Falcon's Beyond Global, Inc. (FBYD)

Item 7. Management’s discussion and analysis of financial condition and results of operations.

The following discussion and analysis of financial condition and results of operations of the Company is provided to supplement the audited consolidated financial statements and the accompanying notes of the Company as of and for the years ended December 31, 2024, and 2023, included elsewhere in this Annual Report. We intend for this discussion to provide the reader with information to assist in understanding the Company’s audited 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 Statement Regarding Forward-Looking Statements and Risk Factor Summary,” in this Annual Report.

Overview of Business

The Company operates at the intersection of three potential high-growth business opportunities: content, technology, and experiences. We create immersive entertainment experiences by designing theme parks, developing engaging content, and bringing brands to life through innovative storytelling and technology. We aim to engage, inspire, and entertain people through our creativity and innovation, and to connect people with brands, with each other, and with themselves through the combination of digital and physical experiences. At the core of our business is brand creation and optimization, facilitated by our multi-disciplinary creative teams. The Company has three business divisions, which are conducted through four and five operating segments as of December 31, 2024 and 2023, respectively.

Our business divisions complement each other as we pursue our growth strategy: (i) the Company’s Falcon’s Creative Group division (“FCG”) creates master plans, designs attractions and experiential entertainment, and produces content, interactives and software; (ii) the Company’s Falcon’s Beyond Destinations division (“FBD”), consisting of Producciones de Parques, S.L., a joint venture between Falcon’s and Meliá Hotels International, S.A. (“Meliá”) (“PDP”), Sierra Parima S.A.S., a joint venture between Falcon’s and Meliá (“Sierra Parima”) (Sierra Parima’s Katmandu Park DR was closed to visitors on March 7, 2024), and Destinations Operations, develops a diverse range of entertainment experiences using both Falcon’s owned and third party licensed intellectual property, spanning location-based entertainment, dining, and retail; and (iii) the Company’s Falcon’s Beyond Brands division (“FBB”) endeavors to bring brands and intellectual property to life through animation, movies, licensing and merchandising, gaming, as well as ride and technology sales.

We went public and listed our shares on Nasdaq on October 6, 2023, in connection with a Business Combination with FAST Acquisition Corp. II.

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

The following reflects our results of operations for the years ended December 31, 2024 and 2023.

Recent Developments

Overview of FCG

Since July 27, 2023, FCG has been deconsolidated and accounted for as an equity method investment in the Company’s consolidated financial statements. FCG generated a majority of the Company’s consolidated revenue and contract asset and liability balances. Any discussions related to results, operations, and accounting policies associated with FCG are referring to the periods prior to deconsolidation. After deconsolidation, as of July 27, 2023, FCG’s results of operations are included in the Company’s consolidated statements of operations and comprehensive income (loss) as a component of Share of loss from equity method investments.

On July 27, 2023, pursuant to the Subscription Agreement (the “Subscription Agreement”) by and between FCG and QIC Delaware, Inc., a Delaware corporation and an affiliate of Qiddiya Investment Company (“QIC”), QIC agreed to invest $30.0 million in FCG (the “Strategic Investment”). On July 27, 2023, in connection with the Strategic Investment, FCG received a net closing payment from QIC of $17.5 million (net of $0.5 million in reimbursements). In addition, in March 2024, the Company established the Falcon’s Beyond Global, LLC Long-Term Incentive Plan, effective as of January 1, 2024 (the “Opco Incentive Plan”) to allow Falcon’s Opco to reward certain eligible employees of Falcon’s Opco and its subsidiaries, including FCG. As a result of establishing the Opco Incentive Plan, in April 2024, QIC released the remaining $12.0 million investment into FCG pursuant to the terms of the Subscription Agreement. These funds are to be used exclusively by FCG to fund its operations and growth and cannot be used to satisfy the commitments of other segments.

Liquidity and Going Concern

The Company has been engaged in expanding its operations through its equity method investments, developing new product offerings, raising capital and recruiting personnel. The Company has incurred a loss from operations, an accumulated deficit, and negative cash

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flows from operating activities for the year ended December 31, 2024. 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 liabilities that are owed or are maturing at this time and to fund ongoing operations. There can be no assurance that additional capital or financing raises, 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.

In April 2024, Falcon’s Opco entered into a term loan agreement with Katmandu Ventures, LLC (“Katmandu Ventures”), a greater than 10% shareholder of the Company, pursuant to which Katmandu Ventures made a loan to Falcon’s Opco in the principal amount of approximately $7.2 million, and a term loan agreement with Universal Kat Holdings, LLC (“Universal Kat”) pursuant to which Universal Kat has made a loan to Falcon’s Opco in the principal amount of approximately $1.3 million. Such term loans bear interest at a rate of 8.88% per annum, payable quarterly in arrears, with an original maturity of March 31, 2025. Approximately $5.4 million of the proceeds of the term loans was used to repay a portion of the outstanding loans under the Infinite Acquisitions revolving credit arrangement.

On June 14, 2024, Universal Kat assigned its entire loan, and Katmandu Ventures assigned $6.3 million of its loan to FAST Sponsor II, LLC (“FAST II Sponsor”), in exchange for the sale of Class A shares of Falcon’s Opco held by FAST II Sponsor. Falcon’s Opco provided written consent of the assignment. This transfer was between FAST II Sponsor and Katmandu Ventures and Universal Kat, respectively. There were no additional changes to the loan agreement terms due to this reassignment.

During 2024, Falcon's Opco entered into three loan amendments with Universal Kat and FAST II to amend the maturity date to February 28, 2025, increase the fixed interest rate after November 16, 2024 to 11.75%, and defer interest and principal payments within five business days after the earlier of Falcon's Opco receives: 1) cash proceeds of $10.0 million or more from a debt or equity transaction, or 2) a distribution of funds from PDP as a result of an asset sale transaction. If an asset sale transaction is not completed on or before January 31, 2025, the Company will pay $0.25 million, and if the asset sale is not completed on or before February 28, 2025, the Company will pay an additional $0.25 million.

As of March 31, 2025, we have accrued interest and the additional $0.5 million payment and we are in negotiations to amend the loans.

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 consolidated statements of operations and comprehensive income (loss). On September 30, 2024, earnout participants agreed to forfeit all remaining earnout shares held in escrow, which were to be to be released and earned based on meeting earnings before interest, taxes, depreciation and amortization (“EBITDA”) and revenue targets. An aggregate of 437,500 shares of Class A common stock and 17,062,500 shares of Class B common stock and an equal number of Falcon’s Opco units were forfeited in connection with the earnout shares forfeiture.

The forfeiture is treated as a modification of the original earnout agreement. The remaining earnout shares which are to be released and earned based on the Company’s stock price meet the requirements for equity classification after the modification. The Company adjusted the fair value of the earnout shares a final time on September 30, 2024, immediately prior to the modification. The total adjusted liability balance, including the amount associated with the forfeited earnout shares, was reclassified into equity on September 30, 2024.

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. For the year ended December 31, 2024 and 2023, respectively, the Company recognized $172.3 million of income and $(345.4) million of loss related to the change in the fair value of earnout liabilities included in the consolidated statement of operations and comprehensive income (loss). After the reclassification to equity, the earnout shares do not require subsequent fair value measurement. See Note 16 – Fair value measurement in the Company’s audited consolidated financial statements for the activity related to the earnout liability during the year ended December 31, 2024.

Factors that May Influence Future Results of Operations

Our financial results of operations may not be comparable from period to period due to several factors. Key factors affecting the results of operations are summarized below.

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Strategic Investment

Our financial results are impacted by the Strategic Investment in FCG. As of July 27, 2023, the date the Company ceased to have a controlling financial interest, FCG was deconsolidated and accounted for as an equity method investment. Until the five-year anniversary of the Strategic Investment, (i) FCG may not make any distributions (except for tax distributions) to any of its members and (ii) FCG will reinvest all of its available cash to support the growth and capacity of FCG and its subsidiaries for any projects, products and purchase orders submitted by QIC to FCG and its subsidiaries. These limitations in the use of available cash restrict FCG’s ability to distribute cash to Falcon’s Opco and, in turn, Falcon’s Opco’s ability to distribute cash to the Company, which could have an adverse impact on the Company’s liquidity and ability to repay its outstanding loans.

Equity Method Investments

Our financial results are impacted by our 50% ownership of the equity interests in three of our unconsolidated joint ventures, PDP, Sierra Parima and Karnival. Additionally, starting from the deconsolidation of FCG on July 27, 2023, our financial results are impacted by our 75% ownership of FCG, as described further below. Prior to July 27, 2023, FCG’s results and balances were consolidated with the Company.

Our four unconsolidated joint ventures are recognized as equity method investments. We have recognized $(3.1) million and $(52.4) million Share of loss from equity method investments, including our share of losses and impairments of the Sierra Parima joint venture of $(43.1) million in 2023, for the years ended December 31, 2024 and 2023, respectively.

The Company has a 50% interest in Karnival, a joint venture established with Raging Power Limited. The purpose of the joint venture is to hold ownership interests in entities developing and operating amusement centers located in the People’s Republic of China. The first facility is under development in Hong Kong. For the year ended December 31, 2024, the Company's share of net income from Karnival remained consistent. The results of operations for Karnival are immaterial for the years ended December 31, 2024, and 2023.

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

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

Timing of Current Projects and Future Geographic and Product Expansion

Our financial results and liquidity needs vary from quarter-to-quarter or year-to-year depending on the timing of:

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our signing of agreements with and related disbursement from our clients

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FCG’s signing of agreements with and related disbursements from QIC

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completion of our current projects

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completion of Karnival’s Vquarium Entertainment Center

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our contributions to our existing and new joint ventures

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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 music offerings, theme park admissions, hotel room charges and merchandise, sales of licensed consumer products or sales of our other consumer products and services.

Risks Associated with Future Results of Operations

For additional information on the risks associated with future results of operations, please see Item 1A. Risk Factors of this Annual Report.

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Components of Our Results of Operations

Overall note regarding the deconsolidation of FCG

The results of operations includes approximately seven months of activity related to FCG prior to deconsolidation during the year ended December 31, 2023. Prior to deconsolidation, FCG’s operations generated a majority of the Company’s consolidated revenue and contract asset and liability balances. Any discussions related to results, operations, and accounting policies associated with FCG refer to the periods prior to deconsolidation. After deconsolidation as of July 27, 2023, FCG’s results of operations are included in the Company’s consolidated statement of operations and comprehensive income (loss) as a component of Share of loss from equity method investments financial statements. See Deconsolidation of Falcon’s Creative Group LLC under Note 1 – Description of business and basis of presentation in the Company’s consolidated financial statements for further discussion. FCG’s separate consolidated financial statements included elsewhere in this Annual Report include FCG’s results for the full years ended December 31, 2024 and 2023, respectively.

