FBYD 10-K & 10-Q changes, risk factors and insider trading

We have a limited operating history and have experienced substantial growth over the last three years due, in large part, to the combination of Falcon’s Treehouse, LLC and its subsidiaries and Falcon’s Treehouse National, LLC with Katmandu Group, LLC and Fun Stuff, S.L. in April of 2021, the Business Combination with FAST Acquisition Corp. II in October 2023, which resulted in the Company becoming a public company with its securities traded on Nasdaq, and the Strategic Investment by Qiddiya Investment Company (“QIC”)., and the acquisition of OES assets in May 2025. However, recent growth rates may not be indicative of our future performance due to our limited operating history as a combined company and the rapid evolution of our business model. We may not be able to achieve similar results or accelerate growth at the same rate as we have organically or in connection with the completion of the Business Combination, and we may not achieve our expected results, all of which may have a material and adverse impact on our financial condition and results of operations.

In addition, ourOur growth and expansion have placed, and will continue to place, significant strain on our management and resources. This level of growth may not be sustainable or achievable in the future. We believe that our continued growth will depend on many factors, including our ability to develop new sources of revenue, diversify monetization methods including by direct to consumer offerings, vertically-integrated retail and third-party marketplaces, attract and retain creative contributors and business partners, increase customer engagement, continue developing innovative technologies, experiences and attractions in response to shifting demand in leisure and entertainment preferences, increase brand awareness and licensing, increase our expertise, expand into new markets, raise capital and continue to execute our legacy business.

We cannot assure you that we will have the personnel, expertise, or resources to achievesustain anyor ofmanage theour above,growth, or that our growth and expansion strategies, including our franchise execution model and our platform model,strategies will be attractive to our customers, and our failure to sustain or increase our growth may materially and adversely affect our business and results of operations.

Under generally accepted accounting principles generally accepted in the United States,States ("U.S. GAAP"), we review certain assets for impairment annually in the fourth quarter of each fiscal year, or more frequently if events or changes in circumstances indicate the carrying value may not be recoverable. Further, we review our equity-method investments for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable. We recognize an impairment of an equity-method investment if the fair value of the investment as a whole, and not the underlying assets, has declined and the decline is other than temporary. The outcome of such testing previously has resulted in, and in the future could result in, impairments of our assets, including our property, plant, and equipment, intangible assets, goodwill and/or our equity method investment in our joint ventures.

Our Sierra Parima segment experienced losses in 2023 as a result of financial, operational, infrastructure challenges encountered at the Katmandu Park DR following its opening in March 2023. Sierra Parima performed an evaluation of its long-lived fixed assets in accordance with ASC 360 to determine whether their fair value is less than carrying value. As a result of this analysis, Sierra Parima recorded a fixed asset impairment of $46.7 million as of December 31, 2023. Based on the estimated sale or liquidation proceeds from Sierra Parima, and Sierra Parima’s outstanding debts remaining to be settled, the fair value of the Company’s investment in Sierra Parima was determined to be zero. The Company’s fifty percent share of the impairment recognized by Sierra Parima and the additional impairment of $14.1 million recognized by the Company are included within Share of loss from equity method investments in the Consolidated Statements of Operations for the year ended December 31, 2023. The impairment is the result of management’s estimates and assumptions regarding the likelihood of certain outcomes related to various liquidation and sale scenarios and pending legal matters, the timing of which remains uncertain. These estimates were determined primarily using significant unobservable inputs (Level 3). The estimates that the Company makes with respect to its equity method investment are based upon assumptions that management believes are reasonable, and the impact of variations in these estimates or the underlying assumptions could be material. ThereOn areMay 30, 2025, the Company's investment in Sierra Parima was sold for nominal consideration and no other liquidity arrangements, guaranteesgain or otherloss financial commitments betweenon the Companysale andwas Sierra Parima. The Company is not committed to provide any additional funding as of December 31, 2024. Any future capital fundings will be discretionary.recognized. For more information about the impairment charge with respect to Sierra Parima, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation” and Note 86, “Investments and advances to equity method investments – Sierra Parima” to our audited consolidated financial statements contained in Item 8 of this Annual Report.

The accounting estimates related to impairments are susceptible to change, including estimating fair value which requires considerable judgment. For goodwill, management’s estimate of a reporting unit’s future financial results is sensitive to changes in assumptions, such as changes in stock prices, weighted-average cost of capital, terminal growth rates and industry multiples. Similarly, cash flow estimates utilized for purposes of evaluating long-lived assets and equity method investments (such as in our PDP joint venture with Sierra Parima) require us to make projections and assumptions for many years into the future for pricing, demand, competition, operating costs, timing of operations, and other factors. We evaluate long-lived assets and equity method investments for impairment when events or changes in circumstances indicate, in management’s judgment, that the carrying value of such assets may not be recoverable (meaning, in the case of its equity method investment, that such investment has suffered other-than-temporary declines in value under ASC 323, Investments: Equity Method Investments and Joint Ventures). When a quantitative assessment is performed, we use estimates and assumptions in estimating our reporting units’, our long-lived assets’ and our equity method investment’s fair values that we believe are reasonable and appropriate at that time; however assumptions and estimates are inherently subject to significant business, economic, competitive and other risks that could materially affect the calculated fair values and the resulting conclusions regarding impairments, which could materially affect our results of operations and financial position.

We cannot guarantee that in future periods we will not be required to recognize additional impairment charges, whether in our other equity method investments, to the extent it is regained in the future, or other intangible assets, nor that we will be able to avoid a significant charge to earnings in our consolidated financial statements during the period in which an impairment is determined to exist. Impairments to our equity method investment in our PDP joint venture with Sierra Parima have materially and adversely affected our results of operations in the past, and could again in the future, as could reductions in the carrying value of any intangible assets or our other equity method investments.

For the year ended December 31, 2024,2025, we incurred a loss from operations of $15.9$13.4 million and negative cash flows from operating activities of $12.6$26.0 million. Management has concluded, and the reportreports of our auditors included in this Annual Report reflect, that there is substantial doubt about our ability to continue as a going concern. Since our inception, we have funded our operations primarily through financing transactions such as related party and third-party loans and the Strategic Investment and have incurred recurring net losses and negative cash flows. We will require additional capital in order to fund currently anticipated expenditures and to meet our obligations as they come due. See “—We will require additional capital, which additional financing may result in restrictions on our operations or substantial dilution to our stockholders, to support the growth of our business, and this capital might not be available on acceptable terms, if at all” below for additional information related to the risks of obtaining additional capital.

