Falcons Beyond Global Inc

Item 1. Description of Business

Overview

We are a visionary leader in innovative and immersive storytelling, sitting at the intersection of three potential high growth business opportunities, content, technology and experiences. We have three business divisions, which are conducted through five operating segments. Our three business divisions complement each other as we pursue our growth strategy.

As referenced above, we operate at the intersection of content, technology, and experiences. 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. We believe the complementary strengths of our business divisions facilitates invaluable insights and streamlined growth.

We recently went public and listed our shares on Nasdaq on October 6, 2023 in connection with a de-SPAC transaction with FAST Acquisition Corp. II. FCG, PDP, and Sierra Parima are currently accounted for as equity method investments and represent a substantial portion of the Company’s operations.

Recent Developments

The Company’s portfolio of equity method investments has undergone recent strategic and operational changes, including through its intention to utilize an asset-efficient approach to the FBD business, to continue its strategic focus on the FCG business, and its growth plans for the FBB business.

Prior to July 27, 2023, FCG was a wholly-owned subsidiary of the Company. 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”). As a result of the rights provided to QIC in connection with the Strategic Investment, FCG was deconsolidated as of July 27, 2023.

Following the Strategic Investment, the Company has been able to devote the necessary resources to realize its growth plans for FCG. For example, the Company recently entered into a Consultancy Services Agreement with QIC in January 2024 for atotal contract value of up to approximately $83.1 million if we bid for and win all of the opportunities available to us under such agreement, pursuant to which, among other things, Falcon’s Treehouse, LLC, a subsidiary of FCG, agreed to provide certain design, technological and construction services for the first-ever Dragon Ball theme park. Falcon’s is the master planner, attraction designer, and creative guardian of the theme park. These services will be performed to assist QIC’s development efforts with Qiddiya, which is a giga-project focused on building destinations, programs and initiatives based on the power of play that will enhance the quality of life of visitors and residents. Qiddiya’s first development will be Qiddiya City, a city wholly dedicated to play and an epicenter of entertainment, sports, and culture, welcoming Saudi nationals, residents, and tourists alike. Further, as a result of FCG’s expected growth and expansion, the Company recently acquired and moved into a larger building in Orlando to meet the space requirement of the nearly 200 new employees the Company intends to hire to support FCG. In addition, in March 2024, we 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, by granting incentive bonuses in the form of cash bonuses. Falcon’s Opco and QIC also entered into an amendment to the FCG LLC Amended and Restated Limited Liability Company Agreement in March 2024 to clarify QIC’s consent rights with respect to grants made under the Opco Incentive Plan. As a result of establishing the Opco Incentive Plan, QIC released in April 2024 the remaining $12.0 million investment into FCG pursuant to the terms of the Subscription Agreement.

In our FBD business, we are now utilizing an asset-efficient strategy, which is expected 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. For example, we are developing themed virtual ocean adventure attractions across Hong Kong and China through our joint venture with Raging Power Limited (“Raging Power”), a subsidiary of K11 Group. K11 Group is a subsidiary of the Hong Kong publicly traded New World Development Company Ltd, a major retail mall developer in China and Hong Kong. The first location is expected to open in 2025 at the new 11 SKIES complex adjacent to Hong Kong Airport.

In March 2024, the Katmandu Park in Punta Cana, Dominican Republic (“Katmandu Park DR”), was closed to visitors following financial, operational, and infrastructure challenges at the park. Katmandu Park DR, which is part of the Company’s unconsolidated Sierra Parima reporting segment and the Falcon’s Beyond Destinations business, was one of two entertainment destinations developed, owned and operated through two joint venture entities between the Company and Meliá Hotels International, S.A. (“Meliá”), and the closure of Katmandu Park DR did not immediately affect the operations of the other joint venture entity. Overall, our Sierra Parima segment experienced losses in 2023 as a result of the challenges encountered at the Katmandu Park DR following its opening in March 2023, and as a result, Sierra Parima determined that the fair value of its long-lived fixed assets was less than carrying value as of December 31, 2023 and recorded a fixed asset impairment, as described in more detail in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation” and Note 8, “Investments and advances to equity method investments,” to the Company’s audited consolidated financial statements included in “Item 8” of this Annual Report. The Company believes that the closure of the park is in the best interest of the joint venture. For more information about the joint ventures with Meliá, see “—Our Relationship with Meliá” below.

Our FBB division is focused on bringing Falcon’s brands and intellectual property to life through animation, movies, licensing & merchandizing, gaming, and technology. Further, FBB identifies third party brands and intellectual property that could be licensed by FBB and developed into compelling LBEs. For example, in January 2024, we entered into a licensing agreement with The Hershey Company (“Hershey”), pursuant to which we agreed to develop Hershey-branded LBE experiences featuring the snack company’s intellectual property, such as Hershey’s, Reese’s, Jolly Rancher, and Twizzlers, in both the United States and international markets. Additionally, as part of FBB we created Falcon’s Attractions Systems & Technologies in March 2024 as a brand name to operate our rides and attractions sales efforts within FBB.

