority security interests in substantially all of the assets of the Company and the Guarantors. ~~The facility provided by the Credit Agreement (the “Credit Facility”) matures on June 28, 2023.~~

The Credit Agreement ~~has~~provides for a revolving borrowing capacity of ~~$300.0~~$300.0 million, and also contains an uncommitted accordion feature allowing the Company to ~~further expand its~~request additional borrowing capacity in an amount equal to ~~$440.0~~the greater of $440.0 million and the EBITDA of the Company for the four most recently ended fiscal quarters, in the form of revolving loans and/or ~~greater,~~term loans under the incremental facility and subject to ~~certain~~ conditions ~~depending on~~set forth in the ~~mix of revolving and term loans comprising the incremental facility.~~Credit Agreement.

~~In the first quarter of 2020, in response to uncertainties associated with the outbreak of the COVID-19 global pandemic and its impact on the Company’s business,~~Until the Company ~~drew down $280.0 million in available borrowing capacity~~delivers the compliance certificate and financial statements for the fiscal quarter ended September 30, 2022, loans under the Credit Facility ~~resulting in total outstanding borrowings~~will bear interest, at the Company's option, at (i) with respect to loans on which interest is payable by reference to the Term SOFR, Eurocurrency Rate or CDOR Rate, such rate plus a margin of ~~$300.0 million,~~1.75%; or (ii) with respect to loans on which ~~remained outstanding as~~interest is payable by reference to the U.S. base rate or the Canadian prime rate, such rate plus a margin of ~~December 31, 2020. During~~0.25%.

Following the ~~first half of 2021, the Company completely repaid the $300.0 million of Credit Facility borrowings, using cash on hand following the issuance~~delivery of the ~~Convertible Notes (as discussed below). Accordingly, as of~~compliance certificate and financial statements for the fiscal quarter ended September 30, ~~2021, there were 0 outstanding borrowings~~2022, loans under the Credit ~~Facility. As of September 30, 2021 and December 31, 2020,~~Facility will bear interest, at the ~~Company did 0t have any letters of credit~~Company's option, at (i) Term SOFR, Eurocurrency Rate or ~~advance payment guarantees outstanding under~~CDOR Rate plus a margin ranging from 1.00% to 1.75% per annum; or (ii) the ~~Credit Facility.~~U.S. base rate or the Canadian prime rate plus a margin ranging from 0.25% to 1.00% per annum, in each case depending on the Company's total leverage ratio. In no event will Term SOFR, Eurocurrency Rate or CDOR Rate be less than 0.00% per annum.

The Credit Agreement ~~contains a covenant~~requires that ~~requires~~ the Company to maintain a ~~Senior Secured Net Leverage Ratio (as defined in the Credit Agreement), as~~maximum senior secured net leverage ratio of3.25:1.00, which is tested on the last day of ~~any Fiscal Quarter (as defined in~~each fiscal quarter, commencing with the ~~Credit Agreement) of no greater than 3.25:1.00.~~fiscal quarter ended June 30, 2022. In addition, the Credit Agreement contains customary affirmative and negative covenants, including covenants that limit indebtedness, liens, ~~capital expenditures,~~ asset sales, investments and restricted payments, in each case subject to negotiated exceptions and baskets. The Credit Agreement also contains customary representations, warranties and event of default provisions.

On ~~March 15, 2021,~~May 25, 2022, the Company ~~entered into the Second Amendment~~delivered a "Designated Period" suspension notice to the ~~Credit Agreement (as previously amended by the First Amendment to the Credit Agreement, dated as of June 10, 2020) (collectively, the “First~~Agent, and ~~Secondment Amendments”). On July 28, 2021,~~ the Company, ~~entered into~~ the ~~Third Amendment to~~Agent and the Credit Agreement (as previously amended by the First and Second Amendments) (collectively, the “Amendments”). The Amendments, among other things, (i) suspend the Senior Secured Net Leverage Ratio covenant through the first quarter of 2022, (ii) re-establish the Senior Secured Net Leverage Ratio covenant thereafter, provided that for subsequent quarters that such covenant is tested, as applicable, the Company will be permitted to use its quarterly EBITDA (as defined in the Credit Agreement) from the third and fourth quarters of 2019 in lieu of EBITDA for the corresponding quarters of 2021, (iii) add a $75.0 million minimum liquidity covenant measured at the end of each calendar month, (iv) restrict the Company’s ability to make certain restricted payments, dispositions and investments, create or assume liens and incur debt that would otherwise have been permitted by the Credit Agreement, (v) permit the issuance of the Convertible Notes (as discussed below) and related transactions, including the capped call transactions, or other unsecured debt, in an amount not to exceed $290.0 million, (vi) allow $~~30.0~~ million in permitted repurchases of the Company’s common shares, subject to a $300.0 million pro forma minimum liquidity covenant and (vii) increase permitted repurchases of the common shares of IMAX China Holding, Inc. from $5.0 million to $20.0 million, subject to pro forma compliance with the existing financial covenants set forth in the Credit Agreement. The modifications to the negative covenants, the minimum liquidity covenant, permitted share repurchases and modifications to certain other provisions in the Credit Agreement pursuant to the Amendments are effective until the earlier of the delivery of the compliance certificate for the fourth quarter of 2022 or the date on which the Company, in its sole discretion, elects to calculate its compliance with the Senior Secured Net Leverage Ratio by using either its actual EBITDA or annualized EBITDA (the “Designated Period”). As of September 30, 2021, the Company was in compliance with all of its requirementslenders under the Credit Agreement ~~as amended.~~

~~Borrowings~~entered into a limited consent, which notice and limited consent evidenced and effectuated the termination of the Designated Period under the Credit ~~Facility bear interest, at~~Agreement. From and after 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 from 0.25% to 1.00% per annum, in each case depending on the Company’s Total Leverage Ratio (as defined in the Credit Agreement); provided, however, that from the effective date of the First Amendment to the Credit Agreement until the Company delivers a compliance certificate under the Credit Facility following the endtermination of the Designated Period, the applicable margin for LIBOR borrowings will be 2.50% per annum and the applicable margin for U.S. base rate borrowings will be 1.75% per annum. The effective interest rate for the three and nine months ended September 30, 2021 was nil and 2.64%, respectively (2020 — 2.70% and 2.24%, respectively).

In addition, the Credit Facility has standby fees ranging from 0.25% to 0.38% per annum, based on the Company’s Total Leverage Ratio with respect to the unused portion of the Credit Facility; provided, however, that from the effective date of the First Amendment to$75.0 million minimum liquidity covenant in the Credit Agreement ~~until the Company delivers a compliance certificate under the Credit Facility following the end of the Designated Period, the standby fee will be 0.50% per annum.~~was no longer in effect.

The Company incurred fees of approximately ~~$1.6~~$1.8 million in connection with the ~~Amendments,~~March 2022 amendment of the Credit Agreement, which are being amortized on a straight-line basis ~~to Interest Expense~~ over the ~~relevant amendment periods.~~

~~Working Capital Facility~~

~~On July 1, 2021, IMAX (Shanghai) Multimedia Technology Co., Ltd. (“IMAX Shanghai”), one~~term of the ~~Company’s majority-owned subsidiaries~~Credit Agreement. In the first quarter of 2022, the Company expensed $0.4 million in ~~China, renewed its unsecured revolving facility for up~~unamortized deferred financing costs associated with lenders that are no longer parties to 200.0 million Chinese Renminbi (“RMB”) (approximately $30.8 million) to fund ongoing working capital requirements (the “Working Capital Facility”). The Working Capital Facility expires in July 2022.the Credit Agreement.

As of September 30, ~~2021,~~2022, there were no outstanding ~~Working Capital~~borrowings under the Credit Facility ~~borrowings were RMB 71.2 million ($11.0 million)~~ and ~~outstanding~~the Company did not have any letters of ~~guarantee were RMB 0.3 million (less than $0.1 million).~~credit or advance payment guarantees outstanding under the Credit Facility. As of December 31, ~~2020, outstanding Working Capital Facility borrowings~~2021, there were ~~RMB 49.9 million ($7.6 million)~~no amounts drawn under the previous credit facility, and 0the Company did not have any letters of ~~guarantee were issued. As of September 30, 2021, the amount available for future borrowings~~credit or advance payment guarantees outstanding under the Working Capital Facility was RMB 118.8 million ($18.3 million) and the amount available for letters of guarantee was RMB 9.7 million ($1.5 million). The amount available for future borrowings under the Working Capital Facility is not subject to a standby fee. The effective interest rate for borrowings under the Working Capital Facility for the three and nine months ended September 30, 2021 was 4.29% and 4.32%, respectively (2020 ― 4.35%, respectively).previous credit facility.

~~Wells Fargo~~ Foreign Exchange Facility

Within the Credit Facility, the Company is able to ~~enter into~~purchase foreign currency forward contracts and/or other swap arrangements. As of September 30, ~~2021,~~2022, the net unrealized loss on the ~~Company’s~~Company's outstanding foreign currency forward contracts was ~~$(0.3)~~$(1.6) million, representing the amount by which the notional value of these forward contracts exceeded their fair value (December 31, ~~2020~~2021 — ~~$2.0~~net unrealized gain of $0.1 million). As of September 30, ~~2021,~~2022, the notional value of the ~~Company’s~~Company's outstanding foreign currency forward contracts was ~~$25.8~~$30.8 million (December 31, ~~2020~~2021 — ~~$31.9~~$26.7 million).

Bank of China Facility

In June 2022, IMAX (Shanghai) Multimedia Technology Co., Ltd. ("IMAX Shanghai"), one of the Company's majority-owned subsidiaries in China, renewed its unsecured revolving facility with Bank of China for up to 200.0 million Chinese Renminbi ("RMB") ($28.2 million), including RMB 10.0 million ($1.4 million) for letters of guarantee, to fund ongoing working capital requirements (the "Bank of China Facility"). The Bank of China Facility expires in September 2023.

As of September 30, 2022, RMB 2.6 million ($0.4 million) of borrowings were outstanding under the Bank of China Facility and outstanding letters of guarantee were RMB 2.8 million ($0.4 million). As of December 31, 2021, outstanding Bank of China Facility borrowings were RMB 23.0 million ($3.6 million) and outstanding letters of guarantee were RMB 2.8 million ($0.5 million).

As of September 30, 2022, the amount available for future borrowings under the Bank of China Facility was RMB 187.4 million ($26.4 million) and the amount available for letters of guarantee was RMB 7.2 million ($1.0 million). The amount available for future borrowings under the Bank of China Facility is not subject to a standby fee. The effective interest rate for the three and nine months ended September 30, 2022 was 3.85% and 4.15%, respectively (2021 ― 4.35%).

HSBC China Facility

In June 2022, IMAX Shanghai entered into an unsecured revolving facility for up to RMB 200.0 million ($28.2 million) with HSBC Bank (China) Company Limited, Shanghai Branch to fund ongoing working capital requirements (the "HSBC China Facility"). As of September 30, 2022, RMB 31.2 million ($4.4 million) of borrowings were outstanding under the HSBC China facility. As of September 30, 2022, the amount available for future borrowings under the HSBC China Facility was RMB 168.8 million ($23.8 million). The effective interest rate for the three and nine months ended September 30, 2022 was 3.85% and 3.95%, respectively.

NBC Facility

OnIn October ~~28,~~ 2019, the Company entered into a ~~$5.0~~$5.0 million facility with ~~the~~ National Bank of Canada (the ~~“NBC Facility”~~"NBC Facility") fully insured by Export Development Canada for use solely in conjunction with the issuance of performance guarantees and letters of credit. The NBC Facility is renewed on an annual ~~basis. It~~basis, and it was renewed onin October ~~15, 2021 for a one-year term~~2022 until June 30, 2023 on the same terms and conditions. The Company did 0tnot have any letters of credit or advance payment guarantees outstanding as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 under the NBC Facility.

(b)

Convertible Notes, Net

~~(b)~~

~~Convertible Notes~~

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, Convertible Notes, Net (as defined below) are recorded within Convertible Notes and Other Borrowings, Net on the Company's Condensed Consolidated Balance Sheets and consist of the following:


	September 30,			December 31,		September 30,			December 31,
(In thousands of U.S. Dollars)	2021			2020		2022			2021
Convertible Notes	$	230,000		$	—	$	230,000		$	230,000
Unamortized discounts and debt issuance costs		(6,735	)		—	$	(5,245	)		(6,359	)
	$	223,265		$	—
Convertible Notes, net						$	224,755		$	223,641

On March 19, 2021, the Company issued ~~$230.0~~$230.0 million of ~~0.500%~~0.500% Convertible Senior Notes due 2026 (the ~~“Convertible Notes”~~"Convertible Notes") in a private placement conducted pursuant to Rule 144A under the Securities Act of 1933, as ~~amended~~. amended. The net proceeds from the issuance of the Convertible Notes were ~~$223.7~~$223.7 million, after deducting the initial ~~purchasers’~~purchasers' discounts and commissions. In addition, the Company paid ~~$1.2~~$1.2 million of debt issuance costs associated with the Convertible Notes. The Company used a portion of the net proceeds from the issuance of the Convertible Notes to make a partial repayment of previous outstanding ~~Credit Facility~~revolving credit facility borrowings ~~(as discussed above),~~ and ~~is using~~used the remainder for working capital or other general corporate purposes.

The Convertible Notes are senior unsecured obligations of the Company and bear interest at a rate of ~~0.500%~~0.500% per annum on the principal ~~thereof,~~of $230.0 million, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, ~~2021.~~2021. The Convertible Notes will mature on April 1, 2026, unless they are redeemed or repurchased by the Company or converted on an earlier date.

Holders of the Convertible Notes have the right to convert their Convertible Notes in certain circumstances and during specified periods. Before January 1, 2026, holders of the Convertible Notes have the right to convert their Convertible Notes only upon the occurrence of certain events. From and after January 1, 2026, holders of the Convertible Notes may convert their Convertible Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. Upon conversion, the Company will pay or deliver, as applicable, cash or a combination of cash (in an amount no less than the principal amount of the Convertible Notes being converted) and common shares, at its election, based on the applicable conversion rates. The initial conversion rate is 34.7766 common shares per ~~$1,000~~$1,000 principal amount of Convertible Notes, which represents an initial conversion price of approximately ~~$28.75~~$28.75 per common share, and is subject to adjustment upon the occurrence of certain events.

The Convertible Notes are redeemable, in whole or in part, at the ~~Company’s~~Company's option at any time, and from time to time, on or after April 6, 2024 and on or before the 40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, but only if the last reported sale price per share of the ~~Company’s~~Company's common stock exceeds ~~130%~~130% of the conversion price for a specified period of time. In addition, calling any Convertible Notes for redemption will constitute a ~~“make-whole~~"make-whole fundamental ~~change”~~change" with respect to such notes, in which case the conversion rate applicable to the conversion of such notes will be increased in certain circumstances if such notes are converted after they are called for redemption.

In addition, upon the occurrence of a ~~“fundamental change”~~"fundamental change" (as defined ~~below~~)below), holders may require the Company to repurchase their Convertible Notes at a cash repurchase price equal to the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest, if any. Subject to the terms and conditions of the indenture governing the Convertible Notes, a ~~“fundamental change”~~"fundamental change" means, among other things, an event resulting in (i) a change of control, (ii) a transfer of all or substantially all of the assets of the Company, (iii) a merger, (iv) liquidation or dissolution of the Company, or (v) delisting of the ~~Company’s~~Company's common shares from a national securities exchange.

The Company recorded the Convertible Notes entirely as a liability in the Condensed Consolidated Balance Sheets, net of initial ~~purchasers’~~purchasers' discounts and commissions and other debt issuance costs, with interest expense reflecting the cash coupon plus the amortization of the discounts and capitalized costs. Additionally, ~~ASU 2020-06 modifies~~under the ~~treatment of convertible debt securities that may be settled in cash or shares by requiring the use of the “if-converted” method. Under the “if-converted”~~"if-converted" method, because the principal amount of the Convertible Notes is settled in cash and the conversion spread is settleable in the ~~Company’s~~Company's common shares, diluted earnings per share is calculated by including the net number of incremental shares that would be issued upon conversion of the Convertible Notes, using the average market price during the period. Accordingly, the application of the ~~“if-converted”~~"if-converted" method may reduce the ~~Company’s~~Company's reported diluted earnings per share.

In connection with the pricing of the Convertible Notes, the Company entered into privately negotiated capped call transactions (the ~~“Capped~~"Capped Call ~~Transactions”~~Transactions") with certain financial institutions. The Capped Call Transactions are expected to reduce potential dilution resulting from the common shares the Company is required to issue and/or to offset any potential cash payments the Company is required to make in excess of the principal amount of the Convertible Notes in the event that the market price per share of the ~~Company’s~~Company's common shares is greater than the strike price of the Capped Call Transactions, with such reduction and/or offset subject to a cap. The Capped Call Transactions have an initial cap price of ~~$37.2750~~$37.2750 per share of the ~~Company’s~~Company's common shares, which represents a premium of ~~75%~~75% over the last reported sale price of the common shares when they were priced on March 16, 2021, and isare subject to certain adjustments under the terms of the Capped Call Transactions. Collectively, the Capped Call Transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes, the number of the ~~Company’s~~Company's common shares underlying the Convertible Notes. The cost of the Capped Call Transactions was approximately ~~$19.1~~$19.1 million.

The Capped Call Transactions are separate transactions, ~~and~~ are not part of the terms of the Convertible Notes and will not affect any ~~holder’s~~holder's rights under the Convertible Notes. Holders of the Convertible Notes will not have any rights with respect to the Capped Call Transactions.

The Capped Call Transactions meet all of the applicable criteria for equity classification in accordance with ASC 815-10-15-74(a), ~~“Derivatives~~"Derivatives and Hedging—Embedded Derivatives—Certain Contracts Involving an ~~Entity’s~~Entity's Own Equity,”" and, as a result, the related ~~$19.1~~$19.1 million cost was recorded as a reduction to Other Equity within ~~Shareholders’~~Shareholders' Equity on the ~~Company’s~~Company's Condensed Consolidated Statements of ~~Shareholder’s~~Shareholder's Equity and Condensed Consolidated Balance Sheets.

(c)

Federal Economic Development Loan

SSIMWAVE entered into a contribution agreement with the Federal Economic Development Agency for Southern Ontario (the "Federal Economic Development Loan") on May 29, 2019, under which SSIMWAVE may receive up to $4.2 million Canadian Dollars ("CAD") ($3.1 million) by way of repayable contributions toward certain eligible projects costs. The contributions under the agreement cover 35% of the eligible and supported costs of SSIMWAVE between January 10, 2019 and December 31, 2022. The contributions are repayable over 60 months, with repayments estimated to begin in January 2024, with an annual interest rate of 0%. As at September 30, 2022, SSIMWAVE has received contributions of CAD$3.8 million ($2.8 million) from the Federal Economic Development Loan.

8.The benefit of the interest free loan has been determined by calculating the present value of the payments using a market-based interest rate and comparing this to the proceeds received. The benefit is being recorded as the interest free benefit of government funding within the Condensed Consolidated Statements of Operations. The obligation is being accreted to its maturity amount, resulting in an interest accretion expense in the period. The interest benefit and interest accretion were not material during the three and nine months ended September 30, 2022, as the Company's acquisition of SSIMWAVE was consummated on September 22, 2022.

As of September 30, 2022, the Federal Economic Development Loan has a carrying value of $1.8 million, net of unaccreted interest benefit and is recorded within Convertible Notes and Other Borrowings, Net on the Company's Condensed Consolidated Balance Sheets.

9. Commitments, Contingencies and Guarantees

(a)

Commitments

~~(a)~~

~~Commitments~~

In the ordinary course of its business, the Company enters into contractual agreements with third parties that include non-cancellable payment obligations, for which it is liable in future periods. These arrangements can include terms binding the Company to minimum payments and/or penalties if it terminates the agreement for any reason other than an event of default as described by the agreement.

(b)

Contingencies and guarantees

~~(b)~~

~~Contingencies and guarantees~~

The Company is involved in lawsuits, claims, and proceedings, including those identified below, which arise in the ordinary course of business. Management is required to assess the likelihood of any adverse judgments or outcomes related to these legal contingencies, as well as potential ranges of probable or reasonably possible losses. The Company records a provision for a liability when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The determination of the amount of any liability recorded or disclosed is reviewed at least quarterly based on a careful analysis of each individual exposure with, in some cases, the assistance of outside legal counsel, taking into account the impact of negotiations, settlements, rulings, and other pertinent information related to the case. The amount of liabilities recorded or disclosed for these contingencies may change in the future due to changes in ~~management’s~~management's judgments resulting from new developments or changes in settlement strategy. Any resulting adjustment to the liabilities recorded by the Company could have a material adverse effect on its results of operations, cash flows, and financial position in the period or periods in which such changes in judgment occur. The Company believes it has adequate provisions for any such matters. The Company expenses legal costs relating to its lawsuits, claims and proceedings as incurred.

(i)In January 2004, the Company and IMAX Theatre Services Ltd., a subsidiary of the Company, commenced an arbitration seeking damages before the International Court of Arbitration of the International Chamber of Commerce (the ~~“ICC”~~"ICC") with respect to the breach by Electronic Media Limited ~~(“EML”~~("EML") of its December 2000 agreement with the Company. In June 2004, the Company commenced a related arbitration before the ICC against ~~EML’s~~EML's affiliate, E-City Entertainment (I) PVT Limited ~~(“E-City”~~("E-City"). On March 27, 2008, the arbitration panel issued a final award in favor of the Company in the amount of ~~$11.3~~$11.3 million, consisting of past and future rents owed to the Company, plus interest and costs, as well as an additional ~~$2,512~~$2,512 each day in interest from October 1, 2007 until the date the award is ~~paid.~~paid. In July 2008, E-City commenced a proceeding in Mumbai, India seeking ~~an order that~~to prevent recognition of the ICC award ~~may not be recognized~~ in ~~India and on 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 Supreme Court of India, and on~~India. On March 10, 2017, the Supreme Court ~~set aside the Bombay High Court’s judgment and~~of India dismissed ~~E-City’s~~E-City's petition. On March 29, 2017, the Company filed an Execution Application in the Bombay High Court seeking to enforce the ICC award against E-City and several related parties, which award the Company calculates to be ~~$24.2~~$25.1 million, inclusive of interest, as of September 30, ~~2021.~~2022. That matter is currently pending. The Company has also taken steps to enforce the ICC final award outside of India. In December 2011, the Ontario Superior Court of Justice issued an order recognizing the final award and requiring E-City to pay the Company ~~$30,000~~$30,000 to cover the costs of the application, and in May 2012, the New York Supreme Court recognized the Canadian judgment and entered it as a New York judgment. The Company intends to continue pursuing its rights and seeking to enforce the award, although no assurances can be given with respect to the ultimate outcome.

(ii)On November 11, 2013, Giencourt Investments, S.A. ~~(“Giencourt”~~("Giencourt") initiated arbitration before the International Centre for Dispute Resolution in Miami, Florida, based on alleged breaches by the Company of its theater agreement and related license agreement with Giencourt. 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”~~"Award"), which held that the parties had reached a binding settlement, and therefore the panel did not reach a decision regarding the merits of the dispute. On December 3, 2020, the District Judge entered a final judgment (the ~~“Final Judgment”~~"Final Judgment") against the Company in the total amount of ~~$11.3~~$11.3 million as damages under the Award. As of December 31, 2020, the ~~Company’s~~Company's Consolidated Balance Sheets ~~includes~~included a liability within Accrued and Other Liabilities of ~~$11.3~~$11.3 million related to the Final Judgment, consisting of ~~$7.2~~$7.2 million related to amounts ~~previously~~ collected from or owed to Giencourt principally in respect of theater systems that were not delivered and ~~$4.1~~$4.1 million ~~recorded within Legal Judgment and Arbitration Awards in the Company’s Consolidated Statements of Operations during the year ended December 31, 2020~~ in respect of the remaining amounts owed under the Final Judgment. On June 23, 2021, the Company entered into a final settlement agreement with Giencourt to fully resolve all disputes between the parties in the United States and Ontario (the ~~“Settlement Agreement”~~"Settlement Agreement"). In the second quarter of 2021, the Company paid Giencourt ~~$9.5~~$9.5 million as required by the terms of the Settlement Agreement. As a result of the Settlement Agreement, the Final Judgment has been vacated, all litigation between the parties in all jurisdictions has been dismissed and full and final releases have been exchanged by the parties. Accordingly, upon entry in the Settlement Agreement on June 23, 2021, the remaining ~~$1.8~~$1.8 million liability recorded within Accrued and Other Liabilities was reversed and a corresponding ~~$1.8~~$1.8 million benefit was recorded in the ~~Company’s~~Company's Condensed Consolidated Statements of Operations within Legal Judgment and Arbitration ~~Awards.~~Awards in the second quarter of 2021.

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

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

(c)

Financial Guarantees

~~(c)~~

~~Financial Guarantees~~

Certain subsidiaries of the Company have provided significant financial guarantees to third parties under the Credit ~~Agreement.~~Agreement (see Note 8).

~~(d)~~

~~Product Warranties~~

(d)

Product Warranties

The ~~Company’s~~Company's accrual for product warranties, which is recorded within Accrued and Other Liabilities in the Condensed Consolidated Balance Sheets, was ~~$nil and~~ less than ~~$0.1~~$0.1 million and $nil as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021, respectively.~~, respectively.~~

(e)

Director and Officer Indemnifications

~~(e)~~

~~Director/Officer Indemnifications~~

The ~~Company’s~~Company's by-laws contain an indemnification of its ~~directors/~~current directors and officers, former ~~directors/~~directors and officers, and persons who have acted at its request to be a ~~director/~~director and/or officer of an entity in which the Company is a shareholder or creditor, to indemnify them, to the extent permitted by the Canada Business Corporations Act, against expenses (including legal fees), judgments, fines and any amounts actually and reasonably incurred by them in connection with any action, suit or proceeding in which the directors and/or officers are sued as a result of their service, if they acted honestly and in good faith with a view to the best interests of the Company. In addition, the Company has entered into indemnification agreements with each of its directors in order to effectuate the foregoing. The nature of the indemnification prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay to counterparties. The Company has purchased ~~directors’~~directors' and ~~officers’~~officers' liability insurance. ~~NaN~~No amount has been accrued in the ~~Company’s~~Company's Condensed Consolidated Balance Sheets as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, with respect to this indemnity.

(f)

Other Indemnification Agreements

~~(f)~~

~~Other Indemnification Agreements~~

In the normal course of ~~the Company’s~~its operations, the Company provides indemnifications to counterparties in transactions such as: IMAX Theater Systems lease and sale agreements and the supervision of installation or servicing of IMAX Theater Systems; film production, exhibition and distribution agreements; real property lease agreements; and employment agreements. These indemnification agreements require the Company to compensate the counterparties for costs incurred as a result of litigation claims that may be suffered by the counterparty as a consequence of the transaction or the ~~Company’s~~Company's breach or non-performance under these agreements. While the terms of these indemnification agreements vary based upon the contract, they normally extend for the life of the agreements. A small number of agreements do not provide for any limit on the maximum potential amount of indemnification; however, virtually all of the IMAX Theater System lease and sale agreements limit such maximum potential liability to the purchase price of the system. The fact that the maximum potential amount of indemnification required by the Company is not specified in some cases prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay to counterparties. Historically, the Company has 0tnot made any significant payments under such indemnifications and no amounts have been accrued in the Condensed Consolidated Financial Statements with respect to the contingent aspect of these indemnities.

9.27

10. Condensed Consolidated Statements of Operations – Supplemental Information

~~(a)~~

(a)

Selling Expenses

~~Sales~~The following table summarizes the Company's selling expenses (reversals), including sales commissions and other selling expenses such as direct advertising and marketing expenses, which are recognized within Costs and Expenses Applicable to Revenues in the Condensed Consolidated Statements of Operations, for three and nine months ended September 30, 2022 and 2021:


	Three Months Ended September 30,
	2022				2021
(In thousands of U.S. Dollars)	Sales Commissions		Other Selling Expenses		Sales Commissions		Other Selling Expenses
Technology sales(1)	$	269	$	254	$	259	$	144
Image enhancement and maintenance services(2)		—		3,678		—		3,292
Technology rentals(3)		225		363		51		675
Total	$	494	$	4,295	$	310	$	4,111


	Nine Months Ended September 30,
	2022					2021
(In thousands of U.S. Dollars)	Sales Commissions			Other Selling Expenses		Sales Commissions		Other Selling Expenses
Technology sales(1)	$	316		$	454	$	701	$	481
Image enhancement and maintenance services(2)		—			11,443		—		6,006
Technology rentals(3)		(64	)		1,093		214		1,356
Total	$	252		$	12,990	$	915	$	7,843

(1)

Sales commissions paid prior to the recognition of the related revenue are deferred and recognized ~~in the Condensed Consolidated Statements of Operations~~ upon the ~~recognition~~client acceptance of the related theater system revenue. For the three and nine months ended September 30, 2021, the sales commission costs recognized within Costs and Expenses Applicable to Revenues – Technology Sales are $0.2 million and $0.6 million, respectively (2020 — $0.3 million and $0.4 million, respectively). IMAX Theater System. Direct advertising and marketing costs for each theater are expensed as incurred. ~~For the three~~

(2)

Film exploitation costs, including advertising and ~~nine months ended September 30, 2021, the total of all such~~marketing costs, ~~recognized within Costs and Expenses Applicable to Revenues – Technology Sales was $0.1 million and $0.3 million, respectively (2020 — $0.3 million and $0.6 million, respectively).~~

are expensed as incurred.

(3)

Sales commissions related to joint revenue sharing arrangements accounted for as operating leases are recognized ~~as Costs and Expenses Applicable to Revenues – Technology Rentals~~ in the month they are earned by the salesperson, which is typically the month in which the theater system is installed. For the three and nine months ended September 30, 2021, sales commissions related to such joint revenue sharing arrangements totaled $0.1 million and $0.4 million, respectively (2020 — $0.3 million and $0.5 million, respectively). Direct advertising and marketing costs for each theater are expensed as incurred. For the three and nine months ended September 30, 2021, the total of such costs recognized within Costs and Expenses Applicable to Revenues – Technology Rentals was $0.7 million and $1.5 million, respectively (2020 — $0.4 million and $0.8 million, respectively).

Film exploitation costs, including advertising and marketing expense, totaled $3.2 million and $5.9 million, respectively, for the three and nine months ended September 30, 2021 (2020 — $0.5 million and $3.1 million, respectively),installed, and are ~~expensed as incurred within Costs and Expenses Applicable~~subject to ~~Revenues – Image Enhancement and Maintenance Services.~~

subsequent performance-based adjustments.

(b)

Foreign Exchange

~~(b)~~

~~Foreign Exchange~~

Included in Selling, General and Administrative Expenses for the three and nine months ended September 30, ~~2021~~2022 is a net loss of ~~$(0.6)~~$(1.2) million and a$(3.0) million, respectively, (2021 — net loss of $(0.6) million and net gain of ~~$1.1 million,~~ $~~respectively~~1.1 ~~(2020 — net~~ ~~gain~~ ~~of $0.2 million and net loss of $(0.8)~~ million, respectively) resulting from changes in exchange rates related to ~~foreign currency~~RMB denominated monetary assets and liabilities. See Note ~~16(c)~~17(c) for additional information.

(c)

Collaborative Arrangements

~~(c)~~

~~Collaborative Arrangements~~

Joint Revenue Sharing Arrangements

~~The Company provides IMAX Theater Systems to customers through~~See Note 6 for a description of the material terms of the Company's collaborative joint revenue sharing arrangements. Under the traditional form of these arrangements, in exchange for providing the IMAX Theater System under a long-term lease, the Company earns rent based on a percentage of contingent box office receipts and, in some cases, concession revenues, rather than requiring the customer to pay a fixed upfront fee or annual minimum payments. Under certain other joint revenue sharing arrangements, known as hybrid arrangements, the customer is responsible for making fixed upfront payments prior to the delivery and installation of the IMAX Theater System. Under joint revenue sharing arrangements, the customer has the ability and the right to operate the hardware components or direct others to operate them in a manner determined by the customer. The Company’s joint revenue sharing arrangements are typically non-cancellable for 10 years or longer with renewal provisions. Title to the IMAX Theater System under a joint revenue sharing arrangement generally does not transfer to the customer. The Company’s joint revenue sharing arrangements do not contain a guarantee of residual value at the end of the lease term. The customer is required to pay for executory costs such as insurance and taxes and is required to pay the Company for maintenance and an extended warranty throughout the term. The customer is responsible for obtaining insurance coverage for the IMAX Theater System commencing on the date specified in the arrangement’s shipping terms and ending on the date the IMAX Theater System is returned to the Company.

~~As of September 30, 2021, the Company has signed traditional and hybrid joint revenue sharing agreements with 42 exhibitors (2020~~ ~~— 41)~~ ~~for a total of 1,228 IMAX Theater Systems (2020~~ ~~— 1,233), of which 904 theaters (2020~~ ~~— 881)~~ ~~were operational and included in the network as of that date. The terms of these arrangements are similar in nature, rights and obligations.~~ The accounting policy for the ~~Company’s~~Company's joint revenue sharing arrangements is disclosed in Note ~~3(n)~~3(p) of the ~~Company’s 2020~~Company's audited Consolidated Financial Statements in its 2021 Form 10-K.

Revenue attributable to transactions arising between the Company and its customers under joint revenue sharing arrangements are recorded within Revenues — Technology Sales (for hybrid joint revenue sharing arrangements) and Revenues — Technology ~~Rentals.~~Rentals (for traditional joint revenue sharing arrangements). For the three and nine months ended September 30, ~~2021,~~2022, such revenues totaled ~~$10.9~~$13.5 million and ~~$29.9~~$46.2 million, respectively ~~(2020~~(2021 — ~~$4.5~~$10.9 million and ~~$11.5~~$29.9 million, respectively). (See Note ~~13(a)~~14(a) for a disaggregated presentation of the ~~Company’s~~Company's revenues.)

IMAX DMR

In an IMAX DMR arrangement, the Company receives a percentage of the box office receipts from a third party who owns the copyright to a film in exchange for converting the film into IMAX DMR format and distributing it through the IMAX ~~network~~.network. The ~~percentage~~fee earned by the Company in a typical IMAX DMR arrangement averages approximately 12.5% of box office receipts (i.e. gross box office receipts ~~earned in IMAX DMR arrangements has averaged approximately 12.5%~~less applicable sales taxes), except for within Greater China, where the Company receives a lower percentage of net box office receipts for certain Hollywood films.

For the three and nine months ended September 30, 2021, the majority of IMAX DMR revenue was earned from the exhibition of 24 films (21 new and 3 carryovers) and 53 films (47 new and 6 carryovers), respectively, and the re-release of classic titles throughout the IMAX theater network, as compared to 6 new films and 20 films (16 new and 4 carryovers), respectively, and the re-release of classic titles in the three and nine months ended September 30, 2020. The accounting policy for the ~~Company’s~~Company's IMAX DMR arrangements is disclosed in Note ~~3(n)~~3(p) of the ~~Company’s 2020~~Company's audited Consolidated Financial Statements in its 2021 Form 10-K.

Revenue attributable to transactions arising between the Company and its customers under IMAX DMR arrangements are included in Revenues – Image Enhancement and Maintenance Services. For the three and nine months ended September 30, ~~2021,~~2022, such revenues totaled ~~$15.7~~$19.9 million and ~~$39.4~~$67.1 million, respectively ~~(2020~~(2021 — ~~$6.9~~$15.7 million and ~~$18.1~~$39.4 million, respectively). (See Note ~~13(a)~~14(a) for a disaggregated presentation of the ~~Company’s~~Company's revenues.)

Co-Produced Film Arrangements

In certain film arrangements, the Company co-produces a film with a third party whereby the third party retains the copyright and certain other rights to the film. In some cases, the Company obtains exclusive theatrical distribution rights to the film. Under these arrangements, both parties contribute ~~funding~~ to the ~~Company’s partly-owned subsidiary for~~funding of the production, distribution and ~~distribution of~~exploitation costs associated with the ~~film and for associated exploitation costs.~~film.

As of September 30, ~~2021,~~2022, the Company ~~has 1~~is party to one co-produced film arrangement, which represents the VIE total assets balance of ~~$1.6~~$1.5 million and liabilities balance of ~~$0.3~~$0.3 million and 3three other co-produced film arrangements, the terms of which are similar. The accounting policies relating to co-produced film arrangements are disclosed in Notes ~~3(a)~~3(b) and ~~3(n)~~3(p) of the ~~Company’s 2020~~Company's 2021 Form 10-K.

For the three and nine months ended September 30, ~~2021,~~2022, an expense of ~~$0.2~~$0.2 million and ~~$0.3~~$0.6 million, respectively ~~(2020~~(2021 — ~~$0.5~~$0.2 million and ~~$1.9~~$0.3 million, respectively) attributable to transactions between the Company and other parties involved in the production of the films have been included in Costs and Expenses Applicable to Revenues – Image Enhancement and Maintenance Services.

~~10.~~29

11. Condensed Consolidated Statements of Cash Flows – Supplemental Information

~~(a)~~

~~Changes in other operating assets and liabilities~~

(a)

Changes in other operating assets and liabilities


	Nine Months Ended
	September 30,
(In thousands of U.S. Dollars)		2022				2021
Decrease (increase) in:
Financing receivables	$		11,608		$		(1,693	)
Prepaid expenses			(2,006	)			(2,767	)
Variable consideration receivables			1,147				(1,243	)
Other assets			280				664
Increase (decrease) in:
Accounts payable			6,044				(5,135	)
Accrued and other liabilities			(20,621	)			(1,728	)
	$		(3,548	)	$		(11,902	)

(b)

Depreciation and amortization


	Nine Months Ended
	September 30,
(In thousands of U.S. Dollars)		2022			2021
Film assets	$		13,249	$		10,661
Property, plant and equipment:
Equipment supporting joint revenue sharing arrangements			16,639			16,784
Other property, plant and equipment(1)			7,055			7,176
Other intangible assets(2)			4,394			4,509
Other assets(3)			1,326			1,440
	$		42,663	$		40,570

(1)

Includes the amortization of laser projection systems, camera, and lens upgrades recorded in Research and Development on the Condensed Consolidated Statement of Operations of $0.6 million in the nine months ended September 30, 2022 (2021 — $0.6 million).

(2)

Includes the amortization of licenses and intellectual property recorded in Research and Development on the Condensed Consolidated Statement of Operations of $1.0 million in the nine months ended September 30, 2022 (2021 — $1.0 million).

(3)

Includes the amortization of lessee incentives provided by the Company to its customers under joint revenue sharing arrangements.

(c)

Write-downs

Nine Months Ended

September 30,

(In thousands of U.S. Dollars)

2021

2020

(Increase) decrease in:

Financing receivables
$

(1,693
)

$

(3,212
)
Prepaid expenses

(2,767
)

(1,332
)
Variable consideration receivables

(1,243
)

(1,007
)
Other assets

664

(3,712
)
Decrease in:

Accounts payable

(5,135
)

(8,320
)
Accrued and other liabilities⁽¹⁾

(1,728
)

(6,526
)

$

(11,902
)

$

(24,109
)


	Nine Months Ended
	September 30,
(In thousands of U.S. Dollars)		2022			2021
Other assets(1)	$		4,470	$		—
Inventories(2)			503			468
Property, plant and equipment:
Equipment supporting joint revenue sharing arrangements(3)			235			328
Other property, plant and equipment			9			—
Other intangible assets			24			63
Film assets(4)			466			19
	$		5,707	$		878

~~(1)~~

~~Includes a $9.5 million payment made in the second quarter of 2021 in connection with the settlement of the Giencourt matter, as discussed in Note 8(b)(ii).~~

(1)

In the nine months ended September 30, 2022, the Company recognized a full impairment of its RMB 30.0 million ($4.5 million) investment in the film Mozart from Space (2021 — $nil) based on projected box office results and distribution costs. (See Note 17(e).)