We have funded our operations since inception primarily through financing transactions such as related party and third-party loans and the Strategic Investment. We cannot be certain when or if our operations will generate sufficient cash to fully fund our ongoing operations or the growth of our business. Prior to the deployment of our asset-efficient strategy in our FBD business, we had engaged in expanding our physical operations through our equity method investments. We are continuing to develop new product offerings and hire additional personnel, to expand using our franchise execution model within our FBB business, and to offer a fully integrated service on our platform in order to create seamless, large-scale projects with greater creative control and operational efficiency, offering a unique, turnkey experience to our customers. As a result, we incurred a loss from operations of $15.9$13.4 million for the year ended December 31, 2024,2025, had an accumulated deficit attributable to common stockholders of $46.5$44.6 million as of December 31, 2024,2025, and had negative cash flows from operating activities of $12.6$26.0 million for the year ended December 31, 2024.2025. We intend to continue to make investments to support our business, which may require us to engage in equity or debt financings to secure additional funds. In addition, as of December 31, 2024,2025, the Company has accrued material amounts of expenses in relation to its external advisors, accountants and legal costscosts. inAs relationof toDecember 31, 2025, the Business Combination and other things. The Company had a working capital deficiency of $(31.318.1) million,million whichincluding excludes$0.6 million debt that ismatured maturingon May 16, 2025 and debt coming due of $2.6 million in the next 12 months as of December 31, 2024. Additionally, as of December 31, 2024, the Company has $10.2 million in debt that is maturing in the next 12 months and have unfunded commitments to its unconsolidated joint venture Karnival of $2.4 million (HKD 18.7 million).months. The Company does not currently have sufficient cash or liquidity to pay liabilities that are owed or are maturing at this time and the ability to do so in the future is contingent upon securing additional financing or capital raises.

Additional financing may not be available on terms favorable to us, if at all, or the cost of additional financing may be exceedingly high. In particular, ongoing conflicts in the ongoingMiddle invasionEast, ofincluding Ukrainehostilities bywith Iran, and the war between Russia and the Israel-Hamas warUkraine have caused disruption in the global financial markets, which may reduce our ability to access capital and negatively affect our liquidity in the future. If adequate funds are not available on acceptable terms, we may be unable to invest in future growth opportunities or to implement our strategy, particularly with respect to our FBD and FBB divisions, which could harm our business, operating results, and financial condition. If we incur additional debt, the debt holders would have rights senior to holders of Common Stock to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay future dividends to holders of our Common Stock. If we undertake financing by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, preferred stock, convertible securities or other equity securities in one or more transactions at a price per share that is less than the price per share paid by current stockholders. If we sell common stock, preferred stock, convertible securities, or other equity securities in more than one transaction, stockholders may be further diluted by subsequent sales. Additionally, future equity financings may result in new investors receiving rights superior to our existing stockholders. Because our decision to issue securities in the future will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future issuances of debt or equity securities. As a result, our stockholders bear the risk of future issuances of debt or equity securities reducing the value of our Common Stock and diluting their interests.

Following the closure of Katmandu Park DR,DR and the Tenerife Sale, and the commencement of liquidation of our Karnival joint venture, our FBD business is in transition, and the repositioning and rebranding of FBD projects will be subject to timing, budgeting and other risks which could have a material adverse effect on us. In addition, the ongoing need for capital expenditures to develop our FBD business could have a material adverse effect on us, including our financial condition, liquidity and results of operations.

In our FBD business, we may encounter difficulties in adapting our asset-efficient strategy or in developing and maintaining effective joint partnerships with our existing JV partners,partner, Meliá and Raging Power,Meliá, and/or with new joint venture partnerships. We expect our asset-efficient strategy to reduce our capital expenditures by harnessing the strengths and resources of current and future strategic partners, allowing us to focus on our core competencies of bringing incredible experiences to people. However, we may not be able to execute on such strategy effectively. For example, we may not be able to negotiate agreements with our existing joint venture partners or with new joint venture partners on terms that are acceptable to us or at all, and our ability to successfully operate an asset-efficient model exposes us to different risks than we face with an asset-heavy model, as we will be increasingly subject to the risks inherent in third-party infrastructure over which we would have limited control. Further, our efforts to reduce our existing capital expenditures may not be successful. For example, while we believe the closure of Katmandu Park DR to visitors was in the best interest of the Sierra Parima joint venture with Meliá because the closure eliminates potential ongoing operational losses at the Katmandu Park DR, and while we believe the Tenerife Sale and commencement of liquidation of our Karnival joint venture were each similarly in our best interests, there may be unexpected consequences of thesuch closureclosure, sale and liquidation that negatively impact our business or that of our joint venture partner, whereby such unexpected consequences could be the basis for a dispute with our joint venture partner.

In addition, in the future, certain of our construction timelines may be lengthened and/or require increased development costs due to competition for skilled construction labor and employees with relevant technical expertise, disruption in the supply chain for materials, increased costs for raw materials and supplies, labor relations and construction practices in foreign markets, rising inflation, ongoing conflicts in the conflictMiddle East, including hostilities with Iran, and the war between Russia and Ukraine and the Israel-Hamas war; and these circumstances could continue or worsen in the future. As a result of the foregoing, we cannot assure you that any of our development, acquisition, expansion, repositioning and rebranding projects will be completed on time or within budget or that the ultimate rates of investment return will be as we forecasted at the time the project was commenced. If we are unable to complete a project on time or within budget, the resort and/or theme park’s projected operating results may be adversely affected, which could have a material adverse effect on us, including our business, financial condition, liquidity, results of operations and prospects.

The FBD properties, including the resortshotel and theme park owned and operated by our PDP joint venture with Meliá, also have an ongoing need for renovations, rebranding and other capital improvements and expenditures, including to replace furniture, fixtures and equipment from time to time as the need arises. While we believe the closure of Katmandu Park DR to visitorsvisitors, the Tenerife Sale, and the commencement of liquidation of Karnival should help reduce our ongoing capital expenditures, particularly with respect to our Sierra Parima joint venture, we still have assets through our PDP joint venture, including a hotel in Tenerife, Spain and a hotel and theme park in Mallorca, Spain.

In addition to liquidity risks, these capital expenditures may result in declines in revenues while hotels and parks are in initial construction, while rooms, restaurants, rides or attractions are out of service for rebranding or maintenance, and while areas of our properties are closed due to capital improvement projects. We expect our costs will increase over time, and our losses may continue, as we expect to continue to invest additional funds in expanding our business and sales and marketing activities. We also expect to incur additional general and administrative expenses as a result of our growth and expect our costs to continue increase to support our operations as a public company. Historically, our costs have increased over the years due to these factors, and we expect to continue to incur increasing costs to support our anticipated future growth. For example, following the opening of our Katmandu Park DR in March 2023, we experienced various financial, operational, and infrastructure challenges that led to lower than planned open days and attendance at the park. As a result, in March 2024, we closed Katmandu Park DR to visitors. For more information about the closure of the Katmandu Park DR, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation” and Note 88, “Investments and advances to equity method investments – Sierra Parima” to our audited consolidated financial statements contained in Item 8 of this Annual Report.

Developing FCG requires ongoing investment in personnel and infrastructure. In 20242024, we acquired and moved into a larger building in Orlando to meet the space requirement offor our approximately 210 employees and our expectedcontinued growth. Our growth plans for FCG place significant demands on our management and operating personnel, and we may not be able to hire, train, and retain the appropriate personnel to manage and grow these services. Depending upon the timing and level of revenues generated from FCG, including through the Consultancy Services Agreement with QIC and other initiatives, the related results of operations and cash flows we anticipate from FCG may not be achieved. If we are unable to manage our growth effectively, our business, results of operations, and financial condition may be adversely affected.

