Snail, Inc.

Previous wording

Our mission is to provide high-quality entertainment experiences to audiences around the world. We are a leading, global independent developer and publisher of interactive digital entertainment for consumers around the world. We have built a premier portfolio of premium games designed for use on a variety of platforms, including consoles, PCs, and mobile devices.ARK: Survival Evolved has been a top-25 selling game on the Steam platform by gross revenue in each year we released anARK DLC. Our expertise in technology, in-game ecosystems and monetization of online multiplayer games has enabled us to assemble a broad portfolio of intellectual property across multiple media formats and technology platforms. Our flagship franchise from which we generate the substantial majority of our revenues,ARK, is a leader within the sandbox survival genre with 94.8 million console and PC installs through December 31, 2024 and repeated releases within the top-25 selling games on the Steam platform. See below for discussion of key performance metrics and non-GAAP measures. During the fiscal year ended December 31, 2024,ARK: Survival Evolved andARK: Survival Ascendedcombined for an average total of 213,000 daily active users (“DAUs”) on the Steam and Epic platforms, as compared to 416,479 in the fiscal year ended December 31, 2023. We define “daily active users” as the number of unique users who play any given game on any given day. For the years ended December 31, 2024 and 2023, we generated 85.1% and 87.8%, respectively, of our revenues from theARKfranchise.

Current wording

Our mission is to provide high-quality entertainment experiences to audiences around the world. We are a leading, global independent developer and publisher of interactive digital entertainment for consumers around the world. We have built a premier portfolio of premium games designed for use on a variety of platforms, including consoles, PCs, and mobile devices, highlighted byARK: Survival Evolved,which has consistently ranked among top-grossing titles on Steam. Our expertise in technology, in-game ecosystems and monetization of online multiplayer games has enabled us to assemble a broad portfolio of intellectual property across multiple media formats and technology platforms. Our flagship franchise from which we generate the substantial majority of our revenues,ARK, is a leader within the sandbox survival genre with 108.7 million console and PC installs through December 31, 2025 and repeated releases within the top-grossing games on the Steam platform. See below for discussion of key performance metrics and non-GAAP measures. During the fiscal year ended December 31, 2025,ARK: Survival Evolved andARK: Survival Ascendedcombined for an average total of 224,000 daily active users (“DAUs”) on the Steam and Epic platforms, as compared to 213,000 in the fiscal year ended December 31, 2024. We define “daily active users” as the number of unique users who play any given game on any given day. For the years ended December 31, 2025 and 2024, we generated 89.4% and 85.1%, respectively, of our revenues from theARKfranchise.

Previous wording

Our dedication to providing audiences with high-quality entertainment experiences utilizing the latest gaming technology has produced strong user engagement, continued revenue growth, and increased cash flows. Through December 31, 2024, ourARK franchise game has been played for 3.9 billion hours with an average playing time per user of 162.1 hours and with the top 21.3% of all players spending over 100 hours in the game, according to data from the Steam platform. For the years ended December 31, 2024 and 2023, our net revenue was $84.5 million and $60.9 million, respectively. During the year ended December 31, 2024, approximately 42.4% of our revenue came from consoles, 48.1% from PC and 5.5% from mobile platforms as compared to 43.7% from consoles, 43.4% from PC and 9.6% from mobile platforms during the year ended December 31, 2023. For the year ended December 31, 2024 we had a net income of $1.8 million, as compared to net loss of $9.1 million for the year ended December 31, 2023.

Current wording

Our dedication to providing audiences with high-quality entertainment experiences utilizing the latest gaming technology has produced strong user engagement, continued revenue growth, and increased cash flows. Through December 31, 2025, ourARK franchise game has been played for 4.3 billion hours with an average playing time per user of 161.4 hours and with the top 21.5% of all players spending over 100 hours in the game, according to data from the Steam platform. For the years ended December 31, 2025 and 2024, our net revenue was $81.2 million and $84.5 million, respectively. During the year ended December 31, 2025, approximately 38.4% of our revenue came from consoles, 49.7% from PC and 9.6% from mobile platforms as compared to 42.4% from consoles, 48.1% from PC and 5.5% from mobile platforms during the year ended December 31, 2024. For the year ended December 31, 2025, we had a net loss of $27.2 million, as compared to net income of $1.8 million for the year ended December 31, 2024.

Previous wording

We continuously evaluate and invest in content strategy to improve and innovate our games and features and to develop current technological platforms. We are currently actively investing in expanding our gaming pipeline as well as developing media and eSports content related to our gaming intellectual property. We also continue to invest to grow our micro-influencer platform,NOIZ, by attracting new influencers and brand customers. We have established a new division internally under the Interactive Films brand. This division will focus on creating content in the vertical short film segment of the digital entertainment market. The mobile application has already soft launched on iOS and Android platforms. We have released thirty-one short film dramas to date and expect a consistent roll out of new short film dramas.

Current wording

We continuously evaluate and invest in content strategy to improve and innovate our games and features and to develop current technological platforms. We are currently actively investing in expanding our gaming pipeline as well as developing media and eSports content related to our gaming intellectual property. We also continue to invest to grow our micro-influencer platform,NOIZ, by attracting new influencers and brand customers. We have established a new division internally under the Interactive Films brand. This division will focus on creating content in the vertical short film segment of the digital entertainment market. As of December 31, 2025, we have released 140 short film dramas including licensed films from external organizations and expect a consistent roll out of new short film dramas.

