IMAX CORP 10-K

Item 1. Business IMAX Corporation, together with its consolidated subsidiaries (the “Company” or “IMAX”) is a Canadian corporation that was formed in March 1994 as a result of an amalgamation between WGIM Acquisition Corp. and the former IMAX Corporation (“Predecessor IMAX”). Predecessor IMAX was incorporated in 1967. As of December 31, 2023, the Company indirectly owns 71.55% of IMAX China Holding, Inc. (“IMAX China”), whose shares trade on the Hong Kong Stock Exchange. IMAX China is a consolidated subsidiary of the Company. GENERAL IMAX is a premier global technology platform for entertainment and events. Through its proprietary software, auditorium, architecture, patented intellectual property, and specialized equipment, IMAX offers a unique end-to-end solution to create superior, awe-inspiring immersive content experiences for which the IMAX ® brand is globally renowned. Top filmmakers, movie studios, artists, and creators utilize the cutting-edge visual and sound technology of IMAX to connect with audiences in innovative ways. As a result, IMAX is among the most important and successful global distribution platforms. The Company leverages its proprietary technology and engineering in all aspects of its business, which principally consists of the IMAX film remastering (“IMAX Film Remastering” and formerly known as “IMAX DMR”) and the sale or lease of premium IMAX theater systems (“IMAX System(s)”). IMAX Systems are based on proprietary and patented image, audio and other technology developed over the course of the Company’s history since its founding in 1967. The customers for IMAX Systems are principally theatrical exhibitors that operate commercial multiplex theaters, and, to a much lesser extent, museums, science centers and destination entertainment sites. The Company does not own the locations in the IMAX network, except for one, and is not an exhibitor, but instead sells or leases the IMAX System to exhibitor customers along with a license to use its trademarks and ongoing maintenance services for which there is an annual payment by the exhibitor to IMAX. IMAX has the largest global premium format network, more than double the size of its nearest competitor. As of December 31, 2023, there were 1,772 IMAX Systems operating in 90 countries and territories, including 1,693 commercial multiplexes, 12 commercial destinations, and 67 institutional locations in the Company’s global network. This compares to 1,716 IMAX Systems operating in 87 countries and territories as of December 31, 2022, including 1,633 commercial multiplexes, 12 commercial destinations, and 71 institutional locations in the Company’s global network. Additional information on the composition of the IMAX network is provided in the discussion of Marketing and Customers. IMAX Systems provide the Company’s exhibitor customers with a combination of the following benefits: • the ability to exhibit content that has been enhanced through IMAX Film Remastering, which usually results in higher image and sound fidelity than conventional cinema experiences; • advanced, high-resolution projectors with specialized equipment and automated theater control systems, which generate significantly more contrast and brightness than conventional theater systems; • large screens and proprietary auditorium geometry, which result in a substantially larger field of view so that the screen extends to the edge of a viewer’s peripheral vision and creates more realistic images; • advanced sound system components, which deliver more expansive sound imagery and pinpointed origination of sound to any specific spot in an auditorium equipped with an IMAX System; • specialized theater acoustics, which result in a four-fold reduction in background noise; • ongoing maintenance and extended warranty services; and • a license to the globally recognized IMAX brand, as well as benefits from IMAX marketing of films being shown in its network and IMAX’s growing social media followership. 4 In addition, certain movies shown in the IMAX network are filmed using proprietary IMAX film cameras or IMAX certified digital cameras, which along with IMAX’s customized guidance and a workflow process provide filmmakers enhanced and differentiated image quality and an IMAX-exclusive film aspect ratio that delivers up to 26% more image onto a standard IMAX movie screen. In select IMAX locations worldwide, movies filmed with IMAX cameras have an IMAX-exclusive 1.43 film aspect ratio, with up to 67% more image. Together, these components cause audiences in IMAX locations to feel as if they are a part of the on-screen action, creating a more intense, immersive, and awe-inspiring exciting experience than a conventional cinematic format. As a result of the engineering and scientific achievements that are a hallmark of The IMAX Experience ® , the Company’s exhibitor customers typically charge a premium for films released in IMAX’s format versus films exhibited in their other auditoriums. The premium pricing, combined with the higher attendance levels associated with IMAX films, generates incremental box office for the Company’s exhibitor customers and for the movie studios releasing their films to the IMAX network. The incremental box office generated by IMAX films combined with IMAX’s unmatched global network footprint and scale has helped establish IMAX as a key premium distribution and marketing platform for Hollywood and foreign local language movie studios. The Company’s global content portfolio includes blockbuster films, both from Hollywood and local language film industries worldwide; IMAX documentaries, both original and acquired (“IMAX Documentaries”), and IMAX events and experiences in emerging verticals including music, gaming, and sports. The Company achieved its second highest grossing year at the global box office (“GBO”) and its highest grossing year at the Domestic, United States and Canada combined, box office in 2023. The year was highlighted by the Company’s highest grossing year for local language films, the $180.4 million in IMAX box office generated by Christopher Nolan’s Oppenheimer , and strong indexing across titles including S uper Mario Bros., Guardians of the Galaxy Vol. 3, Spider-Man: Across the Spider-Verse , and Mission Impossible: Dead Reckoning. A cornerstone of the IMAX brand for more than 50 years, IMAX recently relaunched its IMAX Documentaries unit to focus on a new generation of narrative-driven original and acquired documentary films, as well as downstream revenue opportunities through partnerships with leading streaming platforms. Additional forthcoming IMAX original documentaries include The Blue Angels and The Elephant Odyssey . The Company also continues to evolve its platform to bring new, innovative events and experiences to audiences worldwide. During the year, the Company partnered with A24 for the IMAX Live TM 40 th anniversary screening of Jonathan Demme’s Stop Making Sense at the Toronto International Film Festival, which became the highest grossing IMAX Live event of all time. In January 2024, the Company and Pathé Live in partnership with Mercury Studios and Queen Films released Queen Rock Montreal , a concert from 1981, exclusively in 450 IMAX locations globally. As of December 31, 2023, the Company has a footprint of 252 connected locations in the IMAX network across North America, Europe, and Asia were configured with connectivity to deliver live and interactive content with low latency and superior sight and sound. For more information on the Company’s content, see section “FILM DISTRIBUTION AND POST-PRODUCTION” below. As a premier global technology platform for entertainment and events, the Company strives to remain at the forefront of advancements in entertainment technology. The Company offers a suite of laser-based digital projection systems (“IMAX Laser Systems”), which deliver increased resolution, sharper and brighter images, deeper contrast, and the widest range of colors available to filmmakers today. The Company further believes that its suite of IMAX Laser Systems are helping facilitate the next major renewal and upgrade cycle for the global IMAX network. In September 2022, the Company acquired SSIMWAVE Inc. (“SSIMWAVE”), a leader in artificial intelligence (“AI”)-driven video quality solutions for media and entertainment companies. The acquisition of SSIMWAVE marks a significant expansion of the Company’s streaming and consumer technology strategy to deliver the highest quality images on any screen, while also creating cost efficiencies to streaming companies, broadcasters and other companies that transmit visual data — to drive new, recurring revenue and grow its global leadership in entertainment technology. In 2023, the Company formed a new business unit, Streaming and Consumer Technology to focus on in-home entertainment technology. The business unit includes the streaming technology acquired in the SSIMWAVE acquisition as well as IMAX Enhanced ® product services. The Company utilizes AI for image enhancement, streaming technology, and data analysis to improve various aspects of its business. It is actively exploring other global use cases for AI to improve its products, operations, and efficiency. 5 IMAX NETWORK The IMAX network is the most extensive premium network in the world with 1,772 IMAX Systems operating in 90 countries and territories, including 1,693 commercial multiplexes, 12 commercial destinations and 67 institutional locations as of December 31, 2023. The Company currently estimates a worldwide commercial multiplex addressable market of 3,619 locations, of which there are 1,693 IMAX Systems operating as of December 31, 2023, representing a market penetration of only 46.8%. IMAX grew its network by 3.7% in 2023 driven by 128 system installations and ended the year with a backlog of 450 IMAX Systems. The Company believes that the majority of its future network growth will come from international markets outside of China. As of December 31, 2023, 76% of IMAX Systems in the global commercial multiplex network were located within international markets (defined as all countries other than the United States and Canada). Revenues and GBO derived from international markets continue to exceed revenues and GBO from the United States and Canada. For the year ended December 31, 2023, the Company’s revenue generated from its Greater China (which includes the mainland of the People’s Republic of China, Hong Kong, Macau, and Taiwan) operations represents 25% of consolidated revenue, compared to 24% in 2022 and 44% in 2021. Restrictions resulting from the COVID-19 pandemic significantly impacted operations in China in 2022 and 2023. As of December 31, 2023, the Company had 807 IMAX Systems operating in Greater China with an additional 206 systems in backlog. The Company’s backlog in Greater China represents 46% of its total current backlog, including system upgrades. The Company has a partnership in China with Wanda Film (“Wanda”) and as of December 31, 2023, through the Company’s partnership with Wanda, there were 376 IMAX Systems operational in Greater China, of which 362 are under the parties’ joint revenue sharing arrangements. In December 2023, Beijing Wanda Investment, which owns a 20% stake in Wanda Film Holding, was sold to China Ruyi Holdings, a Tencent Holdings-backed company. (Refer to “Risk Factors – The Company conducts business internationally, which exposes it to uncertainties and risks that could negatively affect its operations, sales and future growth prospects”, “– The Company faces risks in connection with its significant presence in China and the continued expansion of its business there”, “– General political, social and economic conditions can affect the Company’s business by reducing both revenues generated from existing IMAX Systems and the demand for new IMAX Systems”, and “– The Company may not convert all of its backlog into revenue and cash flows” in Part I, Item 1A.) PRINCIPAL PRODUCTS AND SERVICES The Company believes it is the world’s largest designer and manufacturer of specialty premium projection and sound system components for premium large-format theaters around the world, and it is also a significant distributor of large-format films. The Company’s principal products and services are as follows: • IMAX Film Remastering – The digital remastering of films and other content into IMAX formats for distribution to the IMAX network. • Film Distribution and Post-Production – The distribution of large-format documentary films, primarily to institutional theaters, and, increasingly, the distribution of exclusive IMAX events and experiences including music, gaming, and sports, as well as the provision of film post-production services. • IMAX Systems – The sale or lease of premium IMAX Systems to exhibitor customers. • IMAX Maintenance – The provision of preventative and emergency maintenance services and quality monitoring to the IMAX network. • Other – Principally includes the Company’s streaming and consumer technology business, including its streaming technology and IMAX Enhanced product services, as well as other ancillary activities. The Company assesses and evaluates the Company’s performance based on the operating results of the Content Solutions and Technology Products and Services segments, which largely reflect the different customer bases the Company serves. The Content Solutions segment principally focuses on content enhancement and distribution services for the Company’s movie studio customers. The Technology Products and Services segment primarily consists of products and services for the Company’s exhibitor customers, including the sale, lease and ongoing service of IMAX Systems. The Company’s segment information is provided in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 21 to Consolidated Financial Statements in Part II, Item 8. 6 IMAX FILM REMASTERING IMAX Film Remastering is a proprietary technology that digitally remasters films into IMAX formats. IMAX Film Remastering digitally enhances the image resolution of films for projection on IMAX screens while maintaining or enhancing the visual clarity and sound quality to levels for which The IMAX Experience is known. In addition, the original soundtrack of a film to be exhibited across the IMAX network is remastered for IMAX digital sound systems. IMAX remastered soundtracks are uncompressed and full fidelity. IMAX sound systems use proprietary loudspeaker systems and proprietary surround sound configurations that ensure every seat in an auditorium is an optimal listening position. The IMAX Film Remastering process involves: • in certain instances, scanning, at the highest possible resolution, each individual frame of the film and converting it into a digital image; • optimizing the image using proprietary image enhancement tools; • enhancing the digital image using techniques such as sharpening, color correction, grain and noise removal and the elimination of unsteadiness and removal of unwanted artifacts; • recording the enhanced digital image into an IMAX digital cinema package format or onto IMAX 15/70-format film; and • specially remastering the soundtrack to take full advantage of the unique sound system of IMAX Systems. IMAX films also benefit from enhancements made by individual filmmakers exclusively for the IMAX release of the film. Collectively, the Company refers to these enhancements as “IMAX DNA.” Filmmakers and movie studios have sought IMAX-specific enhancements in recent years to generate interest in and excitement for their films. Such enhancements include shooting films with IMAX cameras to increase the audience’s immersion in the film and to take advantage of the unique dimensions of the IMAX screen by projecting the film in a larger aspect ratio that delivers up to 26% more image onto a standard IMAX screen. In select IMAX locations worldwide, movies filmed with IMAX cameras have an IMAX-exclusive 1.43 film aspect ratio, with up to 67% more image. The Company has a Filmed For IMAX ® program under which filmmakers craft films from their inception in various ways in order to optimize The IMAX Experience . The program includes incremental and bespoke marketing support, which box office metrics demonstrate audiences respond extremely favorably to, and drives higher market share for IMAX. Management believes that growth in international box office remains an important driver of growth for the Company. To support continued growth in international markets, the Company is focused on the expansion of the IMAX network and has sought to bolster its international film strategy, supplementing its slate of Hollywood films with appealing local language films released in select markets, including China, Japan, India, and South Korea. 