Brad Wechsler, Co-Chairman, Co-Chief Executive Officer Rich Gelfond, Co-Chief Executive Officer Frank Joyce, Chief Financial Officer

Eric Wold, Merriman Curhan Ford & Co. Richard Ingrassia, Roth Capital Partners Ken Silver, CRT Capital Matthew Harrigan, Janco Partners Michael Kelman, Susquehanna Financial Group David Marsh, Friedman, Billings, Ramsey Dennis McAlpine, McAlpine & Associates

Welcome to IMAX Corporate 1st Quarter Earnings 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.

Brad Wechsler, Co-Chairman, Co-Chief Executive Officer: Thank you. Good morning, everyone and thanks for joining us today for our 1st quarter 2006 Conference Call. Joining me as always, is my partner, Co-Chairman and Co-CEO, Rich Gelfond; also with us are our General Counsel, Rob Lister and our CFO, Frank Joyce. Before we begin, let me remind you that the 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 results, 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 10Q we are filing later today. Our 1st quarter 2006 financial results were issued this morning in a press release for all of you to review. During today’s call, references will be made to certain non-GAAP financial measures as defined by Regulation G of the SEC. Discussion of management use of these measurements and reconciliations to GAAP measures are contained in the company’s 1st quarter earnings release and our 10Q. The full text of the earnings release along with a supporting financial table is available on our website www.imax.com. First, let me briefly outline the agenda for today’s call. I’ll review our 1st quarter financial and operating results, I’ll then turn it over to Rich for our current outlook and an update on the process underway to produce strategic alternatives for the company; finally we’ll open the call up for your questions. But before I begin, on the nuts and bolts of our operations and before I turn it over to Rich, I’d like to release to the elephant in the room and tell you our strategic alternatives process is proceeding nicely and the interest expressed in IMAX to date has been described by our bankers as robust; now to the financials. For the 1st quarter, we recorded a net loss of $0.14 per share. This was about $0.04 worse than the approximately $0.10 loss we had originally guided to. The variance between our projected results and our actual numbers, is attributable to a number of factors including the under performance of “V for Vendetta,” which reduced earnings by $0.02. In addition, the increase in non-cash compensation related to the increase in stock price after our announcement that we were exploring strategic alternatives including the potential sale of the company reduced earnings by $0.01. But, we also incurred other non-cash expenses related to the sales process in the quarter. In terms of executing our core operating initiatives and commercial strategy, we continue to make progress in the 1st quarter. In particular, we were successful in our ongoing efforts to utilize our MPX systems to convert conventional multiplex auditoriums into IMAX theaters and expand our network of theaters throughout the world. Looking at each of these areas in a bit more detail, we had eight theater deals in the 1st quarter, six of which were in North America. We think this is a testament both to the fact that our existing theaters are performing and of course to our powerful 2006 film plate which will now feature a new day-in-day blockbuster film hitting IMAX theaters every 6-8 weeks. Our backlog at the end of March consisted of 69 systems with a value of $111 million and as we said in the past, signing remains the best indicator of our future financial performance. To put it in more perspective for you, seven quarters have passed since we installed our first MPX system in Oviedo, Spain. In the seven quarters that preceded that installation we signed deals for 46 systems. In the seven quarters that followed, we signed deals for 79 systems. This is the clearest indication of the company’s momentum right now, fueled by the combination of the favorable economics of the MPX system combined with the increasing intent of the increasingly attractive slates of DMR films. It is not a coincidence that the growing success of these two technological developments, MPX and DMR, resulted in every single key metric of our business earnings, revenues, signings, and installations going up solidly in 2005. As expected, we completed one installation in the 1st quarter. As we have indicated previously, we expect 2006 installs to be heavily backend loaded as they were in 2005. Q2 will be significantly better than Q1 with approximately 10 installations but the dramatic up take of installations are scheduled for the second half of the year, in particularly Q4. Turning to our 1st quarter film performance, we released the IMAX version of “V for Vendetta” on March 16 to approximately 56 domestic and 13 international theatres. As we mentioned previously, “V” was an R-rated non-franchised film and as such was a bit of an experiment. It could have been the nature of the film, it opened on fewer screens than “Harry Potter and the Goblet of Fire” or “Polar Express” and in some theaters it shared playing time with our other release “Deep Sea 3D”. The film opened reasonably well and enjoyed positive audience response, but it