Previous wording

We have experienced significant growth in our number of downloads over the last several years. We have sold 49.9 million units between January 1, 2016 and December 31, 2024. During the year ended December 31, 2024, we sold 4.7 million units compared to 6.3 million in the year ended December 31, 2023. Our video games provide highly engaging, differentiated entertainment experiences where the combination of challenge and progress drives player engagement, high average player times, and long-term franchise value. The success of our franchise hinges on our ability to keep our current players engaged while also growing our user base by innovating our platform and monetizing new offerings. The degree to which gamers are willing to engage with our platform is driven by our ability to create interactive and unique content that will enhance the game-play experience. We sell DLCs which are supplementary to our master games and expand the gaming universe to continuously evolve the game and retain players. Our master games are the base versions of a specific title, for example,ARK: Survival Evolved is our master game andARK: Genesis is a DLC.

Current wording

We have experienced significant growth in our number of downloads over the last several years. We have sold 56.2 million units between January 1, 2016 and December 31, 2025. During the year ended December 31, 2025, we sold 6.3 million units compared to 4.7 million in the year ended December 31, 2024. Our video games provide highly engaging, differentiated entertainment experiences where the combination of challenge and progress drives player engagement, high average player times, and long-term franchise value. The success of our franchise hinges on our ability to keep our current players engaged while also growing our user base by innovating our platform and monetizing new offerings. The degree to which gamers are willing to engage with our platform is driven by our ability to create interactive and unique content that will enhance the game-play experience. We sell DLCs which are supplementary to our master games and expand the gaming universe to continuously evolve the game and retain players. Our master games are the base versions of a specific title, for example,ARK: Survival Evolved is our master game andARK: Genesis is a DLC.

Previous wording

We are focused on innovation and technology leadership in order to maintain our competitive advantage. We spend a portion of our capital on our research and development platform to continuously improve our technological offerings and gaming platform. Our proprietary video game technology includes a versatile game engine, development pipeline tools, advanced rendering technology and advanced server and network operations. Continued investment in improving the technology behind our existing gaming platforms as well as developing new software tools for new product offerings is important to maintaining our strategic goals, developer and creator talent, and financial objectives. For us to continue providing cutting-edge technology to our users and bringing digital interactive entertainment to market, we must also continue to invest in developmental and creative resources. For our users, we regularly invest in user-friendly features and enhance user experience in our games and platforms. As our industry moves towards increased use of cloud gaming and gaming as a service technology, our ability to bring interactive technologies to market will be an increasingly important part of our business. To accompany our entry into the vertical short film market, we have developed a distribution platform, theSalty TV mobile application that allows users to access the content on demand.

Current wording

We are focused on innovation and technology leadership in order to maintain our competitive advantage. We spend a portion of our capital on our research and development platform to continuously improve our technological offerings and gaming platform. Our proprietary video game technology includes a versatile game engine, development pipeline tools, advanced rendering technology and advanced server and network operations. Continued investment in improving the technology behind our existing gaming platforms as well as developing new software tools for new product offerings is important to maintaining our strategic goals, developer and creator talent, and financial objectives. For us to continue providing cutting-edge technology to our users and bringing digital interactive entertainment to market, we must also continue to invest in developmental and creative resources. For our users, we regularly invest in user-friendly features and enhance user experience in our games and platforms. As our industry moves towards increased use of cloud gaming and gaming as a service technology, our ability to bring interactive technologies to market will be an increasingly important part of our business. Furthermore, to accompany our entry into the vertical short film market, we have developed a distribution platform, theSaltyTV mobile application that allows users to access the content on demand.

Previous wording

We derive nearly all of our revenue from third-party distribution platforms, these include but are not limited to, Xbox Live and Game Pass, PlayStation Network, Steam, Epic Games Store, the Apple App Store, the Google Play Store, My Nintendo Store and the Amazon Appstore. These digital distribution platforms have policies that may impact our reachability to our potential audience, including the discretion to amend their terms of service, which could affect our current operations and our financial performance. As we expand to new markets, we anticipate similar relationships with additional distribution partners that could similarly impact our performance.

Current wording

We derive nearly all of our revenue from third-party distribution platforms, these include but are not limited to, Xbox Live and Game Pass, PlayStation Network, Steam, Epic Games Store, the Apple App Store, the Google Play Store and My Nintendo Store. These digital distribution platforms have policies that may impact our reachability to our potential audience, including the discretion to amend their terms of service, which could affect our current operations and our financial performance. As we expand to new markets, we anticipate similar relationships with additional distribution partners that could similarly impact our performance.

Previous wording

We primarily derive revenue from the sale of our games through various gaming platforms. Through these platforms, users can download our games and, for certain games, purchase virtual items to enhance their game-playing experience. We offer certain software products through third-party digital storefronts, such as Xbox Live and Game Pass, PlayStation Network, Steam, Epic Games Store, the Apple App Store, the Google Play Store, My Nintendo Store and the Amazon Appstore, and certain retail distributors. For sales arrangements through Xbox Live and Game Pass, PlayStation Network, Steam, Epic Game Stores, My Nintendo Store and retail distributors, 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 report revenue on a net basis based on the consideration received from the digital storefront. For sales arrangements through the Apple App Store and the Google Play Store, we have discretion in establishing the price for the specified good or service and have determined that we are the principal to the end user and therefore report revenue on a gross basis. Mobile platform fees charged by these digital storefronts are expensed as incurred and reported within cost of revenue as merchant fees.

