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Snail, Inc.

Snail, Inc.SNALEarnings & Financial Report

Nasdaq · Information Technology · Services-Prepackaged Software

Suzhou Snail Digital Technology Co., Ltd., doing business as Snail, is a Chinese video game company and a Virtual Network Operator headquartered in Suzhou, China, which has branches Snail Games and Snail Mobile. Its division, Snail USA, markets Snail Games products in North America, South America, & Europe. Snail Games products include massively multiplayer online (MMOs), real-time strategy (RTS), and casual games. Its global registered user base has reached over 70 million accounts. The U.S....

What changed in Snail, Inc.'s 10-K — 2024 vs 2025

Top changes in Snail, Inc.'s 2025 10-K

615 paragraphs added · 445 removed · 337 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

180 edited+133 added−55 removed98 unchanged
Hai Shi, the Company’s Founder, Co-Chief Executive Officer, Chief Strategy Officer, and Chairman, for breach of contract and related claims arising out of a commercial lease for premises located in Los Angeles County. Plaintiff alleges that the defendants exercised an option to extend the lease and was harmed when defendants instead terminated the lease and vacated the premises.
Hai Shi, the Company’s Founder, Chief Executive Officer, Chief Strategy Officer, and Chairman, for breach of contract and related claims arising out of a commercial lease for premises located in Los Angeles County. Plaintiff alleges that the defendants exercised an option to extend the lease and was harmed when defendants instead terminated the lease and vacated the premises.
The loan is secured by the Company’s building, with a carrying value of $ 4.2 million, and matures on June 30, 2031 . The note is subject to a prepayment penalty. Debt covenants of this loan require the Company to maintain a minimum debt service coverage ratio of at least 1.5 to 1 .
The loan is secured by the Company’s building, with a carrying value of $ 4.1 million, and matures on June 30, 2031 . The note is subject to a prepayment penalty. Debt covenants of this loan require the Company to maintain a minimum debt service coverage ratio of at least 1.5 to 1 .
Accounts receivable — related party is non-interest bearing and due on demand. The related party, SDE Inc. (“SDE”), is 100 % owned and controlled by the wife of the Founder, Co-Chief Executive Officer, Chief Strategy Officer and Chairman of the Company. In January 2024, the Company entered into an offset agreement with SDE.
Accounts receivable – related party is non-interest bearing and due on demand. The related party, SDE Inc. (“SDE”), is 100 % owned and controlled by the wife of the Founder, Chief Executive Officer, Chief Strategy Officer and Chairman of the Company. In January 2024, the Company entered into an offset agreement with SDE.
The 2022 Omnibus Incentive allows us to grant options to purchase our common stock and to grant stock options, stock appreciation rights, restricted stock, restricted stock units and performance awards and other cash-based awards and other stock-based awards to our employees, officers, and directors, up to a maximum of 5,718,000 shares.
The 2022 Omnibus Incentive allows us to grant options to purchase the Company’s common stock and to grant stock options, stock appreciation rights, restricted stock, restricted stock units and performance awards and other cash-based awards and other stock-based awards to our employees, officers, and directors, up to a maximum of 5,718,000 shares.
The Company considers the carrying amount of the loan to approximate fair value as the discounted cost in comparison to market rates would not be materially different than the cost to acquire a loan with similar terms.
The Company considers the carrying amount of the loans to approximate fair value as the discounted cost in comparison to market rates would not be materially different than the cost to acquire a loan with similar terms.
The Company determined that the Convertible Notes included features that required bifurcation from the debt host and met the criteria to be accounted for as a derivative liability that is accounted for at fair value.
The Company determined that the 2023 Convertible Notes included features that required bifurcation from the debt host and met the criteria to be accounted for as a derivative liability that is accounted for at fair value.
On April 21, 2023, Snail Games USA Inc. entered into an indemnity and reimbursement agreement with INDIEV, dated as of April 1, 2023, pursuant to which INDIEV agrees to assume all obligations and liabilities pursuant to the lease and indemnify and reimburse Snail Games USA Inc. for any amounts, damages, expenses, costs or other liability incurred by Snail Games USA Inc. arising under or pursuant to the lease or relating to the premises.
On April 21, 2023, Snail Games USA Inc. entered into an indemnity and reimbursement agreement with INDIEV, dated as of April 1, 2023, pursuant to which INDIEV agreed to assume all obligations and liabilities pursuant to the lease and indemnify and reimburse Snail Games USA Inc. for any amounts, damages, expenses, costs or other liability incurred by Snail Games USA Inc. arising under or pursuant to the lease or relating to the premises.
The Company is paid the net sales amount after deducting shipping costs, VAT and other related expenses by the distributor. F-11 Snail Inc. and Subsidiaries Notes to Consolidated Financial Statements Cost of Revenues Cost of revenues include software license royalty fees, merchant fees, server and database center costs, game localization costs, game licenses, engine fees and amortization costs.
The Company is paid the net sales amount after deducting shipping costs, VAT and other related expenses by the distributor. F-11 Snail Inc. and Subsidiaries Notes to Consolidated Financial Statements Cost of Revenues Cost of revenues include software license royalty fees, merchant fees, internet, server and database center costs, game licenses, engine fees and amortization costs.
Collection of trade receivables may be affected by changes in economic or other industry conditions and may, accordingly, impact our overall credit risk. The Company does not require collateral or other security to support financial instruments subject to credit risk. The Company performs ongoing credit evaluations of customers and maintains reserves for potentially uncollectible accounts.
Collection of trade receivables may be affected by changes in economic or other industry conditions and may, accordingly, impact the Company’s overall credit risk. The Company does not require collateral or other security to support financial instruments subject to credit risk. The Company performs ongoing credit evaluations of customers and maintains reserves for potentially uncollectible accounts.
F-17 Snail Inc. and Subsidiaries Notes to Consolidated Financial Statements Deferred Revenue The Company records deferred revenue when payments are due or received in advance of the fulfillment of our associated performance obligations; reductions to deferred revenue balance were primarily due to the recognition of revenue upon fulfillment of its performance obligations, which were in the ordinary course of business.
F-19 Snail Inc. and Subsidiaries Notes to Consolidated Financial Statements Deferred Revenue The Company records deferred revenue when payments are due or received in advance of the fulfillment of our associated performance obligations; reductions to deferred revenue balance were primarily due to the recognition of revenue upon fulfillment of its performance obligations, which were in the ordinary course of business.
F-26 Snail Inc. and Subsidiaries Notes to Consolidated Financial Statements On December 1, 2021, the Company and Studio Wildcard sent a notice of claimed infringement (the “DCMA Takedown Notice”) to Valve Corporation, which operates the Steam platform, pursuant to the Digital Millennium Copyright Act (“DCMA”).
F-32 Snail Inc. and Subsidiaries Notes to Consolidated Financial Statements On December 1, 2021, the Company and Studio Wildcard sent a notice of claimed infringement (the “DCMA Takedown Notice”) to Valve Corporation, which operates the Steam platform, pursuant to the Digital Millennium Copyright Act (“DCMA”).
The program does not have a fixed expiration date. Repurchased shares are accounted for at cost and reported as a reduction of equity in the consolidated balance sheets under treasury stock. No treasury stock was sold during the years ended December 31, 2024 and 2023.
The program does not have a fixed expiration date. Repurchased shares are accounted for at cost and reported as a reduction of equity in the consolidated balance sheets under treasury stock. No treasury stock was sold during the years ended December 31, 2025 and 2024.
F-14 Snail Inc. and Subsidiaries Notes to Consolidated Financial Statements Concentration of Credit Risk and Significant Customers The Company maintains cash balances at several major financial institutions. While the Company attempts to limit credit exposure with any single institution, balances often exceed insurable amounts.
F-15 Snail Inc. and Subsidiaries Notes to Consolidated Financial Statements Concentration of Credit Risk and Significant Customers The Company maintains cash balances at several major financial institutions. While the Company attempts to limit credit exposure with any single institution, balances often exceed insurable amounts.
The amendments in this update are effective for annual periods beginning after December 15, 2025, and interim reporting periods within show annual periods. Early adoption is permitted for all entities that have adopted the amendments in update 2020-06. The Company is evaluating the impact of adopting the new standard.
The amendments in this update are effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual periods. Early adoption is permitted for all entities that have adopted the amendments in update 2020-06. The Company is evaluating the impact of adopting the new standard.
The Company will offset $ 0.5 million per month, or $ 6.0 million annually, beginning in January 2024, until the receivable has been collected or offset in full. To reflect the timing of the offset agreement, a portion of the SDE receivable is presented as a long-term asset.
The Company will offset $ 0.5 million per month, or $ 6.0 million annually, beginning in January 2024, until the receivable has been collected or offset in full. To reflect the timing of the offset agreement, a portion of the SDE receivable is presented as a long-term asset as of December 31, 2024.
As of December 31, 2024, the Company has not sold any Class A common stock under the Equity Line Purchase Agreement. The registration statement covering the offer and sale of up 15,093,768 shares of Class A common stock was effective on October 10, 2023.
As of December 31, 2025, the Company has not sold any Class A common stock under the Equity Line Purchase Agreement. The registration statement covering the offer and sale of up 15,093,768 shares of Class A common stock was effective on October 10, 2023.
For virtual goods, the satisfaction of our performance obligation is dependent on the nature of the virtual good purchased and as a result, the Company categorizes its virtual goods as follows: ● Consumable: c onsumable virtual items represent items that can be consumed by a specific player action.
For virtual goods, the satisfaction of the Company’s performance obligation is dependent on the nature of the virtual good purchased and as a result, the Company categorizes its virtual goods as follows: ● Consumable: c onsumable virtual items represent items that can be consumed by a specific player action.
Leasehold improvements are amortized using the straight-line method over the estimated life of the asset, not to exceed the length of the lease. Repairs and maintenance costs are expensed as incurred. Foreign Currency The functional currency for our foreign operations is primarily the applicable local currency.
Leasehold improvements are amortized using the straight-line method over the estimated life of the asset, not to exceed the length of the lease. Repairs and maintenance costs are expensed as incurred. Foreign Currency The functional currency for the Company’s foreign operations is primarily the applicable local currency.
F-16 Snail Inc. and Subsidiaries Notes to Consolidated Financial Statements Earnings (loss) Per Share Earnings (loss) per share (“EPS”) is calculated by dividing the net income (loss) that is applicable to the common stockholders for the period by the weighted average number of shares of common stock during that period.
F-18 Snail Inc. and Subsidiaries Notes to Consolidated Financial Statements Earnings (loss) Per Share Earnings (loss) per share (“EPS”) is calculated by dividing the net income (loss) that is applicable to the common stockholders for the period by the weighted average number of shares of common stock during that period.
F-25 Snail Inc. and Subsidiaries Notes to Consolidated Financial Statements NOTE 14 – OPERATING LEASE RIGHT-OF-USE ASSETS The Company’s right-of-use assets represent arrangements related primarily to office facilities used in the ordinary business operations of the Company and its subsidiaries.
F-31 Snail Inc. and Subsidiaries Notes to Consolidated Financial Statements NOTE 14 – OPERATING LEASE RIGHT-OF-USE ASSETS The Company’s right-of-use assets represent arrangements related primarily to office facilities used in the ordinary business operations of the Company and its subsidiaries.
Realized and unrealized transaction gains and losses arising from transactions denominated in foreign currencies different than the relevant functional currency are included in our consolidated statements of operations and comprehensive income (loss) in the period in which they occur.
Realized and unrealized transaction gains and losses arising from transactions denominated in foreign currencies different than the relevant functional currency are included in the Company’s consolidated statements of operations and comprehensive income (loss) in the period in which they occur.
As of December 31, 2024 and 2023, 1,350,275 shares of Class A common stock were repurchased pursuant to the Share Repurchase Program for an aggregate purchase price of approximately $ 3.7 million.
As of December 31, 2025 and 2024, 1,350,275 shares of Class A common stock were repurchased pursuant to the Share Repurchase Program for an aggregate purchase price of approximately $ 3.7 million.
The Company recognizes revenue from the sale of durable virtual items ratably over the estimated service period for the applicable game (i.e., over time), which represents our best estimate of the average life of the durable virtual item or the life of the user.
The Company recognizes revenue from the sale of durable virtual items ratably over the estimated service period for the applicable game (i.e., over time), which represents the Company’s best estimate of the average life of the durable virtual item or the life of the user.
A summary of our outstanding warrants as of December 31, 2024 is included below: SUMMARY OF OUTSTANDING WARRANTS Number Outstanding Exercise Price Class Expiration Date Equity line of credit warrants 334,314 $ 1.50 Liability August 24, 2028 Convertible notes warrants 1,405,470 .84 Liability November 24, 2028 Underwriters warrants 120,000 6.25 Equity November 9, 2025 Total warrants: 1,859,784 Share Repurchase Program On November 10, 2022, the Company’s board of directors authorized a share repurchase program under which the Company may repurchase up to $ 5 million of outstanding shares of Class A common stock of the Company, subject to ongoing compliance with the Nasdaq listing rules.
A summary of our outstanding warrants as of December 31, 2025 is included below: SUMMARY OF OUTSTANDING WARRANTS Number Outstanding Exercise Price Class Expiration Date Equity line of credit warrants 334,314 $ 1.50 Liability August 24, 2028 Convertible notes warrants 1,216,185 0.84 Liability November 24, 2028 Total warrants: 1,550,499 A summary of our outstanding warrants as of December 31, 2024 is included below: Number Outstanding Exercise Price Class Expiration Date Equity line of credit warrants 334,314 $ 1.50 Liability August 24, 2028 Convertible notes warrants 1,405,470 0.84 Liability November 24, 2028 Underwriters warrants 120,000 6.25 Equity November 9, 2025 Total warrants: 1,859,784 Share Repurchase Program On November 10, 2022, the Company’s board of directors authorized a share repurchase program under which the Company may repurchase up to $ 5 million of outstanding shares of Class A common stock of the Company, subject to ongoing compliance with the Nasdaq listing rules.
As of December 31, 2024, the Company’s effective tax rate differed from the federal statutory rate of 21 % primarily due to foreign research and development deduction, permanent differences, change in valuation allowance, and change in warrant valuation.
As of December 31, 2024, the Company’s effective tax rate differed from the federal statutory rate of 21% primarily due to foreign research and development deduction, permanent differences, changes in valuation allowance and change in warrant revaluation.
Diluted EPS reflects the potential dilution that could occur using the treasury stock and if-converted methods. The following table provides a reconciliation of the weighted average number of shares used in the calculation of Basic and Diluted EPS.
Diluted EPS reflects the potential dilution that could occur using the treasury stock and if-converted methods, as applicable. The following table provides a reconciliation of the weighted average number of shares used in the calculation of Basic and Diluted EPS.
As of December 31, 2024 and 2023, there were non-controlling interests with the following subsidiaries: SCHEDULE OF EQUITY INTEREST AND NON CONTROLLING INTEREST IN SUBSIDIARIES Subsidiary Name Equity % Owned Non-Controlling % Snail Innovative Institute 70 % 30 % BTBX.IO, LLC 70 % 30 % Donkey Crew, LLC 99 % 1 % F-12 Snail Inc. and Subsidiaries Notes to Consolidated Financial Statements Cash and Cash Equivalents and Restricted Cash and Cash Equivalents Cash is available for use in current operations or other activities such as capital expenditures.
As of December 31, 2025 and 2024, there were non-controlling interests with the following subsidiaries: SCHEDULE OF EQUITY INTEREST AND NON CONTROLLING INTEREST IN SUBSIDIARIES Subsidiary Name Equity % Owned Non-Controlling % Snail Innovative Institute 70 % 30 % BTBX.IO, LLC 70 % 30 % Donkey Crew, LLC 99 % 1 % F-12 Snail Inc. and Subsidiaries Notes to Consolidated Financial Statements Cash and Cash Equivalents and Restricted Cash and Cash Equivalents Cash is available for use in current operations or other activities such as capital expenditures and business combinations.
During the year ended December 31, 2024, the Company made $ 1.7 million in prepaid royalty payments related to ARK: Survival Ascended DLC’s which have not yet been released.
During the year ended December 31, 2025, the Company made $ 1.6 million in prepaid royalty payments related to ARK: Survival Ascended DLC’s which have not yet been released. During the year ended December 31, 2024, the Company made $ 1.7 million in prepaid royalty payments related to the ARK: Survival Ascended DLC’s which have not yet been released.
Such estimates include revenue recognition, see Note 2 – Revenue Recognition , provisions for credit losses, deferred income tax assets and associated valuation allowances, deferred revenue, stock-based compensation and fair value of warrants.
Such estimates include revenue recognition, see Note 2 – Revenue Recognition , provisions for credit losses, deferred income tax assets and associated valuation allowances, deferred revenue, stock-based compensation and fair value of warrants and convertible notes.
