Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Item 2. 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 unaudited condensed consolidated financial statements and the accompanying notes of the Company as of and for the three and nine months ended September 30, 2025, and 2024, included elsewhere in this Quarterly Report. We intend for this discussion to provide the reader with information to assist in understanding the Company's unaudited condensed consolidated financial statements and the accompanying notes, the changes in those financial statements and the accompanying notes from period to period along with the primary factors that accounted for those changes. Certain information contained in this management's discussion and analysis includes forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors. Please see "Cautionary Note Regarding Forward-Looking Statements," in this Quarterly Report.

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 operating segments.

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"), 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 ride and technology sales and service, animation, movies, licensing and merchandising, and gaming.

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

The following reflects our results of operations for the three and nine months ended September 30, 2025 and 2024.

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, and negative cash flows from operating activities, as it has invested in growing the Falcon's Beyond Brands division and the newly acquired OES business, for the nine months ended September 30, 2025. 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 the interim unaudited condensed consolidated financial statements.

The Company's development plans, and investments have been funded by a combination of debt and equity investments from its stockholders, and distributions from the sale of non-core assets from its equity method investments. The Company is reliant upon its stockholders, and third parties for obtaining additional financing through debt or equity raises, and from distributions from equity method investments, to fund its working capital needs, contractual commitments, and expansion plans. As of September 30, 2025, the Company continues to carry material accrued expenses and accounts payable in relation to its external advisors fees for the 2023 Business Combination. As of September 30, 2025, the Company has a working capital deficiency of $27.0 million including $8.2 million debt that matured on May 16, 2025 and debt coming due of $1.9 million.

The Company does not currently have sufficient cash or liquidity to pay all liabilities that are owed or are maturing in the next twelve months and fund ongoing operations. There can be no assurance that additional capital or financing raises, or liquidation of non-core assets and investments, if completed, will provide the necessary funding for the next twelve months from the date of this Quarterly Report. This Quarterly Report 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.

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

Revenue

Revenue increased for the three and nine months ended September 30, 2025, compared to the same periods in 2024, primarily driven by new attractions contracts.

Project design and build expense

Project design and build expense increased for the three and nine months ended September 30, 2025, compared to the same periods in 2024, primarily driven by new attractions sales and service contracts.

Selling, general and administrative expense

Selling, general and administrative expense increased for the three months ended September 30, 2025, compared to the same period in 2024, primarily driven by a $2.1 million increase in payroll, payroll taxes, and benefits, professional fees, occupancy costs and marketing to support the expansion of the attraction services business. The increase was partially offset by $0.6 million credit in full settlement of a claim against a third party network service provider to recover expenses related to a network intrusion.

Selling, general and administrative expense increased for the nine months ended September 30, 2025, compared to the same period in 2024, primarily driven by a $5.2 million increase in payroll, payroll taxes, and benefits, professional fees, occupancy costs and marketing to support the expansion of the attraction services business. The decrease was partially offset by a $2.3 million decrease in audit and professional services fees and by a $0.6 million credit in full settlement of a claim against a third party network service provider to recover expenses related to a network intrusion.

Transaction (credit) expenses

The Company recognized a transaction credit of $3.5 million for the nine months ended September 30, 2025 as a result of a transaction expense settlement. The transaction credit was partially offset by $1.7 million transaction expenses for the nine months ended September 30, 2025 related to a proposed underwritten offering of the Company's Class A common stock during the first quarter in 2025 that was not completed.

Research and Development

Research and development increased for the nine months ended September 30, 2025, compared to the same periods in 2024, primarily driven by the development of a location based entertainment experience.

Depreciation and amortization expense

Depreciation and amortization expense increased for the three and nine months ended September 30, 2025, compared to the same periods in 2024, primarily driven by the OES Acquisition. See "Note 3 - Business combination" within Item 1 of this Quarterly Report.

Share of (loss) gain from equity method investments

Share of (loss) gain from equity method investments increased for the three and nine months ended September 30, 2025, compared to the same periods in 2024 was primarily driven by:

PDP: Share of net income from PDP decreased for the three months ended September 30, 2025, compared to the same periods in 2024, primarily driven by lower net income due to absence of the the Tenerife property following the sale of Tertian earlier in the year, partially offset by purchase price adjustments on the sale of Tertian and a higher foreign currency translation rate.

