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Item 1A. Risk Factors

2023-04-13 compared with 2022-03-03 · 308 added, 141 removed, 274 unchanged (62% of the section changed)

4 unchanged sentences

This could cause the trading price of our common stock to decline, perhaps significantly, and you may lose part or all of your investment.

Risks Related to NCM LLC’s Chapter 11 Proceeding

We are subject to the risks and uncertainties associated with NCM LLC’s Chapter 11 Case.

During NCM LLC’s Chapter 11 case, our operations and our ability to develop and execute our business plan, as well as our continuation as a going concern, are subject to the risks and uncertainties associated with bankruptcy.

These risks include the following:

• NCM LLC’s ability to obtain and/or maintain court approval with respect to motions filed in Chapter 11 case from time to time and to operate within the restrictions imposed by the Bankruptcy Court;

• Our and NCM LLC’s ability to develop, confirm and consummate a Chapter 11 plan or alternative restructuring transaction in the timeframe contemplated by the Restructuring Support Agreement or as otherwise ordered by the Bankruptcy Court;

• The ability of third parties to seek and obtain court approval to terminate contracts and other agreements with us;

• NCM LLC’s ability to maintain our relationships with our suppliers, vendors, customers, employees and other third parties;

• Our and NCM LLC’s potential need to address liquidity and capital resources during or after the conclusion of the Chapter 11 Case;

• NCM LLC’s ability to maintain contracts that are critical to our operations;

• Our and NCM LLC’s ability to execute on our business plan;

• The high costs of bankruptcy and related fees;

• The actions and decisions of our creditors and other third parties who have interests in our Chapter 11 Case that may be inconsistent with our plans;

• The ability of third parties to appoint a Chapter 11 trustee, or to convert the Chapter 11 Case to a Chapter 7 proceeding;

• The value of our outstanding common stock prior to the Chapter 11 Case could be substantially impaired as a result of the Chapter 11 Case and trading during the pendency of the Chapter 11 Case will be highly speculative;

• Uncertainties and continuing risks associated with our ability to achieve our stated goals and continue as a going concern.

Delays in NCM LLC’s Chapter 11 Case increase the risks of NCM LLC being unable to reorganize NCM LLC’s business and emerge from bankruptcy and increase NCM LLC’s costs associated with the bankruptcy process.

These risks and uncertainties could affect our business and operations in various ways.

For example, the Chapter 11 Case could impact our ownership in NCM LLC or our role as manager and negative events associated with the Chapter 11 Case could adversely affect NCM LLC’s relationships with suppliers, vendors, customers, employees, and other third parties, which in turn could adversely affect our operations and financial condition.

Also, we need the prior approval of the Bankruptcy Court for transactions outside the ordinary course of business at NCM LLC, which may limit our ability to respond timely to certain events or take advantage of certain opportunities.

Because of the risks and uncertainties associated with NCM LLC’s Chapter 11 Case, we cannot accurately predict or quantify the ultimate impact of events that will occur during the Chapter 11 Case that may be inconsistent with our plans.

The Chapter 11 Case could impact the relationship between us and NCM LLC.

NCM LLC’s Operating Agreement provides that we will be the manager of NCM LLC and may not be removed without our consent.

Our Board of Directors determined that NCM LLC’s bankruptcy may lead to conflicts between us and NCM LLC due the nature of our relationship, and to ensure appropriate decisions are made, our Board of Directors delegated some of its authority to the Independent Manager of NCM LLC to resolve these conflicts.

The Independent Manager may take action that could be adverse to NCM, Inc.

in connection with these conflict matters.

While we believe that the vast majority of decisions related to NCM LLC’s Chapter 11 Case will not raise any conflicts and the appointment of the Independent Manager will resolve any conflicts, it is possible that NCM LLC’s creditors could petition the Bankruptcy Court to appoint a trustee to manage the business.

In this event, our ability to continue to pursue our business plan would be significantly impacted and NCM LLC’s could suffer without the benefit of our management and expertise.

NCM LLC’s Chapter 11 Case limits the flexibility of our management team in running our business.

While we expect to continue to manage NCM LLC’s businesses while it is the debtor in possession under supervision by the Bankruptcy Court, we are required to obtain the approval of the Bankruptcy Court and, in some cases, certain lenders prior to engaging in activities or transactions outside the ordinary course of business.

Bankruptcy Court approval of non-ordinary course activities entails preparation and filing of appropriate motions with the Bankruptcy Court, negotiation with creditors’ committees and other parties-in-interest and one or more hearings.

The creditors’ committees and other parties-in interest may be heard at any Bankruptcy Court hearing and may raise objections with respect to these motions.

This process may delay major transactions and limit our ability to respond quickly to opportunities and events in the marketplace.

Furthermore, in the event the Bankruptcy Court does not approve a proposed activity or transaction, we would be prevented from engaging in activities and transactions that we believe are beneficial to us.

Operating under Bankruptcy Court protection for a long period of time may harm our business.

Operating our business under Bankruptcy Court protection could have a material adverse effect on our business, financial condition, results of operations and liquidity and the significance of the impact may increase the longer we operate under Bankruptcy Court protection.

During the pendency of the Chapter 11 Case, our senior management may be required to spend a significant amount of time and effort dealing with the reorganization instead of focusing exclusively on our business operations.

A prolonged period of operating under Bankruptcy Court protection also may make it more difficult to retain management and other key personnel necessary to the success and growth of our business.

In addition, as the length of the Chapter 11 Case increases, the risk that customers and suppliers will lose confidence in our ability to reorganize our business successfully may also increase, and such customers and suppliers may seek to establish alternative commercial relationships.

Additionally, so long as the Chapter 11 Case continues, we will be required to incur costs for professional fees and other expenses associated with the administration of the Chapter 11 Case.

Furthermore, we cannot predict the ultimate amount of all settlement terms for the liabilities that will be subject to a plan of reorganization.

Even once a plan of reorganization is approved and implemented, our operating results may be adversely affected by the possible reluctance of prospective lenders and other counterparties to do business with a company that was involved in a bankruptcy and subsidiary recently emerged from Chapter 11.

We may not be able to obtain confirmation of a Chapter 11 plan of reorganization for NCM LLC.

To emerge successfully from Bankruptcy Court protection as a viable entity, NCM LLC must meet certain statutory requirements with respect to adequacy of disclosure with respect to the plan of reorganization, and solicit and obtain the requisite acceptances of such a plan and fulfill other statutory conditions for confirmation of such a plan, which have not occurred to date.

The confirmation process is subject to numerous, unanticipated potential delays, including a delay in the Bankruptcy Court’s commencement of the confirmation hearing regarding NCM LLC’s plan of reorganization.

Though we have entered into the Restructuring Support Agreement with certain of our creditors, including in the aggregate, more than two-thirds of all claims arising under the Prepetition Secured Debt Documents, to support our proposed plan of reorganization, we may not receive the requisite acceptances of constituencies in the Chapter 11 Case to confirm the proposed plan.

Even if the requisite acceptances of the plan are received, the Bankruptcy Court may not confirm the Plan.

Even if all voting classes vote in favor of the plan or the Bankruptcy Code requirements for "cramdown" are met with respect to any class that voted to reject or was deemed to reject the Plan, the Bankruptcy Court, which may exercise its substantial discretion as a court of equity, may choose not to confirm the Plan.

The precise requirements and evidentiary showing for confirming a plan, notwithstanding its rejection by one or more impaired classes of claims or equity interests, depends upon a number of factors including, without limitation, the status and seniority of the claims or equity interests in the rejecting class (i.e., secured claims or unsecured claims or subordinated or senior claims).

If a proposed Chapter 11 plan of reorganization is not confirmed by the Bankruptcy Court, it is unclear whether we would be able to reorganize NCM LLC’s business and what, if anything, holders of claims against us would ultimately receive with respect to their claims under a subsequent plan of reorganization (or liquidation).

Even if the proposed plan of reorganization is confirmed by the Bankruptcy Court, it may not become effective because it is subject to the satisfaction of certain conditions precedent (some of which are beyond our control).

There can be no assurance that such conditions will be satisfied and, therefore, that a plan of reorganization will become effective and that NCM LLC will emerge from the Chapter 11 Case as contemplated by a plan of reorganization.

If emergence is delayed, we and NCM LLC may not have sufficient cash available to operate our businesses.

In that case, NCM LLC may need new or additional post-petition financing,

There can be no assurance as to whether NCM LLC will successfully reorganize and emerge from the Chapter 11 Case or, if NCM LLC does successfully reorganize, as to when NCM LLC would emerge from the Chapter 11 Case.

If NCM LLC is unable to successfully reorganize, we may not be able to continue our operations.

A plan of reorganization may not satisfy the requirements for non-consensual confirmation of a chapter 11 plan under the Bankruptcy Code.

In the event that any impaired class of claims does not accept or is deemed not to accept a proposed plan of reorganization, the Bankruptcy Court may nevertheless confirm the plan at the NCM LLC’s request if at least one impaired class has accepted the plan (with such acceptance being determined without including the vote of any “insider” in such class), and as to each impaired class that has not accepted the plan, the Bankruptcy Court determines that the plan “does not discriminate unfairly” and is “fair and equitable” with respect to the dissenting impaired classes.

While we may believe that a plan of reorganization satisfies the requirements for non-consensual confirmation, there can be no assurance that the Bankruptcy Court will reach the same conclusion.

If the Bankruptcy Court does not find that the proposed plan of reorganization satisfies the requirements for non-consensual confirmation, the Bankruptcy Court may not confirm the plan.

NCM LLC may seek to amend, waive, modify, or withdraw the Plan at any time before confirmation.

Subject to and in accordance with the terms of the Restructuring Support Agreement, NCM LLC reserves the right, in accordance with the Bankruptcy Code, to amend or modify a plan before the entry of the confirmation order or waive any conditions thereto if and to the extent such amendments or waivers are necessary or desirable to consummate the plan.

The potential impact of any such amendment or waiver on the holders of claims and interests cannot presently be foreseen but may include a change in the economic impact of the plan on some or all of the proposed classes or a change in the relative rights of such classes.

All holders of claims and interests will receive notice of such amendments or waivers required by applicable law and the Bankruptcy Court.

If we seek to modify the plan after receiving sufficient acceptances but before the Bankruptcy Court’s entry of an order confirming the plan, the previously solicited acceptances will be valid only if (i) all classes of adversely affected holders accept the modification in writing or (ii) the Bankruptcy Court determines, after notice to designated

parties, that such modification was de minimis or purely technical or otherwise did not adversely change the treatment of holders of accepting claims or interests, or is otherwise permitted by the Bankruptcy Code.

We cannot make any assurances that the conditions precedent to the Plan’s effectiveness will occur or be waived by the confirmation date.

