SNAL 10-K

Snail, Inc. (SNAL)

10-K 2024-04-01 For: 2023-12-31

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Added on April 08, 2026

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Title of each class		Trading Symbol (s)		Name of each exchange on which registered
Class A common stock, par value $0.0001 per share		SNAL		The Nasdaq Stock Market LLC

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

Class of Common Stock		Outstanding Shares as of March 27, 2024
Class A Common Stock, par value $0.0001 per share		8,007,474
Class B Common Stock, par value $0.0001 per share		28,748,580

		Page
	Cautionary Statement	ii
PART I.
Item 1.	Business	1
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	38
Item 1C.	Cybersecurity Risk Management, Strategy and Governance	38
Item 2.	Properties	38
Item 3.	Legal Proceedings	38
Item 4.	Mine Safety Disclosures	38
PART II.
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	38
Item 6.	[Reserved]	40
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	55
Item 8.	Financial Statements and Supplementary Data	55
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	56
Item 9A.	Controls and Procedures	56
Item 9B.	Other Information	56
Item 9C.	Disclosures Regarding Foreign Jurisdictions That Prevent Inspections	56
PART III.
Item 10.	Directors, Executive Officers and Corporate Governance	57
Item 11.	Executive Compensation	57
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	57
Item 13.	Certain Relationships and Related Transactions, and Director Independence	57
Item 14.	Principal Accountant Fees and Services	57
PART IV.
Item 15.	Exhibits and Financial Statement Schedules	58
Item 16.	Form 10-K Summary	60
Signatures		61

	●	our ability to re-establish profitable operations, raise additional capital or renegotiate our debt arrangements;

	●	our growth prospects and strategies;

	●	launching new games and additional functionality to games that are commercially successful;

	●	our expectations regarding significant drivers of our future growth;

	●	our ability to retain and increase our player base and develop new video games and enhance our existing games;

	●	competition from companies in a number of industries, including other casual game developers and publishers and both large and small, public and private multimedia companies;

	●	our ability to attract and retain a qualified management team and other team members while controlling our labor costs;

	●	our relationships with 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;

	●	our ability to successfully enter new markets and manage our international expansion;

	●	protecting and developing our brand and intellectual property portfolio;

	●	costs associated with defending intellectual property infringement and other claims;

	●	our future business development, results of operations and financial condition;

	●	rulings by courts or other governmental authorities;

	●	our Share Repurchase Program (as defined below), including expectations regarding the timing and manner of repurchases made under the Share Repurchase Program;

	●	our plans to pursue and successfully integrate strategic acquisitions;

	●	other risks and uncertainties described in this Annual Report, including those described in Item 1A of Part I, “Risk Factors”; and

	●	assumptions underlying any of the foregoing.

	●	Scorched Earth. A desert map with minimum water and extreme weathers. The DLC was released on September 2016.

	●	Aberration. A radiation style expansion pack to explore the mysterious underground world. The DLC was released on December 2017.

	●	Extinction. A mechanical style expansion pack themed to fight against giant titans and save the post-apocalyptic earth. The DLC was released on November 2018.

	●	Genesis 1 & 2. A mission-based gameplay DLC with the ability to explore new worlds and mysterious stories. The DLCs were released in February 2020 and in June 2021, respectively.

	●	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. 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. If we were to lose functionality in any of these areas for any reason, our business may be negatively impacted.

	●	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 fail to manage our growth effectively, then our business, operating results and financial condition would be adversely affected.

	●	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.

	●	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. 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.

	●	Mr. Shi, our Founder, 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.

