IMAX (IMAX) Risk Analysis

The Company is undertaking brand extensions and new business initiatives. These initiatives represent potential new areas of growth for the Company and could include the offering of new products and services that may not be accepted by the market. The Company has recently explored initiatives in the field of in-home entertainment technology, including the development of the Company's SCT business to bring The IMAX Experience to users across streaming platforms and consumer devices. The in-home entertainment industry is an intensely competitive business and dependent on consumer demand, over which the Company has no control. The Company has also invested in the connection of the IMAX network to facilitate bringing more unique content, including broadcasts of live events, to IMAX audiences in theaters. New initiatives could also involve acquisitions or the formation of joint ventures and business alliances. New business initiatives involve significant challenges and risks, including that they may not advance the Company's long-term business strategy, that the Company realizes an unsatisfactory return on its investments or fails to realize anticipated business synergies, that the Company has difficulty integrating or retaining new employees, systems, and technology, that the Company has disagreements with a relevant partner with respect to financing, management, and development, that the Company fails to identify or anticipate risks and liabilities of acquired companies in advance of acquisition, or that management gets distracted from the Company's core business. Also, it may take longer than expected to realize the full benefits from these initiatives such as increased revenue or enhanced efficiencies, or the benefits may ultimately be smaller than the Company expected. If any new brand extensions and business initiatives in which the Company invests or attempts to develop do not progress as planned, the Company may be adversely affected by investment expenses that have not led to the anticipated results, including by the write-downs of its assets, by the distraction of management from its core business or by damage to its brand or reputation.

The Company depends on its proprietary knowledge regarding IMAX Systems including digital, audio, and film technology. The Company relies principally upon a combination of copyright, trademark, patent and trade secret laws, restrictions on disclosures and contractual provisions to protect its proprietary and intellectual property rights. These laws and procedures may not be adequate to prevent unauthorized parties from attempting to copy or otherwise obtain the Company's processes and technology or deter others from developing similar processes or technology, which could weaken the Company's competitive position and require the Company to incur costs to secure enforcement of its intellectual property rights. The protection provided to the Company's proprietary technology by the laws of foreign jurisdictions may not protect it as fully as the laws of Canada or the United States. The lack of protection afforded to intellectual property rights in certain international jurisdictions may be increasingly problematic given the extent to which the future growth of the Company is anticipated to come from foreign jurisdictions. The Company may develop proprietary technology or knowledge, including AI-generated works, that are not entitled to intellectual property protection. Finally, some of the underlying technologies of the Company's products and system components are not covered by patents or patent applications. The Company owns patents issued and patent applications pending, including those covering its digital projector, digital conversion technology, laser illumination technology, and other inventions relating to imaging technology and video quality assessment. The Company's patents are filed in the United States, often with corresponding patents or filed applications in other jurisdictions, such as Canada, China, Belgium, Japan, France, Germany, and the United Kingdom. The patent applications pending may not be issued or the patents may not provide the Company with any competitive advantage. The patent applications may also be challenged by third parties. Several of the Company's issued patents expire between 2026 and 2043. If the Company's patent claims are rendered invalid or unenforceable, or narrowed in scope, the patent coverage afforded the Company's products and services could be impaired, which could negatively affect its competitive position. In addition, competitors and other third parties may be able to circumvent or design around the Company's patents and may develop and obtain patent protection for more effective technologies. If these developments were to occur, it could have an adverse effect on the Company's sales or market position. Any claims or litigation initiated by the Company to protect its proprietary technology or other intellectual property could be time consuming, costly, and divert the attention of its technical and management resources. If the Company chooses to go to court to stop a third party from infringing its intellectual property, that third party may ask the court to rule that the Company's intellectual property rights are invalid and/or should not be enforced against that third party. The Company relies upon trade secrets and other confidential and proprietary know-how to develop and maintain the Company's competitive position. While it is the Company's policy to enter into agreements imposing nondisclosure and confidentiality obligations upon its employees and third parties to protect the Company's intellectual property, these obligations may be breached, may not provide meaningful protection for the Company's trade secrets or proprietary know-how, or adequate remedies may not be available in the event of an unauthorized access, use or disclosure of the Company's trade secrets and know-how. Furthermore, despite the existence of such nondisclosure and confidentiality agreements, or other contractual restrictions, the Company may not be able to prevent the unauthorized disclosure or use of its confidential proprietary information or trade secrets by consultants, vendors and employees. In addition, others could obtain knowledge of the Company's trade secrets through independent development or other legal means. The Company believes that protecting the IMAX brand is a critical element in maintaining the Company's relationships with studios and its exhibitor clients and building and maintaining brand loyalty and recognition. Though the Company relies on a combination of trademark and copyright law as well as its contractual provisions to protect the IMAX brand, those protections may not be adequate to prevent erosion of the brand over time, particularly in foreign jurisdictions. Erosion of the brand could threaten the demand for the Company's products and services and impair its ability to grow future revenue streams. In addition, if any of the Company's registered or unregistered trademarks, trade names or service marks is challenged, infringed, circumvented, declared generic or determined to be infringing on other marks, it could have an adverse effect on the Company's sales or market position.

