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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended
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Sep. 30, 2023
Accounting Policies [Abstract] |
Revenue Recognition | Revenue Recognition The Company’s revenue includes the publishing of software games delivered digitally and through physical discs (e.g., packaged goods). The Company’s digital games may include additional downloadable content that are new feature releases to digital full-game downloads. Revenue also includes sales of mobile in-app purchases that require the Company’s hosting support in order to utilize the game or related content. Such games include virtual goods that can be purchased by the end users, as desired. When control of the promised products and services is transferred to the customers, the Company recognizes revenue in the amount that reflects the consideration it expects to receive in exchange for these products and services. Revenue from delivery of products is recognized at a point in time when the end consumers download the games and the control of the license is transferred to them. The Company recognizes revenue using the following five steps as provided by Accounting Standards Codification (“ASC”) Topic 606 Revenue from Contracts with Customers: 1) identify the contract(s) with the customer; 2) identify the performance obligations in each contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when, or as, the entity satisfies a performance obligation. The Company’s terms and conditions vary by customers and typically provide net 30 to 75 days terms.
Principal vs. Agent Consideration | Principal vs. Agent Consideration The Company offers certain software products via third-party digital storefronts, such as Microsoft’s Xbox Live, Sony’s PlayStation Network, Valve’s Steam, Epic Games Store, My Nintendo Store, Apple’s App Store, the Google Play Store, and retail distributors. For sales of our software products via third-party digital storefronts and retail distributor, the Company determines whether or not it is acting as the principal in the sale to the end user, which the Company considers in determining if revenue should be reported based on the gross transaction price to the end user or based on the transaction price net of fees retained by the third-party digital storefront. An entity is the principal if it controls a good or service before it is transferred to the customer. Key indicators that the Company uses in evaluating these sales transactions include, but are not limited to, the following:
| ● | The underlying contract terms and conditions between the various parties to the transaction;
| ● | Which party is primarily responsible for fulfilling the promise to provide the specified good or service; and
| ● | Which party has discretion in establishing the price for the specified good or service.
Snail Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements Based on our evaluation of the above indicators, for sales arrangements via Microsoft’s Xbox Live, Sony’s PlayStation Network, Valve’s Steam, Epic Games Store, My Nintendo Store, and our retail distributor, the digital platforms and distributors have discretion in establishing the price for the specified good or service and the Company has determined it is the agent in the sales transaction to the end user and therefore the Company reports revenue on a net basis based on the consideration received from the digital storefront. For sales arrangements via Apple’s App Store and the Google Play Store, the Company has discretion in establishing the price for the specified good or service and it has determined that the Company is the principal to the end user and thus reports revenue on a gross basis and mobile platform fees charged by these digital storefronts are expensed as incurred and reported within cost of revenues.
Contract Balance | Contract Balance The Company records deferred revenue when cash payments are received or due in advance of its performance, even if amounts are refundable. Deferred revenue is comprised of the transaction price allocable to the Company’s performance obligation on technical support and the sale of virtual goods available for in-app purchases, and payments received from customers prior to launching the games on the platforms. The Company categorizes the virtual goods as either “consumable” or “durable.” Consumable virtual goods represent goods that can be consumed by a specific player action; accordingly, the Company recognizes revenues from the sale of consumable virtual goods as the goods are consumed and the performance obligation is satisfied. Durable virtual goods represent goods that are accessible to the players over an extended period of time; accordingly, the Company recognizes revenues from the sale of durable virtual goods ratably over the period of time the goods are available to the player and the performance obligation is satisfied, which is generally the estimated service period, 30 to 100 days from date of activation. The Company has a long-term title license agreement with a platform. The agreement was initially made between the parties in November 2018 and valid through December 31, 2021. The agreement was subsequently amended in June 2020 to extend the ARK 1 availability on the platform perpetually, effective January 1, 2022 and to put ARK 2 on the platform for three years upon release. The Company recognized $2.5 million in revenue related to ARK 1’s perpetual license during the nine months ended September 30, 2022 and deferred $2.3 million related to ARK 2 that is included in the long-term portion of deferred revenue. In November 2021, the Company entered an agreement with a platform to make ARK 1 available on a platform for a period of 5 weeks in exchange for $3.5 million. The platform launched the 5-week program on March 1, 2022 and the Company recognized the full amount of revenue from this contract during the nine months ended September 30, 2022. The Company entered into a non-exclusive license agreement with a platform in February 2020 to make ARK 1 available on the platform, exclusive of all available DLC, for a period of 2 weeks in exchange for $8.0 million. During the 2 weeks the platform offered digital rights to ARK 1 to its end users for free. The platform launched the first free week in June of 2020 and the Company recognized $4.0 million of the advanced payment as revenue during the year ended December 31, 2020. In September 2022, the platform launched the second free week and the Company recognized the remaining $4.0 million of revenue during the nine months ended September 30, 2022. In July 2023, the Company entered into a distribution agreement with its retail distribution partner for the distribution of ARK: Survival Ascended and ARK II. The initial term is two years and will renew each subsequent year unless it is cancelled. Upon executing the distribution agreement, the Company received $0.5 million and $1.3 million as prepaid royalties that are reported as current and long-term deferred revenue until the release of ARK: Survival Ascended and ARK II, respectively.