7 The following table provides detailed information about the films that were released to the Company’s global network during the years ended December 31, 2023 and 2022: For the Years Ended December 31, 2023 2022 Hollywood film releases (1) 36 32 Local language film releases: China 28 15 Japan 11 8 South Korea 9 5 India 8 6 France 1 1 Malaysia 1 — Thailand 1 — Indonesia — 1 Total local language film releases 59 36 Total film releases (2)(3) 95 68 (1) Includes one re-released film for the year ended December 31, 2023 (2022 — five). (2) For the year ended December 31, 2023, the films released to the Company’s global network include 10 with IMAX DNA (2022 — 12). (3) Excludes three Alternative Content Experiences in 2023 (2022 — seven). To date, in 2024, 18 titles have been released to the global IMAX network, including three re-releases, and the Company has announced the following additional 24 titles to be released in 2024: Scheduled Title Studio Release Date (1) IMAX DNA Dune: Part II Warner Bros. Pictures/Legendary Pictures March 2024 Filmed For IMAX Kung Fu Panda 4 Universal Pictures March 2024 — Ghostbusters: Frozen Empire Sony Pictures March 2024 — Godzilla x Kong: The New Empire Warner Bros. Pictures/Legendary Pictures April 2024 Filmed For IMAX Civil War A24 April 2024 — Spy x Family Code:White Sony Pictures/Crunchyroll April 2024 — The Fall Guy Universal Pictures May 2024 — Kingdom of The Planet of The Apes Walt Disney Studios May 2024 — Furiosa Warner Bros. Pictures May 2024 — Bad Boys 4 Sony Pictures June 2024 — Inside Out 2 Walt Disney Studios/Pixar Animation Studios June 2024 — A Quiet Place: Day One Paramount Pictures June 2024 — Despicable Me 4 Universal Pictures July 2024 — Twisters Universal Pictures/Warner Bros. Pictures July 2024 — Deadpool & Wolverine Marvel Studios/Walt Disney Studios July 2024 — Alien: Romulus Walt Disney Studios August 2024 — Kraven the Hunter Sony Pictures/Marvel Studios August 2024 — Beetlejuice 2 Warner Bros. Pictures September 2024 — Transformers One Paramount Pictures September 2024 — Wolfs Sony Pictures/Apple September 2024 — Joker: Folie à Deux Warner Bros. Pictures/DC Studios October 2024 Filmed For IMAX Venom 3 Sony Pictures November 2024 Filmed For IMAX Untitled Gladiator Sequel Paramount Pictures November 2024 — Wicked – Part 1 Universal Pictures November 2024 — (1) The scheduled release dates in the table above are subject to change, may vary by territory, and may not reflect the date(s) of limited premiere events. The Company remains in active negotiations with studios for additional films to fill out its short- and long-term film slate for the IMAX network. The Company also expects to announce additional local language films and exclusive IMAX events and experiences to be released to its global network throughout 2024. 8 FILM DISTRIBUTION AND POST-PRODUCTION The Company continues to believe that the IMAX network serves as a valuable platform to launch and distribute original content. The Company distributes large-format documentary films, primarily to institutional customers. The Company receives as its distribution fee either a fixed amount or a fixed percentage of the box office receipts and, following the recoupment of its costs, is typically entitled to receive an additional percentage of gross revenues as participation revenues. The ownership rights to such films may be held by the film sponsors, the film investors and/or the Company. As of December 31, 2023, the Company has distribution rights with respect to approximately 60 films, which cover subjects such as space, wildlife, music, sports, history and natural wonders. In May 2023, the Company announced that Amazon Studios acquired worldwide rights to the Company’s original documentary, The Blue Angels , filmed with IMAX digital certified cameras and produced in collaboration with Dolphin Entertainment, Bad Robot Productions, and Zipper Bros Films. The documentary is expected to be delivered in the second quarter of 2024. In October 2023, Deep Sky , a documentary on NASA’s Webb Telescope in collaboration with Crazy Boat Pictures Ltd. and filmmaker Nathaniel Kahn, was released to the IMAX network. In July 2023, the Company also announced the start of production of The Elephant Odyssey, a documentary in collaboration with Beach House Pictures Pte Ltd and China International Communications Group, which is expected to be released in 2025. In addition, the Company continues to evolve its platform to bring new, innovative IMAX events and experiences to audiences worldwide. As of December 31, 2023, the Company has a footprint of 252 connected locations in the IMAX network across the United States, Canada, Europe, and Asia configured with connectivity to deliver live, interactive content with low latency and superior sight and sound. In 2023, the Company partnered with Metro-Goldwyn-Studios Inc. (“MGM”) for an IMAX premiere event, consisting of red carpet interviews and behind the scenes footage, followed by a special advanced screening of Creed III , which was released across the IMAX global network. The Company also hosted a reunion of the iconic band Talking Heads at the Toronto International Film Festival, followed by a screening of Stop Making Sense , before the movie was released to the IMAX network more broadly. This became the highest grossing IMAX Live event of all time. These events were broadcast live to much of the IMAX Domestic connected network. In January 2024, the Company and Pathé Live in partnership with Mercury Studios and Queen Films released Queen Rock Montreal , a concert film from 1981, exclusively in 450 IMAX locations globally. The Company also provides film post-production and quality control services for large-format films, whether produced by IMAX or third-parties, and digital post-production services. In addition, the Company also provides IMAX film and digital cameras to content creators under the IMAX certified camera program. IMAX SYSTEMS The Company’s primary products are its various digital projection systems, which are either sold or leased to exhibitor customers along with a license for the use of the globally recognized IMAX brand. The Company’s digital projection systems include a projector that offers superior image quality and stability and a digital theater control system; a digital audio system delivering up to 12,000 watts of sound; a screen with a proprietary coating technology, and, in certain situations, 3D glasses and cleaning equipment. IMAX’s digital projection systems also operate without the need for analog film prints. The Company’s digital projection systems provide a premium and differentiated experience to audiences that is consistent with what they have come to expect from the IMAX brand, while providing exhibitor customers with the compelling economics and flexibility that digital technology affords. As part of the arrangement to sell or lease an IMAX System, the Company provides extensive advice on auditorium planning and design, and supervision of installation services. The terms of each sale or lease arrangement vary according to the configuration of the IMAX System, as well as the cinema and film distribution markets relevant to the geographic location of the customer. Revenue from the sale or lease of an IMAX System may be recognized at a different time from when cash is collected from the exhibitor customer. Further discussion of the Company’s revenue recognition policies is provided in Critical Accounting Estimates in Part II, Item 7 and Note 2(o) to Consolidated Financial Statements in Part II, Item 8. 9 The following table presents the number of IMAX Systems that are in the network and in backlog, by configuration, as of December 31, 2023 and 2022: December 31, 2023 December 31, 2022 System System Network New Upgrade Network New Upgrade Base Backlog Backlog Base Backlog Backlog IMAX Laser Systems 466 238 68 349 200 89 IMAX Xenon Systems 1,276 144 — 1,330 161 — IMAX Film Systems 30 — — 37 — — Total 1,772 382 68 1,716 361 89 IMAX Laser Systems In 2014, the Company introduced its first laser-based digital projection system. Since then, the Company has continued research and development aimed at creating more affordable laser-based solutions with various screen sizes for its commercial multiplex customers. Beginning in 2021, the Company began offering an additional laser-based system product to provide customers with an opportunity to replace and upgrade IMAX Xenon Systems. The Company currently sells two different configurations of its laser systems. The Company believes that IMAX Laser Systems present greater brightness and clarity, higher contrast, a wider color gamut and deeper blacks, consume less power and last longer than other digital projection technologies, and are capable of illuminating the largest screens in the IMAX network. IMAX Xenon Systems In 2008, the Company introduced its digital IMAX Xenon System. Prior to 2008, all of the IMAX Systems offered by the Company were film-based and required analog film prints. The Company believes that IMAX Xenon Systems deliver higher quality imagery when compared with IMAX Film Systems. IMAX Film Systems IMAX Film Systems include various configurations, including 2D and 3D systems, and screen sizes. Following the introduction of the digital IMAX Xenon System in 2008, the number of IMAX Film Systems in the IMAX network has decreased significantly. However, IMAX’s proprietary format, the IMAX 70mm Film System continues to be a sought after IMAX viewing experience. The existing network of 30 unique locations are being actively supported and leveraged for special event releases throughout the year such as with the 2023 release of Oppenheimer in IMAX 70mm film, which garnered significant consumer interest and demand for this format . The following table provides information about the Company’s system backlog by deal type as of December 31, 2023 and 2022: December 31, 2023 December 31, 2022 Number of Number of Systems Dollar Value Systems Dollar Value (In thousands of U.S. Dollars, except number of systems) New Upgrade New Upgrade New Upgrade New Upgrade Sales Arrangements (1) 148 16 $ 158,318 $ 16,068 149 13 $ 165,176 $ 14,362 Hybrid JRSA (2) 102 1 76,173 910 116 4 86,215 3,235 Traditional JRSA (2)(3) 132 51 425 1,975 96 72 200 2,900 382 68 $ 234,916 $ 18,953 361 89 $ 251,591 $ 20,497 (1) Includes Sales, Hybrid Sales, and Sales-Type Lease deal types. (2) The consideration owed under traditional joint revenue sharing arrangements is typically a percentage of contingent box office receipts rather than a fixed upfront fee or fixed annual minimum payments. Accordingly, such arrangements do not usually have a dollar value in backlog; however, hybrid joint revenue sharing arrangements typically provide for contracted upfront payments and therefore carry a backlog value based on those payments. (3) Includes 30 IMAX Systems (2022 ― 38) where certain of the Company’s contracts contain options for the customer to elect to upgrade system type or to alter the contract structure (for example, from a joint revenue sharing arrangement to a sale) after signing, but before installation. Current backlog information reflects all known elections. 10 (4) As of December 31, 2023, the Company’s backlog includes 14 systems (2022 ― 14) in Russia, one system (2022 ― 1) in Ukraine, and five systems (2022 ― 5) in Belarus with a total fixed contracted value of $22.9 million (2022 ― $22.9 million). The backlog reflects the minimum number of commitments for IMAX Systems according to the signed contracts. The dollar value fluctuates depending on the number of new arrangements signed from year-to-year, which adds to backlog, and the installation and acceptance of IMAX Systems and the settlement of contracts, both of which reduce backlog. The dollar value of backlog typically represents the fixed contracted revenue according to the signed IMAX System sale and lease agreements that the Company expects to recognize as revenue upon installation and acceptance of the associated system, as well as an estimate of variable consideration in sales arrangements. The value of backlog does not include amounts allocated to maintenance and extended warranty revenues or revenue from IMAX Systems in which the Company has an equity interest, operating leases, and long-term conditional theater commitments. The Company believes that the contractual obligations for IMAX System installations that are listed in the backlog are valid and binding commitments. From time to time, in the normal course of its business, the Company will have customers who are unable to proceed with an IMAX System installation for a variety of reasons, including the inability to obtain certain consents, approvals or financing. Once the determination is made that the customer will not proceed with installation, the agreement with the customer is terminated or amended. If the agreement is terminated, once the Company and the customer are released from all their future obligations under the agreement, all or a portion of the initial rents or fees that the customer previously made to the Company are recognized as revenue. (Refer to “Risk Factors ― The Company may not convert all of its backlog into revenue and cash flows.”) Certain of the Company’s contracts contain options for the customer to elect to upgrade system type during the term or to alter the contract structure (for example, from a joint revenue sharing arrangement to a sale) after signing, but before installation. The current backlog information reflects all known elections. IMAX MAINTENANCE IMAX System arrangements also include a requirement for the Company to provide maintenance services over the life of the arrangement in exchange for an extended warranty and annual maintenance fee paid by the exhibitor. Under these arrangements, the Company provides preventative and emergency maintenance services to ensure that each presentation is up to the highest IMAX quality standard. Annual maintenance fees are paid throughout the duration of the term of the system agreements. (Refer to “Maintenance and Extended Warranty Services” below.) OTHER PRODUCTS AND SERVICES Streaming and Consumer Technology Streaming and Consumer Technology includes the Company’s Streaming Technology software offerings and IMAX Enhanced product services. Streaming Technology consists of several software products including: • IMAX Stream Smart ― works within existing video compression workflows to reduce bitrates and retain picture quality across all devices and formats and deliver significant cost savings. • IMAX StreamAware On-Demand ― all-in-one quality assurance and quality control to automate and standardize checks for comprehensive content integrity and regulatory compliance for third-party content libraries, across an entire video compression workflow • IMAX StreamAware On-Air ― real-time monitoring software for live streams, which enables users to monitor video quality across their networks and to identify and address streaming issues. These AI-powered products allow streaming platforms and broadcasters to automate workflows. The Company believes that these products allow users to deliver the highest quality viewing experiences to their subscribers while reducing costs. IMAX Enhanced is a solution to bring The IMAX Experience into the home. IMAX Enhanced provides end-to-end premium technology across streaming content and best-in-class entertainment devices, offering consumers high-fidelity playback of image and sound in the home and beyond, including the following features: • IMAX’s expanded aspect ratio, which is available on select titles and streaming platforms, including Disney+; • IMAX’s proprietary remastering technology, which produces more vivid, higher-fidelity 4K HDR images on premium televisions; and 11 • IMAX’s signature sound, which was specially recreated and calibrated for the home to unlock more immersive audio. To be certified as IMAX Enhanced, leading consumer electronics manufacturers spanning 4K/8K televisions, projectors, A/V receivers, loudspeakers, soundbars, smartphones, personal computers, tablets, and more must meet a carefully prescribed set of audiovisual performance standards, set by a certification committee, along with some of Hollywood’s leading technical specialists. At present, certified global device partners include Sony Electronics, Hisense, TCL, LG, Phillips, Hewlett Packard, Xiaomi, Sound United and Honor, among others. As of December 31, 2023, more than 300 IMAX Enhanced titles have been released across five of the biggest streaming platforms worldwide: Disney+, Sony Bravia CORE, Tencent Video, iQiyi and Rakuten TV. Over 15 million IMAX Enhanced certified devices are estimated to be in the market today . The Company’s collaboration with Disney