Amounts payable to SDE are included in accounts receivable – related party and accounts payable - related parties in the consolidated balance sheets as of December 31, 2024 and 2023, respectively. The loss of SDE as a vendor would significantly and adversely affect the Company’s core business. Leases The Company has a lease relating primarily to office facilities.
Amounts payable to SDE are included in accounts payable – related parties and accounts receivable – related party in the consolidated balance sheets as of December 31, 2025 and 2024, respectively. The loss of SDE as a vendor would significantly and adversely affect the Company’s core business. Leases The Company has leases relating primarily to office facilities.
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions.
Recently Issued Accounting Pronouncements In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions.
The Company believes this provides a reasonable depiction of the transfer of our game related services to our players, as it is the best representation of the period during which our players play our software games. Future usage patterns may differ from historical usage patterns, and therefore the estimated service period may change in the future.
The Company believes this provides a reasonable depiction of the transfer of its game related services to its players, as it is the best representation of the period during which its players play the Company’s software games. Future usage patterns may differ from historical usage patterns, and therefore the estimated service period may change in the future.
The average price paid per share was $ 2.72 and approximately $ 1.3 million aggregate amount of shares of Class A common stock remain available for repurchase under the Share Repurchase Program. There were no share repurchases made during the year ended December 31, 2024.
The average price paid per share was $ 2.72 and approximately $ 1.3 million aggregate amount of shares of Class A common stock remain available for repurchase under the Share Repurchase Program. There were no share repurchases made during the years ended December 31, 2025 and 2024.
The following table summarizes our PSU activity with employees, presented with the maximum number of shares that could potentially vest, for the years ended December 31, 2024 and 2023.
The following table summarizes our PSU activity with employees, presented with the maximum number of shares that could potentially vest, for the years ended December 31, 2025 and 2024.
The remaining $ 3.9 million of current non-refundable deferred revenues and $ 2.6 million of long term non-refundable deferred revenue will be recognized as revenue primarily on a straight-line basis over the next 60 months, based on our estimates of technical support obligations, the usage of consumable virtual goods and estimated period of time an end user will play the game.
The remaining $ 3.7 million of current non-refundable deferred revenues and $ 2.8 million of long term non-refundable deferred revenue will be recognized as revenue primarily on a straight-line basis over the next 60 months, based on our estimates of technical support obligations, the usage of consumable virtual goods and estimated period of time an end user will play the game.
Estimated Service Period For certain performance obligations satisfied over time, the Company has determined that the estimated service period is the time period in which an average user plays our software games (“user life”) which most faithfully depicts the timing of satisfying our performance obligation.
Estimated Service Period For certain performance obligations satisfied over time, the Company has determined that the estimated service period is the time period in which an average user plays the Company’s software games (“user life”) which most faithfully depicts the timing of satisfying its performance obligation.
F-13 Snail Inc. and Subsidiaries Notes to Consolidated Financial Statements A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Our financial instruments include cash and cash equivalents, restricted cash and cash equivalents, short-term financial instruments, short-term loans, accounts receivable and accounts payable.
F-14 Snail Inc. and Subsidiaries Notes to Consolidated Financial Statements A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s financial instruments include cash and cash equivalents, restricted cash and cash equivalents, short-term financial instruments, short-term loans, accounts receivable and accounts payable.
The carrying amount of the Company’s short-term and long-term borrowings, which are considered level 2 liabilities, approximates fair value based on current rates and terms available to the Company for similar debt. The Company’s promissory note has a fixed rate until June 2026, then a floating rate that approximates the Wall Street Journal Prime Rate plus 0.50 %.
The carrying amount of the Company’s short-term and long-term borrowings, which are considered level 2 liabilities, approximate their fair value based on current rates and terms available to the Company for similar debt. The fair value of the Company’s promissory note has a fixed rate until June 2026, then a floating rate that approximates the Wall Street Journal Prime Rate.
These amounts are included in cost of revenues in the accompanying consolidated statements of operations and comprehensive income (loss). The weighted average remaining useful life for which amortization expense will be recognized is 3.0 years as of December 31, 2024.
These amounts are included in cost of revenues in the accompanying consolidated statements of operations and comprehensive income (loss). The weighted average remaining useful life for which amortization expense will be recognized is 3.2 years as of December 31, 2025.
The Company recognizes revenue using the following five steps as provided by Accounting Standards Codification (“ASC”) Topic 606 Revenue from Contracts with Customers : 1) identify the contract(s) with the customer; 2) identify the performance obligations in each contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when, or as, the entity satisfies a performance obligation.
The Company recognizes revenue using the following five steps as provided by ASC Topic 606 Revenue from Contracts with Customers : 1) identify the contract(s) with the customer; 2) identify the performance obligations in each contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when, or as, the entity satisfies a performance obligation.
As of December 31, 2024, the Company had one vendor who accounted for approximately 36 % of consolidated gross payables, respectively, and as of December 31, 2023 the Company had one vendor who accounted for approximately 69 % of consolidated gross payables. The loss of these vendors could have a significant impact on the Company’s financial performance.
As of December 31, 2025, the Company had one vendor who accounted for approximately 41 % of consolidated gross payables, respectively, and as of December 31, 2024 the Company had one vendor who accounted for approximately 36 % of consolidated gross payables. The loss of these vendors could have a significant impact on the Company’s financial performance.
Management judgment is required to estimate our allowance for credit losses in any accounting period. The amount and timing of our credit losses and cash collection could change significantly because of a change in any of the risk factors mentioned above. There were no credit losses recognized during the year ended December 31, 2024.
Management judgment is required to estimate the Company’s allowance for credit losses in any accounting period. The amount and timing of credit losses and cash collection could change significantly because of a change in any of the risk factors mentioned above. There were no credit losses recognized during the years ended December 31, 2025 and 2024.
The Convertible Notes carried an original issue discount of approximately 7.4 %, bear interest at a rate of 7.5 % per annum ( 16 % per annum in case of an event of default), and were repaid in equal consecutive monthly installments that began in February 2024 and matured on May 24, 2024 (the “Maturity Date”).
The 2023 Convertible Notes carried an original issue discount of approximately 7.4 %, bore interest at a rate of 7.5 % per annum ( 16 % per annum in case of an event of default), were repaid in equal consecutive monthly installments that began in February 2024 and matured on May 24, 2024 .
The complaint seeks damages in excess of $ 3 million. Snail Games USA Inc. disputes the allegations and the amount of damages. The Company has responded to the complaint with an answer and cross-complaint. The cross-complaint seeks return for the $ 130,000 security deposit. The landlord has answered and denied the allegations of the cross-complaint.
The complaint seeks damages in excess of $ 3 million. The Company disputes the allegations and the amount of damages. The Company has responded to the complaint with an answer and cross-complaint. The cross-complaint seeks return for the $ 130,000 security deposit. The landlord has answered and denied the allegations of the cross-complaint.
The Company had one vendor, SDE, Inc., a related party, that accounted for 55 % and 51 % of the Company’s combined cost of revenues and operating expenses during the years ended December 31, 2024 and 2023, respectively.
The Company had one vendor, SDE, Inc., a related party, that accounted for 48 % and 55 % of the Company’s combined cost of revenues and operating expenses during the years ended December 31, 2025 and 2024, respectively.
Hai Shi. The CODM assesses performance and decides how to allocate resources based on net income (loss) to evaluate operational efficiency and direct resources of the Company. Segment assets are reported on the consolidated balance sheet as total assets.
The CODM assesses performance and decides how to allocate resources based on net income (loss) to evaluate operational efficiency and direct resources of the Company. Segment assets are reported on the consolidated balance sheets as total assets.
The following table summarizes the computations of basic EPS and diluted EPS. The allocation of earnings between Class A and Class B shares is based on their respective economic rights to the undistributed earnings of the Company. Basic EPS is computed as net income (loss) divided by the weighted-average number of common shares outstanding for the period.
The allocation of earnings between Class A and Class B shares is based on their respective economic rights to the undistributed earnings of the Company. Basic EPS is computed as net income (loss) divided by the weighted-average number of common shares outstanding for the period.
The Company uses a combination of quantitative and qualitative risk factors to estimate the allowance, including an analysis of the customers’ creditworthiness, historical experience, age of current accounts receivable balances, changes in financial condition or payment terms of our customers, and reasonable forecasts of the collectability of the accounts receivable.
The Company uses a combination of quantitative and qualitative risk factors to estimate the allowance, including an analysis of the customers’ creditworthiness, historical experience, age of current accounts receivable balances, changes in financial condition or payment terms of the Company’s customers.
The Company capitalizes the cost of license usage rights as intangible assets and amortizes them over the terms of the respective licensing rights. The Company capitalized $ 420,000 in license usage rights during the twelve months ended December 31, 2024 which are included within intangible assets, net, within the consolidated balance sheets.
The Company capitalizes the cost of license usage rights as intangible assets and amortizes them over the terms of the respective licensing rights. As of December 31, 2025 and 2024, the Company capitalized $ 420,000 in license usage rights which are included within intangible assets, net, within the consolidated balance sheets.
Changes in the estimated fair value of the Warrants are recognized as a non-cash gain or loss on the statements of operations. Each of the outstanding warrants is convertible on a one-for-one basis into the Company’s common stock and are fully exercisable as of December 31, 2024.
Changes in the estimated fair value of the Warrants are recognized as a non-cash gain or loss in other income (expense) on the statements of operations and comprehensive income (loss). Each of the outstanding warrants is convertible on a one-for-one basis into the Company’s common stock and are fully exercisable as of December 31, 2025.
The total amount of loan and interest receivable — related party was $ 105,759 and $ 103,753 , as of December 31, 2024 and 2023, respectively. The Company earned $ 2,005 and $ 2,000 in interest on the related party loans receivable during years ended December 31, 2024 and 2023, respectively.
The total amount of loan and interest receivable — related party was $ 107,759 and $ 105,759 , as of December 31, 2025 and 2024, respectively. The Company earned $ 2,000 and $ 2,005 in interest on the related party loans receivable during the years ended December 31, 2025 and 2024, respectively.
Stock-based compensation expense (income) resulting from PSUs of ($ 61,713 ) and $ 48,080 are recorded under research and development expenses included in our consolidated statements of operations and comprehensive income (loss) for the years ended December 31, 2024 and 2023, respectively.
Stock-based compensation expense (income) resulting from PSUs of $ 28,571 and ($61,713) are recorded under research and development expenses included in our consolidated statements of operations and comprehensive income (loss) for the years ended December 31, 2025 and 2024, respectively.
Restricted cash and cash equivalents are time deposits, that are currently provided as a standby letter of credit to landlords. The Company’s policy for determining whether an item is treated as cash, or a cash equivalent, is based on its original maturity, liquidity, and risk profile.
Restricted cash and cash equivalents are time deposits, that are currently provided as a standby letter of credit to landlords and collateral held in reserve related to the Company’s revolving line of credit. The Company’s policy for determining whether an item is treated as cash, or a cash equivalent, is based on its original maturity, liquidity, and risk profile.
As of December 31, 2024 and 2023, the outstanding balance of net accounts receivable from related party was as follows: SCHEDULE OF ACCOUNTS RECEIVABLE (PAYABLE) - RELATED PARTY 2024 2023 Accounts receivable – related party $ 7,500,592 $ 13,500,592 Less: accounts payable – related party – SDE (3,663,726 ) (10,946,478 ) Net accounts receivable, related party - SDE 3,836,866 2,554,114 Less: accounts receivable – related party, net of current portion 1,500,592 7,500,592 Net accounts receivable (payable), related party, current - SDE $ 2,336,274 $ (4,946,478 ) F-18 Snail Inc. and Subsidiaries Notes to Consolidated Financial Statements NOTE 6 – PREPAID EXPENSES - RELATED PARTY On March 10, 2023, the Company amended its exclusive software license agreement with SDE relating to the ARK franchise.
As of December 31, 2025 and 2024, the outstanding balance of net accounts (payable) receivable from related party was as follows: SCHEDULE OF ACCOUNTS RECEIVABLE (PAYABLE) - RELATED PARTY 2025 2024 Accounts receivable – related party $ 1,500,592 $ 7,500,592 Less: accounts payable – related party – SDE (6,008,842 ) (3,663,726 ) Net accounts receivable (payable), related party – SDE (4,508,250 ) 3,836,866 Less: accounts receivable – related party, net of current portion — (1,500,592 ) Net accounts receivable (payable), related party, current – SDE $ (4,508,250 ) $ 2,336,274 F-20 Snail Inc. and Subsidiaries Notes to Consolidated Financial Statements NOTE 6 – PREPAID EXPENSES - RELATED PARTY On March 10, 2023, the Company amended its exclusive software license agreement with SDE relating to the ARK franchise.
The Company’s estimated service period for players of our current software games is generally 30 to 100 days from the date of purchase. The Company has a long-term title license agreement with a platform which makes ARK 1 available on the platform in perpetuity, and puts ARK II on the platform for three years upon release.
The Company’s estimated service period for players of the Company’s mobile games is generally 90 days from the date of purchase. The Company has a long-term title license agreement with a platform which makes ARK 1 available on the platform in perpetuity, and puts ARK II on the platform for three years upon release.
As of December 31, 2024 and 2023, the Company had deposits of $ 6,610,066 and $ 14,716,652 , respectively, that were not insured by the Federal Deposit Insurance Corporation and are included in the cash and cash equivalents, and restricted cash and cash equivalents, in the accompanying consolidated balance sheets. The Company extends credit to various digital resellers and partners.
As of December 31, 2025 and 2024, the Company had deposits of $ 8,619,889 and $ 6,610,066 , respectively, that were not insured by the Federal Deposit Insurance Corporation and are included in the cash and cash equivalents, and restricted cash and cash equivalents, in the accompanying consolidated balance sheets. The Company extends credit to various digital resellers and partners.
As such, no deferred tax liability was recorded on the unremitted earnings of the foreign subsidiary as of December 31, 2024 and 2023. As of December 31, 2024, the Company had $ 1,374,706 of unremitted earnings that will be indefinitely reinvested in its Poland subsidiary.
As such, no deferred tax liability was recorded on the unremitted earnings of the foreign subsidiary as of December 31, 2025 and 2024. As of December 31, 2025, the Company had $ 1,663,858 of unremitted earnings that will be indefinitely reinvested in its Poland subsidiary.
The Underwriters Warrants are exercisable, in whole or in part, commencing on November 9, 2022, and expiring on the three -year anniversary thereof. The Underwriters Warrants have not been exercised as of the filing of this Annual Report.
The Underwriters Warrants are exercisable, in whole or in part, commencing on November 9, 2022, and expiring on the three-year anniversary thereof. The Underwriters Warrants have not been exercised as of the filing of this Annual Report and expired on November 9, 2025 in accordance with their terms.
The changes in fair value during the years ended December 31, 2024 and 2023, amounted to a loss of $ 1,006,294 and $ 34,527 , respectively, included in other income (expense) in our consolidated statements of operations and comprehensive income (loss).
The changes in fair value during the years ended December 31, 2025 and 2024, amounted to a loss of $ 620,206 and $ 1,006,294 , respectively, included in other income (expense) in our consolidated statements of operations and comprehensive income (loss).
As of December 31 , 2024, our total unrecognized compensation cost related to RSUs and PSUs was approximately $ 2.1 million and is expected to be recognized over a weighted-average service period of 2.0 years. NOTE 18 – OPERATING SEGMENTS The Company’s Chief Operating Decision Maker (“CODM”) is our Founder, Co-Chief Executive Officer, Chief Strategy Officer, and Chairman Mr.
As of December 31, 2025, our total unrecognized compensation cost related to RSUs and PSUs was approximately $ 1.8 million and is expected to be recognized over a weighted-average service period of 1.3 years. NOTE 18 – OPERATING SEGMENTS The Company’s Chief Operating Decision Maker (“CODM”) is our Founder, Chief Executive Officer, Chief Strategy Officer, and Chairman Mr. Hai Shi.
Stock-based compensation expense (income) resulting from RSUs and PSUs of ($ 828,495 ) and 799,955 are recorded under general and administrative expenses included in our consolidated statements of operations and comprehensive income (loss) for the years ended December 31, 2024 and 2023, respectively.
Stock-Based Compensation Expense (Income) Stock-based compensation expense (income) resulting from RSUs of $ 342,925 and ($828,495) are recorded under general and administrative expenses included in our consolidated statements of operations and comprehensive income (loss) for the years ended December 31, 2025 and 2024, respectively.
Deferred taxes are recognized for the differences between the basis of assets and liabilities for financial statement and income tax purposes. The Company follows FASB Topic ASC 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns.
The Company follows FASB Topic ASC 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns.