did not hold the audiences’ attention as long as we had hoped. While the film disappointed from a financial perspective, it filled out film slate and helped exhibitors during a traditionally slow film period. I should point out however, that even though on an absolute basis “V for Vendetta” under performed, on a relative basis, 35mm the results were impressive as IMAX box office trends continue to exceed those of traditional 35mm film. “V” also presented us with some interesting data relative to other DMR releases. The IMAX DMR version of “V” represented 7% of the total domestic box office compared to the 4-5% share that our other DMR films have typically had on less than 1% of the screen exhibiting the film. While we were disappointed, the film did not perform better overall, we believe the relative strength of IMAX vs. traditional 35mm film reflects that fact that moviegoers are increasingly voting at the ticket window; seeking out IMAX and order to enjoy a truly (inaudible) film viewing experience. On a financial basis, as noted before, we performed $0.02 a share worse than what we had budgeted. On the other hand, we were very pleased with the 1st quarter performance of “Deep Sea 3D,” a 45-minute film on original IMAX 3D production which we released with Warner Bros. This film has turned out to be a real bright spot for us demonstrating consistent strength week after week and actually gaining momentum since it first opened. To date, this film has grossed about approximately $8.8 million. In addition, being bolstered by nearly unanimous positive reviews “Deep Sea’s” success has been driven by its ability to capture viewer’s imaginations by offering them a stunning under water experience. This film is still running in approximately 49 theaters world wide and continues to perform well. Finally, I should mention that the DMR version of “Harry Potter and the Goblet of Fire” has grossed more than $20 million becoming the first digitally re-mastered 2D IMAX release to reach this milestone. This gives the film accumulative per screen average of around $190,000 and we think this success underscores the growing consumer enthusiasm for film that have been digitally re-mastered in The IMAX Experience. From a cost perspective, I’d like to remind you that the cost for us to convert a 2D film is typically in the range of $1.5-2 million. Because this cost doesn’t change, we are able to recognize incremental margin growth as we leverage IMAX films over our ever expanding network of theaters. In addition, we’d like to remind you that for a theater to earn $1 million a year at the box office on six films, they need to average about $160,000 per film. Six of our last eight films have averaged at this level or better. Also, 3D films tend to perform noticeably better than 2D and in 2006 we will release four 3D films as well as “Superman” 3D which will contain 20-minutes of 3D footage. Before Rich looks ahead to the exiting films due to release in 2006, I’d like to walk you through some of the financial line items for the 3-month period ending March 31, 2006. For the 1st quarter, total revenue was $20.4 million as compared to $31.4 million for the 1st quarter of 2005. We had one install in the 1st quarter compared to six in the 1st quarter last year. There were no revenues associated with consensual lease buyouts, terminations by default, and MPX conversion agreements included in systems revenue this year compared to $7.1 million in lease buyouts in the 1st quarter a year ago. Breaking the total revenue down further – film revenue for the quarter was $6.5 million up from $4.9 million in the year ago quarter. Theater operation revenue for the quarter were $3.7 million vs. $3.8 million in the 1st quarter of 2005. Other revenues were $842,000. Turning to expenses for the 1st quarter, SG&A was up $260,000 to $10.5 million. As we mentioned SG&A was impacted by non-cash expenses related to the timing and announcement of our sale process including phantom stock appreciation, option grants, and other costs. In addition, the strength of the Canadian dollar negatively impacted our results by about a ½ a cent. R&D expenses for the quarter were roughly $915,000; with that let me turn it over to Rich. Rich Gelfond, Co-Chief Executive Officer: Thanks, Brad and good morning everybody. In recent months, there has been a lot discussion of the impact of digital technology on IMAX. So I thought it would be useful to give you our perspective – on our last call we updated you on developments on the digital front both in conventional cinema and in IMAX. One key update was the release of the first film in digital 3D. At that time, the numbers for Disney’s digital 3D version of “Chicken Little” had just come in which indicated about $8 million in total 3D box office on roughly 85 screens with approximately 1/3 of the films attendance being incremental or attracting new audience members to the (inaudible). Since then, we have got more detail on clarity on the films performance. The total 3D box office for the film was actually a little less than $8 million and the incremental attendance ended up being slightly less than 33%. Once again for comparison purposes, it seems to make sense to compare the performance of “Chicken Little” 3D in digital with “Polar Express” in IMAX 3D because both films grossed around $125 million box office and 35mm 2D. I believe you will agree with us that the data underscored how IMAX 3D is an entirely different experience in exhibitor and consumer proposition than digital 3D. Remember “Polar” 3D played on almost exactly the same number of screens as “Chicken Little” 3D. The 35mm 2D versions of the films were almost identical and they were both released at exactly the time of the year to the same target audience; so they are about as good a comparison as you are ever going to get. In fact, the only major difference between the conventional films was that the conventional version of “Chicken Little” featured much more aggressive marketing of the 3D digital version including give-a-way “Chicken Little” 3D glasses. As we continually point out, the numbers make the point better than the word can. “Chicken Little” 3D did approximately $8 million as I said in digital 3D. “Polar Express” did $45 million in its initial run in IMAX 3D. “Polar” was 95% incremental, meaning it brought virtually an entirely new audience to the complex whereas “Chicken Little” was only about 30% incremental meaning about 70% of the “Chicken Little” audience was cannibalized from its complexes other auditorium. To elaborate on what we define as incremental, we track three CGI films in a certain group of film complexes. If you take what these films did at the base line, “Chicken Little” drove the box office 30% higher in those complexes. “Polar Express” on the other hand, did 300% better than the base line. One screen in the country showing “Chicken Little” grows $300,000 or more 90% of the screens see viewing “Polar” 3D grossed over $300,000. If you look at how domestic multiplexes are ranked in the industry, the average IMAX multiplex showing “Polar” moved up significantly in these rankings as a result of showing “Polar” in IMAX 3D. According to the numbers, the average multiplex showing “Polar Express” increased from approximately number 280 in the United States to number 60 as the result of exhibiting “Polar Express” 3D. These numbers are not meant in any way to disparage “Chicken Little” or digital 3D. They are simply meant to demonstrate that just as IMAX 2D is dramatically different than conventional 2D, IMAX 3D is just as different from a 3D film in a conventional theater. Just as IMAX theater design, screen image quality, and sound cannot be matched at conventional 2D auditorium, the same elements of The IMAX Experience have exactly the same differentiation value in a conventional 3D auditorium regardless of whether the 3D technology in that conventional theater is analog, digital, or whatever comes next. IMAX theaters are designed in a way to bring the audience inside the movie. They remove the queues for the consumers watching a film to create a sense of realism and (inaudible) by making the films boundaries disappear. This is what will always separate IMAX from any other film and any technology exhibited in a traditional movie theater. And, as we work on our own first generation of digital projection systems as we announced previously, that has a very high research and development priority for us. You must remember that these systems will be installed in IMAX theaters featuring the same critical proprietary component that create the trademark IMAX Experience; which consumers around the world have always driven farther for, paid more for, and rated higher than any other cinematic experience anywhere. As we said in the past, we will not unveil an IMAX digital projector unless it carries an image quality consistent with the IMAX brand. Today our R&D efforts are advancing rapidly and we expect some significant announcement in the near future. Our early work with digital back in the later 90’s could not produce a digital product of this level of quality; nor could any of the chipsets we are seeing in the conventional digital rollout today. However, by using our extensive stable of digital IP and working closely with a premium technology partner, we made some breakthroughs that we believe will lead us to an additional product of IMAX quality. One that when installed in an IMAX environment, will deliver an experience consumers have come to expect from us and one that is worthy of our brand. If this product is successful, there will be tremendous benefits for all our constituents. As a digital IMAX theater, we can promise an enormous print cost savings, the draw of bringing special attractions such as live events to the IMAX theater, and a payback structure many times more profitable than the conventional payback model. Using conservative assumptions, a $100,000 to $125,000 digital projector and annual print savings of $17,000 per year for all the prints, the payback on investment for conversion of a conventional screen to digital is 6-8 years. Compare that to payback that is less than 3-years for the conversion of an IMAX theater from film to digital and you see why we are quite excited about both the economic and the entertainment opportunities connected with an IMAX digital system. Now moving on to our film slate. We are extremely pleased as to what we have lined up for the rest of 2006. Our current slate ensures that we will have a new release every 6-8 weeks, which is both psychologically and financially important to our exhibitors. It also marks the first time we