☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
June 30, 2023
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 84-1797523 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
1980 Festival Plaza Drive, Ste. 300
Las Vegas, Nevada 89135
310-991-4982
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $0.0001 | CURI | NASDAQ | ||
Warrants, each | CURIW | NASDAQ |
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
| Emerging growth company | ☒ | |||||
☒
SOFTWARE ACQUISITION GROUPCURIOSITYSTREAM INC.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2020 June 30, 2023
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1. Interim Financial Statements.
SOFTWARE ACQUISITION GROUP INC.
CONDENSED BALANCE SHEETS
March 31, 2020 | December 31, 2019 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | 803,596 | $ | 1,093,408 | ||||
| Prepaid expenses | 144,236 | 128,133 | ||||||
| Total Current Assets | 947,832 | 1,221,541 | ||||||
| Marketable securities held in Trust Account | 150,202,852 | 149,719,910 | ||||||
| Total Assets | $ | 151,150,684 | $ | 150,941,451 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accrued expenses | $ | 144,695 | $ | 179,881 | ||||
| Income taxes payable | 53,280 | 1,952 | ||||||
| Total Current Liabilities | 197,975 | 181,833 | ||||||
| Deferred underwriting fee payable | 5,232,500 | 5,232,500 | ||||||
| Total Liabilities | 5,430,475 | 5,414,333 | ||||||
| Commitments | ||||||||
| Class A common stock subject to possible redemption, 14,015,810 and 14,044,440 shares at redemption value at March 31, 2020 and December 31, 2019, respectively | 140,720,206 | 140,527,112 | ||||||
| Stockholders’ Equity | ||||||||
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized, none issued and outstanding | — | — | ||||||
| Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 934,190 and 905,560 issued and outstanding (excluding 14,015,810 and 14,044,440 shares subject to possible redemption) at March 31, 2020 and December 31, 2019, respectively | 93 | 91 | ||||||
| Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 3,737,500 shares issued and outstanding at March 31, 2020 and December 31, 2019 | 374 | 374 | ||||||
| Additional paid-in capital | 4,799,104 | 4,992,200 | ||||||
| Retained earnings | 200,432 | 7,341 | ||||||
| Total Stockholders’ Equity | 5,000,003 | 5,000,006 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 151,150,684 | $ | 150,941,451 | ||||
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 | ||||
CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2020
(UNAUDITED)
| Operating costs | $ | 238,523 | ||
| Loss from operations | (238,523 | ) | ||
| Other income: | ||||
| Interest income | 482,942 | |||
| Income before provision for income taxes | 244,419 | |||
| Provision for income taxes | (51,328 | ) | ||
| Net income | $ | 193,091 | ||
| Weighted average shares outstanding, basic and diluted(1) | 4,643,060 | |||
| Basic and diluted net loss per common share(2) | $ | (0.04 | ) |
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 | ||||||||||||
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
THREE MONTHS ENDED MARCH 31, 2020
(UNAUDITED)
Class A Common Stock | Class B Common Stock | Additional Paid | Retained | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | in Capital | Earnings | Equity | ||||||||||||||||||||||
| Balance – January 1, 2020 | 905,560 | $ | 91 | 3,737,500 | $ | 374 | $ | 4,992,200 | $ | 7,341 | $ | 5,000,006 | ||||||||||||||||
| Change in value of Class A common stock subject to possible redemption | 28,630 | 2 | — | — | (193,096 | ) | — | (193,094 | ) | |||||||||||||||||||
| Net income | — | — | — | — | — | 193,091 | 193,091 | |||||||||||||||||||||
| Balance – March 31, 2020 | 934,190 | $ | 93 | 3,737,500 | $ | 374 | $ | 4,799,104 | $ | 200,432 | $ | 5,000,003 | ||||||||||||||||
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 | ) | ||||
3
CONDENSED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2020
(UNAUDITED)
| Cash Flows from Operating Activities: | ||||
| Net income | $ | 193,091 | ||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||
| Interest earned on marketable securities held in Trust Account | (482,942 | ) | ||
| Changes in operating assets and liabilities: | ||||
| Prepaid expenses | (16,103 | ) | ||
| Accrued expenses | (35,186 | ) | ||
| Income taxes payable | 51,328 | |||
| Net cash used in operating activities | (289,812 | ) | ||
| Net Change in Cash | (289,812 | ) | ||
| Cash – Beginning | 1,093,408 | |||
| Cash – Ending | $ | 803,596 | ||
| Non-cash investing and financing activities: | ||||
| Change in value of common stock subject to possible redemption | $ | 193,094 | ||
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 | ||||||||||||||||
4
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Software Acquisition Group
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 | ||||
As of March 31, 2020, the Company had not yet commenced any operations. All activity through March 31, 2020 relatesalso has distribution agreements which grant other media companies certain distribution rights to the Company’s formation, the initial public offering (the “Initial Public Offering”), which is described below, and identifying a target company for a Business Combination.programs, referred to as content licensing deals. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The registration statements for the Company’s Initial Public Offering were declared effective on November 19, 2019. On November 22, 2019, the Company consummated the Initial Public Offering of 14,950,000 units (the “Units” and, with respect to the shares of Class A common stock included in the Units sold, the “Public Shares”), which includes the full exercise by the underwriter of the over-allotment option to purchase an additional 1,950,000 Units, at $10.00 per Unit, generating gross proceeds of $149,500,000, which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 4,740,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to Software Acquisition Holdings, LLC (the “Sponsor”), generating gross proceeds of $4,740,000, which is described in Note 4.
