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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 10-Q
_____________________
(MARK ONE)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2023
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number: 001-39139
CURI logo jpeg.jpg
_____________________
CURIOSITYSTREAM INC.
(Exact Name of Registrant as Specified in Its Charter)
_____________________
Delaware84-1797523
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
8484 Georgia Ave., Suite 700
Silver Spring, Maryland 20910
(Address of principal executive offices)
(301) 755-2050
(Issuer’s telephone number)
_____________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange
on which registered
Common Stock, par value $0.0001CURINASDAQ
Warrants, each exercisable for one share of Common Stock at an exercise price of $11.50 per shareCURIWNASDAQ
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of November 3, 2023, 53,075,952 shares of Common Stock of the registrant were issued and outstanding.


CURIOSITYSTREAM INC.
QUARTERLY REPORT ON FORM 10-Q
Table of Contents
Page
i

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CURIOSITYSTREAM INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
September 30,
2023
December 31,
2022
(Unaudited)
Assets
Current assets
Cash and cash equivalents$40,304 $40,007 
Restricted cash500 500 
Short-term investments in debt securities 14,986 
Accounts receivable6,877 10,899 
Other current assets1,410 3,118 
Total current assets49,091 69,510 
Investments in equity method investees6,666 10,766 
Property and equipment, net822 1,094 
Content assets, net45,900 68,502 
Operating lease right-of-use assets3,418 3,702 
Other assets411 539 
Total assets$106,308 $154,113 
Liabilities and stockholders’ equity
Current liabilities
Content liabilities$128 $2,862 
Accounts payable6,963 6,065 
Accrued expenses and other liabilities4,154 7,752 
Deferred revenue12,997 14,281 
Total current liabilities24,242 30,960 
Warrant liability74 257 
Non-current operating lease liabilities4,378 4,648 
Other liabilities675 622 
Total liabilities29,369 36,487 
Stockholders’ equity
Common stock, $0.0001 par value – 125,000 shares authorized as of September 30, 2023, and December 31, 2022; 53,071 shares issued and outstanding as of September 30, 2023; 52,853 issued and outstanding as of December 31, 2022
5 5 
Additional paid-in capital362,270 358,760 
Accumulated other comprehensive loss (40)
Accumulated deficit(285,336)(241,099)
Total stockholders’ equity76,939 117,626 
Total liabilities and stockholders’ equity$106,308 $154,113 
The accompanying notes are an integral part of these consolidated financial statements.
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CURIOSITYSTREAM INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
September 30,
Nine Months Ended
September 30,
(Unaudited and in thousands except per share amounts)
2023202220232022
Revenues$15,630 $23,569 $42,114 $63,544 
Operating expenses
Cost of revenues8,494 13,566 27,428 38,404 
Advertising and marketing5,106 5,626 12,424 31,602 
General and administrative6,959 8,757 22,998 29,863 
Impairment of content assets18,970  18,970  
Impairment of goodwill and intangible assets   3,603 
39,529 27,949 81,820 103,472 
Operating loss(23,899)(4,380)(39,706)(39,928)
Change in fair value of warrant liability74 514 184 4,852 
Interest and other income (expense) 31 (478)856 (564)
Equity method investment loss(2,638)(94)(5,092)(566)
Loss before income taxes(26,432)(4,438)(43,758)(36,206)
Provision for income taxes133 64 479 165 
Net loss$(26,565)$(4,502)$(44,237)$(36,371)
Net loss per share
Basic$(0.50)$(0.09)$(0.83)$(0.69)
Diluted$(0.50)$(0.09)$(0.83)$(0.69)
Weighted average number of common shares outstanding
Basic53,04052,79352,99952,773
Diluted53,04052,79352,99952,773
The accompanying notes are an integral part of these consolidated financial statements.
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CURIOSITYSTREAM INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Three Months Ended
September 30,
Nine Months Ended
September 30,
(Unaudited and in thousands)2023202220232022
Net loss$(26,565)$(4,502)$(44,237)$(36,371)
Other comprehensive income (loss):
Unrealized gain on available for sale securities 270 40 40 
Total comprehensive loss$(26,565)$(4,232)$(44,197)$(36,331)
The accompanying notes are an integral part of these consolidated financial statements.