Current wording

We primarily derive revenue from the sale of our games through various gaming platforms. Through these platforms, users can download our games and, for certain games, purchase virtual items to enhance their game-playing experience. We offer certain software products through third-party digital storefronts, such as Xbox Live and Game Pass, PlayStation Network, Steam, Epic Games Store, the Apple App Store, the Google Play Store and My Nintendo Store, and certain retail distributors.

Previous wording

General and administrative expenses include rent expense, salaries, stock-based compensation, legal and professional expenses, administrative internet and server expenses, contract costs, insurance expenses, license and permits, other taxes and travel expenses. We expect salaries and wages to increase as we increase headcount as we expand our product offerings. Stock-based compensation will be recorded within research and development and general and administrative expense. We also record legal settlement expenses as components of general and administrative expenses. We expect general and administrative expenses will increase in absolute dollars due to the additional administrative and regulatory burden of becoming and operating as a public company and the inflationary pressures of recent years.

Current wording

General and administrative expenses include rent expense, salaries, stock-based compensation, legal and professional expenses, administrative internet and server expenses, contract costs, insurance expenses, license and permits, other taxes and travel expenses. We expect salaries and wages to increase as we increase headcount when expanding our product offerings. Stock-based compensation will be recorded within research and development and general and administrative expense. We also record legal settlement expenses as components of general and administrative expenses. We expect general and administrative expenses will increase in absolute dollars due to the inflationary pressures of recent years.

Previous wording

Research and development consists primarily of consulting expenses and salaries and wages devoted towards the development of new games and related technologies and development costs outsourced through Suzhou Snail. We do not fund or enter into arrangements relating to the research and development activities from third-party developers from whom we license games. We expect our research and development to increase as we develop new content, games or technologies.

Current wording

Research and development consists primarily of consulting expenses and salaries and wages devoted towards the development of new games and related technologies and development costs outsourced through Suzhou Snail. We expect our research and development to increase as we develop new content, games or technologies.

Previous wording

The provision for income taxes consists of current income taxes in the various jurisdictions where we are subject to taxation, primarily the United States, as well as deferred income taxes reflecting the net tax effects of temporary differences between the carrying amounts of assets and liabilities in each of these jurisdictions for financial reporting purposes and the amounts used for income tax purposes. Under current U.S. tax law, the federal statutory tax rate applicable to corporations is 21%. Our effective tax rate of 25.7% differed from the federal statutory rate of 21% primarily due to the foreign research and development deduction, permanent differences, change in valuation allowance, and change in warrant valuation.

Current wording

The provision for income taxes consists of current income taxes in the various jurisdictions where we are subject to taxation, primarily the United States, as well as deferred income taxes reflecting the net tax effects of temporary differences between the carrying amounts of assets and liabilities in each of these jurisdictions for financial reporting purposes and the amounts used for income tax purposes. Under current U.S. tax law, the federal statutory tax rate applicable to corporations is 21%. Our effective tax rate of (64.6)% differed from the federal statutory tax rate of 21% primarily due to state income taxes and a change in valuation allowance.

Previous wording

Net revenues for the year ended December 31, 2024 increased by $23.6 million, or 38.7%, compared to the year ended December 31, 2023. The increase in net revenues was due to an increase in recognition of deferred revenues of $32.2 million related to the Ark franchise, an increase in salesBellwright of $5.9 million, partially offset by a decrease in total Ark sales of $13.0 million, a decrease in Ark Mobile sales of $1.0 million and a decrease in the Company’s other titles of $0.7 million.

Current wording

Net revenues for the year ended December 31, 2025 decreased by $3.2 million, or 3.8%, compared to the year ended December 31, 2024. The decrease in net revenues was due to a decrease in recognition of deferred revenues of $15.5 million related to the Ark franchise, and, to a lesser extent, a decrease in salesBellwright of $1.5 million, a decrease in revenues related toMyth of Empiresof $1.3 million, partially offset by an increaseARK: Survival Ascended sales of $11.3 million, an increase inArk Mobile sales of $2.4 million and an increase in revenues generated fromSaltyTVapplication of $0.8 million.

Previous wording

The increase in cost of revenues for the year ended December 31, 2024 was due to an increase of $5.5 million in software license royalties – related parties, a result of increased deferred royalty recognition related toARKfranchise, an increase of $3.5 million in license and amortization – related parties due to the increased license fee paid to SDE partially offset by lower amortization expense due to a lower depreciable base of intangible assets in 2024, a decrease in engine fees of $0.5 million, decrease in internet, server and data center fees of $1.6 million, a decrease in merchant fees of $0.5 million and a decrease in software license royalties of $0.5 million.

Current wording

The increase in cost of revenues for the year ended December 31, 2025 was due to an increase of $1.7 million in license and amortization primarily due to a larger depreciable base attributable to film assets, an increase in engine fees of $0.9 million due to a one-time engine expense fee, an increase in internet, server and data center fees of $1.0 million, and an increase in merchant fees of $1.0 million related to increaseARK: Ultimate Mobile Editionrevenues.

Previous wording

General and administrative expenses for the year ended December 31, 2024 decreased by $2.9 million, or 18.6%, compared to the year ended December 31, 2023. The decrease in general and administrative expenses was due to a decrease in salaries and wages of $1.3 million due to the reversal of $0.9 million in previously expensed stock based compensation, a decrease in legal and professional expenses of $1.1 million, a decrease in bad debt expense of $0.6 million, a decrease in administrative internet and server costs of $0.4 million, and a decrease in expenses of $0.4 million for SEC filing fees, investor relations, NASDAQ listing fees and compliance expenses; partially offset by an increase in non-income related taxes of $0.4 million and general office expenses of $0.2 million.