Transaction costs amounted to $8,745,223 consisting of $2,990,000 of underwriting fees, $5,232,500 of deferred underwriting fees and $522,723 of other offering costs. In addition, as of March 31, 2020, cash of $803,596 was held outside of the Trust Account and is available for working capital purposes.
Following the closing of the Initial Public Offering on November 22, 2019, an amount of $149,500,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering, and the sale of the Private Warrants was placed in a trust account (the “Trust Account”) and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act of 1940, as amended (the “Investment Company Act”), as determined by the Company, until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the funds in the Trust Account to the Company’s stockholders, as described below.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. NASDAQ rules provide that the Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the Trust Account (less any deferred underwriting commissions and taxes payable on interest earned on the Trust Account) at the time of the signing of a definitive agreement to enter a Business Combination. The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.
The Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. In connection with a proposed Business Combination, the Company may seek stockholder approval of a Business Combination at a meeting called for such purpose at which stockholders may seek to redeem their shares, regardless of whether they vote for or against a Business Combination. The Company will proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 either immediately prior to or upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted in favor of the Business Combination.
SOFTWARE ACQUISITION GROUP INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
If the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s Amended and Restated Certificate of Incorporation provides that, a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from seeking redemption rights with respect to 20% or more of the Public Shares without the Company’s prior written consent.
The public stockholders will be entitled to redeem their shares for a pro rata portion of the amount then in the Trust Account ($10.00 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). The per-share amount to be distributed to stockholders who redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriter (as discussed in Note 6). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
If a stockholder vote is not required and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation, offer such redemption pursuant to the tender offer rules of the Securities and Exchange Commission (the “SEC”), and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination.
The Company’s Sponsor has agreed (a) to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination, (b) not to propose an amendment to the Company’s Amended and Restated Certificate of Incorporation with respect to the Company’s pre-Business Combination activities prior to the consummation of a Business Combination unless the Company provides dissenting public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment; (c) not to redeem any shares (including the Founder Shares) and Private Placement Warrants (including underlying securities) into the right to receive cash from the Trust Account in connection with a stockholder vote to approve a Business Combination (or to sell any shares in a tender offer in connection with a Business Combination if the Company does not seek stockholder approval in connection therewith) or a vote to amend the provisions of the Amended and Restated Certificate of Incorporation relating to stockholders’ rights of pre-Business Combination activity and (d) that the Founder Shares and Private Placement Warrants (including underlying securities) shall not participate in any liquidating distributions upon winding up if a Business Combination is not consummated. However, the Sponsor will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares purchased during or after the Initial Public Offering if the Company fails to complete its Business Combination.
If the Company is unable to complete a Business Combination by May 22, 2021 (the “Combination Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Company’s board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case to its obligations to provide for claims of creditors and the requirements of applicable law. The underwriter has agreed to waive itsalso sells selected rights to the deferred underwriting commission held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution,content it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).
SOFTWARE ACQUISITION GROUP INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
The Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement or Business Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the day of liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriter of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). However, the Company has not asked the Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations and believe that the Sponsor’s only assets are securities of the Company. Therefore, the Company cannot assure its stockholders that the Sponsor would be able to satisfy those obligations. None of the Company’s officers or directors will indemnify the Company for claims by third parties including, without limitation, claims by vendors and prospective target businesses. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
presentation and summary of significant accounting policiesPresentation
flows. The accompanying unaudited condensedconsolidated financial statements should be read in conjunction with the Company’saudited 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 Form
Emerging Growth Company
the year ended December 31, 2022.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies,three months ended June 30, 2023, the Company asalso performed a separate analysis of its Investments in equity method investees to determine if an emerging growth company, can adopt“other-than-temporary” impairment exists. Refer to Note 3 for further discussion on the new or revised standard at the time private companies adopt the new or revised standard. This may make comparisonresults of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
7
SOFTWARE ACQUISITION GROUP INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
estimatesEstimates
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actualaccompanying notes. Actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of March 31, 2020 and December 31, 2019.
Marketable Securities Held in Trust Account
At March 31, 2020 and December 31, 2019, the assets held in the Trust Account were substantially held in a money market fund that invests primarily in U.S. Treasury Bills.
Common Stock Subject to Possible Redemption
The Company accounts for its common stock Significant items subject to possible redemption in accordance withsuch estimates include the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is either withincontent asset amortization policy, the controlassessment of the holder or subject to redemption uponrecoverability of content assets and equity method investments, the occurrencefair value of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets.
Income Taxes
The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an assetshare-based awards and liability approach to financial accountingclassified warrants and reporting for income taxes. Deferredmeasurement of income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicableliabilities.
ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2020 and December 31, 2019. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security “CARES” Act into law. The CARES Act includes several significant business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (“NOL) and allow businesses to carry back NOLs arising in 2018, 2019 and 2020 to the five prior years, suspend the excess business loss rules, accelerate refunds of previously generated corporate alternative minimum tax credits, generally loosen the business interest limitation under IRC section 163(j) from 30 percent to 50 percent among other technical corrections included in the Tax Cuts and Jobs Act tax provisions. The Company does not believe that the CARES Act will have a significant impact on Company's financial position or statement of operations.
SOFTWARE ACQUISITION GROUP INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
Net Income per Common Share
Net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. The Company applies the two-class method in calculating earnings per share. Shares of common stock subject to possible redemption at March 31, 2020, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic loss per share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. The Company has not considered the effect of warrants to purchase 12,215,000 shares of common stock that were sold in the Initial Public Offering and the private placement in the calculation of diluted loss per share, since the exercise of the warrants is contingent upon the occurrence of future events. As a result, diluted loss per share is the same as basic loss per share for the period presented.