Background of the Company

Our track record spans over 24 years with execution of over $120 billion worth of story-driven development projects in 27 countries. Historically, fifty-eight percent (58%) of first-time clients have contracted for additional services, and the scope of services contracted by returning clients averages 60 times the scope of the initial project. Falcon’s has won more than 30 prestigious industry awards.

The Falcon’s business, consisting of the business conducted by Falcon’s Treehouse, LLC and Falcon’s Treehouse National, LLC (the “Falcon’s Business”), began in 2000 with a focus on attraction design services and expanded into a broader array of services including master planning, media, interactive, and audio production, project management, and attraction hardware development, procurement, and sales.

The Katmandu business, consisting of business conducted by Katmandu Group, LLC and Fun Stuff, S.L. (the “Katmandu Business”), began in 2007 with the creation of the House of Katmandu theme park in Mallorca, Spain, later rebranded as Katmandu Park, which was our first instance of the “Big Experience, Small Footprint” themed entertainment concept used for developing entertainment destination resorts in major tourist destinations worldwide. The success of the House of Katmandu theme park in Mallorca led to the creation of a joint venture relationship between the Katmandu Business and Meliá in 2012.

In April 2021, the Falcon’s Business and the Katmandu Business were combined to form Falcon’s Beyond Global, LLC.

As our company and services evolved, in 2017 we registered “Falcon’s Creative Group” as a fictitious name with the State of Florida in order to formally conduct business under that name. Following the combination of Falcon’s Business with the Katmandu Business, Falcon’s formed Falcon’s Creative Group, LLC, which is an entity organized under the laws of the State of Delaware, and Falcon’s Beyond Destinations, LLC in March 2022 and Falcon’s Beyond Brands, LLC in June 2022, which are both entities organized under the laws of the State of Florida. The three entities were formed in anticipation of planned internal organizational movements to align with the purpose of Falcon’s three distinct operating divisions.

We maintain a website located atwww.falconsbeyond.com. Our corporate filings, including our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K, our proxy statements and reports filed by our officers and directors under Section 16(a) of the Exchange Act, and any amendments to those filings, are available, free of charge, on our website as soon as reasonably practicable after we electronically file such material with the SEC. The contents of our website are not incorporated in or otherwise to be regarded as a part of this Annual Report.

Our Three Business Divisions

As referenced above and further described below, Falcon’s is organized into three business divisions: FCG, FBD, and FBB. Our three businesses contribute to and strengthen one another, amplifying our brand presence and creating diversified revenue streams.

FCG: Falcon’s Creative Group

Our FCG division creates master plans, designs attractions and experiential entertainment, and produces content, interactives, and software. Our in-house combination of design, media, and experiential technology enables us to deliver complete, integrated guest experiences.

The FCG division has recently experienced rapid growth through an increase in demand and expansion of project scope. This growth has been funded in part by the Strategic Investment, pursuant to which we agreed to prioritize any projects, products and purchase orders submitted by QIC. This increase in demand and expansion of project scope has resulted in the need to allocate additional resources and talent to FCG to ensure that contracted scopes of work can be delivered.

Strategic Investment by Qiddiya Investment Company

Overview

On July 27, 2023, pursuant to the Strategic Investment, QIC agreed to invest approximately $30.0 million in FCG through a private placement of preferred units by FCG LLC. Pursuant to the Subscription Agreement, upon the closing of the Strategic Investment, FCG LLC received a closing payment of $17.5 million (net of $500,000 in reimbursements relating to due diligence fees incurred by QIC). In April 2024, QIC released the remaining $12.0 million of the $30.0 million investment to FCG LLC as a result of the establishment of the Opco Incentive Plan.

After giving effect to the transactions contemplated by the Subscription Agreement, FCG LLC has two members: QIC holding 25% of the equity interest of FCG LLC in the form of preferred units and Falcon’s Opco holding the remaining 75% of the equity interest of FCG LLC in the form of common units. In connection with the Strategic Investment, FCG LLC amended and restated its limited liability company agreement to include QIC as a member and to provide QIC with certain consent, priority and preemptive rights and Falcon’s Opco and FCG LLC entered into an intercompany service agreement and a license agreement. In addition, FCG LLC agreed to indemnify the members of its board of managers for liabilities arising from their service in their respective roles.

Case Study: Qiddiya Water Theme Park

QIC selected Falcon’s as the lead master planner for a water theme park in Qiddiya, a planned tourism destination in Saudi Arabia. With multiple unprecedented themed and immersive water attractions, Falcon’s now-completed master plan for the water park alters the vision for the future of water theme parks. When built, the year-round water theme park is planned to span across more than 252,000 square meters and feature 23 rides and attractions, including seven that will be world firsts. It is expected to be the only water theme park in the world that offers a unique mix of dry and wet rides as well as state-of-the-art, competition-level facilities for water sports enthusiasts, including surfing and white-water rafting experiences.

Case Study: Dragon Ball Theme Park

QIC selected Falcon’s as the lead master planner, attraction designer and creative guardian of the first-ever Dragon Ball theme park, based on the popular comic book franchise. Unveiled at AnimeJapan on March 22, 2024, the Dragon Ball theme park experience will span over 500,000 square meters and will feature seven different themed lands that recreate various iconic locales from the original series, such as Kame House, Capsule Corporation, and Beerus’s Planet. Park guests will be able to create epic sagas of their own with the characters from the first Dragon Ball series to the latest Dragon Ball Super series in new and immersive ways.

