0001104659-22-127433 | 10-Q | XBRL Viewer

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Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2022	Dec. 14, 2022
Document Information
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2022
Entity File Number	001-41556
Entity Registrant Name	SNAIL, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	88-4146991
Entity Address, Address Line One	12049 Jefferson Blvd
Entity Address, City or Town	Culver City
Entity Address State Or Province	CA
Entity Address, Postal Zip Code	90230
City Area Code	310
Local Phone Number	988-0643
Title of 12(b) Security	Class A Common Stock, par value $0.0001 per share
Trading Symbol	SNAL
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Central Index Key	0001886894
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q3
Amendment Flag	false
Class A Common Stock
Document Information
Entity Common Stock, Shares Outstanding		8,157,443
Class B Common Stock
Document Information
Entity Common Stock, Shares Outstanding		28,748,580

Balance Sheet - Snail Inc	Sep. 30, 2022 USD ($)
ASSETS
Cash and cash equivalents	$ 9,044,666
Assets, Current	39,186,555
Assets	73,102,889
SHAREHOLDER'S EQUITY
Common Stock, Value, Issued	5,000
Additional paid-in capital	12,881,055
Total shareholder's equity	9,949,743
Snail Inc
ASSETS
Cash and cash equivalents	100
Assets, Current	100
Assets	100
SHAREHOLDER'S EQUITY
Additional paid-in capital	100
Total shareholder's equity	$ 100

- Definition

Sum of the carrying amounts as of the balance sheet date of all assets that are recognized. Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.

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Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.

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Balance Sheet - Snail Inc (Parenthetical)	Sep. 30, 2022 $ / shares shares
Common stock, par value (per share) \| $ / shares	$ 0.01
Common Stock, Shares Authorized	1,000,000
Common stock, shares issued	500,000
Common stock, shares outstanding	500,000
Snail Inc
Common stock, par value (per share) \| $ / shares	$ 0.001
Common Stock, Shares Authorized	1,000
Common stock, shares issued	100
Common stock, shares outstanding	100

Condensed Consolidated Balance Sheets - USD ($)	Sep. 30, 2022	Dec. 31, 2021
Current Assets:
Cash	$ 9,044,666	$ 10,164,338
Accounts receivable, net of allowances for doubtful accounts of $19,929 and $31,525, respectively	4,596,313	12,244,785
Accounts receivable - related party, net	12,239,430	8,435,823
Loan and interest receivable - related party	101,249	203,408
Prepaid expenses - related party, net of long-term portion	1,500,000	3,145,000
Prepaid expenses and other current assets	11,704,897	11,017,007
Total current assets	39,186,555	45,210,361
Restricted cash and cash equivalents	6,368,016	6,389,777
Prepaid expenses - related party	6,520,000
Property, plant and equipment, net	5,245,271	5,678,701
Deferred income taxes	8,191,051	8,191,051
Other noncurrent assets	194,032	199,919
Operating lease right-of-use assets, net	3,887,326	5,100,912
Total assets	73,102,889	80,085,845
Current Liabilities:
Accounts payable	6,765,934	3,871,510
Accounts payable - related party	22,330,781	23,733,572
Accrued expenses and other liabilities	2,375,610	2,975,475
Loan payable-related parties	0	400,000
Interest payable-related parties	527,770	528,439
Revolving loan	9,000,000	9,000,000
Short term note	6,666,667
Notes payable		216,329
Current portion of long-term debt	79,425	77,348
Current portion of deferred revenue	3,934,693	11,005,517
Current portion of operating lease liabilities	1,339,172	1,688,965
Total current liabilities	53,020,052	53,497,155
Accrued expenses	454,438
Long-term debt, net of current portion	2,825,390	2,885,434
Deferred revenue, net of current portion	9,048,505	9,275,417
Operating lease liabilities, net of current portion	3,285,679	4,375,786
Total liabilities	68,634,064	70,033,792
Commitments and contingencies
Equity:
Common stock, $0.01 par value, 1,000,000 shares authorized, 500,000 shares issued and outstanding	5,000	5,000
Additional paid-in capital	12,881,055	94,159,167
Due from shareholder - loan receivable		(91,388,176)
Due from shareholder - interest receivable		(2,965,346)
Accumulated other comprehensive loss	(343,277)	(266,557)
Retained earnings (accumulated deficit)	(2,593,035)	16,045,231
Total Snail Games USA Inc. equity	9,949,743	15,589,319
Noncontrolling interests	5,480,918	5,537,266
Total equity	4,468,825	10,052,053
Total liabilities, noncontrolling interests and equity	73,102,889	80,085,845
License rights from related parties
Current Assets:
Intangible assets, net	3,235,038	8,787,976
License rights
Current Assets:
Intangible assets, net		250,000
Other
Current Assets:
Intangible assets, net	$ 275,600	$ 277,148

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Sep. 30, 2022	Dec. 31, 2021
Balance Sheets
Accounts receivable, net of allowances for doubtful accounts	$ 19,929	$ 31,525
Common stock, par value (per share)	$ 0.01	$ 0.01
Common stock, shares authorized	1,000,000	1,000,000
Common stock, shares issued	500,000	500,000
Common stock, shares outstanding	500,000	500,000

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
Revenues, net	$ 15,614,171	$ 24,361,019	$ 59,132,284	$ 83,200,198
Cost of revenues	11,468,961	15,478,327	37,744,863	48,381,061
Gross profit	4,145,210	8,882,692	21,387,421	34,819,137
Operating expenses:
General and administrative	5,434,013	3,997,917	16,177,534	13,053,478
Research and development	116,624	216,798	479,630	588,207
Advertising and marketing	198,417	148,752	569,127	265,812
Depreciation and amortization	128,536	208,896	435,644	638,659
Total operating expenses	5,877,590	4,572,363	17,661,935	14,546,156
Income (loss) from operations	(1,732,380)	4,310,329	3,725,486	20,272,981
Other income (expense):
Interest income	12,712	21,230	45,789	71,857
Interest income-related parties	505	420,164	582,128	1,128,397
Interest expense	(261,070)	(114,447)	(613,338)	(304,918)
Interest expense - related parties		(2,016)	(3,222)	(5,983)
Other income	19,500	31,247	319,153	482,790
Foreign currency transaction gain (loss)	16,169	(15,987)	21,679	(80,755)
Equity in loss of unconsolidated entity				(314,515)
Total other income (expense), net	(212,184)	340,191	352,189	976,873
Income (loss) before provision for income taxes	(1,944,564)	4,650,520	4,077,675	21,249,854
Income tax provision (benefit)	(398,998)	891,538	803,305	4,214,245
Net income (loss)	(1,545,566)	3,758,982	3,274,370	17,035,609
Net gain (loss) attributable to non-controlling interests	(6,828)	(125,881)	56,348	(489,499)
Net income (loss) attributable to Snail Games USA Inc.	(1,538,738)	3,884,863	3,218,022	17,525,108
Comprehensive income statement:
Other comprehensive income (loss)	5,682	382,088	(76,720)	421,048
Total other comprehensive income (loss)	$ (1,533,056)	$ 4,266,951	$ 3,141,302	$ 17,946,156

Condensed Consolidated Statements of Equity - USD ($)	Common Stock	Additional Paid-In-Capital	Due from Shareholder Loan and Interest Receivable	Accumulated Other Comprehensive Loss	Retained Earnings (Accumulated Deficit)	Snail Games USA Inc.Equity	Non controlling Interests	Total
Balance at the beginning at Dec. 31, 2020	$ 5,000	$ 94,159,167	$ (62,186,331)	$ (197,174)	$ 7,576,835	$ 39,357,497	$ (5,017,741)	$ 34,339,756
Balance at the beginning (in shares) at Dec. 31, 2020	500,000
Increase (Decrease) in Stockholders' Equity
Loan to shareholder	$ 0	0	(9,169,393)	0	0	(9,169,393)	0	(9,169,393)
Foreign currency translation				33,332		33,332		33,332
Net income (loss)					6,178,607	6,178,607	(168,008)	6,010,599
Balance at the end at Mar. 31, 2021	$ 5,000	94,159,167	(71,355,724)	(163,842)	13,755,442	36,400,043	(5,185,749)	31,214,294
Balance at the end (in shares) at Mar. 31, 2021	500,000
Balance at the beginning at Dec. 31, 2020	$ 5,000	94,159,167	(62,186,331)	(197,174)	7,576,835	39,357,497	(5,017,741)	34,339,756
Balance at the beginning (in shares) at Dec. 31, 2020	500,000
Increase (Decrease) in Stockholders' Equity
Net income (loss)								17,035,609
Balance at the end at Sep. 30, 2021	$ 5,000	94,159,167	(87,767,533)	223,874	25,101,943	31,722,451	(5,467,900)	26,254,551
Balance at the end (in shares) at Sep. 30, 2021	500,000
Balance at the beginning at Mar. 31, 2021	$ 5,000	94,159,167	(71,355,724)	(163,842)	13,755,442	36,400,043	(5,185,749)	31,214,294
Balance at the beginning (in shares) at Mar. 31, 2021	500,000
Increase (Decrease) in Stockholders' Equity
Loan to shareholder	$ 0	0	(7,058,648)	0	0	(7,058,648)	0	(7,058,648)
Foreign currency translation				5,628		5,628		5,628
Dissolution of subsidiary							39,340	39,340
Net income (loss)					7,461,638	7,461,638	(195,610)	7,266,028
Balance at the end at Jun. 30, 2021	$ 5,000	94,159,167	(78,414,372)	(158,214)	21,217,080	36,808,661	(5,342,019)	31,466,642
Balance at the end (in shares) at Jun. 30, 2021	500,000
Increase (Decrease) in Stockholders' Equity
Loan to shareholder	$ 0	0	(9,353,161)	0	0	(9,353,161)	0	(9,353,161)
Foreign currency translation				382,088		382,088		382,088
Net income (loss)					3,884,863	3,884,863	(125,881)	3,758,982
Balance at the end at Sep. 30, 2021	$ 5,000	94,159,167	(87,767,533)	223,874	25,101,943	31,722,451	(5,467,900)	26,254,551
Balance at the end (in shares) at Sep. 30, 2021	500,000
Balance at the beginning at Dec. 31, 2021	$ 5,000	94,159,167	(94,353,522)	(266,557)	16,045,231	15,589,319	(5,537,266)	10,052,053
Balance at the beginning (in shares) at Dec. 31, 2021	500,000
Increase (Decrease) in Stockholders' Equity
Loan to shareholder			(450,681)			(450,681)		(450,681)
Foreign currency translation				(51,203)		(51,203)		(51,203)
Net income (loss)					5,811,057	5,811,057	(7,290)	5,803,767
Balance at the end at Mar. 31, 2022	$ 5,000	94,159,167	(94,804,203)	(317,760)	21,856,288	20,898,492	(5,544,556)	15,353,936
Balance at the end (in shares) at Mar. 31, 2022	500,000
Balance at the beginning at Dec. 31, 2021	$ 5,000	94,159,167	(94,353,522)	(266,557)	16,045,231	15,589,319	(5,537,266)	10,052,053
Balance at the beginning (in shares) at Dec. 31, 2021	500,000
Increase (Decrease) in Stockholders' Equity
Net income (loss)								3,274,370
Balance at the end at Sep. 30, 2022	$ 5,000	12,881,055		(343,277)	(2,593,035)	9,949,743	(5,480,918)	4,468,825
Balance at the end (in shares) at Sep. 30, 2022	500,000
Balance at the beginning at Mar. 31, 2022	$ 5,000	94,159,167	(94,804,203)	(317,760)	21,856,288	20,898,492	(5,544,556)	15,353,936
Balance at the beginning (in shares) at Mar. 31, 2022	500,000
Increase (Decrease) in Stockholders' Equity
Loan to shareholder			(130,197)			(130,197)		(130,197)
Dividend distribution		(81,278,112)	$ 94,934,400		(21,856,288)	(8,200,000)		(8,200,000)
Foreign currency translation				(31,199)		(31,199)		(31,199)
Net income (loss)					(1,054,297)	(1,054,297)	70,466	(983,831)
Balance at the end at Jun. 30, 2022	$ 5,000	12,881,055		(348,959)	(1,054,297)	11,482,799	(5,474,090)	6,008,709
Balance at the end (in shares) at Jun. 30, 2022	500,000
Increase (Decrease) in Stockholders' Equity
Foreign currency translation				5,682		5,682		5,682
Net income (loss)					(1,538,738)	(1,538,738)	(6,828)	(1,545,566)
Balance at the end at Sep. 30, 2022	$ 5,000	$ 12,881,055		$ (343,277)	$ (2,593,035)	$ 9,949,743	$ (5,480,918)	$ 4,468,825
Balance at the end (in shares) at Sep. 30, 2022	500,000

- Definition

The consolidated profit or loss for the period, net of income taxes, including the portion attributable to the noncontrolling interest.