The fair value of the warrants at issuance has been estimated using a Monte-Carlo model as follows: SCHEDULE OF FAIR VALUE OF WARRANTS December 31, 2024 December 31, 2023 Stock price $ 1.86 $ 1.21 Exercise price $ 0.84 $ 1.89 Contractual term (years) 3.65 4.65 Volatility 60.0 % 50.0 % Risk-free rate 4.31 % 3.87 % Expected volatility is the estimate of the expected volatility of the Company’s Class A common stock, based on the Company’s weekly trading history then reduced by 5 % as it is generally accepted that market participants to not pay for the full volatility.
The fair value of the warrants at issuance has been estimated using a Black-Scholes pricing model as of December 31, 2025 and a Monte Carlo pricing model as of December 31, 2024 as follows: SCHEDULE OF FAIR VALUE OF WARRANTS December 31, 2025 December 31, 2024 Stock price $ 0.89 $ 1.86 Exercise price $ 0.84 $ 0.84 Contractual term (years) 2.90 3.65 Volatility 88.7 % 60.0 % Risk-free rate 3.51 % 4.31 % Expected volatility is the estimate of the expected volatility of the Company’s Class A common stock, based on the Company’s weekly trading history then reduced by 5 % as it is generally accepted that market participants to not pay for the full volatility.
The amendments in the update requires that public business entities, on an annual basis, disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. The amendments in this update are effective for annual periods beginning after December 15, 2024. The Company is evaluating the impact of adopting the new standard.
The amendments in the update requires that public business entities, on an annual basis, disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. The amendments in this update are effective for annual periods beginning after December 15, 2024, and the Company has adopted this standard as of the effective date.
SCHEDULE OF RESTRICTED STOCK UNITS ACTIVITY Restricted Stock Units Weighted- Average Grant-Date Fair Values Outstanding as of January 1, 2024 1,165,247 $ 5.00 Granted — — Vested — — Forfeited or cancelled (22,963 ) (5.00 ) Outstanding as of December 31, 2024 1,142,284 $ 5.00 Restricted Stock Units Weighted- Average Grant-Date Fair Values Outstanding as of January 1, 2023 1,197,552 $ 5.00 Granted — — Vested — — Forfeited or cancelled (32,305 ) (5.00 ) Outstanding as of December 31, 2023 1,165,247 $ 5.00 The grant date fair value of PSUs granted to employees is based on the quoted market price of our common stock on the date of grant.
SCHEDULE OF RESTRICTED STOCK UNITS ACTIVITY Restricted Stock Units Weighted- Average Grant-Date Fair Values Outstanding as of January 1, 2025 1,142,284 $ 5.00 Granted — — Vested — — Forfeited or cancelled (14,926 ) (5.00 ) Outstanding as of December 31, 2025 1,127,358 $ 5.00 Restricted Stock Units Weighted- Average Grant-Date Fair Values Outstanding as of January 1, 2024 1,165,247 $ 5.00 Granted — — Vested — — Forfeited or cancelled (22,963 ) (5.00 ) Outstanding as of December 31, 2024 1,142,284 $ 5.00 The grant date fair value of PSUs granted to employees is based on the quoted market price of our common stock on the date of grant.
During the twelve months ended December 31, 2024 and 2023, the Company recognized approximately $ 201,815 of deferred income tax expense, and $ 185,432 of deferred income tax benefit, respectively, related to our stock-based compensation expense.
During the twelve months ended December 31, 2025 and 2024, the Company recognized approximately $ 83,178 of deferred income tax benefit, and $ 201,815 of deferred income tax expense, respectively, related to our stock-based compensation expense.
The Company has a weighted average interest rate of 5.6 % and 8.1 % on its short-term obligations as of December 31, 2024 and 2023, respectively.
The Company has a weighted average interest rate of 5.7% and 5.6% on its short-term obligations as of December 31, 2025 and 2024, respectively.
See Note 18 – Operating Segments for required disclosures. Recently Issued Accounting Pronouncements In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to improve the transparency of income tax disclosures requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction.
Recently Adopted Accounting Pronouncements In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to improve the transparency of income tax disclosures requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction.
For issued or modified Warrants that do not meet all the criteria for equity classification, the Warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter.
For issued or modified Warrants that do not meet all the criteria for equity classification, the Warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Warrant liabilities are presented within accrued expenses and other liabilities on the consolidated balance sheets.
During the years ended December 31, 2024 and 2023, the Company made cash payments to SDE in the amount of $ 43.5 million and $ 33.1 million, respectively and anticipates continuing to make cash payment to SDE in future years.
During the years ended December 31, 2025 and 2024, the Company made cash payments to SDE in the amount of $ 40.2 million and $ 43.5 million, respectively and anticipates continuing to make cash payment to SDE in future years.
Accretion of the convertible notes and amortization of loan origination expenses and loan discounts of $ 345,837 and $ 462,284 are included as part of interest expense for the years ended December 31, 2024 and 2023, respectively.
Accretion of the convertible notes and amortization of loan origination expenses and loan discounts of $ 13,109 and $ 345,837 are included as part of interest expense for the years ended December 31, 2025 and 2024, respectively.
At December 31, 2024 and 2023, the fair value of the warrant liability was $ 1,448,109 and $ 480,281 , respectively, and was included in the accrued expenses and other liabilities in the Company’s consolidated balance sheets.
At December 31, 2025 and 2024, the fair value of the warrant liability was $ 632,876 and $ 1,448,109 , respectively, and was included in the accrued expenses and other liabilities in the Company’s consolidated balance sheets.
The fair value of the warrants has been estimated using a Monte-Carlo model as follows: SCHEDULE OF FAIR VALUE OF WARRANTS December 31, 2024 December 31, 2023 Stock price $ 1.86 $ 1.21 Exercise price $ 1.50 $ 1.50 Contractual term (years) 3.65 4.65 Volatility 60.0 % 50.0 % Risk-free rate 4.31 % 3.87 % Expected volatility is the estimate of the expected volatility of the Company’s Class A common stock, based on the Company’s weekly trading history then reduced by 5 %.
The fair value of the warrants has been estimated using a Black-Scholes pricing model as of December 31, 2025 and a Monte Carlo pricing model as of December 31, 2024 as follows: SCHEDULE OF FAIR VALUE OF WARRANTS December 31, 2025 December 31, 2024 Stock price $ 0.89 $ 1.86 Exercise price $ 1.50 $ 1.50 Contractual term (years) 2.65 3.65 Volatility 98.4 % 60.0 % Risk-free rate 3.49 % 4.31 % Expected volatility is the estimate of the expected volatility of the Company’s Class A common stock, based on the Company’s weekly trading history then reduced by 5 %.
The changes in fair value during the years ended December 31, 2024 and 2023, amounted to a loss of ($192,945) and income of $ 1,644 , respectively, and is included in other income (expense) in our consolidated statements of operations and comprehensive income (loss).
The changes in fair value during the years ended December 31, 2025 and 2024, amounted to a gain of ($148,329) and a loss of ($192,945) , respectively, and is included in other income (expense) in our consolidated statements of operations and comprehensive income (loss).
The Company had four customers in the year ended December 31, 2024, and three customers in the year ended December 31, 2023, that accounted for 46 %, 15 %, 14 %, 11 %, and 42 %, 18 %, and 11 % of the Company’s net revenue, respectively.
The Company had three customers in the year ended December 31, 2025, and four customers in the year ended December 31, 2024, that accounted for 49 %, 15 %, 12 %, and 46 %, 15 %, 14 %, and 11 % of the Company’s net revenue, respectively.
At December 31, 2024 and 2023, the fair value of the warrant liability was $ 292,004 and $ 103,767 , respectively, and included in the accrued expenses and other liabilities in the Company’s consolidated balance sheets.
At December 31, 2025 and 2024, the fair value of the warrant liability was $ 143,675 and $ 292,004 , respectively, and included in the accrued expenses and other liabilities in the Company’s consolidated balance sheets.
Upon vesting, a number of shares of common stock equivalent to the number of restricted stock units is typically issued net of required tax withholding requirements, if any. Restricted stock units are subject to forfeiture and transfer restrictions.
Restricted stock units are unfunded, unsecured rights to receive common stock upon the satisfaction of certain vesting criteria. Upon vesting, a number of shares of common stock equivalent to the number of restricted stock units is typically issued net of required tax withholding requirements, if any. Restricted stock units are subject to forfeiture and transfer restrictions.
The estimated service periods for players of our current software games are generally between 30 and 100 days depending on the software games. Shipping, Handling and Value Added Taxes (“VAT”) The distributor, as the principal, is responsible for the shipping of the game discs to retail stores and incurring the shipping and VAT costs.
The estimated service periods for players of the Company’s current software games are generally 90 days depending on the software games. Shipping, Handling and Value Added Taxes (“VAT”) The distributor is responsible for the shipping of the game discs to retail stores and incurring the shipping and VAT costs.
The following table summarizes the components of the Company’s cash and cash equivalents, and restricted cash and cash equivalents as of December 31, 2024 and 2023: SUMMARY OF COMPONENTS OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS 2024 2023 Cash and cash equivalents $ 7,303,944 $ 15,198,123 Restricted cash and cash equivalents 935,000 1,116,196 Cash and cash equivalents, and restricted cash and cash equivalents $ 8,238,944 $ 16,314,319 NOTE 5 – ACCOUNTS RECEIVABLE (PAYABLE) – RELATED PARTY Accounts receivable — related party represents receivables in the ordinary course of business attributable to certain mobile game revenues that, for administrative reasons, were collected by a related party and that the related party has not yet remitted back to the Company.
The following table summarizes the components of the Company’s cash and cash equivalents, and restricted cash and cash equivalents as of December 31, 2025 and 2024: SUMMARY OF COMPONENTS OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS 2025 2024 Cash and cash equivalents $ 8,568,164 $ 7,303,944 Restricted cash and cash equivalents 1,935,000 935,000 Cash and cash equivalents, and restricted cash and cash equivalents $ 10,503,164 $ 8,238,944 NOTE 5 – ACCOUNTS RECEIVABLE (PAYABLE) – RELATED PARTY Accounts receivable – related party represents receivables in the ordinary course of business attributable to certain mobile game revenues that, for administrative reasons, were collected by a related party and that the related party has not yet remitted back to the Company.
The Company has four customers as of December 31, 2024 and 2023, who accounted for approximately 85 % and 95 % of consolidated gross receivables, respectively.
The Company has two customers as of December 31, 2025 and four customers as of December 31, 2024, who accounted for approximately 73 % and 85 % of consolidated gross receivables, respectively.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Failure to renew our existing content licenses on favorable terms or at all or to obtain additional licenses would impair our ability to introduce new games, improvements or enhancements or to continue to offer our current games, which would materially harm our business, results of operations, financial condition and prospects. ● We depend on our key management and product development personnel. ● Our management team has limited experience managing a public company. ● Our business is subject to the risks of earthquakes, fire, floods, public health crises and other natural catastrophes and to interruption by man-made problems such as power disruptions, computer viruses, data security breaches or other incidents or terrorism. ● Our industry is subject to rapid technological change, and if we do not adapt to, and appropriately allocate our resources among, emerging technologies and business models, our business may be negatively impacted. ● We rely on third-party platforms, such as Xbox Live and Game Pass, PlayStation Network, Steam, Epic Games Store, the Apple App Store, the Google Play Store, My Nintendo Store and the Amazon Appstore, to distribute our games and collect revenues generated on such platforms and rely on third-party payment service providers to collect revenues generated on our own platforms. ● We depend on servers and networks to operate our games with online features.
Failure to renew our existing content licenses on favorable terms or at all or to obtain additional licenses would impair our ability to introduce new games, improvements or enhancements or to continue to offer our current games, which would materially harm our business, results of operations, financial condition and prospects. ● We depend on our key management and product development personnel. ● Our management team has limited experience managing a public company. ● Our business is subject to the risks of earthquakes, fire, floods, public health crises and other natural catastrophes and to interruption by man-made problems such as power disruptions, computer viruses, data security breaches or other incidents, war or terrorism. ● Our industry is subject to rapid technological change, and if we do not adapt to, and appropriately allocate our resources among, emerging technologies and business models, our business may be negatively impacted. ● We rely on third-party platforms, such as Xbox Live and Game Pass, PlayStation Network, Steam, Epic Games Store, My Nintendo Store, the Apple App Store, the Google Play Store, and the Amazon Appstore, to distribute our games and collect revenues generated on such platforms and rely on third-party payment service providers to collect revenues generated on our own platforms. ● We depend on servers and networks to operate our games with online features.
Such risks include, but are not limited to, the following: ● We are dependent on the future success of our ARK franchise, and we must continue to publish “hit” titles or sequels to such “hit” titles in order to compete successfully in our industry. ● If we do not consistently deliver popular, high-quality content in a timely manner, if we are not successful in meaningfully expanding our existing franchise, or if consumers prefer products from our competitors, our business may be negatively impacted. ● We rely on license agreements to publish certain games, including games in our ARK franchise.
Such risks include, but are not limited to, the following: Risks Related to Our Business and Industry ● We are dependent on the future success of our ARK franchise, and we must continue to publish “hit” titles or sequels to such “hit” titles in order to compete successfully in our industry. ● If we do not consistently deliver popular, high-quality content in a timely manner, if we are not successful in meaningfully expanding our existing franchise, or if consumers prefer products from our competitors, our business may be negatively impacted. ● We rely on license agreements to publish certain games, including games in our ARK franchise.
Additionally, the federal government has recently proposed legislation intended to protect American investments in Chinese companies. President In addition, various equity-based research organizations have published reports on Chinese companies after examining their corporate governance practices, related party transactions, sales practices and financial statements, and these reports have led to special investigations and listing suspensions on U.S. national exchanges.
Additionally, the federal government has recently proposed legislation intended to protect American investments in Chinese companies. In addition, various equity-based research organizations have published reports on Chinese companies after examining their corporate governance practices, related party transactions, sales practices and financial statements, and these reports have led to special investigations and listing suspensions on U.S. national exchanges.
Since we elected to rely on the exemptions available to a “controlled company,” you do not have the same protections afforded to stockholders of companies that are subject to such corporate governance requirements. Our controlling stockholder, Founder, Co-Chief Executive Officer, Chief Strategy Officer and Chairman, Mr. Shi, controls a majority of our outstanding common stock.
Since we elected to rely on the exemptions available to a “controlled company,” you do not have the same protections afforded to stockholders of companies that are subject to such corporate governance requirements. Our controlling stockholder, Founder, Chief Executive Officer, Chief Strategy Officer and Chairman, Mr. Shi, controls a majority of our outstanding common stock.
Accordingly, you do not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the Nasdaq rules. Mr. Shi, our Founder, Co-Chief Executive Officer, Chief Strategy Officer and Chairman, controls us, and his ownership of our common stock prevents you and other stockholders from influencing significant decisions. Mr.
Accordingly, you do not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the Nasdaq rules. Mr. Shi, our Founder, Chief Executive Officer, Chief Strategy Officer and Chairman, controls us, and his ownership of our common stock prevents you and other stockholders from influencing significant decisions. Mr.
Shi’s interests may differ from ours or from those of our other stockholders, actions that he takes with respect to us, as our controlling stockholder, may not be favorable to us or to you or our other stockholders. Mr. Shi, our Founder, Co-Chief Executive Officer, Chief Strategy Officer and Chairman, is a Chinese national.
Shi’s interests may differ from ours or from those of our other stockholders, actions that he takes with respect to us, as our controlling stockholder, may not be favorable to us or to you or our other stockholders. Mr. Shi, our Founder, Chief Executive Officer, Chief Strategy Officer and Chairman, is a Chinese national.
In particular, we license intellectual property rights related to our ARK franchise from SDE, the parent company of Studio Wildcard, which is also an entity that is owned and controlled by the spouse of our Founder, Co-Chief Executive Officer, Chief Strategy Officer and Chairman, Mr. Shi.
In particular, we license intellectual property rights related to our ARK franchise from SDE, the parent company of Studio Wildcard, which is also an entity that is owned and controlled by the spouse of our Founder, Chief Executive Officer, Chief Strategy Officer and Chairman, Mr. Shi.
The size of our active user base with our products are critical to our success. We are new to the short film drama business. Our financial performance has been and will continue to be significantly affected by our ability to grow and engage our active user base.
The size of our active user base with our products is critical to our success. We are new to the short film drama business. Our financial performance has been and will continue to be significantly affected by our ability to grow and engage our active user base.
On August 30, 2021, China’s National Press and Publication Administration announced a new regulation that required online gaming companies limit their services provided to minors to one hour per day on Fridays, Saturdays, Sundays and public holidays.
On August 30, 2021, China’s National Press and Publication Administration announced a regulation that required online gaming companies limit their services provided to minors to one hour per day on Fridays, Saturdays, Sundays and public holidays.
For additional information concerning our license arrangements, including licensing agreements with affiliated third parties, see Item 1 of Part I, “Business—Intellectual Property,” included in this Annual Report for the fiscal year ended December 31, 2024. 13 Failure to maintain or renew our existing material licenses or to obtain additional licenses could impair our ability to introduce new games and new content or to continue to offer our current games, which could materially harm our business, results of operations and financial condition.