FCG has a significant relationship with QIC which goes beyond QIC’s investment in FCG. Our sales objectives at FCG involve expanding the scope of current projects and acquiring new projects outside of QIC.

Life of a Project

As illustrated below, a typical theme park project may have a development timeline of four to five years from master planning to opening.

FBD: Falcon’s Beyond Destinations

We are now deploying an asset-efficient strategy in our FBD business. We believe this strategy aligns with Falcon’s “Big Experience, Small Footprint” themed entertainment concept. We aim to partner with developers who have existing commercial properties with established infrastructure and real estate management capabilities, which we believe will allow us to enter new markets and expand our operations more quickly, de-risk our FBD operations, and focus on our core competencies of bringing incredible experiences to people using our story-driven intellectual property. Our asset-efficient strategy will be used both for Falcon’s-owned intellectual property and for third-party brands that the Company has the rights to use through its FBB division.

Prior to the asset-efficient strategy now being deployed, the FBD division historically developed an asset-heavy range of products and services, including hotels, theme parks, and RD&E venues in premium beach destinations using Company-owned intellectual property.

Our Relationship with Raging Power Limited

Our relationship with Raging Power began on November 2, 2021, when the Company, Raging Power and Karnival TP-AQ Holdings Limited (“Karnival”), entered into a joint venture agreement, pursuant to which the Company became a 50% shareholder in Karnival.

Karnival plans to build our first joint venture LBE experience at the 11 SKIES project, located adjacent to the Hong Kong International Airport, which will be operated by K11, a subsidiary of New World Development Company Limited. The joint venture is developing a story-driven underwater interactive adventure, Vquarium, for the 11 SKIES project. Vquarium will explore oceans and waterways around the globe in a wonder-filled narrative that offers intimate and empowering encounters with virtual sea life to entertain, educate, and inspire. Using Falcon’s asset-efficient strategy, K11 is providing the real estate management and infrastructure and Falcon’s is providing the intellectual property development for Vquarium. Further, as part of the joint venture relationship, Karnival has contracted our FCG division to provide creative design services, media production services, and project management support. This will result in some of our capital investment in the joint venture being returned in the form of payment for services provided by FCG. Pursuant to the terms of the joint venture agreement, Falcon’s and Raging Power are each required to provide funding to Karnival in the form of non-interest-bearing shareholder loans, 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 the Company will receive 16.6% – 20.6% of gross revenue of the LBE at 11 SKIES.

Following its debut at 11 SKIES, Falcon’s plans to expand the Vquarium experience beyond LBEs, across all forms of entertainment, including media content, video games, and consumer products. This intellectual property expansion model is core to our mission and purpose, to accelerate franchise activations concurrently across physical and digital experiences.

For more information about our joint venture relationship with Raging Power, see Note 8, “Investments and advances to equity method investments,” to our audited consolidated financial statements included elsewhere in this Annual Report.

Our Relationship with Meliá

Our FBD resort destinations have historically been developed through two joint venture entities with Meliá. These joint ventures are currently structured as equal partnerships, with Falcon’s Opco and Meliá generally each making equivalent contributions of capital and/or assets needed to build out the properties owned by the joint ventures and having equal control. The joint ventures allow for shared responsibility in the more asset-intensive aspect of our FBD business (i.e., construction of the theme parks).

For more information about our joint venture relationships with Meliá, see Note 8, “Investments and advances to equity method investments,” to our audited consolidated financial statements included elsewhere in this Annual Report.

PDP Joint Venture

On December 13, 2012, Infinite Acquisitions Partners LLP (formerly Katmandu Collections, “Infinite Acquisitions”) and PDP entered into a joint venture and shareholders agreement with Meliá (as amended from time to time, the “PDP JV Agreement”), to form a joint venture to develop the Sol Katmandu Resort in Mallorca, Spain, which was subsequently rebranded as Sol Katmandu Park & Resort, and the Sol Tenerife hotel in Tenerife, Spain. In 2019, Infinite Acquisitions transferred its ownership interest in PDP, and all of its rights and obligations under the PDP JV Agreement and all related agreements, to Fun Stuff, a wholly-owned subsidiary of Falcon’s Opco.

Meliá provides PDP with hotel-related services pursuant to a hotel services agreement, and Fun Stuff provides PDP with hospitality and related services, as well as services to develop the leisure and entertainment aspects of the Sol Katmandu Park & Resort, pursuant to a leisure and entertainment service agreement, in each case, in exchange for 1.5% of the revenue from the Sol Katmandu Park & Resort, plus an additional amount as determined by reference to the gross operating profit of Sol Katmandu Park & Resort. Each of the agreements provide that it will automatically terminate in the event the PDP JV Agreement is terminated.