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Amount of stockholders' equity (deficit), net of receivables from officers, directors, owners, and affiliates of the entity, attributable to both the parent and noncontrolling interests. Amount excludes temporary equity. Alternate caption for the concept is permanent equity.

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+ Details

Condensed Consolidated Statements of Cash Flows - USD ($)	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Cash flows from operating activities:
Net income	$ 3,274,370	$ 17,035,609
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Amortization - intangible assets	5,803,610	11,131,342
Amortization - loan origination fees	19,149	22,388
Depreciation and amortization - property and equipment	435,644	638,659
Gain on lease termination	(122,533)
Gain on paycheck protection program and economic injury disaster loan forgiveness	(174,436)	(392,200)
Gain on disposal of fixed assets	(17,067)
Interest income from shareholder loan	(580,878)	(1,074,881)
Deferred taxes		2,682
Decrease in non-controlling interest - dissolution of subsidiary		39,340
Changes in assets and liabilities:
Accounts receivable	7,648,432	5,049,456
Accounts receivable - related party	(3,803,606)	2,542,956
Prepaid expenses - related party	(4,875,000)
Prepaid expenses and other current assets	(2,232,406)	(5,689,750)
Other noncurrent assets	(15,228)	241,422
Accounts payable	2,905,024	(390,331)
Accounts payable - related party	(1,402,791)	311,024
Accrued expenses	(127,993)	700,163
Interest payable - related parties	1,490	5,983
Lease liabilities	(103,782)	(130,090)
Deferred revenue	(7,297,736)	(11,389,985)
Net cash (used in) provided by operating activities	(665,737)	18,653,787
Cash flows from investing activities:
Loan provided to related party		(24,506,321)
Repayment on loan provided by related party	(300,000)
Acquisition of license rights - related party		(5,000,000)
Purchases of property and equipment	(5,256)	(3,403)
Proceeds from sale of property and equipment	19,500
Repayment on Pound Sand note	1,496,063
Investment at cost		(895)
Net cash provided by (used in) investing activities	1,210,307	(29,510,619)
Cash flows from financing activities:
Repayments on long-term debt	(57,967)	(6,731,666)
Repayments on short-term note	(3,333,333)
Borrowings on long-term debt		2,904,815
Borrowings on short-term note	10,000,000
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
Borrowings on revolving loan		6,500,000
Cash dividend declared and paid	(8,200,000)
Net cash (used in) provided by financing activities	(1,633,193)	2,673,149
Effect of currency translation on cash and cash equivalents	(52,810)	380,403
Net decrease in cash, and restricted cash and cash equivalents	(1,141,433)	(7,803,280)
Cash, and restricted cash and cash equivalents - beginning of period	16,554,115	33,902,707
Cash, and restricted cash and cash equivalents - end of period	15,412,682	26,099,427
Cash paid during the period for:
Interest	594,189	105,577
Income taxes	831,400	3,300,000
Noncash transactions during the period 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 financing activity during the period:
Gain on paycheck protection program and economic injury disaster loan forgiveness	(174,436)	(392,200)
License rights from related parties
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Amortization - intangible assets	250,000	450,000
License rights
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Amortization - intangible assets	5,552,938	10,675,193
Other
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Amortization - intangible assets	$ 672	$ 6,149

ORGANIZATION

9 Months Ended

Sep. 30, 2022

ORGANIZATION

ORGANIZATION

NOTE 1 – PRESENTATION AND NATURE OF OPERATIONS

Snail Games USA Inc. is devoted to researching, developing, marketing, publishing, and distributing games, content and support that can be played on a variety of platforms including game consoles, PCs, mobile phones and tablets. The terms “Snail Games USA,” “we,” “our” and the “Company” are used to refer collectively to Snail Games USA Inc. and its subsidiaries. The Company is a global developer and publisher of interactive entertainment content and support on video game consoles, personal computers, mobile devices, and other platforms.

The Company was founded in 2009 as a wholly owned subsidiary of Suzhou Snail Digital Technology Co., Ltd. (“Suzhou Snail”) located in Suzhou, China. On July 13, 2022, Suzhou Snail transferred all of its right, title, and interest to all of the 500,000 shares of common stock of the Company (“Shares”) to Snail Technology (HK) Limited (“Snail Technology”), an entity organized under the laws of Hong Kong, pursuant to the certain Share Transfer Agreement dated July 13, 2022 between Suzhou Snail and Snail Technology. Subsequently, Snail Technology transferred all of its right, title, and interest in the shares to certain individuals per the Share Transfer Agreement. In connection with the transaction described in Note 19 - Subsequent Events, the individuals contributed their interest in the Company to Snail, Inc. (the “Parent”) in return for common stock of the Parent in connection with Snail, Inc.’s initial public offering (“IPO”). Because the Company and Suzhou Snail are owned by the same shareholders, Suzhou Snail is considered a related party to the Company.

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles as promulgated in the United States of America (“U.S.GAAP”) for interim reporting. Accordingly, certain notes or other information that are normally required by U.S. GAAP have been condensed or omitted if they substantially duplicate the disclosures contained in our annual audited condensed consolidated financial statements. Additionally, the year-end condensed consolidated balance sheet data was derived from audited consolidated financial statements but does not include all disclosures required by U.S. GAAP. Accordingly, the unaudited condensed consolidated financial statements should be read in conjunction with the audited condensed consolidated financial statements and notes thereto for the year ended December 31, 2021.

In the opinion of management, all adjustments considered necessary for the fair presentation of the Company’s financial position and its results of operations in accordance with U.S. GAAP (consisting of normal recurring adjustments) have been included in the accompanying unaudited condensed consolidated financial statements.

Certain comparative amounts have been reclassified to conform with the current period presentation.

The condensed consolidated financial statements include the accounts of Snail Games USA Inc. and the following subsidiaries:


	Equity %
Subsidiary Name	Owned
Snail Innovation Institute	70	%
Frostkeep Studios, Inc.	100	%
Eminence Corp	100	%
Wandering Wizard, LLC	100	%
Donkey Crew Limited Liability Company	99	%
Interactive Films, LLC	100	%
Project AWK Productions, LLC	100	%
BTBX.IO, LLC	70	%
Elephant Snail, LLC (through April 15, 2021)	51	%

All intercompany accounts, transactions, and profits have been eliminated upon consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and the accompanying notes. Such estimates include revenue recognition, provisions for doubtful accounts, deferred income tax assets and associated valuation allowances, deferred revenue, income taxes, valuation of intangibles, including those with related parties and impairment of intangible assets. These estimates generally involve complex issues and require management to make judgments, involve analysis of historical and future trends that can require extended periods of time to resolve, and are subject to change from period to period. In all cases, actual results could differ materially from estimates.

Segment Reporting

The Company has one operating and reportable segment. Our operations involve similar products and customers worldwide. Revenue earned is primarily derived from the sale of software titles, which are developed internally or licensed from related parties. Financial information about our segment and geographic regions is included in Note 3 – Revenue from Contracts with Customers.

COVID-19

Since the start of the coronavirus pandemic early in 2020, the Company has made sustained efforts to ensure the health and safety of the workforce while ensuring continuity of the business. In the workplace, the Company has designed and implemented protocols for social distancing, made provisions for the workforce to work remotely where possible, and established quarantine policies for those who present COVID-like symptoms or may have been in contact with those who have. Further, the Company keeps current with local, state, federal and international laws and restrictions that could affect the business and provide real-time information to the workforce. The Company has its own policies relating to health and is committed to compliance with COVID-19 policies.

As has been the case with many other employers, since the start of 2021, the Company has encouraged its workforce to receive vaccinations against COVID-19 through various means, including incentive programs. However, new variants, particularly the Delta and Omicron variants, have engendered a resurgence of the virus in many regions particularly among the unvaccinated. In-the-midst of changing conditions, the Company has nevertheless been able to manage its business with minimal impact during the three and nine month periods ended September 30, 2022 and 2021.

Snail Inc

ORGANIZATION

ORGANIZATION

NOTE 1ORGANIZATION

Snail, Inc. was incorporated under the laws of Delaware in January 2022. The Registrant’s fiscal year end is December 31. The Registrant was formed for the purpose of completing an initial public offering (“IPO”) and related transactions to carry on the business of Snail Games USA and its subsidiaries. On November 14, 2022, in connection with the IPO, Snail, Inc. became the holding company of Snail Games USA and its subsidiaries through the exchange of common stock of Snail Games USA for common stock of Snail, Inc, and will control the business and affairs of Snail Games USA and its subsidiaries.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2022

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

The Company’s revenue includes the publishing of software games delivered digitally and through physical discs (e.g., packaged goods). The Company’s digital games may include additional downloadable content that are new feature releases to digital full-game downloads. Revenue also includes sales of mobile in-app purchases that require the Company’s hosting support in order to utilize the game or related content. Such games include virtual goods that can be purchased by the end users, as desired. When control of the promised products and services is transferred to the customers, the Company recognizes revenue in the amount that reflects the consideration it expects to receive in exchange for these products and services. Revenue from delivery of products is recognized at a point in time when the end consumers download the games and the control of the license is transferred to them.

The Company recognizes revenue using the following five steps as provided by ASC Topic 606 Revenue from Contracts with Customers: 1) identify the contract(s) with the customer; 2) identify the performance obligations in each contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when, or as, the entity satisfies a performance obligation. The Company’s terms and conditions vary by customers and typically provide net 30 to 75 days terms or 45 days after each quarter ends.

Principal vs Agent Consideration

The Company offers certain software products via third-party digital storefronts, such as Microsoft’s Xbox Live, Sony’s PlayStation Network, Valve’s Steam, Epic Games Store, Apple’s App Store, the Google Play Store, and retail distributor. For sales of our software products via third-party digital storefronts and retail distributor, we determine whether or not we are acting as the principal in the sale to the end user, which we consider in determining if revenue should be reported based on the gross transaction price to the end user or based on the transaction price net of fees retained by the third-party digital storefront. An entity is the principal if it controls a good or service before it is transferred to the customer. Key indicators that we use in evaluating these sales transactions include, but are not limited to, the following:

●

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.

Based on our evaluation of the above indicators, for sales arrangements via Microsoft’s Xbox Live, Sony’s PlayStation Network, Valve’s Steam, Epic Games Store, and retail distributor, the digital platforms and distributors have discretion in establishing the price for the specified good or service and we have determined we are the agent in the sales transaction to the end user and therefore we report revenue on a net basis based on the consideration received from the digital storefront. For sales arrangements via Apple’s App Store and the Google Play Store, we have discretion in establishing the price for the specified good or service and we have determined that we are the principal to the end user and thus report revenue on a gross basis and mobile platform fees charged by these digital storefronts are expensed as incurred and reported within cost of revenues.

Contract Balance

The Company records deferred revenue when cash payments are received or due in advance of its performance, even if amounts are refundable.

Deferred revenue is comprised of the transaction price allocable to the Company’s performance obligation on technical support and the sale of virtual goods available for in-app purchases, and payments received from customers prior to launching the games on the platforms. The Company categorizes the virtual goods as either “consumable” or “durable.” Consumable virtual goods represent goods that can be consumed by a specific player action; accordingly, the Company recognizes revenues from the sale of consumable virtual goods as the goods are consumed and the performance obligation is satisfied. Durable virtual goods represent goods that are accessible to the players over an extended period of time; accordingly, the Company recognize revenues from the sale of durable virtual goods ratably over the period of time the goods are available to the player and the performance obligation is satisfied, which is generally the estimated service period.

The Company also has a long-term title license agreement with a platform for a period of three years. The Company recognizes deferred revenue and amortizes this revenue according to the terms of the relevant agreement. The agreement was initially made between the parties in November 2018 and valid through December 31, 2021. The agreement was subsequently amended in June 2020 to extend the ARK 1 availability on the platform perpetually, effective January 1, 2022 and to put ARK 2 on the platform for three years upon release. The Company recognized $2.5 million in revenue related to ARK 1 perpetual license for the nine months ended September 30, 2022 and deferred $2.3 million related to ARK 2 that is included in the long-term portion of deferred revenue.

In November 2021, the Company entered an agreement with a platform to make ARK 1 available on the platform for a period of 5 weeks in exchange for $3.5 million. The platform launched the 5-week program on March 1, 2022 and the Company recognized the full amount of revenue from this contract for the nine months ended September 30, 2022, as the significant performance obligation of making the game available on the platform was met on the first day of the contract.

The Company entered into a non-exclusive license agreement with a platform in February 2020 to make ARK 1 available on the platform, exclusive of all available DLC, for a period of 2 weeks in exchange for $8.0 million. During the 2 weeks the platform offered digital rights to ARK 1 to its end users for free. The platform launched the first free week in June of 2020 and the Company recognized $4.0 million of the advanced payment as revenue during the year ended December 31, 2020. In September 2022, the platform launched the second free week and the Company recognized the remaining $4.0 million of revenue during the nine months ended September 30, 2022.