Reconciliation of Net Income per Common Share
The Company’s net income is adjusted for the portion of income that is attributable to common stock subject to possible redemption, as these shares only participate in the earnings of the Trust Account and not the income or losses of the Company. Accordingly, basic and diluted loss per common share is calculated as follows:
| Three Months Ended | ||||
| March 31, 2020 | ||||
| Net income | $ | 193,091 | ||
| Less: Income attributable to shares subject to possible redemption | (357,763 | ) | ||
| Adjusted net loss | $ | (164,672 | ) | |
| Weighted average shares outstanding, basic and diluted | 4,643,060 | |||
| Basic and diluted net loss per common share | $ | (0.04 | ) | |
riskCredit Risk
Fair Value of Financial Instruments
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 for significant assumptions which the Company used in the fair value model for the Private Placement
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 | ||||||
Recently Issued Accounting Standards
Management does not believecash, cash equivalents and restricted cash in the consolidated statements of cash flows is as follows:
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 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 | |||||||||||||
| As of December 31, 2022 | ||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
| (in thousands) | ||||||||||||||||
| Debt Securities: | ||||||||||||||||
| Corporate | $ | 15,026 | — | $ | (40 | ) | $ | 14,986 | ||||||||
| Total | $ | 15,026 | — | $ | (40 | ) | $ | 14,986 | ||||||||
| 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 | ||||
9
SOFTWARE ACQUISITION GROUP INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Licensed content | $1804 | $1,798 | $3,749 | $4,797 | ||||||||||||
Produced content | 4,662 | 8,293 | 8,569 | 14,333 | ||||||||||||
Total | $6,466 | $10,091 | $12,318 | $19,130 | ||||||||||||
| As of June 30, 2023 | As of December 31, 2022 | |||||||
| (in thousands) | ||||||||
| Level 3 | ||||||||
| Private Placement Warrants | $ | 147 | $ | 257 | ||||
| Total Level 3 | $ | 147 | $ | 257 | ||||
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 | ||||||||||||||||||||||||
| (1) | Other revenue primarily relates to other marketing services. |
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 | ||||||||||||||
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 4,740,000 Private Placementshare. All Warrants at a price of $1.00 per Private Placement Warrant for an aggregate purchase price of $4,740,000. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share. expire on October 14, 2025.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
In June 2019, the Company issued an aggregate of 3,593,750 shares (the “Founder Shares”) to the Sponsor for an aggregate purchase price of $25,000 in cash. On November 19, 2019, the Company effected a stock dividend for 0.04 share for each Founder Share outstanding, resulting in the Sponsor holding an aggregate of 3,737,500 Founder Shares. The 3,737,500 Founder Shares included an aggregate of up to 487,500 shares subject to forfeiture by the Sponsor to the extent that the underwriter’s over-allotment was not exercised in full or in part, so that the Sponsor will collectively own, on an as-converted basis, 20% of the Company’s issued and outstanding shares after the Proposed Offering (assuming the Sponsor does not purchase any Public Shares in the Initial Public Offering and excluding the Private Placement Warrants and underlying securities). As a result of the underwriter’s election to fully exercise its over-allotment option, 487,500 Founder Shares are no longer subject to forfeiture.
The initial stockholders have agreed not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination or (B) the date on which the Company completes a liquidation, merger, capital stock exchange or similar transaction that results in the Company’s stockholders havinghas the right to exchange their shares of common stock for cash, securities or other property. Notwithstanding the foregoing, if the last sale price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Business Combination, the Founder Shares will be released from the lock-up.
Promissory Note — Related Party
On June 25, 2019, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Note”). The Note was non-interest bearing and payable on the earlier of December 31, 2019 or the completion of the Initial Public Offering. The borrowings outstanding under the Note of $235,540 were repaid upon the consummation of the Initial Public Offering on November 22, 2019.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Company’s Sponsor, an affiliate of the Sponsor, or the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of notes may be converted upon consummation of a Business Combination into warrants at a price of $1.00 per warrant. The warrants will be identical to the Private Placement Warrants. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans.
SOFTWARE ACQUISITION GROUP INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
Administrative Support Agreement
The Company entered into an agreement whereby, commencing on November 19, 2019 through the earlier of the Company’s consummation of a Business Combination and its liquidation, the Company will pay the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. For the three months ended March 31, 2020, the Company incurred $30,000 in fees for these services, of which $45,000 and $15,000 is included in accrued expenses in the accompanying condensed balance sheets as of March 31, 2020 and December 31, 2019, respectively.
NOTE 6. COMMITMENTS
Registration Rights
Pursuant to a registration rights agreement entered into on November 19, 2019, the holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued upon conversion of the Working Capital Loans (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights, requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to our Class A common stock). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriter is entitled to a deferred fee of three and half percent (3.50%) of the gross proceeds of the Initial Public Offering, or $5,232,500. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
NOTE 7. STOCKHOLDERS’ EQUITY
Preferred Stock — The Company is authorized to issue 1,000,000 shares of $0.0001 par value preferred stock. At March 31, 2020 and December 31, 2019, there were no preferred shares issued or outstanding.
Class A Common Stock — The Company is authorized to issue up to 100,000,000 shares of Class A, $0.0001 par value common stock. Holders of the Company’s common stock are entitled to one vote for each share. At March 31, 2020 and December 31, 2019, there were 934,190 and 905,560 shares of Class A common stock issued or outstanding, excluding 14,015,810 and 14,044,440 shares of Class A common stock subject to possible redemption, respectively.