Estimated Service Period | Estimated Service Period For certain performance obligations satisfied over time, the Company has determined that the estimated service period is the time period in which an average user plays our software products (“user life”) which most faithfully depicts the timing of satisfying our performance obligation.
Shipping, Handling and Value Added Taxes (“VAT”) | Shipping, Handling and Value Added Taxes (“VAT”) The distributor, as the principal, is responsible for the shipping of the game discs to retail stores and incurring the shipping and VAT costs. The Company is paid the net sales amount after deducting shipping costs, VAT and other related expenses by the distributor. Snail Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements
Cost of Revenues | Cost of Revenues Cost of revenues include software license royalty fees, merchant fees, server and database center costs, game localization costs, game licenses, engine fees and amortization costs. Cost of revenues for the three and nine months ended September 30, 2023 and 2022 were comprised of the following: SCHEDULE OF COST OF REVENUES
|  | Three months ended September 30, |  |  | Nine months ended September 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Software license royalties – related parties |  | $ | 2,108,764 |  |  | $ | 3,428,231 |  |  | $ | 6,878,563 |  |  | $ | 13,314,258 |
Software license royalties |  |  | 372,666 |  |  |  | 47,020 |  |  |  | 979,505 |  |  |  | 47,020 |
License and amortization – related parties |  |  | 4,695,652 |  |  |  | 6,350,979 |  |  |  | 14,753,623 |  |  |  | 19,052,938 |
License and amortization |  |  | 201 |  |  |  | 224 |  |  |  | 603 |  |  |  | 250,672 |
Game localization |  |  | - |  |  |  | 840 |  |  |  | - |  |  |  | 840 |
Merchant fees |  |  | 215,635 |  |  |  | 602,814 |  |  |  | 1,023,911 |  |  |  | 1,856,371 |
Engine fees |  |  | 292,127 |  |  |  | 359,263 |  |  |  | 1,009,252 |  |  |  | 1,575,942 |
Internet, server and data center |  |  | 1,777,894 |  |  |  | 1,490,505 |  |  |  | 4,929,631 |  |  |  | 4,155,164 |
Costs related to advertising revenue |  |  | 147 |  |  |  | 144,191 |  |  |  | 84,700 |  |  |  | 144,191 |
Total: |  | $ | 9,463,086 |  |  | $ | 12,424,067 |  |  | $ | 29,659,788 |  |  | $ | 40,397,396 |
General and Administrative Costs | General and Administrative Costs General and administrative costs include rent, salaries, stock-based compensation, legal and professional expenses, internet and server, contractor costs, insurance expense, licenses and permits, other taxes and travel expenses. These costs are expensed as they are incurred. For the three months ended September 30, 2023 and 2022, general and administrative expenses totaled $3,452,141 and $4,478,907, respectively. For the nine months ended September 30, 2023 and 2022, general and administrative expenses were $11,915,126 and $13,525,001, respectively. Stock-based compensation of $220,231 and $589,532 was incurred during the three and nine months ended September 30, 2023, respectively; no such compensation was incurred in the three and nine months ended September 30, 2022.
Advertising and Marketing Costs | Advertising and Marketing Costs The Company expenses advertising and marketing costs as incurred. For the three months ended September 30, 2023 and 2022, advertising and marketing expenses totaled $215,477 and $198,417, respectively. For the nine months ended September 30, 2023 and 2022, advertising and marketing expenses were $488,318 and $569,127, respectively.