Estimated Service Period

For certain performance obligations satisfied over time, we have determined that the estimated service period is the time period in which an average user plays our software products (“user life”) which most faithfully depicts the timing of satisfying our performance obligation. We consider a variety of data points when determining and subsequently reassessing the estimated service period for players of our software products. Primarily, we review the weighted average number of days between players’ first and last days played online. When a new game is launched and no history of online player data is available, we consider other factors to determine the user life, such as the estimated service period of other games actively being sold with similar characteristics. We also consider known online trends, the service periods of our previously released software products, and, to the extent publicly available, the service periods of our competitors’ software products that are similar in nature to ours.

We believe this provides a reasonable depiction of the use of games by our customers, as it is the best representation of the period during which our customers play our software products. Determining the estimated service period is subjective and requires significant management judgment and estimates. Future usage patterns may differ from historical usage patterns, and therefore the estimated service period may change in the future. The estimated service periods for virtual goods are generally approximately 30 to 100 days.

Shipping and Handling

The distributor, as the principal, is responsible for the shipping of the game discs to the retail stores and incurring the shipping costs. The Company is paid the net sales amount after deducting shipping costs and other related expenses by the distributor.

Cost of Revenues

Cost of revenues include software license royalty fees, merchant fees, server and database center costs, game localization costs, game licenses and amortization costs. Cost of revenues for the three and nine month periods ended September 30, 2022 and 2021 were comprised of the following:


	Three months ended				Nine months ended
	September 30,				September 30,
	2022		2021		2022		2021
Software license royalties - related parties	$	3,428,231	$	4,954,040	$	13,314,258	$	17,046,875
Software license royalties		47,020		—		47,020		—
License and amortization - related parties		6,350,979		8,483,182		19,052,938		24,169,714
License and amortization		224		155,701		250,672		456,149
Game localization		840		5,727		840		47,100
Merchant fees		602,814		847,610		1,856,371		2,878,020
Engine fees		359,263		552,913		1,575,942		2,453,533
Internet, server and data center		535,399		479,154		1,502,631		1,329,670
Costs related to advertising revenue		144,191		—		144,191		—
Total:	$	11,468,961	$	15,478,327	$	37,744,863	$	48,381,061

Advertising and Marketing Costs

The Company expenses advertising costs as incurred. For the three months ended September 30, 2022 and 2021, advertising expense totaled $198,417 and $148,752, respectively. For the nine months ended September 30, 2022 and 2021, advertising expenses totaled $569,127 and $265,812, respectively.

Research and Development

Research and development costs are expensed as incurred. Research and development costs include travel, payroll, and other general expenses specific to research and development activities. Research and development costs for the three months ended September 30, 2022 and 2021 were $116,624 and $216,798, respectively. Research and development costs for the nine months ended September 30, 2022 and 2021 were $479,630 and $588,207, respectively.

Non-controlling Interests

Non-controlling interests on the condensed consolidated balance sheets and condensed consolidated statements of operations and comprehensive income (loss) include the equity allocated to non-controlling interest holders. As of September 30, 2022 and December 31, 2021, there were non-controlling interests with the following subsidiaries:


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

Fair Value Measurements

The Company follows FASB ASC Topic 820, Fair Value Measurements. ASC 820 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants.

ASC 820 establishes a hierarchy of valuation inputs based on the extent to which the inputs are observable in the marketplace. Observable inputs reflect market data obtained from sources independent of the reporting entity and unobservable inputs reflect the entity’s own assumptions about how market participants would value an asset or liability based on the best information available. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value.

The following describes the hierarchy of inputs used to measure fair value and the primary valuation methodologies used by the Company for financial instruments measured at fair value.

The three levels of inputs are as follows:

●

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.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Our financial instruments include cash and cash equivalents, restricted cash and cash equivalents, short-term financial instruments, short-term loans, accounts receivable, accounts payable and current liabilities. The carrying values of these financial instruments approximate their fair value due to their short maturities. The carrying amount of our debt approximates fair value because the interest rates on these instruments approximate the interest rate on debt with similar terms available to us for a similar duration with the exception of the Company’s promissory note which has a fixed rate for 5 years, then a floating rate that approximates the Wall Street Journal Prime Rate plus 0.50%. The Company considers the carrying amount of the loan to approximate fair value as the discounted cost in comparison to market rates would not be materially different than the cost to acquire a loan with similar terms.The Company re-measured the fair value of one of its intangible assets, Atlas, as of December 31, 2021, using level 3 inputs. Please refer to Note 11 – Intangible Assets for more details. The Company does not have any other assets or liabilities measured at fair value on a recurring or non-recurring basis at September 30, 2022 and December 31, 2021.

Concentration of Credit Risk and Significant Customers

The Company maintains cash balances at several major financial institutions. While the Company attempts to limit credit exposure with any single institution, balances often exceed insurable amounts. As of September 30, 2022 and December 31, 2021, the Company had deposits of $14,037,412 and $15,135,863, respectively, that were not insured by the Federal Deposit Insurance Corporation.

The Company extends credit to various digital resellers and partners. Collection of trade receivables may be affected by changes in economic or other industry conditions and may, accordingly, impact our overall credit risk. The Company performs ongoing credit evaluations of customers and maintains reserves for potentially uncollectible accounts. At September 30, 2022 and December 31, 2021, the Company had two customers who accounted for approximately 58% and four customers who accounted for approximately 86% of consolidated gross receivables, respectively. Among the two customers as of September 30, 2022 and four customers as of December 31, 2021, each customer accounted for 30% and 28% as of September 30, 2022, and 29%, 28%, 17%, and 12% as of December 31, 2021 of the consolidated gross receivables outstanding. During the three months ended September 30, 2022 and 2021, approximately 43% and 57%, respectively, of net revenue was derived from these customers. During the nine months ended September 30, 2022 and 2021, approximately 56% and 73%, respectively, of net revenue was derived from these customers.

In January 2022, the Company received approximately $1,500,000 from Pound Sand, LLC in connection with the Company’s sale of its membership interest in Pound Sand, LLC on December 3, 2020; this amount was included as a receivable in the other current assets as of December 31, 2021 in the accompanying condensed consolidated balance sheets.

Leases

The Company has several leases relating primarily to office facilities. The Company determines if an arrangement is or contains a lease at contract inception. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The lease liability is measured as the present value of the unpaid lease payments, and the right-of-use asset value is derived from the calculation of the lease liability. Lease payments include fixed and in-substance fixed payments, variable payments based on an index or rate, reasonably certain purchase options, and termination penalties. Variable lease payments are recognized as lease expenses as incurred, and generally relate to variable payments made based on the level of services provided by the landlords of our leases. For leased assets with similar lease terms and asset types, we applied a portfolio approach in determining a single incremental borrowing rate for the leased assets. The Company uses its estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments because the Company does not have the information necessary to determine the rate implicit in the lease. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. The Company’s lease term includes any option to extend the lease when it is reasonably certain to be exercised based on considering all relevant factors. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets and we recognize lease expense for these leases on a straight-line basis over the lease term. Operating leases are included in operating lease right-of-use assets, net, current portion of operating lease liabilities, and operating lease liabilities, net of current portion on the consolidated balance sheets.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses, which replaces the incurred loss impairment methodology in current US GAAP with a methodology that requires the reflection of expected credit losses and also requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. For most financial instruments, the standard requires the use of a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses, which generally results in the earlier recognition of credit losses on financial instruments. The Company expects to adopt ASC 2016-13 on January 1, 2023. The impact of adopting the new standard is not anticipated to have a material impact on the Company’s condensed consolidated financial statements.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832) – Disclosures by Business Entities about Government Assistance, to provide guidance on the disclosures of forgivable loan transactions with a government that are accounted for by applying a grant or contribution accounting model, by analogy. It seeks to provide increased transparency for financial statement users to better assess the nature of the transactions, the related accounting policies used to account for the transactions, the effect of the transaction on an entities financial statements and significant terms and conditions of the transactions. The Company adopted this standard beginning on January 1, 2022. The adoption of the standard affected the disclosures of the Paycheck Protection Program (“PPP”) loan and related loan forgiveness in the Company’s condensed consolidated financial statements. Please see Note 15 – Revolving Loan, Short Term Note and Long-Term Debt for more information.

Earnings Per Share

The Company analyzed the calculation of net income (loss) per share for the three and nine month periods ended September 30, 2022, and 2021 and determined that it resulted in values that would not be meaningful to the users of these condensed consolidated financial statements given the impact of the exchange of shares in connection with the IPO, see Note 19 – Subsequent Events. Therefore, net income (loss) per share information has not been presented for the three and nine months presented.

CARES Act

On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property, the Company did not result in a material cash benefit as a result of these provision.

The CARES Act is a stimulus package that provides various forms of relief through, among other things, grants, loans and tax incentives to certain businesses and individuals. In particular, the CARES Act created an emergency lending facility known as the PPP, which is administered by the U.S. Small Business Administration (“SBA”) and provides federally insured and, in some cases, forgivable loans to certain eligible businesses so that those businesses can continue to cover certain of their near-term operating expenses and retain employees. See Note 15 – Revolving Loan, Short Term Note, and Long-Term Debt for additional information.

Dividend Restrictions

Our ability to pay cash dividends is currently restricted by the terms of our credit facilities.

Snail Inc

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The balance sheet has been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Separate Statements of Income, Stockholder’s Equity and Cash Flows have not been presented as there have been no operating activities by this entity during the period ended September 30, 2022.

STOCKHOLDERS' EQUITY	9 Months Ended
STOCKHOLDERS' EQUITY	Sep. 30, 2022
Snail Inc
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY	NOTE 3STOCKHOLDER’S EQUITY Mr. Hai Shi is the Founder and Chairman of the Registrant and was the sole shareholder as of September 30, 2022. He contributed the $100 to the Registrant on January 14, 2022 to purchase 100 shares of the Registrants common stock.

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
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+ Details

SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2022

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

NOTE 19 – SUBSEQUENT EVENTS

●

On September 16, 2022, the Company’s parent, Snail, Inc., filed a Form S-1 Registration Statement with the United States Securities and Exchange Commission in connection with its IPO. On November 9, 2022, effective with the IPO pricing, the Company’s existing shareholders transferred their 500,000 shares of common stock of the Company to Snail, Inc. in exchange for 6,251,420 shares of Class A common stock and 28,748,580 shares of Class B common stock of Snail, Inc., and Snail, Inc. became the parent of Snail Games USA Inc. On November 9, 2022 the Company’s parent, Snail, Inc., priced its IPO, and on November 10, 2022, Snail, Inc.’s Class A common stock began trading on The Nasdaq Capital Market exchange under the ticker symbol SNAL. In the IPO, Snail, Inc. issued 3,000,000 shares of Class A common stock and net proceeds from the IPO were distributed to the Company in November 2022 in the amount of approximately $12.0 million. In connection with the IPO, $1.0 million of IPO proceeds were remitted to an escrow account which is held to provide a source of funding for certain indemnification obligations of Snail, Inc. to the underwriters. The amount in escrow will be reported as restricted cash for 12 months from the date of the offering, at which time the restrictions will be removed and the balance will be reverted to unrestricted cash. In the IPO, Snail, Inc. also issued to the underwriters warrants to purchase 120,000 shares of Class A common stock at 125% of the IPO price, or $6.25 per share. The warrants are exercisable for three years from the effective date of registration. The underwriters were also granted an option to purchase up to an additional 450,000 shares of Class A common stock that expires on December 19, 2022, and the underwriters have not exercised the option.

●

The Company’s 2022 Omnibus Incentive Plan (the “2022 Plan”) became effective upon the consummation of the IPO. The 2022 Plan is administered by the compensation committee of the board of directors. The maximum number of shares available for issuance under the 2022 Plan is 5,718,000. The 2022 Plan permits the grant of restricted stock units (“RSUs”). RSU grants of shares of Class A common stock are subject to certain vesting conditions and restrictions specified in the applicable RSU award agreement. Any employee, non-employee director or consultant is eligible to receive equity-based compensation in the form of RSUs pursuant to the 2022 Plan. In November 2022, employees were granted 1,200,960 RSUs at a value of $6.0 million and non-employee directors were granted 24,000 RSUs at a value of $0.1 million.

●

In November 2022, the Company received a $2.5 million refund of prior year California income tax relating to the Company’s implementation of California’s adopted market-based sourcing rules in income years open for refund. Subsequent years’ returns have been filed using the same methodology on which these refund claims were granted following California Franchise Tax Board review.

●

On November 10, 2022, the Snail, Inc. board of directors approved and established a new share repurchase program (the “Share Repurchase Program”) to reacquire shares of Snail, Inc.’s Class A common stock. The maximum aggregate value of the shares repurchased shall not exceed $5.0 million, and there is no fixed expiration date on the Share Repurchase Program. The exact number of shares of Class A common stock and timing and method of the repurchase are at the discretion of the CEO, CFO and Treasurer. As of December 13, 2022, 1,090,877 shares of Class A common stock were repurchased pursuant to the Share Repurchase Program and the average price paid per share was $2.98.

