Snail, Inc. Debt Disclosure

NOTE 12 – REVOLVING LOAN, SHORT TERM NOTES AND LONG - TERM DEBT

SCHEDULE OF LONG TERM DEBT 

		December 31, 2025				December 31, 2024
2021 Revolving Loan – On January 2, 2026, the Company amended its revolving loan agreement and decreased the maximum balance from $6,000,000 to $5,000,000. The revolving maturity date of the revolving loan is extended to March 31, 2030, and has an annual interest rate equal to the prime rate less 0.25% and a floor of 6.50%. In March 2026, the Company received a subsequent extension of the revolving loan maturity date to March 31, 2030. Debt covenants of this loan require the Company to maintain a minimum debt service coverage ratio of at least 1.5 to 1 and is required to maintain a $1,000,000 pledge deposit. At December 31, 2025, the interest rate on this loan was 6.5%. The Company was in compliance with the debt covenants of this loan for the trailing twelve month period ended December 31, 2025, and it is reasonably possible it will remain in compliance for the twelve months thereafter. Prior to latest amendment, the revolving loan had been extended through three prior amendments, with the original maturity date of December 31, 2023 extended successively to December 31, 2024, June 30, 2025, and June 30, 2026, respectively. As a result of the maturity date being extended beyond twelve months from the balance sheet date, the outstanding balance has been classified as long-term debt as of December 31, 2025 compared to its classification as current debt as of December 31, 2024.		$	5,000,000			$	3,000,000
2021 Promissory Note – On June 17, 2021, the Company amended its loan agreement to reduce the principal amount with a financial institution for 10 years, annual interest rate of 3.5% for the first 5 years, and then floating at Wall Street Journal rate from years 6 to 10. The loan is secured by the Company’s building, with a carrying value of $4.1 million, and matures on June 30, 2031. The note is subject to a prepayment penalty. Debt covenants of this loan require the Company to maintain a minimum debt service coverage ratio of at least 1.5 to 1. The Company was in compliance with the debt covenants of this loan for the trailing twelve month period ended December 31, 2025, and it is reasonably possible it will remain in compliance for the twelve months thereafter. At December 2024, the Company was in compliance with the debt covenants of this loan; however, the Company was expected to be non-compliant with the debt covenants in the following twelve months and presented the long-term portion of the note as current.			2,636,536				2,722,549
February 2025 Convertible Notes – On February 21, 2025, the Company issued convertible notes at a 10.0% discount and a principal balance of $3,300,000. The notes had an interest rate of 5.0%, were paid in consecutive monthly installments beginning May 21, 2025 and matured on February 21, 2026. In the event of a default the Company could have been required to pay to the holders an amount equal to the principal outstanding, plus any accrued interest through the date of payments, multiplied by 120%. The Company had the option to prepay the notes at any time and the note holders have the option to convert the notes, in whole or in part, at any time. The Company elected the fair value option to account for the convertible notes. This note was fully paid in February 2026 (see Note 20 – Subsequent Events).			691,010				—
2025 Term Loan – On June 10, 2025, the Company entered into a term loan agreement with a principal balance of $3,500,000. The note has a floating rate of 0.50% in excess of the Wall Street Journal Prime Rate and a floor of 6.50%, and is paid in monthly installments starting July 1, 2025, and maturing June 30, 2028. As of December 2025, the interest on this loan is 7.25%. In the event of a default, the Company could be required to pay the lender the entire principal balance, plus any accrued and unpaid interest immediately due and payable, without notice or demand. The note is secured by a lien on collateral. Collateral includes all of the borrower’s rights, title, and interest in all assets, including but not limited to accounts, equipment, deposits, intellectual property and books and records. Debt covenants of this loan requires the Company to maintain a minimum debt service coverage ratio of at least 1.5 to 1. The Company was in compliance with debt covenants of this loan for the trailing twelve month period ended December 31, 2025, and it is reasonably possible it will remain in compliance for the twelve months thereafter.			2,961,882				—
October 2025 Convertible Notes – On October 24, 2025, the Company issued convertible notes at a 10.0% discount and a principal balance of $2,200,000. The notes had an interest rate of 5.0% are payable in consecutive monthly installments beginning January 24, 2026 and will mature on October 24, 2026. In the event of a default the Company could be required to pay to the holders an amount equal to the principal outstanding, plus any accrued interest through the date of payments, multiplied by 120%. The Company has the option to prepay the notes at any time and the note holders have the option to convert the notes, in whole or in part, at any time into shares of the Company’s Class A common stock. The Company elected the fair value option to account for the convertible notes.			2,115,856				—
November 2025 Convertible Notes – On November 26, 2025, the Company issued convertible notes at a 10.0% discount and a principal balance of $1,100,000. The notes had an interest rate of 5.0% and are payable in consecutive monthly installments beginning February 26, 2026 and will mature on November 26, 2026. In the event of a default the Company could be required to pay to the holders an amount equal to the principal outstanding, plus any accrued interest through the date of payments, multiplied by 120%. The Company has the option to prepay the notes at any time and the note holders have the option to convert the notes, in whole or in part, at any time into shares of the Company’s Class A common stock. The Company elected the fair value option to account for the convertible notes.			1,035,323				—
Total debt			14,440,607				5,722,549
Less: current portion of long-term debt			1,305,880				2,722,549
Less: revolving loan			—				3,000,000
Less: current portion of term loan			—				—
Less: convertible notes at fair value			3,842,189				—
Total long-term debt		$	9,292,538			$	—

