Snail, Inc.
For the period ended Mar 31, 2025. Filed May 14, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 14, 2025
SNAL$1.95+7.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-13.
0001493152-24-045110
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-14.
0001641172-25-010394
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 154 previous paragraphs and 135 current paragraphs.
85 unchanged; 31 reworded; 19 added; 34 removed; 4 previous and 0 current paragraphs rearranged.
Tables are not compared: 13 previous and 9 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (19)
Current report
In February 2025, we released a brand new DLC map forARK: Survival Ascended, ARK: Astraeos. This expansive Greek methodology map offers over 264-square kilometers of playable area, filled with stunning scenery, ancient ruins, sacred temples, and powerful new bosses. Since release, we sold 253K units across Steam, PlayStation, and Xbox. We have also completed two new game acquisitions through our gaming network and partners as part of the larger effort to expand our games portfolio.
Current report
At GDC 2025, we officially announced the 10-year celebration ofARK: Survival Evolved with a brand new DLC, ARK: Aquatica, set to release in June 2025. The new non-canonical expansion map features an ambitious underwater setting where 95% of gameplay will take place beneath the surface. ForARK: Survival Ascended,we announced a new full-size canonical expansion that sets in a frozen world where players follow legendary survivor Mei Yin on a perilous quest to uncover ARK’s buried secrets. Furthermore, we announced Bellwright will be released on the Xbox platform as a next step to broaden the game’s exposure and player base. We have also debut teaser trailers for two in-house developed projects, Nine Yin Sutra: Wushu and Nine Yin Sutra: Immortal. These two original titles invite players into vast, immersive worlds shaped by martial arts mastery and cultivation.
Current report
To bring more entertainment to our users, our short film mobile application,Salty TV, brings exclusive, original stories from heart-racing thrillers to jaw-dropping romances to our viewers. We have released forty-nine short film dramas through March 31, 2025 and expect a consistent roll out of new short film dramas throughout 2025 and beyond. In a strategic step forward in advancing the short-film business line, Snail Inc. subsidiary Interactive Films signed a Memorandum of Understanding (MOU) with Mega Matrix Inc. (NYSE American: MPU) for a joint development, production, and global distribution of short dramas.
Current report
Revenues
Current report
Cost of revenues
Current report
Benefit from income taxes
Current report
Revenues
Current report
Net revenues for the three months ended March 31, 2025 increased by $6.0 million, or 42.5%, compared to the three months ended March 31, 2024. The increase in net revenues was due to an increase in total Ark sales of $2.7 million, an increase in sales of theARK Mobileof $1.3 million that was driven by the release ofARK: Ultimate Mobile Edition, and the Company deferred $3.3 million less of its sales during the three months ended March 31, 2025 than it deferred in the three months ended March 31, 2024. These increases were partially offset by a decrease in revenues related toother games of $1.6 million.
Current report
Cost of revenues
Current report
Cost of revenues for the three months ended March 31, 2025 increased by $2.2 million, or 18.4%, compared to the three months ended March 31, 2024.
Current report
General and administrative expenses for the three months ended March 31, 2025 increased by $2.6 million, or 117.5%, compared to the three months ended March 31, 2024. The increase in general and administrative expenses was due to an increase in salaries and wages of $2.1 million, the result of the Company recording $0.8 million in stock compensation expense in 2025 versus an income related to stock compensation of ($0.9) million in 2024, an increase in office expense of $0.2 million, an increase in contractors expense of $0.1 million and travel expense of $0.1 million.
Current report
Advertising and marketing expenses for the three months ended March 31, 2025 increased by $1.2 million, or 826.3%, compared to the three months ended March 31, 2024. The increase in advertising and marketing expenses was due to the Company’s presence at the Game Developers Conference (“GDC”) during the three months ended March 31, 2025, and increased advertising campaigns for our Wandering Wizard titles andSaltyTVapplication and related offerings.
Current report
Benefit from income taxes
Current report
For the three months ended March 31, 2025, bookings increased by $2.6 million, or 13.6%, compared to the three months ended March 31, 2024, because of the releases ofARK: Survival AscendedDLCAstraeosin the first quarter of 2025, and the releases ofBobs Tall Tales, andBellwright in the latter quarters of 2024.