Class B Common Stock — The Company is authorized to issue up to 10,000,000 shares of Class B, $0.0001 par value common stock. Holders of the Company’s common stock are entitled to one vote for each share. The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of the Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like. In the case that additional shares of Class A common stock, or equity linked securities, are issued or deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority ofredeem the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering plus all shares of Class A common stock and equity linked securities issued or deemed issued in connection with a Business Combination (excluding any shares or equity linked securities issued, or to be issued, to any seller in a Business Combination, and any private placement-equivalent warrants issued to the Sponsor or its affiliates upon conversion of loans made to the Company). Holders of Founder Shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment as provided above, at any time.
11
SOFTWARE ACQUISITION GROUP INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
At March 31, 2020 and December 31, 2019, there were 3,737,500 shares of Class B common stock issued and outstanding.
The Company may issue additional common stock or preferred stock to complete its Business Combination or under an employee incentive plan after completion of its Business Combination.
Warrants — The Public Warrants will become exercisable on the later of (a) 30 days after the consummation of a Business Combination or (b) 12 months from the effective date of the registration statement relating to the Initial Public Offering. No Public Warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the common shares issuable upon exercise of the Public Warrants and a current prospectus relating to such common shares. Notwithstanding the foregoing, if a registration statement covering the Class A common shares issuable upon the exercise of the Public Warrants is not effective within 60 days from the consummation of a Business Combination, the holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise the Public Warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. If an exemption from registration is not available, holders will not be able to exercise their Public Warrants on a cashless basis. The Public Warrants will expire five years from the consummation of a Business Combination or earlier upon redemption or liquidation.
The Company may call the Public Warrants for redemption (excluding the Private Placement Warrants), in whole and not in part at a price of $0.01 per warrant:
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
As of June 30, 2023 | As of December 31, 2022 | |||||||
| Exercise price | $ | 11.50 | $ | 11.50 | ||||
| Stock price (CURI) | $ | 0.93 | $ | 1.14 | ||||
| Expected volatility | 84.00 | % | 77.00 | % | ||||
| Expected warrant term (years) | 2.3 | 2.8 | ||||||
| Risk-free interest rate | 4.68 | % | 4.22 | % | ||||
| Dividend yield | 0 | % | 0 | % | ||||
| Fair Value per Private Placement Warrant | $ | 0.04 | $ | 0.07 | ||||
The exercise price andweighted average number of shares of Class Athe Company’s common stock issuable upon exerciseoutstanding 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
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 | ) | ||||
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 | |||||||||||||
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 | |||||||||||||
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 | ||||||||
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 | % | |||||||||||||||||
June 30, 2023 | December 31, 2022 | |||||||
| (in thousands) | ||||||||
Balance Sheet: | ||||||||
| Accounts receivable | $ | 2,679 | $ | 3,358 | ||||
| Accounts payable | $ | 386 | $ | 404 | ||||
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 | ||||||||
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 | ||||||||
| (1) | Short term lease cost includes a refund received by the Company during the three months ended June 30, 2023 for office space it previously occupied. |
| 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 | ||
SOFTWARE ACQUISITION GROUP INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the Company’s initial Business Combination on the date of the consummation of such initial Business Combination (net of redemptions), and (z) the volume weighted average tradingcurrent market price of the Company’s common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise pricefor RSUs of an equivalent fair value. The Exchange was completed in July 2023. As a result of the warrants will be adjusted (to the nearest cent) to be equal to 115%Exchange, 4.6 million of the higher of the Market Value and the Newly Issued Price and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
NOTE 8. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820outstanding eligible stock options were exchanged for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The1.6 million new RSUs, with a fair value of $0.99 per share on the Company’s financial assets and liabilities reflects management’s estimatedate of amounts thatthe Exchange. There was no incremental compensation expense recorded by the Company would have received in connection with the saleas a result of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:Exchange.
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at March 31, 2020 and December 31, 2019, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Description | Level | March 31, 2020 | December 31, 2019 | |||||||
| Assets: | ||||||||||
| Marketable securities held in Trust Account | 1 | $ | 150,202,852 | $ | 149,719,910 | |||||
NOTE 9. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Software Acquisition Group Inc. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Software Acquisition Holdings, LLC. The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of the Company’s financial condition andour results of operations and financial condition. The following discussion should be read in conjunction with the Company’s unaudited consolidated financial statements and the notes thereto containedincluded elsewhere in this Quarterly Report. Certain information containedReport 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 discussionbusiness and analysis set forth below includes forward-looking statements that involve risks and uncertainties.operations of CuriosityStream Inc.
SpecialCautionary Note Regarding Forward-LookingForward-looking Statements
This Quarterly Report includeson 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 not historical facts and involve risks and uncertainties that could cause actual resultsintended to differ materially from those expected and projected.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 inunder 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. WordsWhen used in this Quarterly Report on Form 10-Q, words such as “expect,“anticipate,” “attribute,” “believe,” “anticipate,“continue,” “hope,” “estimate,” “expect,” “intend,” “estimate,“may,” “seek”“might,” “potential,” “seek,” “should,” “will” and variations“would,” and similar words and expressions, are intendedas they relate to us or the Company’s management, identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs,are based on the beliefs of management, as well as assumptions made by, and information currently available. A number of factorsavailable to, the Company’s management. Actual results could cause actual events, performance or results to differ materially from the events, performance and results discussed inthose contemplated by the forward-looking statements. For information identifying importantstatements 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 anticipatedincluded in the forward-looking statements, please referstatements. Factors that might cause or contribute to the Risk Factors section of the Company’ssuch 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 U.S. SecuritiesSEC on March 31, 2023, and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention orother subsequent periodic reports and future periodic reports. We assume no obligation to updaterevise or revisepublicly release any revision to any forward-looking statements whether as a result of new information, future events or otherwise.
contained in this Quarterly Report on Form 10-Q, unless required by law.
