Falcon's Beyond Global Inc

Item 1A. Risk Factors.

Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual Report. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, other than as set forth below, there have been no material changes to the risk factors disclosed in the Annual Report. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.

The impairments of our intangible assets and equity method investment in our joint ventures have materially and adversely impacted our business and results of operations and may do so again in the future.

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

Our Sierra Parima segment experienced losses in 2023 as a result of financial, operational, infrastructure challenges encountered at the Katmandu Park DR following its opening in March 2023. Sierra Parima performed an evaluation of its long-lived fixed assets in accordance with ASC 360 to determine whether their fair value is less than carrying value. As a result of this analysis, Sierra Parima recorded a fixed asset impairment of $46.7 million as of December 31, 2023. Based on the estimated sale or liquidation proceeds from Sierra Parima, and Sierra Parimas outstanding debts remaining to be settled, the fair value of the Companys investment in Sierra Parima was determined to be zero. The impairment is the result of managements 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. On May 30, 2025, the Companys investment in Sierra Parima was sold for nominal consideration and no gain or loss on the sale was recognized. For more information about the impairment charge with respect to Sierra Parima, see "Note 5  Investments and advances to equity method investments  Sierra Parima to our unaudited condensed consolidated financial statements contained in Item 1 of this Quarterly Report.

Further, the Tenerife Sale, which was completed on May 30, 2025, represented a significant change in circumstances that could impact the fair value of the Companys remaining investment in PDP. The Company evaluated its remaining equity investment in PDP for

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impairment as of June 30, 2025 and determined that it was other-than-temporarily impaired. The Company estimated the fair value of

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its investment in PDP using the direct capitalization method of the income approach. The Company used the property's estimated net operating income, yearly growth rate, capital expenditure reserves and a capitalization rate as the primary significant unobservable inputs (Level 3). The estimated fair value is based upon assumptions that management believes are reasonable, and the impact of variations in these estimates or the underlying assumptions could be material. The fair value of the Companys investment in PDP was determined to be $27.1 million. As of June 30, 2025, the Company recognized an other-than-temporary impairment charge of $5.3 million, which is recorded in share of (loss) gain from equity method investments in the consolidated statement of operations and comprehensive (loss) income. See Note 5  Investments and advances to equity method investments  PDP to our unaudited condensed consolidated financial statements contained in Item 1 of this Quarterly Report.

The accounting estimateCompany has a 50% interest in Karnival, an unconsolidated joint venture. The Company and its joint venture partners have agreed to commence the liquidation process of the joint venture. The liquidation process of the joint venture represents a significant change in circumstances that could impact the fair value of the Companys related to impairments are suscemaining investment in Karnival. Accordingly, the Company performed an impairment evaluation of its equity method investment in Karnival to determine whether the remaining carrying amount of the investment exceeds its fair value, and determined that, as of September 30, 2025, it was other-than-temporarily impaired. The Company estimated the fair value of its investment in Karnival using the liquidation value of cash and cash equivalents less estimated costs to liquidate valuation inputs (Level 2). The estimated fair value is based upon assumptions that management believes are reasonable, and the impact of variations in these estimates or the underlying assumptible to change, including ons could be material. The fair value of the Companys investment in Karnival was determined to be $4.2 million. As of September 30, 2025, the Company recognized an other-than-temporary impairment charge of $3.0 million, which is recorded in share of (loss) gain from equity method investments in the consolidated statement of operations and comprehensive (loss) income.

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

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

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

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

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Further, even with an asset-efficient business model, our FBD business may still be subject to traditional risks associated with resort and theme park development, acquisition, expansion, repositioning and rebranding, including, among others:

construction delays or cost overruns that may increase project costs;

receipt of zoning and other required governmental permits and authorizations;

increased costs due to competition for labor, including employees and subcontractors, skilled in emerging technology;

strikes or other labor issues;

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restrictions or delays in transportation and import-export procedures;

delays or cost inflation in the supply chain and third-party vendors required to develop the resorts and parks;

development costs incurred for projects that are not pursued to completion;

investment of substantial capital without, in the case of developed or repositioned resorts, immediate corresponding income;

results that may not achieve our desired revenue or profit goals;

acts of nature such as earthquakes, wildfires, hurricanes, volcanic eruptions, floods or fires that could adversely impact a resort;

ability to raise capital, including construction or acquisition financing; and

governmental restrictions on the nature or size of a project.

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

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

In addition, because a principal competitive factor for a theme park or other attraction is the uniqueness and perceived quality of its rides and experiential technologies, we must make significant up-front and continued capital investments, from the initial construction of the theme parks through maintenance and potentially the addition of new rides, attractions and technologies. These up-front and continued capital investments may not ever result in net income.

In addition to liquidity risks, these capital expenditures may result in declines in revenues while hotels and parks are in initial construction, while rooms, restaurants, rides or attractions are out of service for rebranding or maintenance, and while areas of our properties are closed due to capital improvement projects. We expect our costs will increase over time, and our losses may continue, as we expect to continue to invest additional funds in expanding our business and sales and marketing activities. We also expect to incur additional general and administrative expenses as a result of our growth and expect our costs to continue increase to support our operations as a public company. Historically, our costs have increased over the years due to these factors, and we expect to continue to incur increasing costs to support our anticipated future growth. For example, following the opening of our Katmandu Park DR in March 2023, we experienced various financial, operational, and infrastructure challenges that led to lower than planned open days and attendance at the park. As a result, in March 2024, we closed Katmandu Park DR to visitors. For more information about the closure of the Katmandu Park DR, see "Note 5  Investments and advances to equity method investments  Sierra Parima" to our unaudited condensed consolidated financial statements contained in Item 1 of this Quarterly Report.

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The costs of capital improvements, expenditures or any of the above noted factors, or if we are unable to generate adequate revenue growth and manage our expenses, could have a material adverse effect on us, including our financial condition, liquidity and results of operations. There is also a risk that our estimates of the cost of such capital improvements will not be accurate, causing us to seek additional financing and creating construction delays. In addition, any construction delays or ride downtime can adversely affect attendance at our hotels, theme parks and other interactive attractions and our ability to realize revenue growth.

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