allows fans to stream 20 Disney titles in IMAX’s expanded aspect ratio at home on Disney+. The presence of IMAX Enhanced on Disney+ provides strong brand exposure for IMAX by expanding the Company’s in-home entertainment footprint to Disney+ and most of its 150 million global subscribers. The Company believes that IMAX Enhanced enables an elevated end-to-end experience on Disney+, with IMAX signature sound coming to subscribers with IMAX Enhanced certified devices. IMAX Enhanced is part of the Company’s next evolutionary step to extend the IMAX brand and technology further into new use cases, including streaming entertainment and the consumer electronics market. (Refer to “Risk Factors ― Failure to respond adequately or in a timely fashion to changes and advancements in technology could negatively affect the Company’s business.”) Other The Company derives a small portion of its revenue from other sources including one owned and operated IMAX System in Sacramento, California; a commercial arrangement with one theater resulting in the sharing of profits and losses; the provision of management services to three other theaters; renting the Company’s proprietary 2D and 3D large-format film cameras; and also offering production advice and technical assistance to both documentary and Hollywood filmmakers. MARKETING AND CUSTOMERS The Company markets IMAX Systems through a direct sales force and marketing staff located in offices in Canada, the United States, Greater China, Europe, and Asia. In addition, the Company has agreements with consultants, business brokers and real estate professionals to locate potential customers and system locations for the Company on a commission basis. IMAX currently estimates a worldwide commercial multiplex addressable market of 3,619 locations, of which there are 1,693 IMAX Systems operating as of December 31, 2023, representing a market penetration of only 46.8%. Commercial multiplex systems are the largest part of the IMAX network, comprising 1,693 IMAX Systems, or 96%, of the 1,772 IMAX Systems in the IMAX network as of December 31, 2023. The Company’s institutional customers include science and natural history museums, zoos, aquaria, and other educational and cultural centers. The Company also sells or leases IMAX Systems to commercial destinations such as theme parks, private home theaters, tourist destination sites, fairs, and expositions. As of December 31, 2023, approximately 75% of all open and operational IMAX Systems were in locations outside of the United States and Canada. The following table provides detailed information about the IMAX network by system type and geographic location as of December 31, 2023 and 2022: December 31, 2023 December 31, 2022 Commercial Multiplex Commercial Destination Institutional Total Commercial Multiplex Commercial Destination Institutional Total United States 363 4 24 391 364 4 25 393 Canada 42 1 7 50 40 1 7 48 Greater China (1) 791 — 16 807 778 — 16 794 Asia (excluding Greater China) 166 2 2 170 138 2 2 142 Western Europe 126 4 8 138 118 4 8 130 Latin America (2) 60 1 8 69 55 1 11 67 Rest of the World 145 — 2 147 140 — 2 142 Total (3) 1,693 12 67 1,772 1,633 12 71 1,716 (1) Greater China includes China, Hong Kong, Taiwan, and Macau. (2) Latin America includes South America, Central America, and Mexico. 12 (3) Period-to-period changes in the table above are reported net of the effect of permanently closed locations. The Company has a partnership in China with Wanda which is its largest exhibitor customer. As of December 31, 2023, Wanda represented 22% of the Company’s commercial network, 4% of the Company’s backlog and 10% of its revenues. As of December 31, 2022, Wanda represented 23% of the Company’s commercial network, 4% of the Company’s backlog and 7% of its revenue. A geographic breakdown of the Company’s revenue is provided in Note 21 to Consolidated Financial Statements in Part II, Item 8. INDUSTRY OVERVIEW Competition The out-of-home entertainment industry is very diverse with numerous companies vying for the public’s leisure time, and the Company faces competition as a consequence. Within the theatrical space, exhibitors and entertainment technology companies have introduced their own branded, large-screen 3D auditoriums or other proprietary theater systems, some of which include laser-based projectors, and in many cases, have marketed those auditoriums or theater systems as having similar quality or attributes to an IMAX System. The Company also faces in-home competition from a number of alternative film distribution channels such as subscription streaming services, transactional video-on-demand (both rentals and sales), advertiser-supported video-on-demand, internet, and broadcast and cable television. The Company further competes for the public’s leisure time and disposable income with other forms of entertainment, including gaming, sporting events, concerts, live theater, social media, and restaurants. Furthermore, the Company may continue to face competition in the future from companies in the entertainment industry with new technologies and/or greater capital resources to develop and support them. The Company believes that its competitive strengths include the value of the IMAX brand name, the premium IMAX consumer experience, the design, quality and historic reliability rate of IMAX Systems (including the IMAX Laser Systems as well as the IMAX immersive sound system, the return on investment of an IMAX System for exhibitors, the number and quality of IMAX films that it distributes, the tailored distribution and marketing support by dedicated teams around the world, the relationships the Company maintains with prominent Hollywood and international filmmakers and other content creators (a number of whom desire to film their movies and events with IMAX cameras), the availability of Hollywood and international films to the IMAX network through IMAX Film Remastering technology, the availability of unique and innovative events and experiences such as distributed concerts, special theatrical screenings, and live Q&A sessions with top content creators, consumer loyalty and the level of the Company’s service and maintenance and extended warranty efforts. The Company believes that all of these alternative formats deliver overall experiences that are inferior to The IMAX Experience and do not have IMAX's brand trust, filmmaker endorsement, loyal fan base, or global footprint and scale. Exhibitor Consolidation The Company’s primary customers are commercial multiplex exhibitors. Since 2016, the commercial exhibition industry has undergone significant consolidation, including AMC Entertainment Holdings Inc.’s (“AMC”) acquisition of Carmike Cinemas and Odeon & UCI Cinemas Group (“Odeon”), which includes Nordic Cinema Group (“Nordic”), and Cineworld Group plc's (“Cineworld”) acquisition of Regal Entertainment Group (“Regal”). The Company believes that the consolidation of the commercial exhibition industry has helped facilitate the growth of the IMAX network. The Company has historically enjoyed strong relationships with large commercial exhibitor chains, which have greater capital to purchase, lease or otherwise acquire IMAX Systems. As larger commercial chains such as AMC and Cineworld have purchased smaller chains, those smaller chains have in turn become part of the IMAX network. For instance, following AMC’s acquisition of Odeon and Nordic, the Company and AMC entered into an agreement for 25 new IMAX Systems across the Odeon and Nordic network. The Company believes that continued consolidation could facilitate further signings and other strategic benefits going forward. However, exhibitor consolidation has also resulted in individual exhibitor chains constituting a material portion of the Company’s revenue and network. Continued industry consolidation, as well as consolidation in the movie studio industry, may present risks to the Company. (Refer to “Risk Factors – Consolidation among commercial exhibitors and studios reduces the breadth of the Company’s customer base, and could result in a narrower market for the Company’s products and reduced negotiating leverage. A deterioration in the Company’s relationship with key partners could materially and adversely affect the Company’s business, financial condition or results of operation. In addition, an adverse economic impact on a significant customer’s business operations could have a corresponding material adverse effect on the Company.” in Part I, Item 1A.) 13 THE IMAX BRAND IMAX is a premier global technology platform for entertainment and events. The Company relies on its brand to communicate its leadership and singular goal of creating entertainment experiences that exceed all expectations. Top filmmakers, studios, and other content creators use the IMAX brand to message that a film will connect with audiences in unique and extraordinary ways. The Company has a Filmed for IMAX program through which filmmakers partner closely with IMAX to craft films that fully leverage IMAX technology and where every frame, from inception, is intentionally designed for The IMAX Experience . Box office metrics demonstrate audiences respond extremely favorably to Filmed for IMAX titles. To capture content in a resolution appropriate for IMAX screens, filmmakers utilize IMAX 70mm film cameras or IMAX-certified best-in-class digital cameras with leading brands including ARRI, Panavision, RED Digital Cinema and Sony. When this content is paired with IMAX’s proprietary post-production process, the resulting craftsmanship enthralls fans in 1,700+ IMAX locations around the world. The IMAX brand is a promise to deliver what today’s audiences crave, which is a memorable, more emotionally engaging, more thrilling and shareable experience. IMAX commissions on-going third party consumer research to measure the strength of its brand in numerous markets. The Company’s latest 2023 studies show that the IMAX brand has achieved near universal awareness, is uniquely recognized as a leading, ultra-premi um brand, and offers one of the most differentiated movie-going experiences. The IMAX brand has also been proven to signal a special, must-see event at levels far greater than any other entertainment technology brand based on evidence. Across various measures of brand equity and health, the IMAX brand ranged from two to 10 times more powerful than other entertainment technology brands. The Company believes that its strong brand equity supports consumers’ predisposition to choose IMAX over competing brands and to pay a premium for The IMAX Experience now and into the future. RESEARCH AND DEVELOPMENT The Company believes that it is a premier global technology platform for awe-inspiring entertainment and events with significant proprietary expertise in digital and film-based projection and sound system component design, engineering, and imaging technology, particularly in laser-based technology. A significant portion of the Company’s research and development efforts have been focused on the IMAX Laser Systems, which the Company believes is capable of illuminating the largest screens in the IMAX network and provides greater brightness and clarity, higher contrast, a wider color gamut and deeper blacks, while consuming less power and lasting longer than existing digital technology, to ensure that the Company continues to provide the highest quality, premier cinematic experience available to consumers. The Company has continued research and development aimed at creating more affordable laser-based solutions with various screen sizes for its commercial multiplex customers. The Company intends to continue research and development to further evolve its end-to-end technology. This includes bringing connectivity to the Company’s global network to support live and interactive events worldwide; developing new IMAX film cameras and certifying additional digital cameras; further improving its proprietary film remastering and distribution process for the delivery of content for both theatrical (including local language content) and home entertainment; and further improving the reliability of its projectors, as well as enhancing the Company’s image and sound quality. Within the Company’s Streaming and Consumer Technology business, there is ongoing research and development in perceptual metrics including novel measurement and optimization techniques. Investments are also being made to expand existing and/or develop new technologies which are expected to further enhance video quality, delivery, and creation across devices. Furthermore, the Company intends to invest in activities that will capture opportunities to create/build AI and automation into its operations and processes. As of December 31, 2023 and 2022, 86 and 66 of the Company’s employees were connected with research and development projects, respectively. MANUFACTURING AND SERVICE Projector Component Manufacturing The Company assembles IMAX System projectors at its facility in Mississauga, Ontario, Canada (near Toronto). With a few exceptions, the Company develops and designs all of the key elements of the proprietary technology involved in this component. The fabrication of a majority of parts and sub-assemblies is subcontracted to a group of carefully pre-qualified third-party suppliers. Manufacture and supply contracts are signed for the delivery of the component on an order-by-order basis. The Company believes its significant suppliers will continue to supply quality products in quantities sufficient to satisfy its needs. The Company inspects all parts and sub-assemblies, completes the final assembly, and then subjects the projector to comprehensive testing individually and as a system prior to shipment. Historically, these projectors have had reliability rates based on scheduled shows of approximately 99%. 14 Sound System Component Manufacturing The Company develops, designs, and assembles the key elements of the theater sound system component. The standard IMAX sound system component consists of parts from a variety of sources, with approximately 50% of the materials of each sound system attributable to proprietary parts provided under original equipment manufacturers agreements with outside vendors. These proprietary parts include custom loudspeaker enclosures and horns, specialized amplifiers, and signal processing and control equipment. The Company inspects all parts and sub-assemblies, completes the final assembly, and then subjects the sound system to comprehensive testing as a system. Screen and Other Components The Company purchases its screen components and glasses cleaning equipment from third parties. The standard screen system component consists of a projection screen manufactured to IMAX specifications and a frame to hang the projection screen. The proprietary glasses cleaning machine is a stand-alone unit that is connected to the theater’s water and electrical supply to automate the cleaning of 3D glasses. Maintenance and Extended Warranty Services The Company provides ongoing maintenance and extended warranty services to IMAX Systems. These arrangements are usually for a separate fee, although the Company sometimes includes free service in the initial year of the arrangement. The maintenance and extended warranty arrangements include service, maintenance, and replacement parts for IMAX Systems. To support the IMAX network, the Company has personnel stationed in major markets throughout the world who provide periodic and emergency maintenance and extended warranty services on existing IMAX Systems. The Company provides various levels of maintenance and warranty services, which are priced accordingly. Under full-service programs, Company personnel typically visit each IMAX location every six to twelve months to provide preventative maintenance, cleaning and inspection services and emergency visits to resolve problems and issues with the system. Under some arrangements, customers can elect to participate in a service partnership program whereby the Company trains a customer’s technician to carry out certain aspects of maintenance. Under such shared maintenance arrangements, the Company participates in certain of the customer’s maintenance checks each year, provides a specified number of emergency visits, and provides spare parts, as necessary. PATENTS AND TRADEMARKS The Company’s inventions cover various aspects of its proprietary technology and many of these inventions are protected by Letters of Patent or applications filed throughout the world, most significantly in the United States, Canada, China, Belgium, Japan, France, Germany, and the United Kingdom. The subject matter covered by these patents and applications includes auditorium design and geometry, audio and display technology, mechanisms employed in projectors and projection equipment (including 3D projection equipment), stereoscopic (3D) imaging, digitally re-mastering 35mm films into large-format, dynamic range and contrast of projectors, seaming or superimposing images from multiple projectors, and other inventions relating to imaging technology, digital projectors, laser projection, and video quality assessment. Included in the Company’s patent portfolio are more than 30 patents and patent families acquired from the Eastman Kodak Company covering laser projection technology. In addition, the Company acquired more than 15 patent families in connection with the acquisition of SSIMWAVE in September 2022. The Company has been and will continue to be diligent in the protection of its proprietary interests. As of December 31, 2023, the Company holds 92 patents, has 14 patents pending in the United States and has corresponding patents or filed applications in many countries throughout the world. While the Company considers its patents to be important to the overall conduct of its business, it does not consider any particular patent essential to its operations. Certain of the Company’s patents expire between 2024 and 2041. The Company owns or otherwise has rights to trademarks and trade names used in conjunction with the sale of its products, systems, and services. The following trademarks are considered significant in terms of the current and contemplated operations of the Company: IMAX, IMAX 3D, Experience It In IMAX ® , The IMAX Experience , DMR, Filmed For IMAX, IMAX Live, IMAX Enhanced, and SSIMWAVE ® . These trademarks are widely protected by registration or common law throughout the world. 