Welcome to IMAX Corporation’s Q2 2008 earnings conference call. Please note that today's call is being recorded. At this time, I would like to turn the conference over to Brad Wechsler for opening remarks and introductions. Please go ahead, sir.

Thank you very much, operator. Good morning everyone, and thank you for joining us on today's second quarter conference call. Joining me is my partner, Co-Chairman and Co-CEO Rich Gelfond. Also, with us today, our CFO Joe Sparacio, also, our General Counsel Rob Lister, and our Head of Investor Relations, Heather Anthony. Before we begin, let me remind you the following information regarding forward-looking statements. Our comments and answers to your answers 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 more detailed discussion of some of the factors that could affect our future sales or future results and occurrences. During today's call, references may be made to certain non-GAAP financial measures as defined by Reg G of the Securities and Exchange Commission. The full text of our second quarter release along with supporting financial tables is available on our web site, www.imax.com. Today's conference call is being web cast in its entirety on our web site. Today, we will start reviewing our progress related to our strategic initiatives and briefly recap our quarterly results. Then I will turn it over to Rich to take you through our film performance and future outlook as we work toward improved financial results. So to jump right in, while we are very pleased with the significant strategic progress made thus far in 2008, our financial results do not yet reflect the pieces being put in place that we believe will return IMAX to profitability. This is due to a number of factors including our transition to digital and lower than expected film performance during the first half of the year. Each of which has…

Thanks, Brad. I would like to begin by taking you through our film slate, recent joint venture deals, and business outlook for the remainder of 2008. As discussed in our last call, in April, we released Paramount Pictures "Shine A Light The IMAX Experience” which grossed $4.6 million worldwide as of quarter end. On May 9, we released “Speed Racer The IMAX Experience” in partnership with Warner Brothers Pictures which resulted in $5.3 million in box office for the quarter or $44,000 per screen. Although the film's gross was significantly lower than expected, we should underscore that IMAX accounted for approximately 10% of the overall domestic box office, a little more than 1% of the North American screens. In June, we released the IMAX version of "Kung Fu Panda". The first of our five picture deals with DreamWorks Animation. The DreamWorks Animation film is a great success worldwide and the IMAX version has yielded $11.7 million in worldwide box office to date. As Brad alluded to, while our first half film performance was lower than we would have liked, we believe the strength of our second half titles should make up for much of the shortfall and help us finish the year on a positive note, which is a perfect segue into "The Dark Knight" which has exceeded our expectations and appears to be nothing short of a phenomenon. In addition to a fantastic script and great performances from the cast, we believe visionary Director Chris Nolan's groundbreaking use of IMAX cameras to shoot the film's six biggest action sequences has provided a unique draw for audiences seeking event-type movie going that the IMAX experience delivers. By using IMAX cameras, Chris Nolan took advantage of IMAX's full screen aspect ratio to advance the dramatic effect of these sequences. For those…

Thank you, sir. (Operator instructions) Our first question will come from Eric Wold of Merriman Curhan Ford, please go ahead. Eric Wold – Merriman Curhan Ford: Hi, good morning, couple of questions. One, looking at the film slate for next year, between "Watchmen" and "Monsters vs. Aliens", assuming the dates don't change for these releases, they are about three weeks apart to the release date, kind of give us a sense of– is that really the sign of your ability to kind of get movies done and profit much quicker under the digital world, and then should we expect about that level between most films in '09 and 2010?

Actually, I think, three weeks is probably a little short, Eric. I think, probably the more typical time between films will be four or five weeks. In this instance, though, because of the advent of digital, we were able to amortize of cost of the prints over a much broader network, meaning there will be a film release which still costs $20,000 a print; however, there will also a significant digital release which will be very inexpensive. So, therefore the average cost comes down. In this instance, Eric, I think digital enabled it to happen, but it was more or less just the timing of the release date for films, not a strategic shift in our thinking, and I think – as I said, I think it is going to be four or five weeks, but I think we will be opportunistic in cases like this year where we only have two weeks to run "Madagascar", that's what we'll do, and I think you will see some of that next year, but, I think ideally it would have a little bit longer running room. Eric Wold – Merriman Curhan Ford: Okay, I apologize if you did say it, but with the eight movies you have this year, what is the thought on how many movies you could end up having next year and then if you want to look into 2010?

Well, I think, we are going to – we have started increasing the number of films. I don't think we were specific, but we did say under digital. We are just using your previous question, if every film would play three weeks, 52 divided by three is 17 films a year. We were not doing that. That's not our business model. We have been to seven – six, seven to eight– six to eight films a year recently. We think in a digital world, we should be in the 10 to 12 picture range, and I think you should start to see a gradual move up in IMAX as we go forward into '09 and beyond. Eric Wold – Merriman Curhan Ford: Okay, and then lastly. On the expense side, your R&D was a little over $2 million or so in the quarter, $2.5 million in Q1, how much is left that was spent in Q3? What should we think about that and where should that go? Should I get back down to $7 million kind of where it was, kind of in 06' or somewhere a lower than that?