have developed such a regular flow of content; which is yet another reflection of the success of our commercial strategy. This Friday, we will release the IMAX DMR version of “Poseidon” on 62 domestic screens which includes the largest number of domestic commercial multiplex screens we have ever opened a film on. We will also open “Poseidon” in 17 international markets. As many of you know, this high tech special effect driven film tells a survival story of passengers aboard an ocean liner toppled by a colossal tidal wave. We think the famous scene where the wave capsizes the ship will really take your breath away on the huge IMAX screen. We are also very excited to announce that four theaters in Mexico will actually begin showing “Poseidon” a full 2-weeks before it opens in conventional 35mm format in Mexico. We think this will really help communicate to audiences the unique entertainment proposition we offer moviegoers, and underscores IMAX’s ability to stand our in the current entertainment environment. As we have seen historically, we expect “Poseidon” to benefit from Warner Bros. strong commitment to marketing the IMAX DMR version of their film. Their efforts to integrate IMAX into their marketing campaign really make a difference in the performance of these films. Hopefully, you all saw our very exciting announcement a couple of weeks that on June 30 the highly anticipated “Superman Returns” will become the world’s first wide action Hollywood feature, so it could be converted from 2D to IMAX 3D. We will use our proprietary 2D-3D conversion technology to convert approximately 20-minutes of the film into 3D and we think the results will be absolutely spectacular. As a matter of fact, we’ve seen some of the early conversions and they look really terrific as audiences will feel like they are really flying with this timeless super hero. This is an historic first for IMAX a real milestone in our company’s technological evolution and we couldn’t be happier to be bringing “Superman” to a level of live action realism never before seen on our screen. This conversion into IMAX 3D represents a true blending of technology and film that will transport audiences to a whole new level in terms of scale and power and we cannot wait to see their reaction. “Superman” will be followed by six solid months of IMAX 3D Hollywood films. We remain very excited about the August release of the CGI animated film “The Ant Bully”. This film is voiced by an all star cast and has a great story line. With universally appealing scenes and is produced by Playtone, the production company run by Tom Hanks, that produced “My Big Fat Greek Wedding”. “Open Season” is an animated feature from the director of the “Lion King”; another great film for families “Open Season” tells the story of a deer who befriends a grizzly bear when the two animals are alone in the woods during hunting season and the film features an all star cast of contributing voices including Ashton Kutcher and Martin Lawrence. We said before that we are excited about expanding our studio relationships and to that end we are pleased to be partnering with Sony Pictures Animations for the release of “Open Season” which is Sony’s first CGI film. We last partnered with Sony on “Spiderman 2” and we look forward to working with them again to provide “Open Season” moviegoers with The IMAX Experience not found anywhere else. Finally, November will mark the release of another Warner Bros. film, “Happy Feet” which is a tale about a penguin trying to find its mate through dance because of the penguin’s lack of ability to sing. It may sound a little corny but watch out for this film, the buzz is already gaining momentum and we certainly have high expectations. The film has a great cast that includes Nicole Kidman, Hugh Jackman, and Robin Williams and is being directed by George Miller who directed the “Babe” film, “Lorenzo’s Oil”, and the “Mad Max” trilogy. Overall, we think our 2006 film slate will be instrumental in driving recurring revenues. As we look ahead, I think it is worth reiterating, that our films continue to bust the box office trends for traditional 35mm films. In the 35mm world, domestic box offices seen the impact of consumers choosing the stay home and watch DVD’s, browse the internet, or play video games. IMAX DMR films, on the other hand, continue to enjoy significant strength at the box office relative to the 35mm version. What IMAX delivers is unique and cannot be replicated in the home or anywhere outside of IMAX theaters. The box office underscores this, while conventional exhibitions was down for the third consecutive in 2005, IMAX DMR box office was up 35% and that is with two less film and three less IMAX 3D films than we have on our slate in 2006. Looking out to 2007 – we are in the midst of discussions with multiple studios about some of the best movies of the year. We can’t be any more specific on today’s call; unfortunately, but we are thrilled about the opportunities to open to us and look forward to updating you in the near future. Now I’d like to provide you with a brief update regarding our process to find strategic alternatives for IMAX. As you all know, on March 9 we announced we had retained Alan and Company and UBS to explore strategic alternatives for the company including a possible sale. We continue to