For additional information concerning our license arrangements, including licensing agreements with affiliated third parties, see Item 1 of Part I, “Business—Intellectual Property,” included in this Annual Report for the fiscal year ended December 31, 2025. 13 Failure to maintain or renew our existing material licenses or to obtain additional licenses could impair our ability to introduce new games and new content or to continue to offer our current games, which could materially harm our business, results of operations and financial condition.
As we enhance, expand and diversify our business and product offerings, the application of existing or future financial accounting standards, particularly those relating to the way we account for revenues and income taxes, could have a significant impact on our reported net revenues, net income and earnings per share under generally accepted accounting principles in the United States in any given period. 32 The Company has debt obligations with short term durations that are coming due within one year.
As we enhance, expand and diversify our business and product offerings, the application of existing or future financial accounting standards, particularly those relating to the way we account for revenues and income taxes, could have a significant impact on our reported net revenues, net income and earnings per share under generally accepted accounting principles in the United States in any given period. 32 We have debt obligations with short term durations that are coming due within one year.
Our management team may not successfully or efficiently manage our transition to being a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors.
Our management team may not successfully or efficiently manage being a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors.
We continue to assess the impact this new regulation may have on our results of operations however, at this time, the impact of this new regulation remains uncertain. Changes in government regulations relating to the Internet could have a negative impact on our business.
We continue to assess the impact this regulation may have on our results of operations however, at this time, the impact of this regulation remains uncertain. Changes in government regulations relating to the Internet could have a negative impact on our business.
Risk of Service Disruptions Due to Large-Scale Distributed Denial-of-Service (DDoS) Attacks Our online game servers are vulnerable to Distributed Denial-of-Service (“DDoS) attacks, we are increasingly targeted by large-scale DDoS attacks, which have, at times, overwhelmed our game servers despite our implementation of advanced DDoS protection measures, it can disrupt gameplay, impact players experience, and harm our reputation.
Our online games are vulnerable to the risk of Service Disruptions Due to Large-Scale Distributed Denial-of-Service (DDoS) Attacks Our online game servers are vulnerable to Distributed Denial-of-Service (“DDoS) attacks, we are increasingly targeted by large-scale DDoS attacks, which have, at times, overwhelmed our game servers despite our implementation of advanced DDoS protection measures, it can disrupt gameplay, impact players experience, and harm our reputation.
The timing, pricing, and size of share repurchases will depend on a number of factors, including, but not limited to, price, corporate and regulatory requirements, and general market and economic conditions. As of December 31, 2024, approximately $1.3 million of the Share Repurchase Program remains available for future repurchases.
The timing, pricing, and size of share repurchases will depend on a number of factors, including, but not limited to, price, corporate and regulatory requirements, and general market and economic conditions. As of December 31, 2025, approximately $1.3 million of the Share Repurchase Program remains available for future repurchases.
However, because these cyberattacks may remain undetected for prolonged periods of time and the techniques used by criminal hackers and other third parties to breach systems are constantly evolving, change frequently and we may be unable to anticipate these techniques or implement adequate preventative measures.
However, because these cyberattacks may remain undetected for prolonged periods of time and the techniques used by criminal hackers and other third parties to breach systems are constantly evolving, we may be unable to anticipate these techniques or implement adequate preventative measures.
Our management will have broad discretion over the use of the net proceeds from our sale of shares of common stock to the Equity Line Investor, and you may not agree with how we use the proceeds and the proceeds may not be invested successfully.
Our management will have broad discretion over the use of the net proceeds from our sale of shares of common stock to the Equity Line Investor and the ATM Offering, and you may not agree with how we use the proceeds and the proceeds may not be invested successfully.
Additionally, other countries outside of the EU have enacted or are considering enacting similar cross order data transfer restrictions and laws requiring local data residency, which could increase the cost and complexity of delivering our services and operating our business.
Additionally, other countries outside of the EU, such as China, have enacted or are considering enacting similar cross order data transfer restrictions and laws requiring local data residency, which could increase the cost and complexity of delivering our services and operating our business.
As a newly public company, we may be slow to attract research coverage and the analysts who publish information about our Class A common stock may have relatively little experience with us or our industry, which could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates.
We may be slow to attract research coverage and the analysts who publish information about our Class A common stock may have relatively little experience with us or our industry, which could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates.
We may direct the Equity Line Investor to purchase up to $5,000,000 worth of shares of our Class A common stock under the Equity Line Purchase Agreement until December 31, 2025, in amounts up to $1,000,000 in shares of our Class A common stock depending on market prices.
We may direct our Equity Line Investor to purchase up to $5.0 million worth of shares of our Class A common stock under the Equity Line Purchase Agreement until December 31, 2025, in amounts up to $1.0 million in shares of our Class A common stock depending on market prices.
We entered into an original exclusive software license agreement with SDE in November 2015, for the rights to ARK: Survival Evolved , and subsequently entered into the amended and restated ARK1 License Agreement. In December 2022 and October 2023, we amended the ARK1 License Agreement.
We entered into an original exclusive software license agreement with SDE in November 2015, for the rights to ARK: Survival Evolved , which ARK1 License Agreement was subsequently amended and restated ARK1 License Agreement in December 2022 and further amended in October 2023.
The effects of the CCPA are significant and have required, and could continue to require, us to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply.
The effects of the CCPA and similar state laws are significant and have required, and could continue to require, us to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply.
Additionally, we will only be able to sell or issue to the Equity Line Investor (subject to certain reductions and other adjustments pursuant to the Equity Line Purchase Agreement, the “Exchange Cap”) in total under the Equity Line Purchase Agreement, which is equal to 19.99% of the aggregate number of shares of Class A common stock outstanding prior to execution of the Equity Line Purchase Agreement, unless stockholder approval is obtained to issue in excess of such amount.
Additionally, we will only be able to sell or issue to the Equity Line Investor (subject to certain reductions and other adjustments pursuant to the Equity Line Purchase Agreement, (i.e., the Exchange Cap) in total under the Equity Line Purchase Agreement, which is equal to 19.99% of the aggregate number of shares of Class A common stock outstanding prior to execution of the Equity Line Purchase Agreement, unless stockholder approval is obtained to issue in excess of such amount.
Substantially all of the games, DLC and in-game virtual items that we sell are purchased using the payment processing systems of these platforms and, for the year ended December 31, 2024, 94.6% of our revenues were generated through Xbox Live and Game Pass, PlayStation Network, Steam, Epic Games Store, My Nintendo Store, the Apple App Store, the Google Play Store, and the Amazon Appstore.
Substantially all of the games, DLC and in-game virtual items that we sell are purchased using the payment processing systems of these platforms and, for the year ended December 31, 2025, 95.1% of our revenues were generated through Xbox Live and Game Pass, PlayStation Network, Steam, Epic Games Store, My Nintendo Store, the Apple App Store, the Google Play Store, and the Amazon Appstore.
We derive most of our revenue from publishing video games on third-party platform providers, such as Xbox Live and Game Pass, PlayStation Network, Steam, Epic Games Store, the Apple App Store, the Google Play Store, My Nintendo Store and the Amazon Appstore, which, in the aggregate, comprised 94.6% of our net revenue by product platform for the year ended December 31, 2024.
We derive most of our revenue from publishing video games on third-party platform providers, such as Xbox Live and Game Pass, PlayStation Network, Steam, Epic Games Store, the Apple App Store, the Google Play Store, My Nintendo Store and the Amazon Appstore, which, in the aggregate, comprised 95.1 % of our net revenue by product platform for the year ended December 31, 2025.
The terms of our license agreements with SDE may differ from those terms which would be negotiated with independent parties. In addition, we may have disputes with SDE that may impact our business, results of operations, financial condition and/or prospects. The ARK franchise contributed 85.1% of our net revenue for the year ended December 31, 2024.
The terms of our license agreements with SDE may differ from those terms which would be negotiated with independent parties. In addition, we may have disputes with SDE that may impact our business, results of operations, financial condition and/or prospects. The ARK franchise contributed 89.4% of our net revenue for the year ended December 31, 2025.
Our continued success will depend to a significant extent on our senior management team and maintaining positive relationships with our games’ developers, including Studio Wildcard, and the product development personnel responsible for content creation and development of our ARK franchise. On April 15, 2024, Jim S.
Our continued success will depend to a significant extent on our senior management team and maintaining positive relationships with our games’ developers, including Studio Wildcard, and the product development personnel responsible for content creation and development of our ARK franchise.
If we were to lose functionality in any of these areas for any reason, our business may be negatively impacted. 10 ● We may be unable to effectively manage the continued growth and the scope and complexity of our business, including our expansion into new business models that are untested and into adjacent business opportunities with large, established competitors. ● The interactive entertainment software industry is highly competitive. ● We are subject to product development risks, which could result in delays and additional costs, and often times we must adapt to changes in software technologies. ● Our business is subject to our ability to develop commercially successful products for the current video game platforms, which may not generate immediate or near-term revenues, and as a result, our business and operating results may be more volatile and difficult to predict during console transitions than during other times. ● Our results of operations or reputation may be harmed as a result of objectionable consumer, or other third party-created content, or if our distributors, retailers, development, and licensing partners, or other third parties with whom we are affiliated, act in ways that put our brand at risk. ● The products or services we release may contain defects, bugs or errors. ● External game developers may not meet product development schedules or otherwise fulfill their contractual obligations. ● Any cybersecurity-related attack, significant data breach, or disruption of the information technology systems or networks on which we rely could negatively impact our business. ● If we do not successfully invest in, establish and maintain awareness of our brand and games or if we incur excessive expenses promoting and maintaining our brand or our games, our business, financial condition, results of operations or reputation could be harmed. ● Our operating results may fluctuate from quarter to quarter, which makes our future results difficult to predict. ● We have experienced rapid growth and expect to invest in our growth for the foreseeable future.
If we were to lose functionality in any of these areas for any reason, our business may be negatively impacted. 10 ● We may be unable to effectively manage the continued growth and the scope and complexity of our business, including our expansion into new business models that are untested and into adjacent business opportunities with large, established competitors. ● Our online games are vulnerable to the risk of service disruptions due to large-scale distributed denial-of-service (DDoS) attacks. ● The interactive entertainment software industry is highly competitive. ● We are subject to product development risks, which could result in delays and additional costs, and often times we must adapt to changes in software technologies. ● Our business is subject to our ability to develop commercially successful products for the current video game platforms, which may not generate immediate or near-term revenues, and as a result, our business and operating results may be more volatile and difficult to predict during console transitions than during other times. ● Our results of operations or reputation may be harmed as a result of objectionable consumer, or other third party-created content, or if our distributors, retailers, development, and licensing partners, or other third parties with whom we are affiliated, act in ways that put our brand at risk. ● The products or services we release may contain defects, bugs or errors. ● External game developers may not meet product development schedules or otherwise fulfill their contractual obligations. ● If we do not successfully invest in, establish and maintain awareness of our brand and games or if we incur excessive expenses promoting and maintaining our brand or our games, our business, financial condition, results of operations or reputation could be harmed. ● Our operating results may fluctuate from quarter to quarter, which makes our future results difficult to predict. ● We have experienced rapid growth and expect to invest in our growth for the foreseeable future.
In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the Nasdaq. As a public company, we are required to provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our second Annual Report on Form 10-K.
In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the Nasdaq. As a public company, we are required to provide an annual management report on the effectiveness of our internal control over financial reporting.
Even if we sell all $5,000,000 in shares of our Class A common stock under the Equity Line Purchase Agreement to the Equity Line Investor, we may still need additional capital to finance our future plans and working capital needs, and we may have to raise funds through the issuance of equity or debt securities.
Even if we sell all $5.0 million in shares of our Class A common stock under the Equity Line Purchase Agreement to the Equity Line Investor and issue an additional $5.5 million in convertible notes, we may still need additional capital to finance our future plans and working capital needs, and we may have to raise funds through the issuance of equity or debt securities.
If obtaining sufficient funding from the Equity Line Investor were to prove unavailable or prohibitively dilutive, we will need to secure another source of funding in order to satisfy our working capital needs.
If obtaining sufficient funding from the Equity Line Investor were to prove unavailable or prohibitively dilutive, we would need to secure a third source of funding in order to satisfy our working capital needs.
In the United States, such privacy and data security laws and regulations include federal laws and regulations like the federal Controlling the Assault of Non-Solicited Pornography and Marketing Act, the Telephone Consumer Protection Act, the Do-Not-Call Implementation Act, and rules and regulations promulgated under the authority of the Federal Trade Commission and state laws like the California Consumer Privacy Act (“CCPA”) and the varying data breach notification laws that have been enacted in all 50 U.S. states and the District of Columbia.
In the United States, such privacy and data security laws and regulations include federal laws and regulations like the Federal Trade Commission Act, the Do-Not-Call Implementation Act, and rules and regulations promulgated under the authority of the Federal Trade Commission and state laws like the California Consumer Privacy Act (“CCPA”) and the varying data breach notification laws that have been enacted in all 50 U.S. states and the District of Columbia.
In addition, any amounts we sell under the Equity Line Purchase Agreement may not satisfy all of our funding needs, even if we are able and choose to sell and issue all of our Class A common stock currently registered. 40 The extent we rely on the Equity Line Investor as a source of funding will depend on a number of factors including the prevailing market price of our Class A common stock and the extent to which we are able to secure working capital from other sources.
In addition, any amounts we may obtain from these financing sources may not satisfy all of our funding needs, even if we are able and choose to sell and issue all of our Class A common stock currently registered. 40 The extent we rely on the Equity Line Investor as a source of funding will depend on a number of factors including the prevailing market price of our Class A common stock and the extent to which we are able to secure working capital from other sources, such as from the sale of convertible notes.
Our ability to sell shares to the Equity Line Investor and obtain funds under the Equity Line Purchase Agreement is limited by the terms and conditions in the Equity Line Purchase Agreement, including restrictions on the amounts we may sell to the Equity Line Investor at any one time, and a limitation on our ability to sell shares to the Equity Line Investor to the extent that it would cause the Equity Line Investor to beneficially own more than 9.99% of our outstanding shares of Class A common stock.
Notwithstanding the foregoing, our ability to obtain these additional funds contains certain restrictions, such as selling shares to the Equity Line Investor and obtaining funds under the Equity Line Purchase Agreement is limited by the terms and conditions in the Equity Line Purchase Agreement, including restrictions on the amounts we may sell to the Equity Line Investor at any one time, and a limitation on our ability to sell shares to the Equity Line Investor to the extent that it would cause the Equity Line Investor to beneficially own more than 9.99% of our outstanding shares of Class A common stock.
We have implemented cybersecurity programs and the tools, technologies, processes, and procedures intended to secure our data and systems, and prevent and detect unauthorized access to, or loss of, our data, or the data of our customers, consumers or employees.
We have implemented cybersecurity programs and the tools, technologies, processes, and procedures intended to protect our data and systems against unauthorized access to, or loss of, our data, or the data of our customers, consumers or employees.
We identified material weaknesses in our internal control over financial reporting and we may identify additional material weaknesses in the future that may cause us to fail to meet our reporting obligations or result in material misstatements of our financial statements.
We may identify additional material weaknesses in the future that may cause us to fail to meet our reporting obligations or result in material misstatements of our financial statements.
Failure to meet Nasdaq’s continued listing requirements could result in the delisting of our Class A common stock, negatively impact the price of our Class A common stock and negatively impact our ability to raise additional capital.
Failure to meet Nasdaq’s continued listing requirements could result in the delisting of our Class A common stock, negatively impact the price of our Class A common stock and negatively impact our ability to raise additional capital. Our Class A common stock is listed on the Nasdaq Stock Market (“Nasdaq”).
The Staff informed the Company that if, at any time before the Compliance Date, the bid price for the Class A common stock closed at $1.00 or more for a minimum of ten (10) consecutive business days, the Staff would provide written notification to the Company that it complied with the Bid Price Rule and the matter will be closed.
The Staff informed us that if, at any time before the Compliance Date, the bid price for our Class A common stock closed at $1.00 or more for a minimum of ten (10) consecutive business days (or such additional number of days as Nasdaq may require), the Staff would provide written notification to us that it complied with the Bid Price Rule and the matter will be closed.
On June 27, 2024, we received a deficiency letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) notifying us that, for thirty (30) consecutive business days (from May 10, 2024 to June 26, 2024), the bid price for our Class A common stock had closed below the minimum $1.00 per share requirement for continued inclusion on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”).
On December 30, 2025, we received a deficiency letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) notifying us that, for thirty (30) consecutive business days from November 11, 2025 through December 29, 2025, the bid price for our Class A common stock had closed below the minimum $1.00 per share requirement for continued inclusion on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”).
Our management identified a material weakness in our internal control over financial reporting involving the failure to properly value the fair value of warrants related to the convertible notes and equity line of credit.
