CULVER CITY, Calif., Aug. 27, 2025 (GLOBE NEWSWIRE) -- Snail, Inc. (Nasdaq: SNAL) (“Snail Games” or the “Company”), a leading global independent developer and publisher of interactive digital entertainment, is confirmed to present at the 2025 Annual Gateway Conference, which is being held September 3-4 at the Four Seasons Hotel in San Francisco, CA. Snail Games' management team is scheduled to present on Wednesday, September 3rd at 12:30 p.m. Pacific Time (PT). The presentation will be webcast live and avai ...

This quarterly report represents an earnings surprise of +11,400.00%. A quarter ago, it was expected that this company would post a loss of $0.11 per share when it actually produced a loss of $0.06, delivering a surprise of +45.45%. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Snail, Inc. shares have lost about 47.4% since the beginning of the year versus ...

Financial Data and Key Metrics Changes - The company's net revenue for Q2 2025 increased to $22,260,000 compared to the same period last year, primarily due to an increase in total AHRQ sales and the inclusion of ART Survival Ascended in the platform subscription program [22][23] - Bookings for Q2 increased by 18.5% to $27,100,000 compared to $22,900,000 from the same period last year, driven by various sale promotions [24][25] - The net loss for Q2 was negative $16,600,000 compared to net income of $2,300,000 in the same period last year, attributed to increased costs and operating expenses [24][25] Business Line Data and Key Metrics Changes - The company saw a significant increase in units sold, which rose by 58.4% to 2,100,000 for the quarter, largely driven by strong performance in June [8][9] - The average daily active users (DAU) for ARC Survival Evolved and ARC Survival Ascended reached approximately 157,085, with cumulative hours played reaching 4.1 billion [13][14] - The mobile game surpassed 6,900,000 downloads, with an average DAU of approximately 104,000 during the quarter [13] Market Data and Key Metrics Changes - The publisher sale event in June was a critical driver for player acquisition and engagement, leading to a 10.8 times increase in daily unit sales compared to non-promotional periods [18] - The ten-year anniversary of the ARC franchise saw significant updates and promotions, resulting in a resurgence in sales and engagement for titles like ARC Survival Evolved [17][19] Company Strategy and Development Direction - The company is pursuing a dual-pronged growth strategy focusing on both the core gaming business and the stablecoin initiative, aiming to drive growth in gaming while exploring long-term opportunities in digital assets [12][33] - The stablecoin project is seen as a natural evolution of the company's innovation-led strategy, with plans to develop a proprietary U.S. Dollar-backed stablecoin [27][28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future across both gaming and stablecoin initiatives, emphasizing the potential for these two pillars to become interconnected [12][33] - The company is committed to transparency and regular updates regarding the stablecoin project as it progresses [8][32] Other Important Information - The company has engaged strategic partners and advisors to ensure the success of the stablecoin initiative, including a legal advisor for compliance and a consultant with deep industry expertise [30][31] - The company has initiated a capital formation strategy through an equity market offering to build the necessary reserves for the stablecoin [32] Q&A Session Summary Question: What drove the increase in bookings this quarter? - The increase in bookings was primarily driven by various sale promotions in 2025 that did not occur in 2024, specifically around ART Survival Evolved and the presale of ART Lost Colony [25] Question: How does the company plan to integrate the stablecoin initiative with its gaming operations? - The stablecoin initiative is expected to create synergies with the gaming portfolio, enabling new user experiences and innovative solutions [12][33]

[Company Introduction](index=1&type=section&id=Company%20Introduction) Snail, Inc. is a leading global independent developer and publisher of interactive digital entertainment - Snail, Inc. (Nasdaq: SNAL) is a leading global independent developer and publisher of interactive digital entertainment[2](index=2&type=chunk) [Second Quarter 2025 and Recent Operational Highlights](index=1&type=section&id=Second%20Quarter%202025%20and%20Recent%20Operational%20Highlights) Snail, Inc. reported strong Q2 2025 operational highlights, including robust ARK sales, new game launches, content updates, and a strategic stablecoin initiative - Announced intention to explore a strategic digital asset initiative, including the development and introduction of its own proprietary stablecoin, retaining Dr. George Cao as an external consultant[6](index=6&type=chunk) - Launched pre-order for ARK: Lost Colony and celebrated the **10-year anniversary** of ARK: Survival Evolved (ASE)[6](index=6&type=chunk) [ARK Franchise Updates](index=1&type=section&id=ARK%20Franchise%20Updates) The ARK franchise showed strong Q2 2025 performance with significant unit sales, daily active users, major content updates, and a 10-year anniversary celebration - ARK: Survival Evolved (ASE) sold approximately **1,196,583 units** in Q2 2025, with an average daily active users (DAU) of **156,947** and peak DAU of **258,708**[6](index=6&type=chunk) - ARK: Survival Ascended (ASA) sold approximately **807,065 units** in Q2 2025, achieved **8 million downloads** via PlayStation Plus in May 2025, and surpassed **6.9 million total downloads** by June 30, 2025[6](index=6&type=chunk) - Launched seasonal Eggcellent Adventure and Anniversary event, the first major ARK: Astraeos update, and ARK: Ragnarok Ascended[6](index=6&type=chunk) ARK Franchise Key Metrics (Q2 2025) | Metric | ARK: Survival Evolved (ASE) | ARK: Survival Ascended (ASA) | | :----- | :-------------------------- | :--------------------------- | | Units Sold (Q2 2025) | ~1,196,583 | ~807,065 | | Average DAU (Q2 2025) | 156,947 | 84,585 | | Peak DAU (Q2 2025) | 258,708 | 163,455 | | PlayStation Plus Downloads (May 2025) | N/A | 8 million | | Total Downloads (as of June 30, 2025) | N/A | >6.9 million | [Game Portfolio Updates](index=1&type=section&id=Game%20Portfolio%20Updates) Snail, Inc. expanded its game portfolio with new content for Bellwright, acquired publishing rights for two new titles, and launched several new games - Celebrated Bellwright's one-year Early Access anniversary and introduced significant new content and player-requested features[6](index=6&type=chunk) - Announced the acquisition of publishing rights for Whispers of West Grove and Rebel Engine[6](index=6&type=chunk) - Launched The Cecil: The Journey Begins, Chasmal Fear, Castle of Secrets, Robots of Midnight, and Zombie Rollerz: The Last Ship[6](index=6&type=chunk) [Business Updates](index=1&type=section&id=Business%20Updates) Snail, Inc. announced a strategic digital asset initiative to develop a proprietary stablecoin, establishing a new subsidiary and initiating capital formation - Announced its intention to explore pursuing a strategic digital asset initiative that includes the development and introduction of its own proprietary stablecoin[6](index=6&type=chunk) - Retained external consultant Dr. George Cao, the founder and CEO of AscendEX, a full-stack cryptocurrency financial platform, and seasoned legal advisors[6](index=6&type=chunk)[9](index=9&type=chunk) - Established Snail Coins LLC, a new wholly owned subsidiary, to serve as the dedicated entity responsible for the issuance, management, and operations of its proprietary USD-backed stablecoin project[9](index=9&type=chunk) - Announced an At The Market Offering Agreement to initiate capital formation for the reserve asset backing its stablecoin project[9](index=9&type=chunk) - Company subsidiary Interactive Films LLC announced the