Current report
The Company had a net loss of $1.9 million and $1.8 million, for the three months ended March 31, 2025 and 2024, respectively, representing an decrease of $0.1 million. The decrease was primarily due to an increase in general and administrative expenses of $2.6 million, an increase in research and development of $1.8 million, an increase in advertising and marketing of $1.2 million and an increase in cost of revenues of $2.2 million, partially offset by increased revenues of $6.0 million, increased benefit from tax income taxes of $1.0 million, and an increase in total other income (expense) of $0.5 million.
Current report
Investing activities
Current report
Net cash flows used in investing activities for the three months ended March 31, 2025 were $1.9 million compared to none in the three months ended March 31, 2024. Investing activities for the three months ended March 31, 2025 included $0.3 million for the acquisition of software applications, $1.4 million for the acquisition of license rights to certain titles, and $0.2 million in capitalized research and development expenditures for the development of software to be sold or marketed.
Current report
In February 2025, the Company issued convertible notes with an aggregate principal amount of $3,300,000 for gross proceeds of $3,000,000. The 2025 Convertible Notes, which mature on February 21, 2026, carry an original issue discount of 10%, and are subject to a guaranteed interest equal to 5% of the principal amount. The principal and interest charges are payable in 10 equal monthly payments starting May 21, 2025. The Company is accounting for the convertible notes at fair value.
Current report
Subject to certain ownership limitations, all or portion of the then outstanding and unpaid principal and interest of the 2025 Convertible Notes can be converted at the option of the holder at any time into shares of the Company’s Class A common, at a conversion price of $5.00 per share, except that except that, for an aggregate of $866,250 of the conversion amount, the conversion price is equal to the lesser of $5.00 per share or 92% of the lowest daily volume weighted average price of the Class A common stock during the 5 trading days period prior the receipt of the notice of conversion. The conversion price may be adjusted for certain customary dilutive events.
Removed paragraphs (34)
Previous report
On June 27, 2024, we received a deficiency letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) notifying us that, for the last thirty (30) consecutive business days (From May 10, 2024 to June 26, 2024), the bid price for our Class A common stock had closed below the minimum $1.00 per share requirement for continued inclusion on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”). In accordance with Nasdaq rules, we were provided an initial period of 180 calendar days, or until December 24, 2024 (the “Compliance Date”), to regain compliance with the Bid Price Rule. If, at any time before the Compliance Date, the bid price for the Class A common stock closed at $1.00 or more for a minimum of ten (10) consecutive business days, the Staff would provide written notification to the Company that it complied with the Bid Price Rule and the matter will be closed.
Previous report
On October 18, 2024, we received a letter from the Staff notifying the Company that our Class A common stock had closed above $1.00 for 10 consecutive business days, from October 4, 2024, to October 17, 2024. Accordingly, the Company has regained compliance with the Bid Price Rule (Listing Rule 5550(a)(2)) and this matter is now closed.
Previous report
For the three months ended September 30, 2024, bookings increased by $5.6 million, or 53.6%, compared to the three months ended September 30, 2023, because of the release ofARK: Survival Ascendedin the fourth quarter of 2023, and the releases ofBobs Tall TalesandBellwrightin the first half of 2024, along with theARK: Survival AscendedDLCAberration in September 2024. In addition to increased sales of the aforementioned titles*,bookings decreased because the Company recognized deferred revenues of approximately $8.2 million during the three months ended September 30, 2024 for the release ofAberrationand part II ofBobs Tall Tales*; partially offset by the deferral of $2.6 million in revenues for sales ofARK: Survival AscendedDLC’s and the remaining part ofBobs Tall Taleswhich have not yet launched. During the three months ended September 30, 2023 the Company deferred $1.8 million in prepaid royalties forARK: Survival AscendedandARK II.
Previous report
For the nine months ended September 30, 2024, bookings increased by $25.6 million, or 77.1%, compared to the nine months ended September 30, 2023, because of the release ofARK: Survival Ascendedin the fourth quarter of 2023, and the release ofBobs Tall TalesandBellwrightalong with theARK: Survival AscendedDLCs,Scorched Earth in April 2024 andAberrationin September 2024. In addition to increased sales of the aforementioned titles*,additionally, the Company deferred $15.3 million in revenues during the nine months ended September 30, 2024 for theARK: Survival AscendedDLC’s and parts ofBobs Tall Tales* which have not yet released, partially offset by the recognition of $14.4 million from deferred revenue upon the release ofScorched Earth, Aberrationand the first two parts ofBobs Tall Tales.