I am going to ask Joe to answer that.

On the Research and Development year-to-date, it is about $4.5 million. We are now projecting that by the end of the year, we will be in the $7.5 million to $8.0 million range, and then the expectation would be that it would begin to ramp down from there. Eric Wold – Merriman Curhan Ford: Okay. How far down could it go back – to half that level where it was prior to digital?

Eric, going back a number of years in film world, we were at probably $3.5 to $4.0 million of, sort of, annual R&D. I think that's probably a little low in the early years of digital, and if you wanted – I literally just said that because that's a little low, but it should not be near the $7 million to $8 million of sustaining rate that we have been going through for the last couple of years. Eric Wold – Merriman Curhan Ford: Okay. Perfect guys. Thank you.

Thank you. Our next question will now come from Richard Ingrassia from Roth Capital Partners. Please go ahead. Richard Ingrassia – Roth Capital Partners: Thanks. Good morning, everybody.

Good morning, Rich.

Good morning, Rich. Richard Ingrassia – Roth Capital Partners: In the past, some changes in installation schedules have been fairly typical as you mentioned, Rich. So, should we be surprised if there is a change at all in the JV roll out schedule or do you have a better visibility there than on your legacy business?

There is no doubt that it's more predictable than it is in our legacy business, and the reason for that is that it's pretty much all retrofits rather than new builds, and it's all domestic rather than international. If you go through the variances in our install schedule, the biggest reasons for them tend to be either that the construction wasn't finished on time, permitting issues, things related to that, or they are in other countries, for example, we have had one that's been delayed in Pakistan for awhile and one in Lebanon, and I think you can understand, although doing business in New York City is difficult, it's not quite the same thing. So, I think you could see in our digital roll out changes in the boxes, so we said we are going to do Philadelphia and we will do New York instead, and I think it's possible. You could see a couple slip, because life isn't perfect, screen won't come in on time or a part won't work, but I think it will be much more predictable than what you have seen historically. Richard Ingrassia – Roth Capital Partners: And there are no negative incentives should that happen, right?

You mean, people have a right to walk away from the contract or something like that? Richard Ingrassia – Roth Capital Partners: Yes, or some change in the terms?

No, there aren't, but to make you comfortable, like for this year, the vast majority of the ones that are scheduled to open, you know, we have already done drawings with the exhibitors. The parts have been ordered. The inventory is being put in place, and this is very much with both AMC and Regal. It's very much a joint effort where they have a team and we have a team, and we were working together on a daily basis, and Brad and I get very frequent reports from the people running our team for us. So, when we say there is going to be 40 open and it is going to be 50 for the year, could it be off by a couple? Sure it could be. Could it be off by 20? That would be shocking to me. Unless some technical problem we haven't foreseen comes out of the blue. Richard Ingrassia – Roth Capital Partners: Okay, thanks. And sticking with the JV, I know there is no recoup so you start sharing first dollar, but can you give us a more precise idea of the lag in cash flow recognition post installation?

Basically and Joe, correct me if I'm wrong, I think, it is a figure, a quarter more or less. Joe?

Yes.

Yes. Richard Ingrassia – Roth Capital Partners: Okay, thanks, and one more question, if you don't mind. Obviously, you are entering a period here of more monthly installations than you have ever experienced as a company. Can you say just a few words about the resources you have in place at manufacturing and installation and service, and if you'll need to add to that capacity, when that might happen?

We did that already. I mean, one of the things that Rich and I have been working on for at least six months is making sure that we were prepared for sort of the change in our business and the more aggressive installation growth that we are going into, and we have hired, I think, both temporary and permanent people. We also recently beefed up our service representatives because we want to have people in the field to support the systems as necessary. So, I think that's already occurred.

And, Rich, just to give you kind of a broader perspective on it, I mean, our customers have seen the numbers that they are doing for "The Dark Knight" right now, and they are opening in time for Madagascar and Harry Potter, and this isn't a case of us pushing customers. This is a case of them pushing as hard as we are. Richard Ingrassia – Roth Capital Partners: Okay, thank you.

Thank you. (Operator instructions) Our next question will come from Jeff Blaeser of Morgan Joseph. Please go ahead. Jeff Blaeser – Morgan Joseph: Thank you, good morning, and thanks for taking my call. As you expand your theater base, let's say from 100 to 200 plus, do you see any potential cannibalization within the IMAX theaters? As an example "The Dark Knight", if you say you've done around $30 million, $35 million to date, if you extrapolate 200 theaters, what do you think that number would have been had we been one year out?

Let me give you the argument both ways and then tell you how we were think about it. Jeff Blaeser – Morgan Joseph: Okay.