●

In December 2022, the Company extended the maturity of its term loan from January 26, 2023 to January 26, 2024 for the remaining balance outstanding at the time of the extension, which was $5.8 million. The rate has also been amended to the higher of the Wall Street Journal Prime Rate less 0.25% or 5.75%. A modification fee of $9,375 was paid in connection with the maturity extension.

●

In December 2022, the Company amended its exclusive license agreement relating to ARK 1. The license fee has been restructured so that the Company will pay 45% of total revenue of ARK 1 as a royalty instead of the $1.5 million monthly fee plus 25% of the total ARK 1 revenue once the sequel, ARK 2, is publicly released.

Snail Inc

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

NOTE 4SUBSEQUENT EVENTS

Refer to Note 19 – Subsequent Events, in the Snail Games USA and Subsidiaries condensed consolidated financial statements for information regarding the IPO, reorganization transaction, and other subsequent events.

PRESENTATION AND NATURE OF OPERATIONS

9 Months Ended

Sep. 30, 2022

PRESENTATION AND NATURE OF OPERATIONS

PRESENTATION AND NATURE OF OPERATIONS

NOTE 1 – PRESENTATION AND NATURE OF OPERATIONS

Basis of Presentation and Consolidation

Certain comparative amounts have been reclassified to conform with the current period presentation.

The condensed consolidated financial statements include the accounts of Snail Games USA Inc. and the following subsidiaries:


	Equity %
Subsidiary Name	Owned
Snail Innovation Institute	70	%
Frostkeep Studios, Inc.	100	%
Eminence Corp	100	%
Wandering Wizard, LLC	100	%
Donkey Crew Limited Liability Company	99	%
Interactive Films, LLC	100	%
Project AWK Productions, LLC	100	%
BTBX.IO, LLC	70	%
Elephant Snail, LLC (through April 15, 2021)	51	%

All intercompany accounts, transactions, and profits have been eliminated upon consolidation.

Use of Estimates

Segment Reporting

COVID-19

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2022

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

Principal vs Agent Consideration

●

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.

Contract Balance

The Company records deferred revenue when cash payments are received or due in advance of its performance, even if amounts are refundable.

Estimated Service Period

Shipping and Handling

Cost of Revenues


	Three months ended				Nine months ended
	September 30,				September 30,
	2022		2021		2022		2021
Software license royalties - related parties	$	3,428,231	$	4,954,040	$	13,314,258	$	17,046,875
Software license royalties		47,020		—		47,020		—
License and amortization - related parties		6,350,979		8,483,182		19,052,938		24,169,714
License and amortization		224		155,701		250,672		456,149
Game localization		840		5,727		840		47,100
Merchant fees		602,814		847,610		1,856,371		2,878,020
Engine fees		359,263		552,913		1,575,942		2,453,533
Internet, server and data center		535,399		479,154		1,502,631		1,329,670
Costs related to advertising revenue		144,191		—		144,191		—
Total:	$	11,468,961	$	15,478,327	$	37,744,863	$	48,381,061

Advertising and Marketing Costs

Research and Development

Non-controlling Interests


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

Fair Value Measurements

The following describes the hierarchy of inputs used to measure fair value and the primary valuation methodologies used by the Company for financial instruments measured at fair value.

The three levels of inputs are as follows:

●

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 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.

Concentration of Credit Risk and Significant Customers

Leases

Recently Issued Accounting Pronouncements

Earnings Per Share

CARES Act

Dividend Restrictions

Our ability to pay cash dividends is currently restricted by the terms of our credit facilities.

REVENUE FROM CONTRACTS WITH CUSTOMERS

9 Months Ended

Sep. 30, 2022

REVENUE FROM CONTRACTS WITH CUSTOMERS

REVENUE FROM CONTRACTS WITH CUSTOMERS

NOTE 3 – REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of revenue

Geography

We attribute net revenue to geographic regions based on customer location. Net revenue by geographic region for the three and nine month periods ended September 30, 2022 and 2021 were as follows:


	Three months ended				Nine months ended
	September 30,				September 30,
	2022		2021		2022		2021
United States	$	14,767,182	$	22,226,122	$	55,025,810	$	73,482,250
International		846,989		2,134,897		4,106,474		9,717,948
Total revenue from contracts with customers:	$	15,614,171	$	24,361,019	$	59,132,284	$	83,200,198

Platform

Net revenue by platform for the three and nine month periods ended September 30, 2022 and 2021 were as follows:


	Three months ended				Nine months ended
	September 30,				September 30,
	2022		2021		2022		2021
Console	$	3,750,029	$	8,979,422	$	27,157,380	$	36,441,184
PC		9,315,721		11,886,422		22,943,193		34,623,623
Mobile		2,161,624		3,116,517		7,346,822		10,046,412
Other		386,797		378,658		1,684,889		2,088,979
Total revenue from contracts with customers:	$	15,614,171	$	24,361,019	$	59,132,284	$	83,200,198

Distribution channel

Our products are delivered through digital online services (digital download, online platforms, and cloud streaming), mobile, and retail distribution and other. Net revenue by distribution channel for the three and nine month periods ended September 30, 2022 and 2021 was as follows:


	Three months ended				Nine months ended
	September 30,				September 30,
	2022		2021		2022		2021
Digital	$	13,065,750	$	20,865,844	$	50,100,573	$	71,064,807
Mobile		2,161,624		3,116,517		7,346,822		10,046,412
Physical retail and other		386,797		378,658		1,684,889		2,088,979
Total revenue from contracts with customers:	$	15,614,171	$	24,361,019	$	59,132,284	$	83,200,198

Deferred Revenue

The Company records deferred revenue when payments are due or received in advance of the fulfillment of our associated performance obligations; reductions to deferred revenue balance were due primarily to the recognition of revenue upon fulfillment of our performance obligations, which were in the ordinary course of business. Activities in the Company’s deferred revenue as of September 30, 2022 and December 31, 2021 were as follows:


	September 30,		December 31,
	2022		2021
Deferred revenue, beginning balance in advance of revenue recognition billing	$	20,280,934	$	34,529,335
Revenue recognized		(13,039,126)		(26,478,997)
Revenue deferred		5,741,390		12,230,596
Deferred revenue, ending balance		12,983,198		20,280,934
Less: short term portion		3,934,693		11,005,517
Deferred revenue, long term	$	9,048,505	$	9,275,417

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

CASH, AND RESTRICTED CASH AND CASH EQUIVALENTS

9 Months Ended

Sep. 30, 2022

CASH, AND RESTRICTED CASH AND CASH EQUIVALENTS

CASH, AND RESTRICTED CASH AND CASH EQUIVALENTS

NOTE 4 – CASH, AND RESTRICTED CASH AND CASH EQUIVALENTS

Cash equivalents are valued using quoted market prices or other readily available market information. The Company has $6,368,016 and $6,389,777 as of September 30, 2022 and December 31, 2021, respectively, as security for the debt with a financial institution (see Note 15 — Revolving Loan, Short Term Note, and Long-Term Debt) and to secure standby letters of credit with landlords. The following table summarizes the components of the Company’s cash, and restricted cash and cash equivalents as of September 30, 2022 and September 30, 2021:


	2022		2021
Cash	$	9,044,666	$	19,716,853
Restricted cash and cash equivalents		6,368,016		6,382,574
Cash, and restricted cash and cash equivalents	$	15,412,682	$	26,099,427

ACCOUNTS RECEIVABLE - RELATED PARTY

9 Months Ended

Sep. 30, 2022

ACCOUNTS RECEIVABLE - RELATED PARTY

ACCOUNTS RECEIVABLE - RELATED PARTY

NOTE 5 – ACCOUNTS RECEIVABLE – RELATED PARTY

Accounts receivable — related party represents receivables in the ordinary course of business attributable to certain mobile game revenues that, for administrative reasons, are collected by a related party and that the related party has not remitted back to the Company. The accounts receivable is offset by payables due to the related party for royalties, internet data center (“IDC”) and marketing costs. Accounts receivable — related party is non-interest bearing and due on demand. The related party is 100% owned and controlled by the wife of the Founder and Chairman of the Company. As of September 30, 2022 and December 31, 2021, the outstanding balance of net accounts receivable from related party was as follows:


	2022		2021
Accounts receivable - related party	$	13,519,409	$	13,519,409
Less: Accounts payable - related party		(1,279,979)		(5,083,586)
Accounts receivable - related party, net	$	12,239,430	$	8,435,823

DUE FROM SHAREHOLDER

9 Months Ended

Sep. 30, 2022

DUE FROM SHAREHOLDER

DUE FROM SHAREHOLDER

NOTE 6 – DUE FROM SHAREHOLDER

Other receivables from related party consisted of monies that the Company lent to the Company’s Founder and Chairman, who is also the majority shareholder of Suzhou Snail. The loan bore 2.0% per annum interest. Both the loan receivable and the interest receivable are presented as contra equity in our condensed consolidated statements of equity for a total of $94,353,522 as of December 31, 2021. On April 26, 2022, the Company, with approval from its Board of Directors and in accordance with applicable laws and regulations, assigned the other receivables – related party (“due from shareholder” or the “Shi Loan”) of $94,934,400 outstanding including interest, to Suzhou Snail, which assumed the loan as creditor. Simultaneously, the Company declared and paid Suzhou Snail an in-kind dividend with an aggregate amount equal to $94,934,400 on April 26, 2022; see Note 7 – Dividend Distribution. As of September 30, 2022, the other receivable was $0 and no longer reflected on the Company’s condensed consolidated balance sheets.

DIVIDEND DISTRIBUTION

9 Months Ended

Sep. 30, 2022

DIVIDEND DISTRIBUTION

DIVIDEND DISTRIBUTION

NOTE 7 – DIVIDEND DISTRIBUTION

On April 26, 2022, the Company declared an in-kind dividend of $94,934,400 for the assignment of the due from shareholder and a cash dividend of $8,200,000 to pay the related withholding taxes; see Note 6 – Due from Shareholder.

PREPAID EXPENSES - RELATED PARTY

9 Months Ended

Sep. 30, 2022

PREPAID EXPENSES - RELATED PARTY

PREPAID EXPENSES - RELATED PARTY

NOTE 8 – PREPAID EXPENSES - RELATED PARTY

During the nine month period ended September 30, 2022 the Company prepaid $5,000,000 for exclusive license rights to ARK 2 to a related party. Prepaid expenses — related party consisted of the following as of September 30, 2022 and December 31, 2021:


	2022		2021
Prepaid royalties	$	1,520,000	$	3,145,000
Prepaid licenses		6,500,000		—
Prepaid expenses - related party, ending balance		8,020,000		3,145,000
Less: short-term portion		(1,500,000)		(3,145,000)
Total prepaid expenses - related party, long-term	$	6,520,000	$	—

PREPAID EXPENSES AND OTHER CURRENT ASSETS

9 Months Ended

Sep. 30, 2022

PREPAID EXPENSES AND OTHER CURRENT ASSETS

PREPAID EXPENSES AND OTHER CURRENT ASSETS

NOTE 9 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

In January 2022, the Company received $1,500,000 from Pound Sand, LLC in connection with the Company’s sale of its membership interest in Pound Sand, LLC on December 3, 2020; this amount was included as a receivable in the prepaid expenses and other current assets as of December 31, 2021 in the accompanying condensed consolidated balance sheets.

Prepaid expenses and other current assets consisted of the following as of September 30, 2022 and December 31, 2021:


	2022		2021
Prepaid income taxes	$	9,076,317	$	8,217,660
Other prepaids		2,404,370		861,332
Other current assets		224,210		1,938,015
Total prepaid expenses and other current assets	$	11,704,897	$	11,017,007

PROPERTY, PLANT AND EQUIPMENT, NET

9 Months Ended

Sep. 30, 2022

PROPERTY, PLANT AND EQUIPMENT, NET

PROPERTY, PLANT AND EQUIPMENT, NET

NOTE 10 – PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consisted of the following as of September 30, 2022 and December 31, 2021:


	2022		2021
Building	$	1,874,049	$	1,874,049
Land		2,700,000		2,700,000
Building improvements		1,010,218		1,010,218
Leasehold improvements		1,537,775		1,537,775
Autos and trucks		178,695		267,093
Computer and equipment		1,821,819		1,830,949
Furniture and fixtures		411,801		411,801
		9,534,357		9,631,885
Accumulated depreciation		(4,289,086)		(3,953,184)
Property, plant and equipment, net	$	5,245,271	$	5,678,701

Depreciation and amortization expense was $128,536 and $208,896 for the three months ended September 30, 2022 and 2021, respectively. Depreciation and amortization expense was $435,644 and $638,659 for the nine months ended September 30, 2022 and 2021, respectively.

INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2022

INTANGIBLE ASSETS

INTANGIBLE ASSETS

NOTE 11 – INTANGIBLE ASSETS

Intangible assets of trademark and technology consist of game license software underlying intellectual property rights, game trademark name, logo, and other branding items. The Company amortizes the intangible assets over its useful life.

During 2021, the Company impaired the Atlas license right due to delay in launching the game in several platforms. The Company recognized $16,325,000 as impairment loss during the year ended December 31, 2021 and the impairment was calculated based on revision to the discounted cash flow valuation using a 10% discount rate, which reflected the launch delay’s and decreased future cash flow. The following tables set all the intangible assets presented on the condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021:


	September 30, 2022
	Gross								Weighted
	Carrying		Accumulated		Impairment		Net Book		Average
	Amount		Amortization		Loss		Value		Useful Life
License rights from related parties	$	136,665,000	$	(133,429,962)	$	—	$	3,235,038	3 - 5 years
License rights	$	3,000,000	$	(3,000,000)	$	—	$	—	5 years
Intangible assets - other:
Software	$	51,784	$	(51,784)	$	—	$	—	3 years
Trademark		10,745		(6,031)		—		4,714	15 years
In-progress patent		270,886		—		—		270,886
Total:	$	333,415	$	(57,815)	$	—	$	275,600


	December 31, 2021
	Gross								Weighted
	Carrying		Accumulated		Impairment		Net Book		Average
	Amount		Amortization		Loss		Value		Useful Life
License rights from related parties	$	152,990,000	$	(127,877,024)	$	(16,325,000)	$	8,787,976	3 - 5 years
License rights	$	3,000,000	$	(2,750,000)	$	—	$	250,000	5 years
Intangible assets - other:
Software	$	51,784	$	(50,908)	$	—	$	876	3 years
Trademark		10,745		(5,359)		—		5,386	15 years
In-progress patent		270,886		—		—		270,886
Total:	$	333,415	$	(56,267)	$	—	$	277,148

Amortization expense was $1,851,203 and $4,139,551 for the three months ended September 30, 2022 and 2021, respectively. Amortization expense was $5,803,610 and $11,131,342 for the nine months ended September 30, 2022 and 2021, respectively. These amounts are included in cost of revenues in the accompanying condensed consolidated statements of operations and comprehensive income (loss). Future amortization expense of intangible assets is as follows:


Years ending December 31,	Amount
Remainder of 2022	$	1,851,205
2023		1,384,927
2024		804
2025		803
2026		743
Thereafter		272,156
	$	3,510,638

ACCOUNTS PAYABLE RELATED PARTY

9 Months Ended

Sep. 30, 2022

ACCOUNTS PAYABLE RELATED PARTY

ACCOUNTS PAYABLE RELATED PARTY

NOTE 12 – ACCOUNTS PAYABLE — RELATED PARTY

Accounts payable to related party represents payables in the ordinary course of business primarily for purchases of game distribution licenses and also the royalties due to Suzhou Snail. As of September 30, 2022 and December 31, 2021, the Company had $22,330,781 and $23,733,572, respectively, as accounts payable due to Suzhou Snail. For the three months ended September 30, 2022 and 2021, the Company incurred $94,836 and $200,239, respectively as license costs due to Suzhou Snail. During the nine months ended September 30, 2022 and 2021, the Company incurred $316,869 and $592,262, respectively as license costs due to Suzhou Snail. During the nine months ended September 30, 2022, there was $1,719,660 paid to Suzhou Snail for royalties. There were no such payments made during the nine months ended September 30, 2021.

LOAN AND INTEREST RECEIVABLE - RELATED PARTY

9 Months Ended

Sep. 30, 2022

LOAN AND INTEREST RECEIVABLE - RELATED PARTY

LOAN AND INTEREST RECEIVABLE - RELATED PARTY

NOTE 13 – LOAN AND INTEREST RECEIVABLE — RELATED PARTY

In February 2021, the Company lent $200,000 to a wholly owned subsidiary of Suzhou Snail, the loan bears 2.0% per annum interest, interest and principal are due in February 2022. In February 2022, Suzhou Snail signed an agreement with this subsidiary and assumed loan and related interest for a total of $203,890. Subsequently, $103,890 was offset against the loan and interest payable owed to Suzhou Snail on a separate note. Please refer to Note 14 — Loan Payable and Interest Payable — Related Parties. The total amount of loan and interest receivable — related parties was $101,249 and $203,408, as of September 30, 2022 and December 31, 2021, respectively.

LOAN PAYABLE AND INTEREST PAYABLE - RELATED PARTIES

9 Months Ended

Sep. 30, 2022

LOAN PAYABLE AND INTEREST PAYABLE-RELATED PARTIES

LOAN PAYABLE AND INTEREST PAYABLE-RELATED PARTIES

NOTE 14 – LOAN PAYABLE AND INTEREST PAYABLE — RELATED PARTIES

The Company had a loan amount due to related parties of $400,000 bearing 2.00% per annum interest. $300,000 of the loan is from a wholly owned subsidiary of Suzhou Snail and due in June 2022, and $100,000 is from Suzhou Snail and due in December 2023. The $100,000 loan along with $3,890 interest payable to Suzhou Snail was offset by the loan receivable Suzhou Snail assumed in February 2022. Please refer to Note 13 — Loan and Interest Receivable — Related Party. In July 2022, the Company paid off the outstanding principal balance of $300,000. As of September 30, 2022 and December 31, 2021, the total loan payable — related parties amounted to $0 and $400,000, respectively, and total unpaid interest amounted to $527,770 and $528,439, as of September 30, 2022 and December 31, 2021, respectively.

REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT

NOTE 15 – REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT


	September 30,		December 31,
	2022		2021
PPP Promissory Note - In April 2020, the Company applied for and received $773,810 in SBA loans through the paycheck protection program. During the period ended March 31, 2022, the Company made $90,198 in principal payments and during the year ended December 31, 2021 the SBA forgave $392,200 of the PPP loan. In April 2022, the SBA forgave the remaining balance of $126,131 and issued a refund for $48,305 of principal payments made during the three months ended March 31, 2022.	$	—	$	216,329
2021 Revolving Loan - On June 17, 2021, the Company amended its revolving loan agreement (“amended revolver”) and increased the maximum balance to $9,000,000. The amended revolver matures on December 31, 2023 and has an annual interest rate equal to the prime rate less 0.25%. The revolver is secured by the certificate of deposit accounts held with the financial institution, and reported as restricted cash, in the amount of $5,257,382 and $5,240,752 as of September 30, 2022 and December 31, 2021, respectively. Debt covenants of this loan require the Company to maintain a minimum debt service coverage ratio of at least 1.5 to 1.		9,000,000		9,000,000
2021 Promissory Note - On June 17, 2021, the Company amended its loan agreement to reduce the principal amount with financial institution for 10 years, annual interest rate of 3.5% for the first 5 years, and then floating at Wall Street Journal rate from years 6 to 10, the loan is secured by the Company’s building and matures on June 30, 2031. The note is subject to a prepayment penalty.		2,904,815		2,962,782
2022 Short Term Note - On January 26, 2022, the Company amended its revolving loan and long-term debt agreements to obtain an additional note with a principal balance of $10,000,000 which matures on January 26, 2023. Interest shall be equal to the higher of 3.75% or the Wall Street Journal Prime Rate plus 0.50%. The loan is secured by the Company’s assets. In the event of a default, all outstanding amounts under the note will bear interest at a default rate equal to 5% over the note rate. Debt covenants of this loan require the Company to maintain a minimum debt service coverage ratio of at least 1.5 to 1 and will be measured quarterly. In November 2022, the maturity was extended to January 26, 2024; see Note 19 - Subsequent Events.		6,666,667		—
Total		18,571,482		12,179,111
Less: current portion		15,746,092		9,293,677
Total long-term debt	$	2,825,390	$	2,885,434

Total interest expense for the above debt and revolver loan amounted to $254,480 and $105,577 for the three months ended, September 30, 2022 and 2021, respectively. Total interest expense for above debt and revolver loan amounted to $594,171 and $281,680 for the nine months ended September 30, 2022 and 2021, respectively. Amortization of loan origination expenses of $6,590 and $8,870 are included as part of interest expense for the three months ended September 30, 2022 and 2021, respectively. Amortization of loan origination expenses of $19,149 and $22,388 are included as part of interest expense for the nine months ended September 30, 2022 and 2021, respectively. The Company is in compliance with its debt covenants as of September 30, 2022 and December 31, 2021.

The following table provides future minimum payments of its long-term debt as of December 31:


Years ending December 31,	Amount
Remainder of 2022	$	1,269,381
2023		14,496,804
2024		82,748
2025		86,013
2026		89,115
Thereafter		2,547,421
	$	18,571,482

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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+ Details

INCOME TAXES

9 Months Ended

Sep. 30, 2022

INCOME TAXES

INCOME TAXES

NOTE 16 – INCOME TAXES

The Company and its subsidiaries currently file tax returns in the United States (federal and state) and Poland. The statute of limitations for its consolidated federal income tax returns are open for tax years ended December 31, 2018 and after. The statute of limitations for its consolidated California income tax returns are open for tax years ended December 31, 2017 and after. All tax periods for its Polish subsidiary are currently subject to examination since its inception in 2018.

The Company recognized an income tax benefit of $398,998 and expense of $891,538 for the three months ended September 30, 2022 and 2021, respectively, reflecting an effective tax rate of 20.5% and 19.2% for the three month periods ended September 30, 2022 and 2021, respectively. The income tax expense of $803,305 and $4,214,245 for the nine months ended September 30, 2022 and 2021, respectively, reflects an effective tax rate of 19.7% for the period ended September 30, 2022 and 19.8% for the period ended September 30, 2021. At September 30, 2022, the Company’s effective tax rate of 19.7% was less than the federal statutory rate of 21.0% primarily due to the impact of foreign taxes.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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+ Details

OPERATING LEASE RIGHT-OF-USE ASSETS

9 Months Ended

Sep. 30, 2022

OPERATING LEASE RIGHT-OF-USE ASSETS

OPERATING LEASE RIGHT-OF-USE ASSETS

NOTE 17 – OPERATING LEASE RIGHT-OF-USE ASSETS

The Company’s right-of-use assets represent arrangements related primarily to office facilities used in the ordinary business operations of the Company and its subsidiaries. In April, 2018, a commercial bank issued an irrevocable standby letter of credit on behalf of the Company to the landlord for $1,075,000 to lease office space. The standby letter of credit was valid for a one-year term and was amended in January 2021 to extend to January 31, 2026. As of September 30, 2022 and December 31, 2021 the Company’s net operating lease right-of-use assets amounted to $3,887,326 and $5,100,912, respectively. During the nine months ended September 30, 2022, the Company terminated one of its lease contracts and had a second expire. One of the Company’s lease contracts resulted in a gain on the lease termination of $122,533. There were no such terminations during the year ended December 31, 2021. The effects of the termination and expiration of the Company’s lease contracts on the related lease asset and liability were as follows:


	Right of Use		Accumulated		Lease Liability				Gain on
	Asset		Amortization		Current		Long Term		Termination
Lease Terminations	$	(1,301,571)	$	907,370	$	442,704	$	74,030	$	122,533

COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2022

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

NOTE 18 – COMMITMENTS AND CONTINGENCIES

Litigation

The Company is subject to claims and contingencies related to lawsuits and other matters arising out of the normal course of business. In addition, we may receive notifications alleging infringement of patent or other intellectual property rights. The Company has elected to expense legal costs associated with legal contingencies as incurred. As of December 31, 2021, the Company had an estimated accrual of $1,330,000, as a result of a pending litigation settlement. Such amount is included in accrued expenses on the accompanying condensed consolidated balance sheets. The Company paid the balance of $1,330,000 during the nine month period ended September 30, 2022.

On December 1, 2021, the Company and Studio Wildcard sent a notice of claimed infringement (the “DCMA Takedown Notice”) to Valve Corporation, which operates the Steam platform, pursuant to the Digital Millennium Copyright Act (“DCMA”). The DCMA Takedown Notice concerns a videogame titled Myth of Empires, which was developed by Suzhou Angela Online Game Technology Co., Ltd. (“Angela Game”) and published by Imperium Interactive Entertainment Limited (“Imperium”). The DCMA Takedown Notice alleges that Angela Game and Imperium misappropriated the copyrighted source code of ARK: Survival Evolved and used it to develop the game Myth of Empires. The DCMA Takedown Notice requested that Steam cease distributing Myth of Empires and remove the game from the Steam platform. Steam complied with the DCMA Takedown Notice and removed Myth of Empires from its platform. The DCMA Takedown Notice was also sent to Tencent Cloud LLC (“Tencent”), which hosts the United States servers for users who downloaded the game before it was removed from Steam, but Tencent has not complied with the DCMA Takedown Notice.

On December 9, 2021, Angela Game and Imperium filed a complaint against the Company and Studio Wildcard in the United States District Court for the Central District of California in response to the DCMA Takedown Notice. The lawsuit seeks a declaratory judgment on non-liability for copyright infringement and non-liability for trade secret misappropriation, as well as unspecified damages for alleged misrepresentations in the DCMA Takedown Notice. Angela Game and Imperium also filed an application for a temporary restraining order asking the court to order us and Studio Wildcard to rescind the DCMA Takedown Notice so that Steam could once again reinstate Myth of Empires for download. On December 20, 2021, the Company and Studio Wildcard filed an answer to the complaint, which included counterclaims against Angela Game and Imperium and a third-party complaint against Tencent seeking unspecified damages resulting from the alleged copyright infringement and misappropriation of trade secrets in connection with the ARK: Survival Evolved source code. On December 23, 2021 the court denied the application for a temporary restraining order and issued an order to show cause as to why a preliminary injunction should not be issued. On January 31, 2022, a hearing was held on the order to show cause, and the court issued an order denying the preliminary injunction.

On February 3, 2022 Angela Game and Imperium appealed the order to the Ninth Circuit Court of Appeals (“Ninth Circuit”), claiming that the district court judge abused her discretion in denying the injunction. On October 6, 2022, the Ninth Circuit issued an order affirming the district court’s denial of the injunction.

Meanwhile, the district court has appointed a neutral expert to compare the parties’ computer code and issue a report about the extent of similarities. The parties have also retained their own experts to compare the code. The district court has set no discovery deadlines or a trial date.

At this time, we are unable to quantify the magnitude of the potential loss should the plaintiffs’ lawsuit succeed. The Company has not recorded any accrual as the legal costs are borne by Studio Wildcard.

SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2022

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

NOTE 19 – SUBSEQUENT EVENTS

●

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2022

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

Principal vs Agent Consideration

●

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.

Contract Balance

The Company records deferred revenue when cash payments are received or due in advance of its performance, even if amounts are refundable.

Estimated Service Period

Shipping and Handling

Cost of Revenues


	Three months ended				Nine months ended
	September 30,				September 30,
	2022		2021		2022		2021
Software license royalties - related parties	$	3,428,231	$	4,954,040	$	13,314,258	$	17,046,875
Software license royalties		47,020		—		47,020		—
License and amortization - related parties		6,350,979		8,483,182		19,052,938		24,169,714
License and amortization		224		155,701		250,672		456,149
Game localization		840		5,727		840		47,100
Merchant fees		602,814		847,610		1,856,371		2,878,020
Engine fees		359,263		552,913		1,575,942		2,453,533
Internet, server and data center		535,399		479,154		1,502,631		1,329,670
Costs related to advertising revenue		144,191		—		144,191		—
Total:	$	11,468,961	$	15,478,327	$	37,744,863	$	48,381,061

Advertising and Marketing Costs

Research and Development

Non-controlling Interests


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

Fair Value Measurements

The following describes the hierarchy of inputs used to measure fair value and the primary valuation methodologies used by the Company for financial instruments measured at fair value.

The three levels of inputs are as follows:

●

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 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.

Concentration of Credit Risk and Significant Customers

Leases

Recently Issued Accounting Pronouncements

Earnings Per Share

CARES Act

Dividend Restrictions

Our ability to pay cash dividends is currently restricted by the terms of our credit facilities.

PRESENTATION AND NATURE OF OPERATIONS (Tables)

9 Months Ended

Sep. 30, 2022

PRESENTATION AND NATURE OF OPERATIONS

Summary of subsidiaries included in the condensed consolidated financial statements


	Equity %
Subsidiary Name	Owned
Snail Innovation Institute	70	%
Frostkeep Studios, Inc.	100	%
Eminence Corp	100	%
Wandering Wizard, LLC	100	%
Donkey Crew Limited Liability Company	99	%
Interactive Films, LLC	100	%
Project AWK Productions, LLC	100	%
BTBX.IO, LLC	70	%
Elephant Snail, LLC (through April 15, 2021)	51	%

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2022

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Schedule of Cost of revenues


	Three months ended				Nine months ended
	September 30,				September 30,
	2022		2021		2022		2021
Software license royalties - related parties	$	3,428,231	$	4,954,040	$	13,314,258	$	17,046,875
Software license royalties		47,020		—		47,020		—
License and amortization - related parties		6,350,979		8,483,182		19,052,938		24,169,714
License and amortization		224		155,701		250,672		456,149
Game localization		840		5,727		840		47,100
Merchant fees		602,814		847,610		1,856,371		2,878,020
Engine fees		359,263		552,913		1,575,942		2,453,533
Internet, server and data center		535,399		479,154		1,502,631		1,329,670
Costs related to advertising revenue		144,191		—		144,191		—
Total:	$	11,468,961	$	15,478,327	$	37,744,863	$	48,381,061

Schedule of Equity interest and Non controlling interest in subsidiaries

As of September 30, 2022 and December 31, 2021, there were non-controlling interests with the following subsidiaries:


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

REVENUE FROM CONTRACTS WITH CUSTOMERS (Tables)

9 Months Ended

Sep. 30, 2022

REVENUE FROM CONTRACTS WITH CUSTOMERS

Schedule of disaggregation of revenue


	Three months ended				Nine months ended
	September 30,				September 30,
	2022		2021		2022		2021
United States	$	14,767,182	$	22,226,122	$	55,025,810	$	73,482,250
International		846,989		2,134,897		4,106,474		9,717,948
Total revenue from contracts with customers:	$	15,614,171	$	24,361,019	$	59,132,284	$	83,200,198


	Three months ended				Nine months ended
	September 30,				September 30,
	2022		2021		2022		2021
Console	$	3,750,029	$	8,979,422	$	27,157,380	$	36,441,184
PC		9,315,721		11,886,422		22,943,193		34,623,623
Mobile		2,161,624		3,116,517		7,346,822		10,046,412
Other		386,797		378,658		1,684,889		2,088,979
Total revenue from contracts with customers:	$	15,614,171	$	24,361,019	$	59,132,284	$	83,200,198


	Three months ended				Nine months ended
	September 30,				September 30,
	2022		2021		2022		2021
Digital	$	13,065,750	$	20,865,844	$	50,100,573	$	71,064,807
Mobile		2,161,624		3,116,517		7,346,822		10,046,412
Physical retail and other		386,797		378,658		1,684,889		2,088,979
Total revenue from contracts with customers:	$	15,614,171	$	24,361,019	$	59,132,284	$	83,200,198

Schedule of deferred Revenue


	September 30,		December 31,
	2022		2021
Deferred revenue, beginning balance in advance of revenue recognition billing	$	20,280,934	$	34,529,335
Revenue recognized		(13,039,126)		(26,478,997)
Revenue deferred		5,741,390		12,230,596
Deferred revenue, ending balance		12,983,198		20,280,934
Less: short term portion		3,934,693		11,005,517
Deferred revenue, long term	$	9,048,505	$	9,275,417

CASH, AND RESTRICTED CASH AND CASH EQUIVALENTS (Tables)

9 Months Ended

Sep. 30, 2022

CASH, AND RESTRICTED CASH AND CASH EQUIVALENTS

Components of the Company's cash, and restricted cash and cash equivalents


	2022		2021
Cash	$	9,044,666	$	19,716,853
Restricted cash and cash equivalents		6,368,016		6,382,574
Cash, and restricted cash and cash equivalents	$	15,412,682	$	26,099,427

ACCOUNTS RECEIVABLE - RELATED PARTY (Tables)

9 Months Ended

Sep. 30, 2022

ACCOUNTS RECEIVABLE - RELATED PARTY

Schedule of outstanding balance of net accounts receivable from related party


	2022		2021
Accounts receivable - related party	$	13,519,409	$	13,519,409
Less: Accounts payable - related party		(1,279,979)		(5,083,586)
Accounts receivable - related party, net	$	12,239,430	$	8,435,823

PREPAID EXPENSES - RELATED PARTY (Tables)

9 Months Ended

Sep. 30, 2022

PREPAID EXPENSES - RELATED PARTY

Schedule of prepaid expenses - related party


	2022		2021
Prepaid royalties	$	1,520,000	$	3,145,000
Prepaid licenses		6,500,000		—
Prepaid expenses - related party, ending balance		8,020,000		3,145,000
Less: short-term portion		(1,500,000)		(3,145,000)
Total prepaid expenses - related party, long-term	$	6,520,000	$	—

PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables)

9 Months Ended

Sep. 30, 2022

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Schedule of prepaid expenses and other current assets


	2022		2021
Prepaid income taxes	$	9,076,317	$	8,217,660
Other prepaids		2,404,370		861,332
Other current assets		224,210		1,938,015
Total prepaid expenses and other current assets	$	11,704,897	$	11,017,007

PROPERTY, PLANT AND EQUIPMENT, NET (Tables)

9 Months Ended

Sep. 30, 2022

PROPERTY, PLANT AND EQUIPMENT, NET

Schedule of property, plant and equipment, net


	2022		2021
Building	$	1,874,049	$	1,874,049
Land		2,700,000		2,700,000
Building improvements		1,010,218		1,010,218
Leasehold improvements		1,537,775		1,537,775
Autos and trucks		178,695		267,093
Computer and equipment		1,821,819		1,830,949
Furniture and fixtures		411,801		411,801
		9,534,357		9,631,885
Accumulated depreciation		(4,289,086)		(3,953,184)
Property, plant and equipment, net	$	5,245,271	$	5,678,701

INTANGIBLE ASSETS (Tables)

9 Months Ended

Sep. 30, 2022

INTANGIBLE ASSETS

Schedule of intangible assets


	September 30, 2022
	Gross								Weighted
	Carrying		Accumulated		Impairment		Net Book		Average
	Amount		Amortization		Loss		Value		Useful Life
License rights from related parties	$	136,665,000	$	(133,429,962)	$	—	$	3,235,038	3 - 5 years
License rights	$	3,000,000	$	(3,000,000)	$	—	$	—	5 years
Intangible assets - other:
Software	$	51,784	$	(51,784)	$	—	$	—	3 years
Trademark		10,745		(6,031)		—		4,714	15 years
In-progress patent		270,886		—		—		270,886
Total:	$	333,415	$	(57,815)	$	—	$	275,600


	December 31, 2021
	Gross								Weighted
	Carrying		Accumulated		Impairment		Net Book		Average
	Amount		Amortization		Loss		Value		Useful Life
License rights from related parties	$	152,990,000	$	(127,877,024)	$	(16,325,000)	$	8,787,976	3 - 5 years
License rights	$	3,000,000	$	(2,750,000)	$	—	$	250,000	5 years
Intangible assets - other:
Software	$	51,784	$	(50,908)	$	—	$	876	3 years
Trademark		10,745		(5,359)		—		5,386	15 years
In-progress patent		270,886		—		—		270,886
Total:	$	333,415	$	(56,267)	$	—	$	277,148

Schedule of future amortization expense of intangible assets


Years ending December 31,	Amount
Remainder of 2022	$	1,851,205
2023		1,384,927
2024		804
2025		803
2026		743
Thereafter		272,156
	$	3,510,638

REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT (Tables)

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Summary of debt


	September 30,		December 31,
	2022		2021
PPP Promissory Note - In April 2020, the Company applied for and received $773,810 in SBA loans through the paycheck protection program. During the period ended March 31, 2022, the Company made $90,198 in principal payments and during the year ended December 31, 2021 the SBA forgave $392,200 of the PPP loan. In April 2022, the SBA forgave the remaining balance of $126,131 and issued a refund for $48,305 of principal payments made during the three months ended March 31, 2022.	$	—	$	216,329
2021 Revolving Loan - On June 17, 2021, the Company amended its revolving loan agreement (“amended revolver”) and increased the maximum balance to $9,000,000. The amended revolver matures on December 31, 2023 and has an annual interest rate equal to the prime rate less 0.25%. The revolver is secured by the certificate of deposit accounts held with the financial institution, and reported as restricted cash, in the amount of $5,257,382 and $5,240,752 as of September 30, 2022 and December 31, 2021, respectively. Debt covenants of this loan require the Company to maintain a minimum debt service coverage ratio of at least 1.5 to 1.		9,000,000		9,000,000
2021 Promissory Note - On June 17, 2021, the Company amended its loan agreement to reduce the principal amount with financial institution for 10 years, annual interest rate of 3.5% for the first 5 years, and then floating at Wall Street Journal rate from years 6 to 10, the loan is secured by the Company’s building and matures on June 30, 2031. The note is subject to a prepayment penalty.		2,904,815		2,962,782
2022 Short Term Note - On January 26, 2022, the Company amended its revolving loan and long-term debt agreements to obtain an additional note with a principal balance of $10,000,000 which matures on January 26, 2023. Interest shall be equal to the higher of 3.75% or the Wall Street Journal Prime Rate plus 0.50%. The loan is secured by the Company’s assets. In the event of a default, all outstanding amounts under the note will bear interest at a default rate equal to 5% over the note rate. Debt covenants of this loan require the Company to maintain a minimum debt service coverage ratio of at least 1.5 to 1 and will be measured quarterly. In November 2022, the maturity was extended to January 26, 2024; see Note 19 - Subsequent Events.		6,666,667		—
Total		18,571,482		12,179,111
Less: current portion		15,746,092		9,293,677
Total long-term debt	$	2,825,390	$	2,885,434

Summary of future minimum payments of its long-term debt


Years ending December 31,	Amount
Remainder of 2022	$	1,269,381
2023		14,496,804
2024		82,748
2025		86,013
2026		89,115
Thereafter		2,547,421
	$	18,571,482

OPERATING LEASE RIGHT-OF-USE ASSETS (Tables)

9 Months Ended

Sep. 30, 2022

OPERATING LEASE RIGHT-OF-USE ASSETS

Schedule of the effects of the termination and expiration of lease contracts on the related lease asset and liability


	Right of Use		Accumulated		Lease Liability				Gain on
	Asset		Amortization		Current		Long Term		Termination
Lease Terminations	$	(1,301,571)	$	907,370	$	442,704	$	74,030	$	122,533

STOCKHOLDERS' EQUITY (Details) - Snail Inc - Mr. Hai Shi, the Founder and Chairman of Registrant	Jan. 14, 2022 USD ($) shares
STOCKHOLDERS' EQUITY
Value of shares contributed by Registrant \| $	$ 100
Shares contributed by Registrant \| shares	100

PRESENTATION AND NATURE OF OPERATIONS - Paragraphs (Details)		9 Months Ended
	Jul. 13, 2022 shares	Sep. 30, 2022 segment
PRESENTATION AND NATURE OF OPERATIONS
Number of operating segments		1
Number of reportable segments		1
Suzhou Snail \| Snail Technology
PRESENTATION AND NATURE OF OPERATIONS
Number of shares of common stock issued as per agreement \| shares	500,000

PRESENTATION AND NATURE OF OPERATIONS - Subsidiaries (Details)	Sep. 30, 2022
Snail Innovation Institute
PRESENTATION AND NATURE OF OPERATIONS
Equity interest owned by the company	70.00%
Donkey Crew Limited Liability Company
PRESENTATION AND NATURE OF OPERATIONS
Equity interest owned by the company	99.00%
BTBX.IO, LLC
PRESENTATION AND NATURE OF OPERATIONS
Equity interest owned by the company	70.00%
Subsidiaries \| Snail Innovation Institute
PRESENTATION AND NATURE OF OPERATIONS
Equity interest owned by the company	70.00%
Subsidiaries \| Frostkeep Studios, Inc.
PRESENTATION AND NATURE OF OPERATIONS
Equity interest owned by the company	100.00%
Subsidiaries \| Eminence Corp
PRESENTATION AND NATURE OF OPERATIONS
Equity interest owned by the company	100.00%
Subsidiaries \| Wandering Wizard, LLC
PRESENTATION AND NATURE OF OPERATIONS
Equity interest owned by the company	100.00%
Subsidiaries \| Donkey Crew Limited Liability Company
PRESENTATION AND NATURE OF OPERATIONS
Equity interest owned by the company	99.00%
Subsidiaries \| Interactive Films, LLC
PRESENTATION AND NATURE OF OPERATIONS
Equity interest owned by the company	100.00%
Subsidiaries \| Project AWK Productions, LLC
PRESENTATION AND NATURE OF OPERATIONS
Equity interest owned by the company	100.00%
Subsidiaries \| BTBX.IO, LLC
PRESENTATION AND NATURE OF OPERATIONS
Equity interest owned by the company	70.00%
Subsidiaries \| Elephant Snail, LLC (through April 15, 2021)
PRESENTATION AND NATURE OF OPERATIONS
Equity interest owned by the company	51.00%

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Contract Balance and Service Period (Details) - USD ($)	1 Months Ended				9 Months Ended	12 Months Ended
	Nov. 30, 2021	Jun. 30, 2020	Feb. 29, 2020	Nov. 30, 2018	Sep. 30, 2022	Dec. 31, 2020	Dec. 31, 2021
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Deferred revenue					$ 12,983,198	$ 34,529,335	$ 20,280,934
Minimum
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Estimated service period for goods					30 days
Maximum
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Estimated service period for goods					100 days
Long-term title license agreement with platform
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Period of agreement				3 years
ARK 1 \| Long-term title license agreement with platform
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue recognized					$ 2,500,000
ARK 1 \| Agreement with platform
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Period of agreement	35 days
Proceeds from agreement with customers	$ 3,500,000
ARK 1 \| Non-exclusive license agreement with platform
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Period of agreement			14 days
Proceeds from agreement with customers			$ 8,000,000.0
Revenue recognized					4,000,000.0	$ 4,000,000.0
ARK 2 \| Long-term title license agreement with platform
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Period of agreement		3 years
Deferred revenue					$ 2,300,000

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Cost of revenues (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Software license royalties - related parties	$ 3,428,231	$ 4,954,040	$ 13,314,258	$ 17,046,875
Software license royalties	47,020		47,020
License and amortization - related parties	6,350,979	8,483,182	19,052,938	24,169,714
License and amortization	224	155,701	250,672	456,149
Game localization	840	5,727	840	47,100
Merchant fees	602,814	847,610	1,856,371	2,878,020
Engine fees	359,263	552,913	1,575,942	2,453,533
Internet, server and data center	535,399	479,154	1,502,631	1,329,670
Costs related to advertising revenue	144,191		144,191
Total:	$ 11,468,961	$ 15,478,327	$ 37,744,863	$ 48,381,061

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Advertising and Marketing Costs (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Advertising expense	$ 198,417	$ 148,752	$ 569,127	$ 265,812

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Research and Development (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Research and development expense	$ 116,624	$ 216,798	$ 479,630	$ 588,207

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Non controlling interest in subsidiaries (Details)	Sep. 30, 2022
Snail Innovation Institute [Member]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Equity interest owned by the company	70.00%
Non controlling interest held in a subsidiary	30.00%
B T B X.io, LLC [Member]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Equity interest owned by the company	70.00%
Non controlling interest held in a subsidiary	30.00%
Donkey Crew Limited Liability Company [Member]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Equity interest owned by the company	99.00%
Non controlling interest held in a subsidiary	1.00%

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Fair Value Measurements (Details) - Promissory Note 2021 [Member]		9 Months Ended
	Jun. 17, 2021	Sep. 30, 2022
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Debt instrument, interest rate, stated percentage, period	5 years
Wall Street Journal Prime Rate
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Debt instrument, interest rate, stated percentage, period		5 years
Floating prime rate		0.50%

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Concentration of Credit Risk (Details)	1 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended
	Jan. 31, 2022 USD ($)	Sep. 30, 2022 USD ($)	Sep. 30, 2021	Sep. 30, 2022 USD ($) customer	Sep. 30, 2021	Dec. 31, 2021 USD ($) customer
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Deposits not insured by FDIC		$ 14,037,412		$ 14,037,412		$ 15,135,863
Pound Sand LLC [Member]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Proceeds received from sale of membership interest	$ 1,500,000
Customer concentration risk \| Gross receivables
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Number of customers \| customer				2		4
Customer concentration risk \| Gross receivables \| Customers
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration percentage				58.00%		86.00%
Customer concentration risk \| Gross receivables \| Customer One
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration percentage				30.00%		29.00%
Customer concentration risk \| Gross receivables \| Customer Two
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration percentage				28.00%		28.00%
Customer concentration risk \| Gross receivables \| Customer Three
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration percentage						17.00%
Customer concentration risk \| Gross receivables \| Customer Four
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration percentage						12.00%
Customer concentration risk \| Revenues \| Customers
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration percentage		43.00%	57.00%	56.00%	73.00%

REVENUE FROM CONTRACTS WITH CUSTOMERS - Disaggregation of revenue (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
REVENUE FROM CONTRACTS WITH CUSTOMERS
Total revenue from contracts with customers	$ 15,614,171	$ 24,361,019	$ 59,132,284	$ 83,200,198
Digital
REVENUE FROM CONTRACTS WITH CUSTOMERS
Total revenue from contracts with customers	13,065,750	20,865,844	50,100,573	71,064,807
Mobile
REVENUE FROM CONTRACTS WITH CUSTOMERS
Total revenue from contracts with customers	2,161,624	3,116,517	7,346,822	10,046,412
Physical retail and other
REVENUE FROM CONTRACTS WITH CUSTOMERS
Total revenue from contracts with customers	386,797	378,658	1,684,889	2,088,979
Console
REVENUE FROM CONTRACTS WITH CUSTOMERS
Total revenue from contracts with customers	3,750,029	8,979,422	27,157,380	36,441,184
PC
REVENUE FROM CONTRACTS WITH CUSTOMERS
Total revenue from contracts with customers	9,315,721	11,886,422	22,943,193	34,623,623
Mobile
REVENUE FROM CONTRACTS WITH CUSTOMERS
Total revenue from contracts with customers	2,161,624	3,116,517	7,346,822	10,046,412
Other
REVENUE FROM CONTRACTS WITH CUSTOMERS
Total revenue from contracts with customers	386,797	378,658	1,684,889	2,088,979
United States
REVENUE FROM CONTRACTS WITH CUSTOMERS
Total revenue from contracts with customers	14,767,182	22,226,122	55,025,810	73,482,250
International
REVENUE FROM CONTRACTS WITH CUSTOMERS
Total revenue from contracts with customers	$ 846,989	$ 2,134,897	$ 4,106,474	$ 9,717,948

REVENUE FROM CONTRACTS WITH CUSTOMERS - Deferred Revenue (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
REVENUE FROM CONTRACTS WITH CUSTOMERS
Deferred revenue, beginning balance in advance of revenue recognition billing	$ 20,280,934	$ 34,529,335
Revenue recognized	(13,039,126)	(26,478,997)
Revenue deferred	5,741,390	12,230,596
Deferred revenue, ending balance	12,983,198	20,280,934
Less: short term portion	3,934,693	11,005,517
Deferred revenue, long term	$ 9,048,505	$ 9,275,417

CASH, AND RESTRICTED CASH AND CASH EQUIVALENTS (Details) - USD ($)	Sep. 30, 2022	Dec. 31, 2021	Sep. 30, 2021	Dec. 31, 2020
CASH, AND RESTRICTED CASH AND CASH EQUIVALENTS
Cash	$ 9,044,666	$ 10,164,338	$ 19,716,853
Restricted cash and cash equivalents	6,368,016	6,389,777	6,382,574
Cash, and restricted cash and cash equivalents	$ 15,412,682	$ 16,554,115	$ 26,099,427	$ 33,902,707

ACCOUNTS RECEIVABLE - RELATED PARTY (Details) - USD ($)	9 Months Ended
ACCOUNTS RECEIVABLE - RELATED PARTY (Details) - USD ($)	Sep. 30, 2022	Dec. 31, 2021
Related Party Transaction
Accounts receivable - related party	$ 13,519,409	$ 13,519,409
Less: Accounts payable - related party	(1,279,979)	(5,083,586)
Accounts receivable - related party, net	$ 12,239,430	$ 8,435,823
Immediate family member of management or principal owner
Related Party Transaction
Ownership percentage (as percent)	100.00%

DUE FROM SHAREHOLDER (Details) - USD ($)		12 Months Ended
DUE FROM SHAREHOLDER (Details) - USD ($)	Apr. 26, 2022	Dec. 31, 2021	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020
Related Party Transaction
Equity		$ 10,052,053	$ 4,468,825	$ 6,008,709	$ 15,353,936	$ 26,254,551	$ 31,466,642	$ 31,214,294	$ 34,339,756
Other receivables-related party			$ 0
Snail Digital Technology Co., Ltd. [Member]
Related Party Transaction
Due from shareholder and interest assigned	$ 94,934,400
Paid in-kind dividend	$ 94,934,400
Receivables from stockholder
Related Party Transaction
Interest rate per annum		2.00%
Equity		$ 94,353,522

- Definition

+ References

+ Details

DIVIDEND DISTRIBUTION (Details) - Snail Digital Technology Co., Ltd. [Member]	Apr. 26, 2022 USD ($)
DIVIDEND DISTRIBUTION
Paid in-kind dividend	$ 94,934,400
Cash dividend to pay related withholding taxes	$ 8,200,000

PREPAID EXPENSES - RELATED PARTY (Details) - USD ($)	Sep. 30, 2022	Dec. 31, 2021
Prepaid royalties	$ 1,520,000	$ 3,145,000
Prepaid licenses	6,500,000
Prepaid expenses - related party, ending balance	8,020,000	3,145,000
Less: short term portion	1,500,000	$ 3,145,000
Total prepaid expenses - related party, long-term	6,520,000
ARK 2
Prepaid licenses	$ 5,000,000