FCG offersprovides extensivecreative and advisory services including destination strategy, master planning, attractionsexperiential and experientialattraction design, digital media, interactive software, IP development, and creative guardianship for entertainment designand hospitality destinations. FBB encompasses a broad portfolio of intellectual property, proprietary technologies, and operating businesses that design, engineer, commercialize, and deploy entertainment systems, products, content, and experiences across physical and digital mediaenvironments. servicesFBD develops, owns, operates, and ourexpands experientialentertainment technologiesvenues, tohospitality customers, including FBD, seeking to create themed experiences based on their own intellectual property. FBB’s business model is to deploy, expandexperiences, and monetizebranded destination concepts across a variety of location-based formats, utilizing proprietary and partner brands andthird-party intellectual property across multiple media and experiential channels.property. As such, increasingly, our intellectual property and technologies will be deployed in large-scale, complex technology environments, and we believe our future success will depend on our ability to provide our customers with a comprehensive solution to their experiential entertainment needs, and to increase sales of our intellectual property and technologies for use in such deployments.technologies.

FCG’s ability to provide effective ongoing services, or to provide such services in a timely, efficient, or scalable manner, may depend in part on its customers’ environments and their abilities to effectively integrate FCG’s technologies in their existing facilities. In addition, FCG’s ability to provide effective services is largely dependent on our ability to attract, train, and retain qualified personnel, independent contractors and subcontractors, with experience in supporting customers in the use of tools and technologies such as ours. As the number of FCG’s customers or projects grows, that growth may put additional pressure on FCG’s services teams, and FCG may be unable to respond quickly enough to accommodate short-term increases in customer demand for its services. FCG may also be unable to modify the future scope and delivery of its services to compete with changes in the services provided by its competitors. Increased customer demand for support, without corresponding revenue, could increase costs and negatively affect our business and results of operations. In addition, as FCG continues to grow its operations and expand its global customer base, FCG needs to be able to provide efficient services that meet its customers’ needs globally at scale, and its services teams may face additional challenges, including those associated with operating the platforms and delivering support, training, and documentation in languages other than English and providing services across expanded time-zones. If FCG is unable to provide efficient services globally at scale, our ability to grow FCG’s operations may be harmed, and FCG may need to hire additional services personnel, which could negatively impact our business, financial condition, and results of operations.

Further, FBB’s ability to provide effective services and execute on its business strategy depends upon its ability to effectively deploy our and third-party brands’ intellectual property across multiple media and experiential channels, such as animation, movies, music, licensing and merchandising, gaming, streaming, and ride and technology sales.channels. This means that FBB’s success depends disproportionately on its ability to successfully develop proprietary and third-party brands across disparate consumer bases, technologies and geographies and to maintain and extend the reach and relevance of these brands to global consumers in a wide array of markets. This strategy will require us to acquire, build, invest in and develop our competencies in disparate areas, which will require significant effort, time and money, with no assurance of success. The success of FBB’s franchise execution modelFBB also requires significant alignment and integration among our business divisions and between FBB and third-party brands. If FBB is unable to successfully develop, maintain and expand key proprietary and third-party brands as planned, our business performance could suffer. Further, if the consumer market does not broadly adopt our intellectual property, FBB’s franchise execution modelFBB would be impacted and we would be unable to implement our current business strategy.

A significant portion of FCG’s and our revenue is derived from onetwo large clientclients of FCG and any loss of, or decrease in services to, thatthose clientclients could harm FCG’s and our results of operations.

A limited number of industry customers have contributed a significant portion of FCG’s and our revenues in the past and are projected to do so in the future. In particular, FCG had two major customers in 2025 and one major customer,customer QIC,in with2024. revenue greater than 10% of the total revenue forFor the year ended December 31, 20242025, 60% and 39% of 99% of FCG’sFCG's revenue forcame the years ended December 31, 2024 . We expectfrom QIC to represent a significant majority of FCG’s and theNMDC. Company's revenue forFor the year ended December 31, 2025.2024, 99% of FCG's revenue came from QIC. We are likely to continue to experience ongoing customer concentration. It is possible that revenue from QIC may not reach or exceed historical levels in any future period. Each of the agreements that we have entered into with QIC contains the scope of services and completion milestone requirements applicable to each particular entertainment asset or services to which the agreement relates. Because our work for QIC is not subject to a master services agreement, our and QIC’s rights and obligations and our time to complete a specific task may vary from agreement to agreement and the terms and conditions of each agreement is generally tailored to the specific project or services covered by the applicable agreement. In some instances, QIC may have a contractual obligation under separate agreements with unaffiliated third-party intellectual owners to obtain approval of our work prior to acceptance of our work whereby we are not in privity of contract with such third-party intellectual property owners. As of AprilMarch 3,30, 2025,2026, we have 9 active agreements with QIC, each of which may be terminated at will by either FCG, after providing 14 days’ notice to QIC, upon a further notice of 42 days or QIC upon 14 days’ notice to FCG. Further, there are no cross-termination or cross-default provisions in these agreements, as they relate to discrete services or projects that are not dependent on each other. Although we believe that we have a strong relationship with QIC, if QIC moves their business elsewhere it would have an adverse effect on our profitability, particularly the profitability of FCG.

In connection with the Strategic Investment, Falcon’s Opco, FCG LLC and QIC entered into a third amended and restated limited liability company agreement of FCG LLC, on September 4, 2023 (as amendedamended, on March 18, 2024 (the “FCG A&R LLCA”), which grants certain consent, preemptive and priority rights to QIC with respect to FCG LLC and its subsidiaries, and in some instances, the Company and Falcon’s Opco. The FCG A&R LLCA was amended on March 18, 2024 to provide QIC with additional consent rights over incentive bonuses.

in FBD, construction delays, zoning and other local, state or federal governmental approvals, cost overruns, lender financial defaults, or natural or man-made disasters, such as earthquakes, tsunamis, wildfires, hurricanes, floods, fires, volcanic eruptions and oil spills, increasing overall project costs, affecting timing of project completion or resulting in project cancellations;

any liability or alleged liability or resultant delays associated with latent defects in design or construction of projects we have developed for our businesses or that FCG or FBDwe may construct in the future adversely affecting our business, financial condition and reputation; and the delay or failure by third-party contractors to perform for any reason, exposing us to operational, reputational and financial harm.

FCG and its clients also source supplies and materials from third parties that are exposed to such risks, and the occurrence of any of these risks with respect to those third parties could have a material adverse effect on FCG’s and its client’s access to the supplies and materials sourced from these third parties. In addition, ongoing conflicts in the ongoingMiddle invasionEast, ofincluding Ukrainehostilities bywith Iran, and the war between Russia and the Israel-Hamas warUkraine may significantly amplify already existing disruptions to FCG clients’clients and FBD’s supply-chains and logistics.

We are subject to numerous other risks associated with acquisitions, dispositions, business combinations, or joint ventures.

