Reading International Inc: Form 10-K for the period ended Dec 31, 2025

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 (http://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 (http://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 into two operating segments, which are owned and operated through various operating subsidiaries:

***Theatrical Motion Picture Exhibition (“***Cinema Exhibition”), through as of the date of this 2025 Annual Report, our 58 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 2025 Annual Report, of approximately 9,114,000 square feet of land and approximately 429,000 square feet of net rentable area.

Market and External Impacts on our Cinema Exhibition Business and Our Company’s Responses

We believe that, although the global cinema industry box office was relatively flat for 2025 as compared to 2024, our industry has over the past year demonstrated its resilience and its continuing ability to attract customers looking for an outside the home entertainment experience. The success of releases such as A Minecraft Movie, Lilo & Stitch, Superman, Jurassic World: Rebirth, Zootopia 2, Wicked: For Good, Sinners, and Avatar: Fire and Ash, together with what we believe is a strong film slate through the end of 2026, make us optimistic about the future of our cinema business.

While the COVID 19 pandemic is substantially behind us, its lasting effects on both the global economy and the cinema industry remain evident. The pandemic had a profound impact on our Company’s operations and significantly strained our liquidity. Beginning in March 2020, government mandates required the temporary closure of all our cinemas and live theatres across the United States, Australia, and New Zealand, resulting in an immediate interruption of cinema revenues and heightened consumer caution towards public entertainment venues. After the start of the pandemic, we were able to negotiate occupancy relief with our cinema landlords. Unfortunately, the recovery from the pandemic was then interrupted by the screen actors and writers strikes of 2023, which materially impacted the movie release schedule. Also, even though we are a micro-cap public company, the U.S. federal government prohibited public companies from receiving any financial support.

Following the worldwide pandemic and the screen actors and writers strikes, our global cinema operations have faced elevated cost pressures, including legislated increases in labor expenses and higher costs for goods, utilities, and insurance. Our cinemas use a significant amount of electricity and U.S. operations are concentrated in Hawaii and California which have the highest electricity costs in the United States. Labor related changes across have expanded beyond wage rates to include additional leave requirements, revised overtime calculations, and increased compliance and administrative obligations. The Company has partially offset these higher costs through measured adjustments to ticket and food and beverage pricing, while remaining mindful of price sensitivity and demand.

To address liquidity pressures, the Company undertook a range of actions focused on strengthening its financial position, including monetizing certain of our real estate holdings, working with lenders to extend loan terms and obtain covenant relief, exiting unprofitable cinema locations, negotiating rent abatements and deferrals with landlords, and cutting back anticipated capital expenditures.

We have taken meaningful steps to run our theatres more efficiently while strengthening cinema level profitability, and this progress was evident when we last year achieved record food and beverage spend per guest across our circuit. Alcohol is now available at all of our domestic U.S. locations and at most theatres in Australia and New Zealand. The continued growth of mobile ticketing and mobile concession ordering has made purchasing easier for guests, increased concession sales, and allowed us to operate with leaner staffing levels without diminishing the overall moviegoing experience.

Since 2020, we have wound up our business at eight (8) cinemas. All had negative cash flow during the year of closing. All but one had negative cash flow since the onset of the Pandemic.

Following a slow first quarter of 2025 at the box office, we began to observe improved box office trends in April 2025, supported by releases such as A Minecraft Movie ($961 million) and Sinners ($370 million). Performance remained relatively consistent throughout the year with the release of several higher-grossing titles, including Lilo & Stitch ($1.0 billion), Superman ($618 million), Jurassic World: Rebirth ($869 million), and The Fantastic Four: First Steps ($522 million). And, while the industry delivered certain strong movies in the fourth quarter 2025, such as Wicked: For Good ($526 million), Zootopia 2 ($1.9 billion), and Avatar: Fire and Ash ($1.5 billion), the quarterly result could not match the strength of the film slate delivered in the fourth quarter 2024. Looking ahead, audiences are expected to return for a robust slate of highly anticipated upcoming releases in 2026, including The Super Mario Galaxy Movie, The Devil Wears Prada 2, Toy Story 5, Supergirl, Minions 3, Moana, The Odyssey, Spider Man: Brand New Day, The Cat in the Hat, Avengers: Doomsday, and Dune: Part Three, further supporting the continued recovery and long term strength of the cinema industry.

Development and Operation of our Real Estate Business and Selective Monetization Strategies

Our real estate assets continue to perform, and while we have monetized a number of our fee interests to meet recent economic challenges, we continue to regard our real estate operations as key to the development of long term stockholder value. We have been strategic in our monetization decisions principally selling either non-income producing assets previously held for development or assets which had reached their maximum value, absent the investment of significant additional capital. We have not engaged in fire sale dispositions or turned over any properties to lenders.

Between 2021 and 2025, our real estate monetizations have generated $197.5 million in net cash, which enabled us to reduce debt by $99.9 million, invest $32.4 million in capital improvements, and continue to support operations, retain key employees and stabilize our workforce. In early 2024, as our need for administrative space declined, we sold our administrative building in Culver City, California for $10.0 million, generating approximately $1.3 million in net cash (after paying off our mortgage, brokerage commissions and transactional fees). We are currently reviewing our need for replacement of office space, focusing on leasing opportunities. Looking ahead, we expect additional cash will be required through 2026 as the global film release schedule continues to stabilize following the lasting impacts of the pandemic and the 2023 Hollywood strikes and as deferred rent obligations are to be repaid and debt is to be reduced. In addition to working with existing lenders, we believe certain real estate assets can provide an additional source of liquidity. While the amounts that may be generated from future dispositions cannot be predicted with certainty, management believes that, based on independent valuations and past successful asset sales, sufficient funds can be raised to meet expected liquidity needs.

At our 44 Union Square property in New York, Petco Animal Supplies Stores. Inc (“Petco”) continues to occupy the cellar, ground, and second floors under a long-term lease on a full rent-paying basis, while we actively market the remaining space through our newly appointed leasing agent, Newmark. We are seeing improving demand within the Union Square submarket. Regarding Australia and New Zealand, we completed two significant asset monetization’s during the first half of 2025. On January 31, 2025, we sold our Wellington, New Zealand properties for $21.5 million (NZ$38.0 million) and entered into an ATL for the cinema component of that upgraded Courtenay Central building. On May 21, 2025, we sold our Cannon Park properties in Townsville, Queensland for $20.7 million (AU$32.0 million), while retaining the cinema leasehold. Proceeds from these transactions were used, in part, to pay approximately $32.1 million of debt. In our Australia and New Zealand real estate assets, our third party, non-cinema rental space is approximately 98% leased, with tenants paying full rent.

OUR COMMERCIAL BRANDS

Set forth below is a brief description of the various brands under which we organize our business operations: We are the sole owner worldwide of the “ANGELIKA” trademark and trade dress for motion picture and entertainment purposes.

Our Commercial Brands

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Our strategy has remained to integrate cinema entertainment with real estate in a way that creates long-term value for our stockholders. Historically, the reliable cash flows generated by our cinema operations, prior to the pandemic and the 2023 Hollywood strikes, support a proactive approach to acquiring and holding long-term real estate assets, including land held for future development. Although we believe cinema performance is improving, uncertainty surrounding short term U.S. cinema cash flows has led us to take a more measured approach to investment and activity within both our cinema and real estate operations.

Historically, our real estate portfolio has provided a strong foundation, helping us navigate periods of unexpected disruption while enhancing our financial flexibility by serving as a collateral base to support longer term and relatively stable real estate borrowing. Over the past four years, including the aftermath of the COVID 19 pandemic, the 2023 Hollywood strikes, and rising interest rates, our real estate assets have played a critical role in sustaining key operations and preserving long term value. In the post-pandemic period, we have monetized nine properties, generating $197.5 million net cash used to reduce debt, support operations, pay interest, and meet capital commitments. Looking ahead, we expect that the selective monetization of real estate assets will continue to provide liquidity, to the extent needed, as the cinema industry stabilizes and as we repay deferred rents and further reduce interest bearing debt.

Our hybrid, multi-country approach is focused on diversification and the development of long-term hard asset value. This approach has supported the business through the COVID-19 pandemic, the 2023 Hollywood strikes, and a period of elevated interest rates, as conditions continue to stabilize.

Our Principal Tangible Assets

As of December 31, 2025, our principal tangible assets included:

interests in 58 cinemas comprising of 469 screens;

our 44 Union Square property in Manhattan. The cellar, ground floor, and second floor of the building are fully leased to Petco, which is in occupancy of its premises on a full rent paying basis;

two Entertainment Themed Centers (“ETCs”) known as Newmarket Village (in a suburb of Brisbane) and The Belmont Common (in a suburb of Perth);

our administrative office building in South Melbourne, Australia;

the fee interests in two commercial properties in Manhattan improved with live theatres comprised of a single stage in each location;

the fee interest in and improvements constituting our Cinemas 1,2,3 located in Manhattan;

an approximately 23.9-acre rail access industrial property in Williamsport, Pennsylvania, which is currently being held for sale;

approximately 201-acres located principally in Pennsylvania from our legacy railroad business, including the Reading Viaduct, comprising over 6.0 acres in downtown Philadelphia; and

cash and cash equivalents, aggregating $10.5 million.

For a breakdown of our real estate assets, please refer to Part I, Item 2 – Properties.

We now present an overview of our business segments.

CINEMA EXHIBITION

Overall

We are committed to delivering exceptional cinematic experiences for our guests, combining hospitality-driven comfort and service with state-of-the-art cinematic presentations. Our offerings include uniquely designed venues, carefully curated film and event programming, and thoughtfully crafted food and beverage selections. As previously mentioned, we operate our global cinema exhibition business under three primary distinguished brands: Reading Cinemas, Consolidated Theatres and Angelika Film Centers.

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, 2025:

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(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.