~~(b)~~(2)

~~Depreciation and amortization~~

Nine Months Ended

September 30,

(In thousands of U.S. Dollars)

2021

2020

Film assets
$

10,661

$

6,159

Property, plant and equipment:

Equipment supporting joint revenue sharing arrangements

16,784

19,247

Other property, plant and equipment

7,176

8,478

Other intangible assets⁽¹⁾

4,509

4,882

Other assets⁽²⁾

1,440

1,933

$

40,570

$

40,699

~~(1)~~

~~Includes~~ the amortization of licenses and intellectual property recorded in Research and Development on the Condensed Consolidated Statement of Operations of $1.0 million in the nine months ended September 30, 2021 (~~2020~~ — ~~$1.0 million).~~

~~(2)~~

~~Includes the amortization of lessee incentives provided by the Company to its customers under joint revenue sharing arrangements.~~

~~(c)~~

~~Write-downs~~

Nine Months Ended

September 30,

(In thousands of U.S. Dollars)

2021

2020

Inventories⁽¹⁾
$

468

$

729

Property, plant and equipment:

Equipment supporting joint revenue sharing arrangements⁽²⁾

328

1,050

Other property, plant and equipment

0

66

Other intangible assets

63

132

Film assets⁽³⁾

19

10,211

Other assets⁽⁴⁾

0

1,151

$

878

$

13,339

~~(1)~~

In the nine months ended September 30, 2022, the Company recorded write-downs of $0.5 million in Costs and Expenses Applicable to Technology Sales. The write-downs recorded during the nine months ended September 30, 2022 include $0.2 million related to excess and damaged inventory and $0.3 million recorded to reduce the carrying value of service parts held in Russia. In the nine ~~months ended September 30, 2021, the Company recorded write-downs of $0.5 million (2020 — $0.7 million) in Costs and Expenses Applicable to Technology Sales related to excess and damaged inventory.~~

~~(2)~~

In the nine months ended September 30, 2021, the Company recorded charges of $0.3 million (2020 — $1.1 million) in Costs and Expenses Applicable to Technology Rentals mostly related to the write-down of leased xenon-based digital systems which were taken out of service in connection with customer upgrades to laser-based digital systems.

~~(3)~~

In the nine months ended September 30, 2020, the Company recorded impairment losses of $10.2 million in Costs and Expenses Applicable to Image Enhancement and Maintenance Services principally to write-down the carrying value of certain documentary and alternative film content due to a decrease in projected box office totals and related revenues based on management’s regular quarterly recoverability assessments. To a much lesser extent, the impairment losses also relate to the write-down of DMR related film assets.

~~(4)~~

~~In the nine months ended September 30, 2020, the Company recorded a write-down of $1.2 million in Asset Impairments related to content-related assets which became impaired in the period.~~

~~(d)~~

~~Significant non-cash investing activities~~

Nine Months Ended

September 30,

(In thousands of U.S. Dollars)

2021

2020

Net (decrease) increase in accruals related to:

   Investment in equipment supporting joint revenue sharing arrangements
$

217

$

(1,897
)
   Acquisition of other intangible assets

(863
)

69

   Purchases of property, plant and equipment

(8
)

158

$

(654
)

$

(1,670
)

~~11. Income Taxes~~

~~(a)~~

~~Income Tax Expense~~

~~For the three~~ months ended September 30, 2021, the Company recorded ~~income tax expense~~write-downs of ~~$4.4~~$0.5 million ~~(2020 — income tax expense~~in Costs and Expenses Applicable to Technology Sales to reduce the carrying value of ~~$19.3 million).~~excess inventory.

~~For~~(3)

In the ~~three~~nine months ended September 30, ~~2021, the Company’s effective tax rate~~2022, the Company recorded charges of ~~(226.6)% varies~~$0.2 million (2021 — $0.3 million) in Costs and Expenses Applicable to Technology Rentals mostly related to an IMAX Theater System that was removed from its existing location, as well as the write-down of leased xenon-based digital systems which were taken out of service in connection with customer upgrades to laser-based digital systems.

(4)

In the nine months ended September 30, 2022, the Company recorded impairment losses of $0.5 million (2021 — $nil) related to the write-down of DMR and documentary film assets.

(d)

Significant non-cash investing activities


	Nine Months Ended
	September 30,
(In thousands of U.S. Dollars)		2022			2021
Net increase (decrease) in accruals related to:
Cash consideration in respect of SSIMWAVE acquisition(1)	$		3,227	$		—
Investment in equipment supporting joint revenue sharing arrangements			1,229			217
Acquisition of other intangible assets			45			(863	)
Purchases of property, plant and equipment(2)			103			(8	)
	$		4,604	$		(654	)

(1)

As of September 30, 2022, the Company's Condensed Consolidated Balance Sheets include a liability of $3.2 million related to its acquisition of SSIMWAVE on September 22, 2022, which is recorded on the Condensed Consolidated Balance Sheets within Accrued and Other Liabilities. (See Note 4.)

(2)

See Note 5 for supplemental disclosure of noncash leasing activities.

(e)

Significant non-cash financing activities

In the third quarter of 2022, the Company recognized a $1.9 million liability related to repurchases of its common shares, which were not settled as of September 30, 2022 and were recorded on the Condensed Consolidated Balance Sheets within Accrued and Other Liabilities.

As of September 30, 2022, the Federal Economic Development Loan acquired in the SSIMWAVE acquisition has a carrying value of $1.8 million, net of unaccreted interest benefit and is recorded within Convertible Notes and Other Borrowings, Net on the Company's Condensed Consolidated Balance Sheets. As at September 30, 2022, SSIMWAVE has received contributions of CAD$3.8 million ($2.8 million) from the ~~Canadian statutory tax rate of 26.2% that was in effect during the period as follows:~~Federal Economic Development Loan. (See Note 4 and Note 8(c).)

12. Income Taxes

Three Months Ended

Three Months Ended

September 30, 2021

September 30, 2020
(In thousands of U.S. Dollars, except rates)
Amount

Rate

Amount

Rate
Income tax benefit at combined statutory rates
$
509

26.2%

$
7,279

26.2%
Adjustments resulting from:

Unrealized investment gains not taxable

—

—

420

1.5%
Increase of valuation allowance

(4,270
)

(219.8%)

(23,707
)

(85.3%)
Changes to tax reserves

(215
)

(11.1%)

(181
)

(0.7%)
Withholding taxes resulting from management's decision to no longer indefinitely reinvest the historical earnings of certain foreign subsidiaries

—

—

(186
)

(0.7%)
Reduction in tax benefits resulting from the vesting of share-based compensation

(4
)

(0.2%)

(38
)

(0.1%)
Other non-deductible/non-taxable items

(422
)

(21.7%)

(2,936
)

(10.5%)
Income tax expense
$
(4,402
)

(226.6%)

$
(19,349
)

(69.6%)
(a)

Income Tax Expense

For the three months ended September 30, ~~2021,~~2022, the Company recorded income tax expense of $2.3 million (2021 — $4.4 million). For the three months ended September 30, 2022, the Company's effective tax rate differs from the combined Canadian federal and provincial statutory income tax rate due to the following factors:


	Three Months Ended						Three Months Ended
	September 30, 2022						September 30, 2021
(In thousands of U.S. Dollars, except rates)	Amount			Rate			Amount			Rate
Income tax benefit at combined statutory rates	$	1,434		26.5%			$	514		26.5%
Adjustments resulting from:
Change of valuation allowance		(4,264	)	(78.8%)				(4,270	)	(219.9%)
Shortfall tax benefits related to share-based compensation		(2	)		—			(4	)	(0.2%)
Changes to tax reserves		(176	)	(3.3%)				(215	)	(11.1%)
Changes to deferred tax assets and liabilities resulting from audit and other tax return adjustments		(102	)	(1.9%)				454			23.4	%
Other non-deductible/non-taxable items		762			14.1	%		(881	)	(45.4%)
Income tax expense	$	(2,348	)	(43.4%)			$	(4,402	)	(226.7%)

For the three months ended September 30, 2022, the Company recorded an additional ~~$4.3~~$4.3 million (2021 — $4.3 million) valuation allowance against deferred tax assets in jurisdictions where management ~~could not~~cannot reliably forecast that sufficient future tax liabilities ~~would~~will arise ~~principally due to~~in specific jurisdictions, which includes the ~~uncertainties around the long-term~~ impact of the COVID-19 ~~global~~ pandemic. Accordingly, the tax benefit associated with the current period losses in these jurisdictions is not ultimately reflected in the ~~Company’s~~Company's Condensed Consolidated Statements of Operations.

For the nine months ended September 30, ~~2021,~~2022, the Company recorded income tax expense of ~~$9.4~~$8.1 million ~~(2020~~(2021 — ~~$24.6~~$9.4 million). For the nine months ended September 30, ~~2021,~~2022, the ~~Company’s~~Company's effective tax rate ~~of (69.5)% varies~~differs from the combined Canadian federal and provincial statutory income tax rate due to the following factors:


	Nine Months Ended					Nine Months Ended
	September 30, 2022					September 30, 2021
(In thousands of U.S. Dollars, except rates)	Amount			Rate		Amount			Rate
Income tax benefit at combined statutory rates	$	4,205		26.5%		$	3,588		26.5%
Adjustments resulting from:
Change of valuation allowance		(14,699	)	(92.6%)			(14,248	)	(105.2%)
(Shortfall) excess tax benefits related to share-based compensation		(154	)	(1.0%)			709		5.2%
Changes to tax reserves		(587	)	(3.7%)			1,234		9.1%
Gain on sale of Maoyan investment not taxable		—			—		1,367		10.1%
Withholding taxes resulting from management's decision to no longer indefinitely reinvest the historical earnings of certain foreign subsidiaries		—			—		(547	)	(4.0%)
Changes to deferred tax assets and liabilities resulting from audit and other tax return adjustments		2,395		15.1%			(246	)	(1.8%)
Other non-deductible/non-taxable items		749		4.7%			(1,273	)	(9.4%)
Income tax expense	$	(8,091	)	(51.0%)		$	(9,416	)	(69.5%)

For the nine months ended September 30, 2022, the Company recorded an additional $14.7 million (2021 — $14.2 million) valuation allowance against deferred tax assets in jurisdictions where management cannot reliably forecast that sufficient future tax liabilities will arise in specific jurisdictions, which includes the impact of ~~26.2% that was~~the COVID-19 pandemic. Accordingly, the tax benefit associated with the current period losses in ~~effect during~~these jurisdictions is not ultimately reflected in the ~~period as follows:~~Company's Condensed Consolidated Statements of Operations.

Nine Months Ended

Nine Months Ended

September 30, 2021

September 30, 2020

(In thousands of U.S. Dollars, except rates)
Amount

Rate

Amount

Rate

Income tax benefit at combined statutory rates
$
3,548

26.2%

$
29,201

26.2%

Adjustments resulting from:

Realized and unrealized investment gains (losses) not taxable

1,367

10.1%

(239
)

(0.2%)

Increase of valuation allowance

(14,248
)

(105.2%)

(23,706
)

(21.3%)

Changes to tax reserves

1,234

9.1%

(4,978
)

(4.5%)

Withholding taxes resulting from management's decision to no longer indefinitely reinvest the historical earnings of certain foreign subsidiaries

(547
)

(4.0%)

(18,661
)

(16.7%)

Increase in tax benefits resulting from the vesting of share-based compensation

709

5.2%

33

—

Other non-deductible/non-taxable items

(1,479
)

(10.9%)

(6,256
)

(5.6%)

Income tax expense
$
(9,416
)

(69.5%)

$
(24,606
)

(22.1%)

As of September 30, ~~2021,~~2022, the ~~Company’s~~Company's Condensed Consolidated Balance Sheets include net deferred income tax assets of ~~$18.7~~$14.4 million, net of a valuation allowance of ~~$45.5~~$61.8 million (December 31, ~~2020~~2021 — ~~$18.0~~$13.9 million, net of a valuation allowance of $28.8 million). The $16.7 million valuation allowance change recorded during the nine months ended September 30, 2021 is reflected within Income Tax Expense in the Company’s Condensed Consolidated Statements of Operations ($14.2 million) and within Shareholder’s Equity on the Company’s Condensed Consolidated Balance Sheets ($2.5$46.0 million). The valuation allowance ~~is expected to reverse at the point in time~~will be reversed when and if management determines it is more likely than not that the Company will incur sufficient tax liabilities to allow it to utilize the deferred tax assets against which the valuation allowance is recorded. Despite the valuation allowance recorded against its deferred tax assets, the Company remains entitled to benefit from tax attributes which currently have a valuation allowance applied to them.

(b)

Income Tax Effect on Other Comprehensive Loss

During the three and nine months ended September 30, 2021, $20.4 million of historical earnings from a subsidiary in China were repatriated and, as a result $2.0 million of foreign withholding taxes were paid in the period (2020 — $nil).

~~(b)~~

~~Income Tax Effect on Other Comprehensive (Loss) Income~~

For the three and nine months ended September 30, 2022 and 2021, ~~and 2020,~~ the ~~income tax expense~~Income Tax Expense related to the ~~following items in~~components of Other Comprehensive ~~(Loss) Income are:~~Loss is as follows:


	Three Months Ended							Nine Months Ended								Three Months Ended							Nine Months Ended
		September 30,						September 30,									September 30,						September 30,
(In thousands of U.S. Dollars)		2021			2020			2021				2020					2022			2021			2022				2021
Unrealized change in cash flow hedging instruments		$	199		$	(160	)		$	42			$	235			$	411		$	199			$	488			$	42
Realized change in cash flow hedging instruments			82			(29	)			358				(211	)			(19	)		82				(44	)			358
Reclassification of unrealized change in ineffective cash flow hedging instruments			7			—				83				—				—			7				—				83
Defined benefit and postretirement benefit plans			(12	)		—				(37	)			40				(12	)		(12	)			(36	)			(37	)
		$	276		$	(189	)		$	446			$	64			$	380		$	276			$	408			$	446

~~12.~~13. Capital Stock ~~And~~and Reserves

(a)

Share-Based Compensation

~~(a)~~

~~Share-Based Compensation~~

For the three and nine months ended September 30, ~~2021,~~2022, share-based compensation expense totaled ~~$6.1~~$5.4 million and ~~$18.2~~$19.1 million, respectively ~~(2020~~(2021 — ~~$5.3~~$6.1 million and ~~$16.0~~$18.2 million, respectively) and is reflected in the following accounts in the Condensed Consolidated Statements of Operations:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,				Three Months Ended				Nine Months Ended
(In Thousands of U.S. Dollars)	2021		2020		2021		2020
									September 30,				September 30,
(In thousands of U.S. Dollars)									2022		2021		2022		2021
Cost and expenses applicable to revenues	$	314	$	130	$	920	$	530	$	312	$	314	$	820	$	920
Selling, general and administrative expenses		5,706		5,151		17,046		15,325		4,985		5,706		17,974		17,046
Research and development		89		29		245		114		107		89		299		245
	$	6,109	$	5,310	$	18,211	$	15,969	$	5,404	$	6,109	$	19,093	$	18,211

The following table summarizes the Company's share-based compensation expense (reversal) by each award type:


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(In thousands of U.S. Dollars)	2022			2021		2022		2021
Stock Options	$	120		$	253	$	449	$	808
Restricted Share Units		3,516			3,900		11,405		11,524
Performance Stock Units		1,864			1,183		5,317		3,169
IMAX China Stock Options		17			41		75		143
IMAX China Long Term Incentive Plan Restricted Share Units		122			600		1,712		2,217
IMAX China Long Term Incentive Plan Performance Stock Units		(235	)		132		135		350
	$	5,404		$	6,109	$	19,093	$	18,211

For the three and nine months ended September 30, 2020, there was a lower level of share-based compensation expenses allocated to Costs and Expense Applicable to Revenues or Research and Development due to the lower level of production during the COVID-19 global pandemic.

~~The following table summarizes the Company’s~~2022, share-based compensation expense ~~by each award type:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

(In Thousands of U.S. Dollars)
2021

2020

2021

2020

Stock Options
$

253

$

433

$

808

$

1,449

Restricted Share Units

3,900

3,430

11,524

10,866

Performance Stock Units

1,183

483

3,169

1,229

IMAX China Stock Options

41

600

143

701

IMAX China Long Term Incentive Plan Restricted Share Units

600

332

2,217

1,645

IMAX China Long Term Incentive Plan Performance Stock Units

132

32

350

79

$

6,109

$

5,310

$

18,211

$

15,969

~~Included in the above table is an expense of~~ includes $nil ~~in the three~~ and ~~nine months ended September 30, 2021 (2020~~$1.3 million, respectively (2021 — $$nil ~~and $0.1 million, respectively)~~), related to restricted share units granted to ~~a certain advisor~~non-employee directors of ~~the Company.~~IMAX Corporation and IMAX China.

Stock Option Summary

The following table summarizes the activity under the ~~Company’s~~Company's Stock Option Plan ~~(“SOP”~~("SOP") and the IMAX Corporation Second Amended and Restated Long-Term Incentive Plan (as may be amended, ~~“IMAX LTIP”~~"IMAX LTIP") for the nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


	Number of Shares							Weighted Average Exercise Price Per Share				Number of Shares							Weighted Average Exercise Price Per Share
	2021			2020			2021			2020		2022			2021				2022		2021
Stock options outstanding, beginning of period		4,892,962			5,732,209		$		26.81	$	26.82		3,736,157			4,892,962		$		26.61	$	26.81
Granted		—			—				—		—		—			—				—		—
Exercised		(41,613	)		—				21.23		—		—			(41,613	)			—		21.23
Forfeited		(86,587	)		(23,633	)			22.51		22.35		—			(86,587	)			—		22.51
Expired		(903,038	)		(772,665	)			28.31		27.03		(126,569	)		(903,038	)			33.61		28.31
Cancelled		(123,220	)		(18,483	)			26.68		27.97		(4,849	)		(123,220	)			27.03		26.68
Stock options outstanding, end of period		3,738,504			4,917,428				26.61		26.80		3,604,739			3,738,504				26.36		26.61
Stock options exercisable, end of period		3,487,857			4,315,484				26.93		27.32		3,523,032			3,487,857				26.45		26.93

Stock options are no longer granted under the ~~Company’s~~Company's previously approved SOP.

Restricted Share Units ~~(“RSU”~~("RSU") Summary

The following table summarizes the activity in respect of RSUs issued under the IMAX LTIP for the nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


	Number of Awards						Weighted Average Grant Date Fair Value Per Share						Number of Awards						Weighted Average Grant Date Fair Value Per Share
	2021			2020				2021			2020		2022			2021				2022			2021
RSUs outstanding, beginning of period		1,564,838			1,065,347		$		18.33	$		23.17		1,457,883			1,564,838		$		19.16	$		18.33
Granted		831,123			1,050,385				21.03			15.35		694,131			831,123				19.42			21.03
Vested and settled		(571,616	)		(386,451	)			19.11			21.59		(714,496	)		(571,616	)			18.68			19.11
Forfeited		(231,380	)		(54,933	)			19.50			19.70		(108,504	)		(231,380	)			20.37			19.50
RSUs outstanding, end of period		1,592,965			1,674,348				19.29			18.75		1,329,014			1,592,965				19.45			19.29

Performance Stock Units ("PSU") Summary

The Company grants awards for two types of ~~performance stock units (“PSUs”),~~PSUs, one which vests based on a combination of employee service and the achievement of certain EBITDA-based targets and one which vests based on a combination of employee service and the achievement of total shareholder return ~~(“TSR”~~("TSR") targets. The achievement of the EBITDA and TSR targets in these PSUs is determined over a three-year performance period. At the conclusion of the three-year performance period, the number of PSUs that ultimately vest can range from 0% to a maximum vesting opportunity of 175% of the initial award, depending upon actual performance versus the established EBITDA and stock-price targets.

The grant date fair value of PSUs with EBITDA-based targets is equal to the closing price of the ~~Company’s~~Company's common shares on the date of grant or the average closing price of the ~~Company’s~~Company's common shares for five days prior to the date of grant. The grant date fair value of PSUs with TSR targets is determined on the grant date using a Monte Carlo simulation, which is a valuation model that ~~takes into account~~considers the likelihood of achieving the TSR targets embedded in the award (“("Monte Carlo ~~Model”~~Model"). The compensation expense attributable to each type of PSU is recognized on a straight-line basis over the requisite service period.

The fair value determined by the Monte Carlo Model is affected by the ~~Company’s~~Company's share price, as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, market conditions as of the grant date, the ~~Company’s~~Company's expected share price volatility over the term of the awards, and other relevant data. The compensation expense is fixed on the date of grant based on the fair value of the PSUs granted.

The amount and timing of compensation expense recognized for PSUs with EBITDA-based targets is dependent upon management's assessment of the likelihood of achieving these targets. If, as a result of ~~management’s~~management's assessment, it is projected that a greater number of PSUs will vest than previously anticipated, a life-to-date adjustment to increase compensation expense is recorded in the period that such determination is made. Conversely, if, as a result of ~~management’s~~management's assessment, it is projected that a lower number of PSUs will vest than previously anticipated, a life-to-date adjustment to decrease compensation expense is recorded in the period that such determination is made. The expense recognized in the nine months ended September 30, 2022 and 2021 includes adjustments reflecting ~~management’s~~management's estimate of the number of PSUs with EBITDA-based targets expected to vest.

The following table summarizes the activity in respect of PSUs issued under the IMAX LTIP for the nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


	Number of Awards						Weighted Average Grant Date Fair Value Per Share						Number of Awards						Weighted Average Grant Date Fair Value Per Share
	2021			2020				2021			2020		2022			2021				2022			2021
PSUs outstanding, beginning of period		361,844			—		$		15.68	$		—		613,405			361,844		$		18.21	$		15.68
Granted		309,574			370,265				20.77			15.66		359,138			309,574				20.34			20.77
Forfeited		(54,634	)		(2,526	)			16.08			14.84		(37,266	)		(54,634	)			19.79			16.08
PSUs outstanding, end of period		616,784			367,739				18.20			15.67		935,277			616,784				18.97			18.20

As of September 30, ~~2021,~~2022, the maximum number of shares of common stock that may be issued with respect to PSUs outstanding is ~~1,079,372,~~1,636,735, assuming full achievement of the EBITDA and TSR targets.

~~(b)~~

~~Issuer Purchases of Equity Securities~~

(b)

Issuer Purchases of Equity Securities

In On April ~~2021,~~28, 2022 and July 28, 2022, the ~~Company’s~~Company's Board of Directors approved a 12-month extension to its share repurchase program through June 30, ~~2022. The extension authorized the Company to repurchase up to approximately $89.4~~2023 and an increase of $200.0 million ~~worth of common shares, the remaining amount available of the original $200.0 million initially authorized under~~in the share repurchase program, ~~when it commenced on July 1, 2017.~~respectively. With the increase of $200.0 million, the Company's total share repurchase authority is $400.0 million under the current share repurchase program. As of September 30, 2022, the Company has $220.1 million available under its approved repurchased program. The repurchases may be made either in the open market or through private transactions, including repurchases made pursuant a plan intended to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, subject to market conditions, applicable legal requirements, and other relevant factors. The Company has no obligation to repurchase shares and the share repurchase program may be suspended or discontinued by the Company at any time.

During the three and nine months ended September 30, 2022, the Company repurchased 418,496 and 3,501,696 common shares, respectively, at an average price of $14.62 and $15.82 per share, respectively, for a total of $6.1 million and $55.4 million, respectively, excluding commissions. During the three and nine months ended September 30, 2021 the Company repurchased 316,812 common shares, respectively, ~~(2020 — nil and 2,484,123 common shares, respectively),~~ at an average price of ~~$14.53~~$14.53 per share, respectively, ~~(2020 — $nil and $14.72 per share, respectively),~~for a total of $4.6 million, excluding commissions. During the three and nine months ended September 30, 2022 and 2021, there were ~~0 common~~no shares ~~purchased~~purchases in the administration of employee ~~share-based compensation plans (2020 — nil and 200,000 common shares at an average price of $nil and $15.43 per~~ share ~~respectively).~~based plans.

As of September 30, 2022 and December 31, 2021, the IMAX LTIP trustee held 276 shares purchased for less than $0.1 million (December 31, 2020 — 723 shares for less than $0.1 million), in the open market to be issued upon the settlement of RSUs and certain stock options. Thedid not hold any shares. Any shares held with the trustee are recorded at cost and are reported as a reduction against Capital Stock on the ~~Company’s~~Company's Condensed Consolidated Balance Sheets.

Subsequent to September 30, 2022 and through October 28, 2022, the Company completed repurchases through a 10b5-1 program of 1,129,774 shares at an average price of $13.96 per share, for a total cost of $15.8 million, excluding commissions.

In 2021, IMAX ~~China announced that its~~China's shareholders granted its Board of Directors a general mandate authorizing the Board, subject to applicable laws, to repurchase of shares of IMAX China not to exceed ~~10%~~10% of the total number of issued shares as of May 6, 2021 ~~(34,835,824~~ (34,835,824 shares). This program expired on the date of the 2022 Annual General Meeting of IMAX China on June 23, 2022. During the 2022 Annual General Meeting, shareholders approved the repurchase of shares of IMAX China not to exceed 10% of the total number of issued shares as of June 23, 2022 (34,063,480 shares). This program will be valid until the ~~2022~~2023 Annual General Meeting of IMAX China. The repurchases may be made in the open market or through other means permitted by applicable laws. IMAX China has no obligation to repurchase its shares and the share repurchase program may be suspended or discontinued by IMAX China at any time. During the three and nine months ended September 30, 2022, IMAX China repurchased 1,513,800 and 2,961,800 common shares, respectively, at an average price of 6.20 Hong Kong Dollar ("HKD") and HKD 8.00 per share ($0.79 and $1.02 per share), respectively, for a total of HKD 9.4 million and HKD 23.7 million or $1.2 million and $3.0 million, respectively. During the three and nine months ended September 30, 2021 IMAX China repurchased 3,569,000 common shares, respectively, at an average price of HKD 10.90 per share, respectively ~~(U.S. $1.40~~($1.40 per ~~share, respectively)~~share) for a total of HKD 38.9 million ($5.0 million). ~~During three and nine months ended September 30, 2020,~~The change in the non-controlling interest attributable to IMAX China ~~repurchased nil and 906,400~~as a result of common shares ~~respectively, at an average price~~repurchased is recorded as a reduction to Non-Controlling Interests in the Condensed Consolidated Balance Sheets and the Condensed Consolidated Statements of ~~HKD nil~~Shareholders' Equity. The difference between the consideration paid and ~~HKD 13.13 per~~the ownership interest obtained as a result of IMAX China share ~~respectively (U.S. $nil~~repurchases is recorded within Other Equity in the Condensed Consolidated Balance Sheets and ~~$1.69 per share, respectively).~~the Condensed Consolidated Statements of Shareholders' Equity. (See Note 1.)

(c)

Basic and Diluted Weighted Average Shares Outstanding

~~(c)~~

~~Basic and Diluted Weighted Average Shares Outstanding~~

The following table reconciles the denominator of the basic and diluted weighted average share computations:

	Three Months Ended					��	Nine Months Ended
	September 30,						September 30,					Three Months Ended							Nine Months Ended
	2021			2020			2021		2020			September 30,							September 30,
(In thousands)													2022			2021			2022			2021
Issued and outstanding, beginning of period		59,396			58,857			58,921		61,176				56,095			59,396			58,654			58,921
Weighted average number of shares (repurchased) issued, net		(152	)		2			286		(1,816	)			(56	)		(152	)		(1,353	)		286
Weighted average number of shares outstanding - basic		59,244			58,859			59,207		59,360
Weighted average number of shares outstanding — basic														56,039			59,244			57,301			59,207
Weighted average effect of potential common shares, if dilutive		—			—			—		—				—			—			—			—
Weighted average number of shares outstanding - diluted		59,244			58,859			59,207		59,360
Weighted average number of shares outstanding — diluted														56,039			59,244			57,301			59,207

For the three and nine months ended September 30, ~~2021,~~2022, the calculation of diluted weighted average shares outstanding excludes ~~6,115,389~~6,178,413 shares ~~(2020~~(2021 — ~~6,959,515~~6,115,389 shares) that are issuable upon the vesting or exercise of share-based compensation including: (i) ~~1,592,965~~1,329,014 RSUs ~~(2020~~(2021 — ~~1,674,348~~1,592,965 RSUs), (ii) ~~783,920~~1,244,660 PSUs ~~(2020~~(2021 — ~~367,739~~783,920 PSUs) and (iii) ~~3,738,504~~3,604,739 stock options ~~(2020~~(2021 — ~~4,917,428~~3,738,504 stock options), as the effect would be anti-dilutive.

The calculation of diluted weighted average shares outstanding for the three and nine months ended September 30, 2022 and 2021 also excludes any shares potentially issuable upon the conversion of the Convertible Notes as the average market price of the ~~Company’s~~Company's common shares during the period of time they were outstanding was less than the conversion price of the Convertible Notes. (See Note ~~7(b)~~8(b).)

(d)

Statutory Surplus Reserve

~~(d)~~

~~Statutory Surplus Reserve~~

Pursuant to the corporate law of the ~~People’s~~People's Republic of China (the ~~“PRC”~~"PRC"), entities registered in the PRC are required to maintain certain statutory reserves, which are appropriated from after-tax profits (after offsetting accumulated losses from prior years), as reported in their respective statutory financial statements, before the declaration or payment of dividends to equity holders. All statutory reserves are created for specific purposes.

The ~~Company’s~~Company's PRC subsidiaries are required to appropriate ~~10%~~10% of statutory net profits to statutory surplus reserves, upon distribution of their after-tax profits. The ~~Company’s~~Company's PRC subsidiaries may discontinue the contribution when the aggregate sum of the statutory surplus reserve is more than ~~50%~~50% of its registered capital. The statutory surplus reserve is non-distributable other than during liquidation and may only be used to fund losses from prior years, to expand production operations, or to increase the capital of the subsidiaries. In addition, the subsidiaries may make further contribution to the discretional surplus reserve using post-tax profits in accordance with resolutions of the Board of Directors.

~~During the three months ended September 30,~~36

In 2021, one of the ~~Company’s~~Company's PRC subsidiaries declared and paid dividends of RMB 131.6 million ($20.4 million). In the third quarter of 2021, upon passage of the requisite resolution of the Board of Directors, a statutory surplus reserve of RMB 36.4 million ($5.6 million) was recorded within ~~Shareholders’~~Shareholders' Equity as an appropriation of the retained earnings of the ~~Company’s~~Company's PRC subsidiaries, of which ~~$3.9~~$3.9 million is attributable to the ~~Company’s~~Company's common shareholders and ~~$1.7~~$1.7 million is attributable to non-controlling shareholders. The statutory surplus reserve of RMB 36.4 million ($5.6 million) has reached ~~50%~~50% of its PRC ~~subsidiaries’~~subsidiaries' registered capital.No additional statutory surplus reserve was recorded by the Company's PRC subsidiaries for the three months ended September 30, 2022.

~~13.~~14. Revenue from Contracts with Customers

(a)

Disaggregated Information About Revenue

~~(a)~~

~~Disaggregated Information About Revenue~~

The following tables summarize the ~~Company’s~~Company's revenues by type and reportable segment for the three and nine months ended September 30, 2022 and 2021:


	Three Months Ended September 30, 2022
	Revenue from
	Contracts with Customers				Revenue from
(In thousands of U.S. Dollars)	Fixed Consideration		Variable Consideration		Lease Arrangements		Finance Income		Total
Technology sales
IMAX Systems(1)	$	11,162	$	2,671	$	207	$	—	$	14,040
Joint Revenue Sharing Arrangements, fixed fees		—		—		998		—		998
Other Theater Business		2,107		—		—		—		2,107
All Other		919		1		—		—		920
Sub-total		14,188		2,672		1,205		—		18,065
Image enhancement and maintenance services
IMAX DMR		—		19,919		—		—		19,919
IMAX Maintenance		13,939		—		—		—		13,939
Film Distribution		157		924		—		—		1,081
Film Post-Production		968		—		—		—		968
All Other		—		326		—		—		326
Sub-total		15,064		21,169		—		—		36,233
Technology rentals
Joint Revenue Sharing Arrangements, contingent rent		—		—		12,540		—		12,540
Sub-total		—		—		12,540		—		12,540
Finance income
IMAX Systems		—		—		—		1,917		1,917
Total	$	29,252	$	23,841	$	13,745	$	1,917	$	68,755


	Nine Months Ended September 30, 2022
	Revenue from
	Contracts with Customers				Revenue from
(In thousands of U.S. Dollars)	Fixed consideration		Variable consideration		Lease Arrangements		Finance Income		Total
Technology sales
IMAX Systems(1)	$	22,032	$	4,055	$	241	$	—	$	26,328
Joint Revenue Sharing Arrangements, fixed fees		—		—		2,486		—		2,486
Other Theater Business		3,697		—		—		—		3,697
All Other		2,677		82		—		—		2,759
Sub-total		28,406		4,137		2,727		—		35,270
Image enhancement and maintenance services
IMAX DMR		—		67,064		—		—		67,064
IMAX Maintenance		43,564		—		—		—		43,564
Film Distribution		324		2,179		—		—		2,503
Film Post-Production		2,915		—		—		—		2,915
All Other		—		1,239		—		—		1,239
Sub-total		46,803		70,482		—		—		117,285
Technology rentals
Joint Revenue Sharing Arrangements, contingent rent		—		—		43,708		—		43,708
All Other		—		—		18		—		18
Sub-total		—		—		43,726		—		43,726
Finance income
IMAX Systems		—		—		—		6,478		6,478
Total	$	75,209	$	74,619	$	46,453	$	6,478	$	202,759


	Three Months Ended September 30, 2021
	Revenue from
	Contracts with Customers				Revenue from
(In thousands of U.S. Dollars)	Fixed Consideration		Variable Consideration		Lease Arrangements		Finance Income		Total
Technology sales
IMAX Systems(1)	$	9,701	$	802	$	98	$	—	$	10,601
Joint Revenue Sharing Arrangements, fixed fees		—		—		1,036		—		1,036
Other Theater Business		363		—		—		—		363
All Other		1,154		6		—		—		1,160
Sub-total		11,218		808		1,134		—		13,160
Image enhancement and maintenance services
IMAX DMR		—		15,701		—		—		15,701
IMAX Maintenance		13,055		—		—		—		13,055
Film Distribution		203		496		—		—		699
Film Post-Production		899		—		—		—		899
All Other		—		234		—		—		234
Sub-total		14,157		16,431		—		—		30,588
Technology rentals
Joint Revenue Sharing Arrangements, contingent rent		—		—		9,887		—		9,887
All Other		—		—		332		—		332
Sub-total		—		—		10,219		—		10,219
Finance income
IMAX Systems		—		—		—		2,635		2,635
Total	$	25,375	$	17,239	$	11,353	$	2,635	$	56,602


	Nine Months Ended September 30, 2021
	Revenue from
	Contracts with Customers				Revenue from
(In thousands of U.S. Dollars)	Fixed consideration		Variable consideration		Lease Arrangements		Finance Income		Total
Technology sales
IMAX Systems(1)	$	20,143	$	2,573	$	4,220	$	—	$	26,936
Joint Revenue Sharing Arrangements, fixed fees		—		—		3,776		—		3,776
Other Theater Business		1,275		—		—		—		1,275
All Other		2,474		47		—		—		2,521
Sub-total		23,892		2,620		7,996		—		34,508
Image enhancement and maintenance services
IMAX DMR		—		39,438		—		—		39,438
IMAX Maintenance		33,196		—		—		—		33,196
Film Distribution		204		911		—		—		1,115
Film Post-Production		2,886		—		—		—		2,886
All Other		—		279		—		—		279
Sub-total		36,286		40,628		—		—		76,914
Technology rentals
Joint Revenue Sharing Arrangements, contingent rent		—		—		26,108		—		26,108
All Other		—		—		600		—		600
Sub-total		—		—		26,708		—		26,708
Finance income
IMAX Systems		—		—		—		8,181		8,181
Total	$	60,178	$	43,248	$	34,704	$	8,181	$	146,311

Three Months Ended September 30, 2021

Revenue from

Contracts with Customers

Revenue from

(In thousands of U.S. Dollars)
Fixed
Consideration

Variable
Consideration

Lease
Arrangements

Finance Income

Total

Technology sales

IMAX Systems⁽¹⁾
$

9,701

$

802

$

98

$

0

$

10,601

Joint Revenue Sharing Arrangements, fixed fees

0

0

1,036

0

1,036

Other Theater Business

363

0

0

0

363

Other sales⁽²⁾

1,154

6

0

0

1,160

Sub-total

11,218

808

1,134

0

13,160

Image enhancement and maintenance services

IMAX DMR

0

15,701

0

0

15,701

IMAX Maintenance

13,055

0

0

0

13,055

Film Post-Production

899

0

0

0

899

Film Distribution

203

496

0

0

699

Other

0

234

0

0

234

Sub-total

14,157

16,431

0

0

30,588

Technology rentals

Joint Revenue Sharing Arrangements, contingent rent

0

0

9,887

0

9,887

Other

0

0

332

0

332

Sub-total

0

0

10,219

0

10,219

Finance income

IMAX Systems

0

0

0

2,635

2,635

Total
$

25,375

$

17,239

$

11,353

$

2,635

$

56,602

(1)

Includes revenues earned from sale and sales-type lease arrangements involving new and upgraded IMAX Theater Systems, as well as the impact of renewals and amendments to existing theater system arrangements.

(b)

Deferred Revenue

Nine Months Ended September 30, 2021

Revenue from

Contracts with Customers

Revenue from

(In thousands of U.S. Dollars)
Fixed
consideration

Variable
consideration

Lease
Arrangements

Finance Income

Total

Technology sales

IMAX Systems⁽¹⁾
$

20,143

$

2,573

$

4,220

$

0

$

26,936

Joint Revenue Sharing Arrangements, fixed fees

0

0

3,776

0

3,776

Other Theater Business

1,275

0

0

0

1,275

Other sales⁽²⁾

2,474

47

0

0

2,521

Sub-total

23,892

2,620

7,996

0

34,508

Image enhancement and maintenance services

IMAX DMR

0

39,438

0

0

39,438

IMAX Maintenance

33,196

0

0

0

33,196

Film Post-Production

2,886

0

0

0

2,886

Film Distribution

204

911

0

0

1,115

Other

0

279

0

0

279

Sub-total

36,286

40,628

0

0

76,914

Technology rentals

Joint Revenue Sharing Arrangements, contingent rent

0

0

26,108

0

26,108

Other

0

0

600

0

600

Sub-total

0

0

26,708

0

26,708

Finance income

IMAX Systems

0

0

0

8,181

8,181

Total
$

60,178

$

43,248

$

34,704

$

8,181

$

146,311

~~(1)~~

~~Includes r~~evenues earned from sales or sales-type lease arrangements involving new and upgraded IMAX Theater Systems, as well as the impact on revenue of renewals and amendments to existing theater system arrangements.

~~(2)~~

~~Other sales include revenues associated with New Business Initiatives.~~

~~The following tables summarize the Company’s revenues by type and reportable segment for the three and nine months ended September 30, 2020:~~

Three Months Ended September 30, 2020

Revenue from

Contracts with Customers

Revenue from

(In thousands of U.S. Dollars)
Fixed
Consideration

Variable
Consideration

Lease
Arrangements

Finance Income

Total

Technology sales

IMAX Systems⁽¹⁾⁽²⁾
$

12,356

$

1,481

$

1,159

$

0

$

14,996

Joint Revenue Sharing Arrangements, fixed fees

0

0

57

0

57

Other Theater Business

307

0

0

0

307

Other sales⁽³⁾

378

15

0

0

393

Sub-total

13,041

1,496

1,216

0

15,753

Image enhancement and maintenance services

IMAX DMR

0

6,886

0

0

6,886

IMAX Maintenance

5,855

0

0

0

5,855

Film Post-Production

739

0

0

0

739

Film Distribution

750

376

0

0

1,126

Other

0

(17
)

0

0

(17
)
Sub-total

7,344

7,245

0

0

14,589

Technology rentals

Joint Revenue Sharing Arrangements, contingent rent

0

0

4,473

0

4,473

Sub-total

0

0

4,473

0

4,473

Finance income

IMAX Systems

0

0

0

2,441

2,441

Total
$

20,385

$

8,741

$

5,689

$

2,441

$

37,256

Nine Months Ended September 30, 2020

Revenue from

Contracts with Customers

Revenue from

(In thousands of U.S. Dollars)
Fixed
consideration

Variable
consideration

Lease
Arrangements

Finance Income

Total

Technology sales

IMAX Systems⁽¹⁾⁽²⁾
$

14,711

$

3,143

$

2,325

$

0

$

20,179

Joint Revenue Sharing Arrangements, fixed fees

0

0

1,196

0

1,196

Other Theater Business

1,261

0

0

0

1,261

Other sales⁽³⁾

1,361

105

0

0

1,466

Sub-total

17,333

3,248

3,521

0

24,102

Image enhancement and maintenance services

IMAX DMR

0

18,061

0

0

18,061

IMAX Maintenance

13,225

0

0

0

13,225

Film Post-production

3,088

0

0

0

3,088

Film Distribution

3,000

1,453

0

0

4,453

Other

282

0

0

282

Sub-total

19,313

19,796

0

0

39,109

Technology rentals

Joint Revenue Sharing Arrangements, contingent rent

0

0

10,307

0

10,307

Sub-total

0

0

10,307

0

10,307

Finance income

IMAX Systems

0

0

0

7,495

7,495

Total
$

36,646

$

23,044

$

13,828

$

7,495

$

81,013

~~(1)~~

~~(2)~~

Prior period comparatives have been revised to appropriately classify $1.1 million and $2.3 million, respectively, of fixed consideration under revenue from contracts with customers to revenue from lease arrangements for the three and nine months ended September 30, 2020.