	●	the platform providers discontinue or limit our access to their platforms;

	●	governments or private parties, such as internet providers, impose bandwidth restrictions, increase charges or restrict or prohibit access to those platforms;

	●	the platforms increase the fees they charge us;

	●	the platforms modify their algorithms, communication channels available to developers, respective terms of service or other policies;

	●	the platforms decline in popularity;

	●	the platforms adopt changes or updates to their technology that impede integration with other software systems or otherwise require us to modify our technology or update our games in order to ensure players can continue to access our games and content with ease;

	●	the platforms elect or are required to change how they label free-to-play games or take payment for in-game purchases;

	●	the platforms block or limit access to the genres of games that we provide in any jurisdiction;

	●	the platform experiences a bankruptcy or other form of insolvency event; or

	●	we are unable to comply with the platform providers’ terms of service.

	●	our ability to maintain and grow our player base;

	●	our ability to retain and increase revenue from existing customers;

	●	our ability to introduce new features and functionalities and enhance existing features and functionalities;

	●	our ability to respond to competitive developments, including pricing changes and the introduction of new products and features by our competitors, or the emergence of new competitors;

	●	seasonal purchasing patterns of our consumers;

	●	impact of downtime or defects in our game and reputational harm;

	●	changes to financial accounting standards and the interpretation of those standards that may affect the way we recognize and report our financial results, including changes in accounting rules governing recognition of revenue;

	●	general economic and political conditions and government regulations in the countries where we currently operate or plan to expand;

	●	decisions by us to incur additional expenses, such as increases in sales and marketing or research and development; and

	●	potential costs to attract, onboard, retain and motivate qualified personnel.

	●	cause us to incur greater costs and expenses in the protection of our intellectual property;

	●	potentially negatively impact our intellectual property rights, for example, by causing one or more of our intellectual property rights to be ruled or rendered unenforceable or invalid; or

	●	divert our technical personnel’s or management’s attention and our resources. In any lawsuit we bring to enforce our intellectual property rights, a court may refuse to stop the other party from using the technology at issue on grounds that our intellectual property rights do not cover the technology in question, are not valid, or otherwise not enforceable against such other party. Further, in such proceedings, the defendant could counterclaim that our intellectual property is invalid or unenforceable and the court may agree, in which case we could lose valuable intellectual property rights. The outcome in any such lawsuit is unpredictable.

	●	requirement that a majority of its board of directors consist of independent directors;

	●	the requirement that its director nominations be made, or recommended to the full board of directors, by its independent directors or by a nominations committee that is comprised entirely of independent directors and that it adopts a written charter or board resolution addressing the nominations process; and

	●	the requirement that it has a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

	●	any determination with respect to our business direction and policies, including the appointment and removal of officers and, in the event of a vacancy on our board of directors, additional or replacement directors;

	●	any determinations with respect to mergers, business combinations or dispositions of assets;

	●	determination of our management policies;

	●	determination of the composition of the committees on our board of directors;

	●	our financing policy;

	●	our compensation and benefit programs and other human resources policy decisions;

	●	changes to any other agreements that may adversely affect us;

	●	the payment of dividends on our common stock; and

	●	determinations with respect to our tax returns.

	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 2023		153	$	1.68		153	$	1,333
February 2023		—		—		—		—
March 2023		—		—		—		—
April 2023		—		—		—		—
May 2023		—		—		—		—
June 2023		—		—		—		—
July 2023		—		—		—		—
August 2023		—		—		—		—
September 2023		—		—		—		—
October 2023		—		—		—		—
November 2023		—		—		—		—
December 2023		—		—		—		—
Total		153	$	1.68		153	$	1,333

	Fiscal years ended December 31,
	2023		2022		Change		% Change
	(in millions)
Units Sold		6.3		5.8		0.5		8.8	%

	Fiscal years ended December 31,
	2023		2022			$ Change			% Change
	(in millions)
Total net revenue	$	60.9	$	74.4		$	(13.5	)		(18.2	)%
Change in deferred net revenue		24.8		(10.7	)		35.5			330.8	%
Bookings	$	85.7	$	63.7		$	22.0			34.5	%