Taking into account current cash flow constraints, we remain focused, to the extent practicable, on enhancing our existing cinema facilities, and securing liquor licenses in Australia and New Zealand to offer our customers premium experiences. These include luxury recliner seating, advanced presentation technologies such as superior sound systems, lounges, cafés, bar services, and additional amenities. At December 31, 2025, 202 of our auditoriums are equipped with recliner seating (excluding screens held in joint ventures), while 34 auditoriums feature large-format screens, including TITAN XC, TITAN LUXE, or IMAX. While our circuit did transition to digital projection and sound systems; we retained the capability to showcase films in both 35MM and 70MM formats in select cinemas, catering to the preferences of certain directors and cinephiles.

Although we operate cinemas in three countries, the general nature of our operations and operating strategies do 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).

Approximately 58% of our 2025 cinema revenue is from total box office receipts. Ticket prices vary by location, with reduced rates available for senior citizens, children and, in certain markets, military personnel and students. In addition, across our U.S. based cinemas, we offer value ticket days, including Half Priced Tuesday and Mahalo Tuesdays (in our Hawaii locations) and, now, in Australia and New Zealand, we offer our rewards members access to Terrific Tuesdays, which is a discounted ticket day.

Showtimes and features are advertised across our websites, various internet platforms, and, in some markets, in select local newspapers. We are continuously expanding our presence through social media, websites, email campaigns, and other online platforms. Additionally, film distributors may promote certain feature films through various print, radio, television, and internet channels, with distributors typically covering these advertising costs.

Food and beverage (F&B) sales accounted for approximately 34% of our total 2025 cinema revenue. While nearly all of our global cinemas are licensed for the sale and on-site consumption of alcoholic beverages, our traditional F&B offerings have predominantly consisted of popcorn, candy, and soda. This is evolving, as more of our theaters are expanding their F&B selections. One of our key strategic priorities is to enhance our existing cinemas with a broader range of F&B options that align with emerging trends and customer preferences. We measure our performance in this area using spend per patron (SPP), comparing it both to our competitors and as an indicator of the effectiveness of our F&B operations. While the profitability of our F&B operations is influenced by various factors, including labor costs and the cost of goods sold, we believe this metric provides valuable insight into our top-line performance.

Screen advertising and other revenue contributed approximately 9% to our total 2025 cinema revenue. Except for certain rights that we have retained to sell screen advertising to local advertisers, 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

Apart from three unconsolidated cinemas, our operations are overseen by management teams based in Los Angeles and Manhattan in the United States, Melbourne, Australia, and Wellington, New Zealand. Two of our New Zealand Rialto cinemas are held through a joint venture in which Reading New Zealand owns a 50% interest, with our joint venture partner responsible for day-to-day operations while we provide film booking support. In addition, we hold a passive one third interest in a 16-screen cinema in Brisbane, which is also operated by the same third-party partner.

Licensing and Pricing

Our cinemas license films from a diverse mix of content suppliers that include both large international studios and independent distributors. While the global market for wide release, mainstream films is largely controlled by major studios, distribution structures vary by region. Regarding Australia and New Zealand, certain studio titles may be handled through independent local distributors rather than directly by the studios themselves. In the United States, specialty and alternative content is typically released through studio affiliated specialty labels as well as through established independent distributors focused on curated theatrical releases. Film licensing arrangements are generally structured around revenue sharing, with rental terms tied to a negotiated percentage of box office performance that can differ by title, venue, and market conditions.

Competition

Film availability is determined by distributor allocation decisions that increasingly involve competition between theatrical exhibitors and streaming platforms, which can limit access to certain titles. While our cinemas in Australia and New Zealand generally maintain broad access to available releases, industry dynamics have shifted in recent years, particularly following the COVID-19 pandemic.

Streaming services have expanded the scale and quality of their content, while some distributors now prioritize streaming and on-demand releases over traditional theatrical windows for some films. At the same time, video content has become a dominant medium across digital channels, serving as a primary method for audience engagement through social media, websites, email campaigns, and other online platforms.

The continued dominance of streaming subscription services such as Netflix, Amazon Prime Video, Disney/Hulu, and Apple continues to create competition for the traditional theatrical experience offered by cinemas. Netflix has increasingly engaged with theatrical exhibition through select cinema releases, including KPop Demon Hunters, Frankenstein, A House of Dynamite, and Stranger Things: The Finale, reflecting a broader effort to participate in the traditional cinema ecosystem. Amazon Prime has contributed to this competitive landscape through streaming exclusive releases such as The Naked Gun and Playdate, while also hosting major Warner Bros. titles including A Minecraft Movie and Sinners following their theatrical runs. Disney/Hulu has also demonstrated the ability to drive viewership through streaming-first releases, including The Toxic Avenger, A Complete Unknown, Twinless, and Predator: Killer of Killers. Apple made the star-studded F1 The Movie available on its platform following its theatrical release and premiered streaming-exclusive films such as Highest 2 Lowest and Fountain of Youth. Meanwhile, Universal Pictures maintained a traditional release strategy in 2025, with all of its films debuting in movie theaters before becoming available on its Peacock platform. YouTube’s Paid Video on Demand program’s vast offerings, including free content, could potentially shift audiences away from mainstream media of the type historically presented by cinemas.

The ability to obtain high performing films may be affected by the level of competition within certain markets and by our relative size and screen count. In North America, a significant portion of theatrical exhibitions are controlled by large exhibitors such as AMC, Regal, and Cinemark, which together account for approximately 50% of available screens and can offer distributors broader access to major markets than we are able to provide. In addition, these exhibitors operate in a number of markets with limited direct competition, which may influence distributor allocation decisions. As a result, distributors may prioritize these larger operators when licensing high demand films. Conditions differ in Australia and New Zealand, where multiplex exhibitors generally have access to films in distribution, although competition remains strong from boutique operators that are able to secure limited engagements for popular commercial titles.

Audience preferences are increasingly shaped by the quality of the cinema experience, including the availability of advanced projection and sound technology, luxury recliner seating, and expanded food and beverage offerings. In recent years, a number of competing cinemas have opened or completed renovations that incorporate these premium features, including alcohol service and seat food delivery, which compete directly with our offerings. Certain competitors also benefit from greater financial capacity, in some cases due to prior restructurings or capital raising activities, enabling them to invest more aggressively in upgrades and enhancements that may place competitive pressure on our cinemas.

Following substantial investments in our cinema portfolio since 2015, we believe our circuit is well-positioned for a strong recovery in the post-COVID-19 and post-Hollywood strike environment. Key metrics, as of the date of this Report, include:

Luxury Recliner Seating:

• 67% of our U.S. screens are equipped with luxury recliner seating.
• 33% of our Australian and New Zealand (AU/NZ) screens feature luxury recliner seating.

Premium Large Format (PLF) Auditoriums:

• 44% of our U.S. theaters feature at least one PLF auditorium (IMAX, TITAN LUXE, or TITAN XC).
• 54% of our AU/NZ theaters feature a PLF auditorium (TITAN XC or TITAN LUXE).

Enhanced Food and Beverage (F&B) Offerings:

• 83% of our U.S. cinemas offer enhanced F&B menus, including alcoholic beverages.
• 59% of our AU/NZ cinemas provide enhanced F&B menus.
• 84% of our global cinemas serve alcoholic beverages.

The film exhibition markets in the United States, Australia, and New Zealand are influenced by a small number of major exhibition companies with significant financial resources, enabling them to compete more aggressively than we can. Based on information in filings with the SEC, as of December 31, 2025, the principal exhibitors in the United States are: AMC (with 7,072 screens in 544 cinemas); Regal (with 5,734 screens in 425 cinemas), owned by Cineworld Group, the U.K.’s largest cinema operator; and Cinemark (with 4,241 screens in 303 cinemas). As of December 31, 2025, we were the 14th largest exhibitor in the United States with 179 screens in 18 cinemas.

The principal exhibitors in Australia are Event Cinemas (a subsidiary of Event Hospitality and Entertainment, Limited) (“Event”), Hoyts Cinemas (“Hoyts”), and Village Cinemas (“Village”). The major exhibitors control approximately 67% of the total cinema box office: Event 28%, Hoyts 28%, and Village 11%. By comparison, our 210 screens (excluding our joint venture theaters) represent approximately 8% of the total box office making Reading the fourth largest exhibitor in Australia as of December 31, 2025.

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 9% of the market

(Event and Reading market share figures exclude any joint venture theaters) and are the third largest exhibitor in New Zealand, operating 41 screens in 7 cinemas as of December 31, 2025.

In-Home, Streaming and Mobile Device Competition

Rapid advances in home based and mobile entertainment have reshaped how audiences’ access and consume content, with higher quality systems, lower costs, and broad distribution through internet, cable, and satellite platforms. The widespread adoption of streaming services and the growing volume of content developed specifically for at home viewing have increased competition for consumer attention and altered traditional release patterns, placing pressure on studios to compress or bypass conventional theatrical windows.

In response, we continue to differentiate the theatrical experience by investing in areas that cannot be easily replicated at home. These efforts include upgraded seating and amenities, enhanced service standards, reserved online ticketing, improved screen and sound technology, and a broader mix of alternative and event driven programming. Our objective is to reinforce the cinema as a premium, shared experience that delivers compelling value to guests, while remaining disciplined in our capital investments. These market dynamics impact all of our operating regions, and we are actively refining our programming, marketing, and operating models to reflect evolving consumer behavior. Over time, we expect to expand our cinema platform through targeted renovations and selective growth opportunities internationally.

To further strengthen guest engagement, we are also expanding our loyalty and membership ecosystem. In the fourth quarter of 2024, we officially transitioned from the Reel Club to Reading Rewards and Angelika Rewards, our new and improved loyalty program in Australia and New Zealand. This upgrade underscores our dedication to delivering a more flexible and rewarding experience for our valued customers. Customers earn points on every dollar spent on tickets, snacks, and drinks at Reading and Angelika Cinemas. These points can now be redeemed for a wide range of rewards, including free or discounted tickets, concessions items, and more, giving customers greater flexibility and choice. Additionally, members can upgrade to Reading and Angelika Rewards Boost with a fee, unlocking even more perks like discounted movie tickets, bonus points, and food & beverage savings. In December 2025, we transitioned from Cinema Extras in our U.S. Consolidated Theatres to a new free to join Consolidated rewards program and paid subscription premium membership to support our broader strategy to deepen customer relationships and drive repeat visitation. We also have been continuing to phase in free to join Reading reward membership and paid subscription premium membership in our U.S. Reading Cinemas. Our existing Angelika free membership program in the U.S. is continuing to grow and currently has over 182,000 memberships as of the date of this report, up over 22% from December 2024.