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CURIOSITYSTREAM INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited and in thousands)
Common Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income
(Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance at June 30, 202353,026$5 $361,392 $ $(258,771)$102,626 
Net loss— — — (26,565)(26,565)
Stock-based compensation, net45— 878 — — 878 
Balance at September 30, 202353,071$5 $362,270 $ $(285,336)$76,939 
Balance at December 31, 202252,853$5 $358,760 $(40)$(241,099)$117,626 
Net loss— — — (44,237)(44,237)
Stock-based compensation, net218— 3,510 — — 3,510 
Other comprehensive income— — 40 — 40 
Balance at September 30, 202353,071$5 $362,270 $ $(285,336)$76,939 
Balance at June 30, 202252,786$5 $355,555 $(452)$(222,051)$133,057 
Net loss— — — (4,502)(4,502)
Stock-based compensation, net16— 1,656 — — 1,656 
Other comprehensive income— — 270 — 270 
Balance at September 30, 202252,802$5 $357,211 $(182)$(226,553)$130,481 
Balance at December 31, 202152,677$5 $352,334 $(222)$(190,182)$161,935 
Net loss— — — (36,371)(36,371)
Stock-based compensation, net125— 4,877 — — 4,877 
Other comprehensive loss— — 40 — 40 
Balance at September 30, 202252,802$5 $357,211 $(182)$(226,553)$130,481 
The accompanying notes are an integral part of these consolidated financial statements.
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CURIOSITYSTREAM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
(Unaudited and in thousands)
20232022
Cash flows from operating activities
Net loss$(44,237)$(36,371)
Adjustments to reconcile net loss to net cash used in operating activities
Change in fair value of warrant liability(183)(4,852)
Additions to content assets(14,074)(31,729)
Change in content liabilities(2,734)(4,706)
Amortization of content assets17,706 29,510 
Depreciation and amortization expenses370 573 
Impairment of content assets18,970  
Impairment of goodwill and intangible assets 3,603 
Amortization of premiums and accretion of discounts associated with investments in debt securities, net26 1,087 
Stock-based compensation3,586 5,055 
Equity method investment loss5,092 566 
Other non-cash items363 288 
Changes in operating assets and liabilities
Accounts receivable4,022 6,342 
Other assets1,737 4,994 
Accounts payable903 4,188 
Accrued expenses and other liabilities(3,947)(4,792)
Deferred revenue(1,230)(4,500)
Net cash used in operating activities(13,630)(30,744)
Cash flows from investing activities
Purchases of property and equipment(5)(130)
Investment in equity method investees(992)(2,438)
Sales of investments in debt securities 22,893 
Maturities of investments in debt securities15,000 41,873 
Purchases of investments in debt securities (1,497)
Net cash provided by investing activities14,003 60,701 
Cash flows from financing activities
Payments related to tax withholding(76)(178)
Net cash used in financing activities(76)(178)
Net increase in cash, cash equivalents and restricted cash297 29,779 
Cash, cash equivalents and restricted cash, beginning of period40,507 17,547 
Cash, cash equivalents and restricted cash, end of period$40,804 $47,326 
Supplemental disclosure:
Cash paid for taxes$144 $571 
Cash paid for operating leases$360 $352 
Right-of-use assets obtained in exchange for new operating lease liabilities$ $3,965 
The accompanying notes are an integral part of these consolidated financial statements.
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CURIOSITYSTREAM INC.
UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BUSINESS
The principal business of CuriosityStream Inc. (the “Company” or “CuriosityStream”) is providing customers with access to high quality factual content via a direct subscription video on-demand (SVOD) platform accessible by internet connected devices, or indirectly via distribution partners that deliver CuriosityStream content via the distributor’s platform or system. The Company’s online library available for streaming spans the entire category of factual entertainment including science, history, society, nature, lifestyle, and technology. The library is composed of thousands of accessible on-demand and ad-free productions and includes shows and series from leading nonfiction producers.