development of The Fame Game: Welcome to Hollywood and signed a Memorandum of Understanding with Mega Matrix Inc. for joint development, production, and global distribution of short dramas[6](index=6&type=chunk)[9](index=9&type=chunk) [Management Commentary](index=2&type=section&id=Management%20Commentary) Management highlighted Q2 2025 as a pivotal period, driven by the strategic stablecoin initiative and strong core gaming business performance, particularly the ARK franchise - Co-Chief Executive Officer Hai Shi commented on the pivotal and transformative period, highlighted by the official announcement to develop and launch a proprietary stablecoin, aligning with long-term vision and digital financial innovation[7](index=7&type=chunk) - Co-Chief Executive Officer Tony Tian noted strong momentum in the core gaming business, driven by the annual Steam Publisher Sale event and the **10-year anniversary** of the ARK franchise[8](index=8&type=chunk) [Co-CEO Hai Shi's Remarks](index=2&type=section&id=Co-CEO%20Hai%20Shi's%20Remarks) Hai Shi highlighted the strategic stablecoin initiative as a transformative move, supported by the GENIUS Act, aiming for compliant digital assets and game integration - The stablecoin initiative represents a significant evolution in Snail's business model, aligning with both its long-term vision and broader momentum in digital financial innovation[7](index=7&type=chunk) - The decision to enter the stablecoin space was catalyzed by the recent passage of the GENIUS Act, establishing a formal regulatory foundation[7](index=7&type=chunk) - Envisions the stablecoin unlocking a wide range of external use cases and integrating functionality within the core gaming business to enhance game economies and facilitate seamless transactions[7](index=7&type=chunk) - Deliberate steps include retaining strategic consultant partners and legal advisors, actively building technological infrastructure and compliance architecture, and entering an at-the-market offering agreement for capital formation[8](index=8&type=chunk) [Co-CEO Tony Tian's Remarks](index=2&type=section&id=Co-CEO%20Tony%20Tian's%20Remarks) Tony Tian underscored continued strong core gaming momentum, especially the ARK franchise, driven by sales events and a focus on consistent content updates and new launches - Core gaming business continues to demonstrate strong momentum, with notable performance in June driven by the annual Steam Publisher Sale event[8](index=8&type=chunk) - The ARK franchise remains a key pillar of the content ecosystem, celebrating its **10-year anniversary** with new content drops and updates[8](index=8&type=chunk) - Committed to delivering consistent value through regular content updates and expansions for ARK, while strategically pursuing opportunities to develop, acquire, and launch titles within the indie portfolio[8](index=8&type=chunk) - Teams are focused on preparing for the launch of ARK: Lost Colony and simultaneously advancing a slate of indie titles in the pipeline[8](index=8&type=chunk) [Financial Highlights](index=3&type=section&id=Financial%20Highlights) Snail, Inc. reported increased net revenues and bookings for Q2 and six months ended June 30, 2025, but experienced net losses and negative EBITDA due to higher expenses and a deferred tax asset valuation allowance Key Financial Highlights (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change (YoY) | | :----- | :------ | :------ | :----------- | | Net Revenues | $22.2 million | $21.6 million | +$0.6 million | | Net Loss (Income) | $(16.6) million | $2.3 million | $(18.9) million | | Bookings | $27.1 million | $22.9 million | +18.5% | | EBITDA | $(2.4) million | $3.1 million | $(5.5) million | Key Financial Highlights (Six Months 2025 vs. Six Months 2024) | Metric | 6M 2025 | 6M 2024 | Change (YoY) | | :----- | :------ | :------ | :----------- | | Net Revenues | $42.3 million | $35.7 million | +18.4% | | Net Loss (Income) | $(18.5) million | $0.5 million | $(19.0) million | | Bookings | $49.4 million | $42.4 million | +16.3% | | EBITDA | $(5.8) million | $1.2 million | $(7.0) million | [Second Quarter 2025 Financial Performance](index=3&type=section&id=Second%20Quarter%202025%20Financial%20Performance) In Q2 2025, net revenues increased slightly to $22.2 million, but the company reported a net loss of $(16.6) million and negative EBITDA of $(2.4) million, primarily due to increased operating expenses and a $12.9 million deferred tax asset valuation allowance Second Quarter 2025 Financial Performance | Metric | Q2 2025 | Q2 2024 | Change (YoY) | | :----- | :------ | :------ | :----------- | | Net Revenues | $22.2 million | $21.6 million | +$0.6 million | | Net Loss (Income) | $(16.6) million | $2.3 million | $(18.9) million | | Bookings | $27.1 million | $22.9 million | +18.5% | | EBITDA | $(2.4) million | $3.1 million | $(5.5) million | | Unrestricted Cash (as of June 30, 2025) | $7.9 million | $7.3 million (Dec 31, 2024) | +$0.6 million | - Net loss was primarily due to increases in the cost of revenues and operating expenses (increased headcount, research and development, and marketing expenses) and the recognition of a valuation allowance against the Company's deferred tax assets of **$12.9 million**[11](index=11&type=chunk) - Bookings increase was primarily driven by various sales promotions in 2025 that did not occur in 2024, specifically around ARK: Survival Evolved and the release of ARK: Lost Colony to presale in 202

[PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Unaudited condensed consolidated financial statements reveal a significant net loss, decreased total assets, and increased total liabilities Condensed Consolidated Balance Sheets (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total current assets | $38,811,455 | $31,246,538 | | Total assets | $57,957,425 | $62,193,364 | | Total current liabilities | $55,160,840 | $36,181,080 | | Total liabilities | $71,449,089 | $58,024,202 | | Total stockholders' equity (deficit) | $(13,491,664) | $4,169,162 | Condensed Consolidated Statements of Operations (Three Months Ended June 30) | Metric | 2025 | 2024 | | :-------------------------------- | :----------- | :----------- | | Revenues, net | $22,185,750 | $21,606,650 | | Gross profit | $6,954,745 | $8,102,476 | | Income (loss) from operations | $(1,817,434) | $2,670,962 | | Net income (loss) | $(16,562,706) | $2,254,616 | | Basic EPS | $(0.44) | $0.06 | Condensed Consolidated Statements of Operations (Six Months Ended June 30) | Metric | 2025 | 2024 | | :-------------------------------- | :----------- | :----------- | | Revenues, net | $42,296,622 | $35,722,379 | | Gross profit | $12,802,272 | $10,176,507 | | Income (loss) from operations | $(5,918,273) | $463,063 | | Net income (loss) | $(18,509,671) | $474,158 | | Basic EPS | $(0.50) | $0.01 | Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30) | Metric | 2025 | 2024 | | :-------------------------------- | :----------- | :----------- | | Net cash (used in) provided by operating activities | $(2,413,125) | $6,983,748 | | Net cash used in investing activities | $(3,026,645) | $0 | | Net cash provided by (used in) financing activities | $5,977,229 | $(6,657,130) | | Net increase in cash and cash equivalents, and restricted cash and cash equivalents | $601,482 | $298,274 | [Snail, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Snail,%20Inc.