UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 10-Q
_____________________
(MARK ONE)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarter ended JuneSeptember 30, 2023
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the transition period fromto
_________ 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 No.) | |||||
8484 Georgia Ave., Suite 700
Silver Spring, Maryland 20910
(Address of principal executive offices)
(301)
755-2050
(Issuer’s telephone number)
_____________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each 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 | ||||||||||||||
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ☐
oIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation(§ (§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 ☐o
S-T
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 definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” inRule 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 is a shell company (as defined in Rule
12b-2
of the Exchange Act). Yes ☐ No ☒As of August 10November 3, 2023, 2023, there were
CURIOSITYSTREAM INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED June 30, 2023
TABLE OF CONTENTS
Table of Contents
| Page | ||||||||
i
June 30, 2023 | December 31, 2022 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 44,337 | $ | 40,007 | ||||
Restricted cash | 500 | 500 | ||||||
Short-term investments in debt securities | — | 14,986 | ||||||
Accounts receivable | 9,087 | 10,899 | ||||||
Other current assets | 1,679 | 3,118 | ||||||
Total current assets | 55,603 | 69,510 | ||||||
Investments in equity method investees | 9,303 | 10,766 | ||||||
Property and equipment, net | 911 | 1,094 | ||||||
Content assets, net | 63,288 | 68,502 | ||||||
Operating lease right-of-use | 3,564 | 3,702 | ||||||
Other assets | 448 | 539 | ||||||
Total assets | $ | 133,117 | $ | 154,113 | ||||
Liabilities and stockholders’ equity (deficit) | ||||||||
Current liabilities | ||||||||
Content liabilities | $ | 1,750 | $ | 2,862 | ||||
Accounts payable | 6,407 | 6,065 | ||||||
Accrued expenses and other liabilities | 4,173 | 7,752 | ||||||
Deferred revenue | 12,876 | 14,281 | ||||||
Total current liabilities | 25,206 | 30,960 | ||||||
Warrant liability | 147 | 257 | ||||||
Non-current operating lease liabilities | 4,470 | 4,648 | ||||||
Other liabilities | 668 | 622 | ||||||
Total liabilities | 30,491 | 36,487 | ||||||
Stockholders’ equity (deficit) | ||||||||
Common stock, $0.0001 par value – 125,000 shares authorized as of June 30, 2023 and December 31, 2022; 53,026 shares issued and outstanding as of June 30, 2023; 52,853 issued and outstanding as of December 31, 2022 | 5 | 5 | ||||||
Additional paid-in capital | 361,392 | 358,760 | ||||||
Accumulated other comprehensive loss | — | (40 | ) | |||||
Accumulated deficit | (258,771 | ) | (241,099 | ) | ||||
Total stockholders’ equity (deficit) | 102,626 | 117,626 | ||||||
Total liabilities and stockholders’ equity (deficit) | $ | 133,117 | $ | 154,113 | ||||
CURIOSITYSTREAM INC.
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Revenues | $ | 14,097 | $ | 22,348 | $ | 26,484 | $ | 39,975 | ||||||||
Operating expenses | ||||||||||||||||
| Cost of revenues | 9,933 | 12,988 | 18,934 | 24,838 | ||||||||||||
| Advertising and marketing | 4,203 | 11,208 | 7,318 | 25,976 | ||||||||||||
| General and administrative | 7,980 | 10,603 | 16,039 | 21,106 | ||||||||||||
| Impairment of goodwill and intangible assets | — | 3,603 | — | 3,603 | ||||||||||||
| 22,116 | 38,402 | 42,291 | 75,523 | |||||||||||||
Operating loss | (8,019 | ) | (16,054 | ) | (15,807 | ) | (35,548 | ) | ||||||||
| Change in fair value of warrant liability | 184 | 478 | 110 | 4,338 | ||||||||||||
| Interest and other income (expense) | 437 | (29 | ) | 825 | (86 | ) | ||||||||||
| Equity method investment loss | (2,235 | ) | (316 | ) | (2,454 | ) | (472 | ) | ||||||||
Loss before income taxes | (9,633 | ) | (15,921 | ) | (17,326 | ) | (31,768 | ) | ||||||||
| Provision for income taxes | 288 | 56 | 346 | 101 | ||||||||||||
Net loss | $ | (9,921 | ) | $ | (15,977 | ) | $ | (17,672 | ) | $ | (31,869 | ) | ||||
Net loss per share | ||||||||||||||||
| Basic | $ | (0.19 | ) | $ | (0.30 | ) | $ | (0.33 | ) | $ | (0.60 | ) | ||||
| Diluted | $ | (0.19 | ) | $ | (0.30 | ) | $ | (0.33 | ) | $ | (0.60 | ) | ||||
Weighted average number of common shares outstanding | ||||||||||||||||
| Basic | 53,006 | 52,775 | 52,978 | 52,762 | ||||||||||||
| Diluted | 53,006 | 52,775 | 52,978 | 52,762 | ||||||||||||
CONSOLIDATED BALANCE SHEETS
| (In thousands, except par value) | September 30, 2023 | December 31, 2022 | |||||||||
| (Unaudited) | |||||||||||
| Assets | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | 40,304 | $ | 40,007 | |||||||
| Restricted cash | 500 | 500 | |||||||||
| Short-term investments in debt securities | — | 14,986 | |||||||||
| Accounts receivable | 6,877 | 10,899 | |||||||||
| Other current assets | 1,410 | 3,118 | |||||||||
| Total current assets | 49,091 | 69,510 | |||||||||
| Investments in equity method investees | 6,666 | 10,766 | |||||||||
| Property and equipment, net | 822 | 1,094 | |||||||||
| Content assets, net | 45,900 | 68,502 | |||||||||
| Operating lease right-of-use assets | 3,418 | 3,702 | |||||||||
| Other assets | 411 | 539 | |||||||||
| Total assets | $ | 106,308 | $ | 154,113 | |||||||
| Liabilities and stockholders’ equity | |||||||||||
| Current liabilities | |||||||||||
| Content liabilities | $ | 128 | $ | 2,862 | |||||||
| Accounts payable | 6,963 | 6,065 | |||||||||
| Accrued expenses and other liabilities | 4,154 | 7,752 | |||||||||
| Deferred revenue | 12,997 | 14,281 | |||||||||
| Total current liabilities | 24,242 | 30,960 | |||||||||
| Warrant liability | 74 | 257 | |||||||||
| Non-current operating lease liabilities | 4,378 | 4,648 | |||||||||
| Other liabilities | 675 | 622 | |||||||||
| Total liabilities | 29,369 | 36,487 | |||||||||
| Stockholders’ equity | |||||||||||
| Common stock, $0.0001 par value – 125,000 shares authorized as of September 30, 2023, and December 31, 2022; 53,071 shares issued and outstanding as of September 30, 2023; 52,853 issued and outstanding as of December 31, 2022 | 5 | 5 | |||||||||
| Additional paid-in capital | 362,270 | 358,760 | |||||||||
| Accumulated other comprehensive loss | — | (40) | |||||||||
| Accumulated deficit | (285,336) | (241,099) | |||||||||
| Total stockholders’ equity | 76,939 | 117,626 | |||||||||
| Total liabilities and stockholders’ equity | $ | 106,308 | $ | 154,113 | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
1
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (Unaudited and in thousands except per share amounts) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| Revenues | $ | 15,630 | $ | 23,569 | $ | 42,114 | $ | 63,544 | |||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Cost of revenues | 8,494 | 13,566 | 27,428 | 38,404 | |||||||||||||||||||
| Advertising and marketing | 5,106 | 5,626 | 12,424 | 31,602 | |||||||||||||||||||
| General and administrative | 6,959 | 8,757 | 22,998 | 29,863 | |||||||||||||||||||
| Impairment of content assets | 18,970 | — | 18,970 | — | |||||||||||||||||||
| Impairment of goodwill and intangible assets | — | — | — | 3,603 | |||||||||||||||||||
| 39,529 | 27,949 | 81,820 | 103,472 | ||||||||||||||||||||
| Operating loss | (23,899) | (4,380) | (39,706) | (39,928) | |||||||||||||||||||
| Change in fair value of warrant liability | 74 | 514 | 184 | 4,852 | |||||||||||||||||||
| Interest and other income (expense) | 31 | (478) | 856 | (564) | |||||||||||||||||||
| Equity method investment loss | (2,638) | (94) | (5,092) | (566) | |||||||||||||||||||
| Loss before income taxes | (26,432) | (4,438) | (43,758) | (36,206) | |||||||||||||||||||
| Provision for income taxes | 133 | 64 | 479 | 165 | |||||||||||||||||||
| Net loss | $ | (26,565) | $ | (4,502) | $ | (44,237) | $ | (36,371) | |||||||||||||||
| Net loss per share | |||||||||||||||||||||||
| Basic | $ | (0.50) | $ | (0.09) | $ | (0.83) | $ | (0.69) | |||||||||||||||
| Diluted | $ | (0.50) | $ | (0.09) | $ | (0.83) | $ | (0.69) | |||||||||||||||
| Weighted average number of common shares outstanding | |||||||||||||||||||||||
| Basic | 53,040 | 52,793 | 52,999 | 52,773 | |||||||||||||||||||
| Diluted | 53,040 | 52,793 | 52,999 | 52,773 | |||||||||||||||||||
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Net loss | $ | (9,921 | ) | $ | (15,977 | ) | $ | (17,672 | ) | $ | (31,869 | ) | ||||
| Other comprehensive income (loss) | ||||||||||||||||
| Unrealized gain (loss) on available for sale securities | — | 3 | 40 | (230 | ) | |||||||||||
Total comprehensive loss | $ | (9,921 | ) | $ | (15,974 | ) | $ | (17,632 | ) | $ | (32,099 | ) | ||||
The accompanying notes are an integral part of these consolidated financial statements.