	Fiscal years ended December 31,
	2023		2022		$ Change			% Change
	(in millions)
Platform 1	$	25.7	$	22.5	$	3.2			13.9	%
Platform 2		11.1		17.3		(6.2	)		(36.0	)%
Platform 3		12.2		12.7		(0.5	)		(3.9	)%
Platform 4		3.3		2.3		1.0			42.1	%
All Other Revenue		8.6		19.6		(11.0	)		(55.8	)%
Total	$	60.9	$	74.4	$	(13.5	)		(18.2	)%

	Fiscal years ended December 31,
	2023			2022			$ Change			% Change
	(in millions)
Net cash flows provided by (used in) operating activities	$	0.5		$	(3.4	)	$	3.9			113.9	%
Net cash flows provided by investing activities		-			1.2			(1.2	)		(100.0	)%
Net cash flows (used in) provided by financing activities		(3.4	)		4.9			(8.3	)		(171.0	)%
Net (decrease) increase in cash and cash equivalents and restricted cash and cash equivalents	$	(2.9	)	$	2.7		$	(5.6	)		(210.3	)%

	●	Reasonably available data points, including third party or industry pricing, and contractually stated prices.

	●	Market conditions such as market demand, competition, market constraints, awareness of the product and market trends.

	●	Entity-specific factors including pricing strategies and objectives, market share and pricing practices for bundled arrangements.

		Page
Report of Independent Registered Public Accounting Firm (BDO USA, P.C.; Costa Mesa, California; PCAOB ID No. 243)		F-2
Consolidated Balance Sheets		F-3
Consolidated Statements of Operations and Comprehensive Income (Loss)		F-4
Consolidated Statements of Equity		F-5
Consolidated Statements of Cash Flows		F-6
Notes to Consolidated Financial Statements		F-7

	December 31, 2023			December 31, 2022

ASSETS

Current Assets:
Cash and cash equivalents	$	15,198,123		$	12,863,817
Restricted escrow deposit		-			1,003,804
Accounts receivable, net of allowances for credit losses of $523,500 and $19,929, respectively		25,134,808			6,758,024
Accounts receivable - related party		-			11,344,184
Accounts receivable		-			11,344,184
Loan and interest receivable - related party		103,753			101,753
Prepaid expenses - related party		6,044,404			-
Prepaid expenses and other current assets		10,169,448			10,565,141
Total current assets		56,650,536			42,636,723

Restricted cash and cash equivalents		1,116,196			6,374,368
Accounts receivable – related party, net of current portion		7,500,592			-
Prepaid expenses - related party, net of current portion		7,784,062			5,582,500
Property, plant and equipment, net		4,682,066			5,114,799
Intangible assets, net - license - related parties		-			1,384,058
Intangible assets, net - other		271,717			272,521
Deferred income taxes		10,247,500			7,602,536
Other noncurrent assets		164,170			198,668
Operating lease right-of-use assets, net		2,440,690			3,606,398
Total assets	$	90,857,529		$	72,772,571

LIABILITIES, NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY

Current Liabilities:
Accounts payable	$	12,102,929		$	9,452,391
Accounts payable - related parties		23,094,436			19,918,259
Accounts payable		23,094,436			19,918,259
Accrued expenses and other liabilities		2,887,193			1,474,088
Interest payable - related parties		527,770			527,770
Revolving loan		6,000,000			9,000,000
Notes payable		2,333,333			5,416,666
Convertible notes, net of discount		797,361			-
Current portion of long-term promissory note		2,811,923			86,524
Current portion of deferred revenue		19,252,628			4,335,404
Current portion of operating lease liabilities		1,505,034			1,371,227
Total current liabilities		71,312,607			51,582,329

Accrued expenses		254,731			457,024
Promissory note, net of current portion		-			3,221,963
Deferred revenue, net of current portion		15,064,078			5,216,042
Operating lease liabilities, net of current portion		1,425,494			2,930,529
Total liabilities		88,056,910			63,407,887