believe that a partner or an acquirer could help take IMAX to the next level in any number of ways including providing additional flexibility to accelerate our attractive joint venture strategy, helping us develop new technological innovations, or adding to our brand and marketing reach. We have been very pleased with the level of interest we’ve seen to date and how the process is going so far. We are currently evaluating preliminary proposals from a broad range of interested parties and preparing for the second round of the process. Overall, we would characterize the process as very dynamic and robust and remain convinced that this process will ultimately enable us to derive the best value for our shareholders. We hope you understand that at this stage it is difficult to assign a concrete time frame for this process, but we look forward to releasing additional information just as soon as we can. While we are very focused on recognizing value for our shareholders as part of our exploration of strategic alternatives, we are also committed to accomplishing our financial and operational goals as we move forward. While our 1st quarter financial performance was somewhat disappointing because of expenses related to the sales process and disappointing results from “V for Vendetta”, we believe these results do not reflect any fundamental weakness in our growth and operating strategy. We continue to expect signings, installations, and film performance to accelerate in 2006 and drive significant growth. Specifically we plan to sign deals for 45-50 new systems this year. Moving on to our 2nd quarter expectations – we have planned to install approximately 10 theater systems. We should mention that 5 of these 10 installs are either actually new signings or installations that we moved up because exhibitors were eager to take advantage of our strong film slate. We expect 2nd quarter revenues to come in at about $40 million and to report earnings in the range of $0.05-0.08 per share. As we indicated on our last call, we are not providing full year guidance given the fact that we remain in the midst of our strategic alternative process; however, we can confirm that we are on track with regard to our objectives for both signings and installations, the company’s most important indicators of growth and financial performance. We hope you all share our enthusiasm for what may develop for IMAX in 2006 and beyond. Thanks very much for listening and I’ll turn it over to the Operator as we are happy to take questions.

At this time if you do have a question, please press “*1” on your touchtone telephone and if you are on a speaker phone, please be sure your mute function is turned off to allow your signal to reach us. And once again, that is “*1” for questions and we’ll pause for moment. And we’ll take our first question from Eric Wold, Merriman Curhan Ford & Co. Eric Wold, Merriman Curhan Ford & Co: Hi good morning. Recently there has been, as usual, a lot of concerns raised by others in the Press about your finances and how that may effect the sale process – I know you can’t talk too much about it, but is there anything you can say about any financing that been lined up or committed to or anything along those lines for people that may be looking to joint venturing with you or acquiring you? Rich Gelfond, Co-Chief Executive Officer: It is my understanding, Eric, that a couple of investment banks have offered financing to potential acquirers around IMAX and those investment banks that did their work long before any recent articles and the recent articles didn’t change their view at all. I think I know what you are referring to and I don’t think there has been anything to change anybody’s view. There hasn’t been anything changing anyone’s view of the process here. Eric Wold, Merriman Curhan Ford & Co.: Perfect – and just a couple of questions on Q2, in that Q2 guidance of the 10 systems to be recognized revenue on what is the mix between North America and International? Rich Gelfond, Co-Chief Executive Officer: Do you have the answer to that, Frank? Frank Joyce, Chief Financial Officer: I don’t have that. Rich Gelfond, Co-Chief Executive Officer: He could look while the call goes on, Eric and we’ll come back to that. Eric Wold, Merriman Curhan Ford & Co.: Ok and since there obviously was less than $1 million in lease buyout revenue in Q4, nothing in Q1, anything in Q2 in the Q2 guidance for that? Rich Gelfond, Co-Chief Executive Officer: I don’t know off hand, but it is not a material number. Eric Wold, Merriman Curhan Ford & Co.: Ok and then lastly, just looking at this year assuming, maybe this has been updated, assuming there are no additional signings at all this year, which I think is unlikely, but no additional signing at all where would you fall on to what schedule to be installed this year in terms of the total number? Rich Gelfond, Co-Chief Executive Officer: Eric, we don’t look at it that way because obviously in the comment I just made a big part of our year includes some signs and installs. I don’t know what the number is off hand; we are not looking at it that way. Frank Joyce, Chief Financial Officer: And for the Q2 installations – I see four being for North America. Eric Wold, Merriman Curhan Ford & Co.: So it is four for North America? Frank Joyce, Chief Financial Officer: Yes.