Our management previously identified a material weakness in our internal control over financial reporting involving the failure to properly determine the fair value of warrants related to the convertible notes and equity line of credit in accordance with applicable accounting guidance.
Tax law or tax rate changes could affect our effective tax rate and future profitability. Our effective tax rate was 25.7% for the year ended December 31, 2024 and 20.9% for the year ended December 31, 2023.
Tax law or tax rate changes could affect our effective tax rate and future profitability. Our effective tax rate was (64.6)% for the year ended December 31, 2025 and 25.7% for the year ended December 31, 2024.
It is unclear whether investors will find our Class A common stock less attractive because we may rely on these exemptions.
It is unclear whether investors will find our securities less attractive because we may rely on these exemptions.
While AI automates certain tasks, it also creates new roles and opportunities within our organization. We anticipate that AI will play an increasingly significant role in our operations and strategy.
We invest in employee training and development to adapt to AI-driven changes. While AI automates certain tasks, it also creates new roles and opportunities within our organization. We anticipate that AI will play an increasingly significant role in our operations and strategy.
Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until the later of (1) our second Annual Report on Form 10-K or (2) the Annual Report on Form 10-K for the first year we no longer qualify as an emerging growth company.
Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until the Annual Report on Form 10-K for the first year we no longer qualify as an emerging growth company and are deemed an accelerated filer under SEC rules.
The ARK franchise contributed 85.1% of our net revenue for the year ended December 31, 2024, and our five best-selling franchises (including ARK ), which may change year over year, in the aggregate accounted for 94.0% of our net revenue for the year ended December 31, 2024.
The ARK franchise contributed 89.4% of our net revenue for the year ended December 31, 2025, and our five best-selling franchises (including ARK ), which may change year over year, in the aggregate accounted for 96.6% of our net revenue for the year ended December 31, 2025.
Therefore, we may not in the future have access to the full amount available to us under the Equity Line Purchase Agreement, depending on the price of our Class A common stock.
Therefore, we may not in the future have access to (i) the full amount available to us under the Equity Line Purchase Agreement due to the price of our Class A common stock and (ii) proceeds from the sale of additional convertible notes.
Our management will have broad discretion with respect to the use of proceeds from the sale of any shares of our common stock to the Equity Line Investor. You will be relying on the judgment of our management regarding the application of the proceeds from the sale of any shares of our common stock to the Equity Line Investor.
You will be relying on the judgment of our management regarding the application of the proceeds from the sale of any shares of our common stock to the Equity Line Investor and our shares sold in the ATM Offering.
If we have disputes with external developers or they cannot meet product development schedules, acquire certain approvals or are otherwise unable or unwilling to fulfill their contractual obligations to us, we may delay or cancel previously announced games, alter our launch schedule or experience increased costs and expenses, which could result in a delay or significant shortfall in anticipated revenue, harm our profitability and reputation and cause our financial results to be materially affected. 19 Any cybersecurity-related attack, significant data breach or disruption of the information technology systems or networks on which we rely could negatively impact our business.
If we have disputes with external developers or they cannot meet product development schedules, acquire certain approvals or are otherwise unable or unwilling to fulfill their contractual obligations to us, we may delay or cancel previously announced games, alter our launch schedule or experience increased costs and expenses, which could result in a delay or significant shortfall in anticipated revenue, harm our profitability and reputation and cause our financial results to be materially affected. 19 If we do not successfully invest in, establish and maintain awareness of our brand and games or if we incur excessive expenses promoting and maintaining our brand or our games, our business, financial condition, results of operations or reputation could be harmed.
Tian, our other Co-Chief Executive Officer, and Mr. Peter Kang, our Vice President and Director of Business Development and Operations. The loss of the services of any or all of these executive officers, or certain key product development personnel, including those employed by studio partners, such as Studio Wildcard, could significantly harm our business.
The loss of the services of any or all of our executive officers, or certain key product development personnel, including those employed by studio partners, such as Studio Wildcard, could significantly harm our business.
In addition, as console hardware moves through its life cycle, hardware manufacturers typically enact price reductions, and decreasing prices may put downward pressure on software prices.
Moreover, it typically takes time before we have products available on next generation consoles. In addition, as console hardware moves through its life cycle, hardware manufacturers typically enact price reductions, and decreasing prices may put downward pressure on software prices.
Such laws, regulations, regulatory codes and guidelines may be inconsistent across jurisdictions or conflict with other rules. The legislative and regulatory landscapes for data privacy and security continue to evolve in jurisdictions worldwide, with an increasing focus on privacy and data protection issues with the potential to affect our business.
The legislative and regulatory landscapes for data privacy and security continue to evolve in jurisdictions worldwide, with an increasing focus on privacy and data protection issues with the potential to affect our business.
Were it determined that our use was not in compliance with a particular license, we may be required to release our proprietary source code, pay damages for breach of contract, re-engineer our games or products, discontinue distribution in the event re-engineering cannot be accomplished on a timely basis, or take other remedial action that may divert resources away from our game development efforts, any of which could negatively impact our business. 27 Risks Related to Legal or Regulatory Compliance Changing data privacy and security laws and regulations in the jurisdictions in which we or our consumers do business could increase the cost of our operations and subject us to possible sanctions, civil lawsuits (including class action or similar representative lawsuits) and other penalties; such laws and regulations are continually evolving.
Were it determined that our use was not in compliance with a particular license, we may be required to release our proprietary source code, pay damages for breach of contract, re-engineer our games or products, discontinue distribution in the event re-engineering cannot be accomplished on a timely basis, or take other remedial action that may divert resources away from our game development efforts, any of which could negatively impact our business. 27 Risks Related to Legal or Regulatory Compliance Any cybersecurity-related attack, significant data breach or disruption of the information technology systems or networks on which we rely could negatively impact our business.
We seek to mitigate these risks through regular audits, risk assessments, review of privacy standards, security protocols, monitoring, and adaptive AI models. The integration of AI technologies has also led to changes in workforce requirements. We invest in employee training and development to adapt to AI-driven changes.
Improper use of AI development tools could also result in a loss of our ability to protect our own IP assets. We seek to mitigate these risks through regular audits, risk assessments, review of privacy standards, security protocols, monitoring, and adaptive AI models. The integration of AI technologies has also led to changes in workforce requirements.
In accordance with Nasdaq rules, we were provided an initial period of 180 calendar days, or until December 24, 2024 (the “Compliance Date”), to regain compliance with the Bid Price Rule.
In accordance with Nasdaq rules, we have a compliance period of 180 calendar days, or until June 29, 2026 (the “Compliance Date”), to regain compliance with the Bid Price Rule.
See Part II, Item 9A, “Controls and Procedures,” in this Annual Report for information regarding the identified material weaknesses and our actions to date to remediate the material weakness.
See Part II, Item 9A, “Controls and Procedures,” in this Annual Report for additional information regarding the material weakness and the remediation actions undertaken by management.
If we default on our credit obligations, our operations may be interrupted, and our business could be seriously harmed. We have a credit facility that we may draw on to finance our operations and other corporate purposes. If we default on these credit obligations, our lenders may accelerate the debt and/or foreclose on property securing the debt.
If we default on our credit obligations, our operations may be interrupted, and our business could be seriously harmed. In addition to our outstanding convertible notes, we also have a credit facility that we may draw on to finance our operations and other corporate purposes.
We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make our Class A common stock less attractive to investors. We are an “emerging growth company,” as defined in the JOBS Act.
We are an “emerging growth company” and a “smaller reporting company,” and we cannot be certain if the reduced SEC reporting and disclosure requirements applicable to emerging growth companies or smaller reporting companies will make our securities less attractive to investors. We are an “emerging growth company,” as defined in the JOBS Act.
You should carefully consider the risks and uncertainties described below, as well as the other information in this Annual Report, including our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the events or developments described below, or of additional risks and uncertainties not presently known to us or that we currently deem immaterial, could materially and adversely affect our business, results of operations, financial condition and growth prospects.
The occurrence of any of the events or developments described below, or of additional risks and uncertainties not presently known to us or that we currently deem immaterial, could materially and adversely affect our business, results of operations, financial condition and growth prospects.
See Note 12 - Revolving Loan, Short Term Note and Long-Term Debt to our audited consolidated financial statements included in this Annual Report. Risks Related to Our Corporate Structure We are a “controlled company” under the corporate governance rules of Nasdaq and, as a result, qualify for and rely on exemptions from certain corporate governance requirements.
Risks Related to Our Corporate Structure We are a “controlled company” under the corporate governance rules of Nasdaq and, as a result, qualify for and rely on exemptions from certain corporate governance requirements.
In addition, such cybersecurity breaches may subject us to legal claims or proceedings, like individual claims and regulatory investigations and actions, including fines, especially if there is loss, disclosure, or misappropriation of, or access to, our customers’ personal information or other sensitive information, or there is otherwise an intrusion into our customers’ privacy.
In addition, such cybersecurity breaches may subject us to legal claims or proceedings, like individual claims and regulatory investigations and actions, including fines, especially if there is loss, disclosure, or misappropriation of, or access to, our customers’ personal information or other sensitive information, or there is otherwise an intrusion into our customers’ privacy Changing data privacy and security laws and regulations in the jurisdictions in which we or our consumers do business could increase the cost of our operations and subject us to possible sanctions, civil lawsuits (including class action or similar representative lawsuits) and other penalties; such laws and regulations are continually evolving.
The CCPA, which became effective on January 1, 2020 and became enforceable by the California Attorney General on July 1, 2020, along with related regulations that came into force on August 14, 2020, provides additional individual privacy rights for California residents and places increased data privacy and security obligations on entities handling certain personal information of California residents and households.
The CCPA, as amended, and related regulations provides additional individual privacy rights for California residents and places increased data privacy and security obligations on entities handling certain personal information of California residents and households.
If any of these events occur, our operations may be interrupted and our ability to fund our operations or obligations, as well as our business, could be seriously harmed. In addition, our credit facility contains operating covenants, including maintenance of certain financial ratios.
If we default on these credit obligations, our lenders may accelerate the debt and/or foreclose on property securing the debt. If any of these events occur, our operations may be interrupted and our ability to fund our operations or obligations, as well as our business, could be seriously harmed.
For more information on our credit facility, see Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.” If we fail to maintain effective internal control over financial reporting, as well as required disclosure controls and procedures, our ability to produce timely and accurate consolidated financial statements or comply with applicable regulations could be impaired.
If we fail to maintain effective internal control over financial reporting, as well as required disclosure controls and procedures, our ability to produce timely and accurate consolidated financial statements or comply with applicable regulations could be impaired. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.
If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock and the trading price of our Class A common stock may be more volatile.
If some investors find our securities less attractive as a result, there may be a less active trading market for our Class A common stock and the trading price of our Class A common stock may be more volatile. 39 Risks Related to Convertible Notes Offerings, Equity Line Credit Financing and our At the Market Offering Program Investors who buy shares in the convertible notes, equity line credit financing offering and in the “at the market offering program” at different times will likely pay different prices.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another State court in Delaware or the U.S.
Although this material weakness has been remediated, there is no assurance that we will not identify additional material weaknesses in the future, which could impact our ability to accurately and timely report financial results. 38 Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another State court in Delaware or the U.S.
We have significant debt obligations coming due within one year. Our current revolving loan has a balance of $3.0 million as of December 31, 2024, and is due for repayment on June 30, 2025. The Company intends to extend the revolving loan and renew our short-term note debt arrangement and faces the risk that we will be unable to.
We have significant debt obligations coming due within one year. As of December 31, 2025, our revolving loan had a balance of $5.0 million and a repayment date of June 30, 2026. Subsequent to December 31, 2025, we received an extension of our revolving loan to March 31, 2030.
In addition, our business is vulnerable to changing economic conditions and to other factors that adversely affect the gaming industry, which could negatively impact our business. ● General economic factors, domestically and internationally, may adversely affect our business, financial condition, and results of operations. ● We utilize artificial intelligence (“AI”), which could expose us to liability or adversely affect our business. ● If we are unable to protect the intellectual property relating to our material software, the commercial value of our products will be adversely affected, and our competitive position could be harmed. ● If we infringe, misappropriate, or otherwise violate or are alleged to infringe, misappropriate or otherwise violate the intellectual property rights of third parties, our business could be adversely affected. ● The Company has debt obligations with short term durations that are coming due within one year. 11 ● We are a “controlled company” under the corporate governance rules of Nasdaq and, as a result, qualify for and rely on exemptions from certain corporate governance requirements.
In addition, our business is vulnerable to changing economic conditions and to other factors that adversely affect the gaming industry, which could negatively impact our business. ● General economic factors, domestically and internationally, may adversely affect our business, financial condition, and results of operations. ● We have debt obligations with short term durations that are coming due within one year. ● We have recorded a full valuation allowance against our deferred tax assets, and there can be no assurance that any portion of these assets will be realized.
Shi, our Founder, Co-Chief Executive Officer, Chief Strategy Officer and Chairman, controls us, and his ownership of our common stock prevents you and other stockholders from influencing significant decisions. ● We cannot guarantee that our Share Repurchase Program will be fully implemented, nor that it will enhance stockholder value, and share repurchases could affect the price of our Class A common stock. ● The realization of the Company’s deferred tax assets is contingent upon the Company’s upcoming new game releases to generate sufficient taxable income.
General Risk Factors ● We cannot guarantee that our Share Repurchase Program will be fully implemented, nor that it will enhance stockholder value, and share repurchases could affect the price of our Class A common stock.
Tsai’s resignation as the Company’s Chief Executive Officer, the Company appointed Hai Shi and Xuedong (Tony) Tian to serve as the Company’s new Co-Chief Executive Officers, effective April 15, 2024. We are highly dependent on the expertise, skill and knowledge of Mr. Shi, our Founder, Co-Chief Executive Officer, Chief Strategy Officer and Chairman, Mr.
We appointed Hai Shi, our founder, Chairman of the Board of Directors and Chief Strategy Officer, to serve as our sole Chief Executive Officer effective October 1, 2025.
For the fiscal year ended December 31, 2024, our total net revenue was $84.5 million. 39 For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
As such, we are eligible for exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes–Oxley Act, reduced disclosure obligations regarding executive compensation, and an exemption from the requirements to obtain a non-binding advisory vote on executive compensation or golden parachute arrangements.
We could continue to be considered an emerging growth company for up to five years, although we would lose that status sooner if our annual gross revenues exceed $1.235 billion, if we issue more than $1.0 billion in nonconvertible debt in a three-year period or if the fair value of our Class A common stock held by non-affiliates exceeds $700.0 million (and we have been a public company for at least 12 months and have filed at least one Annual Report on Form 10-K).
We will remain an emerging growth company until the earliest of: (a)(i) the last day of the fiscal year following the fifth anniversary of the closing of our initial public offering; (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion; or (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year and (b) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
Removed
If we fail to manage our growth effectively, then our business, operating results and financial condition would be adversely affected. ● If general economic conditions decline, demand for our games could decline.
Added
You should carefully consider the risks and uncertainties described below, as well as the other information in this Annual Report, including our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These disclosures reflect the Company’s beliefs and opinions as to factors that could materially and adversely affect the Company and its securities in the future.
Removed
Tsai notified the Company of his decision to resign from his position as the Chief Executive Officer of the Company and all of the Company’s subsidiaries, including, Snail Games USA, Inc., with such resignation effective April 15, 2024; however, Mr. Tsai remained with the Company for a 30-day transition period. In conjunction with Mr.
Added
References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future.
Removed
If we do not successfully invest in, establish and maintain awareness of our brand and games or if we incur excessive expenses promoting and maintaining our brand or our games, our business, financial condition, results of operations or reputation could be harmed.
Added
If we fail to manage our growth effectively, then our business, operating results and financial condition would be adversely affected. ● User metrics and other estimates are subject to inherent challenges in measurement, and real or perceived inaccuracies in those metrics could harm our business, revenue and financial results ● Expansion of the Company’s operations into new products, services and technologies, including content categories, is inherently risky and may subject it to additional business, legal, financial and competitive risks. ● We utilize artificial intelligence (“AI”), which could expose us to liability or adversely affect our business.
Removed
On October 18, 2024, Nasdaq notified the Company that the Staff had determined that for ten (10) consecutive business days, from October 4, 2024, to October 17, 2024, the closing bid price of our Class A common stock has been at $1.00 per share or greater.
Added
Risks Related to Intellectual Property ● If we are unable to protect the intellectual property relating to our material software, the commercial value of our products will be adversely affected, and our competitive position could be harmed. ● If we infringe, misappropriate, or otherwise violate or are alleged to infringe, misappropriate or otherwise violate the intellectual property rights of third parties, our business could be adversely affected.