Even if a plan is confirmed by the Bankruptcy Court, there can be no assurance as to the timing of the effective date of the plan.

If the conditions precedent to the effective date set forth in the plan do not occur or are not waived as set forth in the plan, then any order entered by the Bankruptcy Court confirming the plan may be vacated, in which event no distributions would be made under the plan, NCM LLC, and all holders of claims and interests would be restored to the status quo ante as of the day immediately preceding the confirmation date, and NCM LLC’s obligations with respect to claims and interests would remain unchanged.

The Restructuring Support Agreement may be terminated, which could adversely affect the Chapter 11 Case.

The Restructuring Support Agreement contains provisions that gives the Company, NCM LLC, and the Required Consenting Creditors (as defined in the Restructuring Support Agreement) the ability to terminate the Restructuring Support Agreement if certain conditions are not satisfied or waived, including the failure to achieve certain milestones.

Termination of the Restructuring Support Agreement could result in a protracted Chapter 11 Case, which could significantly and detrimentally impact NCM LLC and our relationships with vendors, employees, and major customers, or potentially the conversion of the Chapter 11 Case into a case under Chapter 7 of the Bankruptcy Code.

The Restructuring is subject to conditions and milestones that we may not be able to satisfy.

There are certain material conditions NCM LLC must satisfy under the Restructuring Support Agreement, including the timely satisfaction of milestones in the Chapter 11 Case, which include the confirmation of the Plan and the consummation of the restructuring transactions thereunder.

The satisfaction of such conditions is subject to risks and uncertainties, many of which are beyond our control.

Our long-term liquidity requirements and the adequacy of our capital resources are difficult to predict at this time.

While we believe that we have sufficient liquidity and capital resources to complete the Chapter 11 proceedings, we face uncertainty regarding the adequacy of our liquidity and capital resources.

In addition to the cash requirements necessary to fund ongoing operations, NCM LLC has and will continue to incur significant professional fees and other costs in connection with preparation the Chapter 11 Case.

In the event that additional liquidity or capital is needed, it may be costly and contain restrictions on our ability to operate without approval.

NCM LLC’s liquidity, including our ability to meet our ongoing operational obligations, is dependent upon, among other things:

(i) NCM LLC’s ability to comply with the terms and conditions of any cash collateral order that may be entered by the Bankruptcy Court in connection with the Chapter 11 proceedings, (ii) NCM LLC and our ability to maintain adequate cash on hand, (iii) NCM LLC’s ability to generate cash flow from operations, (iv) NCM LLC’s ability to develop, confirm and consummate a Chapter 11 plan or other alternative restructuring transaction, and (v) the cost, duration and outcome of the Chapter 11 Case.

Our post-NCM LLC’s Chapter 11 proceeding capital structure is yet to be determined, and any changes to our capital structure may have a material adverse effect on holders of our common stock and NCM LLC’s debt and security holders.

There is significant risk that the holders of our common stock would receive no recovery under the Chapter 11 Case and that our common stock will be worthless.

We entered into a Restructuring Support Agreement with certain of NCM LLC’s lenders prior to the commencement of the Chapter 11 Case, which provides for a proposed post-bankruptcy capital structure that includes us maintaining an equity ownership in NCM LLC.

However, the post-bankruptcy capital structure has yet to be finally determined and will be set pursuant to a plan that requires Bankruptcy Court approval.

The reorganization of our capital structure may include exchanges of new debt or equity securities for NCM LLC’s existing debt, equity securities, and claims against NCM LLC.

Such new debt may be issued at different interest rates, payment schedules and maturities than NCM LLC’s existing debt securities.

NCM LLC’s existing equity securities are subject to a high risk of being cancelled.

While this cancellation would not directly cancel our common stock, the cancellation of our ownership interest in NCM LLC would have a significant impact on our ability to continue as a going concern and the potential value available to holders of our common stock.

If existing debt or equity holders are adversely affected by a reorganization, it may adversely affect our ability to issue new debt or equity in the future.

Although we cannot predict how the claims and interests of stakeholders in the Chapter 11 Case, including holders of NCM LLC’s outstanding security holders, we expect that NCM LLC’s recovery will likely be limited.

Consequently, there is a significant risk that the holders of our Class A common stock would receive no recovery under the Chapter 11 Case and that our Class A common stock will be worthless.

As a result of the Chapter 11 Case, our financial results may be volatile and may not reflect historical trends.

During the Chapter 11 proceedings, we expect our financial results to be volatile as restructuring activities and expenses, contract terminations and rejections, and claims assessments significantly impact on our consolidated financial statements.

Additionally, we may no longer be able to consolidate NCM LLC’s operations with our financial statements if NCM, Inc.

no longer controls NCM LLC for accounting purposes.

As a result, our historical financial performance is likely not indicative of our financial performance after the date of the bankruptcy filing.

In addition, if NCM LLC emerges from Chapter 11, the amounts reported in subsequent consolidated financial statements may materially change relative to historical consolidated financial statements, including as a result of revisions to our operating plans pursuant to a plan of reorganization.

We and NCM LLC also may be required to adopt fresh start accounting, in which case our assets and liabilities will be recorded at fair value as of the fresh start reporting date, which may differ materially from the recorded values of assets and liabilities on our consolidated balance sheets.

Our financial results after the application of fresh start accounting also may be different from historical trends.

NCM LLC may be subject to claims that will not be discharged in the Chapter 11 Case, which could have a material adverse effect on our financial conditions and results of operations.

The Bankruptcy Code provides that the confirmation of a plan of reorganization discharges a debtor from substantially all debts arising prior to confirmation.

With few exceptions, all claims that arose prior to April 11, 2023, or before confirmation of the plan of reorganization (i) would be subject to compromise and/or treatment under the plan of reorganization and/or (ii) would be discharged in accordance with the terms of the plan of reorganization.

Any claims not ultimately discharged through the plan of reorganization could be asserted against the reorganized entities and may have an adverse effect on our financial condition and results of operations on a post-reorganization basis.

We may experience increased levels of employee attrition as a result of the Chapter 11 Case and difficulty recruiting replacements

As a result of the Chapter 11 Case, we and NCM LLC may experience increased levels of employee attrition, and our employees likely will face considerable distraction and uncertainty.

A loss of key personnel or material erosion of employee morale could adversely affect our business and results of operations.

Our ability to engage, motivate and retain key employees or take other measures intended to motivate and incentivize key employees to remain with us through the pendency of the Chapter 11 Case may be limited by restrictions on implementation of incentive programs under the Bankruptcy Code.

In order to prevent the loss of services of senior management and other employees necessary for NCM LLC’s Chapter 11 Case, we or NCM LLC entered into retention agreements.

There can be no assurance that we have identified each employee necessary to the business or that we have adequately compensated these employees to ensure they continue to provide services.

The uncertainty caused by the Chapter 11 Case could also cause NCM LLC to be a less desirable employer and make it more difficult to identify and recruit replacement employees as needed.

This could impair our ability to execute our strategy and implement operational initiatives, which would be likely to have a material adverse effect on our business, financial condition and results of operations.

In certain instances, a Chapter 11 proceeding may be converted to a proceeding under Chapter 7.

There can be no assurance as to whether NCM LLC will successfully reorganize under the Chapter 11 Case.

If the Bankruptcy Court finds that it would be in the best interest of creditors and/or NCM LLC, the Bankruptcy Court may convert the Chapter 11 Case to proceedings under Chapter 7.

In such event, a Chapter 7 trustee would be appointed or elected to liquidate NCM LLC’s assets for distribution in accordance with the priorities established by the Bankruptcy Code.

NCM LLC believe that liquidation under Chapter 7 would result in significantly smaller distributions being made to the NCM LLC’s creditors than those provided for in a Chapter 11 plan of reorganization because of (i) the limited value of NCM LLC’s primary assets in a liquidation scenario, (ii) the likelihood that the assets would have to be sold or otherwise disposed of in a disorderly fashion over a short period of time rather than reorganizing or selling in a controlled manner NCM LLC’s businesses as a going concern, (iii) additional administrative expenses involved in the appointment of a Chapter 7 trustee, and (iv) additional expenses and claims, some of which would be entitled to priority, that would be generated during the liquidation and from the rejection of leases and other executory contracts in connection with a cessation of operations.

NCM LLC’s Chapter 11 Case may cause our common stock to decrease in value materially or may render our common stock worthless.

NCM LLC has a substantial amount of indebtedness that is senior to the Company’s interest in NCM LLC and our shares of common stock in in our capital structure.

Recoveries in the Chapter 11 Case for our equity and for holders of our common stock, if any, will depend upon our ability to negotiate and confirm a plan, the terms of such plan, the performance of our business, the value of NCM LLC’s assets, the value of NCM LLC’s secured notes, a portion of which we hold, and other factors.

Although we cannot predict how our equity interest will be treated under a plan at this time, our equity interest may not receive a material, or any, recovery, which will impact the value of our common stock.

Consequently, there is a significant risk that the holders of our common stock will ultimately receive little or no recovery under the Chapter 11 Case based on our ownership of NCM LLC’s equity interest and that our common stock will decrease in value materially or become worthless.

Trading in shares of our common stock during the pendency of NCM LLC’s Chapter 11 Case is highly speculative and you could lose all or part of your investment.

The price of our common stock has been volatile following the commencement of the Chapter 11 Case and may decrease in value.

Accordingly, any trading in our common stock during the pendency of NCM LLC’s Chapter 11 Case is highly speculative and poses substantial risks to purchasers of our common stock.

Accordingly, we cannot assure you of the liquidity of an active trading market, your ability to sell your shares of our common stock when desired, or the prices that you may obtain for your shares of our common stock.

In the past, following periods of extreme volatility in the market price of a company’s securities, securities class-action litigation has often been instituted against that company.

Securities litigation against us could result in substantial costs and a diversion of our management’s attention and resources.

We may be delisted by Nasdaq, which could adversely affect the value and liquidity of our common stock and our ability to raise capital.

Nasdaq Rule 5110 provides that Nasdaq may use its discretionary authority to suspend or terminate the listing of a Company that has filed for protection under any provision of the federal bankruptcy laws.

While we have not filed for bankruptcy, it is possible that Nasdaq may still exercise its discretion based on NCM LLC's Chapter 11 Case.

We will appeal this decision if it is made, but there is no assurance that we will be able to maintain our continued listing with Nasdaq.

The Company does not know the timing of any delisting event if the outcome of the appeal is adverse.

Delisting our common stock may adversely impact its liquidity, impair our stockholders’ ability to buy and sell our common stock, impair our ability to raise capital, and the market price of our common stock could decrease.

Delisting our common stock could also adversely impact the perception of our financial condition and have additional negative ramifications, including loss of confidence by our employees, the loss of institutional investor interest and fewer business opportunities.