2
CURIOSITYSTREAM INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (Unaudited and in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| Net loss | $ | (26,565) | $ | (4,502) | $ | (44,237) | $ | (36,371) | |||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||
| Unrealized gain on available for sale securities | — | 270 | 40 | 40 | |||||||||||||||||||
| Total comprehensive loss | $ | (26,565) | $ | (4,232) | $ | (44,197) | $ | (36,331) | |||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
| (Unaudited and in thousands) | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | 53,026 | $ | 5 | $ | 361,392 | $ | — | $ | (258,771) | $ | 102,626 | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | (26,565) | (26,565) | |||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation, net | 45 | — | 878 | — | — | 878 | |||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | 53,071 | $ | 5 | $ | 362,270 | $ | — | $ | (285,336) | $ | 76,939 | ||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | 52,853 | $ | 5 | $ | 358,760 | $ | (40) | $ | (241,099) | $ | 117,626 | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | (44,237) | (44,237) | |||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation, net | 218 | — | 3,510 | — | — | 3,510 | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | 40 | — | 40 | |||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | 53,071 | $ | 5 | $ | 362,270 | $ | — | $ | (285,336) | $ | 76,939 | ||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2022 | 52,786 | $ | 5 | $ | 355,555 | $ | (452) | $ | (222,051) | $ | 133,057 | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | (4,502) | (4,502) | |||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation, net | 16 | — | 1,656 | — | — | 1,656 | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | 270 | — | 270 | |||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2022 | 52,802 | $ | 5 | $ | 357,211 | $ | (182) | $ | (226,553) | $ | 130,481 | ||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | 52,677 | $ | 5 | $ | 352,334 | $ | (222) | $ | (190,182) | $ | 161,935 | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | (36,371) | (36,371) | |||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation, net | 125 | — | 4,877 | — | — | 4,877 | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | 40 | — | 40 | |||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2022 | 52,802 | $ | 5 | $ | 357,211 | $ | (182) | $ | (226,553) | $ | 130,481 | ||||||||||||||||||||||||||||||||||||
Common Stock | Preferred Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||
Balance at March 31, 2023 | 52,961 | $ | 5 | — | $ | — | $ | 360,002 | $ | — | $ | (248,850 | ) | $ | 111,157 | |||||||||||||||||
| Net loss | — | — | — | — | — | — | (9,921 | ) | (9,921 | ) | ||||||||||||||||||||||
| Stock-based compensation, net | 66 | — | — | — | 1,390 | — | — | 1,390 | ||||||||||||||||||||||||
Balance at June 30, 2023 | 53,026 | $ | 5 | — | $ | — | $ | 361,392 | $ | — | $ | (258,771 | ) | $ | 102,626 | |||||||||||||||||
Balance at December 31, 2022 | 52,853 | $ | 5 | — | $ | — | $ | 358,760 | $ | (40 | ) | $ | (241,099 | ) | $ | 117,626 | ||||||||||||||||
| Net loss | — | — | — | — | — | — | (17,672 | ) | (17,672 | ) | ||||||||||||||||||||||
| Stock-based compensation, net | 173 | — | — | — | 2,632 | — | — | 2,632 | ||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | 40 | — | 40 | ||||||||||||||||||||||||
Balance at June 30, 2023 | 53,026 | $ | 5 | — | $ | — | $ | 361,392 | $ | — | $ | (258,771 | ) | $ | 102,626 | |||||||||||||||||
Balance at March 31, 2022 | 52,767 | $ | 5 | — | $ | — | $ | 353,985 | $ | (455 | ) | $ | (206,074 | ) | $ | 147,461 | ||||||||||||||||
| Net loss | — | — | — | — | — | — | (15,977 | ) | (15,977 | ) | ||||||||||||||||||||||
| Stock-based compensation, net | 19 | — | — | — | 1,570 | — | — | 1,570 | ||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | 3 | — | 3 | ||||||||||||||||||||||||
Balance at June 30, 2022 | 52,786 | $ | 5 | — | $ | — | $ | 355,555 | $ | (452 | ) | $ | (222,051 | ) | $ | 133,057 | ||||||||||||||||
Balance at December 31, 2021 | 52,677 | $ | 5 | — | $ | — | $ | 352,334 | $ | (222 | ) | $ | (190,182 | ) | $ | 161,935 | ||||||||||||||||
| Net loss | — | — | — | — | — | — | (31,869 | ) | (31,869 | ) | ||||||||||||||||||||||
| Stock-based compensation, net | 109 | — | — | — | 3,221 | — | — | 3,221 | ||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | (230 | ) | — | (230 | ) | ||||||||||||||||||||||
Balance at June 30, 2022 | 52,786 | $ | 5 | — | $ | — | $ | 355,555 | $ | (452 | ) | $ | (222,051 | ) | $ | 133,057 | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
| Nine Months Ended September 30, | |||||||||||
| (Unaudited and in thousands) | 2023 | 2022 | |||||||||
| Cash flows from operating activities | |||||||||||
| Net loss | $ | (44,237) | $ | (36,371) | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities | |||||||||||
| Change in fair value of warrant liability | (183) | (4,852) | |||||||||
| Additions to content assets | (14,074) | (31,729) | |||||||||
| Change in content liabilities | (2,734) | (4,706) | |||||||||
| Amortization of content assets | 17,706 | 29,510 | |||||||||
| Depreciation and amortization expenses | 370 | 573 | |||||||||
| 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 | 1,087 | |||||||||
| Stock-based compensation | 3,586 | 5,055 | |||||||||
| Equity method investment loss | 5,092 | 566 | |||||||||
| Other non-cash items | 363 | 288 | |||||||||
| Changes in operating assets and liabilities | |||||||||||
| Accounts receivable | 4,022 | 6,342 | |||||||||
| Other assets | 1,737 | 4,994 | |||||||||
| Accounts payable | 903 | 4,188 | |||||||||
| Accrued expenses and other liabilities | (3,947) | (4,792) | |||||||||
| Deferred revenue | (1,230) | (4,500) | |||||||||
| Net cash used in operating activities | (13,630) | (30,744) | |||||||||
| 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 | 41,873 | |||||||||
| Purchases of investments in debt securities | — | (1,497) | |||||||||
| Net cash provided by investing activities | 14,003 | 60,701 | |||||||||
| Cash flows from financing activities | |||||||||||
| Payments related to tax withholding | (76) | (178) | |||||||||
| Net cash used in financing activities | (76) | (178) | |||||||||
| Net increase in cash, cash equivalents and restricted cash | 297 | 29,779 | |||||||||
| Cash, cash equivalents and restricted cash, beginning of period | 40,507 | 17,547 | |||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 40,804 | $ | 47,326 | |||||||
| Supplemental disclosure: | |||||||||||
| Cash paid for taxes | $ | 144 | $ | 571 | |||||||
| Cash paid for operating leases | $ | 360 | $ | 352 | |||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | $ | — | $ | 3,965 | |||||||
For the six months ended June 30, | ||||||||
2023 | 2022 | |||||||
Cash flows from operating activities | ||||||||
| Net loss | $ | (17,672 | ) | $ | (31,869 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Change in fair value of warrant liability | (110 | ) | (4,338 | ) | ||||
| Additions to content assets | (7,103 | ) | (25,303 | ) | ||||
| Change in content liabilities | (1,112 | ) | (3,708 | ) | ||||
| Amortization of content assets | 12,317 | 19,130 | ||||||
| Depreciation and amortization expenses | 249 | 441 | ||||||
| Impairment of goodwill and intangible assets | — | 3,603 | ||||||
| Amortization of premiums and accretion of discounts associated with investments in debt securities, net | 26 | 758 | ||||||
| Stock-based compensation | 2,689 | 3,382 | ||||||
| Equity method investment loss | 2,454 | 472 | ||||||
Other non-cash items | 243 | 211 | ||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | 1,812 | 11,893 | ||||||
| Other assets | 1,464 | 4,040 | ||||||
| Accounts payable | (645 | ) | 6,146 | |||||
| Accrued expenses and other liabilities | (3,862 | ) | (2,850 | ) | ||||
| Deferred revenue | (1,358 | ) | (157 | ) | ||||
| Net cash used in operating activities | (10,608 | ) | (18,149 | ) | ||||
Cash flows from investing activities | ||||||||
| Purchases of property and equipment | (5 | ) | (120 | ) | ||||
| Investment in equity method investees | — | (1,625 | ) | |||||
| Sales of investments in debt securities | — | 2,893 | ||||||
| Maturities of investments in debt securities | 15,000 | 24,373 | ||||||
| Purchases of investments in debt securities | — | (1,497 | ) | |||||
| Net cash provided by investing activities | 14,995 | 24,024 | ||||||
Cash flows from financing activities | ||||||||
| Payments related to tax withholding | (57 | ) | (161 | ) | ||||
| Net cash used in financing activities | (57 | ) | (161 | ) | ||||
Net increase in cash, cash equivalents and restricted cash | 4,330 | 5,714 | ||||||
| Cash, cash equivalents and restricted cash, beginning of period | 40,507 | 17,547 | ||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 44,837 | $ | 23,261 | ||||
Supplemental disclosure: | ||||||||
| Cash paid for taxes | $ | 25 | $ | 398 | ||||
| Cash paid for operating leases | $ | 269 | $ | 219 | ||||
Right-of-use | $ | — | $ | 3,965 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
5
The principal business of CuriosityStream Inc. (the “Company” or “CuriosityStream”) is to provideproviding customers with access to high quality factual content via a direct subscription video
on-demand
(SVOD) platform accessible by internet connected devices, or indirectly via distribution partners that 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 of thousands of accessible on-demand and ad-free productions and includes shows and series from leading nonfiction producers.The Company’s content assets are available for consuming directly through its owned and operated website (“O&O 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 content included (e.g., Direct Service or 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, major smart TV brands (e.g., LG, Vizio, 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 content licensing deals. The Company also sells selected rights to content it creates before production begins.
The accompanying unaudited consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and are consistent in all material respects with those applied in the Company’s consolidated financial statements as of and for the year ended December 31, 2022.
In the opinion of management, the unaudited consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair presentation of the Company’s financial position, results of operations, and cash flows. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes and Management’s Discussion and Analysis of Financial Condition, and Results of Operations included in the Annual Report on Formsixnine months ended JuneSeptember 30, 2023, are not necessarily indicative of the results to be expected for the year ending December 31, 2023.
10-K
for the year ended December 31, 2022. The results of operations for the three and In the second quarter of 2023, the Company began entering into trade and barter transactions primarily for the purpose of exchanging content assets through licensing agreements with media counterparties. Refer to Note 5 -Revenue for discussion of our accounting policy related to these transactions. Outside of these transactions, there have been no material changes in the Company’s significant accounting policies compared to the significant accounting policies described in the Company’s consolidated financial statements as of and for the year ended December 31, 2022.
Impairment
During the three months ended September 30, 2023, the Company identified certain indicators of impairment related to its content assets and performed an analysis of these assets to assess if fair value was less than unamortized costs. Refer to Note 4 - Balance Sheet Components for further discussion. In addition, during the three months ended September 30, 2023, the Company separately performed an analysis of its Investments in equity method investees to determine if an “other-than-temporary” impairment existed. Refer to Note 3 - Equity Investments, for further discussion on the results of this analysis.
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The Company periodically reviews and evaluates the recoverability of its long-lived assets. Where applicable, estimates of net future cash flows, on an undiscounted basis, are calculated based on future revenue and operating performance estimates. If appropriate and where deemed necessary, a reduction in the carrying value is recorded based on the difference between the carrying value and the fair value based on discounted cash flows.
During the three months ended JuneSeptember 30, 2023, the Company identified certain indicators of impairment with respect to its long-lived asset group, including the continual decline in the Company’s stock price. Based on the resulting impairment analysis, the Company determined that the undiscounted cash flows of the long-lived asset group, which for the purposes of this analysis excluded the Company’s Investments in equity method investees, exceeded the carrying value as of June 30. 2023.September 30, 2023, subsequent to the impairment of content assets discussed above. As such, no impairment charges with respect to the long-lived asset group were required to be recorded by the Company during the three months ended JuneSeptember 30, 2023.
Use of estimates
EstimatesThe 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 items subject to such estimates include theamortization and fair value of content asset amortization policy,assets, the assessment of the recoverability of content assets and equity method investments, and the determination of fair value ofestimates related to non-monetary transactions, share-based awards, and liability classified warrants and measurement of income tax assets and liabilities.warrants.
Concentration of risk
RiskFinancial 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 receivable, net are typically unsecured and are derived from revenues earned from customers primarily located in the United States.
Fair value measurementValue Measurement of financial instruments
Financial InstrumentsFair 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 inputs 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 inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:
•Level 1 —: Quoted prices in active markets for identical 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 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.
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.
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The Company’s assets measured at fair value on a recurring basis includehave included its investments in money market funds and corporate debt securities.securities (at December 31, 2022). 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 private placement warrants issued to Software Acquisition Holdings LLC, the Company’s former Sponsor, in a private placement offering (the “Private Placement 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 6 - Stockholders’ Equity for significant assumptions which the Company used in the fair value model for the Private Placement
Warrants.
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.
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)“Financial “Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU
No. 2016-13,
2016-13”).”
The amendments in this update introduce a new standard to replace the incurred loss impairment methodology under prior U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company determines its allowance for doubtful accounts based on historical loss experience, customer financial condition, and current economic conditions. The Company adopted the new standard effective January 1, 2023, which has not had a material impact on its consolidated financial statements.NOTE 3 - EQUITY INVESTMENTS
The Company’s carrying values for its equity method investments as of September 30, 2023, and December 31, 2022, were as follows:
| (In thousands) | Spiegel Venture | Nebula | Total | ||||||||||||||
| Balance at December 31, 2022 | $ | 2,899 | $ | 7,867 | $ | 10,766 | |||||||||||
| Investments in equity method investees | 992 | — | 992 | ||||||||||||||
| Equity method investment loss | (2,025) | (3,067) | (5,092) | ||||||||||||||
| Balance at September 30, 2023 | $ | 1,866 | $ | 4,800 | $ | 6,666 | |||||||||||
SPIEGEL VENTURE
In July 2021, the Company acquired a 32% ownership in Spiegel TV Geschichte und Wissen GmbH & Co. KG (the “Spiegel Venture”)
Per the Share Purchase Agreement which was(as amended during the six months ended June 30,in early 2023, (as amended, 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 (the “Holdback Payment”). During the three months ended June 30, 2023, the Company determined Spiegel Venture had achieved such financial targets, resulting in the Company recordingpaying a Holdback Payment liabilityin the amount of $0.9 million which is included in Accounts Payable on its consolidated balance sheet, related to the Holdback Payment. This amount was paidSpiegel Venture during July 2023.
The Company has a call option that permits it to require Spiegel TV and Autentic to sell their 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 2025, and (ii) the period between March 1, 2026, and March 30, 2026.Together with the Call Option, each of Spiegel TV and Autentic has a put option that permits it to require the Company to purchase their interest (“Put Option”) at a value based on a determinable calculation outlined in the 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 the fiscal year 2025, and (ii) the period between April 1, 2026 and April 30, 2026.
In the event the Call Option or Put Option is not exercised, both options will continue to be available to each respective party in the following year through perpetuity, with its exercise limited to the same date range as outlined above. The Put Option is not currently considered to be probable of becoming exercisable based on the defined conditions in the SPA.
NEBULA
Watch Nebula LLC (“Nebula”)
is an SVOD technology platform built for and by a group of independent content creators. On August 23, 2021, the Company purchased a 12% ownership interest in Nebula for $6.0 million. Nebula is an SVOD technology platform built for and by a group of content creators. Should Nebula meet certain quarterly targets through the third quarter of 2023, the Company is obligated to purchase additional ownership interests, each for a payment of $0.8 million. After each payment the Company will obtain an additional 1.625% of equity ownership interests. The Company did not make further investments in Nebula during the three and six months ended June 30, 2023. The Company’s total ownership interest in Nebula as of June 30, 2023 was 16.875%.
Upon its initial investment, the Company obtained 25% representation on Nebula’s Board of Directors, providing the Company with significant influence, but not a controlling interest.
Since the time of its original investment, the Company has been obligated to purchase additional incremental ownership interests, each for a payment of $0.8 million and representing 1.625% of equity ownership, if Nebula meets certain quarterly targets. The Company has made three subsequent incremental purchases, bringing its total ownership interest in Nebula to 16.875% as of September 30, 2023. The Company did not make further investments in Nebula during the three and nine months ended September 30, 2023, and the obligation to make additional purchases ended as of September 30, 2023. The Company has not received dividends from Nebula as of JuneSeptember 30, 2023.