I’ll go next to Richard Ingrassia, Roth Capital Partners Richard Ingrassia, Roth Capital Partners: Thanks and good morning everybody. Rich, just to be clear – your guidance then for 2006 is still between 38-45 installations? Rich Gelfond, Co-Chief Executive Officer: This is an area you have to be very precise in. I think we said we are not giving any guidance on this call. I don’t remember exactly what we said in the last call, but I just don’t want to trip over any words. What we said is we are on track for whatever we said, ok. I just don’t want to reference to what I don’t remember what was said on the last call. Richard Ingrassia, Roth Capital Partners: Ok – that is what I have for last time. What was the amount, if you can, of incremental SG&A in the quarter related to the deal; it looks like it came in at about $2 million ahead of the run rate. Rich Gelfond, Co-Chief Executive Officer: No, SG&A was not $2 million ahead of the run rate – we were almost flat with last year. But, I would say probably close to $1 million ahead of the run rate, is that what you would say, Frank because of stock appreciation charges and some of the other things deal related expenses and some other, and I’d say it is around $1 million, Rich. Anything else? Richard Ingrassia, Roth Capital Partners: Yes, I don’t know if you could answer this specifically or not either but do you have a number, last quarter you gave us a way to back into 2006 backlog vs. your install guidance for the year. Can you give us some sense for the backlog today for 2006? Frank Joyce, Chief Financial Officer: I am probably not answering that question, but the backlog today I think is 69 systems with $111 million. Richard Ingrassia, Roth Capital Partners: Of the 69, how many are on backlog for 2006? Frank Joyce, Chief Financial Officer: I cannot tell you off the top of my head. Rich Gelfond, Co-Chief Executive Officer: You can call later and follow-up, we just don’t have it off the top of our heads.

I’ll go next to Ken Silver, CRT Capital Ken Silver, CRT Capital: Hi good morning. I guess a couple of questions… Rich Gelfond, Co-Chief Executive Officer: Just one thing, Rich – I think they are around a dozen that needs to be signed and installed in the budget, around – ok is that the question you are looking for? Come back in the queue Rich and tell me if that is not the answer you are looking for ok. Go ahead, sorry. Ken Silver, CRT Capital: Ok – in the Press Release it says you recognized revenue on three installations in the 1st quarter, but Brad you said you only installed one. I know this has come up before but could just clarify that again. Rich Gelfond, Co-Chief Executive Officer: I think two others were like lease renewals, so where as the lease term expires at ten years and the elected to renew it, they are not installs but there is some revenue implication which are significantly smaller than an install. Brad Wechsler, Co-Chairman, Co-Chief Executive Officer: Those are lower margins obviously. Ken Silver, CRT Capital: Ok and then the 2nd quarter guidance you said revenue you are expecting approximately $40 million which is basically $20 million higher than the 1st quarter. I guess there are going to be nine more installations? Rich Gelfond, Co-Chief Executive Officer: That is what we are guided to, yes. Ken Silver, CRT Capital: Can you give a sense for what you expect film revenues to be in the 2nd quarter or how much of that 40 is film? Brad Wechsler, Co-Chairman, Co-Chief Executive Officer: I think that is hard to break that out specifically, but obviously 2nd quarter revenues should be noticeably better than 1st given the performance of the films in the 1st quarter. Rich Gelfond, Co-Chief Executive Officer: It is about 12. Ken Silver, CRT Capital: Ok so in other words the two major underpinnings of the higher revenue, the nine installs and higher films, right? Rich Gelfond, Co-Chief Executive Officer: Yes, I mean if you want to just say nine installs then I don’t know it is probably a little off, but if you say the average install is around $1.5 million a little bit more, I mean that gets you most of it. Ken Silver, CRT Capital: I guess at 14, 14 out of the 20. Brad Wechsler, Co-Chairman, Co-Chief Executive Off: Because there are increases in systems obviously. Ken Silver, CRT Capital: And then I just have a couple questions about the M&A process, you said you are moving into the second rounds. Can you describe what the first round entailed? Rich Gelfond, Co-Chief Executive Officer: I am going to talk generically about it, not our process the way these processes work in general is that your investment banks receive a large number of inquiries and out of that they decide who to enter confidentiality agreements with, who to send books to it is a wide net and then it bankers, and again I am not talking about our process, but in general they whittle that down by seeking preliminary proposals and they look at what the proposal is, what is the financial capability of the person making the proposal, what is their reputation, what is their timeline, what is their likelihood that they’ll close and then that somewhat smaller group goes into a much more intensive diligent phase and in general that is what a second round is – is that much more intensive phase. Ken Silver, CRT Capital: Ok – so your first round received financial indications of interest. Rich Gelfond, Co-Chief Executive Officer: I am not going to comment on our process beyond what we said.

And we’ll go to Matthew Harrigan, Janco Partners Matthew Harrigan, Janco Partners: Most of my granular questions were answered, but is Warner’s likely to prominently the 20-minute live 3D excerpt in its marketing and can we infer from this that you are more optimistic on the time path for having more 3D live action content in 2007. And then lastly, I know you can’t get very specific at all on the strategic alternatives process, but nobody even your admirers is allowing for any of the movies you have this summer to do “Polar Express” type numbers, can you make an argument that it would be very good for the strategic process to require to at least to extend into the summer to show the credibility if you do manage to have another hit, maybe not a candid “Polar Express” but certainly a lot higher than some of the cynics who think that “Polar Express” was just a one off would be inclined to believe. Brad Wechsler, Co-Chairman, Co-Chief Executive Officer: I think Warner Bros. like IMAX is very excited about the notion of incorporating 3D footage into “Superman” and I absolutely believe that that will be featured prominently in the marketing of the film – it is really I think again Warner’s would like to do something special for their audiences, they would like to be able to come back and see the film another time and see it in 3D and I think we have developed this very symbiotic relationship with Warner, particularly as it relates to the best way to marketing a film to create incremental revenues both for Warner Bros. and for our theater customers so you should expect to see the marketing. With respect to what that means for 2007 and beyond, I mean as Rich said in his speech he sort of underplayed it a little. This is the first time that we are going to see any footage from a live action 35mm film converted to 3D, very, very exciting. In some sense this is what IMAX is all about which is sort of at the cutting edge of both film and technology and absolutely you start with small steps and you accelerate to larger steps and I think as we go forward, you’ll see more and more of this as we go forward into 2007 and 2008. And with respect to your last question about timing and strategic alternatives and trying to be smart enough to sync up strategic alternative process with film releases and film performance, (A) we are not that smart, and (B) the strategic alternative process has a pacing of its own so I think they really are separate and discreet.

I’ll go next to Michael Kelman, Susquehanna Financial Group Michael Kelman, Susquehanna Financial Group: Thanks, gross margins were only around 30% in the quarter obviously significantly below the 50% level experienced over the last few years. Obviously that was driven mostly by the revenue short fall, but could you walk us through the variable and fixed nature of your cost structure – particularly in the cost of sales given the weakness in gross profit. Frank Joyce, Chief Financial Officer: Clearly gross margin is driven by the number of installations and there is a certain amount of fixed costs within the cost of sales that is covered as more installation go, so in looking at gross margins in the quarter in this significant variance, clearly it is the number of installations. I know you are talking about cost of sale a big part of obviously the selling effort is in SG&A, one item in cost of sales is obviously variable is actually, literally the system cost which you do not debit out of inventory when an installation is deferred, but I think the big answer to your question is really when you go down to three installs the mix of your revenue drifts dramatically to your other parts of your business and out of systems which is the very high margin part of our business.