Revenue

In our FCG segment, FCG generates revenue from master planning, attraction design, experiential entertainment, content production, interactives, and software. The Company’s retained investment in FCG is accounted for under the equity method and, subsequent to the deconsolidation of FCG on July 27, 2023, FCG revenue is no longer included in the results of operations. In our Destinations Operations segment, revenues may be generated through the management of resorts and theme parks and incentive fees. In our FBB segment, revenues were generated through the licensing of digital media for the year ended December 31, 2023.

Project design and build expense

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

Selling, general and administrative expense

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

Transaction expenses are stated separately in the results of operations. Transaction expenses include professional services expenditures directly related to business combinations, other investments, and disposals of other assets and liabilities that qualify as a business.

Credit loss expense

Our credit loss expense includes expected credit loss reserve activity related to accounts receivable balances with our unconsolidated joint venture Sierra Parima.

Research and development expense

Much of our intellectual property has been developed and tested in-house. We have established a team to develop the full slate of software, hardware and systems that power our products, integrating product management, engineering, analytics, data science, and design. Research and development expenses primarily consist of internal labor involved in research and development activities primarily related to the development of new FBB products across a broad range of sectors (e.g., physical theme parks, ride systems, media content and consumer merchandise), as well as development of the new asset-efficient strategy in our FBD business. Research and development expenses are expensed in the period incurred. We expect expenses to increase in future periods as we continue to invest in research and development activities to achieve our operational and commercial goals. See “Item 1. Business – Intellectual Property Research and Development” for more information.

Intangible asset impairment expense

Our intangible asset impairment expense consists entirely of the impairment of the Ride Media Content (“RMC”) intangible asset owned by our FBB segment.

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Depreciation and amortization expense

Our Depreciation and amortization expense is primarily attributed to the amortization of finite-lived intangible assets, comprising of RMC, trade names, customer relationships, developed technology and right-of-use assets for our finance lease. All trade names, customer relationships, developed technology and finance lease right-of-use assets have been deconsolidated with FCG as of July 27, 2023. We also incurred depreciation expenses for property and equipment utilized in the operation of our businesses.

Share of loss from equity method investments

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

During 2023 and 2024, our 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 and $14.1 million in impairment losses recognized for investments in equity method investments during the year ended December 31, 2024 and 2023, respectively, entirely related to impairment of the Company’s equity method investment in Sierra Parima. See Note 7 – Investments and advances to unconsolidated joint ventures.

Gain on deconsolidation of FCG

Our gain on deconsolidation consists of the gain recognized on the deconsolidation of FCG. The gain recognized on deconsolidation is the difference between the estimated fair value of the Company’s retained investment in FCG and the carrying value of FCG’s net assets. See Deconsolidation of Falcon’s Creative Group LLC under Note 1 – Description of business and basis of presentation in the Company’s audited consolidated financial statements for further discussion.

Interest expense

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 9 – 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.

Interest income

During fiscal 2023, our Interest income consisted primarily of interest income recognized in connection with licensing the right to use digital ride media content to Sierra Parima. The agreement required ten equal annual payments of $0.3 million to the Company beginning in March 2023. As the payments were deferred over a ten-year period, a significant financing component exists. Therefore, the Company recognized a financing receivable discounted based on the contracted annual payments and recognized interest income beginning in March 2023. As of December 31, 2023, the Company recognized an expected credit loss reserve against all balances due from Sierra Parima, including receivables related to this ride media license. See Credit loss expense in results of operations below. As such, the Company recognized less than $0.1 million in interest income for the year ended December 31, 2024.

Change in fair value of warrant liabilities

The Company accounts for Warrants assumed in connection with the Business Combination (see Note 1 – Description of business and basis of presentation) in accordance with the guidance contained in ASC 815, Derivatives and Hedging (“ASC 815”), under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Warrants as liabilities at their fair value and adjusts the Warrants to fair value at the end of each reporting period. The liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the results of operations.

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Change in fair value of earnout liabilities

At the Closing 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.

On September 30, 2024, earnout participants agreed to forfeit all remaining earnout shares held in escrow, which were to be released and earned based on meeting EBITDA and revenue targets. An aggregate of 437,500 shares of Class A common stock and 17,062,500 shares of Class B common stock and an equal number of Falcon’s Opco units were forfeited in connection with the earnout shares forfeiture.

The forfeiture is treated as a modification of the original earnout agreement. The remaining earnout shares which are to be released and earned based on the Company’s stock price meet the requirements for equity classification after the modification. The Company adjusted the fair value of the earnout shares a final time on September 30, 2024, immediately prior to the modification. The total adjusted liability balance, including the amount associated with the forfeited earnout shares, was reclassified into equity as of September 30, 2024.

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. For the years ended December 31, 2024 and 2023, 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 statement of operations and comprehensive income (loss). After the reclassification to equity, the earnout shares will not require subsequent fair value measurement.

Foreign exchange transaction (loss) gain

Our Foreign exchange transaction (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.

Income tax

The Company is treated as a corporation for U.S. federal and state income tax purposes and is subject to U.S. federal and state income taxes, in addition to local and foreign income taxes, with respect to its allocable share of taxable income generated by Falcon’s Opco. Falcon’s Opco is organized as a limited liability company taxed as a partnership. The consolidated financial statements of Falcon’s Opco do not include a provision for federal or state income tax expense or benefit as our taxable income or loss is included in the tax returns of Falcon’s Opco’s members. Our foreign subsidiaries and unconsolidated joint ventures are subject to tax in their local jurisdiction and we record a provision for income tax expense or benefit where applicable.

Results of Operations

The following comparisons are historical results and are not indicative of future results, which could differ materially from the historical financial information presented.

The results of operations for the year ended December 31, 2023, includes approximately seven months of activity related to FCG LLC prior to deconsolidation on July 27, 2023. Any discussions related to results, operations, and accounting policies associated with FCG are referring to the periods prior to deconsolidation. See Deconsolidation of Falcon’s Creative Group LLC under Note 1 – Description of business and basis of presentation and Note 8 – Investments and advances to equity method investments in the Company’s audited consolidated financial statements.

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The following table summarizes our results of operations for the following periods:

Revenue

Revenue decreased $11.5 million to $6.7 million for the year ended December 31, 2024, compared to $18.2 million for the year ended December 31, 2023. The decrease was primarily attributable to a $14.4 million decrease due to the deconsolidation of FCG and $1.3 million decrease in digital medial services due to the closure of the Sierra Parima Katmandu Park DR. The decrease was partially offset by a $4.2 million increase in revenue for shared services provided by FBG to FCG during the year ended December 31, 2024.

Project design and build expense

Project design and build expense decreased $10.2 million to $0 for the year ended December 31, 2024, compared to $10.2 million for the seven-month period ended December 31, 2023 due to the deconsolidation of FCG.

Selling, general and administrative expense

Selling, general and administrative expense decreased by $5.7 million to $22.4 million for the year ended December 31, 2024, compared to $28.1 million for the year ended December 31, 2023. The decrease was primarily related to a $3.8 million decrease in audit fees and

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professional services fees, a $1.9 million decrease in office and administrative expenses, and a $1.7 million decrease in sales and marketing expenses due to the deconsolidation of FCG and due to reduction in third party accounting, audit, and legal fees relating to public company readiness. These decreases were partially offset by incremental shared services headcount to support the expansion of the business and for public company related costs, representing a $1.6 million increase in payroll, payroll taxes, and benefits.

Transaction expenses

The Company incurred $26.0 million in transaction expenses related to the Business Combination for the year ended December 31, 2023. The transaction expenses for the year ended December 31, 2023 mainly included legal fees, consulting fees, banking fees, printer and transfer agent fees, and excise tax on stock redemptions. These expenses represent costs incurred in excess of funds received in connection with the Business Combination completed in the fourth quarter of 2023.

Credit loss expense

The Company recognized less than $0.1 million and $6.0 million in credit loss expense related to receivables from Sierra Parima for the years ended December 31, 2024 and 2023, respectively.

Research and Development

Research and development expense decreased $1.0 million to $0.2 million for the year ended December 31, 2024, compared to $1.2 million for the year ended December 31, 2023 due to the completion of several major FBB division projects.

Intangible asset impairment expense

Intangible asset impairment expense was $0 and $2.4 million for the year ended December 31, 2024 and 2023, respectively. During 2023, the Company assessed impairment indicators and determined that there has been a significant decrease in the amount of expected ultimate revenue to be recognized from the ride media content asset. Development plans for future parks, where this asset would have been deployed, have been put on hold as the Company evaluates the funding required to develop these parks. These circumstances indicate that the fair value may be less than the unamortized cost of the asset. As significant uncertainty exists as to when capital may be available to commit to these future projects, the Company could not reasonably project any future cash flows from the ride media content, and its value has been fully impaired as of December 31, 2023.

Depreciation and amortization expense

Depreciation and amortization expense decreased $1.6 million to less than $0.1 million for year ended December 31, 2024, compared to $1.6 million for the year ended December 31, 2023, due to the deconsolidation of FCG.

Share of loss from equity method investments

Share of loss from equity method investments decreased $49.4 million to $(3.1) million loss for the year ended December 31, 2024, compared to a $(52.5) million loss for the year ended December 31, 2023. The change in loss from equity method investments was driven by:

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PDP: Share of net income from PDP increased by $4.5 million for the year ended December 31, 2024, compared to the corresponding period in 2023, primarily driven by a $8.9 million increase in PDP’s net income. PDP’s increase in net income was driven by $4.4 million increase in revenue, a $0.9 million decrease in finance and derivative costs and $8.2 million decrease in impairment losses; partially offset by unfavorable changes of $(0.6) million in hotel expenses, $(0.9) million in general and administrative expenses and $(3.1) million in income taxes. The Company recognized its 50% share of PDP’s net income.

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Sierra Parima: As of December 31, 2023, equity investment in Sierra Parima was deemed to be other-than-temporarily impaired and the fair value of the Company’s investment in Sierra Parima was determined to be $0. Therefore, there was no

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gain or loss recorded during the year ended December 31, 2024, compared to a $(43.1) million share of net loss during the year ended December 31, 2023.

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Karnival: Share of net income from Karnival remained consistent for year ended December 31, 2024.