Current wording

General and administrative expenses for the year ended December 31, 2025 increased by $5.2 million, or 40.6%, compared to the year ended December 31, 2024. The increase in general and administrative expenses was due to an increase in salaries and wages of $3.0 million due to an increase in an employee headcount and recording $0.4 million in stock compensation expense in 2025 versus an income related stock based income of ($0.9) million in 2024, an increase in contractors expenses of $1.0 million, an increase in general office expenses of $0.5 million, an increase in legal and professional costs of $0.3 million, an increase in rent, insurance and travel expenses of $0.5 million and an increase in public company expenses of $0.2 million related to SEC filing fees, investor relations, NASDAQ listing fees and compliance expenses; partially offset by an decrease in non-income related taxes of $0.2 million and fines and penalties of $0.1 million.

Previous wording

Research and development expenses for the year ended December 31, 2024 increased by $6.5 million, or 130.3%, compared to the year ended December 31, 2023. The increase in research and development expenses was due to the outsourced development ofFor the Starsand projectAetherpaid through Suzhou Snail and increased internal research and development salaries as we continue to build our internal development team*.*

Current wording

Research and development expenses for the year ended December 31, 2025 increased by $2.9 million, or 25.2%, compared to the year ended December 31, 2024. The increase in research and development expenses was due to the outsourced development ofFor the StarsandNine Yin Sutra: Immortalpaid through Suzhou Snail and increased internal research and development salaries as we continue to build our internal development team*.*

Previous wording

Interest income was $0.3 million and $0.1 million for the year ended December 31, 2024 and 2023, respectively. The increase was due to the balance of our cash deposits being higher on average during the year ended December 31, 2024.

Current wording

Interest income was $1.3 million and $0.3 million for the year ended December 31, 2025 and 2024, respectively. The increase was due to $1.1 million of interest income related to the interest portion of IRS refunds received during the year ended December 31, 2025.

Previous wording

Interest expense primarily related to our outstanding indebtedness with third-party lenders. Interest expense decreased by $0.8 million for the year ended December 31, 2024 because of the Company having a lower average debt balance during the year ended December 31, 2024.

Current wording

Interest expense primarily related to our outstanding indebtedness with third-party lenders. Interest expense remained relatively consistent for the year ended December 31, 2025 compared to December 31, 2024.

Previous wording

The Company had an income tax provision of $0.6 million for the year ended December 31, 2024 and a benefit of ($2.4) million for the year ended December 31, 2023. Our effective income tax rate was 25.7% and 20.9% during the years ended December 31, 2024 and 2023, respectively.

Current wording

We had an income tax provision of $10.7 million for the year ended December 31, 2025 and a provision of $0.6 million for the year ended December 31, 2024. Our effective income tax rate was (64.6)% and 25.7% during the years ended December 31, 2025 and 2024, respectively. The increase was due to a valuation allowance of $10.8 million for which we determined it is more-likely-than-not that such deferred tax assets will not be realized.

Previous wording

Units sold decreased during the year ended December 31, 2024, as compared to the year ended December 31, 2023, by 1.6 million units, or 25.3%. Units sold ofARK: Survival Evolved decreased by 2.1 million units*,partially offset by an increase inARK: Survival Ascendedunits sold of 0.3 million and an increase inBellwright*sales of 0.4 million units.

Current wording

Units sold increased during the year ended December 31, 2025, as compared to the year ended December 31, 2024, by 1.6 million units, or 32.7%. Units sold ofARKfranchise increased by 1.7 million units, partially offset by a decrease inBellwrightandWest Huntsales of 0.1 million units.

Previous wording

For the year ended December 31, 2024, bookings decreased by $10.0 million, or 11.7%, compared to the year ended December 31, 2023, because of increased sales at a higher ASP driven by the release ofARK: Survival Ascendedin the fourth quarter of 2023. The releases ofBobs Tall TalesandBellwrightalong with theARK: Survival AscendedDLCs,Scorched Earth in April 2024,Aberrationin September 2024 andExtinction in December 2024 partially offset the decrease in unit sales in 2024 but each product release was at a lower ASP than the initial release ofARK: Survival Ascended. Additionally, the Company recognized $13.2 million from deferred revenue upon the release ofScorched Earth, AberrationandExtinction in 2024 and deferred $6.7 million in revenues during the year ended December 31, 2024 for theARK: Survival AscendedDLC’s have not yet released as compared to $22.0 million in revenues deferred during the year ended December 31, 2023 for theARK: Survival AscendedDLC’s and parts ofBobs Tall Talesthat had not yet launched*.*

Current wording

For the year ended December 31, 2025, bookings increased by $12.2 million, or 16.2%, compared to the year ended December 31, 2024, because of increased sales ofARK: Survival Ascended driven by the launch ofARK: Lost Colony in December 2025, the release ofARK: Astraeos in February 2025 andARK: Survival Evolved had its first sales event in June 2025 since the price drop in August 2023. Additionally, we deferred $6.6 million forARK: Survival Ascended DLC’s which have not yet released in 2025 as compared to $13.2 million recognized from deferred revenue upon the release ofScorched Earth,Aberration andExtinction in 2024 and deferred $6.7 million in revenues during the year ended December 31, 2024 for theARK: Survival Ascended DLC’s that have not yet released.