Commitments and contingencies		-			-

Stockholders’ Equity:
Class A common stock, $0.0001 par value, 500,000,000 shares authorized; 9,275,420 shares issued and 7,925,145 shares outstanding as of December 31, 2023, and 9,251,420 shares issued and 8,053,771 shares outstanding as of December 31, 2022		927			925
Class B common stock, $0.0001 par value, 100,000,000 shares authorized; 28,748,580 shares issued and outstanding as of December 31, 2023 and 2022		2,875			2,875
Common stock, value		-			-

Additional paid-in capital		26,171,575			23,436,942
Accumulated other comprehensive loss		(254,383	)		(307,200	)
Accumulated deficit		(13,949,325	)		(4,863,250	)
		11,971,669			18,270,292
Treasury stock at cost (1,350,275 and 1,197,649 shares as of December 31, 2023 and 2022, respectively)		(3,671,806	)		(3,414,713	)
Total Snail, Inc. equity		8,299,863			14,855,579
Noncontrolling interests		(5,499,244	)		(5,490,895	)
Total stockholders’ equity		2,800,619			9,364,684
Total liabilities, noncontrolling interests and stockholders’ equity	$	90,857,529		$	72,772,571

	2023			2022

Revenues, net	$	60,902,098		$	74,444,141
Cost of revenues		48,306,403			53,121,676

Gross profit		12,595,695			21,322,465

Operating expenses:
General and administrative		15,816,088			18,713,958
Research and development		5,057,421			2,955,592
Advertising and marketing		1,582,464			714,492
Depreciation and amortization		432,306			565,906
Loss (gain) on disposal of fixed assets		427			(17,067	)
Total operating expenses		22,888,706			22,932,881

Loss from operations		(10,293,011	)		(1,610,416	)

Other income (expense):
Interest income		129,854			200,913
Interest income - related parties		2,000			582,632
Interest income		129,854			200,913
Interest expense		(1,531,719	)		(922,293	)
Interest expense - related parties		-			(3,222	)
Interest expense		(1,531,719	)		(922,293	)
Other income		265,980			302,086
Foreign currency transaction loss		(68,180	)		(1,945	)
Total other income (expense), net		(1,202,065	)		158,171

Loss before benefit from income taxes		(11,495,076	)		(1,452,245	)

Benefit from income taxes		(2,400,652	)		(2,446,423	)

Net (loss) income		(9,094,424	)		994,178

Net (loss) income attributable to non-controlling interests		(8,349	)		46,371

Net (loss) income attributable to Snail, Inc. and Snail Games USA Inc.	$	(9,086,075	)	$	947,807

Comprehensive income (loss) statement:

Net (loss) income	$	(9,094,424	)	$	994,178

Other comprehensive income (loss) related to foreign currency translation adjustments, net of tax		52,817			(40,643	)

Total comprehensive (loss) income	$	(9,041,607	)	$	953,535

Net (loss) income attributable to Class A common stockholders:
Basic	$	(1,960,813	)	$	228,482
Diluted	$	(1,960,813	)	$	228,482

Net (loss) income attributable to Class B common stockholders:
Basic	$	(7,125,262	)	$	719,325
Diluted	$	(7,125,262	)	$	719,325

(Loss) income per share attributable to Class A and B common stockholders:
Basic	$	(0.25	)	$	0.03
Diluted	$	(0.25	)	$	0.03

Weighted-average shares used to compute income per share attributable to Class A common stockholders⁽¹⁾:
Basic		7,911,369			9,131,512
Diluted		7,911,369			9,131,512

Weighted-average shares used to compute income per share attributable to Class B common stockholders:
Basic		28,748,580			28,748,580
Diluted		28,748,580			28,748,580


	Common Stock - Snail Games USA Inc.					Class A Common Stock			Class B Common Stock				Additional Paid-In-			Due from Shareholder Loan and Interest			Accumulated Other Comprehensive			Retained		Treasury Stock						Snail Games USA Inc.			Non controlling			Total
	Shares			Amount		Shares		Amount	Shares		Amount		Capital			Receivable			Loss			Earnings		Shares			Amount			Equity			interests			Equity
Balance at December 31, 2021	500,000		$	5,000		-	$	-	-	$	-	$	94,159,167		$	(94,353,522	)	$	(266,557	)	$	16,045,231		-		$	-		$	15,589,319		$	(5,537,266	)	$	10,052,053