Risks Related to Our Business and Industry

We may be unsuccessful in extending the maturity dates of NCM LLC’s Revolving Credit Facilities, amending its Senior Secured Credit Facility to extend a waiver of these financial covenants or obtaining additional debt financing from third parties.

The failure to obtain such an extension, waiver or obtain additional debt financing could lead to our failure to pay outstanding debt when due and an event of default, which gives rise to substantial doubt about our ability to continue as a going concern.

The Company has borrowings under two Revolving Credit Facilities with $217.0 million outstanding as of December 29, 2022, that mature on June 20, 2023.

The Company does not have available liquidity to repay the full outstanding balance on the date of maturity.

Under the Credit Agreement, failure to repay borrowings under the Revolving Credit Facilities at maturity would result in an event of default for the term loans, which would allow a majority of the lenders under the Credit Agreement to accelerate the maturity of the principal amounts of outstanding term loans to become due and payable.

It would also result in an event of default for each tranche of the senior notes, which would allow the indenture trustee or senior note holders of each tranche of senior notes to accelerate the maturity to become due and payable.

The Company does not have available liquidity to repay any accelerated principal of term loans or tranches of the outstanding senior notes upon an event of default within one year after the date that the financial statements are issued.

Additionally, based on current projections, the Company does not expect to meet certain financial covenants for the period ending March 30, 2023.

Further, if the Company’s independent registered public accounting firm includes a “going concern” or like qualification or exception, other than for debt maturing within one year, in its report on the Company’s financial statements for the year ending December 29, 2022, this would be an event of default under the Company’s Credit Agreement at the time the Company’s financial statements for the year ending December 29, 2022 are filed.

Under the Credit Agreement, failure to remain in compliance with these covenants or inability to repay borrowings under the Revolving Credit Facilities at maturity would result in an event of default for the term loans, which would allow a majority of the lenders under the Credit Agreement to accelerate the maturity of the principal amounts of outstanding term loans to become due and payable.

It would also result in an event of default for the senior notes, which would allow the indenture trustee or senior note holders of each tranche of senior notes to accelerate the maturity to become due and payable.

Should the Company’s borrowings become due and payable, the Company would not be able to repay the Company’s total outstanding debt balance.

These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern.

Management believes it will be able to amend NCM LLC’s Revolving Credit Facilities to extend the maturity dates, amend its Senior Secured Credit Facility to extend a waiver of these financial covenants or obtain additional debt financing through a loan from third parties, and/or NCM, Inc., but there is no assurance that the Company will be successful in completing any of these options in a timely manner, or on acceptable terms, if at all.

Management believes that based on the Company’s current financial position and liquidity sources, including current cash balances, and forecasted future cash flows, the Company can meet its operating obligations as they become due.

However, the failure to amend the Revolving Credit Facilities to extend the maturity dates, amend its Senior Secured Credit Facility to extend a waiver of these financial covenants or obtain additional debt financing through a loan from third parties and any associated events of default under the Credit Agreement or NCM LLC’s senior notes would have a material

adverse effect on our financial condition, which gives rise to substantial doubt about our ability to continue as a going concern.

If we are unable to continue as a going concern, we may have to file for Chapter 11, liquidate our assets and may receive less than the value at which those assets are carried on our financial statements, and it is likely that investors will lose all or a part of their investment.

The ESA with a founding member that has declared bankruptcy may be rejected, renegotiated or deemed unenforceable.

On September 7, 2022, Cineworld Group plc, the parent company of Regal, and certain of its subsidiaries, including Regal, Regal Cinemas, Inc., a party to the ESA, and Regal CineMedia Holdings, LLC, a party to other agreements with NCM LLC and NCM, Inc., filed petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the Southern District of Texas (the “Cineworld Proceeding”).

In addition, each of the other founding members currently has a significant amount of indebtedness.

As a result of the COVID-19 Pandemic, each of the founding members temporarily closed all of their theaters in the United States and furloughed the majority of their employees for a portion of 2020 and chose to seek additional financing through various methods.

As a result of the Cineworld Proceeding, or if a bankruptcy case were commenced by or against another founding member, it is possible that all or part of the ESA with the applicable founding member could be rejected by a trustee in the bankruptcy case pursuant to Section 365 or Section 1123 of the United States Bankruptcy Code, or by the founding member, and thus not be enforceable.

On October 21, 2022, Regal filed a motion to reject the ESA without specifying an effective date for the rejection and indicated that Regal currently plans on negotiating with the Company regarding the ESA.

NCM LLC has also filed a complaint against Regal seeking declaratory relief and an injunction prohibiting Regal from breaching certain exclusivity, non-compete, non-negotiate and confidentiality provisions in the ESA by entering into a new agreement with a third-party or bringing any of the services performed by NCM LLC in-house.

Although there can be no assurances that NCM LLC’s request for declaratory relief will be successful, the Company believes these rights will survive any attempted rejection in the bankruptcy court by Regal.

While the Cineworld Proceeding is currently ongoing and the potential impact of the Cineworld Proceeding on NCM LLC’s operations is unknown, in the event that NCM LLC’s agreements with Regal and its affiliates is rejected or renegotiated, it could have a materially negative impact on the Company’s operations or financial condition.

In addition, as a part of the Cineworld Proceeding, Regal has announced plans to optimize the number of theaters it operates and has announced the closures of certain theaters.

Should Regal or another founding member liquidate or dispose of theaters or remove theaters from our network through bankruptcy or for other business reasons, if the acquirer did not agree to continue to allow us to sell advertising in the acquired theaters the number of theaters in our advertising networks would be reduced which in turn would reduce the number of advertising impressions available to us and thus could reduce our advertising revenue.

Pandemics, epidemics or disease outbreaks, such as the novel coronavirus (COVID-19 virus), have disrupted and are continuing to disrupt our business and the business of our founding members and network affiliates, which has and could continue to materially affect our operations, liquidity and results of operations.

Pandemics or disease outbreaks such as the novel coronavirus (COVID-19 virus), including the Delta and Omicron variants, have and are continuing to disrupt our business and the business of our founding members’ and network affiliates’ theaters.

Despite the approval and widespread distribution of FDA approved COVID-19 vaccines, cases of COVID-19, particularly cases of the Omicron variant, continue to spread throughout the world and reported cases in the United States reached record highs at the end of 2021 and early 2022.

Pandemics or disease outbreaks such as the novel coronavirus (COVID-19 virus), including variants, have and are continuing to disrupt our business and the business of our founding members’ and network affiliates’ theaters.

Our founding members and network affiliates’ theaters continue to remain open and are not currently subject to government regulations that are as restrictive as the early stages of the COVID-19 Pandemic.

There can be no assurance that the severity of the COVID-19 Pandemic will decline;

new variants will not emerge and spread;

reinstated government restrictions and public safety measures will not negatively impact network attendance, advertiser sentiment, and our business in general;

when or if theaters within our network will return to historic attendance levels;

and that the theaters which have reopened will remain open.

Multiple, successful major motion pictures were released during 2021, but overall theatrical attendance remained significantly below attendance prior to the COVID-19 Pandemic even though certain released films achieved attendance that was comparable to levels prior to the COVID-19 Pandemic.

Additionally, many of the 2021 films released in theaters were released simultaneously in theaters and through other distribution methods, including streaming or premium video-on-demand as a response to the conditions during the COVID-19 Pandemic or were released directly to streaming or delayed until 2022.

Some studios have committed to releasing certain 2022 films exclusively in theaters, but the status of the release dates and nature of the releases potentially remains open for many upcoming films.

In-theater advertising revenue remained significantly

below historical levels in 2021 as we were not able to participate in the 2021 advertising upfront marketplace during the summer of 2020 while theaters were closed and due to the uncertainty caused by the COVID-19 Pandemic.

We believe that the exhibition industry has historically fared well during periods of economic stress, and we remain optimistic, though cannot guarantee, that our founding members and network affiliates will rebound and attendance figures will continue to benefit from pent-up social demand as people seek togetherness with a return to normalcy.

However, the ultimate significance of the COVID-19 Pandemic, including the extent of the adverse impact on our financial and operational results, will be dictated by the currently unknowable duration of the pandemic, the effect of the pandemic on the overall economy and the advertising market, responsive governmental regulations, including mandated business closures which could recur causing subsequent closure periods, public health guidelines and regulations, shifting movie slates and distribution methods, voluntary theater closures, and decreasing levels of theater attendance.

Our business also could be significantly affected should the disruptions caused by the COVID-19 Pandemic lead to permanent changes in consumer behavior (such as the movie audience’s willingness to return to the movie theaters, which may be influenced by the adoption or continued use of streaming services), or further reductions or impacts to the customary theatrical release window.

The COVID-19 Pandemic also makes it more challenging for management to estimate the future performance of our business, particularly over the near to medium term.

There can be no assurance that the COVID-19 Pandemic and associated impacts will not return in the future, or a future pandemic will not lead to public safety restrictions or consumer behavior that will negatively impact our business, advertiser sentiment, or audience attendance.

In-theater advertising revenue remained below historical levels in 2021 and 2022.

Overall theatrical attendance remained below historical attendance prior to the COVID-19 Pandemic even though certain released films achieved attendance that was comparable to levels prior to the COVID-19 Pandemic.

However, many of the films expected to be released were released simultaneously in theaters and through other distribution methods, including streaming or premium video-on-demand, released directly to streaming or delayed as a revenue strategy or because of production delays, which impacted attendance.

The uncertainty created by the COVID-19 pandemic limited our ability to participate in the 2021 advertising upfront impacting our typical mix of upfront and scatter revenue throughout 2021 and 2022.

We believe that the exhibition industry has historically fared well during periods of economic stress, and we remain optimistic, though cannot guarantee, that the theatrical business and attendance figures will continue to rebound.

However, the ultimate significance of the COVID-19 Pandemic or other future pandemics, on our business is still unknown.

We are monitoring the rapidly evolving situation and its potential impacts on our financial position, results of operations, liquidity and cash flows.

Due to the impacts to our operations, we were required to take drastic measures to ensure our business survived the COVID-19 Pandemic, including incurring additional debt financing, furloughing and terminating employees, extending payment terms on accounts payable, and reducing or delaying planned operating and capital expenditures.

The ultimate impact of these actions on our operations in the future remains to be seen, including increased difficulties in accessing lending or capital markets or other sources of liquidity, increased employee turnover or litigation, actual or potential impairment charges, and advertisers perception and willingness to invest with us.

and advertisers perception and willingness to invest with us.

Additionally, many of our founding members and network affiliates were also required to take significant actions during the COVID-19 Pandemic and these actions may lead to decreased attendance in the future and may cause financial distress.

Even the perception that our business or the business of founding members and network affiliates may be impacted, could lead to decreased advertising expenditures and other significant disruption to our business.