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FCG: Share of net loss from FCG was $(6.4) million for the year ended December 31, 2024, which was consolidated by the Company until July 27, 2023, during the year ended December 31, 2023. The Company recognizes 100% of net income, 9% preferred return to QIC and amortization of the basis difference on deconsolidation of FCG. FCG net loss of $(0.6) million for the year ended December 31, 2024 was increased by adjustments of $(5.8) million comprised of $(2.5) million in accretion of preference dividend and fees, and $(3.3) million in amortization of basis difference.

Gain on deconsolidation of FCG

The Company recognized a gain on deconsolidation of FCG of $27.4 million for the year ended December 31, 2023. The gain recognized on deconsolidation is the difference between the estimated fair value of the Company’s retained investment in FCG and the carrying value of FCG’s net assets.

Interest expense

Interest expense increased by $0.8 million to $1.9 million for the year ended December 31, 2024, compared to $1.1 million for the year ended December 31, 2023 as a result of the increase in outstanding debt and interest rates on both short and long-term debt.

Interest income

Interest income decreased by $0.1 million to less than $0.1 million for the year ended December 31, 2024, compared to $0.1 million for the year ended December 31, 2023.

Change in fair value of warrant liability

Loss due to change in fair value of warrant liabilities increased $2.2 million to $(0.8) million for year ended December 31, 2024, compared to $(3.0) million for the year ended December 31, 2023 driven by the increase in the market value of the Warrants for the year ended December 31, 2024.

Change in fair value of earnout liability

Gain due to change in fair value of earnout liability was $172.3 million for the year ended December 31, 2024, driven by $20.6 million decrease in the market price of the Company’s stock between December 31, 2023 and April 29, 2024 when the 2023 performance based awards were remeasured prior to release of shares from escrow, a $9.4 million change in assumptions regarded performance expectations in Q4, 2024 due to timing of contracts, and a $142.3 million decrease in the remaining earnout liabilities due to a decrease in the market price of the Company’s stock between December 31, 2023 and September 30, 2024. Loss due to change in fair value of earnout liability was $(345.4) million for the year ended December 31, 2023, driven by the increase in the market value of the Company’s stock between closing of the Business Combination and December 31, 2023. As of December 31, 2024, all EBITDA and revenue based earnout shares have been earned or forfeited. The remaining earnout shares based on Company stock price targets have been reclassified to equity and will not require subsequent fair value measurement.

Foreign exchange transaction (loss) gain

Foreign exchange transaction (loss) gain increased $1.5 million to a $(1.1) million loss for the year ended December 31, 2024, compared to a $0.4 million gain for the year ended December 31, 2023. The decrease was primarily attributable to the unrealized foreign exchange loss on U.S. denominated related party debt with a Spanish subsidiary as the U.S. dollar strengthened against the Euro during the year ended December 31, 2024 and weakened against the Euro during the year ended December 31, 2023.

Income tax

Income tax (expense) benefit was less than $(0.1) million and $0.3 million for the years ended December 31, 2024 and 2023, respectively.

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Segment Reporting

The following table presents selected information about our segments' results. Subsequent to FCG’s deconsolidation on July 27, 2023 FCG segment income or loss is comprised of the Company’s equity method share of FCG’s income or loss:

Total segment loss from operations decreased $21.5 million to $(0.1) million loss for the year ended December 31, 2024, compared to $(21.6) million loss for the year ended December 31, 2023, due to the following:

•
FCG segment loss for the year ended December 31, 2024, decreased $12.5 million to $1.2 million gain as compared to loss of $(11.3) million in the year ended December 31, 2023, primarily as a result of an increase in revenues and improved margins on new long-term contracts. These positive results were partially offset by adjustments of $(5.8) million comprised of $(2.5) million in accretion of preference dividend and fees, and $(3.3) million in incremental amortization on the intangible assets on the difference between the Company’s share of net assets measured at fair value and FCG’s carrying value.

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FCG recorded revenues of $53.2 million in the year ended December 31, 2024, representing an increase of $30.6 million or 136% over the year ended December 31, 2023. As previously announced on January 18, 2024, FCG entered into a consultancy agreement with QIC to provide a Dragon Ball theme park over the course of approximately two years. FCG recognized $36.3 million in revenue relating to this Dragon Ball consultancy agreement during the year ended December 31, 2024.

FCG recorded an operating loss of $(0.1) million, and net loss of $(0.6) million during the year ended December 31, 2024, compared to an operating loss of $(12.6) million and net loss of $(12.5) million for the corresponding period of 2023.

•
Destinations Operations segment loss from operations for the year ended December 31, 2024, decreased $0.4 million to $(1.4) million loss compared to loss of $(1.8) million for the year ended December 31, 2023, due to a reduction in marketing and research and development spend for projects that were completed in 2023.

•
PDP segment income for the year ended December 31, 2024, increased $1.8 million to $3.0 million compared to $1.2 million for the year ended December 31, 2023. The increase is primarily driven by a $8.9 million increase in PDP’s net income. PDP’s increase in net income was driven by a $4.4 million increase in revenue, a $0.9 million decrease in finance and derivative costs and $8.2 million decrease in impairment losses; partially offset by unfavorable changes of $(0.6) million in hotel expenses, $(0.9) million in general and administrative expenses and $(3.1) million in income taxes. The Company recognized its 50% share of PDP’s net income.

•
The Sierra Parima Katmandu Park closed in March of 2024 following financial, operational, and infrastructure challenges, closing the segment going forward. The investment has been fully impaired as of December 31, 2023, and the Company has no further obligation to participate in losses of Sierra Parima. As a result, there were no segment operations to report for Sierra Parima segment for the year ended December 31, 2024.

•
FBB segment loss from operations for the year ended December 31, 2024 decreased $1.0 million to $(3.0) million compared to $(4.0) million for the year ended December 31, 2023. For the year ended December 31, 2024 revenue decreased $1.5 million related to a digital media licensing contract with Sierra Parima. Research and development expenses decreased $1.0 million due to completed projects and less emphasis on developing new products while shifting to marketing projects. Selling, general and administrative expense decreased by a $1.5 million due to project timing.

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 (losses) from reportable segments and the Company’s consolidated financial results. For more information about our Segment Reporting, see Note 15 – Segment information in the Company’s audited consolidated financial statements.

Non-GAAP Financial Measures

We prepare our consolidated financial statements in accordance with US GAAP. In addition to disclosing financial results prepared in accordance with US GAAP, we disclose information regarding Adjusted EBITDA which is a non-GAAP measure. We define Adjusted EBITDA as net income (loss), determined in accordance with US GAAP, for the period presented, before net interest and expense, income tax expense, depreciation and amortization, transaction expenses related to the business combination, credit loss expense related to the closure of the Sierra Parima Katmandu Park, share of equity method investee’s impairment of fixed assets, impairment of equity method investments, change in fair value of warrant liabilities, change in fair value of earnout liabilities, intangible asset impairment loss, and gain on deconsolidation of FCG.

We believe that Adjusted EBITDA is useful to investors as it eliminates the non-cash depreciation and amortization expense that results from our capital investments and intangible assets recognized in any business combination and improves comparability by eliminating the interest expense associated with our debt facilities, and eliminating the change in fair value of warrant and earnout liabilities, which may not be comparable with other companies based on our structure.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under US GAAP. Some of these limitations are (i) it does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments, (ii) it does not reflect changes in, or cash requirements for, our working capital needs, (iii) it does not reflect interest expense, or the cash requirements necessary to service interest or principal payments, on our debt, (iv) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements, (v) it does not adjust for all

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non-cash income or expense items that are reflected in our statements of cash flows, and (vi) other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures.

The following table sets forth reconciliations of net income (loss) under US GAAP to Adjusted EBITDA for the following periods:

Adjusted EBITDA increased by $13.2 million from $(33.2) million loss to $(20.0) million loss for the year ended December 31, 2024, primarily driven by a decrease of $9.3 million in the share of loss from equity method investments, a decrease in research and development expenses of $1.0 million, a net adjusted EBITDA decrease of $2.1 million as a result of the FCG deconsolidation and a $3.0 million increase in revenue. These increases were partially offset by increases in foreign exchange transaction loss of $1.5 million and selling, general, and administrative expense of $0.7 million.

FCG prepares standalone consolidated financial statements in accordance with US GAAP. In addition to disclosing FCG's standalone financial results prepared in accordance with US GAAP, we disclose information regarding FCG's standalone Adjusted EBITDA which is a non-GAAP measure. FCG defines Adjusted EBITDA as net income (loss), determined in accordance with US GAAP, for the period presented, before net interest and expense, income tax expense, depreciation and amortization, and credit loss expense related to the closure of the Sierra Parima Katmandu Park.

FCG believes that Adjusted EBITDA is useful to investors as it eliminates the non-cash depreciation and amortization expense that results from FCG's capital investments and intangible assets recognized in any business combination and improves comparability by eliminating the interest expense associated with our debt facilities, which may not be comparable with other companies based on our structure.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of FCG's standalone results as reported under US GAAP. Some of these limitations are (i) it does not reflect FCG's cash expenditures, or future requirements for capital expenditures or contractual commitments, (ii) it does not reflect changes in, or cash requirements for, FCG's working capital needs, (iii) it does not reflect interest expense, or the cash requirements necessary to service interest or principal payments, on FCG's debt, (iv) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements, (v) it does not adjust for all non-cash income or expense items that are reflected in FCG's statements of cash flows, and (vi) other companies in our industry may calculate these measures differently than FCG does, limiting their usefulness as comparative measures.

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The following table sets forth reconciliations of net income (loss) for FCG under US GAAP to Adjusted EBITDA for the following periods:

Adjusted EBITDA increased by $8.9 million from $(7.8) million loss to $1.1 million gain for the year ended December 31, 2024, primarily driven by an increase in revenues of $30.6 million, a decrease of $0.8 million selling, general, and administrative expenses, a decrease of $0.4 million inventory write off; partially offset by an increase in project design and build expenses of $22.9 million. As of December 31, 2024, the contracted pipeline for FCG was $36.4 million.

Liquidity and Capital Resources

Sources and Uses of Liquidity

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 borrowings, equity contributions from our existing investors, distributions from equity method investees and cash on hand.

As of December 31, 2024, our total indebtedness was approximately $41.2 million. We had approximately $825 thousand of cash and $0.9 million available for borrowing under our lines of credit.