Loan to shareholder	-			-		-		-	-		-		-			(580,878	)		-			-		-			-			(580,878	)		-			(580,878	)

Dividend Distribution	-			-		-		-	-		-		(73,078,112	)		94,934,400			-			(21,856,288	)	-			-			-			-			-

Withholding tax distribution	-			-		-		-	-		-		(8,200,000	)		-			-			-		-			-			(8,200,000	)		-			(8,200,000	)

Reclass of common stock due to IPO reorganization	(500,000	)		(5,000	)	6,251,420		625	28,748,580		2,875		1,500			-			-			-		-			-			-			-			-

Warrants issued to underwriters	-			-		-		-	-		-		193,927			-			-			-		-			-			193,927			-			193,927

IPO, net of offering costs	-			-		3,000,000		300	-		-		10,137,210			-			-			-		-			-			10,137,510			-			10,137,510

Return of dividend distribution tax withholding payment
Stock-based compensation related to restricted stock units	-			-		-		-	-		-		223,250			-			-			-		-			-			223,250			-			223,250
Common stock issued for service
Common stock issued for service, shares

Repurchase of common stock	-			-		-		-	-		-		-			-			-			-		(1,197,649	)		(3,414,713	)		(3,414,713	)		-			(3,414,713	)

Foreign currency translation	-			-		-		-	-		-		-			-			(40,643	)		-		-			-			(40,643	)		-			(40,643	)

Net income	-			-		-		-	-		-		-			-			-			947,807		-			-			947,807			46,371			994,178

Balance at December 31, 2022	-		$	-		9,251,420	$	925	28,748,580	$	2,875	$	23,436,942		$	-		$	(307,200	)	$	(4,863,250	)	(1,197,649	)	$	(3,414,713	)	$	14,855,579		$	(5,490,895	)	$	9,364,684


	Class A Common Stock				Class B Common Stock				Additional Paid-In-			Accumulated Other Comprehensive			Accumulated			Treasury Stock						Snail, Inc.			Non controlling			Total
	Shares		Amount		Shares		Amount		Capital			Loss			Deficit			Shares			Amount			Equity			interests			Equity

Balance at December 31, 2022		9,251,420	$	925		28,748,580	$	2,875	$	23,436,942		$	(307,200	)	$	(4,863,250	)		(1,197,649	)	$	(3,414,713	)	$	14,855,579		$	(5,490,895	)	$	9,364,684
Balance, value		9,251,420	$	925		28,748,580	$	2,875	$	23,436,942		$	(307,200	)	$	(4,863,250	)		(1,197,649	)	$	(3,414,713	)	$	14,855,579		$	(5,490,895	)	$	9,364,684

Return of dividend distribution tax withholding payment		-		-		-		-		1,886,600			-			-			-			-			1,886,600			-			1,886,600

Stock based compensation related to restricted stock units		-		-		-		-		848,035			-			-			-			-			848,035			-			848,035

Common stock issued for service		24,000		2		-		-		(2	)		-			-			-			-			-			-			-

Repurchase of common stock		-		-		-		-		-			-			-			(152,626	)		(257,093	)		(257,093	)		-			(257,093	)

Foreign currency translation		-		-		-		-		-			52,817			-			-			-			52,817			-			52,817

Net loss		-		-		-		-		-			-			(9,086,075	)		-			-			(9,086,075	)		(8,349	)		(9,094,424	)
Net income (loss)		-		-		-		-		-			-			(9,086,075	)		-			-			(9,086,075	)		(8,349	)		(9,094,424	)