Future pandemics could require us to implement measures similar to those implemented in response to the COVID-19 Pandemic.

Significant declines in theater attendance could reduce the attractiveness of cinema advertising and could reduce our revenue.

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Certain patrons avoided crowds and other public indoor spaces and governments restrictions impacted the ability of theaters to operate at normal capacity.

Following some successful theatrical releases in 2021, it is unclear whether consumers and studios will revert to their pre-COVID-19 Pandemic behavior or if these changes are long-term trends.

Additional factors that could reduce attendance at our network theaters include the following, which may be accelerated by actions taken in response to the COVID-19 Pandemic:

• if NCM LLC’s network theater circuits cannot compete with other entertainment due to an increase in the use of alternative film delivery methods (and the shortening or elimination of the “release window” between the release of major motion pictures and releasing to alternative delivery methods or releasing motion pictures directly to alternative delivery methods simultaneously with theater release or bypassing the theater entirely), including network and online video streaming and downloads;

Following some successful theatrical releases in 2021 and many successful theatrical releases in 2022, it is unclear whether consumers and studios will revert to their pre-COVID-19 Pandemic behavior or if these changes are long-term trends.

Additional factors that could reduce attendance at our network theaters include the following:

• if NCM LLC’s network theater circuits cannot compete with other entertainment due to an increase in the use of alternative film delivery methods (and the shortening or elimination of the “release window” of major motion pictures bypassing the theater entirely), including network and online video streaming and downloads;

• theater circuits in NCM LLC’s network are expected to continue to renovate auditoriums in certain of their theaters to install new larger, more comfortable seating or adjust seating arrangements, reducing the number of seats and the audience size in a theater auditorium.

This renovation has been viewed favorably by patrons and many theater circuits have noted an intent to continue such renovations;

• changes in theater operating policies, including the number and length of trailers for films that are played prior to the start of the feature film, which increase in time, may result in most or all of the Noovie® pre-show starting further out from the actual start of the feature film;

These renovations have been viewed favorably by patrons and many theater circuits have noted an intent to continue such renovations;

• changes in theater operating policies, including the number and length of trailers for films that are played prior to the start of the feature film, which may result in most or all of the Noovie® show starting further out from the actual start of the feature film;

• any reduction in consumer confidence or disposable income in general that reduces the demand for motion pictures or adversely affects the motion picture production or exhibition industries;

• the success of first-run motion pictures, which depends upon the production and marketing efforts of the major studios and the attractiveness and value proposition of the movies to consumers compared to other forms of entertainment;

• the success of first-run motion pictures, which depends upon the number of films produced for theater exhibition and the production and marketing efforts of the major studios and the attractiveness and value proposition of the movies to consumers compared to other forms of entertainment;

• if political events, such as terrorist attacks, or health-related epidemics, such as flu outbreaks and pandemics, such as the COVID-19 Pandemic, cause consumers to avoid movie theaters or other places where large crowds are in attendance;

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• if the theaters in our network fail to maintain and clean their theaters and provide amenities that consumers prefer;

• if studios shift the expected film slate or begin to reduce the number of feature films produced for theater exhibition or their investments in producing those films or reduce the investments made to market those films;

• if future theater attendance declines significantly over an extended time period, including as a result of the COVID-19 Pandemic, one or more of the founding members or network affiliates may face financial difficulties and could be forced to sell or close theaters or reduce the number of screens it builds or upgrades or increase ticket prices;

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Additionally, if attendance underperforms against expectations or declines significantly, the Company will be required to provide additional advertising time (makegoods) to national advertisers to reach agreed-on audience delivery thresholds.

Certain of these circumstances can also lead to volatility within our utilization, which typically varies more than 10% on an annual basis and we experience even more substantial volatility quarter-to-quarter.

Changes in theater patron behavior could result in declines in the viewership of our Noovie® pre-show which could reduce the attractiveness of cinema advertising and our revenues.

The value of our national and regional on-screen advertising and to a lesser extent our local advertising is based on the number of theater patrons that are in their seats and thus have the opportunity to view the Noovie pre-show.

Trends in patron behavior that could reduce viewership of our Noovie pre-show include the following:

• theater patrons are increasingly purchasing tickets ahead of time via on-line ticketing mediums and when available reserving a seat in the theater (offered in approximately 87% of our network as of December 30, 2021), which could affect how early patrons arrive to the theater and reduce the number of patrons that are in a theater seat to view most or all of the Noovie pre-show;

Certain of these circumstances can

also lead to volatility within our utilization, which typically varies more than 10% on an annual basis and we experience even more substantial volatility quarter-to-quarter.

Changes in theater patron behavior could result in declines in the viewership of our Noovie® show which could reduce the attractiveness of cinema advertising and our revenues.

Trends in patron behavior that could reduce viewership of our Noovie show include the following:

• theater patrons are increasingly purchasing tickets ahead of time via online ticketing mediums and when available reserving a seat in the theater (offered in a significant percentage of our network), which could affect how early patrons arrive to the theater and reduce the number of patrons that are in a theater seat to view most or all of the Noovie show;

• during the COVID-19 Pandemic, certain consumers changed their behavior in order to avoid large groups and other public indoor activities, and these behavior changes could become a long-term trend;

• certain theater chains have increased the number of trailers and time devoted to other programming prior to the display of the feature film, and in combination with our Post-Showtime Inventory, may cause patrons to arrive later to theaters and reduce the number of patrons that are in a theater seat to view most or all of the Noovie pre-show;

• changes in theater patron amenities, including, online ticketing, bars and entertainment within exhibitor lobbies causing increased dwell time of patrons.

• changes in theater patron amenities, including bars and entertainment within exhibitor lobbies causing increased dwell time of patrons.

National advertising sales and rates are dependent on the methodology used to measure audience impressions.

If a change is made to this methodology that reflects fewer audience impressions available during the pre-show, this could adversely affect the Company’s revenue and results of operations.

If a change is made to this methodology that reflects fewer audience impressions available during the show, this could adversely affect the Company’s revenue and results of operations.

If the non-competition provisions of the ESAs are deemed unenforceable, the founding members could compete against us and our business could be adversely affected.

With certain limited exceptions, each of the ESAs prohibits the applicable founding member from engaging in any of the business activities that we provide in the founding member’s theaters under the amended ESAs, and from owning interests in other entities that compete with us.

These provisions are intended to prevent the founding members from harming our business by providing cinema advertising services directly to their theaters or by entering into agreements with other third-party cinema advertising providers.

However, under state and federal law, a court may determine that a non-competition covenant is unenforceable, in whole or in part, for reasons including, but not limited to, the court’s determination that the covenant:

• is not necessary to protect a legitimate business interest of the party seeking enforcement;

• unreasonably restrains the party against whom enforcement is sought;

• is contrary to the public interest.

Enforceability of a non-competition covenant is determined by a court based on all of the facts and circumstances of the specific case at the time enforcement is sought, including the type of court hearing the matter.

For this reason, it is not possible for us to predict whether, or to what extent, a court would enforce the non-competition provisions contained in the ESAs.

If a court were to determine that the non-competition provisions are unenforceable, the founding members could compete directly against us or enter into an agreement with another cinema advertising provider that competes against us.

Any inability to enforce the non-competition provisions, in whole or in part, could cause our revenue to decline and could have a material negative impact on our business.

In connection with the Cineworld Proceeding, NCM LLC has also filed an adversary proceeding against Regal Cinemas, Inc.

seeking declaratory relief and an injunction prohibiting Regal Cinemas, Inc.

from breaching certain exclusivity, non-compete, non-negotiate and confidentiality provisions in the ESA.

The bankruptcy court may be a less favorable venue for adjudicating the implicated provisions.

We may not realize the anticipated benefits of the 2019 ESA Amendments.

On September 17, 2019, NCM LLC entered into the 2019 ESA Amendments with affiliates of Cinemark and Regal.

Among other things, the 2019 ESA Amendments provide that, beginning November 1, 2019, NCM LLC is entitled to display up to five minutes of the Noovie ® pre-show after the scheduled showtime of a feature film and a Platinum Spot that is either 30 or 60 seconds of the Noovie pre-show in the trailer position directly prior to the “attached” trailers preceding the feature film.

Among other things, the 2019 ESA Amendments provide that, beginning November 1, 2019, NCM LLC is entitled to display up to five minutes of the Noovie ® show after the scheduled showtime of a feature film and a Platinum Spot that is either 30 or 60 seconds of the Noovie show in the trailer position directly prior to the “attached” trailers preceding the feature film.

The COVID-19 Pandemic occurred shortly after NCM LLC was entitled to this inventory, disrupting our ability to utilize it.

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Potential difficulties and uncertainties that may impair the full realization of the anticipated benefits include, among others:

• the behavior of theater patrons may change in response to the display of a portion of the Noovie pre-show after the advertised showtime, or in response to the combination of advertising and trailers before the start of the feature film, resulting in a reduction to the number of patrons that are in a theater seat to view most or all of the Noovie pre-show;

• exhibitors may encounter issues in displaying a portion of the Noovie pre-show after the advertised showtime because of technical issues, access issues with their content providers or other issues that may arise in the future;

• potential advertisers may not view the Post-Showtime Inventory as attractive due to inability to run across our entire network or view it as a premium advertising opportunity and the average CPMs for the Noovie pre-show may not increase as much as anticipated, or at all;

• the behavior of theater patrons may change in response to the display of a portion of the Noovie show after the advertised showtime, or in response to the combination of advertising and trailers before the start of the feature film, resulting in a reduction to the number of patrons that are in a theater seat to view most or all of the Noovie show;

• potential advertisers may not view the Post-Showtime Inventory as attractive due to inability to run across our entire network or view it as a premium advertising opportunity and the average CPMs for the Noovie show may not increase as much as anticipated, or at all;

• NCM LLC may not satisfy the minimum average CPM or the other restrictions which are required by the 2019 ESA Amendments for it to have the right to display the Platinum Spot for more than one concurrent advertiser;

• the extended length of time between the advertised showtime and the beginning of the feature film may decrease the average CPM for that portion of the Noovie pre-show appearing before the advertised showtime, which may partially or fully offset any increase in average CPM for the Post-Showtime Inventory;

• the extended length of time between the advertised showtime and the beginning of the feature film may decrease the average CPM for that portion of the Noovie show appearing before the advertised showtime, which may partially or fully offset any increase in average CPM for the Post-Showtime Inventory;

• the increased theater access fees payable to Cinemark and Regal in connection with the Post-Showtime Inventory and revenue share applicable to the Platinum Spot may exceed the increase, if any, in revenue resulting from the 2019 ESA Amendments.

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We may not be successful in increasing the number of theaters in which NCM LLC has the right to display Post-Showtime Inventory.