Since August 2021, the Company has included access to Nebula’s SVOD service as a part of a combined CuriosityStream / Watch Nebula subscription offer and as part of the Company’s Smart Bundle subscription package. As part of this arrangement, the Company has shared revenue with Nebula, based on certain metrics, and paid monthly. On September 26, 2023, Nebula provided the Company with a notice of non-renewal (the “Nebula Non-Renewal”), which will result in the expiration of the revenue share at the end of 2023.
Nebula is still required to make its service available to subscribers to either of these offerings through the end of the term of any such subscription that exists as of December 31, 2023.
IMPAIRMENT ASSESSMENT
The Company regularly reviews its Investments in equity method investees for impairment, including when the carrying value of an investment exceeds its related market or fair value. If it has been determined that an investment has sustained an“other-than-temporary” “other-than-temporary” decline in value, the investment is written-down to its fair value. The factors the Company considers in determining an “other-than-temporary” decline has occurred includes, but is 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.
As a result of the Company’s impairment analysis, it determined the fair value of its investment in Nebulathe Spiegel Venture exceeded the carrying value as of JuneSeptember 30, 2023, and as such no “other-than-temporary” impairment charge iswas required. The
As a result of the Company’s impairment analysis related to Nebula, it determined that the carrying value of the Company’sthis investment in the Spiegel Venture exceeded the determined fair value as of JuneSeptember 30, 2023 and as. As such, the Company recorded a
$2.3 million impairment, which is included in Equityequity method investment loss, duringfor the three months ended JuneSeptember 30, 2023.
NOTE 4 - BALANCE SHEET COMPONENTS
Spiegel Venture | Nebula | Total | ||||||||||
(in thousands) | ||||||||||||
| Balance at December 31, 2022 | $ | 2,899 | $ | 7,867 | $ | 10,766 | ||||||
| Investments in equity method investees | 992 | — | 992 | |||||||||
| Equity method investment loss | (1,939 | ) | (516 | ) | (2,455 | ) | ||||||
| Balance at June 30, 2023 | $ | 1,952 | $ | 7,351 | $ | 9,303 | ||||||
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 is as follows:is:
| (In thousands) | September 30, 2023 | December 31, 2022 | |||||||||
| Cash and cash equivalents | $ | 40,304 | $ | 40,007 | |||||||
| Restricted cash | 500 | 500 | |||||||||
| Cash and cash equivalents and restricted cash | $ | 40,804 | $ | 40,507 | |||||||
June 30, 2023 | December 31, 2022 | |||||||
(in thousands) | ||||||||
| Cash and cash equivalents | $ | 44,337 | $ | 40,007 | ||||
| Restricted cash | 500 | 500 | ||||||
| Cash and cash equivalents and restricted cash | $ | 44,837 | $ | 40,507 | ||||
As of JuneSeptember 30, 2023, and December 31, 2022
, restricted cash includes cash deposits required by a bank as collateral related to corporate credit card agreements.| As of June 30, 2023 | As of December 31, 2022 | |||||||||||||||||||||||
Cash and cash equivalents | Short-term investments | Total | Cash and cash equivalents | Short-term investments | Total | |||||||||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||||||||||
Level 1 Securities | ||||||||||||||||||||||||
Money market funds | $ | 43,333 | $ | — | $ | 43,333 | $ | 17,724 | $ | — | $ | 17,724 | ||||||||||||
Total Level 1 Securities | $ | 43,333 | — | $ | 43,333 | $ | 17,724 | — | $ | 17,724 | ||||||||||||||
Level 2 Securities | ||||||||||||||||||||||||
Corporate debt securities | — | — | — | — | $ | 14,986 | $ | 14,986 | ||||||||||||||||
Total Level 2 Securities | — | — | — | — | $ | 14,986 | $ | 14,986 | ||||||||||||||||
Total | $ | 43,333 | — | $ | 43,333 | $ | 17,724 | $ | 14,986 | $ | 32,710 | |||||||||||||
| September 30, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||
| (In thousands) | Cash and cash equivalents | Short-term investments | Total | Cash and cash equivalents | Short-term investments | Total | |||||||||||||||||||||||||||||
| Level 1 securities: | |||||||||||||||||||||||||||||||||||
| Money market funds | $ | 38,375 | $ | — | $ | 38,375 | $ | 17,724 | $ | — | $ | 17,724 | |||||||||||||||||||||||
| Total Level 1 securities | $ | 38,375 | — | $ | 38,375 | $ | 17,724 | — | $ | 17,724 | |||||||||||||||||||||||||
| Level 2 securities: | |||||||||||||||||||||||||||||||||||
| Corporate debt securities | — | — | — | — | $ | 14,986 | $ | 14,986 | |||||||||||||||||||||||||||
| Total Level 2 securities | — | — | — | — | $ | 14,986 | $ | 14,986 | |||||||||||||||||||||||||||
| Total | $ | 38,375 | — | $ | 38,375 | $ | 17,724 | $ | 14,986 | $ | 32,710 | ||||||||||||||||||||||||
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| As of December 31, 2022 | December 31, 2022 | ||||||||||||||||||||||||||||||||||||||
| (In thousands) | (In thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||||||
| Debt Securities: | |||||||||||||||||||||||||||||||||||||||
| Debt securities: | Debt securities: | ||||||||||||||||||||||||||||||||||||||
| Corporate | $ | 15,026 | — | $ | (40 | ) | $ | 14,986 | Corporate | $ | 15,026 | — | $ | (40) | $ | 14,986 | |||||||||||||||||||||||
| Total | $ | 15,026 | — | $ | (40 | ) | $ | 14,986 | Total | $ | 15,026 | — | $ | (40) | $ | 14,986 | |||||||||||||||||||||||
Content assets consisted of the following:
| As of | ||||||||
| June 30, 2023 | December 31, 2022 | |||||||
| (in thousands) | ||||||||
| Licensed content, net | ||||||||
| Released, less amortization | $ | 11,056 | $ | 11,154 | ||||
| Prepaid and unreleased | 3,746 | 4,014 | ||||||
| 14,802 | 15,168 | |||||||
| Produced content, net | ||||||||
| Released, less amortization | 36,213 | 33,094 | ||||||
| In production | 12,273 | 20,240 | ||||||
| 48,486 | 53,334 | |||||||
| Total | $ | 63,288 | $ | 68,502 | ||||
| (in thousands) | September 30, 2023 | December 31, 2022 | |||||||||
| Licensed content, net: | |||||||||||
Released, less amortization and impairment1 | $ | 6,308 | $ | 11,154 | |||||||
| Prepaid and unreleased | 7,997 | 4,014 | |||||||||
| Total Licensed content, net | 14,305 | 15,168 | |||||||||
| Produced content, net: | |||||||||||
Released, less amortization and impairment2 | 20,792 | 33,094 | |||||||||
| In production | 10,803 | 20,240 | |||||||||
| Total produced content, net | 31,595 | 53,334 | |||||||||
| Total content assets | $ | 45,900 | $ | 68,502 | |||||||
1 The September 30, 2023, amount reflects a $4.4 million impairment charge recorded for the three months ended September 30, 2023. See Impairment Assessment below. | |||||||||||
2 The September 30, 2023, amount reflects a $14.6 million impairment charge recorded for the three months ended September 30, 2023. See Impairment Assessment below. | |||||||||||
Of the $6.3 million unamortized cost of the licensed content that hashad been released is expected toas of September 30, 2023, the Company expects that $3.1 million, $1.6 million and $0.9 million will be amortized in each of the next three years. As of June 30, 2023,
$20.8 million unamortized cost of the produced content that hashad been released is expected toas of September 30, 2023, the Company expects that $6.4 million, $5.9 million and $4.9 million will be amortized in each of the next three years.
Impairment Assessment
The Company’s business model is generally 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 assets 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.
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Given these factors, as well as the Company’s declining market capitalization and operating losses during the quarter, the Company identified an indicator of impairment related to its content asset group and performed an analysis of content assets to assess if the fair value was less than unamortized cost. To determine if an impairment existed, the Company utilized a traditional discounted cash flow approach based on expectations for the monetization of its content assets in the aggregate, including estimates for future cash inflows and outflows. As a result of this impairment analysis of content assets, the Company determined that the unamortized cost exceeded the fair value, and as such, the Company recorded a $19.0 million impairment for the three months ended September 30, 2023.
The discounted cash flow analysis includes cash flow estimates of revenue and costs, as well as a discount rate (a Level 3 fair value measurement). Estimates of future revenue and costs involve measurement uncertainty, and it is therefore possible that further reductions in the carrying value of content assets may be required as a consequence of changes in management’s future revenue estimates. The discount rate utilized in the discount cash flow analysis was based on the weighted average cost of capital of the Company plus a risk premium representing the risk associated with the Company’s content assets. The discount rate may be impacted by adverse changes in the macroeconomic environment and volatility in the debt and equity markets.
Amortization
In accordance with its accounting policy for content assets, the Company amortizedamortizes licensed content costs and produced content costs, which is included inwithin cost of revenues onin the Company’s unaudited consolidated statements of operationsoperations. For the three and nine months ended September 30, 2023, and 2022, content amortization was as follows:
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||||||||||||||||||||
| (in thousands) | (in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||
Licensed content | $1804 | $1,798 | $3,749 | $4,797 | Licensed content | $ | 1,728 | $ | 1,793 | $ | 5,478 | $ | 6,590 | ||||||||||||||||||||||||||
Produced content | 4,662 | 8,293 | 8,569 | 14,333 | Produced content | 3,661 | 8,588 | 12,229 | 22,920 | ||||||||||||||||||||||||||||||
Total | $6,466 | $10,091 | $12,318 | $19,130 | Total | $ | 5,389 | $ | 10,381 | $ | 17,707 | $ | 29,510 | ||||||||||||||||||||||||||
WARRANT LIABILITY
As described in Note 6 - Stockholders’ Equity, the Private Placement Warrants are classified as aTheAs of September 30, 2023, and December 31, 2022, the fair value of the Private Placement Warrants, as determined using Level 3 inputs, was as follows:
non-current
liability and reported at fair value at each reporting period. | (in thousands) | September 30, 2023 | December 31, 2022 | |||||||||
| Private Placement Warrants | $ | 74 | $ | 257 | |||||||
| As of June 30, 2023 | As of December 31, 2022 | |||||||
| (in thousands) | ||||||||
| Level 3 | ||||||||
| Private Placement Warrants | $ | 147 | $ | 257 | ||||
| Total Level 3 | $ | 147 | $ | 257 | ||||
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NOTE 5 — Revenue
- REVENUEThe following table sets forth the Company’s revenues disaggregated by type for the three and sixnine months ended JuneSeptember 30, 2023, and 2022, as well as the relative percentage of each revenue type to total revenue.revenue:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||||||||||||||||
| Subscriptions: | |||||||||||||||||||||||||||||||||||||||||||||||
| O&O Service | $ | 6,601 | 42 | % | $ | 7,890 | 33 | % | $ | 19,664 | 47 | % | $ | 23,110 | 36 | % | |||||||||||||||||||||||||||||||
| App Services | 830 | 5 | % | 960 | 4 | % | 2,556 | 6 | % | 3,018 | 5 | % | |||||||||||||||||||||||||||||||||||
| Subscriptions total | 7,431 | 47 | % | 8,850 | 38 | % | 22,220 | 53 | % | 26,128 | 41 | % | |||||||||||||||||||||||||||||||||||
| License fees: | |||||||||||||||||||||||||||||||||||||||||||||||
| Partner Direct Business | 1,177 | 8 | % | 1,157 | 5 | % | 3,361 | 8 | % | 3,491 | 5 | % | |||||||||||||||||||||||||||||||||||
| Bundled Distribution | 1,504 | 10 | % | 2,595 | 11 | % | 4,487 | 11 | % | 10,250 | 16 | % | |||||||||||||||||||||||||||||||||||
| Content Licensing | 5,082 | 32 | % | 10,790 | 46 | % | 10,715 | 25 | % | 21,692 | 34 | % | |||||||||||||||||||||||||||||||||||
| License fees total | 7,763 | 50 | % | 14,542 | 62 | % | 18,563 | 44 | % | 35,433 | 56 | % | |||||||||||||||||||||||||||||||||||
| Other* | 436 | 3 | % | 177 | 1 | % | 1,331 | 3 | % | 1,983 | 3 | % | |||||||||||||||||||||||||||||||||||
| Total revenues | $ | 15,630 | $ | 23,569 | $ | 42,114 | $ | 63,544 | |||||||||||||||||||||||||||||||||||||||
| * Other revenue primarily relates to other marketing services | |||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||||
Subscriptions — O&O Service | $ | 6,421 | 45 | % | $ | 7,912 | 35 | % | $ | 13,064 | 49 | % | $ | 15,218 | 38 | % | ||||||||||||||||
Subscriptions — App Services | 849 | 6 | % | 1,010 | 5 | % | 1,726 | 7 | % | 2,058 | 5 | % | ||||||||||||||||||||
Subscriptions — Total | 7,270 | 52 | % | 8,922 | 40 | % | 14,790 | 56 | % | 17,276 | 43 | % | ||||||||||||||||||||
License Fees — Partner Direct Business | 1,081 | 8 | % | 1,191 | 5 | % | 2,184 | 8 | % | 2,334 | 6 | % | ||||||||||||||||||||
License Fees — Bundled Distribution | 1,509 | 11 | % | 3,888 | 17 | % | 2,983 | 12 | % | 7,655 | 19 | % | ||||||||||||||||||||
License Fees — Content Licensing | 3,615 | 26 | % | 6,655 | 30 | % | 5,633 | 21 | % | 10,904 | 27 | % | ||||||||||||||||||||
License Fees — Total | 6,205 | 44 | % | 11,734 | 52 | % | 10,800 | 41 | % | 20,893 | 52 | % | ||||||||||||||||||||
Other — Total (1) | 622 | 4 | % | 1,692 | 8 | % | 894 | 3 | % | 1,806 | 5 | % | ||||||||||||||||||||
| Total Revenues | $ | 14,097 | $ | 22,348 | $ | 26,484 | $ | 39,975 | ||||||||||||||||||||||||
REMAINING PERFORMANCE OBLIGATIONS
| Remainder of year ending December 31, 2023 | December 31, | ||||||||||||||||||||||||||||||||||||||||
| (in thousands) | 2024 | 2025 | 2026 | 2027 | Thereafter | Total | |||||||||||||||||||||||||||||||||||
| Remaining performance obligations | $ | 1,671 | $ | 4,972 | $ | 2,179 | $ | 417 | $ | 34 | $ | 219 | $ | 9,492 | |||||||||||||||||||||||||||
Remainder of year ending December 31, 2023 | For the years ending December 31, | |||||||||||||||||||||||||||
2024 | 2025 | 2026 | 2027 | Thereafter | Total | |||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
| Remaining Performance Obligations | $ | 3,591 | $ | 4,132 | $ | 2,121 | $ | 292 | $ | 32 | $ | 208 | $ | 10,376 | ||||||||||||||
These amounts include only fixed consideration or minimum guarantees and do not include amounts related to (i)(a) contracts with an original expected term of one year or less or (ii)(b) licenses of content that are solely based on sales or usage-based royalties.
