UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022 or

¨   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to ______

Commission File No. 1-8625

READING INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including Area Code: (213) 235-2240

Securities Registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ¨ No þ

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for shorter period than the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ¨ Accelerated Filer ¨ Non-Accelerated Filer þ Smaller Reporting Company ¨ Emerging Growth Company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of June 30, 2022 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the registrant's voting and non-voting common equity held by non-affiliates based on the closing price on that date as reported by the Nasdaq Stock Market was $124,342,409. As of March 30, 2023, there were 20,501,150 shares of class A non-voting common stock, par value $0.01 per share and 1,680,590 shares of class B voting common stock, par value $0.01 per share, outstanding.

Documents Incorporated by Reference

Certain portions of the registrant’s definitive Proxy Statement for the 2023 annual meeting of the stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year ended December 31, 2022 are incorporated by reference into Part III of this Annual Report on Form 10-K.
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READING INTERNATIONAL, INC.

ANNUAL REPORT ON FORM 10-K

YEAR ENDED DECEMBER 31, 2022

INDEX

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PART I

Item 1 – Our Business

GENERAL

Reading International, Inc. (“RDI” and collectively with our consolidated subsidiaries and corporate predecessors, our “Company,” “Reading,” “we,” “us,” or “our”) was incorporated in 1999 incident to our reincorporation in the State of Nevada. Our class A non-voting common stock (“Class A Stock”) and class B voting common stock (“Class B Stock”) are listed for trading on the NASDAQ Capital Market (Nasdaq-CM) under the symbols RDI and RDIB, respectively. Our Corporate Headquarters is at 189 Second Avenue, Suite 2S, New York, New York, 10003.

Our corporate website address is www.ReadingRDI.com. We provide, free of charge on our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we have electronically filed such material with, or furnished it to, the Securities and Exchange Commission (the “SEC”) (www.sec.gov). The contents of our Company website are not incorporated into this report. Our corporate governance charters for our Audit and Conflicts Committee and Compensation and Stock Options Committee are available on our website.

BUSINESS DESCRIPTION

Synergistic Diversification and Branding

We are an internationally diversified company focused on the development, ownership and operation of entertainment and real property assets in three jurisdictions: (i) United States (“U.S.”), (ii) Australia, and (iii) New Zealand. We group our businesses in two operating segments, which are owned and operated through various operating subsidiaries:

Theatrical Motion Picture Exhibition (“Cinema Exhibition”), through our 62 cinemas.

Real Estate, including real estate development and the rental or licensing of retail, commercial and live theatre assets comprised, as of the date of this 2022 Annual Report, of approximately 9,926,000 square feet of land and approximately 728,000 square feet of net rentable area.

COVID-19 Impact and Company Response

COVID-19 Impact on our Cinema Business

The COVID-19 pandemic materially impacted not only the global economy, but the global cinema industry, including our Company. Our cinema segment, along with our live theaters, suffered a material adverse impact in 2020, 2021 and into 2022. In March 2020, as a result of the pandemic, all of our cinemas and live theatres in the United States, Australia, and New Zealand were forced to temporarily close by government mandate, ultimately causing an immediate halt to our cinema revenues and income. To address this liquidity challenge in 2020 and 2021, we monetized five non-core assets to create short term liquidity for our Company, we implemented various cash preservation strategies, including, but not limited to, laying off our hourly U.S. cinema and live theatre staff, postponing non-essential operating and capital expenditures, negotiating rent abatements/deferrals with third-party cinema landlords and other major suppliers. We also worked with our lenders to modify our financing arrangements to accommodate the economic condition of the business resulting from the pandemic.

In 2021, a majority of our cinemas reopened (some with occupancy restrictions in place), but admissions continued to be down from pre-pandemic levels due to a weaker slate of movies from the major studios and distributors. As a result of both production backlogs and concerns about movie-goers desire to attend public events through the pandemic, major studios and distributors moved certain movies (i) to later release dates or (ii) directly to streaming, home video or premium video on demand (“PVOD”) platforms and thereby passing the exclusive theatrical release window.

Further impacting our overall profitability was the impact the pandemic had on our cinema business’ operating expenses. Supply chain issues and the marked increase in inflation through this period resulted in higher operating expenses. Our venues also faced labor challenges, including hiring and retaining staff, in addition to mandated increasing wage rates.

As of the date of this 2022 Annual Report, all our cinemas are open other than our Courtenay Central in Wellington, New Zealand which is unlikely to reopen until the redevelopment of the property is completed. Despite being open for business and Hollywood’s COVID induced production backlog, 2022 resulted in significantly fewer wide releases than pre-COVID periods. Additionally, the 2022 box office was impacted by the direct or simultaneous release of movies to ancillary platforms rather than an exclusive theatrical run basis. A more robust slate of major movie releases is expected during 2023, which has generated optimism that box office revenues will continue to improve compared to the pandemic periods (2020-2022). Based on today’s 2023 movie release schedule, the number of titles available for theatrical release, and the anticipated appeal of many of those titles to a variety of audiences, should support increased attendance and box office grosses for 2023. Total revenues for the years ended December 31, 2020, 2021 and 2022 were $77.9 million, $139.1 million, and $203.1 million, respectively, compared to $276.8 million for the year ended December 31, 2019, the last pre-pandemic year. Finally, we believe that the major studios have reinforced a commitment to an exclusive theatrical window, as opposed to releasing their content either direct to or simultaneously with streaming, home video or PVOD platforms.

As a result of fallout from the pandemic, a number of U.S. exhibitors have filed for bankruptcy and/or have begun to shed underperforming cinemas. During 2022, we terminated our lease and permanently closed one U.S. cinema and have advised two additional U.S. landlords of our intention to end our leases and close those U.S. cinemas.

Over the course of the pandemic, we have been able to negotiate certain lease concessions from some of our landlords. However, many of those concessions have been in the form of rent deferrals, and we are, in a number of situations, now carrying the added burden of paying down those deferrals, which puts additional stress on our cinema cash flows. As of the date of this 2022 Annual Report, our existing rent deferral obligation is $9.4 million.

The COVID-19 pandemic has had a greater impact on us than some other U.S. based exhibitors. The U.S. Congress determined that, as a public company (despite our micro-cap status), we should be excluded from participation in various federal pandemic relief programs such as the Shuttered Venue Operator Grant Program and Payroll Protection Programs. Our liquidity position and recovery from the unprecedented impacts of the COVID-19 pandemic would have been significantly improved if we had been eligible for such U.S. federal pandemic relief. This has put us at a competitive disadvantage to private operators who were able to access such funding.

COVID-19 Impact on our Real Estate Business

Our real estate business has been less impacted by the COVID-19 pandemic. As of the date of this 2022 Annual Report, virtually all of our third-party tenants in Australia are operating and paying full rent. While New York City live theatre audiences have not returned to pre-pandemic levels, our two live theatres are both currently licensed. Following government mandated closures effective in March 2020, STOMP reopened at our Orpheum Theater in New York on July 20, 2021. However, STOMP closed on January 8, 2023 after an historic nearly 30 year run. We have entered into license agreement for a new production – The Empire Strips Back – which is scheduled to open at the Orpheum in April 2023. Audible, an Amazon company, continues to license our Minetta Lane Theatre in New York, and, following almost 18 months of government mandated closure resumed public performances on October 8, 2021.

With regard to our architectural award winning 44 Union Square redevelopment project in New York City, while the COVID-19 pandemic and the current “work from home” focus of many employees severely constrained leasing activity in New York City, in January 2022 we did secure a long-term lease for the cellar, ground floor, and second floor of the building with an affiliate of Petco Health and Wellness Company, Inc. (NASDAQ: WOOF), a leading pet health and wellness company (“Petco”). Though our real estate team continues to work to secure one or more tenants for the remaining space at 44 Union Square, we believe that the pandemic’s impact on the office leasing market in New York City and the slower pace of the “return to office” effort in New York City have impacted and will continue to impact our efforts to locate an office tenant for the space at 44 Union Square. We have mortgage financing in place for this project to cover leasing and tenant improvement costs of such space.

With respect to our office building in Culver City, we began receiving rental income from a new tenant in October 2020.

In general, the loss of cinema cash flow due to the COVID-19 pandemic has caused us to scale back our real estate development activities during the 2020-2022 period.

Management’s Responses to the Challenges of COVID-19

To date, we have taken a number of significant steps to preserve our liquidity, and we will continue to evaluate our operations as the world more fully recovers from the pandemic in 2023. We have modified our business strategy in order to shore up our long-term viability in a way that would not have a dilutive impact on our stockholders, overleverage our Company, or require that we fire sale assets. In response to lower cash inflows from our cinema businesses, we reviewed our real estate portfolio to identify assets that had not been adversely impacted by the pandemic and which would require material capital investment to generate any material increase in value. These asset monetizations are detailed at Note 5 - Real Estate Transactions to the financial statements. In arriving at the determination to rely upon the monetization of certain non-core real estate assets to bridge this gap in cinema cashflow (which in 2021

produced net proceeds to our Company of $139.4 million), we considered a variety of alternatives, including the issuance of additional common stock and the issuance of high interest rate “junk” debt. We determined that it would be in the best interests of our Company and our stockholders to avoid dilutive equity issuances and to avoid high interest rate debt. We have used the proceeds from the sale of these properties to pay down debt, to cover operating expenses, to fund limited capital improvements, and to strengthen our liquidity. At December 31, 2022, we had cash and cash equivalents totaling $29.9 million, compared to $83.3 million at December 31, 2021. During 2022, we have reduced our net bank debt from $236.9 million as of December 31, 2021, to $215.6 million as of December 31, 2022.

As we continue to navigate the post-pandemic period and the challenging macro-economic environment marked by higher interest rates and costs of operations, we will continue to assess and reassess our real estate holdings as a funding resource. We continue to analyze and reanalyze each of our properties as a possible source of cash to fund operations and/or pay debt. In this process, we remain focused on identifying non-core assets unlikely to enjoy material value increases without substantial capital investment that can be monetized in a reasonable manner without material adverse tax consequences.

In addition to the monetization of certain non-core real estate assets, we implemented a number of measures to reduce our day-to-day cost of operations while improving the safety of our cinemas in the light of the COVID-19 pandemic. These measures have included, but are not limited to, terminating U.S. cinema and live theater staff for the period of cinema closures, reducing our utilities and essential operating expenditures to the minimum levels necessary, terminating or deferring non-essential capital expenditure, and reducing corporate-level employment costs. We have enhanced our cleaning protocols and installed partitions and air filtration systems to improve the safety aspects of our cinemas and upgraded our mobile platforms to increase social distancing. Furthermore, we were able to keep our Australia and New Zealand cinema level staff due to government assistance provided in those countries.

We were able to maintain most of our cinema assets and keep our key personnel in place as we reopened our cinemas. Generally speaking, our lenders and landlords continue to work with us. While we have closed or anticipate that we will close certain non-performing U.S. cinemas, and while we are in discussions with various landlords as to modifications in our occupancy arrangements, to date no landlord has terminated our right to occupy any of our cinemas. We have a variety of landlords, and these discussions are being progressed on a location-by-location basis. Further, we believe that our relationships with our film suppliers continue to be strong.

While COVID-19 impacts seem to be on the decline globally, we continue to experience residual impacts that we anticipate will be passing in the long-term, and we believe that we will ultimately return to results that resemble those of the pre-pandemic era in the future. However, no assurance can be given that we will achieve these results and, unfortunately, there is still a risk of future global outbreaks of COVID-19 or other diseases. In addition, we may be adversely impacted by long-term social trends and movie release patterns, which are placing greater emphasis on streaming in periods prior to the COVID-19 pandemic.