Removed
Accordingly, the Staff informed us that we had regained compliance with Nasdaq Listing Rule 5550(a)(2) and this matter is now closed.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Our Director of IT holds operational responsibility for cybersecurity and maintains a suite of industry-standard tools to consistent confidentiality, integrity and availability of Company systems and data. Suspicious activity within Company networks and systems are investigated and assessed by the Director of IT and then reported to the executive management team .
Our Director of IT holds operational responsibility for cybersecurity and maintains a suite of industry-standard tools to maintain consistent confidentiality, integrity and availability of Company systems and data. Suspicious activity within Company networks and systems are investigated and assessed by the Director of IT and then reported to the executive management team.
There have been no cybersecurity threat events identified during the year ended December 31, 2024, which have resulted in a material incident, or are reasonably likely to result in a material impact on our business strategy, results of operations or financial condition.
There have been no cybersecurity threat events identified during the year ended December 31, 2025, that have resulted in a material incident, or are reasonably likely to result in a material impact on our business strategy, results of operations or financial condition.
On a quarterly basis, the Director of IT reports cybersecurity monitoring updates to the CEO, coordinates with our newly appointed Board Member to implement our information technology and cybersecurity programs, as well as with our HR Manager to ensure that the Company’s employees have the adequate training on cybersecurity best practices.
Verified incidents are also communicated to the Board of Directors. On a quarterly basis, the Director of IT reports cybersecurity monitoring updates to the CEO, coordinates with the aforementioned Board Member to implement our information technology and cybersecurity programs, as well as with our HR Manager to ensure that the Company’s employees have the adequate training on cybersecurity best practices.
Furthermore, during the year ended December 31, 2024, we have bolstered our Board of Directors through the appointment of a Director with an extensive history in cybersecurity and a deep understanding of cybersecurity threats which may have a material impact on our business and the video game industry as a whole.
Furthermore, one member of our Board of Directors has an extensive history in cybersecurity and a deep understanding of cybersecurity threats which may have a material impact on our business and the video game industry as a whole.
Removed
Verified incidents are also communicated to the Board of Directors.

Item 2. Properties

Properties — owned and leased real estate

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Item 2. Properties. As of December 31, 2024, we lease approximately 16,900 square feet of office space located in Beverly Hills, California under an operating lease that expires on November 13, 2025. We also own a two-story office building consisting of approximately 5,910 square feet of office space on 7,163 square feet of land in Culver City, California.
Item 2. Properties. As of December 31, 2025, we lease approximately 10,100 square feet of office space located in Beverly Hills, California under an operating lease that expires on January 31, 2033. We also own a two-story office building consisting of approximately 5,910 square feet of office space on 7,163 square feet of land in Culver City, California.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Purchases of Equity Securities by the Issuer and Affiliated Purchasers Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs In thousands, except per share amounts Period January 2024 — — — — February 2024 — — — — March 2024 — — — — April 2024 — — — — May 2024 — — — — June 2024 — — — — July 2024 — — — — August 2024 — — — — September 2024 — — — — October 2024 — — — — November 2024 — — — — December 2024 — — — — Total — $ — — $ — 43 On November 10, 2022, our board of directors authorized a Share Repurchase Program under which we may repurchase up to $5 million in outstanding shares of our Class A common stock, subject to ongoing compliance with Nasdaq listing rules.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs In thousands, except per share amounts Period January 2025 — — — — February 2025 — — — — March 2025 — — — — April 2025 — — — — May 2025 — — — — June 2025 — — — — July 2025 — — — — August 2025 — — — — September 2025 — — — — October 2025 — — — — November 2025 — — — — December 2025 — — — — Total — $ — — $ — 43 On November 10, 2022, our board of directors authorized a Share Repurchase Program under which we may repurchase up to $5 million in outstanding shares of our Class A common stock, subject to ongoing compliance with Nasdaq listing rules.
The number of record holders of our Class B common stock as of March 20, 2025 was two. Dividend Policy We currently intend to retain all available funds and any future earnings, if any, to fund the development and expansion of our business and we do not anticipate paying any cash dividends in the foreseeable future.
The number of record holders of our Class B common stock as of March 20, 2026 was two. Dividend Policy We currently intend to retain all available funds and any future earnings, if any, to fund the development and expansion of our business and we do not anticipate paying any cash dividends in the foreseeable future.
All share repurchases settled in the fiscal years ended December 31, 2024 and 2023 were open market transactions. As of December 31, 2024, 1,350,275 shares of Class A common stock were repurchased pursuant to the Share Repurchase Program for an aggregate purchase price of approximately $3.7 million.
All share repurchases settled in the fiscal years ended December 31, 2025 and 2024 were open market transactions. As of December 31, 2025, 1,350,275 shares of Class A common stock were repurchased pursuant to the Share Repurchase Program for an aggregate purchase price of approximately $3.7 million.
Prior to that, there was no public market for our Class A common stock. 42 Holders of Record The approximate number of record holders of our Class A common stock as of March 20, 2025 was three, including Equiniti Trust Company, LLC, which holds shares of our Class A common stock on behalf of an indeterminate number of beneficial owners.
Holders of Record The approximate number of record holders of our Class A common stock as of March 16, 2026 was three, including Equiniti Trust Company, LLC, which holds shares of our Class A common stock on behalf of an indeterminate number of beneficial owners.
Stock Performance Graph As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information. Unregistered Sales of Equity Securities and Use of Proceeds We issued the following securities that were not registered under the Securities Act.
Transfer Agent and Registrar The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company LLC. Stock Performance Graph As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide this information.
The Company did not issue any securities that were not registered under the Securities Act during the year ended December 31, 2024. The foregoing transactions were exempt from registration under the Securities Act, in reliance on Section 4(a)(2) of the Act.
Unregistered Sales of Equity Securities and Use of Proceeds Except as previously disclosed in our filings with the SEC, we did not issue any securities that were not registered under the Securities Act during the year ended December 31, 2025.
Removed
On November 14, 2022, concurrently with the initial public offering (“IPO”) of our Class A common stock, and pursuant to the certain reorganization transactions, the pre-IPO stockholders of Snail Games USA collectively exchanged 500,000 shares of SGUSA common stock for 6,251,420 shares of our Class A common stock and 28,748,580 shares of our Class B common stock.
Added
Prior to that, there was no public market for our Class A common stock. The closing price of our Class A common stock on the Nasdaq Capital Market on March 16, 2026, was $0.563.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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The discount was amortized using the effective interest rate of 103.4%. The effective interest rate is based on the principal balance discounted by stated interest, debt issuance costs and fair value allocated to the related warrants. As of December 31, 2024, the Convertible Notes have been repaid.
The discount was amortized using the effective interest rate of 103.4%. The effective interest rate is based on the principal balance discounted by stated interest, debt issuance costs and fair value allocated to the related warrants. As of December 31, 2024, the 2023 Convertible Notes have been repaid.
Relationship with third party distribution platforms We derive nearly all of our revenue from third-party distribution platforms, these include but are not limited to, Xbox Live and Game Pass, PlayStation Network, Steam, Epic Games Store, the Apple App Store, the Google Play Store, My Nintendo Store and the Amazon Appstore.
Relationship with third party distribution platforms We derive nearly all of our revenue from third-party distribution platforms, these include but are not limited to, Xbox Live and Game Pass, PlayStation Network, Steam, Epic Games Store, the Apple App Store, the Google Play Store and My Nintendo Store.
Deferred Income Taxes The Company’s deferred income tax assets reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Changes in tax laws or the level of future taxable income could affect the realizability of deferred income tax assets.
Deferred Income Taxes Our deferred income tax assets reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Changes in tax laws or the level of future taxable income could affect the realizability of deferred income tax assets.
In the event of a future breach of the debt covenants the lender has the right, but not the obligation, to declare all or any part of the debt as due immediately and cease making any advances or extend any further credit to the Company.
In the event of a future breach of the debt covenants the lender has the right, but not the obligation, to declare all or any part of the debt as due immediately and cease making any advances or extend any further credit to us.
Equity Line Purchase Agreement On August 24, 2023, the Company entered into a common stock purchase agreement (the “Equity Line Purchase Agreement”) and a registration rights agreement (the “Registration Rights Agreement”) with an investor, pursuant to which the investor has committed to purchase up to $5,000,000 in shares of the Company’s Class A common stock, subject to certain limitations and conditions set forth in the Equity Line Purchase Agreement.
Equity Line Purchase Agreement On August 24, 2023, we entered into a common stock purchase agreement (the “Equity Line Purchase Agreement”) and a registration rights agreement (the “Registration Rights Agreement”) with an investor, pursuant to which the investor has committed to purchase up to $5,000,000 in shares of the Class A common stock, subject to certain limitations and conditions set forth in the Equity Line Purchase Agreement.
To accompany our entry into the vertical short film market, we have developed a distribution platform, the Salty TV mobile application that allows users to access the content on demand. 45 Ability to release content, market effectively through cross media and expand the gaming group Establishing and maintaining a loyal network of players for our premium games is vital for our business and drives revenue growth.
Furthermore, to accompany our entry into the vertical short film market, we have developed a distribution platform, the SaltyTV mobile application that allows users to access the content on demand. 45 Ability to release content, market effectively through cross media and expand the gaming group Establishing and maintaining a loyal network of players for our premium games is vital for our business and drives revenue growth.
The Term Loan, which was originally set to mature in June 2031, bears interest at a fixed rate of 3.5% for the first five years and then at a floating rate of the Wall Street Journal prime rate until maturity.
The Term Loan, which is set to mature in June 2031, bears interest at a fixed rate of 3.5% for the first five years and then at a floating rate of the Wall Street Journal prime rate until maturity.
For the year ended December 31, 2024 we had a net income of $1.8 million, as compared to net loss of $9.1 million for the year ended December 31, 2023. 44 Key Factors Affecting Our Business There are a number of factors that affect the performance of our business, and the comparability of our results from period to period, including: Investments in our content strategy We continuously evaluate and invest in content strategy to improve and innovate our games and features and to develop current technological platforms.
For the year ended December 31, 2025, we had a net loss of $27.2 million, as compared to net income of $1.8 million for the year ended December 31, 2024. 44 Key Factors Affecting Our Business There are a number of factors that affect the performance of our business, and the comparability of our results from period to period, including: Investments in our content strategy We continuously evaluate and invest in content strategy to improve and innovate our games and features and to develop current technological platforms.
We expect salaries and wages to increase as we increase headcount as we expand our product offerings. Stock-based compensation will be recorded within research and development and general and administrative expense. We also record legal settlement expenses as components of general and administrative expenses.
We expect salaries and wages to increase as we increase headcount when expanding our product offerings. Stock-based compensation will be recorded within research and development and general and administrative expense. We also record legal settlement expenses as components of general and administrative expenses.
The difference of $525,754 between the proceeds allocated to the Convertible Notes and the aggregate principal amount were accreted over the life of the notes and accounted for the fair value of the warrants and the stated discount. Additionally, $152,500 of transaction costs incurred by the Company were recorded as a debt discount.
The difference of $525,754 between the proceeds allocated to the 2023 Convertible Notes and the aggregate principal amount was accreted over the life of the notes and accounted for the fair value of the warrants and the stated discount. Additionally, $152,500 of transaction costs incurred by us were recorded as a debt discount.
In evaluating the realizability of deferred taxes, the Company evaluates all available positive and negative evidence of whether sufficient future taxable income will be generated to realize the deferred tax assets, including the results of recent operations and projections of future taxable income.
In evaluating the realizability of deferred taxes, we evaluate all available positive and negative evidence of whether sufficient future taxable income will be generated to realize the deferred tax assets, including the results of recent operations and projections of future taxable income.
Financial covenants The 2021 Revolving Loan, Term Loan and the 2022 Short Term Note require us to maintain a minimum debt service coverage ratio of 1.5 to 1.0. Additionally, the 2021 Revolving Loan requires us to maintain an outstanding principal balance of no more than $3.0 million for 30 consecutive days during any twelve-month period.
Financial covenants The 2021 Revolving Loan, 2021 Term Loan, and the 2025 Term Loan require us to maintain a minimum debt service coverage ratio of 1.5 to 1.0. Additionally, the 2021 Revolving Loan requires us to maintain an outstanding principal balance of no more than $2.5 million for 30 consecutive days during any twelve-month period.
The weighting of positive and negative evidence and the projection of future taxable income requires significant judgment and estimates. In addition, changes in these estimates may have a material impact on the Company’s consolidated financial statements.
The weighing of positive and negative evidence and the projection of future taxable income requires significant judgment and estimates. In addition, changes in these estimates may have a material impact on our consolidated financial statements.
During the fiscal year ended December 31, 2024, ARK: Survival Evolved and ARK: Survival Ascended combined for an average total of 213,000 daily active users (“DAUs”) on the Steam and Epic platforms, as compared to 416,479 in the fiscal year ended December 31, 2023.
During the fiscal year ended December 31, 2025, ARK: Survival Evolved and ARK: Survival Ascended combined for an average total of 224,000 daily active users (“DAUs”) on the Steam and Epic platforms, as compared to 213,000 in the fiscal year ended December 31, 2024.
Years ended December 31, 2024 2023 $ Change % Change (in millions) Units Sold (1) 4.7 6.3 (1.6 ) (25.3 )% (1) Units include master games, DLCs, season pass and bundles and excludes skins, soundtracks and other items. 50 Units sold decreased during the year ended December 31, 2024, as compared to the year ended December 31, 2023, by 1.6 million units, or 25.3%.
Years ended December 31, 2025 2024 $ Change % Change (in millions) Units Sold (1) 6.3 4.7 1.6 32.7 % (1) Units include master games, DLCs, season pass and bundles and excludes skins, soundtracks and other items. 50 Units sold increased during the year ended December 31, 2025, as compared to the year ended December 31, 2024, by 1.6 million units, or 32.7%.
Growth of user base We have experienced significant growth in our number of downloads over the last several years. We have sold 49.9 million units between January 1, 2016 and December 31, 2024. During the year ended December 31, 2024, we sold 4.7 million units compared to 6.3 million in the year ended December 31, 2023.
Growth of user base We have experienced significant growth in our number of downloads over the last several years. We have sold 56.2 million units between January 1, 2016 and December 31, 2025. During the year ended December 31, 2025, we sold 6.3 million units compared to 4.7 million in the year ended December 31, 2024.
During the year ended December 31, 2024, approximately 42.4% of our revenue came from consoles, 48.1% from PC and 5.5% from mobile platforms as compared to 43.7% from consoles, 43.4% from PC and 9.6% from mobile platforms during the year ended December 31, 2023.
During the year ended December 31, 2025, approximately 38.4% of our revenue came from consoles, 49.7% from PC and 9.6% from mobile platforms as compared to 42.4% from consoles, 48.1% from PC and 5.5% from mobile platforms during the year ended December 31, 2024.
We define “daily active users” as the number of unique users who play any given game on any given day. For the years ended December 31, 2024 and 2023, we generated 85.1% and 87.8%, respectively, of our revenues from the ARK franchise.
We define “daily active users” as the number of unique users who play any given game on any given day. For the years ended December 31, 2025 and 2024, we generated 89.4% and 85.1%, respectively, of our revenues from the ARK franchise.
As of December 31, 2024 and 2023, the net outstanding balances of receivables due from SDE were $7.5 million and $13.5 million, respectively. We expect accounts receivables owed to us by SDE will be repaid within the next two fiscal years and intend to exercise all legally available means of collection.
As of December 31, 2025 and 2024, the net outstanding balances of receivables due from SDE were $1.5 million and $7.5 million, respectively. We expect accounts receivables owed to us by SDE will be repaid within the next fiscal year and intend to exercise all legally available means of collection.
The notes had an interest rate of 7.5%, were paid in consecutive monthly installments beginning February 24, 2024 and matured on May 24, 2024. In connection with the Convertible Notes the Company issued to the investors warrants to purchase an aggregate of 714,285 shares that were accounted for under the fair value method and allocated a value of $445,754.
The notes had an interest rate of 7.5%, were paid in consecutive monthly installments beginning February 24, 2024 and matured on May 24, 2024. We also issued to the purchasers of the 2023 Convertible Notes warrants to purchase an aggregate of 714,285 shares that were accounted for under the fair value method and allocated a value of $445,754.
The Company and SDE have entered into an agreement to offset uncollected amounts against monthly payments due to SDE for operating expenses and costs of revenue.
We have entered into an agreement with SDE to offset uncollected amounts against monthly payments due to SDE for operating expenses and costs of revenue.
Our flagship franchise from which we generate the substantial majority of our revenues, ARK , is a leader within the sandbox survival genre with 94.8 million console and PC installs through December 31, 2024 and repeated releases within the top-25 selling games on the Steam platform. See below for discussion of key performance metrics and non-GAAP measures.
Our flagship franchise from which we generate the substantial majority of our revenues, ARK , is a leader within the sandbox survival genre with 108.7 million console and PC installs through December 31, 2025 and repeated releases within the top-grossing games on the Steam platform. See below for discussion of key performance metrics and non-GAAP measures.
