NOTE 7—STOCKHOLDERS’ EQUITY

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Stock Split and Reverse Stock Split

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On August 4, 2022, the Company announced that its Board of Directors declared a special dividend of one AMC Preferred Equity Unit for each share of Common Stock outstanding at the close of business on August 15, 2022, the record date. The dividend was paid at the close of business on August 19, 2022 to investors who held Common Stock as of August 22, 2022, the ex-dividend date. Due to the characteristics of the AMC Preferred Equity Units, the special dividend had the effect of a stock split pursuant to ASC 505-20-25-4.

On August 24, 2023, the Company effectuated a reverse stock split at a ratio of one share of Common Stock for every ten shares of Common Stock. As a result of the reverse stock split, each share of Series A Convertible Participating Preferred Stock became convertible into ten shares of Common Stock, and by extension each AMC Preferred Equity Unit became equivalent to one-tenth (1/10th) of a share of Common Stock. The reverse stock split did not impact the number of AMC Preferred Equity Units outstanding. The Company concluded that this change in conversion ratio is analogous to a reverse stock split of the AMC Preferred Equity Units even though the reverse stock split did not have an effect on the number of AMC Preferred Equity Units outstanding.

Accordingly, all references made to share, per share, unit, per unit, or common share amounts in the accompanying consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect both the effects of the special dividend as a stock split and the subsequent reverse stock split. References made to AMC Preferred Equity Units have been retroactively adjusted to reflect the effect of the reverse stock split on their equivalent Common Stock shares.

Share Issuances

On September 6, 2023, the Company entered into a Common Stock equity distribution agreement (the “Common Stock Equity Distribution Agreement”) with Citigroup Global Markets, Inc., Barclays Capital Inc., B. Riley Securities, Inc. and Goldman Sachs & Co. LLC, as the sales agents (“Common Stock Sales Agents”), to sell up to 40.0 million shares of the Company’s Common Stock, from time to time, through an “at-the-market” offering program (the “Common Stock Offering”). Subject to the terms and conditions of the Common Stock Equity Distribution Agreement, the Common Stock Sales Agents will use reasonable efforts consistent with their normal trading and sales practices, applicable law and regulations, and the rules of the NYSE to sell Common Stock from time to time based upon the Company’s instructions for the sales, including any price, time or size limits specified by the Company. The Company intends to use the net proceeds from the sale of Common Stock pursuant to the Common Stock Equity Distribution Agreement to repay, refinance, redeem or repurchase the Company’s existing indebtedness (including expenses, accrued interest and premium, if any) and otherwise for general corporate purposes. On September 13, 2023, the Company announced that it had completed the Common Stock Offering.

During the nine months ended September 30, 2023, the Company raised gross proceeds of approximately $325.5 million and paid fees to the Common Stock Sales Agents and incurred other third-party issuance costs of approximately $8.2 million and $0.5 million, respectively, through its Common Stock Offering of 40.0 million shares of its Common Stock. The Company paid $0.1 million of other third-party issuance costs during the nine months ended September 30, 2023.

On September 26, 2022, the Company entered into an equity distribution agreement (the “Preferred Equity Units Equity Distribution Agreement”) with Citigroup Global Markets Inc., as a sales agent (“Sales Agent”), to sell up to 42.5 million shares of the Company’s AMC Preferred Equity Units, from time to time, through an “at-the-market” offering program (the “Preferred Equity Offering”). Subject to the terms and conditions of the Preferred Equity Units Equity Distribution Agreement, the Sales Agent was required to use reasonable efforts consistent with their normal trading and sales practices, applicable law and regulations, and the rules of the NYSE to sell the AMC Preferred Equity Units from time to time based upon the Company’s instructions for the sales, including any price, time or size limits specified by the Company. The Company intends to use the net proceeds, from the sale of AMC Preferred Equity Units pursuant to the Preferred Equity Units Equity Distribution Agreement to repay, refinance, redeem or repurchase the Company’s existing indebtedness (including expenses, accrued interest and premium, if any) and otherwise for general corporate purposes. Following the Charter Amendments and AMC Preferred Equity Unit Conversion, the Company no longer sells shares under the Preferred Equity Units Distribution Agreement.