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 seeking to meet demand for high-quality factual entertainment via 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.
We operate our business as a blank check company formed undersingle operating segment that provides premium streaming content through multiple channels, including the lawsuse 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. The table below shows our revenue generated through each of the State of Delaware on May 9, 2019foregoing products and services for the purposethree and six months ended June 30, 2023 and 2022:
Currently, the main sources of effectingour 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 | |||||||||||||||||||||||||||||
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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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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 than 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 merger, capital stock exchange, asset acquisition, stock purchase, reorganizationrotating catalog of more than 5,500 internationally licensed videos and audio programs. Every month, we launch dozens of new video titles, which are available on-demand in high- or other similarultra-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 Combinationrevenue 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 onea broadband connection. Currently, most legacy subscribers pay $2.99 per month or more businesses.$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 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 notaffiliate 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 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 any specific Business Combination targetrights (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.
Our Enterprise business is comprised primarily of selling subscriptions in bulk to companies and organizations that in turn offer these subscriptions to their employees and members as an employment benefit or “gift of curiosity.” Revenues from our Enterprise business are included within Subscriptions — O&O Services in Note 5 to the accompanying unaudited consolidated financial statements.
Our Other business 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.
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
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 not, nor has anyonegenerated the majority of our revenues from consumers directly accessing our content in the form of monthly or annual subscription plans. 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 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 behalf, initiated any substantive discussions, directlyrevenue 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 indirectly,backend costs associated with any Business Combination target. Wecontent 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.
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” below.
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 effectuatefocus 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 Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Warrants, our capital stock, debt or a combination of cash, stock and debt.Direct Service.
The issuance of additional shares of our stock in a Business Combination:19
Similarly, if we issue debt securities or otherwise incur significant indebtedness, it could result in:
We are incurring significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
Results of Operations
We have neither engagedThe Company operates as one reporting segment. The financial data in any operations nor generated any revenues to date. Our only activitiesthe following table sets forth selected financial information derived from May 9, 2019 (inception) through March 31, 2020 were organizational activities, those necessary to prepareour unaudited consolidated financial statements for the Initial Public Offering, described below,three months ended June 30, 2023 and identifyingJune 30, 2022 and shows our results of operations as a target companypercentage of revenue or as a percentage of costs, as applicable, for the periods indicated.
Comparison of the three months ended June 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 | %) | |||||||||||
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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 | %) | |||||||||||||||||
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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 was $14.1 million and $22.3 million, respectively. This decrease of $8.2 million, or 37%, is primarily attributable to reductions in both License fees revenue and Subscriptions revenue.
The decrease in License fees revenue of $5.5 million was primarily driven by the non-renewal of certain content licensing arrangements of $5.6 million, partially offset by an increase of $2.6 million from new content licensing arrangements, and a Business Combination. We do not expectdecrease 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 distribution agreements. The decrease in Subscriptions revenue of $1.7 million was primarily due to generate any operating revenues until after the completiontermination of our Business Combination. We generate non-operating incomecertain corporate subscriptions related to bulk agreements, which occurred in the formthird quarter of interest income on marketable securities held after2022.
Operating Expenses
Operating expenses for the Initial Public Offering. three months ended June 30, 2023 were $22.1 million, compared to $38.4 million for the same period in 2022, marking a reduction of $16.3 million, or 42%.
Cost of Revenues: Cost of revenues for the three months ended June 30, 2023 decreased to $9.9 million from $13.0 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 million, or 24%, 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: Advertising and marketing expenses for the three months ended June 30, 2023 decreased to $4.2 million from $11.2 million for the three months ended June 30, 2022. This decrease of $7.0 million, or 63%, was primarily due to strategic changes in our marketing approach and cost-saving measures implemented in our advertising campaigns.
General and Administrative: General and administrative expenses for the three months ended June 30, 2023 decreased by $2.6 million, or 25%, from $10.6 million for the same period in 2022 to $8.0 million. The decrease was primarily due to cost controls and efficiency measures implemented across our administrative functions.
Impairment of Goodwill and Intangible Assets: We incurincurred no impairment charges for goodwill and intangible assets for the three months ended June 30, 2023, in contrast to the $3.6 million expense incurred in the corresponding period of 2022.
Operating Loss
The Company experienced an operating loss of $8.0 million for the three months ended June 30, 2023, which is a decrease of $8.0 million, or 50%, compared to the operating loss of $16.1 million for the three months ended June 30, 2022. The decrease in our operating loss is primarily driven by the reduction in our operating expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance)$16.3 million, or 42%, as well as for due diligence expenses.partially offset by the reduction in revenue of $8.3 million, or 37%.
Change in Fair Value of Warrant Liability
For the three months ended March 31, 2020, we had netJune 30, 2023, the change in the fair value of warrant liability (related to Private Placement Warrants) resulted in income of $193,091, which consists$0.2 million, a decrease of $0.3 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, 2022.
Interest and Other Income (Expense)
Interest and other income (expense) for the three months ended June 30, 2023 was $0.4 million income compared to $0.1 million expense for the three months ended June 30, 2022. The increase is primarily related to an increase in interest income on marketable securities heldduring the current period.