As part of our growth strategy, we regularly engage in discussions with respect to possible acquisitions, dispositions, sale of assets,assets and equity, business combinations, and joint ventures intended to complement or expand our business, or to align our business with our strategy, some of which may be significant transactions for us. Regardless of whether we consummate any such transaction, the negotiation of a potential transaction could require us to incur significant costs, including as a result of professional fees and due diligence efforts, and cause diversion of management’s time and resources. In addition, we may be unable to identify suitable acquisition or strategic investment opportunities, or may be unable to obtain any required financing or regulatory approvals, and therefore may be unable to complete such acquisitions or strategic investments on favorable terms, if at all. We may decide to pursue acquisitions with which our investors may not agree and we cannot assure investors that any acquisition or investment will be successful or otherwise provide a favorable return on investment. In addition, acquisitions and the integration thereof require significant time and resources and place significant demands on our management, as well as on our operational and financial infrastructure. If we fail to successfully close transactions or integrate new teams, or integrate the products and technologies associated with these acquisitions into our company, our business could be seriously harmed. In addition, acquisitions may expose us to operational challenges and risks, including:

Our FCG division is frequently contracted by international customers to provide its master planning and design services in locations outside the United States. For example, we have been contracted to provide full service master planning for five theme park projects, as well as the potential additional expansion work, for third-party clients in the Kingdom of Saudi Arabia. Further, all of the operations of our joint venture businesses are conducted outside of the United States and its territories, currently in the European Union (the “EU”) and China. For instance, we are a 50% shareholder in Karnival, which is developing LBE experiences in China, the first of which is in Hong Kong,Arabia and we are a 50% shareholder in PDP, which owns and operates the Sol Katmandu Park & Resort in Mallorca, Spain, and the Sol Tenerife hotel in Tenerife, Spain. These joint ventures and other direct and indirect international operations expose us to certain challenges and risks, many of which are outside of our control, and which could materially reduce our revenues or profits, materially increase our costs, result in significant liabilities or sanctions, significantly disrupt our businesses, or significantly damage our reputation. These challenges and risks include: (1) compliance with complex and changing laws, regulations, and government policies, including sanctions (such as economic sanctions administered by the U.S. Treasury Department’s Office of Foreign Assets Control, which prohibit certain activities and transactions involving U.S. sanctioned countries and persons), that could have a material negative impact on our operations (and in the case U.S. sanctions, result in criminal or civil liability where violated), harm our ability to pursue creative and development opportunities, cause reputational damage, or otherwise affect us; (2) the difficulties involved in jointly managing an organization doing business in different countries; (3) uncertainties regarding the interpretation of local laws and the enforceability of contract and intellectual property rights under local laws; (4) rapid changes in government policy, political or civil unrest, acts of terrorism, war, pandemics or other health emergencies, border control measures or other travel restrictions, or the threat of international boycotts or U.S. anti-boycott legislation; and (5) monitoring fluctuations in foreign currency exchange rates.

A significant portion of FCG’s planned theme park projects are concentrated in the Kingdom of Saudi Arabia. FCG is supporting the creative development of multiple entertainment experiences within Qiddiya City, a planned tourism destination in Saudi Arabia, including master planning a water theme park, supporting the development for a gaming and esports district, and acting as the master planner, attraction designer and creative guardian of the first-ever Dragon Ball theme park. We have collaborated with QIC over the past six years and we expect this collaboration to continue. FCG is also acting as Creative and Content Advisor for The Mukaab, the central landmark of the New Murabba downtown development in Riyadh.

regional conflicts and escalating geopolitical tensions in the Middle East, including with Iran and armed groups supported by the Iranian government,East and the potential future involvement of the Kingdom of Saudi Arabia in such conflicts;

geopolitical instability and uncertainty in the Kingdom of Saudi Arabia, resulting from government or military regime change, civil unrest or terrorism, including the failure to negotiate a cease fire and withdrawal from Yementerrorism;

Under the terms of our joint venture agreements with Meliá and Raging Power,Meliá, and any joint venture agreements we may enter with future joint venture partners, we may be required t1oto contribute certain funds and assets to our joint venture entities, obtain or provide certain permits, licenses or other authorizations, provide certain fiscal indemnification to our joint venture entities and meet various other terms and conditions. If we fail to comply with the terms and conditions of the applicable joint venture agreement, we may incur liabilities to our joint venture partners under the applicable joint venture agreement. In that situation, the damages we would be subject to would be quantified either by the applicable courts or, in the case that we are required to transfer our shares in the joint ventures to the non-breaching counterparties, by third-party valuation firms. If one or more of these joint venture agreements is terminated, the underlying value and performance of our FBD resorts, experiential entertainment attractions, or other assets could decline significantly. In addition, our joint venture partners, as well as any future partners, may have interests that are different from our interests that may result in conflicting views as to the conduct of the business or future direction of the joint venture. In the event that we have a disagreement with a joint venture partner with respect to a particular issue to come before the joint venture, or as to the management or conduct of the business of the joint venture, we may not be able to resolve such disagreement in our favor. Any such disagreement could have a material adverse effect on our interest in the joint venture, the business of the joint venture or our relationship with such joint venture partner.

We have entered into, and expect to continue to enter into, significant joint venture, strategic collaboration, teaming and other arrangements, including our FBD joint ventures with Meliá and Raging Power and our FBB collaborations with certain brands featured on PBS Kids, Hershey, our letter of intent for an expected collaboration with Tanseisha, and our non-binding letter of intent to operate OES.Kids. These activities involve risks and uncertainties, including the risk of a joint venture partner or other party to a business arrangement failing to satisfy its obligations, which may result in certain liabilities to us for any related commitments, the uncertainty created by challenges in achieving strategic objectives and expected benefits of the business arrangement, the risk of conflicts arising between us and the other parties to our business collaborations and the difficulty of managing and resolving such conflicts, and the difficulty of managing or otherwise monitoring such business arrangements. In addition, in these joint ventures, strategic collaborations and alliances, we may have certain overlapping control with our joint venture or brand partners over the operation of the assets, businesses or brands. As a result, such joint ventures, strategic collaborations and alliances may involve risks such as the possibility that a counterparty in a business arrangement might become bankrupt, be unable to meet its contractual obligations, have economic or business interests or goals that are inconsistent with our business interests or goals, or take actions that are contrary to our instructions or to applicable laws and regulations. In addition, we may be unable to take action without the approval of our business partners, or our partners could take binding actions without our consent. Consequently, actions by a partner or other third-party could expose us to claims for damages, financial penalties, and reputational harm, any of which could have an adverse effect on our business, financial condition, and results of operations.

Further, we cannot control the actions of Meliá, Raging Power,QIC, or our other future joint venture partners,partners or strategic collaborators, including any non-performance or default under our joint venture agreements. If MeliáMeliá, or Raging PowerQIC, or our other future joint venture partners or strategic collaborators were to fail to timely remit revenues to us from our various joint venture businesses,us, or if we dispute the amount of revenue remitted, such event could materially adversely affect our results of operations.

The success of projects held under joint ventures that are not operated by the Company is substantially dependent on the joint venture partner, over which we have limited or no control. Our FBD Mallorca and Tenerife hotelshotel and theme park areis a joint venturesventure with Meliá. Control of the existing joint venture entitiesentity that ownowns and operateoperates these properties is split equally between us and Meliá. Although our current FBD joint venture agreementsagreement provideprovides certain voting rights and provisions for the resolution of deadlocks, Meliá is primarily responsible for the management of the hotelsproperties held by our joint venture entitiesentity and controls most ordinary course business and operational decisions, including, among other things, with respect to sales and marketing of the hotels and determining annual and long-term objectives for occupancy, rates, revenues, clientele structure, sales terms and methods. Consequently, we are highly dependent on the operational expertise of Meliá, and likely will be similarly dependent on our future joint venture partners, as well as their corporate priorities. Further, while control and ownership of our existing joint venturesventure with Meliá is split equally between the Company and Meliá, our control or ownership of future joint ventures with other partners may be in a different proportion. Therefore, our results are subject to the additional risks associated with the financial condition and corporate priorities of our joint venture partners, which could have a material adverse effect on our financial position or results of operations.