Previous report
For the nine months ended September 30, 2024, EBITDA increased by $14.9 million, or 112.2%, compared to the nine months ended September 30, 2023, primarily because of an increase in net income of $12.2 million and a decrease in the benefit from income taxes of $3.3 million, partially offset by a decrease in interest expense and interest expense – related parties of $0.4 million.
Previous report
Our net revenues through our current period top four platform providers as a proportion of our total net revenue for the three and nine months ended September 30, 2024 and 2023 were as follows:
Previous report
We expect changes in revenue to correlate with trends in the use and purchase of our games. The increase in net revenues of Platforms 1, 2 and 3 during the three and nine months ended September 30, 2024 from 2023 was due to increased sales from the release ofARK: Survival Ascended,Scorched Earth, Aberration, Bobs Tall Tales, BellwrightandMyth of Empires. The decrease in net revenues of Platform 4 during the nine months ended September 30, 2024 from 2023 was due toARK: Survival Ascendednot yet being launched on Platform 4 as of September 30, 2024. The increase in net revenues of Platform 4 during the three months ended September 30, 2024 from 2023 was due to the release of anARK: Survival EvolvedDLC on the platform.
Previous report
Net revenues for the three months ended September 30, 2024 increased by $13.5 million, or 150.9%, compared to the three months ended September 30, 2023. The increase in net revenues was due to an increase in total Ark sales of $5.9 million, an increase in sales of theBellwrightof $1.0 million, recognition of $8.2 million in revenue from the release ofAberrationand part II ofBobs Tall Tales,$1.2 million recognized for meeting the performance obligation of releasingGenesis IIandMyth of Empireson certain platforms, partially offset by a decrease in Ark Mobile sales of $0.3 million and an increase in deferred revenues of $2.6 million related to sales ofARK: Survival AscendedandBobs Tall TalesDLC’s which have not yet been released.
Previous report
Cost of revenues for the three months ended September 30, 2024 increased by $4.3 million, or 46.1%, compared to the three months ended September 30, 2023.
Previous report
General and administrative expenses for the three months ended September 30, 2024 increased by $0.3 million, or 11.4%, compared to the three months ended September 30, 2023. The increase in general and administrative expenses was due to an increase in legal and professional expenses of $0.1 million, an increase in office related expenses of $0.1 million, an increase in travel expenses of $0.1 million, an increase in non-income related taxes of $0.2 million, partially offset by reduced salaries and wages of $0.1 million due to reduced stock-based compensation expenses.
Previous report
Advertising and marketing expenses for the three months ended September 30, 2024 increased by $0.3 million, or 130.2%, compared to the three months ended September 30, 2023. The increase in advertising and marketing expenses was due to increased advertising campaigns forARK: Survival Ascended,its DLC releaseAberration,add-on contentBobs Tall Tales,andBellwright.
Previous report
Comparison of the nine months ended September 30, 2024 versus the nine months ended September 30, 2023
Previous report
Net revenues for the nine months ended September 30, 2024 increased by $26.0 million, or 80.2%, compared to the nine months ended September 30, 2023. The increase in net revenues was due to an increase in total Ark sales of $21.0 million, an increase due to the recognition of $1.2 million payment related to the Angela Games settlement and recognized upon satisfaction of performance obligations included in the contract, an increase in salesBellwright of $4.9 million, an increase in sales of the Company’s other games of $0.5 million, partially offset by a decrease in Ark Mobile sales of $1.2 million and an increase in deferred revenues of $0.4 million related to the Ark franchise.
Previous report
Cost of revenues for the nine months ended September 30, 2024 increased by $9.7 million, or 32.7%, compared to the nine months ended September 30, 2023.
Previous report
General and administrative expenses
Previous report
General and administrative expenses for the nine months ended September 30, 2024 decreased by $2.9 million, or 25.1%, compared to the nine months ended September 30, 2023. The decrease in general and administrative expenses was due to a decrease in legal and professional expenses of $1.2 million, a decrease in administrative internet and server costs of $0.3 million, a decrease in salaries and wages of $1.4 million due to the reversal of previously expensed stock based compensation, 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 $0.3 million.
Previous report
Research and development expenses
Previous report
Research and development expenses for the nine months ended September 30, 2024 increased by $3.6 million, or 93.3%, compared to the nine months ended September 30, 2023. The increase in research and development expenses was due to the outsourced development ofHermesandAetherpaid through Suzhou Snail and increased internal research and development salaries as we continue to build our internal development team*.*
Previous report
Advertising and marketing expenses
Previous report
Advertising and marketing expenses for the nine months ended September 30, 2024 increased by $0.8 million, or 172.6%, compared to the nine months ended September 30, 2023. The increase in advertising and marketing expenses was due to increased advertising campaigns for the launch ofARK: Survival Ascended,its DLC releasesScorched Earth andAberration,add-on contentBobs Tall Tales,andBellwright.
