IMAX Corporation et al. - s. 144(1)

Order

Headnote

Application by issuer for revocation of management and insider cease trade order previously issued in accordance with OSC Policy 57-603 Defaults by Reporting Issuers in Complying with Financial Statement Filing Requirements (the "MCTO Policy").

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 6(3), 127, 144.

Policies Cited

OSC Policy 57-603 Defaults by Reporting Issuers in Complying with Financial Statement Filing Requirements.

National Policy 12-202 Revocation of a Compliance-Related Cease Trade Order.

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

(the "Act")

AND

IN THE MATTER OF

CERTAIN DIRECTORS, OFFICERS AND INSIDERS OF

IMAX CORPORATION

(BEING THE PERSONS AND COMPANIES LISTED

IN SCHEDULE "A" HERETO)

 

ORDER

(Subsection 144(1))

WHEREAS on April 16, 2007, a Director of the Ontario Securities Commission (the "Commission") made an order under paragraph 2 and paragraph 2.1 of subsection 127(1) of the Act that all trading in and all acquisitions of securities of IMAX Corporation (the "Corporation"), whether direct or indirect, by any of the persons and companies listed in Schedule "A" appended thereto (the "Respondents") shall cease, until two business days following the receipt by the Commission of all filings the Corporation is required to make pursuant to Ontario securities law (the "Original IMAX MCTO");

AND WHEREAS the Director made the Original IMAX MCTO following an application by the Corporation under OSC Policy 57-603 -- Defaults by Reporting Issuers in Complying with Financial Statement Filing Requirements (the "MCTO Policy") and upon hearing evidence that:

(a) the Corporation is a reporting issuer in the Province of Ontario;

(b) each of the Respondents is, or was, at some time since the end of the period covered by the last financial statements filed by the Corporation, namely September 30, 2006, a director, officer or other insider of the Corporation and during that time had, or may have had, in the ordinary course access to or received material information with respect to the Corporation that has not been generally disclosed;

(c) on March 29, 2007, the Corporation issued and subsequently filed on SEDAR a press release disclosing that it would delay the release of its annual report on Form 10-K for the year ended December 31, 2006 (the "2006 Form 10-K") which includes: (i) audited consolidated financial statements for such period, prepared in accordance with United States generally accepted accounting principles ("GAAP"), together with the Canadian GAAP reconciliation and other information required by Part 4 of National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency ("NI 52-107"); and (ii) management's discussion and analysis ("MD&A") for such period prepared in accordance with Item 303 of Regulation S-K under the United States Securities Exchange Act of 1934, as amended (the "1934 Act").

(d) the Corporation did not file the 2006 Form 10-K by the prescribed deadline under Ontario securities law, namely April 2, 2007; and

(e) as of the date of the Original IMAX MCTO, the Corporation had not filed the 2006 Form 10-K;

AND WHEREAS on October 24, 2007, a Director of the Commission made an order (the "Variation Order") under paragraph 2 and paragraph 2.1 of subsection 127(1) of the Act and under section 144 of the Act that the list of Respondents appended to the Original IMAX MCTO be varied to include the Additional Respondent, as such term was defined in the Variation Order (the Original IMAX MCTO, as varied by the Variation Order, being referred to herein as the "IMAX MCTO");

AND WHEREAS the Corporation has applied to the Commission for revocation of the IMAX MCTO pursuant to section 144 of the Act;

AND UPON the Corporation having represented to the Commission that:

1. The Corporation is incorporated under the Canada Business Corporations Act and is a reporting issuer in each of the Provinces of Canada where such concept exists. The Corporation is an "SEC issuer" as defined by NI 52-107.

2. As a result of the ongoing evaluation of certain identified accounting errors related to capitalization of expenses, film accounting and income tax matters over a six-year period, and in reviewing certain comments received from the Commission and the U.S. Securities and Exchange Commission (the "SEC"), the Corporation had determined to broaden its review to address certain issues related to these comments, primarily in connection with its revenue recognition for certain theatre system installations in previous periods (including the fourth quarter of 2005), the Corporation intended to file restated financial statements to correct such errors (the "Restatement"), and would delay the filing of its 2006 Form 10-K by the required filing dates under Ontario securities law.