Sol Katmandu Park & Resort features the Katmandu Park, a small-footprint theme park located in the heart of the tourist center in Mallorca. Katmandu Park is based on the Company’s “entertainment with rooms” concept that locates entertainment options in the center of the leisure destination. The concept is designed to expand the addressable market for the entertainment beyond just hotel guests while providing a bookings differentiator to the hotel to drive higher room rates and occupancy levels than nearby peer properties. Our hotel outperforms surrounding comparable non-Katmandu Meliá hotels in Mallorca, enjoying higher occupancy and higher average room rates. The park is extensively themed based on our Katmandu intellectual property, immersing guests in the multiverse of Katmandu through interactive experiences, attractions, and custom content.

Sierra Parima Joint Venture

On June 26, 2019, Fun Stuff and Sierra Parima entered into a joint venture and shareholders agreement with Meliá (the “Sierra Parima JV Agreement”), to form a joint venture to develop Katmandu Park DR in Punta Cana, Dominican Republic.

Fun Stuff has historically provided Sierra Parima services related to the development of the RD&E attributes of the Katmandu Entertainment Center, including the Katmandu Park DR, shopping center, and dining elements owned by Sierra Parima pursuant to a leisure and commercial services agreement, in exchange for annual fees, as well as certain intellectual property, base and incentive fees as determined by reference to a revenue percentage. The leisure and commercial services agreement automatically terminates in the event that the Sierra Parima JV Agreement is terminated and also contains other termination rights in the event of a breach of the agreement by the other party.

In March 2024, the Katmandu Park DR was closed to visitors following financial, operational, and infrastructure challenges at the park. The Company believes that the closure of the Katmandu Park DR is in the best interest of the joint venture.

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 Accounting Standards Codification (“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. Based on the estimated sale or liquidation proceeds from Sierra Parima, and Sierra Parima’s outstanding debts remaining to be settled, the fair value of the Company’s investment in Sierra Parima was determined to be zero. The Company’s fifty percent share of the impairment recognized by Sierra Parima and the additional impairment of $14.1 million recognized by the Company are included within Share of gain (loss) from equity method investments in the Consolidated Statements of Operations for the year ended December 31, 2023. For more information about the impairment charge with respect to Sierra Parima, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation”, Note 8, “Investments and advances to equity method investments,” to our audited consolidated financial statements included elsewhere in this Annual Report, and “Item 1A. Risk Factors – 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.”

Falcon’s Central Development Plans

Leading our asset-efficient approach, we are now creating new partnered mix-use entertainment destinations to take advantage of high-traffic low-cost spaces in tourist destinations, such as shopping centers and repurposed superstructures. These destinations will be branded “Falcon’s Central” (“FC”). Each FC is expected to have a wide variety of retail, dining, and entertainment experiences which bring to life a diverse mix of owned and third party intellectual property, including Hershey and PBS Kids.

FBB: Falcon’s Beyond Brands

Our FBB division is our newest division, created with the mandate to deploy and monetize our original brands through strategic content and consumer product activations across multiple channels and markets. We seek to license partner brands to deploy their intellectual property for use in LBEs. Further, we seek to utilize third party intellectual property for consumer products which we may sell at LBEs or through online marketplaces.

Traditional brand development timelines can take many years or even decades to deploy across a broad range of vectors (e.g., physical theme parks, ride systems, media content and consumer merchandise). By contrast, our franchise execution model is designed to efficiently support brand activation and growth across a broad spectrum of deployment vehicles within a compressed timeline. We expect to leverage our in-depth data and insights to create and optimize characters, art styles and storylines for greatest audience impact, and to scale and monetize our offerings through ad-supported video on demand channels, such as YouTube, subscription-based video on demand channels, such as Netflix, and linear TV, such as ABC, where applicable, on social media channels and brand experiences in established metaverse platforms, like Roblox. The goal of this strategy is to accelerate consumer engagement and return on investment through a digital-first approach, leveraging scale and awareness to drive high margin monetization. We are focused on animation, movies, music, licensing and merchandizing, gaming, streaming, and ride and technology sales.

Our proprietary intellectual property includes The Hidden Realms of Katmandu, Cadim and the Monster Wave, Vquarium, ResQ, and Curiosity Playground.

We seek to enter into or have entered into third-party relationships with:

Competition

Each of our three business divisions face their own respective competitive landscapes.

FCG offers an extremely wide range of services to its outside clients and also works on internal development projects. Our broad services offerings include master planning, attractions and experiential entertainment design, and content, interactives and software production. Design studios doing work for outside clients with which we compete include FORREC Ltd., ITEC Entertainment, Jack Rouse Associates (JRA), PGAV Destinations, and Thinkwell Group. Media production studios doing work for outside clients with which we compete include Mack, Pixomundo, Super 78, and Weta Workshop. Design studios working on exclusively internal development include Merlin Magic Making Ltd., Universal Creative, and Walt Disney Imagineering.

FBD competes in the leisure and entertainment industry, which includes theme parks, LBEs, and hospitality. Market leaders include Merlin Entertainments, Meow Wolf, Legends, Andretti’s, Dave & Busters, Legoland Resorts, and Disney Resorts.