DEFERRED REVENUES
Contract liabilities (i.e., deferred revenue) consist of subscriber and affiliate license fees billed that have not been recognized, amounts contractually billed or collected for content licensing sales in advance of the related content being made available to the customer, and unredeemed gift cards and other prepaid subscriptions that have not been redeemed. Total deferred revenues were $13.6$13.7 million and $14.9 million at Juneas of September 30, 2023, and December 31, 2022, respectively. RevenuesFor the nine months ended September 30, 2023, the Company recognized revenues of $10.6$12.9 million were recognized during thesix months endedJune 30, 2023 related to the balance ofamounts deferred revenue atas December 31, 2022, primarily relatedresulting from recognition of annual subscription plan balances.
TRADE AND BARTER TRANSACTIONS
In the second quarter of 2023, the Company began entering into trade and barter transactions primarily for the purpose of 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.
13
For content acquired through trade and barter transactions, the Company records the acquired assets in the consolidated balance sheet and amortizes those assets over the term of the content license, in accordance with the Company’s content and amortization policies. For other products and services received through trade and barter transactions, the Company records operating expenses upon receipt of such products and services, as applicable.
The transaction price for these contracts is measured at the estimated fair value of the 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 the 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 recognitioncounterparty.
For the three and nine months ended September 30, 2023, and 2022, trade and barter revenues were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| Trade and barter license fees: Content Licensing | $ | 4,949 | $ | — | $ | 7,416 | $ | — | |||||||||||||||
| Other trade and barter revenue* | 250 | — | 774 | — | |||||||||||||||||||
| Total trade and barter revenues | $ | 5,199 | $ | — | $ | 8,190 | $ | — | |||||||||||||||
| * Other revenue primarily relates to other marketing services | |||||||||||||||||||||||
For the three and nine months ended September 30, 2023, and 2022, trade and barter advertising and marketing expenses were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| Trade and barter advertising and marketing | $ | 648 | $ | — | $ | 1,172 | $ | — | |||||||||||||||
For the nine months ended September 30, 2023, and 2022, additions to content assets resulting from annual plan amounts.trade and barter transactions were as follows:
| Nine Months Ended September 30, | |||||||||||||||||||||||
| (in thousands) | 2023 | 2022 | |||||||||||||||||||||
| Trade and barter additions to content assets | $ | 7,124 | $ | — | |||||||||||||||||||
NOTE 6 — Stockholders’ equity
- STOCKHOLDERS’ EQUITYAs of JuneSeptember 30, 2023, and December 31, 2022, the Company had authorized the issuance of 126,000,000 shares of capital stock, par value of $0.0001 per share, consisting of (a) 125,000,000 shares of common stock, and (b) 1,000,000 shares of preferred stock.
As ofJune30, September 30, 2023, the Company had 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 on November 22, 2019, and that were issued to the PIPE Investors in connection with the business combination that closed on October 14, 2020 (the “Public Warrants” and, together with the Private Placement Warrants, the “Warrants”) and 3,676,000 Private Placement Warrants outstanding. The Private Placement Warrants are liability-classified, and the Public Warrants are equity-classified.
14
Each whole warrant entitles the registered holder to purchase one share of the Company’s common stock at an exercise price of $11.50 per share. All Warrants expire on October 14, 2025.
The Company has the right to redeem the outstanding Public 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 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 Private Placement Warrants are identical to the Public Warrants except that, so long as they are held by Software Acquisition Holdings LLC or its permitted transferees: (i)(a) they will not be redeemable by the Company; (ii)(b) they may be exercised by the holders on a cashless basis; and (iii)(c) they are subject to registration rights.
There were no exercises of warrants during the three and sixnine months ended JuneSeptember 30, 2023.
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 unaudited 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 stockholders’ equity. 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 areto determine fair value as of September 30, 2023, and December 31, 2022, were as follows:
As of June 30, 2023 | As of December 31, 2022 | September 30, 2023 | December 31, 2022 | ||||||||||||||||
| Exercise price | $ | 11.50 | $ | 11.50 | Exercise price | $ | 11.50 | $ | 11.50 | ||||||||||
| Stock price (CURI) | $ | 0.93 | $ | 1.14 | Stock price (CURI) | $ | 0.71 | $ | 1.14 | ||||||||||
| Expected volatility | 84.00 | % | 77.00 | % | Expected volatility | 92.00 | % | 77.00 | % | ||||||||||
| Expected warrant term (years) | 2.3 | 2.8 | Expected warrant term (years) | 2.0 | 2.8 | ||||||||||||||
| Risk-free interest rate | 4.68 | % | 4.22 | % | Risk-free interest rate | 5.03 | % | 4.22 | % | ||||||||||
| Dividend yield | 0 | % | 0 | % | Dividend yield | 0 | % | 0 | % | ||||||||||
| Fair Value per Private Placement Warrant | $ | 0.04 | $ | 0.07 | Fair Value per Private Placement Warrant | $ | 0.02 | $ | 0.07 | ||||||||||
The change in fair value of the private placement warrant liability for the three and sixnine months ended JuneSeptember 30, 2023, resulted in a gain of $0.2$0.1 million and $0.1$0.2 million, respectively, and for the three and sixnine months ended JuneSeptember 30, 2022, resulted in a gain of $0.5 million and $4.3$4.9 million, respectively.
Basic and diluted earnings (loss) per share calculations are calculated on the basis of the weighted average number of shares of the Company’s common 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. In computing diluted earnings (loss) per share, the average fair value of the Company’s common 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.
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
| Numerator — Basic and Diluted EPS: | ||||||||||||||||
| Net loss | $ | (9,921 | ) | $ | (15,977 | ) | $ | (17,672 | ) | $ | (31,869 | ) | ||||
| Denominator — Basic and Diluted EPS: | ||||||||||||||||
| Weighted–average shares | 53,006 | 52,775 | 52,978 | 52,762 | ||||||||||||
| Net loss per share — Basic and Diluted | $ | (0.19 | ) | $ | (0.30 | ) | $ | (0.33 | ) | $ | (0.60 | ) | ||||
15
For the three and sixnine months ended JuneSeptember 30, 2023, and 2022, the components of basic and diluted net loss per share were as follows:
| (In thousands except per share amounts) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Numerator — Basic and Diluted EPS: | |||||||||||||||||||||||
| Net loss | $ | (26,565) | $ | (4,502) | $ | (44,237) | $ | (36,371) | |||||||||||||||
| Denominator — Basic and Diluted EPS: | |||||||||||||||||||||||
| Weighted–average shares | 53,040 | 52,793 | 52,999 | 52,773 | |||||||||||||||||||
| Net loss per share — Basic and Diluted | $ | (0.50) | $ | (0.09) | $ | (0.83) | $ | (0.69) | |||||||||||||||
Common shares issuable for warrants, options, and restricted stock units (RSU) represent the total amount of outstanding warrants, stock options, and restricted stock units at September 30, 2023, and 2022. For the three and nine months ended September 30, 2023, and 2022, the following share equivalents were excluded from the computation of diluted net loss per share as the inclusion of such shares would behave been anti-dilutive. Common shares issuable for warrants, options, and restricted stock units (RSUs) represent the total amount of outstanding warrants, stock options, and restricted stock units at June 30, 2023 and 2022.
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Antidilutive shares excluded: | ||||||||||||||||
| Options | 4,630 | 5,244 | 4,630 | 5,244 | ||||||||||||
| Restricted stock units | 932 | 1,114 | 932 | 1,114 | ||||||||||||
| Warrants | 6,730 | 6,730 | 6,730 | 6,730 | ||||||||||||
| 12,292 | 13,088 | 12,292 | 13,088 | |||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| (in thousands) | (in thousands) | ||||||||||||||||||||||
| Options | 33 | 5,190 | 33 | 5,190 | |||||||||||||||||||
| Restricted stock units | 2,430 | 1,047 | 2,430 | 1,047 | |||||||||||||||||||
| Warrants | 6,730 | 6,730 | 6,730 | 6,730 | |||||||||||||||||||
| Total | 9,193 | 12,967 | 9,193 | 12,967 | |||||||||||||||||||
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 Company’s Board of Directors of the Company adopted the CuriosityStream 2020 Omnibus Plan (the “2020 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.
The following table summarizes stock option and restricted stock unit (“RSU”)RSU activity, prices, and values for the sixnine months ended JuneSeptember 30, 2023:
Number of Shares Available for Issuance Under the Plan | Stock Options | Restricted Stock Units | |||||||||||||||||||||||||||
| (In thousands except share price and fair value amounts) | Number of Shares | Weighted- Average Exercise Price | Number of Shares | Weighted- Average Grant Date Fair Value | |||||||||||||||||||||||||
| Balance at December 31, 2022 | 1,815 | 4,632 | $ | 7.13 | 759 | $ | 7.14 | ||||||||||||||||||||||
| Granted | (1,923) | — | — | 1,923 | 1.06 | ||||||||||||||||||||||||
| Options exercised and RSUs vested | 71 | — | — | (209) | 8.75 | ||||||||||||||||||||||||
| Forfeited or expired | 4,642 | (4,599) | 7.17 | (43) | 11.91 | ||||||||||||||||||||||||
| Balance at September 30, 2023 | 4,605 | 33 | $ | 5.30 | 2,430 | $ | 2.46 | ||||||||||||||||||||||
Stock Options | Restricted Stock Units | |||||||||||||||||||
Number of Shares Available for Issuance Under the Plan | Number of Shares | Weighted- Average Exercise Price | Number of Shares | Weighted- Average Grant Date Fair Value | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||
| Balance at December 31, 2022 | 1,815 | 4,632 | $ | 7.13 | 759 | $ | 7.14 | |||||||||||||
| Granted | (342 | ) | — | — | 342 | 1.41 | ||||||||||||||
| Options exercised and RSUs vested | 52 | — | — | (144 | ) | 9.23 | ||||||||||||||
| Forfeited or expired | 27 | (2 | ) | 5.88 | (25 | ) | 10.94 | |||||||||||||
| Balance at June 30, 2023 | 1,552 | 4,630 | $ | 7.13 | 932 | $ | 4.86 | |||||||||||||
There were no options exercised during the three and sixnine months ended JuneSeptember 30 2023, and 2022.
16
Stock options and RSU awards generally vest on a monthly, quarterly or annual basis over a period of four years from the grant date. When options are exercised, the Company’s policy is to issueCompany issues previously unissued shares of Common Stock to satisfy share option exercises. 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.
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.