As a result of the 2019 ESA Amendments, NCM LLC is entitled to display up to five minutes of the Noovie ® pre-show after the scheduled showtime of a feature film and a Platinum Spot that is either 30 or 60 seconds of the Noovie pre-show in the trailer position directly prior to the “attached” trailers preceding the feature film.

As a result of the 2019 ESA Amendments, NCM LLC is entitled to display up to five minutes of the Noovie ® show after the scheduled showtime of a feature film and a Platinum Spot that is either 30 or 60 seconds of the Noovie show in the trailer position directly prior to the “attached” trailers preceding the feature film.

We also entered into agreements to obtain similar access to similar inventory with certain of our other current network affiliates.

At this time NCM LLC is displaying Post-Showtime Inventory in theaters that constitute approximately 57% of the attendance in our network based upon pre-COVID-19 attendance levels as of December 30, 2021.

While we intend to seek to enter into agreements that provide similar access to inventory as the 2019 ESA Amendments with more of our current network affiliates and other potential network affiliates, there can be no assurance that we will be successful in increasing either the number of theaters of current network affiliates or potential network affiliates in which NCM LLC has the right to display advertising, including Post-Showtime Inventory.

At this time NCM LLC is displaying Post-Showtime Inventory in theaters that constitute approximately 59% of the attendance in our network as of December 29, 2022.

There can be no assurance that our efforts with current and potential network affiliates will be successful in increasing either the number of theaters in which NCM LLC has the right to display advertising, including Post-Showtime Inventory.

Certain of our theater partners have previously indicated that they have no plans to introduce our Post-Showtime Inventory in their theaters.

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If the founding members do not have adequate financial resources or operational strength, and if they do not replace equipment or equip new theaters to maintain the level of operating functionality that we have today, or if such equipment becomes obsolete, we may have to make additional capital expenditures or our advertising revenue and operating margins may decline.

In addition, the ESAs give the founding members the right to object to certain content in our Noovie ® pre-show, including content that competes with us or the

applicable founding member.

If the founding members do not agree with our decisions on what content, strategic program or partnerships are permitted under the ESAs, we may lose advertising clients and the resulting revenue, which would harm our business.

While AMC is eligible to be issued additional shares pursuant to the terms of the common unit adjustment agreement, on October 24, 2019, AMC redeemed 197,118 membership units, and on March 23, 2021, AMC redeemed 1,390,567 membership units in exchange for shares of our common stock, which represents all of the membership units previously issued to AMC in accordance with the terms of the common unit adjustment agreement reducing its ownership percentage in NCM LLC to 0.0% as of December 30, 2021.

We are uncertain how AMC’s minimal ownership interest in NCM LLC may affect its cooperation with us under its ESA or otherwise going forward.

In addition, the ESAs give the founding members the right to object to certain content in our Noovie ® show, including content that competes with us or the applicable founding member.

If the founding members do not agree with our decisions on what content, strategic program or partnerships

are permitted under the ESAs, we may lose advertising clients and the resulting revenue, which would harm our business.

Regal and its affiliates are currently in bankruptcy and it is unknown if Regal will continue to cooperate, invest and support the business during the pendency of the bankruptcy process.

While founding members are eligible to be issued additional shares pursuant to the terms of the common unit adjustment agreement, two of our founding members currently have zero membership units following the redemption of their common membership units.

We are uncertain how these founding members’ lack of ownership interest in NCM LLC may affect its cooperation with us under its ESA or otherwise going forward.

Our plans for developing additional digital or digital out-of-home revenue opportunities may not be implemented and may not be achieved.

We have invested significant resources in pursuing potential opportunities for revenue growth, which we describe in this annual report on Form 10-K under “Business-Our strategy.” We had 171.0 million and 274.0 million data sets as of December 31, 2020 and December 30, 2021, respectively.

These valuable data sets consist of both our own NCM first-party data from our owned-and-operated digital products, and a variety of key second- and third-party data addressable consumer records, including location-based data that allows us to track when our audiences go to the movie theater to see our Noovie pre-show and where they go in the days and weeks afterwards.

Our ability to increase our data sets requires us to invest in third-party relationships, to comply with evolving privacy and data security laws, rules and regulations and to develop innovative digital properties that will increase the number of users of our online and mobile entertainment and advertising network and mobile apps.

We have invested significant resources in pursuing potential opportunities for revenue growth, which we describe in this annual report on Form 10-K under “Business—Our Strategy.” We had 273.7 million and 374.4 million unique data records as of December 30, 2021 and December 29, 2022, respectively.

These valuable unique data records consist of both our own NCM first-party data from our owned-and-operated digital products, and a variety of key second- and third-party data addressable consumer records, including location-based data that allows us to track when our audiences go to the movie theater to see our Noovie show and where they go in the days and weeks afterwards.

Our ability to increase our unique data records requires us to invest in third-party relationships, to comply with evolving privacy and data security laws, rules and regulations and to develop innovative digital properties that will increase the number of users of our online and mobile entertainment and advertising network and mobile apps.

Our ability to collect and leverage movie audience data is under increasing competitive and regulatory pressure and may be negatively impacted by changes to advertising technology, platform operator policies and privacy laws and regulation and may not deliver the future benefits that we are expecting.

It is important that we achieve a critical mass of audience data to make our digital offering more attractive to advertisers, including national brands who buy both our national and regional advertising inventory.

It is important that we maintain a critical mass of audience data to make our digital offering more attractive to advertisers, including national brands who buy both our national and regional advertising inventory.

Our digital out-of-home business remains at an early stage and is under significant competitive pressure with the proliferation of available alternatives in the digital out-of-home space and may not deliver the future benefits that we are expecting.

If we are unable to develop relationships and advertising that is relevant to the marketplace that can be integrated with our core on-screen advertising products, and if these offerings are not attractive to our advertisers, then the digital out-of-home business may not provide significant revenue or a method to help expand our cinema advertising business as it matures.

Additionally, the COVID-19 Pandemic has impacted the consumer traffic and available impressions at a number of locations we have the right to display digital out-of-home advertising, and the traffic has not yet recovered and may not recover to historic levels.

As such, there can be no assurance that we will recoup our investments made pursuing this business.

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As such, there can be no assurance that we will recoup our investments made pursuing additional revenue opportunities.

The user information we collect and maintain through our online and mobile services may expose us to liability or cause us to incur greater operating expenses.

The personal information we collect and maintain through our online and mobile services, as well as from third-party sources, may expose us to liability or cause us to incur greater operating expenses.

We collect personal information from users of our websites or apps, including those users who establish accounts, or users who view certain advertising displayed through our online and mobile services.

We receive certain information regarding users who enter the theaters in our network, including places visited before entering the theater and after leaving the theater, from third parties to supplement or enhance the information we collect and maintain about users of our online and mobile services or individuals who view advertising or enter theaters.

The collection and use of this information is governed by applicable privacy, information security and consumer protection-related laws and regulations that continue to evolve and may be inconsistent from one jurisdiction to another.

Compliance with all such laws and regulations may increase our operating costs and adversely impact our ability to interact with users of our online and mobile services, and could result in legal liability.

We receive certain personal information regarding consumers who enter the theaters in our network, including places visited before entering the theater and after leaving the theater, from third parties to supplement or enhance the information we collect and maintain about users of our online and mobile services or individuals who view advertising or enter theaters.

We also collect personal information relating to individuals who are job applicants, employees, stockholders, directors, officers and independent contractors of NCM, as well as emergency contact information they provide.

In addition, we collect personal information relating to employees, owners, directors, officers and independent contractors of other organizations within the context of conducting due diligence regarding or providing or receiving a product or service to or from such organization.

The collection and use of this information is governed by applicable privacy, information security and consumer protection laws and regulations that continue to evolve and may be inconsistent from one jurisdiction to another.

Compliance with all such laws and regulations may increase our operating costs and adversely impact our ability to offer our clients advertising targeted to moviegoer demographics or to interact with users of our online and mobile services, and could result in legal liability.

For example, the failure, or perceived failure, to comply with applicable privacy information security or consumer protection-related laws or regulations or our posted privacy policies could result in actions against us by governmental entities or others.

If an actual or perceived breach of our data occurs, the market perception of the effectiveness of our security measures could be harmed, and we could lose users of these services and the associated benefits from gathering such user data.

Changes in regulations relating to the Internet or other areas of our online or mobile services may result in the need to alter our business practices or incur greater operating expenses.

A number of statutes and regulations may impact our business as a result of our online or mobile services.

For example, privacy laws that have passed or are being contemplated give, or will give, individuals additional rights with regards to the collection, use, sharing and protection of their personal information.

The costs of compliance with privacy laws and regulations, and other regulations relating to our online and mobile services or other areas of our business, may be significant.

If an actual or perceived breach of our data occurs, we could incur significant costs notifying affected individuals and providing them with credit monitoring services.

The market perception of the effectiveness of our security measures could also be harmed, and we could lose users of these services and the associated benefits from gathering such user data.

Changes in laws, regulations or rules relating to privacy, data security, the Internet or other areas of our online or mobile services may result in the need to alter our business practices or incur greater operating expenses.

A number of statutes, regulations and rules may impact our business as a result of our online or mobile services and our use of personal information we receive from third parties.

For example, privacy laws that have passed or are being contemplated give, or will give, individuals additional rights with regards to the collection, use, access to, correction, deletion, selling, sharing and protection of their personal information and sensitive personal information.

The costs of compliance with privacy laws, regulations and rules and other regulations relating to our online and mobile services or other areas of our business, may be significant.

The manner in which these and other regulations may be interpreted or enforced may subject us to potential liability, which in turn could have an adverse effect on our business, results of operations, or financial condition.

Changes to these and other regulations may impose additional burdens on us or otherwise adversely affect our business and financial results because of, for example, increased costs relating to legal compliance, defense against adverse claims or damages, the reduction or elimination of features, functionality or content from our online or mobile services, or our inability to use our data sets effectively.

Changes to these and other regulations may impose additional burdens on us or otherwise adversely affect our business and financial results because of, for example, increased costs relating to legal compliance, defense against claims, adverse rulings or damages, the reduction or elimination of features, functionality or content from our online or mobile services, or our inability to use unique data records effectively.

Likewise, any failure on our part to comply with these and other regulations may subject us to additional liabilities.

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In addition, the pricing and volume of advertising may be affected by shifts in spending toward digital platforms from more traditional media, or toward new ways of purchasing advertising, such as through automated purchasing, dynamic advertising insertion, third parties selling local advertising posts and advertising exchanges, some or all of which may not be as advantageous to the Company as current advertising methods.

Expenditures by advertisers tend to be cyclical, reflecting overall economic conditions, as well as budgeting and buying patterns and may be impacted by the conditions caused by the COVID-19 Pandemic.