Research and Development | Research and Development Research and development costs are expensed as incurred. Research and development costs include travel, payroll, and other general expenses specific to research and development activities. Research and development costs for the three months ended September 30, 2023 and 2022 were $1,317,400 and $116,624, respectively. For the nine months ended September 30, 2023 and 2022, research and development costs were $3,892,039 and $479,630, respectively. Stock-based compensation of $16,411 and $32,475 was incurred during the three and nine months ended September 30, 2023, respectively; no stock-based compensation was incurred in the three and nine months ended September 30, 2022.
Non-controlling Interests | Non-controlling Interests Non-controlling interests on the condensed consolidated balance sheets and condensed consolidated statements of operations and comprehensive income (loss) include the equity allocated to non-controlling interest holders. As of September 30, 2023 and December 31, 2022, there were non-controlling interests with the following subsidiaries: SCHEDULE OF EQUITY INTEREST AND NON CONTROLLING INTEREST IN SUBSIDIARIES
Subsidiary Name |  | Equity % Owned |  |  | Non-Controlling % |
Snail Innovative Institute |  |  | 70 | % |  |  | 30 | %
BTBX.IO, LLC |  |  | 70 | % |  |  | 30 | %
Donkey Crew, LLC |  |  | 99 | % |  |  | 1 | %
Snail Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements
Cash and Restricted Cash and Cash Equivalents | Cash and Restricted Cash and Cash Equivalents Cash is available for use in current operations or other activities such as capital expenditures and business combinations. Restricted cash and cash equivalents are time deposits, that are currently provided as a standby letter of credit to landlords.
Restricted Escrow Deposits | Restricted Escrow Deposits Our restricted deposits held in escrow are to provide a source of funding for certain indemnification obligations of Snail, Inc. to our underwriters in connection with our IPO. The deposit and related interest earnings are restricted for one year from the IPO date.
Accounts Receivable | Accounts Receivable The Company generally records a receivable related to revenue when it has an unconditional right to invoice and receive payment. Accounts receivable are carried at original invoice amount less an allowance made for credit losses. The Company uses a combination of quantitative and qualitative factors to estimate the allowance, including an analysis of the customers’ creditworthiness, historical experience, age of current accounts receivable balances, changes in financial condition or payment terms of our customers, and reasonable forecasts of the collectability of the accounts receivable. The Company evaluates the allowance for credit losses on a periodic basis and adjusts it as necessary based on the risk factors mentioned above. Any increase in the provision for credit losses is recorded as a charge to general and administrative expense in the current period. Any amounts deemed uncollectible are written off against the allowance for credit losses. Management judgment is required to estimate our allowance for credit losses in any accounting period. The amount and timing of our credit losses and cash collection could change significantly because of a change in any of the risk factors mentioned above.
Fair Value Measurements | Fair Value Measurements The Company follows Financial Accounting Standards Board (“FASB”) ASC Topic 820, Fair Value Measurements. ASC 820 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. ASC 820 establishes a hierarchy of valuation inputs based on the extent to which the inputs are observable in the marketplace. Observable inputs reflect market data obtained from sources independent of the reporting entity and unobservable inputs reflect the entity’s own assumptions about how market participants would value an asset or liability based on the best information available. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value. The following describes the hierarchy of inputs used to measure fair value and the primary valuation methodologies used by the Company for financial instruments measured at fair value. The three levels of inputs are as follows:
| ● | Level 1: Quoted prices in active markets for identical assets or liabilities that the Company has an ability to access as of the measurement date.
| ● | Level 2: Inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the same term of the assets or liabilities.
| ● | Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Snail Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Our financial instruments include cash and cash equivalents, restricted cash and cash equivalents, short-term financial instruments, derivative instruments, short-term loans, accounts receivable and accounts payable. The carrying values of these financial instruments approximate their fair value due to their short maturities. The carrying amount of our debt approximates fair value because the interest rates on these instruments approximate the interest rate on debt with similar terms available to us for a similar duration except for the Company’s promissory note which has a fixed rate for 5 years, then a floating rate that approximates the Wall Street Journal Prime Rate plus 0.50%. The Company considers the carrying amount of the loan to approximate fair value as the discounted cost in comparison to market rates would not be materially different than the cost to acquire a loan with similar terms. The Company’s warrant liability and derivative instruments are valued at fair value, using level 3 inputs and the Monte-Carlo pricing model. The Company does not have any other assets or liabilities measured at fair value on a recurring or non-recurring basis as of September 30, 2023 and December 31, 2022.