15 HUMAN CAPITAL The Company believes that effective human capital management is critical to its success. The Company’s human capital management objectives are focused on attracting, engaging, and retaining exceptional talent who are passionate about IMAX’s business; and 2) fostering a work environment that unites diverse teams around its mission to connect the world through extraordinary experiences that inspire us to reimagine what’s possible together. To achieve these objectives, the Company’s people and culture strategy focuses on creating a compelling employee brand which attracts top talent to join the Company; engaging its employee base to maximize overall performance and enhance retention; offering a competitive total rewards program (the “Total Rewards Program”); developing and refining a diversity, equity, and inclusion (“DE&I”) plan that is unique to its business; and continuing its focus on employee safety. As of December 31, 2023, the Company employed 697 people, of which approximately 69% were employed outside of the United States. The global workforce consists of approximately 96% full-time and 4% part-time employees. Some of the Company’s recent initiatives to achieve its’s human capital management objectives include the following: Recruiting Talent The Company believes that a collaborative team of innovative employees from diverse backgrounds and experiences is essential to meet the demands of technology and creativity. Additionally, the Company has and will continue to provide DE&I training for hiring managers to ensure the Company’s interview and hiring processes are fair and equitable. The Company’s outreach efforts include using global job boards, engaging with community associations and organizations, working with universities and colleges to build stronger partnerships, and maintaining relationships with IMAX alumni to proactively expand its sources of talent. The Company continues to implement technologies and solutions to support human capital management strategies and processes while supporting talent management for creative projects as it stays connected to the vision, foundation, and core of the Company. Engaging Employees During 2023, the Company created a comprehensive talent management plan to foster greater employee retention, engagement, and inclusivity. The plan includes incorporating the Company’s values of collaboration, belonging, and excellence in its culture into talent management by rolling out development programs to build manager and leader capabilities and enhancing the overall employee experience. The Company expects to implement the plan in 2024. For 2024, the Company has updated its performance management process and launched an employee training program to foster a high-performance and engaging work culture. For example, the performance management process includes a new mid-year talent review cycle to assess talent, understand the Company’s bench strength and gaps for succession planning and engagement strategies. In 2024, the Company plans to deploy an employee engagement survey to gather feedback and insights on how to continue to make IMAX a great place to work. Total Rewards The Company takes a holistic view of the Total Rewards Program, focusing on providing competitive compensation and benefits packages to attract, incentivize, and retain a talented, diverse, multi-generational workforce. The Total Rewards Program balances base compensation, incentive compensation for both short-term and long-term performance, and a focus on total well-being of the employee. The Company’s recent efforts to improve the Total Rewards Program include the following: • In 2023, the Company undertook a review of base compensation across various levels within the Company and established a career development path for employees in the technical domain. • The Company introduced enhancements to its U.S. and Canadian benefits program in select regions, aiming to modernize its benefits offerings to better align with the needs of the Company’s employees. These modifications were informed by both employee feedback and market conditions. • Given the increased focus on mental health, in response to addressing the needs of the Company’s employees and their families, the Company enhanced its health and family-friendly benefits to provide mental health support and access to mental health practitioners to its employees. 16 • The Company supports new parents, including adoptive parents, through maternity and parental leave benefits. Furthermore, the Company has broadened its company-subsidized reimbursement program to cover camps, complementing emergency backup childcare, ongoing childcare, elder care, and pet care. • In 2023, the Company expanded its financial wellness offerings for U.S. employees, to include a subsidized membership for legal assistance. Diversity, Equity, and Inclusion In 2023, the Company continued its commitment to diversity, equity, and inclusion. The Company engaged its executive sponsorship committee to revise its DE&I strategy, which focuses on the following areas: • Fostering a culture of engagement and inclusivity where employees feel a sense of understanding, acceptance, and belonging. • Implementing processes, policies, and practices that are fair and equitable. • Ensuring the diversity of the partners, filmmakers, and audiences IMAX serves are reflected through progressive recruiting and retention efforts. • Impacting the workplace and communities in which IMAX operates in a positive way. As of December 31, 2023, women represented approximately 35% of the Company’s global workforce. The Company currently has three female directors (30%) and two directors who identify as ethnically diverse (20%) on its Board of Directors (the “Board”). There are four (25%) female members of the Company’s management team of 16 as well as four (25%) members of the Company’s management team who identify as ethnically diverse. Employee Safety Risks to the safety of employees are present in day-to-day office work, building renovation, manufacturing, logistics, training, testing, research, and development, and during the designing, installation, and servicing of IMAX Systems around the world. The Company has implemented a global program for workplace safety that ensures it has the necessary controls in place to keep its employees and visitors safe. Every employee is responsible for participating in workplace safety planning activities, and managers are responsible for employee safety program implementation within their business function. This effort is supported by a cross-functional team dedicated to employee health and safety and business continuity. AVAILABLE INFORMATION The Company makes available, free of charge, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments to such reports, as soon as reasonably practicable after such filings have been made with the SEC. Reports may be obtained free of charge through the SEC’s website at www.sec.gov and through the Company’s website at www.imax.com or by calling the Company’s Investor Relations Department at 212-821-0154. No information included on the Company’s website shall be deemed included or otherwise incorporated into this Form 10-K, except where expressly indicated. Item 1A. Ri sk Factors Before you make an investment decision with respect to the Company’s common shares, you should carefully consider all of the information included in this Form 10-K and the Company’s subsequent periodic filings with the SEC. In particular, you should carefully consider the risk factors described below and the risks and uncertainties related to “Forward Looking Statements,” any of which could have a material adverse effect on the Company’s business, results of operations, financial condition and the actual outcome of matters as to which forward looking statements are made in this annual report. The following risk factors should be read in conjunction with the balance of this annual report, including the Consolidated Financial Statements and related notes. The risks described below are not the only ones the Company faces. Additional risks that the Company currently deems immaterial or that are currently unknown to the Company may also impair its business or operations. 17 RISKS RELATED TO THE COMPANY’S BUSINESS AND OPERATIONS General political, social and economic conditions can affect the Company’s business by reducing both revenues generated from existing IMAX Systems and the demand for new IMAX Systems. The Company’s success depends in part on general political, social and economic conditions and the willingness of consumers to purchase tickets to the IMAX auditoriums. If movie-going becomes less popular globally, the Company’s business could be adversely affected, especially if such a decline occurs in Greater China. There remains uncertainty around whether and when movie-going will return to pre-COVID levels in various markets and there can be no assurance that the reduction in movie-going does not represent a permanent change in consumer behavior. The timing and extent of a recovery of consumer behavior and willingness to spend discretionary income on movie-going may delay the Company’s ability to generate significant revenue from GBO generated by its exhibitor customers in various markets. In addition, the Company’s operations could be adversely affected if consumers’ discretionary income globally or in a particular geography falls as a result of an economic downturn or recession, sustained inflationary conditions, high interest rates, supply chain issues, or otherwise. Such adverse impact on consumer’s discretionary income could result in a shift in consumer demand away from movie-going. The majority of the Company’s revenue is directly derived from the box office results of its exhibitor partners. Accordingly, a decline in attendance at commercial IMAX locations could materially and adversely affect several sources of key revenue streams for the Company. Sustained inflationary pressures observed globally could materially increase the cost of our goods, services and personnel, which could cause an increase in the Company's operating costs. The Company also depends on the sale, lease and installation of IMAX Systems to commercial theatrical exhibitors to generate revenue. Commercial theatrical exhibitors generate revenues from consumer attendance at their theaters, which depends on the willingness of consumers to visit movie theaters and spend discretionary income at movie theaters. In the event of declining box office and concession revenues, commercial exhibitors may be less willing to invest capital in IMAX Systems. In addition, a significant portion of systems in the Company’s backlog are expected to be installed in newly built multiplexes. An economic downturn, recession, significant increases in interest rates or other adverse economic developments could impact developers’ ability to secure financing on acceptable terms and complete the buildout of these locations, thereby negatively impacting the Company’s ability to install IMAX Systems, grow its theater network and collects its contractual revenue. The success of the IMAX network is directly related to the availability and success of the IMAX remastered films, and other films released to the IMAX network, as well as the continued purchase or lease of IMAX Systems and other support by theatrical exhibitors, for which there can be no guarantee. An important factor affecting the growth and success of the IMAX network is the availability and strategic selection of films for IMAX locations and the box office performance of such films. The Company itself produces only a small number of such films and, as a result, the Company relies principally on films produced by third-party filmmakers and studios, including both Hollywood and local language features converted into the Company’s format. In 2023, 95 new IMAX films were released to the Company’s global network. There is no guarantee that filmmakers and studios will continue to release films to the IMAX network, or that the films selected for release to the IMAX network will be commercially successful. The Company is directly impacted by the commercial success and box office results of the films released to the IMAX network through its joint revenue sharing arrangements, as well as through the percentage of the box office receipts the Company receives from the studios releasing IMAX films, and the Company’s continued ability to secure films, find suitable partners for joint revenue sharing arrangements and to sell IMAX Systems. The commercial success of films released to IMAX locations depends on a number of factors outside of the Company’s control, including whether the film receives critical and consumer acclaim, the timing of its release, the success of the marketing efforts of the studio releasing the film, consumer preferences and trends in cinema attendance. Moreover, films can be subject to delays in production or changes in release schedule, which can negatively impact the number, timing and quality of IMAX films released to the Company’s global network. For example, the Writers Guild of America and the Screen Actors Guild – American Federation of Television and Radio Artists went on strike in May and July 2023, respectively, over labor disputes with the Alliance Motion Picture and Television Producers. Although these strikes ended in late 2023, they have and may result in further changes in film productions, release, and promotion schedules and plans, which may adversely impact the Company’s revenues and results of operations. In addition, as the Company’s international network has expanded, the Company has signed deals with studios in other countries to convert their films to the Company’s format and release them to the IMAX network. The Company may be unable to select films which will be successful in international markets or may be unsuccessful in selecting the right mix of Hollywood and local language films for a particular country or region, notably Greater China, the Company’s largest market. Also, conflicts in international release schedules may make it difficult to release every IMAX film in certain markets. 