Previous wording

We present EBITDA because it is used by management to assess our financial performance, excluding certain expenses that management believes do not reflect the ongoing operating performance of the business. Management uses EBITDA to supplement GAAP measures of performance when evaluating our business strategies, making budgeting decisions and comparing performance against peer companies.

Current wording

We present EBITDA because it is used by management to assess our financial performance, excluding certain expenses that management believes do not reflect the ongoing operating performance of the business. Management uses EBITDA to supplement GAAP measures of performance when evaluating our business strategies, making budgeting decisions and comparing performance against peer companies. Management believes EBITDA is useful to investors and analysts in highlighting trends in our operating performance, while other measures can differ significantly depending on long-germ strategic decisions regarding capital structure, the tax jurisdictions in which we operate and capital investments.

Previous wording

Our primary sources of liquidity are the cash flows generated from our operations, that are currently available as unrestricted cash. Our unrestricted cash was $7.3 million and $15.2 million as of December 31, 2024 and 2023, respectively.

Current wording

Our primary sources of liquidity are the cash flows generated from our operations, that are currently available as unrestricted cash. Our unrestricted cash was $8.6 million and $7.3 million as of December 31, 2025 and 2024, respectively.

Previous wording

Our restricted cash and cash equivalents were $0.9 million and $1.1 million as of December 31, 2024 and 2023, respectively. Our restricted cash primarily consists of time deposits and is used as security for certain of our debt instruments and to secure standby letters of credit with certain of our landlords.

Current wording

Our restricted cash and cash equivalents were $1.9 million and $0.9 million as of December 31, 2025 and 2024, respectively. Our restricted cash primarily consists of time deposits and to secure standby letters of credit with certain of our landlords and hold collateral in reserve related to our revolving line of credit.

Previous wording

As of December 31, 2024, our 2021 Revolving Loan has a balance of $3.0 million and is due in June 2025. The Company has repaid its Convertible Notes balance of $1.1 million, its $1.5 million financing arrangement, and the remaining $0.8 million of its short term notes balance during the twelve months ended December 31, 2024. In concurrence with the registration of the convertible notes shares the Company registered shares for distribution in an equity line of credit. The Company has the right, but not the obligation, to sell up to $5.0 million in Class A common stock to the investor. We intend to renegotiate with the lender to extend the maturity date of the 2021 Revolving Loan and to negotiate a new Short Term Note. However, there is no guarantee that we will be able to renegotiate the terms of the 2021 Revolving Loan or obtain a new short term note with the lender at terms acceptable to us or at all. The Company was in compliance with its debt covenants related to the 2021 Revolving Note and 2021 Promissory note for the trailing twelve months ended December 31, 2024, however it is probable that the Company will fail the covenants within the next 12 months. As such, the Company has classified the long-term portion of its promissory note as current. There is no guarantee that the Company will receive a waiver from the lender if the covenants of the loans are breached in the future. In the event of a future breach of the debt covenants the lender has the right, but not the obligation, to declare all or any part of the debt as due immediately and cease making any advances or extend any further credit to the Company.

Current wording

As of December 31, 2025, our 2021 Revolving Loan has a balance of $5.0 million and is due and payable in June 2027. Additionally, in February 2025 we issued convertible notes with a stated value of $3.3 million which matured in February 2026 and have been fully repaid. We obtained a term loan note of $3.5 million in June 2025 with a maturity date of June 2028. In October 2025, we issued convertible notes with a stated value of $2.2 million, which mature in October 2026; and in November 2025, we also issued convertible notes with a par value of $1.1 million, which mature in November 2026. Additionally, we have available to issue up to $4.4 million of convertible notes to our existing noteholders. We were in compliance with our debt covenants related to the 2021 Revolving Loan, 2021 Promissory note and 2025 Term Loan for the trailing twelve months ended December 31, 2025. We received a waiver for the covenant breach during the trailing twelve months ended December 31, 2024. We have received an extension on our 2021 Revolving Loan from the lender. There is no guarantee we will receive a waiver from the applicable lender if the covenants of the loans are breached in the future. In the event of a future breach of the debt covenants the lender has the right, but not the obligation, to declare all or any part of the debt as due immediately and cease making any advances or extend any further credit to us.

Previous wording

The Company has raised capital through the issuance of the convertible notes, equity line of credit, a short term financing arrangement with the Company’s internet and data center (“IDC”) vendor, and the distribution agreement entered into with our retail partner which provided advanced royalties. We may need to raise additional capital and issue registered shares to draw on an equity line of credit if needed. The need for additional capital depends on many factors, including, among other things, whether we can successfully renegotiate the terms of our debt arrangements, the rate at which our business grows, demands for working capital, revenue generated from existing DLCs and game titles and launches of new DLCs and new game titles, and any acquisitions that we may pursue. From time to time, we could be required, or may otherwise attempt, to seek additional sources of capital, including, but not limited to, equity and/or debt financings. We cannot provide assurance that we will be able to successfully access any such equity or debt financings, that the required equity or debt financings would be available on terms acceptable to us, if at all, or that any such financings would not be dilutive to our stockholders.

Current wording

We have raised capital through the issuance of the convertible notes and the distribution agreement entered into with our retail partner which provided advanced royalties. We may need to raise additional capital and issue registered shares to draw on an equity line of credit if needed. The need for additional capital depends on many factors, including, among other things, whether we can successfully renegotiate the terms of our debt arrangements, the rate at which our business grows, demands for working capital, revenue generated from existing DLCs and game titles and launches of new DLCs and new game titles, and any acquisitions that we may pursue. From time to time, we could be required, or may otherwise attempt, to seek additional sources of capital, including, but not limited to, equity and/or debt financings. We cannot provide assurance that we will be able to successfully access any such equity or debt financings, that the required equity or debt financings would be available on terms acceptable to us, if at all, or that any such financings would not be dilutive to our stockholders.