Amortizable Intangibles and Other Long-lived Assets | Amortizable Intangibles and Other Long-lived Assets The Company’s long-lived assets and other assets consisting of property, plant and equipment and purchased intangible assets, are reviewed for impairment in accordance with the guidance of FASB Topic ASC 360, Property, Plant, and Equipment. Intangible assets subject to amortization are carried at cost less accumulated amortization and amortized over the estimated useful life in proportion to the economic benefits received. The Company evaluates the recoverability of definite-lived intangible assets and other long-lived assets in accordance with ASC Subtopic 360-10, which generally requires the assessment of these assets for recoverability when events or circumstances indicate a potential impairment exists. The Company considers certain events and circumstances in determining whether the carrying value of identifiable intangible assets and other long-lived assets, other than indefinite lived intangible assets, may not be recoverable including, but not limited to: significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; and changes in the Company’s business strategy. If the Company determines that the carrying value may not be recoverable, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of the asset group to determine whether an impairment exists. If an impairment is indicated based on a comparison of the asset groups’ carrying values and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amount of the asset group exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. There can be no assurance, however, that market conditions will not change or demand for the Company’s products under development will continue. Either of these could result in future impairment of long-lived assets. Actual useful lives and cash flows could be different from those estimated by management which could have a material effect on our consolidated reporting results and financial positions.
Income Taxes | Income Taxes Income taxes are provided for the tax effects of transactions reported in the condensed consolidated financial statements and consisted of taxes currently due and deferred taxes. Deferred taxes are recognized for the differences between the basis of assets and liabilities for financial statement and income tax purposes. The Company follows FASB Topic ASC 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the condensed consolidated financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. FASB ASC 740-10-25 provides criteria for the recognition, measurement, presentation, and disclosure of uncertain tax positions. The Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the condensed consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company recognizes liabilities for uncertain tax positions pursuant to FASB ASC 740-10-25. Such amounts are included in the current and long-term accrued expenses on the accompanying condensed consolidated balance sheets in the amount of $384,150 and $457,024 as of September 30, 2023 and December 31, 2022, respectively. The Company accrues and recognizes interest and penalties related to unrecognized tax benefits in operating expenses. Snail Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements
Concentration of Credit Risk and Significant Customers | Concentration of Credit Risk and Significant Customers The Company maintains cash balances at several major financial institutions. While the Company attempts to limit credit exposure with any single institution, balances often exceed insurable amounts. As of September 30, 2023 and December 31, 2022, the Company had deposits of $5,089,118 and $17,929,308, respectively, that were not insured by the Federal Deposit Insurance Corporation and are included in the cash and cash equivalents, restricted escrow deposit and restricted cash and cash equivalents, in the accompanying condensed consolidated balance sheets. The Company extends credit to various digital resellers and partners. Collection of trade receivables may be affected by changes in economic or other industry conditions and may, accordingly, impact our overall credit risk. The Company performs ongoing credit evaluations of customers and maintains reserves for potentially uncollectible accounts. As of September 30, 2023 and December 31, 2022, the Company had two customers who accounted for approximately 57% and 57% of consolidated gross receivables, respectively. Among the two customers as of September 30, 2023 and December 31, 2022, each customer accounted for 35% and 22% as of September 30, 2023, and 29% and 28% as of December 31, 2022 of the consolidated gross receivables outstanding. During the three months ended September 30, 2023 and 2022, approximately 60% and 43%, respectively, of net revenue was derived from these customers. During the nine months ended September 30, 2023 and 2022, approximately 52% and 56%, respectively, of net revenue was derived from these customers. The loss of these customers or declines in the forecasts of their accounts receivable collectability would have a significant impact on the Company’s financial performance. As of September 30, 2023 and December 31, 2022, the Company had three vendors who accounted for approximately 75% and two vendors who accounted for approximately 55% of consolidated gross payables, respectively. Among the three vendors as of September 30, 2023 and December 31, 2022, each vendor accounted for 51%, 13% and 11% as of September 30, 2023, and 43% and 12% as of December 31, 2022 of our consolidated gross payables outstanding. The loss of these vendors could have a significant impact on the Company’s financial performance and regulatory compliance. The Company had one vendor, SDE Inc. (“SDE”), a related party, that accounted for 45% and 43% of the Company’s combined cost of revenues and operating expenses during the three months ended September 30, 2023 and 2022, respectively. During the nine months ended September 30, 2023 and 2022, SDE accounted for 49% and 47% of the Company’s combined cost of revenues and operating expenses, respectively. Amounts payable to SDE are netted with receivables from them and presented as accounts receivable - related party in the condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022. The loss of SDE as a vendor would significantly and adversely affect the Company’s core business.