%20and%20Subsidiaries%20Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes to financial statements cover accounting policies, revenue, fair value, related-party transactions, and deferred tax assets [NOTE 1 – PRESENTATION AND NATURE OF OPERATIONS](index=9&type=section&id=NOTE%201%20%E2%80%93%20PRESENTATION%20AND%20NATURE%20OF%20OPERATIONS) - Snail, Inc. was incorporated in Delaware in January **2022**, formed for an IPO to carry on the business of Snail Games USA Inc., which develops, markets, publishes, and distributes games across various platforms[24](index=24&type=chunk) - The condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim reporting, with certain disclosures condensed or omitted if they duplicate annual report information[25](index=25&type=chunk) Consolidated Subsidiaries and Equity Ownership | Subsidiary Name | Equity % 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% | | Matrioshka Games, LLC | 100% | [NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=11&type=section&id=NOTE%202%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - Revenue is generated from digital and physical game sales, downloadable content (DLC), and in-app purchases of virtual goods. Revenue recognition occurs at a point in time for product delivery or over time for consumable/durable virtual items and technical support[34](index=34&type=chunk)[36](index=36&type=chunk)[38](index=38&type=chunk) - The Company acts as an agent for sales via platforms like Xbox Live, PlayStation Network, and Steam, reporting revenue on a net basis. For Apple App Store and Google Play Store sales, it acts as principal, reporting gross revenue[41](index=41&type=chunk) Cost of Revenues (Three Months Ended June 30) | Category | 2025 | 2024 | | :-------------------------------- | :----------- | :----------- | | Software license royalties – related parties | $5,754,679 | $4,658,272 | | Licensing fees – related party | $6,000,000 | $6,000,000 | | Merchant fees | $484,461 | $220,051 | | Engine fees | $945,877 | $1,340,897 | | Internet, server and data center | $1,467,078 | $1,221,318 | | Total | $15,231,005 | $13,504,174 | Cost of Revenues (Six Months Ended June 30) | Category | 2025 | 2024 | | :-------------------------------- | :----------- | :----------- | | Software license royalties – related parties | $11,028,407 | $7,932,292 | | Licensing fees – related party | $12,000,000 | $12,000,000 | | Merchant fees | $1,039,156 | $441,500 | | Engine fees | $1,758,826 | $2,302,338 | | Internet, server and data center | $2,763,016 | $2,621,325 | | Total | $29,494,350 | $25,545,872 | - The Company capitalized **$2.6 million** in software development costs under ASC **985** for various titles during the six months ended June 30, **2025**, compared to none in the prior year[62](index=62&type=chunk) Fair Value Measurements (Level 3 Inputs) | Instrument | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Convertible notes | $2,415,050 | $0 | | Convertible notes warrants | $1,066,542 | $1,448,109 | | Equity line of credit warrants | $259,075 | $292,004 | | Total | $3,740,667 | $1,740,113 | - The Company has significant customer concentration, with four customers accounting for approximately **91%** of gross receivables and **44%**, **26%**, **15%**, and **6%** individually as of June 30, **2025**[78](index=78&type=chunk) - SDE, a related party, is a significant vendor, accounting for **56%** and **50%** of combined cost of revenues and operating expenses for the three months ended June 30, **2025** and **2024**, respectively[80](index=80&type=chunk) Outstanding Warrants as of June 30, 2025 | Type | 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 | | Underwriters warrants | 120,000 | $6.25 | Equity | November 9, 2025 | | Total warrants | 1,670,499 | | | | - As of June 30, **2025**, **1,350,275** shares of Class A common stock were repurchased under the Share Repurchase Program for approximately **$3.7 million**, with **$1.3 million** remaining available[95](index=95&type=chunk) [NOTE 3 – REVENUE FROM CONTRACTS WITH CUSTOMERS](index=18&type=section&id=NOTE%203%20%E2%80%93%20REVENUE%20FROM%20CONTRACTS%20WITH%20CUSTOMERS) Net Revenue by Timing of Recognition (Three Months Ended June 30) | Timing | 2025 | 2024 | | :----------- | :----------- | :----------- | | Over time | $1,556,192 | $1,165,995 | | Point in time | $20,629,558 | $20,440,655 | | Total | $22,185,750 | $21,606,650 | Net Revenue by Timing of Recognition (Six Months Ended June 30) | Timing | 2025 | 2024 | | :----------- | :----------- | :----------- | | Over time | $3,374,000 | $2,221,659 | | Point in time | $38,922,622 | $33,500,720 | | Total | $42,296,622 | $35,722,379 | Net Revenue by Geographic Region (Six Months Ended June 30) | Region | 2025 | 2024 | | :------------- | :----------- | :----------- | | United States | $36,818,303 | $30,811,457 | | International | $5,478,319 | $4,910,922 | | Total | $42,296,622 | $35,722,379 | Net Revenue by Platform (Six Months Ended June 30) | Platform | 2025 | 2024 | | :------- | :----------- | :----------- | | Console | $17,797,060 | $14,338,122 | | PC | $19,038,686 | $16,922,466 | | Mobile | $4,384,328 | $2,095,406 | | Other | $1,076,548 | $2,366,385 | | Total | $42,296,622 | $35,722,379 | Deferred Revenue Activity (Six Months Ended June 30) | Metric | 2025 | 2024 | | :------------------------------------------ | :----------- | :----------- | | Deferred revenue, beginning balance | $25,467,447 | $34,316,706 | | Revenue recognized | $(1,472,534) | $(9,607,237) | | Revenue deferred | $8,547,580 | $15,608,213 | | Deferred revenue, ending balance | $32,542,493 | $40,317,682 | | Less: current portion | $(16,601,595) | $(21,451,307) | | Deferred revenue, long term | $15,940,898 | $18,866,375 | [NOTE 4 – CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH AND CASH EQUIVALENTS](index=19&type=section&id=NOTE%204%20%E2%80%93%20CASH%20AND%20CASH%20EQUIVALENTS,%20AND%20RESTRICTED%20CASH%20AND%20CASH%20EQUIVALENTS) Cash and Cash Equivalents (June 30) | Category | 2025 | 2024 | | :------------------------------------------ | :----------- | :----------- | | Cash and cash equivalents | $7,905,426 | $15,494,156 | | Restricted cash and cash equivalents | $935,000 | $1,118,437 | | Total | $8,840,426 | $16,612,593 | - Restricted cash and cash equivalents of **$935,000** as of June 30, **2025**, are held to secure a standby letter of credit with landlords[106](index=106&type=chunk) [NOTE 5 – ACCOUNTS RECEIVABLE (PAYABLE) – RELATED PARTY](index=19&type=section&id=NOTE%205%20%E2%80%93%20ACCOUNTS%20RECEIVABLE%20(PAYABLE)%20%E2%80%93%20RELATED%20PARTY) - The Company has an offset agreement with SDE (a related party) to offset **$0.5 million** per month (**$6.0 million** annually) against payables for royalties, internet, server, and datacenter costs[107](index=107&type=chunk) Net Accounts (Payable) Receivable - Related Party (June 30) | Category | 2025 | 2024 | | :------------------------------------------ | :----------- | :----------- | | Accounts receivable – related party | $4,500,592 | $7,500,592 | | Less: accounts payable – related party | $(5,887,468) | $(3,663,726) | | Net accounts (payable) receivable - related party | $(1,386,876) | $3,836,866 | | Less: accounts receivable – related party, net of current portion | $0 | $(1,500,592) | | Net accounts (payable) receivable - related party, current | $(1,386,876) | $2,336,274 | [NOTE 6 – PREPAID EXPENSES - RELATED PARTY](index=20&type=section&id=NOTE%206%20%E2%80%93%20PREPAID%20EXPENSES%20-%20RELATED%20PARTY) - The Company made **$1.7 million** in prepaid royalty payments for ARK: Survival Ascended DLCs during the six months ended June 30, **2025**, which have not yet been released[110](index=110&type=chunk) Prepaid Expenses - Related Party (June 30) | Category | 2025 | 2024 | | :------------------------------------------ | :----------- | :----------- | | Prepaid royalties | $6,109,122 | $4,378,594 | | Prepaid licenses | $7,500,000 | $7,500,000 | | Other prepaids | $19,429 | $21,291 | | Total prepaid expenses - related party | $13,628,551 | $11,899,885 | | Less: short-term portion | $(5,658,551) | $(2,521,291) | | Total prepaid expenses - related party, long-term | $7,970,000 | $9,378,594 | [NOTE 7 – PREPAID EXPENSES AND OTHER CURRENT ASSETS](index=20&type=section&id=NOTE%207%20%E2%80%93%20PREPAID%20EXPENSES%20AND%20OTHER%20CURRENT%20ASSETS) - In October **2024**, the Company entered a collaborative arrangement for a new title, making **$0.5 million** in prepaid royalty payments capitalized in other prepaids[111](index=111&type=chunk) Prepaid