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

Seasonality

Film release schedules are commonly aligned with major holiday periods. In prior years, this pattern has contributed to a natural smoothing of revenue, as holiday calendars in the United States generally do not coincide with those in Australia and New Zealand, other than during the Christmas and New Year season. From time to time, distributors have elected to postpone releases in Australia and New Zealand in order to capitalize on local holiday periods that do not exist in the U.S. market. Increasingly, however, this practice has declined as global digital distribution and online access have reduced the relevance of region-specific holiday timing and encouraged more synchronized worldwide release strategies.

REAL ESTATE

Overall

We engage in the real estate business through the ownership and rental or licensing to third parties of retail, commercial and live theatre assets. Up until the COVID-19 pandemic, we were actively acquiring land and developing our properties. However, in recent periods we have monetized most of our undeveloped land, and certain assets which, in our view, had reached a stage where any material increase in value would have required substantial capital investment and risk. As of December 31, 2025, we own the fee interests in both of our live theatres, and in 9 of our cinemas (as presented in the preceding table within the “Cinema Exhibition” section). A full list of our principal tangible assets is set forth above under the caption Principal Tangible Assets. We believe that 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 two 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 and holding 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 our leasehold interests are cinema operating properties. We use office space at the Village East cinema building for our corporate headquarters and have an office building in Melbourne which is used for office purposes (the ground floor of which is leased to a third-party tenant).

Our properties are described in greater detail below.

United States

Live Theatres – Minetta Lane and Orpheum

Included amongst 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 concessions services. Except in the case of our license at the Minetta Lane, the terms of our licenses are, naturally, principally dependent upon the commercial success of our licensees. While we attempt to choose productions that we anticipate will be successful, we have no control over the productions themselves. At this time, we own the following two single-stage 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, just before the pandemic, 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. Leasing in the Pandemic and post-pandemic market has proven challenging, particularly given the abrupt increase in interest rates (over 500 basis points). We have, however, leased the first two floors and most of the cellar to Petco for a flagship, state-of-the-art pet-care facility.

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 the last few years has been awarded the (i) The American Architecture Award for Restoration and Renovation, (ii) the ACEC NY Engineering Excellence Award, and (iii) the Building/Technology Systems Diamond Award. Please refer to Item 7 – Recent Developments.

Cinemas 1,2,3

We own 100% of the Cinemas 123, this property has historically been treated as an asset held for long-term development. However, considering a variety of factors, including recent market conditions in Manhattan for real estate assets (which we believe to have improved materially over the past couple of years), cost of capital and demands on our liquidity. Subsequent to balance sheet date, we have retained Nemark to market the property for sale.

Philadelphia Properties

We continue work to develop and realize the value of our real estate holdings in the City of Philadelphia. Our properties include the 0.7-mile-long Reading Viaduct – a raised railbed with bridges spanning the Callowhill and Poplar neighborhoods of Philadelphia and reaching Vine Street in the City’s Central Business District. The Reading Viaduct comprises over 6.0 acres of land, calculated inclusive of our contiguous properties and bridges arching over various public streets and sidewalks that connect our multiple parcels into one continuous land-holding, unimpaired by public thoroughfares.

Representatives of the City of Philadelphia and the City Center District have expressed interest in acquiring the Reading Viaduct for park purposes as an extension to the existing Rail Park. According to its website, the City Center District is “a private-sector organization dedicated to making Center City Philadelphia clean, safe, and attractive, is committed to maintaining Center City’s competitive edge as a regional employment center, a quality place to live, and a premier regional destination for dining, shopping, and cultural attractions.” For more information, go to www.CenterCityPhila.org (http://www.CenterCityPhila.org).

In December 2023, the City adopted an ordinance enabling the condemnation of the Reading Viaduct, and the transfer of the property to the City Center District for use as a public park. Furthering these initiatives, since railroad property (such as the Reading Viaduct) is exempt from condemnation by state governments so long as such property is subject to the jurisdiction and oversight of the Federal Surface Transportation Board (the “STB”), the City has petitioned the STB for a determination that the Reading Viaduct is no longer railroad property subject to STB jurisdiction and oversight (the “STB Proceeding”). On September 24, 2025 the STB ruled in the City’s favor, which determination we have appealed.

We continue to believe that the Reading Viaduct offers a substantial long-term opportunity for our Company through a potential sale, lease or joint venture of part or all of the property. Our properties adjoining our Reading Viaduct include various free-standing legal parcels that could be monetized separately and/or apart from the main body of our Reading Viaduct.

Australia

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

Newmarket Village and Newmarket Office

Located on 219,228 square feet of land in suburban Brisbane, Newmarket Village is currently comprised of approximately 144,430 square feet of net rentable area, including a Coles Supermarket and 46 other third-party tenants. We added a state-of-the-art eight-screen Reading Cinemas with TITAN LUXE in December 2017. In 2025, we also executed 18 new and renewed leases.

The Belmont Common

Anchored by our 10-screen Reading Cinemas with TITAN XC 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 60,117 square feet of net rentable area.

On January 31, 2025, we sold all of our properties in Wellington, New Zealand (including the Courtenay Central building) to Prime Property Group (“Prime”) for a purchase price of $21.5 million (NZ$38.0 million). We understand that Prime intends to redevelop the property. Prime is currently in the space completing the seismic upgrade works of the existing Courtenay Central building. As a part of that transaction we have entered into an ATL for the cinema component of that upgraded Courtenay Central building.

On May 21, 2025, we sold our Cannon Park ETC in Townsville, Queensland, Australia, which consisted of our Cannon Park City Center and Cannon Park Discount Center properties, comprising approximately 9.4-acres, for a purchase price of $20.7 million (AU$32.0 million). We have retained a long-term lease of the cinema component of that property.

Our real estate holdings are described in further detail in Item 2 – Properties. Recent activities with respect to 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 have been informed that there has been an increase in demand for office space in the Union Square submarket of Manhattan through the last year. We believe that our remaining space should be attractive to those interested in the Union Square submarket in that our building is not generic in nature, thanks to its architectural and historical significance, boutique size and overall “brandability.” The first two floors and most of the cellar of our 44 Union Square property are fully leased to Petco. We continue to explore a variety of possible office and non-office types of uses for the remainder of the building.

Australia and New Zealand

Historically, both countries have relatively stable economies with varying degrees of economic growth that are mostly influenced by global trends. While we have substantially reduced our real estate holdings in Australia and New Zealand (having monetized our Wellington Property assets (New Zealand), Auburn (Australia) and Townsville (Australia)), our principal remaining property (Newmarket Village in Brisbane) has enjoyed consistent growth in rentals and values. 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 have lesser exposure to the office market in Australia, as we have only two office properties, an office building (21,582 square feet) at Newmarket Village (which is 98% leased) and an office building (8,428 square feet) in South Melbourne (which is 100% leased) the upper floor of which serves as our corporate headquarters in Australia.

BUSINESS MIX AND FOREIGN CURRENCY IMPACT

On December 31, 2025, the book value of our assets was $434.9 million, and our consolidated stockholders’ book equity was ($18.1) million. Calculated based on book value, $184.2 million, or 41% of our assets, relate to our cinema exhibition activities and $176.4 million, or 41%, 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 4 –Segment Reporting.

We have diversified our assets among three countries: the United States, Australia, and New Zealand. Based on book value, at December 31, 2025, we had approximately 56% of our assets in the United States, 38% in Australia and 6% in New Zealand

We have worked to maintain a balance between our cinema and real estate assets and our U.S. and our Australian and New Zealand assets. In order to support our liquidity while the global cinema industry stabilizes, in 2025, we have strategically monetized our real estate assets in Wellington, New Zealand for NZ$38.0 million, and our Cannon Park properties in Townsville, Queensland, Australia for AU$32.0 million.

At December 31, 2025, we had cash and cash equivalents of $10.5 million, which are treated as corporate assets. We had total worldwide non-current assets of $413.2 million, distributed as follows: $234.3 million in the United States, $155.9 million (AU$233.7 million) in Australia and $23.0 million (NZ$39.9 million) in New Zealand. We had no unrestricted unused capacity of available corporate credit facilities on December 31, 2025.

For 2025, our gross revenues in the United States, Australia, and New Zealand were $106.4 million (52%), $85.1 million (42%), and $11.6 million (6%), respectively, compared to $106.2 million (50%), $90.5 million (43%), and $13.9 million (7%) for 2024. Our total gross revenues decreased slightly in 2025 primarily because of an overall weaker film slate in 2025 compared to 2024 and the closing of loss-making theaters.

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 has been appreciating 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. Over the years, U.S. News and World Report has consistently ranked Australia and New Zealand among the top countries in the world for quality of life. In our view, the economies of Australia and New Zealand are stable economies, and their lifestyles support our entertainment/lifestyle focus. In the first two months of 2026, the Australia and New Zealand dollars increased in value against the US Dollar by approximately 7% and 4% respectively.

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 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, 2025, 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. None of our Australian-based employees or other employees are subject to union contracts. We have a collective bargaining agreement in AU (referred to as an Enterprise Agreement) that covers all cinema wage earners. 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 what we believe to be 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 country. 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. We have also adopted an Anti-Discrimination, Anti-Harassment and Anti-Bullying Policy (our “Anti-Discrimination Policy”). Our Code of Conduct and Anti-Discrimination Policy apply to all Directors and employees and are posted on our website. Our Board has established a means for employees to report a violation or suspected violation of the Code of Conduct and/or our anti-discrimination policy 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. Each of these policies have also been adopted by each of our subsidiaries that has employees in the United States. Similar policies have been adopted by our overseas employer subsidiaries. We are firm supporters of equal rights and diversity.