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Equity Method Investment Loss
For the three months ended June 30, 2023, the Company recorded a loss of $2.2 million compared to a loss of $0.3 million for the three months ended June 30, 2022, related to its investments in Spiegel Venture and Nebula. The increase is primarily due to the Trust Account of $482,942, offset$2.0 million impairment charge recorded by operating costs of $238,523 andthe Company to its investment in Spiegel Venture.
Provision for Income Taxes
We had a provision for income taxes of $51,328.$0.3 million for the three months ended June 30, 2023 compared to $0.1 million for the three months ended June 30, 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 June 30, 2023, was $9.9 million, compared to $16.0 million for the same period in 2022. The decrease in our net loss of $6.1 million, or 38%, primarily resulted from the decrease in operating expenses of $16.3 million, or 42%, partially offset by the reduction in revenue of $8.3 million or 37%, and an impairment charge to one of our equity method investments of $2.0 million.
Comparison of the six months ended June 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 for the six months ended June 30, 2023, and 2022 was $26.5 million and $40.0 million, respectively. This decrease of $13.5 million, or 34%, is primarily attributable to reductions in both License fees revenue and Subscriptions revenue.
The decrease in License fees revenue of $10.1 million was primarily driven by the non-renewal of certain content licensing arrangements of $8.4 million, partially offset by an increase of $2.6 million from new content licensing arrangements, 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 distribution agreements. The decrease in Subscriptions revenue of $2.5 million was primarily due to the termination of certain corporate subscriptions related to bulk agreements, which occurred in the third quarter of 2022.
Operating Expenses
Operating expenses for the six months ended June 30, 2023, were $42.3 million, compared to $75.5 million for the same period in 2022, marking a reduction of $33.2 million or 44%.
Cost of Revenues: Cost of revenues for the six months ended June 30, 2023 decreased to $18.9 million from $24.8 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 million, or 24%, 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: Advertising and marketing expenses for the six months ended June 30, 2023, decreased to $7.3 million from $26.0 million for the six months ended June 30, 2022. This decrease of $18.7 million, or 72%, was primarily due to strategic changes in our marketing approach and cost-saving measures implemented in our advertising campaigns.
General and Administrative: General and administrative expenses for the six months ended June 30, 2023, decreased to $16.0 million, from $21.1 million for six months ended June 30, 2022. The decrease of $5.1 million, or 24%, was primarily due to cost controls and efficiency measures implemented across our administrative functions.
Impairment of Goodwill and Intangible Assets: 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 in the corresponding period of 2022.
Operating Loss
The Company experienced an operating loss of $15.8 million for the six months ended June 30, 2023, which is a decrease of $19.7 million, or 56%, compared to the operating loss of $35.5 million for the six months ended June 30, 2022. The decrease in our operating loss is primarily driven by the reduction in our operating expenses of $33.2 million, or 44%, partially offset by the reduction in revenue of $13.5 million, or 34%.
Change in Fair Value of Warrant Liability
For the six months ended June 30, 2023, the Company recognized a gain of $0.1 million, compared to a gain of $4.3 million for the six months ended June 30, 2022. This reduction in gain of $4.2 million, or 97%, 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 six months ended June 30, 2022.
Interest and Other Income (Expense)
For the six months ended June 30, 2023, Interest and other income (expense) amounted to $0.8 million, an increase of $0.9 million compared to an expense of $0.1 million for the six months ended June 30, 2022. The change was primarily due to increased interest income.
Equity Method Investment Loss
For the six months ended June 30, 2023, the Company recorded a loss of $2.5 million compared to a loss of $0.5 million for the six months ended June 30, 2022, related to its investments in Spiegel Venture and Nebula. The increase is primarily due to the $2.0 million impairment charge recorded by the Company to its investment in Spiegel Venture during the six months ended June 30, 2023.
Provision for Income Taxes
We had a provision for income taxes of $0.3 and $0.1 million in the six months ended June 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 to the Company being in a full valuation allowance position and not recognizing a benefit for either federal or state income tax purposes.
Net Loss
Net loss for the six months ended June 30, 2023 was $17.7 million, compared to a net loss of $31.9 million for the same period in 2022. The decrease in our net loss of $14.2 million, or 45%, is primarily due to a decrease in operating expenses and an increase in interest and other income, partially offset by a decrease in revenue, a reduction in gain from the change in the fair value of warrant liability and an impairment charge to one of our equity method investments.
Liquidity and Capital Resources
As of June 30, 2023, the Company’s cash and cash equivalents, including restricted cash, totaled $44.8 million. For the six months ended June 30, 2023, the Company incurred a net loss of $15.7 million and used $10.6 million of net cash in operating activities and $0.1 million of net cash in financing activities, while investing activities provided $15.0 million of net cash.
On November 22, 2019,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 consummated the Initial Public Offering of 14,950,000 Units, which includes the full exercise by the underwriters of their over-allotment optionhave access to additional funds in the amountshort term and the long term, if needed, through the capital markets to obtain further financing.
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Our principal uses of 1,950,000 Units, at a pricecash are 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
The following table presents our cash flows from operating, investing and financing activities for the six months ended June 30, 2023 and 2022:
| For the six months ended June 30, | ||||||||
| 2023 | 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 increase in cash, cash equivalents and restricted cash | $ | 4,330 | $ | 5,714 | ||||
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Cash Flows from Operating Activities
Cash flows from operating activities primarily consist of $10.00 per Unit, generating gross proceeds of $149,500,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 4,740,000 Private Placement Warrantsnet losses, changes to our Sponsor at a price of $1.00 per Private Placement Warrants, generating gross proceeds of $4,740,000.content assets (including additions and amortization), and other working capital items.