As of December 31, 2024, we had borrowings of $3.0 million outstanding under our 2021 Revolving Loan. Term Loan In June 2021, we entered into a loan agreement with a financial institution providing for a term loan in an aggregate principal amount of $3.0 million (the “Term Loan”).
As of December 31, 2025, we had borrowings of $5.0 million outstanding under our 2021 Revolving Loan. Promissory Note In June 2021, we entered into a loan agreement with a financial institution providing for a term loan in an aggregate principal amount of $3.0 million (the “2021 Term Loan”).
Through December 31, 2024, our ARK franchise game has been played for 3.9 billion hours with an average playing time per user of 162.1 hours and with the top 21.3% of all players spending over 100 hours in the game, according to data from the Steam platform.
Through December 31, 2025, our ARK franchise game has been played for 4.3 billion hours with an average playing time per user of 161.4 hours and with the top 21.5% of all players spending over 100 hours in the game, according to data from the Steam platform.
There is no guarantee that the Company will receive a waiver from the lender if the covenants of the loans are breached in the future.
There is no guarantee we will receive a waiver from the applicable lender if the covenants of the loans are breached in the future.
The Company’s ability to comply with the covenants, or receive waivers for the covenants, can lead to the acceleration of payments due under the debt facilities with the lender, cause the lender to cease making advances under the revolving agreement, or allow the lender to take possession of collateral.
Any failure to comply with the covenants, or receive waivers for the covenants, could lead to the acceleration of payments due under the debt facilities with the lender, cause the lender to cease making advances under the revolving agreement, or allow the lender to take possession of collateral.
The Company has registered shares for potential issuance on exercise of the warrants, or conversion of the note, on Form S-1 that was declared effective on October 30, 2023. As of December 31, 2024, the note holders have exercised 202,379 warrants.
We registered shares for potential issuance on exercise of the warrants, or conversion of the note, under a registration statement on Form S-1 that was declared effective on October 30, 2023. As of December 31, 2024, the note holders have exercised 202,379 warrants.
The increase in research and development expenses was due to the outsourced development of For the Stars and project Aether paid through Suzhou Snail and increased internal research and development salaries as we continue to build our internal development team .
The increase in research and development expenses was due to the outsourced development of For the Stars and Nine Yin Sutra: Immortal paid through Suzhou Snail and increased internal research and development salaries as we continue to build our internal development team .
Additionally, the Company recognized $13.2 million from deferred revenue upon the release of Scorched Earth, Aberration and Extinction in 2024 and deferred $6.7 million in revenues during the year ended December 31, 2024 for the ARK: Survival Ascended DLC’s have not yet released as compared to $22.0 million in revenues deferred during the year ended December 31, 2023 for the ARK: Survival Ascended DLC’s and parts of Bobs Tall Tales that had not yet launched . 51 Non-GAAP Measures In addition to our financial results determined in accordance with U.S. generally accepted accounting principles (“U.S.
Additionally, we deferred $6.6 million for ARK: Survival Ascended DLC’s which have not yet released in 2025 as compared to $13.2 million recognized from deferred revenue upon the release of Scorched Earth , Aberration and Extinction in 2024 and deferred $6.7 million in revenues during the year ended December 31, 2024 for the ARK: Survival Ascended DLC’s that have not yet released. 51 Non-GAAP Measures In addition to our financial results determined in accordance with U.S. generally accepted accounting principles (“U.S.
See Note 5- Accounts Receivable - Related Party to our consolidated financial statements included in this Annual Report. 53 Financing activities Net cash flows used in financing activities for the year ended December 31, 2024 were $6.5 million compared to $3.4 million for the year ended December 31, 2023.
See Note 5 – Accounts Receivable (Payable) – Related Party to our consolidated financial statements included in this Annual Report. 53 Investing activities Net cash flows used in investing activities for the year ended December 31, 2025 were $5.3 million compared to none in the year ended December 31, 2024.
The Company recognizes deferred income taxes based on estimates of future taxable income and the utilization of tax loss carryforwards.
We recognize deferred income taxes based on estimates of future taxable income and the utilization of tax loss carryforwards.
Our current unrestricted cash position of approximately $7.3 million, and our expected revenue receipts will allow the Company to continue operations beyond the next 12 months and service its current debts.
Our current unrestricted cash position of approximately $8.6 million, and our expected revenue receipts will allow us to continue operations beyond the next 12 months and service our current debts.
Our unrestricted cash was $7.3 million and $15.2 million as of December 31, 2024 and 2023, respectively. Our restricted cash and cash equivalents were $0.9 million and $1.1 million as of December 31, 2024 and 2023, respectively.
Our unrestricted cash was $8.6 million and $7.3 million as of December 31, 2025 and 2024, respectively. Our restricted cash and cash equivalents were $1.9 million and $0.9 million as of December 31, 2025 and 2024, respectively.
For the years ended December 31, 2024 and 2023, our net revenue was $84.5 million and $60.9 million, respectively.
For the years ended December 31, 2025 and 2024, our net revenue was $81.2 million and $84.5 million, respectively.
The decrease in the non-cash reconciling items was due to a decrease in amortization of intangible assets of $1.4 million, a decrease in stock based compensation expense of $1.7 million, a decrease in allowance for credit losses of $0.6 million, partially offset by an increase on the loss in fair value of warrant liabilities of $1.3 million, and an increase in deferred taxes of $2.1 million.
The increase in the non-cash reconciling items was due to an increase in deferred taxes of $11.4 million, an increase in amortization of intangible assets and film assets of $1.7 million, an increase in impairment of film and intangible assets of $1.5 million, an increase in stock based compensation expense of $1.3 million; partially offset by an increase on the gain in fair value of warrant liabilities of $2.1 million, a decrease in accretion of a convertible notes of $0.2 million and a decrease in depreciation and amortization of $0.1 million.
Bookings is used by management to understand sales trends and assess the volume of our sales activity over time. Bookings should not be considered as alternatives to net income (loss), as measures of financial performance or any other performance measure derived in accordance with GAAP. Below is a reconciliation of total net revenue to Bookings, the closest GAAP financial measure.
Bookings should not be considered as alternatives to net income (loss), as measures of financial performance or any other performance measure derived in accordance with GAAP. Below is a reconciliation of total net revenue to Bookings, the closest GAAP financial measure.
Results of Operations Comparison of the year ended December 31, 2024 versus the year ended December 31, 2023 Years ended December 31, 2024 2023 $ Change % Change (in millions) Revenues, net $ 84.5 $ 60.9 $ 23.6 38.7 % Cost of revenues 54.2 48.3 5.9 12.3 % Gross profit 30.3 12.6 17.7 140.0 % Operating expenses: General and administrative 12.9 15.8 (2.9 ) (18.6 )% Research and development 11.6 5.1 6.5 130.3 % Advertising and marketing 1.5 1.6 (0.1 ) (3.7 )% Depreciation 0.4 0.4 - (29.7 )% Total operating expenses 26.4 22.9 3.5 15.1 % Income (loss) from operations $ 3.9 $ (10.3 ) $ 14.2 137.8 % 48 Revenues Net revenues for the year ended December 31, 2024 increased by $23.6 million, or 38.7%, compared to the year ended December 31, 2023.
Results of Operations Comparison of the year ended December 31, 2025 versus the year ended December 31, 2024 Years ended December 31, 2025 2024 $ Change % Change (in millions) Revenues, net $ 81.2 $ 84.5 $ (3.2 ) (3.8 )% Cost of revenues 58.8 54.2 4.6 8.4 % Gross profit 22.4 30.3 (7.8 ) (25.8 )% Operating expenses: General and administrative 18.1 12.9 5.2 40.6 % Research and development 14.6 11.6 2.9 25.2 % Advertising and marketing 5.2 1.5 3.7 243.8 % Depreciation 0.3 0.4 (0.1 ) (18.4 )% Impairment expenses 1.5 — 1.5 100.0 % Total operating expenses 39.7 26.4 13.4 50.7 % Income (loss) from operations $ (17.3 ) $ 3.9 $ (21.2 ) (543.9 )% 48 Revenues Net revenues for the year ended December 31, 2025 decreased by $3.2 million, or 3.8%, compared to the year ended December 31, 2024.
However, sales and marketing expenses may fluctuate as a percentage of revenues depending on the timing and efficiency of our marketing efforts. 47 Provision for (benefit from) income taxes The provision for income taxes consists of current income taxes in the various jurisdictions where we are subject to taxation, primarily the United States, as well as deferred income taxes reflecting the net tax effects of temporary differences between the carrying amounts of assets and liabilities in each of these jurisdictions for financial reporting purposes and the amounts used for income tax purposes.
Provision for income taxes The provision for income taxes consists of current income taxes in the various jurisdictions where we are subject to taxation, primarily the United States, as well as deferred income taxes reflecting the net tax effects of temporary differences between the carrying amounts of assets and liabilities in each of these jurisdictions for financial reporting purposes and the amounts used for income tax purposes.
Our restricted cash primarily consists of time deposits and is used as security for certain of our debt instruments and to secure standby letters of credit with certain of our landlords. 52 As of December 31, 2024, our 2021 Revolving Loan has a balance of $3.0 million and is due in June 2025.
Our restricted cash primarily consists of time deposits and to secure standby letters of credit with certain of our landlords and hold collateral in reserve related to our revolving line of credit. 52 As of December 31, 2025, our 2021 Revolving Loan has a balance of $5.0 million and is due and payable in June 2027.
General and administrative expenses General and administrative expenses for the year ended December 31, 2024 decreased by $2.9 million, or 18.6%, compared to the year ended December 31, 2023.
General and administrative expenses General and administrative expenses for the year ended December 31, 2025 increased by $5.2 million, or 40.6%, compared to the year ended December 31, 2024.
For additional information on our significant accounting policies, please refer to Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements included in this Annual Report. We believe that the following critical accounting policies and estimates have the greatest potential impact on our consolidated financial statements.
For additional information on our significant accounting policies, please refer to Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements included in this Annual Report.
Non-cash reconciling items were $0.5 million and $1.1 million for the years ended December 31, 2024 and 2023, respectively, representing a decrease of $0.6 million.
Non-cash reconciling items were $14.0 million and $0.5 million for the years ended December 31, 2025 and 2024, respectively, representing an increase of $13.5 million.
Research and development expenses Research and development expenses for the year ended December 31, 2024 increased by $6.5 million, or 130.3%, compared to the year ended December 31, 2023.
Research and development expenses Research and development expenses for the year ended December 31, 2025 increased by $2.9 million, or 25.2%, compared to the year ended December 31, 2024.
Under current U.S. tax law, the federal statutory tax rate applicable to corporations is 21%. Our effective tax rate of 25.7% differed from the federal statutory rate of 21% primarily due to the foreign research and development deduction, permanent differences, change in valuation allowance, and change in warrant valuation.
Under current U.S. tax law, the federal statutory tax rate applicable to corporations is 21%. Our effective tax rate of (64.6)% differed from the federal statutory tax rate of 21% primarily due to state income taxes and a change in valuation allowance .
The decrease in general and administrative expenses was due to a decrease in salaries and wages of $1.3 million due to the reversal of $0.9 million in previously expensed stock based compensation, a decrease in legal and professional expenses of $1.1 million, a decrease in bad debt expense of $0.6 million, a decrease in administrative internet and server costs of $0.4 million, and a decrease in expenses of $0.4 million for SEC filing fees, investor relations, NASDAQ listing fees and compliance expenses; partially offset by an increase in non-income related taxes of $0.4 million and general office expenses of $0.2 million.
The increase in general and administrative expenses was due to an increase in salaries and wages of $3.0 million due to an increase in an employee headcount and recording $0.4 million in stock compensation expense in 2025 versus an income related stock based income of ($0.9) million in 2024, an increase in contractors expenses of $1.0 million, an increase in general office expenses of $0.5 million, an increase in legal and professional costs of $0.3 million, an increase in rent, insurance and travel expenses of $0.5 million and an increase in public company expenses of $0.2 million related to SEC filing fees, investor relations, NASDAQ listing fees and compliance expenses; partially offset by an decrease in non-income related taxes of $0.2 million and fines and penalties of $0.1 million.
Cost of revenues Cost of revenues for the year ended December 31, 2024 increased by $5.9 million, or 12.3%, compared to the year ended December 31, 2023.
Cost of revenues Cost of revenues for the year ended December 31, 2025 increased by $4.6 million, or 8.4%, compared to the year ended December 31, 2024.
Overview Our mission is to provide high-quality entertainment experiences to audiences around the world. We are a leading, global independent developer and publisher of interactive digital entertainment for consumers around the world. We have built a premier portfolio of premium games designed for use on a variety of platforms, including consoles, PCs, and mobile devices.
Overview Our mission is to provide high-quality entertainment experiences to audiences around the world. We are a leading, global independent developer and publisher of interactive digital entertainment for consumers around the world.
We offer certain software products through third-party digital storefronts, such as Xbox Live and Game Pass, PlayStation Network, Steam, Epic Games Store, the Apple App Store, the Google Play Store, My Nintendo Store and the Amazon Appstore, and certain retail distributors.
We offer certain software products through third-party digital storefronts, such as Xbox Live and Game Pass, PlayStation Network, Steam, Epic Games Store, the Apple App Store, the Google Play Store and My Nintendo Store, and certain retail distributors. We record deferred revenue when payments are due or received in advance of the fulfillment of our associated performance obligations.
Critical Accounting Policies and Estimates Our discussion and analysis of results of operations, financial condition, and liquidity are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP.
For additional information regarding our indebtedness, see Note 12, Revolving Loan, Short Term Note and Long-Term Debt to our consolidated financial statements included in this Annual Report. Critical Accounting Policies and Estimates Our discussion and analysis of results of operations, financial condition, and liquidity are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP.
The increase was primarily due to an increase in net revenue of $23.6 million, decreased general and administrative expenses of $2.9 million, partially offset by increased research and development costs of $6.5 million, increased costs of revenues of $5.9 million, an increase in expenses related to the revaluation of outstanding and exercised warrants of $1.2 million and a decrease in income tax benefit of $3.0 million.
The decrease was primarily due to an decrease in net revenue of $3.3 million, an increase in cost of revenues of $4.6 million, an increase of general and administrative expenses of $5.2 million, an increase of research and development costs of $3.0 million, an increase in advertising and marketing of $3.7 million, an increase in impairment expenses of $1.5 million, an increase in income tax provision of $10.1 million, partially offset by an increase in other income (expense) of $2.1 million.
During the year ended December 31, 2024, prior to repayment, the noteholders exercised the option to convert $60,000 in principal of the notes to 71,460 shares of the Company’s Class A common stock.
During the year ended December 31, 2024, prior to repayment, the noteholders exercised the option to convert $60,000 in principal of the notes to 71,460 shares of our Class A common stock. In February 2025, we issued convertible notes (the “February 2025 Convertible Notes”) with an aggregate principal amount of $3,300,000 for gross proceeds of $3,000,000.
The Company had a net income of $1.8 million and a net loss of $9.1 million, for the years ended December 31, 2024 and 2023, respectively, representing an increase of $10.9 million.
We had a net loss of $27.2 million and a net income of $1.8 million, for the years ended December 31, 2025 and 2024, respectively, representing a decrease of $29.0 million.
Through these platforms, users can download our games and, for certain games, purchase virtual items to enhance their game-playing experience.
Components of Results of Operations Revenues We primarily derive revenue from the sale of our games through various gaming platforms. Through these platforms, users can download our games and, for certain games, purchase virtual items to enhance their game-playing experience.
ARK: Survival Evolved has been a top-25 selling game on the Steam platform by gross revenue in each year we released an ARK DLC. Our expertise in technology, in-game ecosystems and monetization of online multiplayer games has enabled us to assemble a broad portfolio of intellectual property across multiple media formats and technology platforms.
Our expertise in technology, in-game ecosystems and monetization of online multiplayer games has enabled us to assemble a broad portfolio of intellectual property across multiple media formats and technology platforms.
Cost of revenues for the years ended December 31, 2024 and 2023 comprised the following: Years ended December 31, 2024 2023 $ Change % Change (in millions) Software license royalties - related parties $ 19.9 $ 14.4 $ 5.5 38.3 % Software license royalties 0.6 1.1 (0.5 ) (49.1 )% License and amortization - related parties 24.0 20.5 3.5 17.1 % Merchant fees 0.9 1.4 (0.5 ) (34.9 )% Engine fees 3.8 4.3 (0.5 ) (11.1 )% Internet, server and data center 4.9 6.5 (1.6 ) (23.3 )% Costs related to other revenues 0.1 0.1 - (56.5 )% Total: $ 54.2 $ 48.3 $ 5.9 12.3 % The increase in cost of revenues for the year ended December 31, 2024 was due to an increase of $5.5 million in software license royalties – related parties, a result of increased deferred royalty recognition related to ARK franchise, an increase of $3.5 million in license and amortization – related parties due to the increased license fee paid to SDE partially offset by lower amortization expense due to a lower depreciable base of intangible assets in 2024, a decrease in engine fees of $0.5 million, decrease in internet, server and data center fees of $1.6 million, a decrease in merchant fees of $0.5 million and a decrease in software license royalties of $0.5 million.