~~(3)~~

~~Other sales include revenues associated with New Business Initiatives.~~

~~(b)~~

~~Deferred Revenue~~

IMAX Theater System sale and lease arrangements include a requirement for the Company to provide maintenance services over the life of the arrangement, subject to a consumer price index adjustment each year. In circumstances where customers prepay the entire ~~term’s~~term's maintenance fee, additional payments are due to the Company for the years after its extended warranty and maintenance obligations expire. Payments upon renewal each year are either prepaid or made in arrears and can vary in frequency from monthly to annually. AtAs of September 30, ~~2021, $20.3~~2022, $16.3 million of consideration has been deferred in relation to outstanding maintenance services to be provided on existing maintenance contracts (December 31, ~~2020~~2021 — ~~$21.6~~$20.2 million). Maintenance revenue is recognized evenly over the contract term which coincides with the period over which maintenance services are provided. In the event of customer default, any payments made by the customer may be retained by the Company.

In instances where the Company receives consideration prior to satisfying its performance obligations, the recognition of revenue is deferred. The majority of the deferred revenue balance relates to payments received by the Company for IMAX Theater Systems where control of the system has not transferred to the customer. The deferred revenue balance related to an individual theater increases as progress payments are made and is then derecognized when control of the system is transferred to the customer. Recognition dates are variable and depend on numerous factors, including some outside of the ~~Company’s~~Company's control.

~~(See Note 2 for information~~ ~~on the current impacts of and uncertainties relating to the COVID-19 global pandemic which are impacting the Company’s revenues~~39.)

~~14.~~15. Segment Reporting

The ~~Company’s~~Company's Chief Executive Officer ~~(“CEO”~~("CEO") is its Chief Operating Decision Maker ~~(“CODM”~~("CODM"), as such term is defined under U.S. GAAP. The CODM, along with other members of management, assess segment performance based on segment revenues and gross margins. Selling, general and administrative expenses, research and development costs, the amortization of intangible assets, provision for (reversal of) current expected credit losses, certain write-downs, interest income, interest expense, and income tax (expense) benefit are not allocated to the ~~Company’s~~Company's segments.

The Company has the following reportable segments: (i) IMAX DMR; (ii) Joint Revenue Sharing ~~Arrangements;~~Arrangements ("JRSA"); (iii) IMAX ~~Systems,~~Systems; (iv) IMAX Maintenance; (v) Other Theater Business; (vi) ~~New Business Initiatives; (vii)~~ Film Distribution; and ~~(viii)~~(vii) Film Post-Production. The Company's activities that do not meet the criteria to be considered a reportable segment are disclosed within All Other. The Company organizes its reportable segments into the following ~~four~~three categories, identified by the nature of the product sold or service provided:

(i)

IMAX Technology Network, which earns revenue based on contingent box office receipts and includes the IMAX DMR segment and contingent rent from the JRSA segment;

(ii)

IMAX Technology Sales and Maintenance, which includes results from the IMAX Systems, IMAX Maintenance, and Other Theater Business segments, as well as fixed revenues from the JRSA segment; and

(iii)

Film Distribution and Post-Production, which includes activities related to the distribution of large-format documentary films, primarily to institutional theaters, and the distribution of exclusive experiences ranging from live performances to interactive events with leading artists and creators (through the Film Distribution segment) and the provision of film post-production and quality control services.

~~(i)~~

IMAX Technology Network, which earns revenue based on contingent box office receipts and includes the IMAX DMR segment and contingent rent from the Joint Revenue Sharing Arrangement (“JRSA”) segment;

~~(ii)~~

~~IMAX Technology Sales and Maintenance, which includes results from the IMAX Systems, IMAX Maintenance and Other Theater Business segments, as well as fixed revenues from the JRSA segment;~~

~~(iii)~~

~~New Business Initiatives, which is a segment that includes activities related to the exploration of new lines of business and new initiatives outside of the Company’s core business; and~~

~~(iv)~~

Film Distribution and Post-Production, which includes activities related to the licensing of film content, and the distribution of films primarily for the Company’s institutional theater partners (through the Film Distribution segment) and the provision of film post-production and quality control services (through the Film Post-Production segment).

The Company ~~is presenting~~presents its segment information at a disaggregated level to provide more relevant information to ~~readers.~~the users of its financial statements.

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

In the first quarter of 2022, the Company's internal reporting was updated to reclassify the results of IMAX Enhanced®, an initiative to bring The IMAX Experience® into the home, out of the New Business Initiatives segment and into All Other for segment reporting purposes. IMAX Enhanced was the only component of the New Business Initiatives segment. Prior period comparatives have been reclassified to conform with the current period presentation.

The following table presents the ~~Company’s~~Company's revenue and gross margin (margin loss) by category and reportable segment for the three months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


	Revenue(1)				Gross Margin (Margin Loss)
(In thousands of U.S. Dollars)	2022		2021		2022			2021
IMAX Technology Network
IMAX DMR	$	19,919	$	15,701	$	11,408		$	7,293
JRSA, contingent rent		12,540		9,887		6,302			3,626
		32,459		25,588		17,710			10,919
IMAX Technology Sales and Maintenance
IMAX Systems(2)		15,957		13,236		9,029			8,086
JRSA, fixed fees		998		1,036		(154	)		280
IMAX Maintenance		13,939		13,055		6,406			6,462
Other Theater Business(3)		2,107		363		168			64
		33,001		27,690		15,449			14,892
Film Distribution and Post-Production
Film Distribution		1,081		699		(2,369	)		(4	)
Post-Production		968		899		287			420
		2,049		1,598		(2,082	)		416
Sub-total for reportable segments		67,509		54,876		31,077			26,227
All Other(4)		1,246		1,726		624			1,260
Total	$	68,755	$	56,602	$	31,701		$	27,487

Revenue⁽¹⁾

Gross Margin (Margin Loss)⁽⁴⁾

(In thousands of U.S. Dollars)

2021

2020

2021

2020

IMAX Technology Network

IMAX DMR

$
15,701

$
6,886

$
7,293

$
3,079

Joint Revenue Sharing Arrangements, contingent rent

9,887

4,473

3,626

(2,491
)

25,588

11,359

10,919

588

IMAX Technology Sales and Maintenance

IMAX Systems⁽²⁾

13,236

17,437

8,086

8,671

Joint Revenue Sharing Arrangements, fixed fees

1,036

57

280

(117
)
IMAX Maintenance

13,055

5,855

6,462

794

Other Theater Business⁽³⁾

363

307

64

31

27,690

23,656

14,892

9,379

New Business Initiatives

1,238

378

1,189

372

Film Distribution and Post-Production

Film Distribution⁽⁵⁾

699

1,126

(4
)

(5,597
)
Post-Production

899

739

420

(464
)

1,598

1,865

416

(6,061
)
Sub-total

56,114

37,258

27,416

4,278

Other

488

(2
)

71

(449
)
Total

$
56,602

$
37,256

$
27,487

$
3,829

The following table presents the ~~Company’s~~Company's revenue and gross margin (margin loss) by category and reportable segment for the nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


	Revenue(1)				Gross Margin (Margin Loss)
(In thousands of U.S. Dollars)	2022		2021		2022			2021
IMAX Technology Network
IMAX DMR	$	67,064	$	39,438	$	42,965		$	22,405
JRSA, contingent rent		43,708		26,108		25,389			7,299
		110,772		65,546		68,354			29,704
IMAX Technology Sales and Maintenance
IMAX Systems(2)		32,806		35,117		18,432			21,646
JRSA, fixed fees		2,486		3,776		79			783
IMAX Maintenance		43,564		33,196		21,643			15,360
Other Theater Business(3)		3,697		1,283		314			269
		82,553		73,372		40,468			38,058
Film Distribution and Post-Production
Film Distribution		2,503		1,115		(4,631	)		(319	)
Post-Production		2,915		2,886		1,161			1,316
		5,418		4,001		(3,470	)		997
Sub-total for reportable segments		198,743		142,919		105,352			68,759
All Other(4)		4,016		3,392		2,156			1,612
Total	$	202,759	$	146,311	$	107,508		$	70,371

(1)

The Company's largest customer represents 11% and 13%, respectively, of total Revenues for the three and nine months ended September 30, 2022 (2021 — 18% and 22%, respectively). No single customer comprises more than 10% of the Company's total Accounts Receivable as of September 30, 2022 and December 31, 2021.

(2)

The revenue from this segment includes the initial upfront payments and the present value of fixed minimum payments from sale and sales-type lease arrangements of IMAX Theater Systems, as well as the present value of estimated variable consideration from sales of IMAX Theater Systems. To a lesser extent, the revenue from this segment also includes finance income associated with these revenue streams.

(3)

The revenue from this segment principally includes after-market sales of IMAX Theater System parts and 3D glasses.

(4)

All Other includes the results from IMAX Enhanced, SSIMWAVE, and other ancillary activities. In the first quarter of 2022, the Company's internal reporting was updated to reclassify the results of IMAX Enhanced out of the New Business Initiatives segment into All Other for segment reporting purposes. Prior period comparatives have been revised to conform with the current period presentation. The results of SSIMWAVE, which was acquired on September 22, 2022, were not material to the period. (See Note 4 for additional information related to the Company's acquisition of SSIMWAVE)

Revenue⁽¹⁾

Gross Margin (Margin Loss)⁽⁴⁾

(In thousands of U.S. Dollars)

2021

2020

2021

2020

IMAX Technology Network

IMAX DMR

$
39,438

$
18,061

$
22,405

$
7,492

Joint Revenue Sharing Arrangements, contingent rent

26,108

10,307

7,299

(10,610
)

65,546

28,368

29,704

(3,118
)

IMAX Technology Sales and Maintenance

IMAX Systems⁽²⁾

35,117

27,674

21,646

14,497

Joint Revenue Sharing Arrangements, fixed fees

3,776

1,196

783

110

IMAX Maintenance

33,196

13,225

15,360

(355
)
Other Theater Business⁽³⁾

1,283

1,261

269

77

73,372

43,356

38,058

14,329

New Business Initiatives

2,554

1,488

2,281

1,245

Film Distribution and Post-Production

Film Distribution⁽⁵⁾

1,115

4,453

(319
)

(9,296
)
Post-Production

2,886

3,088

1,316

(96
)

4,001

7,541

997

(9,392
)
Sub-total

145,473

80,753

71,040

3,064

Other

838

260

(669
)

(1,837
)
Total

$
146,311

$
81,013

$
70,371

$
1,227

~~(1)~~

The Company’s largest customer represents 18.2% and 22.2%, respectively, of total Revenues for the three and nine months ended September 30, 2021 (2020 — 11.0% and 11.3%, respectively). No single customer comprises more than 10% of the Company’s total Accounts Receivable as of September 30, 2021 and December 31, 2020.

~~(2)~~

The revenue from this segment includes the initial upfront payments and the present value of fixed minimum payments from sales and sales-type lease arrangements of IMAX Theater Systems, as well as the present value of estimated variable consideration from sales of IMAX Theater Systems. To a lesser extent, the revenue from this segment also includes finance income associated with these revenue streams.

~~(3)~~

~~The revenue from this segment principally includes after-market sales of IMAX projection system parts and 3D glasses.~~

~~(4)~~

IMAX DMR gross margin includes marketing costs of $3.2 million and $5.8 million, respectively, for the three and nine months ended September 30, 2021 (2020 — $0.4 million and $2.8 million, respectively). JRSA gross margin includes advertising, marketing and commission expense of $0.8 million and $1.9 million, respectively, for the three and nine months ended September 30, 2021 (2020 — $0.7 million and $1.3 million, respectively). IMAX Systems gross margin includes marketing and commission costs of $0.3 million and $0.9 million, respectively, for the three and nine months ended September 30, 2021 (2020 — $0.6 million and $1.0 million, respectively). Film Distribution segment gross margin includes marketing expense of $nil and less than $0.1 million, respectively, for the three and nine months ended September 30, 2021 (2020 — $0.2 million and $0.4 million, respectively).

~~(5)~~

~~During the three and nine months ended September 30, 2020,~~ ~~Film Distribution segment results include impairment losses of $5.4 million and $9.9 million, respectively, to write-down the carrying value of certain documentary and alternative content film assets~~ ~~due to a decrease in projected box office totals and related revenues based on management’s regular quarterly recoverability assessments. No such charges were incurred in the~~ ~~three and nine months ended September 30, 2021~~.

Geographic Information

Revenue by geographic area is based on the location of the customer. Revenue related to IMAX DMR is presented based upon the geographic location of the theaters that exhibit the remastered films. IMAX DMR revenue is generated through contractual relationships with studios and other third parties and these may not be in the same geographical location as the theater.

The following table summarizes the Company's revenues by geographic area for the three and nine months ended September 30, 2022 and 2021:


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(In thousands of U.S. Dollars)	2022		2021		2022			2021
United States	$	23,168	$	16,469		$	75,881		$	34,275
Greater China		14,889		22,203			47,602			75,634
Asia (excluding China)		13,921		4,925			31,045			12,837
Western Europe		8,938		7,634			26,700			11,160
Latin America		2,397		1,181			6,826			1,579
Canada		1,780		1,083			5,520			620
Russia/the CIS & Ukraine(1)		1,638		1,353			2,794			4,577
Rest of the World		2,024		1,754			6,391			5,629
Total	$	68,755	$	56,602		$	202,759		$	146,311

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Revenue

Greater China

$
22,203

$
19,346

$
75,634

$
26,008

United States

16,469

4,335

34,275

21,112

Western Europe

7,634

5,085

11,160

10,273

Asia (excluding Greater China)

4,925

4,935

12,837

12,663

Russia & the CIS

1,353

738

4,577

2,962

Latin America

1,181

1,616

1,579

3,251

Canada

1,083

384

620

1,327

Rest of the World

1,754

817

5,629

3,417

Total

$
56,602

$
37,256

$
146,311

$
81,013

(1)

In addition to Russia, the CIS includes Azerbaijan, Belarus, Kazakhstan, and Kyrgyzstan. Commencing in March 2022, in response to the ongoing conflict between Russia and Ukraine and resulting sanctions, the Company suspended its operations in Russia and Belarus. As of September 30, 2022, the IMAX network includes 54 theaters in Russia, nine theaters in Ukraine, and one theater in Belarus.

No single country in the Rest of the World, Western Europe, Latin America and Asia (excluding Greater China) comprises more than 10% of the ~~Company’s~~Company's total revenue in the ~~three and~~ nine months ended September 30, 2022 and 2021.

~~15.~~16. Employee's Pension and Postretirement Benefits

(a) Defined Benefit Plan

~~(a)~~

~~Defined Benefit Plan~~

The Company has an unfunded defined benefit pension plan, the Supplemental Executive Retirement Plan (the ~~“SERP”~~"SERP"), covering its CEO, Richard L. Gelfond. Under the terms of the SERP, if Mr. ~~Gelfond’s~~Gelfond's employment is terminated other than for cause (as defined in his employment agreement), he is entitled to receive SERP benefits in the form of a lump sum payment. SERP benefit payments to Mr. Gelfond are subject to a deferral for six months after the termination of his employment, at which time Mr. Gelfond will be entitled to receive interest on the deferred amount credited at the applicable federal rate for short-term obligations. Pursuant to an amendment to his employment agreement dated ~~November 1, 2019,~~September 19, 2022, the term of Mr. ~~Gelfond’s~~Gelfond's employment was extended through December 31, ~~2022,~~2025, although Mr. Gelfond has not informed the Company that he intends to retire at that time. Under the terms of ~~this amendment to~~ his employment agreement, as amended, the total benefit payable to Mr. Gelfond under the SERP ~~was~~is fixed at ~~$20.3~~$20.3 million.

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the ~~Company’s~~Company's projected benefit obligation and unfunded status related to the SERP are as follows:


	September 30,		December 31,		September 30,		December 31,
(In thousands of U.S. Dollars)	2021		2020		2022		2021
Projected benefit obligation:
Obligation, beginning of period	$	20,116	$	18,840	$	20,056	$	20,116
Interest cost		54		379		120		72
Actuarial gain		0		897		—		(132	)
Obligation, end of period and unfunded status⁽¹⁾	$	20,170	$	20,116
Obligation, end of period and unfunded status					$	20,176	$	20,056

~~(1)~~

~~The accumulated benefit obligation for the SERP was $20.2 million at September 30, 2021 (December 31, 2020 — $20.1 million).~~

For the three and nine months ended September 30, ~~2021,~~2022, the Company recorded interest costs of less than ~~$0.1~~$0.1 million and ~~$0.1~~$0.1 million, respectively ~~(2020~~(2021 — ~~$0.1~~less than $0.1 million and ~~$0.3 million, respectively)~~$0.1 million) related to the SERP. The Company expects to recognize additional interest costs of less than ~~$0.1~~$0.1 million related to the SERP during the remainder of ~~2021. NaN~~2022. No contributions are expected to be made to the SERP in ~~2021.~~2022.

~~(b)~~

~~Defined Contribution Pension Plan~~

(b)

Defined Contribution Pension Plan

The Company also maintains defined contribution plans for its employees, including its executive officers. The Company makes contributions to these plans on behalf of employees in an amount up to 5%5% of their base salary subject to certain prescribed maximums. During the three and nine months ended September 30, ~~2021,~~2022, the Company contributed and recorded expense of ~~$0.3~~$0.4 million and ~~$0.8~~$0.9 million, respectively ~~(2020~~(2021 — ~~$0.3~~$0.3 million and ~~$0.8~~$0.8 million, ~~respectively~~)respectively) to its Canadian defined contribution plan and ~~$0.1~~$0.1 million and ~~$0.4~~$0.5 million, respectively ~~(2020~~(2021 — ~~$0.1~~$0.1 million and ~~$0.5~~$0.4 million, ~~respectively~~)respectively) to its defined contribution employee plan under Section 401(k) of the U.S. Internal Revenue Code.

(c)

Postretirement Benefits – Executives

~~(c)~~

~~Postretirement Benefits – Executives~~

The Company has an unfunded postretirement plan for Mr. Gelfond and Bradley J. Wechsler, former Chairman of the ~~Company’s~~Company's Board of ~~Directors.~~Directors (the "Executive Postretirement Benefit Plan"). The ~~plan~~Executive Postretirement Benefit Plan provides that the Company will maintain health benefits for Messrs. Gelfond and Wechsler until they become eligible for Medicare and, thereafter, the Company will provide Medicare supplemental coverage as selected by Messrs. Gelfond and Wechsler. Mr. Wechsler retired from the Company's Board of Directors on June 9, 2021. The Company maintained Mr. Wechsler's health benefits through December 31, 2021, and thereafter is providing him with Medicare supplemental coverage.

As of September 30, ~~2021,~~2022, the ~~Company’s~~Company's postretirement benefits obligation under this plan is ~~$0.7~~$0.7 million (December 31, ~~2020~~2021 — ~~$0.7~~$0.7 million). For the three and nine months ended September 30, ~~2021,~~2022, the Company has recorded an expense of less than ~~$0.1~~$0.1 million ~~(2020~~(2021 — less than ~~$0.1~~$0.1 million) related to this plan. Mr. Wechsler retired from the Company’s Board of Directors on June 9, 2021. The Company will maintain Mr. Wechsler’s current health benefits through December 31, 2021, and thereafter will provide him with Medicare supplemental coverage.

(d)

Postretirement Benefits – Canadian Employees

~~(d)~~

~~Postretirement Benefits – Canadian Employees~~

The Company has an unfunded postretirement plan for its Canadian employees meeting specific eligibility requirements. The Company will provide eligible participants, upon retirement, with health and welfare benefits. As of September 30, ~~2021,~~2022, the ~~Company’s~~Company's postretirement benefits obligation under this plan is ~~$1.8~~$1.5 million (December 31, ~~2020~~2021 — ~~$1.9~~$1.7 million). For the three and nine months ended September 30, ~~2021,~~2022, the Company has recorded expense of less than ~~$0.1~~$0.1 million ~~(2020~~and less than $0.1 million, respectively, (2021 — less than ~~$0.1 million and $0.1 million, respectively)~~$0.1 million) related to this plan.

~~(e)~~

~~Deferred Compensation Benefit Plan~~

(e)

Deferred Compensation Benefit Plan

The Company maintained a nonqualified deferred compensation benefit plan (the ~~“Retirement Plan”~~"Retirement Plan") covering the former CEO of IMAX Entertainment and Senior Executive Vice President of the Company. Under the terms of the Retirement Plan, the benefits were due to vest in full if the executive incurred a separation from service from the Company (as defined therein). In ~~the fourth quarter of~~ 2018, the executive incurred a separation from service from the Company, and as such, the Retirement Plan benefits became fully vested as of December 31, ~~2018 and the accelerated costs were recognized and reflected in Executive Transition Costs in the Consolidated Statements of Operations.~~2018.

As of September 30, ~~2021,~~2022, the benefit obligation related to the Retirement Plan was ~~$3.8~~$3.9 million (December 31, ~~2020~~2021 — ~~$3.7~~$3.8 million) and is recorded on the ~~Company’s~~Company's Condensed Consolidated Balance Sheets within Accrued and Other Liabilities. As the Retirement Plan is fully vested, the benefit obligation is measured at the present value of the benefits expected to be paid in the future with the accretion of interest recognized in the Condensed Consolidated Statements of Operations within Retirement Benefits ~~Non-service Expenses.~~Non-Service Expense.

The Retirement Plan is funded by an investment in company-owned life insurance ~~(“COLI”~~("COLI"), which is recorded at its fair value on the ~~Company’s~~Company's Condensed Consolidated Balance Sheets within Prepaid Expenses. As of September 30, ~~2021,~~2022, fair value of the COLI asset was ~~$3.2~~$3.4 million (December 31, ~~2020~~2021 — ~~$3.2~~$3.3 million). Gains and losses resulting from changes in the cash surrender value of the COLI asset are recognized in the Condensed Consolidated Statements of Operations within Realized and Unrealized Investment ~~Gains (Losses).~~Gains.

~~16.~~44

17. Financial Instruments

(a)

Financial Instruments

~~(a)~~

~~Financial Instruments~~

The Company maintains cash with various major financial institutions. The ~~Company’s~~Company's cash is invested with highly rated financial institutions. The ~~Company’s $193.0~~Company's $87.2 million balance of cash and cash equivalents as of September 30, 2022 (December 31, 2021 — $189.7 million) includes ~~$101.0~~$65.5 million in cash held outside of Canada (December 31, ~~2020~~2021 — ~~$89.9~~$102.1 million), of which ~~$70.3~~$27.9 million was held in the PRC (December 31, ~~2020~~2021 — ~~$77.2~~$76.3 million).

(b)

Fair Value Measurements

~~(b)~~

~~Fair Value Measurements~~

The carrying values of the ~~Company’s~~Company's Cash and Cash Equivalents, Accounts Receivable, Accounts Payable and Accrued and Other Liabilities due within one year approximate their fair values due to the short-term maturity of these instruments. Including these instruments, the ~~Company’s~~Company's financial instruments consist of the following:


	As of September 30, 2022						As of December 31, 2021
(In thousands of U.S. Dollars)	Carrying Amount			Estimated Fair Value			Carrying Amount			Estimated Fair Value
Level 1
Cash and cash equivalents(1)	$	87,151		$	87,151		$	189,711		$	189,711
Equity securities(2)		1,095			1,095			1,087			1,087
Level 2
Net financed sales receivables(3)	$	97,770		$	96,019		$	112,657		$	112,662
Net investment in sales-type leases(3)		24,848			24,823			28,392			28,407
Equity securities(1)		1,000			1,000			1,000			1,000
COLI(4)		3,366			3,366			3,275			3,275
Foreign exchange contracts — designated forwards(2)		(1,608	)		(1,608	)		79			79
Bank of China Facility borrowings(1)		(4,763	)		(4,763	)		(3,612	)		(3,612	)
Federal Economic Development Loan(3)		(1,772	)		(1,772	)	n/a			n/a
Convertible Notes(5)		(230,000	)		(193,400	)		(230,000	)		(223,100	)
Level 3
Interest in film classified as a financial instrument(6)	$	—		$	—		$	—		$	—

As of September 30, 2021

As of December 31, 2020

(In thousands of U.S. Dollars)

Carrying
Amount

Estimated
Fair Value

Carrying
Amount

Estimated
Fair Value

Level 1

Cash and cash equivalents⁽¹⁾

$
193,008

$
193,008

$
317,379

$
317,379

Equity securities⁽²⁾

1,089

1,089

13,633

13,633

Level 2

Net financed sales receivables⁽³⁾

$
113,200

$
113,210

$
112,396

$
112,603

Net investment in sales-type leases⁽³⁾

22,002

21,850

19,414

19,373

Equity securities⁽¹⁾

1,000

1,000

1,000

1,000

COLI⁽⁴⁾

3,244

3,244

3,155

3,155

Foreign exchange contracts — designated forwards⁽³⁾

(209
)

(209
)

1,635

1,635

Foreign exchange contracts — non-designated forwards⁽³⁾

(61
)

(61
)

344

344

Working Capital Facility borrowings⁽¹⁾

(10,974
)

(10,974
)

(7,643
)

(7,643
)
Credit Facility borrowings⁽¹⁾

0

0

(300,000
)

(300,000
)
Convertible Notes⁽⁵⁾

(230,000
)

(224,574
)

0

0

(1)

Recorded at cost, which approximates fair value.

(2)

Fair value is determined using quoted prices in active markets.

(3)

Fair value is estimated based on discounting future cash flows at currently available interest rates with comparable terms.

(4)

Measured at cash surrender value, which approximates fair value.

(5)

Fair value is determined using quoted market prices that are observable in the market or that could be derived from observable market data.

(6)

Recorded at amortized cost less impairment losses. Inputs used in the calculation of estimated fair value include management's projection of future box office and ancillary receipts for the film net of distribution costs and other costs in accordance with the investment agreement. See 17(e) below.

(c)

Foreign Exchange Risk Management

~~(1)~~

~~Recorded at cost, which approximates fair value.~~

~~(2)~~

~~Fair value is determined using quoted prices in active markets.~~

~~(3)~~

~~Fair value is estimated based on discounting future cash flows at currently available interest rates with comparable terms.~~

~~(4)~~

~~Measured at cash surrender value, which approximates fair value.~~

~~(5)~~

~~Fair value is determined using quoted market prices that are observable in the market or that could be derived from observable market data.~~

~~The Company did not have any material amounts of Level 3 assets or liabilities as of September 30, 2021 and December 31, 2020.~~

~~(c)~~

~~Foreign Exchange Risk Management~~

The Company is exposed to market risk from changes in foreign currency rates.

A majority of the ~~Company’s~~Company's revenues is denominated in U.S. Dollars while a ~~substantial~~significant portion of its costs and expenses is denominated in Canadian Dollars. A portion of the Company's net U.S. Dollar cash ~~flows of the Company~~ is ~~periodically~~ converted to Canadian Dollars to fund Canadian Dollar expenses through the spot market. In China and Japan, the Company has ongoing operating expenses related to its operations in RMB and Japanese Yen, respectively. Net cash flows are converted to and from U.S. Dollars through the spot market. The Company also has cash receipts under leases denominated in RMB, Japanese Yen, Canadian Dollars and Euros which are converted to U.S. Dollars through the spot market. In addition, because IMAX films generate box office in 8587 different countries, ~~unfavourable~~unfavorable exchange rates between applicable local currencies and the U.S. Dollar ~~affect the Company’s reported gross~~could have an impact on box-office receipts and the Company's revenues ~~further impacting the Company’s~~and results of operations. The ~~Company’s~~Company's policy is to not use any financial instruments for trading or other speculative purposes.

The Company has entered into a series of foreign currency forward contracts to manage the 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 at inception, and continue to meet hedge effectiveness tests at September 30, ~~2021~~2022 (the ~~“Foreign~~"Foreign Currency ~~Hedges”~~Hedges"), with settlement dates throughout ~~2022.~~2022 and 2023. Foreign currency derivatives are recognized and measured in the Condensed Consolidated Balance Sheets at fair value. Changes in the fair value (i.e., gains or losses) are recognized in the Condensed Consolidated Statements of Operations except for derivatives designated and qualifying as foreign currency cash flow hedging instruments. The Company currently has cash flow hedging instruments associated with Selling, General and Administrative Expenses. For foreign currency cash flow hedging instruments related to Selling, General and Administrative Expenses, the effective portion of the gain or loss in a hedge of a forecasted transaction is reported in Accumulated Other Comprehensive (Loss) Income and reclassified to the Condensed Consolidated Statements of Operations when the forecasted transaction occurs. For foreign currency cash flow hedging instruments related to Inventories, the effective portion of the gain or loss in a hedge of a forecasted transaction is reported in Other Comprehensive (Loss) Income and reclassified to Inventories in the Condensed Consolidated Balance Sheets when the forecasted transaction occurs.Any ineffective portion is recognized immediately in the Condensed Consolidated Statements of Operations.

The following tabular disclosures reflect the impact that derivative instruments and hedging activities have on the ~~Company’s~~Company's Condensed Consolidated Financial Statements:

Notional value of foreign exchange contracts:


	September 30,		December 31,
(In thousands of U.S. Dollars)	2022		2021
Derivatives designated as hedging instruments:
Foreign exchange contracts — Forwards	$	30,806	$	26,702

September 30,

December 31,

(In thousands of U.S. Dollars)

2021

2020

Derivatives designated as hedging instruments:

Foreign exchange contracts — Forwards

$
24,642

$
26,358

Derivatives not designated as hedging instruments:

Foreign exchange contracts — Forwards

1,123

5,552

$
25,765

$
31,910

Fair value of derivatives in foreign exchange contracts:


		September 30,			December 31,
(In thousands of U.S. Dollars)	Balance Sheet Location	2022			2021
Derivatives designated as hedging instruments:
Foreign exchange contracts — Forwards	Other assets	$	—		$	184
	Accrued and other liabilities		(1,608	)		(105	)
		$	(1,608	)	$	79

September 30,

December 31,

(In thousands of U.S. Dollars)

Balance Sheet Location

2021

2020

Derivatives designated as hedging instruments:

Foreign exchange contracts — Forwards

Other assets

$
128

$
1,635

Accrued and other liabilities

(337
)

—

Derivatives not designated as hedging instruments:

Foreign exchange contracts — Forwards

Other assets

—

344

Accrued and other liabilities

(61
)

—

$
(270
)

$
1,979

Derivatives in foreign currency hedging relationships are as follows:


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands of U.S. Dollars)		2021			2020			2021			2020				2022			2021			2022			2021
Foreign exchange contracts	Derivative (Loss) Gain													Derivative Loss
— Forwards	Recognized in OCI													Recognized in OCI
	(Effective Portion)	$	(759	)	$	591		$	(159	)	$	(935	)	(Effective Portion)	$	(1,567	)	$	(759	)	$	(1,862	)	$	(159	)

	Location of Derivative Gain (Loss)													Location of Derivative (Loss) Gain
	Reclassified from AOCI	Three Months Ended September 30,						Nine months ended September 30,						Reclassified from AOCI	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands of U.S. Dollars)	(Effective Portion)	2021			2020			2021			2020			(Effective Portion)	2022			2021			2022			2021
Foreign exchange contracts	Selling, general and													Selling, general and
— Forwards	administrative expenses	$	312		$	(110	)	$	1,367			(779	)	administrative expenses	$	(80	)	$	312		$	(175	)	$	1,367
	Inventory		—			—		$	—			(26	)
		$	312		$	(110	)	$	1,367		$	(805	)

Non-designated derivatives in foreign currency relationships are as follows:


		Three Months Ended September 30,				Nine months ended September 30,						Three Months Ended September 30,					Nine Months Ended September 30,
(In thousands of U.S. Dollars)		2021		2020		2021		2020			Location of Derivative (Loss) Gain	2022		2021			2022		2021
Foreign exchange contracts	Derivative Loss Recognized In										Selling, general and
— Forwards	and Out of OCI										administrative expenses	$	—	$	(122	)	$	—	$	269
	(Effective Portion)	$	—	$	—	$	—	$	(55	)

The Company's estimated net amount of the existing loss as of September 30, ~~2021~~2022 is ~~$0.2~~$(1.5) million, which is expected to be reclassified to earnings within the next twelve months.

(d)

Investments in Equity Securities

~~Non-designated derivatives in foreign currency relationships are as follows~~:

Three Months Ended September 30,

Nine months ended September 30,

(In thousands of U.S. Dollars)

2021

2020

2021

2020

Foreign exchange contracts

Derivative Gain Reclassified

— Forwards

From AOCI

(Ineffective Portion)

$
(25
)

$
—

$
(318
)

$
—

Three Months Ended September 30,

Nine months ended September 30,

(In thousands of U.S. Dollars)

Location of Derivative (Loss) Gain

2021

2020

2021

2020

Foreign exchange contracts

Selling, general and

— Forwards

administrative expenses

$
(122
)

$
75

$
269

$
102

$
(122
)

$
75

$
269

$
102

~~(d)~~

~~Investments in Equity Securities~~

As of September 30, ~~2021,~~2022, the Condensed Consolidated Balance Sheets includes ~~$1.1~~$1.1 million (December 31, ~~2020~~2021 — ~~$13.6~~$1.1 million) of investments in equity securities.

On January 17, 2019, IMAX China (Hong Kong), Limited, a wholly-owned subsidiary of IMAX China, as an investor entered into a cornerstone investment agreement with Maoyan Entertainment ~~(“Maoyan”~~("Maoyan") (as the issuer) and Morgan Stanley Asia Limited (as a sponsor, underwriter and the ~~underwriters’~~underwriters' representative). Pursuant to this agreement, IMAX China (Hong Kong), Limited agreed to invest ~~$15.2~~$15.2 million to subscribe for a certain number of shares of Maoyan 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 six months following the date of the global offering. On February 4, 2019, Maoyan completed its global offering, upon which, IMAX China (Hong Kong), Limited became a less than 1%1% shareholder in Maoyan. ~~In February~~During the first quarter of 2021, IMAX China (Hong Kong), Limited sold all of its 7,949,000 shares of Maoyan for gross proceeds of ~~$17.8~~$17.8 million ~~which represents a $2.6~~and recognized $5.2 million gain ~~relative to the Company’s acquisition cost and a $5.2 million gain compared to the fair value of the investment as of December 31, 2020. Prior to this sale,~~ ~~the Company accounted for its investment~~ in ~~Maoyan at fair value with any changes in fair value recorded to~~ the Condensed Consolidated Statements of Operations. ~~For the three and nine months ended September 30, 2020, the fair value of the Company’s investment in Maoyan experienced an unrealized gain of $1.6 million and loss of $(0.9) million, respectively.~~ ~~As of December 31, 2020, the value of the Company’s investment in Maoyan was $12.6 million.~~

The Company has an investment of ~~$1.1~~$1.1 million (December 31, ~~2020~~2021 — ~~$1.1~~$1.1 million) in the shares of an exchange traded fund. This investment is classified as an equity investment.

As of September 30, ~~2021,~~2022, the Company held investments in the preferred shares of enterprises which meet the criteria for classification as an equity security ~~under FASB ASC 321,~~ carried at historical cost, net of impairment charges. The carrying value of these equity security investments was ~~$1.0~~$1.0 million at September 30, ~~2021~~2022 (December 31, ~~2020~~2021 — ~~$1.0~~$1.0 million) and is recorded in Other Assets.

(e)

Interest in Film

~~17.~~On January 10, 2022, IMAX (Shanghai) Culture and Technology Co., Ltd, a wholly-owned subsidiary of IMAX China, entered into a joint film investment agreement with Wanda Film (Horgos) Co. Ltd. to invest RMB 30.0 million ($4.7 million) in the movie Mozart from Space, which was released on July 15, 2022. Pursuant to the investment agreement, IMAX (Shanghai) Culture and Technology Co., Ltd. has the right to receive a share of the profits or losses of the film distribution. IMAX (Shanghai) Culture and Technology Co., Ltd.'s commitment is limited to its investment and has no further obligation if the actual movie production cost exceeds the original budget. The investment meets the criteria for classification as a financial asset. The investment is measured at amortized cost less impairment losses and is recorded within Other Assets in the Condensed Consolidated Balance Sheets.

During the second quarter of 2022, the Company recognized a full impairment of its RMB 30.0 million ($4.5 million) investment in Mozart from Space based on projected box office results and distribution costs.

18. Non-Controlling Interests

(a)

IMAX China Non-Controlling Interest

~~(a)~~

~~IMAX China Non-Controlling Interest~~

The Company indirectly owns ~~69.83%~~71.41% of IMAX China, ~~Holding, Inc. (“IMAX China”),~~ whose shares trade on the Hong Kong Stock ~~Exchange.~~Exchange (December 31, 2021 — 71.11%). IMAX China remains a consolidated subsidiary of the Company. As of September 30, ~~2021,~~2022, the balance of the ~~Company’s~~Company's non-controlling interest in IMAX China is ~~$82.8 million.~~$63.9 million (December 31, 2021 — $73.5 million). For the three and nine months ended September 30, ~~2021,~~2022, the net income attributable to the non-controlling interest in IMAX China is ~~$2.0~~$1.2 million and ~~$9.5~~$1.5 million, respectively ~~(2020~~(2021 — ~~net income of $2.2~~$2.0 million and ~~net loss of $(10.3)~~$9.5 million, respectively).

~~(b)~~

~~Other Non-Controlling Interest~~

(b)

Other Non-Controlling Interest

The ~~Company’s~~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 Original Film Fund was committed by a third party in the amount of ~~$25.0~~$25.0 million, with the possibility of contributing additional funds. The Company has contributed ~~$9.0~~$9.0 million to the Original Film Fund since 2014 and has reached its maximum contribution. As of September 30, ~~2021,~~2022, the Original Film Fund has invested ~~$22.3~~$22.3 million toward the development 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.

(c)

Non-Controlling Interest in Temporary Equity

~~(c)~~

~~Non-Controlling Interest in Temporary Equity~~

The following table summarizes the movement of the non-controlling interest in temporary equity related to the Original Film Fund for the nine months ended September 30, 2022 and 2021:

Balance as of December 31, 2020

$
759

Net income

1

Balance as of September 30, 2021

$
760


	September 30,
(In thousands of U.S. Dollars)	2022			2021
Beginning balance	$	758		$	759
Net (loss) income		(22	)		1
Ending balance	$	736		$	760

Item 2. ~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations

Presented below is Management's Discussion and Analysis of Financial Condition and Results of Operations (or "MD&A") for IMAX Corporation and its consolidated subsidiaries ~~(“IMAX”~~("IMAX" or the ~~“Company”~~"Company") for the three and nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021. MD&A should be read in conjunction with Note ~~14,~~15, "Segment ~~Reporting"~~Reporting," in the accompanying Condensed Consolidated Financial Statements in Item 1.

As of September 30, ~~2021,~~2022, the Company indirectly owns ~~69.83%~~71.41% of IMAX China Holding, Inc. (“("IMAX ~~China”~~China"), whose shares trade on the Hong Kong Stock Exchange. IMAX China is a consolidated subsidiary of the Company. For the three months ended September 30, 2022, net income attributable to IMAX China is $4.2 million, of which $3.0 million is attributable to the shareholders of the Company (2021 — $6.7 million and $4.7 million, respectively).

SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

Certain statements included in this quarterly report may constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of ~~1995.~~1995 or "forward-looking information" within the meaning of Canadian securities laws. These forward-looking statements include, but are not limited to, references to business and technology strategies and measures to implement strategies, competitive strengths, goals, expansion and growth of business, operations and technology, future capital expenditures (including the amount and nature thereof), industry prospects and consumer behavior, plans and references to the future success of the Company and expectations regarding its future operating, financial and technological results. These forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. However, whether actual results and developments will conform with the expectations and predictions of the Company is subject to a number of risks and uncertainties, including, but not limited to, risks related to the adverse impact of the COVID-19 pandemic; risks associated with investments and operations in foreign jurisdictions and any future international expansion, including those related to economic, political and regulatory policies of local governments and laws and policies of the United States and ~~Canada;~~Canada, as well as geopolitical conflicts, such as the conflict between Russia and Ukraine; risks related to the ~~Company’s~~Company's growth and operations in China; the performance of IMAX DMR® films; the signing of theater system agreements; conditions, changes and developments in the commercial exhibition industry; risks related to currency fluctuations; the potential impact of increased competition in the markets within which the Company operates, including competitive actions by other companies; the failure to respond to change and advancements in digital technology; risks relating to ~~recent~~ consolidation among commercial exhibitors and studios; risks related to brand extensions and new business initiatives; conditions in the in-home and out-of-home entertainment industries; the opportunities (or lack thereof) that may be presented to and pursued by the Company; risks related to cyber-security and data privacy; risks related to the ~~Company’s~~Company's inability to protect its intellectual property; risks related to climate change; risks related to weather conditions and natural disasters that may disrupt or harm the ~~Company’s~~Company's business; risks related to the Company's indebtedness and compliance with its debt agreements; general economic, market or business conditions; risks related to political, economic and social instability, including with respect to the Russia-Ukraine conflict; the failure to convert theater system backlog into revenue; changes in laws or regulations; ~~the failure to fully realize the projected cost savings and benefits from any of the Company’s restructuring initiatives;~~ any statements of belief and any statements of assumptions underlying any of the foregoing; other factors and risks outlined in the ~~Company’s~~Company's periodic filings with the United States Securities and Exchange Commission (the ~~“SEC”~~"SEC") or in Canada, the System for Electronic Document Analysis and Retrieval (the "SEDAR"); and other factors, many of which are beyond the control of the Company. Consequently, all of the forward-looking statements made in this quarterly report are qualified by these cautionary statements, and actual results or anticipated developments by the Company may not be realized, and even if substantially realized, may not have the expected consequences to, or effects on, the Company. The forward-looking statements herein are made only as of the date hereof and the Company undertakes no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The 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 any amendments to such reports, as soon as reasonably practicable after such filings have been made with the ~~SEC.~~SEC and Canadian securities regulators. Reports may be obtained free of charge through the ~~SEC’s~~SEC's website at www.sec.gov or the SEDAR's website at www.sedar.com and through the ~~Company’s~~Company's website at www.imax.com or by calling the ~~Company’s~~Company's Investor Relations Department at 212-821-0100. No information included on the Company's website shall be deemed included or otherwise incorporated into this filing, except where expressly indicated.

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®, Filmed For IMAXTM, IMAX LiveTM, IMAX Enhanced®, IMAX nXos®, Films to the Fullest®, SSIMWAVE®, SSIMPLUS® and Viewer Score®are trademarks and trade names of the Company or its subsidiaries that are registered or otherwise protected under laws of various jurisdictions.

The information posted on the ~~Company’s corporate~~Company's Corporate and Investor Relations websites may be deemed material to investors. Accordingly, investors, media and others interested in the Company should monitor the ~~Company’s~~Company's websites in addition to the ~~Company’s~~Company's press releases, SEC and SEDAR filings and public conference calls and webcasts.

OVERVIEW

~~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 or otherwise protected under laws of various jurisdictions.~~

~~OVERVIEW~~

IMAX is ~~one of the world’s leading~~a premier global technology platform for entertainment ~~technology companies, specializing in technological innovations powering the presentation of some of today’s most immersive entertainment experiences.~~and events. 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~~superior, immersive ~~motion picture and other entertainment event~~content experiences for which the IMAX^® brand ~~has become known globally.~~is globally renowned. Top filmmakers, ~~and~~ movie studios, artists, and creators utilize the cutting-edge visual and sound technology of IMAX to connect with audiences in innovative ~~ways, and, as~~ways. As a result, ~~the~~ IMAX ~~network~~ is among the most important and successful global distribution platforms for ~~major~~domestic and international tentpole films and, ~~other~~increasingly, exclusive experiences ranging from live performances to interactive events ~~around the world.~~with leading artists and creators.

The Company leverages its proprietary technology and engineering in all aspects of its ~~core~~ business, which principally consists of the digital remastering of films and other ~~presentations~~content into the IMAX format (“("IMAX ~~DMR~~^DMR"®”) and the sale or lease of premium IMAX theater systems (“("IMAX Theater ~~Systems”~~Systems").

IMAX Theater Systems are based on proprietary and patented image, audio, and other technology developed over the course of the ~~Company’s 53-year history.~~Company's history since its founding in 1968. The ~~Company’s~~ customers for IMAX Theater Systems are principally theater exhibitors that operate commercial multiplex theaters, ~~(particularly multiplexes)~~ and, to a much lesser extent, museums, science centers, and destination entertainment sites. The Company generally does not own the theaters in the IMAX network and is not an exhibitor, but instead sells or leases the IMAX Theater System to ~~the~~ exhibitor customers along with a license to use its trademarks.

As of September 30, ~~2021,~~2022, there were 1,703 IMAX Theater Systems in 87 countries and territories, including 1,622 commercial multiplexes, 12 commercial destinations, and 69 institutional locations in the Company's global theater network. This compares to 1,664 IMAX Theater Systems ~~operating~~ in 85 countries and territories as of September 30, 2021, including 1,580 commercial multiplexes, 12 commercial destinations, and 72 institutional ~~locations. This compares to 1,632 IMAX Theater Systems operating~~locations in ~~82 countries and territories as of September 30, 2020 including 1,542 commercial multiplexes, 13 commercial destinations and 77 institutional locations.~~the Company's global theater network. (See the table below under ~~“IMAX~~"IMAX Network and ~~Backlog”~~Backlog" for additional information on the composition of the IMAX network.)

The IMAX Theater System provides the ~~Company’s~~Company's exhibitor customers with a combination of the following benefits:

•

the ability to exhibit content that has undergone the IMAX DMR conversion process, which results in higher image and sound fidelity than conventional cinema experiences;

•

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

•

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's peripheral vision and creates more realistic images;

•

advanced 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.

•

~~the ability to exhibit content that has undergone the IMAX DMR conversion process, which results in higher image and sound fidelity than conventional cinema experiences;~~

•

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

•

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’s peripheral vision and creates more realistic images;

•

~~advanced 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, certain movies shown in IMAX theaters are filmed using proprietary IMAX film ~~and~~cameras or IMAX certified digital cameras, which offer filmmakers customized guidance and a workflow process to provide further enhanced and differentiated image quality and aan IMAX-exclusive film aspect ratio that delivers up to 26% more image onto a standard IMAX movie screen. In select IMAX theaters worldwide, movies filmed with IMAX cameras have an IMAX-exclusive 1.43 film aspect ratio, with up to 67% more image.

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

As a result of the engineering and scientific achievements that are a hallmark of TheIMAX Experience,^®, the ~~Company’s~~Company's exhibitor customers typically charge a premium for IMAX ~~DMR~~ films over films exhibited in their other auditoriums. The premium pricing, combined with the higher attendance levels associated with IMAX ~~DMR~~ films, generates incremental box office for the ~~Company’s~~Company's exhibitor customers and for the movie studios releasing their films to the IMAX network. The incremental box office generated by IMAX ~~DMR~~ films has helped establish IMAX as a key premium distribution and marketing platform for Hollywood ~~blockbuster films~~ and foreign local language movie studios.

As ~~one of the world’s leaders in~~a premier global technology platform for entertainment ~~technology,~~and events, the Company strives to remain at the forefront of advancements in cinema technology. The Company offers a suite of IMAX ~~with~~ Laser ~~a laser projection system designed for IMAX theaters in commercial multiplexes. The Company believes that IMAX with Laser delivers~~Theater Systems, which deliver increased resolution, sharper and brighter images, deeper contrast, and the widest range of colors available to filmmakers today. The Company further believes that its suite of IMAX ~~with~~ Laser isTheater Systems are helping facilitate the next major ~~lease~~ renewal and upgrade cycle for the global IMAX network.

In addition, the Company continues to evolve its platform to bring new, innovative IMAX LiveTM events and experiences to audiences worldwide. The Company ~~is also experimenting~~has a connected IMAX theater footprint capable of delivering live, interactive content with ~~new technologies~~low latency and ~~new content as a way~~superior sight and sound. As of September 30, 2022, 176 theaters in the IMAX network across the United States, Canada, and Europe were configured to ~~deepen consumer engagement and brand loyalty, which includes curating unique, differentiated alternative content~~enable the streaming of live events. The Company expects to ~~be exhibited in~~have 250 connected IMAX theaters ~~particularly during those periods when Hollywood blockbuster film content~~available for distributing IMAX Live events by the end of 2022.

In September 2022, the Company acquired SSIMWAVE Inc. ("SSIMWAVE"), a leader in AI-driven video quality solutions for media and entertainment companies. The acquisition of SSIMWAVE marks a significant expansion of the Company's strategy to deliver the highest quality video images on any screen — to drive new, recurring revenue and grow its global leadership in entertainment technology. (See "SSIMWAVE" under "Sources of Revenue - All Other" and Note 4 of Notes to Condensed Consolidated Financial Statements for additional information related to the Company's acquisition of SSIMWAVE.)

Commencing in March 2022, in response to the ongoing conflict between Russia and Ukraine and resulting sanctions, the Company suspended its operations in Russia and Belarus. As of September 30, 2022, the IMAX network includes 54 theaters in Russia, nine theaters in Ukraine, and one theater in Belarus, and the Company's backlog includes 14 theaters in Russia, one theater in Ukraine, and five theaters in Belarus with a total fixed contracted value of $22.9 million. In the first quarter of 2022, the Company recorded provisions for potential credit losses against substantially all of its receivables in Russia due to uncertainties associated with the ongoing conflict. These receivables relate to existing sale agreements as the Company is not ~~available.~~party to any joint revenue sharing arrangements in these countries. In addition, exhibitors in Russia, Ukraine, and Belarus were placed on nonaccrual status for maintenance revenue and finance income beginning in the first quarter of 2022, which resulted in decreases of $0.7 million and $2.1 million in revenue during the three and nine months ended September 30, 2022, respectively. Numerous multiplexes in Ukraine have reopened since the conflict began and the Company remains optimistic that its theater network in Ukraine will ultimately resume operations. The Company continues to monitor the evolving impacts of this conflict and its effects on the global economy and the Company. (See Note 5 of Notes to Condensed Consolidated Financial Statements and "Risk Factors - The Company conducts business internationally, which exposes it to uncertainties and risks that could negatively affect its operations, sales, and future growth prospects." in Part II, Item 1A in this report.)

On September 7, 2022, Cineworld Group plc ("Cineworld"), the parent company of Regal Entertainment Group, and certain of its subsidiaries and Regal CineMedia Holdings, LLC, filed petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the Southern District of Texas. Based on its evaluation of its contracts with Cineworld, its assessment of the reorganization and its discussions with Cineworld to date, the Company has determined that no additional provision for expected credit losses is required. The Company also does not expect to see a material impact on its network of theaters with Cineworld resulting from this reorganization. There can, however, be no guarantees as to the ultimate outcome of a Chapter 11 proceeding. The Company has an unsecured claim of $11.4 million related to receivables from the entities included in the reorganization proceeding.

IMPACT OF COVID-19 PANDEMIC

For the ~~theaters~~nine months ended September 30, 2022, gross box office ("GBO") generated by IMAX films totaled $598.1 million, representing a $237.4 million (66%) increase versus the same period in ~~Rest of World markets.~~

~~The impact of the COVID-19 global pandemic has resulted in significantly lower levels of revenues, earnings and operating cash flows for the Company during 2020 and, to a lesser extent,~~2021. Although GBO results during the nine months ended September 30, ~~2021, when compared to periods prior to~~2022 were impacted by the ~~onset of the pandemic, as gross box office (“GBO”) results from the Company’s~~COVID-related theater ~~customers declined, the installation of certain theater systems was delayed, and maintenance services were generally suspended for theaters that were closed.~~ In response to uncertainties associated with the pandemic, the Company took significant steps to preserve cash by eliminating non-essential costs, temporarily furloughing certain employees, reducing the working hours of other employees and reducing all non-essential capital expenditures to minimum levels. The Company also implemented an active cashclosures in China, management ~~process, which, among other things, required senior management approval of all outgoing payments.~~ In addition, as a result of the financial difficulties faced by certain of the Company’s exhibition customers arising out of pandemic-related closures, although improving, the Company has experienced and may continue to experience delays in collecting payments due under existing theater sale or lease arrangements. The Company has provided temporary relief to certain exhibitor customers by waiving or reducing maintenance fees during periods when theaters are closed or operating with reduced capacities and, in certain situations, by providing extended payment terms on annual minimum payment obligations in exchange for a corresponding or longer extension of the term of the underlying sale or lease arrangement.

For the three and nine months ended September 30, 2021, GBO receipts generated by IMAX DMR films totaled $141.9 million and $360.7 million, respectively, surpassing the totals for the same periods in 2020 by $71.7 million (102%) and $192.6 million (115%), respectively. Moreover, GBO receipts for September 2021 approximated the levels achieved prior to the onset of the COVID-19 global pandemic, and GBO receipts for October 2021 have already exceeded the Company’s all-time record for that month. Management isremains encouraged by ~~these~~the overall positive trend in box office results and believes ~~they indicate~~it indicates that moviegoers are ~~eager~~returning to ~~return to cinemas~~theaters, and in particular IMAX theaters, where and when theaters are open and they feel safe. Despite accounting for 1% of all domestic screens, the IMAX network had a domestic market share of 5% for the nine months ended September 30, 2022. Management is further encouraged by the return of the prevalence of exclusive theatrical windows ~~beginning with the release of~~ ~~Shang-Chi and the Legend of the Ten Rings~~ ~~in September 2021,~~ and the strong pipeline of Hollywood movies scheduled to be released for theatrical exhibition ~~during~~throughout the remainder of ~~2021~~2022 and ~~in 2022.~~into 2023. However, the impact of the COVID-19 ~~global~~ pandemic on the ~~Company’s~~Company's business and financial results will continue to depend on numerous evolving factors that cannot be accurately predicted and that will vary by jurisdiction and market, including the duration and scope of the pandemic, the emergence of new and the spread of existing variants of the virus, the progress made on administering vaccines and developing treatments and the effectiveness of such vaccines and treatments, the continuing impact of the pandemic on global economic conditions and ongoing government responses to the pandemic, which could lead to further theater closures, theater capacity restrictions and/or delays in the release of films.

(See ~~“Risk~~ "Risk Factors – The Company has experienced a significant decrease in its revenues, earnings and cash flows due to the COVID-19 ~~global~~ pandemic and its business, financial condition and results of operations may continue to be significantly harmed in future reporting ~~periods”~~ periods" in Part II, Item 1A in this ~~report~~.report.)

SOURCES OF REVENUE

For the presentation of MD&A, the Company has organized its reportable segments into the following ~~four~~three categories: (i) IMAX Technology Network; (ii) IMAX Technology Sales and Maintenance; ~~(iii) New Business Initiatives;~~ and ~~(iv)~~(iii) Film Distribution and Post-Production. Within these ~~four~~three categories are the ~~Company’s~~Company's following reportable segments: (i) IMAX DMR; (ii) Joint Revenue Sharing ~~Arrangements;~~Arrangements ("JRSA"); (iii) IMAX Systems; (iv) IMAX Maintenance; (v) Other Theater Business; (vi) ~~New Business Initiatives; (vii)~~ Film Distribution; and ~~(viii)~~(vii) Film Post-Production.~~For additional details regarding~~ The Company's activities that do not meet the ~~Company’s sources of revenue, refer~~criteria to ~~its Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”).~~be considered a reportable segment are disclosed within All Other.

IMAX Technology Network

The IMAX Technology Network category earns revenue based on contingent box office receipts. Included in the IMAX Technology Network category are the IMAX DMR segment and contingent rent from the ~~Joint Revenue Sharing Arrangement (“JRSA”)~~JRSA segment, which are each described in more detail below.

IMAX DMR

~~The Company has developed~~ IMAX DMR is a proprietary technology that digitally remasters films into IMAX formats. In a typical IMAX DMR film arrangement, the Company receives a percentage of the box office receipts from a movie studio in exchange for converting a commercial film into IMAX DMR format and distributing it through the IMAX network. The ~~percentage~~fee earned by the Company in a typical IMAX DMR arrangement averages approximately 12.5% of ~~gross~~ box office receipts ~~earned in IMAX DMR arrangements has averaged approximately 12.5%~~(i.e., GBO less applicable sales taxes), except for within Greater China, where the Company receives a lower percentage of net box office receipts for certain Hollywood films.

IMAX DMR digitally enhances the image resolution of films for projection on IMAX screens while maintaining or enhancing the visual clarity and sound quality to levels for which The IMAX Experience is known. In addition, the original soundtrack of a film to be exhibited in IMAX theaters is remastered for IMAX digital sound ~~systems in connection with the IMAX DMR release of the film.~~systems. Unlike the soundtracks played in conventional theaters, IMAX remastered soundtracks are uncompressed and full fidelity. IMAX sound systems use proprietary loudspeaker systems and proprietary surround sound configurations that ensure every theater seat is in an optimal listening position.

IMAX films also benefit from enhancements made by individual filmmakers exclusively for the IMAX release of the film. Collectively, the Company refers to these enhancements as ~~“IMAX DNA”~~"IMAX DNA". Filmmakers and movie 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 to increase the ~~audience’s~~audience's immersion in the film and to take advantage of the unique dimensions of the IMAX screen by projecting the film in a larger aspect ratio that delivers up to 26% more image onto a standard IMAX movie screen. ~~During the nine months ended September 30, 2021, the films released to the global~~In select IMAX ~~theater network include seven films with IMAX DNA, including five~~theaters worldwide, movies filmed with IMAX cameras ~~and two~~have an IMAX-exclusive 1.43 film aspect ratio, with ~~exclusive select scenes~~up to 67% more image. The Company has a Filmed For IMAXTM program under which filmmakers craft films from their inception in ~~expanded aspect ratio.~~various ways in order to optimize The IMAX Experience, which box office metrics demonstrate audiences respond extremely favorably to.

Management believes that growth in international box office remains an important driver of growth for the Company. To support continued growth in international markets, the Company has sought to bolster its international film strategy, supplementing ~~the Company’s film~~its slate of Hollywood ~~DMR titles~~films with appealing local ~~IMAX DMR releases~~language films released in select markets, particularly in China. ~~During~~

The following table provides detailed information about the ~~year ended December 31, 2020, 17 local language IMAX DMR~~ films that were released to the Company's global theater network during the three and nine months ended September 30, 2022 and 2021:


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Hollywood film releases(1)		12		9		26		27
Local language film releases:
China		9		9		13		16
Japan		3		2		6		7
South Korea		3		1		5		1
India		4		—		6		—
France		—		—		1		—
Indonesia		1		—		1		—
Total local language film releases		20		12		32		24
Total film releases(2)		32		21		58		51

(1)

Includes five re-released films for the three and nine months ended September 30, 2022 (2021 — nil and four, respectively).

(2)

For the three and nine months ended September 30, 2022, the films released to the Company's global theater network include four and ten with IMAX DNA, respectively (2021 — six and eight, respectively).

The films distributed through the Company's global theater network ~~including ten in China, three in Russia, three in Japan, and one in South Korea. During~~during the nine months ended September 30, ~~2021, 24 local language IMAX DMR~~2022 include Top Gun: Maverick, Doctor Strange in the Multiverse of Madness, Jurassic World Dominion, The Batman, Thor: Love and Thunder,The Battle at Lake Changjin 2, Spider-Man: No Way Home, and Fantastic Beasts: The Secrets of Dumbledore.

In addition to the films ~~were~~ released to the ~~IMAX~~Company's global theater network ~~including 16 in China and seven in Japan and one in South Korea. The Company expects to announce additional local language IMAX DMR films to be released to the IMAX network~~ during ~~the remainder of 2021 and in 2022.~~

~~During~~ the nine months ended September 30, ~~2021, 47 IMAX DMR films were released to the global IMAX theater network and the following 7 additional IMAX DMR films are scheduled to be released during the remainder of 2021:~~

		~~Scheduled~~
~~Title~~	~~Studio~~	~~Release Date~~⁽¹⁾	~~IMAX DNA~~
~~Venom: Let There Be Carnage: The~~ ~~IMAX~~ ~~Experience~~	~~Sony Pictures~~	~~October 2021~~	~~None~~
~~No Time to Die: The~~ ~~IMAX~~ ~~Experience~~	~~Universal Pictures / MGM / United Artists~~	~~October 2021~~	~~Filmed in IMAX~~
~~Sword Art Online Progressive: The~~ ~~IMAX~~ ~~Experience~~	~~Aniplex~~	~~October 2021~~	~~None~~
~~Eternals: The~~ ~~IMAX~~ ~~Experience~~	~~Walt Disney Studios~~	~~November 2021~~	~~Filmed in IMAX~~
~~Ghostbusters: Afterlife: The~~ ~~IMAX~~ ~~Experience~~	~~Sony Pictures~~	~~November 2021~~	~~None~~
~~Spider-Man: No Way Home: The~~ ~~IMAX~~ ~~Experience~~	~~Sony Pictures~~	~~December 2021~~	~~Expanded Aspect Ratio~~
~~The Matrix Resurrections: The~~ ~~IMAX~~ ~~Experience~~	~~Warner Bros. Pictures~~	~~December 2021~~	~~None~~

~~(1)~~

~~The scheduled release dates in the table above are subject to change, may vary by territory and may not reflect the date(s) of limited premiere events.~~

~~To date,~~2022, the Company has announced the following 2130 additional titles scheduled to be released inthroughout the remainder of 2022 ~~to the global IMAX theater network:~~and 2023:


		Scheduled
Title	Studio	Release Date(1)	IMAX DNA
~~Morbius: The~~ ~~IMAX~~Amsterdam ~~Experience~~	~~Sony Pictures~~20th Century Studios	~~January~~October 2022	~~None~~—
~~Moonfall: The~~ ~~IMAX~~Halloween Ends ~~Experience~~	~~Lionsgate~~Universal Pictures	~~February~~October 2022	~~None~~—
~~Death on the Nile: The~~ ~~IMAX~~Black Adam ~~Experience~~	~~Walt Disney Studios~~Warner Bros. Pictures	~~February~~October 2022	~~None~~—
~~Uncharted: The~~ ~~IMAX~~Black Panther: Wakanda Forever ~~Experience~~	~~Sony Pictures~~Walt Disney Studios	~~February~~November 2022	~~Expanded Aspect Ratio~~Filmed For IMAX
~~The Batman: The~~ ~~IMAX~~Indochine ~~Experience~~	~~Warner Bros. Pictures~~Pathé Live	~~March~~November 2022	~~None~~Filmed For IMAX
~~Notre-Dame Brûle: The~~ ~~IMAX~~Violent Night ~~Experience~~	~~Pathe~~Universal Pictures	~~March~~December 2022	~~Filmed in IMAX~~—
~~Bullet Train:~~Avatar: The ~~IMAX~~Way of Water ~~Experience~~	~~Sony Pictures~~Walt Disney Studios	~~April~~December 2022	~~None~~—
~~Fantastic Beasts: The Secrets of Dumbledore: The~~ ~~IMAX~~Titanic 3D ~~Experience~~(2)	~~Warner Bros. Pictures~~Walt Disney Studios	~~April 2022~~February 2023	~~TBD~~—
~~Doctor Strange In The Multiverse of Madness: The~~ ~~IMAX~~Ant-Man and the Wasp: Quantumania ~~Experience~~	Walt Disney Studios	~~May 2022~~February 2023	Filmed inFor IMAX
~~Top Gun: Maverick: The~~ ~~IMAX~~Creed III ~~Experience~~	~~Paramount Pictures~~United Artists Releasing	~~May 2022~~March 2023	Filmed inFor IMAX
~~Jurassic World: Dominion: The~~ ~~IMAX~~Shazam!: Fury of the Gods ~~Experience~~	~~Universal~~Warner Bros. Pictures	~~June 2022~~March 2023	~~None~~—
John Wick: Chapter 4	Lionsgate	March 2023	—
The Super Mario Bros. Movie	Universal Pictures	April 2023	—
Guardians of the Galaxy Vol. 3	Walt Disney Studios	May 2023	Filmed For IMAX
Fast X	Universal Pictures	May 2023	—
The Little Mermaid	Walt Disney Studios	May 2023	—
Spider-Man: Across the Spider-Verse	Sony Pictures	June 2023	—
Transformers: Rise of the ~~Beasts: The~~ ~~IMAX~~Beasts ~~Experience~~	Paramount Pictures	June ~~2022~~2023	~~None~~—
~~Minions:~~ The ~~Rise Of Gru: The~~ ~~IMAX~~Flash ~~Experience~~	~~Universal~~Warner Bros. Pictures	~~July 2022~~June 2023	~~None~~—
~~Thor: Love & Thunder: The~~ ~~IMAX~~Indiana Jones 5 ~~Experience~~	Walt Disney Studios	July ~~2022~~2023	~~Filmed in IMAX~~—
~~Nope: The~~ ~~IMAX~~Mission: Impossible - Dead Reckoning Part One ~~Experience~~	~~Universal~~Paramount Pictures	July ~~2022~~2023	Filmed inFor IMAX
~~Black Adam: The~~ ~~IMAX~~Oppenheimer ~~Experience~~	~~Warner Bros.~~Universal Pictures	July ~~2022~~2023	~~TBD~~Shot with IMAX Film Cameras
~~Mission Impossible 7: The~~ ~~IMAX~~Blue Beetle ~~Experience~~	~~Paramount~~Warner Bros. Pictures	~~September 2022~~August 2023	Filmed inFor IMAX
~~Spider-Man: Into the Spiderverse Sequel:~~ The ~~IMAX~~Equalizer 3 ~~Experience~~	Sony Pictures	~~October 2022~~September 2023	~~TBD~~—
The ~~Flash: The~~ ~~IMAX~~Nun 2 ~~Experience~~	Warner Bros. Pictures	~~November 2022~~September 2023	~~TBD~~—
~~Black Panther 2: Wakanda Forever: The~~ ~~IMAX~~A Haunting in Venice ~~Experience~~	Walt Disney Studios	~~November 2022~~September 2023	~~TBD~~—
~~Avatar 2: The~~ ~~IMAX~~ ~~Experience~~	~~Walt Disney Studios~~	~~December 2022~~	~~TBD~~

~~(1)~~Kraven the Hunter	~~The scheduled release dates in~~	Sony Pictures	October 2023	—
Dune: Part Two		Warner Bros. Pictures	November 2023	Filmed For IMAX
Wonka		Warner Bros. Pictures	December 2023	—
Aquaman and the ~~table above are subject to change and may vary by territory.~~Lost Kingdom		Warner Bros. Pictures	December 2023	Filmed For IMAX

(1)

The scheduled release dates in the table above are subject to change, including as a result of the impact of the COVID-19 pandemic, may vary by territory, and may not reflect the date(s) of limited premiere events. (See "Risk Factors – The Company has experienced a significant decrease in its revenues, earnings and cash flows due to the COVID-19 pandemic and its business, financial condition and results of operations may continue to be significantly harmed in future reporting periods" in Part II, Item 1A in this report.)

(2)

Denotes re-release films.

The Company remains in active negotiations with all major Hollywood studios for additional films to fill out its ~~short~~short- and long-term film slate for the IMAX network. The Company also expects to announce additional local language films to be released to its global theater network in the remainder of2022 and 2023.

Joint Revenue Sharing Arrangements – Contingent Rent

The JRSA segment provides IMAX Theater Systems to exhibitors through joint revenue sharing arrangements. Under the traditional form of these arrangements, ~~IMAX~~the Company provides the IMAX ~~projection and sound system~~Theater System under a long-term lease in which the Company assumes the majority of the equipment and installation costs. In exchange for its upfront investment, the Company earns rent based on a percentage of contingent box office receipts and, in some cases, concession revenues, rather than requiring the customer to pay a fixed upfront fee or annual minimum payments. Rental payments from the customer are required throughout the term of the arrangement and are due either monthly or quarterly. The Company retains title to the IMAX Theater System equipment components throughout the lease term, and the equipment is returned to the Company at the conclusion of the arrangement.

Under certain other joint revenue sharing arrangements, known as hybrid arrangements, the customer is responsible for making fixed upfront payments prior to the delivery and installation of the IMAX Theater System in an amount that is typically half of what the Company would receive from a typical sale transaction. As with a traditional joint revenue sharing arrangement, the customer also pays the Company a percentage of contingent box office receipts over the term of the arrangement, although this percentage is typically half that of a traditional joint revenue sharing arrangement. For hybrid joint revenue sharing arrangements that take the form of a lease, the contingent rent is reported within the IMAX Technology Network, while the fixed upfront payment is recorded as revenue within IMAX Technology Sales and Maintenance, as discussed below. For hybrid joint revenue sharing arrangements that take the form of a sale, see the discussion below under IMAX Technology Sales and Maintenance.

Under most joint revenue sharing arrangements (both traditional and hybrid), the initial non-cancellable term is 10 years or longer and is renewable by the customer for one to two additional terms of between three to five years. The Company has the right to remove the equipment for non-payment or other defaults by the customer. The contracts are non-cancellable by the customer unless the Company fails to perform its obligations.

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

Joint revenue sharing arrangements also require IMAX to provide maintenance and extended warranty services to the customer over the term of the lease in exchange for a separate fixed annual fee. These fees are reported within IMAX Technology Sales and Maintenance, as discussed below.

Joint revenue sharing arrangements have been an important factor in the expansion of the ~~Company’s~~Company's commercial theater network. Joint revenue sharing arrangements allow commercial theater exhibitors to install IMAX Theater Systems without the significant initial capital investment required in a sale or sales-type lease arrangement. Joint revenue sharing arrangements drive recurring cash flows and earnings for the Company as customers under these arrangements pay the Company a portion of their ongoing box office receipts. The Company funds its investment in equipment for joint revenue sharing arrangements through cash flows from operations. As of September 30, ~~2021,~~2022, the Company had ~~904~~926 theaters ~~in operation~~ under joint revenue sharing arrangements in its global commercial multiplex theater network, a ~~2.6%~~2% increase as compared to the ~~881~~904 theaters ~~in operation under joint revenue sharing arrangements~~ as of September 30, ~~2020.~~2021. The Company also had contracts in backlog for ~~324~~319 theaters under joint revenue sharing arrangements as of September 30, ~~2021,~~2022, including 83100 upgrades to existing theater locations and ~~241~~219 new theater locations.

IMAX Technology Sales and Maintenance

The IMAX Technology Sales and Maintenance category earns revenue principally from the sale or sales-type lease of IMAX Theater Systems, as well as from the maintenance of IMAX Theater Systems. To ~~the~~a lesser extent, the IMAX Technology Sales and Maintenance category also earns revenue from certain ~~ancillary theater business activities and revenues from~~ hybrid joint revenue sharing ~~arrangements.~~arrangements and certain ancillary theater business activities. These activities are described in more detail below under the captioned section for each respective segment.

IMAX Systems

The IMAX Systems segment provides IMAX Theater Systems to exhibitors through sale arrangements or long-term lease arrangements that for accounting purposes are classified as sales-type leases. Under these arrangements, in exchange for providing the IMAX Theater System, the Company earns initial fees and ongoing consideration, ~~(which~~which can include fixed annual minimum payments and contingent fees in excess of the minimum ~~payments),~~payments, as well as maintenance and extended warranty fees (see ~~“IMAX Maintenance”~~"IMAX Maintenance" below). The initial fees vary depending on the system configuration and location of the theater. Initial fees are paid to the Company in installments between the time of signing the arrangement and the time of system installation, which is when the total of these fees, in addition to the present value of future annual minimum payments, are recognized as revenue. Finance income is recognized over the term of a financed sale or sales-type lease arrangement. In addition, in sale arrangements, an estimate of the contingent fees that may become due if certain annual minimum box office receipt thresholds are exceeded is recorded as revenue in the period when the sale is recognized and is adjusted in future periods based on actual results and changes in estimates. Such variable consideration is only recognized on sales transactions to the extent the Company believes there is not a risk of significant revenue reversal.

In sale arrangements, title to the IMAX Theater System equipment generally transfers to the customer. However, in certain instances, the Company retains title or a security interest in the equipment until the customer has made all payments required by the agreement or until certain shipment events for the equipment have occurred. In a sales-type lease arrangement, title to the IMAX Theater System equipment remains with 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~~Company's theater system ~~sales~~sale or lease agreements varies from quarter-to-quarter and year-to-year based on a number of factors, including the number and mix of theater system configurations sold or leased, the timing of installation of the IMAX Theater Systems, the nature of the arrangement and other factors specific to individual contracts.

Joint Revenue Sharing Arrangements – Fixed Fees

Under certain joint revenue sharing arrangements, known as hybrid arrangements, the customer is responsible for making fixed upfront payments prior to the delivery and installation of the IMAX Theater System in an amount that is typically half of what the Company would receive from a typical sale transaction. For hybrid joint revenue sharing arrangements that take the form of a lease, the contingent rent is reported within the IMAX Technology Network, as discussed above, while the fixed upfront payment is reported within IMAX Technology Sales and Maintenance.

IMAX Maintenance

~~For all~~ IMAX ~~theaters, theater owners or operators are~~Theater System arrangements also ~~responsible~~include a requirement for ~~paying~~ the Company to provide maintenance services over the life of the arrangement in exchange for an extended warranty and annual maintenance ~~and extended warranty fee.~~fee paid by the exhibitor. Under these arrangements, the Company provides preventative and emergency maintenance services ~~to every theater in its network~~ to ensure that each presentation is up to the highest IMAX quality standard. Annual maintenance fees are paid throughout the duration of the term of the theater agreements.

Other Theater Business

The Other Theater Business segment principally includes after-market sales of IMAX ~~projection system~~Theater System parts and 3D glasses.

~~New Business Initiatives and Other~~

~~The New Business Initiatives segment includes activities related to the~~ exploration of new lines of business and new initiatives outside of the Company’s core business, which seek to leverage its proprietary, innovative technologies, its leadership position in the entertainment technology space and its unique relationship with content creators.

~~The Company has developed a new home entertainment licensing and certification program called IMAX Enhanced~~. IMAX Enhanced was launched in September 2018, along with audio leader DTS (an Xperi subsidiary) to capitalize on the companies’ decades of combined expertise in image and sound science. IMAX Enhanced brings IMAX digitally re-mastered 4K high dynamic range (HDR) content and DTS audio technologies to premier streaming platforms and best-in-class consumer electronics devices worldwide, offering consumers high-fidelity sight and sound experiences for the home.

To be certified, leading consumer electronics manufacturers spanning 4K/8K televisions, projectors, A/V receivers, loudspeakers, subwoofers and soundbars must meet a carefully prescribed set of audio and video performance standards, set by a certification committee of IMAX and DTS engineers and some of Hollywood’s leading technical specialists.

IMAX Enhanced global device partners include Sony Electronics, Hisense, TCL, Phillips, Xiaomi, and Sound United, among others. IMAX Enhanced has more than six million certified devices in-market. IMAX Enhanced content is now available on five streaming platforms worldwide, with partners that include Sony Pictures Entertainment, Paramount Pictures, Huayi Brothers, Bona Film Group, Tencent Video, iQIYI and Tsutaya TV, with more on the way.

Film Distribution and Post-Production

Through ~~the~~its Film Distribution segment, the Company ~~licenses film content and~~ distributes large-format documentary films, primarily ~~for its~~to institutional ~~theater partners.~~theaters. The Company receives as its distribution fee either a fixed amount or a fixed percentage of the theater box office receipts and, following the ~~Company’s~~ recoupment of its costs, is typically entitled to receive an additional percentage of gross revenues as participation revenues. In March 2022, the Company released the IMAX documentary film entitled IMAX presents The Last Glaciers.

In addition, ~~through its Connected Theaters initiative,~~ the Company ~~is currently exploring~~continues to evolve its platform to bring new, ~~technologies~~innovative IMAX Live events and ~~forms~~experiences to audiences worldwide. The Company has a connected IMAX theater footprint capable of delivering live, interactive content ~~as a way to deepen consumer engagement~~with low latency and ~~brand loyalty, including new technologies to further connect~~superior sight and sound. As of September 30, 2022, 176 theaters in the IMAX network across the United States, Canada, and Europe were configured to ~~facilitate bringing more unique content, including~~enable the streaming of live ~~events, to IMAX theater audiences.~~events. The Company ~~believes such additional connectivity can provide more innovative content~~expects to have 250 connected IMAX theaters available for streaming IMAX Live events by the end of 2022.

In the first quarter of 2022, the Company partnered with Disney for a live Q&A with director and producer Peter Jackson, streaming to 68 IMAX theaters in North America, followed by a special screening of The Beatles: Get Back – The Rooftop Concert, which was later released across the IMAX ~~network and in turn permit~~global network. In the second quarter of 2022, the Company ~~to engage audiences~~partnered with Warner Bros. for a live Q&A that preceded a special screening of Fantastic Beasts: The Secrets of Dumbledore and partnered with Universal for a live Q&A that preceded a special screening of Jurassic World Dominion. Also, in the second quarter of 2022, IMAX Live, in partnership with Summer Game Fest 2022, presented Summer Game Fest, a first-fan celebration of the future of video games, in connected theaters. In the third quarter of 2022, the Company partnered with Warner Bros. for a live Q&A that preceded a special screening of Don't Worry Darling. Also in the third quarter of 2022, the Company presented Brandi Carlile: In The Canyon Haze - Live from Laurel Canyon, a one-night-only live concert performing her new ~~ways.~~deluxe album In The Canyon Haze for the very first time, in connected theaters across the United States.

The Company continues to believe that the IMAX network serves as a valuable platform to launch and distribute original ~~content, especially during periods between peak and off-peak seasons, known as "shoulder periods".~~content.

~~The~~Through its Film Post-Production segment, the Company provides film post-production and quality control services for large-format films, ~~(whether~~whether produced by IMAX or third ~~parties),~~parties, and digital post-production services.

All Other

IMAX Enhanced

IMAX Enhanced® is an initiative, in partnership with audio leader DTS (an Xperi subsidiary), to bring The IMAX Experience into the home. IMAX Enhanced provides end-to-end premium technology across streaming content and best-in-class entertainment devices, offering consumers high-fidelity playback of image and sound in the home and beyond, including the following features:

•

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

•

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

•

IMAX signature sound, which is specially recreated and calibrated for the home by DTS to unlock more immersive audio.

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

At present, certified global device partners include Sony Electronics, Hisense, TCL, LG, Phillips, Xiaomi, Sound United and Honor, among others. As of September 30, 2022, more than 200 IMAX Enhanced titles have been released across five of the biggest streaming platforms worldwide, including Disney+, Sony Bravia CORE, Tencent Video, iQiyi and Rakuten TV. Over 10 million IMAX Enhanced certified devices are estimated to be in the market today.

The Company's collaboration with Disney, which was announced in November 2021, allows fans to stream 17 Disney titles in IMAX's Expanded Aspect Ratio at home on Disney+, including Doctor Strange in the Multiverse of Madness, Shang-Chi and The Legend of The Ten Rings, and Eternals, as well as Iron Man, Guardians of the Galaxy, Guardians of the Galaxy Vol. 2,Captain America: Civil War, Doctor Strange, Thor: Ragnarok, Black Panther, Avengers: Infinity War, Ant-Man and The Wasp, Captain Marvel, Avengers: Endgame, Black Widow, Lightyear, and Thor: Love and Thunder (content availability varies by region). The launch of IMAX Enhanced on Disney+ provides strong brand exposure for IMAX by expanding the Company's in-home entertainment footprint to more than 80 million subscribers.

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

In the first quarter of 2022, the Company's internal reporting was updated to reclassify the results of IMAX Enhanced out of the New Business Initiatives segment and into All Other for segment reporting purposes. IMAX Enhanced was the only component of the New Business Initiatives segment.