In short, we have thus far preserved our core business and, while we have monetized on favorable terms certain real estate assets earlier than we had intended and may be called upon to further cull our portfolio, we still hold quality real estate assets in which to invest our time and resources.

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OUR COMMERCIAL BRANDS

Set forth below is a brief description of the various brands under which we organize our business operations:

Our business plan is to coordinate cinema-based entertainment and real estate to create a powerful and mutually beneficial partnership. Our historically strong and consistent cash flows from our cinemas have, prior to the pandemic, enabled us to be strategic and proactive in acquiring and holding long-term real estate assets, including non-income producing land, and to fuel our real estate development endeavors. However, uncertainty as to current U.S. cinema cash flows has required that we constrain our activities on both the cinema side and the real estate side of or business.

Our real estate portfolio has historically provided us with a solid foundation and helped us weather the COVID caused storm. It has also, over the years, given us financial leverage providing us with a collateral base to support comparatively long term and stable real estate based borrowing. This dynamic combination of cinema and real estate has historically offered a host of advantages that we believe will continue to pay dividends as the longer term pandemic consequences abate. More specifically, the combination of these two segments can provide a variety of business advantages including the following:

Diversification of our Risk Profile and Enhanced Flexibility in meeting our Cash Needs. We believe that a solid real estate base provides flexibility to raise additional liquidity through one, or a combination of mortgage-based borrowing, sale and leaseback transactions and/or sale. Real-estate backed loans typically allow higher leverage of cash flows than operating loans secured by cinema assets, and the underlying assets themselves provide us a more ready source of liquidity through sale than traditional cinema assets. Strategic asset monetization has formed a key part of our COVID-19 response strategy.

Reduced Pressure to Deliver Cinema Business Growth; to Grow for Growth’s Sake. During pre-pandemic periods, our competitors bid up the price of independent circuits and cinema leases in order to grow their market share through re-investment of their cinema cash flow and leverage. While we investigated many of these opportunities, we could not justify the prices paid and the rents required. We have in recent periods focused our cash flow on upgrading our existing cinemas and developing our real estate assets, rather than chasing cinema deals. We have adopted a “better, not bigger” strategy with respect to our U.S. cinema circuit. In 2022, we allocated $6.3 million to upgrade and expand our cinema assets and $2.6 million for non-cinema real estate investments. The COVID-19 pandemic restrained our capital reinvestment. We believe, however, that maintaining a strategic approach to our investments and focusing on our core real estate activities will enable us to weather the challenges posed by the current economic climate and continue to grow our business in the long term. We will continuously monitor market conditions and adjust our investments as needed to ensure financial stability and continued success. It may be, as major exhibitors, such as Regal, walk away from cinema assets that opportunities will present themselves to expand our circuit with minimal capital expenditure and on sustainable lease terms.

Enhanced Control over our own Destiny. As a developer and operator of cinemas, we have enjoyed a unique advantage in creating large-scale retail developments such as our entertainment-themed centers (ETCs). Our cinemas have served as anchor tenants for our projects, historically providing a steady and reliable source of foot traffic and drawing in other businesses to the area. This had allowed us to have more control over the tenant mix and overall development of our ETCs. Additionally, because we are the anchor tenant, we do not have to go through the process of identifying and negotiating with third-party anchor tenants, providing us with a streamlined and efficient development process. We have successfully utilized this approach at our tree currently operating ETCs (and one to be redeveloped) and are excited about the potential for future developments. We are confident that our cinema-anchored developments will continue to be a key driver of our business and create thriving communities.

The Certainty of Cinema Anchor Tenancies. Our expertise in the cinema industry gives us a significant advantage in developing large-scale retail spaces such as our ETCs. Our cinemas serve as the anchor tenants, creating a bustling and vibrant atmosphere that draws in other businesses to the area. This allows us to carefully curate the tenant mix and shape the overall development of our ETCs. Furthermore, as anchor tenants ourselves, we can streamline the development process without having to negotiate with third-party tenants. We have successfully implemented this approach at our four existing ETCs and are excited about the potential for future developments. In 2021, we monetized our Auburn ETC, retaining a leasehold interest for our cinema there. A profit of $38.7 million was booked on that transaction. We are currently developing plans and strategies to execute as a redevelopment of our fourth ETC in Wellington, NZ. Our cinema-anchored developments are a key strength of our business, and we are confident in their ability to create thriving and dynamic communities.

Flexibility in Property Use. We are always open to the idea of converting an entertainment property to another use, if there is a higher and better use for the property, or to sell individual assets if an attractive opportunity presents itself. Our 44 Union Square property has a long-term lease with Petco for the lower level, ground floor and second floor, which went into effect in the first quarter of 2022.

Our hybrid, multi-country strategy emphasizes diversification, and the building of long-term hard asset values. We believe that this business strategy is proving its worth as we have progressed through and are emerging from the current pandemic.

As of December 31, 2022, our principal tangible assets included:

interests in 62 cinemas comprising of 505 screens;

fee interests in two live theatres (the Orpheum and Minetta Lane both in Manhattan);

fee interest in our 44 Union Square property, at which we have leased the lower level, ground floor and second floor to Petco. Petco began paying rent in December 2022, and is now in occupancy of such space on a full rent paying basis. CBRE is currently acting as our exclusive broker for the remainder of the space.

fee interest in one cinema (the Cinemas 1,2,3) in Manhattan, in which we own a 75% managing member interest in the holding limited liability company;

fee interests in two cinemas in Australia (Bundaberg and Maitland) and three cinemas in New Zealand (Dunedin, Napier and Rotorua);

fee interest in our currently operating ETCs in Brisbane (Newmarket Village), Townsville (Cannon Park), and Perth (The Belmont Common) and our ETC currently in the process of redevelopment in Wellington, New Zealand (“Courtenay Central”);

fee interest in our administrative office buildings in Culver City, California and Melbourne, Australia. Both buildings also feature one other third-party tenant;

fee interest in a 23 acre industrial site with rail access in Williamsport, Pennsylvania, leased to Transco;

in addition to the fee interests described immediately above, fee ownership of approximately 9.1 million square feet of developed and undeveloped real estate in the United States, Australia, and New Zealand; and

cash and cash equivalents, aggregating $29.9 million.

We now present an overview of our business segments.

CINEMA EXHIBITION

Overall

We are dedicated to creating engaging cinema experiences for our guests through hospitality-styled comfort and service, state-of-the-art cinematic presentation, uniquely designed venues, curated film and event programming, and crafted food and beverage options. As discussed previously, we manage our worldwide cinema exhibition business under various brands.

Shown in the following table are the number of locations and screens in our theater circuit in each country, by state/territory/region, our cinema brands, and our interest in the underlying asset as of December 31, 2022:

(1)Our Company has a 33.3% unincorporated joint venture interest in a 16-screen cinema located in Mt. Gravatt, Queensland managed by Event Cinemas.

(2)Our Company is a 50% joint venture partner in two New Zealand Rialto cinemas totaling 13 screens. We are responsible for the booking of these cinemas and our joint venture partner, Event Cinemas, manages their day-to-day operations.

(3)On November 9, 2022, we permanently closed our 10-screen cinema at Ko’olau in Hawaii and on Jan 13, 2023, took over an existing 6-screen cinema in Armadale in Australia.

Subject to current cash flow constraints, we continue to focus on upgrading our existing cinemas, obtaining liquor licenses, and developing new cinema opportunities to provide our customers with premium offerings, including luxury recliner seating, state-of-the-art presentation including sound, lounges, cafés and bar service, and other amenities. Currently, 187 of our auditoriums feature recliner seating (excluding our joint ventures). In addition, 33 of our auditoriums now feature large format TITAN XC, TITAN LUXE, or IMAX screens. Our circuit has been completely converted to digital projection and sound systems. However, in certain of our cinemas we have, as a point of differentiation, retained the ability to show film in the 70MM format preferred by some directors.

Although we operate cinemas in three nations, the general nature of our operations and operating strategies does not vary materially from jurisdiction-to-jurisdiction. In each jurisdiction, our gross receipts are primarily from box office receipts, food and beverage sales, gift card purchases, online ticketing fees, and screen advertising. Our ancillary revenue is created principally from theater rentals (for example, for film festivals and special events), and ancillary programming (such as concerts and sporting events).

Our cinemas generated approximately 58% of their 2022 revenue from box office receipts. Ticket prices vary by location, and in selected locations we offer reduced rates for senior citizens, children and, in certain markets, military and students.

Showtimes and features are placed in advertisements on our various websites, on internet sites and, in some markets, in limited instances, local newspapers. We are continually increasing our presence in social media, thereby, reducing our dependency on print advertising. Film distributors may also advertise certain feature films in various print, radio and television media, as well as on the internet, and distributors generally pay those costs.

F&B sales accounted for approximately 34% of our total 2022 cinema revenue. Although certain cinemas have licenses for the sale and on-premises consumption of alcoholic beverages, historically F&B products have been primarily popcorn, candy, and soda. This is changing, as more of our theaters are offering expanded food and beverage offerings. One of our strategic focuses is to upgrade our

existing cinemas with expanded F&B offerings consistent with what we believe to be the new position of cinemas in the pathway from content provider to consumer. We use SPP as a measure of our performance as compared to the performance of our competitors, as well as a measure of the performance of our food and beverage operations. While ultimately, the profitability of our food and beverage operations depends on a variety of factors, including labor cost and cost of goods sold, we think that this calculation is important to show how well we are doing on a top line basis.

Screen advertising and other revenue contribute approximately 8% of our total 2022 cinema revenue. With the exception of certain rights that we have retained to sell screen advertising to local advertisers, generally speaking, we are not in the screen advertising business and nationally recognized screen-advertising companies’ contract with us for the right to show such advertising on our screens.

Management of Cinemas

With the exception of our three unconsolidated cinemas, we manage our cinemas with executives located in Los Angeles and Manhattan in the U.S., Melbourne, Australia, and Wellington, New Zealand. Our two New Zealand Rialto cinemas are owned by a joint venture in which Reading New Zealand is a 50% joint venture partner. While we assist in the booking of these two cinemas, our joint venture partner, Event Cinemas, manages their day-to-day operations. Our one-third interest in a 16-screen Brisbane cinema is passive in nature. That cinema is also managed by Event Cinemas.

Licensing and Pricing

Film product is available from a variety of sources, ranging from the major film distributors, such as Paramount Pictures, Warner Bros, Disney, Sony Pictures, Universal Pictures and Lionsgate, to a variety of smaller independent film distributors. In Australia and New Zealand, some of those major distributors distribute through local unaffiliated distributors. Worldwide, the major film distributors dominate the market for mainstream conventional films. In the U.S., art and specialty film is distributed through the art and specialty divisions of these major distributors, such as Searchlight Pictures and Sony Pictures Classics, and through independent distributors such as A24 and Neon. Film payment terms are generally based on an agreed-upon percentage of box office receipts that will vary from film-to-film.

