RUM Group Inc. 10-K

Item 8. Financial Statements and Supplementary Data Reports of Independent Registered Public Accounting Firm (Moss Adams LLP, Seattle, Washington, PCAOB ID: 659) F-2 Reports of Independent Registered Public Accounting Firm (MNP LLP, PCAOB ID: 1930) F-3 Consolidated Statements of Operations F-4 Consolidated Balance Sheets F-5 Consolidated Statements of Shareholders’ Equity F-6 Consolidated Statements of Cash Flows F-7 Notes to Consolidated Financial Statements F-8 1. Overview and Basis of Presentation F-8 2. Summary of Significant Accounting Policies F-9 3. Acquisitions F-20 4. Revenue from Contracts with Customers F-23 5. Cash, Cash Equivalents, and Marketable Securities F-23 6. Property and Equipment F-24 7. Right-of-Use Assets and Lease Liabilities F-24 8. Intangible Assets F-25 9. Goodwill F-26 10. Income Taxes F-26 11. Other Liability F-28 12. Qualifying Transaction F-29 13. Shareholders’ Equity F-33 14. Share-Based Compensation Expense F-37 15. Loss per Share F-40 16. Commitments and Contingencies F-40 17. Fair Value Measurements F-41 18. Credit and Concentration Risks F-42 19. Related Party Transactions F-42 20. Segment Information F-43 21. Subsequent Events F-43 47 Rumble Inc. Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 Rumble Inc. Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 Contents Reports of Independent Registered Public Accounting Firm (Moss Adams LLP, Seattle, Washington, PCAOB ID: 659 ) F-2 Reports of Independent Registered Public Accounting Firm (MNP LLP, PCAOB ID: 1930) F-3 Consolidated Statements of Operations F-4 Consolidated Balance Sheets F-5 Consolidated Statements of Shareholders’ Equity F-6 Consolidated Statements of Cash Flows F- 7 Notes to the Consolidated Financial Statements F-8 - F-43 F- 1 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Rumble Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Rumble Inc. (the “Company”) as of December 31, 2023, the related consolidated statements of operations, shareholders’ equity and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ Moss Adams LLP Seattle, Washington March 27, 2024 We have served as the Company’s auditor since 2023. F- 2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Rumble Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Rumble Inc. and its subsidiaries (the Company) as of December 31, 2022 and 2021, and the related consolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the two year period ended December 31, 2022, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2022 and 2021, and the results of its consolidated operations and its consolidated cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. <MNP LLP> Chartered Professional Accountants Licensed Public Accountants We have served as the Company’s auditor from 2019 to 2023. Toronto, Canada March 30, 2023 F- 3 Rumble Inc. Consolidated Statements of Operations (Expressed in U.S. Dollars) For the year ended December 31, 2023 2022 Revenues $ 80,963,451 $ 39,384,284 Expenses Cost of services (content, hosting and other) $ 146,156,734 $ 43,745,518 General and administrative 37,125,296 16,086,254 Research and development 15,721,663 6,342,851 Sales and marketing 13,427,021 6,137,860 Acquisition-related transaction costs 1,151,318 1,116,056 Amortization and depreciation 4,850,812 1,556,056 Changes in fair value of contingent consideration ( 1,922,381 ) - Total expenses 216,510,463 74,984,595 Loss from operations ( 135,547,012 ) ( 35,600,311 ) Interest income 13,594,463 3,019,456 Other income (expense) ( 125,511 ) ( 49,067 ) Changes in fair value of warrant liability 2,365,895 21,010,500 Loss before income taxes ( 119,712,165 ) ( 11,619,422 ) Income tax recovery - 215,428 Deferred tax recovery 3,291,703 - Net loss $ ( 116,420,462 ) $ ( 11,403,994 ) Loss per share – basic and diluted $ ( 0.58 ) $ ( 0.05 ) Weighted-average number of common shares used in computing net loss per share - basic and diluted 201,442,321 242,443,272 Share-based compensation expense included in expenses: Cost of services (content, hosting, and other) $ 3,994,180 $ 249,781 General and administrative 10,686,099 1,582,678 Research and development 1,016,627 55,479 Sales and marketing 437,808 45,465 Total share-based compensation expense 16,134,714 1,933,403 The accompanying notes are an integral part of these consolidated financial statements. F- 4 Rumble Inc. Consolidated Balance Sheets (Expressed in U.S. Dollars) December 31, 2023 2022 Assets Current assets Cash and cash equivalents $ 218,338,658 $ 337,169,279 Marketable securities 1,135,200 1,100,000 Accounts receivable 5,440,447 4,748,189 Prepaid expenses and other 13,090,072 9,342,691 238,004,377 352,360,159 Other non-current assets 1,626,802 547,589 Property and equipment, net 19,689,987 8,844,232 Right-of-use assets, net 2,473,903 1,356,454 Intangible assets, net 23,262,428 3,211,305 Goodwill 10,655,391 662,899 $ 295,712,888 $ 366,982,638 Liabilities and Shareholders’ Equity Current liabilities Accounts payable and accrued liabilities $ 24,713,203 $ 14,324,696 Deferred revenue 7,003,891 1,040,619 Income taxes payable - 934 Lease liabilities 975,844 583,186 Contingent consideration 863,643 - 33,556,581 15,949,435 Lease liabilities, long-term 1,630,837 835,924 Contingent consideration, net of current portion 705,717 - Warrant liability 7,696,605 10,062,500 Other liability 500,000 500,000 44,089,740 27,347,859 Commitments and contingencies (Note 16) Shareholders’ equity Preferred shares ($ 0.0001 par value per share, 20,000,000 shares authorized, no shares issued or outstanding) - - Common shares ($ 0.0001 par value per share, 700,000,000 Class A shares authorized, 114,926,700 and 111,467,763 shares issued and outstanding, as of December 31, 2023 and 2022, respectively; 170,000,000 Class C authorized, 165,353,621 and 167,662,214 shares issued and outstanding, as of December 31, 2023 and 2022, respectively; 110,000,000 Class D authorized, 105,782,403 and 105,782,403 shares issued and outstanding, as of December 31, 2023 and 2022, respectively) 768,523 768,357 Accumulated deficit ( 145,203,163 ) ( 28,782,701 ) Additional paid-in capital 396,057,788 367,649,123 251,623,148 339,634,779 $ 295,712,888 $ 366,982,638 The accompanying notes are an integral part of these consolidated financial statements. F- 5 Rumble Inc. Consolidated Statements of Shareholders’ Equity (Expressed in U.S. Dollars) For the year ended December 31, 2023 Number of Common Stock Class A Class C Class D Class A Class C Class D Additional Paid-in Capital Accumulated Deficit Total Balance December 31, 2022 111,467,763 167,662,214 105,782,403 $ 741,013 $ 16,766 $ 10,578 $ 367,649,123 $ ( 28,782,701 ) $ 339,634,779 Issuance of Class A Common Stock in connection with Callin acquisition 981,243 - - 149 - - 14,664,682 - 14,664,831 Issuance costs in connection with Callin acquisition - - - - - - ( 40,478 ) - ( 40,478 ) Holdback of Class A Common Stock for the repayment of domain name loan in connection with the acquisition of Locals Technology Inc. ( 26,731 ) - - ( 3 ) - - ( 391,232 ) - ( 391,235 ) Issuance of Class A Common Stock upon vesting of restricted stock units 551,522 - - 55 - - - - 55 Issuance of Class A Common Stock in exchange for Class C Common Stock 2,308,593 ( 2,308,593 ) - 231 ( 231 ) - - - - Net share settlement on restricted stock units ( 355,690 ) - - ( 35 ) - - ( 2,107,536 ) - ( 2,107,571 ) Share-based compensation - - - - - - 16,283,229 - 16,283,229 Loss for the year - - - - - - - ( 116,420,462 ) ( 116,420,462 ) Balance December 31, 2023 114,926,700 165,353,621 105,782,403 $ 741,410 $ 16,535 $ 10,578 $ 396,057,788 $ ( 145,203,163 ) $ 251,623,148 For the year ended December 31, 2022 Number of Common Stock Legacy Rumble Class A Legacy Rumble Class B Class A Class B Class C Class D Legacy Rumble Class A Legacy Rumble Class B Class A Class B Class C Class D Additional Paid-in Capital Accumulated Deficit Total Balance December 31, 2021 8,119,690 135,220 - - - - $ 43,223,609 $ 129,761 $ - $ - $ - $ - $ 4,392,666 $ ( 17,378,707 ) $ 30,367,329 Issuance of Legacy Rumble Class A Common Stock in exchange for Legacy Rumble preference shares 606,360 - - - - - 17,314,203 - - - - - - - 17,314,203 Issuance of Class A and C Common Stock in exchange for Legacy Rumble Class A and B common shares ( 8,726,050 ) ( 135,220 ) 48,970,404 - 168,762,214 - ( 60,537,812 ) ( 129,761 ) 4,897 - 16,876 - 60,645,800 - - Issuance of Class A Common Stock in exchange for Legacy Rumble warrants - - 14,153,048 - - - - - 731,281 - - - ( 731,281 ) - - Repurchase of Class C Common Stock in the Key Individual Subscription Agreement - - - - ( 1,100,000 ) - - - - - ( 110 ) - ( 10,999,890 ) - ( 11,000,000 ) Issuance of Class D Common Stock in the Key Individual Subscription Agreement - - - - - 105,782,403 - - - - - 10,578 989,422 - 1,000,000 Issuance of Class A and B Common Stock in connection with the Qualifying Transaction - - 10,875,000 7,500,000 - - - - 1,088 750 - - 105,089,512 - 105,091,350 Issuance of Class A Common Stock in exchange for CFVI Class B common shares - - 7,500,000 ( 7,500,000 ) - - - - 750 ( 750 ) - - - - - Issuance of Class A Common Stock in connection with public shares - - 29,969,311 - - - - - 2,997 - - - 299,690,113 - 299,693,110 Issuance costs in connection with the Qualifying Transaction - - - - - - - - - - - - ( 54,091,750 ) - ( 54,091,750 ) Excess fair value over net assets acquired – listing fee - - - - - - - - - - - - ( 2,265,284 ) - ( 2,265,284 ) Eliminate CFVI’s historical accumulated deficit - - - - - - - - - - - - ( 37,003,588 ) - ( 37,003,588 ) Share-based compensation - - - - - - - - - - - - 1,933,403 - 1,933,403 Loss for the year - - - - - - - - - - - - - ( 11,403,994 ) ( 11,403,994 ) Balance December 31, 2022 - - 111,467,763 - 167,662,214 105,782,403 $ - $ - $ 741,013 $ - $ 16,766 $ 10,578 $ 367,649,123 $ ( 28,782,701 ) $ 339,634,779 The accompanying notes are an integral part of these consolidated financial statements. F- 6 Rumble Inc. Consolidated Statements of Cash Flows (Expressed in U.S. Dollars) For the year ended December 31, 2023 2022 Cash flows provided by (used in) Operating activities Net loss for the period $ ( 116,420,462 ) $ ( 11,403,994 ) Adjustments to reconcile net loss to net cash used in operating activities: Amortization and depreciation 4,850,812 1,556,056 Share-based compensation 16,283,229 1,933,403 Non-cash portion interest expense 58,815 36,621 Amortization on right-of-use assets 788,799 528,220 Change in fair value of warrants ( 2,365,895 ) ( 21,010,500 ) Change in fair value of contingent consideration ( 1,922,381 ) - Changes in operating assets and liabilities: Accounts receivable ( 674,981 ) ( 2,935,399 ) Prepaid expenses and other ( 4,990,778 ) ( 9,500,432 ) Accounts payable and accrued liabilities 9,612,728 7,996,298 Deferred revenue 5,963,272 1,010,605 Deferred taxes ( 3,323,744 ) - Operating lease liabilities ( 770,727 ) ( 496,835 ) Net cash used in operating activities ( 92,911,313 ) ( 32,285,957 ) Investing activities Purchase of property and equipment ( 14,572,933 ) ( 8,544,398 ) Purchase of intangible assets ( 2,915,085 ) ( 494,769 ) Purchase of marketable securities ( 1,135,200 ) ( 1,100,000 ) Sale of marketable securities 1,100,000 - Cash acquired in connection with Callin acquisition 1,000,989 - Acquisition of North River, net of cash acquired ( 7,249,085 ) - Net cash used in investing activities ( 23,771,314 ) ( 10,139,167 ) Financing activities Taxes paid from net share settlement for share-based compensation ( 2,107,516 ) - Proceeds from other liabilities - 250,000 Proceeds from Qualifying Transaction - 399,807,596 Repurchase of Class C Common Stock - ( 11,000,000 ) Repayment of Sponsor loan in connection with Qualifying Transaction - ( 2,173,353 ) Share issuance costs ( 40,478 ) ( 54,091,750 ) Net cash (used in) provided by financing activities ( 2,147,994 ) 332,792,493 Effect of exchange rate changes on cash and cash equivalents - ( 45,465 ) (Decrease) increase in cash and cash equivalents during the period ( 118,830,621 ) 290,321,904 Cash and cash equivalents, beginning of period 337,169,279 46,847,375 Cash and cash equivalents, end of period $ 218,338,658 $ 337,169,279 Supplemental cash flow information: Cash paid for income taxes $ 31,974 $ 5,180 Cash paid for interest 4,212 54 Cash paid for lease liabilities 770,727 841,756 Non-cash investing and financing activities: Property and equipment in accounts payable and accrued liabilities 123,946 621,045 Settlement of loan receivable in exchange for Class A Common Stock 391,235 - Non-cash consideration related to the acquisition of Callin (Note 3) 18,226,572 - Recognition of operating right-of-use assets in