Under certain of our FBD joint venture arrangements,arrangement with Meliá, pursuant to which neither venture partner has the power to control the venture, an impasse could be reached, which might have a negative influence on the joint venture and decrease potential returns to our stockholders. For example, certain actions by the joint venture entity may require unanimous approval by us and our joint venture partner. An impasse between us and our joint venture partner could result in a “deadlock event.” In such event, if not resolved, we and our respective partners or co-venturers may each have the right to trigger a buy-sell right or forced sale arrangement, which could cause us to sell our interest, or acquire our partners’ or co-venturers’ interest, or to sell the underlying asset, either on unfavorable terms or at a time when we otherwise would not have initiated such a transaction. In addition, a sale or transfer by us to a third-party of our interests in the partnership or joint venture may be subject to consent rights or rights of first refusal in favor of our partners or co-venturers, which would in each case restrict our ability to dispose of our interest in the partnership or joint venture.

Investments in joint ventures involve these and other risks that would not be present were a third-party not involved, including the possibility that the co-venture partners might become bankrupt or fail to fund their share of required capital or asset contributions. In addition, partners or co-venturers may have economic or other business interests or goals that are inconsistent with our business interests or goals and may be in a position to take action or withhold consent contrary to our policies or objectives. In some instances, partners or co-venturers may have competing interests in our FBD markets that could create conflict of interest issues. For example, Meliá may own hotels that compete with our joint venture hotel for tourists. Disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers from focusing their time and effort on our business. Consequently, actions by or disputes with partners or co-venturers might result in subjecting assets owned by the partnership or joint venture, and to the extent of any guarantee our assets, to additional risk. In addition, we may, in certain circumstances, be liable for the actions of our third-party partners or co-venturers.

Our existing and potential future FBD joint venture entities may also be subject to debt and the refinancing of such debt, and we may be required to provide certain guarantees or be responsible for the full amount of the debt, beyond the amount of our equity investment, in certain circumstances in the event of a default. Our joint venture partners may take actions that are inconsistent with the interests of the joint venture or in violation of the financing arrangements and trigger our guaranty, which may expose us to substantial financial obligations and commitments that are beyond our ability to fund.

The operating season at some of our hotelshotel and our theme park is of limited duration, which can magnify the impact of adverse conditions or events occurring within that operating season.

Our operations in the hospitality industry, such as our FBD hotels,hotel, theme park, and other attractions, and joint venture properties are normally subject to seasonal variations and generally operate during limited periods and/or have fluctuations in anticipated market tourism and spending based on the time of year. As a result, revenues in our FBD division fluctuate with changes in hotel and theme park attendance and occupancy resulting from the seasonal nature of vacation travel and leisure activities and seasonal consumer purchasing behavior, which generally results in increased revenues during the Company’s second and third quarters. For example, our Katmandu Park in Mallorca, Spain has limited open hours from March to mid-June and mid-September to November, extended open hours from mid-June to mid-September, and is closed from November to March. Likewise, the Sol Katmandu Resort operates on a seasonal basis, from April through October each year. As a result, nearly all of our revenues from the Mallorca operations are generated during a 230- to 245-day operating season. Consequently, when adverse conditions or events occur during the operating season, particularly during the peak vacation months of July and August or the important fall season, there is only a limited period of time during which the impact of those conditions or events can be mitigated. Accordingly, the timing of such conditions or events may have a disproportionate adverse effect upon our revenues.

FBB competes in the digitalattraction entertainment content, consumer merchandising markets and theme park ridesystems, and technology sales.commercialization.. All feature a wide range of competitors. In the consumer merchandising and entertainment content sectors, market leaders include The Walt Disney Company, Warner Bros. Discovery, Paramount and Moonbug. Within the attractions systems and technologies markets, FBB competes with Triotech, Dynamic Entertainment, Simtec, Simworx, and DOF Robotics.

Each of our operating divisions seeks to offer products or services for three potential high growth business opportunities: content, technology, and experiences. Our success depends substantially on consumer tastes and preferences that change in often unpredictable ways. Consumer tastes and preferences impact, among other items, revenues from affiliate fees, licensing fees and royalties, critical and commercial success of our planned animation, movies, and music offerings, theme park admissions, hotel room charges and merchandise,attraction sales of licensed consumer products or sales of our other consumer products and services.sales. The success of our businesses depends on our ability to consistently create marketable content and services, which may be distributed, among other ways, through social media, interactive media, broadcast, cable, internet or cellular technology, print media, theme parks and other entertainment attractions, hotels and resort facilities, travel experiences and consumer products. Such distributions and deployments must meet the changing preferences of the broad consumer market and respond to competition from an expanding array of choices facilitated by technological developments in the delivery of content.

Because payroll costs are a major component of the operating expenses at oura FBDtheme resorts,park, a shortage of skilled labor could require higher wages that would increase labor costs, which could adversely affect results of operations and cash flows at our FBD properties. All of the Spanish joint venture employees are subject to collective bargaining agreements governed by the Workers’ Statute of Spain. At the beginning of 2023,2025, there was a pre-agreement announced for a 5.0%6.0% wage increase in 20232025 and 3.3%4% in 20242026 (applying only to the positions that are being remunerated with the collective bargain agreement). Outside of Spain, continued increases to both market wage rates and the statutory minimum wage rates could also materially impact our future seasonal labor rates.

Additionally, staffing shortages in places where our FBD theme park and resort are located also could hinder our ability to grow and expand our businesses and could restrict our ability to operate our resort, theme parks, restaurants and other attractions. As of December 31, 2024,2025, our FBD joint venture entities with Meliá directly and indirectly employed approximately 1799 year-round, full-time employees worldwide at both their corporate offices and on-site at their resorts, restaurants and theme parks, and an additional 225222 full-time and partial-time employees working all or part of the operating season in our joint venture properties in Spain. If we are unable to attract, retain, train, manage, and engage skilled employees, itsour ability to manage and staff itsour resorts could be impaired, which could reduce guest satisfaction.

Our consolidated financial statements have been prepared in accordance with generallyU.S. accepted accounting principles in the United States (“US GAAP”).GAAP. All amounts are shown in thousands of U.S. dollars unless otherwise stated.

The Company has been engaged in expanding its operations through its equity method investments, developing new product offerings, acquiring businesses, raising capital and recruiting personnel. The Company has incurred a loss from operations, an accumulated deficit, and negative cash flows from operating activitiesactivities, foras it has invested in the yearintegration endedand Decembergrowth 31,of 2024.the Falcon's Beyond Brands division and the newly acquired OES business. Accordingly, the Company performed an evaluation of its ability to continue as a going concern through at least twelve months from the date of the issuance of these consolidated financial statements.