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

Marketing

The Company’s overarching marketing strategy focuses on Company brand development and reputation management to help drive the business, as well as growing brand awareness and loyalty. Through targeted campaigns and strategic initiatives, our marketing efforts aim to increase Falcon’s brand visibility and recognition among target audiences including customers, clients, current and future investors, and current and potential future employees. We believe the Company’s marketing team is equipped to quickly adapt to evolving company programs and initiatives to ensure the most optimal marketing campaigns. We maintain an extensive public relations program working with an outside public relations firm to ensure visibility and top news outlet placements for all Company announcements. The Company has a strong organic digital presence with active social media platforms including Facebook, Instagram, X, LinkedIn, and YouTube, as well as a newly launched website that was redesigned in early 2024 to coincide with the Company’s growth and evolving key attributes. Additional marketing programs work to position the Company executives as industry thought leaders by participating in speaking engagements, having an active presence on LinkedIn, and exhibiting in relevant tradeshows. By building brand awareness and loyalty through integrated marketing efforts, the Company is working to lay the foundation for sustainable competitive advantage and market leadership.

Each Company business has its own targeted marketing plan that varies by division and customer type.

FCG’s marketing efforts are based largely on a business-to-business (“B2B”) approach. Given the 24-year history, FCG is generally well-known in the themed entertainment industry and therefore benefits from proven work history and customer referrals. To ensure that FCG maintains a proactive industry profile, FCG has a physical presence at key industry tradeshows and is an active participant in influential industry organizations such as the International Association of Amusement Parks and Attractions (IAAPA), the Themed Entertainment Association (TEA) and the Visual Effects Society (VES). FCG also has a robust digital marketing presence, including a visually rich website featuring imagery, company news, and examples of our design and media production as well as numerous case studies. This is complemented by targeted e-newsletters and blogs showcasing key project work and timely news. FCG has an established social media presence on channels including Facebook, Instagram, X, and YouTube, although the most successful channel given business-focused audience is its LinkedIn page, which has over 14,000 followers. FCG also produces a successful industry monthly podcast,*Experience Imagination,*that examines relevant topics in the themed entertainment industry to educate, inform and entertain listeners. Marketing promotes the podcast through owned and earned channels.

FBD’s marking program is focused on supporting projects under development by establishing each program’s narratives and communication priorities. This involves key collaborations such as marketing strategic planning with joint venture and licensed IP partners to align on integrated marketing efforts. For FBD’s franchise development, our marketing team leads the efforts working with Company creative guardians to identify and frame the project narratives while developing brand assets and guidelines. The overarching concept is to have the flexibility of creating new evolving consumer experiences traveling to an endless array of themed destinations from oceans to space, to the inner Earth and beyond.

FBB’s marketing program is still being refined and includes both B2B and business-to-consumer (“B2C”) approaches, integrating elements from our FCG and FBD marketing efforts. Brand licensing and distribution, as well as ride systems and technologies, are marketed via channels such as trade shows, summits, and publications. This marketing covers the licensing of proprietary intellectual property for the distribution of our original linear content, the licensing of our consumer merchandise, the licensing of third-party brands, and sales of Falcon’s proprietary ride systems and technologies. For example, our recent announcement of our collaboration with Hershey resulted in significant positive industry news stories and organic social media results. Further, Falcon’s Attractions Systems & Technologies launched in March 2024 as a commercial name for FBB to highlight the focus of rides and attractions sales. The launch was accompanied by an integrated marketing campaign, including a website, press announcement, e-newsletter, and posts on social media channels. On-going marketing efforts include industry-related engagement as well as owned and earned channels.

Sales

Our sales strategies vary by division.

FCG’s primary sales strategy is to provide priority access design services on Qiddiya projects in conjunction with QIC’s minority investment in FCG. The Company anticipates that the growth and expansion of FCG will continue to be strengthened by the previously-announced projects launched following the Strategic Investment, including the Consultancy Services Agreement with a total contract value of up to approximately $83.1 millionif we bid for and win all of the opportunities available to us under such agreement. Our sales objectives at FCG involve expanding the scope of current QIC projects and acquiring new projects outside of QIC.

Secondary sales sources for FCG will be driven by sales leads sourced through new business marketing strategies and ongoing customer relationships. The Company maintains an ongoing relationship with most of its past customers in an effort to support the potential for future work for hire business. Illustrating the importance of repeat business, 58% of first-time clients have contracted for additional services, and the scope of services contracted by returning clients averages 60 times the scope of the initial project.

Both FBD and FBB businesses are in the development stage, and our sales efforts for these businesses are growth focused.

FBD has adjusted its development approach to support the growth of the business and the Company’s asset-efficient “Big Experience, Small Footprint” themed entertainment concept. The new strategy emphasizes focus on building strategic relationships with commercial developers and brands that have existing high-traffic commercial properties with established infrastructure and real estate management capabilities. These partnerships will help develop a diverse range of entertainment experience destinations featuring both Company owned and third party licensed intellectual property. The sales model for future LBE venues in development will rely on attraction ticket sales, retail, dining and merchandise revenue.

FBB recently launched a new brand fictious name, Falcon’s Attraction Systems & Technologies, for the sales of rides, attractions and technologies. The sales strategy is focused on B2B marketing efforts including trade shows and direct marketing to drive sales. Additionally, the Company is currently accessing potential acquisition targets to support growth. FBB expects to license media content to distributors, and to sell consumer products at our FBD locations, online direct-to-consumer channels, vertically integrated retail, and third-party marketplaces.