During the year ended December 31, 2024, Infinite Acquisitions loaned an additional $12.5 million to the Company pursuant to the revolving credit arrangement. The revolving credit arrangement is subject to an annual fixed interest rate of 2.75% and matures in September 2034. Further, in April 2024, Falcon’s Opco entered into a one-year term loan agreement with Katmandu Ventures for $7.221 million and a one-year term loan agreement with Universal Kat for $1.25 million. The term loan with Katmandu Ventures and the term loan with Universal Kat both bear interest at a rate of 8.88% per annum, payable quarterly in arrears, with an original maturity of March 31, 2025. Approximately $5.4 million of the combined proceeds of the term loans from Katmandu Ventures and Universal Kat were used to repay a portion of the Infinite Acquisitions revolving credit arrangement.

On June 14, 2024, Katmandu Ventures and Universal Kat assigned the loans (in part for Kat Ventures of $6.3 million and in full for Universal Kat) to FAST II Sponsor in exchange for the sale of Class A shares of the Company held by FAST II Sponsor. This transfer is solely between Universal Kat, Katmandu Ventures and FAST II Sponsor. Falcon’s Opco provided written consent on the assignment. There were no additional changes to the loan agreement terms due to this reassignment.

During 2024, Falcon's Opco entered into three loan amendments with Universal Kat and FAST II to amend the maturity date to February 28, 2025, increase the fixed interest rate after November 16, 2024 to 11.75%, and defer interest and principal payments within five business days after the earlier of Falcon's Opco receives: 1) cash proceeds of $10.0 million or more from a debt or equity transaction, or 2) a distribution of funds from PDP as a result of an asset sale transaction. If an asset sale transaction is not completed on or before January 31, 2025, the Company will pay $0.25 million, and if the asset sale is not completed on or before February 28, 2025, the Company will pay an additional $0.25 million.

As of April 3, 2025, we have accrued interest and the additional $0.5 million payment and we are in negotiations to amend the loans.

We anticipate managing our operations to ensure that our existing cash on hand and unused capacity on our existing lines of credit, along with distributions from equity method investees, additional debt and equity capital raises, and reviewing our portfolio of assets

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to provide additional liquidity over the next twelve months to meet our short-term needs. Currently, we do not have sufficient cash from operations and unused capacity to meet the next twelve months of our operations.

For the year ended December 31, 2024, we have operational losses, accumulated deficits, and negative cash flows from operating activities that raise substantial doubt about our ability to continue as a going concern. As of December 31, 2024, we have $25.9 million of accrued expenses and other current liabilities, which include $20.7 million of transaction and other related professional fees, $2.2 million of excise tax payable on FAST II stock redemptions, $1.5 million of accrued payroll and related expenses, and approximately $1.5 million of other accrued expenses and current liabilities. The transaction expenses are actively being negotiated, and actual settlement may vary from the amounts recorded. Additionally, as of December 31, 2024, we have unfunded commitments to Karnival of $2.4 million (HKD 18.7 million), to be used for the purpose of constructing the Vquarium Entertainment Centers in Hong Kong. On July 27, 2023, FCG received a closing payment from QIC of $17.5 million (net of $0.5 million in reimbursements). On April 16, 2024, QIC released the remaining $12.0 million of the $30.0 million investment to Falcon’s Creative Group, LLC, a deconsolidated subsidiary which is 75% owned by Falcon’s Opco and 25% owned by QIC (“FCG LLC”) upon the establishment of the employee retention and attraction incentive program. These funds are to be used exclusively by the FCG segment to fund its operations and growth and cannot be used to satisfy the commitments of other segments. Until we can generate sufficient revenue from our four reportable segments to cover operating expenses, working capital and capital expenditures, we expect funds raised from additional capital and debt raises to fund our cash needs.

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 additional 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.”

Contractual and Other Obligations

Tax Receivable Agreement

In connection with the Closing of the Business Combination, the Company entered into the Tax Receivable Agreement with Falcon’s Opco, the TRA holder representative, certain members of Falcon’s Opco (the “TRA Holders”) and other persons from time-to-time party thereto. Pursuant to the Tax Receivable Agreement, among other things, the Company is required to pay to each TRA Holder 85% of certain tax benefits, if any, that it realizes (or in certain cases is deemed to realize) as a result of the increases in tax basis resulting from any exchange of new Falcon’s Opco units for Class A Common Stock or cash in the future and certain other tax benefits arising from payments under the Tax Receivable Agreement. In certain cases, the Company’s obligations under the Tax Receivable Agreement may accelerate and become due and payable, based on certain assumptions, upon a change in control and certain other termination events, as defined in the Tax Receivable Agreement. On October 24, 2024, the Company and Exchange TRA Holders entered into an Amendment to the Tax Receivable Agreement to clarify the rights of a TRA Holder that transfers units but does not assign the transferee its rights under the TRA Agreement with respect to such transferred units.

Commitments

Partnership with Raging Power Limited

Pursuant to the terms of our joint venture agreement with Raging Power, Falcon’s and Raging Power are each required to provide funding to Karnival in the form of non-interest-bearing advances, which will be repaid based on a percentage of gross revenues from the operation of the themed virtual ocean adventure attraction we are developing at the new 11 SKIES complex adjacent to the Hong Kong Airport. Accordingly, the joint venture agreement provides that we receive 16.6% to 20.6% of gross revenue of such location. As of December 31, 2024, we have unfunded commitments to Karnival of $2.4 million (HKD 18.7 million).

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Transaction costs

Pursuant to the Business Combination during the year ended December 31, 2023, the Company received net cash proceeds from the Business Combination totaling $0.9 million, net of $1.3 million of FAST II transaction costs and $1.6 million of Falcon’s Opco transaction costs paid at Closing. FAST II and Falcon’s Opco transaction costs related to the Business Combination of $6.3 million and $15.7 million, respectively, are not yet settled as of December 31, 2024 and the Company is actively negotiating to settle them over the next 24 months. These transaction costs are recorded in accrued expenses and long-term payables. Negotiations regarding the terms of the costs yet to be settled are still ongoing and may change materially from these amounts accrued.

The Company is named from time to time as a party to lawsuits and other types of legal proceedings and claims in the normal course of business. On March 27, 2024, a lawsuit was filed against the Company by Guggenheim Securities, LLC (“Guggenheim”) in which Guggenheim alleges that the Company owes certain fees and expenses of $11.1 million for services allegedly performed by Guggenheim in connection with the Business Combination consummated on October 6, 2023 (the “Guggenheim Complaint”). The Company has denied all liability in response to the Guggenheim Complaint. In addition, the Company has filed counterclaims against Guggenheim for fraudulent inducement, breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, negligence, fraudulent misrepresentation and negligent misrepresentation. Guggenheim has moved to dismiss the counterclaims, and the Company has opposed that motion. The case is in its early stages, discovery has commenced, and the Court has set a readiness for trial date for June 28, 2025. Solely as part of the Company’s accounting approach to transaction expenses related to the Business Combination, prior to the Company’s receipt of the Guggenheim Complaint, the Company accrued $11.1 million as of December 31, 2024 and 2023, with respect to the alleged amended engagement agreement with Guggenheim. The Company intends to vigorously defend itself against the claims alleged in the Guggenheim Complaint and contest the amounts Guggenheim asserts are owed.

Related Party Loans

The Company has entered into various financing agreements with Infinite Acquisitions. As of December 31, 2024, we have aggregate outstanding balances of $28.9 million under these financing agreements.

On June 14, 2024, Universal Kat assigned the entire loan to FAST Sponsor II, LLC (“FAST II Sponsor”), in exchange for the sale by FAST II Sponsor to Universal Kat of Class A shares of Falcon’s Opco held by FAST II Sponsor. Falcon’s Opco provided written consent on the assignment. This transfer was between FAST II Sponsor and Universal Kat, and therefore there was no impact to the Company’s financial statements as a result of this transfer. There were no additional changes to the loan agreement terms due to this reassignment.

During 2024, Falcon's Opco entered into three loan amendments with Universal Kat and FAST II to amend the maturity date to February 28, 2025, increase the fixed interest rate after November 16, 2024 to 11.75%, and defer interest and principal payments within five business days after the earlier of Falcon's Opco receives: 1) cash proceeds of $10.0 million or more from a debt or equity transaction, or 2) a distribution of funds from PDP as a result of an asset sale transaction. If an asset sale transaction is not completed on or before January 31, 2025, the Company will pay $0.25 million, and if the asset sale is not completed on or before February 28, 2025, the Company will pay an additional $0.25 million. As of April 3, 2025, we have accrued interest and the additional $0.5 million payment and we are in negotiations to amend the loans.

For more information regarding our related party transactions, see Note 9 — Long-term debt and borrowing arrangements and Note 11 — Related party transactions in the Company’s audited financial statements.

Cash Flows

The following table summarizes our cash flows for the period presented:

Cash Flows from Operating Activities

Our cash flows used in operating activities are primarily driven by transaction, legal and professional fees associated with public company compliance costs and corporate overhead activities.

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Cash used in operating activities for the year ended December 31, 2024, was $(12.6) million compared to $(23.4) million for the year ended December 31, 2023, representing a $10.8 million decrease in cash used in operating activities due to a reduction in legal and professional fees, and the deconsolidation of FCG.

Cash Flows from Investing Activities

Our primary investing activities consisted of the purchase and sale of property, plant and equipment. Net cash used in investing activities was less than $(0.1) million during the year ended December 31, 2024, compared to $0.3 million net cash provided by investing activities during the year ended December 31, 2023, primarily related to changes in outflows of $0.3 million for purchases of computer equipment and $2.0 million in advances made to unconsolidated joint ventures, partially offset by cash inflows relating to deconsolidation of FCG of $2.6 million.

Cash Flows from Financing Activities

Net cash provided by financing activities decreased to $12.9 million in the year ended December 31, 2024, compared to $15.1 million for the year ended December 31, 2023. The decrease in cash provided by financing activities for the year ended December 31, 2024, consisted primarily of $(3.8) million decrease in proceeds from exercised warrants, $(1.8) million decrease in equity contributions and; partially offset by $1.3 million increase net repayments on third party loans, $1.2 million increase in net proceeds from related party loans and $0.8 million increase in proceeds from RSUs issued by affiliates.

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Estimates

The discussion under “Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” is based upon our consolidated financial statements, which have been prepared in accordance with US GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses as well as the disclosure of contingent assets and liabilities. We regularly review our estimates and assumptions. These estimates and assumptions, which are based upon historical experience and on various other factors believed to be reasonable under the circumstances, form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Reported amounts and disclosures may have been different had management used different estimates and assumptions or if different conditions had occurred in the periods presented. Below is a discussion of the policies that we believe may involve a high degree of judgment and complexity.