18 The Company depends principally on commercial theatrical exhibitors to purchase or lease IMAX Systems, to supply box office revenue under joint revenue sharing arrangements and under its sale and sales-type lease agreements and to supply venues in which to exhibit IMAX films. The Company is unable to predict the pace at which exhibitors will purchase or lease IMAX Systems or enter into joint revenue sharing arrangements with the Company, or whether any of the Company’s existing exhibitor customers will continue to do any of the foregoing. If exhibitors choose to reduce their levels of presence or expansion, negotiate economic terms that are less favorable to the Company, or decide not to enter into transactions with the Company, the Company’s revenues would not increase at an anticipated rate and motion picture studios may be less willing to convert their films into the Company’s format for exhibition in commercial IMAX locations. As a result, the Company’s future revenues and cash flows could be adversely affected. The Company is undertaking brand extensions and new business initiatives, and the Company’s investments and efforts in such business evolution may not be successful. The Company is undertaking brand extensions and new business initiatives. These initiatives represent potential new areas of growth for the Company and could include the offering of new products and services that may not be accepted by the market. The Company has recently explored initiatives in the field of in-home entertainment technology, which is an intensely competitive business and which is dependent on consumer demand, over which the Company has no control. The Company is also exploring new technologies to connect the IMAX network to facilitate bringing more unique content, including broadcasts of live events, to IMAX audiences and to expand the Company’s streaming and consumer technology strategy. If any new brand extensions and business initiatives in which the Company invests or attempts to develop does not progress as planned, the Company may be adversely affected by investment expenses that have not led to the anticipated results, by write-downs of its assets, by the distraction of management from its core business or by damage to its brand or reputation. New initiatives could involve acquisitions or the formation of joint ventures and business alliances. For example, in September 2022, the Company acquired SSIMWAVE. Such transactions and arrangements involve significant challenges and risks, including that they may not advance the Company’s long-term business strategy, that the Company realizes an unsatisfactory return on its investments or fails to realize anticipated business synergies, that the Company has difficulty integrating or retaining new employees, systems, and technology, that the Company has disagreements with a relevant partner with respect to financing, management, and development, that the Company fails to identify or anticipate risks and liabilities of acquired companies in advance of acquisition, or that management gets distracted from the Company’s core business. Also, it may take longer than expected to realize the full benefits from these transactions and arrangements such as increased revenue or enhanced efficiencies, or the benefits may ultimately be smaller than the Company expected. The Company faces cyber-security and similar risks, which could result in the disclosure, theft, or loss of confidential or other proprietary information, including intellectual property, damage to the Company’s brand and reputation, legal exposure and financial losses. The Company must also comply with a variety of data privacy regulations and failure to comply with such regulations may adversely affect the Company’s financial performance. The nature of the Company’s business involves access to and storage of confidential and proprietary content and other information, including its own intellectual property and the intellectual property of certain movie studios or partners it may work with, as well as certain information regarding the Company’s customers, employees, licensees, and suppliers. Although the Company maintains robust procedures, internal policies and technological security measures to safeguard such content and information, as well as a cyber-security insurance policy, the Company’s information technology systems, and the information technology systems of its current or future third-party vendors, collaborators, consultants and service providers, could be penetrated by internal or external parties intent on extracting information, corrupting information, stealing intellectual property or trade secrets, or disrupting business processes. Information security risks have increased in recent years because of the proliferation of new technologies and the increased sophistication and activities of perpetrators of cyber-attacks, including from emerging technologies, such as advanced forms of AI and quantum computing. The Company’s information technology infrastructure may be vulnerable to such attacks, including through the use of malware, software bugs, computer viruses, ransomware, social engineering, and denial of service. It is possible that such attacks could compromise the Company’s security measures or the security measures of parties with whom the Company does business. Because the techniques that may be used to circumvent the Company’s safeguards change frequently and may be difficult to detect, the Company may be unable to anticipate any new techniques or implement sufficient preventive security measures. In addition, the Company’s sensitive, proprietary, or confidential information could be leaked, disclosed, or revealed as a result of or in connection with the Company’s employees’ or third-party vendor’s use of generative AI technologies. The Company seeks to monitor such attempts and incidents and to prevent their recurrence through modifications to the Company’s internal procedures and information technology infrastructure and provides information security training and compliance program to its employees on an annual basis, but in some cases preventive action might not be successful. Moreover, the development and maintenance of these security measures may be costly and will require ongoing updates as technologies evolve and techniques to overcome the Company’s security measures become more sophisticated. Any such attack or unauthorized access could result in a disruption of the Company’s operations, the theft, unauthorized use or publication of confidential or proprietary information of the Company or its customers, employees, licensees or suppliers, a reduction of the revenues the Company is able to generate from its operations, damage to the Company’s brand and reputation, a loss of confidence in the security 19 of the Company’s business and products, and significant legal and financial exposure, each of which could potentially have an adverse effect on the Company’s business. Refer to Part 1C, Cybersecurity for additional information. In addition, a variety of laws and regulations at the international, national, and state level govern the Company’s collection, use, protection and processing of personal data. These laws, including but not limited to the General Data Protection Regulation and the California Privacy Rights Act, are constantly evolving and may result in increasing regulatory oversight and public scrutiny in the future. The Company’s actual or perceived failure to comply with such laws and regulations could result in fines, investigations, enforcement actions, penalties, sanctions, claims for damages by affected individuals, and damage to the Company’s reputation, among other negative consequences, any of which could have a material adverse effect on its financial performance. RISKS RELATED TO THE COMPANY’S INTERNATIONAL OPERATIONS The Company conducts business internationally, which exposes it to uncertainties and risks that could negatively affect its operations, sales, and future growth prospects. A significant portion of the GBO generated by the Company’s exhibitor customers and its revenues are generated by customers located outside the United States and Canada. Approximately 64%, 62%, and 70% of the Company’s revenues were derived outside of the United States and Canada in 2023, 2022 and 2021, respectively. As of December 31, 2023, approximately 78% of IMAX Systems in backlog are scheduled to be installed in international markets. The Company’s network spanned 90 different countries as of December 31, 2023, and the Company expects its international operations to continue to account for an increasingly significant portion of its future revenues. There are a number of risks associated with operating in international markets that could negatively affect the Company’s operations, sales and future growth prospects. These risks include: • new restrictions on access to markets, both for IMAX Systems and films; • unusual or burdensome foreign laws or regulatory requirements or unexpected changes to those laws or requirements, including censorship of content that may restrict what films the Company’s network can present; • fluctuations in the value of various foreign currencies versus the U.S. Dollar and potential currency devaluations; • new tariffs, trade protection measures, import or export licensing requirements, trade embargoes, sanctions, and other trade barriers; • difficulties in obtaining competitively priced key commodities, raw materials, and component parts from various international sources that are needed to manufacture quality products on a timely basis; • imposition of foreign exchange controls in foreign jurisdictions; • dependence on foreign distributors and their sales channels; • reliance on local partners, including in connection with joint revenue sharing arrangements; • difficulties in staffing and managing foreign operations; • inability to complete installations of IMAX Systems, including as a result of material disruptions or delays in the Company’s supply chains, or collect full payment on installations thereof; • local business practices that can present challenges to compliance with applicable anti-corruption and bribery laws; • difficulties in establishing market-appropriate pricing; • less accurate and/or less reliable box office reporting; • adverse changes in foreign government monetary and/or tax policies, and/or difficulties in repatriating cash from foreign jurisdictions (including with respect to China, where approval of the State Administration of Foreign Exchange is required); • poor recognition of intellectual property rights; • difficulties in enforcing contractual rights; • economic conditions in foreign markets, including inflation; 20 • public health concerns, including pandemics or epidemics, and regulations in response thereto, which could adversely affect the Company’s and its customers' operations; • requirements to provide performance bonds and letters of credit to international customers to secure system component deliveries; • harm to the IMAX brand from operating in countries with records of controversial government action, including human rights abuses; and • political, economic and social instability, which could result in adverse consequences for the Company’s interests in different regions of the world. Additionally, global geopolitical tensions, such as the Russia and Ukraine and Israel-Hamas Wars, and actions that governments take in response may adversely impact the Company’s ability to operate in such regions and/or result in global or regional economic downturns. For example, in response to the ongoing conflict between Russia and Ukraine, Canada, the United States, and other countries in which the Company operates have imposed broad sanctions and other restrictive actions against governmental and other entities in Russia and Belarus, which in turn have and may continue to have an adverse impact on the Company’s business and results of operations in affected regions. In addition, in the wake of the Russia-Ukraine conflict and resulting sanctions, major movie studios suspended the theatrical release of films in Russia and Belarus and financial institutions halted transactions with Russian entities. The Company has notified its exhibitor clients in Russia and Belarus that such sanctions and actions constitute a force majeure event under their system agreements, resulting in the suspension of the Company’s obligations thereunder. Given the uncertainty as to the scope, intensity, duration and outcome of geopolitical conflicts, it is difficult to predict the full extent of the adverse impact of geopolitical conflicts on the Company’s business and results of operations. Additionally, given the global nature of the Company’s operations, any protracted conflict or the broader macroeconomic impact of geopolitical conflicts and sanctions imposed in response thereto, could have an adverse impact on the Company’s business, results of operations, financial condition, and future performance (the Company has 20 systems in its backlog from Russia, the CIS and Ukraine, and none from Israel) and may also magnify the impact of other risks described herein, including the risk of cybersecurity attacks, which may impact information technology systems unrelated to the conflict, or jeopardize critical infrastructure in jurisdictions where the Company operates. In addition, changes in United States or Canadian foreign policy can present additional risks or uncertainties as the Company continues to expand its international operations. Opening and operating theaters in markets that have experienced geopolitical or sociopolitical unrest or controversy, including through partnerships with local entities, exposes the Company to the risks listed above, as well as additional risks of operating in a volatile region. Such risks may negatively impact the Company’s business operations in such regions and may also harm the Company’s brand. Moreover, a deterioration of the diplomatic relations between the United States or Canada and a given country may impede the Company’s ability to operate IMAX systems in such countries and have a negative impact on the Company’s financial condition and future growth prospects. The Company faces risks in connection with its significant presence in China and the continued expansion of its business there. Greater China is the Company’s largest market by revenue, with approximately 25% of overall revenues generated from its Greater China operations in 2023. As of December 31, 2023, the Company had 807 IMAX Systems operating in Greater China with an additional 206 systems in backlog, which represent 46% of the Company’s current backlog. Of the IMAX Systems currently scheduled to be installed in Greater China, 71% are under joint revenue sharing arrangements, which further increases the Company’s ongoing exposure to box office performance in this market. The China market faces a number of risks, including a continued slow recovery from the COVID-19 pandemic, changes in laws and regulations, currency fluctuations, increased competition, and changes in economic conditions, including the risk of an economic downturn or recession, trade embargoes, restrictions or other barriers, as well as other conditions that may impact the Company’s exhibitor and studio partners, and consumer spending. The worsening of United States–China political tensions could exacerbate any or all of these risks, and adverse developments in any of these areas could impact the Company’s future revenues and cash flows and could cause the Company to fail to achieve anticipated growth. 