3. On May 10, 2007, the Corporation announced that as a result of its ongoing evaluation of these accounting issues, and its intention to complete the Restatement, it would delay the filing of its unaudited interim consolidated financial statements for the quarter ended March 31, 2007 prepared in accordance with US GAAP (the "2007 First Quarter US GAAP Financial Statements"), and MD&A for such period prepared in accordance with Item 303 of Regulation S-K under the 1934 Act (the "2007 First Quarter US GAAP MD&A" and collectively with the 2007 First Quarter US GAAP Financial Statements, the "2007 First Quarter Disclosure Documents") by the required filing dates under Ontario securities law.

4. The evaluation and the intention to complete the Restatement resulted in the delay in filing by the Corporation of (a) its 2006 Form 10-K, and (b) the 2007 First Quarter Disclosure Documents (collectively, the "Delayed Filings") by the required filing dates under Ontario securities law.

5. On October 5, 2007, the Corporation announced that it planned to file a Form 10-K/A for fiscal 2006 to further amend the 2006 Form 10-K and a form 10-QA for the first and second quarters of 2007 to amend its form 10-Q filings for such periods (collectively, the "Revised Restated Filings"). The Revised Restated Filings were deemed necessary by the Corporation's management and the Audit Committee of the Board of Directors to restate financial statements relating to the Corporation's accounting for certain terms of seven real estate leases for its owned and operated theatres and corporate facilities (the "Subsequent Restatement").

6. The Corporation has now completed the filing of its Delayed Filings and the Revised Restated Filings and is up-to-date with its current continuous disclosure filing obligations under Ontario securities law.

7. The consolidated statements of operations, shareholders' equity (deficit) and cash flows for the years ended December 31, 2005 and 2004, and the consolidated balance sheet as of December 31, 2005, including the applicable notes, contained in the 2006 Form 10-K/A, were restated. The Corporation also included in the 2006 Form 10-K/A restated unaudited consolidated financial information for each of the first three quarters of 2006 and each of the first three quarters of 2005. The Corporation also included in the 2006 Form 10-K/A restated summary and selected financial information for the years ended December 31, 2003 and 2002 and certain restated summary and selected financial data derived from the audited financial statements and related notes thereto as well as unaudited and restated quarterly financial data.

8. The Corporation believes that requiring it to refile and amend its prior continuous disclosure filings to rectify content deficiencies therein due or related to the Restatement and Subsequent Restatement (the "Prior Unamended Filings"), including:

(a) its annual reports under the 1934 Act on Form 10-K for the years ended December 31, 2002, 2003, 2004 and 2005,

(b) any of its quarterly reports under the 1934 Act on Form 10-Q for each of the three quarterly periods in 2002, 2003, 2004, 2005 and 2006,

(c) audited consolidated financial statements for the years ended December 31, 2002, 2003 and 2004 prepared in accordance with Canadian generally accepted accounting principles, and

(d) unaudited interim consolidated financial statements for each of the three quarterly periods in 2002, 2003 and 2004 prepared in accordance with Canadian generally accepted accounting principles,

would likely negatively affect its ability to report future financial results on a timely basis and would likely detract from the Corporation's ability to address the material weaknesses in its internal control over financial reporting.

9. The Corporation believes that the information that would be contained in the documents remaining to be filed with the relevant regulatory authorities would in large part repeat information contained in the 2006 Form 10-K/A which would include all financial and other information needed for current investor understanding of the Corporation.

10. Given that the Corporation has not refiled or amended its Prior Unamended Filings, the Respondents cannot rely on the IMAX MCTO to expire pursuant to its terms.

AND WHEREAS the Director is of the opinion that it would not be prejudicial to the public interest to revoke the IMAX MCTO;

IT IS ORDERED, pursuant to Subsection 144(1) of the Act, that the IMAX MCTO be and is hereby revoked.

DATED at Toronto, this 22nd day of November, 2007.

"Cameron McInnis"
Manager, Corporate Finance Branch
Ontario Securities Commission

 

Schedule "A"

Wechsler, Bradley J.
Gelfond, Richard L.
Braun, Neil S.
Copland, Kenneth G.
Girvan, Garth M.
Leebron, David W.
Utay, Marc A.
Macneil, Edward
Foster, Greg
Lister, Robert D.
Bonnick, Brian
O'Reilly, Larry
Welton, Mark
Keighley, David B.
Ruby, G. Mary
Sullivan, Mary
Vance, Jeffrey
Vivekanand, Vigna
Gamble, Kathryn
Sparacio, Joseph