Previous report
Interest income
Previous report
Interest income was $0.2 million and $0.0 million for the nine months ended September 30, 2024 and 2023, respectively. The increase was due to the balance of the of our cash deposits being higher on average during the nine months ended September 30, 2024.
Previous report
Interest expense
Previous report
Other income
Previous report
Other income increased by $0.2 million for the nine months ended September 30, 2024, in comparison to the nine months ended September 30, 2023. The increase is due to the recognition of litigation revenues due to a revenue share agreement that was the result of the litigation settlement and revaluation of the Company’s outstanding warrant liabilities.
Previous report
The Company had an income tax provision of $0.3 million for the nine months ended September 30, 2024 and a benefit of ($3.0) million for the nine months ended September 30, 2023. Our effective income tax rate was 28% and 21% during the nine months ended September 30, 2024 and 2023, respectively.
Previous report
The Company had a net income of $0.7 million, and a net loss of $11.5 million, for the nine months ended September 30, 2024 and 2023, respectively, representing an increase of $12.2 million. The increase was primarily due to an increase in net revenue of $26.0 million, decreased general and administrative expenses of $2.9 million, partially offset by increased research and development costs of $3.6 million, increased costs of revenues of $9.7 million, and an increase in advertising and marketing expenses of $0.8 million, and a decrease in income tax benefit of $3.3 million.
Previous report
2022 Short Term Note
Previous report
In January 2022, we amended and restated our 2021 Revolving Loan and we executed a promissory note to obtain an additional long-term loan with a principal balance of $10.0 million which was set to mature on January 26, 2023 (the “2022 Short Term Note”). In November 2022, the maturity date was extended to January 26, 2024. Interest was equal to the higher of 3.75% and the Wall Street Journal prime rate plus 0.50%. The 2022 Short Term Note is secured and collateralized by our existing assets. The Company completed the last payment obligation on the 2022 Short Term Note during the nine months ended September 30, 2024.
Previous report
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 September 30, 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 September 30, 2024, the note holders have not exercised the warrants. During the nine months ended September 30, 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.
Previous report
Estimated Service Period
Previous report
The deferral and subsequent recognition of revenue for the Company’s technical support obligations are estimated based on our estimated service period. We consider a variety of data points when determining and subsequently reassessing the estimated service period for players of our software products. Primarily, we review the weighted average number of days between players’ first and last days played online. When a new game is launched and no history of online player data is available, we consider other factors to determine the estimated service period, such as the estimated service period of other games actively being sold with similar characteristics. We also consider publicly available sources of online trends, the service periods of our previously released software products, and, to the extent publicly available, the service periods of our competitors’ software products that are similar in nature to ours.
Previous report
We believe this provides a reasonable depiction of the use of games by our customers, as it is the best representation of the period during which our customers play our software products. An increase in estimated service period could result in a reclassification of deferred revenues from short term to long term and extend the period over which we would recognize said revenue resulting in a lower net income in future periods.
Previous report
For our consumable and durable virtual items, we use a variety of data points in determining consumption and estimated service period. We also consider publicly available online trends, the service periods of our previously released software products, and to the extent publicly available, the service periods of our competitors’ software products that are similar in nature to ours. The estimated consumption and service periods for virtual goods are approximately 30 to 100 days. Determining the estimated service period is subjective and requires significant management judgment and estimates. Future usage patterns may differ from historical usage patterns, and therefore the estimated service period may change in the future.