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses, which replaces the incurred loss impairment methodology in current US GAAP with a methodology that requires the reflection of expected credit losses and also requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. For most financial instruments, the standard requires the use of a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses, which generally results in the earlier recognition of credit losses on financial instruments. The Company adopted ASC 2016-13 on January 1, 2023. The impact of adopting the new standard did not have a material impact on the Company’s condensed consolidated financial statements. In August 2020, the FASB issued ASU 2020-06, Contracts in Entity’s Own Equity (Subtopic 815-40) – Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, to simplify the application of GAAP for certain financial instruments with characteristics of liabilities and equity. The FASB decided to eliminate certain accounting models to simplify the accounting for convertible instruments, reduce complexity for preparers and practitioners, and improve the decision usefulness and relevance of the information provided to financial statement users. The GASB also amended the guidance for derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusion and amended the related earnings per share guidance. The Company has elected to delay implementation of this standard until January 1, 2024 based on its emerging growth status. The impact of adopting the new accounting standard is being evaluated. Snail Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements
Employee Savings Plans | Employee Savings Plans The Company maintains a 401(k) for its United States based employees. The plan is offered to all eligible employees to make voluntary contributions. Employer contributions to the plan are reported under general and administrative costs in the amounts of $26,003 and $17,587 for the three months ended September 30, 2023 and 2022, and $77,391 and $44,683 for the nine months ended September 30, 2023 and 2022, respectively.
Stock-Based Compensation | Stock-Based Compensation The Company recognizes compensation cost for stock-based awards to employees based on the awards’ estimated grant-date fair value using a straight-line approach over the service period for which such awards are expected to vest. The Company accounts for forfeitures as they occur. The Company issued restricted stock units (“Restricted Stock Units” or “restricted stock units”) during the year ended December 31, 2022. The fair value of Restricted Stock Units is determined based on the quoted market price of our common stock on the date of grant. The Company’s 2022 Omnibus Incentive Plan (the “2022 Plan”) became effective upon the consummation of the IPO. The 2022 Omnibus Incentive allows us to grant options to purchase our common stock and to grant stock options, stock appreciation rights, restricted stock, restricted stock units and performance awards and other cash-based awards and other stock-based awards to our employees, officers, and directors, up to a maximum of 5,718,000 shares. Stock options may be granted to employees and officers and non-qualified options may be granted to employees, officers, and directors, at not less than the fair market value on the date of grant. The number of shares of common stock available for issuance under the 2022 Plan will be increased annually on the first day of each fiscal year during the term of the 2022 Plan, beginning with the 2023 fiscal year, by an amount equal to the lesser of (a) 5,718,000 shares, (b) 1% of the shares of the Company’s Class B common stock outstanding (on a fully diluted basis) on the final day of the immediately preceding calendar year or (c) such smaller number of shares as determined by the Company’s board of directors. As of September 30, 2023, there were 4,523,237 shares reserved for issuance under the 2022 Plan.
Restricted Stock Units | Restricted Stock Units The Company granted restricted stock units under our 2022 Omnibus Incentive Plan to employees and directors. Restricted stock units are unfunded, unsecured rights to receive common stock upon the satisfaction of certain vesting criteria. Upon vesting, a number of shares of common stock equivalent to the number of restricted stock units is typically issued net of required tax withholding requirements, if any. Restricted stock units are subject to forfeiture and transfer restrictions. For the nine months ended September 30, 2023 and 2022, stock-based compensations expenses amounted to $622,007 and $0, respectively. For the three months ended September 30, 2023 and 2022, stock-based compensation expenses amounts to $236,642 and $0, respectively.