Intellectual Property Research and Development

The Falcon’s Business has decades of experience in intellectual property creation and expansion and in developing award-winning themed experiences and entertainment content. Over the last 24 years, we have provided planning and design services and developed innovative technologies culminating in over $120 billion of location-based entertainment projects realized. Our extensive work-for-hire history has provided a platform for our research and development, leading to our portfolio of award-winning proprietary technology and attraction systems, as well as patents covering some of these technologies and systems.

Much of our intellectual property has been developed and tested in-house at our Falcon’s X-Lab facility in Orlando, Florida — a versatile research facility and prototype laboratory, which is being relocated to our new headquarters, used as the central test lab to research and experiment with emerging technologies in innovative applications. We undertake proactive research on the experiential entertainment industry, focusing on strategies and technologies to facilitate the connection and interfacing between disparate proprietary, consumer, and commercial hardware and software systems to provide immersive interactive experiences in both the physical and virtual worlds. 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.

We rely on a combination of patents, trademarks, copyrights, and trade secrets to protect our intellectual property rights and our success relies in part on our ability to protect our intellectual property rights. Our patents and patent applications cover our attraction systems and experiential technologies, including our motion simulator theater with suspended seating, circular motion theater, and interactive theater system. As of December 31, 2023, we hold 9 issued utility patents in the US and 1 issued utility patent in China, including patents for: CircuMotion Theater, a multi-dimensional, rotating platform that incorporates media content and special effects to create a fully immersive experience; Suspended Theater, which takes riders soaring across epic adventures delivering the unique sensation of flight in a new way; Falcon’s Vision, an augmented reality headset that is designed to be durable, functional, hygienic, and affordable for high-throughput LBEs; and ÄEONXP, a technology solution that gamifies a conventional attraction experience into a flexible and enduring ecosystem of narrative data, complete with consequential choice customizations, character progressions, worldbuilding, global high-score competitions, and an exciting infrastructure within which to cultivate organic social interaction and gaming communities. The foregoing 10 patents expire from 2027 to 2042. We have several utility patent applications pending in the U.S., including: SpectraVerse, which uses projection, tracking, and optical technologies to empower a joint social experience of individualized perspectives in a themed environment, without the need for a headset; and ON!X, a theater system which features continuous positional tracking, personalized player triumph moments, robust audience accessibility, and real-time scoring. Additionally, we feature some of our proprietary designs and technologies in Spheron Theater, which surrounds guests with edge blended, high definition video content, and SpectraVerse Game Bay, which uses our SpectraVerse intellectual property for small group play in an immersive atmosphere.

Our patents protect our competitive advantage by preventing third parties from infringing our proprietary inventions without our permission. We recognize the value of our intellectual property and vigorously defend our intellectual property rights. However, despite our efforts to protect our intellectual property, we may not be able to prevent third parties from developing similar technology or from infringing on our intellectual property rights. Any infringement could harm our business. See Item 1A. Risk Factors – “Theft of our intellectual property, including unauthorized exhibition of our content, may decrease our licensing, franchising and programming revenue which may adversely affect our business and profitability.”

We also own registered domain names and have entered into, and will continue to enter into, both in-bound and out-bound licensing agreements of our intellectual property and the intellectual property of third parties.

We rely on the intellectual property laws of the United States and other relevant jurisdictions, as well as licensing agreements, confidentiality and non-disclosure agreements, and other contractual protections, to safeguard our intellectual property assets.

Our on-boarding policy requires each of our employees to enter into a confidentiality agreement which provides that all inventions and discoveries that are conceived or made by such employee during their employment which relate in any manner to Falcon’s current business or future business will be the sole property of Falcon’s. Additionally, independent contractors involved in the creation and/or development of intellectual property for Falcon’s execute agreements that include confidentiality, work-for-hire, and intellectual property assignment provisions providing that Falcon’s owns the results and/or deliverables created under such agreements. We also take reasonable steps to control and monitor access to our software, documentation, proprietary technology, and other confidential information.

We continue to evaluate additional intellectual property protections to the extent we believe they would be beneficial and cost-effective. We intend to vigorously defend our intellectual property rights and our freedom to operate our business. Despite our efforts to protect our intellectual property assets, our intellectual property could be deemed invalid or unenforceable or otherwise challenged and such efforts may be circumvented or otherwise unsuccessful. See the section entitled “Risk Factors,” including “Risk Factors — Risks Related to Our Intellectual Property” for a description of the risks related to our intellectual property.

Customers and Concentration of Customer Risk

Our business divisions have significant individual customer relationships. FCG in particular tends to have customers that individually represent a significant amount of its consolidated revenues given that it is limited in the number of customers it can service for large master planning and design projects at any one time. Our FCG customers are often themed entertainment developers and operators, museums, zoos, aquariums, cruise lines, media producers, intellectual property holders, and others based in the United States and in 27 other countries. We are proud to have worked with QIC, MOTIONGATE Dubai, Fosun International Limited, the IMG Group, Delaware North Companies, The Walt Disney Company, Universal Studios, and the National Geographic Society, to name a few.

For the year ended December 31, 2023, FCG’s largest customer, QIC, generated an aggregate of approximately 81% of FCG’s revenue.