Balance at December 31, 2023		9,275,420	$	927		28,748,580	$	2,875	$	26,171,575		$	(254,383	)	$	(13,949,325	)		(1,350,275	)	$	(3,671,806	)	$	8,299,863		$	(5,499,244	)	$	2,800,619
Balance, value		9,275,420	$	927		28,748,580	$	2,875	$	26,171,575		$	(254,383	)	$	(13,949,325	)		(1,350,275	)	$	(3,671,806	)	$	8,299,863		$	(5,499,244	)	$	2,800,619

	2023			2022

Cash flows from operating activities:
Net (loss) income	$	(9,094,424	)	$	994,178
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Amortization - intangible assets - license		-			250,000
Amortization - intangible assets - license, related parties		1,384,058			7,403,918
Amortization - intangible assets - other		804			3,751
Amortization - intangible assets
Amortization - loan origination fees and debt discounts		124,595			26,514
Accretion – convertible notes		306,664			-
Depreciation and amortization - property and equipment		432,306			565,906
Stock-based compensation expense		848,035			223,250
Gain on lease termination		-			(122,533	)
Gain on paycheck protection program and economic injury disaster loan forgiveness		-			(174,436	)
Loss (gain) on disposal of fixed assets		427			(17,067	)
Interest income from shareholder loan		-			(580,878	)
Interest income from restricted escrow deposit		-			(3,804	)
Credit losses		581,498			-
Deferred taxes, net		(2,644,964	)		588,478

Changes in assets and liabilities:
Accounts receivable		(18,939,465	)		5,486,716
Accounts receivable - related party		3,824,775			(2,908,361	)
Prepaid expenses - related party		(8,245,966	)		(2,437,500	)
Prepaid expenses and other current assets		501,104			(1,875,919	)
Other noncurrent assets		-			(26,052	)
Accounts payable		2,992,856			4,976,192
Accounts payable - related parties		3,176,177			(3,815,313	)
Accrued expenses and other liabilities		659,647			(1,039,927	)
Interest receivable - related party		(2,000	)		-
Interest payable - related parties		-			986
Lease liabilities		(205,520	)		(145,949	)
Deferred revenue		24,765,261			(10,729,488	)
Net cash provided by (used in) operating activities		465,868			(3,357,338	)

Cash flows from investing activities:
Repayment on loan provided by related party		-			(300,000	)
Purchases of property and equipment		-			(5,256	)
Proceeds from sale of property and equipment		-			19,500
Repayment on Pound Sand note		-			1,496,063
Net cash provided by investing activities		-			1,210,307

Cash flows from financing activities:
Repayments on promissory note		(79,897	)		(70,961	)
Repayments on notes payable		(6,500,000	)		(4,166,667	)
Repayments on revolving loan		(3,000,000	)		-
Borrowings on notes payable		3,000,000			-
Borrowings on short-term note		-			10,000,000
Proceeds from issuance of convertible notes		847,500			-
Refund of dividend withholding tax overpayment		1,886,600			-
Payments on paycheck protection program and economic injury disaster loan		-			(90,198	)
Refund of payments on paycheck protection program and economic injury disaster loan		-			48,305
Cash dividend declared and paid		-			(8,200,000	)
Purchase of treasury stock		(257,093	)		(3,414,713	)
Proceeds from initial public offering, net of offering costs		-			11,791,705
Warrants issued to underwriters		-			193,927
Payments of capitalized offering costs		-			(1,247,567	)
Payments of offering costs in accounts payable		(342,318	)		-
Release of restricted escrow deposit		1,003,804			-
Net cash (used in) provided by financing activities		(3,441,404	)		4,843,831

Effect of foreign currency translation on cash and cash equivalents		51,670			(12,730	)

Net (decrease) increase in cash and cash equivalents, and restricted cash and cash equivalents		(2,923,866	)		2,684,070

Cash and cash equivalents, and restricted cash and cash equivalents - beginning of the year		19,238,185			16,554,115

Cash and cash equivalents, and restricted cash and cash equivalents – end of the year	$	16,314,319		$	19,238,185

Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest	$	934,523		$	788,063
Income taxes	$	248,388		$	888,303
Noncash transactions during the year for:
Loan and interest payable - related parties	$	-		$	103,890
Loan and interest receivable - related parties	$	-		$	(103,890	)
Loan and interest from shareholder	$	-		$	94,934,400
Dividend distribution	$	-		$	(94,934,400	)
Noncash finance activity during the year for:
Issuance of warrants in connection with the equity line of credit	$	(105,411	)	$	-
Gain on paycheck protection program and economic injury disaster loan forgiveness	$	-		$	(174,436	)
Snail Games USA common stock transferred due to reorganization	$	-		$	(5,000	)
Snail, Inc. common stock and additional paid-in capital transferred due to reorganization	$	-		$	5,000
Offering costs included in accounts payable	$	-		$	605,295
Funding of the escrow deposit	$	-		$	(1,000,000	)

	For the twelve months ended December 31, 2022
	As reported		Adjustment			As adjusted
Cost of revenues	$	49,507,888	$	3,613,788		$	53,121,676
Gross profit		24,936,253		(3,613,788	)		21,322,465
General and administrative		22,327,746		(3,613,788	)		18,713,958

	For the three months ended March 31, 2023
	As reported		Adjustment			As adjusted
Cost of revenues	$	9,816,397	$	1,044,540		$	10,860,937
Gross profit		3,642,091		(1,044,540	)		2,597,551
General and administrative		5,570,291		(1,044,540	)		4,525,751

	Equity %
Subsidiary Name	Owned
Snail Games USA Inc.		100	%
Snail Innovation Institute		70	%
Frostkeep Studios, Inc.		100	%
Eminence Corp		100	%
Wandering Wizard, LLC		100	%
Donkey Crew, LLC		99	%
Interactive Films, LLC		100	%
Project AWK Productions, LLC		100	%
BTBX.IO, LLC		70	%

	●	Consumable: consumable virtual items represent items that can be consumed by a specific player action. Consumable virtual items do not result in a direct benefit that the player keeps or provide the player any continuing benefit following consumption, and they often enable a player to perform an in-game action immediately. For the sale of consumable virtual items, the Company recognizes revenue as the items are consumed (i.e., over time).

	●	Durable: durable virtual items represent items that are accessible to the player over an extended period of time. 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.

	●	The underlying contract terms and conditions between the various parties to the transaction;

	●	Which party is primarily responsible for fulfilling the promise to provide the specified good or service; and

	●	Which party has discretion in establishing the price for the specified good or service.

	2023		2022
Software license royalties – related parties	$	14,398,482	$	16,963,388
Software license royalties		1,128,517		145,055
License and amortization – related parties		20,496,961		25,407,002
License and amortization		804		250,876
Game localization		-		840
Merchant fees		1,369,595		2,424,832
Engine fees		4,301,104		1,972,126
Internet, server and data center		6,487,340		5,792,967
Costs related to advertising revenue		123,600		164,590
Total:	$	48,306,403	$	53,121,676

Subsidiary Name	Equity % Owned			Non-Controlling %
Snail Innovative Institute		70	%		30	%
BTBX.IO, LLC		70	%		30	%
Donkey Crew, LLC		99	%		1	%

Buildings		39 years
Building improvements		7 years
Leasehold improvements		Lesser of the lease term or the estimated useful lives of the improvements, generally 5 to 15 years
Computer equipment and software		3 to 5 years
Furniture and fixtures		3 years
Auto and trucks		5 years

	●	Level 1: Quoted prices in active markets for identical assets or liabilities that the Company has an ability to access as of the measurement date.

	●	Level 2: Inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the same term of the assets or liabilities.

	●	Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

	2023		2022
Over time	$	6,437,618	$	18,832,396
Point in time		54,464,480		55,611,745
Total revenue from contracts with customers:	$	60,902,098	$	74,444,141