Competition

Film is allocated by the applicable distributor among competitive cinemas and in an increasingly material number of situations to streaming services. Accordingly, from time to time, we may be unable to license every film that we desire to play. In the Australian and New Zealand markets, we generally have access to all film products in the market. Due to the COVID-19 pandemic, we have seen a rise in streaming services with greater quantity and quality of films offered. We have also seen certain major distributors skip the traditional theatrical window and go straight to streaming, PVOD or Video on Demand (“VOD”). Over the last few years, videos have become an essential component of internet usage, with their prevalence increasing across all online platforms as part of digital marketing strategies. Whether it's through social media, websites, emails, or other communication channels, both short and long videos have emerged as the primary mode of connecting with audiences.

Moreover, the surge in popularity of video-on-demand platforms such as Netflix, Amazon Prime, and Hulu is evident. From September 8-19, 2022, selected AMC Theatres celebrated Disney+ Day which showcased beloved films from the Disney catalog. Additionally, in October 2022, a Netflix movie had a one-week theatrical sneak preview across 600 AMC, Regal, and Cinemark theaters in the United States, marking the first time all three major theater chains had agreed to screen a big-budget Netflix film. Along with this partnership, the sequel to "Knives Out," titled "Glass Onion: A Knives Out Mystery," also premiered in select theaters in the United States, Canada, the United Kingdom, Ireland, Italy, Germany, Spain, Israel, Australia, and New Zealand.

Competition for films may be intense, depending upon the number of cinemas in a particular competitive market. Our ability to obtain top grossing, first run feature films may be adversely impacted by our comparatively small size, and the limited number of screens and markets that we can supply to distributors. Moreover, because of the dramatic consolidation of screens into the hands of a few very large and powerful exhibitors such as AMC, Cineworld, and Cinemark, who between them control over 57% of the North American market, these mega-exhibition companies are in a position to offer distributors access to many more screens in major markets than we can. Also, the major exhibitors have a significant number of markets where they operate without material competition, meaning that the distributors have no alternative exhibitor for their films in these markets. Accordingly, distributors may decide to give preference to these mega-exhibitors when it comes to licensing top-grossing films, rather than deal with independent exhibitors such as ourselves. The situation is different in Australia and New Zealand, where typically every major multiplex cinema has access to all of the film currently in distribution, regardless of the ownership of that multiplex cinema. However, on the reverse side, we have suffered somewhat in these markets from competition from boutique operators, who are able to book top grossing commercial films for limited runs, thus increasing competition for customers wishing to view such top grossing films. The implementation of a two-year sunset period for block booking and circuit dealing is meant to give movie theaters time to adjust their operations during a period of significant market changes. This prevents the block booking licensing agreements from having a negative impact on independent movie distributors' access to the market by creating a barrier to entry.

The availability of state-of-the-art technology and/or luxury recliner seating can also be a factor in the preference of one cinema over another. In recent periods, a number of cinemas have opened or reopened featuring luxury recliner seating and/or expanded food and beverage service, including the sale of alcoholic beverages and food served to the seat. After significant investment in our cinema portfolio since 2015, our circuit is ready for post COVID-19 recovery. 48% of US screens feature Luxury Recliner Seating. 31% of AU/NZ screens feature Luxury Recliner Seating. 35% of US theaters feature at least one Premium Large Format auditorium (IMAX, TITAN LUXE or TITAN XC) and 53% of AU/NZ theaters feature a PLF Auditorium (TITAN XC or TITAN LUXE). Lastly, 78% of US cinemas offer enhanced F&B menus (including liquor), while 53% of AU/NZ cinemas offer enhanced F&B menus, and 66% of our global cinemas serve liquor.

The film exhibition markets in the United States, Australia, and New Zealand are to a certain extent dominated by a limited number of major exhibition companies who have substantial financial resources which could allow them to operate in a more competitive manner than us. Based on information contained in filings made with the SEC, as of December 31, 2022, the principal exhibitors in the United States are AMC (with 7,855 screens in 600 cinemas); Regal (with 6,860 screens in 516 cinemas), owned by Cineworld Group, the U.K.’s largest cinema operator; and Cinemark (with 4,458 screens in 323 cinemas). It is to be noted that these numbers are subject to fluctuations, as Regal and AMC have been shedding screens in the United States in recent periods. As of December 31, 2022, we were the 14th largest exhibitor with 1% of the box office in the United States with 228 screens in 23 cinemas.

The principal exhibitors in Australia are Greater Union, which does business under the Event Cinemas name (a subsidiary of Event Hospitality and Entertainment, Limited) (“Event”), Hoyts Cinemas (“Hoyts”), and Village Cinemas (“Village”). The major exhibitors control approximately 65% of the total cinema box office: Event 29%, Hoyts 24%, and Village 12%. Event has 526 screens nationally, Hoyts 421 screens, and Village 229 screens. By comparison, our 191 screens (excluding our joint venture theaters) represent approximately 8% of the total box office making us the fourth largest exhibitor in Australia. The industry is somewhat vertically integrated in Australia and New Zealand, in that Roadshow Film Distributors, a subsidiary of Village, serves as a distributor of film in Australia and New Zealand.

The principal exhibitors in New Zealand are Event Cinemas with 127 screens and Hoyts with 76 screens, nationally. The major exhibitors in New Zealand control approximately 51% of the total box office: Event 31% and Hoyts 20%. We have 57 screens (excluding its interests in unconsolidated joint ventures). We have 11% of the market (Event and Reading market share figures exclude any partnership theaters) and we are the third largest exhibitor in New Zealand.

In-Home, Streaming and Mobile Device Competition

The in-home streaming and mobile device entertainment industry has experienced significant leaps in recent periods in both the quality and affordability of in-home and mobile device entertainment systems and in the accessibility to, and quality of, entertainment programming through cable, satellite, and internet distribution channels. The success of these alternative distribution channels (like Netflix, Hulu, Disney+ and Amazon Prime Video) and the entrance of new specially curated product for the home and streaming markets are competing with films produced for theatrical release which puts additional pressure on film distributors to reduce and/or eliminate the time period between theatrical and secondary release dates.

Since 2020 the streaming landscape has experienced significant transformation. In 2022 newly named Paramount Global (formerly Viacom CBS) finally revealed specifics about its streaming services, including the number of Paramount+ subscribers. AT&T is in the process of merging Warner Media, which owns HBO Max, with Discovery Communications. AMC Networks launched a premium AMC+ subscription bundle in Canada and Australia on Apple TV channels and Amazon Prime Video Channels. In December 2020 and December 2021, respectively, we launched our very own streaming service, Angelika Anywhere, in the U.S. and Australia, which is curated for film lovers of independent and foreign film, documentaries, and the more specialized movies from the major studios. Currently our US based website and mobile app have the function which allow guests to instantly book Private Watch Parties online instantly. Our Australia and New Zealand, customers can also book Private VIP via online.

We are responding to these challenges generally by increasing the comfort and service levels available at our cinemas, by offering convenient online ticket reservation services with guaranteed seating, by investing in larger screens and enhanced sound, by offering more specialized and alternative product to our audiences, and by providing value for the moviegoer’s dollar. We are focusing on the fact that going to the movies is a special social experience, and we are working to make that experience the best that it can be. We must differentiate ourselves from other forms of video entertainment by emphasizing the special nature of seeing film and alternative content in a cinema environment and by developing ways to position ourselves to take advantage of the increased output of film and feature product. These are issues common to both our U.S. and international cinema operations. We are proactively adjusting our operating, programming, and marketing strategies to take into account the wide-ranging impacts of the pandemic. We want to grow our cinema-based business through a disciplined approach to renovations and new opportunities globally.

Further competitive issues are discussed under Item 1A – Risk Factors.

Seasonality

Major films are generally released to coincide with holidays. This fact provides some balancing of our revenue because, with the exception of Christmas and New Years, there is no material overlap between holidays in the United States and those in Australia and New Zealand. Distributors will delay, in certain cases, releases in Australia and New Zealand to take advantage of Australian and New Zealand holidays that are not celebrated in the United States. However, the deferral of releases is becoming increasingly less common, given the need to address internet and other channels of distribution that operate on a worldwide basis and are less tied to holiday schedules.

2022 saw some successful releases including Top Gun: Maverick and concluded with the release of Avatar: The Way of Water, but only three films reached the $1 billion mark, which included Jurassic World Dominion. Cinema operators are more hopeful for 2023 as the year offers several highly anticipated releases, such as three Marvel titles, a new Indiana Jones movie, a new Mission: Impossible film featuring a Maverick-boosted Tom Cruise, a second Dune film, the Hunger Games prequel, and highly anticipated adaptations of Wonka, Super Mario Bros, Barbie, and Christopher Nolan's Oppenheimer.

REAL ESTATE

Overall

We engage in the real estate business through the development and our ownership and rental or licensing to third parties of retail, commercial and live theatre assets. We own the fee interests in both our live theatres, and in 10 of our cinemas (as presented in the preceding table within the “Cinema Exhibition” section). Our real estate business creates long-term value for our stockholders through the continuous improvement and development of our investment and operating properties, including our ETCs.

Our real estate activities have historically consisted principally of:

the ownership of fee or long-term leasehold interests in properties used in our cinema exhibition activities or which were acquired for the development of cinemas or cinema-based real estate development projects;

the acquisition of fee interests in land for general real estate development;

the licensing to production companies of our live theatres; and,

the redevelopment of our existing fee-owned cinema or live theatre sites to their highest and best use.

All of our leasehold interests are cinema operating properties. We utilize office space at the Village East cinema building for our corporate headquarters.

We have historically made use of third-party agencies to provide the on-site management and leasing administration functions of our Australia and New Zealand sites. In 2020, however, we terminated these arrangements and brought these activities in-house. All of our U.S. real estate operations are managed in-house, with operational support from a third-party for 44 Union Square.

In addition to our principal properties as set out below, we own certain historic railroad properties (such as our 8.2-acre North Viaduct and adjacent commercial properties in Philadelphia).

United States

Live Theatres – Minetta Lane and Orpheum

Included among our real estate holdings are two Off-Broadway style live theatres, operated through our Liberty Theatres subsidiary. We license theatre auditoriums to the producers of Off-Broadway theatrical productions and provide various box office and food & beverage services. The terms of our licenses are, naturally, principally dependent upon the commercial success of our tenants. While we attempt to choose productions that we believe will be successful, we have no control over the production itself. At the current time, we have two single-auditorium theatres in Manhattan:

the Minetta Lane (399 seats); and

the Orpheum (347 seats).

Liberty Theatres is primarily in the business of licensing theatre space. However, we may from time to time participate as an investor in a play, which can help facilitate the exhibition of the play at one of our theatres and do from time to time rent space on a basis that allows us to share in a production’s revenues or profits. Rental revenues, expenses, and profits are reported as part of the real estate segment of our business.

44 Union Square

At the end of 2019, we substantially completed the construction phase of our 44 Union Square redevelopment project, achieving approximately 73,000 square feet of net rentable area (calculated inclusive of anticipated BOMA adjustments) comprised of retail and office space. We have leased all the retail space to Petco for a flagship, state-of-the-art facility. We are currently working with CBRE to lease the office portions of the project. 44 Union Square/Tammany Hall, hailed as a dramatic pièce de résistance with its first in the city, over 800-piece, glass dome, brings the future to New York’s fabled past and in 2022 was awarded the (i) The American Architecture Award for Restoration and Renovation, (ii) the ACEC NY Engineering Excellence Award, (iii) and the Building/Technology Systems Diamond Award. Item 7 – Recent Developments.