QIC, a corporation wholly owned by Saudi Arabia’s Public Investment Fund, has engaged FCG to provide services for Qiddiya, a planned tourism destination and one of a series of large-scale projects to be constructed in Saudi Arabia. Qiddiya is planned to consist of 367 square kilometers of leisure and theme parks, sports arenas, academies for sports and the arts, concert and entertainment venues, racetracks and outdoor and adventure activities alongside nature and environment experiences. Since 2018, FCG has been engaged to lead the design of 26 different entertainment assets located in Qiddiya, including the now-completed master plan for its water theme park. The water theme park will be the country’s first and the region’s largest.

Various services agreements with QIC have been entered into between July 2018 and March 2024, providing for the provision of design, consultancy, creative guardianship, media production, and/or ride hardware procurement services related to the development of Qiddiya. Each of the agreements that we have entered into contains the scope of services and completion milestone requirements applicable to each particular entertainment asset or services to which the agreement relates. Because our work for Qiddiya is not subject to a master services agreement, our and QIC’s rights and obligations and our time to complete a specific task may vary from agreement to agreement and the terms and conditions of each agreement is generally tailored to the specific project or services covered by the applicable agreement. As of April 26, 2024, we have 11 active agreements with QIC, each of which may be terminated at will by either FCG, after providing 14 days’ notice to QIC, upon a further notice of 42 days or QIC upon 14 days’ notice to FCG. Further, there are no cross-termination or cross-default provisions in these agreements, as they relate to discrete services or projects that are not dependent on each other.

Government Regulations

Given that we operate in several industries and geographically diverse locations, our operations are subject to a variety of rules and regulations. Several non-U.S. and U.S. federal and state agencies regulate various aspects of our business. We are subject to applicable laws and regulations in the United States and other countries in which we operate, and the rules and regulations of various governing bodies, which may differ among jurisdictions, including, without limitation, with respect to export restrictions, economic sanctions, consumer protection and privacy, data usage, data integrity, cybersecurity, intellectual property, content requirements, trade restrictions, tariffs, taxation and anti-corruption. These regulations are often complex and subject to varying interpretations, in many cases due to their lack of specificity, and as a result, their application in practice may change or develop over time through judicial decisions or as new guidance or interpretations are provided by regulatory and governing bodies, such as foreign, federal, state, and local administrative agencies. We may be required to incur costs to comply with these requirements, and the costs of compliance, investigation, remediation, litigation, and resolution of regulatory matters could be substantial. See the section entitled “Risk Factors,” including “Risk Factors — Risks Related to Regulatory, Tax, Legal and Compliance Matters” for a description of the risks related to the potential impact of government regulations.

Falcon’s Creative Group

FCG is subject to applicable federal and state regulation in the United States, including, without limitation, regulations relating to protection of intellectual property, such as copyright, patent, and trade secret and other propriety-rights laws and regulations. See “—Intellectual Property Research and Development” above for further information about how we use U.S. laws to protect our intellectual property rights. Our products available in international markets are also subject to applicable U.S. and non-U.S. laws and regulations. When FCG is contracted to integrate its products with overseas businesses, we are subject to the laws and regulations relating to, as applicable, temporary work authorizations or work permits and other immigration matters of the countries where those businesses are located. These laws and regulations are continually evolving and are subject to change over time. See “Risk Factors – We are exposed to risks related to operating in the Kingdom of Saudi Arabia” for regulatory and legal risks with respect to our relationship with QIC, and see “—The significance of our operations and partnerships outside of the United States makes us susceptible to the risks of doing business internationally, which could lower our revenues, increase our costs, reduce our profits, disrupt our business, or damage our reputation” for more information about regulatory and legal risks generally.

Falcon’s Beyond Destinations

FBD and its joint venture entities and operations are subject to applicable environmental laws and regulations in the countries in which they operate hotels, theme parks, FCs or other properties, such as laws and regulations relating to water resources, discharges to air, water and land, the handling and disposal of solid and hazardous waste, and the cleanup of properties affected by regulated materials. Under these laws and regulations, should circumstances warrant, we may be required to investigate and clean up hazardous or toxic substances or chemical releases from current or formerly owned or operated facilities or to mitigate potential environmental risks. Environmental laws typically impose cleanup responsibility and liability without regard to whether the relevant entity knew of or caused the presence of the contaminants. The costs of investigation, remediation or removal of regulated materials may be substantial, and the presence of those substances, or the failure to remediate a property properly, may impair our ability to use, transfer or obtain financing with respect to our property. See the section entitled “Risk Factors,” including “Risk Factors — Risks Related to Regulatory, Tax, Legal and Compliance Matters — United States or international environmental laws and regulations may cause us to incur substantial costs or subject us to potential liabilities.”

At our hotels and theme park, Falcon’s, Meliá, our joint ventures, and third-party service providers collect, use and retain large volumes of guest data, including credit card numbers and other personally identifiable information, for business, marketing and other purposes. We also maintain personally identifiable information about our employees. As such, we are subject to applicable security and data privacy laws and regulations in the countries where we operate regarding protection against the risk of theft, loss or unauthorized or unlawful use of guest, employee or company data. For example, FBD is subject to the General Data Protection Regulation (“GDPR”), which became effective on May 18, 2018. This EU law governing data privacy and protection applies to all of our activities conducted from an establishment in the EU or related to certain of our products and services offered in the EU, and imposes a range of compliance obligations regarding the handling of personal data.