Reworded paragraphs (31)
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 93.7 million console and PC installs through September 30, 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. In the three and nine months ended September 30, 2024,ARK: Survival Evolved andARK: Survival Ascendedcombined for an average total of 210,000 and 212,000 daily active users (“DAUs”) on the Steam and Epic platforms, respectively, as compared to 231,000 and 249,000 in the three and nine months ended September 30, 2023, respectively. We define “daily active users” as the number of unique users who play any given game on any given day. For the three months ended September 30, 2024 and 2023, we generated 88.7% and 86.4%, respectively, of our revenues from theARKfranchise. For the nine months ended September 30, 2024 and 2023, we generated 82.0% and 86.9%, 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.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 96.3 million console and PC installs through March 31, 2025 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. In the three months ended March 31, 2025,ARK: Survival Evolved andARK: Survival Ascendedcombined for an average total of 243,000 daily active users (“DAUs”) on the Steam and Epic platforms, as compared to 209,000 in the three months ended March 31, 2024, respectively. We define “daily active users” as the number of unique users who play any given game on any given day. For the three months ended March 31, 2025 and 2024, we generated 91.6% and 78.6%, 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 September 30, 2024, ourARK franchise game has been played for 3.8 billion hours with an average playing time per user of 162 hours and with the top 21.2% of all players spending over 100 hours in the game, according to data from the Steam platform. For the three months ended September 30, 2024 and 2023, our net revenue was $22.5 million and $9.0 million, respectively. For the nine months ended September 30, 2024 and 2023, our net revenue was $58.3 million and $32.3 million, respectively. During the three months ended September 30, 2024, approximately 44.3% of our revenue came from consoles, 45.6% from PC and 10.1% from mobile and other platforms as compared to 43.5% from consoles, 41.4% from PC and 15.1% from mobile and other platforms during the three months ended September 30, 2023. During the nine months ended September 30, 2024, approximately 41.7% of our revenue came from consoles, 46.7% from PC and 11.6% from mobile and other platforms as compared to 41.1% from consoles, 37.4% from PC and 21.4% from mobile and other platforms during the nine months ended September 30, 2023. We had a net income of $0.2 million and a net loss of $4.4 million, for the three months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024 we had a net income of $0.7 million, as compared to net loss of $11.5 million for the nine months ended September 30, 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 March 31, 2025, ourARK franchise game has been played for 4.0 billion hours with an average playing time per user of 162 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 three months ended March 31, 2025 and 2024, our net revenue was $20.1 million and $14.1 million, respectively. During the three months ended March 31, 2025, approximately 41.3% of our revenue came from consoles, 44.8% from PC and 11.7% from mobile and other platforms as compared to 42.5% from consoles, 36.2% from PC and 6.8% from mobile and other platforms during the three months ended March, 31, 2024. We had a net loss of $1.9 million and $1.8 million, for the three months ended March 31, 2025 and 2024, respectively.
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 segment of the digital entertainment market.
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. The mobile application has already soft launched on iOS and Android platforms. We have released forty-nine short film dramas 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 48.7 million units between January 1, 2016 and September 30, 2024. During the three months ended September 30, 2024, we sold 1.1 million units compared to 1.2 million in the three months ended September 30, 2023. During the nine months ended September 30, 2024, we sold 3.5 million units compared to 3.9 million in the nine months ended September 30, 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 51.5 million units between January 1, 2016 and March 31, 2025. During the three months ended March 31, 2025, we sold 1.5 million units compared to 1.1 million in the three months ended March 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 Shorts market, we are currently developing a distribution platform. Once launched, users will be able 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, theSalty TV mobile application that allows users to access the content on demand.
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 in a manner that is proportional with the added expenses and expertise of operating as a public company. We also 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.
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 additional administrative and regulatory burden of becoming and operating as a public company and the inflationary pressures of recent years.
Previous wording
The benefit from 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 28% differed from the federal statutory rate of 21% due to permanent differences, foreign withholding taxes and state taxes.
Current wording
The benefit from 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 43% differed from the federal statutory rate of 21% due to permanent differences and state taxes.
Previous wording
The increase in cost of revenues for the nine months ended September 30, 2024 was due to an increase of $6.4 million in software license royalties – related parties, a result of increasedARKsales, an increase of $3.2 million in license and amortization – related parties due to the increased license fee paid to SDE partially offset by a lower depreciable base of intangible assets in 2024, an increase in engine fees of $2.2 million, partially offset by decreased internet, server and data center fees of $1.3 million, a decrease in merchant fees of $0.3 million and a decrease in software license royalties of $0.5 million.
Current wording
The increase in cost of revenues for the three months ended March 31, 2025 was due to an increase of $2.0 million in software license royalties – related parties, a result of increasedARKsales, an increase of $0.3 million in license and amortization due to the increased depreciable base of intangible assets in 2025, an increase in merchant fees of $0.3 million related to the increasedARK: Ultimate Mobile Editionrevenues, partially offset by decreased engine fees of $0.2 million, decreased internet, server and data center fees of $0.1 million and decreased software license royalties of $0.1 million.