Our Green Initiatives.

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

United States

We provide recycling bins and eco-friendly popcorn bags and to go containers at all our theaters. And, while our capex and maintenance budgets have been limited during the post-pandemic periods, we have continued our energy enhancements programs, including the installation of (i) LED fixtures/bulbs to lower KWH usage and reduce our energy consumption across all the existing theatres (ii) budgeting and planning to continue modernizing our energy management systems, to efficiently control the current HVAC systems, and (iii) selective replacement HVAC package units, as warranted to improve our carbon footprint.

Australia and New Zealand

In our theaters in Australia and New Zealand, we have fully transitioned to (i) using commercially compostable bamboo takeaway cutlery nationally, (ii) using commercially compostable paper straws, and (iii) using commercially compostable soft drink cold cups, coffee cups, popcorn boxes, takeaway pizza boxes and takeaway clamshell hot food boxes. Our initiative to have our compostable range meet the Australia household compostable standard (AS 5810) has been granted by the Australasian Bioplastics Association. Additional environmental initiatives include (i) the ongoing transition of all lighting from halogen to LED, (ii) a paperless objective, creating editable forms stored securely in the cloud, and (iii) the purchase of laser projectors with significant operational energy savings and the removal of xenon bulb purchasing and disposal needs.

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, our expectations regarding renovations and addition of cinemas; our beliefs regarding the certain external factors on the cinema business; our expected operating 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 beliefs regarding the impact of our cinema-anchored real estate developments; our beliefs regarding the success of our diversified business strategy; our expectations regarding our ability to enter into an extension agreement with Audible on terms acceptable to us; our expectations regarding the impact of streaming and mobile video services on the cinema exhibition industry; our expectations regarding the timing of the completions our renovation projects; our expectations regarding our ability to monetize our assets on terms acceptable to us; 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 inflationary and other negative economic pressures;

the adverse continuing impact of external past events such as the pandemic and Hollywood strikes, on our cinema operations, liquidity, cash flows, financial condition, and access to credit markets;

the decrease in attendance at our cinemas and theatres due to (i) increased ticket prices (ii) a change in consumer behavior in favor of alternative forms or mediums of entertainment, and (iii) limited availability of wide release content;

reduction in operating margins (or negative operating margins) due to (i) decreased attendance, (ii) limited availability of wide release content, and (iii) increased operating expenses;

increased absenteeism and use by employees of liberalized and expanded personal leave laws, and concomitant overtime costs.

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 future outbreak of infectious 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, (ii) disruptions of film production, or (iii) rescheduling of movie releases into later periods, as most currently experienced due to the implications of the Hollywood strikes;

the amount of money allocated and 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 or floods as certain of our operations are in geologically active or flood susceptible areas;

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

the ability to fund necessary refurbishments, remodels and upgrades;

the impact of new laws related to internet privacy and/or marketing, and of private litigation to obtain interpretation and/or enforcement of the same;

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

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 inflationary pressures;

uncertainty as to governmental responses to infectious 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 2026 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 that we experienced during or as a result of 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;

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 future 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;

impacts from the proposed tariffs;

changes in applicable accounting policies and practices; and

political, economic and geopolitical conditions, including the current war conditions in the Middle East, Ukraine and other areas, which may result in disruptions to supply chains, increased energy costs and the postponement of anticipated rate reductions..

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 2025 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.

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

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. Any disruption in the production of these films (including by reason of a strike) could hurt our business and results of operations. The Hollywood strikes in 2023 halted production of films for several months and, delayed or otherwise affected the supply of certain films. The disruption in film production may also cause delays for currently scheduled film release dates. It is difficult to anticipate the scope and timing of such delays or the full extent of the adverse impact of the strikes, and potential future strikes on our business and results of operations in future reporting periods.

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 improved and 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 COVID-19 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.

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 content, 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 and 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 commercial Off-Broadway operators, but also with “not-for-profit” theatres. We believe our live theatres are generally competitive with other Off-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 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. Also, labor shortages may impact our ability to hire and retain employees. 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.

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 subject to a variety of litigation risks. The legal landscape in which we do business is subject to rapid change due to legislative enactments at the federal, state and local levels. Often these requirements are not stated in a uniform manner, and may vary, in intent or as the result of judicial determination, from jurisdiction to jurisdiction. Many have material periodic penalties for non-compliance and allow (or have been interpreted to allow) private litigants to challenge whether such laws have been violated. As a consequence, we find that our vulnerability to forced settlements, litigation exposure and cost of liability insurance generally are substantially higher in the United States (and in particular in states such as California) than in Australia and New Zealand. The defense of such suits, even if successful, can be very costly due to, among other things, the cost of electronic discovery.

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 it has not fully recovered. 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. During the COVID-19 pandemic period, we were compelled to provide certain tenants with rent abatements or deferrals.

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 was supported by the stay-at-home admonitions and restrictions associated with our previous 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 in the event of an 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.

Risk of Reliance on Appraisals. In our business planning and forecasts, we rely on independent third-party appraisals as to the value of our real estate holdings. Such appraisals are inherently subjective, and a reasonable appraiser can reach significantly different views as to fair market value of a given parcel of real property. Valuations of historic railroad properties can be impacted by uncertainties as to title and property line boundaries. Accordingly, no assurances can be given that the fair market value assigned to a parcel of real property can be achieved in the open market. Further, USPAP methodology is inherently backwards looking and, as a result, can overstate value in times of declining real estate values and understate value in raising markets.

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 or disputes.

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 anchor tenants 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.

 Development of real properties may uncover environmental issues. Long held real property assets may contain environmental contamination that is unknown until development efforts commence. See “We may be subject to liability under environmental laws and regulations,” below.

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 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 most of our debt bears interest at variable rates, increases in interest rates could materially increase our interest expense. Approximately $114.1 million of our debt will mature over the next twenty-four months and will require refinancing. Based on our debt outstanding as of December 31, 2025, 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 $1.6 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.

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 2025, the Australian dollar and New Zealand dollar weakened against the U.S. dollar by 2.2% and 3.8%, respectively, compared to the 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, our debt levels in Australia are higher than they would have been if funds had not been repatriated. 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., plus the impact of Hollywood strikes on US operations, 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.). While the Australian and New Zealand Dollars have strengthened against the U.S. dollar in recent months, the strength of the U.S. dollar over the past three years 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 2025, 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. Worsening relations between the U.S. and North Korea, Russia and China, as well as the recent conflicts in the Middle East 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 able 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 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 3 - 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 the internet, streaming and cable-based entertainment, and changes in film distribution have adversely affected 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, despite 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 or the ability to obtain such coverage in the future.

Our stock is thinly traded. Our stock is thinly traded, with an average daily volume in 2025 of only approximately 30,231 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 of 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 in 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

According to a Schedule 13D/A filed on October 27, 2023 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”), Margaret Cotter has sole voting control over 1,058,988 shares of Class B Stock and shared voting power with Ellen Cotter over 100,000 shares of Class B Stock, collectively representing 69% of the outstanding Class B stock of the Company.

For as long as Margaret Cotter continues to have voting power over more than 2/3rds 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 have voting power over more than 2/3rds 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 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.

Under legislation signed into law in 2025, controlling stockholders of Nevada corporations owe only a limited duty to refrain from using undue influence to induce a director breach of fiduciary duties for personal gain. 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 for more detailed 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.

RISK MANAGEMENT AND STRATEGY

We have implemented a cybersecurity program to address cybersecurity threats based on our determination of the risk level. Our program includes policies and procedures that dictate the method in which we develop, deploy, and maintain security measures and controls. We use a cybersecurity framework to select security controls to protect against identified risks. When designing the controls, we consider the severity of risk and its impact on the Company, including the cost of the control and the impact it may have on the Company operations. We use various combinations of controls and tools to mitigate the risk to the Company such as firewalls and intrusion devices, endpoint threat detection systems, multi-factor authentication systems, endpoint threat detection systems as well patch management to prevent exploitable vulnerabilities.

We utilize third-party cybersecurity firms in various capacities to operate some of these controls, including remote monitoring, cloud-based platforms and services as well as on-premises services. For example, we use third parties to perform a variety of functions for the Company, including, but not limited to cybersecurity audits, targeted ransomware assessment and table-top exercises, internal penetration tests and other internal and external audits. These expert services enable us to leverage specialized knowledge and insights into our cybersecurity strategies and processes.

We maintain a written incident response plan and carry out periodic tabletop exercises to improve incident response readiness. Employees undergo security awareness training when hired and periodically thereafter; the scope of this training is continually updated to address newly identified threats. We utilize a risk-based approach and analysis to determine the cybersecurity controls to implement, and hence, there is a possibility that these controls may not adequately address every risk if we do not identify or place a high enough risk factor on a given threat. We are at risk of zero-day attacks and other vulnerabilities that may have been placed at a very low risk. In addition, even well-designed and properly deployed controls may not fully eliminate a given risk.

CYBERSECURITY THREATS

We have not had any cybersecurity incidents that we believe have materially affected or are likely to materially affect the Company.

GOVERNANCE.

Board Member Guy W. Adams serves as our Lead Technology and Cyber Risk Director. In December 2017, Mr. Adams was recognized as a Governance Fellow for the National Association of Corporate Directors, The Gold Standard Director Credential®. In 2018, Director Adams completed the Cyber-Risk Oversight course presented by the National Association of Corporate Directors. At the present time, we have a 10-member Information Technology group, overseen by an Executive Vice President, which is responsible for ongoing testing and threat assessment and reports to the Board at every regularly scheduled Board Meeting.

OPERATING PROPERTY

As of December 31, 2025, we own fee interests across our two operating segments in approximately 429,000 square feet of income-producing properties (including certain properties principally occupied by our cinemas) as follows:

(1) Rental square footage refers to the amount of potential area available to be rented to third parties. A number of our real estate holdings include entertainment and office components rented to one or more of our subsidiaries at fair market rent. The rental area to such subsidiaries is noted under the entertainment square footage.

(2) Represents the percentage of available rental square footage currently leased or licensed to third parties.

