v3.26.1
REVOLVING LOAN, SHORT TERM NOTES AND LONG - TERM DEBT
 6 Months Ended
Jun. 30, 2026
Debt Disclosure [Abstract]  
REVOLVING LOAN, SHORT TERM NOTES AND LONG - TERM DEBT

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

 

    June 30, 2026     December 31, 2025  
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 maturity date of the revolving loan is extended to March 31, 2027, 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, 2027, at which time the Revolving Loan shall convert to a Term Loan and extend 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 June 30, 2026, 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 June 30, 2026, and it is reasonably possible it will remain in compliance for the twelve months thereafter.   $ 2,500,000     $ 5,000,000  
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 June 30, 2026, and it is reasonably possible it will remain in compliance for the twelve months thereafter.     2,591,993       2,636,536  
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.     —       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 June 30, 2026, 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 June 30, 2026, and it is reasonably possible it will remain in compliance for the twelve months thereafter.     2,412,048       2,961,882  
October 2025 Convertible Notes – On October 24, 2025, the Company issued a convertible note at a 10.0% discount and a principal balance of $2,200,000. The notes has an interest rate of 5.0% is 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. During the three months ended June 30, 2026, holders elected to convert $577,500 of outstanding principal balance of the convertible note into shares of the Company’s Class A common stock. The Company elected the fair value option to account for the convertible notes.     307,782       2,115,856  
November 2025 Convertible Notes – On November 26, 2025, the Company issued a convertible note at a 10.0% discount and a principal balance of $1,100,000. The notes has an interest rate of 5.0%, is 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 has the option to convert the notes, in whole or in part, at any time into shares of the Company’s Class A common stock. During the three months ended June 30, 2026, holders elected to convert $288,750 of outstanding principal balance of the convertible note into shares of the Company’s Class A common stock. The Company elected the fair value option to account for the convertible notes.     260,717       1,035,323  
Total debt     8,072,540       14,440,607  
Less: current portion of long-term debt     1,353,296       1,305,880  
Less: convertible notes at fair value     568,499       3,842,189  
Total long-term debt   $ 6,150,745     $ 9,292,538  

 

Total interest expense for the above debt and revolver loan amounted to $151,965 and $148,360 for the three months ended June 30, 2026 and 2025, respectively. Total interest expense for the above debt and revolver loan amounted to $353,274 and $229,106 for the six months ended June 30, 2026 and 2025, respectively. Amortization of loan origination expenses and loan discounts of $1,983 and $3,635 are included as part of interest expense for the three months ended June 30, 2026 and 2025, respectively. Amortization of loan origination expenses and loan discounts of $4,932 and $6,246 are included as part of interest expense for the six months ended June 30, 2026 and 2025, respectively. The Company has a weighted average interest rate of 6.4% and 5.7% on its short-term obligations as of June 30, 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 June 30, 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 June 30, 2026:

Years ending December 31,   Amount  
Remainder of 2026   $ 1,286,932  
2027     1,305,111  
2028     627,750  
2029     99,101  
2030     2,602,675  
Thereafter     2,157,901  
Long term debt   $ 8,079,470  

 

Convertible Debt

 

As of June 30, 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 June 30, 2026. The February 2025 Convertible Notes, October 2025 Convertible Notes and November 2025 Convertible notes had net carrying amounts, or fair values, of $0, $307,782 and $260,717 as of June 30, 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 $25.00 per share, except that, for an aggregate of $866,250 of the conversion amount, the conversion price was equal to the lesser of $25.00 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 June 30, 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 six months ended June 30, 2026, the change in fair value was as follows:

  

   June 30, 2026 
Fair value, at beginning of period  $691,010 
Principal payments   (664,973)
Conversion to common stock   — 
Change in fair value   (26,037)
Fair value, at end of period  $— 

 

 

Snail Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

 

October 2025 Convertible Notes

 

In October 2025, pursuant to a Securities Purchase Agreement, 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 $25.00 per share, except that the holder was entitled to convert, an aggregate of $577,500 of the conversion amount, at a conversion price is equal to the lesser of $25.00 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 for such portion of the conversion amount could be adjusted for certain customary dilutive events. Accordingly, the total number of shares issuable upon conversion of the October 2025 Convertible Notes was not fixed as of December 31, 2025, but became fixed as of June 30, 2026 following the investor’s conversion in full of the $577,500 portion of the conversion amount. Following such conversion, the total number of shares issuable upon conversion of the October 2025 Notes as of June 30, 2026 was 13,860, which number does not include 309,419 shares issued upon conversions effected on or prior to June 30, 2026.

 

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 six months ended June 30, 2026, the change in fair value was as follows:

 

   June 30, 2026 
Fair value, at beginning of period  $2,115,856 
Principal payments   (1,312,767)
Conversion to common stock   (577,500)
Change in fair value   82,193 
Fair value, at end of period  $307,782 

 

During the six months ended June 30, 2026, holders converted an aggregate principal amount of $577,500 of the October 2025 Convertible Notes into shares of the Company’s Class A common stock. The loss in change in fair value of $85,418 is reported in other income in our condensed consolidated statement of operations and comprehensive loss and ($3,225) is recorded in other comprehensive loss due to the change in credit spread from issuance to June 30, 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 June 30, 2026 and December 31, 2025 are as follows:

  

    June 30, 2026     December 31, 2025  
Stock price   $ 3.10     $ 4.45  
Exercise price     92% VWAP or $25.00       92% VWAP or $25.00  
Contractual term (year)     0.07-0.15       0.07-0.81  
Volatility     75.7% - 220.7 %     59.0% - 94.2 %
Risk-free rate     3.67% - 3.72 %     3.49% - 3.71 %

 

November 2025 Convertible Notes

 

In November 2025, pursuant to a Securities Purchase Agreement, 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.

 

 

Snail Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

 

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 $25.00 per share, except that the holder was entitled to convert, an aggregate of $288,750 of the conversion amount at a conversion price is equal to the lesser of $25.00 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 for such portion of the conversion amount could be adjusted for certain customary dilutive events. Accordingly, the total number of shares issuable upon conversion of the November 2025 Convertible Notes was not fixed as of December 31, 2025, but became fixed as of June 30, 2026 following the investor’s conversion in full of the $288,750 portion of the conversion amount. Following such conversion, the total number of shares issuable upon conversion of the November 2025 Convertible Notes as of June 30, 2026, was 11,550, which number does not include 156,572 shares issued upon conversions effected on or prior to June 30, 2026.

 

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 six months ended June 30, 2026, the change in fair value was as follows:

 

   June 30, 2026 
Fair value, at beginning of period  $1,035,323 
Principal payments   (545,555)
Conversion to common stock   (288,750)
Change in fair value   59,699 
Fair value, at end of period  $260,717 

 

During the six months ended June 30, 2026, holders converted an aggregate principal amount of $288,750 of November 2025 Convertible Notes into shares of the Company’s Class A common stock. The loss in change in fair value of $61,784 is reported in other income in our condensed consolidated statement of operations and comprehensive loss and ($2,085) is recorded in other comprehensive loss due to the change in credit spread from issuance to June 30, 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 June 30, 2026 and December 31, 2025 are as follows:

  

    June 30, 2026     December 31, 2025  
Stock price   $ 3.10     $ 4.45  
Exercise price     92% VWAP or $25.00       92% VWAP or $25.00  
Contractual term (year)     0.07-0.24       0.16-0.90  
Volatility     75.7% - 380.8 %     58.1% - 97.3 %
Risk-free rate     3.67% - 3.82 %     3.47% - 3.66 %