Share of net income from PDP increased for the nine months ended September 30, 2025, compared to the same periods in 2024. On May 30, 2025, PDP sold all the shares of Tertian XXI, S.L., ("Tertian") a wholly-owned subsidiary of PDP, which owned the real estate assets comprising the resort hotel at Tenerife, the ("Tenerife Sale"). The Company received $27.0 million in a cash dividend distribution from PDP as a result of the transaction. PDP recognized a pre tax gain on sale of $60.0 million. The Company recognized its 50% share of the gain of $30.0 million within the share of (loss) gain from equity method investments.

The fair value of the Company's remaining investment in PDP, which operates one hotel resort and theme park located in Mallorca, Spain, was determined to be below the recorded value. 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.

See "Note 5 - Investments and advances to equity method investments" within Item 1 of this Quarterly Report. The Company recognized its 50% share of PDP's net income.

Interest expense

Interest expense increased for the three and nine months ended September 30, 2025, compared to the same periods in 2024, primarily driven by the increase in interest rates on both short and long-term debt.

Change in fair value of warrant liability

Gain due to change in fair value of warrant liabilities increased for the nine months ended September 30, 2025, compared to the same period in 2024, primarily driven by the decrease in the market value of the warrants through January 14, 2025. As of March 31, 2025, all warrants have been reclassified to equity and will not require subsequent fair value measurement. See "Note 18 - Stock warrants" in the Company's unaudited condensed consolidated financial statements.

Change in fair value of earnout liability

As of September 30, 2025, all EBITDA and revenue based earnout shares have been earned or forfeited. The remaining earnout shares based on Company stock price targets were reclassified to equity and do not require subsequent fair value measurement. As a result, there was no change in fair value of earnout liabilities incurred for the three and nine months ended September 30, 2025.

Gain due to change in fair value of earnout liability was for the three and nine months ended September 30, 2024, primarily driven by a decrease in the market price of the Company's stock between December 31, 2023 and September 30, 2024.

Foreign exchange transaction (loss) gain

Foreign exchange transaction loss increased for the three months ended September 30, 2025, compared to the same periods in 2024. The change is primarily attributable to the foreign exchange loss on U.S. denominated intercompany debt with a Spanish subsidiary as the U.S. dollar strengthened against the Euro during the three months ended September 30, 2025, and weakened against the Euro during the three months ended September 30, 2024. This intercompany debt was repaid during the three months ended September 30, 2025.

Foreign exchange transaction gain increased for the nine months ended September 30, 2025, compared to the same periods in 2024. The change is primarily attributable to the foreign exchange gain on U.S. denominated intercompany party debt with a Spanish subsidiary as the U.S. dollar weakened against the Euro during the nine months ended September 30, 2025, and strengthened against the Euro during the nine months ended September 30, 2024.

Gain on bargain purchase of OES Acquisition

The fair value of the identifiable assets acquired and liabilities assumed in the OES Acquisition exceeded the fair value of the purchase price. Therefore, the Company recognized $1.1 million gain on bargain purchase of OES Acquisition for the three and nine months ended September 30, 2025. See "Note 3 - Business combination" in the Company's unaudited condensed consolidated financial statements.

Segment Reporting

The following table presents selected information about our segments' results:

FCG revenues decreased for the three and nine months ended September 30, 2025, compared to the same periods in 2024, as a result of the timing of certain contract performance obligations.

FCG project design and build expense decreased for the three and nine months ended September 30, 2025, compared to the same periods in 2024, primarily driven by the decrease in project revenues partially offset by a decline in project gross margins on certain design projects.

Reportable segment measures of profit and loss are earnings before interest, foreign exchange gains and losses, unallocated corporate expenses, impairments and depreciation and amortization expense. Results of operating segments include costs directly attributable to the segment including project costs, payroll and payroll-related expenses and overhead directly related to the business segment operations. Unallocated corporate overhead costs include costs related to accounting, audit, and corporate legal expenses. Unallocated corporate overhead costs are presented as a reconciling item between total income (loss) from reportable segments and the Company's unaudited condensed consolidated financial results. For more information about our Segment Reporting, see Note 14 - Segment information in the Company's unaudited condensed consolidated financial statements.