We believe that the accounting policies disclosed below include estimates and assumptions critical to our business and their application could have a material impact on our consolidated financial statements. In addition to these critical policies, our significant accounting policies are included within Note 2 – Summary of significant accounting policies in our audited consolidated financial statements.

Revenue

We recognize revenue in accordance with the provisions of FASB ASC 606, Revenue from Contracts with Customers (“ASC 606”), which requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services.

Falcon’s Creative Group

Accounting policies associated with FCG are referring to the periods prior to deconsolidation.

We account for a contract once it has approval and commitment from all parties, the rights and payment terms of the parties can be identified, the contract has commercial substance and the collectability of the consideration, or transaction price, is probable. Contracts are often subsequently modified to include changes in specifications or requirements, these changes are not accounted for until they meet the requirements noted above.

A significant portion of the FCG’s revenue is derived from master planning and design contracts, media production contracts and turnkey attraction contracts. The Company accounts for a contract once it has approval and commitment from all parties, the rights and payment terms of the parties can be identified, the contract has commercial substance and the collectability of the consideration, or transaction price, is probable. Contracts are often subsequently modified to include changes in specifications or requirements. These changes are not accounted for until they meet the requirements noted above. Each promised good or service within a contract is accounted for separately under the guidance of ASC 606, if they are distinct. Promised goods or services not meeting the criteria for being a distinct

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performance obligation are bundled into a single performance obligation with other goods or services that together meet the criteria for being distinct. The appropriate allocation of the transaction price and recognition of revenue is then applied for the bundled performance obligation. The Company has concluded that its service contracts generally contain a single performance obligation given the interrelated nature of the activities which are significantly customized and not distinct within the context of the contract.

Once the Company identifies the performance obligations, the Company determines the transaction price, which includes estimating the amount of variable consideration to be included in the transaction price, if any. The Company’s contracts generally do not contain credits, price concessions, or other types of potential variable consideration. Prices are fixed at contract inception and are not contingent on performance or any other criteria.

The Company engages in long-term contracts for production and service activities and recognizes revenue for performance obligations over time. These long-term contracts involve the planning, design, and development of attractions. Revenue is recognized over time (versus point in time recognition), as the Company’s performance creates an asset with no alternative use to the Company and the Company has an enforceable right to payment for performance completed to date, and the customer receives the benefit as the Company builds the asset. The Company considers the nature of these contracts and the types of products and services provided when determining the proper accounting for a particular contract. These are primarily fixed-price contracts.

For long-term contracts, the Company typically recognizes revenue using the input method, using a cost-to-cost measure of progress. The Company believes that this method represents the most faithful depiction of the Company’s performance because it directly measures value transferred to the customer. Contract estimates are based on various assumptions to project the outcome of future events that may span several years. These assumptions include, but are not limited to, the amount of time to complete the contract, including the assessment of the nature and complexity of the work to be performed; the cost and availability of materials; the availability of subcontractor services and materials; and the availability and timing of funding from the customer. The Company bears the risk of changes in estimates to complete on a fixed-price contract, which may cause profit levels to vary from period to period. For over time contracts, the Company recognizes anticipated contract losses as soon as they become known and estimable.

Accounting for long-term contracts requires significant judgment relative to estimating total costs, in particular, assumptions relative to the amount of time to complete the contract, including the assessment of the nature and complexity of the work to be performed. The Company’s estimates are based upon the professional knowledge and experience of its engineers, program managers and other personnel, who review each long-term contract monthly to assess the contract’s schedule, performance, technical matters and estimated cost at completion. Changes in estimates are applied retrospectively and when adjustments in estimated contract costs are identified, such revisions may result in current period adjustments to earnings applicable to performance in prior periods.

On long-term contracts, the portion of the payments retained by the customer is not considered a significant financing component. At contract inception, the Company also expects that the lag period between the transfer of a promised good or service to a customer and when the customer pays for that good or service will not constitute a significant financing component. Many of the Company’s long-term contracts have milestone payments, which align the payment schedule with the progress towards completion on the performance obligation. On some contracts, the Company may be entitled to receive an advance payment, which is not considered a significant financing component because it is used to facilitate inventory demands at the onset of a contract and to safeguard the Company from the failure of the other party to abide by some or all their obligations under the contract.

Contract balances result from the timing of revenue recognized, billings and cash collections, and the generation of Contract assets and liabilities. Contract assets represent revenue recognized in excess of amounts invoiced to the customer and the right to payment is not subject to the passage of time. Contract liabilities are presented on the Company’s consolidated balance sheets and consist of billings in excess of revenues. Billings in excess of revenues represent milestone billing contracts where the billings of the contract exceed recognized revenues.

Investments in unconsolidated joint ventures

We use the equity method to account for investments in corporate joint ventures when we have the ability to exercise significant influence over the operating decisions of the joint venture. Such investments are initially recorded at cost and subsequently adjusted for our proportionate share of the net earnings or loss of the investee, which is reported in Equity in losses of unconsolidated joint ventures in the results of operations. The dividends received, if any, from these joint ventures reduce the carrying amount of our investment.

Warrant Liabilities

The Company accounts for Warrants assumed in connection with the Business Combination in accordance with the guidance contained in ASC 815, Derivatives and Hedging, under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. The Company remeasures the fair value of the Warrants based on the quoted market price of the Warrants. Accordingly, the Company classifies the Warrants as liabilities at their fair value and adjusts the Warrants to fair value at the end of each reporting period.

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The liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the results of operations.

The Warrant agreement was amended effective January 14, 2025. The amendment provides for the mandatory exchange of the Warrants for shares of Class A Common Stock at an exchange ratio of 0.25 shares of Class A Common Stock per Warrant, on October 6, 2028. The Warrants will not be exercisable and the holders of the Warrants will have no further rights except to receive shares of Class A Common Stock on October 6, 2028.

Earnout Liabilities

At the closing 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 of the Company, 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. The Earnout Shares are classified as a liability and measured at fair value, with changes in fair value included in the results of operations.

On September 30, 2024, earnout participants agreed to forfeit all remaining earnout shares held in escrow, which were to be released and earned based on meeting EBITDA and revenue targets. On September 30, 2024, following the earnout forfeiture, the Company adjusted the fair value of all earnout shares a final time, immediately before the modification and ignoring the effect of the modification. The total adjusted liability balance, including the amount associated with the forfeited earnout shares, was reclassified into equity as of September 30, 2024. After reclassification into equity, the earnout shares do not require subsequent fair value measurement.

New and Recently Adopted Accounting Pronouncements

See Note 2 – Summary of significant accounting policies to our audited consolidated financial statements for more information about recent accounting pronouncements, the timing of their adoption and our assessment, to the extent we made one, of their potential impact on our financial condition and results of operations.

JOBS Act Accounting Election

The Company is an “emerging growth company” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement under the Securities Act declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.

Section 107 of the JOBS Act allows emerging growth companies to take advantage of the extended transition period for complying with new or revised accounting standards. Under Section 107, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. Any decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable. The Company has elected to use the extended transition period available under the JOBS Act, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

The Company will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the effectiveness of the Company’s registration statement on Form S-4 in connection with the Business Combination, (b) in which the Company has total annual revenue of at least $1,235,000,000, or (c) in which the Company is deemed to be a large accelerated filer, which means the market value of its common equity that is held by non-affiliates exceeds $700.0 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which the Company has issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

Smaller Reporting Company

Additionally, the Company is a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. The Company will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of the shares of Class A Common Stock held by non-affiliates exceeds $250.0 million as of the prior June 30, and (ii) the Company’s annual revenue exceeds $100.0 million during such completed fiscal year and the market value of the shares of Class A Common Stock held by non-affiliates exceeds $700.0 million as of the prior June 30. To the extent the Company takes advantage of

71

such reduced disclosure obligations, it may also make comparison of the Company’s financial statements with other public companies difficult or impossible.

Results
of Operations

The
following comparisons are historical results and are not indicative of future results, which could differ materially from the historical
financial information presented.

Any
discussions related to results, operations, and accounting policies associated with FCG are referring to the periods prior to deconsolidation.
The results of operations includes approximately seven months of activity related to FCG LLC prior to deconsolidation in the year ended
December 31, 2023. See Deconsolidation of Falcon’s Creative Group LLC under Note 1 – Description of business and basis
of presentation and Note 8 – Investments and advances to equity method investments in the Company’s audited consolidated
financial statements.

The
following table summarizes our results of operations for the following periods:

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Revenue

Revenue
increased $2.2 million to $18.2 million for the year ended December 31, 2023, compared to $16.0 million for the year ended December 31,
2022. The increase was primarily attributable to:

These
above increases were offset by the following decreases to revenue:

The
Company’s investment in FCG is accounted for under the equity method and, as such, FCG project management and design revenue is
no longer included in the results of operations subsequent to the deconsolidation of FCG on July 27, 2023.

Project
design and build expense

Project
design and build expense decreased $1.1 million to $10.2 million for the seven-month period ended December 31, 2023, compared to $11.3 million
for the year ended December 31, 2022, which represents 15.5% decrease as a percent of revenue driven primarily by an increase in sales
with higher margin projects within FCG compared to the year ended December 31, 2022.

During
the year ended December 31, 2023, we continued to work on long-term higher margin contracts for design and project management services,
most of which are higher dollar value jobs due to their increased length, scale, and complexity, offset by lower margin attraction hardware
and turnkey sales services.

Selling,
general and administrative expense

Selling, general and administrative expense increased $9.5 million
to $28.0 million for the year ended December 31, 2023, compared to $18.5 million for the year ended December 31, 2022. The increase was
primarily related to audit fees and professional services fees along with incremental headcount for public company readiness. Audit and
professional services fees increased $5.4 million from $8.3 million for the year ended December 31, 2022 to $13.7 million for the year
ended December 31, 2023.

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Transaction
expenses

Transaction expenses were $26.0 million for the
year ended December 31, 2023. There were no such expenses for the year ended December 31, 2022. The increase was primarily driven by legal
fees, consulting fees, banking fees, printer and transfer agent fees, and excise tax on stock redemptions. These expenses represent costs
incurred in excess of funds received in connection with the Business Combination completed in the fourth quarter of 2023.

Credit loss expense

Credit loss expenses were $6.0 million for the
year ended December 31, 2023. There were no such expenses for the year ended December 31, 2022. Based on an evaluation of Sierra Parima’s
credit characteristics, the expected credit loss reserve was increased by $6.0 million during the year ended December 31, 2023 which represents
the Company’s estimate of expected credit losses over the contractual life of each receivable. This loss reserve now offsets all
receivables from Sierra Parima as of December 31, 2023. A portion of these reserved receivables was removed from the Company’s balance
sheet with the deconsolidation of FCG.