Previous wording

Our current unrestricted cash position of approximately $7.3 million, and our expected revenue receipts will allow the Company to continue operations beyond the next 12 months and service its current debts.

Current wording

Our current unrestricted cash position of approximately $8.6 million, and our expected revenue receipts will allow us to continue operations beyond the next 12 months and service our current debts.

Previous wording

The Company had a net income of $1.8 million and a net loss of $9.1 million, for the years ended December 31, 2024 and 2023, respectively, representing an increase of $10.9 million. The increase was primarily due to an increase in net revenue of $23.6 million, decreased general and administrative expenses of $2.9 million, partially offset by increased research and development costs of $6.5 million, increased costs of revenues of $5.9 million, an increase in expenses related to the revaluation of outstanding and exercised warrants of $1.2 million and a decrease in income tax benefit of $3.0 million.

Current wording

We had a net loss of $27.2 million and a net income of $1.8 million, for the years ended December 31, 2025 and 2024, respectively, representing a decrease of $29.0 million. The decrease was primarily due to an decrease in net revenue of $3.3 million, an increase in cost of revenues of $4.6 million, an increase of general and administrative expenses of $5.2 million, an increase of research and development costs of $3.0 million, an increase in advertising and marketing of $3.7 million, an increase in impairment expenses of $1.5 million, an increase in income tax provision of $10.1 million, partially offset by an increase in other income (expense) of $2.1 million.

Previous wording

Non-cash reconciling items were $0.5 million and $1.1 million for the years ended December 31, 2024 and 2023, respectively, representing a decrease of $0.6 million. The decrease in the non-cash reconciling items was due to a decrease in amortization of intangible assets of $1.4 million, a decrease in stock based compensation expense of $1.7 million, a decrease in allowance for credit losses of $0.6 million, partially offset by an increase on the loss in fair value of warrant liabilities of $1.3 million, and an increase in deferred taxes of $2.1 million.

Current wording

Non-cash reconciling items were $14.0 million and $0.5 million for the years ended December 31, 2025 and 2024, respectively, representing an increase of $13.5 million. The increase in the non-cash reconciling items was due to an increase in deferred taxes of $11.4 million, an increase in amortization of intangible assets and film assets of $1.7 million, an increase in impairment of film and intangible assets of $1.5 million, an increase in stock based compensation expense of $1.3 million; partially offset by an increase on the gain in fair value of warrant liabilities of $2.1 million, a decrease in accretion of a convertible notes of $0.2 million and a decrease in depreciation and amortization of $0.1 million.

Previous wording

Our accounts receivable - related party represent revenues attributable to certain mobile games that, for administrative reasons, were collected on our behalf by SDE Inc. (“SDE”), an affiliated entity, from fiscal year 2018 through 2021. SDE no longer collects such payments on our behalf; all such payments are received directly from the platforms through which we offer the relevant games. As of December 31, 2024 and 2023, the net outstanding balances of receivables due from SDE were $7.5 million and $13.5 million, respectively. We expect accounts receivables owed to us by SDE will be repaid within the next two fiscal years and intend to exercise all legally available means of collection. The Company and SDE have entered into an agreement to offset uncollected amounts against monthly payments due to SDE for operating expenses and costs of revenue. See Note 5-Accounts Receivable - Related Party to our consolidated financial statements included in this Annual Report.

Current wording

Our accounts receivable - related party represent revenues attributable to certain mobile games that, for administrative reasons, were collected on our behalf by SDE Inc. (“SDE”), an affiliated entity, from fiscal year 2018 through 2021. SDE no longer collects such payments on our behalf; all such payments are received directly from the platforms through which we offer the relevant games. As of December 31, 2025 and 2024, the net outstanding balances of receivables due from SDE were $1.5 million and $7.5 million, respectively. We expect accounts receivables owed to us by SDE will be repaid within the next fiscal year and intend to exercise all legally available means of collection. We have entered into an agreement with SDE to offset uncollected amounts against monthly payments due to SDE for operating expenses and costs of revenue. See Note 5 –Accounts Receivable (Payable) – Related Party to our consolidated financial statements included in this Annual Report.

Previous wording

Net cash flows used in financing activities for the year ended December 31, 2024 were $6.5 million compared to $3.4 million for the year ended December 31, 2023. Financing activities for the year ended December 31, 2024 included $6.4 million in debt payments, $0.3 million in payments of capitalized offering costs in accounts payable and proceeds of $0.2 million resulting from the exercise of liability classified warrants. Financing activities for the year ended December 31, 2023 included debt repayments of $9.5 million, the purchases of treasury stock in the amount of $0.3 million, and $0.3 million in payments of capitalized offering costs partially offset by $3.0 million in borrowings on a term loan, $0.8 million for the issuance of convertible notes, $1.9 million received for the refund of a dividend withholding tax overpayment and $1.0 million from the release of the Company’s restricted escrow deposit.