A decline in the economic prospects of advertisers, industries, such as retail or consumer products, or the economy in general could alter current or prospective advertisers’ spending priorities.

Expenditures by advertisers tend to be cyclical, reflecting overall economic conditions, as well as budgeting and buying patterns.

A decline in the economic prospects of advertisers, industries, such as retail or consumer products, or the economy in general could alter current or prospective advertisers’ spending priorities, including changes in prospects caused by inflationary pressures, pandemics or other events.

If we cannot respond effectively to media marketplace changes, advertising market changes, new entrants or advances by our existing competitors, our business may be adversely affected.

Additionally, the mix of film ratings of the available motion pictures, such as a higher proportion of G and PG rated films or a shift in the types of films being shown in theaters, could cause advertisers to reduce their spending with us as the theater patrons for these films may not represent those advertisers’ target markets.

Additionally, the number of films and mix of film ratings of the available motion pictures, such as the proportion of G and PG rated films or a shift in the types and numbers of films being shown in theaters, could cause advertisers to reduce their spending with us as the theater patrons for the available films may not represent those advertisers’ target markets.

Advertising demand also impacts the price (CPM) we are able to charge our clients.

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If we do not continue to upgrade our technology, our business could fail to grow and revenue and operating margins could decline.

In early 2021, we implemented a new cinema advertising management system, Advertising Accord, which is developed by a third-party vendor.

This system will replace many of our internally developed systems and provide delivery optimization, inventory management and monetization, intelligent dynamic scheduling, increased flexibility, and workflow automation.

The system will also interface with our accounting system thus driving client invoicing and revenue recognition.

In early 2021, we implemented a new cinema advertising management system which was developed by a third-party vendor.

This system replaced many of our internally developed systems and provide delivery optimization, inventory management and monetization, intelligent dynamic scheduling, increased flexibility, and workflow automation.

The system also interfaces with our accounting system thus driving client invoicing and revenue recognition.

Given the pervasive impact of this new system on the Company's processes, problems with the systems and software could cause operational difficulties, lead to errors within our financial reporting and slow or prevent the growth of our business in the future.

As we continue to move our technology to cloud based SaaS platforms, our operating results may be impacted as operating expenses associated with the SaaS licenses may increase as our annual capital expenditure spending may decrease and this shift in costs may exceed our current estimates.

If our cinema advertising management system does not successfully provide all of the services we expect, if we are unable to continue to successfully and cost-effectively implement further upgrades to the system, including a programmatic advertising sales option, or if we lose access to the system through termination of the agreement or otherwise, our ability to offer our clients innovative, unique, integrated and targeted marketing products may be impacted, which could limit our future revenue growth.

revenue growth.

The failure to upgrade and maintain our technology allowing our advertising to reach a broader audience and allow for more targeted marketing products similar to other products in the inventory could hurt our ability to compete.

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We may request that the founding members upgrade the equipment or software installed in their theaters, but we must negotiate with the founding members as to the terms of such upgrade, including cost sharing terms, if any.

If we are not able to come to an

agreement on a future upgrade request, we may elect to pay for the upgrades requested which could result in our incurring significant capital expenditures that could adversely affect our profitability.

If we are not able to come to an agreement on a future upgrade request, we may elect to pay for the upgrades requested which could result in our incurring significant capital expenditures that could adversely affect our profitability.

Economic uncertainty or deterioration in economic conditions may adversely impact our business, operating results or financial condition.

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• pricing pressure that may adversely affect revenue and gross margin;

• declining attendance and thus a decline in the impressions available for our pre-show;

• declining attendance and thus a decline in the impressions available for our show;

• reduced credit availability and/or access to capital markets;

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The digital screen fees may exceed the traditional theater access fees in the future because of the higher rate of growth of the digital screen fees.

In addition, pursuant to the 2019 ESA Amendments, we have agreed to pay a fixed payment per patron in consideration for NCM LLC’s access to certain on-screen advertising inventory after the advertised showtime of a feature film, which amount will increase by fixed amounts until November 1, 2022 and then increase by 8% every five years beginning November 1, 2027.

In addition, pursuant to the 2019 ESA Amendments, we have agreed to pay a fixed payment per patron in consideration for NCM LLC’s access to certain on-screen advertising inventory after the advertised showtime of a feature film, which amounts increased by fixed amounts until November 1, 2022 and then now increase by 8% every five years beginning November 1, 2027.

If NCM LLC further amends the ESAs or network affiliate agreements in response to market conditions or in connection with the bankruptcy of a counterparty, the costs could increase.

If we are unable to grow our high margin advertising revenue at a rate at least equal to that of our contractual obligations, our margins and results would be negatively affected.

We generate all of our operating income and Adjusted OIBDA from our high margin advertising business.

Advertisers will not continue to do business with us if they believe our advertising medium is ineffective, unpredictable or overly expensive.

In addition, large advertisers generally have set advertising budgets, most of which are focused on online and mobile networks and traditional media platforms like television.

Reductions in the size of advertisers’ budgets due to local or national economic trends, epidemics, pandemics, other natural disasters or similar events, a shift in spending to advertising mediums like the internet and mobile platforms, perception of uncertainty in advertising mediums, or other factors could result in lower spending on our advertising inventory.

Advertisers will not continue to do business with us if they believe our advertising medium is ineffective, unpredictable or overly expensive or lacks sufficient scale.

In addition, large advertisers generally have set advertising budgets, of which cinema advertising may only be a small portion.

Reductions in the size of advertisers’ budgets due to local or national economic trends, epidemics, pandemics, other natural disasters or similar events, a shift in spending to other advertising mediums, perception of uncertainty in advertising mediums, or other factors could result in lower spending on our advertising inventory.

Advertisers are spending in the scatter market closer to the start date of their advertising campaign.

A substantial portion of our advertising revenue relates to contracts with terms of a month or less, and clients have many video media choices and can adjust where ads are placed up until their airdates without the risk of securing desired impressions.

We have previously been successful in increasing the dollar value of upfront advertising agreements, but as advertising spending shifts in the scatter market closer to the start date of advertising campaigns, our ability to maintain high CPMs in the upfront markets may decrease.

Because of the high incremental margins on our individual advertising contracts, if we are unable to remain competitive and provide value to our advertising clients, they may reduce their advertising purchases or stop placing advertisements with us.

Even the loss of a small number of clients on large contracts would negatively affect our results.

We have previously been successful in securing favorable upfront advertising agreements, but as advertising spending shifts in the scatter market closer to the start date of advertising campaigns, our ability to maintain high CPMs in the upfront markets may decrease.

If we are unable to remain competitive and provide value to our advertising clients, they may reduce their advertising purchases or stop placing advertisements with us.

Even the loss of a small number of clients on large contracts that we are not able to replace would negatively affect our results.

The loss of any major content partner or advertising client could significantly reduce our revenue.

We derive a significant portion of our revenue from our contracts with our content partners, PSAs and NCM LLC’s founding members’ agreements to purchase on-screen advertising for their beverage concessionaires.

We are not direct parties to the agreements between the founding members’ and their beverage concessionaires but expect that each founding member will have an agreement with a beverage concessionaire to provide advertising for the foreseeable future.

None of these companies individually accounted for over 10% of our total revenue during the year ended December 26, 2019.

The agreements with the content partners, PSAs and beverage advertising with the founding members in aggregate accounted for approximately 23% of our total revenue during the year ended December 26, 2019.

We derive a significant portion of our revenue from our contracts with our content partners, courtesy PSAs and NCM LLC’s founding members’ agreements to purchase on-screen advertising for their beverage concessionaires.

We are not direct parties to the agreements between the founding members’ and their beverage concessionaires but expect that each founding

member will have an agreement with a beverage concessionaire to provide advertising for the foreseeable future.

There was one company that individually accounted for over 10% of our total revenue during the year ended December 29, 2022.

The agreements with the content partners, courtesy PSAs and beverage advertising with the founding members in aggregate accounted for approximately 25.6% of our total revenue during the year ended December 29, 2022.

During the year ended December 29, 2022, one content partner accounted for 12.9 % of our total revenue.

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The LEN and lobby promotions represented approximately 0.8% and 0.7% of our total advertising revenue for the year ended December 29, 2022 and December 30, 2021, respectively.

The founding members do not have the right to use their movie screens (including the Noovie ® pre-show or otherwise) for promoting these cross-marketing relationships, and thus we will have the exclusive rights to advertise on the movie screens, except for limited advertising related to theater operations.

The founding members do not have the right to use their movie screens (including the Noovie ® show or otherwise) for promoting these cross-marketing relationships, and thus we will have the exclusive rights to advertise on the movie screens, except for limited advertising related to theater operations.

The founding members also have the right to install a second network of video monitors in the theater lobbies in excess of those required to be installed for the LEN, and the founding members have exercised this right to install a significant number of video monitors in their theater lobbies.

This additional lobby video network, which we refer to as the founding members’ lobby network, may be used by the founding members to promote products or services related to operating the theaters, such as concessions, bars and dining operations, online ticketing partner promotions, gift card and loyalty programs, and special events.

The presence of the founding members’ lobby network within the lobby areas could reduce the effectiveness of our LEN, thereby reducing our current LEN advertising revenue and profitability and adversely affecting future revenue potential associated with that marketing platform.

The presence of this additional lobby video network, which we refer to as the founding members’ lobby network, could reduce the effectiveness of our LEN, thereby reducing our current LEN advertising revenue and profitability and adversely affecting future revenue potential associated with that marketing platform.

We depend upon our senior management and our business may be adversely affected if we cannot retain or replace them.

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If we are not able to find qualified internal or external replacements for critical members of our senior management team, the loss of these key employees could have a material negative impact on our ability to effectively pursue our business strategy and our relationships with advertisers, exhibitors, media and content partners.

During the COVID-19 Pandemic, we had an increase in voluntary turnover and implemented a temporary pay reduction for all employees of up to 50% and each of our named executive officers agreed to a 20% reduction of their base salary and other employee cuts.

These temporary pay reductions were removed for all employees at the beginning of 2022.

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We do not have key-man life insurance covering any of our employees.

If one of the founding members declared bankruptcy, the ESA with that founding member may be rejected, renegotiated or deemed unenforceable.

Each of the founding members currently has a significant amount of indebtedness.

If a bankruptcy case were commenced by or against a founding member, it is possible that all or part of the ESA with that founding member could be rejected by a trustee in the bankruptcy case pursuant to Section 365 or Section 1123 of the United States Bankruptcy Code, or by the founding member, and thus not be enforceable.

Alternatively, the founding member could seek to renegotiate the ESA in a manner less favorable to us than the existing agreement.