 

Total interest expense for the above debt and revolving loan amounted to $641,923 and $713,475 for the years ended December 31, 2025 and 2024, respectively. Accretion of the convertible notes and amortization of loan origination expenses and loan discounts of $13,109 and $345,837 are included as part of interest expense for the years ended December 31, 2025 and 2024, respectively. The Company has a weighted average interest rate of 5.7% and 5.6% on its short-term obligations as of December 31, 2025 and 2024, respectively. The Company was in compliance with its debt covenants related to the 2021 Revolving Loan, 2021 Promissory Note and 2025 Term Loan for the trailing twelve months ended December 31, 2025, and it is reasonably possible it will remain in compliance for the twelve months thereafter.

 

 

Snail Inc. and Subsidiaries

Notes to Consolidated Financial Statements

 

The following table provides future minimum payments of its long-term debt based on contractual payments, as of December 31, 2025:

 

SCHEDULE OF FUTURE MINIMUM PAYMENTS OF LONG TERM DEBT

Years ending December 31,		Amount
2026		$	5,261,812
2027			1,305,111
2028			627,750
2029			99,101
2030			5,102,675
Thereafter			2,157,901
Long term debt		$	14,554,350

 

Convertible Debt

 

As of December 31, 2025, because the Company elected the fair value option for the February 2025 Convertible Notes, October 2025 Convertible Notes and November 2025 Convertible Notes, there were no separately recognized unamortized premium, debt discount, or deferred issuance cost balances associated with these instruments. Accordingly, the net carrying amount of each such instrument equaled its fair value as of December 31, 2025. The February 2025 Convertible Notes, October 2025 Convertible Notes and November 2025 Convertible notes had net carrying amounts, or fair values, of $691,010, $2,115,856 and $1,035,323 as of December 31, 2025, respectively, and were classified within Level 3 of the fair value hierarchy.

 

February 2025 Convertible Notes

 

In February 2025, pursuant to a securities purchase agreement (the “SPA”), the Company issued to two accredited investors (the “Investors”) convertible notes with an aggregate principal amount of $3,300,000 (the “February 2025 Convertible Notes”) for gross proceeds of $3,000,000. The February 2025 Convertible Notes, which mature on February 21, 2026, carry an original issue discount of 10%, and were subject to a guaranteed interest equal to 5% of the principal amount. The principal and interest charges were payable in 10 equal monthly payments starting May 21, 2025. The notes were fully paid in February 2026.