Expenses and Other Current Assets (June 30) | Category | 2025 | 2024 | | :------------------------------------------ | :----------- | :----------- | | Other receivables | $250,442 | $549,103 | | Deferred offering costs | $105,411 | $105,411 | | Other prepaids | $681,495 | $550,270 | | Other current assets | $270,877 | $641,240 | | Total | $1,308,225 | $1,846,024 | [NOTE 8 – PROPERTY AND EQUIPMENT, NET](index=21&type=section&id=NOTE%208%20%E2%80%93%20PROPERTY%20AND%20EQUIPMENT,%20NET) Property and Equipment, Net (June 30) | Category | 2025 | 2024 | | :------------------------------------------ | :----------- | :----------- | | Property and equipment | $9,521,752 | $9,521,752 | | Accumulated depreciation | $(5,279,066) | $(5,143,400) | | Property and equipment, net | $4,242,686 | $4,378,352 | Depreciation Expense (Six Months Ended June 30) | Period | Amount | | :------------------------------------------ | :----------- | | Six months ended June 30, 2025 | $135,665 | | Six months ended June 30, 2024 | $162,892 | [NOTE 9 – INTANGIBLE ASSETS](index=21&type=section&id=NOTE%209%20%E2%80%93%20INTANGIBLE%20ASSETS) Intangible Assets, Net (June 30, 2025) | Category | Gross Carrying Amount | Accumulated Amortization | Net Book Value | | :------------------------------------------ | :-------------------- | :----------------------- | :------------- | | Software and license rights from related parties | $136,665,000 | $(136,665,000) | $0 | | License rights | $5,242,760 | $(3,057,395) | $2,185,365 | | Software | $1,139,232 | $(80,784) | $1,058,448 | | In-progress patent | $270,886 | $0 | $270,886 | | Total | $143,328,623 | $(139,813,924) | $3,514,699 | Amortization Expense (Six Months Ended June 30) | Period | Amount | | :------------------------------------------ | :----------- | | Six months ended June 30, 2025 | $79,424 | | Six months ended June 30, 2024 | $20,864 | - The weighted average remaining useful life for amortization of intangible assets is **4.5 years** as of June 30, **2025**[114](index=114&type=chunk) [NOTE 10 – ACCOUNTS PAYABLE — RELATED PARTIES](index=22&type=section&id=NOTE%2010%20%E2%80%93%20ACCOUNTS%20PAYABLE%20%E2%80%94%20RELATED%20PARTIES) - The Company entered into a software development, publishing, and distribution agreement with Suzhou Snail in July **2024**, involving **$4.5 million** in milestone payments and ongoing royalties[116](index=116&type=chunk) - In December **2024**, an agreement with Suzhou Snail for SaltyTV app development resulted in a **$290,000** development fee capitalized as an intangible asset[116](index=116&type=chunk) Accounts Payable – Related Parties (June 30) | Category | 2025 | 2024 | | :------------------------------------------ | :----------- | :----------- | | Accounts payable - Suzhou | $52,362,069 | $52,998,084 | | Less: accounts receivable - Suzhou | $(37,614,912) | $(37,614,913) | | Accounts payable – SDE | $1,386,876 | $0 | | Total accounts payable – related parties | $16,134,033 | $15,383,171 | [NOTE 11 – LOAN AND INTEREST RECEIVABLE — RELATED PARTY](index=22&type=section&id=NOTE%2011%20%E2%80%93%20LOAN%20AND%20INTEREST%20RECEIVABLE%20%E2%80%94%20RELATED%20PARTY) - The Company has a loan and interest receivable from a wholly-owned subsidiary of Suzhou Snail, totaling **$106,751** as of June 30, **2025**[119](index=119&type=chunk) Interest Income - Related Party Loans Receivable (Six Months Ended June 30) | Period | Amount | | :------------------------------------------ | :----------- | | Six months ended June 30, 2025 | $992 | | Six months ended June 30, 2024 | $997 | [NOTE 12 – REVOLVING LOAN, SHORT TERM NOTES AND LONG - TERM DEBT](index=23&type=section&id=NOTE%2012%20%E2%80%93%20REVOLVING%20LOAN,%20SHORT%20TERM%20NOTES%20AND%20LONG%20-%20TERM%20DEBT) - The Company was not in compliance with debt covenants for its **2021** Revolving Loan, **2021** Promissory Note, and **2025** Term Loan for the trailing twelve months ended June 30, **2025**, but received waivers from the lender[122](index=122&type=chunk) - Due to probable future covenant failures, the long-term portions of the promissory note, revolving loan, and term loan have been classified as current liabilities[122](index=122&type=chunk) Total Debt (June 30) | Debt Type | 2025 | 2024 | | :------------------------------------------ | :----------- | :----------- | | 2021 Revolving Loan | $3,000,000 | $3,000,000 | | 2021 Promissory Note | $2,679,531 | $2,722,549 | | 2025 Convertible Notes | $2,415,050 | $0 | | 2025 Term Loan | $3,500,000 | $0 | | Total debt | $11,594,581 | $5,722,549 | Interest Expense (Six Months Ended June 30) | Period | Amount | | :------------------------------------------ | :----------- | | Six months ended June 30, 2025 | $229,106 | | Six months ended June 30, 2024 | $538,259 | - The **2025** Convertible Notes, issued in February **2025** for **$3.3 million** principal, are accounted for at fair value, with a fair value adjustment of **$53,803** recognized during the six months ended June 30, **2025**[133](index=133&type=chunk)[136](index=136&type=chunk) [NOTE 13 – INCOME TAXES](index=26&type=section&id=NOTE%2013%20%E2%80%93%20INCOME%20TAXES) Income Tax Expense (Six Months Ended June 30) | Period | Amount | | :------------------------------------------ | :----------- | | Six months ended June 30, 2025 | $12,397,768 | | Six months ended June 30, 2024 | $111,562 | - The effective tax rate for the six months ended June 30, **2025**, was **203%**, primarily due to a full valuation allowance recorded against U.S. net deferred tax assets[141](index=141&type=chunk)[142](index=142&type=chunk) - The Company recorded a full valuation allowance on the opening balance of **$10,815,239** for U.S. net deferred tax assets due to cumulative pre-tax losses and revised profitability projections[142](index=142&type=chunk) [NOTE 14 – OPERATING LEASE RIGHT-OF-USE ASSETS](index=27&type=section&id=NOTE%2014%20%E2%80%93%20OPERATING%20LEASE%20RIGHT-OF-USE%20ASSETS) Operating Lease Right-of-Use Assets, Net (June 30) | Category | 2025 | 2024 | | :------------------------------------------ | :----------- | :----------- | | Net operating lease right-of-use assets | $676,918 | $1,279,330 | Operating Lease Costs (Six Months Ended June 30) | Period | Amount | | :------------------------------------------ | :----------- | | Six months ended June 30, 2025 | $848,780 | | Six months ended June 30, 2024 | $796,512 | [NOTE 15 – COMMITMENTS AND CONTINGENCIES](index=27&type=section&id=NOTE%2015%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) - The Company settled a lawsuit with Angela Game in September **2023**, involving an upfront payment and ongoing payments[151](index=151&type=chunk) - A lawsuit filed by Bel Air Soto, LLC against Snail Games USA Inc. and INDIEV (an affiliate) for breach of contract seeks damages over **$3 million**. The Company denies allegations and believes the likelihood of a material loss is remote[152](index=152&type=chunk)[154](index=154&type=chunk) - Aggregate development commitments to related party developers total **$3.5 million** as of June 30, **2025**, in addition to a fixed monthly license fee of **$2.0 million** to SDE for ARK franchise publishing rights[155](index=155&type=chunk) [NOTE 16 – INCOME (LOSS) PER SHARE](index=29&type=section&id=NOTE%2016%20%E2%80%93%20INCOME%20(LOSS)%20PER%20SHARE) Basic Earnings (Loss) Per Share (Six Months Ended June 30) | Metric | 2025 | 2024 | | :------------------------------------------ | :----------- | :----------- | | Net income (loss) attributable to Class A common stockholders | $(4,210,496) | $103,656 | | Net income (loss) attributable to Class B common stockholders | $(14,297,937) | $373,166 | | Total net income (loss) attributable to Snail Inc. | $(18,508,433) | $476,822 | | Class A and B basic earnings (loss) per share | $(0.50) | $0.01 | Diluted Earnings (Loss) Per Share (Six Months Ended June 30) | Metric | 2025 | 2024 | | :------------------------------------------ | :----------- | :----------- | | Diluted earnings (loss) per Class A share | $(0.50) | $0.01 | | Diluted earnings (loss) per Class B share | $(0.50) | $0.01 | - For the three and six months ended June 30, **2025**, convertible notes were excluded from diluted EPS calculation due to anti-dilutive effects[158](index=158&type=chunk) [NOTE 17 – EQUITY](index=29&type=section&id=NOTE%2017%20%E2%80%93%20EQUITY) - The Company has two classes of common stock: Class A (one vote) and Class B (ten votes), with Class B convertible to Class A upon transfer[159](index=159&type=chunk) - Convertible Note Warrants and Equity Line Warrants are classified as liabilities and measured at fair value due to adjustment provisions and potential partial cash settlement[164](index=164&type=chunk)[176](index=176&type=chunk)[178](index=178&type=chunk) Fair Value of Convertible Note Warrants (June 30) | Period | Value | | :------------------------------------------ | :----------- | | Fair value at December 31, 2024 | $1,448,109 | | Change in fair value (six months ended June 30, 2025) | $(487,857) | | Exercises (six months ended June 30, 2025) | $(323,113) | | Fair value at June 30, 2025 | $1,066,542 | Fair Value of Equity Line Warrants (June 30) | Period | Value | | :------------------------------------------ | :----------- | | Fair value at December 31, 2024 | $292,004 | | Change in fair value (six months ended June 30, 2025) | $(32,929) | | Fair value at June 30, 2025 | $259,075 | Stock-Based Compensation Expense (Six Months Ended June 30) | Category | 2025 | 2024 | | :------------------------------------------ | :----------- | :----------- | | General and administrative expenses | $257,642 | $(848,685) | | Research and development expenses | $23,246 | $(63,208) | | Total unrecognized compensation cost (as of June 30, 2025) | $1.7 million | | [NOTE 18 – OPERATING SEGMENTS](index=34&type=section&id=NOTE%2018%20%E2%80%93%20OPERATING%20SEGMENTS) - The Company operates as a single operating and reportable segment, with the Founder, Co-Chief Executive Officer, Chief Strategy Officer, and Chairman, Mr. Hai Shi, serving as the Chief Operating Decision Maker (CODM)[195](index=195&type=chunk) Segment Revenue and Operating Profit (Six Months Ended June 30) | Metric | 2025 | 2024 | | :------------------------------------------ | :----------- | :----------- | | Revenues, net | $42,296,622 | $35,722,379 | | Gross profit | $12,802,272 | $10,176,507 | | (Loss) income from operations | $(5,918,273) | $463,063 | | Net (loss) income | $(18,509,671) | $474,158 | [NOTE 19 – BUSINESS COMBINATION](index=34&type=section&id=NOTE%2019%20%E2%80%93%20BUSINESS%20COMBINATION) - On May **2**, **2025**, the Company acquired the remaining **66.0%** equity interest in Matrioshka Games LLC, increasing ownership to **100%** and obtaining a controlling financial interest[196](index=196&type=chunk) - The acquisition resulted in a gain on remeasurement of previously held equity interest of **$7,857** and is expected to enhance human capital and software development capabilities[196](index=196&type=chunk) [NOTE 20 – SUBSEQUENT EVENTS](index=34&type=section&id=NOTE%2020%20%E2%80%93%20SUBSEQUENT%20EVENTS) - The Company is exploring a strategic digital asset initiative, including developing a proprietary stablecoin, and has set up a legal entity, Snail Coins, LLC[197](index=197&type=chunk) - Federal income tax refunds of **$3.1 million** and **$0.6 million** were received from the IRS for the **2022** and **2017** tax years, respectively[197](index=197&type=chunk) - In August **2025**, the Company entered into two new agreements with Suzhou Snail for quality control services (**$60,000** quarterly) and management of the SaltyTV application (**$180,000** quarterly)[197](index=197&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and operations, focusing on ARK franchise revenue, strategic investments, recent developments, and liquidity [Overview](index=35&type=section&id=Overview) - The ARK franchise is the primary revenue driver, contributing **90.1%** and **90.8%** of revenues for the three and six months ended June 30, **2025**, respectively[199](index=199&type=chunk) Net Revenue and Net Income (Loss) | Period | Net Revenue | Net Income (Loss) | | :------------------------------------------ | :----------- | :---------------- | | Three months ended June 30, 2025 | $22.2 million | $(16.6) million | | Three months ended June 30, 2024 | $21.6 million | $2.3 million | | Six months ended June 30, 2025 | $42.3 million | $(18.5) million | | Six months ended June 30, 2024 | $35.7 million | $0.5 million | - Daily Active Users (DAUs) for ARK: Survival Evolved and ARK: Survival Ascended averaged **242,000** for both the three and six months ended June 30, **2025**, an increase from **218,241** and **213,691** in the prior year periods[199](index=199&type=chunk) [Key Factors Affecting Our Business](index=36&type=section&id=Key%20Factors%20Affecting%20Our%20Business) - The Company is investing in content strategy, expanding its gaming pipeline, developing media/eSports content, and growing its micro-influencer platform, NOIZ[202](index=202&type=chunk) - User base growth is driven by creating interactive and unique content, including DLCs, to enhance gameplay and retain players. The Company sold **2.1 million units** in Q2 **2025**, up from **1.3 million** in Q2 **2024**[203](index=203&type=chunk) - Continued investment in proprietary video game technology, including game engines, development tools, and advanced rendering, is crucial for competitive advantage and new product offerings[205](index=205&type=chunk) - Strategic relationships with developers like Studio Wildcard (for ARK franchise) and Suzhou Snail are vital for original content creation and ongoing game development support[208](index=208&type=chunk) - Reliance on third-party distribution platforms (e.g., Xbox Live, PlayStation Network, Steam) for nearly all revenue means platform policies and fees can significantly impact operations and financial performance[209](index=209&type=chunk) [Recent Developments](index=37&type=section&id=Recent%20Developments) - Released ARK: Astraeos DLC for ARK: Survival Ascended in February **2025**, selling over **480K units** across platforms[211](index=211&type=chunk) - Announced ARK: Aquatica DLC and Lost Colony expansion for ARK: Survival Ascended, along with teaser trailers for two in-house developed projects: Nine Yin Sutra: Wushu and Nine Yin Sutra: Immortal[212](index=212&type=chunk) - ARK: Survival Ascended was added to PlayStation Plus, driving over **8 million** installs and a healthy uplift in ASA DLC sales on PlayStation[214](index=214&type=chunk) - The Lost Colony Expansion Pass pre-sale exceeded expectations, selling over **160K units** through June 30, **2025**[215](index=215&type=chunk) - Released five indie games in Q2 **2025** and expanded the short film mobile application, Salty TV, with **55** dramas and an MOU with Mega Matrix Inc. for joint development[216](index=216&type=chunk)[217](index=217&type=chunk) - Announced exploration of a strategic digital asset initiative, including a proprietary stablecoin, to position the company as an early mover in digital entertainment[218](index=218&type=chunk) - Entered into an At The Market Offering Agreement (ATM Sales Agreement) on August **7**, **2025**, to sell up to **$4.5 million** in Class A Common Stock[220](index=220&type=chunk)[221](index=221&type=chunk) [Components of Results of Operations](index=39&type=section&id=Components%20of%20Results%20of%20Operations) - Revenue is primarily from game sales through platforms, with recognition varying based on principal/agent determination (net for most platforms, gross for Apple/Google App Stores)[224](index=224&type=chunk) - Cost of revenues includes license royalties, merchant fees, engine fees, and server costs, expected to fluctuate proportionately with revenues[226](index=226&type=chunk) - General and administrative