21 The Company does not believe that it is currently required to obtain any permission or approval from the China Securities Regulatory Commission, the Cyberspace Administration of China or any other regulatory authority in the PRC for its operations, but there can be no assurance that such permissions or approvals would not be required in the future and, if required, that they would be granted in a timely manner, on acceptable terms, or at all. Furthermore, PRC regulators, including the Cyberspace Administration of China, the Ministry of Industry and Information Technology, and the Ministry of Public Security, have been increasingly focused on regulation in data security and data protection. Regulatory requirements concerning data protection and cybersecurity, as well as other requirements concerning operations of foreign businesses, in the PRC are evolving, and their enactment timetable, interpretation and implementation involve significant uncertainties. To the extent any PRC laws and regulations become applicable to the Company, it may be subject to the risks and uncertainties associated with the legal system in the PRC, including with respect to the enforcement of laws and the possibility of changes of rules and regulations with little or no advance notice. Certain risks and uncertainties of doing business in China are solely within the control of the Chinese government, and Chinese law regulates both the scope of the Company’s continued expansion in China and the Company's business within China. For instance, the Chinese government regulates the number, timing, and terms of Hollywood films released to the China market. A number of prominent Hollywood films were denied release dates in China in 2021 and 2022, including several films released in IMAX format in other markets. While significantly more Hollywood films were given release dates in China in 2023, several of the prominent Hollywood sequels or franchise films released into China in 2023 underperformed their predecessors in that market. The Company cannot provide assurance that the Chinese government will continue to permit the release of Hollywood IMAX films in China or that the timing, number or performance of IMAX releases will be favorable to the Company. There are also uncertainties regarding the interpretation and application of laws and regulations and the enforceability of intellectual property and contract rights in China. If the Company were unable to navigate China’s regulatory environment, or if the Company were unable to enforce its intellectual property or contract rights in China, the Company’s business could be adversely impacted. The Company may experience adverse effects due to exchange rate fluctuations. A substantial portion of the Company’s revenues are denominated in U.S. Dollars, while a substantial portion of its expenses are denominated in Canadian Dollars. The Company also generates revenues in Chinese Yuan Renminbi, Euros and Japanese Yen. While the Company periodically enters into forward contracts to hedge its exposure to exchange rate fluctuations between the U.S. and the Canadian Dollar, the Company may not be successful in reducing its exposure to these fluctuations. The use of derivative contracts is intended to mitigate or reduce transactional level volatility in the results of foreign operations, but does not completely eliminate volatility. Even in jurisdictions in which the Company does not accept local currency or requires minimum payments in U.S. Dollars, significant local currency issues may impact the profitability of the Company’s arrangements with its customers, which ultimately affect the ability to negotiate cost-effective arrangements and, therefore, the Company’s results of operations. In addition, because IMAX films generate box office revenue in 90 different countries, unfavorable exchange rates between applicable local currencies and the U.S. Dollar could affect the GBO generated by exhibitors and the Company’s reported revenues, further impacting the Company’s results of operations. RISK RELATED TO THE COMPANY’S INDUSTRY AND COMPETITIVE ENVIRONMENT Consolidation among commercial exhibitors and studios reduces the breadth of the Company’s customer base, and could result in a narrower market for the Company’s products and reduced negotiating leverage. A deterioration in the Company’s relationship with key partners could materially and adversely affect the Company’s business, financial condition or results of operation. In addition, an adverse economic impact on a significant customer’s business operations could have a corresponding material adverse effect on the Company. The Company’s primary customers are commercial multiplex exhibitors. Since 2016, the commercial exhibition industry has undergone significant consolidation, including AMC’s acquisition of Carmike Cinemas and Odeon, which includes Nordic and Cineworld’s acquisition of Regal. Exhibitor concentration has resulted in certain exhibitor chains constituting a material portion of the Company’s network and revenue. For instance, Wanda is the Company’s largest exhibitor customer, representing approximately 10% of the Company’s total revenues in 2023. As of December 31, 2023, through the Company’s partnership with Wanda, there were 376 IMAX Systems operational in Greater China and Wanda represented approximately 21% of the commercial network and 4% of the Company’s backlog. The share of the Company’s revenue that is generated by Wanda is expected to continue to grow as the number of IMAX Systems in backlog with Wanda are opened. No assurance can be given that significant customers such as Wanda will continue to purchase IMAX Systems and/or enter into joint revenue sharing arrangements with the Company and if so, whether contractual terms will be affected. If the Company does business with Wanda or other large exhibitor chains less frequently or on less favorable terms than currently, the Company’s business, financial condition or results of operations may be adversely affected. In addition, an adverse economic impact on a significant customer’s business operations could have a corresponding material adverse effect on the Company. 22 The Company also receives revenues from studios releasing IMAX films. Hollywood studios have also experienced consolidation, as evidenced by the Walt Disney Company’s acquisition of certain studio assets from Twenty First Century Fox in 2019. Studio consolidation could result in individual studios comprising a greater percentage of the Company’s film slate and overall IMAX Film Remastering revenue, and could expose the Company to the same risks described above in connection with exhibitor consolidation. Failure to respond adequately or in a timely fashion to changes and advancements in technology could negatively affect the Company’s business. In order to keep pace with changes and advancements in digital technology and in order to continue to provide an experience that is premium to and differentiated from conventional entertainment experiences, the Company has made, and expects to continue to make, significant investments in digital technology in the form of research and development and the acquisition of third-party intellectual property and/or proprietary technology. A significant portion of the Company’s research and development efforts have been focused on its laser-based projection systems. The Company’s recent research and development efforts have also focused on image enhancement technology, developing technologies and systems to help bring additional interactivity to its global IMAX network. The process of developing new technologies is inherently uncertain and subject to certain factors that are outside of the Company’s control, including reliance on third-party partners and suppliers, and the Company can provide no assurance its investments will result in commercially viable advancements to the Company’s existing products or in commercially successful new products, or that any such advancements or products will improve upon existing technology or will be developed within the timeframe expected. Furthermore, in September 2022, with the acquisition of SSIMWAVE, a leader in AI-driven video quality solutions for media and entertainment companies, there is ongoing research and development in perceptual metrics including novel measurement and optimization techniques. Artificial intelligence technologies and their use are currently undergoing rapid change. If the Company fails to enhance its current AI products and develop new products in response to changes in technology or industry standards, or the Company fails to bring product enhancements or new product developments to market quickly enough, the Company’s AI products could rapidly become less competitive or obsolete. The introduction of new, competing products and technologies could harm the Company’s business. The entertainment industry is very competitive. The Company faces competition both in the form of technological advances in in-home entertainment, as well as those within the out-of-home entertainment, including the theater-going experience. For example, according to research conducted by Omdia, there were approximately 42,000 conventional-sized screens in North American commercial multiplexes in 2022. In addition, exhibitors and entertainment technology companies have introduced their own branded, large-screen 3D auditoriums or other proprietary theater systems, and in many cases, have marketed those auditoriums or theater systems as having similar quality or attributes as an IMAX System. The Company competes with entertainment and media companies with new technologies and/or substantially greater capital resources to develop and support them. The Company may be unable to continue to produce theater systems or provide experiences which are premium to, or differentiated from, other theater systems or entertainment experiences, respectively. Furthermore, many of the Company’s commercial exhibitor customers are reliant on the availability of retail shopping malls at physical locations, which compete with other forms of retailing such as online retail websites, and may be adversely affected by the changes in the retail shopping landscape and consumer purchasing pattern. In return, the Company may be adversely affected by the challenges faced by its exhibitor customers. As noted above, the Company faces in-home competition from a number of alternative motion picture distribution channels such as home video, streaming services, video-on-demand, internet, and broadcast and cable television. The average exclusive theatrical release window for Hollywood titles has decreased over the years, and there can be no assurance that this release window, which is determined by the movie studios, will not shrink further which could have an adverse impact on the Company’s business and results of operations. In addition, as a result of the COVID-19 pandemic and related movie theater closures, in 2020 and 2021, a number of films were released directly or concurrently to streaming services the same day as to theaters. Most major film studios have since recommitted to exclusive theatrical releases for blockbuster movies. However, there can be no assurance that direct or concurrent release to streaming services will not resume or increase in the future, intensifying in-home competition. The Company further competes for the public’s leisure time and disposable income with other forms of entertainment, including gaming, sporting events, concerts, live theater, social media, and restaurants. If the Company is unable to continue to produce a differentiated theater experience, consumers may be unwilling to pay the price premiums associated with the cost of IMAX tickets and box office performance of IMAX films may decline. The declining box-office performance of IMAX films could materially and adversely harm the Company’s business and prospects. 23 The Company may not be able to adequately protect its intellectual property, and competitors could misappropriate its technology or brand, which could weaken its competitive position. The Company depends on its proprietary knowledge regarding IMAX Systems and digital and film technology, video quality assessment and image enhancement. The Company relies principally upon a combination of copyright, trademark, patent and trade secret laws, restrictions on disclosures and contractual provisions to protect its proprietary and intellectual property rights. These laws and procedures may not be adequate to prevent unauthorized parties from attempting to copy or otherwise obtain the Company’s processes and technology or deter others from developing similar processes or technology, which could weaken the Company’s competitive position and require the Company to incur costs to secure enforcement of its intellectual property rights. The protection provided to the Company’s proprietary technology by the laws of foreign jurisdictions may not protect it as fully as the laws of Canada or the United States. The lack of protection afforded to intellectual property rights in certain international jurisdictions may be increasingly problematic given the extent to which the future growth of the Company is anticipated to come from foreign jurisdictions. The Company may develop proprietary technology or knowledge, including AI-generated works, that are not entitled to intellectual property protection. Finally, some of the underlying technologies of the Company’s products and system components are not covered by patents or patent applications. The Company owns patents issued and patent applications pending, including those covering its digital projector, digital conversion technology, laser illumination technology, and other inventions relating to imaging technology and video quality assessment. The Company’s patents are filed in the United States, often with corresponding patents or filed applications in other jurisdictions, such as Canada, China, Belgium, Japan, France, Germany, and the United Kingdom. The patent applications pending may not be issued or the patents may not provide the Company with any competitive advantage. The patent applications may also be challenged by third parties. Several of the Company’s issued patents expire between 2024 and 2041. If the Company’s patent claims are rendered invalid or unenforceable, or narrowed in scope, the patent coverage afforded the Company’s products and services could be impaired, which could negatively affect its competitive position. In addition, competitors and other third-parties may be able to circumvent or design around the Company’s patents and may develop and obtain patent protection for more effective technologies. If these developments were to occur, it could have an adverse effect on the Company’s sales or market position. Any claims or litigation initiated by the Company to protect its proprietary technology could be time consuming, costly, and divert the attention of its technical and management resources. If the Company chooses to go to court to stop a third-party from infringing its intellectual property, that third-party may ask the court to rule that the Company’s intellectual property rights are invalid and/or should not be enforced against that third-party. The Company relies upon trade secrets and other confidential and proprietary know how to develop and maintain the Company’s competitive position. While it is the Company’s policy to enter into agreements imposing nondisclosure and confidentiality obligations upon its employees and third-parties to protect the Company’s intellectual property, these obligations may be breached, may not provide meaningful protection for the Company’s trade secrets or proprietary know-how, or adequate remedies may not be available in the event of an unauthorized access, use or disclosure of the Company’s trade secrets and know-how. Furthermore, despite the existence of such nondisclosure and confidentiality agreements, or other contractual restrictions, the Company may not be able to prevent the unauthorized disclosure or use of its confidential proprietary information or trade secrets by consultants, vendors and employees. In addition, others could obtain knowledge of the Company’s trade secrets through independent development or other legal means. The IMAX brand stands for the highest quality and most immersive entertainment experiences. Protecting the IMAX brand is a critical element in maintaining the Company’s relationships with studios and its exhibitor clients and building and maintaining brand loyalty and recognition. Though the Company relies on a combination of trademark and copyright law as well as its contractual provisions to protect the IMAX brand, those protections may not be adequate to prevent erosion of the brand over time, particularly in foreign jurisdictions. Erosion of the brand could threaten the demand for the Company’s products and services and impair its ability to grow future revenue streams. In addition, if any of the Company’s registered or unregistered trademarks, trade names or service marks is challenged, infringed, circumvented, declared generic or determined to be infringing on other marks, it could have an adverse effect on the Company’s sales or market position. The Company may be subject to claims of infringement of third-party intellectual property rights that are costly to defend, result in the diversion of management’s time and efforts, require the payment of damages, limit the Company’s ability to use particular technologies in the future or prevent the Company from marketing its existing or future products and services. The Company’s commercial success will depend in part on not infringing, misappropriating, or violating the intellectual property rights of others. A third-party could assert a claim against the Company for alleged infringement of its patent, copyright, trademark, or other intellectual property rights, including in relation to technologies that are important to the Company’s business. The Company may not be aware of whether its products or services do or will infringe existing or future patents or the intellectual property rights of others. In addition, there can be no assurance that one or more of The Company’s competitors who have developed competing technologies or the Company’s other competitors will not be granted patents for their technology and allege that the Company has infringed. 