(3) Refers to the net carrying value of the land and buildings of the property presented as “Operating Property” in our Consolidated Balance Sheet as of December 31, 2025 (net of any impairments recorded).

(4) This schedule does not include (i) our leasehold assets on cinemas under leased-facility model, (ii) those portions of the owned assets that are not income-producing or purely used for administrative purposes, and (iii) our assets on our legacy business principally in Pennsylvania.

ENTERTAINMENT PROPERTIES

As of December 31, 2025, we leased approximately 2,085,000 square feet of completed cinema space in the United States, Australia, and New Zealand as follows:

In certain cases, we have long-term leases that we view more akin to real estate investments than cinema leases. As of 2025, we had approximately 90,000 square feet of space subject to such long-term leases, which are reported as part of our Cinema Exhibition segment, detailed as follows:

(1) Rental square footage refers to the amount of area available to be rented to third parties. A number of our real estate holdings include entertainment components rented to one or more of our subsidiaries at fair market rent. The rental area to such subsidiaries is noted under the entertainment square footage.

(2) Represents the percentage of rental square footage currently leased to third parties.

(3) Refers to the net carrying value of the leasehold property presented as “Operating Property” in our Consolidated Balance Sheet as of December 31, 2025 (net of any impairments recorded).

EXECUTIVE AND ADMINISTRATIVE OFFICES

In the United States, we occupy approximately 3,500 square feet at our Village East leasehold property in New York for administrative purposes and our principal executive offices.

In Australia, we own an approximately 9,000 square foot office building in Melbourne, Australia, approximately 6,000 square feet of which serve as the administrative office for our Australian and New Zealand operations (the remainder being leased to an unrelated third party).

OTHER PROPERTY INTERESTS AND INVESTMENTS

We own the fee interests in various parcels related to our historic railroad operations, currently comprised of 201-acres principally in Pennsylvania. These are primarily vacant land. With the exception of certain properties located in Philadelphia (including the raised railroad bed near Center City, known as the Reading Viaduct), the properties are principally located in rural areas of Pennsylvania. These properties are unencumbered by any debt.

The information required under Part I, Item 3 – Legal Proceedings is incorporated by reference to the information contained in Note 15 – Commitments and Contingencies to the Consolidated Financial Statements included herein in Part II, Item 8 – Financial Statements and Supplementary Data on this Annual Report on Form 10-K.

This MD&A should be read in conjunction with the accompanying consolidated financial statements included in Part II, Item 8 (Financial Statements and Supplementary Data). The foregoing discussions and analyses contain certain forward-looking statements. Please refer to the “Cautionary Statement Regarding Forward-Looking Statements” included as a preface in Part I, Item 1A – Risk Factors of this 2025 Form 10-K.

OUR BUSINESS

Where have we been, and where we are going.

We have discussed in some detail under the heading “Business Description” in Part I of this Report our views as to the historic impact of the COVID-19 pandemic, the 2023 Hollywood strikes, spiking and then sustained increases in interest rates and certain labor laws on our business and, while not repeating that disclosure here, we incorporate that more detailed discussion by reference to provide context and background. Our discussion below is intended to be more summary in nature.

Rising Interest Rates and Operating Costs

Between March 2022 and July 2023, the Federal Reserve raised the Federal Funds interest rates from 0.25% to 5.5%, the fastest hike in U.S. modern history. This significantly increased our interest expenses, further straining our liquidity. Although subsequent rate cuts from late 2024 through end of 2025 provided some relief, the higher interest rates continue to impact our business. Our average cost of borrowing has increased from 4.0% in 2019 to 7.8% in 2025.

Legislative changes following the pandemic have contributed to higher labor related costs, including wages, leave requirements, and compliance obligations, while increases in the cost of goods, utilities, and insurance have added further expense pressure. In response, we continue to emphasize operating efficiency and make measured adjustments to ticket and food and beverage pricing intended to manage costs without materially affecting customer demand. In addition, an increasingly active litigation environment in the United States, including class action claims related to internet privacy and business practice regulations, has created additional pressure on earnings and cash flow, with certain claims asserting interpretations of these laws that we believe extend beyond their original legislative intent.

Strategic Measures and Financial Adjustments

To mitigate financial pressures and enhance liquidity, we have undertaken several initiatives:

1. Asset Monetization: Between 2021 and 2025, we sold nine real estate assets, generating $197.5 million in net proceeds. These proceeds helped pay down $99.9 million in debt, and fund $32.4 million capital improvements, while also helping us sustain our operations.

2. Cinema Closures and Lease Adjustments: We have closed underperforming cinemas, where possible, including one in the U.S. in 2022, four in 2023 (three in the U.S. and one in New Zealand), one in the U.S. in 2024 and two in 2025 (one in the U.S. and one in New Zealand). Additionally, we have renegotiated leases to reduce occupancy costs, received deferrals or abatements, or shift to percentage-based rent agreements.

3. Administrative Cost-Saving Measures: We streamlined operations by selling our administrative office in Culver City, California, freeing up $1.3 million in cash and saving an estimated $2 million in operating costs for year 2025. We have reduced our non-segment administrative expense from $15.5 million in 2024 to $14.4 million in 2025.

4. Food & Beverage Innovations: In 2024, our global cinema divisions achieved record-high F&B sales per capita. In 2025, beer and wine are available in all U.S. locations, with liquor licenses secured at most locations in Australia and New Zealand. The introduction of mobile ticketing and F&B apps has assisted in generating additional revenue while reducing staffing needs.

5. Deferrals of Capital Improvements: We have generally constrained capital investment in the refurbishment of our cinemas and have only built out 5 cinemas over the past 5 years. This has, however, likely adversely impacted revenues at some of our cinemas to the extent that they are in competition with more recently updated or renovated offerings.

6. Ongoing Liquidity Management: We continue to evaluate our assets for any future monetization that may be needed, focusing on non-core real estate assets that would not, without material capital commitments, in our view offer long-term growth opportunities for our stockholders, and we will continue to close underperforming cinemas at the end of their lease terms or by negotiation. While the exact proceeds from future asset dispositions and the extent that they will ultimately be needed are uncertain, we remain confident in our ability to meet liquidity needs for 2026 and 2027.

Real Estate Operations

Since the beginning of the pandemic, we have monetized many of our Australia and New Zealand real estate assets using the net proceeds principally to paydown debt and to support our operations and materially reduced our real estate activities. As of the end of 2025, we had two ETCs (Newmarket Village and The Belmont Common) and two office buildings in Australia. These properties are, in essence, fully leased. While one of our properties in New Zealand has a third-party tenant occupying a portion of the property (the remainder being occupied by a Reading Cinema), the remaining two properties have Reading Cinemas as their sole tenants. With regard to the United States, the first floor, second floor and cellar of our architectural award winning 44 Union Square redevelopment project in New York City, are leased on a long term basis to Petco Health and Wellness Company (“Petco”). We believe that the commercial leasing market in the Midtown South sub-market has improved, and we have retained Newmark Retail LLC, as our exclusive leasing broker for that property. Our other improved NYC fee properties are tenanted by us.

Historically we have held our Cinemas 1,2,3 property for long term redevelopment. However, in light of market conditions and our need to pay down debt and enhance our liquidity, in Q1 2026, we have retained Newmark & Company Real Estate, Inc. to monetize that property. In the fourth quarter of 2025, we acquired as a part of a larger transaction the 25% interest in that property that we did not previously own. We have also listed for sale our Newbury Yard rail yard property in Williamsport, Pennsylvania. We are not currently involved in any real estate development activity other than the lease up of those portions of our 44 Union Square property not leased by Petco and our work with respect to the Reading Viaduct and associated properties.

In those cases where we have sold real estate in Australia and New Zealand that is improved (in whole or in part) with a cinema, we have retained a lease of that cinema, the terms of which have varied from site to site. Those cinemas all continue to operate profitably.

Looking Ahead

We anticipate continued improvements in cinema operations as audience levels continue to rebound. Looking ahead, anticipated releases such as The Super Mario Galaxy Movie, Michael, The Devil Wears Prada 2, Toy Story 5, Supergirl, Minions 3, Moana, The Odyssey, Spider Man: Brand New Day, The Cat in the Hat, Avengers: Doomsday, and Dune: Part Three, which are expected to contribute to overall increased theatrical activity.

At the same time, we remain focused on adjusting our operating approach in response to changing market conditions. This includes disciplined capital allocation, ongoing cost management efforts, and initiatives designed to strengthen audience engagement. Together, these actions are intended to support our Company’s ability to operate effectively within an evolving entertainment landscape over the longer term.

Additional details regarding expectations and initiatives for 2026 and subsequent periods are provided below.

RECENT DEVELOPMENTS

Recent developments in our two business segments are discussed below. For an overview of our two business segments, including a breakdown of assets that we own and/or manage, please see Part I, Item 1 – Our Business of this 2025 Form 10-K.

Cinema Exhibition

Key Performance Indicators

Food and Beverage Spend Per Patron

A key performance indicator utilized by management in our cinema segment is food and beverage (“F&B”) Spend Per Patron (“SPP”), which is calculated based on our total F&B Revenues on a post-tax basis divided by our attendance during a specific period.

One of our strategic priorities has been to continue upgrading the food and beverage menu at several of our global cinemas. As of December 31, 2025, we have a total of 37 theater locations with upgraded food and beverage menus (i.e. menus that are beyond traditional popcorn, soda, and candy).

We use F&B SPP as a measure of our F&B operational performance as compared to that of our competitors. Although the profitability of our F&B operations is influenced by numerous factors, including labor and cost of goods, F&B SPP serves as an indicator of our ability to achieve consistent strong top-line performance. In addition, F&B SPP highlights our ability to optimize revenue by effectively promoting and selling supplementary products to our customers during each visit. Moreover, this metric assists in evaluating how well we can differentiate our F&B offerings from our competitors. Management in turn uses F&B SPP to adjust food and beverage pricing strategies at our individual theaters, measure the effectiveness of promotional marketing initiatives, optimize menu offerings, and to ensure price barriers are not created for our attendance.