A significant portion of the Company's revenues and of the GBO earned by the Company's exhibitor customers are generated outside the United States and Canada. Approximately 62%, 58%, and 64% of the Company's revenues were derived outside of the United States and Canada in 2025, 2024, and 2023, respectively. As of December 31, 2025, approximately 72% of IMAX Systems in backlog were scheduled to be installed in international markets. The Company's network spanned 91 different countries as of December 31, 2025, and the Company expects its international operations to continue to account for an increasingly significant portion of its future revenues. There are a number of risks associated with operating in international markets that could negatively affect the Company's operations, sales and future growth prospects. These risks, among others, include: Operational and Supply Chain Risks - difficulties in obtaining competitively priced key commodities, raw materials, and component parts from various international sources that are needed to manufacture quality products on a timely basis;- dependence on foreign distributors and their sales channels;- reliance on local partners, including in connection with JRSAs;- difficulties in staffing and managing foreign operations;- inability to complete installations of IMAX Systems, including as a result of material disruptions or delays in the Company's supply chains, or collect full payment on installations thereof;- public health concerns, including pandemics or epidemics, and regulations in response thereto, which could adversely affect the Company's and its customers' operations; and - harm to the IMAX brand from operating in countries with records of controversial government action, including human rights abuses. Financial and Macroeconomic Risks - fluctuations in the value of foreign currencies versus the U.S. Dollar, potential currency devaluations, and imposition of foreign exchange controls in foreign jurisdictions;- adverse changes in foreign government monetary and/or tax policies, and/or difficulties in repatriating cash from foreign jurisdictions (including with respect to China, where approval of the State Administration of Foreign Exchange is required);- requirements to provide performance bonds and letters of credit to international customers to secure IMAX System component deliveries;- less accurate and/or less reliable box office reporting;- difficulties in establishing market-appropriate pricing; and - economic conditions in foreign markets, including inflation. Geopolitical, Trade, and Regulatory Compliance Risks - new and potentially changing tariffs, trade protection measures, import or export licensing requirements, trade embargoes, sanctions and export controls, and other trade barriers, including but not limited to planned, implemented or threatened tariffs and retaliatory responses thereto, or the residual impacts and uncertainty as a result of changes in tariff or trade policy;- new restrictions on access to markets, both for IMAX Systems and content;- unusual or burdensome foreign laws or regulatory requirements or unexpected changes to those laws or requirements, including censorship of content that may restrict what films or other content are exhibited across the Company's network;- local business practices that can present challenges to compliance with applicable anti-corruption and bribery laws;- poor recognition of intellectual property rights;- difficulties in enforcing contractual rights; and - war, conflict, geopolitical tensions and other political, economic and social instability, terrorist attacks and security concerns, such as escalating tensions in the Taiwan Strait, the ongoing conflict between Russia and Ukraine (the Company has 54 theaters in Russia where IMAX services have been suspended), and tensions in the Middle East (including intensified discussions around regime change in Iran), which could result in consequences, including adverse consequences, for the Company's interests in different regions of the world. Additionally, global geopolitical tensions and actions that governments take in response may adversely impact the Company's ability to operate in such regions and/or result in global or regional economic downturns. For example, the ongoing conflict between Russia and Ukraine and responses thereto have had and may continue to have an adverse impact on the Company's business and results of operations in affected regions, including the continued suspension of the Company's operations in the region. Given the uncertainty as to the scope, intensity, duration and outcome of geopolitical conflicts, it is difficult to predict the full extent of the adverse impact of geopolitical conflicts on the Company's business and results of operations. Additionally, given the global nature of the Company's operations, any protracted conflict or the broader macroeconomic impact of geopolitical conflicts and sanctions imposed in response thereto, have had and could continue to have an adverse impact on the Company's business, results of operations, financial condition, and future performance and may also magnify the impact of other risks described herein, including the risk of cybersecurity attacks, which may impact information technology systems unrelated to the conflict, or jeopardize critical infrastructure in jurisdictions where the Company operates. While the Company has implemented policies, internal controls, and other measures reasonably designed to promote compliance with applicable laws and regulations related to doing business internationally, any violations of these laws and regulations, or even allegations of such a violation, could disrupt the Company's operations and harm the Company's business, financial condition and results of operations. In addition, changes in United States or Canadian foreign policy can present additional risks or uncertainties as the Company continues to expand its international operations. Opening and operating theaters in markets that have experienced geopolitical or sociopolitical unrest or controversy, including through partnerships with local entities, exposes the Company to the risks listed above, as well as additional risks of operating in a volatile region. Such risks may negatively impact the Company's business operations in such regions and may also harm the Company's brand. Moreover, a deterioration of the diplomatic relations between the United States or Canada and a given country may impede the Company's ability to conduct business in such countries and have a negative impact on the Company's financial condition and future growth prospects.

A majority of the Company's revenues is denominated in U.S. Dollars while a substantial portion of its expenses is denominated in Canadian Dollars. While the Company seeks to manage its exposure to foreign exchange rate risks through its regular operating and financing activities and, when appropriate, through the use of derivative financial instruments, the Company may not be successful in reducing its exposure to these fluctuations. The use of derivative financial instruments is intended to mitigate or reduce transactional level volatility in the results of foreign operations, but does not completely eliminate volatility. Even in jurisdictions in which the Company does not accept local currency or requires minimum payments in U.S. Dollars, significant local currency issues may impact the profitability of the Company's arrangements with its customers, which ultimately affect the ability to negotiate cost-effective arrangements and, therefore, the Company's results of operations. In addition, because IMAX content generates box office dependent revenue in 91 different countries as of December 31, 2025, unfavorable exchange rates between applicable local currencies and the U.S. Dollar can affect the GBO generated by the Company's exhibitor customers and its revenues.