24 Any claims that the Company’s business infringes the intellectual property rights of others, regardless of the merit or resolution of such claims, could entail significant costs in responding to, defending, and resolving such claims. An adverse determination in any intellectual property claim could require the Company to pay damages and/or stop using its technologies, trademarks, copyrighted works, and other material found to be in violation of another party’s rights and could prevent the Company from licensing its technologies to others unless the Company enters into royalty or licensing arrangements with the prevailing party or are able to redesign its products and services to avoid infringement. Such a license may not be available on reasonable terms, if at all, and there can be no assurance that the Company would be able to redesign its services in a way that would not infringe the intellectual property rights of others. Any payments the Company is required to make and any injunction the Company is required to comply with as a result of any infringement could harm its reputation and financial results. RISKS RELATED TO THE COMPANY’S REVENUES, EARNINGS, AND FINANCIAL POSITION The Company’s operating results and cash flow can vary substantially from period to period and could increase the volatility of its share price. The Company’s operating results and cash flow can fluctuate substantially from period to period. In particular, fluctuations in IMAX System installations and GBO performance of IMAX films can materially affect operating results. Factors that have affected the Company’s operating results and cash flow in the past, and are likely to affect its operating results and cash flow in the future, include, among other things: • the timing of signing and installation of new IMAX Systems (particularly for installations in newly-built multiplexes, which can result in delays that are beyond the Company’s control); • the timing and commercial success of films distributed to the Company’s network; • the demand for, and acceptance of, the Company’s products and services; • the recognition of revenue of sale and sales-type leases; • the classification of leases as sales-type versus operating; • the volume of orders received and that can be filled in the period; • the level of its sales backlog; • the signing of film distribution agreements; • the financial performance of IMAX Systems operated by the Company’s customers; • financial difficulties faced by customers, particularly customers in the commercial exhibition industry; • the magnitude and timing of spending in relation to the Company’s research and development efforts and related investments, as well as new business initiatives, and success thereof; and • the number and timing of joint revenue sharing arrangement installations, related capital expenditures, and timing of related cash receipts. Most of the Company’s operating expenses are fixed in the short term. The Company may be unable to rapidly adjust its spending to compensate for any unexpected shortfall in sales, joint revenue sharing arrangements revenue or IMAX Film Remastering revenue, which would harm operating results for a particular period. The Company’s systems revenue can vary significantly from its cash flows under IMAX System sales or lease agreements. The Company’s systems revenue can vary significantly from the associated cash flows. The Company often provides financing to customers for IMAX Systems on a long-term basis through long-term sale or lease arrangements. The terms of leases or financing receivables are typically 10 to 12 years. The sale and sales-type lease agreements for IMAX Systems typically provide for three major sources of cash flow: • initial fees, which are paid in installments generally commencing upon the signing of the agreement until installation of the IMAX System; 25 • ongoing fees, which are paid monthly after the IMAX System has been opened to the public and are generally equal to the greater of a fixed minimum amount per annum and a percentage of box office receipts; and • ongoing annual maintenance and extended warranty fees, which are generally payable commencing in the second year of theater operations. Initial fees generally make up the vast majority of cash received under IMAX System sales or sales-type lease agreements for a theater arrangement. For sale and sales-type leases, the revenue recorded is generally equal to the sum of initial fees and the present value of any future initial payments, and fixed minimum ongoing payments. Sales arrangements also include an estimate of future variable consideration due under the agreement. Cash received from initial fees in advance of meeting the revenue recognition criteria for the IMAX Systems is recorded as deferred revenue. Leases that do not transfer substantially all of the benefits and risks of ownership to the customer are classified as operating leases. For these leases, initial fees and fixed minimum ongoing payments are recognized as revenue on a straight-line basis over the lease term. Contingent payments in excess of fixed minimum ongoing payments are recognized as revenue when reported by theater operators, provided collectability is reasonably assured. As a result of the above, the revenue set forth in the Company’s Consolidated Financial Statements does not necessarily correlate with the Company’s cash flow or cash position. Revenues include the present value of future contracted cash payments, and there is no guarantee that the Company will receive such payments under its lease and sale agreements if its customers default on their payment obligations. The Company may not convert all of its backlog into revenue and cash flows. As of December 31, 2023, the Company’s backlog included 450 IMAX Systems, consisting of 164 IMAX Systems under sales or lease arrangements and 286 IMAX Systems under joint revenue sharing arrangements. The Company lists signed contracts for IMAX Systems for which revenue has not been recognized as backlog prior to the time of revenue recognition. The total value of the backlog represents all signed IMAX System sale or lease agreements that are expected to be recognized as revenue in the future and includes initial fees along with the estimated present value of contractual ongoing fees due over the term, and a variable consideration estimate for the IMAX Systems under sales arrangements, but it excludes amounts allocated to maintenance and extended warranty revenues. Notwithstanding the legal obligation to do so, some of the Company’s customers with which it has signed contracts may not accept delivery of IMAX Systems that are included in the Company’s backlog. An economic or industry downturn may exacerbate the risk of customers not accepting delivery of IMAX Systems. Any reduction in backlog could adversely affect the Company’s future revenues and cash flows. In addition, customers with system obligations in backlog sometimes request that the Company agree to modify or reduce such obligations, which the Company has agreed to do in the past under certain circumstances. Customer-requested delays in the installation of IMAX Systems in backlog remain a recurring and unpredictable part of the Company’s business. The Company’s inability to enter into renewals of new sales and lease agreements on favorable terms or at all would adversely affect its cash flows and operating results. Approximately 7% of the Company’s sales and lease agreements are due to expire in the next 12 months. If these agreements are not renewed, or if the Company is unable to enter into new leases agreements comparable to those currently in effect in a timely manner, then the Company’s systems revenue could be adversely affected. The Company’s revenues from existing customers are derived in part from financial reporting provided by its customers, which may be inaccurate or incomplete, resulting in lost or delayed revenues. The Company’s revenue under its joint revenue sharing arrangements, a portion of the Company’s payments under lease or sales arrangements and its film distribution fees are based upon financial reporting provided by its customers. If such reporting is inaccurate, incomplete, or withheld, the Company’s ability to receive the appropriate payments it is owed in a timely fashion may be impaired. The Company’s contractual ability to audit IMAX locations may not rectify payments lost or delayed as a result of customers not fulfilling their contractual obligations with respect to financial reporting. 26 There is collection risk associated with payments to be received over the terms of the Company’s IMAX System agreements. The Company is dependent in part on the viability of its exhibitors for collections under long-term leases, sales financing agreements, and joint revenue sharing arrangements. Exhibitors or other operators may experience financial difficulties that could cause them to be unable to fulfill their contractual payment obligations to the Company. As a result, the Company’s future revenues and cash flows could be adversely affected. The Company may be subject to impairment losses on its film assets if such assets do not meet management’s estimates of total revenues. The Company amortizes its film assets, including IMAX Film Remastering costs capitalized using the individual film forecast method, whereby the costs of film assets are amortized and participation costs are accrued for each film in the ratio of revenues earned in the current period to management’s estimate of total revenues ultimately expected to be received for that title. Management regularly reviews, and revises when necessary, its estimates of ultimate revenues on a title-by-title basis, which may result in a change in the rate of amortization of the film assets and write-downs or impairments of film assets. Results of operations in future years will include the amortization of the Company’s film assets and may be significantly affected by periodic adjustments in amortization rates. The Company may be subject to impairment losses on its inventories if they become obsolete. The Company records write-downs for excess and obsolete inventory based upon current estimates of future events and conditions, including the anticipated installation dates for the current backlog of IMAX System contracts, technological developments, signings in negotiation and anticipated market acceptance of the Company’s current and pending IMAX Systems. If the Company’s goodwill or long-lived assets become impaired, the Company may be required to record a significant charge to earnings. Under United States Generally Accepted Accounting Principles (“U.S. GAAP”), the Company reviews its long-lived assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is required to be qualitatively assessed at least annually and when events or changes in circumstances arise or can be quantitatively tested for impairment. Factors that may be considered a change in circumstances include (but are not limited to) a decline in share price and market capitalization, declines in future cash flows, and slower growth rates in the Company’s industry. The Company may be required to record a significant charge to earnings in its financial statements during the period in which any impairment of its goodwill or long-lived assets is determined. 27 RISKS RELATED TO THE COMPANY’S COMMON SHARES The market price for the Company’s common shares has historically been volatile and declines in market price, may negatively affect its ability to raise capital, issue debt, secure customer business, and retain employees. The Company is listed on the New York Stock Exchange (“NYSE”) and its publicly traded shares have in the past experienced, and may continue to experience, significant price and volume fluctuations. This market volatility could reduce the market price of its common shares, regardless of the Company’s operating performance. A decline in the capital markets generally, or an adjustment in the market price or trading volumes of the Company’s publicly traded securities, may negatively affect its ability to raise capital, issue debt, secure customer business or retain employees. These factors, as well as general economic and geopolitical conditions, may have a material adverse effect on the market price of the Company’s publicly traded securities. Because the Company is incorporated in Canada, it may be difficult for plaintiffs to enforce against the Company liabilities based solely upon United States federal securities laws. The Company is incorporated under the federal laws of Canada, some of its directors and officers are residents of Canada and a substantial portion of its assets and the assets of such directors and officers are located outside the United States. As a result, it may be difficult for United States plaintiffs to effect service within the United States upon those directors or officers who are not residents of the United States, or to obtain or enforce against them or the Company judgments of United States courts predicated solely upon civil liability under the United States federal securities laws. In addition, it may be difficult for plaintiffs to bring an original action outside of the United States against the Company to enforce liabilities based solely on United States federal securities laws. RISKS RELATED TO THE COMPANY’S INDEBTEDNESS The credit agreement governing the Company’s senior secured credit facility contains significant restrictions that limit its operating and financial flexibility. The credit agreement governing the Company’s senior secured credit facility contains certain restrictive covenants that, among other things, limit its ability to: • incur additional indebtedness; • pay dividends and make distributions; • repurchase stock; • make certain investments; • transfer or sell assets; • create liens; • enter into transactions with affiliates; • issue or sell stock of subsidiaries; • create dividend or other payment restrictions affecting restricted subsidiaries; and • merge, consolidate, amalgamate, or sell all or substantially all of its assets to another person. These restrictive covenants impose operating and financial restrictions on the Company that limit its ability to engage in acts that may be in the Company’s long-term best interests. 28 The Company’s indebtedness and liabilities could limit the cash flow available for its operations, and expose the Company to risks that could adversely affect its business, financial condition, and results of operations. As of December 31, 2023 , the Company had approximately $389.5 million of consolidated indebtedness and liabilities. The Company may also incur additional indebtedness to meet future financing needs. The Company’s indebtedness could have significant negative consequences for its security holders and its business, results of operations and financial condition by, among other things: • increasing its vulnerability to adverse economic and industry conditions; • limiting its ability to obtain additional financing; • requiring the dedication of a substantial portion of its cash flow from operations to service its indebtedness, which will reduce the amount of cash available for other purposes; • limiting its flexibility to plan for, or react to, changes in its business; • diluting the interests of its shareholders as a result of issuing common shares upon conversion of the 0.500% Convertible Senior Notes due 2026 (the “Convertible Notes”); and • placing the Company at a possible competitive disadvantage with competitors that are less leveraged than the Company or have better access to capital. The Company’s business may not generate sufficient funds, and the Company may otherwise be unable to maintain sufficient cash reserves, to pay amounts due under its indebtedness, and the Company’s cash needs may increase in the future. In addition, the Credit Agreement contains, and any future indebtedness that the Company incurs may contain, financial and other restrictive covenants that limit its ability to operate, raise capital or make payments under its other indebtedness. If the Company fails to comply with these covenants or to make payments under its indebtedness when due, then the Company would be in default under that indebtedness, which could, in turn, result in that and the Company’s other indebtedness becoming immediately payable in full. A description of the Company’s outstanding indebtedness is provided in Note 14 to Consolidated Financial Statements in Part II, Item 8. The Company may be unable to raise the funds necessary to repurchase the Convertible Notes for cash following a fundamental change, or to pay the cash amounts due upon conversion, and the Company’s other indebtedness may limit its ability to repurchase the Convertible Notes or pay cash upon their conversion. Noteholders may, subject to a limited exception described in the indenture governing the Convertible Notes, require the Company to repurchase their Convertible Notes following a fundamental change at a cash repurchase price generally equal to the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest, if any. In addition, all conversions of Convertible Notes will be settled partially or entirely in cash. The Company may not have enough available cash or be able to obtain financing at the time it is required to repurchase the Convertible Notes or pay the cash amounts due upon conversion. In addition, applicable law, regulatory authorities and the agreements governing the Company’s other indebtedness may restrict the Company’s ability to repurchase the Convertible Notes or pay the cash amounts due upon conversion. The Company’s failure to repurchase Convertible Notes or pay the cash amounts due upon conversion when required will constitute a default under the indenture governing the Convertible Notes. A default under the indenture or the fundamental change itself could also lead to a default under agreements governing the Company’s other indebtedness, which may result in that other indebtedness becoming immediately payable in full. The Company may not have sufficient funds to satisfy all amounts due under its other indebtedness and the Convertible Notes. Provisions in the indenture could delay or prevent an otherwise beneficial takeover of the Company. Certain provisions in the Convertible Notes and the related indenture could make a third-party attempt to acquire the Company more difficult or expensive. For example, if a takeover constitutes a fundamental change, then noteholders will have the right to require the Company to repurchase their Convertible Notes for cash. In addition, if a takeover constitutes a make-whole fundamental change, then the Company may be required to temporarily increase the conversion rate of the Convertible Notes. In either case, and in other cases, the Company’s obligations under the Convertible Notes and the indenture could increase the cost of acquiring the Company otherwise discourage a third party from acquiring the Company or removing incumbent management, including in a transaction that noteholders or holders of the Company’s common shares may view as favorable. 