Welcome to the IMAX Corporation conference call. Today's call is being recorded. At this time, I would like to turn the conference over to Mr. Brad Wechsler for opening remarks and introductions. Mr. Wechsler, please go ahead, sir.

Thank you very much, operator. Good morning and thank you for joining us on today's conference call. Joining me today is my partner, Co-Chairman and Co-CEO, Rich Gelfond. Also with us are our interim CFO, Ed MacNeil; Executive Vice President of Finance, Joe Sparacio; and General Counsel, Rob Lister. Before we begin, let me remind you of the following information regarding forward-looking statements. Our comments and answers to your questions on this call may include statements that are forward-looking, in that they pertain to future results or occurrences. Actual future results or occurrences may differ materially from these forward-looking statements. Please refer to our SEC filings for a more detailed discussion of some of the factors that could affect our future results and occurrences, including the 10-K we will be filing today. During today's call, reference will be made to certain non-GAAP financial measures as defined by Regulation G of the Securities and Exchange Commission. Discussion of management's use of these measures and reconciliations to GAAP measures are contained in the Company's earnings release and our 10-K for fiscal 2006, as well as our 10-Q for the first quarter of fiscal 2007, which will be filed today. The full text of the earnings release, along with supporting financial tables, is available on our website, www.imax.com. Today's conference call is being webcast in its entirety on our website as well. We are pleased to be hosting this call and filing our 10-K and 10-Q. In recent months, we've been working extremely hard to complete these filings and are pleased to be moving ahead unencumbered by the overhang of delayed filings. We would like to express our thanks to our finance department, audit committee and Board of Directors, for their tremendous hard work and dedication over the last few months as we…

Thanks Brad. Looking at the rest of our film slate, we announced on June 29 that we are partnering with Paramount Pictures, Warner Bros. Pictures International, and Shangri-La Entertainment to release Beowulf in IMAX 3D in November. This film is a CGI animated feature showcasing the performance capture technology of director/producer Robert Zemeckis, the acclaimed director of The Polar Express. As you will recall, Polar Express did very well in IMAX, with a total box office of $45.1 million, or $519,000 per screen, in its first year of release and over $60 million in IMAX theaters to date. This film has become a perennial. We're delighted to be expanding our studio relationships to include Paramount and are truly excited to be partnering with them on a project that is so well-suited to The IMAX Experience. Significantly, this is the first time a film will be released simultaneously in IMAX 3D as well as conventional theater digital 3D. There has been a lot of attention recently around digital 3D, which has delivered a new conventional theater experience, and we welcome the opportunity to compare simultaneous IMAX 3D and conventional digital 3D releases, as we continue to believe The IMAX Experience delivers the best, most differentiated movie going experience on the planet. Our view is that the per-screen box office performance of IMAX films to date, whether in 2D or 3D, clearly bears this out. We're working on two other films for the year, one to follow Harry Potter and one around Christmas. We hope to announce more specifics shortly. We're very excited about the 2008 film slate, which we are well into discussions as well. So far we have announced The Dark Knight, which is the next installment of the Warner Bros. Pictures Batman franchise, and again stars Christian Bale as…

(Operator Instructions). Your first question comes from Michael Kelman, Susquehanna Financial Group. Please go ahead.

Thank, hi. Two quick questions for you. Rich, I think you just touched on the digital upgrade and including that in some of your contracts. And you talked about what the accounting issues to that may be. Can you talk a little more qualitatively how the upgrade to digital is impacting your theater system sales process? How you are including that in your contracts? And then also maybe touch on how existing theater system contracts that are currently in your backlog are looking towards the digital transition and how you address that? And then the second question is with regards to the SEC and OSC investigations. Can you talk a little bit about where we are in the process of that? What other hurdles need to be met in order to move past that?

Sure, Michael. In terms of the digital, starting in the fourth quarter of last year, we looked out into the future and we didn’t want our business to come to a halt as people waited for the digital system to come online. So we included a provision in the contracts that said, if they took delivery of a film-based projection system, we would upgrade them to digital at our cost. Again, I would just like to run you through some numbers, Michael, so this makes some sense. The typical cost of an MPX system, including minimums, is around $1.5 million. The cost of goods sold of our film-based projector is around $600,000 to $650,000. And the digital upgrade costs around $350,000. So in the worst-case scenario, if we had to pay the full cost of the digital upgrade, we would still make a pretty decent margin on that. However, as I said during my other comments, we have been in discussions with a number of studios. I actually said three in the script, but we have started to touch on it with a fourth. And we believe that the studios will pay for that upgrade at a virtual print fee. So at the end of the day, we don’t believe we're going to end up paying that, at least certainly not all of that cost. The second part of the contract says that, if they are going to take delivery, let's say, in late 2008 and we are ready with a digital system, rather than putting in a film system and swapping out, we can put a digital system in, in lieu of the film system. Or we can have them delay by a few months so that we would put in the digital system, therefore eliminating the need for…

Yeah, Michael, I think your second question was about the continuing interaction with the regulators. I guess the first comment that I would make is that the SEC and the OSC were extremely helpful both through the informal interactions and also through the comment letter and response process. But as we noted in our release, the interaction we believe will continue. We still have more questions to answer in the comment letter and response process. And more generally, we believe that the OSC and the SEC both in [incorporating] and enforcement want to understand some aspects of our business better than they do now.