FollowingDuring the Initial Public Offering and the sale of the Private Placement Warrants, a total of $149,500,000 was placed in the Trust Account. We incurred $8,745,223 in transaction costs, consisting of $2,990,000 of underwriting fees, $5,232,500 of deferred underwriting fees and $522,723 of other offering costs.
For the threesix months ended March 31, 2020,June 30, 2023, and 2022, we recorded a net cash outflow from operating activities of $10.6 million and $18.1 million, respectively, or a decreased outflow of $7.5 million, or 41%.
The net cash outflow used in operating activities for the six months ended June 30, 2023, was $289,812. Net incomeprimarily due to our $17.7 million net loss, $2.6 million of $193,091 was offset by interest earned on marketable securities heldnet cash used in the Trust Account of $482,942. Changeschanges 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 changes in operating assets and liabilities were primarily attributed to a decrease in accrued expenses and other liabilities of $3.9 million and in deferred revenue of $1.4 million, partially offset by an increase in accounts payable of $0.6 million, a decrease in accounts receivable of $1.8 million, and a decrease in other assets of $1.5 million.
The net cash outflow used in operating activities for the six months ended June 30, 2022, was primarily due to our $31.9 million net loss, and $5.4 million of non-cash expenses net of content additions, partially offset by $19.1 million in cash provided $39by changes in operating assets and liabilities. The most significant components of non-cash expenses include content additions of $25.3 million, changes in content liabilities of $3.7 million and changes in the fair value of the warrant liability of $4.3 million, partially offset by amortization of content assets of $19.1 million and stock-based compensation expense of $3.4 million. The components of 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 of $2.9 million.
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 the six months ended June 30, 2023, and 2022, we recorded a net cash inflow from investing activities of $15.0 million and $24.0 million, respectively, or a decrease of cash from operating activities.
Asinflow of March 31, 2020, we had marketable securities held in$9.0 million, or 37.5%.
The net cash inflow provided by investing activities for the Trust Accountsix months ended June 30, 2023, was primarily due to maturities of $150,202,852 (including approximately $703,000 of interest income earned from investments in debt securities of $15.0 million.
The net 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 million, partially offset by purchases of investments in debt securities of $1.6 million and investments in Nebula of $1.6 million.
Cash Flows from Financing Activities
During the six months ended June 30, 2023 and 2022, we recorded net cash outflow from financing activities of $0.1 and $0.2 million, respectively, which is attributable to payments of withholding taxes during the respective periods.
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 moneyslower rate than in previous periods. The amount, timing and allocation of capital expenditures are largely discretionary and within management’s control. Depending on market fundconditions, 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 invests primarily in U.S. treasury bills with a maturity of 180 days or less). Interest income onwe believe have the balance in the Trust Accounthighest expected returns and potential to generate cash flow. Subject to financing alternatives, we may be used by us to pay taxes. Through March 31, 2020, we have not withdrawn any interest earned on the Trust Account. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less income taxes payable and deferred underwriting commissions), to complete our Business Combination. To the extent thatalso increase our capital stock or debt is used, in whole or in part, as considerationexpenditures significantly to complete our Business Combination, the remaining proceeds held in the Trust Account willtake advantage of opportunities we consider to be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.attractive.
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Off Balance Sheet Arrangements
As of March 31, 2020,June 30, 2023, we had $803,596no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Our discussion and analysis of cash held outsideour 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 Trust Account. We intendneed to usemake estimates about the funds held outsideeffect 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 Trust Account primarily to identifyparticular circumstances under which the judgments and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor, or certain of our officers and directors or their affiliates may, butestimates are not obligated to, loan us fundsmade, as may be required. If we complete a Business Combination, we would repay such loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants identicalwell as management’s forecasts as to the Private Placement Warrants, at a price of $1.00 per warrant atmanner in which such circumstances may change in the option of the lender.future.
Content Assets
We do not believe we will need to raise additional fundsThe Company acquires, licenses and produces content, including original programming, in order to meetoffer customers unlimited viewing of factual entertainment content. The content licenses are for a fixed fee and specific windows of availability. Payments for content, including additions to content assets and the expenditures required forchanges in related liabilities, are classified within “Net cash used in operating our business. However, if our estimateactivities” on the unaudited consolidated statements of cash flows.
The Company recognizes its content assets (licensed and produced) as “Content assets, net” on the unaudited consolidated balance sheets. For licenses, 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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Based on factors including historical and estimated viewing patterns, the Company previously amortized the content assets (licensed and produced) in “Cost of identifyingrevenues” on the unaudited consolidated statements of operations on a targetstraight-line basis over the shorter of each title’s contractual window of availability or estimated period of use, beginning with the month of first availability. Starting July 1, 2021, the Company amortizes content assets on an accelerated basis in the initial two months after a title is published on the Company’s platform, as the Company has observed and expects more upfront viewing of content, generally as a result of additional marketing efforts. Furthermore, the amortization of original content is more accelerated than that of licensed content. We review 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 undertaking in-depth due diligencemodel is generally subscription based as opposed to a model generating revenues at a specific title level. Content assets (licensed and negotiatingproduced) are predominantly monetized as a Business Combinationgroup 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 actual amount necessaryaggregated content assets 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 do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combinationbe, abandoned are written off.