The Company uses its own historical volatility as well as the historical volatility of similar public companies for estimating volatility. The risk-free interest rate is estimated using the rate of return on U.S. Treasury securities with maturities that approximate to the expected term of the option. The Company does not currently anticipate declaring any dividends.
| (Stock-based compensation data in thousands) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Dividend yield | N/A | N/A | N/A | 0 | % | ||||||||||||||||||
| Expected volatility | N/A | 65% - 70% | N/A | 60% - 70% | |||||||||||||||||||
| Expected term (years) | N/A | N/A | N/A | 6.00 - 6.50 | |||||||||||||||||||
| Risk-free interest rate | N/A | 2.81% - 2.95% | N/A | 1.40% - 2.95% | |||||||||||||||||||
| Weighted average grant date fair value | N/A | N/A | N/A | $ | 1.91 | ||||||||||||||||||
| Stock-based compensation — Options | $ | 5 | $ | 999 | $ | 1,553 | $ | 2,913 | |||||||||||||||
| Stock-based compensation — RSUs | $ | 892 | $ | 674 | $ | 2,033 | $ | 2,142 | |||||||||||||||
| Total stock-based compensation | $ | 897 | $ | 1,673 | $ | 3,586 | $ | 5,055 | |||||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
| Dividend yield | N/A | 0 | % | N/A | 0 | % | ||||||||||
| Expected volatility | N/A | 65% - 70 | % | N/A | 60% - 70 | % | ||||||||||
| Expected term (years) | N/A | 6.25 | N/A | 6.00 - 6.50 | ||||||||||||
| Risk-free interest rate | N/A | 2.81% - 2.95 | % | N/A | 1.40% - 2.95 | % | ||||||||||
| Weighted average grant date fair value | N/A | 1.12 | N/A | $ | 1.91 | |||||||||||
(in thousands) | (in thousands) | |||||||||||||||
| Stock-based compensation — Options | $ | 771 | $ | 946 | $ | 1,548 | $ | 1,914 | ||||||||
| Stock-based compensation — RSUs | $ | 651 | $ | 648 | $ | 1,141 | $ | 1,468 | ||||||||
Stock-based compensation 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.17
NOTE 9 — Segment and geographic information
- SEGMENT AND GEOGRAPHIC INFORMATIONThe Company operates as one 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.
All long-lived tangible assets are located in the United States. RevenueFor the three and nine months ended September 30, 2023, and 2022, revenue by geographic location based on thecustomer location of customers iswas as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||||||||||
| United States | $ | 8,973 | 57 | % | $ | 13,845 | 59 | % | $ | 23,595 | 56 | % | $ | 40,348 | 63 | % | |||||||||||||||||||||||||||||||
| International: | |||||||||||||||||||||||||||||||||||||||||||||||
| Canada | 1,674 | 11 | % | 412 | 2 | % | 2,566 | 6 | % | 1,215 | 2 | % | |||||||||||||||||||||||||||||||||||
| Germany | 149 | 1 | % | 3,287 | 14 | % | 1,797 | 4 | % | 4,704 | 7 | % | |||||||||||||||||||||||||||||||||||
| Netherlands | 1,566 | 10 | % | 516 | 2 | % | 3,216 | 8 | % | 1,068 | 2 | % | |||||||||||||||||||||||||||||||||||
| Other | 3,268 | 21 | % | 5,509 | 23 | % | 10,940 | 26 | % | 16,209 | 26 | % | |||||||||||||||||||||||||||||||||||
| Total International | 6,657 | 43 | % | 9,724 | 41 | % | 18,519 | 44 | % | 23,196 | 37 | % | |||||||||||||||||||||||||||||||||||
| Total revenue | $ | 15,630 | 100 | % | $ | 23,569 | 100 | % | $ | 42,114 | 100 | % | $ | 63,544 | 100 | % | |||||||||||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||
| United States | $ | 7,936 | 56 | % | $ | 14,704 | 66 | % | $ | 14,622 | 55 | % | $ | 26,503 | 66 | % | ||||||||||||||||
| International: | ||||||||||||||||||||||||||||||||
| United Kingdom | 1,800 | 13 | % | 2,533 | 11 | % | 2,362 | 9 | % | 4,434 | 11 | % | ||||||||||||||||||||
| Other | 4,361 | 31 | % | 5,111 | 23 | % | 9,500 | 36 | % | 9,038 | 23 | % | ||||||||||||||||||||
| Total International | 6,161 | 44 | % | 7,644 | 34 | % | 11,862 | 45 | % | 13,472 | 34 | % | ||||||||||||||||||||
$ | 14,097 | 100 | % | $ | 22,348 | 100 | % | $ | 26,484 | 100 | % | $ | 39,975 | 100 | % | |||||||||||||||||
no revenue related to license fees from the Spiegel Venture. For the nine months ended September 30, 2023, the Company recognized $1.1 million of revenue related to license fees from the Spiegel Venture during the three and six months ended June 30, 2023, respectively.Venture. The Company also incurred
$1.1 million
and $3.4 million in Costcost of revenues during the three and sixnine months ended JuneSeptember 30, 2023, respectively, from its revenue share
to
Nebula from subscription sales to certain bundled subscription packages. This revenue share is recorded in Cost of revenues on the consolidated statements of operations.| (In thousands) | September 30, 2023 | December 31, 2022 | |||||||||
| Accounts receivable | $ | 1,045 | $ | 3,358 | |||||||
| Accounts payable | $ | 376 | $ | 404 | |||||||
For the three and statementnine months ended September 30, 2023, and 2022, the impacts of arrangements with the Spiegel Venture and Nebula on the Company’s consolidated statements of operations iswere as follows:
June 30, 2023 | December 31, 2022 | |||||||
| (in thousands) | ||||||||
Balance Sheet: | ||||||||
| Accounts receivable | $ | 2,679 | $ | 3,358 | ||||
| Accounts payable | $ | 386 | $ | 404 | ||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| Revenues | $ | — | $ | 2,192 | $ | 1,084 | $ | 4,233 | |||||||||||||||
| Cost of revenues | $ | 1,142 | $ | 1,096 | $ | 3,508 | $ | 3,135 | |||||||||||||||
OPERATING LEASE
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
| Statement of Operations: | ||||||||||||||||
| Revenues | $ | 371 | $ | 2,111 | $ | 1,084 | $ | 2,041 | ||||||||
| Cost of revenues | $ | 1,164 | $ | 1,050 | $ | 2,366 | $ | 2,040 | ||||||||
The Company sublets a portion of its office space to Hendricks Investment Holdings, LLC, (“HIH”), which is considered a related party as it is managed by various members of the Company’s Board of Directors. The Company accounts for the arrangement as an operating lease. Refer to Note 11 - Leasesfor furtheradditional information.
18
The Company is a party to a
non-cancellable
operating lease agreement for office space, which expires in 2033. The Company’s operating lease for this office space includes fixed rent payments and variable lease payments, which are primarily related to common area maintenance and utility charges. The Company elected not to separate lease andnon-lease
components, and as such, all amounts paid under the lease are classified as either fixed or variable lease payments. Fixed lease payments were included in the calculation of right of use (“ROU”) asset and leases liabilities with variable lease payments being recognized as lease expense as incurred. The Company has determined that no renewal clauses are reasonably certain of being exercised and therefore has not included any renewal periods within the lease term for this lease.As of JuneSeptember 30, 2023, the Company had operating lease ROU assets of $3.6$3.4 million, current lease liabilities of $0.4$0.3 million, and$4.5$4.4 million. In measuring operating lease liabilities, the Company used a weighted average discount rate of 4.4% in existence as of the January 1, 2022, adoption date of the new leasinglease accounting standard. The weighted average remaining lease term as of JuneSeptember 30, 2023, was 9.679.42 years.
non-current
lease liabilities of Components of Lease Cost
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| Operating lease cost | $ | 120 | $ | 121 | $ | 362 | $ | 363 | |||||||||||||||
| Short-term lease cost* | — | 6 | (16) | 42 | |||||||||||||||||||
| Variable lease cost | 13 | 12 | 38 | 36 | |||||||||||||||||||
| Total lease cost | $ | 133 | $ | 139 | $ | 384 | $ | 441 | |||||||||||||||
* Short term lease cost includes a refund received by the Company during the nine months ended September 30, 2023, for office space it previously occupied. | |||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Operating lease cost | $ | 121 | $ | 121 | $ | 242 | $ | 242 | ||||||||
Short-term lease cost (1) | (16 | ) | 18 | (16 | ) | 36 | ||||||||||
Variable lease cost | 12 | 13 | 25 | 24 | ||||||||||||
Total lease cost | $ | 117 | $ | 152 | $ | 251 | $ | 302 | ||||||||
Maturity of Lease Liabilities
As of JuneSeptember 30, 2023, maturities of the Company’s operating lease liabilities, which do not include short-term leases and variable lease payments, arewere as follows (in thousands):follows:
| (In thousands) | |||||
| Three remaining months of 2023 | $ | 106 | |||
| 2024 | 557 | ||||
| 2025 | 571 | ||||
| 2026 | 585 | ||||
| 2027 | 600 | ||||
| Thereafter | 3,346 | ||||
| Total lease payments | $ | 5,765 | |||
| Less: imputed interest | (1,061) | ||||
| Present value of total lease liabilities | $ | 4,704 | |||
19
| Remaining six months of 2023 | $ | 274 | ||
202 4 | 557 | |||
202 5 | 571 | |||
202 6 | 585 | |||
202 7 | 600 | |||
| Thereafter | 3,346 | |||
| Total lease payments | $ | 5,933 | ||
| Less: imputed interest | (1,112 | ) | ||
| Present value of total lease liabilities | $ | 4,821 | ||
COMPANY AS LESSOR
The Company subletssubleases a portion of its office space to a related party and accounts for the arrangement as an operating lease. Related party sublease rental income is recognized on a straight-line basis and is included in Interest and other income (expense) in the accompanying consolidated statements of operations. For the three and sixnine months ended JuneSeptember 30, 2023, operating lease income from the Company’s sublet was less than
$0.1 million. As of JuneSeptember 30, 2023, total remaining future minimum lease payments receivable on the Company’s operating lease were
As of JuneSeptember 30, 2023, the Company had
As of December 31, 2022, the Company hadCompany’s content obligations amounted to $11.5 million, of content obligations comprised ofincluding $2.9 million included inrecorded within current content liabilities in the accompanying unaudited consolidated balance sheets and $8.6 million of obligations that are not reflected in the accompanying unaudited consolidated balance sheetsyet recorded as they did not yet meet the asset recognition criteria for content assets.
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.ADVERTISING COMMITMENTS
The Company has certain commitments with regardsperiodically enters into agreements to receive future advertising and marketing expensesservices as stated in thepart of various licensee agreements. Certainarrangements, and the Company reports commitments when the applicable agreements provide for specific committed amounts. As of the agreements do not specify the amount of advertising and marketing commitment; however, the total commitments for agreements which do specify the amount are $2.1 million as of JuneSeptember 30, 2023, the Company’s future advertising commitments totaled $1.3 million, of which$1.4 $0.7 Note 13 — Income taxesNOTE 14 - INCOME TAXES $0.3 million for the three and six months ended June 30, 2023, and a provision of $0.1 million for the three and six months ended JuneSeptember 30, 2023 and 2022, and $0.5 million and $0.2 million for the nine months ended September 30, 2023 and 2022, respectively, primarily related to foreign withholding income taxes. The Company’s 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.Note 14 — Subsequent events20On April 28, 2023, the Company’s Board of Directors authorized, and on June 14, 2023, the Company’s shareholders approved, a stock option exchange program (the “Exchange“) that permitted certain current employees and executive officers to exchange certain outstanding stock options with exercise prices substantially above the current market price of the Company’s common stock for RSUs of an equivalent fair value. The Exchange was completed in July 2023. As a result of the Exchange, 4.6 million of outstanding eligible stock options were exchanged for 1.6 million new RSUs, with a fair value of $0.99 per share on the date of the Exchange. There was no incremental compensation expense recorded by the Company as a result of the Exchange.17
the Company expects to pay $0.5 million and
$0.8 million are expected to be paid during the sixthree months ending December 31, 2023, and year ending December 31, 2024, respectively.
The Company recorded a provision for income taxes of
Item
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 unaudited consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. 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 CuriosityStream Inc.
Cautionary Note Regarding Forward-looking Statements
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains certain statements that are, or may deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding the Company’s plans, expectations, thoughts, beliefs, estimates, goals and outlook for the future that are intended to be covered by the protections provided under the Private Securities Litigation Reform Act of 1995.
All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q including, without limitation, statements under this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Quarterly Report on Form 10-Q, words such as “anticipate,” “attribute,” “believe,” “continue,” “hope,” “estimate,” “expect,” “intend,” “may,” “might,” “potential,” “seek,” “should,” “will” and “would,” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on the Company’s behalf are qualified in their entirety by this paragraph. These forward-looking statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those included in forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 31, 2023, and any other subsequent periodic reports and future periodic reports. We assume no obligation to revise or publicly release any revision to any forward-looking statements contained in this Quarterly Report on Form 10-Q, unless required by law.
Overview
OVERVIEW
Created by John Hendricks, founder of the 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.
We are seekingseek to meet demand for high-quality factual entertainment via SVODsubscription video on-demand (“SVOD”) platforms, as well as via bundled content licenses for SVOD and linear offerings, content licensing, brand sponsorship and advertising, talks and courses and partner bulk sales.
The main sources of our revenue are (a) subscriber and license fees earned from our Direct Business (“Direct Business”), (b) license fees from content licensing arrangements (“Content Licensing”), (c) bundled license fees from distribution affiliates (“Bundled Distribution”), (d) subscriber fees from our Enterprise business (“Enterprise”), and (e) Other revenue, 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 five products and services: Direct Business, Bundled Distribution, Content Licensing, Enterprise and Other.
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The following table below showsis a summary of our revenue generated through each of the foregoing products and servicesrevenues for the three and sixnine months ended JuneSeptember 30, 2023, and 2022:
Currently, the main sources of our revenue are (i) subscriber and license fees earned from our Direct Business (“Direct Business”), (ii) bundled license fees from distribution affiliates (“Bundled Distribution”), (iii) license fees from content licensing arrangements (“Content Licensing”), (iv) subscriber fees from our Enterprise business (“Enterprise”), and (v) Other revenue, including advertising and sponsorships (“Other”).