SSIMWAVE

On September 22, 2022 (the "Closing Date"), the Company acquired all of the issued and outstanding shares of SSIMWAVE pursuant to a share purchase agreement by and among the Company, SSIMWAVE, and related shareholders (the "Sellers"). SSIMWAVE provides perceptual quality measurement and optimization solutions based on artificial intelligence technologies for leading media and entertainment companies. Following the acquisition, SSIMWAVE became a wholly-owned subsidiary of the Company.

As consideration for the acquisition of SSIMWAVE, the Company is paying an aggregate purchase price of approximately $23.1 million, comprised of: (i) $19.4 million in cash, of which $16.2 million was paid on the Closing Date, (ii) 160,547 common shares of the Company with a fair value of $1.9 million (the "IMAX Share Consideration"), and (iii) contingent consideration with a fair value of $1.8 million (the "Earn-Out Payment"). The fair value of the IMAX Share Consideration is reduced to reflect the fair value of certain restrictions on the future transfer of the shares. The Earn-Out Payment may be paid to certain Sellers in an aggregate amount of up to $2.0 million in cash, contingent upon and following the achievement of certain commercial and financial milestones during the period from January 1, 2023 to December 31, 2024. The fair value of the Earn-Out Payment is based on management's assessment of the likelihood of achieving these milestones.

(See Note 4 of Notes to Condensed Consolidated Financial Statements for additional information related to the Company's acquisition of SSIMWAVE.)

Other

All Other also includes revenues from the one owned and operated IMAX theater in Sacramento, California; a commercial arrangement with one theater resulting in the sharing of profits and losses; the provision of management services to three other theaters; renting the Company's proprietary 2D and 3D large-format film and digital cameras to third-party production companies; and also offering production advice and technical assistance to both documentary and Hollywood filmmakers.

IMAX NETWORK AND BACKLOG

IMAX Network

The following table provides detailed information about the IMAX network by type and geographic location as of September 30, ~~2021~~2022 and ~~2020:~~2021:


	September 30, 2022								September 30, 2021
	Commercial Multiplex		Commercial Destination		Institutional		Total		Commercial Multiplex		Commercial Destination		Institutional		Total
United States		364		4		25		393		362		4		27		393
Canada		40		1		7		48		39		1		7		47
Greater China(1)		776		—		14		790		752		—		15		767
Western Europe		117		4		8		129		116		4		8		128
Asia (excluding Greater China)		131		2		2		135		121		2		2		125
Russia/the CIS & Ukraine(2)		70		—		—		70		68		—		—		68
Latin America(3)		55		1		11		67		51		1		11		63
Rest of the World		69		—		2		71		71		—		2		73
Total(4)		1,622		12		69		1,703		1,580		12		72		1,664

September 30, 2021

September 30, 2020

Commercial
Multiplex

Commercial
Destination

Institutional

Total

Commercial
Multiplex

Commercial
Destination

Institutional

Total

United States

362

4

27

393

371

4

30

405

Canada

39

1

7

47

39

2

7

48

Greater China⁽¹⁾

752

—

15

767

710

—

16

726

Western Europe

116

4

8

128

115

4

9

128

Asia (excluding Greater China)

121

2

2

125

123

2

2

127

Russia & the CIS

68

—

—

68

68

—

—

68

Latin America⁽²⁾

51

1

11

63

51

1

11

63

Rest of the World

71

—

2

73

65

—

2

67

Total⁽³⁾

1,580

12

72

1,664

1,542

13

77

1,632

(1)

Greater China includes China, Hong Kong, Taiwan, and Macau.

(2)

(3)

Latin America includes South America, Central America and Mexico.

(4)

Period-to-period changes in the table above are reported net of the effect of permanently closed theaters.

~~(1)~~

~~Greater China includes China, Hong Kong, Taiwan and Macau.~~

~~(2)~~

~~Latin America includes South America, Central America and Mexico.~~

~~(3)~~

~~Period-to-period changes in the tables above are reported net of the effect of permanently closed theaters.~~

The Company currently believes that over time its commercial multiplex network could grow to approximately 3,318 IMAX theaters worldwide from the ~~1,580 operating~~1,622 theaters in the network as of September 30, ~~2021.~~2022. The Company believes that the majority of its future growth will come from international markets. As of September 30, ~~2021, 73.6%~~2022, 75% of IMAX Theater Systems in ~~operation~~the global commercial multiplex network were located within international markets (defined as all countries other than the United States and Canada)~~, compared to 72.2% as of September 30, 2020.~~. Revenues and ~~gross box office~~GBO derived from international markets continue to exceed revenues and ~~gross box office~~GBO from the United States and Canada. Risks associated with the ~~Company’s~~Company's international business, including Russia, are outlined in ~~“Risk~~"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”~~prospects" in Part I,II, Item 1A in this report.

In the year ended December 31, 2021, 44% of the ~~Company’s 2020 Form 10-K.~~

~~Greater China is the Company’s largest market, measured by revenues, with approximately 38% and 31% of~~Company's consolidated revenue was generated from its Greater China operations ~~in the years ended December 31, 2020 and~~(2020 — 38%, 2019 ~~respectively. During the nine months ended September 30, 2021~~— 31%), ~~this percentage increased to 52%~~. ~~as the pace of the reopening of IMAX theaters in Greater China has exceeded that of theaters in Domestic and Rest of World markets.~~ As of September 30, ~~2021,~~2022, the Company had ~~767~~790 theaters operating in Greater China with an additional ~~229~~211 theaters in backlog. The ~~Company’s~~Company's backlog in Greater China represents ~~45.3%~~43% of its total current backlog, including upgrades in system type. The ~~Company’s largest single international~~Company has a partnership is in China with Wanda Film ~~(“Wanda”~~("Wanda"). As of September 30, ~~2021,~~2022, through the ~~total number of Wanda’s~~Company's partnership with Wanda, there are 375 IMAX Theater Systems operational in Greater China ~~that are operational is 367 (of~~of which 361 are under the ~~parties’~~parties' joint revenue sharing ~~arrangement).~~arrangements.

(See ~~“Risk~~"Risk Factors – The Company faces risks in connection with its significant presence in China and the ~~continues~~continued expansion of its business there,~~” “Risk~~" "Risk Factors – General political, social and economic conditions can affect the ~~Company’s~~Company's business by reducing both revenues generated from existing IMAX Theater Systems and the demand for new IMAX Theater Systems,”" and ~~“Risk~~"Risk Factors – The Company may not convert all of its backlog into revenue and cash ~~flows”~~flows" in Part I, Item 1A of the ~~Company’s 2020~~Company's 2021 Form 10-K.)

(See ~~“Management’s~~"Management's Discussion and Analysis of Financial Condition and Results of Operations – Impact of COVID-19 ~~Pandemic”~~Pandemic" and ~~“Risk~~"Risk Factors – The Company has experienced a significant decrease in its revenues, earnings and cash flows due to the COVID-19 ~~global~~ pandemic and its business, financial condition and results of operations may continue to be significantly harmed in future reporting ~~periods”~~ periods" in Part II, Item 1A of this report.)

The following tables provide detailed information about the Company's global commercial multiplex ~~theaters in operation within the IMAX~~theater network by arrangement type and geographic location as of September 30, ~~2021~~2022 and ~~2020:~~2021:


	September 30, 2022
	Commercial Multiplex Theaters in IMAX Network
	Traditional JRSA		Hybrid JRSA		Sale / Sales- type Lease		Total
Domestic Total (United States & Canada)		276		6		122		404
International:
Greater China		400		112		264		776
Asia (excluding Greater China)		34		4		93		131
Western Europe		47		28		42		117
Russia/the CIS & Ukraine(1)		—		—		70		70
Latin America		2		—		53		55
Rest of the World		17		—		52		69
International Total		500		144		574		1,218
Worldwide Total(2)		776		150		696		1,622

	September 30, 2021
	Commercial Multiplex Theaters in IMAX Network
	Traditional JRSA		Hybrid JRSA		Sale / Sales- type Lease		Total
Domestic Total (United States & Canada)		274		5		122		401
International:
Greater China		389		109		254		752
Asia (excluding Greater China)		33		2		86		121
Western Europe		47		28		41		116
Russia/the CIS & Ukraine(1)		—		—		68		68
Latin America		1		—		50		51
Rest of the World		16		—		55		71
International Total		486		139		554		1,179
Worldwide Total(2)		760		144		676		1,580

(1)

(2)

Period-to-period changes in the tables above are reported net of the effect of permanently closed theaters.

Backlog

September 30, 2021

Commercial Multiplex Theaters in IMAX Network

Traditional
JRSA

Hybrid
JRSA

Sale / Sales-
type Lease

Total

Domestic Total (United States & Canada)

274

5

122

401

International:

Greater China

389

109

254

752

Asia (excluding Greater China)

33

2

86

121

Western Europe

47

28

41

116

Russia & the CIS

—

—

68

68

Latin America

1

—

50

51

Rest of the World

16

—

55

71

International Total

486

139

554

1,179

Worldwide Total⁽¹⁾

760

144

676

1,580

September 30, 2020

Commercial Multiplex Theaters in IMAX Network

Traditional
JRSA

Hybrid
JRSA

Sale / Sales-
type Lease

Total

Domestic Total (United States & Canada)

279

5

126

410

International:

Greater China

365

105

240

710

Asia (excluding Greater China)

33

2

88

123

Western Europe

48

27

40

115

Russia & the CIS

—

—

68

68

Latin America

2

—

49

51

Rest of the World

15

—

50

65

International Total

463

134

535

1,132

Worldwide Total⁽¹⁾

742

139

661

1,542

~~(1)~~

~~Period-to-period changes in the tables above are reported net of the effect of permanently closed theaters.~~

~~Backlog~~

The following table provides detailed information about the ~~Company’s~~Company's backlog as of September 30, ~~2021~~2022 and ~~2020:~~2021:


	September 30, 2022												September 30, 2021
	Number of						Dollar Value						Number of						Dollar Value
	Systems						(in thousands)						Systems						(in thousands)
	New			Upgrade			New			Upgrade			New			Upgrade			New			Upgrade
Sale and sales-type lease arrangements		154			16		$	175,617		$	18,312			170			12		$	194,539		$	14,207
Hybrid JRSA		121			6			88,604			4,785			133			6			95,349			4,785
Traditional JRSA		98	(1)		94	(1)		200	(2)		4,500	(2)		108	(1)		77	(1)		200	(2)		5,500	(2)
		373	(3)		116	(3)	$	264,421	(3)	$	27,597	(3)		411			95		$	290,088		$	24,492

September 30, 2021

September 30, 2020

Number of

Dollar Value

Number of

Dollar Value

Systems

(in thousands)

Systems

(in thousands)

New

Upgrade

New

Upgrade

New

Upgrade

New

Upgrade

Sales and sales-type lease arrangements

170

12

$
194,539

$
14,207

184

9

$
212,623

$
11,418

Hybrid joint revenue sharing arrangements

133

6

95,349

4,785

139

7

98,398

5,560

Traditional joint revenue sharing arrangements

108

⁽¹⁾

77

⁽¹⁾

200

⁽²⁾

5,500

⁽²⁾

125

⁽¹⁾

81

⁽¹⁾

300

⁽²⁾

5,500

⁽²⁾

411

95

$
290,088

$
24,492

448

97

$
311,321

$
22,478

(1)

Includes 41 IMAX Theater Systems (2021 — 44) where the customer has the option to convert from a joint revenue sharing arrangement to a sale arrangement.

(2)

The consideration owed under joint revenue sharing arrangements, which are accounted for as leases, is typically contingent on the box office receipts earned by the exhibitor. Accordingly, such arrangements do not usually have a dollar value in backlog; however, certain joint revenue sharing arrangements provide for contracted upfront payments and therefore carry a backlog value based on those payments.

(3)

As of September 30, 2022, the Company's backlog includes 14 theaters in Russia, one theater in Ukraine, and five theaters in Belarus with a total fixed contracted value of $22.9 million.

~~(1)~~

~~Includes 44 IMAX Theater Systems (2020 — 46) 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.~~

The number of IMAX Theater Systems in backlog reflects the minimum number of commitments under signed contracts. The dollar value fluctuates depending on the number of new arrangements signed from year-to-year, which adds to backlog and the installation and acceptance of IMAX Theater Systems and the settlement of contracts, both of which reduce backlog. The dollar value of backlog typically represents the fixed contracted revenue under signed IMAX Theater System sale and lease agreements that the Company ~~believes will be recognized~~expects to recognize as revenue upon installation and acceptance of the associated system, as well as an estimate of variable consideration in ~~sales arrangements, however it excludes~~sale arrangements. The value of backlog does not include amounts allocated to maintenance and extended warranty ~~revenues. The value of backlog does not include~~revenues or revenue from theaters in which the Company has an equity interest, operating leases, and long-term conditional theater commitments. Theaters under joint revenue sharing arrangements do not usually have dollar value in backlog, although certain IMAX Theater Systems under joint revenue sharing arrangements provide for contracted upfront payments and therefore carry a backlog value based on those payments. The Company believes that the contractual obligations for IMAX Theater System installations that are listed in 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 an IMAX Theater System installation for a variety of reasons, including the inability to obtain certain consents, approvals or financing. Once the determination is made that the customer will not proceed with installation, the agreement with the customer is terminated or amended. If the agreement is terminated, once the Company and the customer are released from all their 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 as revenue.

Certain of the ~~Company’s~~Company's contracts contain options for the customer to elect to upgrade system type during the term or to alter the contract structure (for example, from a joint revenue sharing arrangement to a sale) after signing, but before installation. Current backlog information reflects all known elections.

The following tables provide detailed information about the ~~Company’s~~Company's backlog by arrangement type and geographic location as of September 30, ~~2021~~2022 and ~~2020:~~2021:


	September 30, 2022
	IMAX Theater System Backlog
	Traditional JRSA		Hybrid JRSA		Sale / Sales- type Lease		Total
Domestic Total (United States & Canada)		121		2		11		134
International:
Greater China		43		96		72		211
Asia (excluding Greater China)		5		14		31		50
Western Europe		18		13		4		35
Russia/the CIS & Ukraine(1)		—		—		21		21
Latin America		3		—		4		7
Rest of the World		2		2		27		31
International Total		71		125		159		355
Worldwide Total		192		127		170		489	(2)

	September 30, 2021
	IMAX Theater System Backlog
	Traditional JRSA		Hybrid JRSA		Sale / Sales- type Lease		Total
Domestic Total (United States & Canada)		120		3		9		132
International:
Greater China		44		107		78		229
Asia (excluding Greater China)		4		15		31		50
Western Europe		11		12		7		30
Russia/the CIS & Ukraine		—		1		23		24
Latin America		3		—		8		11
Rest of the World		3		1		26		30
International Total		65		136		173		374
Worldwide Total		185		139		182		506	(3)

September 30, 2021

IMAX Theater System Backlog

Traditional
JRSA

Hybrid
JRSA

Sale / Lease

Total

Domestic Total (United States & Canada)

120

3

9

132

International:

Greater China

44

107

78

229

Asia (excluding Greater China)

4

15

31

50

Western Europe

11

12

7

30

Russia & the CIS

—

1

17

18

Latin America

3

—

8

11

Rest of the World

3

1

32

36

International Total

65

136

173

374

Worldwide Total

185

139

182

506

⁽¹⁾

September 30, 2020

IMAX Theater System Backlog

Traditional
JRSA

Hybrid
JRSA

Sale / Lease

Total

Domestic Total (United States & Canada)

123

3

10

136

International:

Greater China

59

113

86

258

Asia (excluding Greater China)

5

15

30

50

Western Europe

12

13

6

31

Russia & the CIS

-

1

15

16

Latin America

3

-

9

12

Rest of the World

4

1

37

42

International Total

83

143

183

409

Worldwide Total

206

146

193

545

⁽²⁾
(1)

In addition to Russia, the CIS includes Azerbaijan, Belarus, Kazakhstan, and Kyrgyzstan. Commencing in March 2022, in response to the ongoing conflict between Russia and Ukraine and resulting sanctions, the Company suspended its operations in Russia and Belarus. As of September 30, 2022, the Company's backlog includes 14 theaters in Russia, one theater in Ukraine, and five theaters in Belarus with a total fixed contracted value of $22.9 million.

(2)

Includes 201 new IMAX Laser Theater Systems and 116 upgrades of existing locations to IMAX Laser Theater Systems.

(3)

Includes 157 new IMAX Laser Theater Systems and 95 upgrades of existing locations to IMAX Laser Theater Systems.

~~(1)~~

~~Includes 148 new IMAX with Laser projection system configurations and 90 upgrades of existing locations to IMAX with Laser projection system configurations.~~

~~(2)~~

~~Includes 155 new IMAX with Laser projection system configurations and 92 upgrades of existing locations to IMAX with Laser projection system configurations.~~

Approximately ~~73.9%~~73% of IMAX Theater System arrangements in backlog as of September 30, ~~2021~~2022 are scheduled to be installed in international markets ~~(2020~~(2021 — ~~75.0%~~74%).

Signings and Installations

The following tables provide detailed information about IMAX Theater System signings and installations for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Theater System Signings:
New IMAX Theater Systems
Sale and sales-type lease arrangements		3		4		9		13
Hybrid JRSA		1		—		3		—
Traditional JRSA		7		5		9		8
Total new IMAX Theater Systems		11		9		21		21
Upgrades of IMAX Theater Systems		4		2		14		4
Total IMAX Theater System signings		15		11		35		25

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Theater System Installations:
New IMAX Theater Systems(1)
Sale and sales-type lease arrangements		7		6		14		17
Hybrid JRSA		2		2		5		6
Traditional JRSA		7		6		16		15
Total new IMAX Theater Systems		16		14		35		38
Upgrades of IMAX Theater Systems		1		3		5		7
Total IMAX Theater System installations		17		17		40		45

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Theater System Signings:

New IMAX Theater Systems

Sales and sales-type lease arrangements

4

8

13

22

Hybrid joint revenue sharing lease arrangements

—

—

—

17

Traditional joint revenue sharing arrangements

5

—

8

2

Total new IMAX Theater Systems

9

8

21

41

Upgrades of IMAX Theater Systems

2

2

4

13

Total IMAX Theater System signings

11

10

25

54

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Theater System Installations:

New IMAX Theater Systems

Sales and sales-type lease arrangements

6

9

17

13

Hybrid joint revenue sharing lease arrangements

2

1

6

3

Traditional joint revenue sharing arrangements

6

8

15

10

Total new IMAX Theater Systems

14

18

38

26

Upgrades of IMAX Theater Systems

3

5

7

12

Total IMAX Theater System installations

17

23

45

38

(1)

For the three months ended September 30, 2022, includes two IMAX Theater System that were relocated from their original locations (2021 ― nil). For the nine months ended September 30, 2022, includes eight IMAX Theater Systems that were relocated from their original location. (2021 ― nil). When a theater system under a sale or sales-type lease arrangement is relocated, the amount of revenue earned by the Company may vary from transaction-to-transaction and is usually less than the amount earned for a new sale. In certain situations when a theater system is relocated, the original location is upgraded to an IMAX Laser Theater System.

RESULTS OF OPERATIONS

The ~~Company’s~~Company's business and future prospects are evaluated by Richard L. Gelfond, its Chief Executive Officer ~~(“CEO”~~("CEO"), using a variety of factors and financial and operational metrics including: (i) IMAX box office performance and the securing of new IMAX DMR films and other events to be exhibited in IMAX theaters; (ii) the signing, installation, and financial performance of theater system arrangements, particularly ~~joint revenue sharing arrangements and~~ those involving laser-based projection systems; ~~(ii) film~~(iii) the success of the Company's investments in business evolution and brand extensions, including the integration and performance of SSIMWAVE and the ~~securing~~distribution of ~~new film projects, particularly~~live events to the IMAX ~~DMR films; (iii) the continuing ability to invest in~~network and ~~improve the Company’s technology to enhance the differentiation of~~ ~~The~~IMAX ~~Experience~~ ~~versus other cinematic experiences;~~Enhanced, (iv) revenues and gross margins earned by the ~~Company’s~~Company's segments, as discussed below; (v) consolidated earnings from operations, as adjusted for unusual items; (vi) the continuing ability to invest in and improve the Company's technology to enhance the differentiation of The IMAX Experience versus other out-of-home experiences; (vii) the overall execution, reliability, and consumer acceptance of TheIMAX Experience; ~~(vii) the success of new business initiatives;~~ and (viii) short- and long-term cash flow projections.

The CEO is the ~~Company’s~~Company's Chief Operating Decision Maker ~~(“CODM”~~("CODM"), as such term is defined under United States Generally Accepted Accounting Principles (“("U.S. ~~GAAP”~~GAAP"). The CODM, along with other members of management, ~~assess~~assesses segment performance based on segment revenues and gross margins. Selling, general and administrative expenses, research and development costs, the amortization of intangible assets, ~~provisions~~provision for ~~(recoveries~~(reversal of) current expected credit losses, certain write-downs, interest income, interest expense, and income tax (expense) benefit are not allocated to the ~~Company’s~~Company's segments.

The ~~Company’s~~Company's reportable segments are organized into the following ~~four~~three categories: (i) IMAX Technology Network; (ii) IMAX Technology Sales and Maintenance; ~~(iii) New Business Initiatives;~~ and ~~(iv)~~(iii) Film Distribution and Post-Production. Within these categories are the ~~Company’s~~Company's following reportable segments: (i) IMAX DMR; (ii) ~~Joint Revenue Sharing Arrangements;~~JRSA; (iii) IMAX ~~Systems,~~Systems; (iv) IMAX Maintenance; (v) Other Theater Business; (vi) ~~New Business Initiatives; (vii)~~ Film Distribution; and ~~(viii)~~(vii) Film Post-Production, each of which are described above under ~~“Sources~~"Sources of Revenue.”" The Company's activities that do not meet the criteria to be considered a reportable segment are disclosed within All Other. This categorization is consistent with how the CODM reviews the financial performance of the Company and makes strategic decisions regarding resource allocation and investments to meet long-term business goals. Management believes that a discussion and analysis based on the ~~four~~three categories listed above is significantly more relevant and useful to readers, as the ~~Company’s~~Company's Condensed Consolidated Statements of Operations captions combine results from several segments.

Results of Operations for the Three Months Ended September 30, ~~2021~~2022 and ~~2020~~2021

~~For~~Net Loss and Adjusted Net Loss Attributable to Common Shareholders

The following table presents the ~~three months ended September 30, 2021, the Company reported a~~Company's net loss attributable to common shareholders ~~of $(8.4) million, or $(0.14)~~and the associated per ~~diluted~~ share amounts, as ~~compared to a net loss attributable to common shareholders of $(47.2) million, or $(0.80) per diluted share, for the same period in 2020.~~

~~For the three months ended September 30, 2021, the Company reported an~~well as adjusted net loss attributable to common shareholders* ~~of $(5.0) million, or $(0.08) per diluted share*, as compared to an~~and adjusted net loss attributable to common shareholders*shareholders per share* for the three months ended September 30, 2022 and 2021:


	Three Months Ended September 30,
	2022						2021
(In thousands of U.S. Dollars, except per share amounts)	Net Loss			Per Share			Net Loss			Per Share
Net loss attributable to common shareholders	$	(8,953	)	$	(0.16	)	$	(8,378	)	$	(0.14	)
Adjusted net loss attributable to common shareholders*	$	(3,027	)	$	(0.05	)	$	(5,032	)	$	(0.08	)

* See "Non-GAAP Financial Measures" below for a description of ~~$(44.6)~~this non-GAAP financial measure and a reconciliation to the most comparable GAAP amount.

Revenues and Gross Margin (Margin Loss)

During the three months ended September 30, 2022, the Company's revenues and gross margin increased by $12.2 million or $(0.75) per diluted share*(22%) and $4.2 million (15%), ~~for the~~respectively, when compared to same period in ~~2020.~~2021 principally due to the strength of the GBO performance of the IMAX Technology Network through the distribution of films such as Thor: Love and Thunder, Top Gun: Maverick, Moon Man, Nope, and Minions: The Rise of Gru.

~~Revenues and Gross Margin~~


	Revenue				Gross Margin (Margin Loss)
(In thousands of U.S. Dollars)	2022		2021		2022			2021
IMAX Technology Network
IMAX DMR	$	19,919	$	15,701	$	11,408		$	7,293
JRSA, contingent rent		12,540		9,887		6,302			3,626
		32,459		25,588		17,710			10,919
IMAX Technology Sales and Maintenance
IMAX Systems(1)		15,957		13,236		9,029			8,086
JRSA, fixed fees		998		1,036		(154	)		280
IMAX Maintenance		13,939		13,055		6,406			6,462
Other Theater Business(2)		2,107		363		168			64
		33,001		27,690		15,449			14,892
Film Distribution and Post-Production		2,049		1,598		(2,082	)		416
Sub-total for reportable segments		67,509		54,876		31,077			26,227
All Other(3)		1,246		1,726		624			1,260
Total	$	68,755	$	56,602	$	31,701		$	27,487

Revenue

Gross Margin (Margin Loss)

(In thousands of U.S. Dollars)

2021

2020

2021

2020

IMAX Technology Network

IMAX DMR

$
15,701

$
6,886

$
7,293

$
3,079

Joint Revenue Sharing Arrangements, contingent rent

9,887

4,473

3,626

(2,491
)

25,588

11,359

10,919

588

IMAX Technology Sales and Maintenance

IMAX Systems⁽¹⁾

13,236

17,437

8,086

8,671

Joint Revenue Sharing Arrangements, fixed fees

1,036

57

280

(117
)
IMAX Maintenance

13,055

5,855

6,462

794

Other Theater Business⁽²⁾

363

307

64

31

27,690

23,656

14,892

9,379

New Business Initiatives

1,238

378

1,189

372

Film Distribution and Post-Production

1,598

1,865

416

(6,061
)
Sub-total

56,114

37,258

27,416

4,278

Other

488

(2
)

71

(449
)
Total

$
56,602

$
37,256

$
27,487

$
3,829

(1)

~~(1)~~

~~(2)~~

~~The revenue from this segment principally includes after-market sales of IMAX projection system~~(2)

The revenue from this segment principally includes after-market sales of IMAX Theater System parts and 3D glasses.

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

(3)

~~Beginning in~~All Other includes the ~~third~~results from IMAX Enhanced, SSIMWAVE, and other ancillary activities. In the first quarter of ~~2020, movie theaters throughout~~2022, the Company's internal reporting was updated to reclassify the results of IMAX ~~network gradually reopened following the wide-scale closure of theaters upon the onset~~Enhanced out of the ~~COVID-19 global pandemic. However, although movie theaters~~New Business Initiatives segment into All Other for segment reporting purposes. Prior period comparatives have been revised to conform with the current period presentation. The results of SSIMWAVE, which was acquired on September 22, 2022, were ~~generally open during the third quarter of 2020, the availability of new film content was limited, especially in the Domestic and Rest of World markets, with only 6 new films released~~not material to the ~~IMAX global network. By contrast, in~~period. (See "SSIMWAVE" under "Sources of Revenue - All Other" and Note 4 of Notes to Condensed Consolidated Financial Statements for additional information related to the ~~third quarter~~Company's acquisition of ~~2021, 21 new films were released, resulting in a $71.7 million (102%~~SSIMWAVE.) ~~increase in GBO receipts and corresponding increases in~~

IMAX Technology Network revenue and gross margin of $14.2 million and $10.3 million, respectively. Also impacting the comparison to the prior year are increases of $7.2 million and $5.7 million in IMAX Maintenance revenue and gross margin, respectively, due to the broader reopening of the IMAX theater network and the continued progress towards the resumption of normal operations as the theatrical exhibition industry continues to recover from the COVID-19 global pandemic. See the captioned sections below for a more detailed discussion of the Company’s segment results.

~~IMAX Technology Network~~

IMAX Technology Network results are influenced by the level of commercial success and box office performance of the films released to the IMAX network, as well as other factors including the timing of the films released, the length of the theatrical distribution window, the take rates under the ~~Company’s~~Company's DMR and joint revenue sharing arrangements and the level of marketing spend associated with the films released in the year. Other factors impacting IMAX Technology Network results include fluctuations in the value of foreign currencies versus the U.S. Dollar.

For the three months ended September 30, ~~2021,~~2022, IMAX Technology Network revenues and gross margin increased by ~~$14.2~~$6.9 million (27%) and ~~$10.3~~$6.8 million (62%), respectively, when compared to the same period in ~~2020 primarily~~2021 principally due to the ~~reopening~~strength of the GBO performance of the IMAX ~~theater network, particularly in the United States, and the strong performance of Hollywood film releases.~~Technology Network. See below for separate discussions of IMAX DMR and JRSA contingent rent segment results for the period.

IMAX DMR

For the three months ended September 30, ~~2021,~~2022, IMAX DMR revenues and gross margin increased by ~~$8.8~~$4.2 million (27%) and ~~$4.2~~$4.1 million (56%), respectively, when compared to the same period in ~~2020.~~2021. These increases are primarily due to the strong performance of the films distributed through the IMAX network, which resulted in a ~~$71.7~~$35.2 million ~~(102%~~(25%) increase in GBO ~~receipts generated by IMAX DMR films~~ in the third quarter of ~~2021,~~2022 over the prior year comparative period, from ~~$70.2~~$141.9 million to ~~$141.9~~$177.1 million. This overall improvement in GBO for the period was partially offset by unfavorable foreign currency exchange rate movements. In the third quarter of 2022, GBO was generated by the exhibition of 36 films (27 new films, 4 carryovers, and 5 re-releases), including Thor: Love and Thunder, which generated GBO of $39.8 million in the period, and Top Gun: Maverick, which generated GBO of $20.4 million in the period. In addition, in the third quarter of 2022, local language films released to the Company's global theater network generated $53.0 million in GBO representing 30% of the Company's total GBO as compared to $32.0 million representing 23% of the Company's total GBO during the same period in the prior year. In the third quarter of 2021, GBO was generated by the exhibition of 24 films (21 new films and 3 carryovers). ~~In the third quarter of 2020, GBO was generated by the exhibition of 6 new films and the re-release of classic titles.~~

In addition to the level of revenues, IMAX DMR gross margin is also influenced by the costs associated with the films exhibited in the period, and can vary from period-to-period, ~~particularly~~especially with respect to marketing expenses. For the three months ended September 30, ~~2021,~~2022, marketing expenses were ~~$3.2~~$2.5 million, as compared to ~~$0.4~~$3.2 million during the same period in ~~2020.~~2021.

Joint Revenue Sharing Arrangements – Contingent Rent

For the three months ended September 30, ~~2021,~~2022, JRSA contingent rent revenue and gross margin increased by ~~$5.4~~$2.7 million (27%) and ~~$6.1~~$2.7 million (74%), respectively, when compared to the same period in ~~2020.~~2021. These increases are largely due to a ~~$34.8~~$19.8 million (28%) increase in GBO generated by theaters under joint revenue sharing arrangements in the third quarter of ~~2021~~2022 when compared to the same period in the prior year, from ~~$36.4~~$71.2 million to ~~$71.2~~$91.0 million.

In addition to the level of revenues, JRSA contingent rent margin is also influenced by the level of costs associated with such arrangements, such as depreciation expense related to the underlying theater systems and costs incurred to upgrade theater systems from ~~digital xenon~~IMAX Xenon Theater Systems to IMAX ~~with~~ Laser Theater Systems, as well as advertising, marketing, and commission costs primarily for the launch of new theaters. The level of depreciation expense in a period relative to the prior year is generally a function of the growth of the theater network and the mix of theater system configurations in the network. For the three months ended September 30, ~~2021,~~2022, JRSA gross margin included depreciation expense of ~~$5.5~~$5.6 million ~~which represents a $0.6 million decrease~~ as compared to ~~$6.1~~$5.5 million recorded in the same period of the prior year. For the three months ended September 30, 2022, JRSA gross margin includes advertising, marketing, and commission costs of $0.6 million, as compared to $0.7 million in the same period of the prior year.

IMAX Technology Sales and Maintenance

The primary drivers of IMAX Technology Sales and Maintenance results are the number of IMAX Theater Systems installed in a period, and the level of gross margin percentage earned on each installation, as well as the associated maintenance contracts that accompany each theater installation. The installation of IMAX Theater Systems in newly built theaters or multiplexes, which make up a large portion of the Company's theater system backlog, depends primarily on the timing of the construction of those projects, which is not under the Company's control.

For the three months ended September 30, 2022, IMAX Technology Sales and Maintenance revenue and gross margin increased by $5.3 million (19%) and $0.6 million (4%), respectively, when compared to the same period in the prior year. See below for separate discussions of IMAX Systems and IMAX Maintenance segment results for the period.

The following table provides detailed information about the mix of IMAX Theater Systems installed and recognized during the three months ended September 30, 2022 and 2021:


	For the Three Months Ended September 30,
	2022				2021
(In thousands of U.S. Dollars, except number of systems)	Number of Systems		Revenue		Number of Systems		Revenue
New IMAX Theater Systems:
Sale and sales-type lease arrangements(1)		7	$	7,779		6	$	7,239
JRSA — hybrid		2		998		2		1,031
Total new IMAX Theater Systems(2)		9		8,777		8		8,270

IMAX Theater System upgrades:
Sale and sales-type lease arrangements(1)		1		1,544		1		1,316
Total upgraded IMAX Theater Systems		1		1,544		1		1,316
Total		10	$	10,321		9	$	9,586

(1)

The arrangement for the sale of an IMAX Theater System includes fixed upfront and ongoing consideration, including indexed annual minimum payment increases over the term of the arrangement, as well as an estimate of the contingent fees that may become due if certain annual minimum box office receipt thresholds are exceeded.

(2)

Includes one IMAX Xenon Theater System that was relocated from its original location, which is subject to sales and sales-type lease arrangements (2021 — nil). When a theater system under a sales or sales-type lease arrangement is relocated, the amount of revenue earned by the Company may vary from transaction-to-transaction and is usually less than the amount earned for a new sale. In certain situations when a theater system is relocated, the original location is upgraded to an IMAX Laser Theater System.

The average revenue per IMAX Theater System under sale and sales-type lease arrangements varies depending upon the number of IMAX Theater System commitments with a single respective exhibitor, an exhibitor's location and various other factors. The average revenue per full (i.e., excluding JRSA hybrid arrangements and relocations), new IMAX Theater System under sale and sales-type lease arrangements was $1.3 million for the three months ended September 30, 2022, as compared to $1.2 million during the same period of the prior year.

IMAX Systems

For the three months ended September 30, 2022, IMAX Systems revenue and gross margin increased by $2.7 million (21%) and $0.9 million (12%), respectively, when compared to the same period in the prior year. The higher level of revenue and gross margin is the result of one additional IMAX Theater System installation, including upgrades, in the current period and an increase of $2.6 million due to the impact of amendments to existing theater system arrangements, offset by a decrease of $0.3 million in Finance Income associated with theaters in Russia, Ukraine, and Belarus, which were placed on nonaccrual status due to the ongoing Russia-Ukraine conflict.

IMAX Maintenance

For the three months ended September 30, 2022, IMAX Maintenance segment revenues increased by $0.9 million (7%) while the gross margin decreased by $0.1 million (1%), when compared to the same period in the prior year. The overall increase in IMAX Maintenance segment revenue is due to normalizing revenues as theaters reopen following the earlier stages of the COVID-19 pandemic, partially offset by a decrease of $0.4 million in revenue associated with theaters in Russia, Ukraine, and Belarus, which were placed on nonaccrual status due to the ongoing Russia-Ukraine conflict. The decrease in gross margin is primarily the result of increased costs incurred in preparation for the strong pipeline of blockbuster releases in the remainder of 2022.

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.

Film Distribution and Post-Production

For the three months ended September 30, 2022, Film Distribution and Post-Production revenues increased by $0.5 million (28%) while gross margin decreased by $2.5 million, when compared to the same period in the prior year. The margin loss in the third quarter of 2022 is primarily the result of costs incurred to produce, market and distribute live events and documentary content during the period. These costs include infrastructure costs, depreciation expense and network connection fees of $1.0 million to operate the IMAX connected network for the three months ended September 30, 2022.

Selling, General and Administrative Expenses

The following table presents information about the Company's Selling, General and Administrative Expenses for the three months ended September 30, 2022 and 2021:


	Three Months Ended
	September 30,				Variance
(In thousands of U.S. Dollars)	2022		2021		$			%
Total selling, general and administrative expenses	$	32,905	$	28,377	$	4,528			16	%
Less: Share-based compensation(1)		4,985		5,706		(721	)		(13	%)
Total selling, general and administrative expenses, excluding share-based compensation	$	27,920	$	22,671	$	5,249			23	%

(1)

A portion of share-based compensation expense is recognized within Costs and Expenses Applicable to Revenue and Research and Development. (See Note 13 of Notes to Condensed Consolidated Financial Statements.)

The increase in Selling, General and Administrative Expenses reflects the Company's higher level of business activity in the current period, as the effects of the COVID-19 pandemic continue to subside, resulting in higher staff costs, marketing expenses, and other expenses. Also influencing the comparison to the prior period are a $1.4 million decrease in COVID-19 government relief benefits, $1.0 million in professional fees incurred in the third quarter of 2022 in connection with the acquisition of SSIMWAVE, and $0.6 million resulting from unfavorable foreign currency exchange rate movements.

Research and Development

A significant portion of the Company's recent research and development efforts have been focused on its laser-based projection systems, which the Company believes present greater brightness and clarity, higher contrast, a wider color gamut and deeper blacks, consume less power and last longer than other digital projection technologies, and are capable of illuminating the largest screens in the IMAX network. To a lesser extent, the Company's recent research and development efforts have also focused on image enhancement technology, developing technologies and systems to help bring additional interactivity to its IMAX theater network.

For the three months ended September 30, 2022, Research and Development expenses decreased by $0.9 million (45%), when compared to the same period in the prior year.

The Company intends to continue research and development to further evolve its end-to-end technology. This includes bringing connectivity to the Company's global theater network and experimenting with live and interactive events worldwide; developing new IMAX film cameras and certifying additional digital cameras; further improving its proprietary DMR process for the delivery of content for both theatrical (including local language content) and home entertainment; and further improving the reliability of its projectors, as well as enhancing the Company's image and sound quality. In addition, teams from IMAX and SSIMWAVE are working to expand existing and/or develop new technologies which further enhance video quality, delivery, and creation across all devices.

Credit Loss Expense, Net

For the three months ended September 30, 2022, the Company recorded current expected credit losses of $0.8 million, as compared to a net reversal of current expected credit losses of $3.3 million recognized in the prior year due to an improvement in the outlook for theater operators as the theatrical exhibition industry began to recover from the COVID-19 global pandemic.

Management's judgments regarding expected credit losses are based on the facts available to management at the time that the Condensed Consolidated Financial Statements are prepared and involve estimates about the future. As a result, the Company's judgments and associated estimates of credit losses may ultimately prove, with the benefit of hindsight, to be incorrect.

(See Notes 1 and 5 of Notes to Condensed Consolidated Financial Statements.)

Interest Expense

For the three months ended September 30, 2022, interest expense was $1.3 million, representing a decrease of $0.2 million (14%) when compared to interest expense of $1.5 million during the same period of the prior year. This decrease is principally due to repayments of revolving credit facility borrowings made in the prior year.

Income Taxes

For the three months ended September 30, 2022, the Company recorded income tax expense of $2.3 million (2021 — $4.4 million). The Company's effective tax rate for the three months ended September 30, 2022 of (43.4)% differs from the Canadian statutory tax rate of 26.5% primarily due to the fact that the Company recorded an additional $4.3 million valuation allowance against deferred tax assets in jurisdictions where management cannot reliably forecast that sufficient future tax liabilities will arise in specific jurisdictions, which includes the impact of the COVID-19 pandemic. Accordingly, the tax benefit associated with the current period losses in these jurisdictions is not ultimately reflected in the Company's Condensed Consolidated Statements of Operations.

(See Note 12 of Notes to Condensed Consolidated Financial Statements.)

Non-Controlling Interests

The Company's Condensed Consolidated Financial Statements primarily include the non-controlling interest in the net income or loss of IMAX China, as well as the impact of non-controlling interests in the activity of its Original Film Fund subsidiary. For the three months ended September 30, 2022, the net income attributable to non-controlling interests of the Company's subsidiaries was $1.2 million (2021 — $2.0 million).