Revenue recognition
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 because we become obligated to redeem a significant number of our Public Shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneouslyannual subscriptions with the completion of our Business Combination. If weCompany. 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 unable to complete our Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidatecollected by the Trust Account. In addition, following our Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of March 31, 2020.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliateCompany at the start of the Sponsor a monthly feeannual subscription period and are recognized ratably over the subsequent twelve-month period. Revenues are presented net of $10,000 for office space, utilitiesthe taxes that are collected from subscribers and secretarial and administrative supportremitted to governmental authorities.
Subscriptions — App Services
The Company also earns subscription revenues through its App Services. These subscriptions are similar to the Company. We began incurringO&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 on November 19, 2019as an expense. The Company is the principal in these relationships as the Company retains control over service delivery to its subscribers.
License Fees — Partner Direct and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and the Company’s liquidation.
Bundled Distribution
The underwritersCompany 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 entitledalso referred to deferred fee of three and half percent (3.50%) of the gross proceeds of the Initial Public Offering, or $5,232,500. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject toas affiliates). Under the terms of the underwriting agreement.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.
CriticalLicense 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.
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.
Recently Adopted Financial Accounting PoliciesStandards
The information set forth under Note 2 to the unaudited consolidated financial statements under the caption “Basis of presentation and summary of significant accounting policies” is incorporated herein by reference.
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:26
Common stock subject to possible redemption
We account for common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of our condensed balance sheets.
Net loss per common share
We apply the two-class method in calculating earnings per share. Common stock subject to possible redemption which is not currently redeemable and is not redeemable at fair value, has been excluded from the calculation of basic net loss per common share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. Our net income is adjusted for the portion of income that is attributable to common stock subject to possible redemption, as these shares only participate in the earnings of the Trust Account and not our income or losses.
Recent accounting standards
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures AboutRegarding Market Risk
Not applicable.
As of March 31, 2020, we were not subject to any market or interest rate risk. Following the consummation of our Initial Public Offering, the net proceeds of our Initial Public Offering, including amounts in the Trust Account, have been invested in U.S. government treasury bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
DisclosureWe maintain disclosure controls and procedures are designed to ensureprovide reasonable assurance that information required to be disclosed by us in our reports that we file or submit under the Securities Exchange Act reports isof 1934, as amended (the “Exchange Act”) are recorded, processed, summarized and reported within the specified time periods specified in the SEC’s rules and forms of the SEC, and that such information is accumulated and communicated to ourthe Company’s management, including our principal executive officerits Chief Executive Officer (“CEO”) and principal financial officer or persons performing similar functions,Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision andOur management, with the participation of our management, including our principal executive officerthe CEO and principal financial and accounting officer, we conducted an evaluation ofthe CFO, evaluated the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended March 31, 2020, as such term is(as defined in Rules Rule 13a-15(e) and or 15d-15(e) promulgated under the Exchange Act.Act) as of June 30, 2023. Based on this evaluation,these evaluations, our principal executive officerCEO and principal financial and accounting officer haveCFO concluded that during the period covered by this report, our disclosure controls and procedures were effective to ensure that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
as of June 30, 2023.
Changes in Internal Control overOver Financial Reporting
There was no changeOur management is required to evaluate, with the participation of our CEO and our CFO, any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during theeach fiscal quarter of 2020 covered by this Quarterly Report on Form 10-Q that has materially affected, or isare 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 June 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
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.
None.
Factors that could cause our actual results to differ materially from those in this report includeQuarterly Report on Form 10-Q are any of the risk factorsrisks described in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 20, 2020. As31, 2023. Any of the datethese factors could result in a significant or material adverse effect on our results of this Report, thereoperations 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 tofrom the risk factors previously disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K filed with the SEC.SEC on March 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
On November 22, 2019, we consummated the Initial Public Offering of 14,950,000 Units, which includes the full exercise by the underwriters of their over-allotment option of 1,950,000 Units. The Units sold in the Initial Public Offering, including pursuant to the over-allotment option, were sold at an offering price of $10.00 per Unit, generating total gross proceeds of $149,500,000. B. Riley FBR, Inc. acted as the sole book-running manager of the Initial Public Offering. The securities in the offering were registered under the Securities Act on registration statements on Form S-1 (No. 333-234327 and 333-234786). The Securities and Exchange Commission declared the registration statements effective on November 19, 2019.
Simultaneous with the consummation of the Initial Public Offering, we consummated the private placement of an aggregate of 4,740,000 Private Placement Warrants to the Sponsor at a price of $1.00 per Private Placement Warrant, generating total proceeds of $4,740,000. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Placement Warrants are not transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions.
Of the gross proceeds received from the Initial Public Offering and the Placement Units, $149,500,000 was placed in the Trust Account.
We paid a total of $2,990,000 in underwriting discounts and commissions and $522,723 for other costs and expenses related to the Initial Public Offering. In addition, the underwriters agreed to defer $5,232,500 in underwriting discounts and commissions.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
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None.
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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 | ||||||
| 31.1 | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||
| 31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 | X | ||||||||||
| 32.1* | Certification of the Chief Executive Officer and Chief Financial Officer | 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 | X | ||||||||||
| * | 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 — SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this reportQuarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.
| CURIOSITYSTREAM INC. | ||||
| Date: | By: | /s/ | ||
Name: Title: | Clint Stinchcomb President and Chief Executive Officer (Principal Executive Officer) | |||
| Date: August 14, 2023 | By: | /s/ Peter Westley | ||
Name: Title: | Peter Westley Chief Financial Officer and Treasurer
| |||
( Principal Financial and Accounting | ||||
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