Non-GAAP Financial Measures

We prepare our unaudited condensed consolidated financial statements in accordance with U.S. GAAP. In addition to disclosing financial results prepared in accordance with U.S. GAAP, we disclose information regarding Adjusted EBITDA which is a non-GAAP measure. We define Adjusted EBITDA as net income, determined in accordance with U.S. GAAP, for the period presented, before net interest and expense, income tax expense, depreciation and amortization, transaction (credit) 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 gain on Tenerife Sale, impairment of PDP, impairment of Karnival, change in fair value of warrant liabilities, change in fair value of earnout liabilities and gain on bargain purchase of OES Acquisition.

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 U.S. 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 U.S. GAAP to Adjusted EBITDA for the following periods:

Adjusted EBITDA loss increased for the three months ended September 30, 2025, compared to the same period in 2024, primarily driven by a $1.1 million increase in losses from operations from the integration of the OES acquisition, a $4.0 million decrease in the share of (loss) gain from equity method investments and a decrease of $0.9 million in foreign exchange transaction gain.

Adjusted EBITDA loss increased for the nine months ended September 30, 2025, compared to the same period in 2024, primarily driven by a $0.7 million increase in losses from operations from the integration of the OES acquisition, a $9.7 million decrease in share of gain from equity method investments, partially offset by an increase of $1.8 million in foreign exchange transaction gain.

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

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 U.S. 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.

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

Adjusted EBITDA decreased for the three months ended September 30, 2025, compared to the same period in 2024, primarily driven by a decrease in revenues of $7.4 million; partially offset by a decrease in project design and build expenses of $3.5 million and a decrease in selling, general and administrative expense of $0.3 million.

Adjusted EBITDA decreased for the nine months ended September 30, 2025, compared to the same period in 2024, primarily driven by a decrease in revenues of $19.5 million; partially offset by a decrease in project design and build expenses of $10.5 million and a decrease in selling, general and administrative expense of $1.1 million. As of September 30, 2025, the contracted pipeline for FCG was $48.3 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.

On September 8, 2025, the Company issued $28.7 million of Series B Preferred Stock for $8.0 million in cash and the exchange of $20.7 million of outstanding debt and accrued interest.

As of September 30, 2025, our total indebtedness was approximately $16.1 million. We had approximately $4.3 million of cash and cash equivalents and $10.0 million available for borrowing under our lines of credit. On November 10, 2025 we entered into a new $15.0 million line of credit agreement and amended our existing line of credit agreement to reduce the borrowing capacity to $5.5 million. Collectively, these agreements increasing cash available for borrowing by $5.5 million.

We anticipate managing our operations to ensure that our existing cash on hand and unused capacity on our lines of credit, along with distributions from equity method investees, additional debt and equity capital raises, and reviewing our portfolio of assets 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 settle our outstanding liabilities and meet the needs of our next twelve months of our operations.

For the nine months ended September 30, 2025, we have operational losses, and negative cash flows from operating activities that raise substantial doubt about our ability to continue as a going concern. As of September 30, 2025, we have $21.1 million of accrued expenses and other current liabilities, which include $16.0 million of transaction and other related professional fees, $2.1 million of accrued payroll and related expenses, $2.0 million accrued interest and approximately $1.0 million of other accrued expenses and current liabilities. The transaction expenses are actively being negotiated, and actual settlement may vary from the amounts recorded.

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.

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 $4.1 million and $12.2 million, respectively, are not yet settled as of September 30, 2025, and the Company is actively negotiating to settle them over the next 24 months. These transaction costs are recorded in accrued expenses. 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. As previously disclosed in the Company's Annual Report, 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 filed counterclaims against Guggenheim. Guggenheim denied all liability as to those amended counterclaims. On June 30, 2025, Guggenheim filed a Notice of Issue and Certificate of Readiness for trial, and on October 27, 2025 Guggenheim moved for summary judgment on its claims, which the Company opposed; on the same day, the Company moved for partial summary judgment on its claims which Guggenheim opposed. Pursuant to 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 September 30, 2025 and December 31, 2024, with respect to the alleged amended engagement agreement with Guggenheim.