During the nine months ended September 30, 2023, the Company raised gross proceeds of approximately $114.5 million and paid fees to the Sales Agent and incurred other third-party issuance costs of approximately $2.9 million and $8.7 million, respectively, through its Preferred Equity Offering of approximately 7.1 million shares of its AMC Preferred Equity Units. The Company paid $11.5 million of other third-party issuance costs during the nine months ended September 30, 2023. The Company no longer has any authorized AMC Preferred Equity Units available for issuance under the Preferred Equity Units Equity Distribution Agreement. Furthermore, the AMC Preferred Equity Units ceased trading on the NYSE on August 24, 2023 and were converted to Common Shares on August 25, 2023.

On December 22, 2022, the Company entered into the Forward Purchase Agreement with Antara pursuant to which the Company agreed to (i) sell to Antara 10,659,511 AMC Preferred Equity Units for an aggregate purchase price of $75.1 million and (ii) simultaneously purchase from Antara $100.0 million aggregate principal amount of the Company’s 10%/12% Cash/PIK Toggle Second Lien Notes due 2026 in exchange for 9,102,619 AMC Preferred Equity Units. On February 7, 2023, the Company issued 19,762,130 AMC Preferred Equity Units to Antara in exchange for $75.1 million in cash and $100.0 million aggregate principal amount of the Company’s 10%/12% Cash/PIK Toggle Second Lien Notes due 2026. The Company recorded $193.7 million to stockholders’ deficit as a result of the transaction. The Company paid $1.4 million of accrued interest in cash upon exchange of the notes.

Special Meeting of Stockholders

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The Company’s board of directors called a special meeting of the Company’s stockholders on March 14, 2023 (the “Special Meeting”). At the Special Meeting, the Company’s stockholders approved the following proposals:

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Each of the Share Increase and the Reverse Stock Split were cross-conditioned on the approval of the other, such that approval of both proposals was required for each of them to take effect.

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Shareholder Litigation

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Two putative stockholder class actions were filed in the Delaware Chancery Court that assert a breach of fiduciary duty against certain of the Company’s directors and a claim for breach of 8 Del. C. § 242 against those directors and the Company, arising out of the Company’s creation of AMC Preferred Equity Units, the transactions between the Company and Antara that the Company announced on December 22, 2022 (the “Antara Transactions”), and the Charter Amendments.

This litigation prevented the Company from immediately implementing the Charter Amendments. On April 2, 2023, the parties entered into a binding settlement term sheet to settle the litigation and allow implementation of the Charter Amendments. On August 11, 2023, the Delaware Chancery Court approved the settlement and on Monday, August 21, 2023, the Delaware Supreme Court confirmed the ruling of the Chancery Court. Pursuant to the settlement term sheet, record holders of Common Stock at the close of business on August 24, 2023, after giving effect to the Reverse Stock Split, but prior to the conversion of AMC Preferred Equity Units into Common Stock (“Settlement Payment Recipients”), received a payment of one share of Common Stock for every 7.5 shares of Common Stock owned by the Settlement Payment Recipients (the “Settlement Payment”). On August 28, 2023, the Company made the Settlement Payment and issued 6,897,018 shares of Common Stock. See Note 11—Commitments and Contingencies for further information regarding the litigation and settlement.

Charter Amendments and AMC Preferred Equity Unit Conversion

Each AMC Preferred Equity Unit was a depositary share and represented an interest in a share of Series A Convertible Participating Preferred Stock evidenced by a depositary receipt pursuant to a deposit agreement. Each AMC Preferred Equity Unit was designed to have the same economic and voting rights as a share of Common Stock.

On August 14, 2023, the Company filed an amendment to its Certificate of Incorporation to effectuate the Charter Amendments as of August 24, 2023. The Charter Amendments permitted the conversion of all of the Company’s outstanding AMC Preferred Equity Units into shares of Common Stock (the “Conversion”). On August 25, 2023, 99,540,642 shares of Common Stock were issued as part of the Conversion. On August 25, 2023, AMC Preferred Equity Units ceased trading and were subsequently delisted from the NYSE. On August 25, 2023, the Company filed a Certificate of Elimination of Series A Convertible Participating Preferred Stock with the Secretary of State of Delaware that eliminated the Series A Convertible Participating Preferred Stock from the Company’s Certificate of Incorporation. As of September 30, 2023, the Company has 50,000,000 authorized shares of preferred stock.

AMC’s Board of Directors approved equitable adjustments to all outstanding awards under the 2013 Equity Incentive Plan subsequent to the effectiveness of the Charter Amendments. The outstanding awards were proportionally adjusted consistent with the ratio used for the Reverse Stock Split and all awards previously convertible into AMC Preferred Equity Units are now convertible into Common Stock.