Previous wording
Research and development expenses for the three months ended September 30, 2024 increased by $2.6 million, or 195.0%, compared to the three months ended September 30, 2023. The increase in research and development expenses was due to the outsourced development ofHermesandProject Aetherpaid through Suzhou Snail and an increase in internal research and development salaries as the Company continues to expand its in house development team*.*
Current wording
Research and development expenses for the three months ended March 31, 2025 increased by $1.8 million, or 103.2%, compared to the three months ended March 31, 2024. The increase in research and development expenses was due to the outsourced development ofFor the StarsandProject Aetherpaid through Suzhou Snail and an increase in internal research and development salaries as the Company continues to expand its internal development team*.*
Previous wording
Other Factors Affecting Net Income (Loss)
Current wording
Other Factors Affecting Net Loss
Previous wording
Interest income was $0.1 million and $0.0 million for the three months ended September 30, 2024 and 2023, respectively. The increase was due to the balance of our cash deposits being higher on average during the three months ended September 30, 2024.
Current wording
Interest income was $0.0 million and $0.1 million for the three months ended March 31, 2025 and March 31, 2024, respectively. The decrease was due to the balance of our cash deposits being lower on average during the three months ended March 31, 2025.
Previous wording
Other income decreased by $0.2 million for the three months ended September 30, 2024, in comparison to the three months ended September 30, 2023. The decrease is due to the recognition of $0.3 million in litigation income in the three months ended September 30, 2023.
Current wording
Other income increased by $0.6 million for the three months ended March 31, 2025, in comparison to the three months ended March 31, 2024. The increase is due to the recognition of $0.6 million due to the revaluation of warrant liabilities in the three months ended March 31, 2025.
Previous wording
The Company had an income tax provision of $0.2 million for the three months ended September 30, 2024 and a benefit of $1.2 million for the three months ended September 30, 2023. Our effective income tax rate was 40% during the three months ended September 30, 2024 and 21% during the three months ended September 30, 2023.
Current wording
The Company had benefit from income taxes of $1.5 million for the three months ended March 31, 2025, and a benefit of $0.5 million for the three months ended March 31, 2024. Our effective income tax rate was 43% during the three months ended March 31, 2025 and 21% during the three months ended March 31, 2024.
Previous wording
Units sold decreased during the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, by 0.1 million units, or 13.8%. The Company’s units sold decreased due to a decrease in in sales ofARK: Survival Evolvedof 0.6 million units*,* offset by an increase in sales ofARK: Survival Ascendedof 0.4 million units and 0.1 million units from sales ofBellwrightduring the three months ended September 30, 2024. Units sold decreased during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, by 0.4 million units, or 11.1%. Units sold ofARK: Survival Evolved decreased by 2.0 million units*,partially offset by an increase inARK: Survival Ascendedunits sold of 1.3 million and an increase inBellwright*sales of 0.3 million units.
Current wording
Units sold increased during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, by 0.4 million units, or 44.8%. The Company’s units sold increased due to an increase in sales ofARK: Survival Evolvedof 0.1 million units*,and an increase in sales ofARK: Survival Ascended*of 0.3 million units during the three months ended March 31, 2025.
Previous wording
Bookings is a key operating metric in assessing our financial performance. Bookings adjusts for the impact of deferrals and, we believe, provides a useful indicator of sales in a given period. It reflects the net amount of products and services sold digitally or physically in a given period, excluding the impact of revenue deferrals. Bookings is used by management to understand sales trends and assess the volume of our sales activity over time. Bookings should not be considered as alternatives to net income (loss), as measures of financial performance or any other performance measure derived in accordance with GAAP. Below is a reconciliation of total net revenue to Bookings, the closest GAAP financial measure.
Current wording
Bookings is a key operating metric in assessing our financial performance. Bookings adjusts for the impact of deferrals and, we believe, provides a useful indicator of sales in a given period. It reflects the net amount of products and services sold digitally or physically in a given period, excluding the impact of revenue deferrals. Bookings is used by management to understand sales trends and assess the volume of our sales activity over time. Bookings should not be considered as alternatives to net loss, as measures of financial performance or any other performance measure derived in accordance with GAAP. Below is a reconciliation of total net revenue to Bookings, the closest GAAP financial measure.