Related Party Loans

On September 8, 2025, the Company exchanged $20.5 million of debt and accrued interest with Infinite Acquisitions for the issuance of $20.5 million of shares of Series B Preferred Stock.

The Company has a financing agreement with Katmandu Ventures, LLC ("Katmandu Ventures") with an outstanding balance of $0.6 million as of September 30, 2025. The loan was due on May 16, 2025 and we are in negotiations to amend the loan.

See "Note 9 - Long-term debt and borrowing arrangements", "Note 10 - Related party transactions" and "Note 16 - Equity" in the Company's unaudited condensed consolidated 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, operating costs of our Falcon's Attraction services business and corporate overhead activities.

Cash used in operating activities increased for the nine months ended September 30, 2025, compared to the same period in 2024, due to the settlement of accounts payable and accrued obligations associated with our corporate overhead and compliance costs, and the investment in working capital for the growth of the Falcon's Beyond Brands business following the OES Acquisition.

Cash Flows from Investing Activities

Net cash provided by investing activities increased for the nine months ended September 30, 2025, compared to the same period in 2024, primarily related to a $27.0 million dividend distribution from PDP, partially offset by $2.0 million advance to affiliate and $1.6 million cash paid for the OES Acquisition.

Cash Flows from Financing Activities

Net cash provided by financing activities decreased for the nine months ended September 30, 2025, compared to the same period in 2024. The Company received $8.0 million in proceeds from the issuance Series B Preferred Stock and made net repayments of $5.3 of debt in the nine months ended September 30, 2025. For the nine months ended September 30, 2024, the Company received $6.0 million in net proceeds from debt and warrant exercises, $2.3 million in short term advances from affiliates and $0.6 million in proceeds from issuances of RSUs to affiliates.

Critical Accounting Estimates

The Company's critical accounting policies have not changed materially from those reported in the Company's Annual Report on Form 10-K filed with the SEC on April 3, 2025, except for the addition of the following:

Business Combinations

The Company utilizes the acquisition method of accounting under ASC 805, Business Combinations("ASC 805"), for all transactions and events in which it obtains control over one or more other businesses (even if less than 100% ownership is acquired), to recognize the fair value of all assets and liabilities assumed and to establish the acquisition date fair value as of the measurement date.

While the Company uses its best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed as of the acquisition date, the estimates and assumptions are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill or bargain purchase to the extent we identify adjustments to the preliminary fair values. For changes in the valuation of intangible assets between the preliminary and final purchase price allocation, the related amortization is adjusted in the period it occurs. Subsequent to the measurement period, any adjustment to assets acquired or liabilities assumed is included in operating results in the period in which the adjustment is determined. Transaction expenses that are incurred in connection with a business combination, other than costs associated with the issuance of debt or equity securities, are expensed as incurred.

Contingent consideration is classified as a liability or as equity on the basis of the definitions of a financial liability and an equity instrument; contingent consideration payable in cash is classified as a liability. The Company recognizes the fair value of any contingent consideration that is transferred to the seller in a business combination on the date at which control of the acquiree is obtained. Contingent consideration payments related to acquisitions are measured at fair value each reporting period using Level 3 unobservable inputs (as defined in the Fair value measurement policy included in the Company's Annual Report on Form 10-K filed with the SEC on April 3,

2025). When reported, any changes in the fair value of these contingent consideration payments are included in contingent earnout expense on the consolidated statements of operations and comprehensive (loss) income.

Partial impairment of Investment in PDP

The Tenerife sale represents a significant change in circumstances that could impact the fair value of the Company's remaining investment in PDP. Accordingly, the Company performed an impairment evaluation of its equity method investment in PDP to determine whether the remaining carrying amount of the investment exceeds its fair value.

The Company evaluated its remaining equity investment in PDP for impairment as of June 30, 2025 and determined that it was other-than-temporarily impaired. The Company estimated the fair value of 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 Company's investment in PDP was determined to be $27.1 million. For the nine months ended September 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.

Partial Impairment of Investment in Karnival

The winding up of the joint venture represents a significant change in circumstances that could impact the fair value of the Company's remaining 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.

The Company evaluated its remaining equity investment in Karnival for impairment as of September 30, 2025 and determined that 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 assumptions could be material. The fair value of the Company's investment in Karnival was determined to be $4.2 million. For the three and nine months ended 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.