exchange for operating lease liabilities 1,906,248 228,886 The accompanying notes are an integral part of these consolidated financial statements. F- 7 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 1. Overview and Basis of Presentation Nature of Operations On December 1, 2021, Rumble Inc., a corporation formed under the laws of the Province of Ontario, Canada (“Legacy Rumble”) and CF Acquisition VI, a Delaware corporation (“CFVI”) entered into a business agreement (the “Business Combination Agreement”). On September 16, 2022, pursuant to the terms of the Business Combination Agreement, Legacy Rumble and CFVI announced the completion of a transaction whereby CFVI was renamed Rumble Inc. and Legacy Rumble was renamed Rumble Canada Inc. (the “Qualifying Transaction”). Refer to Note 12 Qualifying Transaction for further detail. Rumble Inc. (“Rumble” or “the Company”) is a high growth, video sharing platform and cloud services provider designed to help content creators manage, distribute, and monetize their content by connecting them with brands, publishers, and directly to their subscribers and followers. The Company’s registered office is located at 444 Gulf of Mexico Drive, Longboat Key, Florida, 34228. The Company’s shares of Class A common stock and warrants are traded on The Nasdaq Global Market (“Nasdaq”) under the symbol “RUM” and “RUMBW”, respectively. Basis of Presentation The accompanying consolidated financial statements (the “financial statements”) are prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and include the results of the Company and its wholly-owned subsidiaries. Any reference in these notes to applicable guidance is meant to refer to the authoritative guidance found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”). All intercompany balances and transactions have been eliminated upon consolidation. These financial statements are presented in U.S. dollars, which is the functional currency of the Company. Basis of Consolidation These consolidated financial statements include the accounts of the Company and all subsidiaries. Subsidiaries are entities in which the Company has a controlling voting interest or is the primary beneficiary of a variable interest entity. Subsidiaries are fully consolidated from the date control is transferred to the Company and are de-consolidated from the date control ceases. The consolidated financial statements include all the assets, liabilities, revenues, expenses and cash flows of the Company and its subsidiaries after eliminating intercompany balances and transactions. Use of Estimates The preparation of these financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities, as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates the estimates used, which include but are not limited to the: allowance for credit losses; valuation of share-based compensation awards; estimates in the determination of the fair value of assets acquired and liabilities assumed in connection with acquisitions; fair value of financial instruments including warrant liability and contingent consideration; discount rate in determining lease liabilities; valuation of long-lived assets and their associated useful lives, valuation of goodwill; and the realization of tax assets, estimates of tax liabilities, and valuation of deferred taxes. These estimates, judgments, and assumptions are reviewed periodically and the impact of any revisions are reflected in the financial statements in the period in which such revisions are made. Actual results could differ materially from those estimates, judgments, or assumptions, and such differences could be material to the Company’s consolidated financial position and results of operations. F- 8 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 2. Summary of Significant Accounting Policies Foreign Currency The functional currencies of the Company and its foreign subsidiaries are the U.S. dollar. Transactions denominated in currencies other than the U.S. dollar are remeasured using end-of-period exchange rates or exchange rates prevailing at the date of the transaction, and the resulting gains or losses are recognized as a component of other income (expense). Fair Value Measurements The fair value of a financial instrument is the amount at which the instrument could be exchanged in an orderly transaction between market participants. Fair value measurement is based on a hierarchy of observable or unobservable inputs. The standard describes three levels of inputs that may be used to measure fair value. Level 1 - Inputs to the valuation methodology are quoted prices available in active markets for identical investments as of the reporting date; Level 2 - Inputs to the valuation methodology other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and the fair value can be determined through the use of models or other valuation methodologies; and Level 3 - Inputs to the valuation methodology are unobservable inputs in situations where there is little or no market activity of the asset and liability and the reporting entity makes estimates and assumptions relating to the pricing of the asset or liability, including assumptions regarding risk. This includes certain cash flow pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The Company may measure eligible assets and liabilities at fair value, with changes in value recognized in profit and loss. Fair value treatment may be elected either upon initial recognition of an eligible asset or liability or, for an existing asset or liability, if an event triggers a new basis of accounting. The Company evaluates the estimated fair value of financial instruments using available market information and management’s estimates. The use of different market assumptions and/or estimation methodologies could have a significant impact on the estimated fair value amounts. Our financial instruments include cash and cash equivalents, marketable securities, accounts receivable, accounts payable and accrued liabilities, lease liabilities, warrant liability, contingent consideration, and other liabilities, approximate fair value. Concentration Risk A meaningful portion of the Company’s revenue (and a substantial portion of the Company’s net cash from operations that it can freely access) is attributable to service agreements with a several customers. See Note 18 for further details. F- 9 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 2. Summary of Significant Accounting Policies (Continued) Revenue Recognition The Company derives revenues primarily from: ● Advertising fees; and ● Other services and cloud Revenues are recognized when the control of promised services is transferred to a customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Sales tax and other similar taxes are excluded from revenues. In order to recognize revenue, the Company applies the following five (5) steps: 1. Identify the contract with a customer 2. Identify the performance obligation(s) 3. Determine the transaction price 4. Allocate the transaction price to the performance obligation(s) 5. Recognize revenue when/as performance obligation(s) are satisfied Advertising fees The Company generates advertising fees by delivering digital video and display advertisements as well as cost-per-message-read advertisements. Digital video and display advertisements are placed on Rumble and third-party publisher websites or mobile applications. Customers pay for advertisements either directly or through their relationships with advertising agencies or resellers, based on the number of impressions delivered or the number of actions such as clicks, or purchases taken, by our users. For cost-per-message-read advertising, customers pay to have their products or services promoted by a content creator. The Company recognizes revenue from video and display advertisements when a user engages with the advertisement, such as an impression, click, or purchase. For cost-per-message-read advertising, advertising revenue is recognized when the performance obligation is fulfilled, usually when the message is read or when a user makes a purchase. In general, advertising fees are reported on a gross basis, since the Company controls the advertising inventory before it is transferred to the customer. Control is evidenced by the Company’s sole ability to monetize the advertising inventory before it is transferred to the customer. Other services and cloud Other services include: subscription fees earned primarily from consumer product offerings such as Locals and badges; revenues generated from content that is licensed by third-parties; pay-per-view; fees from tipping and platform hosting fees. Subscription services are recognized over time for the duration of the contract. F- 10 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 2. Summary of Significant Accounting Policies (Continued) Revenue Recognition (Continued) Under bulk license agreements, the Company’s obligations include hosting the content libraries for access and searching by the customer, updating the libraries with new content provided by the content owner, and making videos selected by the customer available for download, throughout the term of the contract. These services are billed based on the access to the content regardless of the number of videos downloaded. All of these services are highly interdependent as the customer’s ability to derive its intended benefit from the contract depends on the entity transferring both the access to the content library over time and making the videos available as and when required by the customer for download. These services therefore constitute a single performance obligation comprised of a series of distinct services transferred to the customer in a similar manner throughout the contract term. The predominant item in the single performance obligation is a license providing a right to access the content library throughout the license period. For these arrangements, the Company recognizes the total fixed fees under the contract as revenue ratably over the term of the contract as the performance obligation is satisfied, as this best depicts the pattern of control transfer. For license agreements related to the Rumble Player, the Company’s obligations include providing access to the current version the Rumble Player throughout the term of the contract. As part of this arrangement, the customer is required to use the most current version of the player and therefore, the utility of the player to the customer is significantly affected by Rumble’s ongoing activities to maintain and support the player. Revenue is therefore recognized ratably over the term of the contract. The Company generates revenue through the licensing of content to third-party platforms. The consideration received is variable in nature as it is dependent on the level of traffic and number of impressions generated on the third-party platforms. For these arrangements, revenue is recognized when the performance obligation is satisfied over the period the license is provided to the third-party provider. The usage-based royalty exemption has been taken by the Company for these arrangements. Fees from tipping features are recognized at a point in time when a user tips on the platform. Revenues related to platform hosting are recognized over time as the Company provides access to the platform and varies based on the subscription fees generated by the content creator. The Company allocates variable fees earned from these arrangements to those distinct performance obligations where pricing practices are consistent with the allocation objective. Cloud services are generally provided on either a consumption or subscription basis. Revenues related to cloud services provided on a consumption basis are recognized when the customer utilizes the services, based on the quantity of services consumed at the amount which we have the right to invoice for services performed. Revenues related to cloud services provided on a subscription basis are recognized ratably over the contract term as the customer receives and consumes the benefits of the cloud services. Costs to Obtain a Contract The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the benefit of these costs to be longer than one year. As of December 31, 2023, the Company had capitalized $ 4,172,570 related to content costs which are included within prepaid expenses and other on the consolidated balance sheets (2022 - $ 507,392 ). Amortization of contract acquisition costs was $ 6,994,890 for year ended December 31, 2023 and was included within cost of services (content, hosting and other) on the consolidated statements of