Stock-Based Compensation

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The following table presents the stock-based compensation expense recorded within general and administrative: other:

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As of September 30, 2023, the estimated remaining unrecognized compensation cost related to stock-based compensation grants was approximately $20.1 million, which reflects assumptions related to attainment of performance targets based on the scales as described below. The weighted average period over which this remaining compensation expense is expected to be recognized is approximately 1.1 years.

Plan Amendment due to Stock Split

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The 2013 Plan contemplates equitable adjustments for certain transactions such as a stock split. On August 19, 2022, the Compensation Committee approved an adjustment to the 2013 Equity Incentive Plan to entitle each participant one AMC Preferred Equity Unit and one share of Common Stock for each restricted stock unit (“RSU”) or performance stock unit (“PSU”) for awards granted prior to the AMC Preferred Equity Unit special dividend. The Company determined that this modification was a Type 1 (probable-to-probable) modification that did not increase the fair value of the award and therefore did not require additional stock-based compensation expense to be recognized.

Special Awards

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On February 23, 2023, AMC’s Board of Directors approved special awards in lieu of vesting of the 2022 PSU awards. The special awards were accounted for as modification to the 2022 PSU awards which lowered the Adjusted EBITDA and free cash flow performance targets such that 200% vesting was achieved for both tranches. This modification resulted in the immediate additional vesting of 238,959 Common Stock 2022 PSUs and 238,959 AMC Preferred Equity Unit 2022 PSUs. This was treated as a Type 3 modification (improbable-to-probable) which requires the Company to recognize additional stock compensation expense based on the modification date fair values of the Common Stock PSUs and AMC Preferred Equity Units PSUs of $14.9 million and $5.3 million, respectively. During the nine months ended September 30, 2023, the Company recognized $20.2 million of stock compensation expense related to these awards.

Awards Granted in 2023

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During the nine months ended September 30, 2023, AMC’s Board of Directors approved awards of stock, RSUs, and PSUs to certain of the Company’s employees and directors under the 2013 Equity Incentive Plan. Each RSU or PSU is convertible into one share of Common Stock upon vesting.

Each RSU and PSU held by a participant as of a dividend record date is entitled to a dividend equivalent equal to the amount paid with respect to one share of Common Stock underlying the unit. Any such accrued dividend equivalents are paid to the holder only upon vesting of the units. Each unit represents the right to receive one share of Common Stock at a future date.

The Company’s Board of Directors also granted awards to non-section 16 officers that are expected to be settled in cash. Upon vesting, participants receiving cash settlement shall receive an amount of cash equal to the closing price of an AMC Preferred Equity Unit multiplied by the number of underlying cash-based RSUs and PSUs awarded. Following the completion of the Charter Amendments, grantees will now receive an amount of cash equal to the closing price of Common Stock multiplied by the number of underlying cash-based RSUs and PSUs award. These awards have been classified as liabilities and are included within accrued expenses and other liabilities in the condensed consolidated balance sheets. The vesting requirements and vesting periods are identical to the equity classified awards described below. The Company recognizes expense related to these awards based on the fair value of the Common Stock shares, giving effect to the portion of services rendered during the requisite services period. As of September 30, 2023, there were 169,401 nonvested underlying Common Stock RSUs and PSUs related to awards granted to non-section 16 officers. There are 112,894 nonvested underlying Common Stock RSUs and PSUs (2023 Tranche Year) that are currently classified as liabilities and 56,507 nonvested underlying Common Stock PSUs (2024 & 2025 Tranche Year) which have not been granted for accounting purposes as the performance targets for the 2024 and 2025 PSU Tranche Years have yet to be established.

The 2023 award agreements generally had the following features:

The Compensation Committee establishes the annual performance targets at the beginning of each year. Therefore, the grant date (and fair value measurement date) for each Tranche Year is the date at the beginning of each year when a mutual understanding of the key terms and conditions are reached per ASC 718, Compensation – Stock compensation. The 2023 PSU award grant date fair value for the 2023 Tranche Year award of 95,883 units was $3.9 million, the 2022 PSU award grant date fair value for the 2023 Tranche Year award of 46,192 units was $1.9 million, and the 2021 PSU award grant date fair value for the 2023 Tranche Year Award of 160,280 units was $6.8 million, measured using performance targets at 100%.

The following table represents the equity classified nonvested RSU and PSU activity for the nine months ended September 30, 2023:

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