Okay, great. Thanks. One other follow-up question I wanted to ask with regards to the JV discussions you are having with other exhibitor partners. Can you talk a little bit more qualitatively in the discussions, what the exhibitors like about it? What they don't like about it? How they feel the economics of this compared to some of the other offerings that are out there in place, like you talked about digital 3D offerings? And if they use that as a comparable in terms of where they want to allocate their CapEx?

I think the exhibitors very much understand the difference between digital 3D and IMAX 3D. For example, Regal and – I am not sure about MUVICO, but Regal which we just opened the two JVs with, also has digital 3D, and I think they like that business for what it is. But they understand that the IMAX business is a different business. I don’t really think that has been a factor. What they like about it is the fact that we are putting up a significant amount of capital. They don’t have to. And what they also like about it is the fact that we are partners. I think intellectually from their point of view, they had some trouble with the fact that they were putting up the money and IMAX had the right to walk away metaphorically, even though we would never walk away. They like the fact that our interests are aligned. So, therefore, we have a stake in bringing in the best movies and we have a stake in making sure that it works well and that we are hand-in-hand in it. I wouldn’t say there is much they do not like about it. I think what they don’t like is that they still have to put up $200,000, and if you are an exhibitor you'd rather put up nothing than $200,000. I think it’s more a matter of getting more and more empirical data. And as I said during the prepared remarks, Michael, as the film performance has been so consistent and as the existing JVs have turned out good numbers, I think we will overcome these issues. But exhibition by nature is a relatively conservative industry and I think they just want to see the numbers. And then I feel pretty good that a number of them will accept the joint venture idea.

Michael, you also asked briefly about some of the competing 3D technologies. I think one of the things that they like about IMAX in general, and certainly that is true about the joint ventures, is the incrementality that we bring to the business, which is I think at this point highly verifiable through third party data in terms of incremental box office, as well as exclusivity. IMAX gives people exclusivity and we help them differentiate their multiplex from competitors. And I think those are two other aspects that appeal to the customers.

Perfect. Thanks very much.

Thank you. (Operator Instructions). Your next question comes from Paul [Tepish], Merrill Lynch.

Hi, there. Congratulations on improved results from recent movies and thanks for the updates. My question relates to your '02, '05 period. Do you feel that your restatements now put you in compliance with the language in the indenture in the bonds?

Sorry, we are having trouble hearing you.

I will speak more loudly. My question pertains to the '02, '05 period. You feel this recent restatement today puts you in compliance with the indenture language in the bonds?

I am going to turn that over to our General Counsel. I think I know the answer, but I'm going to turn it over to Rob.

Thank you.

Yes, as people that follow the Company are aware, we got consent from our bondholders back in April to file our financial statements by the end of June. And in addition to the June period there was a thirty-day cure period on top of that, which we have filed within. We also announced two consecutive extensions granted to us by our bank in conjunction with our credit facility, which took us through the end of July. So under both the indenture and under our credit facility, the Company believes it is in compliance with both reporting covenants.

Okay. Will you need to have officer certificates signed on those statements or no, we're to take them at face value now, the new restatements?

We're not going to get into all of the details, other than to simply say that the Company is quite confident that it is in compliance with all of its covenants under both its indenture and under its credit facility.

Okay, that's great. Thank you very much.

Thank you. Gentlemen, there are no further questions at this time. I would like to turn conference back to you.

Okay. Thank you very much. I think Rich and I both probably have some very brief concluding remarks. Obviously, like Rich, I want to thank everybody on the IMAX staff and Board and others in helping us get through this very time consuming process of restating our numbers and getting our filings in. Like Rich, we need to still the IMAX business, JVs, digital, film performance, network growth, and I think these are the things that we've got to turn our -- they have been going well. They've been going very well, but I think we have to continue to focus on. And I think management will have more time and energy, hopefully, to continue pushing in that direction. Rich?

As I said before, I think our company has performed quite well under the cloud of these statements having not been filed. But I actually think there were two clouds that are in the process of being lifted off. One is the financial reporting cloud by the filing today. And the second one is this digital transition. As I said, although Brad and I have not seen the final version, we're doing that. The reaction from the people at the Company and the earlier versions we have seen, digital can either be a showstopper or a tremendous opportunity. And from where we sit, I think it’s going to be a very big opportunity for IMAX and we will be happy to share that with you all, as well as our other development shortly. So thank you very much.

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