operations (2022 - $ 225,415 ). There were no asset impairment charges for contract acquisition costs for the periods noted above. F- 11 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 2. Summary of Significant Accounting Policies (Continued) Revenue Recognition (Continued) Principal vs Agent In our arrangements, we evaluate whether we are the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis). The Company controls the advertising inventory before it is transferred to the customer and therefore is the principal in the transaction. Control is evidenced by the Company’s ability to monetize the advertising inventory before it is transferred to the customer. The Company is also acting as the principal in licensing, cloud, and subscription transactions, as it has control over both the content that is monetized as well as the platform over which the content is displayed. Further, the Company manages the monetization of content and is the only party to the contract with its customers. As it relates to revenues earned from platform hosting, we present revenue on a net basis as the Company is acting as the agent providing a platform for content creators to post content and interact with end users. Practical Expedients and Exemptions The Company does not disclose the transaction price allocated to unsatisfied performance obligations for contracts with an original expected length of one year or less and for contracts for which revenue is recognized at the amount to which the Company has the right to invoice for services performed. Costs of Services (Exclusive of Amortization and Depreciation) Costs of services primarily consist of costs related to obtaining, supporting and hosting the Company’s product offerings. These costs primarily include: ● Programming and content costs related to payments to content providers from whom videos and other content are licensed. These costs are typically paid to these providers based on revenues generated. In certain circumstances we incur additional costs related to incentivizing top content creators to promote and join our platform. ● Other costs of services include third-party service provider costs such as data center and networking, staffing costs directly related to professional services fees, and costs paid to publishers. Deferred Revenue The Company records amounts that have been invoiced to its clients in either deferred revenue or revenue depending on whether the revenue recognition criteria described above have been met. Deferred revenue includes payments received in advance of performance under the contract. Advertising Expenses Advertising costs are expensed as incurred and are included in sales and marketing expense on the consolidated statements of operations. During the year ended December 31, 2023, the Company incurred advertising expenses of $ 4,550,742 (2022 – $ 1,666,912 ). F- 12 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 2 . Summary of Significant Accounting Policies (Continued) Internal Use Software and Website Development Costs The Company capitalizes certain costs incurred in developing software programs or websites to be used solely to meet internal needs and cloud-based applications used to deliver our services. The Company capitalizes these costs once the preliminary project stage is complete, and it is probable that the project will be completed and the software will be used to perform the intended function. Capitalized internal use software costs are included in intangible assets, net on the consolidated balance sheets. The estimated useful life of costs capitalized is evaluated for each specific project and is up to five years . Amortization of internal software development costs is included in amortization and depreciation expenses in the consolidated statement of operations. Costs related to the preliminary project stage, post-implementation, training and maintenance are expensed as incurred. Income Taxes The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined on the basis of the difference between the tax bases of assets and liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in effect for the years in which the temporary differences are expected to reverse. A valuation allowance is established for deferred tax assets for which realization is uncertain. Uncertain tax positions are accounted for using a comprehensive model for the manner in which a company should recognize, measure, present and disclose in its financial statements all material uncertain tax positions that the company has taken or expects to take on a tax return. This applies to income taxes and is not intended to be applied by analogy to other taxes, such as sales taxes, value-add taxes, or property taxes. The Company reviews its nexus in various tax jurisdictions and the Company’s tax positions related to all open tax years for events that could change the status of its tax liability, if any, or require an additional liability to be recorded. Such events may be the resolution of issues raised by a taxing authority, expiration of the statute of limitations for a prior open tax year or new transactions for which a tax position may be deemed to be uncertain. Those positions, for which management’s assessment is that there is more than a 50 percent probability of sustaining the position upon challenge by a taxing authority based upon its technical merits, are subjected to the measurement criteria. The Company records the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. Any liabilities for which the Company expects to make cash payments within the next twelve months are classified as “short term”. F- 13 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 2 . Summary of Significant Accounting Policies (Continued) Share-Based Compensation The Company issues equity awards such as stock options and restricted stock units to certain of its employees, advisory board members, directors, officers and consultants. For awards with a market condition, the market condition is taken into consideration in the fair value-based measure, whereas service and performance conditions are taken into consideration in determining the share-based compensation expense. For equity awards granted to employees that have only a service condition, the Company recognizes the share-based compensation expense on a straight-line basis over the requisite service period. The vesting period for the equity awards granted is determined by the board of directors of the company and the typical vesting period for equity awards with service conditions is three to four years. The requisite service period for Rumble’s equity awards subject only to service conditions is coterminous with the vesting period specific to those equity awards. For equity awards with either a market condition or a performance condition, the Company determines the fair value of each tranche of the award, and then recognizes the share-based compensation expense associated with each tranche of the award over the requisite service period for that tranche. For equity awards with a performance condition, the Company assesses the likelihood of the performance condition underlying an award being met and recognizes a share-based compensation expense associated with that award only if it is probable that the performance condition will be met. Forfeitures are accounted for when they occur. Loss per Share The Company calculates basic and diluted net loss per common share by dividing the net loss by the number of weighted average common shares outstanding during the period. The Company has excluded other potentially dilutive shares, which include warrants to purchase common shares and outstanding stock options, from the number of common shares outstanding as their inclusion in the computation for all periods would be anti-dilutive due to net losses incurred. Cash, Cash Equivalents, and Marketable Securities Cash and cash equivalents primarily consist of cash on deposit with banks and amounts held in treasury bills and money market funds. Cash equivalents are carried at amortized cost, which approximates their fair market value. The Company considers all marketable securities with original maturities of three months or less from the date of purchase to be cash equivalents and those with original maturities of greater than three months as marketable securities on our consolidated balance sheets. Management determines the appropriate classification of investments at the time of purchase. Marketable securities are being accounted for as held-to-maturity investments and are carried at amortized cost with any gains and losses being recognized in interest income on the consolidated statements of operations. As of December 31, 2023 and 2022, the marketable securities have maturity dates of twelve months or less and their amortized cost approximates fair value. F- 14 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 2 . Summary of Significant Accounting Policies (Continued) Accounts Receivable and Allowance for Current Expected Credit Losses Accounts receivable includes current outstanding invoices billed to customers due under customary trade terms. The term between invoicing and when payment is due is not significant. The accounts receivable balance as of December 31, 2021 was $ 1,344,654 . The Company maintains an allowance for current expected credit losses for accounts receivable, which is recorded as an offset to accounts receivable and changes are classified in general and administrative expense in the consolidated statements of operations. Collectability is assessed by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when specific customers are identified with known disputes or collectability issues. In determining the amount of the allowance for credit losses, the Company considers historical collectability based on past due status, customer-specific information, market conditions, and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss data. Volatility in market conditions and evolving credit trends are difficult to predict and may cause variability and volatility that may have a material impact on the allowance for credit losses in future periods. The allowance for credit losses at December 31, 2023 was $ nil (2022 - $ nil ). Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets, which is generally as follows: Useful Lives Computer hardware 3 - 5 years Furniture and fixtures 3 - 5 years Leasehold improvements Lesser of useful life or term of lease Expenditures for maintenance and repairs are expensed as incurred. Right-of-Use Assets and Lease Liabilities Right-of-use assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Most of our leases contain lease and non-lease components. Non-lease components include fixed payments for maintenance, utilities, and real estate taxes. The Company combines fixed lease and non-lease components and account for them as a single lease component. Our lease agreements may contain variable costs such as contingent rent escalations, common area maintenance, insurance, real estate taxes, or other costs. Such variable lease costs are expensed as incurred on the consolidated statement of operations. Right-of-use assets and lease liabilities are recognized on the consolidated balance sheets at the commencement date based on the present value of lease payments over the lease term. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. When determining the probability of exercising such options, we consider contract-based, asset-based, and market-based factors. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably assured. F- 15 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 2 . Summary of Significant Accounting Policies (Continued) Right-of-Use Assets and Lease Liabilities (Continued) As most of our leases do not provide an implicit rate, the incremental borrowing rate is used based on the information available at the commencement date in determining the present value of lease payments. The Company determines the incremental borrowing rate as the interest rate the Company would pay to borrow over a similar term the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. Operating lease costs are recognized on a straight-line basis over the lease terms. The Company has elected the practical expedient to not recognize right-of-use assets and lease liabilities for short-term leases, which are those leases with a term of twelve months or less at the commencement date. Intangible Assets Intangible assets with finite lives consist of intellectual property, internal-use software, technology, brand, and domain names. Intangible assets acquired through business combination are recorded at their respective estimated fair values upon acquisition close. Other intangible assets acquired through asset acquisition are measured following a cost accumulation and allocation model under which the cost of the acquisition is allocated on a relative fair value basis to the net assets acquired. Intangible assets are amortized on a straight-line basis over their estimated useful lives, ranging from two to fifteen years . Impairment of Long-Lived Assets and Finite Lived Intangible Assets The Company reviews long-lived assets and finite lived intangible assets for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In order to determine if assets have been impaired, assets are grouped and tested at the lowest level for which identifiable independent cash flows are available (“Asset Group”). When indicators of potential impairment are present, the Company prepares a projected undiscounted cash flow analysis for the respective asset or asset group. If the sum of the undiscounted cash flow is less than the carrying value of the asset or Asset Group, an impairment loss is recognized equal to the excess of the carrying value over the fair value, if any. The Company did not identify any indicators of impairment during the periods presented. Goodwill Goodwill represents the excess of the purchase price of an acquired business over the fair value of the net tangible and identifiable intangible assets acquired. The carrying amount of goodwill is reviewed for impairment at least annually, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. For its annual goodwill impairment test in all periods to date, the Company has determined it has one reporting unit and the fair value of its reporting unit has been determined by the Company’s enterprise value. The Company performs its annual goodwill impairment test during the fourth fiscal quarter. For its annual impairment test performed on October 1, 2023, the Company completed an assessment and determined that there was no impairment of goodwill. F- 16 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 2 . Summary of Significant Accounting Policies (Continued) Warrant Liability The Company accounts for warrants by first assessing whether the warrants meet all of the requirements for equity classification, including whether the warrants are indexed to the Company’s own shares of common stock and whether the warrant holders count potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of issuance of the warrants and as of each subsequent quarterly period end date while the warrants are outstanding. For issued or modified warrants that do not meet all the criteria for equity classification, such warrants are required to be as a liability initially at their fair value on the date of issuance, and subsequently remeasured to fair value on each balance sheet date thereafter. Changes in the estimated fair value of liability-classified warrants are recognized on the consolidated statements of operations in the period of change. The Company accounts for all its warrants as a liability as the warrants do not meet the criteria for equity classification. Business Combinations The Company evaluates whether acquired net assets should be accounted for as a business combination or an asset acquisition by first applying a screen test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If so, the transaction is accounted for as an asset acquisition. If not, the Company applies its judgement to determine whether the acquired net assets meets the definition of a business by considering if the set includes an acquired input, process, and the ability to create outputs. The Company accounts for business combinations using the acquisition method when it has obtained control. The Company measures goodwill as the fair value of the consideration transferred including the fair value of any non-controlling interest recognized, less the net recognized amount of the identifiable assets acquired and liabilities assumed, all measured at their fair value as of the acquisition date. Transaction costs, other than those associated with the issuance of debt or equity securities, that the Company incurs in connection with a business combination are expensed as incurred. Any contingent consideration is measured at fair value at the acquisition date. Contingent consideration that does not meet all the criteria for equity classification is initially recorded at its fair value at the acquisition date, and subsequently remeasured to fair value on each balance sheet date thereafter. Changes in the estimated fair value of liability-classified contingent consideration are recognized in the consolidated statements of operations in the period of change. When the initial accounting for a business combination has not been finalized by the end of the reporting period in which the transaction occurs, the Company reports provisional amounts. Provisional amounts are adjusted during the measurement period, which does not exceed one year from the acquisition date. These adjustments, or recognition of additional assets or liabilities, reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date . F- 17 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 2 . Summary of Significant Accounting Policies (Continued) Asset Acquisitions The Company accounts for asset acquisitions by allocating the consideration to the acquired assets and liabilities on a relative fair value basis. Working capital items are recognized at their stated amounts. The Company has elected an accounting policy to recognize any contingent consideration obligation in an asset acquisition when the contingency is resolved, and the consideration becomes payable. The contingent consideration will be included in the cost allocated to the acquired assets if and when the contingency is resolved. New Standards or Amendments Adopted The Company adopted the following new standards or amendments effective January 1, 2023: ● Accounting Standards Update 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This guidance was subsequently amended by ASU 2018-19, Codification Improvements, ASU 2019-04, Codification Improvements, ASU 2019-05, Targeted Transition Relief, ASU 2019-10, Effective Dates, ASU 2019-11, Codification Improvements and 2020-03, Codification Improvements . The new guidance requires organizations to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. There was no impact on the financial statements as a result of the adoption of the above standards. New Standards or Amendments Not Yet Effective The following amendments to existing standards have been issued up to and including the date of issuance of these financial statements, however are not yet effective for the Company: Effective for years beginning after December 15, 2023: ● Accounting Standards Update 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (Effective for periods beginning after December 31, 2023) . The amendments clarify those principles when measuring the fair value of an equity security subject to a contractual sale restriction and improve current GAAP by reducing diversity in practice, reducing the cost and complexity in measuring fair value, and increasing comparability of financial information across reporting entities that hold those investments. ● Accounting Standards Update 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (applicable to convertible instruments (Effective for periods beginning after December 31, 2023) . The update is expected to reduce complexity and improve comparability of financial reporting associated with accounting for convertible instruments and contracts in an entity’s own equity. F- 18 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 2 . Summary of Significant Accounting Policies (Continued) New Standards or Amendments Not Yet Effective (Continued) ● Accounting Standards Update 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . The purpose of this ASU is to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The Company is in the process of assessing the impact of the new accounting standards on its consolidated financial statements. Effective for years beginning after December 15, 2024: ● Accounting Standards Update 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate). The Company is still evaluating the impact of implementing the above improvements to its consolidated financial statements. Prior Period Reclassifications Certain amounts in expenses and other income (expenses) in prior periods have been reclassified to conform with current period presentation. The reclassification has no impact on net loss, loss per share or total shareholders’ equity. F- 19 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 3. Acquisitions Acquisition of Callin Corp. On May 15, 2023 (the “Acquisition Date”), the Company acquired 100 % of the outstanding equity of Callin Corp. (“Callin”), a podcasting and live streaming platform. Callin creates a seamless experience for its users to create, discover, and consume live and recorded content. The Company has determined that Callin meets the definition of a business and has accounted for the acquisition as a business combination. The fair value of the assets acquired and the liabilities assumed by the Company in connection with the acquisition is as follows: Total consideration $ 18,226,572 Net assets acquired: Cash $ 1,000,989 Accounts receivable 10,939 Prepaid expenses 200,651 Property and equipment 37,841 Software and technology 9,352,000 Accounts payable, accruals, and other liabilities ( 1,137,814 ) Deferred tax liability ( 1,230,526 ) Total net assets acquired $ 8,234,080 Goodwill $ 9,992,492 The fair value of the consideration consists of the following: Fair Value Shares issued $ 6,055,409 Shares to be issued 3,747,209 Replacement awards 15,578 Contingent consideration (liability) – retention payments 3,491,741 Contingent consideration (equity) – milestone 1 2,490,152 Contingent consideration (equity) – milestone 2 2,356,483 Contingent consideration payable 70,000 Total consideration $ 18,226,572 F- 20 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 3. Acquisitions (Continued) Acquisition of Callin Corp. (Continued) Under the terms of the acquisition agreement, the Company is required to issue upfront share consideration of 981,243 shares of Class A Common Stock to the preferred shareholders and SAFE note holders of Callin, of which 963,337 shares had been issued as of December 31, 2023. The fair value of the Company’s Class A Common Stock on the acquisition date was $ 9.99 per share. In addition, the Company issued rights to four payments each consisting of 375,000 contingently issuable shares of Class A Common Stock to the common shareholders, series FF preferred shareholders, option holders and continuing employees of Callin contingent on the following conditions being met: ● Retention payment 1: Services are provided by a selling shareholder for 12 months; ● Retention payment 2: Services are provided by a selling shareholder for 24 months; ● Milestone payment 1: Within 12 months, certain feature development and technical performance criteria are achieved, and the acquired technology is integrated into the Company’s existing software and ● Milestone payment 2: Within 24 months, certain feature development and technical performance criteria are achieved. In assessing what is part of the business combination, the Company has determined that because the two retention payments are contingent on a selling shareholder providing services post-combination, the portion of those tranches earned by the party providing services should be reflected in the Company’s financial statements as post-combination expense. In addition, where future services are required by employees in order to earn rights to the contingent consideration, such rights are being accounted for either entirely as post-combination expense or as replacement awards where the rights replace unvested options or restricted series FF preferred shares that were originally granted by Callin. For the remainder, the four tranches of contingently issuable shares have been accounted for as contingent consideration. The following table shows the breakdown of the contingently issuable shares: Number of Shares Contingent consideration 903,689 Share-based compensation (Note 13) 596,311 Total contingently issuable shares 1,500,000 The fair value of the contingent consideration has been estimated as follows: Retention payments 1 and 2 The Company has determined that retention payments 1 and 2 are one unit of account requiring the Company to issue a variable number of shares that is not indexed to the Company’s stock. As a result, the consideration that is contingent on one of the selling shareholder’s providing services has been classified as a liability. The contingent consideration is classified Level 3 in the fair value hierarchy. The key inputs into the fair value determination are the probability of achieving the milestones, which impacts the expected number of shares to be issued, and the share price on the acquisition date. At the acquisition date, management estimated the number of shares to be issued is 349,523 . The Company has recognized a change in fair value of this contingent consideration of $ 1,922,381 due to the change in the Company’s stock price and the probability of each contingency being met during the period between the acquisition date and the period end. Milestone payments 1 and 2 The Company has determined that milestone payments 1 and 2 are separate units of account because a fixed number of shares will be issued if each contingency is met, and meeting one contingency is not dependent on the other. The key inputs into the fair value determination are the probability of each contingency being met, and the share price on the acquisition date. As of December 31, 2023, milestone payment 1 was met resulting in the issuance of 375,000 Class A Common Stock. F- 21 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 3. Acquisitions (Continued) Acquisition of Callin Corp. (Continued) During the year ended December 31, 2023, the Company adjusted certain provisional amounts recognized at the acquisition date related to the finalization of the valuation report and the income tax provision in the fourth quarter of 2023. An adjustment was made to increase upfront share consideration by $ 143,716 as well as an increase to intangible assets and deferred tax liability of $ 1,594,000 and $ 398,654 , respectively. The corresponding adjustment was reflected in goodwill. The acquired goodwill relates to Callin’s workforce and synergies that are expected to be realized upon the integration of Callin’s technology with the Rumble platform. Such synergies will include the ability to leverage the creator relationships that Rumble has secured to date and will allow for a greater ability to establish brand recognition and monetization of the Callin platform in the future. The goodwill is not expected to be deductible for tax purposes. Acquisition-related transaction costs incurred by the Company for the year ended December 31, 2023 were $ 835,035 . The acquired business contributed revenues of $ nil and net loss of $ 1,269,185 post acquisition for the period ended December 31, 2023. Acquisition of North River Project Inc. On October 3, 2023, the Company acquired 100 % of the outstanding equity of North River Project Inc. (“North River”), for $ 10,000,000 Canadian Dollars ($ 7,293,000 US Dollars) in cash upfront and future contingent cash payments of up to $ 10,000,000 Canadian Dollars. The Company has determined that North River does not meet the definition of a business and has accounted for the acquisition as an asset acquisition. The contingent consideration contains two payments each consisting of $ 5,000,000 Canadian Dollars upon the completion of feature development and integration of the acquired technology into the Company’s existing software within a 5-year period. The Company has elected to account for the contingent consideration at the point in time in which the payments have been met. As of December 31, 2023, none of the milestones have been achieved. The Company acquired North River for the purpose of acquiring certain developed software, developed technology, and an assembled workforce. The Company allocated the consideration as follows: Fair Value Software and technology $ 9,000,740 Assembled workforce 366,188 Net working capital ( 14,808 ) Deferred tax liability ( 2,059,120 ) Total consideration $ 7,293,000 The acquired software and technology was assigned a useful life of 5 years and the assembled workforce was assigned a useful life of 2 years. The assets are recorded in intangible assets, net on the Company’s consolidated balance sheets. F- 22 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 4. Revenue from Contracts with Customers The following table presents revenues disaggregated by type: For the year ended December 31, 2023 2022 Advertising $ 60,026,091 $ 31,139,398 Other services and cloud 20,937,360 8,244,886 Total revenues $ 80,963,451 $ 39,384,284 The Company recognizes revenue either at a point in time, or over time, depending upon the characteristics of the contract. During the year ended December 31, 2023, revenue recognized at a point in time compared to over time was $ 21,741,274 and $ 59,222,177 , respectively. During the year ended December 31, 2022, revenue recognized at a point in time compared to over time was $ 15,391,170 and $ 23,993,114 , respectively. Deferred Revenue Deferred revenue recorded at December 31, 2023 is expected to be fully recognized by December 31, 2024. The deferred revenue balance as of December 31, 2023 was $ 7,003,891 . The deferred revenue balance as of December 31, 2022 was $ 1,040,619 , of which $ 881,596 was recognized as revenues for the year ended December 31, 2023. The deferred revenue balance as of December 31, 2021 was $ 30,014 , of which $ 30,014 was recognized as revenues for the year ended December 31, 2022. 5 . Cash, Cash Equivalents, and Marketable Securities Cash and cash equivalents as of December 31, 2023 and 2022 consist of the following: 2023 2022 Contracted Maturity Balance Balance Cash Demand $ 11,632,839 $ 3,519,674 Treasury bills and money market funds Demand 206,705,819 333,649,605 $ 218,338,658 $ 337,169,279 Marketable securities consist of term deposits of $ 1,135,200 as at December 31, 2023 (2022 – $ 1,100,000 ). The Company did not have any long-term investments as at December 31, 2023 or 2022. As of December 31, 2023, the Company entered into a guarantee/ standby letter of credit in the amount of $ 1,362,500 which will be used towards the issuance of credit for running the day-to-day business operations (2022 – $ 1,257,500 ). F- 23 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 6. Property and Equipment 2023 2022 Computer hardware $ 21,969,345 $ 8,866,157 Furniture and fixtures 121,077 100,921 Leasehold improvements 1,911,901 921,570 24,002,323 9,888,648 Accumulated depreciation ( 4,312,336 ) ( 1,044,416 ) Net carrying value $ 19,689,987 $ 8,844,232 Depreciation expense on property and equipment for the year ended December 31, 2023 was $ 3,267,920 (2022 – $ 987,014 ). 7. Right-of-Use Assets and Lease Liabilities The Company leases several facilities and data centers under non-cancelable operating leases. These leases have original lease periods expiring between 2023 and 2027. The lease agreements generally do not contain any material residual value guarantees or material restrictive covenants. 2023 2022 Accumulated Accumulated Cost Amortization Cost Amortization Right-of-use assets $ 3,833,184 $ 1,359,281 $ 1,926,936 $ 570,482 Net book value $ 2,473,903 $ 1,356,454 Operating lease costs for the year ended December 31, 2023 were $ 848,849 (2022 – $ 564,842 ) and are included in general and administration expenses in the consolidated statements of operations. As of December 31, 2023, the weighted-average remaining lease term and weighted-average incremental borrowing rate for the operating leases were 2.65 years and 7.52 %, respectively (2022 – 3.26 years and 2.35 %). The following shows the future minimum lease payments for the remaining years under the lease arrangement as of December 31, 2023. 2024 $ 1,095,344 2025 984,848 2026 695,056 2027 43,719 2,818,967 Less: imputed interest* 212,386 2,606,581 Current portion $ 975,844 Long-term portion $ 1,630,737 * Imputed interest represents the difference between undiscounted cash flows and cash flows F- 24 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 8. Intangible Assets 2023 Weighted- Average Remaining Useful Lives (in years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Intellectual property 4.74 $ 461,663 $ 101,023 $ 360,640 Domain name 12.42 500,448 86,019 414,429 Brand 7.83 1,284,000 280,369 1,003,631 Software and technology 4.68 20,894,389 1,618,906 19,275,483 Internal software development 4.18 2,004,684 116,854 1,887,830 Assembled workforce 1.75 366,188 45,773 320,415 $ 25,511,372 $ 2,248,944 $ 23,262,428 2022 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Intellectual property $ 123,143 $ 71,019 $ 52,124 Domain name 500,448 52,656 447,792 Brand 1,284,000 151,969 1,132,031 Software and technology 1,969,769 390,411 1,579,358 $ 3,877,360 $ 666,055 $ 3,211,305 Amortization expense related to intangible assets for the year ended December 31, 2023 was $ 1,582,889 (2022 – $ 569,042 ). For intangible assets held as of December 31, 2023, future amortization expense is as follows: 2024 $ 5,127,906 2025 5,019,093 2026 4,717,638 2027 4,366,324 2028 3,422,223 Thereafter 609,244 $ 23,262,428 F- 25 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 9. Goodwill Goodwill represents the excess of the purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired in business combinations. The following table summarizes the changes in the carrying amount of goodwill: Balance, December 31, 2022 $ 662,899 Acquisitions 9,992,492 Balance, December 31, 2023 $ 10,655,391 There was no impairment of goodwill for the years ended December 31, 2023 and 2022. 10. Income Taxes The Company is subject to income tax in the U.S. and Canada through its wholly owned subsidiary, Rumble Canada Inc. Rumble Inc.’s federal statutory tax rate is 21 % (2022 – 21 %) The difference between the tax calculated on income before income tax according to the statutory tax rate and the amount of the income tax included in the income tax expense is reconciled as follows: 2023 2022 Loss before income taxes $ ( 119,712,165 ) $ ( 11,619,422 ) Statutory income tax rate 21 % 21 % Income tax recovery at statutory income tax rate ( 25,139,555 ) ( 2,440,079 ) Non-deductible expenses 420,174 245,566 Change in the fair value of warrant liability ( 943,421 ) ( 4,412,205 ) Difference in jurisdictional tax rates ( 4,891,708 ) ( 1,549,371 ) Tax restructuring - 693,725 Other 194,426 ( 165,724 ) Change in valuation allowance 27,068,381 7,412,660 $ ( 3,291,703 ) $ ( 215,428 ) The Company recorded an income tax benefit of $ 3,291,703 for the year ended December 31, 2023, which is primarily a result of a deferred tax liability created through the acquisitions of Callin and North River and can be used to realize certain deferred tax assets against which we had previously recorded a full valuation allowance. F- 26 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 10. Income Taxes (Continued) Deferred Tax Assets (Liabilities) 2023 2022 Deferred income tax assets: Loss carryforwards $ 45,792,765 $ 17,125,566 Tangible assets - 271,227 Share-based compensation 3,627,277 398,881 R&D and other cost pool carryforwards 2,229,569 - Other 129,636 161,452 Gross deferred income tax assets 51,779,247 17,957,126 Valuation allowance ( 45,273,417 ) ( 16,650,521 ) Total deferred income tax assets, net of valuation allowance 6,505,830 1,306,605 Deferred income tax liabilities: Tangible assets ( 3,208,381 ) - Intangible assets ( 3,297,449 ) ( 1,306,605 ) Total deferred income tax liabilities ( 6,505,830 ) ( 1,306,605 ) Net deferred income tax assets and liabilities $ - $ - The Company has assessed the realizability of the net deferred tax assets by considering the relevant positive and negative evidence available to determine whether it is more likely than not that some portion or all of the deferred tax assets will be realized. In making such a determination, the Company considered all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, and recent results of operations. A significant piece of objective negative evidence evaluated was the cumulative tax loss incurred by the Company over the three year period ended December 31, 2023. Such objective evidence limits the ability to consider other subjective evidence, such as projections for future growth. After consideration of all these factors, the Company has recorded a full valuation allowance against the net deferred tax assets. As at December 31, 2023, a valuation allowance has been taken against the net deferred tax assets of $ 45,273,417 (December 31, 2022 – $ 16,650,521 ). Deferred income taxes have not been recorded on the basis differences for investments in consolidated subsidiaries as these basis differences are indefinitely reinvested or will reverse in a non-taxable manner. Quantification of the deferred income tax liability, if any, associated with indefinitely reinvested basis differences is not practicable. As at December 31, 2023, the Company has US federal and state net loss carryforwards of $ 78,563,194 (December 31, 2022 – $ 47,341,455 ) and Canadian federal and provincial non-capital loss carryforwards of $ 107,580,614 (December 31, 2022 – $ 25,468,713 ). The US federal losses can be carried forward indefinitely, generally, the state losses can be carried forward 20 years. The Canadian non-capital loss carry forwards expire between 2039 and 2043. 2039 $ 85,753 2041 4,595,332 2042 21,012,477 2043 81,887,052 Indefinite 78,563,194 F- 27 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 10. Income Taxes (Continued) Utilization of net operating loss carryforwards may be subject to limitations in the event of a change in ownership as defined under U.S. IRC Section 382, and similar state provisions. An “ownership change” is generally defined as a cumulative change in the ownership interest of significant stockholders of more than 50 percentage points over a three-year period. The Company experienced ownership change during 2021. Such ownership change could result in a limitation of the Company’s ability to reduce future income by net operating loss carryforwards. A formal Section 382 study has not been prepared, so the exact effects of the ownership change are not known at this time. The Company operates in a number of tax jurisdictions and is subject to examination of its income tax returns by tax authorities in those jurisdictions who may challenge any item on these returns. The Company has accumulated loss carryforwards each year since inception in both the US and Canada which are open to audit examination until such time that the year in which they are utilized becomes statute barred. Because the tax matters challenged by tax authorities are typically complex, the ultimate outcome of these challenges is uncertain. The Company recognizes the effects of uncertain tax positions in the consolidated financial statements after determining that it is more-likely-than-not the uncertain tax positions will be sustained. As of December 31, 2023, the Company has not recorded any uncertain tax positions, as well as any accrued interest and penalties on the consolidated balance sheet. During the year ended December 31, 2023, the Company did not record any interest and penalties in the consolidated statement of operations. 11. Other Liability The Company has received certain amounts from a third party to assist with certain operating expenditures of the Company. These amounts are to be repaid upon settlement of those expenditures, are non-interest bearing, and have been treated as a long-term liability. As of December 31, 2023, an amount of $ 500,000 related to these expenses was recorded in other liability (2022 – $ 500,000 ). F- 28 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 12. Qualifying Transaction On December 1, 2021, Legacy Rumble entered into the Business Combination Agreement, which among other things, provided for the exchange of all of the issued and outstanding shares of Legacy Rumble for the shares of Class A Common Stock and Class C Common Stock and exchangeable shares in a wholly-owned subsidiary of CFVI, subject to adjustments and payable in accordance with the terms of the Business Combination Agreement. On September 16, 2022 (the “Closing Date”), pursuant to the terms of the Business Combination Agreement, Legacy Rumble and CFVI announced the completion of a transaction whereby CFVI was renamed Rumble Inc and Legacy Rumble was renamed Rumble Canada Inc. References herein to “CFVI” and “Legacy Rumble” are to CFVI and Rumble Inc, respectively, prior to the consummation of the Qualifying Transaction, and references to the “Company” or “Rumble” are to Rumble Inc following consummation of the Qualifying Transaction. Consideration for the Qualifying Transaction pursuant to the terms of the Business Combination Agreement, and in exchange for their respective shares of capital stock of Legacy Rumble, was as follows: ● For each share of Legacy Rumble capital stock held by eligible electing Canadian shareholders of Legacy Rumble (the “Electing Shareholders”), the Electing Shareholders received a number of exchangeable shares in 1000045728 Ontario Inc., an indirect, wholly owned Canadian subsidiary of CFVI (“ExchangeCo”, and such shares, the “ExchangeCo Shares”) equal to the quotient obtained by dividing the Price Per Company Share (as defined below) by $ 10.00 (the “Company Exchange Ratio”), and such Electing Shareholders concurrently subscribed for nominal value for a corresponding number of shares of Class C common stock, par value $ 0.0001 per share, of the Company (“Class C Common Stock”), a new class of voting, non-economic shares of common stock of the Company created and issued in connection with the Qualifying Transaction. This resulted in the issuance of 168,762,214 shares of Class C Common Stock of the Company for a par value of $ 16,876 ; and ● For each share of Legacy Rumble capital stock held by all other shareholders of Rumble (the “Non-Electing Shareholders”, and collectively with the Electing Shareholders, the “Rumble Shareholders”), such Non-Electing Shareholder received a number of shares of Class A common stock, par value $ 0.0001 per share, of the Company (“Class A Common Stock”) equal to the Company Exchange Ratio. This resulted in the issuance of 48,970,404 shares of Class A Common Stock of the Company for a par value of $ 4,897 . The “Arrangement Consideration” means $ 3,186,384,663 , representing the sum of $ 3,150,000,000 , plus the cash and cash equivalents balance held by Legacy Rumble as of the date of the Qualifying Transaction (net of outstanding indebtedness), plus the aggregate exercise price of all outstanding options to purchase Legacy Rumble stock. The “Price Per Company Share” is obtained by dividing (i) the Arrangement Consideration by (ii) the number of outstanding shares of capital stock of Legacy Rumble (calculated on a fully diluted basis in accordance with the Business Combination Agreement). The Company Exchange Ratio was determined to be 24.5713 : 1.0000 . F- 29 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 12. Qualifying Transaction (Continued) In addition, under the Business Combination Agreement: ● All outstanding options to purchase shares of Legacy Rumble capital stock were exchanged for options (“Exchanged Company Options”) to purchase (a) a number of shares of Class A Common Stock (“Base Option Shares”) equal to the product (rounded down to the nearest whole number) of (i) the number of shares of Legacy Rumble capital stock subject to such options and (ii) the Option Exchange Ratio (as defined below), and (b) a fraction of a share of Class A Common Stock with respect to each Base Option Share equal to the Option Earnout Fraction (as defined below) (such fractional shares, “Tandem Option Earnout Shares”). The aggregate purchase price per Base Option Share together with the related fraction of the Tandem Option Earnout Share equals (i) the exercise price of such Legacy Rumble stock options divided by (ii) the Option Exchange Ratio (rounded up to the nearest whole cent); and ● The outstanding warrant to purchase shares of Legacy Rumble capital stock was exchanged for a number of shares of Class A Common Stock equal to the product (rounded down to the nearest whole number) of the number of shares of Rumble capital stock subject to the warrant and the Company Exchange Ratio. This resulted in the issuance of 14,153,048 shares of Class A Common Stock of the Company for a par value of $ 731,281 . “Option Earnout Fraction” means the difference between (i) the Company Exchange Ratio divided by the Option Exchange Ratio minus (ii) 1.00 . “Option Exchange Ratio” means the quotient obtained by dividing (x) by (y), where: (x) is the quotient, expressed as a dollar number, obtained by dividing (i) the sum of (a) $ 2,136,384,663 , representing the sum of $ 2,100,000,000 plus the cash and cash equivalents balance held by Legacy Rumble as of the date of the Qualifying Transaction (net of debt), plus the aggregate exercise price of all outstanding options to purchase shares of Legacy Rumble capital stock, by (ii) the number of outstanding shares of Legacy Rumble capital stock (calculated on a fully diluted basis in accordance with the Business Combination Agreement); and (y) $ 10.00 . In addition, for an aggregate purchase price of $ 1,000,000 , upon the closing of the Qualifying Transaction and pursuant to a subscription agreement entered into between Christopher Pavlovski, Legacy Rumble’s CEO and founder (“Mr. Pavlovski”) and CFVI, the Company issued and sold to Mr. Pavlovski a number of shares of Class D common stock, par value $ 0.0001 per share, of the Company (“Class D Common Stock”), a new class of non-economic shares of common stock of the Company carrying the right to 11.2663 votes per share created and issued in connecting with the Qualifying Transaction, such that, taking into account the shares of Class A Common Stock and Class C Common Stock issued to Mr. Pavlovski at the closing of the Qualifying Transaction, Mr. Pavlovski has approximately 85 % of the voting power of the Company on a fully diluted basis. F- 30 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 12. Qualifying Transaction (Continued) The Company also issued, as of the date of the closing of the Qualifying Transaction, 1,875,000 shares of Class A Common Stock (par value $ 188 ) in connection with the forward purchase contract. Further, upon the closing of the Qualifying Transaction, the Company consummated a private investment in public equity (“PIPE”) via the issuance of 8,300,000 shares of Class A Common Stock (par value $ 0.0001 per share) for aggregate proceeds of $ 83,000,000 . While CFVI was the legal acquirer of Legacy Rumble, Legacy Rumble was identified as the acquirer for accounting purposes. The Qualifying Transaction is accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, CFVI is treated as the acquired company for financial reporting purposes and Legacy Rumble is treated as the acquiror. This determination is primarily based on the facts that subsequent to the Qualifying Transaction, the Legacy Rumble shareholders hold a majority of the voting rights in the combined company (Rumble or the Company), Legacy Rumble will collectively hold voting power giving them the right to appoint the majority of the directors in Rumble, Legacy Rumble comprises all of the ongoing operations of the combined company, Legacy Rumble comprises all of the senior management of the combined company, and Legacy Rumble is significantly larger than CFVI in terms of revenue, total assets (excluding cash) and employees. Accordingly, for accounting purposes, the Qualifying Transaction was treated as the equivalent of Legacy Rumble issuing shares for the net assets of CFVI, accompanied by a recapitalization. The net assets of CFVI were stated at historical costs. No goodwill or other intangible assets were recorded. Operations prior to the Qualifying Transaction are those of Legacy Rumble. In connection with the Qualifying Transaction, the Company received $ 399,807,596 in gross proceeds. The number of shares of the Company’s common stock outstanding immediately following the consummation of the Qualifying Transaction was: Class A Class C Class D Total CFVI Public Shareholders 29,969,311 - - 29,969,311 Sponsor Related Parties and Other Holders of Founder’s Shares 10,075,000 - - 10,075,000 Rumble Shareholders 63,123,452 167,662,214 105,782,403 336,568,069 PIPE Investors 8,300,000 - - 8,300,000 Closing shares 111,467,763 167,662,214 105,782,403 384,912,380 F- 31 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 12. Qualifying Transaction (Continued) Details of the Qualifying Transaction are summarized as follows: Fair value of shares issued by Rumble $ 353,039,304 Net assets acquired: Cash $ 300,797,018 Prepaid expenses 221,016 Accounts payable, accruals, and other liabilities ( 256,095 ) Warrant liability ( 29,625,500 ) FPA liability ( 8,362,419 ) 262,774,020 PIPE escrow proceeds 83,000,000 Sponsor FPA proceeds 15,000,000 Class D Common Stock proceeds 1,000,000 Shares repurchase of Class C Common Stock ( 11,000,000 ) $ 350,774,020 Excess fair value over net assets acquired – listing fee $ 2,265,284 The excess fair value over net assets acquired was recorded as a reduction to additional paid-in capital. Additionally, the Company incurred transaction costs of $ 54,091,750 , consisting of banking, legal, and other professional fees. The transaction costs were recorded as a reduction to additional paid-in capital in accordance with Staff Accounting Bulletin Topic 5.A. During the year ended December 31, 2022, there was a change in ownership structure of the subsidiaries within the Company. Rumble Inc purchased Locals Technology Inc. and Rumble USA Inc. from Rumble Canada Inc on October 19, 2022 and December 31, 2022, respectively. There is no change in the group structure of the Company due to this change in ownership. F- 32 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 13. Shareholders’ Equity The Company is authorized to issue 1,000,000,000 shares, consisting of: (i) 700,000,000 shares of Class A Common Stock with a par value of $ 0.0001 per share; (ii) 170,000,000 shares of Class C Common Stock with a par value of $ 0.0001 per share; (iii) 110,000,000 shares of Class D Common Stock with a par value of $ 0.0001 per share; and (iv) 20,000,000 shares of preferred stock with a par value of $ 0.0001 per share. The following shares of common stock are issued and outstanding at: 2023 2022 Number Amount Number Amount Class A Common Stock 114,926,700 741,410 111,467,763 $ 741,013 Class C Common Stock 165,353,621 16,535 167,662,214 16,766 Class D Common Stock 105,782,403 10,578 105,782,403 10,578 Balance 386,062,724 768,523 384,912,380 $ 768,357 Class A Common Stock Authorized The Company is authorized to issue 700,000,000 shares with a par value of $ 0.0001 per share. Issued and outstanding The holders of shares of Class A Common Stock are entitled to one vote for each share of Class A Common Stock held at any meeting of shareholders of the Company. The holders of Class A Common Stock are entitled to receive dividends and other distributions declared or paid by the Company. The holders of Class A Common Stock are entitled to receive the remaining property of the Company upon liquidation, dissolution, or winding-up, whether voluntary or involuntary, and any other distribution of assets of the Company among its shareholders for the purpose of winding-up of its affairs subject to the rights of the preferred shares. Number of Class A Common Stock Balance December 31, 2022 111,467,763 Issuance of Class A Common Stock in connection with Callin acquisition 981,243 Issuance of Class A Common Stock upon vesting of stock awards, net share settlement on restricted stock units 195,832 Issuance of Class A Common Stock in exchange for Class C Common Shares 2,308,593 Holdback of Class A Common Stock for the repayment of domain name loan in connection with the acquisition of Locals Technology Inc. ( 26,731 ) Balance December 31, 2023 114,926,700 F- 33 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 13. Shareholders’ Equity (Continued) Class A Common Stock (Continued) Former holders of the Legacy Rumble’s common shares are eligible to receive up to an aggregate of 105,000,000 additional shares of the Company’s Class A Common Stock, of which 76,412,604 shares are currently held in escrow and 28,587,396 shares will be issued when the contingency is met. Similarly, the Sponsor’s common shares are eligible to receive up to an aggregate of 1,973,750 additional shares of the Company’s Class A Common Stock and will be issued when the contingency is met. The holders are eligible to the shares if the closing price of the Company’s Class A Common Stock is greater than or equal to $ 15.00 and $ 17.50 , respectively (with 50 % released at each target, or if the latter target is reached first, 100 %) for a period of 20 trading days during any 30 trading-day period. The term will expire September 16, 2027. If there is a change in control prior to September 16, 2027 resulting in a per share price equal to or in excess of the $15.00 and $17.50 share price milestones not previously met, then the Company shall issue the earnout shares to the holders. Number of Class A Common Stock Balance December 31, 2021 - Issuance of Class A Common Stock in exchange for Legacy Rumble Class A and B common shares 48,970,404 Issuance of Class A Common Stock in exchange for Legacy Rumble warrants 14,153,048 Issuance of Class A and B Common Stock in connection with the Qualifying Transaction 10,875,000 Issuance of Class A Common Stock in exchange for CFVI Class B common shares 7,500,000 Issuance of Class A Common Stock in connection with public shares 29,969,311 Balance December 31, 2022 111,467,763 On September 16, 2022, in connection with the Qualifying Transaction, the following transactions occurred with regards to Class A Common Stock: ● All Legacy Rumble shares and warrants held by Non-Electing Shareholders were exchanged for 48,970,404 and 14,153,048 shares of Class A Common Stock, respectively. ● CFVI Units in connection with the CFVI Placement Units and FPA were exchanged for 700,000 and 1,875,000 shares of Class A Common Stock, respectively. ● The Company issued 8,300,000 Class A Common Stock through the PIPE. ● CFVI Class B Common Stock were exchanged for 7,500,000 shares of Class A Common Stock. ● CFVI Units in connection with the Offering were exchanged for 29,969,311 shares of Class A Common Stock. Class C Common Stock Authorized The Company is authorized to issue 170,000,000 shares with a par value of $ 0.0001 per share. Issued and outstanding The holders of shares of Class C Common Stock are entitled to one vote for each share of Class C Common Stock held at any meeting of shareholders of the Company. The holders of Class C Common Stock are not entitled to receive dividends and other distributions declared or paid by the Company. The holders of shares of Class C Common Stock are not entitled to receive the remaining property of Company upon liquidation, dissolution, or winding-up, whether voluntary or involuntary, and any other distribution of assets of the Company among its shareholders for the purpose of winding-up of its affairs subject to the rights of the preferred shares and Class A Common Stock. F- 34 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 13. Shareholders’ Equity (Continued) Class C Common Stock (Continued) Number of Class C Common Stock Balance December 31, 2022 167,662,214 Issuance of Class A Common Stock in exchange for Class C Common Shares ( 2,308,593 ) Balance December 31, 2023 165,353,621 During the year ended December 31, 2023, Electing Shareholders exchanged (on a 1-for-1 basis) their ExchangeCo Shares for shares of Class A Common Stock. In connection with the exchange, an equivalent number of Class C Common Stock held by the Electing Shareholders was cancelled. Number of Class C Common Stock Balance December 31, 2021 - Issuance of C Common Stock in exchange for Legacy Rumble Class A and B common shares 168,762,214 Repurchase of Class C Common Stock in the Key Individual Subscription Agreement ( 1,100,000 ) Balance December 31, 2022 167,662,214 On September 16, 2022, in connection with the Qualifying Transaction, the following transactions occurred with regards to Class C Common Stock: ● All issued and outstanding Legacy Rumble shares (including Legacy Rumble warrants) held by Electing Shareholders were exchanged for 168,762,214 shares of Class C Common Stock using the Company Exchange Ratio of 24.5713 : 1.0000 pursuant to the Business Combination Agreement. ● Concurrently with the Qualifying Transaction on September 16, 2022, the Company entered into a share repurchase agreement with Mr. Pavlovski. Upon closing of the Qualifying Transaction, the Company repurchased shares of 1,100,000 Class C Common Stock for a total purchase price of $ 11,000,000 . Of the $ 11,000,000 of proceeds, Mr. Pavlovski reinvested $ 1,000,000 to pay the purchase price for the Company’s Class D Common Stock. Class D Common Stock Authorized The Company is authorized to issue 110,000,000 shares with a par value of $ 0.0001 per share. Issued and outstanding The holders of shares of Class D Common Stock are entitled to 11.2663 votes for each share of Class D Common Stock held at any meeting of shareholders of the Company. The holders of shares of Class D Common Stock are not entitled to receive dividends and other distributions declared or paid by the Company. The holders of shares of Class D Common Stock are not entitled to receive the remaining property of Company upon liquidation, dissolution, or winding-up, whether voluntary or involuntary, and any other distribution of assets of the Company among its shareholders for the purpose of winding-up of its affairs subject to the rights of the preferred shares and Class A Common Stock. F- 35 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 13. Shareholders’ Equity (Continued) Class D Common Stock (Continued) Number of Class D Common Stock Balance December 31, 2021 - Issuance of Class D Common Stock in the Key Individual Subscription Agreement 105,782,403 Balance December 31, 2022 and 2023 105,782,403 For an aggregate price of $ 1,000,000 , upon closing of the Qualifying Transaction, the Company issued and sold to Mr. Pavlovski 105,782,403 shares of the Company’s Class D Common Stock. 14. Share-Based Compensation Expense The Company’s stock award plans consist of: Rumble Inc. Amended and Restated Stock Option Plan The Company maintains a long-term incentive plan, the Rumble Inc. Amended and Restated Stock Option Plan (the “Stock Option Plan”). The Stock Option Plan continues to govern the terms and conditions of the outstanding awards previously granted under the Stock Option Plan, and all options to purchase Rumble Class A common shares or Rumble Class B common shares which were converted into options to purchase shares of Class A Common Stock in connection with the Business Combination. As of December 31, 2023, there were 58,165,382 shares of Class A Common Stock reserved for future issuance under the Stock Option Plan Rumble Inc. 2022 Stock Incentive Plan The Rumble Inc. 2022 Stock Incentive Plan (the “Stock Incentive Plan”) was approved by the board of directors and the stockholders of the Company, and became effective, on September 16, 2022. The Company initially reserved 27,121,733 shares of Common Stock for issuance under the Stock Incentive Plan, subject to a ten-year an evergreen feature. As of December 31, 2023, there were 31,655,077 shares of Class A Common Stock reserved for future issuance under the Stock Incentive Plan Share-based compensation expenses are summarized as follows: 2023 2022 Restricted stock units $ 8,463,373 $ 1,713,277 Stock options 5,193,301 220,126 Rights to contingent consideration 2,478,040 - $ 16,134,714 $ 1,933,403 F- 36 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 14. Share-Based Compensation Expense (Continued) Restricted Stock Units The following table reflects the continuity of unvested restricted stock units (“RSUs”) transactions: Number Weighted Average Grant Date Fair Value Outstanding, December 31, 2022 1,548,098 $ 11.62 Granted 646,433 8.51 Vested ( 551,522 ) 11.21 Forfeited ( 11,671 ) 9.01 Outstanding, December 31, 2023 1,631,338 $ 10.55 The total unrecognized compensation cost for the RSUs issued is $ 12,613,413 which is expected to be recognized over a weighted-average period of 1.63 years. The following table reflects additional information related to RSUs activity: 2023 2022 Grant date fair value of RSUs $ 22,916,836 $ 17,993,839 Stock Options The fair value of the options was determined using either a Black-Scholes option pricing model or a Monte Carlo simulation methodology that included simulating the stock price using a risk-neutral Geometric Brownian Motion-based pricing model. The following table reflects the assumptions made: 2023 2022 Share price $ 2.68 -$ 9.23 $ 9.44 -$ 11.13 Exercise price $ 4.63 -$ 10.36 $ 10.60 -$ 12.49 Risk-free interest rate 3.42 %- 4.94 % 3.72 % Volatility 88 %- 97 % 95 % Expected life 4 - 10 years 10 years Dividend rate 0.00 % 0.00 % The Company estimated the volatility by reference to comparable companies that are publicly traded. F- 37 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 14. Share-Based Compensation Expense (Continued) Stock Options (Continued) The following table reflects the continuity of stock option transactions: Service Conditions Number Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Outstanding, December 31, 2022 58,607,457 $ 0.22 Granted 6,446,585 5.70 Forfeited ( 49,203 ) 8.31 Outstanding, December 31, 2023 65,004,839 $ 0.50 15.31 Vested and exercisable, December 31, 2023 58,137,272 $ 0.10 15.31 Performance Conditions Number Weighted Average Exercise Price Weighted Average Remaining Contract Term (in years) Outstanding, December 31, 2022 - $ - Granted 358,249 9.42 Forfeited - - Outstanding, December 31, 2023 358,249 $ 9.42 9.30 Vested and exercisable, December 31, 2023 - - 9.30 The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s Class A Common Stock for those stock options that had exercise prices lower than the fair value of the Company’s Class A Common Stock. As of December 31, 2023, the aggregate intrinsic value of options outstanding was $ 255,088,661 and the aggregate intrinsic value of the options vested and exercisable was $ 254,992,826 . The total unrecognized compensation cost for options with a service only condition and options with a performance condition as of December 31, 2023 was $ 24,586,179 and $ 3,000,000 , respectively. For the options with a service only condition, the cost is expected to be recognized over a weighted average period of 1.72 years. As of December 31, 2023, the Company has 2,592,616 stock options outstanding included within the service condition awards that have market based vesting conditions if the closing price of the Company’s Class A Common Stock is greater than or equal to $ 15.00 and $ 17.50 , respectively (with 50 % released at each target, or if the latter target is reached first, 100 %) for a period of 20 trading days during any 30 trading-day period. F- 38 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 14. Share-Based Compensation Expense (Continued) Stock Options (Continued) As of December 31, 2023, the Company has determined that it is not probable that the conditions related to the performance-based stock options will be met, and therefore, the Company has not recognized the related expense in the consolidated statement of operations. The weighted average grant date fair value of the outstanding options with a service only condition and options with a performance condition as of December 31, 2023 was $ 1.11 and $ 8.37 , respectively. Rights to Contingent Consideration In connection with the acquisition of Callin as described in Note 3, the Company was required to replace unvested options, unvested series FF preferred shares, and restricted common stock held by continuing employees of Callin with a right to receive contingent consideration. If the underlying contingencies are met, the obligation will be satisfied by the issuance of shares of Class A Common Stock. In addition, as described in Note 3, two of the contingent consideration tranches are dependent on one selling shareholder providing services to the Company. Where rights to receive contingent consideration were issued to replace unvested awards of the acquired company, the Company has allocated an amount to consideration based on the fair value of the original award at the acquisition date. The amount allocated is based on the period of time vested as of the acquisition date in relation to the greater of the vesting period of the original award and the total service requirement as per the below. The difference between the fair value of the new award on the acquisition date and the amount allocated to consideration is post-combination expense, as laid out below: Fair value Allocated to consideration $ 15,578 Allocated to post-combination services 5,941,563 Total fair value of rights $ 5,957,141 During the year ended December 31, 2023, share-based compensation expense of $ 2,478,040 was recognized in the consolidated statement of operations related to the rights to contingent consideration (2022 – $ nil ). As of December 31, 2023, there was $ 2,169,365 and $ 1,240,239 of total unrecognized compensation cost related to rights with a service only condition, and rights with a performance condition, respectively. That cost is expected to be recognized over a weighted average period of 1.20 and 1.33 years, respectively. F- 39 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 15. Loss per Share Basic loss per share is computed by dividing net loss attributable to the Company by the weighted-average number of Class A and Class C Common Stock issued and outstanding, excluding those held in escrow as these are contingently issuable shares and have been excluded from the calculation during the year ended December 31, 2023, and 2022. Shares of Class D Common Stock do not share in earnings and not participating securities (i.e., non-economic shares) and therefore, have been excluded from the calculation of weighted-average number of shares outstanding. Diluted loss per share is computed giving effect to all potentially dilutive shares. Diluted loss per share for all periods presented is the same as basic loss per share as the inclusion of potentially issuable shares would be antidilutive. 16. Commitments and Contingencies Commitments The Company has non-cancelable contractual commitments of approximately $ 113 million as of December 31, 2023, which are primarily related to programming and content, leases, and other service arrangements. The majority of commitments will be paid over three years commencing in 2024. Legal Proceedings In the normal course of business, to facilitate transactions in services and products, the Company indemnifies certain parties. The Company has agreed to hold certain parties harmless against losses arising from a breach of representations or covenants, or out of intellectual property infringement or other claims made against certain parties. Several of these agreements limit the time within which an indemnification claim can be made and the amount of the claim. In addition, the Company has entered into indemnification agreements with its officers and directors, and its bylaws contain similar indemnification obligations to its agents. Furthermore, many of the Company’s agreements with its customers and partners require the Company to indemnify them for certain intellectual property infringement claims against them, which would increase costs as a result of defending such claims, and may require that we pay significant damages if there were an adverse ruling in any such claims. Customers and partners may discontinue the use of the Company’s services and technologies as a result of injunctions or otherwise, which could result in loss of revenues and adversely impact the business. It is not possible to make a reasonable estimate of the maximum potential amount under these indemnification agreements due to the unique facts and circumstances involved in each particular agreement. As of December 31, 2023 and 2022, there were no material indemnification claims that were probable or reasonably possible. As of December 31, 2023, Rumble had received notification of several claims: 1) a lawsuit against the Company and one of its shareholders seeking a variety of relief including rescission of a share redemption sale agreement with the Company or damages alleged to be worth $ 419.0 million; 2) a patent infringement lawsuit against the Company, which later settled without any payment to the plaintiff; and 3) two putative class action lawsuits alleging violations of the Video Privacy Protection Act, one of which was dismissed voluntarily, the other of which was dismissed by a federal district court, then voluntarily dismissed on appeal without any exchange of consideration. The Company is defending the claims and considers that the likelihood that it will be required to make a payment to plaintiffs to be remote. F- 40 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 17. Fair Value Measurements The following table summarizes the liabilities measured at fair value on a recurring basis: 2023 Level 1 Level 2 Level 3 Warrant Liability Marketable Securities Contingent Consideration December 31, 2022 $ 10,062,500 $ 1,100,000 $ - Recognized in the Callin acquisition - - 3,491,741 Change in fair value ( 2,365,895 ) 35,200 ( 1,922,381 ) December 31, 2023 $ 7,696,605 $ 1,135,200 $ 1,569,360 2022 Level 1 Level 2 Level 3 Warrant Liability Marketable Securities Contingent Consideration December 31, 2021 $ - $ - $ - Issued term deposits - 1,100,000 - Issued in the Qualifying Transaction 31,073,000 - - Change in fair value ( 21,010,500 ) - - December 31, 2022 $ 10,062,500 $ 1,100,000 $ - Warrant liability Warrant liability consists of warrants issued by the Company in public offerings, private placements, and forward purchase contracts. As of December 31, 2023, the number of warrants outstanding and weighted-average exercise price were 8,050,000 warrants and $ 11.50 , respectively (December 31, 2022 – 8,050,000 and $ 11.50 ). The warrants are exercisable and will expire on September 16, 2027, or earlier upon redemption or liquidation. All warrants are publicly traded. Contingent consideration The contingent consideration liability arose during the year from the Callin acquisition, refer to Note 3 for additional details. The decrease in fair value during the year is attributable to changes in the Company’s stock price. F- 41 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) For the years ended December 31, 2023 and 2022 18. Credit and Concentration Risks Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company is exposed to credit risk resulting from the possibility that a customer or counterparty to a financial instrument defaults on their financial obligations or if there is a concentration of transactions carried out with the same counterparty. Financial instruments that potentially subject the Company to concentrations of credit risk include cash, cash equivalents, marketable securities and accounts receivable. The Company’s cash, cash equivalents, and marketable securities are held in reputable banks in its country of domicile and management believes the risk of loss to be remote. We maintain cash balances that exceed the insured limits by the Federal Deposit Insurance Corporation and the Canada Deposit Insurance Corporation. The Company is exposed to credit risk in the event of default by its customers. Accounts receivables are recorded at the invoiced amount, do not bear interest, and do not require collateral. For the year ended December 31, 2023, one customer accounted for $ 36,973,000 or 46 % of revenue (2022 – $ 17,686,000 or 45 %). As of December 31, 2023, one customer accounted for 35 % of accounts receivable (2022 – 66 %), which has been collected in the month of January 2024. 19. Related Party Transactions The Company’s related parties include directors, shareholders and key management. Compensation to related parties totaled $ 13,008,425 for the year ended December 31, 2023 (2022 – $ 7,060,916 ), of which the Company paid share-based compensation to key management amounting to $ 8,046,363 (2022 – $ 1,569,754 ). The Company has a vendor relationship with Cosmic Inc. and Kosmik Development Skopje doo (“Cosmic”) to provide content moderation and software development services. Cosmic is controlled by Mr. Pavlovski and Mr. Milnes, each of whom holds a significant number of Rumble shares. The Company incurred related party expenses for these services of $ 2,849,600 during the year ended December 31, 2023 (2022 – $ 1,692,960 ). As of October 25, 2021, the Company was owed $ 390,000 from related parties pursuant to a loan carrying an interest rate of 0.19 % per annum. The loan was originally incurred in connection with the purchase of a Company subsidiary’s domain name. During the year ended December 31, 2023, the outstanding loan was repaid in full through the holdback and surrender of 26,731 shares of Class A Common Stock which the borrower was otherwise entitled to receive. There were no other related party transactions during these periods. F- 42 Rumble Inc. Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) (Unaudited) For the years ended December 31, 2023 and December 31, 2022 20. Segment Information Disclosure requirements about segments of an enterprise establish standards for reporting information regarding operating segments in annual financial statements. These requirements include presenting selected information for each segment. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding how to allocate resources and assess performance. The Company’s chief decision-maker is its chief executive officer. The Company and its chief decision-maker view the Company’s operations and manage its business as one operating segment. The following presents the revenue by geographic region: 2023 2022 United States $ 74,439,470 $ 37,412,270 Canada 1,042,983 502,221 Other 5,480,998 1,469,793 $ 80,963,451 $ 39,384,284 The Company tracks assets by physical location. Long-lived assets consists of property and equipment, net, and are shown below: 2023 2022 United States $ 19,334,231 $ 8,401,351 Canada 355,756 442,881 $ 19,689,987 $ 8,844,232 21. Subsequent Events In accordance with ASC 855, the Company’s management reviewed all material events through March 27 th , 2024, and there were no material subsequent events other than those disclosed above. F- 43 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.