5995 Sepulveda Boulevard

We own an approximately 24,000 square foot office building with 72 parking spaces located at 5995 Sepulveda Boulevard in Culver City, California. We occupy approximately 12,000 square feet of our Culver City office building for administrative purposes. The remainder of the building is leased to an unrelated third-party. Reading purchased the building and acquired an existing A & T Lease on April 8, 2016. An update on this property is provided in Item 7 – Recent Developments.

Cinemas 1,2,3

We own, through our 75% managing member interest, the fee interest in our Cinemas 1,2,3 property in Manhattan. While we are evaluating the potential to redevelop this property as a mixed-use property, these endeavors have been deferred as we deal with the challenges posed by the COVID-19 pandemic. However, located on 3rd avenue, across from Bloomingdales on Manhattan’s Upper Eastside, this property is a prime long-term hold-for-development asset of our Company, and we are confident in the long-term outlook for the New York City commercial market. While we monitor the market for conditions to stabilize, we have been operating the property as a 3-screen cinema by Angelika since March 2021.

Australia

We own and operate three ETCs in Australia. Our revenues from these sites consist of rental income and other ancillary charges from our various tenants.

Newmarket Village

Located on 226,537 square feet of land in suburban Brisbane, Newmarket Village is currently comprised of approximately 165,830 square feet of net rentable area, including a Coles Supermarket and 47 other third-party tenants. We added a state-of-the-art eight-screen Reading Cinemas in December 2017. In 2022, we also executed 2 new leases and 4 renewal leases.

Cannon Park

Comprising 9.4-acres across two properties, Cannon Park City Center and Cannon Park Discount Center. Cannon Park was acquired in December 2015. Our multiplex cinema is one of the anchor tenants for Cannon Park City Center, which features 14 third-party F&B and leisure tenants. In 2022, we executed 1 new lease and 3 renew leases.

The Belmont Common

Anchored by our 10-screen Reading Cinemas and six F&B or third-party tenants, The Belmont Common is located in Perth, Australia, and is currently comprised of 103,204 square feet of land and 60,118 square feet of net rentable area.

New Zealand

Courtenay Central

Located in the heart of Wellington – New Zealand’s capital city – our Courtenay Central ETC is currently under redevelopment and is comprised, on a consolidated basis through various subsidiaries, of 161,071 square feet of land situated (i) proximate to the Te Papa Tongarewa Museum (attracting over 1.5 million visitors annually, pre-COVID), and (ii) across the street from the site of the future Takina, Wellington Convention and Exhibition Center (wcec.co.nz), the capital’s first premium conference and exhibition space, which is due to be completed in 2023, and (iii) across the street from the St. James Theatre which was recently renovated and has strengthened Wellington’s theatre scene. Despite the COVID-19 pandemic, construction for this major public project is on track with plans including the creation of a public concourse linking through to Wakefield Street. When it is completed, not only will it be a major generator of foot traffic in the area, but its presence (together with the Te Papa Tongarewa Museum) will provide our property with the potential for

unhindered view lines over- looking Wellington Harbor. During 2022, our Company completed a second Urban Activation and created a space for the public to enjoy on our Wakefield Street Property in collaboration with Wellington City Council. In the third quarter of 2022, we also favorably resolved disputes regarding our pre-earthquake, pre-COVID development obligations to a third-party tenant which now allows us to proceed with our development and seismic strengthening projects in order to achieve their highest and best use. This pivotal settlement has ultimately provided us a path to freely and strategically work with various stakeholders to advance an overall re-thinking and master plan for our properties and to re-establish our assets as the key Wellington destination for film, families, and fun.

As previously reported, damage from the 2016 Kaikoura earthquake necessitated demolition of our nine-story parking garage at the site, and unrelated seismic issues caused us to close major portions of the existing cinema and retail structure in early 2019. Wellington continues to be rated as one of the top cities in the world in which to live, and we continue to believe that the Courtenay Central site is located in one of the most vibrant and growing commercial and entertainment precinct areas of Wellington. In 2022, the University of Canterbury hailed Wellington as New Zealand’s most walkable city as 35% of all residents lived within a 10-minute walk of all amenities and the Keep New Zealand Beautiful Society designated it as “The Most Beautiful Large City in Aotearoa”.

Prior to the COVID-19 pandemic, the real estate team had developed a comprehensive plan featuring a variety of uses to complement and build upon the “destination quality” of the Courtenay Central location. Notwithstanding the COVID-19 pandemic, our real estate team is continuing to work with our consultants, potential tenants, and city representatives to advance our redevelopment plans for this property.

Our real estate holdings are described in further detail in Item 2 – Properties. Our real estate developments are described in Item 7 – Recent Developments.

Competition

A summary discussion of our view as to the competitive aspects of the markets where we own real estate properties is as follows:

United States

We believe that the COVID effect, while significant in 2020 and 2021, will not survive in the long-term as the human need for interaction will outweigh the reduced COVID post-vaccine risks. In 2022, we witnessed a return to normalcy as health and safety measures in public spaces subsided and as large gatherings rebounded. To meet this need for human interaction, we expect that U.S. retail real estate owners will continue to reuse the space vacated by anchor retailers to offer a variety of entertainment options and ultimately enhance the customer experience.

Demand for office space may decline in the near term as corporations adapt to employees’ “work-life balance” and leverage technology to automate tasks. However, our office space offering in the United States is limited. The available space in our Culver City office building is now completely leased. Our 44 Union Square office space is not generic in nature, given its Union Square location, its boutique size and brandability. The retail portion of our 44 Union Square property is now fully leased to Petco.

Australia and New Zealand

Over the past few years, there has been a noted stabilization in real estate market activity resulting in some increases to commercial and retail property values in Australia and to a lesser extent in New Zealand. Both countries have relatively stable economies with varying degrees of economic growth that are mostly influenced by global trends. Also, we have noted that our Australian and New Zealand developed properties have had consistent growth in rentals and values, despite the COVID effects. This is in part a product of the fact that our tenancies have focused on entertainment services (cinemas, food and beverage) and essentials (such as groceries and

pharmacies), which has to some extent insulated us from internet competition. We remain optimistic that our Australian and New Zealand holdings will continue to provide value and cash flows to our operations.

BUSINESS MIX AND FOREIGN CURRENCY IMPACT

At December 31, 2022, the book value of our assets was $587.1 million, and our consolidated stockholders’ book equity was $63.3 million. Calculated based on book value, $267.9 million, or 46% of our assets, relate to our cinema exhibition activities and $247.2 million, or 42%, of our assets, relate to our real estate activities.

For additional segment financial information, please see Part II, Item 8 – Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements-- Note 1 – Description of Business and Segment Reporting.

We have diversified our assets among three countries: the United States, Australia, and New Zealand. Based on book value, at December 31, 2022, we had approximately 58% of our assets in the United States, 34% in Australia and 8% in New Zealand compared to 49%, 40%, and 11%, respectively, at the end of 2021. This shift in the ratio is principally due to repatriation of the proceeds from the monetization of certain AU and NZ real estate assets to US, and currency fluctuations.

We have worked to maintain a balance both between our cinema and real estate assets and between our U.S. and our Australian and New Zealand assets. In 2022, we invested approximately $4.3 million in our U.S. assets: $1.8 million for the development of our real estate assets (principally for the construction of our 44 Union Square property) and $2.5 million for the improvements of our cinema assets (principally the renovations of our cinema at Kapolei, and upgrades of certain other cinemas). We invested approximately $3.2 million in our Australia asset, primarily for the development of our cinema assets (principally the fit-out of our new South City Square eight-screen complex and Busselton five-screen reading cinema). We invested approximately $1.5 million in our New Zealand assets: $1.1 million for our Invercargill cinema renovation and $0.4 million was used for the development of real estate assets (principally on the predevelopment of our Courtenay Central asset).

At December 31, 2022, we had cash and cash equivalents of $29.9 million, which are treated as corporate assets. Our cash included $24.0 million denominated in U.S. dollars, $4.9 million (AU$7.2 million) in Australian dollars, and $1.1 million (NZ$1.7 million) in New Zealand dollars. We had total worldwide non-current assets of $539.6 million, distributed as follows: $300.0 million in the United States, $192.1 million (AU$320.0 million) in Australia and $47.5 million (NZ$74.8 million) in New Zealand. We had no unrestricted unused capacity of available corporate credit facilities on December 31, 2022.

For 2022, our gross revenues in the United States, Australia, and New Zealand were $100.1 million, $87.8 million, and $15.2 million, respectively, compared to $61.8 million, $64.7 million, and $12.6 million for 2021. All three countries posted revenue increases in 2022 as a result of no mandated COVID-19 related closures in 2022, compared to 2021 due to the wide distribution of COVID-19 vaccines and better film releases.

As shown in the chart set forth in the International Business Risks section, exchange rates for the currencies of these jurisdictions have varied, sometimes materially. These ratios naturally have an impact on our revenues and asset values, which are reported in USD.   The U.S. dollar is trading at or about a ten year high compared to the Australian and New Zealand Dollar, which has the effect of reducing the value of our Australia and New Zealand earnings and cash flow from a U.S. point of view. Notwithstanding these fluctuations, we continue to believe that, over the long term, operating in Australia and New Zealand is a prudent diversification of risk. Australia has been identified by the United Nations to be among the Top 10 countries in the World in terms of natural resources per person. Deutsche Bank has twice named Wellington the best place in the world to live. The Organization for Economic Cooperation and Development has twice rated Australia as the best place to live and work in the world. In our view, the economies of Australia and New Zealand are stable economies, and their lifestyles support our entertainment/lifestyle focus.

HUMAN CAPITAL RESOURCES

Our company is committed to diversity and does not discriminate on the basis of sex, race, gender, ethnicity, religious beliefs or practices or any other protected characteristics. We strive to recruit and retain a diverse group of employees. Our board of directors is comprised of three women (including our Chair, Vice Chair and Chair of our Compensation Committee) and two men.

Our cinemas typically employ persons from the communities that they serve and accordingly, we believe that they reasonably reflect the diversification of such communities. Many of our jobs are entry level positions and offer comparatively flexible hours attractive to students and others seeking part time employment. We believe that we provide a starting point for younger people entering the job market for the first time, as well as an opportunity for individuals with other life commitments and interests and who are not seeking full time employment. Finding and retaining cinema staff has been a challenge in the post COVID period.

As of December 31, 2022, we had approximately (i) 89 executive/administrative and 8 real estate employees who were primarily full-time and (ii) 20 live theatre and 1,908 cinema employees worldwide who were predominantly part-time/casual employees. A small number of our cinema employees in New Zealand are union members, as are our projectionists in Hawaii. None of our Australian-based employees or other employees are subject to union contracts. Overall, we are of the view that the existence of these collective bargaining agreements does not materially increase our costs of labor or our ability to compete.

We offer our employees a competitive benefits package. In the U.S., we offer a 401(k)-retirement savings plan (our “401(k) Plan”) that allows eligible U.S. employees to defer a portion of their compensation, within limits prescribed by the Internal Revenue Code, on a pre- and post-tax basis through contributions to the plan. We match contributions made by participants in our 401(k) Plan up to a specified percentage, and these matching contributions are fully vested as of the date on which the contributions are made. Currently, matching has been deferred as allowed by our 401(k)-plan due to COVID-19. For our employees in Australia and New Zealand, we offer superannuation plans in line with the requirements as they pertain to each government. We believe that providing a vehicle for retirement savings through our 401(k) Plan or superannuation plan, and making fully vested matching contributions in the U.S., in accordance with our compensation policies, adds to the overall desirability of our employee compensation package and further incentivizes our employees.