The Company’s development plans, and investments have been funded by a combination of debt and committed equity contributions from its stockholders, and the Company is reliant upon distributions from equity method investments, its stockholders and third parties for obtaining additional financing through debt or equity raises to fund its working capital needs, contractual commitments, and expansion plans. As of December 31, 2024, the Company has accrued material amounts of expenses in relation to its external advisors, accountants and legal costs in relation to the Business Combination. The Company has a working capital deficiency of $(31.3) million which excludes debt maturing in the next 12 months as of December 31, 2024. Additionally, the Company has $10.2 million in debt that is maturing in the next 12 months. The Company does not currently have sufficient cash or liquidity to pay all liabilities that are owed or are maturing atin thisthe timenext twelve months from the financial statement issuance date and to fund ongoing operations.operations and therefore concluded that substantial doubt exists about its ability to continue as a going concern. There can be no assurance that additional capital or financing raises, or liquidation of non-core assets and investments, if completed, will provide the necessary funding for the next twelve months from the date of this Annual Report on Form 10-K. This Annual Report on Form 10-K does not reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.

Our financial results are impacted by our 50% ownership of the equity interests in threetwo of our unconsolidated joint ventures, PDP, Sierra ParimaPDP and Karnival.Karnival Additionally, starting from the deconsolidation of FCG on July 27, 2023, our financial results are impacted byand our 75% ownership of FCG, all of which are recognized as describedequity furthermethod below. Prior to July 27, 2023, FCG’s results and balances were consolidated with the Company.investments.

Our four unconsolidated joint ventures are recognized as equity method investments. We have recognized $17.2 million and $(3.1) million and $(52.4) million Share of gain (loss) from equity method investments, including our share of losses and impairmentsimpairment of the Sierra ParimaPDP joint venture of $(43.15.3) million and the Karnival joint venture of $(3.0) million in 2023,2025, for the years ended December 31, 20242025 and 2023,2024, respectively.

The Company has a 50% interest in Karnival, a joint venture established with Raging Power Limited. The purpose of the joint venture iswas to hold ownership interests in entities developing and operating amusement centers located in the People’s Republic of China. TheIn firstOctober facility2025, isthe underCompany and its joint venture partners agreed to terminate this project and windup the joint venture due to protracted delays in the underlying location development in Hong Kong. For the year ended December 31, 2024, the Company's share of net income from Karnival remained consistent.schedule. The results of operations for Karnival are immaterial for the years ended December 31, 2024,2025, and 2023.2024.

The carrying value of our investments and advances as of December 31, 2024,2025, was comprised of approximately $25.0$17.8 million for FCG, $24.4$28.6 million for PDP,PDP $7.1and $4.2 million for Karnival and $0 million for Sierra Parima.Karnival.

The carrying value of our investments and advances as of December 31, 2023,2024, was comprised of approximately $30.9$25.0 million for FCG, $22.9$24.4 million for PDP,PDP $6.8and $7.1 million for Karnival and $0 million for Sierra Parima.Karnival.

our signing of agreements with and related disbursement from our clients FCG’s signing of agreements with and related disbursements from QIC completion of our current projects completion of Karnival’s Vquarium Entertainment Center our contributions toto, and distributions from our existing and new joint ventures FBB’s strategic partnerships or alliances.

Further, our success depends substantially on our ability to accurately predict and adapt to changing consumer tastes and preferences. Consumer tastes and preferences impact and will impact, among other items, revenues from affiliate fees, licensing fees and royalties, critical and commercial success of our planned animation, movies, and musicentertainment offerings, theme park admissions, hotel room charges and merchandise, sales of licensed consumer products or sales of our other consumer products and services.

Our Project design and build expenses primarily include project related direct wages, freelance labor, hardware,labor and software costs.

Our Selling, general and administrative expenses include payroll, payroll taxes and benefits for non-project related employee salaries, taxes, and benefits as well as technology infrastructure, marketing, occupancy, finance and accounting, legal, human resources, and corporate overhead expenses. Our Selling, general and administrative expenses include third-party accounting and legal costs related to the preparation of the Company becoming a public company upon the Closing of the Business Combination.

Transaction expenses are stated separately in the results of operations. Transaction(credit) expenses include credits from transaction expense settlement and expenses for professional services expenditures directly related to business combinations, other investments,combinations and disposalscapital ofraise other assets and liabilities that qualify as a business.initiatives.

Our Share of gain (loss) from equity method investments represents our proportional share of net earnings or losses of our unconsolidated joint ventures.

During 2023 and 2024, ourOur parks and resorts, which operated within our unconsolidated joint ventures, generated revenue through the sales of hotel rooms, park admissions, food and beverage, merchandise, and ancillary services, and for fiscal 2023, the principal costs of parks and resorts were employee wages and benefits, advertising, maintenance, utilities, and insurance. Factors that have affected these costs have included fixed operating costs, competitive wage pressures, food, beverage and merchandise costs, costs for construction, repairs and maintenance and inflationary pressures.

After the deconsolidation of FCG on July 27, 2023 the Company accounts for its retained investment under the equity method. FCG generates revenues from master planning, attraction design, experiential entertainment, content production, interactives, and software. The principal costs of these services are project design and build expense, employee wages and benefits, research and development, sales and marketing, depreciation and amortization, software costs, legal fees, consultant fees, and occupancy costs.

The Company monitors the equity method investments for impairment and records reductions in their carrying value if the carrying amount of an investment exceeds its fair value. An impairment charge is recorded when such impairment is deemed to be other-than-temporary. To determine whether an impairment is other-than-temporary, we consider our ability and intent to hold the investment until the carrying amount is fully recovered. There were $0$8.3 million and $14.1 million$0 in impairment losses recognized for investments in equity method investments during the year ended December 31, 20242025 and 2023,2024, respectively, entirely related to impairment of the Company’s equity method investment in Sierra Parima.respectively. See "Note 76 – Investments and advances to unconsolidated joint ventures.ventures" in the Company’s audited consolidated financial statements.

Our Interest expense consists primarily of the interest on our debt instruments and finance lease liabilities. Interest expense related to debt instruments is generated by related party and third-party loans and lines of credit used primarily to fund working capital and operations. See "Note 911 – Long-term debt and borrowing arrangements" in the Company’s audited consolidated financial statements for a description of our indebtedness and “Liquidity and Capital Resources” below.

At the Closingclosing of the Business Combination, pursuant to the Merger Agreement, certain holders were entitled to receive up to a total of 1,937,500 and 75,562,500 contingent earnout shares in the form of Class A Common Stock and Class B Common Stock, respectively. The earnout shares were deposited into escrow at the Closing and are to be earned, released and delivered upon satisfaction of, or forfeited and canceled up on the failure of certain milestones. Prior to September 30, 2024, the earnout shares were classified as a liability and measured at fair value, with changes in fair value included in the results of operations.

Prior to reclassification into equity, the fair value of the earnout liability was $250.1 million and $488.6 million as of September 30, 2024, and December 31, 2023, respectively.2024. For the yearsyear ended December 31, 2024 and 2023,2024, the Company recognized $172.3 million and $(345.4) million of gain (loss) related to the change in fair value of earnout liabilities included in the consolidated statementstatements of operations and comprehensive income (loss).income. After the reclassification to equity, the earnout shares will not require subsequent fair value measurement.