Previous wording
In addition to our financial results determined in accordance with U.S. generally accepted accounting principles (“U.S. GAAP” or “GAAP”), we believe EBITDA, as a non-GAAP measure, is useful in evaluating our operating performance. EBITDA, as used in this Quarterly Report on Form 10-Q, is a non-GAAP financial measure that is presented as supplemental disclosures and should not be construed as an alternative to net income (loss) or any other GAAP measure as an indicator of operating performance.
Current wording
In addition to our financial results determined in accordance with U.S. generally accepted accounting principles (“U.S. GAAP” or “GAAP”), we believe EBITDA, as a non-GAAP measure, is useful in evaluating our operating performance. EBITDA, as used in this Quarterly Report on Form 10-Q, is a non-GAAP financial measure that is presented as supplemental disclosures and should not be construed as an alternative to net loss or any other GAAP measure as an indicator of operating performance.
Previous wording
We define EBITDA as net income (loss) before (i) interest income, (ii) interest expense, (iii) (benefit from) provision for income taxes, and (iv) depreciation and amortization expense, property and equipment.
Current wording
We define EBITDA as net loss before (i) interest income, (ii) interest expense, (iii) (benefit from) provision for income taxes, and (iv) depreciation expense, property and equipment.
Previous wording
Below is a reconciliation of net income (loss) to EBITDA, the closest GAAP financial measure.
Current wording
Below is a reconciliation of net loss to EBITDA, the closest GAAP financial measure.
Previous wording
For the three months ended September 30, 2024, EBITDA increased by $5.6 million, or 109.7%, compared to the three months ended September 30, 2023, primarily because of an increase in net income of $4.6 million and a decrease in the benefit from income taxes of $1.4 million, partially offset by a decrease in interest expense and interest expense – related parties of $0.3 million.
Current wording
For the three months ended March 31, 2025, EBITDA decreased by $1.3 million, or 75.5%, compared to the three months ended March 31, 2024, primarily because of an increase in benefit from income taxes of $1.0 million, a decrease in interest expense, and an increase in net loss of $0.1 million, partially offset by a decrease in interest income and interest income – related parties of $0.1 million.
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 $10.6 million and $15.2 million as of September 30, 2024 and December 31, 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 $9.4 million and $7.3 million as of March 31, 2025 and December 31, 2024, respectively.
Previous wording
Our restricted cash and cash equivalents were $1.1 million as of September 30, 2024 and December 31, 2023. 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 $0.9 million as of March 31, 2025 and December 31, 2024. 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.
Previous wording
As of September 30, 2024, our 2021 Revolving Loan has a balance of $3.0 million and is due in December 2024. 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 nine months ended September 30, 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 September 30, 2024, however it is probable that the Company will fail the covenants within the next 12 months. 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 March 31, 2025, our 2021 Revolving Loan has a balance of $3.0 million and is due in June 2025. Additionally, in February 2025 the Company issued convertible notes with a par value of $3.3 million which mature in February 2026. In concurrence with the registration of the 2023 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 March 31, 2025, 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.
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
The Company has raised capital through the issuance of the convertible notes, equity line of credit, 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 $10.6 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 $9.4 million, and our expected revenue receipts will allow the Company to continue operations beyond the next 12 months and service its current debts.
Previous wording
Net cash flows provided by (used in) operating activities for the nine months ended September 30, 2024 increased $12.8 million as compared to the nine months ended September 30, 2023, which resulted primarily from an increase in net income of $12.2 million, a decrease in accounts receivable and accounts receivable - related party of $17.4 million, a decrease in prepaids expenses and prepaid expenses – related party of $1.5 million, partially offset by a decrease in accounts payable and accounts payable – related parties of $15.9 million, a decrease in accrued expenses of $0.3 million, an increase in capitalized film costs of $0.4 million and a decrease in deferred revenues of $1.8 million.
Current wording
Net cash flows provided by operating activities for the three months ended March 31, 2025 decreased $6.0 million as compared to the three months ended March 31, 2024, which resulted primarily from a decrease in net accounts receivable and account receivable related party of $13.5 million, a decrease in deferred revenues of $2.6 million, a decrease in non-cash reconciling items of $0.5 million and an increase in other noncurrent assets of $0.7 million, partially offset by a decrease in prepaid expenses and prepaid expenses – related parties of $3.0 million, a decrease in net loss of $0.1 million, an increase in accounts payable and accounts payable – related parties of $8.5 million.