Research
and Development

Research
and development expense decreased $1.6 million to $1.2 million for the year ended December 31, 2023, compared to $2.8 million for the
year ended December 31, 2022. The expense in both periods relates to the development of new FBB products.

Intangible
asset impairment expense

Intangible
asset impairment expense was $2.4 million for the year ended December 31, 2023. There was no impairment expense for the year ended December
31, 2022. The Company assessed impairment indicators and determined that there has been a significant decrease in the amount of expected
ultimate revenue to be recognized from the ride media content asset. Development plans for future parks, where this asset would have
been deployed, have been put on hold as the Company evaluates the funding required to develop these parks. These circumstances indicate
that the fair value may be less than the unamortized cost of the asset. As significant uncertainty exists as to when capital may be available
to commit to these future projects, the Company could not reasonably project any future cash flows from the ride media content, and its
value has been fully impaired as of December 31, 2023.

Depreciation
and amortization expense

Depreciation and amortization expense increased $0.9 million to $1.6
million for year ended December 31, 2023, compared to $0.7 million for the year ended December 31, 2022, relating primarily to the
amortization of the digital ride media asset of $1.1 million recognized in the first quarter of 2023 when the asset was licensed for use
by Sierra Parima. This increase was partially offset by $0.2 million decrease in depreciation and amortization for all other long-lived
assets. Additionally, increase in year over year depreciation expense would have been larger, however FCG was deconsolidated on July 27,
2023, resulting in only seven months of depreciation expense in the year ended December 31, 2023.

Share
of gain or (loss) from equity method investments

70

Share of loss from equity method investments increased $53.9 million
to ($52.4) million for the year ended December 31, 2023, compared to a $1.5 million gain for the year ended December 31, 2022. The change
in gain or loss from equity method investments was driven by:

Gain
on deconsolidation of FCG

Gain
on deconsolidation of FCG was $27.4 million for the year ended December 31, 2023. There were no gains on deconsolidation for the year
ended December 31, 2022. The gain recognized on deconsolidation is the difference between the estimated fair value of the Company’s
retained investment in FCG and the carrying value of FCG’s net assets. See Deconsolidation of Falcon’s Creative Group
LLC under Note 1 – Description of business and basis of presentation and Note 8 – Investments and advances to equity
method investments in the Company’s audited consolidated financial statements.

Interest
expense

Interest
expense stayed consistent at ($1.1) million for the years ended December 31, 2022 and December 31, 2023. Interest expense was generated
from our related party and third-party loans and lines of credit used primarily during fiscal 2022 and 2023 to fund the development,
acquisition and construction of Katmandu Park in Punta Cana through our investment in the Sierra Parima joint venture and to fund working
capital required in preparation for becoming a public company.

Interest
income

Interest
income of $0.1 million was recognized during the year ended December 31, 2023 from interest income on the long term financing receivable
due from Sierra Parima.

Change
in fair value of warrant liabilities

Loss
due to change in fair value of warrant liabilities increased to ($3.0) million for year ended December 31, 2023, compared to $0 million
for the year ended December 31, 2022 driven by the non-cash increase in the market value of the Warrants between closing of the Business
Combination and December 31, 2023.

Change
in fair value of earnout liability

Loss
due to change in fair value of earnout liability was $345.4 million for the year ended December 31, 2023, driven by the non-cash increase
in the market value of the Company’s stock between closing of the Business Combination and December 31, 2023. There was no such
loss during for the year ended December 31, 2022.

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Foreign
exchange transaction loss

Foreign
exchange transaction gain increased $0.9 million to a $0.4 million gain for the year ended December 31, 2023, compared to a ($0.5) million
loss for the year ended December 31, 2022. The decrease was primarily attributable to the unrealized foreign exchange gain (loss) on
U.S. denominated related party debt with a Spanish subsidiary as the U.S. dollar strengthened against the Euro during the year ended
December 31, 2022 and weakened against the Euro during the year ended December 31, 2023.

Income
tax

Income tax benefit increased by $0.3 million for the year ended December
31, 2023 compared to the year ended December 31, 2022 primarily due to the tax loss post-Merger.

Segment
Reporting

The
following table presents selected information about our segment’s results for the years ended December 31, 2023, and 2022. The
segment results include approximately seven months of FCG’s consolidated activity prior to July 27, 2023. Subsequent to FCG’s
deconsolidation on July 27, 2023 FCG segment income or loss is comprised of only of the Company’s equity method share of FCG’s
income or loss:

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Total
revenue for the year ended December 31, 2023, increased $2.2 million to $18.2 million compared to $16.0 million for the year ended December
31, 2022, primarily driven by an increase in revenue generated within the FCG and FBB segments, which was primarily due to new long-term
contracts for design and project management services at higher contract values, continuation of design and project management projects
with high contract values, and FBB’s digital media contract with Sierra Parima as discussed above.

Additionally,
unallocated corporate revenue related to shared services provided by the Company to FCG also drove revenue increase for the year ended
December 31, 2023. See Deconsolidation of Falcon’s Creative Group LLC under Note 1 – Description of business and basis
of presentation.

Total
segment loss from operations for the year ended December 31, 2023, increased $20.0 million to ($23.2) million compared to ($3.2) million
for the year ended December 31, 2022, due to the following:

Reportable
segments 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. Transaction expenses were $26.0 million
for the year ended December 31, 2023 which were particularly high for this period due to the Business Combination. Unallocated corporate
overhead costs are presented as a reconciling item between total income (losses) from reportable segments and the Company’s consolidated
financial results. For more information about our Segment Reporting, see Note 16 – Segment information in the Company’s
audited consolidated financial statements.

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Non-GAAP
Financial Measures

We prepare our consolidated financial statements
in accordance with US GAAP. In addition to disclosing financial results prepared in accordance with US GAAP, we disclose information
regarding Adjusted EBITDA which is a non-GAAP measure. We define Adjusted EBITDA as net income (loss), determined in accordance with US
GAAP, for the period presented, before interest expense, net, income tax expense, depreciation and amortization, transaction expenses
related to the business combination, credit loss expense, share of equity method investee’s impairment of fixed assets, impairment
of equity method investments, change in fair value of warrant liabilities, change in fair value of earnout liabilities, intangible asset
impairment loss, and gain on deconsolidation of FCG.

We
believe that Adjusted EBITDA is useful to investors as it eliminates the non-cash depreciation and amortization expense that results
from our capital investments and intangible assets recognized in any business combination and improves comparability by eliminating the
interest expense associated with our debt facilities, which may not be comparable with other companies based on our structure.

Adjusted
EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results
as reported under US GAAP. Some of these limitations are (i) it does not reflect our cash expenditures, or future requirements for capital
expenditures or contractual commitments, (ii) it does not reflect changes in, or cash requirements for, our working capital needs, (iii)
it does not reflect interest expense, or the cash requirements necessary to service interest or principal payments, on our debt, (iv)
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced
in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements, (v) it does not adjust for all non-cash
income or expense items that are reflected in our statements of cash flows, and (vi) other companies in our industry may calculate these
measures differently than we do, limiting their usefulness as comparative measures.

The
following table sets forth reconciliations of net loss under US GAAP to Adjusted EBITDA for the following periods:

Net loss increased $(413.5) million to $(430.9) million for the year
ended December 31, 2023, compared to $(17.4) million for the year ended December 31, 2022, primarily driven by a $(345.4) million change
in fair value of earnout liabilities. Adjusted EBITDA loss increased $16.8 million to $(34.6) million for year ended December 31, 2023,
compared to ($17.8) million for the year ended December 31, 2022 primarily driven by higher SG&A which was partially offset by higher
gross margin.

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Liquidity
and Capital Resources

Sources
and Uses of Liquidity

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, and
research and development for growth initiatives. Our principal sources of liquidity are funds from borrowings, equity contributions from
our existing investors and cash on hand.

As of December 31, 2023, our total indebtedness was approximately $29.6
million. We had approximately $0.7 million of unrestricted cash and $3.2 million available for borrowing under our lines of credit. Such
amounts reflect the conversion of $7.3 million owed to Infinite Acquisitions into 727,500 units of the Predecessor and the exchange of
an additional $4.8 million owed to Infinite Acquisitions into 475,000 shares of Series A Preferred Stock, each in connection with the
Closing of the Business Combination.

Prior
to the Closing of the Business Combination, an aggregate of approximately $67.3 million in financing was provided to the Predecessor
by Infinite Acquisitions including through the debt-to-equity conversions. On October 4, 2023, Infinite Acquisitions irrevocably committed
to fund an additional approximately $12.8 million to the Company by December 31, 2023, for a total financing from Infinite Acquisitions
of $80.0 million. As of December 31, 2023, Infinite Acquisitions loaned an additional $6.8 million to the Company through its existing
line of credit. See Note 22 – Subsequent events in the Company’s audited consolidated financial statements. As of December
31, 2023, Infinite Acquisitions had not funded such commitment.

As of December 31, 2023, Infinite Acquisitions loaned an additional
$6.8 million to the Company through its existing revolving credit arrangement. Subsequent to December 31, 2023, Infinite Acquisitions
loaned an additional $4.8 million to the Company pursuant to the revolving credit arrangement through April 26, 2024. The revolving credit
arrangement is subject to an annual fixed interest rate of 2.75% and matures in December 2026. Further, in April 2024, the Predecessor
entered into term loan agreements with Katmandu Ventures and Universal Kat in the combined principal amount of approximately $8.5 million.
Such term loans bear interest at a rate of 8.88% per annum, payable quarterly in arrears, and will mature on March 31, 2025. Approximately
$5.4 million of the proceeds of the term loans was used to repay a portion of the Infinite Acquisitions revolving credit arrangement.
See Note 22 – Subsequent events in the Company’s audited consolidated financial statements.

On
March 10, 2023, in connection with stockholder votes to approve the extension of the date by which FAST II was required to
complete an initial business combination, public stockholders of FAST II elected to redeem an aggregate of 15,098,178 shares
of FAST II Class A Common Stock for cash, at a redemption price of approximately $10.1498 per share for an aggregate redemption
amount of approximately $153.2 million. In addition, in connection with the Business Combination, 6,772,844 holders of FAST II
Class A Common Stock exercised their right to redeem those shares for a pro rata portion of the cash in the FAST II trust account,
which equaled approximately $10.63 per share, for an aggregate of approximately $72.0 million. As a result, an aggregate of approximately
$225.2 million was paid to such redeeming stockholders at or prior to the closing of the Business Combination out of the trust account
established by FAST II upon the closing of the FAST II IPO.