expenses are expected to increase due to public company administrative burdens and inflationary pressures[227](index=227&type=chunk) - Research and development costs are expected to increase with new content, games, and outsourced development[228](index=228&type=chunk) - Impairment of film assets reflects write-downs due to underperforming titles, changes in marketing strategies, or shifts in market demand[230](index=230&type=chunk) - The effective tax rate of (**515%**) for the six months ended June 30, **2025**, significantly differed from the federal statutory rate of **21%** due to a valuation allowance against U.S. net deferred tax assets[231](index=231&type=chunk) [Results of Operations](index=39&type=section&id=Results%20of%20Operations) [Comparison of the three months ended June 30, 2025 versus the three months ended June 30, 2024](index=39&type=section&id=Comparison%20of%20the%20three%20months%20ended%20June%2030,%202025%20versus%20the%20three%20months%20ended%20June%2030,%202024) Financial Performance (Three Months Ended June 30) | Metric | 2025 (in millions) | 2024 (in millions) | $ Change (in millions) | % Change | | :-------------------------- | :----------------- | :----------------- | :--------------------- | :--------- | | Revenues, net | $22.2 | $21.6 | $0.6 | 2.7% | | Cost of revenues | $15.2 | $13.5 | $1.7 | 12.8% | | Gross profit | $7.0 | $8.1 | $(1.1) | (14.2)% | | Total operating expenses | $8.8 | $5.5 | $3.3 | 61.5% | | Income (loss) from operations | $(1.8) | $2.6 | $(4.4) | (168.0)% | - Net revenues increased by **$0.6 million** (**2.7%**) due to increased ARK sales (**$3.3M**), ARK: Survival Ascended platform subscription (**$3.0M**), and ARK Mobile sales (**$0.6M**), partially offset by increased deferred revenues (**$3.7M**) and decreased Bellwright revenues (**$3.0M**)[233](index=233&type=chunk) - Cost of revenues increased by **$1.7 million** (**12.8%**) primarily due to higher software license royalties from related parties (**$1.1M**) and increased license and amortization costs (**$0.4M**)[234](index=234&type=chunk)[235](index=235&type=chunk) - Operating expenses increased by **$3.3 million** (**61.5%**), driven by increases in general and administrative (**$0.7M**), research and development (**$1.4M**), advertising and marketing (**$0.8M**), and impairment of film assets (**$0.4M**)[236](index=236&type=chunk)[237](index=237&type=chunk)[238](index=238&type=chunk)[239](index=239&type=chunk) [Other Factors Affecting Net Loss (Three Months Ended June 30)](index=41&type=section&id=Other%20Factors%20Affecting%20Net%20Loss) Other Factors Affecting Net Loss (Three Months Ended June 30) | Metric | 2025 (in millions) | 2024 (in millions) | $ Change (in millions) | % Change | | :-------------------------- | :----------------- | :----------------- | :--------------------- | :--------- | | Interest income | $0.0 | $0.1 | $(0.1) | (50.4)% | | Interest expense | $(0.2) | $(0.1) | $(0.1) | (19.0)% | | Other income | $(0.7) | $0.2 | $(0.9) | (389.5)% | | Income tax provision | $(13.9) | $(0.6) | $(13.3) | (2,452.6)% | - Interest income decreased due to lower average cash deposits, while interest expense increased slightly due to a new term loan[241](index=241&type=chunk)[242](index=242&type=chunk) - Other income decreased by **$0.9 million**, primarily due to revaluation losses on warrant liabilities (**$0.5M**) and convertible notes (**$0.4M**) in **2025**[243](index=243&type=chunk) - Income tax provision increased significantly to **$13.9 million** (effective rate of **-515%**) due to the valuation allowance against U.S. net deferred tax assets[244](index=244&type=chunk) [Comparison of the six months ended June 30, 2025 versus the six months ended June 30, 2024](index=41&type=section&id=Comparison%20of%20the%20six%20months%20ended%20June%2030,%202025%20versus%20the%20six%20months%20ended%20June%2030,%202024) Financial Performance (Six Months Ended June 30) | Metric | 2025 (in millions) | 2024 (in millions) | $ Change (in millions) | % Change | | :-------------------------- | :----------------- | :----------------- | :--------------------- | :--------- | | Revenues, net | $42.3 | $35.7 | $6.6 | 18.4% | | Cost of revenues | $29.5 | $25.5 | $4.0 | 15.5% | | Gross profit | $12.8 | $10.2 | $2.6 | 25.8% | | Total operating expenses | $18.7 | $9.7 | $9.0 | 92.7% | | Income (loss) from operations | $(5.9) | $0.5 | $(6.4) | (1,378.1)% | - Net revenues increased by **$6.6 million** (**18.4%**) driven by higher ARK sales (**$6.1M**), ARK: Survival Ascended platform subscription (**$3.0M**), and ARK: Ultimate Mobile Edition sales (**$1.9M**), partially offset by decreased Bellwright revenue (**$2.2M**) and a non-recurring Angela Games settlement in **2024** (**$1.2M**)[246](index=246&type=chunk) - Cost of revenues increased by **$4.0 million** (**15.5%**) due to increased software license royalties from related parties (**$3.0M**) and higher license and amortization costs (**$0.7M**)[247](index=247&type=chunk)[248](index=248&type=chunk) - Operating expenses increased by **$9.0 million** (**92.7%**), primarily due to increases in general and administrative (**$3.4M**), research and development (**$3.3M**), advertising and marketing (**$2.0M**), and impairment of film assets (**$0.4M**)[249](index=249&type=chunk)[250](index=250&type=chunk)[251](index=251&type=chunk)[252](index=252&type=chunk) [Other Factors Affecting Net Income (Loss) (Six Months Ended June 30)](index=43&type=section&id=Other%20Factors%20Affecting%20Net%20Income%20(Loss)) Other Factors Affecting Net Income (Loss) (Six Months Ended June 30) | Metric | 2025 (in millions) | 2024 (in millions) | $ Change (in millions) | % Change | | :-------------------------- | :----------------- | :----------------- | :--------------------- | :--------- | | Interest income | $0.1 | $0.2 | $(0.1) | (62.0)% | | Interest expense | $(0.3) | $(0.5) | $0.2 | (52.0)% | | Other income | $0.1 | $0.5 | $(0.4) | (86.9)% | | Income tax provision | $(12.4) | $(0.1) | $(12.3) | 11,012.9% | - Interest income decreased due to lower average cash deposits, while interest expense decreased due to lower average debt[255](index=255&type=chunk)[256](index=256&type=chunk) - Other income decreased by **$0.4 million**, primarily due to a **$0.4 million** expense from warrant liability revaluation in **2025**, compared to litigation revenues in **2024**[257](index=257&type=chunk) - Income tax provision increased to **$12.4 million** (effective rate of **-203%**) due to the valuation allowance against U.S. net deferred tax assets[258](index=258&type=chunk) [Key Performance Metrics](index=43&type=section&id=Key%20Performance%20Metrics) Units Sold (in millions) | Period | 2025 | 2024 | Change | % Change | | :------------------------------------------ | :--- | :--- | :----- | :------- | | Three months ended June 30 | 2.1 | 1.3 | 0.8 | 58.4% | | Six months ended June 30 | 3.7 | 2.4 | 1.3 | 52.4% | - Units sold increased due to higher sales of ARK: Survival Evolved and its DLCs (**0.7M units** in Q2, **0.8M units** in H1) and ARK: Survival Ascended and its DLCs (**0.3M units** in Q2, **0.6M units** in H1)[262](index=262&type=chunk)[263](index=263&type=chunk) Bookings (in millions) | Period | 2025 | 2024 | $ Change | % Change | | :------------------------------------------ | :--- | :--- | :------- | :------- | | Three months ended June 30 | $27.1 | $22.9 | $4.2 | 18.5% | | Six months ended June 30 | $49.4 | $42.4 | $7.0 | 16.3% | - Bookings increased due to various sales promotions for ARK: Survival Evolved and the pre-sale release of ARK: Lost Colony in **2025**[265](index=265&type=chunk)[266](index=266&type=chunk) [Non-GAAP Measures](index=44&type=section&id=Non-GAAP%20Measures) - EBITDA is presented as a non-GAAP measure to evaluate operating performance, excluding interest income/expense, income taxes, and depreciation[267](index=267&type=chunk)[269](index=269&type=chunk) EBITDA (in millions) | Period | 2025 | 2024 | $ Change | % Change | | :------------------------------------------ | :---- | :--- | :------- | :-------- | | Three months ended June 30 | $(2.4) | $3.1 | $(5.5) | (182.9)% | | Six months ended June 30 | $(5.8) | $1.2 | $(7.0) | (616.3)% | - EBITDA decreased significantly for both periods, primarily due to an increase in net loss, partially offset by changes in income tax provision and interest income/expense[272](index=272&type=chunk)[273](index=273&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) - Primary liquidity sources are cash flows from operations, with unrestricted cash at **$7.9 million** (June 30, **2025**) and **$7.3 million** (December 31, **2024**)[275](index=275&type=chunk) - The Company has a **$3.0 million** revolving loan (due June **2026**), **$3.3 million** convertible notes (mature Feb **2026**), and a **$3.5 million** term loan (mature June **2028**)[278](index=278&type=chunk) - The Company was not in compliance with debt covenants for its **2021** Revolving Note, **2021** Promissory Note, and **2025** Term Loan but received waivers. All long-term portions of these debts are classified as current due to probable future non-compliance[278](index=278&type=chunk) - The Company has the right, but not the obligation, to sell up to **$5.0 million** in Class A common stock to an investor under an Equity Line Purchase Agreement until December 31, **2025**[278](index=278&type=chunk) Net Cash Flows (in millions) | Activity | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Operating activities | $(2.4) | $7.0 | | Investing activities | $(3.0) | $0 | | Financing activities | $6.0 | $(6.7) | | Net increase in cash and cash equivalents | $0.6 | $0.3 | - Net cash used in operating activities increased by **$9.4 million**, primarily due to a **$19.0 million** decrease in net income/loss and a **$21.2 million** decrease in net accounts receivable[282](index=282&type=chunk)[283](index=283&type=chunk) - Net cash used in investing activities was **$3.0 million** in H1 **2025**, including acquisitions of software, license rights, and capitalized R&D expenditures[287](index=287&type=chunk) - Net cash provided by financing activities was **$6.0 million** in H1 **2025**, driven by convertible notes issuance (**$3.0M**), new term loan (**$3.5M**), and warrant exercises (**$0.2M**), partially offset by debt repayments[288](index=288&type=chunk) [Critical Accounting Policies and Estimates](index=48&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Deferred revenue recognition and classification rely on estimates of release dates, technical support obligations, and timing of performance obligations, which can materially impact financial statements if estimates change[305](index=305&type=chunk) - Deferred income taxes depend on estimates of future taxable income and utilization of tax loss carryforwards, requiring significant judgment in assessing the realizability of deferred tax assets[307](index=307&type=chunk) [Emerging Growth Company and Smaller Reporting Company Status](index=49&type=section&id=Emerging%20Growth%20Company%20and%20Smaller%20Reporting%20Company%20Status) - The Company is an 'emerging growth company' and 'smaller reporting company,' allowing it to take advantage of reduced reporting requirements and an extended transition period for new accounting standards[309](index=309&type=chunk)[311](index=311&type=chunk)[313](index=313&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Snail, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The Company is exempt from providing quantitative and qualitative disclosures about market risk due to its status as a 'smaller reporting company'[314](index=314&type=chunk) [Item 4. Controls and Procedures](index=50&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective due to a material weakness in warrant fair value valuation - Disclosure controls and procedures were not effective as of June 30, **2025**, due to a material weakness in internal control over financial reporting[316](index=316&type=chunk) - The material weakness relates to the failure to properly value the fair value of warrants connected to convertible notes and the equity line of credit[316](index=316&type=chunk) - Remediation plans include enhancing review controls over fair value valuations and hiring qualified external valuation specialists[317](index=317&type=chunk)[319](index=319&type=chunk) [PART II. OTHER INFORMATION](index=47&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) Legal proceedings information is detailed in Note 15 – Commitments and Contingencies-Litigation - Legal proceedings information is detailed in Note **15** – Commitments and Contingencies-Litigation[318](index=318&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.Risk%20Factors) Significant risks include ARK franchise reliance, third-party platform dependence, internal control weaknesses, financing needs, and stablecoin initiative risks [Risks Related to Our Business and Industry](index=52&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) - The Company is highly dependent on the future success of its ARK franchise, which contributed **90.8%** of net revenue for the six months ended June 30, **2025**. Failure to publish new 'hit' titles or sequels could substantially decrease revenue and profits[320](index=320&type=chunk) - Reliance on license agreements, particularly with related parties like SDE for the ARK franchise, poses a risk if agreements are not renewed on favorable terms or if disputes arise[321](index=321&type=chunk)[323](index=323&type=chunk) - The Company relies on third-party platforms (e.g., Xbox Live, PlayStation Network, Steam) for **94.6%** of its revenue. Changes in platform policies, fees, or access could materially harm the business[324](index=324&type=chunk) - Business and operating results may be volatile during console transitions, as consumer purchases shift and development costs are incurred for both old and new platforms[328](index=328&type=chunk)[329](index=329&type=chunk) - Changes in tax laws or rates, including potential tariffs on R&D operations outsourced to China and Europe, could affect the effective tax rate, increase costs, and disrupt technical development[330](index=330&type=chunk)[331](index=331&type=chunk) - The Company identified a material weakness in internal control over financial reporting related to the fair value valuation of warrants, which could lead to inaccurate financial reporting[333](index=333&type=chunk)[334](index=334&type=chunk) - Additional financing may be required, and the terms of subsequent financings (e.g., equity line, convertible notes, ATM offering) could be dilutive to stockholders or subject to limitations[337](index=337&type=chunk)[338](index=338&type=chunk)[340](index=340&type=chunk)[341](index=341&type=chunk) - Defaulting on credit obligations could interrupt operations, accelerate debt, and seriously harm the business, especially given past non-compliance with debt covenants[343](index=343&type=chunk)[344](index=344&type=chunk) [Risks relating to Stablecoins](index=56&type=section&id=Risks%20relating%20to%20Stablecoins) - The strategic digital asset initiative, including a proprietary stablecoin, may require additional capital and subject the Company to various licensing requirements and significant compliance costs due to an evolving regulatory environment[347](index=347&type=chunk)[349](index=349&type=chunk)[350](index=350&type=chunk) - Negative publicity regarding stablecoins or the broader digital asset industry could significantly harm consumer confidence in the Company's proposed stablecoins, potentially delaying wider acceptance and use[351](index=351&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=57&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities occurred; details on the share repurchase program are provided - No unregistered sales of equity securities occurred during the six months ended June 30, **2025**[352](index=352&type=chunk) - No share