 

Subject to certain ownership limitations, all or a portion of the then outstanding and unpaid principal and interest (the “conversion amount”) of the February 2025 Convertible Notes could 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, for an aggregate of $866,250 of the conversion amount, the conversion price was equal to the lesser of $5.00 per share or 92% of the lowest daily volume weighted average price (“VWAP”) of the Class A common stock during the 5 trading days period prior the receipt of the notice of conversion (the “Market Price”). The conversion price could be adjusted for certain customary dilutive events. Accordingly, the number of shares issuable upon conversion of the February 2025 Convertible Notes was not fixed as of December 31, 2025 and depended on (i) the amount of principal and interest outstanding at the conversion date and (ii) for the portion of the conversion amount subject to a Market Price-based conversion feature, the market price of the Company’s Class A common stock on the applicable conversion date.

 

The February 2025 Convertible Notes could be prepaid by the Company upon giving the Investors a ten-calendar day notice by paying an amount equal to the outstanding balance. In event of default the Investors could require the Company to prepay the February 2025 Convertible Notes at a 120% premium and have the option to convert any amount then outstanding into shares of Common Stock at the lesser of the then applicable conversion price or the Market Price. If the Company fails to make the monthly payment, the Noteholders had the right to convert the amount of the monthly payment into shares of Common Stock at the lesser of the then applicable Conversion Price or the Market Price.

 

The February 2025 Convertible Notes include multiple features that would require bifurcation, analysis and to be revalued at each reporting date. Accordingly, the Company has elected to apply the fair value option to the February 2025 Convertible Notes to simplify the reporting. The February 2025 Convertible Notes were initially measured at fair value and are being re-measured at fair value at each subsequent reporting date. From the date of issuance through December 31, 2025, the change in fair value was as follows:

 

SCHEDULE OF CHANGE IN FAIR VALUE

Fair value, at issuance		$	3,000,000
Principal payments			(2,303,527	)
Conversion to common stock			(331,500	)
Change in fair value			326,037
Fair value at December 31, 2025		$	691,010

 

During the year ended December 31, 2025, holders converted $331,500 of the February 2025 Convertible Notes into 295,873 shares of the Company’s Class A common stock. The loss from change in fair value of $350,434 is reported in other income in our consolidated statement of operations and comprehensive income (loss) and other income of ($24,397) is recorded in other comprehensive income (loss) due to the change in credit spread from issuance to December 31, 2025, prior to tax adjustment. The portion of the total change in the fair value of the February 2025 Convertible Notes that is attributable to changes in the instrument-specific credit risk (the “credit component”) is estimated each reporting date. Management first measures fair value using all updated valuation inputs, including the credit spread implied by current market data (33.0%) then management re-measures fair value holding every assumption constant except for the credit spread, which is reset to the spread at the prior measurement date. The difference between the two fair-value estimates isolates the effect of instrument-specific credit risk.

 

 

Snail Inc. and Subsidiaries

Notes to Consolidated Financial Statements

 

The Company used the binomial lattice framework to determine the fair value of each amortization payout. Accordingly, the valuation uses a range of level 3 inputs to evaluate each maturity payout individually. The range of level 3 inputs used on the issuance date and as of December 31, 2025 are as follows:

 

SCHEDULE OF FAIR VALUE THE RANGE OF LEVEL 3 INPUTS

		December 31, 2025				February 21, 2025
Stock price		$	0.89			$	2.09
Exercise price			92% VWAP or $5.00				92% VWAP or $5.00
Contractual term (year)			0.06-0.14				0.24-1.00
Volatility			58.1% - 61.1	%			117.0% - 190.9	%
Risk-free rate			3.68% - 3.71	%			4.11% - 4.29	%

  

October 2025 Convertible Notes

 

In October 2025, pursuant to a SPA, the Company issued to one accredited investor convertible notes with an aggregate principal amount of $2,200,000 (the “October 2025 Convertible Notes”) for gross proceeds of $2,000,000. The October 2025 Convertible Notes, which mature on October 24, 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 January 24, 2026.

 

Subject to certain ownership limitations, all or portion of the then outstanding and unpaid principal and interest (the “conversion amount”) of the October 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, for an aggregate of $577,500 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 (“VWAP”) of the Class A common stock during the 5 trading days period prior the receipt of the notice of conversion (the “Market Price”). The conversion price may be adjusted for certain customary dilutive events. Accordingly, the number of shares issuable upon conversion of the October 2025 Convertible Notes was not fixed as of December 31, 2025 and depended on (i) the amount of principal and interest outstanding at the conversion date and (ii) for the portion of the conversion amount subject to a Market Price-based conversion feature, the market price of the Company’s Class A common stock on the applicable conversion date.

 

The October 2025 Convertible Notes may be prepaid by the Company upon giving the Investors a ten-calendar day notice by paying an amount equal to the outstanding balance. In event of default, the Investors may require the Company to prepay the October 2025 Convertible Notes at a 120% premium and have the option to convert any amount then outstanding into shares of Common Stock at the lesser of the then applicable conversion price or the Market Price. If the Company fails to make the monthly payment, the Noteholders have the right to convert the amount of the monthly payment into shares of Common Stock at the lesser of the then applicable Conversion Price or the Market Price.

 

The Convertible Notes include multiple features that would require bifurcation, analysis and to be revalued at each reporting date. Accordingly, the Company has elected to apply the fair value option to the October 2025 Convertible Notes to simplify the reporting. The October 2025 Convertible Notes were initially measured at fair value and are being re-measured at fair value at each subsequent reporting date. From the date of issuance through December 31, 2025, the change in fair value was as follows:

 

SCHEDULE OF CHANGE IN FAIR VALUE

Fair value, at issuance		$	2,000,000
Principal payments			—
Conversion to common stock			—
Change in fair value			115,856
Fair value at December 31, 2025		$	2,115,856

 

The loss in change in fair value of $118,900 is reported in other income in our consolidated statement of operations and comprehensive income (loss) and ($3,044) is recorded in other comprehensive income (loss) due to the change in credit spread from issuance to December 31, 2025, prior to tax adjustment. The portion of the total change in the fair value of the October 2025 Convertible Notes that is attributable to changes in the Company’s own credit risk (the “credit component”) is estimated each reporting date using a with-and-without approach. Management first measures fair value using all updated valuation inputs, including the credit spread implied by current market data (33.0%) then management re-measures fair value holding every assumption constant except for the credit spread, which is reset to the spread calibrated on the issuance date (32.5%). The difference between the two fair-value estimates isolates the effect of instrument-specific credit risk.

 

 

Snail Inc. and Subsidiaries

Notes to Consolidated Financial Statements

 

The Company used the binomial lattice framework to determine the fair value of each maturity payout. Accordingly, the valuation uses a range of level 3 inputs to evaluate each maturity payout individually. The range of level 3 inputs used on the issuance date and as of December 31, 2025 are as follows:

 

SCHEDULE OF FAIR VALUE THE RANGE OF LEVEL 3 INPUTS

		December 31, 2025				October 24, 2025
Stock price		$	0.89			$	1.03
Exercise price			92% VWAP or $5.00				92% VWAP or $5.00
Contractual term (year)			0.07-0.81				0.25-1.00
Volatility			59.0% - 94.2	%			78.1% - 126.9	%
Risk-free rate			3.49% - 3.71	%			3.55% - 3.89	%

 

November 2025 Convertible Notes

 

In November 2025, pursuant to a SPA, the Company issued to one accredited investor convertible notes with an aggregate principal amount of $1,100,000 (the “November 2025 Convertible Notes”) for gross proceeds of $1,000,000. The November 2025 Convertible Notes, which mature on November 26, 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 February 26, 2026.

 

Subject to certain ownership limitations, all or portion of the then outstanding and unpaid principal and interest (the “conversion amount”) of the November 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, for an aggregate of $288,750 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 (“VWAP”) of the Class A common stock during the 5 trading days period prior the receipt of the notice of conversion (the “Market Price”). The conversion price may be adjusted for certain customary dilutive events. Accordingly, the number of shares issuable upon conversion of the November 2025 Convertible Notes was not fixed as of December 31, 2025 and depended on (i) the amount of principal and interest outstanding at the conversion date and (ii) for the portion of the conversion amount subject to a Market Price-based conversion feature, the market price of the Company’s Class A common stock on the applicable conversion date.

 

The November 2025 Convertible Notes may be prepaid by the Company upon giving the Investors a ten-calendar day notice by paying an amount equal to the outstanding balance. In event of default the Investors may require the Company to prepay the November 2025 Convertible Notes at a 120% premium and have the option to convert any amount then outstanding into shares of Common Stock at the lesser of the then applicable conversion price or the Market Price. If the Company fails to make the monthly payment, the Noteholders have the right to convert the amount of the monthly payment into shares of Common Stock at the lesser of the then applicable Conversion Price or the Market Price.

 

The Convertible Notes include multiple features that would require bifurcation, analysis and to be revalued at each reporting date. Accordingly, the Company has elected to apply the fair value option to the November 2025 Convertible Notes to simplify the reporting. The November 2025 Convertible Notes were initially measured at fair value and are being re-measured at fair value at each subsequent reporting date. From the date of issuance through December 31, 2025, the change in fair value was as follows:

 

SCHEDULE OF CHANGE IN FAIR VALUE

Fair value, at issuance		$	1,000,000
Principal payments			—
Conversion to common stock			—
Change in fair value			35,323
Fair value at December 31, 2025		$	1,035,323

 

The loss in change in fair value of $35,323 is reported in other income in our consolidated statement of operations and comprehensive income (loss) as of December 31, 2025. Management first measures fair value using all updated valuation inputs, including the credit spread implied by current market data (32.0%) then management re-measures fair value holding every assumption constant except for the credit spread, which is reset to the spread calibrated on the issuance date (31.2%). The difference between the two fair-value estimates isolates the effect of instrument-specific credit risk.

 

 

Snail Inc. and Subsidiaries

Notes to Consolidated Financial Statements

 

The Company used the binomial lattice framework to determine the fair value of each maturity payout. Accordingly, the valuation uses a range of level 3 inputs to evaluate each maturity payout individually. The range of level 3 inputs used on the issuance date and as of December 31, 2025 are as follows:

 

SCHEDULE OF FAIR VALUE THE RANGE OF LEVEL 3 INPUTS

		December 31, 2025			November 24, 2025
Stock price		$	0.89		$	0.88
Exercise price			92% VWAP or $5.00			92% VWAP or $5.00
Contractual term (year)			0.16-0.90			0.25-1.00
Volatility			58.1% - 97.3	%		76.7% - 123.2	%
Risk-free rate			3.47% - 3.66	%		3.58% - 3.88	%

 

2023 Convertible Notes

 

In August 2023, pursuant to a securities purchase agreement, the Company issued to two accredited investors (the convertible debt “Investors”) convertible notes with an aggregate principal amount of $1,080,000 (the “2023 Convertible Notes”) and warrants to purchase up to an aggregate of 714,285 shares of the Company’s Class A common stock for gross proceeds of $1,000,000 (the “2023 Convertible Notes Financing”).

 

The 2023 Convertible Notes carried an original issue discount of approximately 7.4%, bore interest at a rate of 7.5% per annum (16% per annum in case of an event of default), were repaid in equal consecutive monthly installments that began in February 2024 and matured on May 24, 2024.

 

The Company determined that the 2023 Convertible Notes included features that required bifurcation from the debt host and met the criteria to be accounted for as a derivative liability that is accounted for at fair value. On the date of issuance, the compound derivative had an estimated fair value that was not significant due to the remoteness of the events that would trigger the redemption features. The derivative liability uses level 3 inputs, is to be measured at fair value each reporting date with change in fair value being reported in other income. The change in fair value during the year ended December 31, 2024, was not significant and as such, was not recorded.

 

The debt discount was amortized to interest expense over the maturity period using the effective interest method at a 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. For the year ended December 31, 2024, the Company recognized $309,433 of interest expense related to the Convertible Notes, comprising of $22,725 of contractual interest expense, $222,628 in accretion and $64,080 of amortization of debt discount and issuance costs.

 

During the year ended December 31, 2024, the Company repaid the balance of $1,071,750 of principal and accrued interest and the investors converted $60,000 of principal into 71,460 shares of Class A common stock.