We received net cash proceeds from the Business Combination totaling
$1.0 million net of FAST II transaction cost of $2.9 million paid at Closing. FAST II and the Predecessor transaction costs related to
the Business Combination of $6.4 million and $15.7 million, respectively, are not yet settled and the Company expects to settle them over
the next 24 months. Costs incurred in excess of the gross proceeds were recorded in profit or loss.

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We anticipate managing our operations to ensure
that our existing cash on hand and unused capacity on our existing lines of credit, provide us with liquidity to fund our operations for
the next twelve months. For the year ended December 31, 2023, we have losses and negative cash flows from operating activities that
raise substantial doubt about our ability to continue as a going concern. As of December 31, 2023, we have $20.8 million of accrued expenses
and other current liabilities, which include $17.6 million of audit and professional fees relating to the Business Combination, $2.2 million
of excise tax payable on FAST II stock redemptions which is not payable until forthcoming treasury regulations are finalized, $0.6 million
of accrued payroll and related expenses, and approximately $0.4 million of other accrued expenses and current liabilities. Additionally,
as of December 31, 2023, we have unfunded commitments to Karnival of $2.4 million (HKD 18.7 million), to be used for the purpose of constructing
the VAquarium Entertainment Centers in China which need to be paid in 2024. On July 27, 2023, FCG received a closing payment from QIC
of $17.5 million (net of $500,000 in reimbursements). On April 16, 2024, QIC released the remaining $12.0 million of the $30.0 million
investment to FCG LLC upon the establishment of the employee retention and attraction incentive program. These funds are to be used exclusively
by the FCG segment to fund its operations and growth and cannot be used to satisfy the commitments of other segments. Until we can generate
sufficient revenue from our five reportable segments to cover operating expenses, working capital and capital expenditures, we expect
funds raised from additional capital and debt raises to fund our cash needs.

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 additional costs as a result of operating as a public company. See “Factors that
May Influence Future Results of Operations” above. 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.

Contractual
and Other Obligations

Tax
Receivable Agreement

In connection with the Closing if the Business Combination, the Company
entered into the Tax Receivable Agreement with the Predecessor, the TRA holder representative, certain members of the Predecessor (the
“TRA Holders”) and other persons from time-to-time party thereto. Pursuant to the Tax Receivable Agreement, among other things,
the Company is required to pay to each TRA Holder 85% of certain tax benefits, if any, that it realizes (or in certain cases is deemed
to realize) as a result of the increases in tax basis resulting from any exchange of new the Predecessor units for Class A Common
Stock or cash in the future and certain other tax benefits arising from payments under the Tax Receivable Agreement. In certain cases,
the Company’s obligations under the Tax Receivable Agreement may accelerate and become due and payable, based on certain assumptions,
upon a change in control and certain other termination events, as defined in the Tax Receivable Agreement.

Commitments

Partnership
with Raging Power Limited

Pursuant
to the terms of our joint venture agreement with Raging Power, Falcon’s and Raging Power are each required to provide funding to
Karnival in the form of non-interest-bearing advances, which will be repaid based on a percentage of gross revenues from the operation
of the LBE at 11 SKIES. Accordingly, the joint venture agreement provides that we receive 16.6% to 20.6% of gross revenue of the
LBE at 11 SKIES. As of December 31, 2023, we have unfunded commitments to Karnival of $2.4 million (HKD 18.7 million).

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Transaction
costs

Pursuant
to the Business Combination, the Company received net cash proceeds from the Business Combination totaling $1.0 million, net of $1.3
million FAST II transaction costs and $1.6 million of Predecessor transaction costs paid at Closing. FAST II and Predecessor’s
transaction costs related to the Business Combination of $6.4 million and $15.7 million, respectively, are not yet settled at December
31, 2023 and the Company expects to settle them over the next 24 months. These transaction costs are recorded in accrued expenses and
long-term payables. Negotiations regarding the terms of the costs yet to be settled are still ongoing and may change materially from
these amounts accrued. All transaction costs incurred in connection with the Business Combination are recorded in profit or loss.

Related
Party Loans

We
have entered into various financing agreements with Infinite Acquisitions. A portion of the outstanding debt under such financing agreements
was exchanged for shares of Series A Preferred Stock in connection with the Business Combination. As of December 31, 2023, we have aggregate
outstanding balances of $29.6 million under these financing agreements. See “—Infinite Acquisitions Subscription Agreement;
Transferred Debt” above.

For more information regarding our related party
transactions, see Note 10 — Long-term debt and borrowing arrangements and Note 11 — Related party transactions included
in the notes to the Company’s audited financial statements.

Leases

We
no longer have lease liabilities on our consolidated balance sheet as of December 31, 2023. The finance and operating leases for our
corporate headquarters and warehouse space located in Orlando, Florida were deconsolidated with FCG.

For more information regarding our leases, see
Note 6 — Leases included in the notes to the Company’s audited financial statements.

Cash
Flows

The
following table summarizes our cash flows for the period presented:

Cash
Flows from Operating Activities

Our
cash flows from operating activities are primarily driven by the activities associated with our FCG segment, FBB segment beginning in
2022 and corporate overhead activities. Project cyclicality and seasonality may impact cash flows from operating activities on a sequential
quarterly basis during the year.

Cash
used in operating activities increased $4.1 million to ($23.4) million in the year ended December 31, 2023, compared to ($19.3) million
for the year ended December 31, 2022. The most significant adjustments to net income for the year ended December 31, 2023 included adding
back the $52.5 million share of loss from equity method investments, $6.0 million related party credit loss expense, $345.4 million change
in fair value of earnouts, and $2.4 million impairment of the ride media receivable. These add-backs were partially offset by a $27.4
million gain on deconsolidation of FCG. The remaining increase in cash uses in operating activities came from offsetting changes in working
capital assets and liabilities.

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Cash
Flows from Investing Activities

Our
primary investing activities have consisted of investments in and advances to our unconsolidated joint ventures for the development of
our Katmandu Park located in Punta Cana, Dominican Republic, purchases of property, equipment, and capitalization of RMC.

Net
cash provided by investing activities increased $26.6 million to $0.3 million during the year ended December 31, 2023, compared to ($26.3)
million net cash used by investing activities during the year ended December 31, 2022. The cash provided by investing activities during
the year ended December 31, 2023 consisted primarily of (i) $23.8 million decrease in investments and advances to our unconsolidated
joint ventures. Contributions to fund our share of the construction of Katmandu Park, Punta Cana were lower in the year ended December
31, 2023 as major construction work wrapped up in early 2023, and (ii) $2.6 million increase cash inflow on deconsolidation of FCG during
the fourth quarter of 2023.

Cash
Flows from Financing Activities

Net cash provided by financing activities decreased $35.8 million to
$15.1 million in the year ended December 31, 2023, compared to $50.9 million in the year ended December 31, 2022. The cash provided by
financing activities in the year ended December 31, 2023 consisted primarily of (i) $18.4 million in proceeds from the $10.0 million related
party revolving credit arrangement with Infinite Acquisitions, (ii) $3.3 million repayment of related party term loans with Infinite Acquisitions,
(iii) $4.1 million repayment on the $10.0 million related party revolving credit arrangement with Infinite Acquisitions, (iv) $4.2 million
proceeds from exercised Warrants. See Note 10 — Long-term debt and borrowing arrangements.

The
cash provided by financing activities in the year ended December 31, 2022 consisted primarily of $38.2 million equity contributions from
the Predecessor’s members and $14.5 million proceeds from related party debt and credit facilities. This was partially offset by
$1.5 million repayment of third-party debt and $0.2 million principal payment on finance lease obligations.

Off-Balance
Sheet Arrangements

We
do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our
financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital
resources.

Critical
Accounting Estimates

The
discussion under “Company’s Management’s Discussion and Analysis of Financial Condition and results of operations”
is based upon our consolidated financial statements, which have been prepared in accordance with US GAAP. The preparation of these
financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue,
and expenses as well as the disclosure of contingent assets and liabilities. We regularly review our estimates and assumptions. These
estimates and assumptions, which are based upon historical experience and on various other factors believed to be reasonable under the
circumstances, form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources. Reported amounts and disclosures may have been different had management used different estimates and assumptions
or if different conditions had occurred in the periods presented. Below is a discussion of the policies that we believe may involve a
high degree of judgment and complexity.

We
believe that the accounting policies disclosed below include estimates and assumptions critical to our business and their application
could have a material impact on our consolidated financial statements. In addition to these critical policies, our significant accounting
policies are included within Note 2 – Summary of significant accounting policies in our audited consolidated financial statements.

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Revenue

We
recognize revenue in accordance with the provisions of FASB ASC 606, Revenue from Contracts with Customers (“ASC 606”),
which requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the
consideration to which an entity expects to be entitled in exchange for those goods or services.

Falcon’s
Creative Group

Accounting
policies associated with FCG are referring to the periods prior to deconsolidation.

We
account for a contract once it has approval and commitment from all parties, the rights and payment terms of the parties can be identified,
the contract has commercial substance and the collectability of the consideration, or transaction price, is probable. Contracts are often
subsequently modified to include changes in specifications or requirements, these changes are not accounted for until they meet the requirements
noted above.

A
significant portion of the FCG’s revenue is derived from master planning and design contracts, media production contracts and turnkey
attraction contracts. The Company accounts for a contract once it has approval and commitment from all parties, the rights and payment
terms of the parties can be identified, the contract has commercial substance and the collectability of the consideration, or transaction
price, is probable. Contracts are often subsequently modified to include changes in specifications or requirements. These changes are
not accounted for until they meet the requirements noted above. Each promised good or service within a contract is accounted for separately
under the guidance of ASC 606, if they are distinct. Promised goods or services not meeting the criteria for being a distinct performance
obligation are bundled into a single performance obligation with other goods or services that together meet the criteria for being distinct.
The appropriate allocation of the transaction price and recognition of revenue is then applied for the bundled performance obligation.
The Company has concluded that its service contracts generally contain a single performance obligation given the interrelated nature
of the activities which are significantly customized and not distinct within the context of the contract.

Once
the Company identifies the performance obligations, the Company determines the transaction price, which includes estimating the amount
of variable consideration to be included in the transaction price, if any. The Company’s contracts generally do not contain credits, price concessions, or other types of potential variable consideration. Prices are fixed at contract inception and are not contingent
on performance or any other criteria.