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||||||||||||||||||
Direct Business | $ | 8,310 | 59 | % | $ | 8,554 | 38 | % | $ | 16,894 | 64 | % | $ | 16,888 | 42 | % | ||||||||||||||||
Bundled Distribution | 1,509 | 11 | % | 3,888 | 17 | % | 2,983 | 12 | % | 7,655 | 19 | % | ||||||||||||||||||||
Content Licensing | 3,615 | 26 | % | 6,655 | 30 | % | 5,633 | 21 | % | 10,904 | 27 | % | ||||||||||||||||||||
Enterprise | 41 | 0 | % | 1,559 | 7 | % | 80 | 0 | % | 2,722 | 7 | % | ||||||||||||||||||||
Other | 622 | 4 | % | 1,692 | 8 | % | 894 | 3 | % | 1,806 | 5 | % | ||||||||||||||||||||
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Revenues | $ | 14,097 | $ | 22,348 | $ | 26,484 | $ | 39,975 | ||||||||||||||||||||||||
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| (In thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||||||||||||||||
| Direct Business | $ | 8,574 | 55 | % | $ | 8,589 | 36 | % | $ | 25,466 | 60 | % | $ | 25,476 | 40 | % | |||||||||||||||||||||||||||||||
| Content Licensing | 5,082 | 33 | % | 10,790 | 46 | % | 10,715 | 25 | % | 21,692 | 34 | % | |||||||||||||||||||||||||||||||||||
| Bundled Distribution | 1,504 | 10 | % | 2,595 | 11 | % | 4,487 | 12 | % | 10,250 | 16 | % | |||||||||||||||||||||||||||||||||||
| Enterprise | 34 | 0 | % | 1,418 | 6 | % | 115 | 0 | % | 4,143 | 7 | % | |||||||||||||||||||||||||||||||||||
| Other | 436 | 3 | % | 177 | 1 | % | 1,331 | 3 | % | 1,983 | 3 | % | |||||||||||||||||||||||||||||||||||
| Revenues | $ | 15,630 | $ | 23,569 | $ | 42,114 | $ | 63,544 | |||||||||||||||||||||||||||||||||||||||
CuriosityStream’s award-winning content library features more than 15,000 programs that explore topics ranging from space engineering to ancient history to the rise of Wall Street. Our extensive catalog of originally produced and owned content includes more thanapproximately 10,000 short-, mid- and long-form video and audio titles, including One Day University and Learn 25 recorded lectures that are led by some of the most acclaimed college and university professors in the world. Our library also features a rotating catalog of more than 5,5005,000 internationally licensed videos and audio programs. Every month, we launch dozens of new video titles, which are available on-demand in high- or ultra-high definition. Through new and long-standing international partnerships, we have localized a large portion of our video library from English to ten different languages.
Our Direct Business revenue is derived from consumers subscribing directly through our owned and operated website (“O&O Service”), App Services, and Partner Direct relationships. Our O&O Direct-to-Consumer service is available in more than 175 countries to any household with a broadband connection. Currently, most legacy subscribers pay $2.99 per month or $19.99 per year for our standard CuriosityStream service. As of March 27, 2023, we increased our standard pricing for new subscribers to this service to $4.99 per month or $39.99 per year. We are currently in the process of raising the prices for our legacy subscribers, who had previously paid $2.99 per month or $19.99 per year. We also provide a Smart Bundle service for $9.99 per month or $69.99 per year. Our Smart Bundle membership includes everything in our standard service, plus subscriptions to third-party platforms Tastemade, Topic, SommTV, DaVinci Kids, our equity investee Watch Nebula, LLC (“Nebula”), and our One Day University stand-alone service.
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Our App Services enable access to CuriosityStream on almost every major consumer device, including streaming media players like Roku, Apple TV and Amazon Fire TV, major smart TV brands (e.g., LG, Vizio, Samsung) and gaming consoles. The multichannel 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 Channel, Sling TV and YouTube TV.
In addition to our Direct Business described above, our Bundled 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 on-demand content library, mobile rights and pricing and packaging flexibility, in exchange for an annual fixed fee or fee per subscriber.
In
With our Content Licensing business, we license to certain media companies a collection of our existing titles in a traditional content licensing deal. We also 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 content licensing revenue.
In addition to our Direct Business described above, our Bundled 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 on-demand content library, mobile rights and pricing and packaging flexibility, in exchange for an annual fixed fee or fee per subscriber.
Our Enterprise business is comprised primarily of sellingproviding 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.” Revenues from our Enterprise business are included within Subscriptions —Subscriptions: O&O Services in Note 5 - Revenue in the Notes to the accompanying unaudited consolidated financial statements.
Our Unaudited Consolidated Financial Statements
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Other businessrevenue is primarily comprised of advertising and sponsorship revenue. We offer companies the opportunity to be associated with CuriosityStream content in a variety of forms, including short- and long-form program integration, branded social media promotional videos, advertising spots in our video and audio programs that are made available on our linear programming channels or in front of the paywall, and digital display ads.
Companies in the media industry commonly utilize trade and barter agreements in the normal course of business to reduce cash outlays for new content assets or other expenditures by exchanging existing content assets, advertising and other services. In the second quarter of 2023, we began entering into trade and barter transactions primarily for the purpose of exchanging content assets through licensing agreements with media counterparties. Certain transactions may also include the exchange of advertising, whereby we exchange media campaigns or other promotional services.
In the future, we hope to continue developing integrated digital brand partnerships with advertisers. These sponsorship campaigns offer companies the chance to be associated with CuriosityStream content in the forms described above. We believe the impressions accumulated in these multi-faceted campaigns would roll up to verifiable metrics for the clients.
Key Factors Affecting Results of Operations
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, increase our prices, 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 fiscal quarter and are expected to continue to have such significant effects:
Revenues
Since the Company was founded in 2015, we have generated the majority of our revenues from consumers directly accessing our content in the form of monthly or annual subscription plans. Currently, mostWe are currently in the process of raising the prices for our legacy subscribers, paywho had previously paid $2.99 per month or $19.99 per year for our standard CuriosityStream service.year. As of March 27, 2023, we increased our standard pricing for new subscribers to this service to $4.99 per month or $39.99 per year. We also provide a Smart Bundle service for $9.99 per month or $69.99 per year. Currently, our Smart Bundle pricing and pricing for most legacy subscribers remain unchanged. However, we may in the future increase the price of these existing subscription plans, which may have a positive effect on our revenue from this line of our business.
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. The 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 the cost of producing and acquiring our content, the costs of advertising and marketing our service, personnel costs, and distribution fees. Producing and co-producing content and commissioned content is generally more costly than acquiring content through licenses.
Cost of revenues encompasses content amortization, distribution fees, revenue sharing arrangements, hosting and streaming delivery costs, payment processing costs, commission costs, and subtitling and broadcast costs.
The Company’s primary business model is subscription based as opposed to a model 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 library will be stated at the lower of unamortized cost or fair value. In addition, unamortized costs for assets that have been, or are expected to be, abandoned are written off. For a discussion of the accounting policies for content impairment write-down and management estimates involved therein, see “— Critical Accounting Policies and Estimates”Estimates below.
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Further, 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.
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RESULTS OF OPERATIONS
Results of Operations
The Company operates as one reporting segment.
Three Months Ended September 30, 2023
The financial data in the following table sets forth selected financial information derived from our unaudited consolidated financial statements for the three months ended JuneSeptember 30, 2023, and June 30, 2022, and showsincludes our results of operations as a percentage of revenue or as a percentage of costs, as applicable, for the periods indicated.
Comparison of
| Three Months Ended September 30, | $ Change | % Change* | |||||||||||||||||||||||||||||||||
| (Unaudited and in thousands) | 2023 | 2022 | |||||||||||||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||||||||
| Subscriptions | $ | 7,431 | 47 | % | $ | 8,850 | 38 | % | $ | (1,419) | (16 | %) | |||||||||||||||||||||||
| License fee | 7,763 | 50 | % | 14,542 | 61 | % | (6,779) | (47 | %) | ||||||||||||||||||||||||||
| Other | 436 | 3 | % | 177 | 1 | % | 259 | 146 | % | ||||||||||||||||||||||||||
| Total revenue | $ | 15,630 | 100 | % | $ | 23,569 | 100 | % | $ | (7,939) | (34 | %) | |||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||||||||||||||
| Cost of revenues | 8,494 | 21 | % | 13,566 | 49 | % | (5,072) | (37 | %) | ||||||||||||||||||||||||||
| Advertising and marketing | 5,106 | 13 | % | 5,626 | 20 | % | (520) | (9 | %) | ||||||||||||||||||||||||||
| General and administrative | 6,959 | 18 | % | 8,757 | 31 | % | (1,798) | (21 | %) | ||||||||||||||||||||||||||
| Impairment of content assets | 18,970 | 48 | % | — | — | % | 18,970 | 100 | % | ||||||||||||||||||||||||||
| Total operating expenses | $ | 39,529 | 100 | % | $ | 27,949 | 100 | % | $ | 11,580 | 41 | % | |||||||||||||||||||||||
| Operating loss | (23,899) | (4,380) | (19,519) | 446 | % | ||||||||||||||||||||||||||||||
| Other income (expense) | |||||||||||||||||||||||||||||||||||
| Change in fair value of warrant liability | 74 | 514 | (440) | n/m | |||||||||||||||||||||||||||||||
| Interest and other income (expense) | 31 | (478) | 509 | n/m | |||||||||||||||||||||||||||||||
| Equity method investment loss | (2,638) | (94) | (2,544) | 2706 | % | ||||||||||||||||||||||||||||||
| Loss before income taxes | $ | (26,432) | $ | (4,438) | $ | (21,994) | 496 | % | |||||||||||||||||||||||||||
| Provision for income taxes | 133 | 64 | 69 | n/m | |||||||||||||||||||||||||||||||
| Net loss | $ | (26,565) | $ | (4,502) | $ | (22,063) | 490 | % | |||||||||||||||||||||||||||
| * n/m = percentage not meaningful | |||||||||||||||||||||||||||||||||||
Revenue
For the three months ended JuneSeptember 30, 2023, and 2022,
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Subscriptions | $ | 7,270 | 52 | % | $ | 8,922 | 40 | % | $ | (1,652 | ) | (19 | %) | |||||||||||
License fee | 6,205 | 44 | % | 11,734 | 52 | % | (5,529 | ) | (47 | %) | ||||||||||||||
Other | 622 | 4 | % | 1,692 | 8 | % | (1,070 | ) | (63 | %) | ||||||||||||||
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Total Revenues | $ | 14,097 | 100 | % | $ | 22,348 | 100 | % | $ | (8,251 | ) | (37 | %) | |||||||||||
Operating expenses | ||||||||||||||||||||||||
Cost of revenues | 9,933 | 45 | % | 12,988 | 34 | % | (3,055 | ) | (24 | %) | ||||||||||||||
Advertising and marketing | 4,203 | 19 | % | 11,208 | 29 | % | (7,005 | ) | (63 | %) | ||||||||||||||
General and administrative | 7,980 | 36 | % | 10,603 | 28 | % | (2,623 | ) | (25 | %) | ||||||||||||||
Impairment of goodwill and intangible assets | — | — | 3,603 | 9 | % | (3,603 | ) | (100 | %) | |||||||||||||||
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Total operating expenses | $ | 22,116 | 100 | % | $ | 38,402 | 100 | % | $ | (16,286 | ) | (42 | %) | |||||||||||
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Operating loss | (8,019 | ) | (16,054 | ) | 8,035 | (50 | %) | |||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||
Change in fair value of warrant liability | 184 | 478 | (294 | ) | n/m | |||||||||||||||||||
Interest and other income (expense) | 437 | (29 | ) | 466 | n/m | |||||||||||||||||||
Equity method investment loss | (2,235 | ) | (316 | ) | (1,919 | ) | 607 | % | ||||||||||||||||
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Loss before income taxes | $ | (9,633 | ) | $ | (15,921 | ) | $ | 6,288 | (39 | %) | ||||||||||||||
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Provision for income taxes | 288 | 56 | 232 | n/m | ||||||||||||||||||||
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Net loss | $ | (9,921 | ) | $ | (15,977 | ) | $ | 6,056 | (38 | %) | ||||||||||||||
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n/m - percentage not meaningful
Revenue
Revenue for the three months ended June 30, 2023 and 2022 total revenue was $14.1$15.6 million and $22.3$23.6 million, respectively. This decrease of $8.2$7.9 million, or 37%34%, iswas primarily attributable to reductions in both License fees revenue and Subscriptions revenue.
Subscriptions.
The decrease in License fees revenue of $5.5$6.8 million was primarily driven by the non-renewal of certain content presale licensing arrangements of $5.6 million,and Bundled Distribution agreements, partially offset by an increase of $2.6 million from new content licensing arrangements,trade and a decrease from the non-renewal of certain bundled distribution agreements of $2.9 million, partially offset by an increase of $0.5 million from new bundled distributionbarter license agreements. The decrease in Subscriptions revenue of $1.7$1.4 million was primarily due to the termination of certain corporate subscriptions related to bulk agreements, which termination occurred in the third quarter of 2022.