Average Ticket Price Per Patron

An additional key performance indicator utilized by management in our cinema segment is Average Ticket Price (“ATP”) per patron, which is calculated based on our total box office revenues on a post-tax basis divided by our attendance during a specific period. ATP serves to measure our operational cinema performance when compared to that of our competitors. ATP is a useful metric for evaluating our ability to achieve a strong top line performance. In addition, ATP gauges the effectiveness of our cinemas’ pricing strategies and our ability to draw back audiences to our theaters. Management uses ATP to adjust and inform ticket pricing schemes for our individual theaters, measure the effectiveness of our content programming, and ensure that price barriers are not created for core guests.

The key performance indicators used by management in our real estate segment with respect to our properties held for rent (other than our Live Theatres) are net operating income, occupancy factor (the percentage of the net rentable area of our properties that is leased) and average lease duration. Set forth in the table below is a comparison of these indicators for the fourth quarter and twelve months ended December 31, 2025 compared to the corresponding periods in 2024.

Real Estate Key Performance Indicators

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In the case of our Live Theatres, with respect to key performance indicators, we primarily look to the live theater licensing revenue and ancillary income from the theatres. This is the fixed fee income paid to us as a license fee, plus variable fees for various services (like box office and concessions). The licensee takes all risks of the success or failure of the production. However, due to our ancillary variable revenue, we do better with a well performing show than a poorly performing show or no show at all.

Historically, in the case of our development properties (such as 44 Union Square in New York City) and our various international properties such as Newmarket Village in Australia, we have no specific key performance standards to compare performance from period to period. Rather we continue to analyze budgets and projections and compare actual results to budgeted or projected results from time to time.

Cinema Additions

The additions to our cinema portfolio during 2023-2025 were as follows:

Australia and New Zealand

Busselton, Western Australia, Australia: On September 22, 2023, we opened a five-screen complex in the newly expanded Busselton Central Shopping Centre precinct of Busselton, Western Australia. The state-of-the-art complex features a TITAN LUXE screen, elevated F&B offerings, and recliner seating.

South City Square, Queensland, Australia: On August 24, 2023, we launched our first-ever Angelika Cinemas outside of the United States at South City Square in Woolloongabba, Brisbane. The location currently operates as an eight-screen complex, featuring elevated food and beverage offerings (including alcoholic beverages) and recliner seating.

Armadale, Western Australia, Australia: On January 13, 2023, we took over an existing six-screen cinema in Armadale, Australia, a suburb of Perth in Western Australia.

In addition, in the fourth quarter of 2025, we wound up our long term relationship with Sutton Hill Associates pursuant to a transaction whereby we purchased the 25% non-controlling minority interest in our Cinemas 1,2,3, property that we did not already own and the ground-lessee’s interest in the land and improvements constituting our Village East property, in consideration of our assumption of certain long term (10 years) fixed rate (4.75% per annum) debt owed by Sutton Hill Associates to a third party. That debt has been fair valued by our independent valuation consultant at $7.7 million. This transaction is sometimes referred to in this Report as the “SHA Windup Transaction.”

Cinema Pipeline

On January 31, 2025, we entered into an agreement to lease to fit out and operate under a long term lease our existing 10 screen cinema at the to be redeveloped Courtenay Central in Wellington, New Zealand (the “ATL”). That same day we sold all our Wellington properties, including the existing Courtenay Central to Prime. Under the ATL, Prime is obligated to redevelop Courtenay Central and upgrade it to meet current earthquake standards. We intend to renovate the existing cinema to a “best-in-class” standard.

Our Board has also authorized management to proceed with the negotiation of a lease for a new state-of-the-art cinema, located in Noosa, Queensland, Australia.

On February 9, 2025, we closed one under-performing cinema located in Queenstown, New Zealand upon expiration of that lease.

On April 15, 2025, we closed our underperforming cinema located in San Diego, California, upon termination of that lease.

Upgrades to our Film Exhibition Technology and Theater Amenities

Prior to COVID-19, we invested in both (i) the upgrading of our existing cinemas and (ii) the development of new cinemas to provide our customers with premium offerings, including state-of-the-art presentation (including sound, lounges, and bar service) and luxury recliner seating. As of December 31, 2025, all of the upgrades to our theater circuits’ film exhibition technology and amenities over the years are as summarized in the following table:

(1) Gold Lounge: This is our "First Class Full Dine-in Service" in our Australian and New Zealand cinemas, which includes an upgraded F&B menu (with alcoholic beverages), luxury recliner seating features (intimate 25-50 seat cinemas) and waiter service.

(2) Premium Service: This is our "Business Class Dine-in Service" in our Australian and New Zealand cinemas, which typically includes upgraded F&B menu (some with alcoholic beverages) and may include luxury recliner seating features (less intimate 80-seat cinemas), but no waiter service.

(3) Spotlight Service: Our first dine-in cinema concept in the U.S. at Reading Cinemas in Murrieta, California. Six of our 17 auditoriums at this cinema feature waiter service before the movie begins with a full F&B menu, luxury recliner seating, and laser focus on customer service. Our Spotlight service has been temporarily suspended since the initial COVID-19 shutdown.

(4) Upgraded Food & Beverage Menu: Features an elevated F&B menu including a menu of locally inspired and freshly prepared items that go beyond traditional concessions, which we have worked with former Food Network executives to create. The elevated menu also includes beer, wine and/or spirits at most of our locations.

(5) Liquor Licenses: Licenses are applicable at each cinema location, rather than each cinema auditorium. As of December 31, 2025, 76% of our AU/NZ cinemas are licensed to sell alcohol, no liquor licenses pending in Australia and two liquor licenses pending in New Zealand. All U.S. Cinemas are licensed to sell beer and wine and all, but three, can sell spirits/liquor.

Global Real Estate Developments

44 Union Square Redevelopment (New York, N.Y.) – We have made significant progress in the development of our 44 Union Square property in Manhattan. On January 27, 2022, we entered a long-term lease with Petco for the cellar, ground, and second floors of the building, who is on a full rent cash paying basis. We continue our efforts to find a tenant for the remaining four floors of the building.

Minetta Lane Theatre (New York, N.Y.) – Audible holds its license agreement with us through March 15, 2027 having exercised its a one-year renewal option. Under the agreement, Audible presents plays featuring a limited cast of one or two characters and special live performance engagements on the Audible streaming service. During 2025, we saw a great deal of shows including “The Energy Curfew Music Hour with Chris Thile & Punch Brother”, “Sexual Misconduct of the Middle Classes”, “Creditors”, “Pansy Craze”, “Patton Oswalt: Black Coffee and Ice Water”, “Devon Franklin: Be True”, and “Mexodus”. The wide range of productions exemplify the diversity of programming and ongoing demand for live, high quality theatrical content.

Orpheum Theatre (New York, N.Y.) STOMP closed (after 30 years at our theatre) on January 8, 2023. Under our termination agreement with the producers of STOMP, we have certain rights to provide the New York City venue for any future production of that show. Following STOMP’s historic run at the Orpheum, 2025 saw plays such as “The Jonathan Larson Project” and “Ginger Twinsies”.

Cinemas 1,2,3 Redevelopment (New York, N.Y.) – Currently operated as the Cinemas 123, we have historically treated this property as an asset held for long term development. However, in light of a variety of factors, such as market conditions in Manhattan for real estate assets, cost of capital and demands on our liquidity, subsequent to balance sheet date, we have retained Newmark & Company Real Estate, Inc. to sell that property. We now own 100% of this asset, as we acquired in the fourth quarter of 2025, as a part of the SHA Windup Transaction, the 25% interest that we did not own.

Australia:

Newmarket Village ETC, (Brisbane, Australia) – We continue to improve our Newmarket Village ETC by adding new tenancies and focused marketing efforts. The site includes a 23,218 square foot parcel adjacent to the center, improved with an office building. Over the next few years, we will be evaluating development options for this space. The combined center and office building is currently 98% leased.

The Belmont Common, (Belmont, Perth, Australia): The total gross leasable area of the Belmont Common is 60,117 Sq ft. Our multiplex cinema is the anchor tenant with six third-party tenants and our Reading Cinemas, the site is currently 100% leased.

Corporate Matters

Board Compensation and Stock Options Committee – Refer to Part II, Item 8 – Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements-- Note 17 – Share-Based Compensation and Repurchase Plans for details regarding our Board, Executive and Employee stock-based remuneration programs.

OVERALL RESULTS OF OPERATIONS

In this section, we discuss the results of our operations for the year ended December 31, 2025, compared to the year ended December 31, 2024. For a discussion of the year ended December 31, 2024, compared to the year ended December 31, 2023, please refer to Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024.

The following table sets forth the overall results of operations for the three years ended December 31, 2025:

(Dollars in thousands)

CONSOLIDATED RESULTS

2025 vs. 2024

Net Loss attributed to Reading International, Inc. was $14.1 million for the year ended December 31, 2025, an improvement of $21.2 million from a Net Loss of $35.3 million for the year ended December 31, 2024. This improvement was primarily due to (i) an increase in cinema segment operating income and real estate segment operating income (ii) a $3.2 million decrease in interest expense partly due to principal pay down, (iii) a $2.7 million gain on acquisition of noncontrolling interest of Sutton Hills Properties LLC (iv) $8.4 million gain on the sale of assets from the monetization of the Courtenay Central and Cannon Park properties, compared to a loss of $(1.1) million on sale of our Culver City office in the same period prior year and (v) a $1.1 million reduction in G&A expenses, partially offset by $3.7 million increase in other expense.