Results of Operations for the Nine Months Ended September 30, 2022 and 2021

Net Loss and Adjusted Net Loss Attributable to Common Shareholders

The following table presents the Company's net loss attributable to common shareholders and the associated per share amounts, as well as adjusted net loss attributable to common shareholders* and adjusted net loss attributable to common shareholders per share* for the nine months ended September 30, 2022 and 2021:


	Nine Months Ended September 30,
	2022						2021
(In thousands of U.S. Dollars, except per share amounts)	Net Loss			Per Diluted Share			Net Loss			Per Diluted Share
Net loss attributable to common shareholders	$	(25,413	)	$	(0.44	)	$	(32,429	)	$	(0.55	)
Adjusted net loss attributable to common shareholders*	$	(7,349	)	$	(0.13	)	$	(26,813	)	$	(0.44	)

During the nine months ended September 30, 2022, the Company recorded a net non-cash provision of $6.9 million, or $0.12 per share, due to an increase in reserves given the uncertainty of collecting receivables in Russia. This provision was taken due to the ongoing conflict in Ukraine and covers substantially all of the Company's net receivable exposure in the Russian market. Excluding the impact of this provision, net loss attributable to common shareholders* was $(18.5) million, or $(0.32) per share, and adjusted net loss attributable to common shareholders* was $(0.5) million, or $(0.01) per share. Over the past five years, Russia has represented on average approximately 3% of the GBO generated by IMAX films.

Revenues and Gross Margin

During the nine months ended September 30, 2022, the Company's revenues and gross margin increased by $56.4 million (39%) and $37.1 million (53%), respectively, when compared to same period in 2021 principally due to the strength of the GBO performance of the IMAX Technology Network through the distribution of films such as Top Gun: Maverick, Doctor Strange in the Multiverse of Madness, The Batman, Jurassic World Dominion, Thor: Love and Thunder,The Battle at Lake Changjin 2, Spider-Man: No Way Home, and Fantastic Beasts: The Secrets of Dumbledore. Also contributing to the improvement versus the prior year is a $6.3 million (41%) improvement in IMAX Maintenance gross margin due to the continued global reopening of the IMAX theater network amidst the ongoing recovery of the theatrical exhibition industry from earlier stages of the COVID-19 pandemic. However, these factors were partially offset by a lower level of IMAX Theater System installations in the period due, in part, to the impact of COVID-related restrictions in China.

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

The following table presents the Company's revenue and gross margin (margin loss) by category and reportable segment for the nine months ended September 30, 2022 and 2021:


	Revenue				Gross Margin (Margin Loss)
(In thousands of U.S. Dollars)	2022		2021		2022			2021
IMAX Technology Network
IMAX DMR	$	67,064	$	39,438	$	42,965		$	22,405
JRSA, contingent rent		43,708		26,108		25,389			7,299
		110,772		65,546		68,354			29,704
IMAX Technology Sales and Maintenance
IMAX Systems(1)		32,806		35,117		18,432			21,646
JRSA, fixed fees		2,486		3,776		79			783
IMAX Maintenance		43,564		33,196		21,643			15,360
Other Theater Business(2)		3,697		1,283		314			269
		82,553		73,372		40,468			38,058
Film Distribution and Post-Production		5,418		4,001		(3,470	)		997
Sub-total for reportable segments		198,743		142,919		105,352			68,759
All Other(3)		4,016		3,392		2,156			1,612
Total	$	202,759	$	146,311	$	107,508		$	70,371

(1)

(2)

The revenue from this segment principally includes after-market sales of IMAX Theater System parts and 3D glasses.

(3)

All Other includes the results from IMAX Enhanced, SSIMWAVE, and other ancillary activities. In the first quarter of 2022, the Company's internal reporting was updated to reclassify the results of IMAX Enhanced out of the New Business Initiatives segment into All Other for segment reporting purposes. Prior period comparatives have been revised to conform with the current period presentation. The results of SSIMWAVE, which was acquired on September 22, 2022, were not material to the period. (See "SSIMWAVE" under "Sources of Revenue - All Other" and Note 4 of Notes to Condensed Consolidated Financial Statements for additional information related to the Company's acquisition of SSIMWAVE.)

IMAX Technology Network

IMAX Technology Network results are influenced by the level of commercial success and box office performance of the films released to the IMAX network, as well as other factors including the timing of the films released, the length of the theatrical distribution window, the take rates under the Company's DMR and joint revenue sharing arrangements and the level of marketing spend associated with the films released in the year. Other factors impacting IMAX Technology Network results include fluctuations in the value of foreign currencies versus the U.S. Dollar.

For the nine months ended September 30, 2022, IMAX Technology Network revenues and gross margin increased by $45.2 million (69%) and $38.7 million (130%), respectively, when compared to the same period in 2021. See below for separate discussions of IMAX DMR and JRSA contingent rent segment results for the period.

IMAX DMR

For the nine months ended September 30, 2022, IMAX DMR revenues and gross margin increased by $27.6 million (70%) and $20.6 million (92%), respectively, when compared to the same period in 2021. These increases are primarily due to the strong performance of the films distributed through the IMAX network, which resulted in a $237.4 million (66%) increase in GBO during the nine months ended September 30, 2022, from $360.7 million to $598.1 million. This overall improvement in GBO for the period was partially offset by unfavorable foreign currency exchange rate movements. During the nine months ended September 30, 2022, GBO was generated by the exhibition of 68 films (53 new, 10 carryovers, and 5 re-releases), including Top Gun: Maverick, which generated GBO of $109.6 million in the period. During the nine months ended September 30, 2021, GBO was generated by the exhibition of 57 films (47 new, 6 carryovers, and 4 re-releases).

In addition to the level of revenues, IMAX DMR gross margin is also influenced by the costs associated with the films exhibited in the period, and can vary from period-to-period, especially with respect to marketing expenses. For the nine months ended September 30, 2022, marketing expenses were $9.1 million, as compared to $5.8 million during the same period in 2021.

Joint Revenue Sharing Arrangements – Contingent Rent

For the nine months ended September 30, 2022, JRSA contingent rent revenue and gross margin increased by $17.6 million (67%) and $18.1 million (248%), respectively, when compared to the same period in 2021. These increases are largely due to a $112.6 million (57%) increase in GBO generated by theaters under joint revenue sharing arrangements during the nine months ended September 30, 2022, from $196.8 million to $309.4 million.

In addition to the level of revenues, JRSA contingent rent margin is also influenced by the level of costs associated with such arrangements, such as depreciation expense related to the underlying theater systems and costs incurred to upgrade theater systems from IMAX Xenon Theater Systems to IMAX Laser Theater Systems, as well as advertising, marketing and commission costs primarily for the launch of new theaters. The level of depreciation expense in a period relative to the prior year is generally a function of the growth of the theater network and the mix of theater system configurations in the network. For the nine months ended September 30, 2022, JRSA gross margin included depreciation expense of $16.6 million, which was consistent with the same period of the prior year. The lower level of depreciation expense in the current period is due, in part, to the effect of lease term extensions entered into with exhibitor customers as a result of the COVID-19 global pandemic, partially offset by incremental depreciation expense associated with a 3%2% increase in the number of theaters operating under joint revenue sharing arrangements. For the ~~three~~nine months ended September 30, ~~2021,~~2022, JRSA gross margin includes advertising, marketing and commission costs of ~~$0.8~~$1.0 million, as compared to ~~$0.7~~$1.6 million in the same period ~~of the prior year.~~in 2021.

IMAX Technology Sales and Maintenance

The primary drivers of IMAX Technology Sales and Maintenance results are the number of IMAX Theater Systems installed in a ~~year,~~period, and the level of gross margin percentage earned on each installation, as well as the associated maintenance contracts that accompany each theater installation. The installation of IMAX Theater Systems in newly built theaters or multiplexes, which make up a large portion of the ~~Company’s~~Company's theater system backlog, depends primarily on the timing of the construction of those projects, which is not under the ~~Company’s~~Company's control.

~~The following table provides detailed information about~~For the ~~mix of IMAX Theater System installed and recognized during the three~~nine months ended September 30, ~~2021 and 2020:~~

For the Three Months Ended September 30,

2021

2020

(In thousands of U.S. Dollars, except number of systems)

Number of
Systems

Revenue

Number of
Systems

Revenue

New IMAX Theater Systems:

Sales and sales-type lease arrangements⁽¹⁾

6

$
7,239

9

$
9,721

Joint revenue sharing arrangements — hybrid

2

1,031

1

57

Total new IMAX Theater Systems

8

8,270

10

9,778

IMAX Theater System upgrades:

Sales and sales-type lease arrangements

1

1,316

3

4,811

Total

9

$
9,586

13

$
14,589

~~(1)~~

The average revenue per IMAX Theater System under sales and sales-type lease arrangements varies depending upon the number of IMAX Theater System commitments with a single respective exhibitor, an exhibitor’s location and various other factors. The average revenue per full (i.e., not hybrid), new IMAX Theater System under sales and sales-type lease arrangements was $1.2 million for the three months ended September 30, 2021, as compared to $1.1 million during the same period of the prior year.

~~For the three months ended September 30, 2021,~~2022, IMAX Technology Sales and Maintenance revenue and gross margin increased by ~~$4.0~~$9.2 million (13%) and ~~$5.5~~$2.4 million (6%), respectively, when compared to the same period in the prior year. See below for separate discussions of IMAX Systems and IMAX Maintenance segment results for the period.

The following table provides detailed information about the mix of IMAX Theater Systems

~~For~~ installed and recognized during the ~~three~~nine months ended September 30, ~~2021,~~2022 and 2021:


	For the Nine Months Ended September 30,
	2022				2021
(In thousands of U.S. Dollars, except number of systems)	Number of Systems		Revenue		Number of Systems		Revenue
New IMAX Theater Systems:
Sale and sales-type lease arrangements(1)		14	$	13,552		17	$	22,264
JRSA — hybrid		5		2,508		6		3,561
Total new IMAX Theater Systems(2)		19		16,060		23		25,825

IMAX Theater System upgrades:
Sale and sales-type lease arrangements(1)		3		4,452		2		2,753
JRSA — hybrid		—		—		1		775
Total upgraded IMAX Theater Systems		3		4,452		3		3,528

Total		22	$	20,512		26	$	29,353

(1)

(2)

Includes four IMAX Xenon Theater Systems that were relocated from their original location, which are subject to sales and sales-type lease arrangements (2021 — nil). When a theater system under a sales or sales-type lease arrangement is relocated, the amount of revenue earned by the Company may vary from transaction-to-transaction and is usually less than the amount earned for a new sale. In certain situations when a theater system is relocated, the original location is upgraded to an IMAX Laser Theater System.

The average revenue per IMAX Theater System under sale and sales-type lease arrangements varies depending upon the number of IMAX Theater System commitments with a single respective exhibitor, an exhibitor's location and various other factors. The average revenue per full (i.e., excluding JRSA hybrid arrangements and relocations), new IMAX Theater System under sale and sales-type lease arrangements was $1.2 million for the nine months ended September 30, 2022, as compared to $1.3 million during the same period of the prior year.

IMAX Systems

For the nine months ended September 30, 2022, IMAX Systems revenue and gross margin decreased by ~~$4.2~~$2.3 million (7%) and ~~$0.6~~$3.2 million (15%), respectively, when compared to the same period inof the prior year. The lower level of revenue and gross margin is the result of ~~five~~four fewer IMAX Theater System installations, including upgrades, in the current period ~~under sales~~ and ~~sales-type lease arrangements,~~a decrease of $0.9 million in Finance Income associated with theaters in Russia, Ukraine, and Belarus, which were placed on nonaccrual status due to the ongoing Russia-Ukraine conflict. These factors are partially offset by ~~a higher level~~an increase of ~~revenue generated by~~$5.6 million due to the impact of amendments to existing theater system ~~renewals in the current period.~~arrangements.

IMAX Maintenance

For the ~~three~~nine months ended September 30, ~~2021,~~2022, IMAX Maintenance segment revenues and gross margin increased by ~~$7.2~~$10.4 million (31%) and ~~$5.7~~$6.3 million (41%), respectively, when compared to the same period in the prior year, due to the ~~broader~~continued global reopening of the IMAX theater network ~~and~~amidst the ~~continued progress towards the resumption~~ongoing recovery of ~~normal operations as~~ the theatrical exhibition industry ~~continues to recover~~ from earlier stages of the COVID-19 ~~global~~ pandemic. The overall increase in IMAX Maintenance segment revenues and gross margin is partially offset by a decrease of $1.2 million in revenue associated with theaters in Russia, Ukraine, and Belarus, which were placed on nonaccrual status due to the ongoing Russia-Ukraine conflict.

Film Distribution and Post-Production

For the ~~three~~nine months ended September 30, ~~2021,~~2022, Film Distribution and Post-Production revenues ~~decreased~~increased by ~~$0.3~~$1.4 million (35%) while gross margin ~~increased~~decreased by ~~$6.5~~$4.5 million, respectively, when compared to the same period inof the prior year. The ~~comparison~~margin loss is primarily the result of ~~gross margin~~costs incurred to produce, market and distribute live events and documentary content during the ~~prior year period is significantly influenced by $5.4~~period. These costs include infrastructure costs, depreciation expense and network connection fees of $1.6 million ~~of impairment losses recorded in~~to operate the ~~third quarter of 2020 principally to write-down~~IMAX connected network for the ~~carrying value~~ ~~of certain documentary and alternative content film assets due to a decrease in projected box office totals and related revenues. There were no such losses recorded in the third quarter of 2021.~~nine months ended September 30, 2022.

Selling, General and Administrative Expenses

~~For~~The following table presents information about the ~~three months ended September 30, 2021, total~~Company's Selling, General and Administrative Expenses ~~increased by $3.6 million (14%), when compared to~~for the ~~same period in 2020. For the three~~nine months ended September 30, ~~2021, Selling, General~~2022 and Administrative Expenses, excluding the impact of share-based compensation of $5.7 million, were $22.7 million, as compared to $19.7 million in the same period in the prior year, excluding share-based compensation expense of $5.2 million, representing an increase of $3.0 million (15%). 2021:


	Nine Months Ended
	September 30,				Variance
(In thousands of U.S. Dollars)	2022		2021		$		%
Total selling, general and administrative expenses	$	100,181	$	82,393	$	17,788		22	%
Less: Share-based compensation(1)		17,974		17,046		928		5	%
Total selling, general and administrative expenses, excluding share-based compensation	$	82,207	$	65,347	$	16,860		26	%

(1)

A portion of share-based compensation expense is recognized within Cost and Expenses Applicable to Revenue and Research and Development. (See Note 1213 of Notes to Condensed Consolidated Financial Statements.)

~~For the three months ended September 30, 2021, the Company recognized $2.0 million~~The increase in ~~benefits from the Canada Emergency Wage Subsidy (“CEWS”) program as reductions to~~ Selling, General and Administrative Expenses ~~($1.5 million) and Costs and Expenses Applicable to Revenues ($0.5 million) in~~reflects the Condensed Consolidated Statements of Operations. For three months ended September 30, 2020, the Company recognized $2.0 million from the CEWS program as reductions to Selling, General and Administrative Expenses ($1.6 million), Costs and Expenses Applicable to Revenues ($0.3 million) and Research and Development ($0.1 million) in the Condensed Consolidated Statements of Operations. The CEWS program has been extended to October 23, 2021. The Company will continue to review for the availability of additional subsidies and credits for the remaining terms of this program, where applicable, although there are no guarantees that the Company will ultimately apply for or receive any such additional benefits.

~~The increase in third quarter Selling, General and Administrative Expenses versus the prior year is primarily the result of a higher level of staff and other costs due to a~~Company's higher level of business activity ~~during~~in the current period, as the effects of the COVID-19 pandemic ~~subside. This factor is partially offset by a~~ ~~$1.7 million (21%) increase~~continue to subside, resulting in ~~labor~~higher staff costs, marketing expenses, and other ~~costs capitalized to inventory, film assets, and joint venture theater equipment or allocated to costs applicable to revenues, due~~expenses. Also influencing the comparison to the ~~higher level~~prior period was $4.1 million resulting from unfavorable foreign currency exchange rate movements, a decrease of ~~business activity during current~~$3.9 million in COVID-19 government relief payments, and $1.0 million in professional fees incurred in the third quarter asof 2022 in connection with the ~~effects~~acquisition of ~~the COVID-19 global pandemic subside.~~SSIMWAVE.

Research and Development

A significant portion of the ~~Company’s~~Company's recent research and development efforts have been focused on its laser-based projection systems, which the Company believes ~~deliver increased resolution, sharper~~present greater brightness and ~~brighter images,~~clarity, higher contrast, a wider color gamut and deeper ~~contrast as well as~~blacks, consume less power and last longer than other digital projection technologies, and are capable of illuminating the ~~widest range of colors available to filmmakers today.~~

~~In addition,~~largest screens in the ~~third quarter of 2021,~~IMAX network. To a lesser extent, the ~~Company used time~~Company's recent research and ~~resources to work~~development efforts have also focused on ~~leveraging and~~image enhancement technology, developing technologies and systems to help bring additional interactivity to its IMAX theater ~~network, better manage certain of the Company’s internal workflows and better organize and codify certain of the Company’s data.~~network.

For the ~~three~~nine months ended September 30, ~~2021,~~2022, Research and Development expenses ~~increased~~decreased by ~~$0.9~~$2.0 million ~~(79%~~(36%), when compared to the prior year.

The Company intends to continue research and development ~~in other areas considered important~~to further evolve its end-to-end technology. This includes bringing connectivity to the ~~Company’s continued commercial success, including~~Company's global theater network and experimenting with live and interactive events worldwide; developing new IMAX film cameras and certifying additional digital cameras; further improving its proprietary DMR process for the delivery of content for both theatrical (including local language content) and home entertainment; and further improving the reliability of its projectors, certifying more IMAX cameras, enhancing the Company’s image quality, expanding the applicability of the Company’s digital technology in both theater and home entertainment and improvements to the DMR process.

~~Credit Loss (Reversal) Expense, Net~~

For the three months ended September 30, 2021, the Company recorded a net reversal of current expected credit losses of $3.3 million, principally due to the reversal of previously recorded credit loss expense as a result of an improving outlook for theater operators following the reopening of theaters and the resumption of normal film release schedules as the theatrical exhibition industry continues to recover from the COVID-19 global pandemic, as well as ~~better than anticipated collection experience with respect~~enhancing the Company's image and sound quality. In addition, teams from IMAX and SSIMWAVE are working to ~~foreign studio receivable balances~~.

~~For the three months ended September 30, 2020, the Company recorded a provision for current expected credit losses of $3.9 million~~expand existing and/or develop new technologies which ~~reflected judgments made by management regarding the potential effects of the COVID-19 global pandemic on the credit~~further enhance video quality, ~~of Company’s theater~~delivery, and ~~studio related receivable balances.~~creation across all devices.

Management’s judgments regarding expected credit losses are based on the facts available to management at the time that the Condensed Consolidated Financial Statements are prepared and involve estimates about the future. Due to the unprecedented nature of the COVID-19 pandemic, its effect on the Company’s customers and their ability to meet their financial obligations to the Company is difficult to predict. As a result, the Company’s judgments and associated estimates of credit losses may ultimately prove, with the benefit of hindsight, to be incorrect.Credit Loss Expense, Net

~~(See Notes 1 and 4 of Notes to Condensed Consolidated Financial Statements.)~~

~~Realized and Unrealized Investment Gains~~

In the first quarter of 2019, IMAX China (Hong Kong), Limited, a wholly-owned subsidiary of IMAX China, entered into a cornerstone investment agreement with Maoyan Entertainment (“Maoyan”) and purchased equity securities for $15.2 million. In February 2021, IMAX China (Hong Kong), Limited sold all of its shares of Maoyan. Prior to this sale, the Company accounted for its investment in Maoyan at fair value with any changes in fair value recorded to the Condensed Consolidated Statements of Operations. For the three months ended September 30, 2020, the fair value of the Company’s investment in Maoyan experienced an unrealized gain of $1.6 million.

~~Interest Expense~~

For the three months ended September 30, 2021, interest expense was $1.5 million, as compared to $2.4 million during the same period of the prior year. The decrease in interest expense versus the same period of the prior year is due to a lower level of indebtedness partially offset by the amortization of deferred financing costs associated with amendments to the Company’s Credit Agreement. (See Note 7 of Notes to Condensed Consolidated Financial Statements.)

~~Income Taxes~~

~~For the three months ended September 30, 2021, the Company recorded income tax expense of $4.4 million (2020 — income tax expense of $19.3 million).The~~ Company’s effective tax rate for the three months ended September 30, 2021 of (226.6)% differs from the Canadian statutory tax rate of 26.2% primarily due to the fact that the company recorded an additional $4.3 million valuation allowance against deferred tax assets in jurisdictions where management could not reliably forecast that future tax liabilities would arise, principally due to the uncertainties around the long-term impact of the COVID-19 global pandemic. Accordingly, the tax benefit associated with the current period losses in these jurisdictions is not ultimately reflected in the Company’s Condensed Consolidated Statements of Operations. Also impacting the Company’s effective tax rate for the three months ended September 30, 2021 are jurisdictional tax rate differences. ~~In the third quarter of 2021, $20.4 million of historical earnings from a subsidiary in China were repatriated and, as a result $2.0 million of foreign withholding taxes were paid in the period.~~

~~(See Note 11 of Notes to Condensed Consolidated Financial Statements.)~~

~~Non-Controlling Interests~~

The Company’s Condensed Consolidated Financial Statements primarily include the non-controlling interest in the net income (loss) of IMAX China, as well as the impact of non-controlling interests in the activity of its Original Film Fund subsidiary. For the three months ended September 30, 2021, the net income attributable to non-controlling interests of the Company’s subsidiaries was $2.0 million (2020 — net loss of $(1.3) million).

~~Results of Operations for the Nine Months Ended September 30, 2021 and 2020~~

For the nine months ended September 30, ~~2021,~~2022, the Company ~~reported a net loss attributable~~recorded current expected credit losses of $8.1 million, principally due to common shareholders of $(32.4) million, or $(0.55) per diluted share, as compared to a net loss attributable to common shareholders of $(122.5) million, or $(2.06) per diluted share, for the same period in 2020.

For the nine months ended September 30, 2021, the Company reported an adjusted net loss attributable to common shareholders* of $(26.8) million, or $(0.45) per diluted share*, as compared to an adjusted net loss attributable to common shareholders* of $(99.4) million, or $(1.67) per diluted share*, for the same period in 2020.

~~Revenues and Gross Margin~~

~~The following table presents the Company’s revenue and gross margin (margin loss) by category and reportable segment for the nine months ended September 30, 2021 and 2020:~~

Revenue

Gross Margin (Margin Loss)

(In thousands of U.S. dollars)

2021

2020

2021

2020

IMAX Technology Network

IMAX DMR

$
39,438

$
18,061

$
22,405

$
7,492

Joint Revenue Sharing Arrangements, contingent rent

26,108

10,307

7,299

(10,610
)

65,546

28,368

29,704

(3,118
)
IMAX Technology Sales and Maintenance

IMAX Systems⁽¹⁾

35,117

27,674

21,646

14,497

Joint Revenue Sharing Arrangements, fixed fees

3,776

1,196

783

110

IMAX Maintenance

33,196

13,225

15,360

(355
)
Other Theater Business⁽²⁾

1,283

1,261

269

77

73,372

43,356

38,058

14,329

New Business Initiatives

2,554

1,488

2,281

1,245

Film Distribution and Post-Production

4,001

7,541

997

(9,392
)
Sub-total

145,473

80,753

71,040

3,064

Other

838

260

(669
)

(1,837
)
Total

$
146,311

$
81,013

$
70,371

$
1,227

~~(1)~~

~~(2)~~

~~The revenue from this segment principally includes after-market sales of IMAX projection system parts and 3D glasses.~~

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

~~Due to the COVID-19 global pandemic,~~reserves established against substantially all of ~~the theaters~~its receivables in the IMAX network were closed for a significant portion of the first half of 2020, with the theaters in Greater China closed beginning in late-January and substantially all of the Company’s remaining theaters closed beginning in mid-to-late March. ~~Beginning in the third quarter of 2020, movie theaters throughout the IMAX network gradually reopened; however,~~ ~~the availability of new film content was limited.~~ ~~Since that time,~~ ~~stay-at-home orders and capacity restrictions have been lifted in almost all key markets and movie theaters throughout the IMAX network have gradually reopened. As of September 30, 2021, 93%~~ ~~of the theaters in the global IMAX commercial multiplex network were open~~ ~~at various capacities~~, spanning 70 countries. This included 100% of Domestic theaters (i.e., in the United States and Canada), 93% of the theaters in Greater China and 87% of the theaters in Rest of World markets. In addition, 47 new ~~films were released~~ ~~to the IMAX global network~~ ~~during the nine months ended September 30, 2021, as compared to 16 in the same period of 2020,~~ resulting in a $192.6 million (115%) increase in GBO receipts and corresponding increases in IMAX Technology Network revenue and gross margin of $37.2 million and $32.8 million, respectively. Also impacting the comparison to the prior year are increases of $20.0 million and $15.7 million in IMAX Maintenance revenue and gross margin, respectively,Russia due to the broader reopening of the IMAX theater network and the continued progress towards the resumption of normal operations as the theatrical exhibition industry continues to recover from the COVID-19 global pandemic. See the captioned sections below for a discussion of the Company’s segment results.

~~IMAX Technology Network~~

IMAX Technology Network results are influenced by the level of commercial success and box office performance of the films released to the network, as well as other factors including the timing of the films released, the length of the theatrical distribution window, the take rates under the Company’s DMR and joint revenue sharing arrangements and the level of marketing spend associated with the films released in the year. Other factors impacting IMAX Technology Network results include fluctuations in the value of foreign currencies versus the U.S. Dollar.

For the nine months ended September 30, 2021, IMAX Technology Network revenues and gross margin increased $37.2 million and $32.8 million, respectively, when compared to the same period in 2020. See below for separate discussions of IMAX DMR and JRSA contingent rent segment results for the period.

~~IMAX DMR~~

For the nine months ended September 30, 2021, IMAX DMR revenues and gross margin increased by $21.4 million and $14.9 million, respectively, when compared to the same period in 2020. These increases are primarily due to a $192.6 million (115%) increase in GBO receipts generated by IMAX DMR films during the nine months ended September 30, 2021, from $168.1 million to $360.7 million. During the nine months ended September 30, 2021, GBO was generated by the exhibition of 53 films (47 new and 6 carryovers) and the re-release of classic titles. During the nine months ended September 30, 2020, GBO was generated by the exhibition of 20 films (16 new and 4 carryovers) and the re-release of classic titles.

In addition to the level of revenues, IMAX DMR gross margin is also influenced by the costs associated with the films exhibited in the period, and can vary from period-to-period, particularly with respect to marketing expenses. For the nine months ended September 30, 2021, marketing expenses were $5.8 million, as compared to $2.8 million during the same period of 2020.

~~Joint Revenue Sharing Arrangements – Contingent Rent~~

For the nine months ended September 30, 2021, JRSA contingent rent revenue and gross margin increased by $15.8 million and $17.9 million, respectively, when compared to the same period in 2020. These increases are largely due to a $114.7 million (140%) increase in GBO generated by theaters under joint revenue sharing arrangements during the nine months ended September 30, 2021, from $82.1 million to $196.8 million.

In addition to the level of revenues, JRSA contingent rent margin is also influenced by the level of costs associated with such arrangements, such as depreciation expense related to the underlying theater systems and costs incurred to upgrade theater systems from digital xenon to IMAX with Laser, as well as advertising, marketing, and commission costs primarily for the launch of new theaters. The level of depreciation expense in a period relative to the prior year is a function of the growth of the theater network and the mix of theater system configurations in the network. For the nine months ended September 30, 2021, JRSA gross margin included depreciation expense of $16.8 million, which represents a $2.5 million decrease when compared to the same period of the prior year. The lower level of depreciation expense in the current period is due, in part, to the effect of lease term extensions entered into with exhibitor customers as a result of the COVID-19 global pandemic, partially offset by incremental depreciation expense associated with a 3% increase in the number of theaters operating under joint revenue sharing arrangements. For the nine months ended September 30, 2021, JRSA gross margin includes advertising, marketing, and commission costs of $1.9 million, as compared to $1.3 million in the same period of the prior year.

~~IMAX Technology Sales and Maintenance~~

The primary drivers of IMAX Technology Sales and Maintenance results are the number of IMAX Theater Systems installed in a year, and the level of gross margin percentage earned on each installation, as well as the associated maintenance contracts that accompany each theater installation. The installation of IMAX Theater Systems in newly built theaters or multiplexes, which make up a large portion of the Company’s theater system backlog, depends primarily on the timing of the construction of those projects, which is not under the Company’s control.

~~The following table provides detailed information about the mix of IMAX Theater System installed and recognized during the nine months ended September 30, 2021 and 2020:~~

For the Nine Months Ended September 30,

2021

2020

(In thousands of U.S. Dollars, except number of systems)

Number of
Systems

Revenue

Number of
Systems

Revenue

New IMAX Theater Systems:

Sales and sales-type lease arrangements⁽¹⁾

17

$
22,264

13

$
13,452

Joint revenue sharing arrangements — hybrid

6

3,561

3

1,183

Total new IMAX Theater Systems

23

25,825

16

14,635

IMAX Theater System upgrades:

Joint revenue sharing arrangements — hybrid

1

775

—

—

Sales and sales-type lease arrangements

2

2,753

3

4,811

Total upgraded IMAX Theater Systems

3

3,528

3

4,811

Total

26

$
29,353

19

$
19,446

~~(1)~~

The average revenue per IMAX Theater System under sales and sales-type lease arrangements varies depending upon the number of IMAX Theater System commitments with a single respective exhibitor, an exhibitor’s location and various other factors. The average revenue per full (i.e., not hybrid), new IMAX Theater System under sales and sales-type lease arrangements was $1.3 million for the nine months ended September 30, 2021, as compared to $1.0 million during the same period of the prior year.

For the nine months ended September 30, 2021, IMAX Technology Sales and Maintenance revenue and gross margin increased by $30.0 million and $23.7 million, respectively, when compared to the same period of the prior year. See below for separate discussions of IMAX Systems and IMAX Maintenance segment results for the period.

~~IMAX Systems~~

For the nine months ended September 30, 2021, IMAX Systems revenue and gross margin increased $7.4 million and $7.1 million, respectively, when compared to the same period of the prior year. The higher level of revenue and gross margin is the result of three additional IMAX Theater System installations under sales and sales-type lease arrangements in the current period due to an increased pace of theater system installations as the effects of the COVID-19 pandemic subside, as well as by a higher level of revenue generated by theater system renewals in the current period.

~~IMAX Maintenance~~

For the nine months ended September 30, 2021, IMAX Maintenance segment revenues and gross margin increased by $20.0 million and $15.7 million, respectively, when compared to the same period of the prior year, due to the broader reopening of the IMAX theater network and the continued progress towards the resumption of normal operations as the theatrical exhibition industry continues to recover from the COVID-19 global pandemic.

~~Film Distribution and Post-Production~~

For the nine months ended September 30, 2021, Film Distribution and Post-Production revenues decreased by $3.5 million and gross margin increased by $10.4 million, when compared to the same period of the prior year. The comparison of gross margin to the prior year period is significantly influenced by $9.9 million of impairment losses recorded during the nine months ended September 30, 2020 principally to write-down the carrying value of certain documentary and alternative content film assets due to a decrease in projected box office totals and related revenues. There were no such losses recorded during the nine months ended September 30, 2021.

~~Selling, General and Administrative Expenses~~

For the nine months ended September 30, 2021, total Selling, General and Administrative Expenses decreased by $0.9 million (1%), when compared to the same period in 2020. For the nine months ended September 30, 2021, Selling, General and Administrative Expenses, excluding the impact of share-based compensation of $17.1 million, were $65.3 million, as compared to $67.9 million in the same period of the prior year, excluding share-based compensation expense of $15.3 million, representing a decrease of $2.6 million (4%). A portion of share-based compensation expense is recognized within Cost and Expenses Applicable to Revenue and Research and Development. (See Note 12 of Notes to Condensed Consolidated Financial Statements.)

For the nine months ended September 30, 2021, the Company recognized $5.5 million in benefits from CEWS program as reductions to Selling, General and Administrative Expenses ($4.1 million) and Costs and Expenses Applicable to Revenues ($1.4 million) in the Condensed Consolidated Statements of Operations. For the nine months ended September 30, 2020, the Company recognized $5.2 million from the CEWS program ~~and the U.S. CARES Act~~ as reductions to Selling, General and Administrative Expenses ($4.5 million), Costs and Expenses Applicable to Revenues ($0.6 million) and Research and Development Expense ($0.1 million) in the Condensed Consolidated Statements of Operations. The CEWS program has been extended to October 2021. The Company will continue to review for the availability of additional subsidies and credits for the remaining terms of these programs, where applicable, although there are no guarantees that the Company will ultimately apply for or receive any such additional benefits.

~~The decrease in September year-to-date Selling, General and Administrative Expenses versus the prior year is due, in part, to management’s cost control efforts~~ ~~and a lower level of business activity in the first half of 2021 amidst the COVID-19 global pandemic, resulting in lower staff costs, travel, and facilities related expenses, among others. Also contributing to the lower level of current period Selling, General and Administrative Expenses is a~~ $2.0 million (8%) increase in labor and other costs capitalized to inventory, film assets, and joint venture theater equipment or allocated to costs applicable to revenues, due to the higher level of business activity during the current period as the effects of the COVID-19 global pandemic subside.

~~In response~~ to uncertainties associated with the ongoing Russia-Ukraine conflict, partially offset by the reversal of provisions associated with the COVID-19 ~~global~~ pandemic ~~management is continuing to take steps to preserve the Company’s cash and liquidity by closely monitoring and controlling operating expenses and capital expenditures.~~

~~Research and Development~~

A significant portion of the Company’s recent research and development efforts have been focused on IMAX with Laser, the Company’s laser-based projection systems, which the Company believes deliver increased resolution, sharper and brighter images, deeper contrast as well as the ~~widest range~~outlook for the theatrical exhibition industry in Domestic and Rest of ~~colors available~~World markets continues to ~~filmmakers today. To a lesser extent, the Company’s recent research and development efforts have also focused on image enhancement technology.~~

In addition, during the nine months ended September 30, 2021, the Company used time and resources to work on leveraging and developing technologies and systems to help bring additional interactivity to its theater network, better manage certain of the Company’s internal workflows and better organize and codify certain of the Company’s data.

~~For the nine months ended September 30, 2021, Research and Development expenses increased by $1.1 million (25%), when compared to the prior year.~~

The Company 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 applicability of the Company’s digital technology in both theater and home entertainment and improvements to the DMR process.

~~Credit Loss (Reversal) Expense, Net~~improve.

For the nine months ended September 30, 2021, the Company recorded a net reversal of current expected credit losses of $4.9 million, principally due to the reversal of previously recorded credit loss expense as a result of an improving outlook for theater operators following the reopening of theaters and the resumption of normal film release schedules as the theatrical exhibition industry continues to recover from the COVID-19 global pandemic, as well as better than anticipated collection experience with respect to foreign studio receivable ~~balances~~balances..

Asset Impairment

On January 10, 2022, IMAX (Shanghai) Culture and Technology Co., Ltd, a wholly-owned subsidiary of IMAX China, entered into a joint film investment agreement with Wanda Film (Horgos) Co. Ltd. to invest RMB 30.0 million ($4.7 million) in the movie Mozart from Space, which was released on July 15, 2022. Pursuant to the investment agreement, IMAX (Shanghai) Culture and Technology Co., Ltd. has the right to receive a share of the profits or losses of the film distribution. IMAX (Shanghai) Culture and Technology Co., Ltd.'s commitment is limited to its investment and has no further obligation if the actual movie production cost exceeds the original budget. The investment meets the criteria for classification as a financial asset. The investment is measured at amortized cost less impairment losses and is recorded within Other Assets in the Condensed Consolidated Balance Sheets.

For the nine months ended September 30, ~~2020,~~2022, the Company recorded a ~~provision for current expected credit losses~~full impairment of ~~$15.6~~its RMB 30.0 million ~~which reflected judgments made by management regarding the potential effects of the COVID-19 global pandemic on the credit quality of Company’s theater and studio related receivable balances.~~

~~Management’s judgments regarding expected credit losses are~~($4.5 million) investment in Mozart from Space based on ~~the facts available to management at the time that the Condensed Consolidated Financial Statements are prepared~~projected box office results and involve estimates about the future. Due to the unprecedented nature of the COVID-19 pandemic, its effect on the Company’s customers and their ability to meet their financial obligations to the Company is difficult to predict. As a result, the Company’s judgments and associated estimates of credit losses may ultimately prove, with the benefit of hindsight, to be incorrect.distribution costs.

~~(See Notes 1 and 4 of Notes to Condensed Consolidated Financial Statements.)~~

~~Asset Impairments~~

For the nine months ended September 30, 2020, the Company recorded asset impairments of $1.2 million principally related to the write-down of content-related assets which became impaired in the period. There were no such impairments recorded during the nine months ended September 30, 2021.

Legal Judgment and Arbitration Awards

In the nine months ended September 30, 2021, the Company recorded a $1.8 million benefit within Legal Judgment and Arbitration Awards as a result of the settlement of the Giencourt matter, as discussed in Note ~~8(b)~~9(b)(ii) of Notes to Condensed Consolidated Financial Statements. There was no comparable amount recorded during ~~the same period of the prior year.~~2022.

Realized and Unrealized Investment Gains ~~(Losses)~~

In the first quarter of 2019, IMAX China (Hong Kong), Limited, a wholly-owned subsidiary of IMAX China, entered into a cornerstone investment agreement with Maoyan Entertainment ~~(“Maoyan”~~("Maoyan") and purchased equity securities for $15.2 million. In February 2021, IMAX China (Hong Kong), Limited sold all of its ~~7,949,000~~ shares of Maoyan ~~for gross proceeds~~and recognized a gain of ~~$17.8 million, which represents a $2.6 million gain relative to the Company’s acquisition cost and a~~ $5.2 million gain compared to the fair value of the investment as of December 31, 2020. Prior to this sale, the Company accounted for its investment in Maoyan at fair value with any changes in fair value recorded to the Condensed Consolidated Statements of Operations. million.

Interest Expense

For the nine months ended September 30, ~~2020,~~ ~~the fair value of the Company’s investment in Maoyan experienced an~~ ~~unrealized loss of $(0.9) million.~~

~~Interest Expense~~

~~For the nine months ended September 30, 2021,~~2022, interest expense was ~~$5.5~~$4.4 million, representing a decrease of $1.2 million (21%) as compared to ~~$4.6~~$5.5 million during the same period of the prior year. ~~The increase~~This decrease is principally due to repayments of revolving credit facility borrowings made in ~~interest expense versus the same period of~~ the prior year, ~~is due to~~partially offset by the ~~amortization~~expensing of $0.4 million in unamortized deferred financing costs associated with ~~amendments~~lenders that are no longer parties to the ~~Company’s~~ Credit ~~Agreement and the issuance of the Convertible Notes.~~Agreement. (See Note 78 of Notes to Condensed Consolidated Financial Statements.)

Income Taxes

For the nine months ended September 30, ~~2021,~~2022, the Company recorded income tax expense of $8.1 million (2021 — $9.4 ~~million (2020 — $24.6~~ million).The ~~Company’s~~Company's effective tax rate for the nine months ended September 30, ~~2021~~2022 of ~~(69.5)~~(51.0)% differs from the Canadian statutory tax rate of ~~26.2%~~26.5% primarily due to the fact that the Company recorded an additional ~~$14.2~~$14.7 million valuation allowance against deferred tax assets in jurisdictions where management ~~could not~~cannot reliably forecast that sufficient future tax liabilities ~~would~~will arise ~~principally due to~~in specific jurisdictions, which includes the ~~uncertainties around the long-term~~ impact of the COVID-19 ~~global~~ pandemic. Accordingly, the tax benefit associated with the current period losses in these jurisdictions is not ultimately reflected in the ~~Company’s~~Company's Condensed Consolidated Statements of Operations. Also impacting the Company’s effective tax rate for the nine months ended September 30, 2021 are jurisdictional tax rate differences, including a difference related to the gain on the sale of the Maoyan investment (see “Realized and Unrealized Investment Gains (Losses)” above) and a change in the estimated contingent liabilities related to the potential resolution of various tax examinations.