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Operating Expenses
Operating expenses for
For the three months ended JuneSeptember 30, 2023, operating expenses were $22.1$39.5 million compared to $38.4$27.9 million for the same period in 2022, marking a reductionan increase of $16.3$11.6 million, or 42%41%.
Cost of Revenues:Revenues. Cost of revenues forFor the three months ended JuneSeptember 30, 2023, cost of revenues decreased to $9.9$8.5 million from $13.0$13.6 million in the same period of 2022. Cost of revenues encompasses content amortization, hosting and streaming delivery costs, payment processing costs, commission costs, and subtitling and broadcast costs. This reduction of $3.1$5.1 million, or 24%37%, primarily resulted from the decrease in content amortization and a decrease in revenue share expense related to bundled and premier tier arrangements with other streaming services.
Advertising and Marketing:Marketing. Advertising and marketing expenses forFor the three months ended JuneSeptember 30, 2023, advertising and marketing expenses decreased to $4.2$5.1 million from $11.2$5.6 million for the three months ended June 30,same period in 2022. This decrease of $7.0$0.5 million, or 63%9%, was primarily due to strategic changes in our marketing approach and cost-saving measures implemented in our advertising campaigns.
General and Administrative:Administrative. General and administrative expenses forFor the three months ended JuneSeptember 30, 2023, general and administrative expenses decreased by $2.6$1.8 million, or 25%21%, from $10.6$8.8 million for the same period in 2022 to $8.0$7.0 million. The decrease was primarily due to cost controls and efficiency measures implemented across our administrative functions.
Impairment of Goodwill and Intangible Assets:Content Assets. We incurred no impairment charges for goodwill and intangible assets forFor the three months ended JuneSeptember 30, 2023, we incurred an impairment charge of $19.0 million related to our content assets. In comparison, no such impairments were incurred for the same period in contrast2022. For a more detailed discussion of the impairment charge and the underlying factors contributing to the $3.6 million expense incurredimpairment, refer to Note 4 - Content Assets in the corresponding period of 2022.Notes to Unaudited Consolidated Financial Statements.
Operating Loss
The Company experienced an operating loss of $8.0 million for
For the three months ended JuneSeptember 30, 2023, which is a decreaseoperating loss was $23.9 million, an increase in loss of $8.0$19.5 million or 50%, compared to the operating loss of $16.1$4.4 million for the three months ended June 30, 2022. The decreasesame period in our operating loss is primarily driven by2022.This increase was almost entirely attributable to the reduction in our operating expenses of $16.3$19.0 million or 42%, partially offset by the reduction in revenue of $8.3 million, or 37%. content assets impairment.
Other Income (Expense)
Change in Fair Value of Warrant LiabilityJuneSeptember 30, 2023, the change in the fair value of warrant liability (relatedrelated to Private Placement Warrants)Warrants resulted in income of $0.2$0.1 million, a decrease of $0.3$0.4 million from the income of $0.5 million in the same period in 2022. The change primarily stemmed from fluctuations in the market price of our common stock and the corresponding changes to the underlying assumptions used in the valuation model used for our Private Placement Warrants during the three months ended June 30,same period in 2022.
Liability.
For the three months endedInterest and Other Income (Expense)JuneSeptember 30, 2023, was $0.4$0.1 million income compared to $0.1$0.5 million expense for the three months ended June 30,same period in 2022. The increase isdecrease was primarily related to an increasea decrease in interest income during the current year period.
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Interest and other income (expense) for the three months ended20
Equity Method Investment Loss
Loss.For the three months ended JuneSeptember 30, 2023, the Company recorded a loss of $2.2$2.6 million compared to a loss of $0.3$0.1 million for the three months ended June 30,same period in 2022, related to its investments in Spiegel Venture and Nebula. The increase iswas primarily due to the $2.0$2.3 million impairment charge recorded by the Company to its investment in Spiegel Venture.
Provision for Nebula during the third quarter of 2023.
Income Taxes
We had a
Our provision for income taxes of $0.3was $0.1 million for the three months ended JuneSeptember 30, 2023, compared to $0.1 million for the three months ended June 30,same period in 2022. The Company’s provision for income taxes is primarily related to foreign withholding income taxes and differs 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.
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Net Loss
The net loss for the three months ended JuneSeptember 30, 2023, was $9.9$26.6 million, compared to $16.0$4.5 million for the same period in 2022. The decreaseincrease in our net loss of $6.1$22.1 million or 38%, primarily resulted from the decrease in operating expensesan impairment charge of $16.3$19.0 million, or 42%, partially offset by the reduction in revenue of $8.3$7.9 million, or 37%34%, and an impairment charge to one of our equity method investments of $2.0 million.
Comparison$2.3 million, partially offset by decreases in cost of revenues of $5.1 million and general and administrative expense of $1.8 million.
Nine Months Ended September 30, 2023
The financial data in the sixfollowing table sets forth selected financial information derived from our unaudited consolidated financial statements for nine months ended JuneSeptember 30, 2023, and 2022,
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Subscriptions | $ | 14,790 | 56 | % | $ | 17,276 | 43 | % | $ | (2,486 | ) | (14 | %) | |||||||||||
License fee | 10,800 | 41 | % | 20,893 | 52 | % | (10,094 | ) | (48 | %) | ||||||||||||||
Other | 894 | 3 | % | 1,806 | 5 | % | (911 | ) | (50 | %) | ||||||||||||||
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Total Revenues | $ | 26,484 | 100 | % | $ | 39,975 | 100 | % | $ | (13,491 | ) | (34 | %) | |||||||||||
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Cost of revenues | 18,934 | 45 | % | 24,838 | 33 | % | (5,904 | ) | (24 | %) | ||||||||||||||
Advertising and marketing | 7,318 | 17 | % | 25,976 | 34 | % | (18,658 | ) | (72 | %) | ||||||||||||||
General and administrative | 16,039 | 38 | % | 21,106 | 28 | % | (5,067 | ) | (24 | %) | ||||||||||||||
Impairment of goodwill and intangible assets | — | — | 3,603 | 5 | % | (3,603 | ) | (100 | %) | |||||||||||||||
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Total operating expenses | $ | 42,291 | 100 | % | $ | 75,523 | 100 | % | $ | (33,232 | ) | (44 | %) | |||||||||||
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Operating loss | (15,807 | ) | (35,548 | ) | 19,741 | (56 | %) | |||||||||||||||||
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Change in fair value of warrant liability | 110 | 4,338 | (4,228 | ) | (97 | %) | ||||||||||||||||||
Interest and other income (expense) | 825 | (86 | ) | 911 | n/m | |||||||||||||||||||
Equity method investment loss | (2,454 | ) | (472 | ) | (1,982 | ) | (420 | %) | ||||||||||||||||
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Loss before income taxes | $ | (17,326 | ) | $ | (31,768 | ) | $ | 14,442 | (45 | %) | ||||||||||||||
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Provision for income taxes | 346 | 101 | 245 | n/m | ||||||||||||||||||||
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Net loss | $ | (17,672 | ) | $ | (31,869 | ) | $ | 14,197 | (45 | %) | ||||||||||||||
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Revenue
Revenue and includes our results of operations as a percentage of revenue or as a percentage of costs, as applicable, for the sixperiods indicated.
| Nine Months Ended September 30, 2023 | $ Change | % Change* | ||||||||||||||||||||||||||||||||||||
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| Subscriptions | $ | 22,220 | 53 | % | $ | 26,128 | 41 | % | $ | (3,908) | (15 | %) | ||||||||||||||||||||||||||
| License fee | 18,563 | 44 | % | 35,433 | 56 | % | (10,094) | (28 | %) | |||||||||||||||||||||||||||||
| Other | 1,331 | 3 | % | 1,983 | 3 | % | (911) | (46 | %) | |||||||||||||||||||||||||||||
| Total revenue | $ | 42,114 | 100 | % | $ | 63,544 | 100 | % | $ | (21,430) | (34 | %) | ||||||||||||||||||||||||||
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| Cost of revenues | 27,428 | 34 | % | 38,404 | 37 | % | (10,976) | (29 | %) | |||||||||||||||||||||||||||||
| Advertising and marketing | 12,424 | 15 | % | 31,602 | 31 | % | (19,178) | (61 | %) | |||||||||||||||||||||||||||||
| General and administrative | 22,998 | 28 | % | 29,863 | 29 | % | (6,865) | (23 | %) | |||||||||||||||||||||||||||||
| Impairment of content assets | 18,970 | 23 | % | — | — | % | 18,970 | 100 | % | |||||||||||||||||||||||||||||
| Impairment of goodwill and intangible assets | — | — | 3,603 | 3 | % | (3,603) | (100 | %) | ||||||||||||||||||||||||||||||
| Total operating expenses | $ | 81,820 | 100 | % | $ | 103,472 | 100 | % | $ | (21,652) | (21 | %) | ||||||||||||||||||||||||||
| Operating loss | (39,706) | (39,928) | 222 | (1 | %) | |||||||||||||||||||||||||||||||||
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| Change in fair value of warrant liability | 184 | 4,852 | (4,668) | (96 | %) | |||||||||||||||||||||||||||||||||
| Interest and other income (expense) | 856 | (564) | 1,420 | n/m | ||||||||||||||||||||||||||||||||||
| Equity method investment loss | (5,092) | (566) | (4,526) | (420 | %) | |||||||||||||||||||||||||||||||||
| Loss before income taxes | $ | (43,758) | $ | (36,206) | $ | (7,552) | 21 | % | ||||||||||||||||||||||||||||||
| Provision for income taxes | 479 | 165 | 314 | n/m | ||||||||||||||||||||||||||||||||||
| Net loss | $ | (44,237) | $ | (36,371) | $ | (7,866) | 22 | % | ||||||||||||||||||||||||||||||
Revenue
For the nine months ended JuneSeptember 30, 2023, and 2022, total revenue was $26.5$42.1 million and $40.0$63.5 million, respectively. This decrease of $13.5$21.4 million, or 34%, iswas primarily attributable to reductions in both Licenselicense fees revenue and Subscriptions revenue.
subscriptions.
The decrease in Licenselicense fees revenue of $10.1 million was primarily driven by the non-renewal of certain content licensing arrangements as well as the non-renewal of $8.4 million,certain Bundled Distribution agreements, partially offset by an increase of $2.6 million fromin new content licensing arrangements,trade and a decrease from the non-renewal of certain bundled distribution agreements of $5.8 million, partially offset by an increase of $1.1 million from new bundled distributionbarter license agreements. The decrease in Subscriptions revenue of $2.5$3.9 million was primarily due to the termination of certain corporate subscriptions related to bulk agreements, which occurred in the third quarter of 2022.
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Operating Expenses
Operating expenses for
For the sixnine months ended JuneSeptember 30, 2023, total operating expenses were $42.3$81.8 million, compared to $75.5$103.5 million for the same period in 2022, marking a reduction of $33.2$21.7 million, or 44%21%.
Cost of Revenues: CostRevenues. For the nine months ended September 30, 2023, cost of revenues for the six months ended June 30, 2023 decreased to $18.9$27.4 million from $24.8$38.4 million in the same period of 2022. Cost of revenues encompasses content amortization, hosting and streaming delivery costs, payment processing costs, commission costs, and subtitling and broadcast costs. This reduction of $5.9$11.0 million, or 24%29%, primarily resulted from the decrease in content amortization and a decrease in revenue share expense related to bundled and premier tier arrangements with other streaming services.
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Advertising and Marketing: AdvertisingMarketing. For the nine months ended September 30, 2023, advertising and marketing expenses for the six months ended June 30, 2023, decreased to $7.3$12.4 million from $26.0$31.6 million for the six months ended June 30,same period in 2022. This decrease of $18.7$19.2 million, or 72%21%, was primarily due to strategic changes in our marketing approach and cost-saving measures implemented in our advertising campaigns.
General and Administrative: GeneralAdministrative. For the nine months ended September 30, 2023, general and administrative expenses for the six months ended June 30, 2023, decreased to $16.0$23.0 million, from $21.1$29.9 million for six months ended June 30,same period in 2022. The decrease of $5.1$6.9 million, or 24%21%, was primarily due to cost controls and efficiency measures implemented across our administrative functions.
Impairment of Content Assets. For the nine months ended September 30, 2023, We incurred an impairment charge of $19.0 million relating to our content assets. In contrast, no such impairments were identified for the for same period in 2022. For a more detailed discussion of the impairment charge and the underlying factors contributing to the impairment, refer to Note 4 - Content Assets in the Notes to Unaudited Consolidated Financial Statements.
Impairment of Goodwill and Intangible Assets: WeAssets. For the nine months ended September 30, 2023, we incurred no impairment charges for goodwill and intangible assets for the six months ended June 30, 2023, in contrast to the $3.6 million expense incurred for the same period in the corresponding period of 2022.
Operating Loss
The Company experienced an
For the nine months ended September 30, 2023, operating loss of $15.8was $39.7 million, for the six months ended June 30, 2023, which is a decrease of $19.7$0.2 million, or 56%1%, compared to the operating loss of $35.5$39.9 million for the six months ended June 30,same period in 2022. The decreasedeclines in our operating loss is primarily driven by the reduction in our operatingcost of revenues, advertising and marketing, and general and administrative expenses of $33.2 million, or 44%, partiallywere almost entirely offset by the reductioncontent impairment charge and the decline in revenue of $13.5 million, or 34%.
revenue.