Current wording

Net cash flows provided by (used in) financing activities for the year ended December 31, 2025 were $8.7 million compared to ($6.5) million for the year ended December 31, 2024. Financing activities for the year ended December 31, 2025 included proceeds from issuances of convertible notes of $6.0 million, borrowings on $3.5 million term loan, $2.0 million on the revolving line of credit and proceeds of $0.2 million resulting from the exercise of liability classified warrants partially offset by repayments of convertible notes of $2.3 million and additional repayments of notes payable of $0.6 million. Financing activities for the year ended December 31, 2024 included $6.4 million in debt payments, $0.3 million in payments of capitalized offering costs in accounts payable and proceeds of $0.2 million resulting from the exercise of liability classified warrants

Previous wording

In October 2023, we filed a Form S-1 Registration Statement with the SEC in connection with our issuance of convertible note, equity line of credit and warrants related to each financing as noted below.

Current wording

In October 2023, we filed a Registration Statement on Form S-1 with the SEC in connection with our issuance of convertible note, equity line of credit and warrants related to each financing as noted below.

Previous wording

We fund our operations from our net cash flows provided by operating activities. In addition to these cash flows, we have entered into certain debt arrangements to provide additional liquidity and to finance our operations.

Current wording

We fund our operations from our net cash flows provided by operating activities as well as through public and private sales of our securities, and we expect to continue to seek and obtain additional capital in a similar manner. In addition to these cash flows, we have entered into certain debt arrangements to provide additional liquidity and to finance our operations.

Previous wording

In December 2018, we entered into a revolving loan and security agreement with a financial institution for a revolving note in the amount of $5.5 million. On June 21, 2023, the Company amended its revolving loan agreement (“amended revolver”) and decreased the maximum balance from $9,000,000 to $6,000,000. The revolving maturity date of revolving loan is extended to June 30, 2025 and has an annual interest rate equal to the prime rate less 0.25%. At December 31, 2024, the interest rate on this loan was 7.25%. As of December 31, 2024, we had borrowings of $3.0 million outstanding under our 2021 Revolving Loan.

Current wording

In December 2018, we entered into a revolving loan and security agreement with a financial institution for a revolving note in the amount of $5.5 million. On June 17, 2021, we amended and restated our revolving loan and security agreement (the “2021 Revolving Loan”) to increase our revolving line of credit to $9.0 million. On June 21, 2023, we further amended the 2021 Revolving Loan Agreement and decreased the maximum balance from $9.0 million to $6.0 million. As amended, the 2021 Revolving Loan would mature on December 31, 2023 and bore interest at a rate equal to the prime rate less 0.25% and a floor rate of 6.50%. Interest is due and payable under the 2021 Revolving Loan on a monthly basis. We amended the revolving loan agreement in January 2026, to extend the 2021 Revolving Loan maturity date to June 2026. In March 2026, the agreement was further amended to extend the maturity date to March 2030 and to reduce the maximum principal amount from $6,000,000 to $5,000,000 and pledging a $1,000,000 time certificate of deposit. As of December 31, 2025, we had borrowings of $5.0 million outstanding under our 2021 Revolving Loan.

Previous wording

In June 2021, we entered into a loan agreement with a financial institution providing for a term loan in an aggregate principal amount of $3.0 million (the “Term Loan”). The Term Loan, which was originally set to mature in June 2031, bears interest at a fixed rate of 3.5% for the first five years and then at a floating rate of the Wall Street Journal prime rate until maturity. The Term Loan is secured by our principal headquarters.

Current wording

In June 2021, we entered into a loan agreement with a financial institution providing for a term loan in an aggregate principal amount of $3.0 million (the “2021 Term Loan”). The Term Loan, which is set to mature in June 2031, bears interest at a fixed rate of 3.5% for the first five years and then at a floating rate of the Wall Street Journal prime rate until maturity. The Term Loan is secured by our principal headquarters.

Previous wording

On August 24, 2023, the Company issued convertible notes at a 7.4% discount and a principal balance of $1,080,000. The notes had an interest rate of 7.5%, were paid in consecutive monthly installments beginning February 24, 2024 and matured on May 24, 2024. In connection with the Convertible Notes the Company issued to the investors warrants to purchase an aggregate of 714,285 shares that were accounted for under the fair value method and allocated a value of $445,754. The difference of $525,754 between the proceeds allocated to the Convertible Notes and the aggregate principal amount were accreted over the life of the notes and accounted for the fair value of the warrants and the stated discount. Additionally, $152,500 of transaction costs incurred by the Company were recorded as a debt discount. The discount was amortized using the effective interest rate of 103.4%. The effective interest rate is based on the principal balance discounted by stated interest, debt issuance costs and fair value allocated to the related warrants. As of December 31, 2024, the Convertible Notes have been repaid. The Company has registered shares for potential issuance on exercise of the warrants, or conversion of the note, on Form S-1 that was declared effective on October 30, 2023. As of December 31, 2024, the note holders have exercised 202,379 warrants. During the year ended December 31, 2024, prior to repayment, the noteholders exercised the option to convert $60,000 in principal of the notes to 71,460 shares of the Company’s Class A common stock.

Current wording

On August 24, 2023, we issued convertible notes (the “2023 Convertible Notes) at a 7.4% discount and a principal balance of $1,080,000. The notes had an interest rate of 7.5%, were paid in consecutive monthly installments beginning February 24, 2024 and matured on May 24, 2024. We also issued to the purchasers of the 2023 Convertible Notes warrants to purchase an aggregate of 714,285 shares that were accounted for under the fair value method and allocated a value of $445,754. The difference of $525,754 between the proceeds allocated to the 2023 Convertible Notes and the aggregate principal amount was accreted over the life of the notes and accounted for the fair value of the warrants and the stated discount. Additionally, $152,500 of transaction costs incurred by us were recorded as a debt discount. The discount was amortized using the effective interest rate of 103.4%. The effective interest rate is based on the principal balance discounted by stated interest, debt issuance costs and fair value allocated to the related warrants. As of December 31, 2024, the 2023 Convertible Notes have been repaid. We registered shares for potential issuance on exercise of the warrants, or conversion of the note, under a registration statement on Form S-1 that was declared effective on October 30, 2023. As of December 31, 2024, the note holders have exercised 202,379 warrants. During the year ended December 31, 2024, prior to repayment, the noteholders exercised the option to convert $60,000 in principal of the notes to 71,460 shares of our Class A common stock.