Previous wording
Non-cash reconciling items were ($0.4) million and ($0.7) million for the nine months ended September 30, 2024 and 2023, respectively, representing a decrease of $0.3 million. The decrease in the non-cash reconciling items was due to a decrease in amortization of intangible assets of $1.3 million, a decrease in stock based compensation expense of $1.5 million, partially offset by an increase in deferred taxes of $3.0 million, and an increase in accretion expense of $0.2 million.
Current wording
Non-cash reconciling items were ($1.6) million and ($1.2) million for the three months ended March 31, 2025 and 2024, respectively, representing a decrease of $0.4 million. The decrease in the non-cash reconciling items was due to a decrease in deferred taxes of $1.5 million, an increase in the gain on change in fair value of warrant liabilities of $0.6 million, partially offset by an increase in stock based compensation expense (income) of $1.8 million, and an increase in amortization expense of $0.2 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 September 30, 2024 and December 31, 2023, the net outstanding balances of receivables due from SDE were $9.0 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 unaudited condensed consolidated financial statements included in this Quarterly 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 March 31, 2025 and December 31, 2024, the net outstanding balances of receivables due from SDE were $6.0 million and $7.5 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 unaudited condensed consolidated financial statements included in this Quarterly Report.
Previous wording
Net cash flows used in financing activities for the nine months ended September 30, 2024 were $6.7 million compared to $2.4 million for the nine months ended September 30, 2023. Financing activities for the nine months ended September 30, 2024 included $6.4 million in debt payments and $0.3 million in payments of capitalized offering costs in accounts payable. Financing activities for the nine months ended September 30, 2023 included debt repayments of $6.8 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 $2.3 million in borrowings on notes payable, $0.9 million for the issuance of convertible notes and $1.9 million received for refund of a dividend withholding tax overpayment.
Current wording
Net cash flows provided by (used in) financing activities for the three months ended March 31, 2025 were $3.1 million compared to ($5.9) million for the three months ended March 31, 2024. Financing activities for the three months ended March 31, 2025 included $3.0 million from the issuance of convertible notes and $0.2 million received upon the exercise of warrants during the period. Financing activities for the three months ended March 31, 2024 included debt repayments of $5.6 million and $0.3 million in payments of capitalized offering costs in accounts payable.
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 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. As amended, the 2021 Revolving Loan matured on December 31, 2023 and bore interest at a rate equal to the prime rate less 0.25%. Interest is due and payable under the 2021 Revolving Loan on a monthly basis. The Company amended the revolving loan agreement in December 2023, to extend the 2021 Revolving Loan maturity date to December 31, 2024. As of September 30, 2024, we had borrowings of $3.0 million outstanding under our 2021 Revolving Loan. We intend to extend the 2021 Revolving Loan prior to its maturity date in December 2024. There is no guarantee that we will be able to extend the 2021 Revolving Loan on terms acceptable to us in the future, or at all.
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. As amended, the 2021 Revolving Loan matured on December 31, 2023 and bore interest at a rate equal to the prime rate less 0.25%. Interest is due and payable under the 2021 Revolving Loan on a monthly basis. The Company amended the revolving loan agreement in December 2024, to extend the 2021 Revolving Loan maturity date to June 30, 2025. As of March 31, 2025, we had borrowings of $3.0 million outstanding under our 2021 Revolving Loan.
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 September 30, 2024 the Company has not sold any Class A common stock under the Equity Line Purchase Agreement.
Current 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 March 31, 2025, the Company has not sold any Class A common stock under the Equity Line Purchase Agreement, and 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 September 30, 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 the Company classifies its long term debt as current.
Current 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 March 31, 2025, 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 the Company classifies the long-term portion of its promissory note as current.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
The increase in cost of revenues for the three months ended September 30, 2024 was due to an increase of $3.2 million in software license royalties – related parties, a result of increasedARKsales, an increase of $1.3 million in license and amortization – related parties due to the increased license fee paid to SDE partially offset by a lower depreciable base of intangible assets in 2024, an increase in engine fees of $0.6 million, partially offset by decreased internet, server and data center fees of $0.7 million and a decrease in software license royalties of $0.1million.
Previous report — wording carried elsewhere
Cost of revenues for the nine months ended September 30, 2024 and 2023 comprised the following:
Previous report — wording carried elsewhere
Other Factors Affecting Net Income (Loss)
Previous report — wording carried elsewhere
Interest expense primarily related to our outstanding indebtedness with third-party lenders. Interest expense decreased by $0.4 million for the nine months ended September 30, 2024 because of the Company having a lower average debt balance during the nine months ended September 30, 2024.