Should the founding member seek to sell or otherwise liquidate or dispose of theaters or remove theaters from our network through bankruptcy or for other business reasons, if the acquirer did not agree to continue to allow us to sell advertising in the acquired theaters the number of theaters in our advertising networks would be reduced which in turn would reduce the number of advertising impressions available to us and thus could reduce our advertising revenue.

The founding members and our network affiliates are subject to substantial government regulation, which could limit their current business, slow their future growth of locations and screens and in turn impact our business and slow our growth prospects.

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Our ability to invest in our existing digital business and our new digital out-of-home business have been and will continue to be negatively impacted by the COVID-19 Pandemic, which may decrease the growth of these businesses.

The amount of in-theater inventory we have to sell is limited by the length of the Noovie pre-show.

The amount of in-theater inventory we have to sell is limited by the length of the Noovie show.

In order to maintain in-theater growth we will need to expand the number of theaters and screens in our network.

We may not be able to continue to expand our network which could negatively affect our ability to add new advertising clients.

If we are unable to maintain or grow the size of our network, our revenue and operating results could be adversely impacted.

If we lose a significant number of theaters or are unable to expand our network, our revenue and operating results could be adversely impacted.

Our business relies heavily on technology systems, and any failures or disruptions may materially and adversely affect our operations.

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The temporary or permanent loss of our computer equipment, networks, data or software systems through ransomware, data exfiltration, and other cyberattacks and other security threats, termination of a material technology license or contract, operating malfunction, software virus, human error, natural disaster, power loss, terrorist attacks or other catastrophic events could disrupt our operations and cause a material negative impact and the steps that we have taken to mitigate these risks may prove to be ineffective.

These problems may arise in any or all of internally developed or maintained systems, systems of our founding members or network affiliates.

and the systems of third-party service providers.

Although the Company maintains robust procedures, internal policies and technological security measures to safeguard its systems, including disaster recovery systems separate from our operations, robust network security and other measures to help protect our network from unauthorized access and misuse, and a cyber-security insurance policy, the Company’s information technology systems could be penetrated by internal or external parties intent on extracting information, corrupting information, stealing intellectual property or trade secrets, or disrupting business processes.

Although the Company maintains robust procedures, internal policies and technological security measures to safeguard its systems, including disaster recovery systems separate from our operations, robust network security and other measures to help protect our network from unauthorized access and misuse, and a cyber-security insurance policy, the Company’s information technology systems or systems of our founding members, network affiliates or third-party 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.

For example, SolarWinds previously announced that its system was infected with malicious software during 2020, which might have impacted customers, including NCM.

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Depending on the nature and scope of a future disruption, if any technology network or systems were to fail and we were unable to recover in a timely manner, we would be unable to fulfill critical business functions, which could lead to a loss of clients and revenue, harm our reputation or interfere with our ability to comply with financial reporting and other regulatory requirements.

If the non-competition provisions of the ESAs are deemed unenforceable, the founding members could compete against us and our business could be adversely affected.

advertising providers.

• is not necessary to protect a legitimate business interest of the party seeking enforcement;

• unreasonably restrains the party against whom enforcement is sought;

• is contrary to the public interest.

Enforceability of a non-competition covenant is determined by a court based on all of the facts and circumstances of the specific case at the time enforcement is sought.

For this reason, it is not possible for us to predict whether, or to what extent, a court would enforce the non-competition provisions contained in the ESAs.

Any inability to enforce the non-competition provisions, in whole or in part, could cause our revenue to decline.

Our revenue and Adjusted OIBDA fluctuate from quarter to quarter and may be unpredictable, which could increase the volatility of our stock price.

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Because our results may vary from quarter to quarter and may be unpredictable, our financial results for one quarter cannot necessarily be compared to another quarter or the same quarter in prior years and may not be indicative of our financial performance in subsequent quarters.

Additionally, the bankruptcy of our founding members, or negative news regarding the theater industry, cinema advertising generally or us could lead to increased volatility in revenue from quarter to quarter.

These variations in our financial results could contribute to volatility in our stock price.

Our business, services, or technology may infringe on intellectual property rights owned by others, which may interfere with our ability to provide services or expose us to increased liability or expense, or otherwise may be affected by our efforts to protect our intellectual property or restrictions or obligations in third-party licenses.

Our business uses a variety of intellectual property rights, including copyrights, trademarks, trade secrets, domain names and patents or patentable ideas in the provision of our advertising services, the websites we operate at ncm.com and Noovie.com , our digital gaming products including Noovie Trivia and Noovie ARcade, and the features and functionality, content, and software we make available through those websites and apps.

We rely on our own intellectual property rights, as well as intellectual property rights obtained from third parties (including through open-source licenses), to conduct our business and provide our in-theater, online, mobile and creative services.

Our business uses a variety of intellectual property rights, including copyrights, trademarks, trade secrets, domain names and patents or patentable ideas in the provision of our advertising services, the websites we operate at ncm.com and Noovie.com , our digital gaming products including Noovie Trivia and the features and functionality, content and software we make available through those websites and apps.

theater, online, mobile and creative services.

We may incur expenses, some of which may be significant, in developing, protecting, maintaining, and defending our intellectual property rights or licensing intellectual property from third parties.

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We or entities that we license or receive content from or distribute content through may not be adequately insured or indemnified to cover claims of these types or liability that may be imposed on us.

If we fail to regain compliance with the requirements for continued listing on Nasdaq, our common stock could be delisted from trading, which would adversely affect the liquidity of our common stock and our ability to raise additional capital.

On October 28, 2022, we received written notice from The Nasdaq Stock Market LLC (“Nasdaq”) indicating that we are not in compliance with the $1.00 minimum bid price requirement for continued listing on The Nasdaq Global Market, as set forth in Listing Rule 5450(a)(1) (the “Bid Price Rule”).

In accordance with Listing Rule 5810(c)(3)(A), we have a period of 180 calendar days, or until April 26, 2023, to regain compliance with the Bid Price Rule.

To regain compliance, the closing bid price of our common stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days during this 180-day period.

If at any time before April 26, 2023, the bid price of our common stock closes at $1.00 per share or more for a minimum of ten consecutive business days, Nasdaq will provide us with a written confirmation of compliance with the Bid Price Rule.

If we do not regain compliance with the Bid Price Rule by April 26, 2023, we may be eligible for an additional 180-day compliance period.

To qualify, we would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the Bid Price Rule, and would need to provide written notice of its intention to cure the bid price deficiency during the second compliance period.

This notice from Nasdaq has no immediate effect on the listing of our common stock and our common stock will continue to be listed under the symbol “NCMI”.

We are currently evaluating available options for regaining compliance, including but not limited to, implementing a reverse stock split in connection with a special meeting of the stockholders or our 2023 annual meeting of the stockholders to regain compliance with the Bid Price Rule.

There can be no assurance that the Company will regain compliance with the Bid Price Rule or maintain compliance with any of the other Nasdaq continued listing requirements.

If we fail to regain compliance with the Bid Price Rule, our common stock could be delisted from Nasdaq.

If this occurs, trading of our common stock would most likely take place in an over-the-counter market for unlisted securities.

This will likely decrease the liquidity, trading volume, and price of our securities, causing the value of an investment in us to decrease and having an adverse effect on our business, financial conditions and results of operations, including our ability to attract and retain qualified employees, raise capital, and execute on strategic alternatives.

Risks Related to Our Corporate Structure

We are a holding company with no operations of our own, and we depend on distributions and payments under the NCM LLC operating and management services agreements from NCM LLC to meet our ongoing obligations and to pay cash dividends on our common stock.

We are a holding company with no operations of our own and have no independent ability to generate cash flow other than interest income on cash balances.

We are a holding company with no operations of our own and have no independent ability to generate cash flow other than interest income on cash balances or other securities owned.

Consequently, our ability to obtain operating funds primarily depends upon distributions and payments under the NCM LLC operating and management services agreement from NCM LLC.

The distribution of cash flows and other transfers of funds by NCM LLC to us are subject to statutory and contractual restrictions based upon NCM LLC’s financial performance, including NCM LLC’s compliance with the covenants in its Senior Secured Credit Facility, Revolving Credit Facility and indentures, and the NCM LLC Operating Agreement.

The NCM LLC Senior Secured Credit Facility, Revolving Credit Facility and indentures limit NCM LLC’s ability to distribute cash to its members, including us, based upon certain leverage tests, with exceptions for, among other things, payment of our income taxes and a management fee to NCM, Inc.

The NCM LLC Senior Secured Credit Facility, Revolving Credit Facility and indentures limit NCM LLC’s ability to distribute cash to its

members, including us, based upon certain leverage tests, with exceptions for, among other things, payment of our income taxes and a management fee to NCM, Inc.

pursuant to the terms of the management services agreement (incorporated in the ESA).

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may still incur substantially more debt, including secured debt, which would increase the risks associated with NCM LLC’s level of debt.

The agreements relating to NCM LLC’s debt, including the Notes due 2026 and Notes due 2028, the Senior Secured Credit Facility and the Revolving Credit Facility limit but do not prohibit NCM LLC’s ability to incur additional debt, and do not place any restrictions on NCM, Inc.’s ability to incur debt.

The agreements relating to NCM LLC’s debt, including the Notes due 2026 and Notes due 2028, the Senior Secured Credit Facility, the Revolving Credit Facility 2018 and the Revolving Credit Facility 2022 limit but do not prohibit NCM LLC’s ability to incur additional debt, and do not place any restrictions on NCM, Inc.’s ability to incur debt.

Accordingly, NCM, Inc.

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If new debt is added to current debt levels, the related risks that we now face, including those described above under “NCM LLC’s substantial debt obligations could impair our financial condition or prevent us from achieving our business goals,” could intensify.

NCM LLC’s other founding members or their affiliates, as well as our largest stockholder, may have interests that differ from those of our public stockholders and they may be able to influence our affairs.

So long as either Cinemark or Regal owns at least 5% of NCM LLC’s issued and outstanding common membership units, if the two directors appointed by Cinemark or the two directors appointed by Regal to our Board of Directors (except that if either Cinemark or Regal has only appointed one director, and such director qualifies as an “independent director” under the applicable rules of the Nasdaq Stock Market LLC, then such director) vote against any of the corporate actions listed below, we and NCM LLC will be prohibited from taking any such actions:

NCM LLC’s other equityholders or their affiliates, as well as our largest stockholders, may have interests that differ from those of our public stockholders and they may be able to influence our affairs.