Previous wording

On August 24, 2023, the Company entered into a common stock purchase agreement (the “Equity Line Purchase Agreement”) and a registration rights agreement (the “Registration Rights Agreement”) with an investor, pursuant to which the investor has committed to purchase up to $5,000,000 in shares of the Company’s Class A common stock, subject to certain limitations and conditions set forth in the Equity Line Purchase Agreement. The Company shall not issue or sell any shares of common stock under the Equity Line Purchase Agreement which, when aggregated with all other shares of common stock beneficially owned by the investor, would result in beneficial ownership of more than 9.99% of the Company’s outstanding shares of common stock.

Current wording

On August 24, 2023, we entered into a common stock purchase agreement (the “Equity Line Purchase Agreement”) and a registration rights agreement (the “Registration Rights Agreement”) with an investor, pursuant to which the investor has committed to purchase up to $5,000,000 in shares of the Class A common stock, subject to certain limitations and conditions set forth in the Equity Line Purchase Agreement.

Previous wording

Under the terms of the Equity Line Purchase Agreement, the Company has the right, but not the obligation, to sell to the investor, shares of Class A common stock over the period commencing on the execution date of the Equity Line Purchase Agreement and ending on the earlier of (i) December 31, 2025, or (ii) the date on which the investor shall have purchased Securities pursuant to the Equity Line Purchase Agreement for an aggregate purchase price of the $5,000,000, provided that a registration statement covering the resale of shares of Class A common stock that have been and may be issued under the Equity Line Purchase Agreement is declared effective by the SEC. The Company has registered shares for potential issuance on exercise of the warrants, or drawing of the equity line, on Form S-1 that was declared effective on October 30, 2023. As of December 31, 2024 the Company has not sold any Class A common stock under the Equity Line Purchase Agreement and the investor has exercised 33,333 warrants.

Current wording

We have registered shares for potential issuance on exercise of the warrants, or drawing of the equity line, on a Registration Statement on Form S-1 that was declared effective on October 30, 2023. As of December 31, 2025, we have not sold any Class A common stock under the Equity Line Purchase Agreement and the agreement has expired. The investor has exercised 33,333 warrants.

Previous wording

The 2021 Revolving Loan, Term Loan and the 2022 Short Term Note require us to maintain a minimum debt service coverage ratio of 1.5 to 1.0. Additionally, the 2021 Revolving Loan requires us to maintain an outstanding principal balance of no more than $3.0 million for 30 consecutive days during any twelve-month period. For the trailing twelve months ended December 31, 2024, the Company met the minimum debt service coverage ratio required by its debt covenants. The Company repaid the $0.8 million term note that was one of three debt facilities with the lender, in January 2024. The Company’s ability to comply with the covenants, or receive waivers for the covenants, can lead to the acceleration of payments due under the debt facilities with the lender, cause the lender to cease making advances under the revolving agreement, or allow the lender to take possession of collateral. Due to the projected failure to comply with the debt covenant within the next twelve months, the Company classifies its long term debt as current.

Current wording

The 2021 Revolving Loan, 2021 Term Loan, and the 2025 Term Loan require us to maintain a minimum debt service coverage ratio of 1.5 to 1.0. Additionally, the 2021 Revolving Loan requires us to maintain an outstanding principal balance of no more than $2.5 million for 30 consecutive days during any twelve-month period. For the trailing twelve months ended December 31, 2025, the Company has met the minimum debt service coverage ratio required by its debt covenants. Any failure to comply with the covenants, or receive waivers for the covenants, could lead to the acceleration of payments due under the debt facilities with the lender, cause the lender to cease making advances under the revolving agreement, or allow the lender to take possession of collateral.

Previous wording

The Company’s deferred income tax assets reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Changes in tax laws or the level of future taxable income could affect the realizability of deferred income tax assets. The Company recognizes deferred income taxes based on estimates of future taxable income and the utilization of tax loss carryforwards. In evaluating the realizability of deferred taxes, the Company evaluates all available positive and negative evidence of whether sufficient future taxable income will be generated to realize the deferred tax assets, including the results of recent operations and projections of future taxable income. The weighting of positive and negative evidence and the projection of future taxable income requires significant judgment and estimates. In addition, changes in these estimates may have a material impact on the Company’s consolidated financial statements.

Current wording

Our deferred income tax assets reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Changes in tax laws or the level of future taxable income could affect the realizability of deferred income tax assets. We recognize deferred income taxes based on estimates of future taxable income and the utilization of tax loss carryforwards. In evaluating the realizability of deferred taxes, we evaluate all available positive and negative evidence of whether sufficient future taxable income will be generated to realize the deferred tax assets, including the results of recent operations and projections of future taxable income. The weighing of positive and negative evidence and the projection of future taxable income requires significant judgment and estimates. In addition, changes in these estimates may have a material impact on our consolidated financial statements.