repurchases were settled in the three months ended June 30, **2025**. As of June 30, **2025**, **1,350,275** shares of Class A common stock were repurchased for approximately **$3.7 million**, with **$1.3 million** remaining available under the program[353](index=353&type=chunk) [Item 3. Defaults Upon Senior Securities](index=58&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[355](index=355&type=chunk) [Item 4. Mine Safety Disclosures](index=58&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - Mine safety disclosures are not applicable to the Company[356](index=356&type=chunk) [Item 5. Other Information](index=58&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated any Rule 10b5-1 trading arrangement during the quarter - No director or officer adopted or terminated any 'Rule **10b5-1** trading arrangement' or 'non-Rule **10b5-1** trading arrangement' during the quarter ended June 30, **2025**[357](index=357&type=chunk) [Item 6. Exhibits](index=58&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including the At The Market Offering Agreement and certifications - Key exhibits include the At The Market Offering Agreement (dated August **7**, **2025**), Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, and certifications from the Co-Chief Executive Officer and Chief Financial Officer[359](index=359&type=chunk) [SIGNATURES](index=59&type=section&id=SIGNATURES) The report is duly signed on behalf of Snail, Inc. by its Co-Chief Executive Officer and Chief Financial Officer - The report was signed by Xuedong Tian, Co-Chief Executive Officer, and Heidy Chow, Chief Financial Officer, on August **19**, **2025**[362](index=362&type=chunk)

Core Viewpoint - Snail, Inc. reported a transformative second quarter in 2025, marked by a strategic initiative to develop a proprietary stablecoin, alongside strong performance in its gaming portfolio, particularly the ARK franchise [7][8]. Financial Highlights - Net revenues for Q2 2025 increased to $22.2 million, up from $21.6 million in Q2 2024, driven by a $3.3 million increase in total ARK sales and $3.0 million from ARK: Survival Ascended included in a subscription program [9]. - The net loss for Q2 2025 was $(16.6) million, compared to a net income of $2.3 million in the same period last year, primarily due to increased costs and a $12.9 million valuation allowance against deferred tax assets [10]. - Bookings for Q2 2025 rose 18.5% to $27.1 million, compared to $22.9 million in Q2 2024, attributed to sales promotions and the presale of ARK: Lost Colony [11]. - EBITDA for Q2 2025 was $(2.4) million, down from $3.1 million in Q2 2024, reflecting the increased net loss and higher tax provisions [12]. Game Portfolio Updates - ARK: Survival Evolved sold approximately 1,196,583 units in Q2 2025, with an average daily active user (DAU) of 156,947 [6]. - ARK: Survival Ascended achieved approximately 807,065 units sold, with 8 million downloads via PlayStation Plus in May 2025 [6]. - ARK Mobile surpassed 6.9 million downloads, with an average DAU of 104,135 [6]. Business Updates - The company announced the establishment of Snail Coins LLC to manage its USD-backed stablecoin project and other digital asset initiatives [6]. - A Memorandum of Understanding was signed with Mega Matrix Inc. for the joint development and distribution of short dramas [6]. - The company launched its annual Steam Publisher Sale Event, which significantly boosted sales in June [8]. Management Commentary - The co-CEOs emphasized the importance of the stablecoin initiative as a strategic evolution in the business model, aligning with digital financial innovation trends [7]. - They highlighted the strong performance of the ARK franchise and the commitment to regular content updates and expansions [8].

Core Viewpoint - Snail, Inc. will hold a conference call and webcast to discuss its financial results for the second quarter ended June 30, 2025 [1]. Group 1 - The conference call and webcast are scheduled for August 19, 2025, at 4:30 p.m. Eastern time [1]. - Participants can access the live webcast and replay through the provided link or the Company's investor relations website [2]. - Snail, Inc. is recognized as a leading global independent developer and publisher of interactive digital entertainment, offering a diverse portfolio of premium games across various platforms [3].

Core Viewpoint - Snail, Inc. has postponed its conference call to discuss the financial results for the second quarter ended June 30, 2025, which was originally scheduled for August 13, 2025, at 4:30 p.m. Eastern time [1]. Company Overview - Snail, Inc. is a leading global independent developer and publisher of interactive digital entertainment, offering a premier portfolio of premium games across various platforms, including consoles, PCs, and mobile devices [3]. - The company is publicly traded on Nasdaq under the ticker SNAL [3]. Future Communications - The company will issue a press release to announce the new date and time for the postponed earnings call in the future [2]. Investor Relations - Investor contacts for Snail, Inc. include John Yi and Steven Shinmachi from Gateway Group, Inc., with a contact number of 949-574-3860 and email SNAL@gateway-grp.com [4].

Core Insights - Snail, Inc. has launched a new dating simulation game titled "The Fame Game: Welcome to Hollywood," developed by its subsidiary Interactive Films LLC, which focuses on narrative-driven gameplay and emotional interaction [1][2]. Company Overview - Snail, Inc. (Nasdaq: SNAL) is a leading independent game developer and publisher, providing interactive digital entertainment content across various platforms, including consoles, PC, and mobile devices [3]. - Interactive Films LLC, a subsidiary of Snail, Inc., aims to expand new video audiences and engage passionate viewers through storytelling in various formats [4]. Industry Trends - According to Newzoo's 2024 Global Gamer Study, player engagement in life and dating simulation games has increased by 40% year-over-year, particularly among the 18-34 age demographic [2]. - Deloitte's 2023 Digital Media Trends report indicates that 50% of Gen Z and millennials feel a stronger emotional connection to fictional characters than to real people, with nearly one-third believing that games help fulfill their need for meaningful emotional connections [2]. Game Features - "The Fame Game: Welcome to Hollywood" features a simplified design that reduces development costs and accelerates iteration while maintaining emotional depth, making it accessible to casual players and newcomers to narrative-driven games [2]. - The game is exclusively available on the Steam platform and encourages players to add it to their wish lists [2].

Core Insights - Snail, Inc. has announced a new dating simulation game titled "The Fame Game: Welcome to Hollywood," developed under its subsidiary Interactive Films LLC [1][5] - The game is designed to resonate with a broad audience through a narrative told from a male perspective, featuring branching paths and multiple endings to encourage replayability [2][3] Industry Trends - Narrative-led games with relationship mechanics have shown a 40% year-over-year increase in player engagement, particularly among the 18-34 demographic [3] - A significant portion of Gen Z and Millennials (50%) report stronger emotional connections to fictional characters than to real people, indicating a shift in player engagement and emotional investment in games [3] Game Development Strategy - The project utilizes streamlined mechanics for cost-effective development and rapid iteration while maintaining emotional depth [4] - The accessible gameplay structure is designed to lower barriers for entry, appealing to casual players and those new to narrative-focused games, thus broadening the potential audience [4] Launch Information - "The Fame Game: Welcome to Hollywood" will be launched exclusively on Steam, with a call for creators to engage with the game [5]