We have adopted a Code of Business Conduct and Ethics (the “Code of Conduct”) designed to help our Directors and employees resolve ethical issues. Our Code of Conduct applies to all Directors and employees and is posted on our website. Our Board has established a means for employees to report a violation or suspected violation of the Code of Conduct anonymously. In addition, we have adopted an “Amended and Restated Whistleblower Policy and Procedures,” which is also posted on our website, and establishes a process by which employees may anonymously disclose to our Principal Compliance Officer alleged fraud or violations of accounting, internal accounting controls or auditing matters. We are firm supporters of equal rights and diversity, and have accordingly adopted the Anti-Discrimination, Harassment and Bullying Policy posted on our website.

Our Green Initiatives.

We strive to do our part in the fight against climate change.

United States

In our U.S. theaters we are looking at transitioning to paper straws and bamboo biodegradable cutlery in the immediate future. We provide recycle bins at all of our theaters. Prior to the COVID-19 pandemic, we completed a variety of energy enhancements, including the installation of (i) LED Lighting retrofits to lower KWH Usage and reduce our energy consumption across all the theatres, (ii) modern and smart EMS systems at various locations, to efficiently control the current HVAC systems, and (iii) replacement HVAC package units to improve our carbon footprint.

Australia and New Zealand

In our theaters in Australia and New Zealand, we are (i) using commercially compostable bamboo takeaway cutlery nationally, (ii) using commercially compostable paper straws (which are individually wrapped in paper to ensure we are COVID safe), (iii) using commercially compostable soft drink cold cups, coffee cups, popcorn boxes, takeaway pizza boxes and takeaway clamshell hot food boxes. We have achieved our 2021 goal to source only commercially compostable packaging, we expect all AU/NZ locations in Q2 2022 to be 100% converted to the new environmentally friendly stock. At our Burwood cinema in Australia, we are separating waste into three waste streams (compostable material/general waste/recyclable). At our Belmont ETC in Australia, we have installed Solar Panels to minimize our reliance on non-renewable energies.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Our statements in this annual report, including the documents incorporated herein by reference, contain a variety of forward-looking statements as defined by the Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "may," "will," "expect," "believe," "intend," "future," and "anticipate" and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding the closures and reopening of our cinemas and theatres, including our expectations regarding renovations and addition of cinemas; our expectations regarding the long-term impacts of the COVID-19 pandemic on a person’s desire for social interaction our expected operating results, including the long-term impact of the COVID-19 pandemic and our ultimate return to pre-pandemic type results; our expectations regarding the recovery and future of the cinema exhibition industry, including the strength of movies anticipated for release in the future; our expectations regarding people returning to our theatres and continuing to use discretionary funds on entertainment outside of the home; our expectations regarding retail real estate owner’s use of vacant anchor spaces; our expectations regarding the impact of streaming and mobile video services on the cinema exhibition industry; our belief regarding the attractiveness of 44 Union Square to potential tenants and ability to lease space on acceptable terms; our expectations regarding the timing of the completions our renovation projects, our expectations regarding credit facility covenant compliance and our ability to continue to obtain necessary covenant waivers; and our expectations of our liquidity and capital requirements and the allocation of funds.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:

with respect to our cinema and live theatre operations:

reduced consumer demand due to recessionary pressures;

the adverse continuing impact of the COVID-19 pandemic, and other diseases and the adverse effects on our anticipated cinema operations should there be further closings or restrictions mandated as a result of other pandemics or diseases;

the adverse continuing effects of the COVID-19 pandemic or other diseases on our Company’s results from operations, liquidity, cash flows, financial condition, and access to credit markets;

the adverse continuing impact of the COVID-19 pandemic or other diseases on short-term and/or long-term entertainment, leisure and discretionary spending habits and practices of our patrons;

the decrease in attendance at our cinemas and theatres due to (i) continued health and safety concerns, (ii) a change in consumer behavior in favor of alternative forms or mediums of entertainment, and (iii) additional regulatory requirements limiting our seating capacity;

reduction in operating margins (or negative operating margins) due to the implementation of health and safety protocols;

potentially uninsurable liability exposure to customers and staff should they become (or allege that they have become) infected with COVID-19 or other diseases while at one of our facilities;

unwillingness of employees to report to work due to the adverse effects of the COVID-19 pandemic or other diseases or to otherwise conduct work under any revised work environment protocols;

the continuing adverse impact that the COVID-19 pandemic or other diseases may continue to have on the national and global macroeconomic environment;

competition from cinema operators who have successfully used debtor laws to reduce their debt and/or rent exposure;

the uncertainty as to the scope and extent of government responses to the COVID-19 pandemic or other diseases;

the disruptions or reductions in the utilization of entertainment, shopping, and hospitality venues, as well as in our operations, due to pandemics, epidemics, widespread health emergencies, or outbreaks of infectious diseases or to changing consumer tastes and habits;

the number and attractiveness to moviegoers of the films released in future periods, and potential changes in release dates for motion pictures;

the lack of availability of films in the short- or long-term as a result of (i) major film distributors releasing scheduled films on alternative channels or (ii) disruptions of film production;

the amount of money spent by film distributors to promote their motion pictures;

the licensing fees and terms required by film distributors from motion picture exhibitors in order to exhibit their films;

the comparative attractiveness of motion pictures as a source of entertainment and willingness and/or ability of consumers (i) to spend their dollars on entertainment and (ii) to spend their entertainment dollars on movies in an outside-the-home environment;

the extent to which we encounter competition from other cinema exhibitors, from other sources of outside-the-home entertainment, and from inside-the-home entertainment options, such as “home cinemas” and competitive film product distribution technology, such as, streaming, cable, satellite broadcast, video on demand platforms, and Blu-ray/DVD rentals and sales;

our ability to continue to obtain, to the extent needed, waivers or other financial accommodations from our lenders and landlords;

the impact of major movies being released directly to one of the multitudes of streaming services available;

the impact of certain competitors’ subscription or advance pay programs;

the failure of our new initiatives to gain significant customer acceptance and use or to generate meaningful profits;

the cost and impact of improvements to our cinemas, such as improved seating, enhanced F&B offerings, and other improvements;

the ability to negotiate favorable rent abatement, deferral and repayment terms with our landlords (which may include lenders who have foreclosed on the collateral held by our prior landlords);

disruptions during cinema improvements;

in the U.S., the impact of the termination and phase-out of the so called “Paramount Decree;”

the risk of damage and/or disruption of cinema businesses from earthquakes as certain of our operations are in geologically active areas;

the impact of protests, demonstrations, and civil unrest on, among other things, government policy, consumer willingness to go to the movies, and

labor shortages and increased labor costs related to such shortages and to increasingly costly labor laws and regulations applicable to part time non-exempt workers.

with respect to our real estate development and operation activities:

the increased costs of wages, supplies, services and other development expenses from inflation;

the impact on tenants from recessionary pressures;

the impact of the COVID-19 pandemic or other diseases may continue to affect many of our tenants at our real estate operations in the United States, Australia, and New Zealand, their ability to pay rent, and to stay in business;

the impact of the COVID-19 pandemic or other diseases on our construction projects and on our ability to open construction sites and to secure needed labor and materials;

the impact of the COVID-19 pandemic or other diseases on real estate valuations in major urban centers, such as New York;

uncertainty as to governmental responses to COVID-19 or other diseases;

the rental rates and capitalization rates applicable to the markets in which we operate and the quality of properties that we own;

the ability to negotiate and execute lease agreements with material tenants;

the extent to which we can obtain on a timely basis the various land use approvals and entitlements needed to develop our properties;

the risks and uncertainties associated with real estate development;

the availability and cost of labor and materials;

the ability to obtain all permits to construct improvements;

the ability to finance improvements, including, but not limited to increased cost of borrowing and tightened lender credit policies;

the disruptions to our business from construction and/or renovations;

the possibility of construction delays, work stoppage, and material shortage;

competition for development sites and tenants;

environmental remediation issues;

the extent to which our cinemas can continue to serve as an anchor tenant that will, in turn, be influenced by the same factors as will influence generally the results of our cinema operations;

the increased depreciation and amortization expense as construction projects transition to leased real property;

the ability to negotiate and execute joint venture opportunities and relationships;

the risk of damage and/or disruption of real estate businesses from earthquakes as certain of our operations are in geologically active areas;

the disruptions or reductions in the utilization of entertainment, shopping and hospitality venues, as well as in our operations, due to pandemics, epidemics, widespread health emergencies, or outbreaks of infectious diseases, or to changing consumer tastes and habits; and

the impact of protests, demonstrations, and civil unrest on government policy, consumer willingness to visit shopping centers.

with respect to our operations generally as an international company involved in both the development and operation of cinemas and the development and operation of real estate and previously engaged for many years in the railroad business in the United States:

our ability to renew, extend, renegotiate or replace our loans that mature in 2023 and beyond, and the impact of increasing interest rates;

our ability to grow our Company and provide value to our stockholders; 

our ongoing access to borrowed funds and capital and the interest that must be paid on that debt and the returns that must be paid on such capital, and our ability to borrow funds to help cover the cessation of cash flows we are experiencing during the COVID-19 pandemic;

our ability to reallocate funds among jurisdictions to meet short-term liquidity needs;

the relative values of the currency used in the countries in which we operate; 

the impact that any discontinuance, modification or other reform of London Inter-Bank Offered Rate (LIBOR), or the establishment of alternative reference rates, may have on our LIBOR-based debt instruments;

changes in government regulation, including by way of example, the costs resulting from the requirements of Sarbanes-Oxley and other increased regulatory requirements;

our labor relations and costs of labor (including future government requirements with respect to minimum wages, shift scheduling, the use of consultants, pension liabilities, disability insurance and health coverage, and vacations and leave);

our exposure from time to time to legal claims and to uninsurable risks, such as those related to our historic railroad operations, including potential environmental claims and health-related claims relating to alleged exposure to asbestos or other substances now or in the future recognized as being possible causes of cancer or other health related problems, and class actions and private attorney general wage and hour and/or safe workplace-based claims;

our exposure to cybersecurity risks, including misappropriation of customer information or other breaches of information security;

the impact of major outbreaks of contagious diseases;

the availability of employees and/or their ability or willingness to conduct work under any revised work environment protocols;

the increased risks related to employee matters, including increased employment litigation and claims relating to terminations or furloughs caused by cinema and ETC closures;

our ability to generate significant cash flow from operations if our cinemas and/or ETCs continue to experience demand at levels significantly lower than historical levels, which could lead to a substantial increase in indebtedness and negatively impact our ability to comply with the financial covenants, if applicable, in our debt agreements;

our ability to comply with credit facility covenants and our ability to obtain necessary covenant waivers and necessary credit facility amendments;

changes in future effective tax rates and the results of currently ongoing and future potential audits by taxing authorities having jurisdiction over our various companies;

inflationary pressures on labor and supplies, and supply chain disruptions;

changes in applicable accounting policies and practices;

changes in future effective tax rates and the results of currently ongoing and future potential audits by taxing authorities having jurisdiction over our various companies; and

the impact of the conflict events occurring in Eastern Europe and the threats of potential conflicts in the Asia-Pacific region.

The above list is not necessarily exhaustive, as business is by definition unpredictable and risky, and subject to influence by numerous factors outside of our control, such as changes in government regulation or policy, competition, interest rates, supply, technological innovation, changes in consumer taste and fancy, weather, earthquakes, pandemics, and the extent to which consumers in our markets have the economic wherewithal to spend money on beyond-the-home entertainment. Refer to Item 1A - Risk Factors, as well as the risk factors set forth in any other filings made under the Securities Act of 1934, as amended, including any of our Quarterly Reports on Form 10-Q, for more information.