Cost of revenues for the years ended December 31, 2025 and 2024 comprised the following: Years ended December 31, 2025 2024 $ Change % Change (in millions) Software license royalties – related parties $ 20.3 $ 19.9 $ 0.4 2.0 % Software license royalties 0.2 0.6 (0.4 ) (70.6 )% License fees – related party 24.0 24.0 — — % License and amortization 1.7 — 1.7 22,251.3 % Merchant fees 1.9 0.9 1.0 109.2 % Engine fees 4.7 3.8 0.9 22.3 % Internet, server and data center 5.9 4.9 1.0 19.2 % Costs related to other revenue 0.1 0.1 — 82.1 % Total: $ 58.8 $ 54.2 $ 4.6 8.4 % The increase in cost of revenues for the year ended December 31, 2025 was due to an increase of $1.7 million in license and amortization primarily due to a larger depreciable base attributable to film assets, an increase in engine fees of $0.9 million due to a one-time engine expense fee, an increase in internet, server and data center fees of $1.0 million, and an increase in merchant fees of $1.0 million related to increase ARK: Ultimate Mobile Edition revenues.
Years ended December 31, 2024 2023 $ Change % Change (in millions) Net income (loss) $ 1.8 $ (9.1 ) $ 10.9 120.1 % Interest income and interest income – related parties (0.3 ) (0.1 ) (0.2 ) 99.2 % Interest expense and interest expense – related parties 0.7 1.5 (0.8 ) (52.8 )% Provision for (benefit from) income taxes 0.6 (2.4 ) 3.0 (126.3 )% Depreciation expense 0.4 0.4 - (29.7 )% EBITDA $ 3.2 $ (9.7 ) $ 12.9 133.4 % For the year ended December 31, 2024, EBITDA increased by $12.9 million, or 133.4%, compared to the year ended December 31, 2023, primarily because of an increase in net income of $10.9 million and a decrease in the benefit from income taxes of $3.0 million, partially offset by a decrease in interest expense and interest expense – related parties of $0.8 million and an increase in interest income and interest income – related parties of $0.2 million.
Years ended December 31, 2025 2024 $ Change % Change (in millions) Net income (loss) $ (27.2 ) $ 1.8 $ (29.1 ) (1,590.8 )% Interest income and interest income – related parties (1.3 ) (0.3 ) (1.1 ) 413.9 % Interest expense and interest expense – related parties 0.7 0.7 (0.1 ) (8.7 )% Provision for income taxes 10.7 0.6 10.1 1,590.9 % Depreciation 0.3 0.4 (0.1 ) (18.4 )% EBITDA $ (16.8 ) $ 3.2 $ (20.2 ) (627.1 )% For the year ended December 31, 2025, EBITDA decreased by $20.2 million, or 627.1%, compared to the year ended December 31, 2024, primarily due to the decrease in gross profit of $7.8 million, an increase in general and administrative expenses of $5.2 million, an increase in research and development of $2.9 million, an increase in advertising and marketing of $3.7 million and an additional $1.5 million in impairment expenses.
The increase in net revenues was due to an increase in recognition of deferred revenues of $32.2 million related to the Ark franchise, an increase in sales Bellwright of $5.9 million, partially offset by a decrease in total Ark sales of $13.0 million, a decrease in Ark Mobile sales of $1.0 million and a decrease in the Company’s other titles of $0.7 million.
The decrease in net revenues was due to a decrease in recognition of deferred revenues of $15.5 million related to the Ark franchise, and, to a lesser extent, a decrease in sales Bellwright of $1.5 million, a decrease in revenues related to Myth of Empires of $1.3 million, partially offset by an increase ARK: Survival Ascended sales of $11.3 million, an increase in Ark Mobile sales of $2.4 million and an increase in revenues generated from SaltyTV application of $0.8 million.
The Company has registered shares for potential issuance on exercise of the warrants, or drawing of the equity line, on Form S-1 that was declared effective on October 30, 2023.
We have registered shares for potential issuance on exercise of the warrants, or drawing of the equity line, on a Registration Statement on Form S-1 that was declared effective on October 30, 2023. As of December 31, 2025, we have not sold any Class A common stock under the Equity Line Purchase Agreement and the agreement has expired.
Advertising and marketing expenses Advertising and marketing expenses for the year ended December 31, 2024 decreased by $0.1 million, or 3.7%, compared to the year ended December 31, 2023. 49 Other Factors Affecting Net Income (Loss) Years ended December 31, 2024 2023 $ Change % Change (in millions) Interest income $ 0.3 $ 0.1 $ 0.2 100.7 % Interest expense (0.7 ) (1.5 ) 0.8 (52.8 )% Other income (expense) (1.0 ) 0.3 (1.3 ) (468.9 )% Income tax (provision) benefit (0.6 ) 2.4 (3.0 ) (126.3 )% Interest income Interest income was $0.3 million and $0.1 million for the year ended December 31, 2024 and 2023, respectively.
There were no such impairments during the year ended December 31, 2024. 49 Other Factors Affecting Net Income (Loss) Years ended December 31, 2025 2024 $ Change % Change (in millions) Interest income $ 1.3 $ 0.3 $ 1.1 417.1 % Interest expense (0.7 ) (0.7 ) 0.1 (8.7 )% Other income (expense) 0.1 (1.0 ) 1.1 111.7 % Income tax provision (10.7 ) (0.6 ) (10.1 ) (1,590.9 )% Interest income Interest income was $1.3 million and $0.3 million for the year ended December 31, 2025 and 2024, respectively.
This division will focus on creating content in the vertical short film segment of the digital entertainment market. The mobile application has already soft launched on iOS and Android platforms. We have released thirty-one short film dramas to date and expect a consistent roll out of new short film dramas.
This division will focus on creating content in the vertical short film segment of the digital entertainment market. As of December 31, 2025, we have released 140 short film dramas including licensed films from external organizations and expect a consistent roll out of new short film dramas.
The increase was due to the balance of our cash deposits being higher on average during the year ended December 31, 2024. Interest expense Interest expense primarily related to our outstanding indebtedness with third-party lenders.
The increase was due to $1.1 million of interest income related to the interest portion of IRS refunds received during the year ended December 31, 2025. Interest expense Interest expense primarily related to our outstanding indebtedness with third-party lenders. Interest expense remained relatively consistent for the year ended December 31, 2025 compared to December 31, 2024.
Bookings adjusts for the impact of deferrals and, we believe, provides a useful indicator of sales in a given period. It reflects the net amount of products and services sold digitally or physically in a given period, excluding the impact of revenue deferrals.
It reflects the net amount of products and services sold digitally or physically in a given period, excluding the impact of revenue deferrals. Bookings is used by management to understand sales trends and assess the volume of our sales activity over time.
Financing activities for the year ended December 31, 2024 included $6.4 million in debt payments, $0.3 million in payments of capitalized offering costs in accounts payable and proceeds of $0.2 million resulting from the exercise of liability classified warrants.
Financing activities for the year ended December 31, 2024 included $6.4 million in debt payments, $0.3 million in payments of capitalized offering costs in accounts payable and proceeds of $0.2 million resulting from the exercise of liability classified warrants Registered Offerings In October 2023, we filed a Registration Statement on Form S-1 with the SEC in connection with our issuance of convertible note, equity line of credit and warrants related to each financing as noted below.
We may need to raise additional capital and issue registered shares to draw on an equity line of credit if needed.
We have raised capital through the issuance of the convertible notes and the distribution agreement entered into with our retail partner which provided advanced royalties. We may need to raise additional capital and issue registered shares to draw on an equity line of credit if needed.
Cash flows The following tables present a summary of our cash flows for the periods indicated: Years ended December 31, 2024 2023 $ Change % Change (in millions) Net cash flows provided by (used in) operating activities $ (1.6 ) $ 0.5 $ (2.1 ) (436.0 )% Net cash flows used in financing activities (6.5 ) (3.4 ) (3.1 ) (88.5 )% Net decrease in cash and cash equivalents and restricted cash and cash equivalents $ (8.1 ) $ (2.9 ) $ (5.2 ) (170.6 )% Operating activities Net cash flows provided by (used in) operating activities for the year ended December 31, 2024 decreased $2.1 million as compared to the year ended December 31, 2023, which resulted primarily from a decrease in deferred revenues of $33.6 million, a decrease in accounts payable and accounts payable – related parties of $21.4 million, an increase in other noncurrent assets of $1.5 million, a decrease in accrued expenses of $0.6 million, a decrease in non-cash reconciling items of $0.6 million; partially offset by a decrease in accounts receivable and accounts receivable - related party of $34.1 million, increase in net income of $10.9 million, a decrease in prepaids expenses and prepaid expenses – related party of $8.5 million and an increase in prepaid taxes of $2.2 million.
Cash flows The following tables present a summary of our cash flows for the periods indicated: Years ended December 31, 2025 2024 $ Change % Change (in millions) Net cash flows used in operating activities $ (1.2 ) $ (1.6 ) $ 0.4 (26.3 )% Net cash flows used in investing activities (5.3 ) — (5.3 ) (100.0 )% Net cash flows provided by (used in) financing activities 8.7 (6.5 ) 15.2 (234.2 )% Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents $ 2.2 $ (8.1 ) $ 10.3 (128.5 )% Operating activities Net cash flows used in operating activities for the year ended December 31, 2025 increased $0.4 million as compared to the year ended December 31, 2024, primarily due to fluctuations in working capital.
For the trailing twelve months ended December 31, 2024, the Company met the minimum debt service coverage ratio required by its debt covenants. The Company repaid the $0.8 million term note that was one of three debt facilities with the lender, in January 2024.
For the trailing twelve months ended December 31, 2025, the Company has met the minimum debt service coverage ratio required by its debt covenants.
Interest expense decreased by $0.8 million for the year ended December 31, 2024 because of the Company having a lower average debt balance during the year ended December 31, 2024. Other income (expense) Other income (expense) decreased by $1.3 million for the year ended December 31, 2024, in comparison to the year ended December 31, 2023.
Other income (expense) Other income (expense) increased by $1.1 million for the year ended December 31, 2025, in comparison to the year ended December 31, 2024.
Units sold of ARK: Survival Evolved decreased by 2.1 million units , partially offset by an increase in ARK: Survival Ascended units sold of 0.3 million and an increase in Bellwright sales of 0.4 million units. Bookings Bookings is a key operating metric in assessing our financial performance.
Units sold of ARK franchise increased by 1.7 million units, partially offset by a decrease in Bellwright and West Hunt sales of 0.1 million units. Bookings Bookings is a key operating metric in assessing our financial performance. Bookings adjusts for the impact of deferrals and, we believe, provides a useful indicator of sales in a given period.
Years ended December 31, 2024 2023 $ Change % Change (in millions) Total net revenue $ 84.5 $ 60.9 $ 23.6 38.7 % Change in deferred net revenue (8.8 ) 24.8 (33.6 ) (135.7 )% Bookings $ 75.7 $ 85.7 $ (10.0 ) (11.7 )% For the year ended December 31, 2024, bookings decreased by $10.0 million, or 11.7%, compared to the year ended December 31, 2023, because of increased sales at a higher ASP driven by the release of ARK: Survival Ascended in the fourth quarter of 2023.
Years ended December 31, 2025 2024 $ Change % Change (in millions) Total net revenue $ 81.2 $ 84.5 $ (3.2 ) (3.8 )% Change in deferred net revenue 6.6 (8.8 ) 15.5 (174.8 )% Bookings $ 87.8 $ 75.7 $ 12.2 16.2 % For the year ended December 31, 2025, bookings increased by $12.2 million, or 16.2%, compared to the year ended December 31, 2024, because of increased sales of ARK: Survival Ascended driven by the launch of ARK: Lost Colony in December 2025, the release of ARK: Astraeos in February 2025 and ARK: Survival Evolved had its first sales event in June 2025 since the price drop in August 2023.
Research and development Research and development consists primarily of consulting expenses and salaries and wages devoted towards the development of new games and related technologies and development costs outsourced through Suzhou Snail. We do not fund or enter into arrangements relating to the research and development activities from third-party developers from whom we license games.
We expect general and administrative expenses will increase in absolute dollars due to the inflationary pressures of recent years. Research and development Research and development consists primarily of consulting expenses and salaries and wages devoted towards the development of new games and related technologies and development costs outsourced through Suzhou Snail.
Seasonality in our revenue also tends to coincide with promotional cycles on platforms, typically on a quarterly basis. Recent Developments In December 2024, we released the highly anticipated next-gen ARK mobile game, ARK Ultimate Mobile Edition on iOS and Android platforms. In the launch month, over 2 million users downloaded the mobile game across the two mobile platforms.
Seasonality in our revenue also tends to coincide with promotional cycles on platforms, typically on a quarterly basis. Recent Developments In 2025, we accelerated the expansion and monetization of our core franchises across console, PC, and mobile platforms.
Our effective income tax rate was 25.7% and 20.9% during the years ended December 31, 2024 and 2023, respectively. Key Performance Metrics Units Sold We monitor Units Sold as a key performance metric in evaluating the performance of our console and PC game business.
Provision for income taxes We had an income tax provision of $10.7 million for the year ended December 31, 2025 and a provision of $0.6 million for the year ended December 31, 2024. Our effective income tax rate was (64.6)% and 25.7% during the years ended December 31, 2025 and 2024, respectively.
Financing activities for the year ended December 31, 2023 included debt repayments of $9.5 million, the purchases of treasury stock in the amount of $0.3 million, and $0.3 million in payments of capitalized offering costs partially offset by $3.0 million in borrowings on a term loan, $0.8 million for the issuance of convertible notes, $1.9 million received for the refund of a dividend withholding tax overpayment and $1.0 million from the release of the Company’s restricted escrow deposit.
Financing activities for the year ended December 31, 2025 included proceeds from issuances of convertible notes of $6.0 million, borrowings on $3.5 million term loan, $2.0 million on the revolving line of credit and proceeds of $0.2 million resulting from the exercise of liability classified warrants partially offset by repayments of convertible notes of $2.3 million and additional repayments of notes payable of $0.6 million.
The Company was in compliance with its debt covenants related to the 2021 Revolving Note and 2021 Promissory note for the trailing twelve months ended December 31, 2024, however it is probable that the Company will fail the covenants within the next 12 months. As such, the Company has classified the long-term portion of its promissory note as current.
We were in compliance with our debt covenants related to the 2021 Revolving Loan, 2021 Promissory note and 2025 Term Loan for the trailing twelve months ended December 31, 2025. We received a waiver for the covenant breach during the trailing twelve months ended December 31, 2024. We have received an extension on our 2021 Revolving Loan from the lender.
On June 21, 2023, the Company amended its revolving loan agreement (“amended revolver”) and decreased the maximum balance from $9,000,000 to $6,000,000. The revolving maturity date of revolving loan is extended to June 30, 2025 and has an annual interest rate equal to the prime rate less 0.25%. At December 31, 2024, the interest rate on this loan was 7.25%.
As amended, the 2021 Revolving Loan would mature on December 31, 2023 and bore interest at a rate equal to the prime rate less 0.25% and a floor rate of 6.50%. Interest is due and payable under the 2021 Revolving Loan on a monthly basis.
Removed
In an effort to further broaden our game portfolio. In 2024, we acquired eleven games through our gaming network and partners. We expect to release nine acquired games in 2025.
Added
We have built a premier portfolio of premium games designed for use on a variety of platforms, including consoles, PCs, and mobile devices, highlighted by ARK: Survival Evolved, which has consistently ranked among top-grossing titles on Steam.
Removed
A few notable titles include Honeycomb: The World Beyond – A sci-fi survival adventure where players assume the role of a bioengineer navigating the mysterious planet Sota7, Echoes of Elysium – an airship survival RPG set in a breathtaking procedural world of mystery and discovery, and Robots at Midnight – a retro-futuristic action-RPG aiming to captivate players with its dynamic gameplay and immersive storytelling.
Added
We released multiple high-impact ARK franchise DLC expansions, including ARK: Astraeos , ARK: Aquatica , and launched the highly anticipated ARK: Lost Colony in December 2025. The pre-sale performance of ARK: Lost Colony from June through November 2025 exceeded expectations with over 372K units sold. ARK: Survival Ascended , the base game, continued to deliver robust results in 2025.
Removed
To bring more entertainment to our users, we have soft launched a short film mobile application on iOS and Android platforms. The short film mobile application, SaltyTV, brings exclusive, original stories from heart-racing thrillers to jaw-dropping romances to our viewers.

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Other SNAL 10-K year-over-year comparisons