Change in Fair Value of Warrant LiabilityLiability.
For the sixnine months ended JuneSeptember 30, 2023, the Company recognized a gain of $0.1$0.2 million, compared to a gain of $4.3$4.9 million for the six months ended June 30,same period in 2022. This reduction in gain of $4.2$4.7 million, or 97%96%, primarily stemmedresulted from fluctuations in the market price of our common stock and the corresponding changes to the underlying assumptions used in the valuation model used for our Private Placement Warrants during the six months ended June 30, 2022.
Warrants.
Interest and Other Income (Expense)(E
xpense).For the sixnine months ended JuneSeptember 30, 2023, Interest and other income (expense) amounted to $0.8$0.9 million an increase of $0.9$1.4 million compared to an expense of $0.1$0.6 million for the six months ended June 30,same period in 2022. The change was primarily due to increased interest income.
Equity Method Investment LossLoss.
For the sixnine months ended JuneSeptember 30, 2023, the Company recorded a loss of $2.5$5.0 million compared to a loss of $0.5$0.6 million for the six months ended June 30,same period in 2022, related to its investments in Spiegel Venture and Nebula. The increase iswas primarily due to the $2.0$2.3 million impairment charge recorded by the Company to its investment in Spiegel VentureNebula during the six months ended June 30,third quarter of 2023.
Provision for
Income Taxes
We had a
Our provision for income taxes of $0.3was $0.5 and $0.1$0.2 million infor the sixnine months ended JuneSeptember 30, 2023, and 2022, respectively. The Company’s provision for income taxes is primarily related to foreign withholding income taxes and differs from the federal statutory rate primarily due tobecause the Company being inhas taken a full valuation allowance position and has not recognizingrecognized a benefit for either federal or state income tax purposes.
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Net Loss
Net loss for the sixnine months ended JuneSeptember 30, 2023, was $17.7$44.2 million, compared to a net loss of $31.9$36.4 million for the same period in 2022. The decreaseincrease in our net loss of $14.2$7.9 million, or 45%22%, iswas primarily due to a decrease in operating expenses and an increase in interest and other income, partially offset by in revenue of $21.4 million, the $19.0 million impairment charge to our content assets, a decrease in revenue, a reductionreduction in gain from the change in the fair value of warrant liability of $4.7 million and an impairment charge to one of ourincrease in equity method investments.
Liquidityinvestment loss of $4.5 million, partially offset by decreases in advertising and Capital Resources
marketing of $19.2 million, cost of revenues of $11.0 million and general and administrative expenses of $6.9 million.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
As of JuneSeptember 30, 2023, the Company’s cash and cash equivalents, including restricted cash, totaled $44.8$40.8 million. For the sixnine months ended JuneSeptember 30, 2023, the Company incurred a net loss of $15.7$44.2 million and used $10.6$13.6 million of net cash in operating activities and $0.1 million of net cash in financing activities, while investing activities provided $15.0$14.0 million of net cash.
As previously discussed, we began entering into trade and barter transactions in the second quarter of 2023 primarily for the purpose of exchanging content assets through licensing agreements with media counterparties. Our use of these transactions has enabled us to acquire quality content that we can monetize through various distribution channels while preserving our liquidity.
We believe that our current cash levels, including investments in money 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. 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.
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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.
Cash Flows
Flow Analysis
The following table presents our cash flows from operating, investing and financing activities for the sixnine months ended JuneSeptember 30, 2023, and 2022:
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Net cash used in operating activities | $ | (10,608 | ) | $ | (18,149 | ) | ||
Net cash provided by investing activities | 14,995 | 24,024 | ||||||
Net cash used in financing activities | (57 | ) | (161 | ) | ||||
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| Net cash used in operating activities | $ | (13,630) | $ | (30,744) | |||||||
| Net cash provided by investing activities | 14,003 | 60,701 | |||||||||
| Net cash used in financing activities | (76) | (178) | |||||||||
| Net increase in cash, cash equivalents and restricted cash | $ | 297 | $ | 29,779 | |||||||
Cash Flows from Operating Activities
Cash flows from operating activities primarily consist of net losses, changes to our content assets (including additions and amortization), and other working capital items.
During
For the sixnine months ended JuneSeptember 30, 2023, and 2022, we recorded a net cash outflow from operating activities of $10.6$13.6 million and $18.1$30.7 million, respectively, or a decreaseddecline in outflow of $7.5$17.1 million, or 41%56%.
The net cash outflow used in operating activities for
For the sixnine months ended JuneSeptember 30, 2023, our use of cash was primarily due to our $17.7$44.2 million net loss, $2.6 million of net cash used in changes in operating assets and liabilities, and an impairment charge to one of our equity method investments of $2.0 million. The outflow was partially offset by $7.7 million addback of non-cash expenses net of content additions. The most significant components of non-cash expenses include amortization of content assets of $12.3 million and stock-based compensation expense of $2.7 million, substantially offset by additions to content assets of $7.1 million and the change in content liabilities of $1.1 million. The components of$14.1 million and $2.7 million, respectively, as well as changes in operating assets and liabilities were primarily attributed to a decrease in accrued expenses and other liabilities, and deferred revenue of $3.9 million and in deferred revenue of $1.4$1.2 million, respectively. This was partially offset by an increase in accounts payablenoncash items such as amortization of $0.6content assets, stock-based compensation and equity method investment loss of $17.7 million, a decrease$3.6 million and $5.1 million, respectively. Additionally, changes in accounts receivable of $1.8and other assets were $4.0 million and a decrease$1.7 million, respectively.
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Of the $14.1 million in otheradditions to content assets of $1.5 million.
The net cash outflow used in operating activities for the sixnine months ended JuneSeptember 30, 2023, $7.1 million was attributable to non-cash trade and barter arrangements.
For the nine months ended September 30, 2022, our use of cash was primarily due to our $31.9$36.4 million net loss, and $5.4 million of non-cash expenses net ofadditions to content additions, partially offset by $19.1 million in cash provided by changes in operating assets and liabilities. The most significant components of non-cash expenses include content additions of $25.3 million, changeschange in content liabilities of $3.7$31.7 million and changes in the fair value of the warrant liability of $4.3$4.7 million, partially offset by amortization of content assets of $19.1 million and stock-based compensation expense of $3.4 million. The components ofrespectively, as well as changes in operating assets and liabilities were primarily attributed to a decrease in accounts receivable of $11.9 million, a decrease in other assets of $4.0 million, an increase in accounts payable of $6.1 million, which were partially offset by a decrease in accrued expenses and other liabilities, and deferred revenue of $2.9 million.
$4.8 million and $4.5 million, respectively. This was partially offset by noncash items such as amortization of content assets and stock-based compensation of $29.5 million and $5.1 million, respectively. Additionally, changes in accounts receivable, other assets and accounts payable were $6.3 million, $5.0 million and $4.2 million, respectively.
Cash Flows from 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
For the sixnine months ended JuneSeptember 30, 2023, and 2022, we recorded a net cash inflowinflows from investing activities of $15.0$14.0 million and $24.0$60.7 million, respectively, or a decrease of cash inflow of $9.0$46.7 million, or 37.5%77%.
The net
For the nine months ended September 30, 2023, our cash inflow provided by investing activities for the six months ended June 30, 2023, was primarily due to maturities of investments in debt securities of $15.0 million.
The net For the nine months ended September 30, 2022, our cash inflow provided by investing activities for the six months ended June 30, 2022, was primarily due to the sale and maturities of investments in debt securities of $27.3$64.8 million, partially offset by purchases of investments in debt securities of $1.6 million and investments in Nebula of $1.6$2.4 million.
Cash Flows from Financing Activities
During
For the sixnine months ended JuneSeptember 30, 2023, and 2022, we recorded net cash outflow from financing activities of $0.1 million and $0.2 million, respectively, which is attributable to payments of withholding taxes during the respective periods.
each period.
Capital Expenditures
Going forward, we expect to continue making expenditures for additions to our content assets and purchases of property and 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.
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OFF BALANCE SHEET ARRANGEMENTS
Off Balance Sheet Arrangements
As of JuneSeptember 30, 2023, we had no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
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 Quarterly Report on Form 10-Q and related disclosures 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.
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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 forlicense terms consist of a fixed fee andfor specific windows of availability. PaymentsCash payments for content includingare reported within additions to content assets and the changes in related liabilities are classified within “Net cash used in operating activities” onin the unaudited consolidated statements of cash flows.
Content acquired or licensed through trade and barter transactions is also reported within additions to content assets.
The Company recognizes its content assets (licensed and produced) as “Content assets, net” onin the unaudited 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.
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Amortization of content assets is reported within “Cost of revenues” in the unaudited 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 unaudited 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 withat the month of first availability.time a title is published on the Company’s platform. Starting July 1, 2021, the Company amortizesbegan amortizing 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.
Furthermore, the amortization of originalproduced content is more accelerated than that of licensed content. We reviewThe 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 content licensing.
The Company’s 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 assets 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 are written off.
abandoned.
Revenue recognition
Subscriptions —Recognition
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.
Subscriptions
O&O Service.
The Company generates revenue from monthly subscription fees from its O&O 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.
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App ServicesServices.
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 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.
License Fees —
Content Licensing.The Company has distribution agreements which grant a licensee limited distribution rights to the Company’s programs for varying terms, generally in exchange for a fixed license fee. Revenue is recognized once the content is made available for the licensee to use.
Partner Direct and Bundled DistributionDistribution.
The Company generates license fee revenues from MVPDs such as Comcast and Cox as well as from vMVPDs such as Amazon 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.
. In the second quarter of 2023, the Company began entering into trade and barter transactions primarily for the purpose of exchanging 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.
The Company’s performance obligations include (1) access to its SVOD platform viause, which represents 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 obligationpoint in time that control 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.
Recently Adopted Financial Accounting Standards
transferred.
RECENTLY ADOPTED FINANCIAL ACCOUNTING STANDARDS
The information set forth under in Note 2 - Basis of Presentation and Summary of Significant Accounting Policies in the Unaudited Notes to the unaudited consolidated financial statements under the caption “Basis of presentation and summary of significant accounting policies”Interim Consolidated Financial Statements is incorporated herein by reference.
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Item
ITEM 3. Quantitative and Qualitative Disclosures Regarding Market Risk
QUANTITATIVE AND QUALITATIVE DISCLOSURES REGARDING MARKET RISK
Not applicable.
Item
ITEM 4. Controls and Procedures
Disclosure Controls and Procedures
CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in our reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are recorded, processed, summarized and reported within the specified time periods in the rules and forms of the SEC, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.
Our management, with the participation of the CEO and the CFO, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) promulgated under the Exchange Act) as of JuneSeptember 30, 2023. Based on these evaluations, our CEO and CFO concluded that our disclosure controls and procedures were effective as of JuneSeptember 30, 2023.
Changes in Internal Control Over Financial Reporting
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CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is required to evaluate, with the participation of our CEO and our CFO, any changes in internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during each fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. There were no changes in our internal control over financial reporting during the quarter ended JuneSeptember 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
Item
ITEM 1. Legal Proceedings.
LEGAL PROCEEDINGS
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
ITEM 1A. Risk Factors.
RISK FACTORS
Factors that could cause our actual results to differ materially from those in this Quarterly Report on Form 10-Q are any of the risks described in our Annual Report on Form 10-K filed with the SEC on March 31, 2023. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
There have been no material changes from the risk factors previously disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 31, 2023.
Item
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
Item
ITEM 3. Defaults Upon Senior Securities.
DEFAULTS UPON SENIOR SECURITIES
None.
Item
ITEM 4. Mine Safety Disclosures.
MINE SAFETY DISCLOSURES
Not Applicable.
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Item
ITEM 5. Other Information.
OTHER INFORMATION
None.
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Item
ITEM 6. Exhibits
EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| Incorporated By Reference | |||||||||||||||||||||||||||||||||||||||
| Exhibit No. | Description | Form | File No. | Exhibit | Filing Date | Filed/Furnished Herewith | |||||||||||||||||||||||||||||||||
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| 31.1 | |||||||||||||||||||||||||||||||||||||||
| X | |||||||||||||||||||||||||||||||||||||||
| 31.2 | X | ||||||||||||||||||||||||||||||||||||||
| 32.1* | 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. LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | X | |||||||||||||||||||||||||||||||||||||
| 101. PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | |||||||||||||||||||||||||||||||||||||
| 101. DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | |||||||||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (as formatted as Inline XBRL and contained in Exhibit 101) | X | |||||||||||||||||||||||||||||||||||||
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*This document is being furnished with this Form 10-Q. 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.
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PART III —III. SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.
| CURIOSITYSTREAM INC. | |||||||||||
| Date: | By: | /s/ Clint Stinchcomb | |||||||||
| Name: |
| Clint Stinchcomb | |||||||||
| Title: | President and Chief Executive Officer
| ||||||||||
| Date: | By: | /s/ Peter Westley | |||||||||
| Name: |
| Peter Westley | |||||||||
| Title: | Chief Financial Officer and Treasurer
| ||||||||||
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