Given the variety and unpredictability of the factors that will ultimately influence our businesses and our results of operation, no guarantees can be given that any of our forward-looking statements will ultimately prove to be correct. Actual results will undoubtedly vary and there is no guarantee as to how our securities will perform either when considered in isolation or when compared to other securities or investment opportunities.

Forward-looking statements made by us in this annual report are based only on information currently available to us and are current only as of the date of this 2022 Annual Report. We undertake no obligation to publicly update or to revise any of our forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable law. Accordingly, you should always note the date to which our forward-looking statements speak.

Additionally, certain of the presentations included in this annual report may contain “non-GAAP financial measures.” In such case, a reconciliation of this information to our GAAP financial statements will be made available in connection with such statements.

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Item 1A – Risk Factors

Like any other investment, investing in our securities involves risk. Set forth below is a summary of various risk factors that you should consider in connection with your investment in our Company. This summary should be considered in the context of our overall Annual Report on Form 10-K.

BUSINESS RISK FACTORS

We are in the cinema exhibition and real estate businesses. We discuss separately the risks we believe to be material to our involvement in each of these segments. We have discussed separately the risks relating to the international nature of our business activities, our use of leverage, and our status as a controlled corporation. While we report the results of our live theatre operations as real estate operations – because we are principally in the business of renting space to producers rather than in producing plays ourselves – the cinema exhibition and live theatre businesses share certain risk factors and are, accordingly, discussed together.

Cinema Exhibition and Live Theatre Business Risk Factors

Our cinema and live theatre businesses are dependent upon attendance, the availability of attractive entertainment product and employees willing to work in a public environment and, accordingly, are vulnerable to the adverse effects of any future pandemics which may result in government ordered closures, imposition of social distancing requirements, and changes in film release patterns. As demonstrated by the governmental and public response to the COVID-19 pandemic, businesses that bring large numbers of unrelated people together in an enclosed environment are particularly vulnerable to business disruption in the face of contagious diseases with life threatening potential. Not only may government authorities order closures or reduce operating capacities, but the public may feel uncomfortable attending our performances in the face of such an infectious disease risk. Our cinema business has high fixed costs (rent and increasing labor) and our revenue in this segment (ticket sales, food and beverage sales, screen advertising fees) is directly tied to our success at attracting customers to our venues.

We are dependent upon third parties to supply the entertainment product we need for our cinemas and live theatres to attract customers. We do not produce the films we show at our cinemas and, generally speaking, we do not produce the plays that are performed at our live theatres. Film distributors have no obligation to supply us with film and producers have no obligation to make use of our live theatres.

We face competition from other sources of entertainment and other entertainment delivery systems. Both our cinema and live theatre operations face competition from “in-home” and mobile device sources of entertainment. These include competition from network, cable and satellite television, and Video on Demand, internet streaming video services such as Netflix, Hulu, Disney+, HBO Max, Peacock, and Amazon Prime, and social media or user generated internet programing such as, YouTube, TikTok, Reddit, Instagram, and Snapchat, video games and other sources of entertainment. The quality of “in-home” and mobile entertainment systems, as well as programming available on an in-home and mobile basis, has increased, while the cost to consumers of such systems (and such programming) has decreased in recent periods, and some consumers may prefer the security and/or convenience of an “in-home” or mobile entertainment experience to the more public and presentation-oriented experience offered by our cinemas and live theatres. Film distributors have been responding to these developments by, in some cases, decreasing or eliminating the period of time between cinema release and the date such product is made available to “in-home” or mobile forms of distribution. During the COVID-19 pandemic, many distributors moved product onto their proprietary streaming service platforms or onto third party platforms (like Netflix) either in lieu of or simultaneously with a cinema release. Even before the recent pandemic, some traditional in-home and mobile distributors had begun to produce full-length movies, specifically for the purpose of direct or simultaneous release to the in-home and mobile markets. Cinemas will need to meet these competitive factors to continue to attract customers. This may require substantial capital outlays and increased labor expense, which exhibitors may not be able to fully pass on to their customers.

We also face competition from various other forms of “beyond-the-home” entertainment, including sporting events, concerts, restaurants, casinos, video game arcades, and nightclubs. Our cinemas also face competition from live theatres and vice versa.

Further, as we file this 2022 Annual Report, there are rumors that Amazon may be looking to acquire a brick-and-mortar cinema company. We cannot predict the impact of such a development unless and until such an event occurs.

Supply chain disruptions may negatively impact our operating results. We rely on certain suppliers for a number of our products, supplies and services. Shortages, delays, or interruptions in the availability of food and beverage items and other supplies to our theatres and restaurants may be caused by adverse weather conditions; natural disasters; governmental regulation; recalls; commodity availability; seasonality; public health crises or pandemics; labor issues or other operational disruptions; the inability of our suppliers to manage adverse business conditions, obtain credit or remain solvent; or other conditions beyond our control. Such shortages, delays or interruptions could adversely affect the availability, quality, and cost of the items we buy and the operations of our business. Supply chain risk could increase our costs and limit the availability of products that are critical to our operations. We expect these issues to continue for the foreseeable future and plan to minimize the impact by focusing on the supply of those items with the greatest impact on our sales and operations.

We operate in a highly competitive environment with many competitors who are significantly larger and may have significantly better access to films and to funds than we do. We are a comparatively small cinema operator and face competition from much larger exhibitors who are able to offer distributors more screens in more markets – including markets where they may be the exclusive exhibitor – than can we. This may adversely impact our access to films, which may adversely affect our revenue and profitability. These larger competitors may also enjoy (i) greater cash flow, which can be used to develop additional cinemas, including cinemas that may be competitive with our existing cinemas, (ii) better access to equity capital and debt, (iii) better visibility to landlords and real estate developers, (iv) for the sake of building volume, to operate cinemas with margins below our threshold for cinema acquisitions and/or development, and (v) better economies of scale. Access to reasonably priced funding is increasingly important as cinema operators need to upgrade their presentation, food and beverage in order to compete with in-home entertainment options.

In the case of our live theatres, we compete for shows not only with other “for-profit” Off-Broadway theatres, but also with “not-for-profit” operators and, increasingly, with Broadway theatres. We believe our live theatres are generally competitive with other Off-Broadway venues. However, due to the increased cost of staging live theatre productions, we are seeing an increasing tendency for plays that would historically have been staged in an Off-Broadway theatre moving directly to larger Broadway venues.

We are vulnerable to a variety of factors which are beyond our control.

Our cinema and live theatre businesses may be vulnerable to fears of terrorism and random shooter incidents which could cause customers to avoid public assembly venues. Events, such as terrorist attacks and random shooter incidents may discourage patrons from attending our cinemas. We believe that recent shooting incidents have resulted in material increases in insurance premiums for cinema operators.

Our cinema business may be vulnerable to natural disasters. Natural disasters, such as tropical storms, floods, fires, and earthquakes, have damaged and forced the temporary closure, and are likely in the future to similarly impact, our cinema operations. A material portion of our cinemas are located in seismically active areas, such as California, Hawaii and New Zealand.

We may be more subject to general economic conditions than some other businesses. Going to a movie or a play is a luxury, not a necessity. Furthermore, consumer demand for better amenities and food offerings have resulted in an increase of the cost of a night at the movies. Accordingly, a decline in the economy resulting in a decrease in discretionary income, or a perception of such a decline, may result in decreased discretionary spending, which could adversely affect our cinema and live theatre businesses. Adverse economic conditions can also affect the supply side of our business, as reduced liquidity can adversely affect the availability of funding for movies and plays. This is particularly true in the case of Off-Broadway plays, which are often times financed by high-net-worth individuals (or groups of such individuals) and that are very risky due to the absence of any ability to recoup investment in secondary markets like – cable, satellite or internet distribution.

We face competition from competitors offering food and beverage and luxury seating as an integral part of their cinema offerings. The number of our competitors offering expanded food and beverage menus (including the sale of alcoholic beverages) and luxury seating, has continued to grow in recent periods. In addition, more competitors such as AMC are converting existing cinemas to provide such expanded menu offerings and in-theater dining options. The existence of such cinemas may alter traditional cinema selection practices of moviegoers, as they seek out cinemas with such expanded offerings as a preferred alternative to traditional cinemas. In order to compete with these new cinemas, the Company has been required to materially increase its capital expenditures to add such features to many of our cinemas and to take on additional and more highly trained (and, consequently, compensated) staff. Also, the conversion to luxury seating typically requires a material reduction in the number of seats that an auditorium can accommodate which may translate into fewer movie tickets being sold and the shutdown (or limitation of activities) during the time required to complete such modifications.

Our failure to obtain and maintain liquor licenses at any of our cinemas could adversely affect our ability to compete. Each of our cinemas offering alcoholic beverages, is subject to licensing and regulation. Typically, licenses must be renewed annually and may be revoked or suspended for cause at any time. Alcoholic beverage control regulations relate to numerous aspects of the daily operations of each cinema, including minimum age of patrons and employees, hours of operation, advertising, wholesale purchasing, inventory control and handling and storage and dispensing of alcoholic beverages. The failure to receive or retain a liquor license, or any other required permit or license, in a particular location, or to continue to qualify for, or renew licenses, could have a material adverse effect on our profitability, our ability to attract patrons, and our ability to obtain such a liquor license in other locations.

We may be subject to increased labor and benefits costs generally. We are subject to inflationary pressures which have resulted in increased costs of goods and increased cost of film. Our labor costs more as post COVID-19 worker shortages continue, particularly in the minimum wage sector where we operate. In venues that have alcohol licenses, there are higher labor, inventory, and insurance costs. Our cinemas are a major user of electricity, and utility costs are also rising. Given competitive pressures and other forces adversely impacting movie attendances, it may not be possible to pass all or any material portion of these increased costs on to consumers. In addition, we are subject to a variety of changing laws governing such matters as minimum wages, access to benefits and

paid or unpaid leave, working conditions and overtime under which minor violations can result in material liabilities. In California and New York, in particular, law firms have developed which advertise for plaintiffs and bring such cases on a class action, contingent fee basis, where typically between 25% and 40% of any recovery goes to the law firm. Moreover, given the statutory basis of such claims, insurance is not available to cover such exposure. In recent periods, legislatures have been actively increasing minimum wages, mandating minimum hours or imposing notice and leave provisions that make it increasingly difficult to adjust staffing levels to accommodate fluctuating cinema attendance levels, all of which have resulted in increased operating costs as we work to maintain a high level of amenity to our customers.

Real Estate Development and Ownership Business Risks

Specific Risks Related to Our Real Estate Business.

Our real estate business suffered effects from the coronavirus outbreak from which has not been full recovery. The COVID-19 pandemic resulted in the closure or reduced capacity of certain of our retail tenants. All of our ETCs are anchored by our cinemas, which suffered temporary closures and/or reductions in seating capacities during the COVID-19 Pandemic, thereby reducing foot traffic to our ETCs. In some cases, we have been compelled to provide our tenants with rent abatements or deferrals and some tenants continue to be impacted.