Our Foreign exchange transaction gain (loss) gain include our transactional gains and losses on the settlement or re-measurement of our non-functional currency denominated assets and liabilities. Since we conduct business in jurisdictions outside of the United States, we generate realized and unrealized transactional foreign exchange gains and losses from the remeasurement of U.S. dollar denominated cash and debt balances held by Fun Stuff, our Euro functional currency subsidiary, and the settlement of vendor balances denominated in non-functional currencies. As the U.S. dollar strengthens against the Euro, we record realized and unrealized foreign exchange losses; as the U.S. dollar weakens against the Euro, we record realized and unrealized foreign exchange gains.

The following discussion and analysis of our financial condition and results of operations is provided to supplement our unaudited condensed consolidated financial statements and the accompanying notes as of and for the three and six months ended MarchJune 31,30, 2026, and 2025, included elsewhere in this Quarterly Report. We intend for this discussion to provide the reader with information to assist in understanding our unaudited condensed consolidated financial statements and the accompanying notes, the changes in those financial statements and the accompanying notes from period to period along with the primary factors that accounted for those changes. Certain information contained in this management’s discussion and analysis includes forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors. Please see “Cautionary Note Regarding Forward-Looking Statements,” in this Quarterly Report.

The following reflects our results of operations for the three and six months ended MarchJune 31,30, 2026 and 2025.

We have continued to invest in initiatives focused primarily on expanding itsour Falcon's Beyond Brands division, including product development, talent acquisition, and selective strategic investments. These activities have contributed to continued operating losses and negative cash flows from operations. Net cash used in operating activities was $0.3 million for the six months ended June 30, 2026, a reduction compared with comparable prior periods. Accordingly, we performedevaluated an evaluation of itsour ability to continue as a going concern through at least twelve months from the date of the issuance of these interim unaudited condensed consolidated financial statements.

Our development plans and associated working capital needs have been funded by a combination of debt and equity investments from itsour stockholders and the sale of non-core assets. We expect to continue utilizing a mix of these funding sources, including access to capital markets, additional financing arrangements, potential monetization of non-core investments, and expected distributions from PDP associated with the return of required withholding taxes from the sale of the Sol Tenerife Hotel in 2025 to support itsour ongoing growth strategy and working capital requirements. As of MarchJune 31,30, 2026, we have a working capital deficiencydeficit of $12.9$8.4 million that was driven by the Deferred Loan Settlement of $6.9 million, includingwhich short-termis included within the $8.9 million of debt obligations ofclassified $9.3as million.current based on their contractual maturity dates. We are actively evaluating refinancing and other alternatives with respect to these obligations. See “Note 6 – Long-term debt and borrowing arrangements” in our unaudited condensed consolidated financial statements for further discussion.

We assess our ability to meet obligations over the next twelve months based on current liquidity,liquidity assuminglevels and assume the continued execution of our operating plan and certain financing and capital initiatives. WhileAlthough wecash believeflows thesefrom assumptionsoperations arehave reasonable,improved compared with prior comparable periods, we have incurred recurring operating losses and negative cash flows from operations.operations Thesein conditions,recent togetherperiods withand ourhave ongoing capital needs to support itsour growth initiatives and workingto capitalsettle requirements,short-term debt obligations. These conditions raise substantial doubt about our ability to continue as a going concern. We continue to take active steps to strengthen itsour capital position and improve liquidity, including pursuing additional financing and evaluating strategic alternatives.alternatives; Whilehowever, management believesbecause these actions mayhad enhancenot ourbeen completed as of the date of issuance of these financial flexibility,statements, they do not changealleviate the conclusion that substantial doubt existsdescribed about our ability to continue as a going concern.above. There can be no assurance that additional capital or financing, if obtained, will provide sufficient funding for the next twelve months from the date of this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q does not reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of us to continue as a going concern.

Revenue increased for the three and six months ended MarchJune 31,30, 2026, compared to the same period in 2025, primarily driven by newthe attractionsgrowth contracts.of the Falcon's Attractions business. As of June 30, 2026, Falcon's Attractions had a contracted pipeline of $28.4 million.

Project design and build expense increased for the three and six months ended MarchJune 31,30, 2026, compared to the same period in 2025, primarily driven by new attractions service contracts.

Cost of product sales increased for the three and six months ended MarchJune 31,30, 2026, compared to the same period in 2025, primarily driven by new attractions product sales.

DepreciationSelling, general and amortizationadministrative expense increased for the three and six months ended MarchJune 31,30, 2026, compared to the same period in 2025, primarily driven by the MayOES 2025integration, acquisitiongrowth of Oceaneeringattraction Engineeringservices, Servicesand ("OES").support functions required to scale operations.

Share of gain from equity method investments decreased for the three months ended June 30, 2026 and share of loss from equity method investments increased for the threesix months ended MarchJune 31,30, 2026, compared to the same periodperiods in 2025, primarily driven by:

PDP: Share of net lossgain from PDP increaseddecreased for the three months ended MarchJune 31,30, 2026,2026 and share of loss for the six months ended June 30, 2026 increased, compared to the same period in 2025, primarily driven by the sale of the Sol Tenerife Hotel in the second quarter of 2025. Following the prior-year sale of the Sol Tenerife Hotel, which operated year-round and generated peak occupancy during the winter season, current-period results reflect the loss of its full-year contribution and the seasonal nature of the remaining property, which was closed for most of the first quarter. Accordingly, current-period results reflect expected seasonal fluctuations.

Karnival: Share of net gain from Karnival decreasedincreased for the three and six months ended MarchJune 31,30, 2026, compared to the same period in 2025, primarily driven by jointa venturegain partneron cashexcess distributions andover decreaseinvestment inof interest$1.2 rates.million.

FCG: We recognize 100% of net gain (loss), less 9% preferred return to QIC and amortization of the basis difference on deconsolidation of FCG. See "“Segment Reporting"” below for further details.

Interest expense decreased for the three and six months ended MarchJune 31,30, 2026, compared to the same period in 2025, primarily driven by decreases in both short and long-term debt resulting from principal payments made during the period and exchange of debt and accrued interest for shares of Series B Preferred Stock in the third quarter of 2025.

As of March 31, 2025, all warrant liabilities were reclassified to equity and do not require subsequent fair value measurement. See “Note 8 – Stock warrants” in our unaudited condensed consolidated financial statements.

Foreign exchange transaction gain decreased for the three and six months ended MarchJune 31,30, 2026, compared to the same period in 2025. The change is primarily attributable to the decrease of the U.S. denominated related party debt with a Spanish subsidiary.

FCG segment income decreased for the three months ended June 30, 2026, compared to the same period in 2025, primarily as a result of timing of certain current long-term contracts. FCG segment income increased for the threesix months ended MarchJune 31,30, 2026, compared to the same period in 2025, primarily as a result of an increase in margins on certain current long-term contracts and gain on sale of land. FCG's net income (loss) was adjusted for accretion of preference dividend and fees, and amortization of basis difference as follows:

FCG revenues increased for the three and six months ended MarchJune 31,30, 2026, compared to the same period in 2025, as a result of the timing of certain contract performance obligations. As of MarchJune 31,30, 2026, the contracted pipeline for FCG was $29.2$17.1 million.