We’ll go next to David Marsh, Friedman, Billings, Ramsey David Marsh, Friedman, Billings, Ramsey: Thanks, guys could you disclose what the amount of non-cash comp was in the quarter? Brad Wechsler, Co-Chairman, Co-Chief Executive Officer: When you say non-cash comps sure I mean the stock charge was around $500,000, the stock appreciation rate that was one. There were deal related expenses, and this is just by memory but it’s close, which were a couple of a hundred thousand dollars, there were some option expenses (about $300,000) with retention agreements related to the sale which were around $300,000 a couple of other things but that is pretty much the bulk of it. David Marsh, Friedman, Billings, Ramsey: In terms of the backlog, how many of the 69 systems in backlog are MTX? Brad Wechsler, Co-Chairman, Co-Chief Executive Officer: Do you know the answer to that, Frank? Frank Joyce, Chief Financial Officer: Yes, about 65% for 45 systems. David Marsh, Friedman, Billings, Ramsey: And then with regard to the 2D-3D conversion from live action – you guys haven’t done it in the past this is your first forte into it for public consumption, but do you guys have an estimate of how much it would cost you to do a whole film 2D-3D live action? Frank Joyce, Chief Financial Officer: I’ll give you an estimate and then I’ll also make an observation. I think that our estimate is probably around $8 million or so or $8-10 million to do initially, but I think the key thing is we are talking about a new technology here and just the way, I don’t know with shareholders many, many years ago this is the first time we did a DMR film which is “Apollo 13” the conversion process took us 7-months and was fairly expensive. It now takes us 2-weeks or in some instances even less and it has become highly automated so over time we expect to see significant decreases in the cost and increasing amounts of automation in the process. Right now, it is a little too labor intensive that is because it is new.

We’ll go next to Dennis McAlpine, McAlpine & Associates Dennis McAlpine, McAlpine & Associates: Thank you and good morning. Following-up on that, can you talk about the costs as splitting on the 3D conversion on “Superman”, how much you are taking vs. Warner, are they taking any of that cost? Brad Wechsler, Co-Chairman, Co-Chief Executive Officer: I can’t comment specifically on the deal, Dennis, but the bulk of it is born by Warner. Dennis McAlpine, McAlpine & Associates: And on “V for Vendetta”, just to clarify – when you say it was $0.02 less than expected, you are not saying that it was a $0.02 loss? Brad Wechsler, Co-Chairman, Co-Chief Executive Officer: That’s correct. Dennis McAlpine, McAlpine & Associates: And then lastly, if you were to do a digital 3D or a digital IMAX would it make sense for you to go into a digital distribution i. e.: AIX/Christie or something like that and what does it cost you currently per print? Frank Joyce, Chief Financial Officer: One of the reasons why digital is such an exciting opportunity for IMAX, I am going to try to make this as simple as possible, the ratio in the 35mm world and the AIX world the ratio of the cost of a projector to a print cost is about 100 to 1, $100,000 to buy a projection system, $1,000 per print. We expect that the ratio of projector cost to print cost in the IMAX world is 15 to 1; which means after 15 films, you can basically pay for the cost of the IMAX digital projector. That is unbelievably compelling in terms of payback and deployment. Rich Gelfond, Co-Chief Executive Officer And Dennis, I don’t know if you were going here, but if you are asking the question whether something like virtual print fees could finance the role out of IMAX digital that is something that we have been examining closely. Dennis McAlpine, McAlpine & Associates: If you concluded on that examination yet whether it is something that you want to get into or is there something that you would like a third party to get involved? Rich Gelfond, Co-Chief Executive Officer: We would definitely get into it ourselves.

I’ll go to Ken Silver, CRT Capital Ken Silver, CRT Capital: My question was answered, thanks. Rich Gelfond, Co-Chief Executive Officer: I think there are no more questions in the queue. Thank you all for joining the call today. I think you all agree, IMAX is a very exciting junction in its evolution as a company and we look forward to updating you both in the progress of our strategic initiatives and our process underway as well as our progress as a company with the very exciting film slate coming up starting this week. Thank you very much.