Competition from the Digital Economy may adversely impact our ability to lease and obtain reasonable rents for our properties. An increasing amount of shopping is being done online, a trend that has been given momentum by the stay-at-home admonitions and restrictions associated with our battle against the COVID virus. This has adversely impacted retail tenants (particularly those dealing in consumer goods), which may impact our ability to attract such retailers and to obtain rents at historic levels. This is a particular risk to us, given our high percentage of retail tenants. Also, initially motivated by the need to work from home during the COVID-19 pandemic, employers are rethinking the scope and extent of the need for their office space. Some markets may have become overbuilt, which may complicate our ability to lease our properties, to obtain reasonable rents, and to finance future development.

Many of our Properties are located in areas prone to natural disasters. Many of our properties are located in areas subject to a risk of fires such as California and Australia; of hurricanes, tropical storms and/or flooding, such as Australia, California, Hawaii and New York, New Jersey; or earthquakes in New Zealand, Hawaii and California. The availability of insurance for natural disasters (particularly earthquake) may be limited.

Our entertainment properties may be more subject to access litigation than other properties. Substantially all our properties consist of, or include as a material component, entertainment venues. These facilities may attract more access-based litigation (for example, claims under the Americans with Disabilities Act) than other types of real estate.

We operate in a highly competitive environment in which we must compete against companies with much greater financial and human resources than we have. We have limited financial and human resources, compared to our principal real estate competitors. In recent periods, we have relied heavily on outside professionals in connection with our real estate development activities. Many of our competitors have significantly greater resources and may be able to achieve greater economies of scale than we can. Given our structure as a taxable corporation, our cost of capital is typically higher than other real estate investment vehicles such as real estate investment trusts.

Risks Related to the Real Estate Industry Generally

Our financial performance will be affected by risks associated with the real estate industry generally. Events and conditions generally applicable to developers, owners, and operators of real property will affect our performance as well. These include (i) changes in the national, regional and local economic climate, (ii) local conditions, such as an oversupply of, or a reduction in demand for, commercial space and/or entertainment-oriented properties, (iii) reduced attractiveness of our properties to tenants, (iv) the rental rates and capitalization rates applicable to the markets in which we operate and the quality of properties that we own, (v) competition from other properties, (vi) inability to collect rent from tenants, (vii) increased operating costs, including labor, materials, real estate taxes, insurance premiums, and utilities, (viii) costs of complying with changes in law and government regulations including those relating to access, energy conservation and environmental matters, (ix) the relative illiquidity of real estate investments, and (x) decreases in sources of both construction and long-term lending as traditional sources of such funding leave or reduce their commitments to real estate-based lending. In addition, periods of rising interest rates or declining demand for real estate (for example, due to competition from internet sellers the demand for brick and mortar retail spaces has declined and may continue to decline, and due to the increasing popularity of tele-commuting demand for traditional office space has likewise declined and may likewise continue to decline), or the public perception that any of these events may occur, could result in declining rents or increased lease defaults. Increasing cap rates can result in lower property values.

Illiquidity of real estate investments could impede our ability to respond to adverse changes in the performance of our properties. Real estate investments can be relatively illiquid and, therefore, tend to limit our ability to vary our portfolio promptly in response to changes in economic or other conditions. Many of our properties are either “special purpose” properties that could not be readily

converted to general residential, retail or office use. In addition, certain significant expenditures associated with real estate investment, such as real estate taxes and maintenance costs, are generally not reduced when circumstances cause a reduction in income from the investment, and competitive factors may prevent the pass-through of such costs to tenants.

Real estate development involves a variety of risks.

Real estate development involves a variety of risks, including the following:

The identification and acquisition of suitable development properties. Competition for suitable development properties is intense. Our ability to identify and acquire development properties may be limited by our size and resources. Also, as we and our affiliates are considered to be “foreign owned” for purposes of certain Australian and New Zealand statutes, we have been in the past, and may in the future be, subject to regulations that are not applicable to other persons doing business in those countries.

The procurement of necessary land use entitlements for the project. This process can take many years, particularly if opposed by competing interests. Competitors and community groups (sometimes funded by such competitors) may object based on various factors, including, for example, impacts on density, parking, traffic, noise levels and the historic or architectural nature of the building being replaced. If they are unsuccessful at the local governmental level, they may seek recourse to the courts or other tribunals. This can delay projects and increase costs.

The construction of the project on time and on budget. Construction risks include the availability and cost of financing; the availability and costs of material and labor; the costs of dealing with unknown site conditions (including addressing pollution or environmental wastes deposited upon the property by prior owners); inclement weather conditions; and the ever-present potential for labor-related disruptions.

The leasing or sell-out of the project. Ultimately, there are risks involved in the leasing of a rental property or the sale of a condominium or built-for-sale property. For our ETCs, the extent to which our cinemas can continue to serve as an anchor tenant will be influenced by the same factors as will influence generally the results of our cinema operations. Leasing or sale can be influenced by economic factors that are neither known nor knowable at the commencement of the development process and by local, national, and even international economic conditions, both real and perceived.

The refinancing of completed properties. Properties are often developed using relatively short-term loans. Upon completion of the project, it may be necessary to find replacement financing for these loans. This process involves risk as to the availability of such permanent or other take-out financing, the interest rates, and the payment terms applicable to such financing, which may be adversely influenced by local, national, or international factors. Recent increases in lending interest rates and potential tightening of lending given the recent bank crisis may make more difficult refinancing debt or obtaining new debt.

The ownership of properties involves risk. The ownership of properties involves risks, such as: (i) ongoing leasing and re-leasing risks, (ii) ongoing financing and re-financing risks, (iii) market risks as to the multiples offered by buyers of investment properties, (iv) risks related to the ongoing compliance with changing governmental regulation (including, without limitation, laws and regulations related to access, energy conservation and environmental matters), (v) relative illiquidity compared to some other types of assets, and (vi) susceptibility of assets to uninsurable risks, such as biological, chemical or nuclear terrorism, or risks that are subject to caps tied to the concentration of such assets in certain geographic areas, such as earthquakes. Furthermore, as our properties are typically developed around an entertainment use, the attractiveness of these properties to tenants, sources of finance and real estate investors will be influenced by market perceptions of the benefits and detriments of such entertainment-type properties.

We may be subject to liability under environmental laws and regulations. We own and operate cinemas and other properties within the U.S. and internationally, which may be subject to various foreign, federal, state and local laws and regulations relating to the protection of the environment or human health. Such environmental laws and regulations include those that impose liability for the investigation and remediation of spills or releases of hazardous materials. We may incur such liability, including for any currently or formerly owned, leased or operated property, or for any site, to which we may have disposed, or arranged for the disposal of, hazardous materials or wastes. Certain of these laws and regulations may impose liability, including on a joint and several liability, which can result in a liable party being obliged to pay for greater than its share, regardless of fault or the legality of the original disposal. Environmental conditions relating to our properties or operations could have an adverse effect on our business and results of operations and cash flows.

Legislative or regulatory initiatives related to global warming/climate change concerns may negatively impact our business. Recently, there has been an increasing focus and continuous debate on global climate change including increased attention from regulatory agencies and legislative bodies. This increased focus may lead to new initiatives directed at regulating an as yet unspecified array of environmental matters. Legislative, regulatory or other efforts in the U.S. to combat climate change could result in future increases in the cost of raw materials, taxes, transportation and utilities for our vendors and for us which would result in higher operating costs for the Company. Also, compliance by our cinemas and accompanying real estate with new and revised environmental, zoning, land-use or building codes, laws, rules or regulations, could have a material and adverse effect on our business.

However, we are unable to predict at this time, the potential effects, if any, that any future environmental initiatives may have on our business.

Changes in interest rates may increase our interest expense. Because a portion of our debt bears interest at variable rates, increases in interest rates could materially increase our interest expense. While much of our debt is fixed rate, approximately $177.7 million of our current debt will mature over the next twenty-four months and will require refinancing. We anticipate that we will not be able to refinance such maturing debt at current interest rates. Based on our debt outstanding as of December 31, 2022, if interest rates were to increase by 1%, the corresponding increase in interest expense on our variable rate debt would decrease future earnings and cash flows by approximately $2.7 million per year. Potential future increases in interest rates may therefore negatively affect our financial condition and results of operations and reduce our access to the debt or equity capital markets.

Uncertainty relating to the likely phasing out of LIBOR may result in paying increased interest under our credit facilities. Some of our variable rate indebtedness uses LIBOR as a benchmark for establishing the rate. LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform. On July 27, 2017, the United Kingdom’s Financial Conduct Authority announced that it intended to phase out LIBOR by the end of 2021. LIBOR is no longer used to price new loans, and existing finance structures which are based on LIBOR are expected to be transitioned by June 2023 when certain time-based LIBOR rates will no longer be published. On November 23, 2022, FCA announced a consultation on their proposal to require LIBOR’s administrator, IBA, to continue to publish the 1-, 3- and 6-month US dollar LIBOR settings under an unrepresentative ‘synthetic’ methodology until end-September 2024. After this, publication would cease permanently. These reforms and other pressures may cause LIBOR to disappear entirely or to perform differently than in the past. At this time, it is not possible to predict the effect that any discontinuance, modification or other reform of LIBOR or any other reference rate, or the establishment of alternative reference rates, may have on LIBOR, other benchmarks, or LIBOR-based debt instruments. However, the use of alternative reference rates or other reforms could cause the interest rates payable under our credit facilities to be substantially higher than we would otherwise have expected.

International Business Risks

Our Company transacts business in Australia and New Zealand and is subject to risks associated with changing foreign currency exchange rates. During year 2022, the Australian dollar and New Zealand dollar weakened against the U.S. dollar by 7.6% and 10.2%, respectively, compared to same time prior year. Our international operations are subject to a variety of risks, including the following:

Currency Risk: while we report our earnings and net assets in U.S. dollars, substantial portions of our revenue and of our obligations are denominated in either Australian or New Zealand dollars. The value of these currencies can vary significantly compared to the U.S. dollar and compared to each other. We do not hedge the currency risk, but rather have relied upon the natural hedges that exist as a result of the fact that our film costs are typically fixed as a percentage of the box office, and our local operating costs and obligations are likewise typically denominated in local currencies. Set forth below is a chart of the exchange ratios between these three currencies since 1996:

In recent periods, we have repaid intercompany debt and used the proceeds to fund capital investment in the United States. Accordingly, our debt levels in Australia are higher than they would have been if funds had not been returned for such purposes. On a company wide basis, this means that a reduction in the relative strength of the U.S. dollar versus the Australian Dollar and/or the New Zealand dollar would effectively raise the overall cost of our borrowing and capital and make it more expensive to return funds from the United States to Australia and New Zealand. As the impacts of COVID on our business operations in Australia and New Zealand have been less severe than on our operations in the U.S., we have been looking to our operations in Australia and New Zealand to fund our overall corporate general and administrative expense (most of which is resident in the U.S.). The current strength of the U.S. Dollar has diminished the value to our Company of our Australia and New Zealand cash flow.

Risk of adverse government regulation: currently, we believe that relations between the United States, Australia, and New Zealand are good. However, no assurances can be given that these relationships will continue, and that Australia and New Zealand will not in the future seek to regulate more highly the business done by U.S. companies in their countries.

Risk of adverse labor relations: deterioration in labor relations could lead to an increased cost of labor (including the cost of future government requirements with respect to scheduling, accommodation, pension liabilities, disability insurance and health coverage, vacations and leave).

Trade disputes and geopolitical instability outside of the U.S. may adversely impact the U.S. and global economies.