The
Company engages in long-term contracts for production and service activities and recognizes revenue for performance obligations over
time. These long-term contracts involve the planning, design, and development of attractions. Revenue is recognized over time (versus
point in time recognition), as the Company’s performance creates an asset with no alternative use to the Company and the Company
has an enforceable right to payment for performance completed to date, and the customer receives the benefit as the Company builds the
asset. The Company considers the nature of these contracts and the types of products and services provided when determining the proper
accounting for a particular contract. These are primarily fixed-price contracts.

For
long-term contracts, the Company typically recognizes revenue using the input method, using a cost-to-cost measure of progress. The Company
believes that this method represents the most faithful depiction of the Company’s performance because it directly measures value
transferred to the customer. Contract estimates are based on various assumptions to project the outcome of future events that may span
several years. These assumptions include, but are not limited to, the amount of time to complete the contract, including the assessment
of the nature and complexity of the work to be performed; the cost and availability of materials; the availability of subcontractor services
and materials; and the availability and timing of funding from the customer. The Company bears the risk of changes in estimates to complete
on a fixed-price contract, which may cause profit levels to vary from period to period. For over time contracts, the Company recognizes
anticipated contract losses as soon as they become known and estimable.

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Accounting
for long-term contracts requires significant judgment relative to estimating total costs, in particular, assumptions relative to the
amount of time to complete the contract, including the assessment of the nature and complexity of the work to be performed. The Company’s
estimates are based upon the professional knowledge and experience of its engineers, program managers and other personnel, who review
each long-term contract monthly to assess the contract’s schedule, performance, technical matters and estimated cost at completion.
Changes in estimates are applied retrospectively and when adjustments in estimated contract costs are identified, such revisions may
result in current period adjustments to earnings applicable to performance in prior periods.

On
long-term contracts, the portion of the payments retained by the customer is not considered a significant financing component. At contract
inception, the Company also expects that the lag period between the transfer of a promised good or service to a customer and when the
customer pays for that good or service will not constitute a significant financing component. Many of the Company’s long-term contracts
have milestone payments, which align the payment schedule with the progress towards completion on the performance obligation. On some
contracts, the Company may be entitled to receive an advance payment, which is not considered a significant financing component because
it is used to facilitate inventory demands at the onset of a contract and to safeguard the Company from the failure of the other party
to abide by some or all their obligations under the contract.

Contract
balances result from the timing of revenue recognized, billings and cash collections, and the generation of Contract assets and liabilities.
Contract assets represent revenue recognized in excess of amounts invoiced to the customer and the right to payment is not subject to
the passage of time. Contract liabilities are presented on the Company’s consolidated balance sheets and consist of billings in
excess of revenues. Billings in excess of revenues represent milestone billing contracts where the billings of the contract exceed recognized
revenues.

Destinations
Operations

The
principal sources of revenues for the Destinations Operations segment are resort and theme park management and incentive fees. Resort
and theme park management and incentive fees are based on a percentage of revenues and profits, respectively earned by the theme parks
during the corresponding period.

Investments
in unconsolidated joint ventures

We
use the equity method to account for investments in corporate joint ventures when we have the ability to exercise significant influence
over the operating decisions of the joint venture. Such investments are initially recorded at cost and subsequently adjusted for our
proportionate share of the net earnings or loss of the investee, which is reported in Equity in losses of unconsolidated joint ventures
in the results of operations. The dividends received, if any, from these joint ventures reduce the carrying amount of our investment.

Goodwill
and Intangible assets

The
Company reviews definite lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying
amount of such assets may not be recoverable. The recoverability of these amortizing intangible assets is determined by comparing the
forecasted undiscounted net cash flows of the operation to which the assets relate to the carrying amount. If the operation is determined
to be unable to recover the carrying amount of its assets, then the assets are written down to fair value. Fair value is determined based
on discounted cash flows or appraised values, depending on the nature of the assets.

Estimating
the fair value of reporting units is a subjective process that involves the use of significant estimates by management. The FCG reporting
unit has significant revenue concentration associated with a few customers. Although we believe that we have strong relationships with
each customer, if any of these customers were to move their business elsewhere it would have an adverse effect on our profitability,
particularly the profitability of FCG. In addition, unanticipated changes in business performance market declines or other events impacting
the fair value of these businesses, including changes in market multiples, discount rates, interest rates and growth rates assumptions,
could result in goodwill impairment charges in future periods. The Company did not identify any goodwill impairment for the years ended
December 31, 2023, and 2022.

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Ride
Media Content

RMC
consists of themed audio and visual content following a storyline that is displayed to guests while in the queue and during the ride.
The same RMC can be deployed on rides of a similar nature. The Company earns a fixed annual fee for licensing the right to use the RMC
to customers.

In
accordance with ASC 926-20, the Company capitalizes costs to produce the RMC, including direct production costs and production overhead.
The RMC is expected to be predominantly monetized individually, as the RMC is not expected to be monetized with other films or license
agreements. The predominant monetization strategy is determined when capitalization of production costs commences and is reassessed if
there is a significant change to the expected future monetization strategy.

For
RMC that is predominantly monetized on an individual basis, the Company uses a computation method to amortize capitalized production
costs on the ratio of the RMC’s current period revenues to its estimated remaining ultimate revenue (i.e., the total revenue to
be earned in the RMC’s remaining life cycle.) The RMC is typically licensed for a 10-year period with a fixed annual fee. Amortization
begins when the RMC is first deployed and starts generating revenue.

Unamortized
RMC costs are tested for impairment whenever events or changes in circumstances indicate that the fair value of the RMC may be less than
its unamortized costs. If the carrying value of an individual RMC exceeds the estimated fair value, an impairment charge will be recorded
in the amount of the difference. For content that is predominately monetized individually, the Company utilizes estimates including ultimate
revenues and additional costs to be incurred (including marketing and distribution costs), in order to determine whether the carrying
value of the RMC is impaired.

Owned
RMC is presented as a noncurrent asset within Intangible assets, net of accumulated amortization and impairment. Amortization of RMC
assets is primarily included in Depreciation and amortization expense in Income (Loss) from operations.

The
unamortized cost balance of RMC was fully impaired as of December 31, 2023. See results of operations.

Fair
Value

Fair
value focuses on an exit price and is defined as the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and
liabilities which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which
the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset
or liability, such as risk inherent in valuation techniques, transfer restrictions and credit risks. The inputs or methodology used for
valuing financial instruments are not necessarily an indication of the risk associated with investing in those financial instruments.

The
carrying amounts of Cash and cash equivalents, Accounts receivables, Accounts payable and Accrued expenses and other current liabilities
approximate fair value due to the short-term maturities of these assets and liabilities. The carrying amounts of finance leases are discounted
to approximate fair value.

Warrant
Liabilities

The Company accounts for Warrants assumed in connection with the Business
Combination in accordance with the guidance contained in ASC 815, Derivatives and Hedging, under which the Warrants do not meet the criteria
for equity treatment and must be recorded as liabilities. The Company remeasures the fair value of the Warrants based on the quoted market
price of the Warrants. Accordingly, the Company classifies the Warrants as liabilities at their fair value and adjusts the Warrants to
fair value at the end of each reporting period. The liability is subject to re-measurement at each balance sheet date until exercised,
and any change in fair value is recognized in the results of operations.

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Earnout
Liabilities

At the closing 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 of the Company, 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.
The Earnout Shares are classified as a liability and measured at fair value, with changes in fair value included in the results of operations.

Business
combinations

We
account for our acquisitions in accordance with ASC 805, Business Combinations. We initially allocate the purchase price
of an acquisition to the assets acquired and liabilities assumed based on their estimated fair values, with any excess of consideration
recorded as goodwill. The results of operations of acquisitions are included in the consolidated financial statements from the date of
acquisition. Costs incurred to complete the business combination, such as legal and other professional fees, are not considered part
of the transaction consideration and are expensed as incurred.

Full
impairment of Investment in Sierra Parima

As
Sierra Parima recorded a fixed asset impairment under ASC 360, the Company further evaluated its remaining equity investment in Sierra
Parima for impairment as of December 31, 2023, and determined that it was other-than-temporarily impaired. The Company estimated the
fair value of its investment in Sierra Parima using probability weighted scenarios assigned to discounted future cash flows. 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.

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. As of December 31, 2023, the Company recognized
an other-than-temporary impairment charge of $14.1 million, which is recorded in Share of gain (loss) from equity method investments
in the consolidated statement of operations and comprehensive loss.

New
and Recently Adopted Accounting Pronouncements

See
Note 2 – Summary of significant accounting policies to our audited consolidated financial statements for more information
about recent accounting pronouncements, the timing of their adoption and our assessment, to the extent we made one, of their potential
impact on our financial condition and results of operations.

JOBS
Act Accounting Election

The
Company is an “emerging growth company” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart
Our Business Startups Act of 2012 (the “JOBS Act”). Section 102(b)(1) of the JOBS Act exempts emerging growth companies
from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not
had a registration statement under the Securities Act declared effective or do not have a class of securities registered under the Exchange Act)
are required to comply with the new or revised financial accounting standards.

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Section 107
of the JOBS Act allows emerging growth companies to take advantage of the extended transition period for complying with new or revised
accounting standards. Under Section 107, an emerging growth company can delay the adoption of certain accounting standards until
those standards would otherwise apply to private companies. Any decision to opt out of the extended transition period for complying with
new or revised accounting standards is irrevocable. The Company has elected to use the extended transition period available under the
JOBS Act, which means that when a standard is issued or revised and it has different application dates for public or private companies,
the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised
standard. This may make comparison of the Company’s consolidated financial statements with another public company which is neither
an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible
because of the potential differences in accounting standards used.

The
Company will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following
the fifth anniversary of the effectiveness of the Company’s registration statement on Form S-4 in connection with the Business
Combination, (b) in which the Company has total annual revenue of at least $1,235,000,000, or (c) in which the Company is deemed
to be a large accelerated filer, which means the market value of its common equity that is held by non-affiliates exceeds $700.0 million
as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which the Company has issued more than
$1.0 billion in non-convertible debt securities during the prior three-year period.

Smaller
Reporting Company

Additionally,
the Company is a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting
companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years
of audited financial statements. The Company will remain a smaller reporting company until the last day of the fiscal year in which
(i) the market value of the shares of Class A Common Stock held by non-affiliates exceeds $250.0 million as of the prior
June 30, and (ii) the Company’s annual revenue exceeds $100.0 million during such completed fiscal year and the
market value of the shares of Class A Common Stock held by non-affiliates exceeds $700.0 million as of the prior June 30.
To the extent the Company takes advantage of such reduced disclosure obligations, it may also make comparison of the Company’s
financial statements with other public companies difficult or impossible.