BUSINESS SEGMENT RESULTS –2025 vs. 2024

Presented below is the comparison of the segment operating income of our two business segments for the years ended December 31, 2025 and 2024, respectively:

(Dollars in thousands)

A discussion for each segment follows:

Cinema Exhibition – The following table details our Cinema Exhibition segment operating results for the years ended

December 31, 2025 and 2024, respectively:

(Dollars in thousands)

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Cinema Exhibition – The following table details our Cinema Exhibition segment operating results for the quarters ended December 31, 2025 and 2024, respectively:

(Dollars in thousands)

Cinema Exhibition Segment Operating Income

Cinema exhibition segment operating income improved by $6.4 million to $3.6 million for the year ended December 31, 2025, compared to the same period in December 31, 2024, primarily driven by an improvement in cinema performance due to lower operating expense globally, lower depreciation, amortization, general and administrative expense in the U.S. and Australia, offset by lower box office revenue in all three countries due to an overall weaker movie slate in 2025, lower concession revenues in Australia and New Zealand, and lower advertising revenues in all three countries.

Cinema exhibition segment operating income for the fourth quarter of 2025 was $0.9 million, a decrease of $2.9 million from an operating income of $3.8 million in the same time period of 2024 primarily attributable to a weaker movie releases in all three countries.

Revenue

Cinema revenue decreased by $6.5 million, to $188.6 million for the year ended December 31, 2025, compared to 2024 primarily due to a weaker movie slate and cinema closures in US and New Zealand.

The table below is the revenue breakdown, by country, for the years ended December 31, 2025, and 2024, respectively:

(Dollars in thousands)

Below are the changes in our cinema revenue by market:

In the United States, cinema revenues decreased by $0.5 million, to $99.5 million for the year ended December 31, 2025, compared to 2024.

In Australia, cinema revenues decreased by $4.3 million, to $77.7 million for the year ended December 31, 2025, compared to 2024.

In New Zealand, cinema revenues decreased by $1.8 million, to $11.4 million for the year ended December 31, 2025, compared to 2024.

For the quarter ended December 31, 2025, Cinema segment revenue decreased by $7.7 million against the fourth quarter of 2024, to $46.9 million, which was primarily attributable to a weaker fourth quarter holiday blockbuster film slate in 2025 vs 2024 with the releases of Wicked: For Good, Zootopia 2, Avatar: Fire and Ash, and Frankenstein compared to Q4 2024 and cinema closures in US and New Zealand.

Operating Expense

Operating expense for the full year 2025 decreased by $11.6 million, to $172.4 million when compared to 2024 due to lower film rent in all three countries, lower F&B costs in Australia and New Zealand, along with decreased occupancy expenses in US and New Zealand.

For the quarter ended December 31, 2025, operating expenses decreased by $4.5 million, to $43.1 million when compared to the fourth quarter of 2024 primarily driven by cinema closures in the U.S. and New Zealand.

Depreciation, Amortization, Impairment, General and Administrative Expense

Depreciation, amortization, general and administrative expense for the year-ended December 31, 2025 decreased by $1.3 million, to $12.6 million compared to 2024 primarily driven by cinema closures in the U.S. and New Zealand, and delay in CAPEX spending.

Real Estate – The following table details our Real Estate segment operating results for the years ended December 31, 2025 and 2024, respectively:

(Dollars in thousands)

Real Estate – The following table details our Real Estate segment operating results for the quarters ended December 31, 2025 and 2024, respectively:

(Dollars in thousands)

Real Estate Segment Operating Income

Real estate segment operating income was $5.9 million for the year ended December 31, 2025, which was an increase of $1.2 million from an operating income of $4.7 million for the year ended December 31, 2024, primarily as a result of (i) increased revenue for the US properties including live theatres, (ii) lower operating expense in Australia and New Zealand from sale of Courtenay Central and Cannon Park properties, and (iii) lower depreciation and amortization expense in all three countries. Partially offset by the decrease of revenue from Australia and New Zealand from sale of Courtenay Central and Cannon Park properties.

Revenue

The table below is the revenue breakdown by country for each year:

(Dollars in thousands)

Real estate revenues for the year ended December 31, 2025, decreased by $1.6 million, to $18.4 million compared to 2024. This decrease is attributable to lower property rental income in Australia and New Zealand due to sale of Courtenay Central and Cannon Park properties, partially offset by higher US property revenue and Live Theater rental and ancillary income in the U.S.

NON-SEGMENT RESULTS –2025 vs. 2024

For more information about the legal expense, please refer to Part II, Item 8 – Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements-- Note 15 – Commitments and Contingencies.

Income Tax Expense

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The OBBBA includes significant tax law changes, including the permanent extension of certain provisions from the Tax Cuts and Jobs Act, modifications to the international tax framework, and the reinstatement of favorable business tax provisions. These include 100% bonus depreciation, immediate expensing of Section 174 domestic research and experimental expenditures, and revised limitations under Section 163(j) on the deductibility of business interest expense. The legislation has multiple effective dates, with certain provisions effective beginning in 2025, and others implemented through 2027. The OBBBA does not have a material effect on the Company's consolidated financial statements for the year ending December 31, 2025.

Income tax expense increased by $0.4 million, to $0.9 million in 2025, when compared to 2024, primarily due to an increase in income tax expense from Australia in 2025.

Please refer to Part II, Item 8 – Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements-- Note 12 – Income Taxes for further information.

LIQUIDITY AND CAPITAL RESOURCES

Our Financing Strategy

In 2025, due primarily to the negative operating conditions caused by the 2023 Hollywood strikes and increased interest rates, as well as the lingering impacts from the COVID-19 pandemic, we (i) conserved our cash and chose to defer non-essential capital expenditures (such as cinema upgrades and refurbishments), (ii) refinanced our existing debt to provide longer maturity dates and eased financial covenants and/or obtained waivers of financial ratio tests, and (iii) monetized two real estate assets and identified certain other assets as candidates for potential monetization to raise additional liquidity. In January 2025, we sold our Courtenay Central properties in New Zealand at a gross sale price of $21.5 million. The proceeds were used to pay off the Westpac mortgage on the property, and to reduce our Bank of America debt. In May 2025, we sold our Cannon Park ETC in Australia at a gross sale price of $20.7 million. The proceeds were used principally to pay off our NAB bridging facility, and to reduce our Bank of America debt.

In May 2025, we extended the maturity of our loan on 44 Union Square to November 6, 2026, with an option to extend further to May 6, 2027. In July 2025, we extended the maturity of our Bank of America/Bank of Hawaii loan to May 18, 2026. We further extended the maturity of our Bank of America/Bank of Hawaii loan to September 18, 2026, in December 2025. In July 2025, we extended the maturity of our loan on our Live Theatre assets in NYC to June 1, 2026. In November 2025, we extended the maturity of our National Australia Bank (“NAB”) loan to July 31, 2030, and modified the principal repayment schedule and extended the maturity of our Valley National Bank Loan to October 1, 2026. In December 2025, we completed the purchase of Sutton Hill Associates, a California general partnership. As a result of that transaction, we acquired the 25% minority interest in our Cinemas 1,2,3 that we did not already own and the ground lessee’s interest in the land and improvements constituting our Village East Theatre, subject to certain indebtedness owed by Sutton Hill Associates to a third party. That indebtedness, at December 30, 2025, had a face amount of $13.6 million, interest payable quarterly at 4.75% per annum with all principals due and payable in a bullet on September 30, 2035. Due to the extended term of the debt and the below market interest rates, at December 30, 2025, we carried that debt at its fair value of $7.7 million. As a result of the transaction, approximately $7.1 million in short term obligations were eliminated in consolidation.

During 2025, our bank loans with Bank of America, and NAB required that our Company comply with certain covenants. We either complied with the underlying bank covenants or obtained waivers from compliance.

During 2024 and 2025, we also worked to restructure our rent payments under various cinema leases. As a result of these negotiations, we have been able to defer rent payments of approximately $11.5 million to be paid out in the next five years.

We have set as a goal for 2026 to substantially reduce our secured U.S. bank debt. Accordingly, we have classified as an asset held for sale our Newbury Yard rail yard in Williamsport, Pennsylvania and in February 2026, we retained Newmark & Company Real Estate, Inc to monetize our Cinemas 1,2,3 property in Manhattan. While no assurances can be given, we believe it reasonable to assume that these assets can be monetized before the end of the third quarter of this year.

Generally speaking, we believe our relationship with our landlords and lenders is good.

For more information about our borrowings, including loan modifications and modifications to waivers of certain covenants, please refer to Part II, Item 8 – Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 2 – Liquidity, and Note 13 – Borrowings.

The table below presents the changes in our total available resources (cash and borrowings), debt-to-equity ratio, working capital, and other relevant information addressing our liquidity for the last five years:

($ in thousands)

(1) This relates to the construction facilities specifically negotiated for 44 Union Square redevelopment project.

(2) Typically, our working capital is reported as a deficit, as we receive revenue from our cinema business ahead of the time that we have to pay our associated liabilities. We use the money we receive to pay down our borrowings in the first instance.

We endeavor to manage our cash, investments, and capital structure to meet the short-term and long-term obligations of our business, while maintaining financial flexibility and liquidity. We forecast, analyze, and monitor our cash flows to enable investment and financing within the overall constraints of our financial strategy. In the past, we used cash generated from operations and other excess cash to the extent not needed for any capital expenditure, to pay down our loans and credit facilities providing us some flexibility on our available loan facilities for future use and thereby, reducing interest charges. To meet our liquidity’s needs, in 2025, we have worked with our lenders to extend the maturity of various loans.

Refer to Part II, Item 8 – Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements-- Note 13 – Borrowings for further details on our various borrowing arrangements.

On December 31, 2025, our consolidated cash and cash equivalents totaled $10.5 million. Of this amount, $3.3 million, $6.8 million and $0.4 million were held by our U.S., Australian and New Zealand operations, respectively. The funds held in Australia and New Zealand are, under our applicable bank lending arrangement, subject to limitations on their use outside of Australia or New Zealand as applicable. Due to the impact of the COVID-19 pandemic, the lack of U.S. Federal assistance (including funds from the Payroll Protection and Shuttered Venue Programs), the 2023 Hollywood strikes and continuing funding needs in the U.S. we no longer intend to indefinitely reinvest offshore any earnings derived from our Australian and New Zealand operations.