Falcon'sFCG Attractionsproject segmentdesign lossand build expense decreased for the three months ended MarchJune 31,30, 2026, compared to the same period in 2025, remainedprimarily consistentdriven asby a resulttiming of investmentcertain incurrent thelong-term scalingcontracts. of the segment's operations. Falcon's Attractions revenues,FCG project design and build expense and cost of product sales increased for the threesix months ended MarchJune 31,30, 2026, compared to the same period in 2025, asprimarily adriven resultby ofan acquisition of OESincrease in Mayproject 2025.revenues.

Reportable segment measures of profit and loss are earnings before interest, foreign exchange gains and losses, unallocated corporate expenses, impairments and depreciation and amortization expense. Results of operating segments include costs directly attributable to the segment including project costs, payroll and payroll-related expenses and overhead directly related to the business segment operations. Unallocated corporate overhead costs include costs related to accounting, audit, and corporate legal expenses. Unallocated corporate overhead costs are presented as a reconciling item between total income (loss) from reportable segments and our unaudited condensed consolidated financial results. For more information about our Segment Reporting, see “Note 13 – Segment information” in our unaudited condensed consolidated financial statements.

We prepare our unaudited condensed consolidated financial statements in accordance with U.S. GAAP. In addition to disclosing financial resultsmeasures prepared in accordance with U.S. GAAP, we disclose information regardingpresent Adjusted EBITDA which isEBITDA, a non-GAAP financial measure. We define Adjusted EBITDA as net income (loss), determined in accordance with U.S. GAAP, for the period presented, before netinterest expense, interest and expense,income, income tax (expense) benefit,taxes, depreciation and amortization, transactiontransaction-related expensecredits, (credit)changes related toin the Business Combination and change in fair value of warrant liabilities.liabilities, impairment charges, and certain gains or losses associated with equity method investments that are not considered indicative of our core operating performance.

FCG prepares standalone consolidated financial statements in accordance with U.S. GAAP. In addition to disclosing FCG's standalone financial results prepared in accordance with U.S. GAAP, we disclose information regarding FCG's standalone Adjusted EBITDA which is a non-GAAP measure. FCG defines Adjusted EBITDA as net income,income determined in accordance with U.S. GAAP, for the period presented,(loss) before netinterest expense, interest and expense,income, income tax expense,taxes, depreciation and amortizationamortization, and gain on sale of land.

Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations. Our primary short-term cash requirements are to fund working capital, short-term debt, acquisitions, contractual obligations and other commitments. Our medium-term to long-term cash requirements are to service and repay debt and to invest in facilities, equipment, technologies, location-based entertainment, media production and research and development for growth initiatives. Our principal sources of liquidity are funds from operations, borrowings, equity contributions from our existing investors, distributions from equity method investees and cash on hand.

As of MarchJune 31,30, 2026, our total indebtedness was approximately $16.7$16.5 million. We had approximately $1.2$3.1 million of cash and $13.2$12.9 million available for borrowing under our lines of credit.

We anticipate managing our operations to ensure that our existing cash on hand and unused capacity on our existing lines of credit, along with cash flows from operations, distributions from equity method investees, additional debt and equity capital raises, and our portfolio of assets can provide additional liquidity over the next twelve months to meet our short-term needs. Management’s assessment of our ability to meet itsour obligations over the next twelve months is based on current liquidity levels and assumes the continued execution of itsour operating plan and certain financing and capital initiatives. WhileAlthough managementcash believesflows thesefrom assumptionsoperations arehave reasonable,improved compared with prior comparable periods, we have incurred recurring operating losses and negative cash flows from operations.operations Thesein conditions,recent togetherperiods withand ourhave ongoing capital needs to support itsour growth initiatives and workingto capitalsettle requirements,short-term debt obligations. These conditions raise substantial doubt about our ability to continue as a going concern. We continue to take active steps to strengthen itsour capital position and improve liquidity, including pursuing additional financing and evaluating strategic alternatives; however, because these actions had not been completed as of the date of issuance of these financial statements, they do not alleviate the substantial doubt described above. We continue to take active steps to strengthen our capital position and improve liquidity, including pursuing additional financing and evaluating strategic alternatives. While management believes these actions may enhance our financial flexibility, they do not change the conclusion that substantial doubt exists about our ability to continue as a going concern.

As of MarchJune 31,30, 2026, we have a working capital deficiencydeficit of $12.9$8.4 million, includingdriven short-termby the $6.9 million Deferred Loan Settlement, which is included within the $8.9 million of debt obligations ofclassified $9.3as million.current based on their contractual maturity dates. We are actively evaluating refinancing and other alternatives with respect to these obligations. See “Note 6 – Long-term debt and borrowing arrangements” in our unaudited condensed consolidated financial statements for further discussion.

Our capital requirements will depend on many factors, including the timing and extent of spending to support our research and development efforts, investments in technology, the expansion of sales and marketing activities, and market adoption of new and enhanced products and features. In addition, we expect to incur additionalcompliance and oversight costs as a result of operating as a public company. We expect our capital expenditures and working capital requirements to increase materially in the near future. Our ability to generate cash in the future depends on our financial results which are subject to general economic, financial, competitive, legislative and regulatory factors that may be outside of our control. Our future access to, and the availability of credit on acceptable terms and conditions, is impacted by many factors, including capital market liquidity and overall economic conditions. In the event that additional financing is required from outside sources, we cannot be sure that any additional financing will be available to us on acceptable terms if at all. If we are unable to raise additional capital when desired, our business, operating results, and financial condition could be adversely affected. See the section of our Annual Report titled “Risk Factors – We will require additional capital, which additional financing may result in restrictions on our operations or substantial dilution to our stockholders, to support the growth of our business, and this capital might not be available on acceptable terms, if at all.”

We have two financing agreements with Infinite Acquisitions with a total outstanding balance of $7.3$7.6 million and $5.0 million as of MarchJune 30, 2026 and December 31, 2026.2025, respectively.

We have a financing agreement with Katmandu Ventures, LLC (“Katmandu Ventures”) with a total outstanding balance of $0.6 million as of MarchJune 31,30, 2026. The loan was due on May 16, 2025 and we are in negotiations to amend the loan. There was a total outstanding balance of $1.1 million as of December 31, 2025, which was inclusive of a second financing agreement that was repaid in full during February 2026.

See "“Note 6 – Long-term debt and borrowing arrangements" and "Note 14 – Related party transactions"” in our unaudited condensed consolidated financial statements.statements for further discussion.

OurNet cash flows used in operating activities increaseddecreased for the threesix months ended MarchJune 31,30, 2026, compared to the same period in 2025, primarily due to theimproved continuedoperating investmentperformance and favorable changes in working capitalcapital. forIn theaddition, growthwe of the Falcon's Attractions business, partially offset byreceived a $1.7 million dividend distribution from PDP.PDP in the current period.

Net cash provided by investing activities increaseddecreased for the threesix months ended MarchJune 31,30, 2026, compared to the same period in 2025, primarily related to a $1.5 millionthe dividend distribution from Karnival.PDP from the gain on sale from Tenerife in the prior period. In the current period we received $5.4 million dividend distributions from Karnival and made short-term advances of $4.3 million to FCG.

Net cash provided by financing activities increaseddecreased for the threesix months ended MarchJune 31,30, 2026, compared to the same period in 2025, primarily relateddue to lower net borrowings. Net debt proceeds ofwere $1.2$0.9 million ofduring debt.the current period, compared to $6.9 million during the prior period.