Imax Corp. is in serious trouble. Ten months after its stock lost 70% of its value and a week after announcing disastrous 2001 second-quarter results, the Toronto-based giant-screen purveyor has seen another precipitous price drop -- to an all-time low of $1.02 on the US Nasdaq on August 22. In August of 2000, it was trading in the $27 range.

On Aug. 10, ratings agency Moodys severely downgraded the company's debt, saying that Imax was quickly eroding its cash base and increasing the likelihood of insolvency. One analyst told Screendaily the report was one of the most scathing he had seen.

"[Imax] remains more exposed to the financially distressed commercial exhibition industry sector than originally thought," reads the report, pointing to the hard fact that North American exhibitors account for 90% of Imax's current order backlog. While this backlog represented potential future income, the continuing moribund status of exhibition has exhausted the ratings agency's patience. "Moody's now deems much of [the backlog] to be potentially unrealisable as contracts fail to be honored by distressed exhibitors and leases on existing systems located in theaters operating under bankruptcy court protection are potentially rejected altogether in many instances." Indeed, Imax's second quarter loss of $7.1m included a charge of $1.4m in bad debt.

In a statement issued with the results, Imax co-chairman Richard Gelfond and Brad Wechsler maintained an optimistic outlook. "The recovery of the commercial exhibition market and an extremely promising film slate should increase our business momentum into 2002."

Unfortunately, that recovery is nowhere in sight. This summer has seen a proliferation of big openers without legs, films that grab the box office spotlight only to lose 50%-60% of market share by the next weekend. It is a grim situation for exhibitors, whose box office percentages rise the longer a film remains in the theatre. Without profits, North American exhibitors are in no position to relieve Imax's backlog.

As for the promising film slate - Walt Disney will be releasing Beauty And The Beast in Imax cinemas in January 2002 and filmmakers such as James Cameron are at work on Imax films - such initiatives, which pay Imax only a royalty, would have to be wildly successful to generate enough revenue to turn the company around in the long term. The question is whether Imax has enough cash to survive in the short term.

No one from Imax was available for comment.