Item 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations
The following “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the “Business”
section and Rumble Inc.’s (“Rumble” or the “Company”) consolidated financial statements as of and for the
years ended December 31, 2023 and 2022 (“consolidated financial statements”) and other information included elsewhere in this
Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ
materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited
to, those identified below and those discussed in the sections titled “1A. Risk Factors” and “Cautionary Note Regarding
Forward-Looking Statements” included elsewhere in this Annual Report and those discussed in our other filings with the SEC. Additionally,
our historical results are not necessarily indicative of the results that may be expected in any future period. Amounts are presented
in U.S. dollars.
Overview
We are a high growth, video
sharing and cloud services provider platform designed to help content creators manage, distribute, and monetize their content by connecting
them with brands, publishers, and directly to their subscribers and followers. Our registered office is 444 Gulf of Mexico Drive, Longboat
Key, Florida, 34228. Our shares of Class A common stock and warrants are traded on The Nasdaq Global Market (“Nasdaq”) under
the symbols “RUM” and “RUMBW”, respectively.
Significant Events and Transactions
On December 1, 2021, CF Acquisition
Corp. VI, a Delaware corporation (“CFVI”), and Rumble Inc., a corporation formed under the laws of the Province of Ontario,
Canada (“Legacy Rumble”), entered into a business combination agreement (the “Business Combination”). On September
16, 2022, CFVI and Legacy Rumble consummated the business combination contemplated by the business combination agreement. In
connection with the consummation of the Business Combination, CFVI changed its name from CF Acquisition Corp. VI to Rumble Inc. and
Legacy Rumble changed its name from Rumble Inc. to Rumble Canada Inc. Refer to Note 12, Qualifying Transaction, to the Company’s
annual consolidated financial statements for the year ended December 31, 2023.
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On May 15, 2023, the Company
acquired 100% of the outstanding equity of Callin Corp. (“Callin”), a podcasting and live streaming platform. Refer to Note 3,
Acquisitions, to our consolidated financial statements included elsewhere in this Annual Report.
On October 3, 2023, the Company
acquired 100% of the outstanding equity of North River Project Inc. (“North River”), an entity that holds intellectual property.
Refer to Note 3, Acquisitions, to our consolidated financial statements included elsewhere in this Annual Report.
Revenues
We generate revenues primarily
from advertising fees, other services and cloud.
Advertising fees are generated
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
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.
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. Cloud includes consumption-based fees, subscriptions for infrastructure and
professional services.
Refer to Note 2, Summary
of Significant Accounting Policies, to the consolidated financial statements.
Expenses
Expenses primarily include
cost of services, general and administrative, research and development, sales and marketing, acquisition-related transaction costs, amortization
and depreciation, and changes in fair value of contingent consideration. The most significant component of our expenses on an ongoing
basis are programming and content, service provider costs, and staffing-related costs.
We expect to continue to invest
substantial resources to support our growth and anticipate that each of the following categories of expenses will increase in absolute
dollar amounts for the foreseeable future.
Cost of Services
Cost of services consists
of costs related to obtaining, supporting and hosting the Company’s product offerings. These costs primarily include:
General and Administrative Expenses
General and administrative
expenses consist primarily of payroll and related expenses, which include bonuses and share-based compensation for our executives and
certain other employees. General and administrative expenses also include legal and professional fees, business insurance costs, operating
lease costs and other costs. As a public company, we expect to continue to incur material costs related to compliance with applicable
laws and regulations, including audit and accounting fees, legal, insurance, investor relations and other costs.
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Research and Development Expenses
Research and development expenses
consist primarily of payroll and related expenses, which include bonuses and share-based compensation for our employees on our engineering
and development teams. Research and development expenses also include consultant fees related to our development activities to originate,
develop and enhance our platforms.
Sales and Marketing Expenses
Sales and marketing expenses
consist primarily of payroll and related expenses, which include bonuses and share-based compensation for our employees associated with
our sales and marketing functions. Sales and marketing expenses also include consultant fees and direct marketing costs related to the
promotion of our platforms and solutions. We expect our sales and marketing expenses to increase over time as we promote our platform
and brand, increase marketing activities, and grow domestic and international operations.
Acquisition-related Transaction Costs
Acquisition-related transaction
costs consist of transaction expenses related to the Business Combination and other acquisitions.
Amortization and Depreciation
Amortization and depreciation
represent the recognition of costs of assets used in operations, including property and equipment and intangible assets, over their estimated
service lives.