In the first quarter of 2020, management completed a reassessment of its strategy with respect to the most efficient means of deploying the Company’s capital resources globally. Based on the results of this reassessment, management concluded that the historical earnings of certain foreign subsidiaries in excess of amounts required to sustain business operations would no longer be indefinitely reinvested. As a result, the Company recognized a deferred tax liability of $19.7 million in the first quarter of 2020 for the estimated applicable foreign withholding taxes associated with these historical earnings, which will become payable upon the repatriation of any such earnings. The estimate of the applicable foreign withholding taxes was reduced by $1.0 million, principally in the second quarter of 2020, to $18.7 million due to a reduction in the amount of distributable historical earnings. In the first quarter of 2021, the applicable foreign withholding taxes was increased by $0.5 million due to an increase in the amount of distributable historical earnings. In the third quarter of 2021, $20.4 million of historical earnings from a subsidiary in China were repatriated and, as a result, $2.0 million of foreign withholding taxes were paid in the period.

(See Note 1112 of Notes to Condensed Consolidated Financial Statements.)

Non-Controlling Interests

The ~~Company’s~~Company's Condensed Consolidated Financial Statements primarily include the non-controlling interest in the net income ~~(loss)~~or loss of IMAX China, as well as the impact of non-controlling interests in the activity of its Original Film Fund subsidiary. For the nine months ended September 30, ~~2021,~~2022, the net income attributable to non-controlling interests of the ~~Company’s~~Company's subsidiaries was $1.5 million (2021 — $9.5 ~~million (2020 — net loss of $(15.4)~~ million).

CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, ~~2021~~2022 AND ~~2020~~2021

Operating Activities

The net cash used in or provided by the ~~Company’s~~Company's operating activities is affected by a number of factors, including: (i) the level of cash collections from customers in respect of existing IMAX Theater System sale and lease agreements, (ii) the amount of upfront payments collected in respect of IMAX Theater System sale and lease agreements in backlog, (iii) the box-office performance of films distributed by the Company and/or released to IMAX theaters, (iv) the level of inventory purchases, and (v) the level of the ~~Company’s~~Company's operating expenses, including expenses for research and development and new business initiatives.

For the nine months ended September 30, ~~2021,~~2022, net cash ~~used in~~provided by the ~~Company’s~~Company's operating activities totaled ~~$19.6~~$0.5 million, as compared to net cash used in operating activities of ~~$30.8~~$19.6 million in the same period of the prior year. For the nine months ended September 30, 2022, the net cash provided by the Company's operating activities is principally due to cash collected from cash earnings in the period, as well as in respect of Financing and Variable Consideration Receivables, partially offset by an increase in Accounts Receivable of $18.1 million as a result of revenue growth attributable to the strength of the box office performance of the films distributed through the IMAX network, $10.1 million spent on inventory purchases, and $14.2 million spent in connection with the development of Film Assets.

For the nine months ended September 30, 2021, the net cash used in the ~~Company’s~~Company's operating activities iswas principally due to ana significant increase in Accounts Receivable of $24.3 million as a result of ~~revenue growth attributable to the~~theaters reopening ~~of theaters~~ amidst the early stages of recovery from the COVID-19 ~~global pandemic. To a lesser extent, the net cash used in the Company’s operating activities is due to~~pandemic, $10.0 million spent in connection with the development of Film Assets, as well as ~~reductions in Accounts Payable and Accrued and Other Liabilities, including~~ a $9.5 million payment made in the second quarter of 2021 in connection with the settlement of the Giencourt matter,, as discussed in Note ~~8(b)~~9(b)(ii) of Notes to Condensed Consolidated Financial ~~Statements~~Statements..

Investing Activities

For the nine months ended September 30, ~~2020,~~ ~~the~~2022, net cash ~~outflow from operating~~used in investing activities ~~was principally due~~totaled $40.4 million, as compared to the significant decrease in the Company’s revenue and earnings as a result of the COVID-19 global pandemic. In addition, the Company experienced a slowdown in manufacturing, shipments and installation of IMAX Theater Systems at customer sites, resulting in an increase in Inventories. These cash outflows were partially offset by a ~~$30.4 million~~ ~~decrease in Accounts Receivable.~~

~~Investing Activities~~

~~For the nine months ended September 30, 2021,~~ net cash provided by investing activities ~~totaled~~of $6.7 million ~~as compared to net cash used in investing activities of~~ ~~$7.6 million~~ in the same period of the prior year. For the nine months ended September 30, 2022, the net cash used in investing activities is primarily driven by $12.6 million paid for the acquisition of SSIMWAVE, net of cash and cash equivalents acquired, $14.5 million invested in equipment to be used in the Company's joint revenue sharing arrangements with exhibitors (2021 — $5.4 million), $4.7 million invested by IMAX (Shanghai) Culture and Technology Co., Ltd, a wholly-owned subsidiary of IMAX China, in the movie Mozart from Space (see "Asset Impairment" above), $5.2 million in purchases of property, plant and equipment, and $3.2 million of intangible assets acquired, principally related to the purchase or development of software (2021 — $3.4 million).

For the nine months ended September 30, 2021, the net cash provided by investing activities iswas primarily driven by $17.8 million in cash proceeds received from the sale of the ~~Company’s~~Company's investment in Maoyan in the first quarter of 2021 (see ~~“Management’s~~"Management's Discussion and Analysis of Financial Condition and Results of Operations – Realized and Unrealized Investment ~~Gains (Losses)~~”Gains"). ~~This cash inflow is partially offset by $5.4 million invested in equipment to be used in the Company’s joint revenue sharing arrangements with exhibitors (2020~~ ~~— $5.3 million), $3.4 million of intangible assets acquired, principally related to the purchase or development of software (2020~~

~~— $1.7 million), and $2.4 million for the purchase of property, plant and equipment (2020~~ ~~— $0.7 million)~~. Based on ~~management’s~~management's current operating plan for ~~2021,~~2022, the Company expects to continue to use cash to deploy additional IMAX Theater Systems under joint revenue sharing arrangements.

Capital expenditures, including the ~~Company’s~~Company's investment in joint revenue sharing ~~equipment,~~arrangements, the purchase of property, plant and equipment, the acquisition of other intangible assets, and investments in ~~film assets~~films, were $41.9 million for the nine months ended September 30, 2022, as compared to $21.1 million for the nine months ended September 30, ~~2021, as compared to $13.8 million for the nine months ended September 30, 2020.~~2021.

Financing Activities

For the nine months ended September 30, ~~2021,~~2022, net cash used in financing activities totaled ~~$110.5~~$64.6 million, as compared to ~~$233.5~~$110.5 million ~~provided by~~used in financing activities in the same period of the prior year. For the nine months ended September 30, ~~2021,~~2022, the net cash used in financing activities is principally due to $56.6 million used to repurchase common shares of the Company ($53.6 million) and IMAX China ($3.0 million), $3.4 million paid to purchase treasury stock for the settlement of restricted share units and related taxes, $2.7 million of dividends paid to the non-controlling interests of IMAX China, and $2.3 million in fees paid in relation to the Sixth Amended and Restated Credit Agreement entered into by the Company during the first quarter of 2022. (See Note 8 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 for additional information on the Sixth Amended and Restated Credit Agreement.)

For the nine months ended September 30, 2021, net cash used in financing activities was principally due to the $296.6 million in ~~net~~ repayments of revolving credit facility borrowings, which were funded in part with a portion of the $223.7 million in net proceeds received from the issuance of the Convertible Notes, ~~(as defined in “Liquidity~~ and ~~Capital Resources”). The net cash used in financing activities for the current period is also the result of~~ the $19.1 million purchase of capped calls related to the Convertible ~~Notes, as well as $9.6 million used to repurchase common shares of the Company ($4.6 million) and IMAX China Holding, Inc. ($5.0 million).~~Notes. (See Note 78 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 for additional information on the issuance of the Convertible Notes and the related capped call transactions.)

~~For the nine months ended September 30, 2020, net cash provided by financing activities~~ ~~totaled~~ $233.5 million and was principally due to $280.2 million in Credit Facility borrowings drawn in the period, partially offset by $36.6 million paid to repurchase common shares under the Company’s share repurchase program.

LIQUIDITY AND CAPITAL RESOURCES

~~Credit Agreement~~

The Company has a credit agreement, the Fifth Amended and Restated Credit Agreement, with Wells Fargo Bank, National Association (“Wells Fargo”), as agent, and a syndicate of lenders party thereto (the “Credit Agreement”). The Company’s obligations under the Credit Agreement are guaranteed by certain of its subsidiaries (the “Guarantors”) and are secured by first-priority security interests in substantially all the assets of the Company and the Guarantors. The facility provided by the Credit Agreement (the “Credit Facility”) matures on June 28, 2023.

The Credit Agreement has a revolving borrowing capacity of $300.0 million, and contains an uncommitted accordion feature allowing the Company to further expand its borrowing capacity to $440.0 million or greater, subject to certain conditions, depending on the mix of revolving and term loans comprising the incremental facility.

In the first quarter of 2020, in response to uncertainties associated with the outbreak of the COVID-19 global pandemic and its impact on the Company’s business, the Company drew down $280.0 million in available borrowing capacity under the Credit Facility, resulting in total outstanding borrowings of $300.0 million, which remained outstanding as of December 31, 2020. During the first half of 2021, the Company completely repaid the $300.0 million of Credit Facility borrowings, using cash on hand following the issuance of the Convertible Notes (as discussed below). Accordingly, as of September 30, 2021, there were no outstanding borrowings under the Credit Facility. As of September 30, ~~2021 and December 31, 2020,~~2022, the ~~Company did not have any letters of credit or advance payment guarantees outstanding under the Credit Facility.~~

The Credit Agreement contains a covenant that requires the Company to maintain a Senior Secured Net Leverage Ratio (as defined in the Credit Agreement), as of the last 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 affirmative and negative covenants, including covenants that limit indebtedness, liens, capital expenditures, asset sales, investments and restricted payments, in each case subject to negotiated exceptions and baskets. The Credit Agreement also contains customary representations, warranties and event of default provisions.

On March 15, 2021, the Company entered into the Second Amendment to the Credit Agreement (as previously amended by the First Amendment to the Credit Agreement, dated as of June 10, 2020) (collectively, the “First and Second Amendments”). On July 28, 2021, the Company entered into the Third Amendment to the Credit Agreement (as previously amended by the First and Second Amendments) (collectively, the “Amendments”). The Amendments, among other things, (i) suspend the Senior Secured Net Leverage Ratio covenant through the first quarter of 2022, (ii) re-establish the Senior Secured Net Leverage Ratio covenant thereafter, provided that for subsequent quarters that such covenant is tested, as applicable, the Company will be permitted to use its quarterly EBITDA (as defined in the Credit Agreement) from the third and fourth quarters of 2019 in lieu of EBITDA for the corresponding quarters of 2021, (iii) add a $75.0 million minimum liquidity covenant measured at the end of each calendar month, (iv) restrict the Company’s ability to make certain restricted payments, dispositions and investments, create or assume liens and incur debt that would otherwise have been permitted by the Credit Agreement, (v) permit the issuance of the Convertible Notes (as discussed below) and related transactions, including the capped call transactions, or other unsecured debt, in an amount not to exceed $290.0 million, (vi) allow $30.0 million in permitted repurchases of the Company’s common shares, subject to a $300.0 million pro forma minimum liquidity covenant and (vii) increase permitted repurchases of the common shares of IMAX China Holding, Inc. from $5.0 million to $20.0 million, subject to pro forma compliance with the existing financial covenants set forth in the Credit Agreement. The modifications to the negative covenants, the minimum liquidity covenant, permitted share repurchases and modifications to certain other provisions in the Credit Agreement pursuant to the Amendments are effective until the earlier of the delivery of the compliance certificate for the fourth quarter of 2022 or the date on which the Company, in its sole discretion, elects to calculate its compliance with the Senior Secured Net Leverage Ratio by using either its actual EBITDA or annualized EBITDA (the “Designated Period”). As of September 30, 2021, the Company was in compliance with all of its requirements under the Credit Agreement, as amended.

Borrowings under the Credit Facility bear 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 from 0.25% to 1.00% per annum, in each case depending on the Company’s Total Leverage Ratio (as defined in the Credit Agreement); provided, however, that from the effective date of the First Amendment to the Credit Agreement until the Company delivers a compliance certificate under the Credit Facility following the end of the Designated Period, the applicable margin for LIBOR borrowings will be 2.50% per annum and the applicable margin for U.S. base rate borrowings will be 1.75% per annum. The effective interest rate for the three and nine months ended September 30, 2021 was nil and 2.64%, respectively (2020 ― 2.70% and 2.24%, respectively).

In addition, the Credit Facility has standby fees ranging from 0.25% to 0.38% per annum, based on the Company’s Total Leverage Ratio with respect to the unused portion of the Credit Facility; provided, however, that from the effective date of the First Amendment to the Credit Agreement until the Company delivers a compliance certificate under the Credit Facility following the end of the Designated Period, the standby fee will be 0.50% per annum.

~~The Company incurred fees of approximately $1.6 million in connection with the Amendments, which are being amortized on a straight-line basis to Interest Expense over the relevant amendment periods.~~

~~Working Capital Facility~~

On July 1, 2021, IMAX (Shanghai) Multimedia Technology Co., Ltd. (“IMAX Shanghai”), one of the Company’s majority-owned subsidiaries in China, renewed its unsecured revolving facility for up to 200.0 million Chinese Renminbi (“RMB”) (approximately $30.8 million) to fund ongoing working capital requirements (the “Working Capital Facility”). The Working Capital Facility expires in July 2022.

As of September 30, 2021, outstanding Working Capital Facility borrowings were RMB 71.2 million ($11.0 million) and outstanding letters of guarantee were RMB 0.3 million (less than $0.1 million). As of December 31, 2020, outstanding Working Capital Facility borrowings were RMB 49.9 million ($7.6 million) and no letters of guarantee were issued. As of September 30, 2021, the amount available for future borrowings under the Working Capital Facility was RMB 118.8 million ($18.3 million) and the amount available for letters of guarantee was RMB 9.7 million ($1.5 million). The amount available for future borrowings under the Working Capital Facility is not subject to a standby fee. The effective interest rate for borrowings under the Working Capital Facility for the three and nine months ended September 30, 2021 was 4.29% and 4.32%, respectively (2020 ― 4.35%, respectively).

~~Wells Fargo Foreign Exchange Facility~~

Within the Credit Facility, the Company is able to enter into foreign currency forward contracts and/or other swap arrangements. As of September 30, 2021, the net unrealized loss on the Company’s outstanding foreign currency forward contracts was $(0.3) million, representing the amount by which the notional value of these forward contracts exceeded their fair value (December 31, 2020 ― $2.0 million). As of September 30, 2021, the notional value of the Company’s outstanding foreign currency forward contracts was $25.8 million (December 31, 2020 ― $31.9 million).

~~NBC Facility~~

On October 28, 2019, the Company entered into a $5.0 million facility with the National Bank of Canada (the “NBC Facility”) fully insured by Export Development Canada for use solely in conjunction with the issuance of performance guarantees and letters of credit. The NBC Facility is renewed on an annual basis. It was renewed on October 15, 2021 for a one-year term on the same terms and conditions. The Company did not have any letters of credit or advance payment guarantees outstanding as of September 30, 2021 and December 31, 2020 under the NBC Facility.

~~Convertible Notes~~

On March 19, 2021, the Company issued $230.0 million of 0.500% Convertible Senior Notes due 2026 (the “Convertible Notes”) in a private placement conducted pursuant to Rule 144A under the Securities Act of 1933, as amended. The net proceeds from the issuance of the Convertible Notes were $223.7 million, after deducting the initial purchasers’ discounts and commissions. In addition, the Company paid $1.2 million of debt issuance costs associated with the Convertible Notes. The Company used a portion of the net proceeds from the issuance of the Convertible Notes to make a partial repayment of outstanding Credit Facility borrowings (as discussed above), and is using the remainder for working capital or other general corporate purposes.

The Convertible Notes are senior unsecured obligations of the Company and bear interest at a rate of 0.500% per annum on the principal thereof, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2021. The Convertible Notes will mature on April 1, 2026, unless they are redeemed or repurchased by the Company or converted on an earlier date.

Holders of the Convertible Notes have the right to convert their Convertible Notes in certain circumstances and during specified periods. Before January 1, 2026, holders of the Convertible Notes have the right to convert their Convertible Notes only upon the occurrence of certain events. From and after January 1, 2026, holders of the Convertible Notes may convert their Convertible Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. Upon conversion, the Company will pay or deliver, as applicable, cash or a combination of cash (in an amount no less than the principal amount of the Convertible Notes being converted) and common shares, at its election, based on the applicable conversion rates. The initial conversion rate is 34.7766 common shares per $1,000 principal amount of Convertible Notes, which represents an initial conversion price of approximately $28.75 per common share, and is subject to adjustment upon the occurrence of certain events.

The Convertible Notes are redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after April 6, 2024 and on or before the 40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for a specified period of time. In addition, calling any Convertible Notes for redemption will constitute a “make-whole fundamental change” with respect to such notes, in which case the conversion rate applicable to the conversion of such notes will be increased in certain circumstances if such notes are converted after they are called for redemption.

~~In addition, upon the occurrence of a “fundamental change” (as defined~~ ~~below~~), holders may require the Company to repurchase their Convertible Notes at a cash repurchase price equal to the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest, if any. Subject to the terms and conditions of the indenture governing the Convertible Notes, a “fundamental change” means, among other things, an event resulting in (i) a change of control, (ii) a transfer of all or substantially all of the assets of the Company, (iii) a merger, (iv) liquidation or dissolution of the Company, or (v) delisting of the Company’s common shares from a national securities exchange.

On January 1, 2021, the Company elected to early adopt ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for convertible debt that may be settled in cash. As a result, the Company recorded the Convertible Notes entirely as a liability in the Condensed Consolidated Balance Sheets, net of initial purchasers’ discounts and commissions and other debt issuance costs, with interest expense reflecting the cash coupon plus the amortization of the discounts and capitalized costs. Additionally, ASU 2020-06 modifies the treatment of convertible debt securities that may be settled in cash or shares by requiring the use of the “if-converted” method. Under the “if-converted” method, because the principal amount of the Convertible Notes is settled in cash and the conversion spread is settleable in the Company’s common shares, diluted earnings per share is calculated by including the net number of incremental shares that would be issued upon conversion of the Convertible Notes, using the average market price during the period. Accordingly, the application of the “if-converted” method may reduce the Company’s reported diluted earnings per share.

In connection with the pricing of the Convertible Notes, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain financial institutions. The Capped Call Transactions are expected to reduce potential dilution resulting from the common shares the Company is required to issue and/or to offset any potential cash payments the Company is required to make in excess of the principal amount of the Convertible Notes in the event that the market price per share of the Company’s common shares is greater than the strike price of the Capped Call Transactions with such reduction and/or offset subject to a cap. The Capped Call Transactions have an initial cap price of $37.2750 per share of the Company’s common shares, which represents a premium of 75% over the last reported sale price of the common shares on March 16, 2021, and is subject to certain adjustments under the terms of the Capped Call Transactions. Collectively, the Capped Call Transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes, the number of the Company’s common shares underlying the Convertible Notes. The cost of the Capped Call Transactions was approximately $19.1 million.

The Capped Call Transactions are separate transactions, and are not part of the terms of the Convertible Notes and will not affect any holder’s rights under the Convertible Notes. Holders of the Convertible Notes will not have any rights with respect to the Capped Call Transactions.

The Capped Call Transactions meet all of the applicable criteria for equity classification in accordance with ASC 815-10-15-74(a), “Derivatives and Hedging—Embedded Derivatives—Certain Contracts Involving an Entity’s Own Equity,” and, as a result, the related $19.1 million cost was recorded as a reduction to Other Equity within Shareholders’ Equity on the Company’s Condensed Consolidated Statements of Shareholder’s Equity and Condensed Consolidated Balance Sheets.

~~Assessment of Liquidity and Capital Requirements~~

~~As of September 30, 2021, the Company’s~~Company's principal sources of liquidity included: (i) its balances of cash and cash equivalents ($~~193.0~~87.2 million); (ii) the anticipated collection of trade accounts receivable, which includes amounts owed under joint revenue sharing arrangements and DMR agreements with movie studios; (iii) the anticipated collection of financing receivables due in the next 12 ~~months;~~months under sale and sales-type lease arrangements for theaters currently in operation; and (iv) installment payments expected in the next 12 months ~~on its existing sales and sales~~under sale and sales-type lease arrangements in backlog. Under the terms of the Company's typical sale and sales-type lease agreements, the Company receives substantial cash payments before it completes the performance of its contractual obligations.

In addition, as of September 30, ~~2021,~~2022, the Company had $300.0 million in available borrowing capacity under ~~the~~its Sixth Amended and Restated Credit ~~Facility and $18.3~~Agreement with Wells Fargo Bank, National Association (the "Credit Agreement"), $26.4 million in available borrowing capacity under the ~~Working Capital~~IMAX (Shanghai) Multimedia Technology Co., Ltd. ("IMAX Shanghai") revolving credit facility with the Bank of China (the "Bank of China Facility"), and $23.8 million in available borrowing capacity under IMAX Shanghai's revolving credit facility with HSBC Bank (China) Company Limited, Shanghai Branch (the "HSBC China Facility"). (See Note 8 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 for a description of the material terms of the Credit Agreement, the Bank of China Facility, ~~as described above.~~ and the HSBC China Facility.)

The ~~Company’s $193.0~~Company's $87.2 million balance of cash and cash equivalents as of September 30, 2022 (December 31, 2021 — $189.7 million) includes ~~$101.0~~$65.5 million in cash held outside of Canada (December 31, ~~2020~~2021 — ~~$89.9~~$102.1 million), of which ~~$70.3~~$27.9 million was held in the ~~People’s~~People's Republic of China (the ~~“PRC”~~"PRC") (December 31, ~~2020~~2021 — ~~$77.2~~$76.3 million). In ~~the first quarter of~~ 2020, management completed a reassessment of its strategy with respect to the most efficient means of deploying the ~~Company’s~~Company's capital resources globally. Based on the results of this reassessment, management concluded that the historical earnings of certain foreign subsidiaries in excess of amounts required to sustain business operations would no longer be indefinitely reinvested. As of September 30, 2021, the Company’s Condensed Consolidated Balance Sheets include a deferred tax liability of $17.6 million for the applicable foreign withholding taxes associated with these historical earnings, which will become payable upon the repatriation of any such earnings.In ~~the third quarter of~~ 2021, $20.4 million of historical earnings from a subsidiary in China were ~~repatriated~~distributed and, as a result, $2.0 million of foreign withholding taxes were paid to the relevant tax authorities. During the three months ended September 30, 2022, $27.7 million of historical earnings from a subsidiary in China were distributed and, as a result, $2.7 million of foreign withholding taxes were paid to the ~~period.~~relevant tax authorities. As of September 30, 2022, the Company's Condensed Consolidated Balance Sheets include a deferred tax liability of $14.9 million for the applicable foreign withholding taxes associated with the remaining balance of unrepatriated historical earnings that will not be indefinitely reinvested outside of Canada. These taxes will become payable upon the repatriation of any such earnings.

The Company’s operating cash flows will be adversely affected if management’s projections of future signings of IMAX Theater Systems and film performance, theater installations and film productions are not realized. The Company forecasts its future cash flow and short-term liquidity requirements on ~~a quarterly and annual~~an ongoing basis. ~~Since the Company’s future cash flows~~These forecasts are based on estimates and ~~there~~ may be materially impacted by factors that are outside of the ~~Company’s~~Company's control ~~(see “Risk Factors”~~(including the factors described in "Risk Factors" in Item 1A of the Company's 2021 Form 10-K, as supplemented by the risk factors in ~~the Company’s 2020 Form 10-K),~~Part II, Item 1A of this report). As a result, there is no guarantee that these forecasts will come to fruition and that the Company will ~~continue to~~ be able to fund its operations through cash flows from operations. ~~Under~~In particular, the terms of the Company’s typical sale and sales-type lease agreements, the Company receives substantial cash payments before the Company completes the performance of its obligations. Similarly, the Company receives cash payments for some of its film productions in advance of related cash expenditures.

~~The impact of the COVID-19 global pandemic has resulted in significantly lower levels of revenues, earnings and~~Company's operating cash flows and cash balances will be adversely impacted if management's projections of future signings and installations of IMAX Theater Systems and box office performance of IMAX DMR content are not realized.

For the three and nine months ended September 30, 2022, GBO generated by films released to the IMAX network totaled $177.1 million and $598.1 million, respectively, surpassing the totals for the ~~Company~~same periods in 2021 by $35.2 million (25%) and $237.4 million (66%), respectively. Although GBO results during ~~2020~~the three and nine months ended September 30, 2022 were impacted by the COVID-related theater closures in China, management remains encouraged by the overall positive trend in box office results and believes it indicates that moviegoers are returning to theaters, and in particular IMAX theaters, where and when theaters are open and they feel safe. Despite accounting for 1% of all domestic screens, the IMAX network had a ~~lesser extent, during~~domestic market share of 5% for the nine months ended September 30, ~~2021, when compared to periods prior to~~2022.Management is further encouraged by the ~~onset~~return of the ~~pandemic, as GBO results from~~prevalence of exclusive theatrical windows and the ~~Company’s theater customers declined,~~strong pipeline of Hollywood movies scheduled to be released for theatrical exhibition throughout the ~~installation~~remainder of ~~certain theater systems was delayed,~~2022 and ~~maintenance services were generally suspended for theaters that were closed~~. into 2023.In addition, as a result of the financial difficulties faced by certain of the Company’s exhibition customers arising out of pandemic-related closures, although improving, the Company has experienced and may continue to experience delays in collecting payments due under existing theater sale or lease arrangements. The Company has provided temporary relief to certain exhibitor customers by waiving or reducing maintenance fees during periods when theaters are closed or operating with reduced capacities and, in certain situations, by providing extended payment terms on annual minimum payment obligations in exchange for a corresponding or longer extension of the term of the underlying sale or lease arrangement. However, with approximately 93% of the Company’s global theater network open at various capacities as of September 30, 2021, GBO receipts generated by IMAX DMR films and joint revenue sharing arrangements increased in the current quarter and year-to-date periods, leading to improvement in the Company’s results, when compared to the prior year periods covered by this report.

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

CONTRACTUAL OBLIGATIONS

Payments to be made by the Company under contractual obligations as of September 30, ~~2021~~2022 are as follows:


	Payments Due by Period
(In thousands of U.S. Dollars)	Total Obligation		Less Than One Year		1 to 3 years		3 to 5 years		Thereafter
Purchase obligations(1)	$	42,684	$	40,012	$	2,406	$	10	$	256
Pension obligations(2)		20,298		—		—		20,298		—
Operating lease obligations(3)		18,496		3,675		5,892		4,284		4,645
Finance lease obligations		960		480		480		—		—
HSBC Facility		4,396		4,396		—		—		—
Bank of China Facility		367		367		—		—		—
Federal Economic Development Loan(4)		2,777		—		1,081		1,235		461
Convertible Notes(5)		234,600		1,150		2,300		231,150		—
Postretirement benefits obligations		2,859		109		249		246		2,255
	$	327,437	$	50,189	$	12,408	$	257,223	$	7,617

Payments Due by Period

(In thousands of U.S. Dollars)

Total
Obligation

Less Than One Year

1 to 3 years

3 to 5 years

Thereafter

Purchase obligations⁽¹⁾

$
32,879

$
31,176

$
1,676

$
—

$
27

Pension obligations⁽²⁾

20,298

—

20,298

—

—

Operating lease obligations⁽³⁾

19,331

3,376

4,983

4,177

6,795

Working Capital Facility⁽⁴⁾

10,974

10,974

—

—

—

Convertible Notes⁽⁵⁾

235,750

1,150

2,300

232,300

—

Postretirement benefits obligations

3,203

125

265

273

2,540

$
322,435

$
46,801

$
29,522

$
236,750

$
9,362

(1)

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

~~(1)~~

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

(2)

The Company has an unfunded defined benefit pension plan, the Supplemental Executive Retirement Plan (the “SERP”), covering its CEO, Mr. Richard L. Gelfond. The SERP has a fixed benefit payable of $20.3 million. The table above assumes that Mr. Gelfond will receive a lump sum payment of $20.3 million six months after retirement at the end of the term of his current employment agreement, which expires on December 31, 2022, in accordance with the terms of the SERP, although Mr. Gelfond has not informed the Company that he intends to retire at that time.

~~(3)~~

~~Represents total minimum annual rental payments due under the Company’s operating leases, which almost entirely consist of rent at the Company’s leased office space in New York.~~

~~(4)~~

~~On July 1, 2021, IMAX Shanghai renewed the Working Capital Facility through July 2022.~~

~~(5)~~

The Convertible Notes bear interest at a rate of 0.500% per annum on the principal of $230.0 million, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2021. The Convertible Notes will mature on April 1, 2026, unless earlier repurchased, redeemed or converted.

~~Pension and Postretirement Obligations~~

The Company has an unfunded defined benefit pension plan, the ~~SERP,~~Supplemental Executive Retirement Plan (the "SERP"), covering ~~the Company’s~~its CEO, Mr. Richard L. Gelfond. ~~Under~~The SERP has a fixed benefit payable of $20.3 million. The table above assumes that Mr. Gelfond will receive a lump sum payment of $20.3 million six months after retirement at the end of the term of his current employment agreement, which expires on December 31, 2025, in accordance with 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 to receive SERP benefits in the form of a lump sum payment. SERP benefit payments to Mr. Gelfond are subject to a deferral of six months after the termination of his employment, at which time Mr. Gelfond will be entitled to receive interest on the deferred amount credited at the applicable federate rate for short-term obligations. Pursuant to an amendment to his employment agreement dated November 1, 2019, the term of Mr. Gelfond’s employment was extended through December through December 31, 2022, although Mr. Gelfond has not informed the Company that he intends to retire at that time. ~~Under the terms~~(See Note 16 of ~~this amendment~~Notes to ~~his employment agreement, the~~Condensed Consolidated Financial Statements in Part I, Item 1.)

(3)

Represents total ~~benefit payable to Mr. Gelfond~~minimum annual rental payments due under the ~~SERP has been fixed at $20.3 million. As~~Company's operating leases.

(4)

The Federal Economic Development Loan will be repayable over 60 months, with repayments estimated to begin in January 2024,. (See Note 8(c) of ~~September 30, 2021, the Company’s~~Notes to Condensed Consolidated ~~Balance Sheets include~~Financial Statements in Part I, Item 1.)

(5)

The Convertible Notes bear interest at a rate of 0.500% per annum on the ~~present value~~principal of ~~the related SERP benefit obligation~~$230.0 million, payable semi-annually in arrears on April 1 and October 1 of ~~approximately $20.2 million recorded within Accrued and Other Liabilities (December 31, 2020 — $20.1 million).~~

each year. The ~~Company has a postretirement plan~~Convertible Notes will mature on April 1, 2026, unless earlier repurchased, redeemed or converted. (See Note 8(b) of Notes to ~~provide health and welfare benefits to Canadian employees meeting certain eligibility requirements. As of September 30, 2021, the Company’s~~ Condensed Consolidated ~~Balance Sheets include an unfunded benefit obligation of $1.8 million within Accrued and Other Liabilities related to this plan (December 31, 2020 — $1.9 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 former Chairman of its Board of Directors, upon retirement. As of September 30, 2021, the Company’s Condensed Consolidated Balance Sheets include an unfunded benefit obligation of $0.7 million within Accrued and Other Liabilities (December 31, 2020 — $0.7 million). Mr. Wechsler retired from the Company’s Board of Directors on June 9, 2021. The Company will maintain Mr. Wechsler’s current health benefits through December 31, 2021, and thereafter will provide him with Medicare supplemental coverage.

Financial Statements in Part I, Item 1.)

The Company maintained a nonqualified deferred compensation benefit plan (the “Retirement Plan”) covering the former CEO of IMAX Entertainment and Senior Executive Vice President of the Company. Under the terms of the Retirement Plan, the benefits were due to vest in full if the executive incurred a separation from service from the Company (as defined therein). In the fourth quarter of 2018, the executive incurred a separation from service from the Company, and as such, the Retirement Plan benefits became fully vested as of December 31, 2018 and the accelerated costs were recognized and reflected in Executive Transition Costs in the Consolidated Statements of Operations.

As of September 30, 2021, the benefit obligation related to the Retirement Plan was $3.8 million (December 31, 2020 — $3.7 million) and is recorded on the Company’s Condensed Consolidated Balance Sheets within Accrued and Other Liabilities. As the Retirement Plan is fully vested, the benefit obligation is measured at the present value of the benefits expected to be paid in the future with the accretion of interest recognized in the Condensed Consolidated Statements of Operations within Retirement Benefits Non-Service Expenses.

The Retirement Plan is funded by an investment in company-owned life insurance (“COLI”), which is recorded at its fair value on the Company’s Condensed Consolidated Balance Sheets within Prepaid Expenses. As of September 30, 2021, fair value of the COLI asset was $3.2 million (December 31, 2020 — $3.2 million). Gains and losses resulting from changes in the cash surrender value of the COLI asset are recognized in the Condensed Consolidated Statements of Operations within Realized and Unrealized Investment Gains (Losses).

OFF-BALANCE SHEET ARRANGEMENTS

There 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~~Company's financial condition.

RECENTLY ISSUED ACCOUNTING STANDARDS

See Note 3 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 for a discussion of recently issued accounting standards and their impact on the Company's Condensed Consolidated Financial Statements.

NON-GAAP FINANCIAL MEASURES

GAAP refers to generally accepted accounting principles in the United States of America. In this report, the Company presents financial measures in accordance with GAAP and also on a non-GAAP basis under the SEC regulations. Specifically, the Company presents the following non-GAAP financial measures as supplemental measures of its performance:

•

Adjusted net loss attributable to common shareholders;

•

Adjusted net loss attributable to common shareholders per basic and diluted share;

•

EBITDA; and

•

Adjusted EBITDA per Credit Facility.

•

~~Adjusted net loss attributable to common shareholders;~~

•

~~Adjusted net loss attributable to common shareholders per basic and diluted share;~~

•

~~EBITDA; and~~

•

~~Adjusted EBITDA per Credit Facility.~~

Adjusted net loss attributable to common shareholders and adjusted net loss attributable to common shareholders per basic and diluted share exclude, where applicable: (i) share-based compensation; (ii) COVID-19 government relief benefits; (iii) legal judgment and arbitration awards; (iv) realized and unrealized investment gains or ~~losses,~~losses; (v) acquisition-related expenses, as well as the related tax impact of these ~~adjustments,~~adjustments; and ~~(v)~~(vi) income taxes resulting from ~~management’s~~management's decision to no longer indefinitely reinvest the historical earnings of certain foreign subsidiaries.

The Company believes that these non-GAAP financial measures are important supplemental measures that allow management and users of the ~~Company’s~~Company's financial statements to view operating trends and analyze controllable operating performance on a comparable basis between periods without the after-tax impact of share-based compensation and certain unusual items included in net loss attributable to common shareholders. Although share-based compensation is an important aspect of the ~~Company’s~~Company's employee and executive compensation packages, it is a non-cash expense and is excluded from certain internal business performance measures.

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


	Three Months Ended September 30,
	2022						2021
(In thousands of U.S. Dollars, except per share amounts)	Net Loss			Per Share			Net Loss			Per Share
Net loss attributable to common shareholders	$	(8,953	)	$	(0.16	)	$	(8,378	)	$	(0.14	)
Adjustments(1):
Share-based compensation		5,431			0.10			5,876			0.10
COVID-19 government relief benefits, net		(212	)		—			(2,048	)		(0.03	)
Realized and unrealized investment gains		(34	)		—			(30	)		—
Acquisition-related expenses		955			0.02			—			—
Tax impact on items listed above		(214	)		—			(452	)		(0.01	)
Adjusted net loss(1)	$	(3,027	)	$	(0.05	)	$	(5,032	)	$	(0.08	)

Weighted average shares outstanding - basic and diluted					56,039						59,244


	Nine Months Ended September 30,
		2022						2021
(In thousands of U.S. dollars, except per share amounts)		Net Loss			Per Share			Net Loss			Per Share
Net loss attributable to common shareholders		$	(25,413	)	$	(0.44	)	$	(32,429	)	$	(0.55	)
Adjustments(1):
Share-based compensation			18,651			0.33			17,675			0.30
COVID-19 government relief benefits, net			(373	)		(0.01	)		(5,513	)		(0.09	)
Legal judgment and arbitration awards			—			—			(1,770	)		(0.03	)
Realized and unrealized investment gains			(98	)		—			(3,740	)		(0.06	)
Acquisition-related expenses			955			0.02			—			—
Tax impact on items listed above			(1,071	)		(0.02	)		(1,417	)		(0.02	)
Income taxes resulting from management's decision to no longer indefinitely reinvest the historical earnings of certain foreign subsidiaries			—			—			381			0.01
Adjusted net loss(1)		$	(7,349	)	$	(0.13	)	$	(26,813	)	$	(0.44	)

Weighted average shares outstanding - basic and diluted						57,301						59,207

Three Months Ended

Three Months Ended

September 30, 2021

September 30, 2020

(In thousands of U.S. Dollars, except per share amounts)

Net Loss

Per Share

Net Loss

Per Share

Reported net loss attributable to common shareholders

$
(8,378
)

$
(0.14
)

$
(47,209
)

$
(0.80
)
Adjustments⁽¹⁾:

Share-based compensation

5,876

0.10

5,019

0.09

COVID-19 government relief benefits⁽²⁾

(2,048
)

(0.03
)

(2,084
)

(0.03
)
Unrealized investment gains

(30
)

—

(1,091
)

(0.02
)
Tax impact on items listed above

(452
)

(0.01
)

611

0.01

Income taxes resulting from management's decision to no longer indefinitely reinvest the historical earnings of certain foreign subsidiaries

—

—

129

—

Adjusted net loss⁽¹⁾

$
(5,032
)

$
(0.08
)

$
(44,625
)

$
(0.75
)

Weighted average basic shares outstanding

59,244

58,859

Weighted average diluted shares outstanding

59,244

58,859

(1)

Reflects amounts attributable to common shareholders.

Nine Months Ended

Nine Months Ended

September 30, 2021

September 30, 2020

(In thousands of U.S. dollars, except per share amounts)

Net Loss

Per Share

Net Loss

Per Share

Reported net loss attributable to common shareholders

$
(32,429
)

$
(0.55
)

$
(122,530
)

$
(2.06
)
Adjustments⁽¹⁾:

Share-based compensation

17,675

0.30

15,262

0.26

COVID-19 government relief benefits⁽³⁾

(5,513
)

(0.09
)

(5,235
)

(0.08
)
Legal judgment and arbitration awards

(1,770
)

(0.03
)

—

—

Realized and unrealized investment (gains) losses

(3,740
)

(0.06
)

661

0.01

Tax impact on items listed above

(1,417
)

(0.02
)

(584
)

(0.01
)
Income taxes resulting from management's decision to no longer indefinitely reinvest the historical earnings of certain foreign subsidiaries

381

0.01

13,014

0.21

Adjusted net loss⁽¹⁾

$
(26,813
)

$
(0.45
)

$
(99,412
)

$
(1.67
)

Weighted average basic shares outstanding

59,207

59,360

Weighted average diluted shares outstanding

59,207

59,360

~~(1)~~

~~Reflects amounts attributable to common shareholders.~~

~~(2)~~

For the three months ended September 30, 2021, the Company recognized $2.0 million in COVID-19 government relief benefits (2020 — $2.0 million), as reductions to Selling, General and Administrative Expenses ($1.5 million) (2020 — $1.6 million), Costs and Expenses Applicable to Revenues ($0.5 million) (2020 — $0.3 million) and Research and Development Expenses ($nil) (2020 — $0.1 million) in the Condensed Consolidated Statements of Operations.

~~(3)~~

For the nine months ended September 30, 2021, the Company recognized $5.5 million in COVID-19 government relief benefits (2020 — $5.2 million), as reductions to Selling, General and Administrative Expenses ($4.1 million) (2020 — $4.5 million), Costs and Expenses Applicable to Revenues ($1.4 million) (2020 — $0.6 million) and Research and Development Expenses ($nil) (2020 — $0.1 million) in the Condensed Consolidated Statements of Operations.