We have historically funded our working capital requirements, capital expenditures and investments in individual properties primarily from a combination of internally generated cash flows and debt. During 2025, the need for such funding for capital expenditures and investments has decreased, as we have deferred to the fullest extent reasonable such expenditures. However, due primarily to the 2023 Hollywood strikes and the increase in interest rates, our operating income is still insufficient to cover our costs and expenses accordingly, our negative working capital has increased over the course of the year. The funding that has been required, has been funded predominantly from cost reductions, bridge facility debt and strategic asset sales and landlord concessions. As noted in the preceding table, we had no unused available unrestricted corporate credit facilities at December 31, 2025.

The change in cash and cash equivalents for the three years ended December 31, 2025 is as follows:

(Dollars in thousands)

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Operating Activities

2025 vs. 2024

Cash used in operating activities for the twelve months ended December 31, 2025 decreased by $2.3 million, to cash used of $1.6 million compared to cash used in the same period of prior year of $3.8 million, driven by a decrease in Net operating Loss of $11.5 million, offset by a $9.3 million decrease in net payable primarily due to increase in receivables and a smaller increase in accounts payable and accrued expense plus deferred revenues and other liabilities.

Investing Activities

2025 vs. 2024

Cash provided in investing activities during the twelve months ended December 31, 2025, increased by $33.1 million, to cash provided of $37.1 million from a cash provided of $4.0 million in the same period of prior year. This was due to the proceeds from sale of our Cannon Park property assets in May 2025 and the Wellington property assets in January 2025, compared to the proceeds from the sale of our Culver City office in February 2024.

Financing Activities

2025 vs. 2024

Cash used in financing activities for the twelve months ended December 31, 2025, increased by $38.2 million, from a cash provided of $0.3 million to a cash used of $37.9 million. This was primarily due to the paydowns of our Westpac debt, Bank of America debt and NAB Bridge Facility in 2025 as discussed previously.

CONTRACTUAL OBLIGATIONS, COMMITMENTS AND CONTINGENCIES

The following table provides information with respect to the future maturities and scheduled principal repayments of our recorded contractual obligations and certain of our commitments and contingencies, either recorded or off-balance sheet, as of December 31, 2025:

(Dollars in thousands)

(1) Information is presented gross of deferred financing costs.

(2) Represents the lease liability of the option associated with the ground lease purchase of the Village East Cinema.

(3) Estimated interest on debt is based on the anticipated loan balances for future periods and current applicable interest rates.

Please refer to Part II, Item 8 – Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements-- Note 15 – Commitments and Contingencies for more information.

Litigation

We are currently involved in certain legal proceedings and, as required, have accrued estimates of probable and estimable losses for the resolution of these claims, as appropriate.

Please refer to Part I, Item 3 – Legal Proceedings for more information.

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements or obligations (including contingent obligations) that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in the financial condition, revenue or expense, results of operations, liquidity, capital expenditures or capital resources.

FINANCIAL RISK MANAGEMENT

Currency and Interest Rate Risk

Our Company’s objective in managing exposure to foreign currency and interest rate fluctuations is to reduce volatility of earnings and cash flows in order to allow management to focus on core business issues and challenges.

Historically, we have managed our currency exposure by creating, whenever possible, natural hedges in Australia and New Zealand. This involves local country sourcing of goods and services, as well as borrowing in local currencies to match revenues and expenses. We have also historically paid management fees to the U.S. to cover a portion of our domestic overhead. The decrease in the value of the Australian and New Zealand currencies as compared to the U.S. dollar combined with the limitations under our bank loans in Australia and New Zealand to move funds into the U.S., however, have negatively impacted our ability to rely on such funding for ongoing support of our domestic overhead.

Our exposure to interest rate risk arises out of our long-term floating-rate borrowings. To manage the risk, we utilize interest rate derivative contracts to convert certain floating-rate borrowings into fixed-rate borrowings. It is our Company’s policy to enter into interest rate derivative transactions only to the extent considered necessary to meet its objectives as stated above. Our Company does not enter into these transactions or any other hedging transactions for speculative purposes. We are currently facing additional risk as approximately $114.1 million of our borrowings mature over the next 24 months. We believe it unlikely that we will be able to refinance this debt at their current interest rates in this environment.

Inflation

We continually monitor inflation and the effects of changing prices. Inflation increases the cost of goods and services used. Competitive conditions in many of our markets restrict our ability to recover fully the higher costs of acquired goods and services through price increases. We attempt to mitigate the impact of inflation by implementing continuous process improvement solutions to enhance productivity and efficiency and, as a result, lower costs and operating expenses. Inflation may also adversely impact the rent we pay for our leased cinemas, as many have cost of living adjustment features.

CRITICAL ACCOUNTING ESTIMATES

We believe that the application of the following accounting policies requires significant judgments and estimates in the preparation of our financial results:

Impairment of Long-Lived Assets, Including Goodwill and Intangible Assets

We review long-lived assets, including goodwill and intangibles, for impairment as part of our annual budgeting process, at the beginning of the fourth quarter, and whenever events or changes in circumstances indicate that the carrying amount of the asset may not be fully recoverable.

(i) Impairment of Long-lived Assets (other than Goodwill and Intangible Assets with indefinite lives) – we evaluate our long-lived assets and finite-lived intangible assets using historical and projected data of cash flows as our primary indicator of potential impairment and we take into consideration the seasonality of our business. If the sum of the estimated, undiscounted future cash flows is less than the carrying amount of the asset, then an impairment is recognized for the amount by which the carrying value of the asset exceeds its estimated fair value based on an appraisal or a discounted cash flow calculation. For certain non-income producing properties or for those assets with no consistent historical or projected cash flows, we obtain appraisals or other evidence to evaluate whether there are impairment indicators for these assets.

No impairment losses were recorded for long-lived assets for the year ended December 31, 2025, 2024 or 2023.

(ii) Impairment of Goodwill and Intangible Assets with indefinite lives –goodwill and intangible assets with indefinite useful lives are not amortized, but instead, tested for impairment at least annually on a reporting unit basis. The impairment evaluation is based on the present value of estimated future cash flows of each reporting unit plus the expected terminal value. There are significant assumptions and estimates used in determining the future cash flows and terminal value. The most significant assumptions include our cost of debt and cost of equity assumptions that comprise the weighted average cost of capital for each reporting unit. Accordingly, actual results could vary materially from such estimates.

No impairment losses were recorded for goodwill and indefinite-lived intangible assets for the years ended December 31, 2025, 2024, or 2023.

Tax Valuation Allowance and Deferred Taxes

We record our estimated future tax benefits and liabilities arising from the temporary differences between the tax basis of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well as operating loss carryforwards. In evaluating our ability to recover our deferred tax assets in the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results and incorporate assumptions about the amount of future federal, state, and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income (loss). As of December 31, 2025, we had recorded approximately $72.7 million of deferred tax assets (net of $47 million deferred tax liabilities) related to the temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well as operating loss carryforwards and tax credit carryforwards. These deferred tax assets were offset by a valuation allowance of $70.1 million resulting in a net deferred tax asset of $2.6 million. The recoverability of deferred tax assets is dependent upon our ability to generate future taxable income.

Recognition of Gift Card Breakage Income

Generally, our revenue recognition is not assessed as an area requiring significant judgment or estimation. Revenues from ticket and food and beverage sales are recognized when the service is provided – that is when the show has commenced, or the food has been provided. Transaction fees from online sales are recorded at the time of the online transaction. In regard to our real estate business, we execute lease contracts for existing tenancies, but revenue is recognized on a straight-line basis over the lease term.

In contrast, recognition of gift card breakage income requires certain estimates and judgements to be made in regarding the pattern of customer behavior at our cinemas. This policy is described in detail in the section Part II, Item 8 – Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements-- Note 3 – Summary of Significant Accounting Policies – Accounting Changes.

Contingencies

For loss contingencies, we record any loss contingencies when there is a probable likelihood that the liability has been incurred and the amount of the loss can be reasonably estimated.

For other contingencies,

(i) for recoveries through an insurance claim, we record a recoverable asset (not to exceed the amount of the total losses incurred) only when the collectability of such claim is considered probable. To evaluate the probable collectability of an insurance claim, we consider communications with our insurance company.

(ii) for gain contingencies resulting from legal settlements, we record those settlements in our consolidated statements of operations when cash or other forms of payments are received.

Legal contingencies

From time to time, we are involved with claims and lawsuits arising in the ordinary course of our business that may include contractual obligations, insurance claims, tax claims, employment matters, and anti-trust issues, among other matters. We provide accruals for matters that have probable likelihood of occurrence and can be properly estimated as to their expected negative outcome. We do not record expected gains until the proceeds (either in cash or other forms of payments) are received by us. Please refer to Part II, Item 8 – Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements-- Note 15 – Commitments and Contingencies for more information on legal matters.

For a summary of our significant accounting policies, including the critical accounting estimates discussed above, see Part II, Item 8 – Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements-- Note 3.

Management’s Report on Internal Control Over Financial Reporting

Our management’s report on internal control over financial reporting is included in Part II, Item 8 - Financial Statements and Supplementary Data of this Form 10-K.

Evaluation of Disclosure Controls and Procedures

We have formally adopted a policy for disclosure controls and procedures that provides guidance on the evaluation of disclosure controls and procedures and is designed to ensure that all corporate disclosure is complete and accurate in all material respects and that all information required to be disclosed in the periodic reports submitted by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods and in the manner specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. A disclosure committee consisting of the principal accounting officer, and senior officers of each significant business line and other select employees assisted the Chief Executive Officer and the Chief Financial Officer in this evaluation. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as required by the Securities Exchange Act Rule 13a-15(b) and 15d-15(b) as of the end of the period covered by this report.

Changes in Internal Controls Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fourth quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Securities Exchange Act Rules 13a-15(f) and 15d-15(f), including maintenance of (i) records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets, and (ii) policies and procedures that provide reasonable assurance that (a) transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, (b) our receipts and expenditures are being made only in accordance with authorizations of management and our Board of Directors and (c) we will prevent or timely detect unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of the inherent limitations of any system of internal control. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses of judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper overriding of controls. As a result of such limitations, there is risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.