Change in Fair Value of Contingent Consideration
Certain contingent consideration
associated with the Callin acquisition does not meet the criteria for equity classification, and must be recorded as a liability in accordance
with guidance contained in ASC 815-40, Derivatives and Hedging Contracts in Entity’s Own Equity (“ASC 815-40”).
Because the contingent consideration meets the definition of a liability under ASC 815, Derivatives and Hedging (“ASC 815”),
it is measured at fair value at inception and at each reporting date in accordance with the guidance in ASC 820, Fair Value Measurement
(“ASC 820”), with any subsequent changes in fair value recognized in the consolidated statement of operations in the applicable
period of change.
Non-Operating Income and Other Items
Interest Income
Interest income consists of
interest earned on our cash, cash equivalents, and marketable securities. We invest in highly liquid securities such as money market funds,
treasury bills and term deposits.
Other Income (Expense)
Other income (expense) consists of miscellaneous income earned outside
of normal company revenue as well as foreign exchange gains and losses relates to gains and losses on transactions denominated in currencies
other than the U.S. dollar.
Change in Fair Value of Warrant Liability
We account for our outstanding
warrants in accordance with ASC 815-40, under which the warrants issued in connection with Business Combination do not meet the criteria
for equity classification, and must be recorded as liabilities. As these warrants meet the definition of a liability under ASC 815, they
are measured at fair value at inception and at each reporting date in accordance with the guidance in ASC 820, with any subsequent changes
in fair value recognized in the consolidated statement of operations in the applicable period of change.
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Income and Deferred Tax Recovery (Expense)
Income and deferred tax recovery
(expense) consists of the estimated federal, state, and foreign income taxes incurred in the U.S. and other jurisdictions in which we
operate.
Key Business Metrics
To analyze our business performance,
determine financial forecasts and help develop long-term strategic plans, we review the key business metrics described below.
Monthly Active Users (“MAUs”)
We use MAUs as a measure of
audience engagement to help us understand the volume of users engaged with our content on a monthly basis. MAUs represent the total web,
mobile app, and connected TV users of Rumble for each month, which allows us to measure our total user base calculated from data provided
by Google, a third-party analytics provider. Google defines “active users” as the “[n]umber of distinct users who visited
your website or application.”1 We have used the Google
analytics systems since we first began publicly reporting MAU statistics, and the resulting data have not been independently verified.
As of July 1, 2023, Universal
Analytics (“UA”), Google’s analytics platform on which we historically relied for calculating MAUs using company-set
parameters, was phased out by Google and ceased processing data. At that time, Google Analytics 4 (“GA4”) succeeded UA as
Google’s next-generation analytics platform, which has been used to determine MAUs since the third quarter of 2023 and which we
expect to continue to use to determine MAUs in future periods. Although Google has disclosed certain information regarding the transition
to GA4,2 Google does not currently make available sufficient
information relating to its new GA4 algorithm for us to determine the full effect of the switch from UA to GA4 on our reported MAUs. Because
Google has publicly stated that metrics in UA “may be more or less similar” to metrics in GA4, and that “[i]t is not
unusual for there to be apparent discrepancies” between the two systems,3
we are unable to determine whether the transition from UA to GA4 has had a positive or negative effect, or the magnitude of such effect,
if any, on our reported MAUs. It is therefore possible that MAUs that we reported based on the UA methodology (“MAUs (UA)”)
for periods prior to July 1, 2023, cannot be meaningfully compared to MAUs based on the GA4 methodology (“MAUs (GA4)”) in
subsequent periods.
MAUs (GA4) represent the total
web, mobile app, and connected TV users of Rumble for each month,4
which allows us to measure our total user base calculated from data provided by Google.5
Connected TV users were not counted within MAUs within MAUs (UA) for periods prior to July 1, 2023, and we believe the number of such
users was immaterial in those prior periods. We also believe that fewer than 1 million MAUs in the current period are from connected TV,
making them similarly immaterial. Google’s parameters for measuring “active users” appear to exclude many, but not all,
users who access content on Rumble through “embedded” videos on domains other than rumble.com, and we are unable to determine
the exact number of users who access “embedded” content within our total number of MAUs. In addition, MAUs (GA4) may rely
on statistical sampling and may be based on estimates of data that Google is missing “due to factors such as cookie consent.”6
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As with our earlier MAU reporting,
there is a potential for minor overlap in the resulting data due to users who access Rumble’s content through the web, our mobile
apps, and connected TVs in a given measurement period; however, given that we believe this minor overlap to be immaterial, we do not separately
track or report “unique users” as distinct from MAUs. Our reported MAUs do not include users of Locals. We also do not separately
report the number of users who register for accounts in any given period, which is different from MAUs.
Like many other major social
media companies, we rely on significant paid advertising in order to attract users to our platform; however, we cannot be certain that
all or substantially all activity that results from such advertising is genuine. Spam activity, including inauthentic and fraudulent user
activity, if undetected, may contribute to some amount of overstatement of our performance indicators, including reporting of MAUs by
Google. We continually seek to improve our ability to estimate the total number of spam-generated users, and we eliminate material activity
that is substantially likely to be spam from the calculation of our MAUs. We will not, however, succeed in identifying and removing all
spam.
MAUs (GA4) were 67 million
on average in the fourth quarter of 2023, an increase of 16% from the third quarter of 2023. We believe the growth from the third quarter
of 2023 is attributable to increased interest in geopolitical events, high profile seasonal sporting events and increased interest in
certain Rumble content creators.
Estimated Minutes Watched Per Month (“MWPM”)
We use estimated MWPM as a
measure of audience engagement to help us understand the volume of users engaged with our content on a monthly basis and the intensity
of users’ engagement with the platform. Estimated MWPM represents the monthly average of minutes watched per user within a quarterly
period, which helps us measure user engagement. Estimated MWPM is calculated by converting actual bandwidth consumption into minutes watched,
using our management’s best estimate of video resolution quality mix and various encoding parameters. We continually seek to improve
our best estimates based on our observations of creator and user behavior on the Rumble platform, which changes based on the introduction
of new product features, including livestreaming. We are currently limited, however, in our ability to collect data from certain aspects
of our systems. These limits may result in errors that are difficult to quantify, especially as the proportion of livestreaming on the
Rumble platform increases over time, and as we improve the quality of various video formats by increasing bit rates.
Bandwidth consumption includes
video traffic across the entire Rumble platform (website, apps, embedded video, connected TV, RAC, etc.). In addition, our management
believes bandwidth consumption includes a nominal amount of non-video traffic on the Rumble and Locals platforms and a potentially significant
amount of consumption of Rumble videos outside of the Rumble video player and Rumble apps, due in part to intentional user circumvention
of the Rumble platform that, despite our continuous efforts, we are unable to eliminate. Combined, the bandwidth consumption for this
traffic may be material and difficult to quantify, resulting in an inability for us to monetize a potentially significant portion of our
estimated MWPM.
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Estimated MWPM was 10.5 billion
on average in the fourth quarter of 2023, a decrease of 5% from the fourth quarter of 2022 and a decrease of 2% from the third quarter
of 2023. We believe the decline from the fourth quarter of 2022 and third quarter of 2023 is due to a portion of our bandwidth consumption
moving from third-party service providers’ content delivery networks (“CDNs”) to our own proprietary CDN beginning in
the second half of the third quarter of 2023. Based on preliminary testing, our own CDN indicates less bandwidth consumption than one
of our service providers’ CDNs for comparable user activity. Because we calculate estimated MWPM by converting bandwidth consumption
into minutes watched, consumption measured through our own CDN yields a lower estimated MWPM than when measured through that service provider’s
CDN.
Hours of Uploaded Video Per Day
We use the amount of hours of uploaded video per
day as a measure of content creation to help us understand the volume of content being created and uploaded to us on a daily basis. Hours
of uploaded video per day were 12,520 on average in the fourth quarter of 2023, representing an increase of 21% from the fourth quarter
of 2022 and a 20% decrease from the third quarter of 2023. We believe the growth from the fourth quarter of 2022 is due to our expanding
pool of content creators and increased user watch time as a result of livestreaming and continued improvement of user experience. We believe
that the decrease from the third quarter of 2023 is related to YouTube’s decision in the fourth quarter of 2023, to disable the
ability of its users to utilize our tool that automatically imports videos from creators’ YouTube channels to their Rumble channels,
commonly known as the “YouTube sync” tool. We provided additional information about this issue in a current report on Form
8-K, filed with the SEC on January 16, 2024.
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We regularly review, have
adjusted in the past, and may in the future adjust our processes for calculating our key business metrics to improve their accuracy, including
through the application of new data or technologies or product changes that may allow us to identify previously undetected spam activity.
As a result of such adjustments, our key business metrics may not be comparable period-over-period.
Results of Operations
The following table sets forth
our consolidated statements of operations for the years ended December 31, 2023 and 2022 and the dollar and percentage change between
the two periods:
For the year ended December 31, 2023 2022 Variance ($) Variance (%)
Expenses
*NM- Percentage change not meaningful.
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Revenues
Revenues increased by $41.6 million
to $81.0 million in the year ended December 31, 2023 compared to the year ended December 31, 2022, of which $28.9 million is attributable
to higher advertising revenue and $12.7 million is attributable to higher revenue from other services and cloud. The increase in advertising
revenue was driven by an increase in consumption as well as the introduction of new advertising solutions for creators, publishers and
advertisers, including host read advertising and our online advertising management exchange (“Rumble Advertising Center” or
“RAC”), both of which we started to build and test in the second half of 2022 and continued to scale testing throughout 2023.
The increase in revenue from other services and cloud was driven mainly by subscriptions, content licensing, tipping features, and cloud
services offered.
Cost of Services
Cost of services increased
by $102.4 million to $146.2 million in the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was
due to an increase in programming and content costs of $98.9 million, hosting expenses of $2.7 million, and other service costs of $0.8
million.
General and Administrative Expenses
General and administrative expenses increased by $21.0 million
to $37.1 million in the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was due to an increase
in payroll and related expenses of $9.0 million, share-based compensation of $2.5 million related to the recognition of contingent shares
issued in connection with the Callin acquisition that were accounted for as post-combination expense, as well as a $9.5 million increase
in other administrative expenses, most of which are public company-related, including accounting, legal, investor relations, insurance,
and other administrative services.
Research and Development Expenses
Research and development expenses increased by $9.4 million to
$15.7 million in the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was due to an increase in
payroll and related expenses of $7.4 million, as well as a $2.0 million increase in costs related to computer hardware, software, and
other expenses used in research and development related activity.
Sales and Marketing Expenses
Sales and marketing expenses
increased by $7.3 million to $13.4 million in the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase
was due to a $2.6 million increase in staffing-related and consulting service costs as well as a $4.7 million increase in other marketing
and public relations activities.
Acquisition-related transaction costs
Acquisition-related transaction costs increased by $35.3 thousand to
$1.2 million in the year ended December 31, 2023 compared to the year ended December 31, 2022. Acquisition-related transaction costs for
the year ended December 31, 2023 consisted of $1.2 million related to the Callin and North River acquisitions in 2023. For the year ended
December 31, 2022, acquisition-related transaction costs consisted of $1.1 million, which included legal and other professional fees related
to the Business Combination.
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Amortization and Depreciation
Amortization and depreciation
increased by $3.3 million to $4.8 million in the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase
was due to an increase of $2.2 million from depreciation on our property and equipment as we continue to build out our infrastructure
as well as an increase in amortization from intangible assets of $1.1 million.
Change in Fair Value of Contingent Consideration
Change in fair value of contingent
consideration increased by $1.9 million resulting in a gain of $1.9 million in the year ended December 31, 2023. The contingent consideration
liability arose in connection with the Callin acquisition and the fair value of this contingent consideration was measured using the fair
value of the expected number of shares to be issued and Company’s share price at closing. The gain from the change in fair value
of contingent consideration can be directly attributable to changes in the Company’s share price since the closing.
Interest Income
Interest income increased
by $10.6 million to $13.6 million in the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was due
to carrying a higher balance of cash, cash equivalents, and marketable securities as a result of the Business Combination. The funds were
invested in money market funds, treasury bills, and term deposits.
Other Income (Expense)
Other expense increased by
$76.4 thousand to $0.1 million in the year ended December 31, 2023 compared to the year ended December 31, 2022.
Change in Fair Value of Warrant Liability
Change in fair value of warrant
liability decreased by $18.6 million resulting in a gain of $2.4 million in the year ended December 31, 2023. The warrant liability arose
in connection with the warrants offered as part of the Business Combination. As these warrants meet the classification of a financial
liability in accordance with ASC 815-40, the related warrant liability is measured at its fair value, determined in accordance with ASC
820, at each reporting period. The fair value of this warrant liability was measured using the fair value of the Company’s warrants
listed on the Nasdaq. The decrease in the change in fair value of warrant liability is directly attributable to changes in the trading
price of Rumble’s warrants.
Income Tax Recovery
Income tax recovery decreased
by $0.2 million to $nil in the year ended December 31, 2023 compared to the year ended December 31, 2022.
Deferred Tax Recovery
Deferred tax recovery increased by $3.3 million to $3.3 million in
the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was mainly driven by the recognition of deferred
tax liabilities of Callin and North River as of the acquisition date, which were subsequently reversed resulting in a deferred tax benefit.
Liquidity and Capital Resources
Since the completion of our
Business Combination in September 2022, we have financed operations primarily through cash generated from operating activities and the
funds raised from our Business Combination. The primary short-term requirements for liquidity and capital are to fund general working
capital and capital expenditures.
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As of December 31, 2023, our cash, cash equivalents, and marketable
securities balance was $219.5 million. Cash, cash equivalents, and marketable securities consist of cash on deposit with banks and
amounts held in money market funds, treasury bills, and term deposits.
As
we have consistently stated, we intend to use a substantial portion of funds that we have raised to acquire content by providing economic
incentives to a small number of content creators, including sports leagues. This content acquisition strategy will allow us to enter key
content verticals and secure top content creators in those verticals before we have full monetization capabilities in place. Our focus
in 2023 was to grow users and usage consumption and experiment with monetization levers, which may not maximize profitability in the immediate
term, but which we believe positions our business for the long term. As a result, we expect this strategy will require us to consume a
significant portion of our capital raised. As of December 31, 2023, we had entered into programming and content agreements with a minimum
contractual cash commitment of $106 million. A significant amount of these minimum contractual cash commitments will be paid over 12 to
36 months, commencing in 2024. In addition to the minimum contractual cash commitments, we have programming and content agreements that
have variable cost arrangements. These future costs are dependent upon many factors and are difficult to anticipate, however, these costs
may be substantial.
The following table presents
a summary of the consolidated statement of cash flows for the years ended December 31, 2023 and 2022:
Year ended December 31,
Net cash provided by (used in): 2023 2022 Variance ($)
Operating Activities
Net cash used in operating
activities for the year ended December 31, 2023 primarily consisted of net loss adjusted for certain non-cash items, including a $4.3
million gain on the change in fair value of warrants and contingent consideration, offset by a $16.3 million change in share-based compensation,
$5.6 million change in amortization and depreciation as well as changes in operating assets and liabilities. The increase in net cash
used in operating activities during the year ended December 31, 2023 compared to the year ended December 31, 2022 was mostly due to an
increase in expenses partially offset by changes in revenue and operating assets and liabilities.
Investing Activities
Net cash used in investing activities for the year ended December 31,
2023 consisted of $24.8 million in purchases of property, equipment, and intangible assets, offset by $1.0 million in cash acquired in
connection with the Callin acquisition. The increase in net cash used in investing activities during the year ended December 31, 2023
compared to the year ended December 31, 2022, was mostly due to an increase in purchases of property, equipment, and intangible assets,
which includes assets acquired from North River of $7.2 million, offset by cash acquired in connection with the Callin acquisition.
Financing Activities
Net cash used in financing activities for the year ended December 31,
2023 mainly consisted of $2.1 million in taxes paid from net share settlement of share-based compensation. The increase in net cash used
in financing activities was mainly due to the taxes paid from the net share settlement of share-based compensation in the year ended December
31, 2023 compared to the receipt of cash proceeds, net of transactions costs, from the Business Combination in the year ended December
31, 2022.
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Summary of Quarterly Results
Information for the most recent quarters presented are as follows:
Critical Accounting Policies and Estimates
We prepare our consolidated
financial statements in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).
The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenue, costs and expenses and related disclosures. We evaluate our estimates on a continuous basis. We base
our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual
results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates
and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.
We believe the following key
accounting policies require significant judgments and estimates used in the preparation of our consolidated financial statements. Critical
accounting policies and estimates are those that we consider the most important to the portrayal of our financial condition and results
of operations because they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates
about the effects of matters that are inherently uncertain. We believe the following key accounting policies require significant judgments
and estimates used in the preparation of our consolidated financial. Accordingly, we believe that these are the most critical to aid in
fully understanding and evaluating our financial condition and results of operations.
For further information on
the summary of significant accounting policies and the effect on our consolidated financial statements, see Note 2, Summary of Significant
Accounting Policies, to the consolidated financial statements.
Acquisitions (Business Combination vs Asset
Acquisition)
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 judgment 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.
Valuation of Intangible Assets
The Company acquired intangible
assets in connection with acquisitions of Callin and North River. A valuation was performed to determine the estimated fair value of identifiable
intangible assets related to the acquisition. Judgment is required to estimate the fair value of these identifiable intangible assets.
We may use quoted market prices, prices for similar assets, present value techniques, and other valuation techniques such as the depreciated
replacement cost and relief from royalty methods to prepare these estimates. We may need to make estimates of future cash flows and discount
rates as well as other assumptions in order to implement these valuation techniques. Due to the degree of judgment involved in our estimation
techniques, our estimate may result in significant difference in the estimation of fair value.
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Share-based Compensation
The Company issues equity awards such as stock options and restricted
stock units to certain of its employees, directors, officers and consultants. We account for equity awards by recognizing the fair value
of share-based compensation expense on a straight-line basis over the service period of the award.
For equity awards with a service
condition, the fair value is estimated on the grant date using the Black-Scholes option pricing model which takes into account the following
inputs: stock price, expected term, volatility, and risk-free interest rate. For equity awards with a market condition, the fair value
is estimated on the grant date using a Monte Carlo simulation methodology that includes simulating the stock price using a risk-neutral
Geometric Brownian Motion-based pricing model. Changes in the estimated inputs or using other option valuation methods may result in materially
different option values and share-based compensation expense.
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 the performance condition will be met. Where the performance
condition underlying an award is a change in control, the Company considers the performance condition to be probable only when it occurs.
Income Taxes
The Company is subject to
income taxes in the United States and other foreign jurisdictions. Significant judgment is required in determining our provision for income
taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex
tax laws.
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 income tax positions. 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.
New Accounting Pronouncements
See Note 2, Summary of
Significant Accounting Policies, to our consolidated financial statements for the years ended December 31, 2023 and 2022.
JOBS Act Accounting Election
We are an emerging growth
company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards
until such time as those standards apply to private companies. We intend to elect to adopt new or revised accounting standards under private
company adoption timelines. Accordingly, the timing of our adoption of new or revised accounting standards will not be the same as other
public companies that are not emerging growth companies or that have opted out of using such extended transition period and our financial
statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk
We are exposed to certain
market risks as part of our ongoing business operations.
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Credit Risk
We are exposed to credit risk
on our cash, cash equivalents, marketable securities, and accounts receivable. We place cash, cash equivalents, and marketable securities
with financial institutions with high credit standing, and we place excess cash in marketable investment grade debt securities. We are
exposed to credit risk on our accounts receivable in the event of default by a customer. We bill our customers under customary payment
terms and review customers for their creditworthiness. The term between invoicing and payment due date is not significant. A meaningful
portion of our revenue is attributable to service agreements with one customer. For the year ended December 31, 2023, one customer accounted
for $37.2 million or 46% of our revenue (2022 – $17.7 million or 45%). As of December 31, 2023, one customer accounted for 35% of
our accounts receivable (2022 — 66%), which has been collected in the month of January 2024.
Interest Rate Risk
We are exposed to interest
rate risk on our cash, cash equivalents and marketable securities. As of December 31, 2023, we had cash, cash equivalents and marketable
securities of $219.5 million, consisting of investments in money market funds, treasury bills, and term deposits for which the fair
market value would be affected by changes in the general level of interest rates. However, due to the short-term maturities and the low-risk
profile of our investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our
cash, cash equivalents and marketable securities.
Item 8. Financial Statements and Supplementary
Data
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
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)
Expenses
Changes in fair value of contingent consideration (1,922,381 ) -
Loss per share – basic and diluted $ (0.58 ) $ (0.05 )
Share-based compensation expense included in expenses:
Cost of services (content, hosting, and other) $ 3,994,180 $ 249,781
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Rumble Inc.
Consolidated Balance Sheets
(Expressed in U.S. Dollars)
Assets
Current assets
Liabilities and Shareholders’ Equity
Current liabilities
Income taxes payable - 934
Contingent consideration 863,643 -
Contingent consideration, net of current portion 705,717 -
Commitments and contingencies (Note 16)
Shareholders’ equity
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
For the year ended December 31, 2022
Number of Common Stock
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)
Cash flows provided by (used in)
Operating activities
Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair value of contingent consideration (1,922,381 ) -
Changes in operating assets and liabilities:
Investing activities
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 ) -
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 )
Effect of exchange rate changes on cash and cash equivalents - (45,465 )
Supplemental cash flow information:
Cash paid for interest 4,212 54
Non-cash investing and financing activities:
Settlement of loan receivable in exchange for Class A Common Stock 391,235 -
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.,