The Company maintains cash with various major financial institutions. The Company’s cash is invested with highly rated financial institutions. The Company’s $95.3 million balance of cash and cash equivalents as of June 30, 2023 (December 31, 2022 — $97.4 million) includes $83.3 million in cash held outside of Canada (December 31, 2022 — $79.7 million). As of June 30, 2023, cash and cash equivalents held by IMAX China was $73.6 million (December 31, 2022 —$75.0 million), of which $27.2 million was held in the PRC (December 31, 2022 — $43.7 million).

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


	As of June 30, 2023						As of December 31, 2022
(In thousands of U.S. Dollars)	Carrying Amount			Estimated Fair Value			Carrying Amount			Estimated Fair Value
Level 1
Cash and cash equivalents(1)	$	95,266		$	95,266		$	97,401		$	97,401
Equity securities(2)		1,046			1,046			1,035			1,035
Level 2
Net financed sales receivables(3)	$	96,170		$	96,856		$	101,052		$	100,059
Net investment in sales-type leases(3)		29,280			28,543			28,332			27,972
Equity securities(1)		1,000			1,000			1,000			1,000
COLI(4)		3,458			3,458			3,398			3,398
Foreign exchange contracts — designated forwards(2)		635			635			(649	)		(649	)
Wells Fargo Credit Facility borrowings(1)		(20,000	)		(20,000	)		(25,000	)		(25,000	)
HSBC China Facility borrowings(1)		(8,917	)		(8,917	)		(12,496	)		(12,496	)
Bank of China Facility borrowings(1)		(361	)		(361	)		(374	)		(374	)
Federal Economic Development Loan(3)		(2,157	)		(2,157	)		(1,782	)		(1,782	)
Convertible Notes(5)		(230,000	)		(211,600	)		(230,000	)		(196,717	)
Level 3
Interest in film classified as a financial instrument(6)	$	—		$	—		$	—		$	—

(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 15(e) below.

A majority of the Company’s revenues 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 net U.S. Dollar cash is 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 87 different countries, unfavorable exchange rates between applicable local currencies and the U.S. Dollar could have an impact on box-office receipts and the Company’s revenues and results of operations. The 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 as of June 30, 2023 (the “Foreign Currency Hedges”), with settlement dates throughout 2023 and 2024. 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 (“AOCI”) and reclassified to the Condensed Consolidated Statements of Operations 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 as of June 30, 2023 was $39.2 million (December 31, 2022 — $24.7 million). The Company currently does not hold any derivatives which are not designated as hedging instruments.

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

Fair value of derivatives in foreign exchange contracts:


		June 30,			December 31,
(In thousands of U.S. Dollars)	Balance Sheet Location	2023			2022
Derivatives designated as hedging instruments:
Foreign exchange contracts — Forwards	Other assets	$	725		$	50
	Accrued and other liabilities		(90	)		(699	)
		$	635		$	(649	)

Derivatives in foreign currency hedging relationships are as follows:


		Three Months Ended June 30,						Six Months Ended June 30,
(In thousands of U.S. Dollars)		2023			2022			2023			2022
Foreign exchange contracts	Derivative Gain (Loss)
— Forwards	Recognized in OCI
	(Effective Portion)	$	688		$	(610	)	$	822		$	(295	)

	Location of Derivative Loss
	Reclassified from AOCI	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands of U.S. Dollars)	(Effective Portion)	2023			2022			2023			2022
Foreign exchange contracts	Selling, general and
— Forwards	administrative expenses	$	(123	)	$	(66	)	$	(462	)	$	(95	)

The Company’s estimated net amount of the existing gains as of June 30, 2023 is $0.5 million, which is expected to be reclassified to the Condensed Consolidated Statements of Operations within the next twelve months.

The Company has an investment in the shares of an exchange traded fund which is classified as an equity investment. As of June 30, 2023, the value of the investment was $1.0 million (December 31, 2022 — $1.0 million) and is recorded within Investment in Equity Securities in the Condensed Consolidated Balance Sheets.

The Company held an investment in the preferred shares of enterprises which meets the criteria for classification as an equity security carried at historical cost, net of impairment charges. The carrying value of the equity security investment was $1.0 million as of June 30, 2023 (December 31, 2022 — $1.0 million) and is recorded within Other Assets in the Condensed Consolidated Balance Sheets.

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.