So long as either Cinemark or Regal owns at least 5% of NCM LLC’s issued and outstanding common membership units, which is calculated to include shares of common stock received upon redemption of NCM LLC membership units, but excluding shares of our common stock otherwise acquired subject to limited exceptions, if the two directors appointed by Cinemark or the two directors appointed by Regal to our Board of Directors (except that if either Cinemark or Regal has only appointed one director, and such director qualifies as an “independent director” under the applicable rules of the Nasdaq Stock Market LLC, then such director) vote against any of the corporate actions listed below, we and NCM LLC will be prohibited from taking any such actions:

• assign, transfer, sell or pledge all or a portion of the membership units of NCM LLC beneficially owned by NCM, Inc.;

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• approve any actions relating to NCM LLC that could reasonably be expected to have a material adverse tax effect on NCM LLC’s founding members.

Pursuant to a director designation agreement, so long as Cinemark or Regal owns at least 5% of NCM LLC’s issued and outstanding common membership units, such NCM LLC founding member will have the right to designate a total of two nominees to our Board of Directors who will be voted upon by our stockholders.

Pursuant to a director designation agreement, so long as Cinemark or Regal owns at least 5% of NCM LLC’s issued and outstanding common membership units, which is calculated in a similar manner as under our Certificate of Incorporation, such NCM LLC founding member will have the right to designate a total of two nominees to our Board of Directors who will be voted upon by our stockholders.

One such designee by Cinemark and Regal must meet the independence requirements of the stock exchange on which our common stock is listed.

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AMC no longer has seats on our Board of Directors or the right to nominate any person to serve on our Board of Directors.

If any director designee to our Board of Directors designated by Cinemark or Regal is not appointed to our Board of Directors, nominated by us or elected by our stockholders, as applicable, then Cinemark and Regal (so long as such they each continue to own at least 5% of NCM LLC’s issued and outstanding common membership units) will be entitled to approve specified actions of NCM LLC.

For purposes of calculating the 5% ownership threshold for the director veto rights and director designation agreement provisions discussed above, shares of our common stock held by a founding member and received upon redemption of NCM LLC common membership units will be counted toward the threshold.

Common membership units issued to NCM, Inc.

connection with the redemption of common membership units by an NCM LLC founding member will be excluded, so long as such NCM LLC founding member continues to hold the common stock acquired through such redemption or such NCM LLC founding member has disposed of such shares of common stock to another NCM LLC founding member.

Shares of our common stock otherwise acquired by NCM LLC’s founding members will also be excluded, unless such shares of common stock were transferred by one founding member to another and were originally received by the transferring NCM LLC founding member upon redemption of NCM LLC common membership units.

If any director designee to our Board of Directors designated by Cinemark is not appointed to our Board of Directors, nominated by us or elected by our stockholders, as applicable, then Cinemark (so long as they each continue to own at least 5% of NCM LLC’s issued and outstanding common membership units) will be entitled to approve specified actions of NCM LLC.

Under these circumstances, our corporate governance documents allow NCM LLC’s other members and their affiliates to exercise a greater degree of influence in the operation of our business and that of NCM LLC and the management of our affairs and those of NCM LLC than is typically available to stockholders of a publicly-traded company.

Even if NCM LLC’s other members or their affiliates own a minority economic interest (but not less than 5%) in NCM LLC, they may be able to continue exerting such degree of influence over us and NCM LLC.

Even if NCM LLC’s other members or their affiliates own a minority economic interest (but not less than 5%) in NCM LLC or our common stock in certain situations, they may be able to continue exerting such degree of influence over us and NCM LLC.

Further, Standard General L.P.

(“Standard General”), our largest stockholder, beneficially owns 17,449,272 shares of our common stock, and as of December 30, 2021, Cinemark and Regal held NCM LLC membership interests that are convertible into another 86,188,344 shares of our common stock.

As a result, Cinemark, Regal and Standard General are in a position to influence or control to some degree the outcome of matters requiring stockholder approval, including the adoption of amendments to our certificate of incorporation or bylaws and the approval of mergers and other significant corporate transactions.

(“Standard General”), our largest stockholder after Regal and Cinemark, beneficially owns 12,932,382 shares of our common stock, and as of December 29, 2022, Regal beneficially owns 40,683,797 shares of our common stock, and Cinemark held NCM LLC membership interests that are convertible into another 43,690,797 shares of our common stock.

As a result, Cinemark, Regal and Standard General are in a position to influence or control to some degree the

outcome of matters requiring stockholder approval, including the adoption of amendments to our certificate of incorporation or bylaws and the approval of mergers and other significant corporate transactions.

Their influence or control of our Company and NCM LLC may have the effect of delaying or promoting a change of control of our Company and may adversely affect the voting and other rights of other stockholders.

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Different interests among the remaining founding members or between the remaining founding members and us could prevent us from achieving our business goals.

For the foreseeable future, we expect that our Board of Directors will include directors and certain executive officers of Cinemark and Regal and other directors who may have commercial or other relationships with Cinemark and Regal.

The majority of NCM LLC’s outstanding membership interests also are owned by Cinemark and Regal.

Such members compete with each other in the operation of their respective businesses and could have individual business interests that may conflict.

Their differing interests could make it difficult for us to pursue strategic initiatives that require consensus among NCM LLC’s current members.

In addition, to the extent the remaining founding members sell some or all their NCM LLC membership units, such as was the case for AMC at certain times following 2017, the remaining founding members could have increasingly different interests because they no longer mutually benefit from an increase in NCM LLC’s revenues or the value of the NCM, Inc.

common stock into which the NCM LLC membership units are convertible.

As long as Cinemark and Regal maintain their rights to designate directors under our Directors Designation Agreement, our Board of Directors may include directors and certain executive officers of Cinemark and Regal and other directors who may have commercial or other relationships with Cinemark and Regal.

Cinemark and Regal compete with each other in the operation of their respective businesses and could have individual business interests that may conflict.

Their differing interests could make it difficult for us to pursue strategic initiatives that require approval from the Board of Directors or require equityholder approval.

In addition, the structural relationship we have with NCM LLC’s founding members could create conflicts of interest among NCM LLC’s founding members, or between NCM LLC’s founding members and us, in a number of areas relating to our past and ongoing relationships.

These conflicts of interests could also increase upon the sale of NCM LLC membership units by a founding member because the founding member would have little incentive to agree to changes that may result in higher revenue for NCM LLC or a higher price for our common stock.

These conflicts of interests could also increase upon the sale of NCM LLC membership units by a founding member, as is the case for AMC and Regal, because the founding member may have less incentive to agree to changes that may result in higher revenue for NCM LLC or a higher price for our common stock.

There is not any formal dispute resolution procedure in place to resolve conflicts between us and an NCM LLC founding member or between NCM LLC founding members.

We may not be able to resolve any potential conflicts between us and an NCM LLC founding member and, even if we do, the resolution may be less favorable to us than if we were negotiating with an unaffiliated party.

The corporate opportunity provisions in our certificate of incorporation could enable NCM LLC’s members to benefit from corporate opportunities that might otherwise be available to us.

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It provides that if a corporate opportunity is offered to us, NCM LLC or one or more of the officers, directors or stockholders (both direct and indirect) of NCM, Inc.

reason of the fact that such person pursues or acquires such business opportunity, directs such business opportunity to another person or fails to present such business opportunity, or information regarding such business opportunity, to us.

or a member of NCM LLC that relates to the provision of services to motion picture theaters, use of theaters for any purpose, sale of advertising and promotional services in and around theaters and any other business related to the motion picture theater business (except services as provided in the ESAs as from time to time amended and except as may be offered to one of our officers in his capacity as an officer), no such person shall be liable to us or any of our stockholders (or any affiliate thereof) for breach of any fiduciary or other duty by reason of the fact that such person pursues or acquires such business opportunity, directs such business opportunity to another person or fails to present such business opportunity, or information regarding such business opportunity, to us.

This provision may apply even if the business opportunity is one that we might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so.

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The ESAs and the other contractual agreements that we have with NCM LLC’s founding members were originally negotiated in the context of an affiliated relationship in which representatives of NCM LLC’s founding members and their affiliates comprised our entire Board of Directors.

As a result, the financial provisions and the other terms of these agreements, such as covenants, contractual obligations on our part and on the part of NCM LLC’s founding members and termination and default provisions may be less favorable to us than terms that we might have obtained in negotiations with unaffiliated third parties in similar circumstances.

As a result, the financial provisions and the other terms of these agreements,

such as covenants, contractual obligations on our part and on the part of NCM LLC’s founding members and termination and default provisions may be less favorable to us than terms that we might have obtained in negotiations with unaffiliated third parties in similar circumstances.

Our certificate of incorporation and bylaws contain anti-takeover protections that may discourage or prevent strategic transactions, including a takeover of our Company, even if such a transaction would be beneficial to our stockholders.

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Each common membership unit may be redeemed in exchange for, at our option, shares of our common stock on a one-for-one basis or a cash payment equal to the market price of one share of our common stock.

If a significant number of common membership units were issued to NCM LLC’s founding members, NCM LLC’s founding members elected to redeem such units, and we elected to issue common stock

rather than cash upon redemption, the voting power of our common stockholders could be diluted.

On December 28, 2022, Regal was issued 40,683,797 shares of our common stock in connection with the redemption of all of Regal’s common membership units in NCM LLC.

This increased the number of shares of common stock outstanding from 81,764,193 to 128,402,636 and Regal’s ownership is equal to 31.7% of our issued and outstanding common stock as of December, 29, 2022.

This redemption and other future redemptions, if we elected to issue common stock rather than cash upon redemption, may dilute the voting power of our common stockholders.

Other than the maximum number of authorized shares of common stock in our certificate of incorporation, there is no limit on the number of shares of our common stock that we may issue upon redemption of an NCM LLC founding member’s common membership units in NCM LLC.

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The future issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable to the holders of preferred stock could adversely affect the market price for our common stock by making an investment in the common stock less attractive.

For example, investors in the common stock may not wish to purchase common stock at a price above the conversion price of a series of convertible preferred stock because the holders of the preferred stock would effectively be entitled to purchase common stock at the lower conversion price causing economic dilution to the holders of common stock.

For example, investors in the common stock may not wish to purchase common stock at a price above the conversion price of a series of convertible preferred stock because the holders of

the preferred stock would effectively be entitled to purchase common stock at the lower conversion price causing economic dilution to the holders of common stock.

If we or NCM LLC’s founding members are determined to be an investment company, we would become subject to burdensome regulatory requirements and our business activities could be restricted.

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We cannot predict the effect, if any, that market sales of shares of common stock by Regal, Cinemark, AMC, Standard General or any of our significant stockholders will have on the market price of our common stock from time to time.

Sales of substantial amounts of shares of our common stock in the public market, or the perception that those sales will occur, could

cause the market price of our common stock to decline or make future offerings of our equity securities more difficult.

Sales of substantial amounts of shares of our common stock in the public market, or the perception that those sales will occur, could cause the market price of our common stock to decline or make future offerings of our equity securities more difficult.

If we are unable to sell equity securities at times and prices that we deem appropriate, we may be unable to fund growth.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors