SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2021
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 001-39139
CURIOSITYSTREAM INC.
(Exact name of registrant as specified in its charter)
Delaware | 84-1797523 | |||||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |||||||
8484 Georgia Ave., Suite 700 | ||||||||
Silver Spring, Maryland | 20910 | |||||||
(Address of principal executive offices) | (Zip Code) |
(301) 755-2050
(Registrant’s telephone number, including area code)
Securities registered pursuant to section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of exchange on which registered | |||||||||||||
Common Stock, par value $0.0001 | CURI | NASDAQ | |||||||||||||
Warrants, each exercisable for one share of Common stock at an exercise price of $11.50 per share | CURIW | NASDAQ |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐o No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐o No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒x No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒x No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||||||||||
Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
As of June 30, 2021,2023, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the voting and non-voting common stock held by non-affiliates, computed by reference to the closing sales price of $13.64$1.69 reported on The NASDAQ Capital Market, was approximately $$47.8 million.
As of March 29, 2022, there were 52,761,542 shares18, 2024, there were 53,306,291 shares of the registrant’s common stock, $0.0001 par value per share, issued and outstanding.
Portions of the registrant’s definitive proxy statement relating to its annual meeting of stockholders to be held in 20222024 (the “2022“2024 Annual Meeting”), expected to be filed with the Securities and Exchange Commission (the “SEC”) on or before April 28, 202229, 2024 (and, in any event, not later than 120 days after the close of our last fiscal year), are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent stated herein. Except with respect to information specifically incorporated by reference in this Annual Report on Form 10-K, such proxy statement is not deemed to be filed as part hereof.
TABLE OF CONTENTS
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Item 1C. | ||||||||
i
Part I
CERTAIN DEFINED TERMS
Each of the terms the “Company,” “we,” “our,” “us,” and similar terms used herein refer collectively to CuriosityStream Inc., a Delaware corporation, and its consolidated subsidiaries, unless otherwise stated.
In this Annual Report on Form 10-K, unless otherwise stated or unless the context otherwise requires:
“App Services” means applications developed for iOS, Android, streaming media players and smart tv operating systems.
“Board” means the board of directors of the Company.
“Bundled MVPD Business” refers to our ability to convey a broad scope of rights, including 24/7 “linear” channels, on-demand content library, mobile rights and/or pricing and packaging flexibility, in exchange for an annual fixed fee or fee per subscriber as part of a multi-year agreement.
“Bundled MVPD Partners” means affiliate relationships with MVPDs, broadband and wireless companies in the U.S. and international territories.
“Business Combination” means the acquisitions and transactions contemplated by the Merger Agreement.
“Bylaws” means the Amended and Restated Bylaws of CuriosityStream Inc.
“Charter” means the Second Amended and Restated Certificate of Incorporation of CuriosityStream Inc.
“Common Stock” means the Common Stock of the Company, par value $0.0001 per share.
“Code” means the Internal Revenue Code of 1986, as amended.
“CSR” means corporate and social responsibility.
“Legacy CuriosityStream” means Curiosity Inc., a Delaware corporation (formerly named CuriosityStream Operating Inc., and prior to the consummation of the Business Combination, CuriosityStream Inc.).
“DGCL” means the Delaware General Corporation Law.
“Direct Service” or “Direct to Consumer Business” means App Services together with O&O Service.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“GAAP” means United States generally accepted accounting principles, consistently applied, as in effect from time to time.
“IPO” means SAQN’s initial public offering of Units consummated on November 22, 2019.
“JOBS Act” means the Jumpstart Our Business Startups Act of 2012, as amended.
“LIBOR” means the London Interbank Offered Rate.
“Merger” means the merger of Merger Sub with and into Legacy CuriosityStream.
“Merger Sub” means CS Merger Sub, Inc., a Delaware corporation.
“MVPDs” means multichannel video programming distributors.
“NASDAQ” means The NASDAQ Capital Market.
“O&O Service” means our owned and operated website.
“Omnibus Incentive Plan” means our 2020 Omnibus Incentive Plan.
“Partner Direct Service” or “Partner Direct Business” means, collectively, MVPDs that include Comcast and Cox, and vMVPDs and digital distributors that include Amazon Prime Video Channels, Roku Channels, Sling TV and YouTube TV.
“PIPE” means the issuance and sale to the PIPE Investors, an aggregate of 2,500,000 shares of Common Stock for an aggregate purchase price of $25,000,000 pursuant to Subscription Agreements between the Company and the PIPE Investors.
“PIPE Investors” means certain third-party investors in the PIPE.
“PIPE Warrants” means the 353,000 warrants issued to PIPE Investors in connection with our Business Combination.
“Private Placement Warrants” means the 3,676,000 warrants issued to Software Acquisition Holdings LLC in a private placement that closed concurrently with our IPO.
“Program Sales Business” means CuriosityStream’s program sales.
“Public Warrants” means the 7,475,000 warrants sold as part of the Units in the IPO.
“SAQN” means Software Acquisition Group Inc. prior to the consummation of the Business Combination.
“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002, as amended.
“SEC” means the U.S. Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended.
“Sponsor” means the Company’s former sponsor, Software Acquisition Group LLC.
“Sponsorship & Advertising Business” means the Company’s business of developing integrated digital brand partnerships.
“SVoD” means subscription video on-demand.
“Trust Account” means the trust account established in connection with the IPO.
“Units” means the units of SAQN, each consisting of one share of Common Stock and one-half of one Warrant, with each such Public Warrant entitling the holder thereof to purchase one share of Common Stock at a price of $11.50 per share, subject to certain adjustments. On October 14, 2020, the Company’s Common Stock and Public Warrants were listed on NASDAQ under the new trading symbols of “CURI” and “CURIW,” respectively, and all of SAQN’s units separated into their component parts of (i) one share of Common Stock and (ii) one-half (1/2) of one warrant and ceased trading on NASDAQ.
“vMVPDs” means virtual MVPDs.
“Warrants” means the Private Placement Warrants, the PIPE Warrants and Public Warrants.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains certain forward-looking statements. All statements, other than statements of present or historical fact included in this Annual Report on Form 10-K, regarding the Company’s future financial performance, as well as the Company’s strategy, future operations, financial position, estimated revenues, and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Annual Report on Form 10-K, the words “could,” “should,” “will,” “may,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” the negative of such terms and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. The Company cautions you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of the Company, incident to its business.
These forward-looking statements are based on information available as of the date of this Annual Report on Form 10-K, and current expectations, forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing the Company’s views as of any subsequent date. Although the Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws, you are advised to consult any additional disclosures the Company makes in its Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the SEC. Forward-looking statements contained in this Annual Report on Form 10-K include, but are not limited to, statements about the ability of the Company to:
As a result of a number of known and unknown risks and uncertainties, the Company’s actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:
Our business operations are subject to numerous risks and uncertainties, including those outside of our control, that could cause our results to vary from expectations. You should carefully consider these risks and uncertainties when investing in our securities. The principal risks and uncertainties affecting our business include, but are not limited to, the following:
Item
Unless the context otherwise requires, all references in this section to “we,” “us,” “our,” the “Company,” or the “Company”“CuriosityStream” refer to CuriosityStream Inc. and its subsidiaries prior to and following the consummation of the Business Combination. All references in this section to Software Acquisition Group Inc. and SAQN are references to the registrant prior to the consummation of the Business Combination.
Corporate History and Background
On October 14, 2020, (the “Closing Date”), CuriosityStream Inc., a Delaware corporation (formerly named Software Acquisition Group Inc.), consummated a merger pursuant to that certain Agreement and Plan of Merger (the “Merger Agreement”), dated August 10, 2020, by and among Software Acquisition Group Inc., CS Merger Sub, Inc.,a special purpose acquisition company and a Delaware corporation and a wholly owned subsidiary of Software Acquisition Group Inc. (“Merger Sub”SAQN”), and CuriosityStream Operating Inc., a Delaware corporation (which has been re-named Curiosity Inc. following the Business Combination) (“Legacy CuriosityStream”), and Hendricks Factual Media LLC,consummated a Delaware limited liability company (“HFM”). The transactions consummatedreverse merger pursuant to the Agreement and Plan of Merger, Agreement are referred to in this Annual Report on Form 10-K as thedated August 10, 2020 (the “Business Combination.”Combination”). Upon the consummation of the Business Combination, Merger Sub merged with and into Legacy CuriosityStream with Legacy CuriosityStream surviving the merger in accordance with the Delaware General Corporation Law asbecame a wholly owned subsidiary of Software Acquisition Group Inc. (the “Merger”SAQN and the completion of the Merger, the “Closing”). In connection with the Closing, the registrant changed its name from “Software Acquisition Group Inc.” to “CuriosityStream Inc.”
SAQN, a blank check company, was incorporated as a Delaware corporation on May 9, 2019, for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.
CuriosityStream LLC, Legacy CuriosityStream’s predecessor, was formed in the State of Delaware in June 2008. CuriosityStream LLC officially launched its subscription service to U.S. based customers in March 2015 and to international customers in September 2015.
Business Overview
CreatedFounded by John Hendricks, founder of the Discovery Channel and former Chairman of Discovery Communications, we areCuriosityStream is a media and entertainment company that offers premium video and audio programming across the principal categories of factual entertainment, including science, history, society, nature, lifestyle and technology. Our mission is to provide premium factual entertainment that informs, enchants and inspires.
Through the rapid expansion of our library of high-quality titles and by exploiting multiple channels to monetize our programming, we believe that we have achieved global leadership in factual content streaming and are well positioned to capitalize on favorable ongoing industry trends to create value for our shareholders and other stakeholders.
Curiosity Stream’sCuriosityStream’s award-winning video content library features thousands of nonfiction episodes, including more than 1,000 original, commissioned or co-produced documentaries,17,000 programs that explore topics ranging from space engineering to ancient history to the rise of short-form, mid-formWall Street and includes shows and series from leading nonfiction producers. Our library includes:
Through our acquisition in 2021 of One Day University in 2021, we also acquired more than 500 lectures from some of the most popular and acclaimed college and university professors in the United States,U.S., on topics ranging from American history to Broadway shows. In addition, through our acquisition of Learn25, we acquired approximately 5,000 episodes of audio content and about 1,250 video episodes, packaged as courses on factual topics ranging from religion to biographies to psychology. These acquisitions enableenabled us to expand our offering of factual content into audio and educational courses, as well as package our products in special bundles for consumers and business customers.
In 2021, the Company entered into an enhanced strategic partnership with and investment intoinvested in Watch Nebula LLC ("Nebula"), an SVOD streaming service owned by Standard Broadcast LLC and its affiliated YouTube creators. Nebula has more than 450,000 paying subscribers and over 140 creators with a combined more than 120 million YouTube subscribers.
Also in 2021, the Company partnered with SPIEGELSpiegel TV to accelerate international expansion of Curiosity StreamCuriosityStream services, taking a one-third stake in the German joint venture owned by a German media company, Spiegel, and a German documentary producer, Autentic. The joint venture, includes distribution of linear cableSpiegel TV Geschichte und Wissen GmbH & Co. KG (the “Spiegel Venture”), operates two documentary channels (including one branded as "Curiosity Channel"), together with an SVOD service and a FAST channel, Curiosity Channel andas well as revenue sharing on a localized CuriosityStream SVOD service in German-speaking Europe.
In addition,Through our Partner Direct Business, we have affiliate agreement relationships with, and our service is available directly from, MVPDs that include Comcast and Cox, and vMVPDs and digital distributors that include Amazon Prime Video Channels, Roku Channels, Sling TV, Apple Channel and YouTube TV, which we refer to asconstitute our “PartnerPartner Direct Service” or “Partner Direct Business.” The MVPD, vMVPD and digital distributor partners making up our Partner Direct Business pay us a license fee for sales to individuals who subscribe to CuriosityStream via the partners’ respective platforms.
The technology associated with our Partner Direct Business is designed to facilitate a consistent user experience across the different interface platforms and operating system applications. We provide value for both our users and ourselves through our analytics algorithm and data collection system. Leveraging our database of anonymized user preferences, ratings and behavior, we are constantly refining our content recommendation engine to suggest and serve content to our customers.
In additionOur Content Licensing business is focused on providing factual content to entertainment media companies. We have the opportunity to provide a turnkey, financially attractive “factual solution” to meet this business demand. We are able to license to certain media companies a collection of our Partner Direct Servicesexisting titles in a traditional content licensing deal. We are also able to sell selected rights (such as in territories or on platforms that are lower priority for us) to content we create before we even begin production. This latter model reduces risk in our content development decisions and Businesses, wecreates content licensing revenue.
Our Sponsorship & Advertising Business consists of developing integrated digital brand partnerships designed to offer the chance to be associated with CuriosityStream content in a variety of forms, including short and long form program integration, branded social media promotional videos, broadcast advertising spots, and digital display ads.
Our Program Sales Business is focused on providing factual content to entertainment media companies. We have the opportunity to provide a turnkey, financially attractive “factual solution” to meet this business demand. We are able to sell to certain media companies a collection of our existing titles in a traditional program sales deal. We are also able to sell selected rights (such as in territories or on platforms that are lower priority for us) to content we create before we even begin production. This latter model reduces risk in our content development decisions and creates program sales revenue.
Our Corporate & Association Partnership business has been comprised primarily of selling subscriptions in bulk to companies and organizations that in turn offer these subscriptions to their employees and members as an employment benefit or “gift of curiosity.”
Our business model reliesWe provide advertising and sponsorships services through developing integrated digital brand partnerships designed to offer the chance to be associated with CuriosityStream content in a variety of forms, including short- and long-form program integration; branded social media promotional videos; broadcast advertising spots in our video and audio programs that are made available on our linear programming channels or in front of the collaboration of (1)paywall; and our increasing focus on digital display ads while delivering our content team, which works with more than 150 production companies and distributors across the world to create and acquire programming, (2) our legal and finance teams, which structure and formalize agreements, (3) our creative services and content operations teams, which develop all of the marketing materials, metadatathrough advertising-based video-on-demand (AVOD), transactional video-on-demand (TVOD), free advertising-supported streaming television (FAST), YouTube and other assets associated with a piecesimilar distribution channels.
Our revenue forFor the year ended December 31, 2021 was $71.3 million. Our2023, we reported revenue of $56.9 million and a net loss for the year ended December 31, 2021 was $37.6of $48.9 million.
Please see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K for a more detailed discussion of our product and service lines and channels through which we generate revenue.
Competition
We compete for the time and attention of our users across different forms of media, including traditional broadcast, cable, satellite and internet-delivered video, other providers of SVoDSVOD services (e.g., Amazon Prime Video, Hulu, Netflix), other providers of in-home and mobile entertainment such as radio, music streaming services, and social media and networking websites. Many consumers maintain simultaneous relationships with multiple in-home entertainment providers and can easily shift spending from one provider to another.
We compete with other content providers to attract, engage, and retain users with other content providers based on several factors, including: the user experience, content range and quality, ease of use of our platform, price, accessibility, perceptions of advertising load, brand awareness and reputation.
Many of our competitors enjoy competitive advantages such as greater brand recognition, legacy operating histories and larger marketing and content budgets, as well as greater financial, technical, human and other resources. However, we currently face limited competition in the factual SVoD category.
Seasonality
Our overall revenue does not exhibit a consistent seasonal pattern. Our DTC membership growth exhibits a seasonal pattern that reflectsmay reflect variations when consumers buy internet-connected screens and when they tend to increase their viewing. Historically,viewing, although these trends are generally immaterial for our business. In most years, the first quarter, representson a relative percentage basis, has represented our greatest streaming membership growth. In addition, our membership growth can be impacted by our content release schedule and changes to pricing.
Intellectual Property
Our success depends upon our ability to protect our technologies and intellectual property. To accomplish this, we rely on a combination of intellectual property rights, including trade secrets, copyrights and trademarks, as well as contractual restrictions. We have confidentiality and proprietary rights arrangements with our employees, consultants and business partners, and we control access to, and distribution of, our proprietary information.
Our registered trademarks in the United StatesU.S. include “Curiosity,” “CuriosityStream” and “One Day University.”
Government Regulation
As a company conducting business on the internet, we are subject to several foreign and domestic laws and regulations relating to information and network security, data protection, privacy, and governmental access to data, among other things. Many of these laws and regulations are still evolving and could be interpreted, updated, or new laws passed in ways that could harm our business. In the area of information and network security and data protection, the laws in the United States,U.S., the European Union (the “EU”), and other jurisdictions globally can require specified actions to maintain the confidentiality, integrity and availability of networks and data. Additionally, laws in many U.S. states require companies to implement specific information security controls to protect certain types of personally identifiable information. Likewise, U.S. states, the EU, China, and other jurisdictions have laws in place requiring companies to notify users, regulators, and sometimes law enforcement if there is a security breach that compromises certain categories of information, including personal information and personally identifiable information.
We mayare also be subject to U.S. federal and state, EU and other foreign laws regarding privacy, the collection of data of minors, and the privacy of customer data. Our privacy policy and terms of use describe our practices concerning the use, transmission and disclosure of customer information and are posted on our website. Any failure to comply with our posted privacy policy or privacy-related laws, obligations, or regulations globally could result in proceedings against us by governmental authorities, individuals, or others. Further, any failure by us to adequately protect the privacy or security of our customers’ information could result in a loss of confidence in our service among existing and potential customers, and ultimately, in a loss of customers and advertisers.
Privacy Policy
We collect and use certain types of information from our customers in accordance with the privacy policy that is posted on our website. We collect personally identifiable information directly from customers when they register to use our service and sign up to receive email newsletters. We may also obtain information about our customers from other customers and third parties. Our policy is to use the collected information to customize and personalize advertising and content for customers and to enhance the customer experience when using our service.
We also use automated data collection technology, such as tracking cookies, to collect non-personally identifiableonline usage information to help us track customer interactions with our service. Third-party advertisers and service partners may also use tracking technologies to collect non-personally identifiable information regarding use of our platforms.
We have implemented commercially reasonable physical and electronic security measures to protect against the loss, misuse, and alteration of personally identifiable information. No security measures are perfect or impenetrable, and we may be unable to anticipate or prevent unauthorized access to our customers’ personally identifiable information.
Employees
In 2021 and 2020, we had approximately 83 and 54 total,78 full-time employees on average, during 2023 and 2022, respectively. As of December 31, 2021,2023, we had approximately 92employed 48 full-time employees, all of whom were located in the U.S. During 2023, we eliminated 20 positions, including 13 positions eliminated as part of a December 2023 restructuring. Our eliminated roles during the year were primarily in the areas of technology, operations and programming.
We are committed to diversity and inclusion as well as equitable pay within our workforce. To further some of these initiatives, following our Business Combination, we retained Willis Towers Watson, a leading global advisory firm, to review our compensation structure. Our compensation program is designed to attract, retain, and motivate highly qualified employees and executives and is comprised of a mix of competitive base salary, bonus and equity compensation awards, as well as other employee benefits. Almost all current employees have received equity grants with vesting conditions designed to facilitate the retention of personnel and the opportunity to benefit financially from the Company’sour potential future growth and profitability. Our 401(k) Retirement Plan includesretirement plan contributions include a Company100% match of up 100 percent of contributions up to 3 percentfor the first 3% of the employee’s compensationbase salary and a 50 percent Company50% match of contributions between 3 percent3% and 5 percent5% of the employee’s compensation. In 2022, we expect to engage a recruiting firm, or adopt a recruiting tool, that specializes in diversity candidates to assist us in our endeavor to attract and employ diverse applicants to open positions. In addition, as part of a broader initiative to establish and maintain a culture and set of shared values, we intend to survey our employees as to diversity-related topics, including requesting that they supply demographic information about themselves and their interest in participating in diversity and inclusion programs.
Our human resourceresources strategy is overseen by our Chief Operating Officer and executive team, which aims to provide regular updates to our Board. Our employees are not covered by a collective bargaining agreement, and we consider our relations with our employees to be good.
In addition, the health and safety of our employees and communities are of primary concern to us. During the COVID-19 pandemic, we have taken significant steps to protect our workforce, including:
Item
If any of the following events occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment.
Risks Relating to the Company’s Business
If our efforts to attract and retain users are not successful, our business will be adversely affected.
We have experienced significant user growth over the past several years. Our ability to continue to attract users will depend in part on our ability to effectively market our service, consistently provide our users with compelling content choices that keep our users engaged with our service, as well as a quality experience for selecting and viewing factual entertainment. Furthermore, the relative service levels, content offerings, pricing and related features of competitors to our service may adversely impact our ability to attract and retain users.
The ongoing coronavirus (COVID-19) pandemic and the various responsesIf we do not continuously provide value to contain it has harmed our industry, disruptedusers, including making improvements to our business, increasedservice in a manner that is favorably received by them, our costs, led to delays in content releases and may continue to impact our business andrevenue, results of operations as well as our ability to raise additional capital.
The ongoing coronavirus (COVID-19) pandemic and the various responses to contain it have created significant volatility, uncertainty and economic disruption. In response to government mandates, health care advisories and in otherwise responding to employee and vendor concerns, we have altered certain aspects of our operations. Our workforce has had to spend a significant amount of time working from home, which impacts their productivity. International and domestic travel has been severely curtailed, which required the cancellation of dozens of partner and potential partner meetings and the rescheduling to virtual and telephonic forums for other such meetings. Many content productions were paused or adjusted, including productions of third parties who supply us with content. Other partners have similarly had their operations altered or temporarily suspended, including distribution partners and those partners that we use for our operations as well as development, production and post-production of content. To the extent the resulting economic disruption is severe, we could see some partners and vendors go out of business resulting in reduced demand from distributors and consequent reduction in forecasted revenue, as well as supply constraints and increased costs or delays to our productions. Such production pauses have caused us and may cause us in the future to temporarily have less new content available onwill be adversely affected.
The full extent to which the COVID-19 pandemic and the various responses to it impactsor our business, operations and financial results continues to depend on numerous evolving factorsinvestment into our content in a manner that is not favorably received by them, we may not be able to accurately predict, including:attract and retain users, and accordingly, our revenue, including revenue per paying membership, and result of operations may be adversely affected. For example, in 2022, in an attempt to expand our service offerings, we introduced a new, free ad-supported streaming channel on the durationLG channel platform, Curiosity Now, and scope ofour Smart Bundle plan. In addition, we may, from time to time, adjust our membership pricing, our membership plans, or our pricing model itself. These and other adjustments we have made or may make in the pandemic; governmental, businessfuture may not be well-received by consumers and individuals’ actions that have been and continue to be taken in response to the pandemic; the availability and cost to access the capital markets; the effect oncould negatively impact our customers and customer demand for and ability to pay forattract and retain members, revenues per paying membership, revenue and our services; increased competition with alternative media platforms
In addition to the potential direct impactscomplementary to our business the global economy may continueor strategic direction. These initiatives are intended to reduce operating costs [and to strengthen focus on our core business]. If we do not successfully manage our current cost-savings activities, our expected efficiencies, benefits and cost savings might be impacted as a result of the actions taken in response to COVID-19, including through elevated inflation, supply chain disruptions and a sensitive and evolving labor market. To the extent that such a weakened global economy impacts consumers’ abilitydelayed or willingness to pay for our service or vendors’ ability to provide services to us, especially those related to our distribution and content productions, our business and results of operation may be negatively impacted.
Labor shortages could adversely affect our results of operations.
In 2021, many companies experienced labor shortages and other labor-related issues, which were pronounced as a result of the COVID-19 pandemic. A number of factors may adversely affect the labor force available to us or increase labor costs, including high employment levels, federal unemployment subsidies, increased wages offered by other employers, vaccine mandates and other government regulationsnot realized, and our responses thereto. As more employers offer remote work, we may have more difficulty recruiting for jobs that require on-site attendance. We have recently observed an overall tighteningoperations and increasingly competitive labor market. If we are unable to hire and retain employees capable of performing at a high level, our business could be adversely affected. A sustained labor shortage, lackdisrupted. In addition, we may incur additional impairment charges related to fixed assets, goodwill and other intangibles, which may be material and may exceed our estimates. Furthermore, a disruption to our operations or business may cause employee morale and productivity to suffer and may result in unwanted employee attrition. Such disruptions require substantial management time and attention and may divert management from other important work or result in a failure to meet operational targets. Moreover, we could make changes to, or experience delays in executing, any cost-savings initiatives, any of skilled labor, or increased turnover within our employee base, caused by COVID-19 or as a result of general macroeconomic factors,which could have a material adverse impact on our businesscause further disruption and operating results.
We have a limited operating history and history of net losses, and we anticipate that we will experience net losses for the foreseeable future.
You should considerSince our business and prospects in light of the risks, expenses and difficulties encountered by companies in their early stage of development. CuriosityStream LLC, our predecessor, was formed as a Delaware limited liability company in June 2008. CuriosityStream LLC officially launched its subscription service to U.S. based customers in March 2015 and to international customers in September 2015. Accordingly,inception, we have a limitedincurred significant operating history upon which to baselosses, and as of December 31, 2023, we had an evaluationaccumulated deficit of our business and prospects.
We have experienced significant net losses since our inception and, given$290.0 million. Given the significant operating and capital expenditures associated with our business plan, we anticipate continuing to incur net losses for the foreseeable future. If we do achieve profitability, we cannot be certain that we will be able to sustain or increase such profitability. We incurred a net loss of approximately $37.6$48.9 million for the year ended December 31, 2021. We2023, and we have not generated positive cash flow from operations wesince our inception. We may not be able to operate at a net loss indefinitely, and we cannot be certain that we will be able to generate positive cash flow from operations in the future.
Our operating results are expected to be difficult to predict based on a number of factors that also may affect our long-term performance.
We expect our operating results to fluctuate significantly in the future based on a variety of factors, many of which are outside our control and difficult to predict. As a result, period-to-period comparisons of our operating results may not be a good indicator of our future or long-term performance. The following factors may affect us from period-to-period and may affect our long-term performance:
We have expanded rapidlysignificantly since we launched our subscription service in March 2015. We anticipate that further expansion of our operations will be required to achieve significant growth in our products, lines of business and user base and to take advantage of favorable market opportunities. Any future expansion will likely place significant demands on our managerial, operational, administrative and financial resources. If we are not ableunable to respond effectively to new or increased demands that arise because of our growth, or, if in responding, our management is materially distracted from our current operations, our business may be adversely affected. In addition, if we do not have sufficient breadth and depth of content necessary to satisfy increased demand arising from growth in our user base, our user satisfaction may be adversely affected.
We are continuing to expandhave expanded our operations internationally, scaling our serviceseeking to effectively and reliably handle anticipated growth in both users and features related to our service and ramping up our ability to produce original content.service. As our offerings evolve, we are managing and adjusting our business to address varied content offerings, consumer customs and practices, different technology infrastructure, different markets for factual video content, as well as differing legal and regulatory environments. As we scaleexpand our service and introduce new features such as our free streaming channel, Curiosity Now, and our Smart Bundle plan, we are developing technology and utilizing third-party “cloud” computing, services. Currently, approximately a third of our content is originally produced, and as we ramp up our original content production, we are building out expertise in a number of disciplines, including creative, marketing, legal, finance, licensingtechnology and other services. These efforts require significant resources, related to the developmentoperational efficiency and physical production of content.management attention. If we are not able to manage the growing complexity of our business in an efficient manner, including improving, refining or revising our systems and operational practices related to our operations and original content development, our business may be adversely affected.
From time to time, we acquire or invest in businesses, content, and technologies that support our business. The risks associated with such acquisitions or investments (some of which may be unforeseen) include the difficulty of integrating solutions, operations, and personnel; inheriting liabilities and exposure to litigation; failure to realize anticipated benefits and expected synergies; and diversion of management’s time and attention, among other acquisition-relatedacquisition- and/or investment-related risks. We may not be successful in overcoming such risks, and such acquisitions and investments may negatively impact our business.
In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquireacquired goodwill, which must be assessed for impairment at least annually. If our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process.process, as was the case in 2022. Acquisitions also could result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results.
Furthermore, if we do not integrate an acquired business successfully and in a timely manner, we may not realize the benefits of the acquisition to the extent anticipated. If an acquired business fails to meet our expectations, our operating results, business and financial condition may suffer. Acquisitions and investments may contribute to fluctuations in our quarterly financial results. These fluctuations could arise from transaction-related costs and charges associated with eliminating redundant expenses or write-offs of impaired assets recorded in connection with acquisitions and investments, which could negatively impact our financial results.
Certain of our growth strategies are untested, unproven or not yet fully developed.
We intend to increase our revenues through expanding our subscriber base by, among other things, continuing to expand into international markets, expanding into the mobile video market, expanding into the corporate social responsibility market, expanding into the branded partnerships market, developing our Program Sales BusinessContent Licensing business and developing our in-house production studio, Curiosity Studios.Studios, as well as our increasing focus on AVOD, TVOD and FAST channels. Our content is primarily in the English language with subtitling or dubbing in Spanish, Mandarin, Russian, Swedish, German, Dutch, Danish, Finnish, Norwegian and Slovenian in parts of our library and the world where demand exists and we have the language version rights. Our rights to the international distribution of portions of our co-produced or licensed content are subject to certain geographic and platform or media restrictions. However, we intend to seek partnerships with strong platforms in international territories, subject, in each case, to any then-existing geographic and media restrictions on the distribution of any of our content. There can be no assurance that these international partnerships will be successful or result in our meeting revenue targets.
We believe there is an opportunity for us to commission or create content for other program providers. However, there can be no assurance that these partners will, or will continue to, engage us for co-productions or commissioned content, or that we will earn the margins that we expect on such projects.
If we experience excessive rates of user churn, our revenues and business will be harmed.
In order to increase our revenues, we must minimize the rate of loss of existing users while adding new users to our DTCmultiple subscription service.services. Our experience during our operating history indicates that there are many variables that impact churn, including the type of plan selected, user engagement with the platform, and length of a user’s subscription to date.date and subscription pricing. As a result, in periods of rapid user growth, we believe that our average churn is likely to increase as the average length of subscription to date decreases. Similarly, in periods of slow user growth, we believe that our average churn is likely to decrease since our average user duration is longer. However, these estimates are subject to change based on a number of factors, including the percentage of users selecting monthly vs. annual plans, increased rates of subscription cancellations and decreased rates of user acquisition. We cannot assure you that these estimates will be indicative of future performance or that the risks related to these estimates will not materialize.
If our efforts to build a strong brand identity and improve user satisfaction and loyalty are not successful, we may not be able to attract or retain users, and our operating results may be adversely affected.
The CuriosityStream brand is only sevennine years old, and we must continue to build a strong brand identity. To succeed, we must continue to attract and retain a large number of new users. We may be requiredusers which require us to incur significantly highermake significant advertising and promotional expenditures than we currently anticipate to attract large numbers of new users.expenditures. We believe that the importance of brand loyalty will increase with the continued proliferation of SVoDSVOD subscription services. If our branding efforts are not successful, however, our ability to attract and retain users will be adversely affected, adversely, which may negatively impact our future operating results.
We may be unable to compete successfully against current and future competitors, and competitive pressures could harm our business and prospects.
Our industry is intensely competitive, and we expect competition to increase in the future as current competitors improve their content offerings and as new participants enter the market. Competition may result in pricing pressures, reduced profit margins, loss of market share or greater difficulty in acquiring attractive content, any of which could substantially harm our business and results of operations. Many of the companies that are participating in the United StatesU.S. and global SVoDSVOD media sector have longer operating histories, larger and broader user bases, significantly greater financial, human, technical and other resources and greater name recognition than we do. These companies, which include Netflix, Amazon,Amazon.com, Hulu, CBS, ABC, NBC,Paramount, Comcast, BBC, PBS, Fox Networks, Warner Bros. Discovery, Communications, HBO, Disney and others, provide a broader range of content, and could redirect and apply considerable resources to acquired and original factual content.
We face risks, such as unforeseen costs and potential liability, in connection with content we acquire, produce, license and/or distribute through our service.
As a producer and distributor of content, we face potential liability for negligence, copyright and trademark infringement, or other claims based on the nature and content of materials that we acquire, produce, license and/or distribute. We also may face potential liability for content used in promoting our service, including marketing materials. We are devoting more resources toward the development, production, marketing and distribution of original programming. We believe that original programming can help differentiate our service from other offerings, enhance our brand and otherwise attract and retain users. Consequently, we continue to devote resources toward the development, production, marketing and distribution of our original programming. To the extent our original programming does not meet our expectations, in particular, in terms of costs, viewing and popularity, our business, including our brand and results of operations, may be adversely impacted.
To the extent we do not accurately anticipate costs or mitigate risks, including for content that we obtain but ultimately does not appear on or is removed from our service, or if we become liable for content we acquire, produce, license and/or distribute, our business may suffer. Litigation to defend these claims could be costly and the expenses and damages arising from any liability or unforeseen production risks could harm our results of operations. We may not be indemnified against claims or costs of these types and we may not have insurance coverage for these types of claims.
We rely upon a number of partners to make our service available on their platforms and devices.
We currently offer users the ability to receive streaming content through a host of screens and devices, including televisions, set-top boxes, computers, streaming media players, game consoles and mobile devices. We have executed a number of distribution and licensing agreements with MVPDs, vMVPDs and digital distributors including Amazon,Amazon.com, YouTube TV, Roku, Comcast, Cox Communications, Sling TV, Dish and others, as well as with our Bundled Distribution Partners,partners, including Multichoice, FuboTV and TataSky,Izzi, among others.
Our agreements with our partners are typically between one and three years in duration and our business could be adversely affected if, upon expiration, a number of our partners do not continue to provide access to our service or are unwilling to do so on terms acceptable to us, which terms may include the degree of accessibility and prominence of our service. Furthermore, while devices are manufactured and sold by entities other than CuriosityStream, the connection between these devices and CuriosityStream may nonetheless result in consumer dissatisfaction toward CuriosityStream and such dissatisfaction could result in claims against us or otherwise adversely impact our business. In addition, technology changes to our streaming functionality may require that partners update their devices. If partners do not update or otherwise modify their devices, our service and our users’ use and enjoyment of our content could be negatively impacted.
We are subject to payment processing risk.
Our users pay for our service using a variety of different payment methods, including credit and debit cards, gift cards, direct debit and online wallets. We rely on third parties to process payment. Acceptance and processing of these payment methods are subject to certain rules, regulations, and regulationsindustry standards, including data storage requirements, additional authentication requirements for certain payment methods, and require payment of interchange and other fees. To the extent there are disruptions in our payment processing systems, increases in payment processing fees, material changes in the payment ecosystem, such as large re-issuances of payment cards, delays in receiving payments from payment processors and/or changes to rules or regulations concerning payment processing, our revenue, operating expenses and results of operationoperations could be adversely impacted.
Distributors’ failure to promote our content could adversely affect our revenue and could adversely affect our business results.
We will not always control the timing and manner in which our licensed distributors distribute our content offerings. However, their decisions regarding the timing of release and promotional support are important in determining success. Any decision by those distributors not to distribute or promote our content or to promote our competitors’ content to a greater extent than they promote our content could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.
We believe that a positive reputation with consumers concerning our service is important in attracting and retaining users who have many choices when it comes to where to obtain video entertainment. To the extent our content is perceived as low quality, offensive or otherwise not compelling to consumers, our ability to establish and maintain a positive reputation may be adversely impacted. To the extent our content is deemed controversial or offensive by government regulators, we may face direct or indirect retaliatory action or behavior, including being required to remove such content from our service, and our entire service could be banned and/or become subject to heightened regulatory scrutiny across our business and operations.
Changes in competitive offerings for video entertainment, including the potential rapid adoption of piracy-based video offerings, could adversely impact our business.
The market for video entertainment is intensely competitive and subject to rapid change. Through new and existing distribution channels, consumers have increasing options to access video entertainment. The various economic models underlying these channels include subscription, transactional, ad-supported and piracy-based models. All of these have the potential to capture meaningful segments of the video entertainment market. Piracy, in particular, threatens to damage our business. Piracy’s fundamental proposition to consumers is compelling and difficult to compete against, as virtually all content is free. Further, in light of the compelling consumer proposition, piracy services are subject to rapid global growth.
Companies also may enter into business combinations or alliances that strengthen their competitive positions. If we are unable to successfully or profitably compete with current and new competitors, our business will be adversely affected, and we may not be able to increase or maintain market share and revenues or achieve profitability.
The adoption or modification of laws or regulations relating to the internet, telecommunications or other areas of our business could limit or otherwise adversely affect the manner in which we currently conduct our business. As our service and others like us gain traction in international markets, governments are increasingly looking to introduce new or extend legacy regulations to these services, in particular those related to broadcast media, content obligations or restrictions, treatment of intellectual property, net neutrality or payment for transmission and tax. For example, recent changes to European law enablesenable individual member states to impose levies and other financial obligations on media operators located outside their jurisdiction.
Changes in laws or regulations that adversely affect the growth, popularity or use of the internet, including laws impacting net neutrality or requiring payment of network access fees, could decrease the demand for our service and increase our cost of doing business. Certain laws intended to prevent network operators from discriminating against the legal traffic that traverse their networks have been implemented in many countries, including across the EU. In others, the laws may be nascent or non-existent. Furthermore, favorable laws may change, including for example, in the United StatesU.S. where net neutrality regulations were somewhat recently repealed. Given uncertainty around these rules, including changing interpretations, amendments or repeal, coupled with potentially significant political and economic power of local network operators, we could experience discriminatory or anti-competitive practices that could impede our growth, cause us to incur additional expense or otherwise negatively affect our business.
Changes in how we market our service, or increases in our advertising rates, could adversely affect our marketing expenses and user levels may be adversely affected.
We utilize a broad mix of marketing and public relations programs, including social media sites, to promote our service to potential new users. We may limit or discontinue use or support of certain marketing sources or activities if advertising rates increase or if we become concerned that users or potential users deem certain marketing practices intrusive or damaging to our brand. If the available marketing channels are curtailed, our ability to attract new users may be adversely affected.
Companies that promote our service and/or host our advertisements may decide that we negatively impact their business or may make business decisions that in turn negatively impact us. For example, if they decide that they want to compete more directly with us, enter a similar business or exclusively support our competitors, we may no longer have access to their marketing channels or they may charge us higher advertising rates, preventing us from advertising at competitive and/or reasonable rates. We also acquire a number of users who rejoin our service after having previously cancelled their subscription. If we are unable to maintain or replace our sources of subscriptions with similarly effective sources, or if the cost of our existing subscription increases, our subscription levels and marketing expenses may be adversely affected.
We utilize marketing to promote our content and drive viewing by our users. To the extent we promote our content inefficiently or ineffectively, we may not obtain the expected acquisition and retention benefits and our business may be adversely affected.
Emerging industry trends in digital advertising may pose challenges for our ability to forecast or optimize our advertising inventory, which may adversely impact our ability to capture advertising spend.
The digital advertising industry is introducing new ways to measure and price advertising inventory. For example, a significant portion of advertisers are in the process of moving from purchasing advertisement impressions based on the number of advertisements served by the applicable ad server to a new “viewable” impression standard (based on number of pixels in view and duration) for select products.
Our user metrics and other estimates are subject to inherent challenges in measurement, and real or perceived inaccuracies in those metrics may seriously harm and negatively affect our reputation and our business.
We regularly review key metrics related to the operation of our business, including, but not limited to monthly active users (“MAUs”) and user churn, to evaluate growth trends, measure our performance, and make strategic decisions. These metrics are calculated using internal company data and have not been validated by an independent third party. While these numbers are based on what we believe to be reasonable estimates of our user base for the applicable period of measurement, there are inherent challenges in measuring how our service is used across populations globally.
Errors or inaccuracies in our metrics or data could result in incorrect business decisions and inefficiencies. For instance, if a significant understatement of churn or overstatement of MAUs were to occur, we may expend resources to implement unnecessary business measures or fail to take required actions to attract a sufficient number of users to satisfy our growth strategies.
Some of our demographic data also may be incomplete or inaccurate because users self-report their personal information. Consequently, the personal data we have may differ from our users’ actual information. If sponsors, advertisers, partners or investors do not perceive our user, geographic or other demographic metrics to be accurate representations of our user base, or if we discover material inaccuracies in our user, geographic, or other demographic metrics, our reputation may be seriously harmed. See “— “We are at risk of attempts at unauthorized access to our service through cyberattacks, and failure to effectively prevent and remediate such attempts could have an adverse impact on our business, operating results and financial condition.condition.”
We rely on subscription data provided by our third-party distributors and platform partners that has not been independently verified, and inaccuracies in that data may seriously harm and adversely affect our reputation and our business.
Our calculation of total paying subscribers includes the subscribers who are accessing our service via a third-party distributor or platform partner. We rely on these third-party distributors and platform partners to provide us with subscriber data. This data ismay be based on verbal, unpublished or confidential reports and hasmay not have been validated by us or an independent third party. We use this data, among other things, to evaluate growth trends, measure our performance and make strategic decisions. Reliance on such unconfirmed or unpublished data could lead us to make incorrect calculations incorrector business decisions or incur inefficiencies, particularly if these third parties provide inaccurate or incomplete data. If any of the foregoing were to occur, our reputation and business could be seriously harmed or adversely affected.
Our business emphasizes rapid innovation and prioritizes long-term user engagement over short-term financial condition or results of operations, which strategy could have an adverse impact on our business, operating results and financial condition.
Our business is growingevolving and becominghas become more complex, and our success depends on our ability to quickly develop and launch new and innovative services. We believe our culture fosters this goal. Our focus on complexity and quick reactions could result in unintended outcomes or decisions that are poorly received by our users, advertisers, sponsors or partners. Our culture also prioritizes our long-term user engagement over short-term financial condition or results of operations. We frequently make decisions that may reduce our short-term revenue or profitability if we believe that the decisions benefit the aggregate user experience and will thereby improve our financial performance over the long-term. For example, in August 2018, we reduced our monthly and annual subscription prices for our HD service from $5.99 and $59.99 to $2.99 and $19.99, respectively. We also regularly run promotions discounting our service plans from their published prices. For example, in 2021 we ran promotions for annual subscriptions from time to time varying from a 25 percent to a 40 percent discount on the $19.99 price for the first year of an annual subscription. No assurance can be provided that such price reductions will produce an increase in subscribers to a level adequate to support sponsorship sales or generate revenue in an amount required to maintain business operations. These decisions may not produce the long-term benefits that we expect, in which case, our user growth and engagement, our relationships with advertisers, sponsors and partners, as well as our business, operating results and financial condition could be seriously harmed.
Risks Related to Intellectual Property
If content providers or other rights holders refuse to license streaming content or other rights upon terms acceptable to us, our business could be adversely affected.
Our ability to provide our users with content they want to watchenjoy depends on content providers and other rights holders’ licensing rights to distribute such content and certain related elements thereof, such as the public performance of music contained within the content we distribute, upon terms acceptable to us. While the license periods and the terms and conditions of such licenses vary, a significant portion of our content is subject to license for a given period. As of December 31, 2021,2023, approximately 70%81% of our SVOD titles were subject to licenses, approximately 20%39% of which expire in 20222024 and approximately 22%46% of which expire in 2023.2025. Of the titles that expire in 20222024 and 2023,2025, some may be renewed for a one- or two-year term at our unilateral option. If the content providers and other rights holders are not or are no longer willing or able to license us content upon terms acceptable to us, our ability to deliver particular items of content to our subscribers will be adversely affected and/or our costs could increase.
Music and certain authors’ performances contained within content we distribute may require us to obtain licenses for such distribution. In this regard, we engage in negotiations with collection management organizations (“CMOs”) that hold certain rights to music and/or other interests in connection with streaming content into various territories. If we are unable to reach mutually acceptable terms with these organizations, we could become involved in litigation and/or could be enjoined from distributing certain content, which could adversely impact our business. Additionally, pending and ongoing litigation, as well as negotiations between certain CMOs and other third parties in various territories, could adversely impact our negotiations with CMOs, or result in music publishers represented by certain CMOs unilaterally withdrawing rights, thereby adversely impacting our ability to negotiate licensing agreements reasonably acceptable to us. Failure to negotiate such licensing agreements could expose us to potential liability for copyright infringement or otherwise increase our costs.
If our trademarks and other proprietary rights are not adequately protected to prevent use or appropriation by our competitors, the value of our brand and other intangible assets may be diminished and our business may be adversely affected.
We rely and expect to continue to rely on a combination of confidentiality and license agreements with our employees, consultants and third parties with whom we have relationships, as well as trademark and copyright laws, to protect our proprietary rights. We may also seek to enforce our proprietary rights through court proceedings or other legal actions. We have filed and we expect to file from time to time for trademark applications. Nevertheless, these applications may not be approved, third parties may challenge any copyrights or trademarks issued to or held by us, third parties may knowingly or unknowingly infringe our intellectual property rights, and we may not be able to prevent infringement or misappropriation without substantial expense to us. If the protection of our intellectual property rights is inadequate to prevent use or misappropriation by third parties, the value of our brand and other intangible assets may be diminished, competitors may be able to more effectively mimic our service and methods of operations, the perception of our business and service to users and potential users may become confused in the marketplace, and our ability to attract users may be adversely affected.
In addition, the use or adoption of new and emerging technologies may increase our exposure to intellectual property claims, and the availability of copyright and other intellectual property protection for artificialIntellectual property claims against us could be costly and result in the loss of significant rights related to, among other things, our website, streaming technology, our recommendation and promotion capabilities, title selection processes and marketing activities.
Trademark, copyright and other intellectual property rights are important to us and other companies. Our intellectual property rights extend to our technology, business processes and the content we produce and distribute through our website. We use the intellectual property of third parties in creating some of our content and marketing our service through contractual and other rights. From time to time, third parties may allege that we have violated their intellectual property rights. If we are unable to obtain sufficient rights, successfully defend our use, or develop non-infringing technology or otherwise alter our business practices on a timely basis in response to claims against us for infringement, misappropriation, misuse or other violation of third-party intellectual property rights, our business and competitive position may be adversely affected.
Risks Related to Liquidity
We may find it difficult to successfully compete without significant capital investment or loans beyond what is available to us in current and future capital raising efforts.
Competing in the global media marketplace requires considerable financial resources, especially in the direct-to-consumer SVoDSVOD business sector, which requires substantial advertising and marketing expenditures to build widespread brand awareness to a level that produces subscribers. For example, Netflix alone spent approximately $2.5 billion on marketingsubscribers and continuous investment in the fiscal year ended December 31, 2021.our content offerings. In a global media marketplace with competitors spending greater amounts on programming and marketing and/or content than we do, we may find it difficult to successfully compete without significant capital investment or loans beyond what is available to us in current and future capital raising efforts. No assurance can be provided that we canwill be able to successfully acquiremaintain the amount of capital resources required to successfully compete and survive as a business.
We have a substantial amount of obligations, including streaming content obligations, which, together with any debt we may incur in the future, could adversely affect our financial position.
We have a substantial amount of obligations, including streaming content obligations. Moreover, we expect to incur substantial indebtedness in the future and to incur other obligations, including additional streaming content obligations. As of December 31, 2021, we had approximately $9.7 million of total content liabilities as reflected on our consolidated balance sheet. Such amount does not include streaming content commitments that do not meet the criteria for liability recognition, the amounts of which are significant. For more information on our streaming content obligations, including those not on our balance sheet, see Note 13 in the accompanying notes to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Our obligations, including streaming content obligations, may:
Our streaming obligations to licensors include large multi-year commitments. As a result, we may be unable to react to any downturn in the economy or reduction in our cash flows from operations by reducing our streaming content obligations in the near-term. This could result in our needing to access the capital markets at an unfavorable time, which may negatively impact our business.
The long-term and fixed cost nature of our content commitments may limit our operating flexibility and could adversely affect our liquidity and results of operations.
In connection with licensing content, we typically enter into multi-year commitments with content providers. We also enter into multi-year commitments for content that we produce, either directly or through third parties, including elements associated with these productions such as non-cancellable commitments under talent agreements. The payment terms of these agreements are not tied to usage or the size of our user base but may be determined by costs of production or tied to such factors as titles licensed. Such commitments, to the extent estimable under accounting standards, are included in Note 13 in the accompanying notes to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Given the multiple-year duration and largely fixed cost nature of content commitments, if user acquisition and retention do not meet our expectations, our margins may be adversely impacted. Payment terms for certain content commitments, such as content we directly produce, will typically require more up-front cash payments than other content licenses or arrangements whereby we do not cash flow the production of such content. To the extent user and/or revenue growth do not meet our expectations, our liquidity and results of operations could be adversely affected as a result of content commitments and accelerated payment requirements of certain agreements. In addition, the long-term and fixed cost nature of our content commitments may limit our flexibility in planning for or reacting to changes in our business and the markets in which we operate. If we license and/or produce content that is not favorably received by consumers in a territory, or is unable to be shown in a territory, acquisition and retention may be adversely impacted and given the long-term and fixed cost nature of our content commitments, we may not be able to adjust our content offering quickly and our results of operation may be adversely impacted.
We may not be able to generate sufficient cash to service our obligations and any debt we may incur in the future.
Our ability to make payments on our obligations and any debt we incur in the future will depend on our financial and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. In each of the last three years,Since inception, our cash flows from operating activities have been negative. We may be unable to attain a level of cash flows from operating activities or maintain the level of liquidity sufficient to permit us to pay our obligations, including amounts due under our streaming content obligations, and the principal, premium, if any, and interest on any debt we incur. We may or may not be able to accurately predict the ultimate impact on our levels of liquidity from our cash flows and such predictions are subject to change.
If our cash flows are insufficient to service our obligations, including any debt we may incur in the future, and we are unable to refinance or restructure these obligations, we could face substantial liquidity problems and may be forced to reduce or delay investments and capital expenditures or to sell material assets or operations to meet our then-existing debt and other obligations. We cannot assure you that we would be able to implement any of these alternative measures on satisfactory terms or at all or that the proceeds from such alternatives would be adequate to meet any debt or other obligations then due. If it becomes necessarywe were required to implement any of these alternative measures, our business, results of operations or financial condition could be materially and adversely affected.
Risks Related to Information Technology
Any significant disruption in or unauthorized access to our computer systems or those of third parties that we utilize in our operations, including those relating to cybersecurity or arising from cyber-attacks, could result in a loss or degradation of service, unauthorized access, harm to our reputation, disclosure or destruction of data, including user and corporate information, or theft of intellectual property, including digital content assets, which could adversely impact our business.
Our reputation and ability to attract, retain and serve our users is dependent upon the reliable performance and security of our computer systems, mobile and other user applications, and those of third parties that we utilize in our operations. These systems may be subject to cyber incident, damage or interruption from earthquakes, adverse weather conditions, lack of maintenance due to human error or oversight, natural disasters, public health issues such as pandemics or endemics, terrorist attacks, power loss, or telecommunications failures.failures, cybersecurity risks and incidents, and other interruptions beyond our control. Interruptions in, destruction or manipulation of these systems, or with the internet in general, could make our service unavailable or degraded or otherwise hinder our ability to deliver streaming content. Service interruptions, errors in our software or the unavailability of computer systems or data used in our operations, delivery or user interface could diminish the overall attractiveness of our user service to existing and potential users.
Our computer systems, mobile and other applications and systems of third parties we use in our operations are vulnerable to constantly evolving cybersecurity risks, including cyber-attacks and loss of confidentiality, integrity or availability, both from state-sponsored and individual activity, such as hacks, unauthorized access, computer viruses, denial of service attacks, physical or electronic break-ins, malware, ransomware, insider threats, and misconfigurations in information systems, networks, software or hardware, errors and similar disruptions and destruction. Such systems have previously and may continue to periodically experience directed attacks intended to lead to interruptions and delays in our service and operations as well as loss, misuse or theft of data or intellectual property. Any attempt by hackers to obtain our data (including user and corporate information) or intellectual property (including digital content assets), disrupt our service, or otherwise access our systems, or those of third parties we use, if successful, could harm our business, be expensive to remedy, expose us to potential liability and damage our reputation.
We utilize our own communications and computer hardware systems located either in our facilities or in thatthose of a third-party web hosting provider. In addition, we utilize third-party “cloud” computing services in connection with our business operations. We also utilize our own and third-party content delivery networks to help us stream factual entertainment in high volume to CuriosityStream users over the internet. Problems faced by us or our third-party Web hosting, “cloud” computing, or other network providers, including technological or business-related disruptions, as well as cybersecurity threats, could adversely impact the experience of our users, resulting in a loss of users, which could adversely affect our business and results of operations.
We rely upon Amazon Web Services (“AWS”) to operate certain aspects of our service and any disruption of or interference with our use of AWS would impact our operations and our business would be adversely affected.
AWS provides a distributed computing infrastructure platform for business operations, or what is commonly referred to as a “cloud” computing service. We have architected our software and computer systems so as to utilize data processing, storage capabilities and other services provided by AWS. Currently, we run the vast majority of our computing on AWS. In addition, Amazon’s retail division competes with us for users, and Amazon could use, or restrict our use of, AWS to gain a competitive advantage against us. Because we rely heavily on AWS for computing infrastructure and we cannot easily switch our AWS operations to another cloud provider, any disruption of or interference with our use of AWS would impact our operations and our business would be adversely affected.
If the technology we use in operating our business fails, is unavailable, or does not operate to expectations, our business and results of operationoperations could be adversely impacted.
We utilize a combination of proprietary and third-party technology to operate our business. This includes the technology that we have developed to recommend and promote content to our consumers as well as enable fast and efficient delivery of content to our users and their various consumer electronic devices. If our recommendation and promotion capabilities do not enable us to predict and recommend titles that our users will enjoy, our ability to attract and retain users may be adversely affected. We also utilize third-party technology to help market our service, process payments and otherwise manage the daily operations of our business. If our technology or that of third parties we utilize in our operations fails or otherwise operates improperly, including as a result of “bugs” in our development and deployment of software, our ability to operate our service, retain existing users and add new users may be impaired. In addition, any harm to our users’ personal computers or other devices caused by software used in our operations could have an adverse effect on our business, results of operations and financial condition.
We rely on systems housed at our own premises and at those of third-party vendors, including network service providers and data center facilities, to enable viewers to stream our content in a dependable and efficient manner. We have experienced, and expect to continue to experience, periodic service interruptions and delays involving our own systems and those of our third-party vendors. We do not currently maintain live fail-over capability that would allow us to instantaneously switch our streaming operations from AWS to another cloud provider in the event of a service outage at AWS. We house the original or primary current copy of our library database at our main premises.principal operational offices. We update copies of our content on a weekly basis and house these copies offsite. Both our own facilities and those of our third-party vendors are vulnerable to damage or interruption from earthquakes, floods, fires, power loss, telecommunications failures and similar events. They also are subject to break-ins, hacking, denial of service attacks, sabotage, intentional acts of vandalism, terrorist acts, natural disasters, human error, the financial insolvency of our third-party vendors and other unanticipated problems or events. The occurrence of any of these events could result in interruptions in our service and the unauthorized access to, or alteration of, the content and data contained on our systems and that these third-party vendors store and deliver on our behalf.
We do not exercise complete control over our third-party vendors, which makes us vulnerable to any errors, interruptions, or delays in their operations. Any disruption in the services provided by these vendors could have a significant adverse impact on our business reputation, customer relations and operating results. Upon expiration or termination of any of our agreements with third party vendors, we may not be able to replace the services provided to us in a timely manner or on terms and conditions, including service levels and cost, that are favorable to us, and a transition from one vendor to another vendor could subject us to operational delays and inefficiencies until the transition is complete.
Some of our services and technologies may use open sourceopen-source software, which may restrict how we use or distribute our service or require that we release the source code of certain services subject to those licenses.
Some of our services and technologies may incorporate software licensed under open sourceopen-source licenses. Such open sourceopen-source licenses often require that source code subject to the license be made available to the public and that any modifications or derivative works to open sourceopen-source software continue to be licensed under open sourceopen-source licenses. Few courts have interpreted open sourceopen-source licenses, and the manner in which these licenses may be interpreted and enforced is therefore subject to some uncertainty. We rely on multiple employee and non-employee software programmers to design our proprietary technologies, and since we may not be able to exercise complete control over the development efforts of all such programmers we cannot be certain that they have not incorporated open sourceopen-source software into our products and services without our knowledge, or that they will not do so in the future. In the event that portions of our proprietary technology are determined to be subject to certain open source licenses, we may be required to publicly release the affected portions of our source code, be forced to re-engineer all or a portion of our technologies, or otherwise be limited in the licensing of our technologies, each of which could reduce the value of our services and technologies and materially and adversely affect our ability to sustain and grow our business.
Changes in how network operators handle and charge for access to data that travel across their networks could adversely impact our business.
We rely upon the ability of consumers to access our service through the internet. If network operators block, restrict or otherwise impair access to our service over their networks, our service and business could be negatively affected. To the extent that network operators implement usage-based pricing, including meaningful bandwidth caps, or otherwise try to monetize access to their networks by data providers, we could incur greater operating expenses and our user acquisition and retention could be negatively impacted. Furthermore, to the extent network operators create tiers of internet access service and either charge us for or prohibit us from having our content available through these tiers, our business could be negatively impacted.
Most network operators that provide consumers with access to the internet also provide these consumers with multichannel video programming. As such, many network operators have an incentive to use their network infrastructure in a manner adverse to our continued growth and success. To the extent that network operators are able to provide preferential treatment to their data as opposed to ours or otherwise implement discriminatory network management practices, our business could be negatively impacted.
We may be impacted by attempts of third parties to manipulate and exploit our software for the purpose of gaining unauthorized access to our service. If in the future we fail to successfully detect and address such issues, it may have artificial effects on our key performance indicators, such as advertising reach. It should be noted that sinceSince unauthorized access to our service may in the future happen through exploitation of software vulnerabilities, once a new method of doing so is developed by third parties, the level of unauthorized access (and attendant negative financial impact described above, if at all) may increase over time as third parties share the method until we find a way to prevent the unauthorized access, assuming we are able to do so at all. Additionally, individuals using unauthorized versions of our application are unlikely to subscribe to our paid CuriosityStream service. Moreover, once we detect and correct such unauthorized access and any key performance indicators it affects, investor confidence in the integrity of our key performance indicators could be undermined. All of the above consequences of unauthorized access to our service could have material and adverse effects on our business, operating results and financial condition.
In the ordinary course of business and in particular in connection with content acquisition and merchandising our service to our users, we collect and utilize personal data supplied by or obtained from our users. We are subject to laws, rules and regulations in the U.S.United States and in other countriesjurisdictions relating to privacy and the collection, useprivacy and security of personal information, including, but not limited to, the EU’s General Data Protection Regulation or the “GDPR,” the United Kingdom’s GDPR, the U.S. Video Privacy Protection Act (“VPPA”), the U.S. Children’s Online Privacy Protection Act (“COPPA”), the California Consumer Privacy Act (“CCPA”) and(as amended by the California Privacy Rights Act (“CPRA”).) and other state laws designed primarily to protect consumer’s personal data as collected online. Credit card networks may also require us to employ certain security and privacy controls, and failure to comply with these obligations may lead to significant liabilities.
The globalcontinue to be a challenge, which will be exacerbated as additional states adopt their own data privacy laws and regulations.
Other businesses have been criticized by privacy groups and governmental bodies for attempts to link personal identities and other information to data collected on the internet regarding users’ browsing and other habits. Increased regulation of data utilization practices, including new and evolving laws globally, self-regulation, or findings under existing laws that limit our ability to collect, transfer and use information and other data, could have an adverse effect on our business. In addition, if we were to disclose information and other data about our users in a manner that was objectionable to them, our business reputation could be adversely affected, and we could face potential legal claims, reputational loss, or enforcement actions that could impact our operating results. Internationally, we may become subject to additional and/or more stringent legal obligations concerning our treatment of customer and other personal information, and data generally, such as laws regarding data localization and/or restrictions on data export. Failure to comply with these obligations could subject us to liability, and to the extent that we need to alter our business model or practices to adapt to these obligations, we could incur additional expenses.
Our reputation and relationships with users would be harmed if our user data, particularly billing data, were to be accessed by unauthorized persons.
We maintain personal data regarding our users, including names and email addresses. This data is maintained on our own systems as well as that of third parties we use in our operations. With respect to billing data, such as credit card numbers, we and our subscribers rely on third parties to collect and secure such information. We take measures to protect against unauthorized intrusion into our users’ data. Despite these measures we, our payment processing services or other third-party services we use such as AWS, Stripe or PayPal, could experience an unauthorized intrusion into our users’ data. We also may be required to notify regulators about any actual or perceived data breach (including the EU Lead Data Protection Authority) as well as the individuals who are affected by the incident within strict time periods.
Risks Related See
We could be subjectour computer systems or those of third parties that we utilize in our operations, including those relating to economic, political, regulatory and other riskscybersecurity or arising from our international operations.
Operating in international markets requires significant resources and management attention and will subject us to regulatory, economic and political risks that may be different from or incremental to those in the United States. In addition to the risks that we face in the United States, our international operations involve risks thatcyber-attacks, could adversely affect our business, including:
Our failure to manage any of these risks successfully could harm our international operations and could have an adverse effect on our overall business and results of operations.
We are potentially subject to taxation related risks in multiple jurisdictions, and changes in U.S. tax laws, in particular, could have a material adverse effect on our business, cash flow, results of operations or financial condition.
We are a U.S.-based company potentially subject to tax in multiple U.S. and non-U.S. tax jurisdictions. Significant judgment will be required in determining our global provision for income taxes, deferred tax assets or liabilities and in evaluating our tax positions on a worldwide basis. While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that these positions may be overturned by jurisdictional tax authorities, which may have a significant impact on our global provision for income taxes.
Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. In particular, the United States recently enacted significant U.S. federal income tax reform, and certain provisions of this new U.S. federal income tax law may adversely affect us. This new U.S. federal income tax law requires complex computations that were not previously provided for under U.S. tax law. Furthermore, this new U.S. federal income tax law requires significant judgments to be made in interpretation of the law and significant estimates in the calculation of the provision for income taxes. Additional interpretive guidance may be issued by the U.S. Internal Revenue Service, the U.S. Department of the Treasury or another governing body that may significantly differ from the Company’s interpretation of this new U.S. federal income tax law, which may result in a material adverse effect onloss or degradation of service, unauthorized access, harm to our business, cash flow, resultsreputation, disclosure or destruction of operationsdata, including user and corporate information, or financial condition. In addition, governmental tax authorities are increasingly scrutinizing the tax positionstheft of companies. Many countries in the EU, as well as a number of other countries and organizations such as the Organization for Economic Cooperation and Development, are actively considering changes to existing tax laws that, if enacted,intellectual property, including digital content assets, which could increaseadversely impact our tax obligations in countries where we do business. If U.S. or non-U.S. tax authorities change applicable tax laws, our overall taxes could increase, and our business financial condition or results of operations may be adversely impacted.
Risks Related to Human Resources
We may lose key employees or may be unable to hire qualified employees.
We rely on the continued service of our senior management and other key individuals, our Chairman and the founder of our predecessor CuriosityStream LLC, John Hendricks, and our President and Chief Executive Officer, Clint Stinchcomb, members of our executive team and other key employees and the hiring of new qualified employees. In our industry, there is substantial and continuous competition for highly skilled business, product development, technical and other personnel. We may not be successful in recruiting new personnel and in retaining and motivating existing personnel, which may be disruptive to our operations. Our effort to retain and develop personnel may also result in significant additional expenses, which could affect our profitability. In addition, from time to time, there may be changes in our management team that may be disruptive to our business.
Risks RelatingDuring 2023, we initiated a plan to Ownership of Our Common Stock
Our stock price may change significantly and you could lose alleliminate 20 full time positions or part of your investment as a result.
The trading priceabout 30% of our Common Stock is likely to be volatile. The stock market recently has experienced extreme volatility. This volatility often has been unrelatedDecember 31, 2022, workforce. These reductions may negatively affect our culture or disproportionate to the operating performance of particular companies. Youcreate uncertainty regarding our future operations or employment needs, and may not be able to resell your shares at an attractive price due to a number of factors such as those listed in “— Risks Relating to the Company’s Business” and the following:
These broad market and industry fluctuations may adversely affect the market price of our Common Stock, regardless of our actual operating performance. In addition, price volatility may be greater if the public float and trading volume of our Common Stock is low. Declines in the market price of our common stock or failure of the market price to increase could also harmtherefore limit our ability to retain key employees, reduce our access to capital, incur impairment charges and otherwise harm our business. In the period following December 31, 2021, there has been a decline in the Company’s market capitalization, based upon the Company’s publicly quoted share price, below the Company’s carrying or book value. As a result, if this decline in our share price is sustained, this would require us to perform impairment testing of our content assets, goodwill, definite-lived intangible assets, and other long-lived assets and ithire qualified personnel or may result in an impairment charge related to such assets.
In the past, following periods of market volatility, stockholders have instituted securities class action litigation. If we were involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from our business regardless of the outcome of such litigation.
If securities analysts do not publish research or reports about our business or if they downgrade our stock or our sector, our stock price and trading volume could decline.
The trading market for our Common Stock relies in part on the research and reports that industry or financial analysts publish about us or our business. We do not control these analysts. In addition, some financial analysts may have limited expertise with our model and operations. Furthermore, if one or more of the analysts who do cover us downgrade our stock or industry, or the stock of any of our competitors, or publish inaccurate or unfavorable research about our business, the price of our stock could decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline.
Because there are no current plans to pay cash dividends on our Common Stock for the foreseeable future, you may not receive any return on your investment in our Common Stock unless you sell your shares of our Common Stock for a price greater than that which you paid for it.
We intend to retain future earnings, if any, for future operations, expansion and debt repayment (for any debt we may incur in the future) and there are no current plans to pay cash dividends on shares of our Common Stock for the foreseeable future. The declaration, amount and payment of any future dividends on shares of our Common Stock will be at the sole discretion of our Board. Our Board may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax, and regulatory restrictions, implications on the payment of dividends by us to our stockholders or by our subsidiaries to us and such other factors as our Board may deem relevant. In addition, our ability to pay dividends is limited by covenants of our existing and outstanding indebtedness and may be limited by covenants of any future indebtedness we incur. As a result, you may not receive any return on an investment in our Common Stock unless you sell your shares of our Common Stock for a price greater than that which you paid for it.
Future sales, or the perception of future sales, by us or our stockholders in the public market could cause the market price for our Common Stock to decline.
The mass sale of shares of our Common Stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our Common Stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that it deems appropriate.
Pursuantcontribute to the Investor Rights Agreement, dated October 14, 2020, by and among the Sponsor, SAQN, HFM, Legacy CuriosityStream and the officers and directorsunplanned loss of Legacy CuriosityStream party thereto, the officers and directors party to the agreement have the right, subject to certain conditions, to require us to register the salehighly skilled employees through attrition.
Certain of our stockholders may engage in business activities that compete with us or otherwise conflict with our interests.
Certain of our stockholders are in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us. Our Charter provides that none of the stockholder parties, any of their respective affiliates or any director who is not employed by us (including any non-employee director who serves as one of our officers in both his director and officer capacities) or his or her affiliates will have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate. The stockholder parties also may pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us.
We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make our Common Stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and may remain an emerging growth company for up to five years following our initial public offering. For so long as we remain an emerging growth company, we are permitted and plan to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include not being required to comply with the auditor attestation requirements of the Sarbanes-Oxley Act Section 404, not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, reduced disclosure obligations regarding executive compensation, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, the information we provide stockholders will be different than the information that is available with respect to other public companies. For example, in the proxy for our upcoming annual meeting, we will not include all of the executive compensation related information that would be required if we were not an emerging growth company. We cannot predict whether investors will find our Common Stock less attractive if we rely on these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock, and our stock price may be more volatile. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of the IPO, or (b) in which we have total annual gross revenue of at least $1.07 billion, (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period and (3) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission (the “SEC”).
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption from new or revised accounting standards.
NASDAQ may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
Our Common Stock and Warrants are listed on the NASDAQ. We cannot assure you that our securities will continue to be listed on the NASDAQ in the future. In order to continue listing our securities on the NASDAQ, we must maintain certain financial, distribution and stock price levels. Generally, we must maintain a minimum amount in stockholders’ equity (generally $2,500,000 for companies trading on the NASDAQ) and a minimum number of holders of our securities (generally 300 public holders).
If NASDAQ delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Since our Common Stock and Warrants are listed on the NASDAQ, they are covered securities. Although the states are preempted from regulating the sale of covered securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. If we were to be no longer listed on the NASDAQ, our securities would not be covered securities and we would be subject to regulation in each state in which we offer our securities.
An active, liquid trading market for our Common Stock may not be sustained, which may make it difficult for you to sell the Common Stock you purchased.
We cannot predict the extent to which investor interest in us will sustain a trading market or how active and liquid that market may remain. If an active and liquid trading market is not sustained, you may have difficulty selling any shares of our Common Stock that you purchase at a price above the price you purchased it or at all. The failure of an active and liquid trading market to continue would likely have a material adverse effect on the value of our Common Stock. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.
Anti-takeover provisions in our organizational documents could delay or prevent a change of control.
Certain provisions of our Charter and Bylaws may have an anti-takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by our stockholders.
These provisions provide for, among other things:
These anti-takeover provisions could make it more difficult for a third-party to acquire us, even if the third-party’s offer may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you desire.
Our Charter designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.
Our Charter provides that, subject to limited exceptions, any (1) derivative action or proceeding brought on our behalf, (2) action asserting a claim of breach of a fiduciary duty owed by any director, officer, stockholder or employee to us or our stockholders, (3) action asserting a claim arising pursuant to any provision of the DGCL or our Charter or Bylaws, or (4) action asserting a claim governed by the internal affairs doctrine shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, another state or federal court located within the State of Delaware. Our Charter provides that the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Notwithstanding the foregoing, the exclusive forum provision shall not apply to claims seeking to enforce any liability or duty created by the Exchange Act. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our Charter described above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find these provisions of our Charter inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.
General Risk Factors
Our Private Placement Warrants are accounted for as liabilities and the changes in value of our Private Placement Warrants could have a material effect on our financial results.
On April 12, 2021, the SEC Staff issued a statement, expressing its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the balance sheet as opposed to equity (“the SEC Staff Statement”).
After considering the SEC Staff Statement, we re-evaluated our historical accounting of our Warrants and concluded that we must amend the accounting treatment of our Private Placement Warrants. Based on our reassessment, we determined that the Private Placement Warrants should have been classified as liabilities measured at fair value on the closing date of the Merger, with subsequent changes in fair value reported in the consolidated statements of operations each reporting period. We also concluded that a portion of the transaction costs which directly related to the Merger, which were previously charged to stockholders’ equity (deficit), should be allocated to the warrant liability based on their relative fair value to the total fair value of the Private Placement Warrants and other equity securities issued by us in connection with the Merger, and recognized as transaction costs in the consolidated statement of operations.
As a result, we included the derivative liabilities related to the embedded features contained within our Private Placement Warrants on our consolidated balance sheet as of December 31, 2021 and 2020 contained in this Annual Report on Form 10-K. Accounting Standards Codification (“ASC”) Topic 815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity, provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the consolidated statements of operations. As a result of the recurring fair value measurement, our consolidated financial statements and results of operations may fluctuate quarterly, based on factors which are outside of our control. Due to the recurring fair value measurement, we have recognized quarterly, since we filed with the SEC our amended Annual Report on Form 10-K/A for the year ended December 31, 2020, and will continue to recognize the non-cash gains or losses on our Private Placement Warrants each reporting period, and the amount of such gains or losses could be material.
From time to time, we may be engaged in legal proceedings that could cause us to incur unforeseen expenses and could occupy a significant amount of our management’s time and attention.
From time to time, we may be subject to litigation or claims that could negatively affect our business operations and financial position. As we have grown, we have seen a rise in the number of litigation matters brought against us. These matters have included or could in the future include patent infringements, copyright infringement and other claims related to our content, use of music, patent infringements, employment claims, claims about our platform’s compliance with disability accommodation, data collection and privacy law, as well as consumer and securities class actions, each of which are typically expensive to defend. Litigation disputes could cause us to incur unforeseen expenses, result in content unavailability, service disruptions and otherwise occupy a significant amount of our management’s time and attention, any of which could negatively affect our business operations and financial position.
We incur significant costs as a result of operating as a public company.
We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, theNASDAQ’s listing requirements of the NASDAQ and other applicable securities laws and regulations, and, as a result, we incur significant legal, accounting and other expenses that we did not incur prior to becoming a public company. TheseThe expenses incurred by public companies generally for reporting and corporate governance purposes have generally been increasing. We expect these rules and regulations to continue to increase our legal and financial compliance costs and to make some activities more difficult, time-consuming and costly. The demands associated with being a public company may disrupt regular operations of our business by diverting the attention of some of our senior management team away from revenue producing activities to management and administrative oversight, adversely affecting our ability to attract and complete business opportunities and increasing the difficulty in both retaining professionals and managing and growing our businesses. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our Common Stock, fines, sanctions and other regulatory action and potentially civil litigation. Any of these effects could harm our business, financial condition, and results of operations.
Compliance obligations under the Sarbanes-Oxley Act require substantial financial and management resources.
The standards required for a public company under Section 404 of the Sarbanes-Oxley Act requires that we evaluate and report on our system of internal controls. For as long as we remain an emerging growth company, we will not be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. However, in the event we are deemed to be an accelerated filer or a large accelerated filer andor otherwise no longer qualify as an emerging growth company, we will be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. The maintenance of the internal control system to achieve compliance with the Sarbanes-Oxley Act may impose obligations on us and require substantial additional financial and management resources. Further, weaknessesa material weakness in our disclosure controls and internal control over financial reporting havehas been discovered in the past and may be discovered in the future. For example, in 2021, we concluded that it was appropriate to restate our previously issued audited financial statements as of and for the period ended December 31, 2020, and as part of such process, we identified a material weakness in our internal control over financial reporting. We reevaluated the accounting treatment of the Private Placement Warrants, and determined to classify the Private Placement Warrants as liabilities measured at fair value, with subsequent changes in fair value reported in the consolidated statements of operations each reporting period.
We cannot assure you that there will not be additional material weaknesses in our internal control over financial reporting now or in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines that we have a material weakness in our internal control over financial reporting,
Item
None.
Item
Our principal operational offices are located in Silver Spring, Maryland, where we lease approximately 15,500 square feet of office space, under a lease expiring in February 2033, pursuant to which we currently pay approximately $48,000$45,000 per month escalating annually to $57,000 per month through the end of the lease term. We believe that this facility is adequate to meet our current and near-term needs.
Item
From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, if determined adversely to us, we believe would individually or in the aggregate have a material adverse effect on our business, results of operations, financial condition or cash flows.
Item
Not applicable.
Part II
Item
Market Information
Our Common Stock and Warrants are traded on NASDAQ under the symbols “CURI” and “CURIW,” respectively.
Dividends
We have nevernot declared or paid any cash dividends on our Common Stock. We currently intend to retain earnings, if any, to financeStock from the growth and developmenttime we incorporated through December 31, 2023.
Holders
As of March 29, 2022,18, 2024, there were approximately 133 holdersapproximately 206 holders of record of our Common Stock, and 9 holders of record of our Warrants. The actual number of holders of our Common Stock is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares of our Common Stock are held in street name by banks, brokers and other nominees.
Recent Sales of Unregistered Equity Securities
None.
Use of Proceeds
Not Applicable.
Issuer Purchases of Equity Securities
None.
Item 6. [Reserved]
Item
On October 14, 2020, we acquired Legacy CuriosityStream. The Business Combination was accounted for as a reverse recapitalization in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations. Under this method of accounting, Software Acquisition Group Inc., which was the legal acquirer in the Business Combination, was treated as the “acquired” company for financial reporting purposes and Legacy CuriosityStream was treated as the accounting acquirer. Except as otherwise provided herein, our financial statements presentation includes (1) the results of Legacy CuriosityStream as our accounting predecessor for periods prior to the completion of the Business Combination, and (2) the results of the Company for periods after the completion of the Business Combination.
The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our results of operations and financial condition. The following discussion should be read in conjunction with the Company’s consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described in Discovery Channel and former Chairman of Discovery Communications, CuriosityStream is a media and entertainment company that offers premium video and audio programming across the principal categories of factual entertainment, including science, history, society, nature, lifestyle and technology. Our mission is to provide premium factual entertainment that informs, enchants and inspires.“Risk Factors”Risk Factors and elsewhere in this Annual Report on Form 10-K. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “we,” “us,” “our,” and “the Company” are intended to mean the business and operations of Legacy CuriosityStream prior to the Business Combination and to CuriosityStream Inc. following the closingBusiness Combination.Overvieware seekingseek to meet demand for high-quality factual entertainment via SVoDSVOD platforms, as well as viacontent licensing, bundled content licenses for SVoDSVOD and linear offerings, talks and courses and partner bulk sales, brand partnershipssales.sales. We are well-positioned for growth as a digital-native video platform monetizing content across this broadlicensing arrangements ("Content Licensing"),stack.including advertising and sponsorships ("Other").
We operate our business as a single operating segment that provides premium streaming content through multiple channels, including the use of various applications, partnerships and affiliate relationships. We generate our revenue through six products
Year Ended December 31, | $ Change | % Change | |||||||||||||||||||||||||||||||||
(in thousands) | 2023 | 2022 | |||||||||||||||||||||||||||||||||
Revenues | |||||||||||||||||||||||||||||||||||
Direct Business | $ | 34,592 | 61 | % | $ | 34,120 | 44 | % | $ | 472 | 1.4 | % | |||||||||||||||||||||||
Content Licensing | 14,047 | 25 | % | 24,691 | 32 | % | (10,644) | (43 | %) | ||||||||||||||||||||||||||
Bundled Distribution | 6,316 | 11 | % | 11,726 | 15 | % | (5,410) | (46 | %) | ||||||||||||||||||||||||||
Enterprise | 141 | — | % | 5,520 | 7 | % | (5,379) | (97 | %) | ||||||||||||||||||||||||||
Other | 1,793 | 3 | % | 1,986 | 3 | % | (193) | (10 | %) | ||||||||||||||||||||||||||
Total revenues | $ | 56,889 | 100 | % | $ | 78,043 | 100 | % | $ | (21,154) | (27 | %) | |||||||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||||||||||
Cost of revenues | $ | 35,553 | 35 | % | $ | 51,536 | 39 | % | (15,983) | (31 | %) | ||||||||||||||||||||||||
General and administrative | 29,447 | 29 | % | 37,479 | 28 | % | (8,032) | (21 | %) | ||||||||||||||||||||||||||
Advertising and marketing | 17,390 | 17 | % | 40,709 | 31 | % | (23,319) | (57 | %) | ||||||||||||||||||||||||||
Impairment of content assets | 18,970 | 19 | % | — | 0 | % | 18,970 | n/m* | |||||||||||||||||||||||||||
Impairment of goodwill and intangible assets | — | — | % | 3,603 | 3 | % | (3,603) | n/m* | |||||||||||||||||||||||||||
Total operating expenses | $ | 101,360 | 100 | % | $ | 133,327 | 100 | % | $ | (31,967) | (24 | %) | |||||||||||||||||||||||
Operating loss | (44,471) | (55,284) | 10,813 | (20 | %) | ||||||||||||||||||||||||||||||
Other income (expense) | |||||||||||||||||||||||||||||||||||
Change in fair value of warrant liability | 213 | 5,404 | (5,191) | (96 | %) | ||||||||||||||||||||||||||||||
Interest and other income | 1,272 | 176 | 1,096 | 623 | % | ||||||||||||||||||||||||||||||
Equity interests loss | (5,404) | (846) | (4,558) | 539 | % | ||||||||||||||||||||||||||||||
Loss before income taxes | $ | (48,390) | $ | (50,550) | $ | 2,160 | (4 | %) | |||||||||||||||||||||||||||
Provision for income taxes | 506 | 367 | 139 | 38 | % | ||||||||||||||||||||||||||||||
Net loss | $ | (48,896) | $ | (50,917) | $ | 2,021 | (4 | %) | |||||||||||||||||||||||||||
* Percentage not meaningful |
Year Ended December 31, | ||||||||||||||||
2021 | 2020 | |||||||||||||||
Direct to Consumer (Subscriptions - O&O and App Services) | $ | 23,519 | 33 | % | $ | 15,226 | 39 | % | ||||||||
Partner Direct Business (License Fees – Affiliates) | 4,240 | 6 | % | 3,059 | 7 | % | ||||||||||
Bundled Distribution (License Fees – Affiliates) | 14,332 | 20 | % | 13,773 | 35 | % | ||||||||||
Program Sales | 24,758 | 35 | % | 5,691 | 15 | % | ||||||||||
Corporate & Association Partnerships (Subscriptions – O&O Service) | 1,302 | 2 | % | 1,282 | 3 | % | ||||||||||
Other | 3,110 | 4 | % | 590 | 1 | % | ||||||||||
Revenues | $ | 71,261 | $ | 39,621 |
Our award-winning video content library features thousandsOperating loss for the years ended December 31, 2023, and 2022, was $44.5 million and $55.3 million, respectively. The decline in operating loss of nonfiction episodes, including$10.8 million, or 20%, primarily resulted from the decreases to our operating expenses of $32.0 million, or 24%, which more than 1,000 original, commissionedoffset the decline in revenues of $21.2 million, or co-produced documentaries,27%, for the year ended December 31, 2023, compared to the year ended December 31, 2022.
The MVPD, vMVPDmultichannel video programming distributors (“MVPDs”), virtual MVPDs (“vMVPDs”) and digital distributor partners making up our Partner Direct Business pay us a license fee for sales to individuals who subscribe to CuriosityStream via the partners’ respective platforms. We have affiliate agreement relationships with, and our service is available directly from, major MVPDs that include Comcast, Cox, Dish and vMVPDs and digital distributors that include Amazon Prime Video Channels, Apple Channel, Roku Channels,Channel, Sling TV and YouTube TV.
In addition toThe following table details our Direct Business for the years ended December 31, 2023, and 2022:
Year Ended December 31, | $ Change | % Change | |||||||||||||||||||||||||||||||||
(in thousands) | 2023 | 2022 | |||||||||||||||||||||||||||||||||
Direct-to-Consumer: | |||||||||||||||||||||||||||||||||||
O&O Consumer Service | $ | 26,502 | 77 | % | $ | 25,549 | 75 | % | $ | 953 | 4 | % | |||||||||||||||||||||||
App Services | 3,384 | 10 | % | 3,940 | 12 | % | (556) | (14 | %) | ||||||||||||||||||||||||||
Total Direct-to-Consumer | 29,886 | 86 | % | 29,489 | 86 | % | 397 | 1 | % | ||||||||||||||||||||||||||
Partner Direct Business | 4,706 | 14 | % | 4,631 | 14 | % | 75 | 2 | % | ||||||||||||||||||||||||||
Total Direct Business | $ | 34,592 | 100 | % | $ | 34,120 | 100 | % | $ | 472 | 3 | % | |||||||||||||||||||||||
In our Program Sales Business, we selllicense to certain media companies a collection of our existing titles from our content library in a traditional program salescontent licensing deal. We also sellpre-sell selected rights (such as in territories or on platforms that are lower priority for us) to content we create before we even begin production. This latter model reduces risk in our content development decisions and creates programcontent licensing revenue. The following table details our Content Licensing results for the years ended December 31, 2023, and 2022:
Year Ended December 31, | $ Change | % Change | |||||||||||||||||||||||||||||||||
(in thousands) | 2023 | 2022 | |||||||||||||||||||||||||||||||||
Library sales* | $ | 11,739 | 84 | % | $ | 6,131 | 25 | % | $ | 5,608 | 91 | % | |||||||||||||||||||||||
Presales | 2,308 | 16 | % | 18,560 | 75 | % | (16,252) | (88 | %) | ||||||||||||||||||||||||||
Total Content Licensing | $ | 14,047 | 100 | % | $ | 24,691 | 100 | % | $ | (10,644) | (43 | %) | |||||||||||||||||||||||
* The 2023 amount includes $9.9 million from trade and barter transactions. |
Our Corporate & Association PartnershipsBundled Distribution business includes affiliate relationships with our Bundled MVPD Partners and vMVPDs, which are broadband and wireless companies in the U.S. and international territories to whom we can offer a broad scope of rights, including 24/7 “linear” channels, our video-on-demand content library, mobile rights and pricing and packaging flexibility, in exchange for an annual fixed fee or fee per subscriber.
In the future, we also hope to continue developing integrated digital brand partnerships with advertisers. These sponsorship campaigns offer companies the chance to be associated with CuriosityStream content in a variety ofthe forms including short and long form program integration, branded social media promotional videos, broadcast advertising spots, and digital display ads.described above. We believe the impressions accumulated in these multi-faceted campaigns would roll up to verifiable metrics for the clients. We executed one such advertising agreement in 2021 with Nebula. We executed on two such sponsorships in 2020: one in
Priordecline of $0.2 million or 10% from 2022. This decline was largely due to the Business Combination, Software Acquisition Group Inc. wasexpiration of certain marketing arrangements during 2022 and the early part of 2023, partially offset by new marketing services we provided as part of trade and barter transactions, which totaled $1.1 million for 2023.
Recent Developments
Acquisitions
On May 11, 2021, the Company consummated the acquisition of 100% of One Day University for the aggregate consideration of $4.5 million. One Day University provides access to talkssubtitling and lectures from professors at collegesbroadcast costs. Producing and universities in the United States.
On August 13, 2021, the Company consummated the acquisition of 100% of Learn25 for fixed cash consideration of approximately $1.5 million in addition to an earnout capped at $0.6 million. Learn25 provides access to hundreds of audio and video programs on history, science, psychology, health, religion, and other topics from various professors and subject-matter experts around the world.
Each of these acquisitions complements and enhances the Company’s offering of premium factualco-producing content and provides additional long-termcommissioned content is generally more costly than content acquired through licenses.
Partnership with SPIEGEL TV
On July 29, 2021, the Company acquired a 32% ownership in Spiegel TV Geschichte und Wissen GmbH & Co. KG (Spiegel Venture) for $3.3 million, expanding its European footprint through a partnership with SPIEGEL TV, the subsidiary of the German media conglomerate SPIEGEL, and its partner, Autentic, a factual content producer and distributor. Germany is the Company’s top non-English-speaking market, and the partnership expands the Company’s reach through the addition of hundreds of hours of German-dubbed programming to the Company’s SVoD service as well as a rebranded linear channel in German-speaking Europe.
Nebula Investment
On August 23, 2021, the Company purchased a 12% ownership interest in Watch Nebula LLC (Nebula) for $6.0 million with the commitment to purchase an additional 13% ownership interest for a total 25% stake, for a total of $12.5 million (through eight quarterly payments of $0.8 million). The additional equity investment can be made or declined on a quarterly basis or accelerated at any time. The Company obtained 25% representation on Nebula’s board of directors, providing the Company with significant influence, but not a controlling interest.
COVID-19 Pandemic
In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic, which continues to spread throughout the United States and globally. The full extent of the impact of the COVID-19 pandemic on our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict. See Item 1A: “Risk Factors” section set forth in this Annual Report on Form 10-K for additional details. In an effort to protect the health and well-being of our employees, our workforce has had and continues in most instances to spend a significant amount of time working from home, and international travel has been severely curtailed. Our other partners have similarly had their operations disrupted, including those partners that we use for our operations as well as development, production, and post-production of content. While we and our partners have resumed productions and related operations in many parts of the world, our ability to produce content remains affected by the pandemic.
The widespread availability of COVID-19 vaccines and corresponding rates of vaccination generally have been effective in curtailing rates of infection in many parts of the United States, mitigating many of the adverse social and economic effects of the pandemic. COVID-19 vaccinations have continued to increase, including as a result of the approval of vaccine boosters, access to the vaccine for school-aged children, and the implementation of vaccine requirements by certain public sector and private sector employers. Notwithstanding, there remains significant resistance to vaccination in certain geographies and among certain groupings of people. Additionally, regulators have approved oral antiviral treatment pills, which have proven effective in reducing severe illness from COVID-19. In many locations throughout the United States, the spread of COVID-19 decreased substantially throughout the spring and summer of 2021, and, as a result, certain activity restrictions were lifted in whole or in part; however, due in large part to the increased spread of new, more transmissible coronavirus variants, the number of individuals diagnosed with COVID-19 increased substantially at the end of 2021 and early 2022.
We anticipate that these actions and the global health crisis caused by COVID-19, including any resurgences, such as by the “delta” and “omicron” variants of the virus, will continue to negatively impact business activity across the globe. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, local or foreign authorities, or that we determine are in the best interests of our employees, customers, partners, and stockholders. It is not clear what potential effects any such alterations or modifications may have on our business, including the effects on our customers, suppliers, or vendors, or on our financial results.
Key Factors Affecting Results of Operations
Our future operating results and cash flows are dependent upon a number of opportunities, challenges, and other factors, including our ability to efficiently grow our subscriber base and expand our service offerings to maximize subscriber lifetime value. In particular, we believe that the following factors significantly affected our results of operations over the last two fiscal years and are expected to continue to have such significant effects:
Revenues
Currently, the main sources of our revenue are (i) subscriber fees from the Direct to Consumer Business and Direct Subscribers, (ii) license fees from affiliates who receive subscriber fees for CuriosityStream from such affiliates’ subscribers (“Partner Direct Business” and “Partner Direct Subscribers”), (iii) bundled license fees from distribution affiliates (“Bundled MVPD Business” and “Bundled MVPD Subscribers”), and (iv) license fees from program sales arrangements. As of December 31, 2021, we had approximately 23 million total paying subscribers, including Direct Subscribers, Partner Direct Subscribers and Bundled MVPD Subscribers.
Since our founding in 2015, we have generated the majority of our revenues from Direct Subscribers in the form of monthly or annual subscription plans. We charge $2.99 per month or $19.99 dollars per year for our standard Direct Service, or $9.99 per month or $69.99 per year for our premium Direct Service. We may in the future increase the price of our subscription plans, which may have a positive effect on our revenue from this line of our business. The MVPD, vMVPDSmart Bundle and digital distributor partners, making upas well as fees owed to the Spiegel Venture related to our Partner Direct Business pay us a license fee. We recognize subscription revenues ratably during each subscriber’s monthly or yearly subscription period.German SVOD service. We pay a fixed percentage distribution fee to our partners for subscribers accessing our platform via App Services to compensate these partners for access to their customer and subscriber bases. OurThe MVPD, vMVPD and digital distributor partners making up our Partner Direct business pay us a license fee, and host and stream our content to their customers via their own platforms, such as set top boxes in the case of most MVPDs. We do not incur billing, streaming or backend costs associated with content distribution through our MVPD, vMVPD and digital distributor partners.
Operating Costs
Our primary operating costs relate to theThe following table details cost of producingrevenues for the years ended December 31, 2023, and acquiring our2022:
Year Ended December 31, | $ Change | % Change | |||||||||||||||||||||||||||||||||
(in thousands) | 2023 | 2022 | |||||||||||||||||||||||||||||||||
Content amortization | $ | 22,905 | 64 | % | $ | 39,291 | 76 | % | $ | (16,386) | (42 | %) | |||||||||||||||||||||||
Other* | 12,648 | 36 | % | 12,245 | 24 | % | $ | 403 | 3 | % | |||||||||||||||||||||||||
Total cost of revenues | $ | 35,553 | 100 | % | $ | 51,536 | 100 | % | $ | (15,983) | (31 | %) | |||||||||||||||||||||||
* Includes commissions, distribution, production and broadcast, promotions and sponsorships, and other expenses. |
Year Ended December 31, | $ Change | % Change | |||||||||||||||||||||||||||||||||
(in thousands) | 2023 | 2022 | |||||||||||||||||||||||||||||||||
Payroll and related | $ | 12,186 | 41 | % | $ | 15,016 | 40 | % | $ | (2,830) | (19 | %) | |||||||||||||||||||||||
Professional services | 6,295 | 21 | % | 8,145 | 22 | % | (1,850) | (23 | %) | ||||||||||||||||||||||||||
Stock-based compensation | 3,999 | 14 | % | 6,644 | 18 | % | (2,645) | (40 | %) | ||||||||||||||||||||||||||
Restructuring1 | 819 | 3 | % | — | — | % | 819 | n/m2 | |||||||||||||||||||||||||||
Other3 | 6,148 | 21 | % | 7,674 | 20 | % | (1,526) | (20 | %) | ||||||||||||||||||||||||||
Total general and administrative | $ | 29,447 | 100 | % | $ | 37,479 | 100 | % | (8,032) | (21 | %) | ||||||||||||||||||||||||
1 Comprised primarily of severance and workforce optimization costs resulting from a December 2023 reduction in workforce. | |||||||||||||||||||||||||||||||||||
2 Percentage not meaningful. | |||||||||||||||||||||||||||||||||||
3 Includes facilities costs, depreciation and amortization, insurance, technology and subscriptions, travel and other expenses. |
Further,During the three months ended September 30, 2023, we identified certain indicators of impairment related to content assets and performed an analysis of these assets to assess if their fair value was less than their unamortized costs. Refer to Note 4 - Balance Sheet Components for further discussion. As a result of this analysis, we incurred an impairment charge of $19.0 million related to our advertising and marketing expenditures and personnel costs constitute primary operating costs for our business. These costs may fluctuate based on advertising and marketing objectives and personnel needs. In general, we intend to focus marketing dollars on efficient customer acquisition. With respect to personnel costs, we focus on revenue-generating personnel, such as sales staff and roles that support the improvement, maintenance and marketing of our Direct Service.
Results of Operations
The financial data in the following table sets forth selected financial information derived from our audited financial statementscontent assets for the yearsyear ended December 31, 2021 and 2020 and shows our results2023. In comparison, no such impairment of operations as a percentage of revenue or as a percentage of costs, as applicable, for the periods indicated. We conduct business through one operating segment, CuriosityStream.
Year ended December 31, | ||||||||||||||||||||||||
2021 | 2020 | $ Change | % Change | |||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Subscriptions | $ | 24,821 | 35 | % | $ | 16,508 | 42 | % | $ | 8,313 | 50 | % | ||||||||||||
License fee | 43,330 | 61 | % | 22,523 | 57 | % | 20,807 | 92 | % | |||||||||||||||
Other | 3,110 | 4 | % | 590 | 1 | % | 2,520 | 427 | % | |||||||||||||||
Total Revenues | $ | 71,261 | 100 | % | $ | 39,621 | 100 | % | $ | 31,640 | 80 | % | ||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Cost of revenues | 36,673 | 30 | % | 15,418 | 20 | % | 21,255 | 138 | % | |||||||||||||||
Advertising and marketing | 52,208 | 42 | % | 42,152 | 54 | % | 10,056 | 24 | % | |||||||||||||||
General and administrative | 34,859 | 28 | % | 20,851 | 26 | % | 14,008 | 67 | % | |||||||||||||||
Total operating expenses | $ | 123,740 | 100 | % | $ | 78,421 | 100 | % | $ | 45,319 | 58 | % | ||||||||||||
Operating loss | (52,479 | ) | (38,800 | ) | (13,679 | ) | 35 | % | ||||||||||||||||
Change in fair value of warrant liability | 15,182 | (10,120 | ) | 25,302 | n/m | |||||||||||||||||||
Interest and other income | 486 | 500 | (14 | ) | (3 | %) | ||||||||||||||||||
Equity interests income | (464 | ) | - | (464 | ) | n/m | ||||||||||||||||||
Loss before income taxes | $ | (37,275 | ) | $ | (48,420 | ) | $ | 11,145 | (23 | %) | ||||||||||||||
Provision for income taxes | 360 | 179 | 181 | 101 | % | |||||||||||||||||||
Net loss | $ | (37,635 | ) | $ | (48,599 | ) | $ | 10,964 | (23 | %) |
n/m – percentage not meaningful
Revenue
Revenue for the years ended December 31, 2021 and 2020content assets was $71.3 million and $39.6 million, respectively. The increase of $31.6 million, or 80% is due to a $8.3 million increase in subscription revenue, a $20.8 million increase in license fee revenue, and a $2.5 million increase in other revenue.
The increase in subscription revenue resulted from a $8.3 million increase in subscriber fees received by us from Direct Subscribers for annual plans which resulted from increased brand awareness from greater advertising and marketing spending. The increase in license fees of $20.8 million resulted primarily from a $19.1 million increase in license fees related to a larger volume of program sales arrangements, including due to a new distribution agreement with Spiegel Venture incurred during 2021 when compared to 2020, a $0.6 million increase in revenue from Bundled MVPD partners due to new agreements launched during 2021, and a $1.1 million increase in license fees from our Partner Direct Business due to an increase in the number of subscribers. The increase in other revenue of $2.5 million is primarily due to new services agreements entered into with the Spiegel Venture and Nebula in 2021 for $1.3 million each with no comparable transactions2022.
Operating Expenses
Operating expenses for the years ended December 31, 2021, and 2020 were $123.7 million and $78.3 million, respectively. This increase2023, we separately performed an analysis of $45.3 million, or 58%, primarily resulted from the following:
Cost of Revenues: Cost of revenues forour investments in equity method investees to determine if an “other-than-temporary” impairment existed.
Advertising & Marketing: Advertising and marketing expenses for the year ended December 31, 2021, increased to $52.2 million from $42.2 million for the year ended December 31, 2020. This increase of $10.0 million, or 24% is primarily due to an increase in digital advertising of $9.5 million, an increase in radio advertising of $5.1 million, and an increase in agency fees of $1.8 million, partially offset by a decrease of $5.6 million in TV advertising and a decrease of $0.8 million in partner platforms and brand awareness advertising compared to the prior year.
General and Administrative: General and administrative expenses for the year ended December 31, 2021, increased to $34.9 million from $20.9 million for the year ended December 31, 2020. This increase of $14.0 million, or 67%, is primarily attributable to $4.2 million for incremental salaries and benefits and $2.7 million for increased stock-based compensation expense due to higher volume and the fair valuesubstantially all of the grants made to key executives, as well as incrementally increased headcount. In addition, an increase of $3.1 million is primarily attributable to finance and legal professional fees related to becoming a public company, an increase of $1.4 million due to additional insurance incurred necessary for a public company, an increase of $0.9 million related to subscriptions, an increase of $0.3 million related to the amortization of intangible assets balance.
Operating Loss
Operating loss for the years ended December 31, 2021, and 2020 was $52.5 million and $38.8 million, respectively. The increase of $13.7 million, or 35%, in operating loss resulted from the increase in revenue of $31.6 million, or 80%, offset by the increase in operating expenses of $45.3 million, or 58%, in each case during the year ended December 31, 2021, compared to the year ended December 31, 2020, as described above.
Change in Fair Value of Warrant Liability
The fair value of our warrant liability is estimated using the Black-Scholes valuation model that takes into account a number of economic assumptions, including the market price of our Common Stock and its expected volatility. Changes in these inputs from period to period may significantly affect changes in fair values. For the year ended December 31, 2021,2023, the Company recognized a $15.2$0.2 million gain related toin the change in fair value of theour warrant liability, which was duecompared to a decrease$5.4 million gain recognized in 2022. These gains are primarily the result of decreases in the fair value of the liabilities related to the Private Placement Warrants for the year. This comparedrespective periods. For additional information, including the significant assumptions used to a loss of $10.2 million recognized during the year ended December 31, 2020, which was due to an increasedetermine fair value, see Note 7 - Stockholders Equity, in the fair value of the Private Placement Warrants in the prior year.
Interest and other income (expense)
Interest and other income for the year ended December 31, 2021 was comparable to the year ended December 31, 2020.
Equity Interests Loss
For the year ended December 31, 2021,2023, interest and other income increased by $1.1 million, primarily due to our cash and cash equivalents accounts benefiting from higher market interest rates.
Provision for Income Taxes
Due to generating a loss before income taxes in each ofFor the years ended December 31, 2021,2023, and 2020,2022, we had a provision for income taxes of $360 thousand$0.5 million and $179 thousand, respectively. This increase of $181 thousand, or 101%, was primarily$0.4 million, respectively, due to an increasegenerating losses before income taxes in each year. The provision for income taxes is primarily related to foreign withholding tax expense due to an increase in contracts executed with parties in foreign jurisdictions. The Company’sincome taxes. Our provision for income taxes differs from the federal statutory rate primarily due to the Company being in a full valuation allowance position and not recognizing a tax benefit attributable to generated losses for either federal or state income tax purposes.
Net Loss
Net loss for the years ended December 31, 2021, and 2020 was $37.6 million and $48.6 million, respectively. The decrease of net loss of $11.0 million, or 23%, is primarily due to a gain on the change in the fair value of the warrant liability that resulted in a gain of $15.2 million in 2021 compared to a loss of $10.1 million in 2020 and the increase in revenue, partially offset by higher operating expenses and equity interest loss, in each case during the year ended December 31, 2021 compared to the year ended December 31, 2020, as described above.
Liquidity and Capital Resources
As of December 31, 2021, we had2023, our cash and cash equivalents, including restricted cash, of $17.5totaled $38.2 million. In addition, the Company had available for saleOur cash and cash equivalents mainly consist of investments in debt securities totaling $81.2 million, of which $65.8 million was classified asinstitutional money market funds and short-term investments. Alldeposits held at major global financial institutions. We continuously monitor the creditworthiness of the Company’s investments in debt securities can be readily convertedfinancial institutions and money market fund asset managers with whom we invest our funds, and we maintain a level of liquidity sufficient to cashallow us to meet our cash needs in both the Company’s ongoing operating cash flow needs. For the year ended December 31, 2020, we incurred a net loss of $37.6 millionshort term and used $73.2 million of net cash in operating activities, used $74.9 million of net cash in investing activities, while financing activities provided $148.3 million of net cash.
Through the date of the Merger, we financed our operations primarily from the net proceeds of our sale of Series A Preferred Stock in November and December 2018.
In connection with the Merger, we received net cash proceeds of approximately $41.5 million, prior to the payment of $5.7 million of transaction costs. On February 8, 2021, we consummated the Offering (as defined below). The net proceeds from the Offering were $94.1 million, after deducting $6.8 million in underwriting discounts and commissions. We also incurred offering expenses in connection with the Offering of $0.7 million. During the year ended December 31, 2021, we received funds of approximately $54.9 million for the exercise of 4.8 million Public Warrants.
On February 8, 2021, we consummated an underwritten public offering (the “Offering”) of 6,500,000 shares of Common Stock plus an over-allotment option to purchase up to 975,000 additional shares of Common Stock granted to the underwriters who participated in the Offering, which over-allotment option was exercised by the underwriters in full on February 5, 2021. The net proceeds to us from the Offering were $94.1 million, after deducting underwriting discounts and commissions and transaction expenses. The Offering was made pursuant to the Company’s Registration Statement on Form S-1, filed with the SEC on February 1, 2021, and declared effective on February 3, 2021.
We believe that our cash flows from financing, combined with our current cash levels, andincluding investments in debt securitiesmoney market funds that are readily convertible to cash, will be adequate to support our ongoing operations, capital expenditures and working capital for at least the next twelve months, as evidenced by our cash flows from financing activities during the year ended December 31, 2021 and our cash and investment in debt securities balances at December 31, 2021.months. We believe that we have access to additional funds in the short term and the long term, if needed, through the capital markets to obtain further financing under the current market conditions.
Our principal uses ofWe use cash areprincipally to acquire content, promote our service through advertising and marketing, and provide for working capital to operate our business. We have experienced significant net losses since our inception, and, given the significant operating and capital expenditures associated with our business plan, we anticipate that we will continue to incur net losses.
The following table presents our cash flows from operating, investing and financing activities for the years ended December 31, 20212023 and 2020:
Year ended December 31, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Net cash used in operating activities | (73,242 | ) | (53,513 | ) | ||||
Net cash (used in) provided by investing activities | (74,935 | ) | 25,455 | |||||
Net cash provided by financing activities | 148,340 | 36,623 | ||||||
Net increase in cash, cash equivalents and restricted cash | 163 | 8,565 |
Year Ended December 31, | |||||||||||
(in thousands) | 2023 | 2022 | |||||||||
Net cash used in operating activities | $ | (16,172) | $ | (39,523) | |||||||
Net cash provided by investing activities | 14,003 | 62,701 | |||||||||
Net cash used in financing activities | (123) | (218) | |||||||||
Net (decrease) increase in cash, cash equivalents and restricted cash | $ | (2,292) | $ | 22,960 |
Cash Flow from Operating Activities
Cash flow from operating activities primarily consists of net losses, changes to our content assets (including acquisitionsadditions and amortization), and other working capital items.
Year Ended December 31, | |||||||||||
(in thousands) | 2023 | 2022 | |||||||||
Net loss | (48,896) | (50,917) | |||||||||
Adjustments to reconcile net loss to net cash used in operating activities | |||||||||||
Change in fair value of warrant liability | (213) | (5,404) | |||||||||
Additions to content assets | (18,316) | (34,771) | |||||||||
Change in content liabilities | (2,455) | (6,822) | |||||||||
Amortization of content assets | 22,905 | 39,291 | |||||||||
Impairment of content assets, goodwill and intangible assets | 18,970 | 3,603 | |||||||||
Stock-based compensation | 3,999 | 6,644 | |||||||||
Equity interests loss | 5,404 | 846 | |||||||||
Other non-cash items | 1,003 | 3,031 | |||||||||
Changes in operating assets and liabilities | 1,427 | 4,976 | |||||||||
Net cash used in operating activities | (16,172) | (39,523) |
During the years ended December 31, 20212023, and 2020,2022, we recorded a net cash outflow from operating activities of $73.2$16.2 million and $53.5$39.5 million, respectively, or an increaseda decline in outflow in 2023 of $19.7$23.4 million, or 37%59%. The increased
Cash Flow Provided by (Used in) Investing Activities
Cash flow from investing activities consists of purchases, sales and maturities of investments, business acquisitions and equity investments and purchases of property and equipment.
During
Cash Flow from Financing Activities
During the year ended December 31, 2021, we recorded net cash inflow from financing activities of $148.3 million, which was attributable to the receipt of proceeds from the Offering of $94.1 million (net of $6.8 million of underwriting discounts and commissions) and the exercise of warrants of $54.9 million and exercise of stock options of $0.5 million, partially offset by the payments of transaction costs related to the Offering of $0.7 million and payments related to tax withholdings of $0.5 million related to vesting of restricted stock units incurred during the year ended December 31, 2021. During the year ended December 31, 2020, financing cash activities were limited to reverse merger acquisition proceeds of $41.5 million, payments of reverse merger acquisition offering costs of $5.1 million, borrowings and repayments of $9.7 million on the Line of Credit and proceeds from exercise of stock options of $0.3 million.
During the year ended December 31, 2021, we received funds of approximately $55 million for the exercise of 4.8 million Public Warrants.
Capital Expenditures
Going forward, we expect to makecontinue making expenditures for additions to our content assets and purchases of property and equipment.equipment, although at a slower rate than in previous periods. The amount, timing and allocation of capital expenditures are largely discretionary and within management’s control. Depending on market conditions, we may choose to defer a portion of our budgeted expenditures until later periods to achieve the desired balance between sources and uses of liquidity and prioritize capital projects that we believe have the highest expected returns and potential to generate cash flow. Subject to financing alternatives, we may also increase our capital expenditures significantly to take advantage of opportunities we consider to be attractive.
Off Balance Sheet Arrangements
As of December 31, 2021,2023, we had no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operation is based upon our financial statements, which have been prepared in accordance with U.S. GAAP. Certain amounts included in or affecting the financial statements presented in this Annual Report and related disclosuredisclosures must be estimated, requiring management to make assumptions with respect to values or conditions which cannot be known with certainty at the time the financial statements are prepared. Management believes that the accounting policies set forth below comprise the most important “critical accounting policies” for the Company. A critical accounting policy is one which is both important to the portrayal of a company’s financial condition and results of operations and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management evaluates such policies on an ongoing basis, based upon historical results and experience, consultation with experts and other methods that management considers reasonable in the particular circumstances under which the judgments and estimates are made, as well as management’s forecasts as to the manner in which such circumstances may change in the future.
Content Assets
The Company acquires, licenses and produces content, including original programming, in order to offer customers unlimited viewing of factual entertainment content. The content licenses are forContent license terms generally include a fixed fee and specific windows of availability. Payments for content, including additions to content assets and the changes in related liabilities, are classified within “Net cash used in operating activities” on the consolidated statements of cash flows.
Amortization of content assets is reported within “Cost of revenues” in the consolidated statements of operations. Based on factors including historical and estimated viewing patterns, the Company previously amortized the content assets (licensed and produced) in “Cost of revenues” on the consolidated statements of operations on a straight-line basis over the shorter of each title’s contractual window of availability or estimated period of use, beginning with the month of first availability. Starting July 1, 2021, the Company amortizes content assets on an accelerated basis in the initial two months after a title is published, on the Company’s platform, as the Company has observed and expects more upfront viewing of content, generally as a result of additional marketing efforts.
The Company’s primary business model is generally subscription basedsubscription-based as opposed to a model based on generating revenues at a specific title level. Content assets (licensed and produced) are predominantly monetized as a group and therefore are reviewed in aggregate at a group level when an event or change in circumstances indicates a change in the expected usefulness of the content or that the fair value may be less than unamortized cost. If such changes are identified, the aggregated content assetslibrary will be stated at the lower of unamortized cost or fair value. In addition, unamortized costs are written off for content assets that have been, or are expected to be abandonedabandoned.
Revenue recognition
Consumer Service. Services. —Servicemonthly subscription fees from its O&O Consumer Service. CuriosityStream subscribers enter into month-to-month or annual subscriptions with the Company. The Company bills the monthly subscriber on each subscriber’s monthly anniversary date and recognizes the revenue ratably over each monthly membership period. The annual subscription fees are collected by the Company at the start of the annual subscription period and are recognized ratably over the subsequent twelve-month period. Revenues are presented net of the taxes that are collected from subscribers and remitted to governmental authorities.Subscriptions —Direct-to-Consumer - App Services
License Fees — Affiliates
Partner Direct and Bundled Distribution.The Company generates license fee revenues from MVPDs such as Altice, Comcast and Cox as well as from vMVPDs such as Amazon Prime and Sling TV (MVPDs and vMVPDs are also referred to as affiliates). Under the terms of the agreements with these affiliates, the Company receives license fees based upon contracted programming rates and subscriber levels reported by the affiliates. In exchange, the Company licenses its content to the affiliates for distribution to their subscribers. The Company earns revenue under these agreements either based on the total number of subscribers multiplied by rates specified in the agreements or based on fixed fee arrangements. These revenues are recognized over the term of each agreement when earned.
License Fees — Program Sales
In the second quarter of 2023, the Company began entering into trade and barter transactions. The primary purpose of the transactions is the exchange of content assets through licensing agreements with media counterparties, while certain transactions may also include the exchange of advertising, whereby the Company and its counterparty exchange media campaigns or other promotional services. The Company has distribution agreements which grant a licensee limited distribution rightsreviews each transaction to confirm that the content assets, advertising or other services it receives have economic substance, and records revenue in an amount equal to the fair value of what it receives and at the time that it completes its performance obligation. For advertising, the performance obligation is satisfied upon the Company’s programs for varying terms, generally indelivery of the media campaign or other service to the counterparty. For an exchange for a fixed license fee. Revenueof content, the performance obligation is recognized oncesatisfied at the time the content is made available for the licenseecounterparty to use.
Recently Issued Financial Accounting Standards
As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (“JOBS Act”) allows the CompanyEGC, to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act until such time as the Company is no longer considered to be an EGC.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments —- Credit Losses (Topic 326), which requires that an entity measure and recognize expected credit losses for financial assets held at amortized cost and replaces ("ASU 2016-02'). The amendments in this update introduced a new standard to replace the incurred loss impairment methodology inunder current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimateinform credit losses.loss estimates. The guidance also modifiesCompany determines its allowance for doubtful accounts based on historical loss experience, customer financial condition, and current economic conditions. The Company adopted the impairment model for available-for-sale debt securities. ASU 2016-13 isnew standard effective for the Company’s fiscal year beginning January 1, 2023. The Company doesThis adoption did not expect the implementation of ASU 2016-13 to have a material impact on itsthe Company's consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
INDEX TO FINANCIAL STATEMENTSItemFinancial Statements and Supplementary DataFINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Audited Financial Statements of CuriosityStream Inc. as of and for the Yearsyears ended December 31, 20212023, and 2020
To the Stockholders and the Board of Directors of CuriosityStream Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of CuriosityStream Inc. (the Company) as of December 31, 20212023 and 2020,2022, the related consolidated statements of operations, comprehensive loss, redeemable convertible preferred stock and stockholders’stockholders' equity (deficit) and cash flows for each of the two years in the period ended December 31, 2021,2023, 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 financial position of the Company at December 31, 20212023 and 2020,2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021,2023, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’sCompany's management. Our responsibility is to express an opinion on the Company’s 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 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’sCompany'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 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 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2019. Baltimore, Maryland March The accompanying notes are an integral part of these consolidated financial statements. The accompanying notes are an integral part of these consolidated financial statements. The accompanying notes are an integral part of these consolidated financial statements. Total Stockholders’ The accompanying notes are an integral part of these consolidated financial statements. The accompanying notes are an integral part of these consolidated financial statements. On October 14, 2020, The principal business of CuriosityStream Inc. (the "Company" or "CuriosityStream") is The Company’s content assets are available for consuming directly through its owned and operated website (“O&O Consumer Service”), mobile applications developed for iOS and Android operating systems (“App Services”), and via the platforms and systems of third-party partners in exchange for license fees. The Company offers subscribers a monthly or annual subscription. The price for a subscription varies depending on the The preparation of consolidated financial statements in conformity with U.S. GAAP and the rules and regulations of the U.S Securities and Exchange Commission (the “SEC”) requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Significant Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents, investments, and accounts receivable. The Company maintains its cash, cash equivalents, and investments with high credit quality financial institutions; at times, such balances with the financial institutions may exceed the applicable FDIC-insured limits. Accounts Restricted cash maintained under agreements that legally restrict the use of such funds is not included within cash and cash equivalents and is reported in a separate line item on the consolidated balance sheets as of December 31, Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The applicable accounting guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are Level 1: Quoted prices in active markets for identical assets or liabilities. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification at each reporting period. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The Company’s assets measured at fair value on a recurring basis include its investments in money market funds and corporate, U.S. government, and municipal debt securities. Level 1 inputs were derived by using unadjusted quoted prices for identical assets in active markets and were used to value the Company’s investments in money market funds and U.S. government debt securities. Level 2 inputs were derived using prices for similar investments and were used to value the Company’s investments in corporate and municipal debt securities. The Company’s liabilities measured at fair value on a recurring basis include its The Company’s remaining financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses and other liabilities are carried at cost, which approximates fair value because of the short-term maturity of these instruments. The Company Unrealized gains and losses are recorded in accumulated other comprehensive income or loss, a component of stockholders’ equity (deficit). Realized gains and losses are reclassified from accumulated other comprehensive income or loss into earnings as a component of net income or loss. The Company evaluates unrealized losses on investments, if any, to determine if other-than-temporary impairment is required to be recognized. No such other-than-temporary impairments were recognized during the years ended December 31, The Company applies the equity method of accounting to investments when it has the ability to exercise significant influence, but not control, over the investee. Significant influence is presumed to exist when the Company owns between 20% and 50% of the voting interests in the investee, but the Company also applies judgment regarding its level of influence over the investee by considering key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions. Accounts receivable is comprised of receivables from subscriptions revenue, license fees revenue, and other The Company acquires, licenses and produces content, including original programming, in order to offer customers unlimited viewing of factual entertainment content. The Company recognizes its content assets The Company’s primary business model is Note 4 - Balance Sheet Components The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amount to the future undiscounted cash flows the assets are expected to generate. If long-lived assets are considered impaired, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds its fair value. Goodwill represents the excess of the cost of acquisitions over the amount assigned to tangible and identifiable intangible assets acquired less liabilities assumed. At least annually, in the fourth quarter of each fiscal year or more frequently if indicators of impairment exist, management performs a review to determine if the carrying value of goodwill is impaired. The identification and measurement of goodwill impairment involves the estimation of fair value at the Company’s reporting unit level, which is the same or one level below the operating segment level. The Company has determined that it has one reporting unit. The Company performs an initial assessment of qualitative factors to determine whether the existence of events and circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of relevant events and circumstances, the Company determines that it is more likely than not that the fair value of the reporting unit exceeds its carrying value and there is no indication of impairment, no further testing is During the second quarter of 2022, the Company experienced a sustained decrease in its share price, and this triggering event was an indication that it was more likely than not that the fair value of the Company’s single reporting unit was below its carrying value. The Company The Company generates revenue from The Company also Smart Bundle The Company also earns subscription revenues through its App Services. These subscriptions are similar to the O&O Service subscriptions, but are generated based on agreements with certain streaming media players as well as with Smart TV brands and gaming License Fees Cost of revenues primarily includes content asset amortization, streaming delivery costs, payment processing costs and distribution fees. Advertising and marketing expenses include digital, radio, and television advertisements as well as brand awareness The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. The fair value is recognized in earnings over the period during which an employee is required to provide the service. The Company accounts for forfeitures as they occur. The Company uses the asset and liability method of accounting for income taxes, in which deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the carrying amounts of existing assets and liabilities as reported in the consolidated balance sheets and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be reversed. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as a component of the income tax provision in the period that includes the enactment date. A valuation allowance is established if it is more likely than not that all or a portion of the deferred tax assets will not be realized. The Company’s tax positions are subject to income tax audits. The Company recognizes the tax benefit of an uncertain tax position only if it is more likely than not that the position is sustainable upon examination by the taxing authority, based on the technical merits. The tax benefit recognized is measured as the largest amount of benefit which is more likely than not (greater than 50% likely) to be realized upon settlement with the taxing authority. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in its tax provision. Refer to In June 2016, the FASB issued ASU 2016-13, Financial Instruments The Company’s holds equity investments in Spiegel TV Geschichte und Wissen GmbH & Co. KG (the “Spiegel Venture”) Company’s impairment analysis related to Nebula, the Company determined that the carrying value of this investment exceeded the fair value as of Acquisition of One Day University On May 11, 2021, the Company Acquisition of On August 13, 2021, the Company As of December 31, 2023, and December 31, 2022, the fair value of the Company’s securities investments was as follows: Realized losses were The fair value of the Company’s investments in corporate, U.S. government, and municipal debt securities $8.3 million 2022, was as follows: As described in Note 7 - Stockholders' Equity, the Private Placement Warrants are classified as a non-current liability and reported at fair value at each reporting period. The fair value of the Private Placement Warrants as of December 31, The following table sets forth the Company’s These amounts include only fixed consideration or minimum guarantees and do not include amounts related to (i) contracts with an original expected term of one year or less or (ii) licenses of content that are solely based on sales or usage-based royalties. content assets resulting from trade and barter transactions were as follows: The Company elected to recognize earnings as funds are applied to covered expenses and classify the application of funds as a reduction of the related expense in the consolidated statement of operations. The Company has the right to redeem the outstanding Public The warrant liability related to the Private Placement Warrants is recorded at fair value as of each reporting date with the change in fair value reported within other income (expense) in the accompanying consolidated statements of operations as “Change in fair value of warrant liability” until the warrants are exercised, expired or other facts and circumstances lead the warrant liability to be reclassified to stockholder’s equity (deficit). The fair value of the warrant liability for the Private Placement Warrants was estimated using a Black-Scholes pricing model using Level 3 inputs. The significant assumptions used in preparing the Black-Scholes option pricing model The Basic and diluted earnings (loss) per share Net loss attributable to common stockholders - basic For the years ended December 31, The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. The fair value is recognized in earnings over the period during which an employee is required to provide the service. The Company accounts for forfeitures as they occur. In October 2020, the The fair value of stock option awards is estimated using the Black-Scholes option pricing model, which includes a number of assumptions including Company’s estimates of stock price volatility, employee stock option exercise behaviors, future dividend payments, and risk-free interest rates. The expected term of options granted is the estimated period of time from the beginning of the vesting period to the date of expected exercise or other settlement, based on historical exercises and post-vesting terminations. The Company generally estimates expected term based on the midpoint between the vesting date and the end of the contractual term, also known as the simplified method, given the lack of historical exercise behavior. Stock-based compensation The following table summarizes the total remaining unrecognized compensation cost as of December 31, The Company operates as The Company sublets a portion of its office space to Hendricks Investment Holdings, LLC, which is considered a related party The Company has entered into various agreements with a production company The Company administers and participates in a 401(k) plan that covers employees 21 years of age or older with three months or greater of service. The plan permits elective deferrals Content obligations include amounts related to licensed, commissioned and internally produced streaming content. An obligation for the production of content includes non-cancelable commitments under creative talent and employment agreements. An obligation for the licensed and commissioned content is incurred at the time the Company enters into an agreement to obtain future titles. Once a title becomes available, a content liability is generally recorded. Certain agreements include the obligation to license rights for unknown future titles, the ultimate quantity and/or fees for which are not yet determinable as of the reporting date. The Company 2024. As of December 31, As of December 31, hand. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, Our management is responsible for establishing and maintaining an adequate system of internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financing reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Our internal control over financial reporting includes those policies and procedures that: Due to its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal control over financial reporting may vary over time. Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria set forth in This Annual Report does not include an attestation report of our registered public accounting firm due to an exemption established by the JOBS Act for “emerging growth companies.” There have been no changes in our internal control over financial reporting, as identified in connection with the evaluation required by Rule 13a-15(d) and Rule 15d-15(d) of the Exchange Act, which occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. None. We intend to file our definitive proxy statement for our The information required by this item will be included in our The information required by this item will be included in our The information required by this item will be included in our The information required by this item will be included in our The following documents are filed as part of this 2. Financial Statement Schedules. No financial statement schedules are required to be filed as part of this Annual Report. **This document is being furnished with this Form 10-K. This certification is deemed not filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act, or the Exchange Act. ***The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Pursuant to the requirements of the Securities 31, 2022CuriosityStream Inc.Consolidated Balance SheetsDecember 31, (in thousands, except par value) 2023 2022 Assets Current assets Cash and cash equivalents $ 37,715 $ 40,007 Restricted cash 500 500 Short-term investments in debt securities — 14,986 Accounts receivable, net 4,760 10,899 Other current assets 2,315 3,118 Total current assets 45,290 69,510 Investments in equity method investees 6,354 10,766 Property and equipment, net 727 1,094 Content assets, net 44,943 68,502 Operating lease right-of-use assets 3,350 3,702 Other assets 358 539 Total assets $ 101,022 $ 154,113 Liabilities and stockholders’ equity Current liabilities Content liabilities $ 407 $ 2,862 Accounts payable 4,765 6,065 Accrued expenses and other liabilities 3,705 7,752 Deferred revenue 14,521 14,281 Total current liabilities 23,398 30,960 Warrant liability 44 257 Non-current operating lease liabilities 4,283 4,648 Other liabilities 651 622 Total liabilities 28,376 36,487 Stockholders’ equity Common Stock, $0.0001 par value – 125,000 shares authorized as of December 31, 2023 and December 31, 2022; 53,286 shares issued and outstanding as of December 31, 2023; 52,853 shares issued and outstanding as of December 31, 2022 5 5 Additional paid-in capital 362,636 358,760 Accumulated other comprehensive loss — (40) Accumulated deficit (289,995) (241,099) Total stockholders’ equity 72,646 117,626 Total liabilities and stockholders’ equity $ 101,022 $ 154,113 (in thousands, except par value) December 31, 2021 2020 Assets Current assets Cash and cash equivalents $ 15,216 $ 11,203 Restricted cash 2,331 6,181 Short-term investments in debt securities 65,833 22,171 Accounts receivable 23,493 7,222 Other current assets 6,413 4,467 Total current assets 113,286 51,244 Investments in debt securities 15,430 2,825 Investments in equity method investees 9,987 - Property and equipment, net 1,342 1,346 Content assets, net 72,682 32,926 Intangibles, net 1,369 - Goodwill 2,793 - Other assets 689 254 Total assets $ 217,578 $ 88,595 Liabilities and stockholders’ equity (deficit) Current liabilities Current content liabilities $ 9,684 $ 2,116 Accounts payable 3,428 3,577 Accrued expenses and other liabilities 12,429 3,313 Deferred revenue 22,430 12,678 Total current liabilities 47,971 21,684 Warrant liability 5,661 20,843 Non-current deferred rent liability 1,290 1,027 Other liabilities 721 67 Total liabilities 55,643 43,621 Stockholders’ equity (deficit) Preferred stock, $0.0001 par value – 1,000 shares authorized at December 31, 2021 and 2020; 0 shares issued and outstanding as of December 31, 2021 and 2020 - - Common stock, $0.0001 par value – 125,000 shares authorized at December, 2021 and 2020; 52,677 shares issued and outstanding at December 31, 2021; 40,289 shares issued and 39,542 shares outstanding as of December 31, 2020 5 4 Additional paid-in capital 352,334 197,507 Accumulated other comprehensive (loss) income (222 ) 10 Accumulated deficit (190,182 ) (152,547 ) Total stockholders’ equity (deficit) 161,935 44,974 Total liabilities and stockholders’ equity (deficit) $ 217,578 $ 88,595 CuriosityStream Inc.Consolidated Statements of OperationsYear Ended December 31, (in thousands, except per share data) 2023 2022 Revenues $ 56,889 $ 78,043 Operating expenses Cost of revenues 35,553 51,536 Advertising and marketing 17,390 40,709 General and administrative 29,447 37,479 Impairment of content assets 18,970 — Impairment of goodwill and intangible assets — 3,603 Total operating expenses 101,360 133,327 Operating loss (44,471) (55,284) Change in fair value of warrant liability 213 5,404 Interest and other income 1,272 176 Equity interests loss (5,404) (846) Loss before income taxes (48,390) (50,550) Provision for income taxes 506 367 Net loss $ (48,896) $ (50,917) Net loss per share Basic $ (0.92) $ (0.96) Diluted $ (0.92) $ (0.96) Weighted average number of common shares outstanding Basic 53,044 52,787 Diluted 53,044 52,787 (in thousands, except for per share data) For the year ended
December 31, 2021 2020 Revenues $ 71,261 $ 39,621 Operating expenses Cost of revenues 36,673 15,418 Advertising and marketing 52,208 42,152 General and administrative 34,859 20,851 123,740 78,421 Operating loss (52,479 ) (38,800 ) Change in fair value of warrant liability 15,182 (10,120 ) Interest and other income 486 500 Equity interests loss (464 ) - Loss before income taxes (37,275 ) (48,420 ) Provision for income taxes 360 179 Net loss $ (37,635 ) $ (48,599 ) Less preferred dividends and accretion of issuance costs - (13,788 ) Net loss attributable to common stockholders $ (37,635 ) $ (62,387 ) Net loss per share attributable to common stockholders Basic $ (0.73 ) $ (3.30 ) Diluted $ (1.02 ) $ (3.30 ) Weighted average number of common shares outstanding Basic 51,482 18,931 Diluted 51,789 18,931 CuriosityStream Inc.Consolidated Statements of Comprehensive LossYear Ended December 31, (in thousands) 2023 2022 Net loss $ (48,896) $ (50,917) Other comprehensive income (loss) Unrealized gain on available for sale securities 40 182 Total comprehensive loss $ (48,856) $ (50,735) (in thousands) For the year ended
December 31, 2021 2020 Net loss $ (37,635 ) $ (48,599 ) Other comprehensive loss Unrealized loss on available for sale securities (232 ) (179 ) Total comprehensive loss $ (37,867 ) $ (48,778 ) CuriosityStream Inc.Consolidated Statement of Redeemable Convertible Preferred Stock and Stockholder’s Equity (Deficit)Common Stock (in thousands) Amount Balance as of
December 31, 202152,677 $ 5 $ 352,334 $ (222) $ (190,182) $ 161,935 Net loss — — — — (50,917) (50,917) Stock-based compensation, net 176 — 6,426 — — 6,426 Other comprehensive loss — — — 182 — 182 Balance as of
December 31, 202252,853 $ 5 $ 358,760 $ (40) $ (241,099) $ 117,626 Net loss — — — — (48,896) (48,896) Stock-based compensation, net 434 — 3,876 — — 3,876 Other comprehensive income — — — 40 — 40 Balance as of
December 31, 202353,287 $ 5 $ 362,636 $ — $ (289,995) $ 72,646 (in thousands) Redeemable
Convertible
Series A Additional Accumulated
Other Preferred Stock Common Stock Preferred Stock Paid-in Comprehensive Accumulated Equity Shares Amount Shares Amount Shares Amount Capital Income (Loss) Deficit (Deficit) Balance at December 31, 2019 18,383 $ 155,174 13,165 $ 1 - $ - $ - $ 189 $ (91,506 ) $ (91,316 ) Net loss - - - - - - - - (48,599 ) (48,599 ) Stock-based compensation - - - - - - 4,300 - - 4,300 Redeemable convertible preferred stock adjustment to redemption value - 13,788 - - - - (1,346 ) - (12,442 ) (13,788 ) Recapitalization of redeemable convertible preferred stock into common stock (18,383 ) (168,962 ) 18,383 2 - - 168,960 - - 168,962 Net Cash Contribution from Business Combination and PIPE financing - - 8,638 1 - - 24,864 - - 24,865 Exercise of Options - - 62 - - - 253 - - 253 Exercise of Warrants - - 41 - - - 476 - - 476 Other comprehensive loss - - - - - - - (179 ) - (179 ) Balance as of December 31, 2020 - $ - 40,289 $ 4 - $ - $ 197,507 $ 10 $ (152,547 ) $ 44,974 Net loss - - - - - - - - (37,635 ) (37,635 ) Stock-based compensation, net - - 80 - - - 6,510 - - 6,510 Issuance of Common Stock - - 7,475 1 - - 94,100 - - 94,101 Common Stock issuance costs - - - - - - (707 ) - - (707 ) Exercise of Options - - 120 - - - 502 - - 502 Exercise of Warrants - - 4,733 - - - 54,422 - - 54,422 Cancellation of escrow shares - - (20 ) - - - - - - - Other comprehensive loss - - - - - - - (232 ) - (232 ) Balance as of December 31, 2021 - $ - 52,677 $ 5 - $ - $ 352,334 $ (222 ) $ (190,182 ) $ 161,935 CuriosityStream Inc.Consolidated Statements of Cash FlowsYear Ended December 31, 2023 2022 Cash flows from operating activities Net loss $ (48,896) $ (50,917) Adjustments to reconcile net loss to net cash used in operating activities Change in fair value of warrant liability (213) (5,404) Additions to content assets (18,316) (34,771) Change in content liabilities (2,455) (6,822) Amortization of content assets 22,905 39,291 Depreciation and amortization expenses 496 699 Impairment of content assets 18,970 — Impairment of goodwill and intangible assets — 3,603 Amortization of premiums and accretion of discounts associated with investments in debt securities, net 26 1,191 Stock-based compensation 3,999 6,644 Equity interests loss 5,404 846 Other non-cash items 481 1,141 Changes in operating assets and liabilities Accounts receivable 6,139 11,862 Other assets 855 3,355 Accounts payable (1,295) 2,654 Accrued expenses and other liabilities (4,542) (4,645) Deferred revenue 270 (8,250) Net cash used in operating activities (16,172) (39,523) Cash flows from investing activities Purchases of property and equipment (5) (130) Investment in equity method investees (992) (2,438) Sales of investments in debt securities — 22,893 Maturities of investments in debt securities 15,000 43,873 Purchases of investments in debt securities — (1,497) Net cash provided by investing activities 14,003 62,701 Cash flows from financing activities Payments related to tax withholding (123) (218) Net cash used in provided by financing activities (123) (218) Net (decrease) increase in cash, cash equivalents and restricted cash (2,292) 22,960 Cash, cash equivalents and restricted cash, beginning of period 40,507 17,547 Cash, cash equivalents and restricted cash, end of period $ 38,215 $ 40,507 Supplemental disclosure: Cash paid for taxes $ 195 $ 614 Cash paid for operating leases 466 486 Right-of-use assets obtained in exchange for new operating lease liabilities — 3,965 (in thousands) For the year ended December 31, 2021 2020 Cash flows from operating activities Net loss $ (37,635 ) $ (48,599 ) Adjustments to reconcile net loss to net cash used in operating activities Change in fair value of warrant liability (15,182 ) 9,521 Additions to content assets (65,637 ) (25,994 ) Change in content liabilities 7,568 (1,190 ) Amortization of content assets 27,881 9,695 Depreciation and amortization expenses 612 391 Amortization of premiums and accretion of discounts associated with investments in debt securities, net 3,085 182 Stock-based compensation 6,964 4,300 Equity interests loss 464 - Other non-cash items 240 - Changes in operating assets and liabilities Accounts receivable (16,236 ) (5,445 ) Other assets (2,652 ) (1,584 ) Accounts payable (127 ) (1,527 ) Accrued expenses and other liabilities 7,414 1,093 Deferred revenue 9,999 5,644 Net cash used in operating activities (73,242 ) (53,513 ) Cash flows from investing activities Purchases of property and equipment (351 ) (367 ) Business acquisitions (5,362 ) - Investment in equity method investees (9,638 ) - Sales of investments in debt securities 50,377 43,190 Maturities of investments in debt securities 41,900 10,750 Purchases of investments in debt securities (151,861 ) (28,118 ) Net cash (used in) provided by investing activities (74,935 ) 25,455 Cash flows from financing activities Exercise of stock options 502 253 Exercise of warrants 54,898 - Payments related to tax withholding (454 ) - Proceeds from issuance of Common Stock 94,101 - Proceeds from Business Combination and PIPE financing - 41,506 Payment of offering costs (707 ) (5,136 ) Borrowings on line of credit - 9,758 Repayments on line of credit - (9,758 ) Net cash provided by financing activities 148,340 36,623 Net increase in cash, cash equivalents and restricted cash 163 8,565 Cash, cash equivalents and restricted cash, beginning of period 17,384 8,819 Cash, cash equivalents and restricted cash, end of period $ 17,547 $ 17,384 Supplemental schedule of non-cash financing activities: Preferred dividends and accretion of issuance costs $ - $ 13,788 Supplemental disclosure: Interest payments $ - $ 17 Cash paid for taxes $ 269 $ 253
CURIOSITYSTREAM INC.Note 1 — Organization and business(the “Closing Date”), CuriosityStream Inc., a Delaware corporation (formerly named Software Acquisition Group Inc., a special purpose acquisition company and a Delaware corporation (“SAQN”), a publicly traded special purpose acquisition company) consummated a reverse merger pursuant to that certain Agreement and Plan of Merger, (the “Merger Agreement”), dated August 10, 2020 by and among Software Acquisition Group Inc., CS Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary(the “Business Combination”). Upon the consummation of Software Acquisition Group Inc. (“Merger Sub”),the Business Combination, CuriosityStream Operating Inc., a Delaware corporation (formerly named CuriosityStream Inc. and subsequently renamed Curiosity Inc.) (“Legacy CuriosityStream”), and Hendricks Factual Media LLC, became a Delaware limited liability company (“HFM”).Pursuant to the terms of the Merger Agreement, a business combination between Software Acquisition Group Inc. and Legacy CuriosityStream was effected through the merger of Merger Sub with and into Legacy CuriosityStream, with Legacy CuriosityStream surviving as the surviving company and a wholly-ownedwholly owned subsidiary of Software Acquisition Group Inc. (the “Merger”SAQN, and collectively with the other transactions described in the Merger Agreement, the “Business Combination”). On the Closing Date, Software Acquisition Group Inc.registrant changed its name from “Software Acquisition Group Inc.” to CuriosityStream“CuriosityStream Inc. (the “Company” or “CuriosityStream”) and” Following the consummation of the Business Combination, Legacy CuriosityStream changed its name to CuriosityStreamfrom “CuriosityStream Operating Inc., which subsequently changed its name” to Curiosity“Curiosity Inc.to provideproviding customers with access to high quality factual content via a direct subscription video on-demand (SVoD)(SVOD) platform accessible by internet connected devices, or indirectly via distribution partners who deliver CuriosityStream content via the distributor’s platform or system. The Company's online library available for streaming spans the entire category of factual entertainment including science, history, society, nature, lifestyle, and technology. The library is composed ofCompany's SVOD platform offers more than three thousand6,000 accessible on-demand and ad-free productions and includes shows and series from leading non-fiction producers.streaming resolutionlocation of the subscriber, the content included (e.g., HDDirect Service or 4K)Smart Bundle service) and the length of the subscription (e.g., monthly or annual) selected by the customer. As an additional part of the Company’s App Services, it has built applications to make its service accessible on almost every major customer device, including streaming media players like Roku, Apple TV and Amazon Fire TV, all major smart TV brands (e.g., LG, Vizio, Samsung, Sony)Samsung) and gaming consoles. In addition, CuriosityStream has affiliate agreement relationships with, and its content assets are available through, certain multichannel video programming distributors (“MVPDs”) and virtual MVPDs (“vMVPDs”). The Company also has distribution agreements which grant other media companies certain distribution rights to the Company’s programs, referred to as program sales deals.content licensing arrangements. The Company also sells selected rights (such as in territories or on platforms that are not currently being exploited by the Company) to content created before production begins.Note 2 — Basis of presentation and summary of significant accounting policiesBasis of presentation(U.S. GAAP)(“U.S. GAAP”). The consolidated financial statements include the accounts of CuriosityStream Inc.the Company and its wholly owned subsidiaries.subsidiary. Intercompany balances and transactions have been eliminated.Pursuant to the Merger Agreement, the merger between Merger Sub and Legacy CuriosityStream was accounted for as a reverse recapitalization in accordance with U.S. GAAP (the “Reverse Recapitalization”). Under this method of accounting, Software Acquisition Group Inc. was treated as the “acquired” company and Legacy CuriosityStream is treated as the acquirer for financial reporting purposes.Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of Legacy CuriosityStream issuing stock for the net assets of Software Acquisition Group Inc., accompanied by a recapitalization. The net assets of Software Acquisition Group Inc. are stated at historical cost, with no goodwill or other intangible assets recorded.Legacy CuriosityStream was determined to be the accounting acquirer based on the following predominant factors:●Legacy CuriosityStream’s existing stockholders have the greatest voting interest in the Company;●The largest individual stockholder in the Company was an existing stockholder of Legacy CuriosityStream;●Legacy CuriosityStream’s directors represented the majority of the initial new Board of Directors of the Company;●Legacy CuriosityStream’s senior management is the senior management of the Company; and●Legacy CuriosityStream is the larger entity based on historical revenue and has the larger employee base.The consolidated assets, liabilities and results of operations prior to the Reverse Recapitalization are those of Legacy CuriosityStream. The shares and corresponding capital amounts and losses per share, prior to the Reverse Recapitalization, have been retroactively restated based on shares reflecting the exchange ratio of 0.626 (the “Exchange Ratio”) established in the Business Combination.Use of estimatesareas in which management usesitems subject to such estimates include the content asset amortization, the assessment of the recoverability of content assets and equity method investments, intangible assets and goodwill, the determination of fair value of assets and liabilities for allocation of the purchase price of companies acquired, and the fair value of common stock (for periods priorestimates related to the Merger),non-monetary transactions, share-based awards and liability classified warrants.Concentration of riskreceivablereceivables, net are typically unsecured and are derived from revenues earned from customers primarily located in the United States.During the years ended December 31, 2021, and 2020, the top three customers (one2021, and 26%2023, the top three customers accounted for 11% of the Company’s revenues duringwith no customer individually accounting for 10% of the year ended December 31, 2020.Company’s revenues. These same three customers accounted for 34% and 48%18% of the Company’s accounts receivable atreceivables as of December 31, 2021 and 2020, respectively.Cash, cash equivalents and restricted cashall highly liquid short-term investments in instruments purchased with an original maturity of three months90 days or less to be cash equivalents.20212023, and 2020.A reconciliation of the Company’s cash and cash equivalents in the consolidated balance sheets to cash, cash equivalents and restricted cash in the consolidated statements of cash flows as of December 31, 2021 and 2020 is as follows: December 31, 2021 2020 Cash and cash equivalents $ 15,216 $ 11,203 Restricted cash 2,331 6,181 Cash, cash equivalents and restricted cash $ 17,547 $ 17,384 At December 31, 2021, restricted cash includes funds reserved of $1,181 related to the Paycheck Protection Program (PPP) loan (see Note 6) which are being held in an escrow account until the PPP loan is forgiven, holdback amounts of $500 and $150 reserved for indemnification purposes as part of the acquisitions of One Day University and Now You Know Media, Inc. respectively (see Note 3), and cash deposits required by a bank as collateral related to corporate credit card agreements of $500. The Company’s line of credit of $4,500 was terminated on July 16, 2021, and as a result, $4,500 of cash deposits previously held by a bank as collateral were released from restriction. At December 31, 2020, restricted cash represented cash deposits required by a bank as collateral related to the Company’s line of credit for $4,500 and corporate credit card agreements of $500 as well as reserve funds of $1,181 related to the Paycheck Protection Program (PPP) loan.Fair value measurement of financial instrumentsinputsthose that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputsthose that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability.●Level 1 — Quoted prices in active markets for identical•Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.●Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term•Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.●Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.Privateprivate placement warrants issued to Software Acquisition Holdings LLC, the Company’s former Sponsor, in a private placement offering (the “Private Placement Warrants.Warrants”). The fair value of the Private Placement Warrants is considered a Level 3 valuation and is determined using the Black-Scholes valuation model. Refer to Note 7 - Stockholders' Equity for significant assumptions which the Company used in the fair value model for the Private Placement Warrants.Investmentsholdsmay hold investments in money market funds, government debt securities, and corporate debt securities which the Company classifies as available-for-sale. The investments are therefore carried at fair value based on unadjusted quoted market prices (Level 1) and quoted prices for comparable assets (Level 2).20212023, and 2020.2022. Investments in debt securities that will mature within one year of the balance sheet dates are reflected as Short-termshort-term investments in debt securities in the accompanying consolidated balance sheets.Equity Method Investmentsinterestsmethod investment income (loss)” on the consolidated statements of operations. The Company classifies distributions received from equity method investments using the cumulative earnings approach onin the consolidated statements of cash flows.The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. Management reviewed the underlying net assets of its investees as of December 31, 2021, and determined that the Company’s proportionate economic interest in its investees was not impaired. The carrying value of the Company’s equity method investments is reported as “Investment in equity method investees” on the consolidated balance sheets.Accounts receivablerevenue such as service agreements with the Spiegel Venture and a marketing services agreement with Nebula.revenue. The Company records accounts receivable net of an allowance for doubtful accounts. The allowance is determined based on a review of the estimated collectability of the specific accounts and historical loss experience and existing economic conditions. Uncollectible amounts are written off against the allowance for doubtful accounts once management determines collection of ansuch amount, or a portion thereof, to be less than probable. As of December 31, 2021,2023, and 2020,2022, allowance for doubtful accounts amounted to $56$0.5 million and $14,$0.1 million, respectively.Content assets, netThe content licenses are forContent license terms generally include a fixed fee and specific windows of availability. Payments for content, including additions to content assets and the changes in related liabilities, are classified within “Net cash used in operating activities” on the consolidated statements of cash flows. (licensed and produced) as “Content assets, net” on the consolidated balance sheets. For licenses,licensed content, the Company capitalizes the fee per title and records a corresponding liability at the gross amount of the liability when the license period begins, the cost of the title is known, and the title is accepted and available for streaming. For productions, the Company capitalizes costs associated with the production, including development costs, direct costs and production overhead. the Company previously amortized the content assets (licensed and produced) in “Cost of revenues” on the consolidated statements of operations on a straight-line basis over the shorter of each title’s contractual window of availability or estimated period of use, beginning with the month of first availability. Starting July 1, 2021, the Company amortizes content assets on an accelerated basis in the initial two months after a title is published, on the Company’s platform, as the Company has observed and expects more upfront viewing of content, generally as a result of additional marketing efforts.originalproduced content is more accelerated than that of licensed content. This change in estimated amortization patterns did not have a material impact on the amount of content amortization expense recorded during the year ended December 31, 2021. The Company reviews factors that impact the amortization of the content assets on a regular basis and the estimates related to these factors require considerable management judgment. The Company continues to review factors impacting the amortization of content assets on an ongoing basis and will also record amortization on an accelerated basis when there is more upfront use of a title, for instance due to significant program sales.generally subscription basedsubscription-based as opposed to a model based on generating revenues at a specific title level. Content assets (licensed and produced) are predominantly monetized as a group and therefore are reviewed in aggregate at a group level when an event or change in circumstances indicates a change in the expected usefulness of the content or that the fair value may be less than unamortized cost. If such changes are identified, the aggregated content assetslibrary will be stated at the lower of unamortized cost or fair value. No such changes were identified during the years ended December 31, 2021 and 2020. In addition, unamortized costs are written off for content assets that have been, or are expected to be abandoned are written off.PropertyDuring the three months ended September 30, 2023, the Company assessed the fair value of its content assets as a result of identifying indicators of impairment related to those assets. The Company determined that the unamortized cost exceeded the fair value, and equipmentas such, the Company recorded a $19.0 million impairment of its content assets. Refer to Long-lived assetsNo impairment charge related to long-lived assets was recognized forFor the years ended December 31, 2021,2023, and 2020.Warrant liabilityThe Company classifies its Private Placement Warrants as liabilities as the terms of these warrants provide for potential changes to the settlement amounts dependent upon the characteristics of the warrant holder and because the holder of a warrant is not an input into the pricing of a fixed-for-fixed option on equity shares. Such provisions would preclude the warrant from being classified in equity and thus the warrant is classified as a liability. The Private Placement Warrants are recorded at fair value on the consolidated balance sheets and changes in the fair value of the Company’s Private Placement Warrants in each period are reported in “Change in fair value of warrant liability” on the consolidated statements of operations.Business CombinationsThe results of businesses acquired in a business combination are included in our consolidated financial statements from the date of the acquisition. The Company uses the acquisition method of accounting and allocates the purchase price, including the fair value of any non-cash consideration, to the identifiable assets and liabilities of the relevant acquired business at their acquisition date fair values. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill. While2022, the Company uses its best estimates and assumptionsrecognized no impairment charges related to accurately valuelong-lived assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, its estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations.Determining the fair value of assets acquired and liabilities assumed requires the Company to perform valuations with significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenue, costs and cash flows, discount rates and selection of comparable companies. The Company engages the assistance of valuation specialists in concluding on fair value measurements in connection with determining fair values of assets acquired and liabilities assumed in a business combination. Transaction costs associated with business combinations are expensed as incurred, and are included in general and administrative expense in the consolidated statements of operations.Goodwill and intangible assetsperformed; however,performed. However, if the Company concludes otherwise, an impairment test must be performed by estimating the fair value of the reporting unit and comparing it with its carrying value, including goodwill.Generalgeneral and administrative expenses onin the consolidated statements of operations. The Company reviews identifiable finite-lived intangible assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset and its ultimate disposition. Measurement of any impairment loss is based on the amount by which the carrying value of the asset exceeds its fair value.completed the required annualperformed an interim goodwill impairment test of its goodwill as of June 30, 2022, and recognized a goodwill impairment charge of $2.8 million for its singlethe three months ended June 30, 2022, as the fair value of the reporting unit aswas less than the related carrying value. This charge was included in impairment of October 1, 2021, resulting in no goodwill impairment. The Company also determined there were no indicators of impairment with respect to its amortizableand intangible assets duringin the Company’s consolidated statements of operations for the year ended December 31, 2021.Revenue recognition — monthly subscription fees from its O&O Consumer Service. CuriosityStream subscribers enter into month-to-month or annual subscriptions with the Company. The Company bills the monthly subscriber on each subscriber’s monthly anniversary date and recognizes the revenue ratably over each monthly membership period. The annual subscription fees are collected by the Company at the start of the annual subscription period and are recognized ratably over the subsequent twelve-month period. Revenues are presented net of the taxes that are collected from subscribers and remitted to governmental authorities.offers gift certificates for use onprovides a future date.Smart Bundle membership that includes access to our standard service, as well as subscriptions to certain third-party platforms. The Company recognizes revenue from gift certificatesthe gross subscription revenues when earned and simultaneously recognizes the services have been provided.corresponding fees for the third-party platforms as an expense. The gift certificates do not expire.Company is the principal in these relationships as it has control over providing the customer with access to the third-party platforms and the determination of the Subscriptions — App Servicesconsoles (see Note 1).consoles. Under these agreements, the streaming media player typically bills the subscriber directly and then remits the collected subscriptions to the Company, net of a distribution fee. The Company recognizes the gross subscription revenues when earned and simultaneously recognizes the corresponding distribution fees as an expense. The Company is the principal in these relationships as the Company retains control over service delivery to its subscribers. — Affiliates Altice, Comcast and Cox as well as from vMVPDs such as Amazon Prime and Sling TV (MVPDs and vMVPDs are also referred to as affiliates). Under the terms of the agreements with these affiliates, the Company receives license fees based upon contracted programming rates and subscriber levels reported by the affiliates. In exchange, the Company licenses its content to the affiliates for distribution to their subscribers. The Company earns revenue under these agreements either based on the total number of subscribers multiplied by rates specified in the agreements or based on fixed fee arrangements. These revenues are recognized over the term of each agreement when earned.License Fees — Program SalesTable of Contentshas distribution agreements which grant a licensee limited distribution rightsreviews each transaction to confirm that the content assets, advertising or other services it receives have economic substance, and records revenue in an amount equal to the fair value of what it receives and at the time that it completes its performance obligation. For advertising, the performance obligation is satisfied upon the Company’s programs for varying terms, generally indelivery of the media campaign or other service to the counterparty. For an exchange for a fixed license fee. Revenueof content, the performance obligation is recognized oncesatisfied at the time the content is made available for the licenseecounterparty to use.The Company’s performance obligations include (1) access to its SVoD platform via the Company’s O&O Service and App Services, (2) access to the Company’s content assets, and (3) licenses of specific program titles. In contracts containing the right to access the Company SVoD platform, the performance obligation is satisfied as access to the SVoD platform is provided post any free trial period. In contracts which contain access to the Company’s content assets, the performance obligation is satisfied as access to the content is provided. For contracts with licenses of specific program titles, the performance obligation is satisfied as that content is made available for the customer to use.Payment terms for access to the Company’s SVoD services require payment in advance on or prior to the date access to the service is provided. Payments for contracts providing access to the Company’s content assets are paid either in advance, over the license term, or on a sales and usage basis. Payments for licenses of specific program titles are paid either upfront or over the license term on a fixed fee basis, or on a sales and usage basis. To date, there has been no financing component associated with the Company’s revenue arrangements and such arrangements do not contain rights of return provisions.Cost of revenuesAdvertising and marketingand television types of costs.expenditures. These costs are expensed as incurred. For the years ended December 31, 20212023, and 20202022, advertising and marketing expenses were $52,208$17.4 million and $42,152,$40.7 million, respectively, and are reflected in advertising and marketing costs in the accompanying consolidated statements of operations.Stock-based compensationSee Refer to Note 9 - Stock-Based Compensation in the Notes to Consolidated Financial Statementsfor further details.information.
From time to time, the Company approves and implements restructuring plans for the purpose of internal resource alignment and cost saving measures. Such restructuring plans may include terminating employees and cancellation of contracts. In December 2023, the Company initiated a plan to eliminate 13 full-time positions, about 20% of its workforce at the time. As a result, the Company recorded a one-time, pre-tax restructuring charge of $0.8 million, comprised primarily of severance and workforce optimization costs and reflected within general and administrative expenses in the accompanying consolidated statements of operations. Of this amount, the Company paid $0.1 million in 2023 and expects to pay $0.7 million in 2024.Income taxesRecently issued financial accounting standardsAs an EGC, theThe JOBS Act allows the Company, as an EGC, to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act until such time as the Company is no longer considered to be an EGC.FASBFinancial Accounting Standards Board (“FASB”) issued ASUAccounting Standards Update (“ASU”) 2016-02,Leases (Topic 842) (“ASU 2016-02”), which requires lessees to recognize lease assets and lease liabilities onin the balance sheet for those leases classified as operating leases under current U.S. GAAP. ASU 2016-02 requires a lessee to recognize a lease liability and a right-of-use asset for each lease with a term longer than twelve months. The new guidance also requires additional qualitative and quantitative disclosures related to the nature, timing and uncertainty of cash flows arising from leases.will adoptadopted the new standard effective January 1, 2022, using a modified retrospective approach.approach and electing to use the package of practical expedients permitted under the transition guidance, which allows for the carry forward of historical lease classification for existing leases on the adoption date and does not require the assessment of existing lease contracts to determine whether the contracts contain a lease or initial direct costs. Prior periods were not retrospectively adjusted.is continuing its evaluation of the impactdid not have any finance lease liabilities as of the adoption and currently estimatesdate. There was no cumulative effect adjustment to the recognitionopening balance of lease liabilities on the Company’s consolidated balance sheet for its operating leases in the rangeaccumulated deficit as of approximately $5.0 million to $6.0 million withJanuary 1, 2022. Adoption of this new guidance did not have a corresponding right-of-use assets balance, net of existing lease incentives, of approximately $3.5 million to $4.5 million, and no material impact on itsthe consolidated statements of operations or cash flows.—- Credit Losses (Topic 326), which requires that an entity measure and recognize expected credit losses for financial assets held at amortized cost and replaces ("ASU 2016-02'). The amendments in this update introduced a new standard to replace the incurred loss impairment methodology inunder current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimateinform credit losses.loss estimates. The guidance also modifiesCompany determines its allowance for doubtful accounts based on historical loss experience, customer financial condition, and current economic conditions. The Company adopted the impairment model for available-for-sale debt securities. ASU 2016-13 isnew standard effective for the Company’s fiscal year beginning January 1, 2023. The Company doesThis adoption did not expect the implementation of ASU 2016-13 to have a material impact on itsthe Company's consolidated financial statements.
In December 2023, the FASB issued ASU No. 2023-09 ("ASU 2023-09"), Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-09.Note– Equity Investments and Business Combinations(in thousands) Balance, December 31, 2022 $ 2,899 $ 7,867 $ 10,766 Investments in equity method investees 992 — 992 (2,155) (3,249) (5,404) Balance, December 31, 2023 $ 1,736 $ 4,618 $ 6,354 $3,260.an initial investment of $3.3 million. The Spiegel Venture, which prior to the Company’s equity purchase, was jointly owned and operated by Spiegel TV GmbH ("Spiegel TV") and Autentic GmbH ("Autentic"), operates two documentary channels, together with various subscription video-on-demand (“SVOD”) services,an SVOD service as well as a free advertising-supported streaming television (FAST) channel, which provide factual content to pay television audiences in Germany.Germany and certain German-speaking regions of other countries. The Company has not received any dividends from the Spiegel Venture as of December 31, 2021.ThePer the Share Purchase Agreement (as amended in early 2023, the “SPA”), in the event Spiegel Venture achieved certain financial targets during its 2022 fiscal period, the Company is required to make an additional payment related to its 32% equity ownership to both Spiegel TV and Autentic entered into five agreements (collectively “the(the “Holdback Payment”). During the three months ended June 30, 2023, the Company determined Spiegel Venture Agreements”), consisting of the Shareholder’s Agreement, the Partnership Agreement, the Service Agreement, the Distribution Agreement, and the Content Agreement. Refer to Note 11 for details of transactions betweenhad achieved such financial targets, resulting in the Company paying the Holdback Payment in the amount of $0.9 million during July 2023.theAutentic to sell its ownership interests in Spiegel Venture (“Call Option”) to the Company. The Call Option, exercisable at a value based on a determinable calculation in the SPA, is initially exercisable only during the period that is the later of (i) the 30-day period following the adoption of Spiegel Venture’s audited financial statements for the fiscal year ended December2024, and (ii) the period between March 1, 2025 and March 31, 2021.Watch Nebula LLC (“Nebula”)On August 23, 2021,Together with the Call Option, each of Spiegel TV and Autentic has a put option that permits it to require the Company purchasedto purchase their interest (“Put Option”) at a 12% ownership interestvalue based on a determinable calculation outlined in Watch Nebula LLCthe SPA. The Put Option is only exercisable upon the achievement of certain defined conditions, as outlined in the SPA, and is initially exercisable only during the period that is the later of i) the 60-day period following the adoption of Spiegel Venture’s audited financial statements for $6,000. the fiscal year 2025, and (ii) the period between April 1, 2026, and April 30, 2026. The Company is committed to purchasing an additional 13% ownership interest through eight quarterly payments of $813, which after each payment, the Company will obtain an additional 1.625% of equity ownership interests. Prior to the Company’s investment, Nebula was a 100% wholly owned subsidiary of Standard Broadcast LLC (“Standard”). TheOn August 23, 2021, the Company purchased a 12% ownership interest in Nebula for $6.0 million. Upon its initial investment, the Company obtained 25% of the representation on Nebula’s Boardboard of Directors,directors, providing the Company with significant influence, but not a controlling interest.2021.and Nebula entered into three separate agreements (collectively the “Nebula Agreements”), consisting of the Membership Interest Purchase Agreement, Amended and Restated Operating Agreement, and the Bundled Marketing and Premium Tier Agreement. Refer to Note 11 for details of transactions between the Company and Nebula during the year ended December 31, 2021.There were noregularly reviews its investments in equity method investees asfor impairment, including when the carrying value of December 31, 2020.an investment exceeds its related market or fair value. If it has been determined that an investment has sustained an “other-than-temporary” decline in value, the investment is written-down to its fair value. The roll-forwardfactors the Company considers in determining an “other-than-temporary” decline has occurred include, but are not limited to, (i) the determined market value of the investee in relation to its cost basis, (ii) the financial condition and operating performance of the investee and (iii) the Company’s intent and ability to retain the investment for a sufficient period of time to allow for recovery in the market value of the investment.valuesvalue of its investment in the Spiegel Venture exceeded the fair value as of June 30, 2023, and as such the Company recorded a $2.0 million impairment for itsthe three months ended June 30, 2023. This impairment charge in included within equity method investments during the year ended December 31, 2021 is as follows: Spiegel Venture Nebula Total Investments in equity method investees (1) $ 3,260 $ 6,813 $ 10,073 Capitalized transaction costs 304 74 378 Equity interests (loss) income (475 ) 11 (464 ) Investments in equity method investees $ 3,089 $ 6,898 $ 9,987 (1)Nebula's investment in equity method investees balance includes an accrual of $813 also reported in Accrued expenses and other liabilities as of December 31, 2021.The Company’s equity interests (loss) incomeinvestment loss for the year ended December 31, 2021 was comprised2023.following: Spiegel Venture Nebula Total Equity interests (loss) income based on investee net (loss) income $ (74 ) $ 11 $ (63 ) Intercompany profit elimination on content licensed to Spiegel Venture (401 ) - (401 ) Equity interest (loss) income $ (475 ) $ 11 $ (464 ) consummated the acquisition ofentered into an asset purchase agreement to acquire 100% of One Day University (ODU) pursuant to that certain Asset Purchase Agreement dated May 11, 2021 (“the ODU Acquisition Date”("ODU"), by and among ODU and the Company for the aggregate consideration of $4,500 (“the ODU Acquisition”).$4.5 million. ODU provides access to talks and lectures from professors at colleges and universities in the United States.At closing of the ODU Acquisition, theU.S. The Company paid $4,000$4.0 million of cash consideration with the remaining $500$0.5 million to be held by the Company as a holdback for indemnification purposes. TheOn May 11, 2022, the ODU holdback of $500 will be released twelve months after the ODU Acquisition Date and is recorded in Restricted cash and in Accrued expenses and other liabilities as of December 31, 2021, on the consolidated balance sheet.The ODU Acquisition$0.5 million was accounted for as a purchase, with the results of operations, which were not material, of ODU included in the Company’s consolidated results from May 11, 2021. The purchase consideration was allocated to assets acquired and liabilities assumed based on their fair values as of the ODU Acquisition Date as follows:Accounts receivable $ 35 Property and equipment 11 Content assets 1,000 Intangible assets 1,300 Goodwill 2,565 Accounts payable (3 ) Deferred revenue (408 ) $ 4,500 Content assets relatespaid to the lectures available on the ODU libraryprevious owners from escrow funds previously classified as well as premium programs available for purchase on the ODU platform. The cost approach was used to estimate the fair value of the content assets as of the valuation date. ODU content is recorded as part of Content assets, net on the consolidated balance sheet and is being amortized on a straight-line basis over the remaining lecturer license period from the acquisition date to the end of the license period. The weighted average useful life is 3.6 years.The amount allocated to intangible assets has been attributed to the following categories and will be amortized over the useful lives of each individual asset identified on a straight-line basis as follows: Estimated
useful lives
(years)Customer relationships $ 700 3 Trademark 500 6.5 Covenant-not-to-compete 100 3 Total intangible assets $ 1,300 Now You Know Media, Inc. (“Learn25”)consummated the acquisition ofentered into an asset purchase agreement to acquire 100% of Now You Know Media Inc. (“Learn25”) pursuant to that certain Asset Purchase Agreement dated August 13, 2021 (“the Learn25 Acquisition Date”), by and among Learn25, Michael Bloom, a shareholder of Learn25, and the Company for fixed cash consideration of $1,512 (“the Learn25 Acquisition”),$1.5 million in addition to an earnout of up to $600$0.6 million based on the achievement of certain revenue targets post-acquisition through fiscal year 2021. Learn25 provides access to hundreds of audio and video programs on history, science, psychology, health, religion, and other topics from various professors and subject-matter experts around the world.At closing of the Learn25 Acquisition, the The Company paid $1,362$1.4 million of cash consideration with the remaining $150$0.2 million to be held by the Company as a holdback for indemnification purposes. TheOn February 11, 2022, the Company paid an earnout of $0.5 million pursuant to the achievement of revenue targets in 2021. On March 4, 2022, the Learn25 holdback of $150 is recorded in Restricted$0.2 million was paid to the previous owners from escrow funds previously classified as restricted cash.Accrued expensesthe consolidated balance sheets to cash, cash equivalents and other liabilitiesrestricted cash in the consolidated statements of cash flows as of December 31, 2021, on2023, and 2022 is as follows: December 31, (in thousands) 2023 2022 Cash and cash equivalents $ 37,715 $ 40,007 Restricted cash 500 500 Cash, cash equivalents and restricted cash $ 38,215 $ 40,507 consolidated balance sheet.TheCompany paid the Learn25 Acquisition was accounted for as a purchase, withholdback of $0.2 million to the results of operations, which were not material,previous owners of Learn25 included infrom escrow funds previously classified as restricted cash. On April 16, 2022, the Company’s consolidated statementPaycheck Protection Program (PPP) loan was forgiven, and $1.2 million of operationsfunds were released from August 13, 2021. The purchase consideration, which includedescrow to the initialCompany and reclassified from restricted cash to cash and cash equivalents. On May 11, 2022, the Company paid the ODU holdback of $0.5 million to the previous owners of ODU from escrow funds previously classified as restricted cash.the earnout, was allocated to assets acquiredits investments in money market funds and liabilities assumed based on their fair values as of the Learn25 Acquisition Date as follows:Content assets $ 1,000 Intangible assets 340 Other current assets 204 Goodwill 228 $ 1,772 Content assets is being amortized over an estimated useful life of 3.5 years and intangible assets (the most significant of which was customer relationships) are being amortized over useful lives ranging from 2 to 3 years. Content assets relates to the programs available on the Learn25 library. The cost approach was used to estimate the value of the content assets as of the valuation date. The economic life was determined based on the lecturer’s average license period. Learn25 content is recorded as part of Content assets, net on the consolidated balance sheets.The earnout had a fair value of $500 as of December 31, 2021 and is recorded in “Accrued expenses and other liabilities” on the consolidated balance sheet.The Company used discounted cash flows analyses, which represent Level 3 fair value measurements, to assess certain components of its purchase price allocations for ODU and Learn25, including acquired intangible assets and contingent earnout liabilities. The Company measures the contingent earnout liabilities at fair value on the Learn25 Acquisition Date and on a recurring basis.For both acquisitions, goodwill arises from the opportunity for synergies of the combined companies to grow and strengthen the Company’s content proposition by adding lectures from top professors and expanding the customer base. The acquisitions expand the Company’s subscription video on demand services by adding monthly and annual subscribers. The goodwill arising from these acquisitions is not amortized for financial reporting purposes but is deductible for federal tax purposes.Reverse merger acquisitionAs discussed in Note 1, on October 14, 2020,corporate debt securities, the Company consummated the Merger, pursuant to the terms of the Merger Agreement dated August 10, 2020, with Legacy CuriosityStream surviving the merger as a wholly owned subsidiary of the Company.Legacy CuriosityStream common stock issued and outstanding were cancelled and converted into the right to receive 0.626 shares (the “Exchange Ratio”) of the Company’s Common Stock, par value $0.0001 per share (“Common Stock”). Unless otherwise stated, the Exchange Ratio was applied to the number of shares and share prices of Legacy CuriosityStream throughout these consolidated financial statements.At the effective time of the Merger (the “Effective Time”), all (100%) of the issued and outstanding shares of capital stock of Legacy CuriosityStream were converted into an aggregate of 31,556,837 shares (the “Merger Shares”) of Common Stock. Pursuant to the Merger Agreement, 1,501,758 Merger Shares issued by the Company at closing would be held in escrow for a period of twelve months after the Closing Date to satisfy indemnification obligations and an additional 19,924 Merger Shares would be held in escrow pending final working capital calculations (collectively, the “Escrow Shares”). On February 22, 2021, the 19,924 Merger Shares held in escrow pending final working capital calculations were released and cancelled from escrow. Pursuant to the Merger Agreement, on October 18, 2021, the 1,501,758 Merger Shares held in escrow to satisfy indemnification obligations were released to the Legacy CuriosityStream shareholders. As of October 18, 2021, no Merger Shares remain held in escrow in connection with the Merger. In connection with the Closing, and pursuant to the terms of a PIPE Subscription Agreement entered into by the Company with certain third-party investors (the “PIPE Investors”) in connection with the execution of the Merger Agreement, the Company completed the issuance of an aggregate of 2,500,000 newly-issued shares of Common Stock for an aggregate purchase price of $25.0 million (the “PIPE”). The shares of Common Stock issued by the Company pursuant to the PIPE were issued concurrently with the Closing of the Merger on the Closing Date.Upon the closing of the Merger:●12,549,512 shares of SAQN Class A Common Stock held by shareholders prior to the Merger were redeemed with cash from SAQN’s trust account, leaving 2,400,488 shares of pre-existing SAQN Class A Common Stock outstanding after redemption, which were then converted into an equivalent amount of shares of Common Stock.●all issued and outstanding shares of Legacy CuriosityStream capital stock converted into an aggregate of 31,556,837 shares of Common Stock (inclusive of the Escrow Shares);●all of the 3,737,500 outstanding shares of SAQN’s Class B Common Stock, par value $0.0001 per share, held by Software Acquisition Holdings, LLC (the “Sponsor”), converted into an aggregate of 3,737,500 shares of Common Stock, 2,242,500 of which are subject to certain vesting conditions;●of the 4,740,000 Private Placement Warrants held by the Sponsor immediately prior to the Effective Time, (i) 711,000 were forfeited by the Sponsor and (ii) an aggregate of 353,000 were forfeited by the Sponsor and reissued by the Company to certain PIPE Investors and holders of Common Stock existing prior to the Effective Time;●all of the outstanding options to acquire Legacy CuriosityStream common stock were converted into options to acquire an aggregate of 2,214,246 shares of Common Stock; and●the Company issued an aggregate of 2,500,000 shares of Common Stock to the PIPE Investors pursuant to the closing of the PIPE.The Company received $16.5 million in cash from the SAQN trust account and $25.0 million from the PIPE investors related to the issuance of 2,500,000 shares of Common Stock. The Company paid a total of $5.7 million of transaction costs related to the Business Combination.Note 4 —Balance sheet componentsInvestments in debt securitiesThe Company’s investments in debt securities at fair value based onuses unadjusted quoted market prices (Level 1)1 inputs), and quoted prices for comparable assets (Level 2) are:2 inputs), respectively. As of December 31, 2021 As of December 31, 2020 Cash and Cash Equivalents Short-term
Investments Investments
(non-current) Total Cash and
Cash
Equivalents Short-term
Investments Investments
(non-current) Total Level 1 Securities Money market funds $ 11,709 $ - $ - $ 11,709 $ 2,165 $ - $ - $ 2,165 U.S. Government debt securities - 13,582 - 13,582 5,999 12,892 - 18,891 Total Level 1 Securities 11,709 13,582 - 25,291 8,164 12,892 - 21,056 Level 2 Securities Corporate debt securities - 50,641 15,430 66,071 - 8,054 2,825 10,879 Municipal debt securities - 1,610 - 1,610 - 1,225 - 1,225 Total Level 2 Securities - 52,251 15,430 67,681 - 9,279 2,825 12,104 Total $ 11,709 $ 65,833 $ 15,430 $ 92,972 $ 8,164 $ 22,171 $ 2,825 $ 33,160 December 31, 2023 December 31, 2022 (in thousands) Total Total Level 1 Securities Money market funds $ 36,072 $ — $ 36,072 $ 17,724 $ — $ 17,724 Total Level 1 Securities 36,072 — 36,072 17,724 — 17,724 Level 2 Securities Corporate debt securities — — — — 14,986 14,986 Total Level 2 Securities — — — — 14,986 14,986 Total $ 36,072 $ — $ 36,072 $ 17,724 $ 14,986 $ 32,710 tables summarizetable summarizes the Company’s corporate, U.S. government, and municipal debt securities: As of December 31, 2021 Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Estimated
Fair Value Debt Securities: Corporate $ 66,281 $ - $ (210 ) $ 66,071 U.S. Government 13,594 - (12 ) 13,582 Municipalities 1,610 - - 1,610 Total $ 81,485 $ - $ (222 ) $ 81,263 December 31, 2022 (in thousands) Gross
Unrealized
GainsDebt Securities: Corporate $ 15,026 $ — $ (40) $ 14,986 Total $ 15,026 $ — $ (40) $ 14,986 As of December 31, 2020 Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Estimated
Fair Value Debt Securities: Corporate $ 10,867 $ 14 $ (2) $ 10,879 U.S. Government 18,892 1 (2) 18,891 Municipalities 1,226 - (1) 1,225 Total $ 30,985 $ 15 $ (5) $ 30,995 $6 and realized gains were $114less than $0.1 million reported in interest and other income in the accompanying consolidated statements of operations for the years ended December 31, 20212023 and 2020, respectively.atas of December 31, 2021,2022, by contractual maturity is as follows:December 31, 2022 (in thousands) Amortized Cost Due in one year or less $ 15,026 $ 14,986 Due after one year through five years — — Due after five years — — Total $ 15,026 $ 14,986 December 31, 2021 Amortized
Cost Estimated
Fair Value Due in one year or less $ 66,001 $ 65,833 Due after one year through five years 15,484 15,430 Total $ 81,485 $ 81,263 Content assetsContentAs of December 31, 2023, and 2022, content assets consisted of the following:December 31, (in thousands) 2023 2022 Licensed content, net $ 8,271 $ 11,154 Prepaid and unreleased 8,357 4,014 Total licensed content, net 16,628 15,168 Produced content, net 22,880 33,094 In production 5,435 20,240 Total produced content, net 28,315 53,334 Total content assets $ 44,943 $ 68,502 As of December 31, 2021 2020 Licensed content, net Released, less amortization $ 11,406 $ 9,985 Prepaid and unreleased 9,119 3,022 20,525 13,007 Produced content, net Released, less amortization 18,507 9,071 In production 33,650 10,848 52,157 19,919 Total $ 72,682 $ 32,926 Asunamortized cost of licensed content that had been released as of December 31, 2021, $5,238, $3,102,2023, the Company expects that $3.8 million, $2.3 million, and $1,298 of the $11,406 unamortized cost of the licensed content that has been released is expected to$1.5 million will be amortized in each of the next three years. AsOf the $22.9 million unamortized cost of produced content that had been released as of December 31, 2021, $4,908, $4,769,2023, the Company expects that $8.7 million, $6.0 million, and $4,288 of the $18,507 unamortized cost of the produced content that has been released is expected to$4.9 million will be amortized in each of the next three years.
The Company’s primary business model is subscription-based as opposed to a model based on generating revenues at a specific title level. Content assets are predominantly monetized as a group and therefore are reviewed in aggregate at a group level when an event or change in circumstances indicates a change in the expected usefulness of the content or that the fair value may be less than unamortized cost. If such changes are identified, the aggregated content library will be stated at the lower of unamortized cost or fair value. In addition, unamortized costs are written off for content assets that have been, or are expected to be abandoned.amortizedamortizes licensed content costs and produced content costs, duringwhich is included within cost of revenues in the Company’s consolidated statements of operations. For the years ended December 31, 20212023, and 2020, respectively,2022, content amortization was as follows:Year Ended December 31, (in thousands) 2023 2022 Licensed content $ 7,250 $ 8,480 Produced content 15,655 30,811 Total $ 22,905 $ 39,291 Year Ended December 31, 2021 2020 Licensed content $ 8,961 $ 6,800 Produced content 18,920 2,895 $ 27,881 $ 9,695 PropertyAs of December 31, 2023, and 2022, property and equipment,Property and equipment are summarized by major classifications, were as follows: Estimated useful life December 31, (in years) 2021 2020 Furniture and fixtures 10 to 15 $ 108 $ 108 Equipment 5 1,247 967 Computer and software 3 to 5 729 625 Website and application development 3 422 687 Leasehold improvements Lesser of the lease term or their useful lives 703 703 Work-in-progress - 32 85 Property and equipment, gross 3,241 3,175 Less accumulated depreciation and amortization 1,899 1,829 Property and equipment, net $ 1,342 $ 1,346 Estimated
Useful Life
(in Years)December 31, (in thousands) 2023 2022 Furniture and fixtures 10 to 15 $ 101 $ 108 Equipment 5 1,040 1,252 Computer and software 3 to 5 570 857 Website and application development 3 37 37 Leasehold improvements Lesser of lease term or lives 703 703 Work-in-progress — 5 5 Property and equipment, gross 2,456 2,962 Less accumulated depreciation and amortization 1,729 1,868 Property and equipment, net $ 727 $ 1,094 the property and equipment, above, including the amortization of leasehold improvements, was $338$0.4 million and $330$0.4 million for the years ended December 31, 20212023, and 2020,2022, respectively.Intangible assetsIntangible assets as ofThe change in goodwill for the year ended December 31, 2021 were comprised of the following:(in thousands) Balance, December 31, 2021 $ 2,793 2,793 Balance, December 31, 2022 $ — Weighted average remaining lives (in years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relationships 2.3 $ 940 $ 184 $ 756 Trademark 4.5 570 62 508 Covenant-not-to-compete 2.4 130 25 105 $ 1,640 $ 271 $ 1,369 The Company did not have any intangible assets as of December 31, 2020. Warrant liability20212023, and 2020,2022, was as follows: As of December 31, 2021 2020 Level 3 Private Placement Warrants $ 5,661 $ 20,843 Total Level 3 $ 5,661 $ 20,843 December 31, (in thousands) 2023 2022 Level 3 Private Placement Warrants $ 44 $ 257 Total Level 3 $ 44 $ 257 NoteNOTE 5 — Revenuerevenues disaggregated by typerevenues for the years ended December 31, 2021,2023, and 2020,2022, as well as the relative percentage of each revenue type to total revenue.Year Ended December 31, (in thousands) 2023 2022 Direct Business: Direct-to-Consumer: O&O Consumer Service $ 26,502 47 % $ 25,549 33 % App Services 3,384 6 % 3,940 5 % Total Direct-to-Consumer 29,886 53 % 29,489 38 % Partner Direct Business 4,706 8 % 4,631 6 % Total Direct Business 34,592 61 % 34,120 44 % Content Licensing: 11,739 21 % 6,131 8 % Presales 2,308 4 % 18,560 24 % Total Content Licensing 14,047 25 % 24,691 32 % Bundled Distribution 6,316 11 % 11,726 15 % Enterprise 141 — % 5,520 7 % Other 1,793 3 % 1,986 3 % Total revenues $ 56,889 $ 78,043 * The 2023 amount includes $9.9 million of trade and barter transactions. Year Ended December 31, 2021 2020 Subscriptions – O&O Service $ 20,906 29 % $ 13,031 33 % Subscriptions – App Services 3,915 6 % 3,477 9 % Subscriptions – Total 24,821 35 % 16,508 42 % License Fees – Affiliates 18,572 26 % 16,832 42 % License Fees – Program Sales (1) 24,758 35 % 5,691 15 % License Fees – Total 43,330 61 % 22,523 57 % Other – Total (1)(2) 3,110 4 % 590 1 % Total Revenues $ 71,261 $ 39,621 (1)For the year ended December 31, 2021, total related party revenue was $5.6 million, consisting of $3.0 million for content licensed by the Company to the Spiegel Venture included in License Fees – Program Sales, and $2.6 million for marketing services rendered to Spiegel Venture and Nebula for $1.3 million each, which is included in Other revenue. There were no related party revenues for the year ended December 31, 2020. See Note 11.(2)In addition to (1) above, Other revenue also includesAs of December 31, 2023, the Company expects to recognize revenues related to ODU live events of $0.1 million, Learn25 catalog sales of $0.2 million and other marketing services for $0.2 million.Revenues expected to be recognized in the future related to performance obligations that are unsatisfied at December 31, 2021 are as follows: For the twelve months ending December 31, 2022 2023 2024 2025 2026 Thereafter Total Remaining Performance Obligations $ 18,512 $ 7,070 $ 4,944 $ 2,945 $ 10 $ 70 $ 33,551 Year Ended December 31, (in thousands) 2024 2025 2026 2027 Thereafter Total Remaining performance obligations $ 2,240 $ 1,600 $ 1,251 $ 75 $ 55 $ 5,221 programcontent licensing sales in advance of the related content being made available to the customer, and unredeemed gift certificatescards and other prepaid subscriptions that have not been redeemed. Total$23,152$15.2 million and $12,745 at$14.9 million, respectively, with the non-current portions of $0.6 million as of December 31, 20212023, and 2020, respectively.2022, included in other liabilities on the consolidated balance sheets. The increase in deferred revenues isrevenue was primarily due to higher subscription rates that the growth in annual subscriptions from O&O and App Services, which require upfront annual payments, as well as an increase in the volume of program sales activity.Revenues of $12,502 were recognized duringFor the year ended December 31, 2021,2023, the Company recognized revenues of $14.3 million related to the balanceamounts deferred as of deferred revenue at December 31, 2020.Note 6 — LineIn the second quarter of credit and Paycheck Protection Program LoanOn February 12, 2020,2023, the Company obtained a one-year $4,500 linebegan entering into trade and barter transactions primarily for the purpose of credit facility from a bank. exchanging content assets through licensing agreements with media counterparties. Certain transactions may also include the exchange of advertising, whereby the Company and its counterparty exchange media campaigns or other promotional services.linetransaction price for these contracts is measured at the estimated fair value of credit calledthe non-cash consideration received unless this is not reasonably estimable; in which case, the consideration is measured based on the standalone selling price of the services provided. For an exchange of content, the performance obligation is satisfied at the time the content is made available for interest-only monthly payments at a rate equalthe counterparty to use, which represents the point in time that control is transferred. For advertising, the performance obligation is satisfied upon the Company’s delivery of the media campaign or other service to the LIBOR Daily Floating Rate plus 2.25%. The loan carried an unused feecounterparty.Year Ended December 31, (in thousands) 2023 2022 Trade and barter license fees: Content licensing $ 9,873 $ — Other trade and barter revenue* 1,130 — Total trade and barter revenues $ 11,003 $ — * Other revenue primarily relates to other marketing services Year Ended December 31, (in thousands) 2023 2022 Trade and barter advertising and marketing 1,480 — be due upon the original loan maturity date of February 28, 2021. The line of credit facility was collateralized by cash of $4,500. During February 2021, the loan maturity date was extended to February 28, 2022. The Company’s line of credit arrangement was terminated on July 16, 2021.Year Ended December 31, (in thousands) 2023 2022 Trade and barter additions to content assets 9,523 — On May 1, and received funding from the Paycheck Protection Program (“PPP”) in the amount of $1,158$1.2 million under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) (the “PPP Loan”). The PPP Loan matureswas approved on May 1, 2020, was set to mature in May 2022 and bearsbore interest at a rate of 1.0% per annum. Monthly amortized principal and interest payments are deferred for six months after the date of disbursement. The PPP provides that the use of the PPP Loan amount shall be limited to certain qualifying expenses and may be partially or wholly forgiven in accordance with the requirements set forth in the CARES Act. The amount of loan proceeds eligible for forgiveness takes into account a number of factors, including the amount of loan proceeds used by the Company during the specified period after the loan origination for certain purposes including payroll costs, rent payments on certain leases, and certain qualified utility payments.DuringOn April 16, 2022, the year ended December 31, 2020, $1,158 of loan proceeds were applied to cover payroll and non-payroll expenses perCompany received the PPP. As a result, general and administrative expenses during the year ended December 31, 2020 within the statement of operations were reduced by this amount. Should the Company’s loan forgiveness application be rejected,letter from the Small Business Administration (SBA) stating that the loan had been forgiven in full, including applicable interest. Following receipt of the loan forgiveness notification letter, funds of $1.2 million were released from escrow, and the Company may be requiredreclassified this amount from restricted cash to repay all, or a portion ofcash and cash equivalents on the funds received under the PPP under an amortization schedule through May 2025 with an annual interest rate of 1%. The Company believes it has met all the requirements under the PPP and anticipates that it will not be required to repay any portion of the grant.Note 7 — Redeemable convertible preferred stock and stockholders’ equityCommon StockIn connection with the Business Combination, the Company amended and restated its certificate of incorporation. 20212023, and 2020,2022, the Company hashad authorized the issuance of 126,000,000 shares of capital stock, par value of $0.0001 per share, consisting of (a)(i) 125,000,000 shares of common stock,Common Stock and (b)(ii) 1,000,000 shares of preferred stock.On February 8, 2021,consummated an underwrittenhad 3,054,203 publicly traded warrants outstanding that were sold as part of the units of Software Acquisition Group Inc. in its initial public offering (the “Offering”) of 6,500,000 shares of the Company’s common stock, par value per share $0.0001 (“Common Stock”), plus an over-allotment option to purchase up to 975,000 additional shares of Common Stock grantedon November 22, 2019, and that were issued to the underwriters who participated in the Offering, which was exercised by the underwriters in full on February 5, 2021. The net proceeds from the Offering were $94,100, after deducting $6,811 in underwriting discounts and commissions. The Company also incurred and paid offering expensesPIPE Investors in connection with the Offering of $707 during the year ended December 31, 2021.WarrantsAs of December 31, 2021, the Company had 3,054,203 Public Warrants (including 353,000 warrants issued in connectionBusiness Combination (the “Public Warrants” and, together with the PIPE)Private Placement Warrants, the "Warrants") and 3,676,000 Private Placement Warrants outstanding. The Private Placement Warrants are liability-classified, and the Public Warrants and PIPE Warrants are equity-classified.Following the consummation of the Business Combination, holders of the Public Warrants, Private Placement Warrants, and PIPE Warrants are entitled to acquire common stock of the Company. Each whole warrant entitles the registered holder to purchase one share of the Company’s common stockCommon Stock at an exercise price of $11.50 per share, beginning November 13, 2020, 30 days after the Closing Date.share. All Warrants will expire on October 14, 2025, five years after the completion of the Business Combination. Warrants and PIPE Warrants in whole and not in part at a price of $0.01 per warrant upon a minimum of 30 days’ prior written notice of redemption, if and only if the last sale price of the Company’s common stockCommon Stock matched or exceeded $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sent the notice of redemption to the warrant holders.the SponsorSoftware Acquisition Holdings LLC or its permitted transferees: (i) they will not be redeemable by the Company;Company; (ii) they may be exercised by the holders on a cashless basis;basis; and (iii) they are subject to registration rights.The below table summarizes activity related to the Company’sNo warrants were exercised during the yearyears ended December 31, 2021:Warrant Type Cash
Exercise
Price per
Share Warrants
Outstanding
12/31/20 Warrants
Exercised
during year
ended
12/31/2021 Warrants
Outstanding
12/31/21 Public Warrants (CURIW) and PIPE Warrants $ 11.50 7,786,589 (4,732,386 ) 3,054,203 Private Placement $ 11.50 3,676,000 - 3,676,000 Total 11,462,589 (4,732,386 ) 6,730,203 During the year ended December 31, 2021, the Company received total proceeds of $54,898 related to the exercise of Public Warrants, of which $476 relate to warrants exercised in December 2020.areto determine fair value as of December 31, 2023, and 2022 were as follows: As of December 31, 2021 2020 Exercise Price $ 11.50 $ 11.50 Stock Price (CURI) $ 5.93 $ 13.95 Expected volatility 58.00 % 39.63 % Expected warrant term (years) 3.8 4.8 Risk-free interest rate 1.12 % 0.36 % Dividend yield 0 % 0 % Fair Value per Private Placement Warrant $ 1.54 $ 5.67 December 31, 2023 2022 Exercise price $ 11.50 $ 11.50 Stock Price (CURI) $ 0.54 $ 1.14 Expected volatility 100.00 % 77.00 % Expected warrant term (years) 1.8 2.8 Risk-free interest rate 4.23 % 4.22 % Dividend yield 0 % 0 % Fair Value per Private Placement Warrant $ 0.01 $ 0.07 changechanges in fair value of the private placement warrant liability for the years ended December 31, 20212023, and 20202022 resulted in a gain of $15,182$0.2 million and a loss of $10,120,$5.4 million, respectively.Legacy CuriosityStream Redeemable Convertible Preferred StockDuring November and December 2018, in connection with a private placement equity offering, Legacy CuriosityStream issued 14,557,000 shares of Series A Redeemable Convertible Preferred Stock (“Series A Preferred Stock”) in exchange for gross proceeds of $145,570. Legacy CuriosityStream incurred equity issuance costs of $8,027 in connection with this offering, which were reflected as a reduction to the initial carrying value of the Series A Preferred Stock balance.The Company classifies preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control, as temporary equity. Given the redemption rights contained within the Series A Preferred Stock, the Company accounted for the outstanding preferred stock as temporary equity through the Closing Date. Series A Preferred Stock was initially recorded at its fair value, net of transaction costs, at the original issuance date. At each reporting period prior to the Closing Date, the amount was adjusted by accreting changes in the redemption value over the period from the date of issuance to the earliest redemption date.Immediately prior to the completion of the Business Combination on October 14, 2020, all outstanding shares of Legacy CuriosityStream’s Series A Preferred Stock converted into 29,365,570 shares of Legacy CuriosityStream Class A Common Stock, which were then converted into Common Stock of the Company as a result of the Business Combination using the recapitalization Exchange Ratio. The redeemable convertible preferred stock was also reclassified into permanent equity as a result of the Business Combination on the Closing Date.Note 8 — Earnings (loss) per share calculations are calculated on the basis of the weighted average number of shares of the Company’s common stockCommon Stock outstanding during the respective periods. Diluted earnings (loss) per share give effect to all dilutive potential common shares outstanding during the period using the treasury stock method for stock options and other potentially dilutive securities and the if-converted method for redeemable convertible preferred stock prior to the Merger.securities. In computing diluted earnings (loss) per share, the average fair value of the Company’s common stockCommon Stock for the period is used to determine the number of shares assumed to be purchased from the exercise price of the options. Purchases of treasury stock reduce the outstanding shares commencing on the date that the stock is purchased. Common stock equivalents are excluded from the calculation when a loss is incurred as their effect would be anti-dilutive. Year ending December 31, 2021 2020 Numerator - Basic EPS: Net loss $ (37,635 ) $ (48,599 ) Preferred dividends and accretion of issuance costs - (13,788 ) (37,635 ) (62,387 ) Denominator - Basic EPS: Weighted - average shares - basic 51,482,257 18,931,456 Net loss per share attributable to common stockholders - basic $ (0.73 ) $ (3.30 ) Numerator - Diluted EPS: Net loss $ (37,635 ) $ (48,599 ) Preferred dividends and accretion of issuance costs - (13,788 ) Decrease in fair value of Private Placement Warrants (15,182 ) - Net loss attributable to common stockholders - diluted (52,817 ) (62,387 ) Denominator - Diluted EPS: Weighted - average shares - basic 51,482,257 18,931,456 Incremental common shares from assumed exercise of Private Placement Warrants 306,739 - Weighted - average shares - diluted 51,788,996 18,931,456 Net loss per share attributable to common stockholders - diluted $ (1.02 ) $ (3.30 ) 20212023, and 2020,2022, the components of basic and diluted net loss per share were as follows:Year Ended December 31, (in thousands, except per share amounts) 2023 2022 Numerator — Basic and Diluted EPS Net loss $ (48,896) $ (50,917) Denominator — Basic and Diluted EPS Weighted–average shares 53,044 52,787 Net loss per share — Basic and Diluted $ (0.92) $ (0.96) computationcalculation of diluted net loss per share as the inclusion of such shares would have been be anti-dilutive. Common shares issuable for warrants, options, and restricted stock units represent the total amount of outstanding warrants, stock options, and restricted stock units at December 30, 2021 and 2020.Antidilutive shares excluded: December 31, 2021 2020 Options 4,747,832 4,710,717 Restricted Stock Units 850,277 413,277 Warrants 3,054,203 11,462,589 8,652,312 16,586,583 Year Ended December 31, (in thousands) 2023 2022 Options 32 4,632 Restricted Stock Units 2,058 759 Warrants 6,730 6,730 Total 8,820 12,121 NoteNOTE 9 — Stock-based compensation- STOCK-BASED COMPENSATIONLegacy CuriosityStream Stock Option PlanPrior to the Business Combination, Legacy CuriosityStream maintained a stock-based compensation plan. The Legacy CuriosityStream Stock Option Plan provided for the grant of options to purchase shares of common stock to employees, non-employee directors, consultants and independent contractors at option exercise prices and vesting terms as determined by the Legacy CuriosityStream Board of Directors.Each Legacy CuriosityStream option from the Legacy CuriosityStream Stock Option Plan that was outstanding immediately prior to the Business Combination, whether vested or unvested, was converted into an option to acquire a number of shares of Common Stock (each such option, an “Exchanged Option”) equal to the product (rounded down to the nearest whole number) of (i) the number of shares of Legacy CuriosityStream common stock subject to such Legacy CuriosityStream option immediately prior to the Business Combination and (ii) the Exchange Ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to (A) the exercise price per share of such Legacy CuriosityStream option immediately prior to the consummation of the Business Combination, divided by (B) the Exchange Ratio. Except as specifically provided in the Merger Agreement, following the Business Combination, each Exchanged Option will continue to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the corresponding former Legacy CuriosityStream option immediately prior to the consummation of the Business Combination.CuriosityStream 2020 Omnibus PlanBoardCompany's board of Directors of the Companydirectors (the "Board") adopted the CuriosityStream 2020 Omnibus Plan (the “2020 Plan”). The 2020 Plan became effective upon consummation of the Business Combination and succeeds the Legacy CuriosityStream Stock Option Plan. Upon adoption of the 2020 Plan, a total of 7,725,000 shares were approved to be issued as stock options, share appreciation rights, restricted stock units and restricted stock.restricted stock unit (RSU)RSU activity, prices, and values forfrom December 31, 2022, to December 31, 2023:Stock Options Restricted Stock Units Balance as of December 31, 2022 1,814,964 4,632,093 $ 7.13 6.8 758,720 $ 7.14 Granted (1,923,208) — — — 1,923,208 $ 1.06 Options exercised and RSUs vested 151,666 — — — (505,201) $ 6.90 Forfeited or expired 4,718,582 (4,599,801) $ 7.16 — (118,781) $ 9.11 Balance as of December 31, 2023 4,762,004 32,292 $ 5.79 5.9 2,057,946 $ 2.57 Exercisable as of December 31, 2022 3,003,687 $ 7.24 6.2 Exercisable as of December 31, 2023 27,143 $ 5.44 5.8 Unvested as of December 31, 2022 1,628,406 $ 6.93 8.0 Unvested as of December 31, 2023 5,149 $ 7.64 6.7 * Of the total 4,599,801 forfeited or expired stock options during 2023, 4,597,539 options were converted into 1,581,571 Restricted Stock Units (RSUs) in July 2023. Refer to the detailed explanation below for more information. 20212023, and 2020: Stock Options Restricted Stock Units Number of
Shares
Available for
Issuance
Under the Plan Number of
Shares Weighted-
Average
Exercise
Price Weighted-
Average
Remaining
Contractual
Term
(in Years) Aggregate
Intrinsic
Value (1) Number of
Shares Weighted-
Average
Grant Date
Fair Value Balance at December 31, 2020 2,538,648 4,710,717 $7.06 8.5 $32,349 413,277 $9.21 Granted (2) (1,012,264 ) 284,582 14.78 - - 727,682 12.42 Options exercised and RSUs vested 46,794 (119,564 ) 4.20 - - (171,259 ) 10.34 Forfeited or expired 247,326 (127,903 ) 5.82 - - (119,423 ) 11.50 Balance at December 31, 2021 1,820,504 4,747,832 $ 7.61 8.2 $ 3,254 850,277 $ 11.41 Exercisable at December 31, 2020 1,275,524 $ 7.36 6.6 $ 8,320 Exercisable at December 31, 2021 2,348,875 $ 7.74 8.0 $ 2,010 Unvested at December 31, 2020 3,435,193 $ 6.96 9.2 $ 24,029 Unvested at December 31, 2021 2,398,957 $ 7.49 8.4 $ 1,244 (1)Intrinsic value is based on the difference between the exercise price of in-the-money-stock options and the fair value of the Company’s Common Stock as of the respective balance sheet date.(2)Included in options granted during the year ended December 31, 2021, is a total of 152,358 fully vested options with an exercise price of $16.42 and a five-year contractual term, which resulted in compensation expense totaling $0.9 million being recorded upon grant. Such options were granted during the three months ended March 31, 2021.The intrinsic valueStock options and RSU awards generally vest on a monthly, quarterly, or annual basis over a period of options exercised duringfour years from the year ended December 31, 2021 and 2020 was $1,363 and $373, respectively.Options and RSUs generally have a four-year vesting period with 25% of the shares vesting on each anniversarygrant date. When options are exercised, the Company’s policy is to issueCompany issues previously unissued shares of Common Stock to satisfy share option exercises.RSUs generally have a four-year or a quarterly vesting period with 1/48th of the shares vesting monthly or 6.25% of the shares vesting quarterly. Upon vesting and distribution of RSUs, the Company’s policy is to issueCompany issues previously unissued shares of Common Stock to satisfy restricted stock units vested, net of shares withheld for taxes if elected by the RSU holder.AssumptionsFor the years ended December 31, 2023, and 2022, the assumptions used to value the options granted and the resulting weighted-average grant date fair value and stock-based compensation expense for the years ended December 31, 2021 and 2020 were as follows: December 31, 2021 2020 Dividend yield 0 % 0 % Expected volatility 60 % 60 % Expected term (years) 2.50 - 6.25 5.00 - 6.25 Risk-free interest rate 0.14% to 1.11 % 0.38% to 1.71 % Weighted average grant date fair value $ 6.58 $ 4.15 Stock-based compensation - Options $ 4,597 $ 4,171 Stock-based compensation - RSUs $ 2,367 $ 129 Year Ended December 31, (stock-based compensation in thousands) 2023 2022 Dividend yield N/A 0 % Expected volatility N/A 60% - 70% Expected term (years) N/A 6.0 - 6.5 Risk-free interest rate N/A 1.40% - 2.95% Weighted average grant date fair value N/A $ 1.91 Stock-based compensation—Options $ 1,559 $ 3,829 Stock-based compensation—RSUs $ 2,440 $ 2,815 Total stock-based compensation $ 3,999 $ 6,644 cost is measured at the grant date based on the fair value of the award and is recognized on a straight-line basis over the requisite service period.2021,2023, related to non-vested stock options and restricted stock unitsRSUs, and the weighted average remaining years over which the cost will be recognized: Total
Unrecognized
Compensation
Cost Weighted
Average
Remaining
Years Stock options $ 9,095 2.4 Restricted Stock Units 8,721 3.3 Total $ 17,816 (in thousands) Stock options $ 13 0.7 Restricted Stock Units 3,112 0.9 Total $ 3,125 NoteNOTE 10 — Segment and geographic information1one reporting segment. The Company’s chief operating decision maker (“CODM”) is its chief executive officer, who reviews financial information presented on an entity-wide basis for purposes of making operating decisions, assessing financial performance and allocating resources.United States. RevenueU.S. For the years ended December 31, 2023, and 2022, revenue by geographic location,region based on thecustomer location of the customers, withwas as follows:Year Ended December 31, (in thousands) 2023 2022 United States $ 31,978 56 % $ 48,270 62 % International: United Kingdom 4,001 7 % 8,191 10 % Other 20,910 37 % 21,582 28 % Total International $ 24,911 44 % $ 29,773 38 % Total $ 56,889 100 % $ 78,043 100 % individually comprisingthe United Kingdom, comprised of 10% or greater than 10% of total revenue is as follows:for one or more of the periods presented. Year ended December 31, 2021 2020 United States $ 41,461 58 % $ 31,123 79 % International: Germany 8,625 12 % 1,054 2 % Other 21,175 30 % 7,444 19 % Total International $ 29,800 42 % 8,498 21 % $ 71,261 100 % $ 39,621 100 % NoteNOTE 11 — Related party transactionsEquity investmentsAs described in Note 2,For the Company entered into the Spiegel Venture agreements and during yearyears ended December 31, 2021,2023, and 2022, the Company recognized revenues$1.1 million and $0.3 million of $2,986 for content deliveredrevenue, respectively, related to license fees from the Spiegel Venture and $1,277 for marketing services rendered.As described in Note 2,Venture. For the Company and Nebula entered into the Nebula Agreements and during the yearyears ended December 31, 2021,2023, and 2022, the Company recognized zero and $1.6 million of revenue, of $1,349respectively, related to content creation and advertising services provided to Nebula.incurred $1,2022022, the Company also recorded $4.5 million and $4.3 million, respectively, in cost of revenues pertaining to the revenue share toarrangement with Nebula from subscription sales related to the Bundled Marketing and Premium Tier Agreement whichcertain bundled subscription packages. This revenue share is recorded in Costcost of revenues on the consolidated statement of operations. The BundledPremium Tier subscriptions bundles2022, the Nebula SVOD subscription with the CuriosityStream subscription for a single subscription fee through the CuriosityStream Premium Tier.A summaryimpacts of the impact ofarrangements with Spiegel Venture and Nebula on the above arrangements on ourCompany’s consolidated balance sheets were as follows:December 31, (in thousands) 2023 2022 Accounts receivable $ 811 $ 3,358 Accounts payable 374 404 statement2022, the impacts of arrangements with the Spiegel Venture and Nebula on the Company’s consolidated statements of operations iswere as follows: December 31, 2021 2020 Balance Sheets Accounts receivable $ 6,254 $ - Accounts payable 611 - Year Ended December 31, (in thousands) 2023 2022 Revenues $ 1,091 $ 1,901 Cost of revenues 4,609 4,289 Year ended December 31, 2021 2020 Statements of Operations Revenues $ 5,612 $ - Cost of revenues 1,202 - Operating lease(see Note 13). Related party sublease rental income recognized on a straight-line basis totaled $52 and $53as it is managed by various members of the Board. The Company accounts for the years ended December 31, 2021, and 2020, respectively, and is included in General and administrative expenses in the accompanying consolidated statementsarrangement as an operating lease. Refer to Note 13 - Leases for further information.Production agreementsforof which the Company’s Chief Executive Officer has a less than 10% ownership interest. UnderFor the terms of these agreements,year ended December 31, 2022, the Company paid a total of $3,198 and $3,038 during the years ended December 31, 2021 and 2020, respectively,$2.4 million to this production company upon the differentvarious milestones stated in the agreements. UnderAs of December 31, 2022, the Company no longer had any obligation under these agreements, the Company will pay additional amounts totaling $3,375, payable upon the attainment of the remaining milestones which are expected to be achievedand during the year endingended December 31, 2022.NoteNOTE 12 — Retirement Planby the employees from each participant’s compensation up to the maximum allowed by law. The Company matches employee deferrals at 100% on up to 3% of compensation and 50% of employee deferrals between 3 –3% and 5% of compensation. Participants are immediately vested in their elective deferrals and the Company matching contributions. The Company made matching contributions of $357 and $211$0.3 million for each of the years ended December 31, 2021,2023, and 2020, respectively.Note 13 — Commitments and contingenciesContent commitmentsAtAs of December 31, 2021,2023, and 2022, the Company had $39,047held operating lease ROU assets of $3.3 million and 3.7 million, respectively; current lease liabilities of $0.4 million and 0.3 million, respectively; and non-current lease liabilities of $4.3 million and $4.6 million, respectively. In measuring operating lease liabilities, the Company used a weighted average discount rate of 4.4% as of December 31, 2023. The weighted average remaining lease term as of December 31, 2023, was 9.2 years years.Year Ended December 31, (in thousands) 2023 2022 Operating lease cost $ 481 $ 484 Short-term lease cost — 42 Variable lease cost 52 51 Total lease cost $ 533 $ 577 (in thousands) 2024 $ 557 2025 571 2026 585 2027 600 2028 615 Thereafter 2,731 Total Lease Payments 5,659 Less: imputed interest (1,011) Present value of total lease liabilities $ 4,648 comprised of $9,684 included in currentamounted to $1.1 million, including $0.4 million recorded within content liabilities in the accompanying consolidated balance sheets, and $29,363$0.7 million of obligations that are not reflected in the accompanying consolidated balance sheetsrecorded as they did not yet meet the asset recognition criteria for content assets (see Note 4). Contentassets. These obligations of $24,922 and $4,441 are expected to be paid during the yearsyear ending December 31, 2022 and 2023, respectively.AtAs of December 31, 2020,2022, the Company had $26,022 ofCompany's content obligations comprised of $2,116 included in currentamounted to $11.5 million, including $2.9 million recorded within content liabilities in the accompanying consolidated balance sheets, and $23,906$8.6 million of obligations that are not reflected in the accompanying consolidated balance sheetsrecorded as they did not yet meet the asset recognition criteria for content assets. Advertising commitmentshas certain commitments with regardsperiodically enters into agreements to receive future advertising and marketing expensesservices as stated in thepart of various licensee agreements. Certain ofagreements, and the Company reports commitments when the applicable agreements do not specify the amount of advertising and marketing commitment; however, the total commitmentsprovide for agreements which do specify the amount are $12,144 asspecific committed amounts. As of December 31, 2021,2023, the Company's future advertising commitments totaled $0.6 million, all of which $11,644 and $500 are expectedthe Company expects to be paidpay during the yearsyear ending December 31, 2022, and 2023, respectively. Operating leasesTable of Contents The Company leases corporate office space in Silver Spring, Maryland. The lease expires February 28, 2033. The terms of the lease include a rent abatement period of ten months and a tenant improvement allowance of $93 and $295 for 2020 and 2021, respectively.Total rent paid under the terms of the lease was $304 and $317 forFor the years ended December 31, 2021,2023, and 2020, respectively. Rent expense has been calculated on a straight-line basis over2022, the term of the lease. Accordingly, rent expense included in general and administrative expenses in the accompanying consolidated statements of operations was $523 and $528 for the years ended December 31, 2021, and 2020, respectively. The rent and sublease rental income future minimum lease payments for the above operating lease are as follows:Year Ending December 31, CuriosityStream
rent Sublease
rental
income Net
rent 2022 $ 530 $ (53 ) $ 477 2023 543 (54 ) 489 2024 557 (56 ) 501 2025 571 (57 ) 514 2026 585 (59 ) 526 Thereafter 3,946 (395 ) 3,551 $ 6,732 $ (674 ) $ 6,058 Note 14 — Income taxesThe components of the provision for income taxes arewere as follows: For the year ended
December 31, 2021 2020 Provision for income taxes: Current: Federal $ - $ - State and local 11 25 Foreign 345 154 Total current provision 356 179 Deferred: Federal $ 3 $ - State and local 1 - Foreign - - Total deferred provision $ 4 $ - Total tax provision $ 360 $ 179 Year Ended December 31, (in thousands) 2023 2022 Current: Federal $ — $ — State and Local 77 (25) Foreign 429 396 Total current provision $ 506 $ 371 Deferred: Federal $ — $ (3) State and local — (1) Foreign — — Total deferred provision $ — $ (4) Total tax provision $ 506 $ 367 TheFor the years ended December 31, 2023, and 2022, the following table reconciles the Company’s effective income tax rate to the U.S. federal statutory income tax rate. For the year ended December 31, 2021 2020 Amount Effective Rate Amount Effective Rate U.S. federal statutory income tax provision (benefit) $ (7,851 ) 21.0 % $ (10,168 ) 21.0 % Permanent items (3,360 ) 9.0 % 1,541 (3.2 )% State and local income taxes, net of federal tax benefit (2,727 ) 7.3 % (1,994 ) 4.1 )% Change in valuation allowance 13,824 (37.0 )% 9,758 (20.2 )% Return to provision adjustments 129 (0.3 )% 888 (1.8 )% Foreign withholding taxes 345 (0.9 )% 154 (0.3 )% Total tax provision $ 360 (0.9 )% $ 179 (0.4 )% Year Ended December 31, (in thousands) 2023 2022 Loss before income taxes $ (48,390) $ (50,550) U.S. federal statutory income tax provision (benefit) $ (10,152) 21.0 % $ (10,615) 21.0 % Permanent items 212 (0.4 %) (360) 0.7 % State and local income taxes, net of federal tax benefit (1,635) 3.4 % (1,938) 3.8 % Change in valuation allowance 11,786 (24.4) % 12,409 (24.5) % Return to provision adjustments 41 (0.1) % 475 (0.9) % Foreign withholding taxes 254 (0.5) % 396 (0.8) % Total tax provision $ 506 (1.0) % $ 367 (0.7) % TheFor the years ended December 31, 2023, and 2022, the Company has recorded a $360tax provision of $0.5 million and $179 tax provision$0.4 million, respectively, primarily related to foreign withholding and income taxes for the years ended December 31, 2021, and 2020, respectively. For the year ended December 31, 2021, and 2020, the Company’s provisiontaxes. These provisions for income taxes differsdiffer from the federal statutory rate primarily due to the Company being in a full valuation allowance position and not recognizing a benefit for either federal or state income tax purposes.The major As of December 31, 2023, and 2022, the significant components of deferred tax assets and liabilities arewere as follows: December 31, 2021 2020 Deferred tax assets: Net operating loss carryforwards $ 37,428 $ 24,875 Accrued expenses and reserves 798 494 Intangibles and content assets 2,334 2,712 Deferred rent 314 260 Stock based compensation 2,627 1,384 Other 179 93 Total deferred tax asset 43,680 29,818 Valuation allowance (43,642 ) (29,815 ) Deferred tax assets, net of valuation allowance $ 38 $ 3 Deferred tax liabilities: Unrealized gain (43 ) (3 ) Deferred tax liabilities, net $ (5 ) $ - December 31, (in thousands) 2023 2022 Deferred tax assets: Net operating loss carryforwards $ 54,962 $ 49,050 Accrued expenses and reserves 401 526 Intangibles and content assets 7,439 2,837 Lease liability 1,143 1,232 Stock based compensation 3,540 3,046 Other 1,175 275 Total deferred tax asset 68,660 56,966 Valuation allowance (67,837) (56,051) Deferred tax assets, net of valuation allowance $ 823 $ 915 Deferred tax liabilities: ROU asset (823) (915) Deferred tax liabilities, net $ — $ — 2021,2023, and 2020,2022, the Company maintained a valuation allowance on substantially all of its deferred tax assets. The deferred tax assets predominantly relate to operating losses, intangibles and content assets, and stock-based compensation. As a result of Legacy CuriosityStream’s conversion from an LLC to a C corporation in 2018, Legacy CuriosityStream recognized a partial step-up in the tax basis of intangibles and content assets that will be recovered as those assets are sold or the basis is amortized. On the date of the conversion, Legacy CuriosityStream recorded an estimated net deferred tax asset relating to this partial step-up in tax basis. be recorded against all net deferred tax assets. The Company intends to maintain a full valuation allowance on net deferred tax assets until sufficient positive evidence exists to support a reversal of the valuation allowance.2021,2023, and 2020,2022, the Company hadheld federal net operating loss carryforwards of approximately $149,148$220.2 million and $97,227,$196.9 million, respectively, which do not expire. As of December 31, 2021,2023, and 2020,2022, the Company hadheld gross state net operating loss carryforwards of approximately $100,855$146.4 million and $77,047,$135.0 million, respectively, which begin to expire in 2024. All of the federal and state net operating losses may be subject to change of ownership limitations provided by the Internal Revenue Code of 1986 and similar state provisions. An annual loss limitation may result in the expiration or reduced utilization of the net operating losses.No has been recorded in the consolidated financial statements. The Company recognizes the tax benefit of an uncertain tax position only if it is more likely than not that the position is sustainable upon examination by the taxing authority, based on the technical merits. The tax benefit recognized is measured as the largest amount of benefit which is more likely than not (greater than 50% likely) to be realized upon settlement with the taxing authority. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in its tax provision.27, 2020,13, 2024, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law in responseBoard declared a regular quarterly cash dividend of $0.025 per share of Common Stock, equivalent to $0.10 per share of Common Stock on an annual basis. The first cash dividend will be paid on April 30, 2024, to all holders of record of Common Stock at the COVID-19 pandemic. The CARES Act provides numerous tax provisions and stimulus measures, including temporary changes regarding the prior and future utilizationclose of net operating losses, temporary changesbusiness on April 12, 2024. This cash dividend of approximately $1.3 million is expected to the prior and future limitationsbe paid from available cash on interest deductions, and technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property. The Company has evaluated the provisions of the CARES Act relating to income taxes which will not result in material impact on its consolidated financial statements. The Company has not been audited by the Internal Revenue Service or any state income or franchise tax agency. All tax years remain open to examination by major taxing jurisdictions to which the Company is subject.Table of ContentsItemChanges in and Disagreements with Accountants on Accounting and Financial DisclosureCHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone.ItemControls and ProceduresCONTROLS AND PROCEDURESEvaluation of Disclosure Controls and Procedures(1)(i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2)(ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. As of December 31, 20212023 (the “Evaluation Date”), our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).2021.On April 12, 2021, the staff of the SEC issued an SEC Staff Statement (the “SEC Staff Statement”) in which the SEC Staff clarified its interpretations of certain generally accepted accounting principles related to warrants issued by Special Purpose Acquisition Companies (“SPACs”). Based on the clarifications expressed in the SEC Staff Statement which resulted in the restatement discussed in our Annual Report on Form 10-K/A for the year ended December 31, 2020, the Company’s management and the Chief Executive Officer and Chief Financial Officer concluded as of December 31, 2020, there was a material weakness in controls related to the classification and accounting for warrants issued by a SPAC, which did not operate effectively to appropriately apply the provisions of ASC 815.Management’s Report on Internal Control over Financial Reporting●Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions or dispositions of our assets.●Provide reasonable assurance that our transactions are recorded as necessary to permit preparation of our financial statements in accordance with accounting principles generally accepted in the United States, and that our receipts and expenditures are being made only in accordance with authorizations of management and our directors.●Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements."Internal Control - “Internal Control—Integrated Framework"Framework” (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company'sCompany’s internal control over financial reporting was effective as of December 31, 2021.
ATTESTATION REPORT OF THE REGISTERED PUBLIC ACCOUNTING FIRMRemediation of Material WeaknessTo remediate the material weakness, the Company studied and clarified its understanding of the accounting of contracts that may be settled in the Company’s own stock, such as warrants, as equity of the entity or as an asset or liability as highlighted in the SEC Staff Statement, and implemented additional review procedures and enhanced its accounting policy related to the accounting for such contracts to determine proper accounting in accordance with GAAP as clarified by the SEC Staff Statement. Based on actions taken, as well as the evaluation of the design and operating effectiveness of these new controls, management believes that the material weakness has been remediated as of December 31, 2021.Attestation Report of the Registered Public Accounting FirmChanges in Internal Control We have not experienced any material impact to our internal controls over financial reporting despite the fact that certainour employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation and our internal controls to minimize any impact on their design and operating effectiveness.ContentsItemOther InformationNone.Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.20222024 Annual Meeting (“20222024 Proxy Statement”) with the SEC, pursuant to Regulation 14A, on or beforeApril 28, 2022.29, 2024 (and, in any event, not later than 120 days after the close of our last fiscal year). Accordingly, certain information required by Part III of this Annual Report on Form 10-K has been omitted pursuant to General Instruction G(3) of Form 10-K. Only those sections of the 20222024 Proxy Statement that specifically address the items set forth herein are incorporated by reference.ItemDirectors, Executive Officers and Corporate GovernanceDIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCECode of EthicsOur Board has adopted a written Code of Ethics and Business Conduct applicable to all officers, directors and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We have posted a current copy of our Code of Ethics and Business Conduct on our website at www.curiositystream.com in the “Governance” section under “Governance Documents.” We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver from, a provision of our Code of Ethics and Business Conduct, as well as NASDAQ’s requirement to disclose waivers with respect to directors and executive officers, by posting such information on our website at the address and location specified above. The information contained on our website is not incorporated by reference into this Annual Report on Form 10-K.The remaining information required by this item will be included in our 20222024 Proxy Statement and is incorporated herein by reference.ItemExecutive CompensationEXECUTIVE COMPENSATIONWe are an “emerging growth company,” as defined under the JOBS Act, and are therefore not required to provide certain disclosures regarding executive compensation required of larger public companies or hold a nonbinding advisory vote on executive compensation or obtain stockholder approval of any golden parachute payments not previously approved.20222024 Proxy Statement and is incorporated herein by reference.ItemSecurity Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersSECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS20222024 Proxy Statement and is incorporated herein by reference.ItemCertain Relationships and Related Transaction, and Director IndependenceCERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE20222024 Proxy Statement and is incorporated herein by reference.ItemPrincipal Accountant Fees and ServicesPRINCIPAL ACCOUNTANT FEES AND SERVICES20222024 Proxy Statement and is incorporated herein by reference.Part IVItemExhibits, Financial Statement SchedulesEXHIBITS, FINANCIAL STATEMENT SCHEDULESreport:Form 10-K:1.Consolidated Financial Statements. Reference is made to the Index to Consolidated Financial Statements beginning on Page F-1 hereof.2.Financial Statement Schedules.Exhibit No. Description Incorporated By Reference Filed/Furnished
HerewithForm File No. Exhibit Filing Date 2.1 8-K 001-39139 2.1 August 11,
20203.1 8-K 001-39139 3.1 October 14,
20203.2 8-K 001-39139 3.2 October 14,
20204.1 S-1/A 001-39139 4.2 November 8,
20194.2 S-1/A 001-39139 4.3 November 8,
20194.3 8-K 001-39139 4.1 November 25,
20194.4 10-K 001-39139 4.4 March 31,
20214.5 10-K 001-39139 4.5 March 31,
202110.1 8-K 001-39139 10.1 November 25,
2019Exhibit No. Description Incorporated By Reference Filed/Furnished
HerewithForm File No. Exhibit Filing Date 10.2 8-K 001-39139 10.3 November 25,
201910.3 S-1/A 333-234327 10.5 November 8,
201910.4 8-K 001-39139 10.5 November 25,
201910.5 8-K 001-39139 10.1 August 11,
202010.6* 8-K 001-39139 10.10 October 14,
202010.7 8-K 001-39139 10.11 October 14,
202010.8 8-K 001-39139 10.12 October 14,
202010.9 8-K 001-39139 10.13 October 14,
202010.10* 8-K 001-39139 10.14 October 14,
202010.11* 8-K 001-39139 10.15 October 14,
202010.12* 8-K 001-39139 10.16 October 14,
2020Exhibit No. Description Incorporated By Reference Filed/Furnished
HerewithForm File No. Exhibit Filing Date 10.13 8-K 001-39139 10.17 October 14,
202010.14* 8-K 001-39139 10.1 March 19,
202110.15* 8-K 001-39139 10.2 March 19,
202110.16* 8-K 001-39139 10.3 March 19,
202110.17* 8-K 001-39139 10.1 October 8,
202110.18* 8-K 001-39139 10.1 May 24,
202210.19* 8-K 001-39139 10.1 November 9,
202210.20* 8-K 001-39139 10.1 November 16,
202214.1 8-K 001-39139 14.1 October 14,
202021.1 8-K 001-39139 21.1 October 14,
202023.1 X 24.1 10-K 001-39139 24.1 March 31,
202131.1 X 31.2 X 32.1** X Exhibit No. 3.DescriptionExhibits. The following exhibits are filed, furnished or incorporated by referenceIncorporated By ReferenceFiled/Furnished
HerewithForm File No. Exhibit Filing Date 97.1 X 101.INS*** Inline XBRL Instance Document.** X 101.SCH Inline XBRL Taxonomy Extension Schema Document.** X 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.** X 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.** X 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.** X 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.** X 104 Cover Page Interactive Data File (formatted as part of this Annual Report on Form 10-K.Inline XBRL and contained in Exhibit 101).**X
*This document is a management contract or compensatory plan or arrangement.ItemFormFORM 10-K SummaryNone.
None.SIGNATURESCURIOSITYSTREAM INC. Dated: March 31, 202225, 2024By: /s/ Clint Stinchcomb Name: Clint Stinchcomb Title: Dated: March 31, 202225, 2024By: /s/ Jason EustacePeter WestleyName: Jason EustacePeter WestleyTitle: and Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.Date: March 31, 202225, 2024/s/ Clint Stinchcomb Name: Name: Clint Stinchcomb Title: Date: March 25, 2024 /s/ Peter Westley Date: March 31, 2022/s/ Jason EustaceName: Jason EustacePeter WestleyTitle: Date: March 25, 2024 /s/ John Hendricks Date: March 31, 2022*Name: John Hendricks Title: Chairman of the Board, Director Date: March 25, 2024 /s/ Elizabeth Saravia Name: Elizabeth Saravia Date: March 31, 2022*Name: Elizabeth HendricksTitle: Director Date: March 25, 2024 /s/ Patrick Keeley Date: March 31, 2022*Name: Patrick Keeley Title: Director Date: March 25, 2024 /s/ Matthew Blank Date: March 31, 2022*Name: Matthew Blank Title: Director Date: March 25, 2024 /s/ Jonathan Huberman Date: March 31, 2022*Name: Jonathan Huberman Title: Director Date: March 25, 2024 /s/ Mike Nikzad Date: March 31, 2022*Name: Mike Nikzad Title: Director Date: March 25, 2024 /s/ Andrew Hendrix Date: March 31, 2022*Name: Andrew Hendricks Title: Director *By:/s/ Clint StinchcombName: Clint StinchcombAs Attorney-in-Fact 51iso4217:USD xbrli:shares