The argument for no cannibalization is much more significant awareness of IMAX, and the fact that we are capacity constrained right now, so we are just going to be meeting unsatisfied demand. The argument going the other way, of course, is when you put multiple theaters into a DMA, you are going to be eating somebody else's lunch. So, in the context of all of that, I think our view as we begin to think of '09 and look at our own long-term model has been to put in a modest cannibalization factor to be conservative in terms of per screen performance going forward. I'm not going to define modest for you.

And to just add to the way we were thinking about it, when you look at a film like– it's going to be film dependent. So, when you look at a film like Dark Knight, I will give you like sort of an outline example, but the BFI at London has $1.5 million in ticket sales. They sold out weeks in advance in the theater. So, if you add other theaters, I don't really think there would be a cannibalization factor. So, I think, earlier in the run, it's less likely, and for real blockbusters, it's less likely. I think when you get later in the run and you get films on more of the shoulder period, you might see a little bit more of it happening, and that just gives you, as Brad said, a little more insight into the way we are think being it, but we are modeling it conservatively and we will all learn about it together. Jeff Blaeser – Morgan Joseph: Okay, fair enough, and also back on the installed base that you mentioned 40 to 50 this year to 250 by the end of Okay. I think that would equate to about 50 per year thereafter. Will the rest be international? I think you gave it to us. What would be the overall?

No. What we were saying is we were going to complete the AMC and Regal roll out in 2010, and that would give us 250 domestic theaters by 2010. You know, then we talked about international. We have not yet gone through our budget and made plans for precisely how many we are going to roll out, but there certainly should be more than 50 a year. Jeff Blaeser – Morgan Joseph: Okay, that's just a base case, and then add-ons will most likely develop.

That's based upon signed contractual deals that we have in backlog right now, and we obviously will be adding to our backlog as we continue to do business. Jeff Blaeser – Morgan Joseph: As a good problem to have, is that backlog impacting future signings just because you may not be able to get to them in a certain time or you have not seen that yet?

No, but what you are seeing is in North America. I mean, we probably have about 400 zones, and we are in 250 of those zones including the contracts. I have said this before and everyone should be clear about this, there is no other 100-theater deal that you could do in North America because you have to start to attack the holes in your network rather than your wholesale network. So, the ability to deliver is not affecting our backlog. Jeff Blaeser – Morgan Joseph: Great, thank you very much.

Thank you. And our next question will now come from David Lu of Hedgehog Capital. David Lu – Hedgehog Capital: Hi, guys, how are you?

Hi.

Hi. David Lu – Hedgehog Capital: Just wondering, if there are any plans for digital IMAX camera on the drawing boards or if that's something impossible?

Right now in terms of digital camera development, we have made the decision to let others do that. Right now, there has been Sony and Panavision, have been increasing the quality of their digital image capture systems. It often happens in conjunction with working with a film maker, for example, James Cameron has been very involved in developing image capture to suit their needs for given pictures. As long as that is going on, we haven't seen the need to do that ourselves. What we feel we can do and where we continue to invest and make progress is take those images that are captured whether they are captured digitally or on film and then with our own digital proprietary DMR system to improve the sort of size and resolution and make them what we consider to be IMAX quality. David Lu – Hedgehog Capital: So, you are saying you are continuing to work on improvements to that conversion?

On digital manipulation, always, for example, we have mentioned in the past IMAX Live. As you go digital, we want to be able to do the World Cup in IMAX. Now, that means realtime up revving and as opposed to doing it off-line and these are things that we were still working on. David Lu – Hedgehog Capital: Okay, great. Thanks.

Thank you, Dave.

Thank you. At this time, I would like to turn the meeting back over to management.

I guess, just summing up the call and where we are is that IMAX has been this phenomenal consumer proposition for 40 years and where people are willing to pay a premium price for a premium experience, and I think the changes in the last couple of years led by the transition to digital and our joint venture model, I think will enable us to monetise the commercial appeal of IMAX in a way that we haven't been able to do in the past. As we said at the beginning of the call, the transition to digital has been somewhat painful from a financial point of view, and obviously financial results look backwards not forwards, and I think we are still seeing some of the effects of that transition. And as we get into the real world and we start shipping the digital systems and we start delivering more and more movies, not "The Dark Knight" is obviously a phenomenal success, but some of the four pictures we announced today and others to come in 2009. We believe that our financial results will follow the business momentum, and as a management team, I think we are all incredibly excited about where we are. And we laid out a number of strategical goals and initiatives over the last couple of years, and I think we have achieved most, if not all of them, and we are looking forward to being able to have calls with you where that translates into financial results as well.

I have nothing to add. I think that was very comprehensive. Thank you very much.

Thank you very much.

Thank you. Ladies and gentlemen, this does conclude your conference call for today. Once again, thank you for participating and at this time we ask that you please disconnect your lines. Have yourselves a great day.