In addition, our joint ventures are subject to other governmental regulations in the countries where they operate including, without limitation, labor, zoning and land use, minimum wage and health and safety regulations applicable to hotel, restaurant and theme park construction and operations.

Falcon’s Beyond Brands

FBB is subject to applicable laws and regulations of the United States and other jurisdictions where it operates, including, without limitation, those relating to protection of intellectual property and data privacy and security. FBB, in its partnerships with other brands and content creators, will work alongside licensors to assist in protecting the intellectual property of others in certain instances. We must design and operate our products and services in compliance with the applicable laws and regulations of the relevant jurisdiction(s).

Human Capital Management

The Company

Our key human capital management objectives are to attract, retain and develop the highest quality talent throughout our company. To support these objectives, we strive to provide our employees good working conditions and competitive pay, as well as a wide range of benefits programs to eligible employees. We continuously evaluate our benefits programs and policies to meet present and future employee needs and desires. These programs and policies are intended to ensure the well-being of our employees. Programs and policies applicable to our U.S. employees generally include, but are not limited to, access to medical, dental, life, short-term and long-term disability insurance benefits, a 401(k) and profit-sharing plan to assist employees in saving for their future and paid vacation and holidays.

At Falcon’s, culture is not just an incidental by-product of working together, it’s our way of life. We believe in integrity, inclusion, diversity, and fairness, as shown by the employee initiatives that we encourage and enforce:

As of December 31, 2023, we had 116 full-time employees, of which 102 were based at our Orlando headquarters and 14 were based in the Philippines. None of our U.S. or Philippines-based employees are covered by collective bargaining agreements. This does not include employees of our joint venture entities, which are discussed below.

In 2023, Falcon’s was awarded the Top Workplaces Orlando regional award by Orlando Sentinel for the second year in a row.

We consider our employees relations to be good.

Our Joint Ventures

As of December 31, 2023, our two joint ventures with Meliá had approximately 297 year-round, full-time employees, of which 161 were based in Spain and 136 were based in the Dominican Republic. In Spain, as of December 31, 2023, there were an additional 361 full-time and partial-time employees that work all or a part of the operating season of the given property.

All of the Spanish joint venture employees are subject to collective bargaining agreements governed by Estatuto de los Trabajadores (the “Workers’ Statute”) of Spain. These agreements are reached after negotiations between unions, industry representatives and public administrators. At the beginning of 2023, there was a pre-agreement announced for a 5.0% wage increase in 2023 and 3.3% in 2024 (applying only to the positions that are being remunerated with the collective bargain agreement).

Insurance

The Company

We maintain insurance, excess coverage, or reinsurance for property and commercial general liability, personal and advertising injury, automobile liability, professional services liability, workers’ compensation, cybersecurity. and other coverage in amounts and on terms that our management believes are commercially reasonable and appropriate, based on our actual claims experience and expectations for future claims.

We also maintain insurance for our non-US activities and operations including commercial general liability, automobile liability, employer’s liability, kidnap and ransom, and other coverage in amounts and on terms that our management believes are commercially reasonable and appropriate, based on our actual claims experience and expectations for future claims.

There can be no assurance that our insurance coverage will be adequate to cover all claims to which we may be exposed. See “Risk Factors – Our insurance may not be adequate to cover the potential losses, liabilities and damages of our FBD division, the cost of insurance may continue to increase materially, including as a result of natural disasters, some of which may be related to climate change, and we may not be able to secure insurance to cover all of our risks, all of which could have a material adverse effect on us.”

Meliá-Falcon’s Joint Venture Entities

Our joint venture entities maintain insurance for property, professional services liability, commercial general liability and other appropriate coverage in amounts and on terms that our management believes are commercially reasonable and appropriate for businesses operating in the tourism industry in the geographies in which we operate, based on Falcon’s, Meliá’s and the joint ventures entities’ actual claims experience and expectations for future claims. The joint venture entities also maintain general accident insurance and life insurance. This general liability insurance provides coverage for hotel and theme park employees’ death and incapacity, resulting from our operations. We believe these insurance policies are adequate for foreseeable losses and on terms and conditions that are reasonable and customary with solvent insurance carriers. In addition, the joint ventures maintain what we believe to be appropriate levels of insurance coverage in areas where there is a high probability of severe weather events or earthquakes.

The types and levels of coverage the joint ventures obtain may vary from time to time depending on their view of the likelihood of specific types and levels of loss in relation to the cost of obtaining coverage for such types and levels of loss and they may experience material losses that exceed, or are not covered by, their insurance.

We generally evaluate our insurance policies on an annual basis, which may involve renegotiation of terms as necessary. The majority of our current insurance policies were renewed at the beginning of the second quarter of 2023. We cannot predict the level of the premiums that we may be required to pay for subsequent insurance coverage, the level of any retention applicable thereto, the level of aggregate coverage available or the availability of coverage for specific risks.