Warrants | Warrants In connection with the IPO, offering costs related to legal, accounting, and underwriting costs were net with the proceeds and recorded as a reduction in additional paid in capital, in the stockholders’ equity section of the condensed consolidated balance sheets. The Company also issued Underwriters Warrants (as defined below) for services provided during the IPO to purchase 120,000 shares of Class A common stock. The Underwriters Warrants are accounted for as equity instruments and are included in the stockholders’ equity section of the condensed consolidated balance sheets. The fair value of the Underwriters Warrants has been estimated using the Black-Scholes option pricing model. On August 24, 2023, the Company issued warrants in connection with its convertible debt for the purchase of 714,285 shares (the “convertible note warrants”). The convertible note warrants are accounted for as a liability and are included in the accrued expenses and other liabilities in the condensed consolidated balance sheets. The fair value of the convertible note warrants has been estimated using the Monte-Carlo pricing model. For more information regarding convertible notes and related warrants see Note 20 - Equity. On August 24, 2023, the Company issued a warrant to an investor (the “equity line warrant”) for the purchase of 367,647 shares of Class A common stock in consideration of the investor’s commitment to purchase Class A common stock. The fair value of the equity line warrant is recorded as a warrant liability and is included in the accrued expenses and other liabilities in the Company’s condensed consolidated balance sheet. The fair value of the equity line warrants has been estimated using the Monte-Carlo pricing model. For more information regarding equity line and related warrants see Note 20 – Equity.
Share Repurchase Program | Share Repurchase Program On November 10, 2022, the Company’s board of directors authorized a share repurchase program under which the Company may repurchase up to $5 million of outstanding shares of Class A common stock of the Company, subject to ongoing compliance with the Nasdaq listing rules. The program does not have a fixed expiration date. Repurchased shares are accounted for at cost and reported as a reduction of equity in the condensed consolidated balance sheets under treasury stock. No treasury stock was sold during the three and nine months ended September 30, 2023. As of September 30, 2023, 1,350,275 shares of Class A common stock were repurchased pursuant to the Share Repurchase Program for an aggregate purchase price of approximately $3.7 million. The average price paid per share was $2.72 and approximately $1.3 million aggregate amount of shares of Class A common stock remain available for repurchase under the Share Repurchase Program. Snail Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements
Earnings (Loss) Per Share | Earnings (Loss) Per Share Earnings (loss) per share (“EPS”) is calculated by dividing the net income (loss) that is applicable to the common stockholders for the period by the weighted average number of shares of common stock during that period. The diluted EPS for the period is calculated by dividing the net income (loss) applicable to common stockholders for the period by the weighted average number of shares of common stock and common stock equivalents outstanding during the period. The Company’s common stock equivalents are measured using the treasury stock method and represent unvested restricted stock units and warrants. The Company issues two classes of common stock with differing voting rights, and as such, reports EPS using the dual class method. For comparative purposes, the Company has presented EPS for the three and nine months ended September 30, 2022 using the number of shares exchanged in the reorganization of the Company as the denominator. For more information see Note 19 – Earnings (Loss) Per Share.
Dividend Restrictions | Dividend Restrictions Our ability to pay cash dividends is currently restricted by the terms of our credit facilities.

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- Definition Disclosure of accounting policy for salaries, bonuses, incentive awards, postretirement and postemployment benefits granted to employees, including equity-based arrangements; discloses methodologies for measurement, and the bases for recognizing related assets and liabilities and recognizing and reporting compensation expense. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (b),(f(1)) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480429/718-10-50-2 + Details
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- Definition Disclosure of accounting policy for computing basic and diluted earnings or loss per share for each class of common stock and participating security. Addresses all significant policy factors, including any antidilutive items that have been excluded from the computation and takes into account stock dividends, splits and reverse splits that occur after the balance sheet date of the latest reporting period but before the issuance of the financial statements. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Name Accounting Standards Codification -Topic 260 -SubTopic 10 -Section 50 -Paragraph 1 -Subparagraph (c) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482662/260-10-50-1 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Name Accounting Standards Codification -Topic 260 -SubTopic 10 -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482662/260-10-50-2 + Details
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- Definition Disclosure of accounting policy for fair value measurements of financial and non-financial assets, liabilities and instruments classified in shareholders' equity. Disclosures include, but are not limited to, how an entity that manages a group of financial assets and liabilities on the basis of its net exposure measures the fair value of those assets and liabilities. + References No definition available. + Details
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- Definition Disclosure of accounting policy for the impairment and disposal of long-lived assets including goodwill and other intangible assets. + References No definition available. + Details
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- Definition Disclosure of accounting policy with regard to collateral required and collateral rights on securities sold under agreements to repurchase. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 860 -SubTopic 30 -Name Accounting Standards Codification -Section 50 -Paragraph 1A -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481420/860-30-50-1A + Details
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