In 2022, global growth weakened, trade tensions heightened, and several emerging markets experienced significant downturns as macroeconomic and geopolitical developments weighed on market sentiments. Governmental policies of developed economies, such as the U.S., have a substantial effect on emerging markets, and the consequences of a trade war between two developed countries, like that of the U.S. and China, could further contribute to the adverse economic and political conditions of emerging and other developed economies. Additionally, North Korea’s nuclear weapons capabilities, Chinese activities relative to the South China Sea, Taiwan, and Hong Kong, and the Russian invasion of Ukraine continue to be an ongoing security concern and worsening relations between the U.S. and North Korea, Russia and China continue to create a global security issue that may adversely affect international business and economic conditions. While it is difficult for us to predict the effect of such trade wars and heightened geopolitical and economic instability on our business, they could lead to currency devaluation, economic and political turmoil, market volatility, and a loss of consumer confidence in the broader U.S. economy.

Risks Associated with Certain Discontinued Operations

Certain of our subsidiaries were previously in industrial businesses. As a consequence, properties that are currently owned or may have in the past been owned, by these subsidiaries may prove to have environmental issues. Where we have knowledge of such environmental issues and are in a position to make an assessment as to our exposure, we have established what we believe to be appropriate reserves, but we are exposed to the risk that currently unknown problems may be discovered. These subsidiaries are also exposed to potential claims related to exposure of former employees to coal dust, asbestos, and other materials now considered to be, or which in the future may be found to be, carcinogenic or otherwise injurious to health.

Operating, Financial Structure and Borrowing Risk

Typically, we have negative working capital. As we invest our cash in new acquisitions and the development of our existing properties, we have negative working capital. This negative working capital is typical in the cinema exhibition industry because our short-term liabilities are in part financing our long-term assets instead of long-term liabilities financing short-term assets, as is the case in other industries such as manufacturing and distribution. Our short-term liabilities also include significant obligations related to our cinema leases. See Part II, Item 8 – Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements-- Note 2 - Summary of Significant Accounting Policies – Operating Leases.

We are subject to complex taxation, changes in tax rates, adoption of new U.S. or international tax legislation and disagreements with tax authorities that could adversely affect our business, financial condition, or results of operations. We are subject to many different forms of taxation in both the U.S. and in foreign jurisdictions where we operate, such as the U.S. Tax Cuts and Jobs Act signed into law in December 2017. The new laws are still evolving and require that we interpret the provisions of the law as we work to comply with them. The costs of compliance with these laws and regulations are high and are likely to increase in the future. Any failure on our part to comply with these laws and regulations can result in negative publicity and diversion of management’s time and effort and may subject us to significant liabilities and other penalties.

We have substantial short- to medium-term debt. Generally speaking, we have historically financed our operations through relatively short-term debt. No assurances can be given that we will be able to refinance this debt, or if we can, that the terms will be reasonable. However, as a counterbalance to this debt, we have certain unencumbered real property assets, which could be sold to pay debt or encumbered to assist in the refinancing of existing debt, if necessary.

We have substantial lease liabilities. Most of our cinemas operate in leased facilities. These leases typically have “cost of living” or other rent adjustment features and require that we operate the properties as cinemas. The COVID-19 pandemic, increased competition from internet, streaming and cable-based entertainment, and changes in film distribution have adversely affect the ability of our cinema operating subsidiaries to meet these rental obligations. Even if our cinema exhibition business returns to pre-Pandemic levels and thereafter remains relatively constant, cinema level cash flow will likely be adversely affected unless we can increase our revenue sufficiently to offset increases in our rental liabilities.

If our company suffers cybersecurity attacks, data security challenges or privacy incidents that result in security breaches, we could suffer a loss of sales, additional liability, reputational harm or other adverse consequences. The effective operation of our international businesses depends on our network infrastructure, computer systems, physical, virtual and/or cloud based, and software. Our information technology systems collect and process information provided by customers, employees and vendors.  In addition, third-party vendors’ systems process ticketing for our theaters.  These various information technology systems and the data stored within them are subject to penetration by cyber attackers.  We utilize industry accepted security protocols to securely maintain and protect proprietary and confidential information. However, in spite of our best efforts, our information systems may fail to operate for a variety of technological or human reasons.  An interruption or failure of our information technology systems and of those maintained by our third-party providers could adversely affect our business, liquidity or results of operations and result in increases in reputational risk, litigation or penalties.  Furthermore, any such occurrence, if significant could require us to expend resources to remediate and

upgrade information technology systems.  Since 2015, we have annually procured cybersecurity insurance to protect against cybersecurity risks; however, we cannot provide any assurance regarding the adequacy of such insurance coverage.

Our stock is thinly traded. Our stock is thinly traded, with an average daily volume in 2022 of only approximately 30,738.5 shares of Class A Stock. Our Class B Stock is very thinly traded with even less volume. This can result in significant volatility, as demand by buyers and sellers can easily get out of balance.

Uninsured bank deposits may be at risk. We maintain cash in certain financial institution bank accounts in the United States, Australia, and New Zealand. In the United States, the Federal Deposit Insurance Corporation insures accounts in the amount of $250,000 per depositor, per insured bank, for each account ownership category. At certain of our financial institutions, we have more than $250,000 on deposit and those amounts may not be insured in the event of a bank failure.

Ownership and Management Structure, Corporate Governance, and Change of Control Risks

As of December 31, 2022, according to a Schedule 13D/A filed on November 2, 2022 by Margaret Cotter (the Chair of our Board, Executive Vice President of our Company and sister of Ellen Cotter), Ellen Cotter (the Vice-Chair of our Board,  President and Chief Executive Officer of our Company and sister of Margaret Cotter) and certain of their affiliates (the “Cotter Schedule 13D/A”), such parties stated that in order to preserve the intent of James J. Cotter, Sr. (in establishing the Voting Trust referred to in the James J. Cotter Living Trust (the “Trust”)),  Margaret Cotter has sole voting control over all of the Class B Stock of our Company in the Voting Trust, pursuant to the terms of a Settlement Agreement and related arrangements between Margaret Cotter and Ellen Cotter, the beneficial ownership of shares of Class B Stock owned by James J. Cotter, Sr. in the Trust or the Estate of James J. Cotter, Sr. (the “Estate”), the following represented the beneficial ownership of Margaret Cotter and Ellen Cotter:

Of 614,332.8 shares of Class B Stock owned by the Trust transferred directly to Margaret Cotter and Ellen Cotter as individuals, (i) Margaret Cotter has sole voting power over all 614,332.8 shares, (ii) Margaret Cotter has sole dispositive power over 307,166.4 shares of Class B Stock of the Company owned by the Trust transferred to Margaret Cotter directly (50% of the 614,332.8), and (iii) until they enter into a stockholders agreement, Margaret Cotter and Ellen Cotter have shared dispositive power over 307,166.4 (the remaining 50% of 614,332.8) Class B shares transferred to Ellen Cotter directly.

Margaret Cotter has sole voting and dispositive power over 327,808 shares currently held by the Estate, to be transferred to a trust to be set up for the benefit of Margaret Cotter’s children (the “DMC Trust”), once formed, upon final administration of the Estate (at which point she will retain sole voting and dispositive power over them).

Margaret Cotter has sole voting and dispositive power over the 81,774,2 shares currently held by the Trust, to be transferred to the DMC Trust once formed (at which point she will retain sole voting and dispositive power over them).

Margaret Cotter and Ellen Cotter, as co-executors of the Estate, continue to have shared voting and dispositive power over 100,000 shares of Class B Stock currently held by the Estate and not otherwise allocated by the Settlement Agreement.

As of the date hereof, Margaret Cotter also has sole voting and dispositive power over 35,100 shares of Class B Stock directly beneficially owned by her, and Ellen Cotter also has sole voting and dispositive over 50,000 shares of Class B Stock directly beneficially owned by her. As a result, Margaret Cotter beneficially owns 1,158,988 shares of Voting Stock, representing 69% of the outstanding Class B stock of the Company. 

For as long as Margaret Cotter continues to beneficially own 69% of the Class B Stock, Margaret Cotter will be able to unilaterally elect or remove all of the members of our Board of Directors and determine the outcome of all matters submitted to a vote of our stockholders, including matters involving mergers or other business combinations, the acquisition or disposition of assets, the incurrence of indebtedness, the issuance of any additional shares of common stock or other equity securities, related party transactions, and the payment of dividends on common stock. Margaret Cotter will also have the unilateral power to prevent or cause a change in control and could take other actions that might be desirable to her and/or other members of her family, but not to other stockholders.

For as long as Margaret Cotter continues to beneficially own 69% of the Class B Stock, Margaret will have the power to sell the control of our Company to a purchaser or purchasers of her choosing without any approval of our Company’s Board or any other stockholder. To the extent that the Margaret Cotter controls more than two-thirds of our outstanding Class B Stock, she will have the power under Nevada law at any time, with or without cause, to remove any one or more Directors (up to and including the entire Board of Directors) by written consent taken without a meeting of the stockholders. 

While controlling stockholders may owe certain fiduciary duties to our Company and/or minority stockholders, these duties are limited.  No assurances can be given that Margaret Cotter, alone or in conjunction with Ellen Cotter, will not take action that, while beneficial to her and members of her family (including Ellen Cotter) and legally enforceable, would not necessarily be in the best interests of our Company and/or our stockholders generally. Margaret Cotter holds her beneficial ownership of 409,552 shares of our Class B Stock ultimately as the trustee of the DMC Trust, under which she owes fiduciary duties to her children which may conflict with her obligations as a controlling stockholder of our Company.

Reference is made to the Cotter Schedule 13D/A for more detail information of the scope and extent of the holdings of Margaret Cotter and Ellen Cotter. Our Class A Stock is non-voting and accordingly our Class B Stock represents all of the voting power of our Company. 

We are a “Controlled Company” under applicable NASDAQ Regulations. As permitted by those Regulations, our Board has elected to opt-out of certain corporate governance rules applicable to non-controlled companies. Generally speaking, NASDAQ requires listed companies to meet certain minimum corporate governance provisions. However, a “Controlled Company,” such as we, may elect not to be governed by certain of these provisions. Our Board of Directors has elected to exempt our Company from requirements that (i) at least a majority of our Directors be independent and (ii) nominees to our Board of Directors be nominated by a committee comprised entirely of independent Directors or by a majority of our Company’s independent Directors. Notwithstanding the determination by our Board of Directors to opt-out of these NASDAQ requirements, we believe that a majority of our Board of Directors and the entirety of our Compensation Committee are nevertheless currently comprised of independent Directors. As a practical matter, subject to her fiduciary duties as a controlling stockholder, Margaret Cotter controls the composition of our Board of Directors.

We depend on key personnel for our current and future performance. Our current and future performance depends to a significant degree upon the continued contributions of our senior management team and other key personnel. The loss or unavailability to us of any member of our senior management team or a key employee could significantly harm us. We cannot assure you that we would be able to locate or employ qualified replacements for senior management or key employees on acceptable terms. Due to the uncertainty of our control situation, the ongoing availability of these employees and our ability to replace them is uncertain. Recent action by the Securities Exchange Commission with respect to the claw back of executive bonuses under certain circumstances may, in our view, put us at a competitive disadvantage compared to private companies in recruiting talented executives.

Item 1B – Unresolved Staff Comments

None.

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Item 2 – Properties

OPERATING PROPERTY

As of December 31, 2022, we own fee interests across our two operating segments in approximately 728,000 square feet of income-producing properties (including certain properties principally occupied by our cinemas) as follows: