0001104659-23-038408 | 10-K | XBRL Viewer

INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2022

Schedule of components of income (loss) before income taxes


	2022		2021
United States	$	(1,587,477)	$	9,476,520
Foreign		135,232		217,560
	$	(1,452,245)	$	9,694,080

Schedule of income tax (benefit) provision


	2022		2021
Current:
U.S. federal	$	(499,784)	$	4,975,632
U.S. State		(2,535,117)		(61,333)
Foreign		—		30,041
Total current income taxes		(3,034,901)		4,944,340
Deferred:
U.S. federal		602,102		(2,988,575)
U.S. State		(11,686)		(174,984)
Foreign		(1,938)		3,768
Total deferred income taxes		588,478		(3,159,791)
Income tax (benefit) provision	$	(2,446,423)	$	1,784,549

Schedule of reconciliation of amounts computed by applying the federal statutory tax rate to earnings before income taxes


	2022		2021
Federal statutory income tax rate	21.00	%	21.00	%
Valuation allowance	58.33	%	3.50	%
FIN 48	5.21	%	—
Return to provision	17.27	%	—
State refund benefit	130.84	%	—
Change in subsidiary tax status	(73.52)	%	—
PPP loan	2.45	%	(0.85)	%
GILTI	(1.80)	%	0.44	%
State taxes	2.94	%	(2.44)	%
R&D credit true-up	2.84	%	—
Rate change	1.82	%	(0.40)	%
Other	1.10	%	(2.94)	%
	168.48	%	18.31	%

Schedule of tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities


	2022		2021
Deferred tax assets (noncurrent):
Net operating losses	$	6,884,595	$	5,181,080
Deferred revenue		2,003,812		3,959,110
Research and development credit		494,777		189,431
Book lease liability (ASC 842)		937,968		1,387,106
Fixed assets and intangibles		1,959,679		3,856,167
Section 174 Capitalized R&E		825,394		—
Other		1,085,662		639,219
Total deferred tax assets		14,191,887		15,212,113
Deferred tax liabilities (noncurrent):
Book ROU assets (ASC 842)		(786,350)		(1,168,823)
Basis difference in subsidiary		(797,806)		—
Total deferred tax liabilities:		(1,584,156)		(1,168,823)
Long-term deferred tax asset		12,607,731		14,043,290
Valuation allowance		(5,005,195)		(5,852,239)
Net deferred tax asset	$	7,602,536	$	8,191,051

Schedule of changes in gross unrecognized tax benefits


	2022		2021
Unrecognized tax benefits at beginning of year	$	693,913	$	1,054,081
Gross Increases – current year positions		—		—
Gross Increases – prior year positions		72,177		124,979
Gross Decreases – prior year positions		—		(485,147)
Gross Decreases – settlements		(69,195)		—
Unrecognized tax benefits at end of year	$	696,895	$	693,913

REVENUE FROM CONTRACTS WITH CUSTOMERS

12 Months Ended

Dec. 31, 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 years ended December 31, 2022 and 2021 were as follows:


	2022		2021
United States	$	69,977,621	$	93,826,986
International		4,466,520		12,907,163
Total revenue from contracts with customers:	$	74,444,141	$	106,734,149

Platform

Net revenue by platform for the years ended December 31, 2022 and 2021 were as follows:


	2022		2021
Console	$	32,382,088	$	47,111,657
PC		31,592,858		43,096,994
Mobile		9,506,777		12,990,321
Other		962,418		3,535,177
Total revenue from contracts with customers:	$	74,444,141	$	106,734,149

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 years ended December 31, 2022 and 2021 was as follows:


	2022		2021
Digital	$	63,974,946	$	90,038,651
Mobile		9,506,777		12,990,321
Physical retail and other		962,418		3,705,177
Total revenue from contracts with customers:	$	74,444,141	$	106,734,149

Deferred Revenue

The Company records deferred revenue when payments are due or received in advance of the fulfillment of our associated performance obligations; reductions to deferred revenue balance were primarily due to the recognition of revenue upon fulfillment of our performance obligations, which were in the ordinary course of business. As of December 31, 2022, the balance of deferred revenue was $9,551,445, of which $2.7 million is due to non-refundable payments. We are expecting to recognize $0.4 million of the $2.7 million in the next 12 months through the platform releases of certain DLCs and the remaining $2.3 million in the next 24 months through the release of ARK II. The Company expects to recognize $4.0 million of current deferred revenues and $2.9 million of long term deferred revenue as revenue over the next 12 to 60 months. The revenue will be recognized on a straight line basis; based on our estimates of technical support obligations and activation of durable virtual goods. Activities in the Company’s deferred revenue as of December 31, 2022 and 2021 were as follows:


	December 31,		December 31,
	2022		2021
Deferred revenue, beginning balance in advance of revenue recognition billing	$	20,280,934	$	34,529,335
Revenue recognized		(18,832,396)		(26,478,997)
Revenue deferred		8,102,908		12,230,596
Deferred revenue, ending balance		9,551,446		20,280,934
Less: short term portion		(4,335,404)		(11,005,517)
Deferred revenue, long term	$	5,216,042	$	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
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI https://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130556-203045

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 9
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130550-203045

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (e)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (d)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 15
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130558-203045

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (c)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

+ Details

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Share Repurchase Program (Details) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Nov. 10, 2022
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Number of treasury stock sold	0	0
Aggregate purchase price of shares repurchased	$ 3,414,713
Class A Common Stock
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Shares authorized to repurchase			$ 5,000,000
Number of shares repurchased	1,197,649
Aggregate purchase price of shares repurchased	$ 3,400,000
Average price paid per share for repurchase of shares	$ 2.85
Shares remain available for repurchase	$ 1,600,000

DIVIDEND DISTRIBUTION (Details) - USD ($)		12 Months Ended
DIVIDEND DISTRIBUTION (Details) - USD ($)	Apr. 26, 2022	Dec. 31, 2022	Dec. 31, 2021
DIVIDEND DISTRIBUTION
Paid in-kind dividend		$ 94,934,400
Snail Digital Technology Co., Ltd. [Member]
DIVIDEND DISTRIBUTION
Paid in-kind dividend	$ 94,934,400
Cash dividend	$ 8,200,000
Dividends			$ 0

INTANGIBLE ASSETS (Details) - USD ($)	12 Months Ended
INTANGIBLE ASSETS (Details) - USD ($)	Dec. 31, 2022	Dec. 31, 2021
INTANGIBLE ASSETS
Impairment or loss on impaired intangible asset	$ 0	$ 16,325,000
Net Book Value	1,656,579
License - related parties
INTANGIBLE ASSETS
Impairment or loss on impaired intangible asset		16,325,000
Gross Carrying Amount	136,665,000	152,990,000
Accumulated Amortization	(135,280,942)	(127,877,024)
Impairment Loss		(16,325,000)
Net Book Value	$ 1,384,058	$ 8,787,976
Discount rate		10.00%
License - related parties \| Minimum
INTANGIBLE ASSETS
Weighted Average Useful Life	3 years	3 years
License - related parties \| Maximum
INTANGIBLE ASSETS
Weighted Average Useful Life	5 years	5 years
License
INTANGIBLE ASSETS
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
INTANGIBLE ASSETS
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
INTANGIBLE ASSETS
Gross Carrying Amount	$ 10,745	$ 10,745
Accumulated Amortization	(9,110)	(5,359)
Net Book Value	$ 1,635	$ 5,386
Weighted Average Useful Life	12 years	12 years
In-progress patent
INTANGIBLE ASSETS
Gross Carrying Amount	$ 270,886	$ 270,886
Net Book Value	270,886	270,886
Other
INTANGIBLE ASSETS
Gross Carrying Amount	333,415	333,415
Accumulated Amortization	(60,894)	(56,267)
Net Book Value	$ 272,521	$ 277,148

Document and Entity Information - USD ($)	12 Months Ended
Document and Entity Information - USD ($)	Dec. 31, 2022	Mar. 27, 2023	Mar. 24, 2023	Jun. 30, 2022
Document and Entity Information
Document Type	10-K
Document Annual Report	true
Document Transition Report	false
Document Period End Date	Dec. 31, 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 Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
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
ICFR Auditor Attestation Flag	false
Entity Shell Company	false
Entity Public Float				$ 10,903,580
Entity Central Index Key	0001886894
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	FY
Amendment Flag	false
Auditor Name	BDO USA, LLP
Auditor Location	Costa Mesa, California
Auditor Firm ID	243
Class A Common Stock
Document and Entity Information
Entity Common Stock, Shares Outstanding			7,901,145
Class B Common Stock
Document and Entity Information
Entity Common Stock, Shares Outstanding		28,748,580

DUE FROM SHAREHOLDER

12 Months Ended

Dec. 31, 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 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 December 31, 2022, the other receivable was $0 and no longer reflected on the Company’s consolidated balance sheets. The loan accrued interest of $580,878 and $1,523,149 during the years ended December 31, 2022 and 2021 respectively. The earned interest is reported in interest income – related parties in the Company’s consolidated statements of comprehensive income.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Contract Balance (Details) - USD ($)	1 Months Ended					12 Months Ended
	Nov. 30, 2021	Jun. 30, 2020	May 31, 2020	Feb. 29, 2020	Nov. 30, 2018	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Employer contributions to the plan						$ 65,908	$ 38,470
Long-term title license agreement with game pass
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Period of agreement					3 years
Agreement with platform
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Proceeds from agreement with customers			$ 7,500,000
ARK 1 \| Agreement with platform
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Period of agreement	35 days
Proceeds from agreement with customers	$ 3,500,000
Revenue recognized						2,500,000
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	$ 3,800,000	$ 4,000,000.0
ARK 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue recognized						3,800,000
ARK 2 \| Long-term title license agreement with game pass
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Period of agreement		3 years
ARK 2 \| Agreement with platform
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue recognized						$ 2,300,000

PREPAID EXPENSES - RELATED PARTY

12 Months Ended

Dec. 31, 2022

PREPAID EXPENSES - RELATED PARTY

PREPAID EXPENSES - RELATED PARTY

NOTE 8 – PREPAID EXPENSES - RELATED PARTY

During the year ended December 31, 2022 the Company prepaid $5,000,000 for exclusive license rights to ARK 2 to a related party. No such payments were made in the year ended December 31, 2021. Prepaid expenses — related party consisted of the following as of December 31, 2022 and 2021:


	2022		2021
Prepaid royalties	$	582,500	$	3,145,000
Prepaid licenses		5,000,000		—
Prepaid expenses - related party, ending balance		5,582,500		3,145,000
Less: short-term portion		—		(3,145,000)
Total prepaid expenses – related party, long-term	$	5,582,500	$	—

INCOME TAXES - Income tax rate reconciliation (Details)	12 Months Ended
INCOME TAXES - Income tax rate reconciliation (Details)	Dec. 31, 2022	Dec. 31, 2021
Reconciliation of amounts computed by applying the federal statutory tax rate to earnings before income taxes
Federal statutory income tax rate	21.00%	21.00%
Valuation allowance	58.33%	3.50%
FIN 48	5.21%
Return to provision	17.27%
State refund benefit	130.84%
Change in subsidiary tax status	(73.52%)
PPP loan	2.45%	(0.85%)
GILTI	(1.80%)	0.44%
State taxes	2.94%	(2.44%)
R&D credit true-up	2.84%
Rate change	1.82%	(0.40%)
Other	1.10%	(2.94%)
Effective tax rate	168.48%	18.31%

PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables)

12 Months Ended

Dec. 31, 2022

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Schedule of prepaid expenses and other current assets


	2022		2021
Prepaid income taxes	$	9,822,603	$	8,217,660
Other prepaids		80,271		861,332
Other current assets		662,267		1,938,015
Total prepaid expenses and other current assets	$	10,565,141	$	11,017,007

INCOME TAXES - Income tax (benefit) provision (Details) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Current:
U.S. federal	$ (499,784)	$ 4,975,632
U.S. State	(2,535,117)	(61,333)
Foreign		30,041
Total current income taxes	(3,034,901)	4,944,340
Deferred:
U.S. federal	602,102	(2,988,575)
U.S. State	(11,686)	(174,984)
Foreign	(1,938)	3,768
Total deferred income taxes	588,478	(3,159,791)
Income tax (benefit) provision	$ (2,446,423)	$ 1,784,549

ACCOUNTS PAYABLE - RELATED PARTY (Details) - USD ($)	12 Months Ended
ACCOUNTS PAYABLE - RELATED PARTY (Details) - USD ($)	Dec. 31, 2022	Dec. 31, 2021
LOAN PAYABLE AND INTEREST PAYABLE - RELATED PARTY
Accounts payable to parent	$ 19,918,259	$ 23,733,572
Parent
LOAN PAYABLE AND INTEREST PAYABLE - RELATED PARTY
Accounts payable to parent	19,918,259	23,733,572
Royalty payments	4,219,660	539,216
Parent \| License - related parties
LOAN PAYABLE AND INTEREST PAYABLE - RELATED PARTY
License costs to related party	$ 404,347	$ 749,161

EQUITY - Restricted Stock Units (Details) - $ / shares	12 Months Ended
EQUITY - Restricted Stock Units (Details) - $ / shares	Dec. 31, 2022	Dec. 31, 2021
RSU's
Restricted Stock Units
Vested	0	0
RSU's \| Directors
EQUITY
Vesting period	1 year
Restricted Stock Units
Outstanding as of January 1, 2022	0
Granted	24,000
Vested	0
Forfeited or cancelled	0
Outstanding as of December 31, 2022	24,000	0
Weighted-Average Grant Date Fair Value
Outstanding as of January 1, 2022	$ 0
Granted	5.00
Vested	0
Forfeited or cancelled	0
Outstanding as of December 31, 2022	$ 5.00	$ 0
Performance Shares [Member] \| Employees
EQUITY
Vesting period	5 years	5 years
Restricted Stock Units
Outstanding as of January 1, 2022	0
Granted	1,200,960
Vested	0	0
Forfeited or cancelled	(3,408)
Outstanding as of December 31, 2022	1,197,552	0
Weighted-Average Grant Date Fair Value
Outstanding as of January 1, 2022	$ 0
Granted	5.00
Vested	0
Forfeited or cancelled	5.00
Outstanding as of December 31, 2022	$ 5.00	$ 0

EQUITY - Repurchase Activity (Details) - Class A Common Stock $ / shares in Units, $ in Millions	12 Months Ended
	Dec. 31, 2022 USD ($) $ / shares shares
EQUITY
Number of share repurchased	1,197,649
Aggregate purchase price \| $	$ 3.4
Average price paid per share \| $ / shares	$ 2.85
Aggregate amount of stock remain available for repurchase	1,600,000

PRESENTATION AND NATURE OF OPERATIONS

12 Months Ended

Dec. 31, 2022

PRESENTATION AND NATURE OF OPERATIONS

PRESENTATION AND NATURE OF OPERATIONS

NOTE 1 – PRESENTATION AND NATURE OF OPERATIONS

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 Inc. and its subsidiaries. Snail Games USA Inc. was founded in 2009 as a wholly owned subsidiary of Suzhou Snail Digital Technology Co., Ltd. (“Suzhou Snail”) located in Suzhou, China. 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, Inc,” “Snail Games,” “we,” “our” and the “Company” are used to refer collectively to Snail, 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.

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 reorganization transaction described below the individuals contributed their interest in the Company to Snail, Inc. in return for common stock of Snail, Inc in connection with Snail, Inc.’s IPO. Because the Company and Suzhou Snail are owned by the same shareholders, Suzhou Snail is considered a related party to the Company.

Reorganization Transaction and IPO

On September 16, 2022, Snail, Inc., filed a Registration Statement on Form S-1 with the United States Securities and Exchange Commission in connection with its IPO. On November 9, 2022, effective as of the IPO pricing, Snail Games USA Inc.’s existing shareholders transferred their 500,000 shares of common stock of Snail Games USA Inc. 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. Because the reorganization transaction was considered a transaction between entities under common control, the financial statements for periods prior to the reorganization transaction and the IPO have been adjusted to combine the previously separate entities for presentation purposes. On November 9, 2022, Snail, Inc. priced its IPO, and on November 10, 2022, Snail, Inc.’s Class A common stock began trading on The Nasdaq Capital Market under the ticker symbol SNAL. In the IPO, Snail, Inc. issued 3,000,000 shares of Class A common stock at $5.00 per share and net proceeds from the IPO were distributed to the Snail Games USA Inc. in November 2022 in the amount of approximately $12.0 million, net of the underwriting discount and offering costs of $3.0 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 is reported as a restricted escrow deposit in the consolidated balance sheets 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.

Basis of Presentation and Consolidation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles as promulgated in the United States of America (“U.S. GAAP”).

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 consolidated financial statements.

Certain comparative amounts have been reclassified to conform with the current period presentation. The common stock of Snail Games USA Inc., as of December 31, 2021, has been reclassified as Class A common stock as the stockholders of the Snail Games USA Inc. common stock had their shares converted to Class A shares of Snail Inc. during the reorganization transaction that occurred amongst a common controlled group. For more information regarding the reorganization transaction see Note 20 – Equity.

The consolidated financial statements include the accounts of Snail, Inc. and the following subsidiaries:


	Equity %
Subsidiary Name	Owned
Snail Games USA Inc	100	%
Snail Innovation Institute	70	%
Frostkeep Studios, Inc.	100	%
Eminence Corp	100	%
Wandering Wizard, LLC	100	%
Donkey Crew, LLC	99	%
Interactive Films, LLC	100	%
Project AWK Productions, LLC	100	%
BTBX.IO, LLC	70	%
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 consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the amounts reported in our 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, impairment of intangible assets, stock-based compensation and fair value of warrants. 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 years ended December 31, 2022 and 2021.

LOAN AND INTEREST RECEIVABLE - RELATED PARTY

12 Months Ended

Dec. 31, 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 the 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 $101,753 and $203,408, as of December 31, 2022 and 2021, respectively. The Company earned $1,753 and $3,890 in interest on the related party loans receivable during the years ended December 31, 2022 and 2021, respectively.

Consolidated Balance Sheets (Parenthetical) - USD ($)	Dec. 31, 2022	Dec. 31, 2021
Accounts receivable, net of allowances for doubtful accounts	$ 19,929	$ 31,525
Treasury Stock, Shares	1,197,649	0
Class A Common Stock
Common stock, par value (per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	500,000,000	0
Common stock, shares issued	9,251,420	0
Common stock, shares outstanding	8,053,771	0
Class B Common Stock
Common stock, par value (per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	100,000,000	0
Common stock, shares issued	28,748,580	0
Common stock, shares outstanding	28,748,580	0
Snail Games USA
Common stock, par value (per share)	$ 0.01	$ 0.01
Common stock, shares authorized		1,000,000
Common stock, shares issued		500,000
Common stock, shares outstanding		500,000

OPERATING LEASE RIGHT-OF-USE ASSETS - Sub-lease (Details) - Office space in Los Angeles, California	1 Months Ended	12 Months Ended
	May 31, 2022 USD ($)	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($) property
OPERATING LEASE RIGHT-OF-USE ASSETS
Number of sub-leased properties \| property			1
Sub-leased income		$ 0	$ 434,119
Amount owed to landlord			$ 95,000
Penalty amount	$ 0

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Advertising Costs (Details) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Advertising expense	$ 714,492	$ 275,370

PREPAID EXPENSES - RELATED PARTY (Tables)

12 Months Ended

Dec. 31, 2022

PREPAID EXPENSES - RELATED PARTY

Schedule of prepaid expenses - related party


	2022		2021
Prepaid royalties	$	582,500	$	3,145,000
Prepaid licenses		5,000,000		—
Prepaid expenses - related party, ending balance		5,582,500		3,145,000
Less: short-term portion		—		(3,145,000)
Total prepaid expenses – related party, long-term	$	5,582,500	$	—

EQUITY

12 Months Ended

Dec. 31, 2022

EQUITY

EQUITY

NOTE 20 – EQUITY

The Company has authorized two classes of common stock, Class A and Class B. The rights of the holders of both Class A and Class B common stock will be identical, except with respect to voting, conversion and transfer restrictions applicable to the Class B common stock. Each share of Class A common stock will be entitled to one vote. Each share of Class B common stock will be entitled to ten votes and will be convertible into one share of Class A common stock automatically upon transfer, subject to certain exceptions. Holders of Class A common stock and Class B common stock will vote together as a single class on all matters unless otherwise required by law.

On November 9, 2022, in connection with the IPO, the Company entered into an underwriting agreement (the “Underwriting Agreement” with the underwriters (the “Underwriters”), pursuant to which the Company agreed to issue and sell 3,000,000 shares of Class A common stock (the “Firm Shares”) at a purchase price of $4.675 per share to the Underwriters and granted the Underwriters an option (the “Over-Allotment Option”) to purchase up to 450,000 additional shares of Class A common stock (the “Option Shares”) at a purchase price of $4.675 per share. The Underwriters may exercise the Over-Allotment Option at any time in whole, or from time to time in part, on or before the forty-fifth day following the effectiveness of the IPO. The Over-Allotment Option was not exercised by the Underwriters prior to its expiration.

In connection with the Underwriting Agreement, on November 9, 2022, the Company also issued to the Underwriters warrants to purchase such number of shares of the Company’s Class A common stock in an amount equal to four percent of the total number of shares of Class A common stock sold in the IPO, or 120,000 shares of Class A common stock (the “Underwriters Warrants”). The Underwriters Warrants may be exercised at a price per share equal to 125% of the IPO price, or $6.25 per share. The Underwriters Warrants are exercisable, in whole or in part, commencing on November 9, 2022, and expiring on the three-year anniversary thereof. The Underwriters Warrants have not been exercised as of the filing of this Annual Report.

The Underwriters Warrants and Over-Allotment Option are legally detachable and separately exercisable from each other and from the Firm Shares; therefore, they meet the definition of freestanding and are not considered embedded in the Firm Shares.

The Underwriters Warrants are considered indexed to the Company’s own stock. Additionally, the Company concludes that the Underwriters Warrants meet all requirements for equity classification. Because the Underwriters Warrants are issued to the Underwriters for their services and can be exercised immediately (subject to certain transfer conditions) they will be measured at their fair value on their date of issuance and recorded within stockholders’ equity. As long as the Underwriters Warrants remain classified as equity, they shall not be revalued. The fair value of the Underwriters Warrants was determined using the Black-Scholes model. The key assumptions used in the valuation were a average expected volatility of 53%, discount rate of 4.49% and remaining term of 3 years.

The Company adopted a new accounting policy for the allocation of IPO costs between Firm Shares, equity-classified Underwriters Warrants and equity classified Over-Allotment Option. The Company will allocate all the issuance costs to the firm shares as a reduction of proceeds.

Restricted Stock Units

Vesting for restricted stock units granted to directors is based on the holders’ continued employment with us through each applicable vest date. If the vesting conditions are not met, unvested restricted stock units will be forfeited. Our restricted stock units to directors generally vest over 1 year. The following table summarizes our restricted stock units activity with directors for the year ended December 31, 2022:


	Restricted Stock	Weighted-Average
	Units	Grant-Date Fair Values
Outstanding as of January 1, 2022	—	$	—
Granted	24,000		5.00
Vested	—		—
Forfeited or cancelled	—		—
Outstanding as of December 31, 2022	24,000	$	5.00

The grant date fair value of restricted stock units granted to directors is based on the quoted market price of our common stock on the date of grant. The weighted-average grant date fair values of restricted stock units granted during the years ended December 31, 2022

and 2021 are $5.00 and $0 respectively. There are no restricted stock units that vested during the years ended December 31, 2022 and 2021.

Our restricted stock units granted to employees vest upon the achievement of pre-determined performance-based milestones as well as service conditions. The pre-determined performance-based milestones are based on specified percentages of the restricted stock units that would vest at each of the first five anniversaries of the IPO date if the Company’s average annual growth rate (“AAGR”) is calculated to be at a target percentage or above during the period between the Company’s IPO Date and the annual revenue for each of the anniversary year. If these performance-based milestones are not met but service conditions are met, the performance-based restricted stock units will not vest, in which case any compensation expense we have recognized to date will be reversed. Generally, the total aggregate measurement period of our performance-based restricted stock units is 5 years, with awards cliff-vesting after each annual measurement period during the total aggregate measurement period.

Each quarter, we update our assessment of the probability that the performance milestones will be achieved. We amortize the fair values of performance-based restricted stock units over the requisite service period. Each performance-based milestone is weighted evenly and the number of shares that vest based on each performance-based milestone is independent from the other.

The following table summarizes our restricted stock unit activity with employees, presented with the maximum number of shares that could potentially vest, for the year ended December 31, 2022:


	Restricted Stock	Weighted-Average
	Units	Grant-Date Fair Values
Outstanding as of January 1, 2022	—	$	—
Granted	1,200,960		5.00
Vested	—		—
Forfeited or cancelled	(3,408)		5.00
Outstanding as of December 31, 2022	1,197,552	$	5.00

The grant date fair value of restricted stock units granted to employees is based on the quoted market price of our common stock on the date of grant. The weighted-average grant date fair values of restricted stock units granted during the years ended December 31, 2022 and 2021 are $5.00 and $0 respectively. There are no restricted stock units that vested during the years ended December 31, 2022 and 2021.

Repurchase Activity

All share repurchases settled in the fourth quarter of fiscal year 2022 were open market transactions. As of December 31, 2022, 1,197,649 shares of Class A common stock were repurchased pursuant to the Share Repurchase Program for an aggregate purchase price of approximately $3.4 million. The average price paid per share was $2.85 and approximately $1.6 million aggregate amount of shares of Class A common stock remain available for repurchase under the Share Repurchase Program.

Stock-Based Compensation Expense

Stock-based compensation expense resulting from restricted stock units and performance-based restricted stock units of $223,250 and $0 are recorded under General and Administrative expenses included in our Consolidated Statements of Comprehensive Income for the years ended December 31, 2022 and 2021, respectively.

During the years ended December 31, 2022 and 2021, we recognized $48,678 and $0 respectively, of deferred income tax benefit related to our stock-based compensation expense.

As of December 31, 2022, our total unrecognized compensation cost related to restricted stock units, was approximately $2.6 million and is expected to be recognized over a weighted-average service period of 4.7 years.

- 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
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-URI https://asc.fasb.org/topic&trid=2208762

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496158-112644

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 13
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496158-112644

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 14
-Subparagraph (c)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496171-112644

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 14
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496171-112644

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.3-04)
-URI https://asc.fasb.org/extlink&oid=120397183&loc=d3e187085-122770

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 18
-Subparagraph (d)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496189-112644

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (g)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496158-112644

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 18
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496189-112644

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (h)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496158-112644

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 14
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496171-112644

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 18
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496189-112644

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 16
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496180-112644

Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (i)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496158-112644

Reference 15: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(e)(1))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

Reference 16: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 40
-Section 50
-Paragraph 6
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126731327&loc=SL126733271-114008

+ Details

ACCOUNTS RECEIVABLE - RELATED PARTY (Details) - USD ($)	12 Months Ended
ACCOUNTS RECEIVABLE - RELATED PARTY (Details) - USD ($)	Dec. 31, 2022	Dec. 31, 2021
LOAN AND INTEREST RECEIVABLE - RELATED PARTY
Accounts receivable - related party	$ 13,519,409	$ 13,519,409
Less: Accounts payable - related party	(2,175,225)	(5,083,586)
Accounts receivable - related party, net	$ 11,344,184	$ 8,435,823
Immediate family member of management or principal owner
LOAN AND INTEREST RECEIVABLE - RELATED PARTY
Ownership percentage (as percent)	100.00%

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Warrants (Details)	Dec. 31, 2022 shares
Class A Common Stock
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Number of warrants issued to purchase common stock	120,000

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Stock Based Compensation (Details)	Dec. 31, 2022 shares
Omnibus Incentive Plan (Twenty Twenty-Two Plan)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Number of shares available for issuance	5,718,000

OPERATING LEASE RIGHT-OF-USE ASSETS - Leases (Details)	1 Months Ended	12 Months Ended
OPERATING LEASE RIGHT-OF-USE ASSETS - Leases (Details)	Apr. 30, 2018 USD ($)	Dec. 31, 2022 USD ($) lease	Dec. 31, 2021 USD ($)
OPERATING LEASE RIGHT-OF-USE ASSETS
Number of leases terminated \| lease		1
Variable lease payments		$ 77,385
Right of Use Asset		3,606,398	$ 5,100,912
Lease Liability - Current		1,371,227	1,688,965
Lease Liability - Long Term		2,930,529	4,375,786
Gain on 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 Termination		$ 122,533	$ 0
Standby Letters of Credit
OPERATING LEASE RIGHT-OF-USE ASSETS
Maximum borrowing capacity	$ 1,075,000
Letter of credit term	1 year

Consolidated Statements of Equity - USD ($)	Snail Games USA Common Stock	Common Stock Class A Common Stock	Common Stock Class B Common Stock	Additional Paid-In-Capital	Due from Shareholder Loan and Interest Receivable	Accumulated Other Comprehensive Loss	Retained Earnings	Treasury Stock	Snail Games USA Inc. Equity	Non controlling Interests	Class A Common Stock	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					(32,167,191)				(32,167,191)			(32,167,191)
Foreign currency translation						(69,383)			(69,383)			(69,383)
Dissolution of subsidiary										39,340		39,340
Net income							8,468,396		8,468,396	(558,865)		7,909,531
Balance at the end 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 end (in shares) at Dec. 31, 2021	500,000
Increase (Decrease) in Stockholders' Equity
Loan to shareholder					(580,878)				(580,878)			(580,878)
Foreign currency translation						(40,643)			(40,643)			(40,643)
Dividend distribution				(73,078,112)	$ 94,934,400		(21,856,288)
Withholding tax distribution				(8,200,000)					(8,200,000)			(8,200,000)
Reclass of common stock due to IPO reorganization	$ (5,000)	$ 625	$ 2,875	1,500
Reclass of common stock due to IPO reorganization (in shares)	(500,000)	6,251,420	28,748,580
Warrants issued to underwriters				193,927					193,927			193,927
IPO, net of offering costs		$ 300		10,137,210					10,137,510			10,137,510
IPO, net of offering costs (in shares)		3,000,000
Stock based compensation related to restricted stock units				223,250					223,250			223,250
Repurchase of common stock								$ (3,414,713)	(3,414,713)		$ (3,400,000)	(3,414,713)
Repurchase of common stock (in shares)								(1,197,649)			1,197,649
Net income							947,807		947,807	46,371		994,178
Balance at the end at Dec. 31, 2022		$ 925	$ 2,875	$ 23,436,942		$ (307,200)	$ (4,863,250)	$ (3,414,713)	$ 14,855,579	$ (5,490,895)		$ 9,364,684
Balance at the end (in shares) at Dec. 31, 2022		9,251,420	28,748,580					(1,197,649)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Amortizable Intangibles and Other Long-lived Assets (Details) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Impairment or loss on impaired intangible asset	$ 0	$ 16,325,000

PRESENTATION AND NATURE OF OPERATIONS - Reorganization Transaction and IPO (Details) - USD ($)		1 Months Ended	12 Months Ended
	Nov. 09, 2022	Nov. 30, 2022	Dec. 31, 2022
PRESENTATION AND NATURE OF OPERATIONS
Net proceeds from shares issued in IPO		$ 12,000,000.0	$ 11,791,705
Amount deposited in escrow account			$ 1,003,804
IPO
PRESENTATION AND NATURE OF OPERATIONS
Offering costs		3,000,000.0
Amount deposited in escrow account		$ 1,000,000.0
Period amount in escrow is restricted		12 months
Snail Games Usa Stockholders
PRESENTATION AND NATURE OF OPERATIONS
Number of Snail Games USA shares transferred in exchange for Class A common stock	500,000
Class A common stock
PRESENTATION AND NATURE OF OPERATIONS
Number of shares of common stock issued as per agreement	6,251,420
Class A common stock \| IPO
PRESENTATION AND NATURE OF OPERATIONS
Number of shares of common stock issued as per agreement	3,000,000	3,000,000
Number of shares of common stock issued as per agreement (in dollars per share)		$ 5.00
Number of shares of common stock issued as per agreement (in dollars per share)	$ 4.675
Class B common stock
PRESENTATION AND NATURE OF OPERATIONS
Number of shares of common stock issued as per agreement	28,748,580

EARNINGS PER SHARE (Details) - USD ($)

12 Months Ended

Dec. 31, 2022

Dec. 31, 2021

Basic Earnings Per Share:

Total net income attributable to Snail Inc and Snail Games USA Inc

$ 947,807

$ 8,468,396

Basic earnings per share

$ 0.03

$ 0.24

Diluted Earnings Per Share:

Diluted earnings per share

$ 0.03

$ 0.24

Class A common stock

Basic Earnings Per Share:

Basic

^[1]

$ 228,482

$ 8,468,396

Weighted average shares outstanding - basic

9,131,512

35,000,000

Diluted Earnings Per Share:

Diluted

^[1]

$ 228,482

$ 8,468,396

Weighted average shares outstanding - basic

9,131,512

35,000,000

Weighted average shares outstanding - diluted

9,131,512

35,000,000

Class B common stock

Basic Earnings Per Share:

Basic

$ 719,325

Weighted average shares outstanding - basic

28,748,580

Diluted Earnings Per Share:

Diluted

$ 719,325

Weighted average shares outstanding - basic

28,748,580

Weighted average shares outstanding - diluted

28,748,580

[1]	the shares used for the denominator in the calculation of EPS are the number of shares transferred in the reorganization transaction for comparative purposes. Snail Games USA did not have Class A common stock as of December 31, 2021.

ACCOUNTS PAYABLE - RELATED PARTY

12 Months Ended

Dec. 31, 2022

ACCOUNTS PAYABLE - RELATED PARTY

ACCOUNTS PAYABLE - RELATED PARTY

NOTE 12 – ACCOUNTS PAYABLE — RELATED PARTY

Accounts payable due 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 December 31, 2022 and 2021, the Company had $19,918,259 and $23,733,572, respectively, as accounts payable due to Suzhou Snail. For the years ended December 31, 2022 and 2021, the Company incurred $404,347 and $749,161, respectively as license costs due to Suzhou Snail. During the years ended December 31, 2022 and 2021, respectively, there were $4,219,660 and $539,216 in payments to Suzhou Snail for royalties.

PROPERTY, PLANT AND EQUIPMENT, NET (Tables)

12 Months Ended

Dec. 31, 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		(4,419,558)		(3,953,184)
Property, plant and equipment, net	$	5,114,799	$	5,678,701

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Fair Value Measurements (Details) - Promissory Note 2021 [Member] - Wall Street Journal Prime Rate	12 Months Ended
	Dec. 31, 2022
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Debt instrument, interest rate, stated percentage, period	5 years
Floating prime rate	0.50%

INCOME TAXES - Deferred tax assets and liabilities (Details) - USD ($)	Dec. 31, 2022	Dec. 31, 2021
Deferred tax assets (noncurrent):
Net operating losses	$ 6,884,595	$ 5,181,080
Deferred revenue	2,003,812	3,959,110
Research and development credit	494,777	189,431
Book lease liability (ASC 842)	937,968	1,387,106
Fixed assets and intangibles	1,959,679	3,856,167
Section 174 Capitalized R&E	825,394
Other	1,085,662	639,219
Total deferred tax assets	14,191,887	15,212,113
Deferred tax liabilities (noncurrent):
Book ROU assets (ASC 842)	(786,350)	(1,168,823)
Basis difference in subsidiary	(797,806)
Total deferred tax liabilities:	(1,584,156)	(1,168,823)
Long-term deferred tax asset	12,607,731	14,043,290
Valuation allowance	(5,005,195)	(5,852,239)
Net deferred tax asset	$ 7,602,536	$ 8,191,051

REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT - Future minimum payments (Details)	Dec. 31, 2022 USD ($)
REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT
2023	$ 14,503,190
2024	499,414
2025	86,013
2026	89,115
2027	92,329
Thereafter	2,455,092
Long term debt	$ 17,725,153

- Definition

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

+ References + Details

Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
Consolidated Statements of Cash Flows - USD ($)	Dec. 31, 2022	Dec. 31, 2021
Cash flows from operating activities:
Net income	$ 994,178	$ 7,909,531
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Amortization - intangible assets	7,657,669	15,262,559
Amortization - loan origination fees	26,514	22,951
Depreciation and amortization - property and equipment	565,906	798,813
Stock-based compensation expense	223,250
Gain on lease termination	(122,533)
Gain on paycheck protection program and economic injury disaster loan forgiveness	(174,436)	(392,200)
(Gain) loss on disposal of fixed assets	(17,067)	117,316
Impairment or loss on impaired intangible asset	0	16,325,000
Interest income from shareholder loan	(580,878)	(1,523,149)
Interest income from restricted escrow deposit	(3,804)
Deferred taxes	588,478	(3,159,791)
Decrease in non-controlling interest - dissolution of subsidiary		39,340
Changes in assets and liabilities:
Accounts receivable	5,486,716	693,981
Accounts receivable - related party	(2,908,361)	1,256,970
Prepaid expenses - related party	(2,437,500)	980,000
Prepaid expenses and other current assets	(1,875,919)	(4,167,621)
Other noncurrent assets	(26,052)	1,785,730
Accounts payable	4,976,192	(1,538,468)
Accounts payable - related party	(3,815,313)	(92,948)
Accrued expenses	(1,039,927)	(4,045,216)
Interest payable - related parties	986	8,000
Lease liabilities	(145,949)	(182,895)
Deferred revenue	(10,729,488)	(14,248,401)
Net cash (used in) provided by operating activities	(3,357,338)	15,849,502
Cash flows from investing activities:
Debt extended to related party		(203,408)
Loan provided to related party		(30,644,042)
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)
Proceeds from sale of property and equipment	19,500
Repayment on Pound Sand note	1,496,063
Net cash provided by (used in) investing activities	1,210,307	(35,847,450)
Cash flows from financing activities:
Repayments on long-term debt	(70,961)	(6,845,545)
Repayments on short-term note	(4,166,667)
Borrowings on long-term debt		3,000,000
Borrowings on short-term note	10,000,000
Payments on paycheck protection program and economic injury disaster loan	(90,198)	(26,281)
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)
Purchase of treasury stock	(3,414,713)
Proceeds from initial public offering, net of offering costs	11,791,705
Warrants issued to underwriters	193,927
Payment of capitalized offering costs	(1,247,567)
Net cash provided by financing activities	4,843,831	2,628,174
Effect of currency translation on cash and cash equivalents	(12,730)	21,182
Net increase (decrease) in cash and cash equivalents, and restricted cash and cash equivalents	2,684,070	(17,348,592)
Cash and cash equivalents, and restricted cash and cash equivalents - beginning of year	16,554,115	33,902,707
Cash and cash equivalents, and restricted cash and cash equivalents - end of year	19,238,185	16,554,115
Cash paid during the year for:
Interest	788,063	405,251
Income taxes	888,303	6,577,000
Noncash transactions during the year for:
Loan and interest payable - related parties	103,890
Loan and interest receivable - related parties	(103,890)
Loan and interest from shareholder	94,934,400
Dividend distribution	(94,934,400)
Noncash financing activity during the year:
Gain on paycheck protection program and economic injury disaster loan forgiveness	(174,436)	(392,200)
Snail Games USA common stock transferred due to reorganization	(5,000)
Snail, Inc. common stock and additional paid-in capital transferred due to reorganization	5,000
Offering costs included in accounts payable	605,295
Funding of the escrow deposit	(1,000,000)
License, related parties
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Amortization - intangible assets	7,403,918	14,655,520
Impairment or loss on impaired intangible asset		16,325,000
License
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Amortization - intangible assets	250,000	600,000
Other
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Amortization - intangible assets	$ 3,751	$ 7,039

OPERATING LEASE RIGHT-OF-USE ASSETS - Lease payments (Details)	Dec. 31, 2022 USD ($)
Future lease payments
2023, Future lease payments	$ 1,548,889
2024, Future lease payments	1,610,844
2025, Future lease payments	1,453,785
Total future lease payments	4,613,518
Imputed Interest
2023, Imputed Interest	177,662
2024, Imputed Interest	105,810
2025, Imputed Interest	28,290
Total Imputed Interest	311,762
Lease Liabilities
2023, Lease Liabilities	1,371,227
2024, Lease Liabilities	1,505,034
2025, Lease Liabilities	1,425,495
Total Lease Liabilities	$ 4,301,756

Consolidated Statements of Comprehensive Income - USD ($)

12 Months Ended

Dec. 31, 2022

Dec. 31, 2021

Revenues, net

$ 74,444,141

$ 106,734,149

Cost of revenues

49,507,888

63,686,242

Gross profit

24,936,253

43,047,907

Operating expenses:

General and administrative (including stock-based compensation expense of $223,250 and $0, respectively)

22,327,746

16,396,958

Research and development

2,955,592

834,818

Advertising and marketing

714,492

275,370

Depreciation and amortization

565,906

798,813

(Gain) loss on disposal of fixed assets

(17,067)

117,316

Impairment of intangible assets

16,325,000

Total operating expenses

26,546,669

34,748,275

Income (loss) from operations

(1,610,416)

8,299,632

Other income (expense):

Interest income

200,913

85,276

Interest income - related parties

582,632

1,595,372

Interest expense

(922,293)

(415,793)

Interest expense - related parties

(3,222)

(8,000)

Other income

302,086

493,687

Foreign currency transaction (loss)

(1,945)

(41,579)

Equity in loss of unconsolidated entity

(314,515)

Total other income, net

158,171

1,394,448

Income (loss) before provision for income taxes

(1,452,245)

9,694,080

Income tax (benefit) provision

(2,446,423)

1,784,549

Net income

994,178

7,909,531

Net gain (loss) attributable to non-controlling interests

46,371

(558,865)

Net income attributable to Snail, Inc. and Snail Games USA Inc

947,807

8,468,396

Comprehensive income statement:

Other comprehensive loss related to currency translation adjustments, net of tax

(40,643)

(69,383)

Total comprehensive income

$ 907,164

$ 8,399,013

Income per share attributable to:

Basic

$ 0.03

$ 0.24

Diluted

$ 0.03

$ 0.24

Class A common stock

Net income attributable to:

Basic

^[1]

$ 228,482

$ 8,468,396

Diluted

^[1]

$ 228,482

$ 8,468,396

Weighted-average shares used to compute income per share:

Basic

9,131,512

35,000,000

Diluted

9,131,512

35,000,000

Class B common stock

Net income attributable to:

Basic

$ 719,325

Diluted

$ 719,325

Weighted-average shares used to compute income per share:

Basic

28,748,580

Diluted

28,748,580

[1]	the shares used for the denominator in the calculation of EPS are the number of shares transferred in the reorganization transaction for comparative purposes. Snail Games USA did not have Class A common stock as of December 31, 2021.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 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.

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, My Nintendo Store, Apple’s App Store, the Google Play Store, and retail distributors. 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, 30 to 90 days from date of activation.

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 during the year ended December 31, 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 a 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 during the year ended December 31, 2022, as the significant performance obligation of making the game available on the platform was met on the first day of the contract period.

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 downloadable content (“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 year ended December 31, 2022.

The Company entered into a long-term license agreement with a platform in May 2020 to make ARK 1 and ARK II available to the platform’s end users in exchange for $7.5 million. ARK I launched on the platform in September 2021 and the Company recognized $3.8 million of the advanced payment as revenue during the year ended December 31, 2021. In November 2022, the platform terminated the agreement due to its ceasing operations. The Company recognized the remaining $3.8 million of revenue during the year ended December 31, 2022 according to a clause in the agreement which determined that the ARK II deliverable was met when the platform terminated the agreement for ease.

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.

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, engine fees and amortization costs. Cost of revenues for the years ended December 31, 2022 and 2021 were comprised of the following:


	2022		2021
Software license royalties – related parties	$	16,963,388	$	21,451,888
Software license royalties		145,055		—
License and amortization – related parties		25,407,002		32,655,520
License and amortization		250,876		600,895
Game localization		840		47,100
Merchant fees		2,424,832		3,751,658
Engine fees		1,972,126		3,107,032
Internet, server and data center		2,179,179		2,072,149
Costs related to advertising revenue		164,590		—
Total:	$	49,507,888	$	63,686,242

General and Administrative Costs

General and administrative costs include rents, salaries, stock based compensation, legal and professional expenses, internet and server, contractor costs, insurance expense, licenses and permits, other taxes and travel expenses. These costs are expensed as they are incurred. For the years ended December 31, 2022 and 2021, general and administrative expenses totaled $22,327,746 and $16,396,958, respectively. Stock based compensation of $223,250 was incurred during the year ended December 31, 2022; no such compensation was paid in the year ended December 31, 2021.

Advertising and Marketing Costs

The Company expenses advertising costs as incurred. For the years ended December 31, 2022 and 2021, advertising expenses totaled $714,492 and $275,370, 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 years ended December 31, 2022 and 2021 were $2,955,592 and $834,818, respectively.

Non-controlling Interests

Non-controlling interests on the consolidated balance sheets and consolidated statements of comprehensive income include the equity allocated to non-controlling interest holders. As of December 31, 2022 and 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	%

Cash and Restricted Cash and Cash Equivalents

Cash is available for use in current operations or other activities such as capital expenditures and business combinations. Restricted cash and cash equivalents are time deposits, that are currently provided as security to our debts with a financial institution and the issuance of a standby letter of credit to landlords.

Restricted Escrow Deposits

Our restricted deposits held in escrow are to provide a source of funding for certain indemnification obligations of Snail, Inc. to our underwriters in connection with our public issuance. The deposit and related interest earnings are restricted for one year from the IPO date.

Accounts Receivable

The Company generally records a receivable related to revenue when it has an unconditional right to invoice and receive payment. Accounts receivable are carried at original invoice amount less a reserve made for doubtful accounts based on a review of all outstanding amounts on a periodic basis. The Company determines the allowance for doubtful accounts by evaluating customers’ creditworthiness; historical experience; age of current accounts receivable balances; and changes in financial condition or payment terms of our customers. The allowance for doubtful accounts is typically immaterial and, if required, are based on management’s best estimate. In estimating the allowance for doubtful accounts, the Company analyzes the age of current outstanding account balances, historical bad debts, and customer concentrations. The provision for doubtful accounts is recorded as a charge to general and administrative expense when a potential loss is identified. Losses are written off against the allowance when the receivable is determined to be uncollectible. Management judgment is required to estimate our allowance for doubtful accounts in any accounting period. The amount and timing of our bad debt expense and cash collection could change significantly as a result of a change in any of the risk factors mentioned above.

Property, Plant and Equipment, Net

Property, plant and equipment, net, are stated at cost. Depreciation is calculated using the straight-line method over the following useful lives:


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

When assets are retired or disposed of, the cost and accumulated depreciation thereon are removed, and any resulting gains or losses are included in the consolidated statements of comprehensive income. Leasehold improvements are amortized using the straight-line method over the estimated life of the asset, not to exceed the length of the lease. Repairs and maintenance costs are expensed as incurred.

Foreign Currency

The functional currency for our foreign operations is primarily the applicable local currency. Accounts of foreign operations are translated into U.S. dollars using exchange rates for assets and liabilities at the balance sheet date and average prevailing exchange rates for the period for revenue and expense accounts. Adjustments resulting from the translation are included in accumulated other comprehensive loss. Realized and unrealized transaction gains and losses arising from transactions denominated in foreign currencies different than the relevant functional currency are included in our consolidated statements of comprehensive income in the period in which they occur.

Intangible Assets – License Usage Rights

The Company enters into license agreements with third-party developers and related party developers that require the Company to make payments for license usage rights and game development and production services. These license agreements grant the Company the exclusive publishing and distribution rights to game titles as well as, in some cases, the underlying intellectual property rights. These license agreements also specify the payment schedules, royalty rates and the relevant licensing period. The Company capitalizes the cost of license usage rights as intangible assets and amortizes them over the terms of the respective licensing rights.

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 as of December 31, 2022 and 2021.

Amortizable Intangibles and Other Long-lived Assets

The Company’s long-lived assets and other assets consisting of property, plant and equipment and purchased intangible assets, are reviewed for impairment in accordance with the guidance of the FASB Topic ASC 360, Property, Plant, and Equipment. Intangible assets subject to amortization are carried at cost less accumulated amortization and amortized over the estimated useful life in proportion to the economic benefits received. The Company evaluates the recoverability of definite-lived intangible assets and other long-lived assets in accordance with ASC Subtopic 360-10, which generally requires the assessment of these assets for recoverability when events or circumstances indicate a potential impairment exists. The Company considers certain events and circumstances in determining whether the carrying value of identifiable intangible assets and other long-lived assets, other than indefinite lived intangible assets, may not be recoverable including, but not limited to: significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; and changes in the Company’s business strategy. If the Company determines that the carrying value may not be recoverable, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of the asset group to determine whether an impairment exists. If an impairment is indicated based on a comparison of the asset groups’ carrying values and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amount of the asset group exceeds its fair value. There can be no assurance, however, that market conditions will not change or demand for the Company’s products under development will continue. Either of these could result in future impairment of long-lived assets. Actual useful lives and cash flows could be different from those estimated by management which could have a material effect on our consolidated reporting results and financial positions. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. For the years ended December 31, 2022 and 2021, the Company recorded $0 and $16,325,000 as impairment loss related to the Atlas game license rights from a related party.

Income Taxes

Income taxes are provided for the tax effects of transactions reported in the financial statements and consisted of taxes currently due and deferred taxes. Deferred taxes are recognized for the differences between the basis of assets and liabilities for financial statement and income tax purposes.

The Company follows FASB Topic ASC 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns.

Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

FASB ASC 740-10-25 provides criteria for the recognition, measurement, presentation, and disclosure of uncertain tax positions. The Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company recognized liabilities for uncertain tax positions pursuant to FASB ASC 740-10-25. Such amounts are included in the current and long term accrued expenses on the accompanying consolidated balance sheets in the amount of $457,024 and $454,438 as of December 31, 2022 and 2021, respectively. The Company accrued and recognized interest and penalties related to unrecognized tax benefits in operating expenses.

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 December 31, 2022 and 2021, the Company had deposits of $17,929,308 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. As of December 31, 2022 and 2021, the Company had two customers who accounted for approximately 57% and four customers who accounted for approximately 86% of consolidated gross receivables, respectively. Among the two customers as of December 31, 2022 and four customers as of December 31, 2021, each customer accounted for 29% and 28% as of December 31, 2022, and 29%, 28%, 17%, and 12% as of December 31, 2021 of the consolidated gross receivables outstanding. Of the 86% consolidated gross receivables accounted for by the four customers, as of December 31, 2021, 12% was due from a customer located in Canada. During the years ended December 31, 2022 and 2021, approximately 54% and 68%, respectively, of net revenue was derived from these customers.

As of December 31, 2022 and 2021, the Company had two customers who accounted for approximately 55% and two customers who accounted for approximately 64% of consolidated gross payables, respectively. Among the two customers as of December 31, 2022 and 2021, each customer accounted for 43% and 12% as of December 31, 2022, and 53% and 11% as of December 31, 2021 of our consolidated gross payables outstanding. Amounts payable to SDE are netted with receivables from them and presented as accounts receivable - related party in the consolidated balance sheets as of December 31, 2022 and 2021. The expenses paid to SDE during the years ended December 31, 2022 and 2021 accounted for 47% and 40% of the Company’s combined gross cost of revenues and operating expenses, respectively.

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 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 consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Contracts in Entity’s Own Equity (Subtopic 815-40) – Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, to simplify the application of GAAP for certain financial instruments with characteristics of liabilities and equity. The FASB decided to eliminate certain accounting models to simplify the accounting for convertible instruments, reduce complexity for preparers and practitioners, and improve the decision usefulness and relevance of the information provided to financial statement users. The GASB also amended the guidance for derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusion and amended the related earnings per share guidance. The Company has elected to delay implementation of this standard until January 1, 2024 based on its emerging growth status. The impact of adopting the new accounting standard is being evaluated.

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 consolidated financial statements. Please see Note 15 – Revolving Loan, Short Term Note and Long-Term Debt for more information.

Employee Savings Plans

The company maintains a 401(k) for its United States based employees. The plan is offered to all eligible employees to make voluntary contributions. Employer contributions to the plan are reported under general and administrative costs in the amounts of $65,908 and $38,470 for the years ended December 31, 2022 and 2021.

Stock Based Compensation

We recognize compensation cost for stock-based awards to employees based on the awards’ estimated grant-date fair value using a straight-line approach over the service period for which such awards are expected to vest. We account for forfeitures as they occur. We issued restricted stock units (“Restricted Stock Units” or “restricted stock units”) during the year ended December 31, 2022. The fair value of Restricted Stock Units is determined based on the quoted market price of our common stock on the date of grant.

The Company’s 2022 Omnibus Incentive Plan (the “2022 Plan”) became effective upon the consummation of the IPO. The 2022 Omnibus Incentive allows us to grant options to purchase our common stock and to grant stock options, stock appreciation rights, restricted stock, restricted stock units and performance awards and other cash-based awards and other stock-based awards to our employees, officers, and directors, up to a maximum of 5,718,000 shares. Stock options may be granted to employees and officers and non-qualified options may be granted to employees, officers, and directors, at not less than the fair market value on the date of grant.

Restricted Stock Units

We grant restricted stock units under our 2022 Omnibus Incentive Plan to employees and directors. Restricted stock units are unfunded, unsecured rights to receive common stock upon the satisfaction of certain vesting criteria. Upon vesting, a number of shares of common stock equivalent to the number of restricted stock units is typically issued net of required tax withholding requirements, if any. Restricted stock units are subject to forfeiture and transfer restrictions.

Warrants

In connection with the IPO, offering costs related to legal, accounting, and underwriting costs were net with the proceeds and recorded as a reduction in additional paid in capital, in the stockholders’ equity section of the balance sheet. The Company also issued Underwriters Warrants (as defined below) for services provided during the IPO to purchase 120,000 shares of Class A common stock. The Underwriters Warrants are accounted for as equity instruments and are included in the stockholders’ equity section of the balance sheet. The fair value of the Underwriters Warrants has been estimated using the Black-Scholes option pricing model.

Share Repurchase Program

On November 10, 2022, the Company’s board of directors authorized a share repurchase program under which the Company may repurchase up to $5 million of outstanding shares of Class A common stock of the Company, subject to ongoing compliance with the Nasdaq listing rules. The program does not have a fixed expiration date. Repurchased shares are accounted for at cost and reported as a reduction of equity in the consolidated balance sheets under treasury stock. No treasury stock was sold during the year ended December 31, 2022. As of December 31, 2022, 1,197,649 shares of Class A common stock were repurchased pursuant to the Share Repurchase Program for an aggregate purchase price of approximately $3.4 million. The average price paid per share was $2.85 and approximately $1.6 million aggregate amount of shares of Class A common stock remain available for repurchase under the Share Repurchase Program.

Earnings Per Share

Earnings per share (“EPS”) is calculated by dividing the net income that is applicable to the common stockholders for the period by the weighted average number of shares of common stock during that period. The diluted EPS for the period is calculated by dividing the net income applicable to common stockholders for the period by the weighted average number of shares of common stock and common stock equivalents outstanding during the period. The Company’s common stock equivalents are measured using the treasury stock method and represent unvested RSUs and warrants. For comparative purposes the Company has presented EPS for the year ended December 31, 2021 using the number of shares exchanged in the reorganization of the Company as the denominator. For more information see Note 19 – Earnings Per Share.

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.

Consolidated Balance Sheets - USD ($)	Dec. 31, 2022	Dec. 31, 2021
Current Assets:
Cash and cash equivalents	$ 12,863,817	$ 10,164,338
Restricted escrow deposit	1,003,804
Accounts receivable, net of allowances for doubtful accounts of $19,929 and $31,525, respectively	6,758,024	12,244,785
Accounts receivable - related party, net	11,344,184	8,435,823
Loan and interest receivable - related party	101,753	203,408
Prepaid expenses - related party		3,145,000
Prepaid expenses and other current assets	10,565,141	11,017,007
Total current assets	42,636,723	45,210,361
Restricted cash and cash equivalents	6,374,368	6,389,777
Prepaid expenses - related party	5,582,500
Property, plant and equipment, net	5,114,799	5,678,701
Deferred income taxes	7,602,536	8,191,051
Other noncurrent assets	198,668	199,919
Operating lease right-of-use assets, net	3,606,398	5,100,912
Total assets	72,772,571	80,085,845
Current Liabilities:
Accounts payable	9,452,391	3,871,510
Accounts payable - related party	19,918,259	23,733,572
Accrued expenses and other liabilities	1,474,088	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	5,416,666
Notes payable		216,329
Current portion of long-term debt	86,524	77,348
Current portion of deferred revenue	4,335,404	11,005,517
Current portion of operating lease liabilities	1,371,227	1,688,965
Total current liabilities	51,582,329	53,497,155
Accrued expenses	457,024
Long-term debt, net of current portion	3,221,963	2,885,434
Deferred revenue, net of current portion	5,216,042	9,275,417
Operating lease liabilities, net of current portion	2,930,529	4,375,786
Total liabilities	63,407,887	70,033,792
Commitments and contingencies
Stockholders' Equity:
Additional paid-in capital	23,436,942	94,159,167
Due from shareholder - loan receivable		(91,388,176)
Due from shareholder - interest receivable		(2,965,346)
Accumulated other comprehensive loss	(307,200)	(266,557)
Retained earnings (accumulated deficit)	(4,863,250)	16,045,231
Stockholders' Equity	18,270,292	15,589,319
Treasury stock at cost (1,197,649 and 0 shares, respectively)	(3,414,713)
Total Snail, Inc. and Snail Games USA Inc. equity	14,855,579	15,589,319
Noncontrolling interests	(5,490,895)	(5,537,266)
Total stockholders' equity	9,364,684	10,052,053
Total liabilities, noncontrolling interests and stockholders' equity	72,772,571	80,085,845
Class A Common Stock
Stockholders' Equity:
Common stock	925
Class B Common Stock
Stockholders' Equity:
Common stock	2,875
Snail Games USA
Stockholders' Equity:
Common stock		5,000
License - related parties
Current Assets:
Intangible assets, net	1,384,058	8,787,976
License
Current Assets:
Intangible assets, net		250,000
Other
Current Assets:
Intangible assets, net	$ 272,521	$ 277,148

INCOME TAXES

12 Months Ended

Dec. 31, 2022

INCOME TAXES

INCOME TAXES

NOTE 16 – INCOME TAXES

The components of income (loss) before income taxes for the years ended December 31, 2022 and 2021 are as follows:


	2022		2021
United States	$	(1,587,477)	$	9,476,520
Foreign		135,232		217,560
	$	(1,452,245)	$	9,694,080

The income tax (benefit) provision for the years ended December 31, 2022 and 2021 are as follows:


	2022		2021
Current:
U.S. federal	$	(499,784)	$	4,975,632
U.S. State		(2,535,117)		(61,333)
Foreign		—		30,041
Total current income taxes		(3,034,901)		4,944,340
Deferred:
U.S. federal		602,102		(2,988,575)
U.S. State		(11,686)		(174,984)
Foreign		(1,938)		3,768
Total deferred income taxes		588,478		(3,159,791)
Income tax (benefit) provision	$	(2,446,423)	$	1,784,549

The provision (benefits) for income taxes differs from the amounts computed by applying the federal statutory tax rate of 21.0% to earnings before income taxes, as follows:


	2022		2021
Federal statutory income tax rate	21.00	%	21.00	%
Valuation allowance	58.33	%	3.50	%
FIN 48	5.21	%	—
Return to provision	17.27	%	—
State refund benefit	130.84	%	—
Change in subsidiary tax status	(73.52)	%	—
PPP loan	2.45	%	(0.85)	%
GILTI	(1.80)	%	0.44	%
State taxes	2.94	%	(2.44)	%
R&D credit true-up	2.84	%	—
Rate change	1.82	%	(0.40)	%
Other	1.10	%	(2.94)	%
	168.48	%	18.31	%

As of December 31, 2022, the Company’s effective tax rate differed from the federal statutory rate of 21% primarily as a result of a state income tax refund for previous years filings related to the Company’s implementation of California’s adopted market-based sourcing rules in income years open for refund, changes in the valuation allowance on our deferred tax assets and the conversion of our BTBX.IO subsidiary to a partnership, which is treated as a dissolution for tax purposes.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities consisted of the following as of December 31, 2022 and 2021:


	2022		2021
Deferred tax assets (noncurrent):
Net operating losses	$	6,884,595	$	5,181,080
Deferred revenue		2,003,812		3,959,110
Research and development credit		494,777		189,431
Book lease liability (ASC 842)		937,968		1,387,106
Fixed assets and intangibles		1,959,679		3,856,167
Section 174 Capitalized R&E		825,394		—
Other		1,085,662		639,219
Total deferred tax assets		14,191,887		15,212,113
Deferred tax liabilities (noncurrent):
Book ROU assets (ASC 842)		(786,350)		(1,168,823)
Basis difference in subsidiary		(797,806)		—
Total deferred tax liabilities:		(1,584,156)		(1,168,823)
Long-term deferred tax asset		12,607,731		14,043,290
Valuation allowance		(5,005,195)		(5,852,239)
Net deferred tax asset	$	7,602,536	$	8,191,051

Included in these consolidated financial statements are two entities that are not consolidated in the U.S. tax return filing due to less than 80% ownership by Snail Games USA Inc. As of December 31, 2022, the non-includable entities have U.S. federal net operating loss (“NOL”) carryforwards of $3,117,395 which begin to expire in 2037 and $11,079,414 with an indefinite carryforward period. As of December 31, 2022, the non-includable entities have $14,106,538 of California net operating loss carryforwards, which begin to expire in 2037. The Company’s consolidated federal NOL carryforwards are $12,753,956 and its 163(j) interest carryforward is $144,385; both have an indefinite life. The Company’s consolidated state NOL carryforwards are $3,218,833 and expire through 2042.

The Company maintained a valuation allowance of $4,057,479 and $5,188,110 as of December 31, 2022 and 2021, respectively, the valuation allowance relates primarily to the NOL of the non-includable entities mentioned above, which have had historical losses, and which management has assessed are not more likely than not to be able to realize those NOLs. The Company’s consolidated tax filing group had a valuation allowance of $683,552 and $664,129 as of December 31, 2022 and 2021, respectively. The Company had a foreign valuation allowance of $264,165 as of December 31, 2022. As of December 31, 2022 and 2021, the Company has foreign net operating loss carryforwards of $36,815 and $72,977, respectively, all of which are fully reserved and expire through 2028.

The Company has assessed all positive and negative evidence of whether sufficient future taxable income will be generated to realize the deferred tax assets, including the level of historical taxable income and projections of future taxable income over the periods during which the deferred tax assets are deductible, except as noted above. The Company has a history of significant book income and taxable income for the three most recent years – with a three-year cumulative pre-tax book income of $49.2 million and three-year cumulative taxable income of $71.7 million. Therefore management believes it is more likely than not that the Company will realize the benefits of these deductible differences.

As of December 31, 2022, the Company has foreign tax credit carryforwards which, if not utilized, begin to expire in 2027 of $192,180 and R&D credit carryforwards of $264,165 expire through 2032. As of December 31, 2022 the Company has state R&D credit carryforwards of $343,428 with an indefinite carryforward period. The Company has booked an uncertain tax position reserve on the entire amount of foreign tax and R&D credit carryforwards due to uncertainty regarding their nature and future utilization.

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, 2019 and after. The statute of limitations for its consolidated state income tax returns are open for tax years ended December 31, 2018 and after. All tax periods for its Polish subsidiary are currently subject to examination since its inception in 2018. While the Company has historically only filed a state tax return in California, the management has accrued income tax liabilities for additional states as of December 31, 2022 and 2021, respectively and is also undergoing the Voluntary Disclosure Agreement process in additional states.

After enactment of the Tax Cuts and Jobs Act (“TCJA”) in 2017, any current earnings of a foreign subsidiary are subject to the Global Intangible Low-Taxed Income (“GILTI”) tax and any future repatriation of foreign earnings back to the U.S. would be subject to a 100% dividends-received deduction, thus, not subject to additional federal taxes. The Company owns one foreign corporation, Donkey Crew, which is subject to the GILTI tax and will have a GILTI inclusion during the year ended December 31, 2022. It is Management’s intent to permanently reinvest any future foreign earnings to support operations and business growth of its affiliated company in Poland. As such, no federal deferred tax liability was recorded on the unremitted earnings of the foreign subsidiary as of December 31, 2022 and 2021. State deferred tax liability is deemed immaterial due to minimal earnings offset by R&D benefits and negative foreign earnings for the years December 31, 2022 and 2021, respectively.

The following table reflects changes in gross unrecognized tax benefits for the years ended December 31, 2022 and 2021:


	2022		2021
Unrecognized tax benefits at beginning of year	$	693,913	$	1,054,081
Gross Increases – current year positions		—		—
Gross Increases – prior year positions		72,177		124,979
Gross Decreases – prior year positions		—		(485,147)
Gross Decreases – settlements		(69,195)		—
Unrecognized tax benefits at end of year	$	696,895	$	693,913

As of December 31, 2022 and 2021, the Company had $497,720 and $487,867, respectively, of unrecognized tax benefits that if recognized would impact the Company’s effective tax rate. The Company accrued and recognized interest and penalties related to unrecognized tax benefits in operating expense. As of December 31, 2022 and 2021, the Company had accrued $0 and $9,257 of interest and penalties, respectively. The Company does not expect the amount to change within 12 months and is currently not under audit by any taxing jurisdictions.

- 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.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 21
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SAB Topic 11.C)
-URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 17
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SAB TOPIC 6.I.5.Q1)
-URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 14
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 270
-Section 50
-Paragraph 1
-URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-URI https://asc.fasb.org/topic&trid=2144680

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 30
-Section 50
-Paragraph 2
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

+ Details

CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH AND CASH EQUIVALENTS (Details) - USD ($)	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH AND CASH EQUIVALENTS
Cash and cash equivalents	$ 12,863,817	$ 10,164,338
Restricted cash and cash equivalents	6,374,368	6,389,777
Cash and cash equivalents, and restricted cash and cash equivalents	$ 19,238,185	$ 16,554,115	$ 33,902,707

OPERATING LEASE RIGHT-OF-USE ASSETS

12 Months Ended

Dec. 31, 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 December 31, 2022 and 2021 the Company’s net operating lease right-of-use assets amounted to $3,606,398 and $5,100,912, respectively. During the year ended December 31, 2022, the Company terminated one of its lease contracts and had a second expire. The terminated lease contract resulted in a gain on the lease termination of $122,533 during the year ended December 31, 2022. There were no such terminations during the year ended December 31, 2021. The Company had variable lease payments of approximately $77,385 during the year ended December 31, 2022 which consisted primarily of common area maintenance charges and administrative fees. 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 and Expirations	$	(1,301,571)	$	907,370	$	442,704	$	74,030	$	122,533

During 2021, the Company sub-leased one property. For the years ended December 2022 and 2021, the Company received rent income from the sub-lessee in the amount of $0 and $434,119, respectively. Due to the differences between sub-tenant payments and lease payments, $95,000 was owed to the landlord as of December 31, 2021. In May 2022, the Company entered into an agreement with the landlord to terminate the lease early with no penalty and paid off the balance due.

Operating lease costs for the years ended December 31, 2022 and 2021 are as follows:


	For the years ended December 31,
	2022		2021
Operating lease costs	$	1,590,872	$	1,980,873
Short term lease costs		—		—
Total operating lease costs	$	1,590,872	$	1,980,873

Supplemental information related to operating leases is as follows:


	2022			2021
Cash paid for amounts included in the measurement of lease liabilities	$	1,489,396		$	1,445,235
Weighted average remaining lease term		2.9 years			3.7 years
Weighted average discount rate		5.00	%		4.92	%

Future undiscounted lease payments for operating leases and a reconciliation of these payments to our operating lease liabilities as of December 31, 2022 are as follows:


	Future lease payments		Imputed Interest		Lease Liabilities

Years ending December 31,	Amount
2023	$	1,548,889	$	177,662	$	1,371,227
2024		1,610,844		105,810		1,505,034
2025		1,453,785		28,290		1,425,495
2026		—		—		—
Thereafter		—		—		—
Total future lease payments	$	4,613,518	$	311,762	$	4,301,756

REVENUE FROM CONTRACTS WITH CUSTOMERS - Activity (Details) - USD ($)	12 Months Ended
	Dec. 31, 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	(18,832,396)	(26,478,997)
Revenue deferred	8,102,908	12,230,596
Deferred revenue, ending balance	9,551,446	20,280,934
Less: short term portion	(4,335,404)	(11,005,517)
Deferred revenue, net of current portion	$ 5,216,042	$ 9,275,417

PROPERTY, PLANT AND EQUIPMENT, NET

12 Months Ended

Dec. 31, 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 December 31, 2022 and 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		(4,419,558)		(3,953,184)
Property, plant and equipment, net	$	5,114,799	$	5,678,701

Depreciation and amortization expense was $565,906 and $798,813 for the years ended December 31, 2022 and 2021, respectively. The Company’s subsidiary, Donkey Crew, LLC, held net property, plant and equipment outside of the United States in the amount of $13,569 and $31,016, as of December 31, 2022 and 2021, respectively.

During the years ended December 31, 2022 and 2021, the Company disposed of $99,811 and $449,970 in assets with accumulated depreciation of $97,421, and $332,654, respectively, as of the disposal date. The total gain resulting from the disposal of assets amounted to $17,067 for the year ended December 31, 2022 and the total loss was $117,316 for the year ended 2021, respectively.

PRESENTATION AND NATURE OF OPERATIONS - (Details)		12 Months Ended
PRESENTATION AND NATURE OF OPERATIONS - (Details)	Jul. 13, 2022 shares	Dec. 31, 2022 segment
PRESENTATION AND NATURE OF OPERATIONS
Number of operating segments		1
Number of reportable segments		1
Snail Games USA Inc
PRESENTATION AND NATURE OF OPERATIONS
Equity interest owned by the company		100.00%
Snail Innovation Institute
PRESENTATION AND NATURE OF OPERATIONS
Equity interest owned by the company		70.00%
Frostkeep Studios, Inc.
PRESENTATION AND NATURE OF OPERATIONS
Equity interest owned by the company		100.00%
Eminence Corp
PRESENTATION AND NATURE OF OPERATIONS
Equity interest owned by the company		100.00%
Wandering Wizard, LLC
PRESENTATION AND NATURE OF OPERATIONS
Equity interest owned by the company		100.00%
Donkey Crew, LLC
PRESENTATION AND NATURE OF OPERATIONS
Equity interest owned by the company		99.00%
Interactive Films, LLC
PRESENTATION AND NATURE OF OPERATIONS
Equity interest owned by the company		100.00%
Project AWK Productions, LLC
PRESENTATION AND NATURE OF OPERATIONS
Equity interest owned by the company		100.00%
BTBX.IO, LLC
PRESENTATION AND NATURE OF OPERATIONS
Equity interest owned by the company		70.00%
Elephant Snail, LLC (through April 15, 2021)
PRESENTATION AND NATURE OF OPERATIONS
Equity interest owned by the company		51.00%
Snail Technology
PRESENTATION AND NATURE OF OPERATIONS
Number of shares of common stock issued as per agreement \| shares	500,000

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Non controlling interest in subsidiaries (Details)	Dec. 31, 2022
Snail Innovation Institute
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Equity interest owned by the company	70.00%
Non controlling interest held in a subsidiary	30.00%
BTBX.IO, LLC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Equity interest owned by the company	70.00%
Non controlling interest held in a subsidiary	30.00%
Donkey Crew, LLC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Equity interest owned by the company	99.00%
Non controlling interest held in a subsidiary	1.00%

LOAN AND INTEREST RECEIVABLE - RELATED PARTY (Details) - USD ($)	1 Months Ended		12 Months Ended
	Feb. 28, 2022	Feb. 28, 2021	Dec. 31, 2022	Dec. 31, 2021
LOAN AND INTEREST RECEIVABLE - RELATED PARTY
Loan to related party				$ 30,644,042
Interest income earned			$ 582,632	1,595,372
Loan and interest receivable - related party			101,753	203,408
A Subsidiary of Suzhou Snail
LOAN AND INTEREST RECEIVABLE - RELATED PARTY
Loan to related party		$ 200,000
Interest rate per annum		2.00%
Interest income earned			1,753	$ 3,890
Suzhou Snail [Member]
LOAN AND INTEREST RECEIVABLE - RELATED PARTY
Loan amount and interest assumed	$ 203,890
Amount of loan and interest receivable offset			$ 103,890

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property, Plant and Equipment, Net (Details)	12 Months Ended
	Dec. 31, 2022
Buildings
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Useful lives	39 years
Building improvements
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Useful lives	7 years
Leasehold improvements \| Minimum
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Useful lives	5 years
Leasehold improvements \| Maximum
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Useful lives	15 years
Computer equipment and software \| Minimum
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Useful lives	3 years
Computer equipment and software \| Maximum
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Useful lives	5 years
Furniture and fixtures
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Useful lives	3 years
Auto and trucks
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Useful lives	5 years

LOAN PAYABLE AND INTEREST PAYABLE - RELATED PARTIES

12 Months Ended

Dec. 31, 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 December 31, 2022 and 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 December 31, 2022 and 2021, respectively. Interest expenses for the loans payable to related parties were $3,222 and $8,000 during the years ended December 31, 2022 and 2021, respectively.

DUE FROM SHAREHOLDER (Details) - USD ($)		12 Months Ended
DUE FROM SHAREHOLDER (Details) - USD ($)	Apr. 26, 2022	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
LOAN PAYABLE AND INTEREST PAYABLE - RELATED PARTY
Equity		$ 9,364,684	$ 10,052,053	$ 34,339,756
Other receivables-related party		0
Paid in-kind dividend		94,934,400
Loan accrued interest		$ 580,878	1,523,149
Snail Digital Technology Co. Ltd.
LOAN PAYABLE AND INTEREST PAYABLE - RELATED PARTY
Due from shareholder and interest assigned	$ 94,934,400
Paid in-kind dividend	$ 94,934,400
Receivables from stockholder
LOAN PAYABLE AND INTEREST PAYABLE - RELATED PARTY
Interest rate per annum		2.00%
Equity			$ 94,353,522

- Definition

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.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 45
-Paragraph 24
-URI https://asc.fasb.org/extlink&oid=124436220&loc=d3e21930-107793

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.3-04)
-URI https://asc.fasb.org/extlink&oid=120397183&loc=d3e187085-122770

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 45
-Paragraph 23
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=124436220&loc=d3e21914-107793

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 7
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=124431687&loc=d3e22644-107794

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 50
-Paragraph 5
-URI https://asc.fasb.org/extlink&oid=124431353&loc=SL124442411-227067

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 326
-SubTopic 10
-Section 65
-Paragraph 4
-Subparagraph (d)
-URI https://asc.fasb.org/extlink&oid=122640432&loc=SL121648383-210437

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 105
-SubTopic 10
-Section 65
-Paragraph 6
-Subparagraph (c)
-URI https://asc.fasb.org/extlink&oid=126987489&loc=SL124442142-165695

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 105
-SubTopic 10
-Section 65
-Paragraph 6
-Subparagraph (d)
-URI https://asc.fasb.org/extlink&oid=126987489&loc=SL124442142-165695

Reference 9: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 45
-Paragraph 16
-URI https://asc.fasb.org/extlink&oid=126929396&loc=SL4568740-111683

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 40
-Section 65
-Paragraph 1
-Subparagraph (e)(3)
-URI https://asc.fasb.org/extlink&oid=126732423&loc=SL123482106-238011

Reference 11: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 28
-Subparagraph (f)
-URI https://asc.fasb.org/extlink&oid=123596393&loc=d3e14064-108612

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 45
-Paragraph 5
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=124436220&loc=d3e21711-107793

Reference 13: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 323
-SubTopic 10
-Section 50
-Paragraph 3
-Subparagraph (c)
-URI https://asc.fasb.org/extlink&oid=114001798&loc=d3e33918-111571

Reference 14: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(g)(1)(ii))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

Reference 15: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 830
-SubTopic 30
-Section 50
-Paragraph 1
-URI https://asc.fasb.org/extlink&oid=6450520&loc=d3e32583-110901

Reference 16: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 65
-Paragraph 8
-Subparagraph (d)(2)
-URI https://asc.fasb.org/extlink&oid=126983759&loc=SL121830611-158277

Reference 17: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 848
-SubTopic 10
-Section 65
-Paragraph 2
-Subparagraph (a)(3)(iii)(03)
-URI https://asc.fasb.org/extlink&oid=125980421&loc=SL125981372-237846

Reference 18: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 830
-SubTopic 30
-Section 45
-Paragraph 17
-URI https://asc.fasb.org/extlink&oid=118261656&loc=d3e32136-110900

Reference 19: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 65
-Paragraph 8
-Subparagraph (d)(3)
-URI https://asc.fasb.org/extlink&oid=126983759&loc=SL121830611-158277

Reference 20: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 40
-Section 65
-Paragraph 2
-Subparagraph (f)(2)
-URI https://asc.fasb.org/extlink&oid=124501264&loc=SL117420844-207641

Reference 21: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 718
-SubTopic 10
-Section 65
-Paragraph 15
-Subparagraph (f)(2)
-URI https://asc.fasb.org/extlink&oid=128097895&loc=SL121327923-165333

Reference 22: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 55
-Paragraph 4I
-URI https://asc.fasb.org/extlink&oid=120409616&loc=SL4590271-111686

Reference 23: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 40
-Section 65
-Paragraph 2
-Subparagraph (f)(1)
-URI https://asc.fasb.org/extlink&oid=124501264&loc=SL117420844-207641

Reference 24: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 830
-SubTopic 30
-Section 45
-Paragraph 20
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=118261656&loc=d3e32211-110900

Reference 25: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 45
-Paragraph 15
-URI https://asc.fasb.org/extlink&oid=126929396&loc=SL4568447-111683

Reference 26: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 718
-SubTopic 10
-Section 65
-Paragraph 15
-Subparagraph (f)(1)
-URI https://asc.fasb.org/extlink&oid=128097895&loc=SL121327923-165333

Reference 27: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 1
-Subparagraph (b)(3)
-URI https://asc.fasb.org/extlink&oid=124431687&loc=d3e22499-107794

Reference 28: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 718
-SubTopic 10
-Section 65
-Paragraph 15
-Subparagraph (e)
-URI https://asc.fasb.org/extlink&oid=128097895&loc=SL121327923-165333

+ Details

INTANGIBLE ASSETS (Tables)

12 Months Ended

Dec. 31, 2022

INTANGIBLE ASSETS

Schedule of intangible assets


	December 31, 2022
									Weighted
	Gross								Average
	Carrying		Accumulated						Useful
	Amount		Amortization		Impairment Loss		Net Book Value		Life
License rights from related parties	$	136,665,000	$	(135,280,942)	$	—	$	1,384,058	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		(9,110)		—		1,635	12 years
In-progress patent		270,886		—		—		270,886
Total:	$	333,415	$	(60,894)	$	—	$	272,521


	December 31, 2021
									Weighted
	Gross								Average
	Carrying		Accumulated						Useful
	Amount		Amortization		Impairment Loss		Net Book Value		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	12 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	$	1,384,862
2023		804
2024		27
2025		—
2026		—
Thereafter		270,886
	$	1,656,579

EQUITY - Reorganization Transaction and IPO (Details) - USD ($)	1 Months Ended	12 Months Ended
	Nov. 30, 2022	Dec. 31, 2022	Nov. 09, 2022
EQUITY
Net proceeds from shares issued in IPO	$ 12,000,000.0	$ 11,791,705
Amount deposited in escrow account		$ 1,003,804
IPO [Member]
EQUITY
Offering costs	3,000,000.0
Amount deposited in escrow account	$ 1,000,000.0
Period amount in escrow is restricted	12 months
Class A common stock \| IPO [Member]
EQUITY
Number of shares of common stock issued as per agreement (in dollars per share)			$ 4.675

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Research and Development (Details) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Research and development expense	$ 2,955,592	$ 834,818

INCOME TAXES - Components of income (loss) before income taxes (Details) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
INCOME TAXES
United States	$ (1,587,477)	$ 9,476,520
Foreign	135,232	217,560
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest	$ (1,452,245)	$ 9,694,080

- Definition

Amount of income (loss) from continuing operations, including income (loss) from equity method investments, before deduction of income tax expense (benefit), and income (loss) attributable to noncontrolling interest.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (c)
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 30
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8906-108599

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (f)
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599

Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 940
-SubTopic 20
-Section 25
-Paragraph 1
-URI https://asc.fasb.org/extlink&oid=126941158&loc=d3e41242-110953

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 22
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8736-108599

Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SX 210.5-03(10))
-URI https://asc.fasb.org/extlink&oid=126953954&loc=SL114868664-224227

Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 220
-Section S99
-Paragraph 1
-Subparagraph (SX 210.7-04(8))
-URI https://asc.fasb.org/extlink&oid=120400993&loc=SL114874131-224263

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
-SubTopic 235
-Section S99
-Paragraph 1
-Subparagraph (SX 210.9-05(b)(2))
-URI https://asc.fasb.org/extlink&oid=120399901&loc=d3e537907-122884

Reference 9: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 31
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8924-108599

Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
-SubTopic 220
-Section S99
-Paragraph 1
-Subparagraph (SX 210.9-04(15))
-URI https://asc.fasb.org/extlink&oid=120399700&loc=SL114874048-224260

+ Details

PREPAID EXPENSES AND OTHER CURRENT ASSETS

12 Months Ended

Dec. 31, 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 consolidated balance sheets.

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


	2022		2021
Prepaid income taxes	$	9,822,603	$	8,217,660
Other prepaids		80,271		861,332
Other current assets		662,267		1,938,015
Total prepaid expenses and other current assets	$	10,565,141	$	11,017,007

INCOME TAXES - Operating loss carryforward (Details)	Dec. 31, 2022 USD ($) entity item	Dec. 31, 2021 USD ($)
INCOME TAXES
Number of unconsolidated entities \| entity	2
Operating loss carryforwards of non-includable entities, which begin to expire in 2037	$ 3,117,395
U.S. federal net operating loss ("NOL") carryforwards of non-includable entities with indefinite carryforward period	11,079,414
Interest carryforward	144,385
Valuation allowance, non-includable entities	4,057,479	$ 5,188,110
Valuation allowance	5,005,195	5,852,239
Three-year cumulative pre-tax book income	49,200,000
Three-year cumulative taxable income	$ 71,700,000
Number of foreign corporations which is subject to the GILTI tax \| item	1
Federal deferred tax liability on the unremitted earnings of the foreign subsidiary	$ 0	0
Federal
INCOME TAXES
NOL carryforwards	12,753,956
Valuation allowance	683,552	664,129
State
INCOME TAXES
NOL carryforwards	3,218,833
Foreign
INCOME TAXES
NOL carryforwards	36,815	$ 72,977
Tax credit carryforwards	192,180
Valuation allowance	264,165
Research Tax Credit Carryforward [Member]
INCOME TAXES
Tax credit carryforwards	264,165
Research Tax Credit Carryforward [Member] \| Foreign
INCOME TAXES
Tax credit carryforwards	343,428
California
INCOME TAXES
Operating loss carryforwards of non-includable entities, which begin to expire in 2037	$ 14,106,538

DIVIDEND DISTRIBUTION

12 Months Ended

Dec. 31, 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. There were no such distributions during the year ended December 31, 2021.

EARNINGS PER SHARE

12 Months Ended

Dec. 31, 2022

EARNINGS PER SHARE

EARNINGS PER SHARE

NOTE 19 – EARNINGS PER SHARE

The Company uses the two class method to compute its basic earnings per share (“Basic EPS”) and diluted earnings per share (“Diluted EPS”). The following table summarizes the computations of basic EPS and diluted EPS. The allocation of earnings between Class A and Class B shares is based on their respective economic rights to the undistributed earnings of the Company. Basic EPS is computed as net income divided by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock-based compensation plans including restricted stock units using the treasury stock method. The restricted stock units were excluded from the treasury stock method computation of diluted shares as their inclusion would have had an antidilutive effect. For the year ended December 31, 2021 the Company has used the number of shares transferred in the reorganization transaction for the denominator in the EPS calculation. The following table provides a reconciliation of the weighted average number of shares used in the calculation of basic and diluted EPS.


	2022		2021
Basic Earnings Per Share:
Net income attributable to Class A common stockholders	$	228,482	$	8,468,396
Net income attributable to Class B common stockholders		719,325		—
Total net income attributable to Snail Inc and Snail Games USA Inc		947,807		8,468,396
Class A weighted average shares outstanding - basic		9,131,512		35,000,000
Class B weighted average shares outstanding - basic		28,748,580		—
Class A and B basic earnings per share	$	0.03	$	0.24

Diluted Earnings Per Share:
Net income attributable to Class A common stockholders	$	228,482	$	8,468,396
Net income attributable to Class B common stockholders		719,325		—
Class A weighted average shares outstanding - basic		9,131,512		35,000,000
Dilutive effects of common stock equivalents		—		—
Class A weighted average shares outstanding - diluted		9,131,512		35,000,000
Class B weighted average shares outstanding - basic		28,748,580		—
Dilutive effects of common stock equivalents		—		—
Class B weighted average shares outstanding - diluted		28,748,580		—
Diluted earnings per Class A and B share	$	0.03	$	0.24

The restricted stock units and Underwriters Warrants were excluded from the treasury stock method computation of diluted shares as their inclusion would have had an antidilutive effect. There were no such exclusions made in the 2021 calculation.

EQUITY (Details)		1 Months Ended	12 Months Ended
EQUITY (Details)	Nov. 09, 2022 $ / shares shares	Nov. 30, 2022 $ / shares shares	Dec. 31, 2022 Vote class shares
EQUITY
Number of classes of common stock \| class			2
IPO
EQUITY
Period amount in escrow is restricted		12 months
Class A common stock
EQUITY
Number of votes per share \| Vote			1
Number of shares of common stock issued as per agreement	6,251,420
Class A common stock \| Over-Allotment Option
EQUITY
Number of shares of common stock issued as per agreement	450,000
Price per share \| $ / shares	$ 4.675
Class A common stock \| IPO
EQUITY
Number of shares of common stock issued as per agreement	3,000,000	3,000,000
Price per share \| $ / shares	$ 4.675
Price per share \| $ / shares		$ 5.00
Class A common stock \| Underwriting agreement
EQUITY
Percentage of warrants issued	4.00%
Number of warrants issued to purchase common stock	120,000
Warrants term	3 years
Weighted average expected volatility (in percent)			53.00%
Discount rate (in percent)			4.49%
Remaining term (in years)			3 years
Class A common stock \| Snail Inc
EQUITY
Percent of issue price at IPO price	125.00%
Issue price per share \| $ / shares	$ 6.25
Class B common stock
EQUITY
Number of votes per share \| Vote			10
Number of Class A share issuable upon conversion			1
Number of shares of common stock issued as per agreement	28,748,580

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2022

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Schedule of Cost of revenues


	2022		2021
Software license royalties – related parties	$	16,963,388	$	21,451,888
Software license royalties		145,055		—
License and amortization – related parties		25,407,002		32,655,520
License and amortization		250,876		600,895
Game localization		840		47,100
Merchant fees		2,424,832		3,751,658
Engine fees		1,972,126		3,107,032
Internet, server and data center		2,179,179		2,072,149
Costs related to advertising revenue		164,590		—
Total:	$	49,507,888	$	63,686,242

Schedule of Equity interest and Non controlling interest in subsidiaries


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

Schedule of useful lives of property, plant and equipment


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

ACCOUNTS RECEIVABLE - RELATED PARTY (Tables)

12 Months Ended

Dec. 31, 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		(2,175,225)		(5,083,586)
Accounts receivable – related party, net	$	11,344,184	$	8,435,823

ACCOUNTS RECEIVABLE - RELATED PARTY

12 Months Ended

Dec. 31, 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 December 31, 2022 and 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		(2,175,225)		(5,083,586)
Accounts receivable – related party, net	$	11,344,184	$	8,435,823

EQUITY - Stock-Based Compensation Expense (Details) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
EQUITY
Stock-based compensation expense	$ 223,250	$ 0
Deferred income tax benefit related to our stock-based compensation expense	48,678	0
RSU's
EQUITY
Stock-based compensation expense	223,250	$ 0
Total unrecognized compensation cost	$ 2,600,000
Total unrecognized compensation cost expected to be recognized over a weighted-average service period	4 years 8 months 12 days

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

12 Months Ended

Dec. 31, 2022

REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT

Summary of long-term debt


	December 31,		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%. At December 31, 2022, the interest rate on this loan was 7.25%. The revolver is secured by the certificate of deposit accounts held with the financial institution, and reported as restricted cash, in the amount of $5,262,627 and $5,240,752 as of December 31, 2022 and 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. Debt covenants of this loan require the Company to maintain a minimum debt service coverage ratio of at least 1.5 to 1.		2,891,820		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 was originally set to mature 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 and the interest rate amended to the higher of the Wall Street Journal Prime Rate less 0.25%, or 5.75%. At December 31, 2022, the interest rate on this loan was 7.25%.		5,833,333		—
Total		17,725,153		12,179,111
Less: current portion		14,503,190		9,293,677
Total long-term debt	$	3,221,963	$	2,885,434

Summary of future minimum payments of its long-term debt


Years ending December 31,	Amount
2023	$	14,503,190
2024		499,414
2025		86,013
2026		89,115
2027		92,329
Thereafter		2,455,092
	$	17,725,153

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Concentration of Credit Risk (Details)	1 Months Ended	12 Months Ended
	Jan. 31, 2022 USD ($)	Dec. 31, 2022 USD ($) customer	Dec. 31, 2021 USD ($) customer
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Deposits not insured by FDIC \| $		$ 17,929,308	$ 15,135,863
Number of customers		2	2
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		2	4
Customer concentration risk \| Gross receivables \| Major Customers [Member]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration percentage		57.00%	86.00%
Customer concentration risk \| Gross receivables \| Major Customers [Member] \| Canada
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration percentage			12.00%
Customer concentration risk \| Gross receivables \| Customer One
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration percentage		29.00%	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%	17.00%
Customer concentration risk \| Gross receivables \| Customer Four
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration percentage			12.00%
Customer concentration risk \| Revenues \| Major Customers [Member]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration percentage		54.00%	68.00%
Customer concentration risk \| Gross payables
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Number of customers		2	2
Customer concentration risk \| Gross payables \| Major Customers [Member]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration percentage		55.00%	64.00%
Customer concentration risk \| Gross payables \| Customer One
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration percentage		43.00%	53.00%
Customer concentration risk \| Gross payables \| Customer Two
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration percentage		12.00%	11.00%
Expense concentration \| SDE Inc \| Combined gross cost of revenues and operating expenses
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration percentage		47.00%	40.00%

REVOLVING LOAN, SHORT TERM NOTE AND LONG -TERM DEBT

12 Months Ended

Dec. 31, 2022

REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT

REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT

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


	December 31,		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%. At December 31, 2022, the interest rate on this loan was 7.25%. The revolver is secured by the certificate of deposit accounts held with the financial institution, and reported as restricted cash, in the amount of $5,262,627 and $5,240,752 as of December 31, 2022 and 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. Debt covenants of this loan require the Company to maintain a minimum debt service coverage ratio of at least 1.5 to 1.		2,891,820		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 was originally set to mature 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 and the interest rate amended to the higher of the Wall Street Journal Prime Rate less 0.25%, or 5.75%. At December 31, 2022, the interest rate on this loan was 7.25%.		5,833,333		—
Total		17,725,153		12,179,111
Less: current portion		14,503,190		9,293,677
Total long-term debt	$	3,221,963	$	2,885,434

Total interest expense for above debt and revolver loan amounted to $895,761 and $386,452 for the years ended December 31, 2022 and 2021, respectively. Amortization of loan origination expenses of $26,514 and $22,951 are included as part of interest expense for the years ended December 31, 2022 and 2021, respectively. The Company is in compliance with or received a waiver in the event of noncompliance, with its debt covenants as of December 31, 2022 and 2021.

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


Years ending December 31,	Amount
2023	$	14,503,190
2024		499,414
2025		86,013
2026		89,115
2027		92,329
Thereafter		2,455,092
	$	17,725,153

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue Recognition (Details)	12 Months Ended
	Dec. 31, 2022
Minimum
Significant Accounting Policies [Line Items]
Typical customer terms	30 days
Maximum
Significant Accounting Policies [Line Items]
Typical customer terms	75 days

SUBSEQUENT EVENTS (Details) - USD ($)	1 Months Ended		12 Months Ended
SUBSEQUENT EVENTS (Details) - USD ($)	Mar. 31, 2023	Jan. 31, 2023	Dec. 31, 2022	Mar. 27, 2023	Mar. 10, 2023
Class A Common Stock
SUBSEQUENT EVENTS
Number of shares repurchased			13,607
Average price paid per share for repurchase of shares			$ 1.53
Subsequent events
SUBSEQUENT EVENTS
Maximum DLC amount payable under the exclusive software license agreement with SDE					$ 5,000,000.0
DLC amount prepaid	$ 1,000,000.0
Subsequent events \| Mr. Hai Shi, Chief Strategy Officer
SUBSEQUENT EVENTS
Annual salary amount				$ 400,000
Subsequent events \| Class A Common Stock
SUBSEQUENT EVENTS
Number of shares repurchased		139,019
Average price paid per share for repurchase of shares		$ 1.70

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Employee Savings Plan (Details) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Employer contributions to the plan	$ 65,908	$ 38,470

- Definition

Amount of contribution received by defined benefit plan from employer which increases plan assets.

+ References + Details

REVENUE FROM CONTRACTS WITH CUSTOMERS - Deferred Revenue (Details) - USD ($)	Dec. 31, 2022	Dec. 31, 2021
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Deferred revenue	$ 9,551,445
Deferred revenue, non-refundable amount	2,700,000
Current portion of deferred revenue	4,335,404	$ 11,005,517
Long term deferred revenue	$ 5,216,042	$ 9,275,417
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 \| Minimum [Member]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	12 months
Current portion of deferred revenue	$ 4,000,000.0
Long term deferred revenue	$ 2,900,000
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 \| Maximum [Member]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	60 months
Current portion of deferred revenue	$ 4,000,000
Long term deferred revenue	2,900,000
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 \| ARK 1
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Deferred revenue	400,000
Deferred revenue, non-refundable amount	$ 2,700,000
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	12 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 \| ARK 2
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Deferred revenue	$ 2,300,000
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	24 months

REVENUE FROM CONTRACTS WITH CUSTOMERS (Tables)

12 Months Ended

Dec. 31, 2022

REVENUE FROM CONTRACTS WITH CUSTOMERS

Schedule of disaggregation of revenue


	2022		2021
United States	$	69,977,621	$	93,826,986
International		4,466,520		12,907,163
Total revenue from contracts with customers:	$	74,444,141	$	106,734,149


	2022		2021
Console	$	32,382,088	$	47,111,657
PC		31,592,858		43,096,994
Mobile		9,506,777		12,990,321
Other		962,418		3,535,177
Total revenue from contracts with customers:	$	74,444,141	$	106,734,149


	2022		2021
Digital	$	63,974,946	$	90,038,651
Mobile		9,506,777		12,990,321
Physical retail and other		962,418		3,705,177
Total revenue from contracts with customers:	$	74,444,141	$	106,734,149

Schedule of deferred Revenue


	December 31,		December 31,
	2022		2021
Deferred revenue, beginning balance in advance of revenue recognition billing	$	20,280,934	$	34,529,335
Revenue recognized		(18,832,396)		(26,478,997)
Revenue deferred		8,102,908		12,230,596
Deferred revenue, ending balance		9,551,446		20,280,934
Less: short term portion		(4,335,404)		(11,005,517)
Deferred revenue, long term	$	5,216,042	$	9,275,417

CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH AND CASH EQUIVALENTS

12 Months Ended

Dec. 31, 2022

CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH AND CASH EQUIVALENTS

NOTE 4 — CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH AND CASH EQUIVALENTS

Cash equivalents are valued using quoted market prices or other readily available market information. The Company has $6,374,368 and $6,389,777 as of December 31, 2022 and 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 cash equivalents, and restricted cash and cash equivalents as of December 31, 2022 and 2021:


	2022		2021
Cash and cash equivalents	$	12,863,817	$	10,164,338
Restricted cash and cash equivalents		6,374,368		6,389,777
Cash and cash equivalents, and restricted cash and cash equivalents	$	19,238,185	$	16,554,115

PREPAID EXPENSES - RELATED PARTY (Details) - USD ($)	Dec. 31, 2022	Dec. 31, 2021
Prepaid royalties	$ 582,500	$ 3,145,000
Prepaid licenses	5,000,000
Prepaid expenses - related party, ending balance	5,582,500	3,145,000
Less: short-term portion		(3,145,000)
Total prepaid expenses - related party	5,582,500
ARK 2
Prepaid licenses	$ 5,000,000	$ 0

INTANGIBLE ASSETS - Amortization (Details) - USD ($)	12 Months Ended
INTANGIBLE ASSETS - Amortization (Details) - USD ($)	Dec. 31, 2022	Dec. 31, 2021
INTANGIBLE ASSETS
Amortization expense	$ 7,657,669	$ 15,262,559
Remaining useful life - Amortization expense	1 year
Future amortization expense
Remainder of 2022	$ 1,384,862
2023	804
2024	27
Thereafter	270,886
Total	$ 1,656,579

INCOME TAXES - Unrecognized tax benefits (Details) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
INCOME TAXES
Unrecognized tax benefits at beginning of year	$ 693,913	$ 1,054,081
Gross Increases - prior year positions	72,177	124,979
Gross Decreases - prior year positions		(485,147)
Gross Decreases - settlements	(69,195)
Unrecognized tax benefits at end of year	696,895	693,913
Unrecognized tax benefits that if recognized would impact the Company's effective tax rate	497,720	487,867
Interest and penalties accrued	$ 0	$ 9,257

SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2022

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

NOTE 21 – SUBSEQUENT EVENTS

●

In December 2022, the Company repurchased 13,607 shares of Class A common stock at an average price of $1.53 per share, pursuant to the Share Repurchase Program. These shares did not settle until January 2023 and have not been included in the Company’s treasury stock balance as of December 31, 2022.

●

In January 2023, the Company repurchased 139,019 shares of Class A common stock at an average price of $1.70 per share pursuant to the Share Repurchase Program.

●

On March 10, 2023, the Company amended its exclusive software license agreement with SDE relating to the ARK franchise. For DLC’s, the Company plans to release during the term of the agreement, we will now have the option to pay the $5.0 million DLC payment in whole or in part, when paid in advance; or in full, upon the DLC release. No payment for any DLC under this agreement will exceed $5.0 million. In March 2023, the Company pre-paid $1.0 million for a DLC we plan to release in 2023.

●

On March 27, 2023, the Company has appointed Mr. Hai Shi as the Company’s Chief Strategy Officer. The employment is at-will with an annual salary amount of $400,000.

PRESENTATION AND NATURE OF OPERATIONS (Tables)

12 Months Ended

Dec. 31, 2022

PRESENTATION AND NATURE OF OPERATIONS

Schedule of subsidiaries included in the consolidated financial statements


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

INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 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 reflect all the intangible assets presented on the consolidated balance sheets as of December 31, 2022 and 2021:


	December 31, 2022
									Weighted
	Gross								Average
	Carrying		Accumulated						Useful
	Amount		Amortization		Impairment Loss		Net Book Value		Life
License rights from related parties	$	136,665,000	$	(135,280,942)	$	—	$	1,384,058	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		(9,110)		—		1,635	12 years
In-progress patent		270,886		—		—		270,886
Total:	$	333,415	$	(60,894)	$	—	$	272,521


	December 31, 2021
									Weighted
	Gross								Average
	Carrying		Accumulated						Useful
	Amount		Amortization		Impairment Loss		Net Book Value		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	12 years
In-progress patent		270,886		—		—		270,886
Total:	$	333,415	$	(56,267)	$	—	$	277,148

Amortization expense was $7,657,669 and $15,262,559 for the years ended December 31, 2022 and 2021, respectively. These amounts are included in cost of revenues in the accompanying consolidated statements of comprehensive income. The weighted average remaining useful life for which amortization expense will be recognized is 1.0 years. Future amortization expense of intangible assets is as follows:


Years ending December 31,	Amount
Remainder of 2022	$	1,384,862
2023		804
2024		27
2025		—
2026		—
Thereafter		270,886
	$	1,656,579

REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT - Paragraph (Details) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT
Interest expense	$ 922,293	$ 415,793
Amortization of loan origination expenses	26,514	22,951
Revolver
REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT
Interest expense	$ 895,761	$ 386,452

OPERATING LEASE RIGHT-OF-USE ASSETS - Lease cost (Details) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Operating lease
Operating lease costs	$ 1,590,872	$ 1,980,873
Total operating lease costs	$ 1,590,872	$ 1,980,873

REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT - Schedule Table (Details)				1 Months Ended			3 Months Ended	12 Months Ended
	Jan. 26, 2022 USD ($)	Jul. 17, 2021	Jun. 17, 2021 USD ($)	Nov. 30, 2022	Apr. 30, 2022 USD ($)	Apr. 30, 2020 USD ($)	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)
REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT
Total								$ 17,725,153	$ 12,179,111
Less: current portion								14,503,190	9,293,677
Total long-term debt								3,221,963	2,885,434
Loan forgiven								174,436	392,200
Refund of principal payments								48,305
Restricted cash and cash equivalents								$ 6,374,368	6,389,777
Interest rate								7.25%
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								$ 5,262,627	5,240,752
Interest rate								7.25%
Debt service coverage ratio		1.5
2021 Revolving Loan \| Prime Rate
REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT
Percentage reduction from prime rate			0.25%
2021 Promissory Note
REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT
Total								$ 2,891,820	$ 2,962,782
Debt term			10 years
Debt service coverage ratio		1.5
2021 Promissory Note \| For first 5 years
REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT
Debt instrument, interest rate, stated percentage, period			5 years
2021 Promissory Note \| Wall Street Journal Prime Rate
REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT
Annual interest rate, basis spread								0.50%
Debt instrument, interest rate, stated percentage, period								5 years
2021 Promissory Note \| Wall Street Journal Prime Rate \| For first 5 years
REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT
Annual interest rate, basis spread			3.50%
2022 Short Term Note
REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT
Total								$ 5,833,333
Interest rate	3.75%			5.75%
Debt service coverage ratio	1.5
Principal amount	$ 10,000,000
Default interest rate	5.00%
2022 Short Term Note \| Wall Street Journal Prime Rate
REVOLVING LOAN, SHORT TERM NOTE AND LONG-TERM DEBT
Annual interest rate, basis spread	0.50%			0.25%

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 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


	2022		2021
Software license royalties – related parties	$	16,963,388	$	21,451,888
Software license royalties		145,055		—
License and amortization – related parties		25,407,002		32,655,520
License and amortization		250,876		600,895
Game localization		840		47,100
Merchant fees		2,424,832		3,751,658
Engine fees		1,972,126		3,107,032
Internet, server and data center		2,179,179		2,072,149
Costs related to advertising revenue		164,590		—
Total:	$	49,507,888	$	63,686,242

General and Administrative Costs

Advertising and Marketing Costs

The Company expenses advertising costs as incurred. For the years ended December 31, 2022 and 2021, advertising expenses totaled $714,492 and $275,370, respectively.

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	%

Cash and Restricted Cash and Cash Equivalents

Restricted Escrow Deposits

Accounts Receivable

Property, Plant and Equipment, Net

Property, plant and equipment, net, are stated at cost. Depreciation is calculated using the straight-line method over the following useful lives:


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

Foreign Currency

Intangible Assets - License Usage Rights

Intangible Assets – License Usage Rights

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.

Amortizable Intangibles and Other Long-lived Assets

Income Taxes

Concentration of Credit Risk and Significant Customers

Leases

Recently Issued Accounting Pronouncements

Employee Savings Plans

Stock Based Compensation

Restricted Stock Units

Warrants

Share Repurchase Program

Earnings Per Share

CARES Act

Dividend Restrictions

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

Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Consolidated Statements of Comprehensive Income
Stock-based compensation expense	$ 223,250	$ 0

PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details) - USD ($)	1 Months Ended
	Jan. 31, 2022	Dec. 31, 2022	Dec. 31, 2021
Sale of membership interests
Prepaid income taxes		$ 9,822,603	$ 8,217,660
Other prepaids		80,271	861,332
Other current assets		662,267	1,938,015
Total prepaid expenses and other current assets		$ 10,565,141	$ 11,017,007
Pound Sand LLC [Member]
Sale of membership interests
Proceeds received from sale of membership interest	$ 1,500,000

REVENUE FROM CONTRACTS WITH CUSTOMERS - Disaggregation of revenue (Details) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
REVENUE FROM CONTRACTS WITH CUSTOMERS
Total revenue from contract with customers	$ 74,444,141	$ 106,734,149
Digital
REVENUE FROM CONTRACTS WITH CUSTOMERS
Total revenue from contract with customers	63,974,946	90,038,651
Mobile
REVENUE FROM CONTRACTS WITH CUSTOMERS
Total revenue from contract with customers	9,506,777	12,990,321
Physical retail and other
REVENUE FROM CONTRACTS WITH CUSTOMERS
Total revenue from contract with customers	962,418	3,705,177
Console
REVENUE FROM CONTRACTS WITH CUSTOMERS
Total revenue from contract with customers	32,382,088	47,111,657
PC
REVENUE FROM CONTRACTS WITH CUSTOMERS
Total revenue from contract with customers	31,592,858	43,096,994
Mobile
REVENUE FROM CONTRACTS WITH CUSTOMERS
Total revenue from contract with customers	9,506,777	12,990,321
Other
REVENUE FROM CONTRACTS WITH CUSTOMERS
Total revenue from contract with customers	962,418	3,535,177
United States
REVENUE FROM CONTRACTS WITH CUSTOMERS
Total revenue from contract with customers	69,977,621	93,826,986
International
REVENUE FROM CONTRACTS WITH CUSTOMERS
Total revenue from contract with customers	$ 4,466,520	$ 12,907,163

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - General and Administrative (Details) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General and administrative expenses	$ 22,327,746	$ 16,396,958
Stock based compensation	$ 223,250	$ 0

OPERATING LEASE RIGHT-OF-USE ASSETS (Tables)

12 Months Ended

Dec. 31, 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 and Expirations	$	(1,301,571)	$	907,370	$	442,704	$	74,030	$	122,533

Schedule of operating lease costs


	For the years ended December 31,
	2022		2021
Operating lease costs	$	1,590,872	$	1,980,873
Short term lease costs		—		—
Total operating lease costs	$	1,590,872	$	1,980,873

Schedule of supplemental information related to operating leases


	2022			2021
Cash paid for amounts included in the measurement of lease liabilities	$	1,489,396		$	1,445,235
Weighted average remaining lease term		2.9 years			3.7 years
Weighted average discount rate		5.00	%		4.92	%

Schedule of future undiscounted lease payments for operating leases and reconciliation of these payments to our operating lease liabilities


	Future lease payments		Imputed Interest		Lease Liabilities

Years ending December 31,	Amount
2023	$	1,548,889	$	177,662	$	1,371,227
2024		1,610,844		105,810		1,505,034
2025		1,453,785		28,290		1,425,495
2026		—		—		—
Thereafter		—		—		—
Total future lease payments	$	4,613,518	$	311,762	$	4,301,756

LOAN PAYABLE AND INTEREST PAYABLE - RELATED PARTIES (Details) - USD ($)	1 Months Ended	12 Months Ended
	Jul. 31, 2022	Dec. 31, 2022	Dec. 31, 2021	Feb. 28, 2022
LOAN PAYABLE AND INTEREST PAYABLE - RELATED PARTY
Loan payable - related parties		$ 0	$ 400,000
Interest payable - related parties		527,770	528,439
Interest expense-related parties		3,222	$ 8,000
Loan Payable
LOAN PAYABLE AND INTEREST PAYABLE - RELATED PARTY
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
LOAN PAYABLE AND INTEREST PAYABLE - RELATED PARTY
Loan payable - related parties		$ 300,000
Payment of related party debt	$ 300,000
Snail Digital Technology Co. Ltd.
LOAN PAYABLE AND INTEREST PAYABLE - RELATED PARTY
Loan payable - related parties		$ 100,000
Snail Digital Technology Co. Ltd. \| Loan from related party due in December 2023
LOAN PAYABLE AND INTEREST PAYABLE - RELATED PARTY
Loans payable offset against receivable				$ 100,000
Amount of interest payable offset by interest receivable				$ 3,890

CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH AND CASH EQUIVALENTS (Tables)

12 Months Ended

Dec. 31, 2022

CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH AND CASH EQUIVALENTS

Summary of components of the company's cash and cash equivalents, and restricted cash and cash equivalents


	2022		2021
Cash and cash equivalents	$	12,863,817	$	10,164,338
Restricted cash and cash equivalents		6,374,368		6,389,777
Cash and cash equivalents, and restricted cash and cash equivalents	$	19,238,185	$	16,554,115

COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 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 consolidated balance sheets. The Company paid the balance of $1,330,000 during the year ended December 31, 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 (the “District Court”) 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 also retained their own experts to compare the code. The expert served his report and in it detailed the basis for his conclusion that Angela copied substantial portions of the ARK: Survival Evolved source code and made extensive efforts to hide its copying. Angela Game moved the District Court to strike the expert reports. The hearing occurred on February 27, 2023 and the District Court denied Angela Game’s motion to strike the expert reports. Also on that date, the District Court heard the Company’s motion to require that Angela Game file a $3.0 million bond to support an award of costs and fees if the Company prevails on Angela Game’s claims. The District Court granted the Company’s motion for a bond and ordered Angela Game to post a bond in the amount of $750,000.

As of March 8, 2023, both parties are in the midst of fact discovery, and anticipate beginning the exchange of electronically stored information in the near future. Fact discovery is expected to end around June 2023 and the District Court has set a January 2024 trial date.

At this time, we are unable to quantify the magnitude of the potential loss should the plaintiffs’ lawsuit succeed.

Related parties

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Cost of Revenues (Details) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Software license royalties - related parties	$ 16,963,388	$ 21,451,888
Software license royalties	145,055
License and amortization - related parties	25,407,002	32,655,520
License and amortization	250,876	600,895
Game localization	840	47,100
Merchant fees	2,424,832	3,751,658
Engine fees	1,972,126	3,107,032
Internet, server and data center	2,179,179	2,072,149
Costs related to advertising revenue	164,590
Total:	$ 49,507,888	$ 63,686,242

PROPERTY, PLANT AND EQUIPMENT, NET (Details) - USD ($)	12 Months Ended
PROPERTY, PLANT AND EQUIPMENT, NET (Details) - USD ($)	Dec. 31, 2022	Dec. 31, 2021
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, gross	$ 9,534,357	$ 9,631,885
Accumulated depreciation	(4,419,558)	(3,953,184)
Property, plant and equipment, net	5,114,799	5,678,701
Depreciation and amortization - property and equipment	565,906	798,813
Building
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, gross	1,874,049	1,874,049
Land
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, gross	2,700,000	2,700,000
Building improvements
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, gross	1,010,218	1,010,218
Leasehold improvements
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, gross	1,537,775	1,537,775
Autos and trucks
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, gross	178,695	267,093
Computer equipment and software
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, gross	1,821,819	1,830,949
Furniture and fixtures
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, gross	$ 411,801	$ 411,801

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Income Taxes (Details) - USD ($)	Dec. 31, 2022	Dec. 31, 2021
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Liabilities for uncertain tax positions included in current and long term accrued expenses	$ 457,024	$ 454,438

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Restricted Escrow Deposits (Details)	12 Months Ended
	Dec. 31, 2022
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Escrow deposit period from IPO date	1 year

PROPERTY, PLANT AND EQUIPMENT, NET- Disposal (Details) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net	$ 5,114,799	$ 5,678,701
Property, plant and equipment disposed	99,811	449,970
Accumulated depreciation for property, plant and equipment disposed	97,421	332,654
Gain on disposal of fixed assets	17,067	(117,316)
Donkey Crew Limited Liability Company \| Outside US
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net	$ 13,569	$ 31,016

EQUITY (Tables)

12 Months Ended

Dec. 31, 2022

Directors

EQUITY

Schedule of restricted stock units activity


	Restricted Stock	Weighted-Average
	Units	Grant-Date Fair Values
Outstanding as of January 1, 2022	—	$	—
Granted	24,000		5.00
Vested	—		—
Forfeited or cancelled	—		—
Outstanding as of December 31, 2022	24,000	$	5.00

Employees

EQUITY

Schedule of restricted stock units activity


	Restricted Stock	Weighted-Average
	Units	Grant-Date Fair Values
Outstanding as of January 1, 2022	—	$	—
Granted	1,200,960		5.00
Vested	—		—
Forfeited or cancelled	(3,408)		5.00
Outstanding as of December 31, 2022	1,197,552	$	5.00

EARNINGS PER SHARE (Tables)

12 Months Ended

Dec. 31, 2022

EARNINGS PER SHARE

EARNINGS PER SHARE


	2022		2021
Basic Earnings Per Share:
Net income attributable to Class A common stockholders	$	228,482	$	8,468,396
Net income attributable to Class B common stockholders		719,325		—
Total net income attributable to Snail Inc and Snail Games USA Inc		947,807		8,468,396
Class A weighted average shares outstanding - basic		9,131,512		35,000,000
Class B weighted average shares outstanding - basic		28,748,580		—
Class A and B basic earnings per share	$	0.03	$	0.24

Diluted Earnings Per Share:
Net income attributable to Class A common stockholders	$	228,482	$	8,468,396
Net income attributable to Class B common stockholders		719,325		—
Class A weighted average shares outstanding - basic		9,131,512		35,000,000
Dilutive effects of common stock equivalents		—		—
Class A weighted average shares outstanding - diluted		9,131,512		35,000,000
Class B weighted average shares outstanding - basic		28,748,580		—
Dilutive effects of common stock equivalents		—		—
Class B weighted average shares outstanding - diluted		28,748,580		—
Diluted earnings per Class A and B share	$	0.03	$	0.24

OPERATING LEASE RIGHT-OF-USE ASSETS - Supplemental information (Details) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Operating lease
Cash paid for amounts included in the measurement of lease liabilities	$ 1,489,396	$ 1,445,235
Weighted average remaining lease term	2 years 10 months 24 days	3 years 8 months 12 days
Weighted average discount rate	5.00%	4.92%

COMMITMENTS AND CONTINGENCIES (Details) - USD ($)		12 Months Ended
COMMITMENTS AND CONTINGENCIES (Details) - USD ($)	Feb. 27, 2023	Dec. 31, 2022
Commitments and contingencies
Estimated accrual as a result of pending litigation settlement		$ 1,330,000
Litigation settlement payment		1,330,000
Amount of bond		$ 750,000
ARK 1
Commitments and contingencies
Royalty percentage on revenue		45.00%
Royalty expenses, related party		$ 1,500,000
Additional royalty percentage on revenue		25.00%
Forecast
Commitments and contingencies
Amount of bond to support an award of costs and fees	$ 3,000,000.0