PREPAID EXPENSES AND OTHER CURRENT ASSETS - (Details) - USD ($)	1 Months Ended
	Jan. 31, 2022	Sep. 30, 2022	Dec. 31, 2021
Sale of membership interests
Prepaid income taxes		$ 9,076,317	$ 8,217,660
Other prepaids		2,404,370	861,332
Other current assets		224,210	1,938,015
Total prepaid expenses and other current assets		$ 11,704,897	$ 11,017,007
Pound Sand LLC [Member]
Sale of membership interests
Proceeds received from sale of membership interest	$ 1,500,000

PROPERTY, PLANT AND EQUIPMENT, NET (Details) - USD ($)	3 Months Ended		9 Months Ended
PROPERTY, PLANT AND EQUIPMENT, NET (Details) - USD ($)	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, gross	$ 9,534,357		$ 9,534,357		$ 9,631,885
Accumulated depreciation	(4,289,086)		(4,289,086)		(3,953,184)
Property, plant and equipment, net	5,245,271		5,245,271		5,678,701
Depreciation and amortization - property and equipment	128,536	$ 208,896	435,644	$ 638,659
Building
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, gross	1,874,049		1,874,049		1,874,049
Land
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, gross	2,700,000		2,700,000		2,700,000
Building improvements
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, gross	1,010,218		1,010,218		1,010,218
Leasehold improvements
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, gross	1,537,775		1,537,775		1,537,775
Autos and trucks
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, gross	178,695		178,695		267,093
Computer and equipment
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, gross	1,821,819		1,821,819		1,830,949
Furniture and fixtures
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, gross	$ 411,801		$ 411,801		$ 411,801

INTANGIBLE ASSETS (Details) - USD ($)	9 Months Ended	12 Months Ended
INTANGIBLE ASSETS (Details) - USD ($)	Sep. 30, 2022	Dec. 31, 2021
Finite-Lived Intangible Assets [Line Items]
Net Book Value	$ 3,510,638
License rights from related parties
Finite-Lived Intangible Assets [Line Items]
Impairment Loss		$ 16,325,000
Gross Carrying Amount	136,665,000	152,990,000
Accumulated Amortization	(133,429,962)	(127,877,024)
Impairment Loss		(16,325,000)
Net Book Value	$ 3,235,038	$ 8,787,976
Discount rate		10.00%
License rights from related parties \| Minimum
Finite-Lived Intangible Assets [Line Items]
Weighted Average Useful Life	3 years	3 years
License rights from related parties \| Maximum
Finite-Lived Intangible Assets [Line Items]
Weighted Average Useful Life	5 years	5 years
License rights
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 3,000,000	$ 3,000,000
Accumulated Amortization	$ (3,000,000)	(2,750,000)
Net Book Value		$ 250,000
Weighted Average Useful Life	5 years	5 years
Software
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 51,784	$ 51,784
Accumulated Amortization	$ (51,784)	(50,908)
Net Book Value		$ 876
Weighted Average Useful Life	3 years	3 years
Trademark
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 10,745	$ 10,745
Accumulated Amortization	(6,031)	(5,359)
Net Book Value	$ 4,714	$ 5,386
Weighted Average Useful Life	15 years	15 years
In-progress patent
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 270,886	$ 270,886
Net Book Value	270,886	270,886
Other Intangible Assets [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	333,415	333,415
Accumulated Amortization	(57,815)	(56,267)
Net Book Value	$ 275,600	$ 277,148

INTANGIBLE ASSETS - Amortization (Details) - USD ($)	3 Months Ended		9 Months Ended
INTANGIBLE ASSETS - Amortization (Details) - USD ($)	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
INTANGIBLE ASSETS
Amortization expense	$ 1,851,203	$ 4,139,551	$ 5,803,610	$ 11,131,342
Future amortization expense
Remainder of 2022	1,851,205		1,851,205
2023	1,384,927		1,384,927
2024	804		804
2025	803		803
2026	743		743
Thereafter	272,156		272,156
Total	$ 3,510,638		$ 3,510,638

ACCOUNTS PAYABLE RELATED PARTY (Details) - USD ($)	3 Months Ended		9 Months Ended
ACCOUNTS PAYABLE RELATED PARTY (Details) - USD ($)	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Related Party Transaction
Accounts payable - related party	$ 22,330,781		$ 22,330,781		$ 23,733,572
Suzhou Snail
Related Party Transaction
License costs to related party	$ 94,836	$ 200,239	316,869	$ 592,262
Suzhou Snail \| License Rights From Related Parties [Member]
Related Party Transaction
Royalty payments			$ 1,719,660	$ 0

LOAN AND INTEREST RECEIVABLE - RELATED PARTY (Details) - USD ($)	1 Months Ended		9 Months Ended
	Feb. 28, 2022	Feb. 28, 2021	Sep. 30, 2021	Sep. 30, 2022	Dec. 31, 2021
Related Party Transaction
Loan to related party			$ 24,506,321
Loan and interest receivable - related party				$ 101,249	$ 203,408
A Subsidiary of Suzhou Snail
Related Party Transaction
Loan to related party		$ 200,000
Interest rate per annum		2.00%
Suzhou Snail
Related Party Transaction
Amount of loan and interest receivable offset	$ 103,890
Suzhou Snail \| Suzhou Snail
Related Party Transaction
Loan amount and interest assumed	$ 203,890

LOAN PAYABLE AND INTEREST PAYABLE - RELATED PARTIES (Details) - USD ($)	1 Months Ended	12 Months Ended
	Jul. 31, 2022	Dec. 31, 2021	Sep. 30, 2022	Feb. 28, 2022
Related Party Transaction
Loan payable-related parties		$ 400,000	$ 0
Interest payable-related parties		528,439	$ 527,770
Loan Payable
Related Party Transaction
Loan payable-related parties		$ 400,000
Interest rate per annum		2.00%
A Subsidiary of Suzhou Snail \| Loan from related party due in June 2022
Related Party Transaction
Loan payable-related parties		$ 300,000
Payment of related party debt	$ 300,000
Suzhou Snail \| Loan from related party due in December 2023
Related Party Transaction
Loan payable-related parties		$ 100,000
Loans payable offset against receivable				$ 100,000
Amount of interest payable offset by interest receivable				$ 3,890

REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT - Schedule Table (Details) - USD ($)			1 Months Ended		3 Months Ended	9 Months Ended	12 Months Ended
	Jan. 26, 2022	Jun. 17, 2021	Apr. 30, 2022	Apr. 30, 2020	Mar. 31, 2022	Sep. 30, 2022	Dec. 31, 2021	Sep. 30, 2021
REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT
Total						$ 18,571,482	$ 12,179,111
Less: current portion						15,746,092	9,293,677
Total long-term debt						2,825,390	2,885,434
Proceeds from SBA loans						10,000,000
Refund of principal payments						48,305
Restricted cash and cash equivalents						6,368,016	6,389,777	$ 6,382,574
PPP Promissory Note
REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT
Total							216,329
Proceeds from SBA loans				$ 773,810
Principal payment of loan					$ 90,198
Loan forgiven			$ 126,131				392,200
Refund of principal payments					$ 48,305
2021 Revolving Loan
REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT
Total						9,000,000	9,000,000
Maximum borrowing capacity		$ 9,000,000
Restricted cash and cash equivalents						5,257,382	5,240,752
Debt service coverage ratio		1.5
2021 Revolving Loan \| Prime Rate
REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT
Percentage of spread		0.25%
2021 Promissory Note
REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT
Total						$ 2,904,815	$ 2,962,782
Debt term		10 years
Debt instrument, interest rate, stated percentage, period		5 years
Interest rate		3.50%
2021 Promissory Note \| Wall Street Journal Prime Rate
REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT
Percentage of spread						0.50%
Debt instrument, interest rate, stated percentage, period						5 years
2022 Short Term Note
REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT
Total						$ 6,666,667
Principal payment of loan	$ 10,000,000
Percentage of spread	3.75%
Default interest rate	5.00%
Debt service coverage ratio	1.5
2022 Short Term Note \| Wall Street Journal Prime Rate
REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT
Percentage of spread	0.50%

REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT - Paragraph (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT
Interest expense	$ 261,070	$ 114,447	$ 613,338	$ 304,918
Amortization of loan origination expenses	6,590	8,870	19,149	22,388
Revolving Credit Facility [Member]
REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT
Interest expense	$ 254,480	$ 105,577	$ 594,171	$ 281,680

REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT - Future minimum payments (Details)	Sep. 30, 2022 USD ($)
Debt Disclosure [Abstract]
Remainder of 2022	$ 1,269,381
2023	14,496,804
2024	82,748
2025	86,013
2026	89,115
Thereafter	2,547,421
Long term debt	$ 18,571,482

- Definition

Amount, excluding unamortized premium (discount) and debt issuance cost, of long-term debt. Excludes lease obligation.

+ References + Details

INCOME TAXES (Details) - USD ($)	3 Months Ended		9 Months Ended
INCOME TAXES (Details) - USD ($)	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
INCOME TAXES
Income tax provision (benefit)	$ (398,998)	$ 891,538	$ 803,305	$ 4,214,245
Effective tax rate	20.50%	19.20%	19.70%	19.80%
Federal statutory rate			21.00%

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

OPERATING LEASE RIGHT-OF-USE ASSETS (Details) - USD ($)	1 Months Ended	9 Months Ended	12 Months Ended
OPERATING LEASE RIGHT-OF-USE ASSETS (Details) - USD ($)	Apr. 30, 2018	Sep. 30, 2022	Dec. 31, 2021
OPERATING LEASE RIGHT-OF-USE ASSETS
Right of Use Asset		$ 3,887,326	$ 5,100,912
Lease Liability - Current		1,339,172	1,688,965
Lease Liability - Long Term		3,285,679	4,375,786
Gain on lease termination		122,533
Terminated and Expired Lease
OPERATING LEASE RIGHT-OF-USE ASSETS
Right of Use Asset		1,301,571
Accumulated Amortization		907,370
Lease Liability - Current		442,704
Lease Liability - Long Term		74,030
Gain on lease termination		$ 122,533	$ 0
Standby Letters of Credit [Member]
OPERATING LEASE RIGHT-OF-USE ASSETS
Maximum borrowing capacity	$ 1,075,000
Letter of credit term	1 year

COMMITMENTS AND CONTINGENCIES (Details) - USD ($)	9 Months Ended
COMMITMENTS AND CONTINGENCIES (Details) - USD ($)	Sep. 30, 2022	Dec. 31, 2021
COMMITMENTS AND CONTINGENCIES
Estimated accrual as a result of pending litigation settlement		$ 1,330,000
Litigation settlement payment	$ 1,330,000

SUBSEQUENT EVENTS (Details) - Subsequent events - USD ($)			1 Months Ended
	Dec. 13, 2022	Nov. 09, 2022	Dec. 31, 2022	Nov. 30, 2022	Oct. 31, 2022	Dec. 19, 2022	Nov. 10, 2022
SUBSEQUENT EVENTS
Amount deposited in escrow account				$ 1,000,000.0
Period amount in escrow is restricted				12 months
Refund received on prior year income taxes				$ 2,500,000
Share repurchase program authorized amount							$ 5,000,000.0
Number of share repurchased	1,090,877
Average price paid per share	$ 2.98
ARK, Survival Evolved [Member]
SUBSEQUENT EVENTS
Royalty payment (as a percent of revenue)			45.00%	25.00%
Monthly royalty fee before amendment				$ 1,500,000
Short-Term Debt [Member]
SUBSEQUENT EVENTS
Outstanding amount			$ 5,800,000
Interest rate			5.75%
Modification fee paid			$ 9,375
Short-Term Debt [Member] \| Wall Street Journal Prime Rate [Member]
SUBSEQUENT EVENTS
Percentage of spread			0.25%
Employees \| RSU's
SUBSEQUENT EVENTS
Awards granted (in shares)				1,200,960
Awards granted				$ 6,000,000.0
Directors \| RSU's
SUBSEQUENT EVENTS
Awards granted (in shares)				24,000
Awards granted				$ 100,000
Omnibus Incentive Plan (Twenty Twenty-Two Plan) [Member]
SUBSEQUENT EVENTS
Number of shares available for issuance					5,718,000
Option granted to purchase up to an additional shares \| Class A Common Stock
SUBSEQUENT EVENTS
Warrants issued to Underwriters						450,000
Stockholders
SUBSEQUENT EVENTS
Number of shares of common stock transferred					500,000
Snail Inc
SUBSEQUENT EVENTS
Net proceeds from shares issued in IPO				$ 12,000,000.0
Snail Inc \| Class A Common Stock
SUBSEQUENT EVENTS
Number of shares of common stock issued as per agreement				3,000,000	6,251,420
Warrants issued to Underwriters		120,000
Percent of issue price at IPO price		125.00%
Issue price per share		$ 6.25
Exercisable term		3 years
Snail Inc \| Class B Common Stock
SUBSEQUENT EVENTS
Number of shares of common stock issued as per agreement					28,748,580