In addition to the non-GAAP financial measures discussed above, management also uses ~~“EBITDA,”~~"EBITDA," as such term is defined in the Credit Agreement, and which is referred to herein as ~~“Adjusted~~"Adjusted EBITDA per Credit Facility.”" As allowed by the Credit Agreement, Adjusted EBITDA per Credit Facility includes adjustments in addition to the exclusion of interest, taxes, depreciation and amortization. Accordingly, this non-GAAP financial measure is presented to allow a more comprehensive analysis of the ~~Company’s~~Company's operating performance and to provide additional information with respect to the ~~Company’s~~Company's compliance ~~against~~with its Credit Agreement requirements, ~~in the current period, if~~when applicable. In addition, the Company believes that Adjusted EBITDA per Credit Facility presents relevant and useful information widely used by analysts, investors and other interested parties in the ~~Company’s~~Company's industry to evaluate, assess and benchmark the ~~Company’s~~Company's results.

EBITDA is defined as net income or loss excluding: (i) income tax expense or benefit; (ii) interest expense, net of interest income; (iii) depreciation and amortization, including film asset amortization; and (iv) amortization of deferred financing costs. Adjusted EBITDA per Credit Facility is defined as EBITDA excluding: (i) share-based and other non-cash compensation; (ii) realized and unrealized investment gains or losses; (iii) acquisition-related expenses and (iv) write-downs, net of recoveries, including asset impairments and credit loss ~~expense; and (iv) legal judgment and arbitration awards.~~expense.

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


	For the Three Months Ended September 30, 2022 (1)
	Attributable to
	Non-controlling
	Interests and			Less: Attributable to			Attributable to
(In thousands of U.S. Dollars)	Common Shareholders			Non-controlling Interests			Common Shareholders
Reported net loss	$	(7,757	)	$	1,196		$	(8,953	)
Add (subtract):
Income tax expense		2,348			(22	)		2,370
Interest expense, net of interest income		354			(39	)		393
Depreciation and amortization, including film asset amortization		15,640			1,214			14,426
Amortization of deferred financing costs(2)		712			—			712
EBITDA		11,297			2,349			8,948
Share-based and other non-cash compensation		5,544			(27	)		5,571
Unrealized investment gains		(35	)		—			(35	)
Acquisition-related expenses		955			—			955
Write-downs, including asset impairments and credit loss expense		1,083			66			1,017
Adjusted EBITDA per Credit Facility	$	18,844		$	2,388		$	16,456


	For the Twelve Months Ended September 30, 2022 (1)
	Attributable to
	Non-controlling
	Interests and			Less: Attributable to			Attributable to
(In thousands of U.S. Dollars)	Common Shareholders			Non-controlling Interests			Common Shareholders
Reported net loss	$	(10,579	)	$	4,734		$	(15,313	)
Add (subtract):
Income tax expense		19,239			2,027			17,212
Interest expense, net of interest income		970			(327	)		1,297
Depreciation and amortization, including film asset amortization		58,175			5,056			53,119
Amortization of deferred financing costs(2)		3,229			—			3,229
EBITDA		71,034			11,490			59,544
Share-based and other non-cash compensation		27,031			845			26,186
Unrealized investment gains		(128	)		—			(128	)
Acquisition-related expenses		955			—			955
Write-downs, including asset impairments and credit loss expense		15,675			1,538			14,137
Adjusted EBITDA per Credit Facility	$	114,567		$	13,873		$	100,694

For the Three Months Ended September 30, 2021 ⁽¹⁾

Attributable to

Non-controlling

Interests and

Less: Attributable to

Attributable to

(In thousands of U.S. Dollars)
Common Shareholders

Non-controlling Interests

Common Shareholders

Reported net loss
$

(6,344
)

$

2,034

$

(8,378
)

Add (subtract):

Income tax expense

4,402

634

3,768

Interest expense, net of interest income

261

(90
)

351

Depreciation and amortization, including film asset amortization

14,899

1,723

13,176

Amortization of deferred financing costs⁽²⁾

741

—

741

EBITDA

13,959

4,301

9,658

Share-based and other non-cash compensation

6,226

233

5,993

Unrealized investment gains

(30
)

—

(30
)

(Recoveries) write-downs, including asset impairments and credit loss expense

(2,901
)

(381
)

(2,520
)

Adjusted EBITDA per Credit Facility
$

17,254

$

4,153

$

13,101

(1)

For the Twelve Months Ended September 30, 2021 ⁽¹⁾

Attributable to

Non-controlling

Interests and

Less: Attributable to

Attributable to

(In thousands of U.S. Dollars)
Common Shareholders

Non-controlling Interests

Common Shareholders

Reported net loss
$

(42,500
)

$

11,174

$

(53,674
)

Add (subtract):

Income tax expense

11,314

3,209

8,105

Interest expense, net of interest income

3,642

(355
)

3,997

Depreciation and amortization, including film asset amortization

52,575

5,009

47,566

Amortization of deferred financing costs⁽²⁾

2,056

—

2,056

EBITDA

27,087

19,037

8,050

Share-based and other non-cash compensation

24,251

1,050

23,201

Realized and unrealized investment gains

(4,169
)

(1,218
)

(2,951
)

Write-downs, including asset impairments and credit loss expense

3,410

(603
)

4,013

Legal judgment and arbitration awards

2,335

—

2,335

Adjusted EBITDA per Credit Facility
$

52,914

$

18,266

$

34,648

~~(1)~~ The Senior Secured Net Leverage Ratio is calculated using Adjusted EBITDA per Credit Facility determined on a trailing twelve-month basis. During the first quarter of 2021, the Company entered into the Second Amendment to the Credit Facility Agreement which, among other things, suspends the Senior Secured Net Leverage Ratio financial covenant in the Credit Agreement through the first quarter of 2022 ~~and, once re-established, permits the Company to use EBITDA from the third and fourth quarters of 2019 in lieu of EBITDA for the corresponding quarters of 2021~~. (See Note 78 of Notes to Condensed Consolidated Financial ~~Statements.~~Statements in Part I, Item 1.)

(2)

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

The Company cautions users of its financial statements that these non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies. Additionally, the non-GAAP financial measures used by the Company should not be considered in isolation, or as a substitute for, or superior to, the comparable GAAP amounts.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to market risk from foreign currency exchange rates and interest rates, which could affect operating results, financial position and cash flows. Market risk is the potential change in an ~~instrument’s~~instrument's value caused by, for example, fluctuations in interest and currency exchange rates. The ~~Company’s~~Company's primary market risk exposure is the risk of unfavorable movements in exchange rates between the U.S. Dollar, the Canadian Dollar and ~~the~~ Chinese ~~Yuan Renminbi.~~Renminbi ("RMB"). The Company does not use financial instruments for trading or other speculative purposes.

Foreign Exchange Rate Risk

A majority of the ~~Company’s~~Company's revenue is denominated in U.S. Dollars while a significant portion of its costs and expenses is denominated in Canadian Dollars. A portion of the ~~Company’s~~Company's net U.S. Dollar cash flows is converted to Canadian Dollars to fund Canadian Dollar expenses through the spot market. In addition, films released to the IMAX ~~films~~theater network generate box office in 8587 different countries, and therefore unfavorable exchange rates between applicable local currencies and the U.S. Dollar could have an impact on the ~~Company’s reported gross box office~~GBO generated by the Company's exhibitor customers and its revenues. The Company has incoming cash flows from its revenue generating theaters and ongoing operating expenses in China through its majority-owned subsidiary IMAX Shanghai. In Japan, the Company has ongoing Yen-denominated operating expenses related to its Japanese operations. Net RMB and Japanese Yen cash flows are converted to U.S. Dollars through the spot market. The Company also has cash receipts under leases denominated in RMB, Japanese Yen, Euros and Canadian Dollars.

The Company manages its exposure to foreign exchange rate risks through its regular operating and financing activities, when appropriate, through the use of derivative financial instruments. These derivative financial instruments are utilized to hedge economic exposures as well as reduce earnings and cash flow volatility resulting from shifts in market rates.

Certain of the ~~Company’s~~Company's PRC subsidiaries held approximately RMB ~~454.4~~195.4 million ($~~70.1~~27.5 million) in cash and cash equivalents as of September 30, ~~2021~~2022 (December 31, ~~2020~~2021 — RMB ~~500.3~~484.7 million or ~~$76.7~~$76.0 million) and are required to transact locally in RMB. Foreign currency exchange transactions, including the remittance of any funds into and out of the PRC, are subject to controls and require the approval of the China State Administration of Foreign Exchange to complete. Any developments relating to the Chinese economy and any actions taken by the Chinese government are beyond the control of the Company; however, the Company monitors and manages its capital and liquidity requirements to ensure compliance with local regulatory and policy requirements. (See "Risk Factors – The Company faces risks in connection with its significant presence in China and the continued expansion of its business there," in Part I, Item 1A of the Company's 2021 Form 10-K.)

For the three and nine months ended September 30, ~~2021,~~2022, the Company recorded foreign exchange net loss of $(1.2) million and $(3.0) million, respectively, as compared to a foreign exchange net loss of $(0.6) million and net gain ~~$1.1 million, respectively, as compared to a foreign exchange net gain~~ of ~~$0.2 million and a net loss of $(0.8)~~$1.1 million for the three and nine months ended September 30, ~~2020,~~2021, respectively, associated with the translation of foreign currency denominated monetary assets and liabilities.

The Company has entered into a series of foreign currency forward contracts to manage the ~~Company’s~~ risks associated with the volatility of foreign currencies. ~~The~~Certain of these foreign currency forward contracts ~~have~~met the criteria required for hedge accounting under the Derivatives and Hedging Topic of the Financial Accounting Standards Board Accounting Standard Codification at inception, and continue to meet hedge effectiveness tests as of September 30, 2022, with settlement dates throughout ~~2022.~~2022 and 2023. Foreign currency derivatives are recognized and measured in the Condensed Consolidated Balance Sheets at fair value. Changes in the fair value ~~(gains~~(i.e., gains or losses) are recognized in the Condensed Consolidated Statements of Operations except for derivatives designated and qualifying as foreign currency cash flow hedging instruments. ~~Certain of these foreign currency forward contracts held by the Company as of September 30, 2021, are designated and qualify as foreign currency cash flow hedging instruments.~~ The Company currently has cash flow hedging instruments associated with Selling, General and Administrative ~~Expenses, Inventories and capital expenditures.~~Expenses. For foreign currency cash flow hedging instruments related to Selling, General and Administrative Expenses, the effective portion of the gain or loss in a hedge of a forecasted transaction is reported inwithin Accumulated Other Comprehensive (Loss) Income and reclassified to the Condensed Consolidated Statements of Operations when the forecasted transaction occurs. For foreign currency cash flow hedging instruments related to Inventories, the effective portion of the gain or loss in a hedge of a forecasted transaction is reported in Other Comprehensive (Loss) Income and reclassified to Inventories on the Condensed Consolidated Balance Sheets when the forecasted transaction occurs. Any ineffective portion is recognized immediately in the Condensed Consolidated Statements of Operations.

The notional value of foreign currency cash flow hedging instruments that qualify for hedge accounting at September 30, ~~2021~~2022 was ~~$24.6~~$30.8 million (December 31, ~~2020~~2021 — ~~$26.4~~$26.7 million). ~~A loss~~Losses of ~~$(0.8)~~$(1.6) million and ~~a loss of $(0.2)~~$(1.9) million ~~was~~were recorded to Other Comprehensive ~~(Loss) Income~~Loss with respect to the change in fair value of these contracts for the three and nine months ended September 30, ~~2021,~~2022, respectively, ~~(2020~~(2021 — ~~gain~~losses of ~~$0.6~~$(0.8) million and ~~a loss of $(0.9)~~$(0.2) million, respectively). ~~A gain~~Losses of ~~$0.3~~$(0.1) million and ~~a gain of $1.4~~$(0.2) million ~~was~~were reclassified from Accumulated Other Comprehensive (Loss) Income to Selling, General and Administrative Expenses ~~and Inventories~~ for the three and nine months ended September 30, ~~2021, respectively (2020~~2022 (2021 — gains of $0.3 million, and $1.4 million, respectively). An unrealized loss of $(0.1) million and ~~a loss of $(0.8) million, respectively). An~~ unrealized gain of ~~less than $0.1 million and~~ $0.3 million resulting from a change in the classification of certain forward contracts no longer meeting the requirements for hedge accounting were reclassified from Accumulated Other Comprehensive (Loss) Income to Selling, General and Administrative Expenses for the three and nine months ended September 30, 2021 ~~(2020~~(2022 — ~~$nil)~~nil). The ~~notional value of forward contracts that do~~Company currently does not ~~qualify for hedge accounting at September 30, 2021 was $1.1 million (December 31, 2020 — $5.6 million).~~hold any derivatives which are not designated as hedging instruments.

For all derivative instruments, the Company is subject to counterparty credit risk to the extent that the counterparty may not meet its obligations to the Company. To manage this risk, the Company enters into derivative transactions only with major financial institutions.

AtAs of September 30, ~~2021,~~2022, the ~~Company’s~~Company's Financing Receivables and working capital items denominated in Canadian Dollars, RMB, Japanese Yen, Euros and other foreign currencies translated into U.S. Dollars was ~~$144.2 million.~~$162.7 million, of which $165.9 million was denominated in RMB. Assuming a 10% appreciation or depreciation in foreign currency exchange rates from the quoted foreign currency exchange rates atas of September 30, ~~2021,~~2022, the potential change in the fair value of foreign currency-denominated financing receivables and working capital items would have been ~~$14.4~~$16.3 million. A significant portion of the ~~Company’s~~Company's Selling, General, and Administrative Expenses is denominated in Canadian Dollars. Assuming a 1% change appreciation or depreciation in foreign currency exchange rates atas of September 30, ~~2021,~~2022, the potential change in the amount of Selling, General, and Administrative Expenses would be $0.1 million.

Interest Rate Risk Management

The ~~Company’s~~Company's earnings ~~are~~may also be affected by changes in interest rates due to the impact those changes have on its interest income from cash, and its interest expense from variable-rate ~~borrowings. Specifically, the Company’s largest exposure with respect to variable interest rate debt on~~ borrowings that may be made under the Credit Facility.

As of September 30, 2022, the Company had drawn down $4.4 million on its HSBC China Facility ~~resulting from changes in LIBOR.~~(December 31, 2021 — nil) and $0.4 million on its Bank of China Facility (December 31, 2021 — $3.6 million) which are subject to variable effective interest rates.

The Company had no variable rate debt instruments ~~outstanding~~representing 1.0% and 0.8% of its total liabilities as of September 30, ~~2021.~~2022 and December 31, 2021, respectively. If the interest rates available to the Company increased by 10%, the Company's interest expense would increase by less than $0.1 million and interest income from cash would increase by $0.1 million. These amounts are determined by considering the impact of the hypothetical interest rates on the Company's variable rate debt and cash balances at September 30, 2022.

Item 4. Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods and that such information is accumulated and communicated to management, including the CEO and the Chief Financial Officer ~~(“CFO”~~("CFO"), to allow timely discussions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

The ~~Company’s~~Company's management, with the participation of its CEO and its CFO, has evaluated the effectiveness of the ~~Company’s “disclosure~~Company's "disclosure controls and ~~procedures”~~procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) as of September 30, ~~2021~~2022 and has concluded that, as of the end of the period covered by this report, the ~~Company’s~~Company's disclosure controls and procedures were effective. The Company will continue to periodically evaluate its disclosure controls and procedures and will make modifications from time to time as deemed necessary to ensure that information is recorded, processed, summarized and reported within the time periods specified in the ~~SEC’s~~SEC's rules and forms.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in the ~~Company’s~~Company's internal control over financial reporting which occurred during the three months ended September 30, ~~2021,~~2022, that have materially affected, or are reasonably likely to materially affect, the ~~Company’s~~Company's internal control over financial reporting. The Company has not experienced any material impact to its internal control over financial reporting despite the fact that most of its Finance employees are working remotely due to the COVID-19 pandemic. The Company will continue to monitor the evolving COVID-19 situation to minimize its impact on the design and operating effectiveness of the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See Note 89 of Notes to Condensed Consolidated Financial Statements to the accompanying Condensed Consolidated Financial Statements in Item 1 for information regarding legal proceedings involving the Company.

Item 1A. Risk Factors

This Form 10-Q and the risk factors below should be read together with, and supplement, the risk factors in Item 1A. Risk Factors in the ~~Company’s 2020~~Company's 2021 Form 10-K, which describes various risks and uncertainties to which the Company is or may become subject. The risks described below and in the ~~Company’s 2020~~Company's 2021 Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect its business, financial condition and/or operating results.

RISKS RELATED TO THE ~~COMPANY’S~~COMPANY'S BUSINESS AND OPERATIONS

The Company has experienced a significant decrease in its revenues, earnings, and cash flows due to the COVID-19 ~~global~~ pandemic and its business, financial condition and results of operations may continue to be significantly harmed in future reporting periods.

The impact of the COVID-19 pandemic is complex and continuously evolving, resulting in significant disruption to the ~~Company’s~~Company's business and the global economy. At various points during the pandemic, authorities around the world imposed measures intended to control the spread of COVID-19, including stay-at-home orders and restrictions on large public gatherings, which caused movie theaters in countries around the world to temporarily close, including the IMAX theaters in those countries. As a result of ~~the~~these theater closures, movie studios postponed the theatrical release of most films originally scheduled for release in 2020 and early 2021, including many scheduled to be shown in IMAX theaters, while several other films were released directly or concurrently to streaming platforms. ~~More recently,~~Beginning in the third quarter of 2020, stay-at-home orders and capacity restrictions ~~have been~~were lifted in ~~almost all~~many key markets, ~~and, beginning in the third quarter of 2020,~~ movie theaters throughout the IMAX network gradually reopened, and movie release schedules have begun to normalize. Note, however, that following the emergence of the Omicron variant and the rise of COVID-19 cases in China in the first quarter of 2022, the Chinese government reinstituted capacity restrictions and safety protocols on large public gatherings, which has led to the temporary closure of theaters in several cities. Beginning in the second quarter of 2022, IMAX theaters in China gradually reopened. ~~However, there is~~As of September 30, 2022, approximately 92% of the IMAX theaters in Greater China were open at various capacities. On average, during the third quarter of 2022, approximately 82% of the IMAX theaters in Greater China were open at various capacities. There continues to be no assurance that movie theaters will remain open or continue to reopen if there is a continued rise of or resurgence in COVID-19 cases in certain jurisdictions. As

Despite the strong performance of ~~September 30, 2021, 93% of~~numerous blockbuster films in recent quarters, and the ~~theaters in~~outsized market share represented by the ~~global IMAX commercial multiplex~~Company's theater network, were open at various capacities, spanning 70 countries. This included 100% of Domestic theaters (i.e., in the United States and Canada), 93% of the theaters in Greater China and 87% of the theaters in Rest of World markets.

~~The impact of the COVID-19 global pandemic has resulted in significantly lower levels of revenues, earnings and operating cash flows for the Company during~~ 2020 and, to a lesser extent, during the nine months ended September 30, 2021, when compared to periods prior to the onset of the pandemic, as GBO results from the Company’s theater customers declined significantly, the installation of certain theater systems was delayed, and maintenance services were generally suspended for theaters that were closed. As a result, for the three and nine months ended September 30, 2021, the Company continued to experience a significantly lower level of earnings and operating cash flows as it generated lower than normal levels of GBO-based revenue from its joint revenue sharing arrangements and digital remastering services, it was unable to provide normal maintenance services to any of the theaters that remained closed, and while some installation activity continued, certain theater system installations were, and may continue to be delayed. Moreover, given thethere remains uncertainty around whether and when movie-going will return to historical levels there is no guarantee that the effects of the COVID-19 global pandemic will end even after theaters are reopened. In addition, the global economic impact of COVID-19 has resulted in record levels of unemployment in certain countries, which has led to, and may continue to result in, lower consumer spending.on an annual basis. The timing and extent of a recovery of consumer behavior and willingness to spend discretionary income on movie-going may delay the ~~Company’s~~Company's ability to generate significant ~~GBO-based~~ revenue from GBO generated by its exhibitor customers until consumer behavior normalizes and consumer spending fully recovers.

In response to uncertainties associated with the COVID-19 global pandemic, the Company took significant steps to preserve cash by eliminating non-essential costs, temporarily furloughing certain employees, reducing the working hours of other employees and reducing all non-essential capital expenditures to minimum levels. The Company also implemented an active cash management process, which, among other things, required senior management approval of all outgoing payments. There can, however, be no guarantees that the steps the Company has taken to preserve cash and manage its expenditures will result in the cost savings the Company anticipates.

The Company has applied for and received wage subsidies, tax credits and other financial support under COVID-19 relief legislation that has been enacted in the countries in which it operates. There are no guarantees that the Company will apply for or receive such benefits in the future or that the Company will receive any additional material financial support through these or other programs that may be created, expanded, or implemented by governments in the countries in which the Company operates.

~~In addition, as~~

As a result of the financial difficulties faced by certain of the ~~Company’s~~Company's exhibition customers arising out of ~~the COVID-19 pandemic related~~pandemic-related theater closures, the Company has experienced and may continue to experience delays in collecting payments due under existing theater sale or lease arrangements. The Company has provided temporary relief to certain exhibitor customers by waiving or reducing maintenance fees during periods when theaters are closed or operating with reduced capacities and, in certain situations, by providing extended payment terms on annual minimum payment obligations in exchange for a corresponding or longer extension of the term of the underlying sale or lease arrangement. Certain of the Company’s exhibitor partners that had reopened theaters have temporarily suspended operations of their theater network in certain jurisdictions and other exhibitor partners have reduced their theaters’ operating hours, which may exacerbate existing financial difficulties. OurCompany's exhibitor partners may continue to experience operational and/or financial difficulties if the COVID-19 pandemic continues or consumers change their behavior and consumption patterns, ~~in response to the prolonged suspension of movie-going, or for other reasons,~~ which would further increase the risks associated with payments due under existing agreements with the Company. The ability of such partners to make payments cannot be guaranteed and is subject to changing economic circumstances. Further, the Company has had to delay ~~movie~~certain theater system installations from backlog and may be required to further delay or cancel such installations in the future. As a result, the ~~Company’s~~Company's future revenues and cash flows may be adversely affected.

Given the dynamic nature of the circumstances, while the Company has been negatively impacted as of the date of filing of this report, it is difficult to predict the full extent of ~~such~~the adverse impact of the COVID-19 ~~global~~ pandemic on the ~~Company’s~~Company's financial condition, liquidity, business and results of operations in future reporting periods. The extent and duration of such impact on the Company will depend on future developments, including, but not limited to, the duration and scope of the pandemic, the emergence, spread and severity of variants of the virus, the progress made on administering vaccines and developing treatment and the ~~timing~~effectiveness of ~~reopening~~such vaccines and treatments, the progress towards the resumption of normal operations of movie theaters worldwide and their return to historical levels of attendance, the timing of when new films are released, consumer behavior, the solvency of the ~~Company’s~~Company's exhibitor partners, their ability to make timely payments, any potential construction or installation delays involving ~~our~~the Company's exhibitor partners, the continuing impact of the pandemic on global economic conditions and ongoing government responses to the pandemic. Such events are highly uncertain and cannot be accurately forecast. Moreover, there can be no guarantees that the Company’s liquidity needs will not increase materially over the course of the COVID-19 pandemic. In addition, liquidity needs as well as other changes to the Company’s business and operations may impact the Company’s ability to maintain compliance with certain covenants under the amended Credit Agreement. The Company may also be subject to impairment losses based on long-term estimated projections. These estimates and the likelihood of future changes in these estimates depend on a number of underlying variables and a range of possible outcomes. Actual results may differ materially from management’s estimates, especially due to the uncertainties associated with the COVID-19 pandemic. forecasted.If business conditions deteriorate further, or should they remain depressed for a more prolonged period of time, management’s estimates of operating results and future cash flows for reporting units may be insufficient to support the goodwill assigned to them, thus requiring impairment charges. Estimates related to future expected credit losses and deferred tax assets, as well as the recoverability of joint revenue sharing equipment and the realization of variable consideration assets, could also be materially impacted by changes in estimates in the future.

The COVID-19 pandemic and public health measures implemented to contain it may also have the effect of heightening many of the other risks described in the ~~Company’s 2020~~Company's 2021 Form ~~10-K,~~10-K.

The Company is undertaking brand extensions and new business initiatives, and the Company's investments and efforts in such business evolution may not be successful.

The Company is undertaking brand extensions and new business initiatives. These initiatives represent potential new areas of growth for the Company and could include the offering of new products and services that may not be accepted by the market. The Company has recently explored initiatives in the field of in-home entertainment technology, which is an intensely competitive business and which is dependent on consumer demand, over which the Company has no control. The Company is also exploring new technologies to connect the IMAX network to facilitate bringing more unique content, including ~~but~~broadcasts of live events, to IMAX theater audiences. If any new brand extensions and business initiatives in which the Company invests or attempts to develop does not ~~limited~~progress as planned, the Company may be adversely affected by investment expenses that have not led to ~~risks relating~~the anticipated results, by write-downs of its assets, by the distraction of management from its core business or by damage to ~~harm to our key personnel, diverting management’s resources~~its brand or reputation.

New initiatives could involve acquisitions or the formation of joint ventures and ~~time to addressing~~business alliances. In September 2022, the ~~impacts~~Company acquired SSIMWAVE for $19.4 million in cash and 160,457 common shares of ~~COVID-19, which may negatively affect~~ the ~~Company’s ability to implement its business plan~~Company with a fair value of $1.9 million with additional earnout consideration. Such transactions and ~~pursue certain opportunities, potential impairments, the effectiveness of our internal control of financial reporting, cybersecurity and data privacy risks due to employees working from home,~~arrangements involve significant challenges and risks, ~~of increased indebtedness due to~~including; that they may not advance the drawdown of the Credit Facility, including the Company’s ability to seek waivers of covenants or to refinance such borrowings, among others. The longer the COVID-19 pandemic and associated protective measures persist, the more severe the extent of the adverse impact of the pandemic onCompany's long-term business strategy, that the Company ~~is likely~~realizes an unsatisfactory return on its investments, that the Company has difficulty integrating or retaining new employees, systems, and technology, that the Company has disagreements with a relevant partner with respect to ~~be.~~financing, management, and development, or that management gets distracted from the Company's core business. Also, it may take longer than expected to realize the full benefits from these transactions and arrangements such as increased revenue or enhanced efficiencies, or the benefits may ultimately be smaller than the Company expected.

RISKS RELATED TO THE ~~COMPANY’S INDEBTEDNESS~~COMPANY'S INTERNATIONAL OPERATIONS

The ~~Company’s indebtedness and liabilities could limit the cash flow available for its operations, expose the~~ Company conducts business internationally, which exposes it to uncertainties and risks that could ~~adversely~~negatively affect its operations, sales, and future growth prospects.

A significant portion of the GBO generated by the Company's exhibitor customers and its revenues are generated by customers located outside the United States and Canada. Approximately 70%, 77%, and 66% of the Company's revenues were derived outside of the United States and Canada in 2021, 2020 and 2019, respectively. As of September 30, 2022, approximately 73% of IMAX Theater Systems in backlog are scheduled to be installed in international markets. The Company's network spanned 87 different countries as of September 30, 2022, and the Company expects its international operations to continue to account for an increasingly significant portion of its future revenues. There are a number of risks associated with operating in international markets that could negatively affect the Company's operations, sales and future growth prospects. These risks include:

•

new restrictions on access to markets, both for IMAX Theater Systems and films;

•

unusual or burdensome foreign laws or regulatory requirements or unexpected changes to those laws or requirements, including censorship of content that may restrict what films the Company's theaters can present;

•

fluctuations in the value of various foreign currencies 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 needed to manufacture quality products on a timely basis;

•

imposition of foreign exchange controls in 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 IMAX Theater Systems, including as a result of material disruptions or delays in the Company's supply chains, or collect full payment on installations thereof;

•

local business ~~financial condition~~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 foreign government 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, which could result in adverse consequences for the Company's interests in different regions of the world.

Additionally, global geopolitical tensions and actions that governments take in response may adversely impact the Company. In response to the ongoing conflict between Russia and Ukraine, Canada, the United States, and other countries in which the Company operates have imposed broad sanctions and other restrictive actions against governmental and other entities in Russia, which in turn have and may continue to have an adverse impact on the Company's business and results of ~~operations.~~

Asoperations in affected regions. In addition, in the wake of ~~September 30, 2021~~, the ~~Company had approximately $354.9 million~~Russia-Ukraine conflict, major movie studios suspended the theatrical release of ~~consolidated indebtedness.~~films in Russia and financial institutions halted transactions with Russian entities. The Company ~~may also incur additional indebtedness to meet future financing needs.~~has notified its exhibitor clients in Russia and Belarus that such sanctions and actions constitute a force majeure event under their theater agreements, resulting in the suspension of the Company's obligations thereunder. The ~~Company’s indebtedness~~scope, intensity, duration and outcome of the conflict is uncertain. Additionally, given the global nature of the Company's operations, any protracted conflict or the broader macroeconomic impact of the Russia-Ukraine conflict and sanctions imposed on Russia and other countries could have ~~significant negative consequences for its security holders and its~~an adverse impact on the Company's business, results of operations, ~~and~~ financial condition, ~~by, among other things:~~

•

~~increasing its vulnerability to adverse economic and industry conditions;~~

•

~~limiting its ability to obtain additional financing;~~

•

~~requiring the dedication of a substantial portion of its cash flow from operations to service its indebtedness, which will reduce the amount of cash available for other purposes;~~

•

~~limiting its flexibility to plan for, or react to, changes in its business;~~

•

~~diluting the interests of its shareholders as a result of issuing common shares upon conversion of the Convertible Notes; and~~

•

~~placing the Company at a possible competitive disadvantage with competitors that are less leveraged than the Company or have better access to capital.~~

~~The Company’s business may not generate sufficient funds,~~and future performance (the Company has 21 theater systems in its backlog from Russia and the ~~Company~~CIS and Ukraine) and may ~~otherwise be unable to maintain sufficient cash reserves, to pay amounts due under its indebtedness,~~also magnify the impact of other risks described herein and ~~the Company’s cash needs may increase~~ in the ~~future.~~ Company's 2021 Form 10-K, including the risk of cybersecurity attacks, which have increased in connection with the ongoing conflict and may impact information technology systems unrelated to the conflict, or jeopardize critical infrastructure in jurisdictions where the Company operates.

In addition, changes in United States or Canadian foreign policy can present additional risks or uncertainties as the ~~Credit Agreement contains,~~Company continues to expand its international operations. Opening and ~~any future indebtedness~~operating theaters in markets that wehave experienced geopolitical or sociopolitical unrest or controversy, including through partnerships with local entities, exposes the Company to the risks listed above, as well as additional risks of operating in a volatile region. Such risks may ~~incur~~negatively impact the Company's business operations in such regions and may ~~contain, financial~~also harm the Company's brand. Moreover, a deterioration of the diplomatic relations between the United States or Canada and ~~other restrictive covenants that limit~~a given country may impede the ~~Company’s~~Company's ability to operate ~~its business, raise capital or make payments under its other indebtedness. If~~theaters in such countries and have a negative impact on the ~~Company fails to comply with these covenants or to make payments under its indebtedness when due, then the Company would be in default under that indebtedness, which could, in turn, result in that~~Company's financial condition and ~~our other indebtedness becoming immediately payable in full. For a description of the Company outstanding indebtedness, see Note 7 of Notes to Condensed Consolidated Financial Statements.~~

~~Provisions in the indenture could delay or prevent an otherwise beneficial takeover of us.~~

Certain provisions in the Convertible Notes and the related indenture could make a third party attempt to acquire the Company more difficult or expensive. For example, if a takeover constitutes a fundamental change, then noteholders will have the right to require the Company to repurchase their Convertible Notes for cash. In addition, if a takeover constitutes a make-whole fundamental change, then the Company may be required to temporarily increase the conversion rate of the Convertible Notes. In either case, and in other cases, the Company’s obligations under the Convertible Notes and the indenture could increase the cost of acquiring the Company otherwise discourage a third party from acquiring the Company or removing incumbent management, including in a transaction that noteholders or holders of the Company’s common shares may view as favorable.future growth prospects.

~~The Company is subject to counterparty risk with respect to the Capped Call Transactions, and the capped call may not operate as planned.~~

~~In connection with the issuance of the Convertible Notes, the Company entered into privately negotiated capped call transactions with option counterparties (the “Capped Call Transactions”).~~ The Capped Call Transactions are expected to reduce potential dilution resulting from the common shares the Company is required to issue and/or to offset any potential cash payments the Company is required to make in excess of the principal amount of the Convertible Notes in the event that the market price per share of the Company’s common shares is greater than the strike price of the Capped Call Transactions, with such reduction and/or offset subject to a cap. Collectively, the Capped Call Transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes, the number of the Company’s common shares underlying the Convertible Notes.

The option counterparties are financial institutions, and the Company will be subject to the risk that they might default under the Capped Call Transactions. The Company’s exposure to the credit risk of the option counterparties will not be secured by any collateral. Global economic conditions have from time to time resulted in the actual or perceived failure or financial difficulties of many financial institutions. If an option counterparty becomes subject to insolvency proceedings, the Company will become an unsecured creditor in those proceedings with a claim equal to the Company’s exposure at that time under our transactions with that option counterparty. The Company’s exposure will depend on many factors, but, generally, the increase in the Company’s exposure will be correlated with increases in the market price or the volatility of its common shares. In addition, upon a default by an option counterparty, the Company may suffer adverse tax consequences and more dilution than the Company currently anticipate with respect to its common shares. The Company can provide no assurances as to the financial stability or viability of any option counterparty. In addition, the Capped Call Transactions are complex, and they may not operate as planned. For example, the terms of the Capped Call Transactions may be subject to adjustment, modification or, in some cases, renegotiation if certain corporate or other transactions occur. Accordingly, these transactions may not operate as the Company intends if it is required to adjust their terms as a result of transactions in the future or upon unanticipated developments that may adversely affect the functioning of the Capped Call Transactions.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

InOn April ~~2021,~~28, 2022 and July 28, 2022, the ~~Company’s~~Company's Board of Directors approved a 12-month extension to its share repurchase program through June 30, ~~2022. The extension authorized~~2023, and an increase of $200.0 million in the share repurchase program, respectively. With the increase of $200.0 million, the Company's total share repurchase authority is $400.0 million under the current share repurchase program. As of September 30, 2022, the Company ~~to repurchase up to approximately $89.4~~has $220.1 million ~~worth of common shares, the remaining amount~~ available ~~of the original $200.0 million initially authorized~~ under ~~the share-repurchase program when it commenced on July 1, 2017.~~its approved repurchased program. The repurchases may be made either in the open market or through private transactions, including repurchases made pursuant to a plan intended to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, subject to market conditions, applicable legal requirements, and other relevant factors. The Company has no obligation to repurchase shares and the share repurchase program may be suspended or discontinued by the Company at any time.

During the three months ended September 30, ~~2021,~~2022, the Company repurchased ~~316,812~~418,496 common shares at an average price of ~~$14.53~~$14.62 per ~~share. As~~share for a total of ~~September 30, 2021, the Company has $84.8~~$6.1 million, ~~available under its approved repurchase program.~~excluding commissions.

The ~~Company’s~~Company's common share repurchase program activity for the three months ended September 30, ~~2021~~2022 was as follows:


	Total number of shares purchased		Average price paid per share		Total value of shares purchased as part of publicly announced program		Maximum value of shares that may yet be purchased under the program
July 1 through July 31, 2022		71,467	$	15.93		1,138,259	$	25,042,844
August 1 through August 31, 2022		—		—		—		25,042,844
September 1 through September 30, 2022		347,029		14.36		4,982,066		220,060,778
Total		418,496	$	14.62		6,120,325

Total number of shares purchased

Average price paid per share

Total number of shares purchased as part of publicly announced program

Maximum value of shares that may yet be purchased under the program

July 1 through July 31, 2021

—

$

—

—

$

89,361,337

August 1 through August 31, 2021

—

—

—

89,361,337

September 1 through September 30, 2021

316,812

14.53

316,812

84,757,657

Total

316,812

$

14.53

316,812

The total number of shares purchased during the nine months ended September 30, ~~2021,~~2022, under both the Company and IMAX ~~China’s~~China's repurchase plans, does not include any shares purchased in the administration of employee share-based compensation plans.

(See Note 8 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 for a summary of the material terms and conditions of the Company's revolving credit facility, which include a limitation of the amount of permitted share repurchases.)

Item 6. Exhibits


Exhibit No.		Description
~~10.1~~10.1*+		~~Third Amendment to the Fifth Amended and Restated Credit~~Employment Agreement, dated ~~as of July 28, 2021. Incorporated by reference to Exhibit 10.1 to~~September 19, 2022, between IMAX ~~Corporation’s Form 8-K dated as of July 28, 2021 (File No. 001-35066).~~Corporation and Richard L. Gelfond.

31.1*		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated October ~~28, 2021,~~31, 2022, by Richard L. Gelfond.

31.2*		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated October ~~28, 2021,~~31, 2022, by ~~Joseph Sparacio.~~Natasha Fernandes.

32.1*		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated October ~~28, 2021,~~31, 2022, by Richard L. Gelfond.

32.2*		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated October ~~28, 2021,~~31, 2022, by ~~Joseph Sparacio.~~Natasha Fernandes.

101.INS		Inline XBRL Instance Document – The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

*Filed herewith.

~~SIGNATURES~~

+Management contract or compensatory plan, contract or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	IMAX CORPORATION

Date: October ~~28, 2021~~31, 2022	By:	/s/ ~~JOSEPH SPARACIO~~NATASHA FERNANDES
		~~Joseph Sparacio~~Natasha Fernandes
		~~Interim~~ Chief Financial Officer
		(Principal Financial Officer)

Date: October ~~28, 2021~~31, 2022	By:	/s/ KEVIN M. DELANEY
		Kevin M. Delaney
		Senior Vice-President, Finance & Controller
		(Principal Accounting Officer)

9088

	Revenue⁽¹⁾					Gross Margin (Margin Loss)⁽⁴⁾
(In thousands of U.S. Dollars)	2021		2020			2021			2020
IMAX Technology Network
IMAX DMR	$	15,701	$	6,886		$	7,293		$	3,079
Joint Revenue Sharing Arrangements, contingent rent		9,887		4,473			3,626			(2,491	)
		25,588		11,359			10,919			588
IMAX Technology Sales and Maintenance
IMAX Systems⁽²⁾		13,236		17,437			8,086			8,671
Joint Revenue Sharing Arrangements, fixed fees		1,036		57			280			(117	)
IMAX Maintenance		13,055		5,855			6,462			794
Other Theater Business⁽³⁾		363		307			64			31
		27,690		23,656			14,892			9,379
New Business Initiatives		1,238		378			1,189			372
Film Distribution and Post-Production
Film Distribution⁽⁵⁾		699		1,126			(4	)		(5,597	)
Post-Production		899		739			420			(464	)
		1,598		1,865			416			(6,061	)
Sub-total		56,114		37,258			27,416			4,278
Other		488		(2	)		71			(449	)
Total	$	56,602	$	37,256		$	27,487		$	3,829

Balance as of December 31, 2020	$	759
Net income		1
Balance as of September 30, 2021	$	760

	September 30, 2021								September 30, 2020
	Commercial Multiplex		Commercial Destination		Institutional		Total		Commercial Multiplex		Commercial Destination		Institutional		Total
United States		362		4		27		393		371		4		30		405
Canada		39		1		7		47		39		2		7		48
Greater China⁽¹⁾		752		—		15		767		710		—		16		726
Western Europe		116		4		8		128		115		4		9		128
Asia (excluding Greater China)		121		2		2		125		123		2		2		127
Russia & the CIS		68		—		—		68		68		—		—		68
Latin America⁽²⁾		51		1		11		63		51		1		11		63
Rest of the World		71		—		2		73		65		—		2		67
Total⁽³⁾		1,580		12		72		1,664		1,542		13		77		1,632

	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced program		Maximum value of shares that may yet be purchased under the program
July 1 through July 31, 2021		—	$	—		—	$	89,361,337
August 1 through August 31, 2021		—		—		—		89,361,337
September 1 through September 30, 2021		316,812		14.53		316,812		84,757,657
Total		316,812	$	14.53		316,812