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

SCHEDULE OF LONG TERM DEBT

Total interest expense for the above debt and revolver loan amounted to $201,308 and $80,746 for the three months ended March 31, 2026 and 2025, respectively. Amortization of loan origination expenses and loan discounts of $2,949 and $2,611 are included as part of interest expense for the three months ended March 31, 2026 and 2025, respectively. The Company has a weighted average interest rate of 5.7% and 5.7% on its short-term obligations as of March 31, 2026 and December 31, 2025, respectively. The Company was in compliance with its financial covenants related to the 2021 Revolving Loan, 2021 Promissory Note and 2025 Term Loan for the trailing twelve months ended March 31, 2026, and it is reasonably possible it will remain in compliance for the twelve months thereafter.

Snail Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

The following table provides future minimum payments of its long-term debt based on contractual payments, as of March 31, 2026:

SCHEDULE OF FUTURE MINIMUM PAYMENTS OF LONG TERM DEBT

Convertible Debt

As of March 31, 2026, 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 March 31, 2026. The February 2025 Convertible Notes, October 2025 Convertible Notes and November 2025 Convertible notes had net carrying amounts, or fair values, of $0, $1,522,928 and $859,327 as of March 31, 2026, 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 March 31, 2026 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. For the three months ended March 31, 2026, the change in fair value was as follows:

SCHEDULE OF CHANGE IN FAIR VALUE 

Snail Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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 March 31, 2026 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. For the three months ended March 31, 2026, the change in fair value was as follows:

SCHEDULE OF CHANGE IN FAIR VALUE

The loss in change in fair value of $57,790 is reported in other income in our condensed consolidated statement of operations and comprehensive income (loss) and ($3,225) is recorded in other comprehensive income (loss) due to the change in credit spread from issuance to March 31, 2026. 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 (34.0%) 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 (33.0%). The difference between the two fair-value estimates isolates the effect of instrument-specific credit risk.

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 as of March 31, 2026 and December 31, 2025 are as follows:

SCHEDULE OF FAIR VALUE THE RANGE OF LEVEL 3 INPUTS 

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 March 31, 2026 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. For the three months ended March 31, 2026, the change in fair value was as follows:

SCHEDULE OF CHANGE IN FAIR VALUE 

Snail Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

The loss in change in fair value of $39,007 is reported in other income in our condensed consolidated statement of operations and comprehensive income (loss) and ($2,085) is recorded in other comprehensive income (loss) due to the change in credit spread from issuance to March 31, 2026. The portion of the total change in the fair value of the November 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 (34.0%) 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 (33.0%). The difference between the two fair-value estimates isolates the effect of instrument-specific credit risk.

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 as of March 31, 2026 and December 31, 2025 are as follows:

SCHEDULE OF FAIR VALUE THE RANGE OF LEVEL 3 INPUTS