29 The Company is subject to counterparty risk with respect to the Capped Call Transactions, and the capped call may not operate as planned. In connection with the issuance of the Convertible Notes, the Company entered into privately negotiated capped call transactions with option counterparties (the “Capped Call Transactions”). The Capped Call Transactions are expected to reduce potential dilution resulting from the common shares the Company is required to issue and/or to offset any potential cash payments the Company is required to make in excess of the principal amount of the Convertible Notes in the event that the market price per share of the Company’s common shares is greater than the strike price of the Capped Call Transactions, with such reduction and/or offset subject to a cap. Collectively, the Capped Call Transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes, the number of the Company’s common shares underlying the Convertible Notes. The option counterparties are financial institutions, and the Company will be subject to the risk that they might default under the Capped Call Transactions. The Company’s exposure to the credit risk of the option counterparties will not be secured by any collateral. Global economic conditions have from time to time resulted in the actual or perceived failure or financial difficulties of many financial institutions. If an option counterparty becomes subject to insolvency proceedings, the Company will become an unsecured creditor in those proceedings with a claim equal to the Company’s exposure at that time under our transactions with that option counterparty. The Company’s exposure will depend on many factors, but, generally, the increase in the Company’s exposure will be correlated with increases in the market price or the volatility of its common shares. In addition, upon a default by an option counterparty, the Company may suffer adverse tax consequences and more dilution than the Company currently anticipates with respect to its common shares. The Company can provide no assurances as to the financial stability or viability of any option counterparty. In addition, the Capped Call Transactions are complex, and they may not operate as planned. For example, the terms of the Capped Call Transactions may be subject to adjustment, modification or, in some cases, renegotiation if certain corporate or other transactions occur. Accordingly, these transactions may not operate as the Company intends if it is required to adjust their terms as a result of transactions in the future or upon unanticipated developments that may adversely affect the functioning of the Capped Call Transactions. GENERAL RISK FACTORS The loss of one or more of the Company’s key personnel, or its failure to attract and retain its employee population, could adversely affect its business. The Company’s operations and prospects depend in large part on the performance and continued service of its senior management team. The competition for experienced senior management in the Company’s industry is intense, and the Company may not find qualified replacements for any of these individuals if their services are no longer available on the same terms or at all. The loss of the services of one or more members of the Company’s senior management team could adversely affect its ability to effectively pursue its business strategy. In addition, the Company may experience challenges with respect to employee retention given the current competitive labor market. A number of external factors beyond the Company’s control, including its industry’s highly competitive market for skilled workers and leaders, cost inflation, development of non-compete laws, and workforce participation rates, may negatively affect the Company’s ability to retain and attract qualified employees. If the Company experiences high attrition rates in its employee population, the results of our operations may be adversely affected. Changes in accounting and changes in management’s estimates may affect the Company’s reported earnings and operating income. U.S. GAAP and accompanying accounting pronouncements are highly complex and involve many subjective judgments. Changes in these rules, their interpretation, management’s estimates, or changes in the Company’s products or business could significantly change its reported future earnings and operating income and could add significant volatility to those measures, without a comparable underlying change in cash flow from operations. More information is provided in Critical Accounting Estimates within Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7. Regulatory and market responses to climate change concerns may negatively impact our business and increase our operating costs. Growing public concern about climate change has resulted in the increased focus of local, state, regional, national and international regulatory bodies on climate change issues. As a result, climate change regulation and market reactions to climate change could adversely impact the Company’s business, including the potential for an increase in climate risk assessment. Such enhanced governmental and societal attention to climate matters, including expanding mandatory and voluntary reporting, diligence, and disclosure on topics such as climate change impacts, carbon emissions, water usage, waste management, and risk oversight, could expand the nature, scope, and complexity of matters that the Company is required to control, assess, and report. Furthermore, regulatory efforts to combat climate change could result in increases in the cost of raw materials, taxes, transportation and utilities for the Company’s suppliers and vendors 30 which would result in higher operating costs for the Company and potentially impact the availability of components used in the Company’s systems. These and other rapidly changing laws, regulations, policies, interpretations, and expectations may increase the cost of the Company’s compliance, divert management attention, alter the environment in which it does business, and expose the Company to potentially significant fines or other penalties if it is unable to comply with such laws, regulations or policies, any of which could have a material adverse effect on the Company’s business, results of operations, and financial condition. In addition, the shift toward a lower-carbon economy, driven by policy regulations, low-carbon technology advancement, consumer sentiment, and/or liability risks, may negatively impact the Company’s business and operating costs. However, the Company is unable to predict at this time, the potential effects, if any, that any climate change initiatives may have on its business. The Company’s business and financial results could be adversely affected by weather conditions and natural and man-made disasters. Physical risks, including man-made disasters, such as infrastructure failures, structural collapse, fires, explosions, and acts of war and terror, as well as weather conditions and natural disasters, such as earthquakes, droughts, floods, hailstorms, heavy or prolonged precipitation, wildfires, hurricanes, sea level rise and others, affecting the IMAX global network or corporate locations, could harm the Company’s business. Additionally, the physical impacts of climate change may cause occurrences of natural disasters to increase in frequency, severity and duration, magnifying the adverse impact of such occurrences and the cost of insuring against them. The climates and geology of some of the regions in which the Company’s principal offices are located, including California, present increased risks of adverse weather or natural disasters. Any such events in the future could disrupt the Company’s operations and impact the Company’s ability to serve its customers. Item 1B. Unreso lved Staff Comments None. Item 1C. Cybersecurity Overview The Company is not aware of any cybersecurity threats or incidents to date that have materially affected its strategy, results of operations, or financial condition. However, the scope and impact of any future cybersecurity incident cannot be predicted with certainty. More information on how material cybersecurity attacks may impact the Company’s business is provided in “Item 1A. Risk Factors”. Cybersecurity Risk Management Framework The Company employs a multi-faceted cybersecurity risk management framework, which is integrated into its enterprise risk management system. The Company aligns its security policies and practices with the ISO 27001 framework and manages its cybersecurity risks through a dedicated information security team, reporting to Mr. Preston. The information security team is tasked with, among other things, assessing, identifying and managing material cybersecurity risks and overseeing the implementation of the Company’s cybersecurity strategy. The Company’s cybersecurity risk management includes, but is not limited to, the following elements. • Risk Identification and Assessment: o The team conducts periodic risk assessments, which includes penetration testing and vulnerability scanning, on the Company’s Information Technology (IT) infrastructure, systems, and networks to identify potential vulnerabilities, weaknesses, and risks, and evaluates the potential impact of cybersecurity risks on the Company’s operations, financials, and business. • Risk Mitigation Measures: o The team implements and maintains a multi-layered defense approach to safeguard the Company’s information technology infrastructure in accordance with industry best practices and updates the Company’s systems and software to address identified vulnerabilities. The Company has also developed an incident response and disaster recovery plan to respond to cybersecurity incidents. • Vendor Risk Management: o The Company evaluates the risk profile of its third-party service providers and may include cybersecurity enhancement or compliance requirements in its service agreements, as needed. The information security team 31 periodically reviews key vendors and counterparties’ cybersecurity practices and may conduct audits or assessments at its discretion. In addition, the Company has established clear lines of communication with key stakeholders, including executives, IT teams, employees, and customers, to ensure transparency and an effective response to cybersecurity incidents. Furthermore, the information security team develops and provides cybersecurity awareness training to the Company’s employees and regularly communicates updates on best cybersecurity practices and improvements in the cybersecurity program. The Company may use third-party programs and software and engage assessors, consultants, cybersecurity auditors, or other third parties to review, test, and advise on improvements to the Company’s cybersecurity infrastructure. Role of the Board of Directors The Audit Committee oversees the Company’s risk management and assessment, including its mitigation strategies, and updates the entire Board on the Company’s risk profile and exposures on an as needed basis. With respect to cybersecurity, the Company’s Chief Technology Officer (“CTO”) and Head of Information Security updates the Audit Committee on at least an annual basis on matters such as external cybersecurity threats and attack trends; updates to threat monitoring processes; the composition of the Company’s information security team; cybersecurity awareness training and testing; cybersecurity strategy; cybersecurity metrics, and assessments the progress of cybersecurity programs; and the potential scope and impact of cybersecurity risks and incidents on the Company’s operations and financial condition. The Audit Committee may also meet with management on an ad hoc basis to discuss and review any material cybersecurity incidents or threats. Role of Management Management is responsible for managing risks and informing the Board of the Company’s material near- and long-term risks and risk management strategies. Management presents the Company’s risk assessment, which includes its cybersecurity risks, to the Audit Committee on at least an annual basis. The Chief Technology Officer (“CTO”) leads management’s assessment and management of cybersecurity risks. The Company’s Head of Information Security leads the information security team, which is responsible for managing day-to-day cybersecurity risks and implementing and maintaining the Company’s cybersecurity strategy. The Head of Information Security reports to and regularly briefs the CTO on cybersecurity matters, including results of vulnerability testing and remediation, cyber incident responses, and progress on cybersecurity infrastructure initiatives. The CTO and Head of Information Security update the Audit Committee about cybersecurity risks and any investigation of a material cybersecurity incident. The Company’s current CTO has over 20 years of experience in senior technology leadership roles, involving oversight of all aspects of technology development and technical operations, including cybersecurity. The Company’s current Head of Information Securities has over 20 years of experience in cybersecurity roles, including in cybersecurity engineering, information security assessment, and development and management of corporate security policies and governance problems. 32 Item 2. P roperties The Company’s principal executive offices are located in Mississauga, Ontario, Canada, New York, New York, and Playa Vista, California. As of December 31, 2023, the Company’s principal facilities are as follows: Operation Own/Lease Expiration Mississauga, Ontario (1) Headquarters, Administrative, Assembly, Research and Development, and Maintenance Services Own N/A Playa Vista, California Sales, Marketing, Film Production and Post-Production Own N/A New York, New York Executive Lease 2029 Tokyo, Japan Sales, Marketing, and Maintenance Services Lease 2024 Shanghai, China Sales, Marketing, Maintenance Services, and Administrative Lease 2029 Waterloo, Ontario Sales, Marketing, Administrative, and Research and Development Lease 2024 Dublin, Ireland Sales, Marketing, Administrative, and Research and Development Lease 2026 London, United Kingdom Sales Lease 2024 (1) This facility is subject to a charge in favor of Wells Fargo Bank in connection with a secured revolving credit facility. More information is provided in Note 14 to Consolidated Financial Statements in Part II, Item 8. The Company believes that its existing facilities and equipment are in good operating condition and are suitable for the conduct of its business. Item 3. Legal Proceedings Refer to Note 16 to Consolidated Financial Statements in Part II, Item 8. Item 4. Mine Saf ety Disclosures Not applicable. 33 PART II