The Company’s content assets are available for consuming directly through its owned and operated website (“O&O Service”), mobile applications developed for iOS and Android operating systems (“App Services”), and via the platforms and systems of third-party partners in exchange for license fees. The Company offers subscribers a monthly or annual subscription. The price for a subscription varies depending on the content included (e.g., Direct Service or Smart Bundle service) and the length of the subscription (e.g., monthly or annual) selected by the customer. As an additional part of the Company’s App Services, it has built applications to make its service accessible on almost every major customer device, including streaming media players like Roku, Apple TV and Amazon Fire TV, major smart TV brands (e.g., LG, Vizio, Samsung) and gaming consoles. In addition, CuriosityStream has affiliate agreement relationships with, and its content assets are available through, certain multichannel video programming distributors (“MVPDs”) and virtual MVPDs (“vMVPDs”). The Company also has distribution agreements which grant other media companies certain distribution rights to the Company’s programs, referred to as content licensing deals. The Company also sells selected rights to content it creates before production begins.
NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and are consistent in all material respects with those applied in the Company’s consolidated financial statements as of and for the year ended December 31, 2022.
In the opinion of management, the unaudited consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair presentation of the Company’s financial position, results of operations, and cash flows. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes and Management’s Discussion and Analysis of Financial Condition, and Results of Operations included in the Annual Report on Form 10-K for the year ended December 31, 2022. The results of operations for the three and nine months ended September 30, 2023, are not necessarily indicative of the results to be expected for the year ending December 31, 2023.

In the second quarter of 2023, the Company began entering into trade and barter transactions primarily for the purpose of exchanging content assets through licensing agreements with media counterparties. Refer to Note 5 - Revenue for discussion of our accounting policy related to these transactions. Outside of these transactions, there have been no material changes in the Company’s significant accounting policies compared to the significant accounting policies described in the Company’s consolidated financial statements as of and for the year ended December 31, 2022.
Impairment
During the three months ended September 30, 2023, the Company identified certain indicators of impairment related to its content assets and performed an analysis of these assets to assess if fair value was less than unamortized costs. Refer to Note 4 - Balance Sheet Components for further discussion. In addition, during the three months ended September 30, 2023, the Company separately performed an analysis of its Investments in equity method investees to determine if an “other-than-temporary” impairment existed. Refer to Note 3 - Equity Investments, for further discussion on the results of this analysis.

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The Company periodically reviews and evaluates the recoverability of its long-lived assets. Where applicable, estimates of net future cash flows, on an undiscounted basis, are calculated based on future revenue and operating performance estimates. If appropriate and where deemed necessary, a reduction in the carrying value is recorded based on the difference between the carrying value and the fair value based on discounted cash flows.
During the three months ended September 30, 2023, the Company identified certain indicators of impairment with respect to its long-lived asset group, including the continual decline in the Company’s stock price. Based on the resulting impairment analysis, the Company determined that the undiscounted cash flows of the long-lived asset group, exceeded the carrying value as of September 30, 2023, subsequent to the impairment of content assets discussed above. As such, no impairment charges with respect to the long-lived asset group were required to be recorded by the Company during the three months ended September 30, 2023.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Significant items subject to such estimates include amortization and fair value of content assets, the assessment of the recoverability of equity method investments, and the determination of fair value estimates related to non-monetary transactions, share-based awards, and liability classified warrants.
Concentration of Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents, investments, and accounts receivable. The Company maintains its cash, cash equivalents, and investments with high credit quality financial institutions; at times, such balances with the financial institutions may exceed the applicable FDIC-insured limits.
Accounts receivable, net are typically unsecured and are derived from revenues earned from customers primarily located in the United States.
Fair Value Measurement of Financial Instruments
Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The applicable accounting guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification at each reporting period. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.
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The Company’s assets measured at fair value on a recurring basis have included its investments in money market funds and corporate debt securities (at December 31, 2022). Level 1 inputs were derived by using unadjusted quoted prices for identical assets in active markets and were used to value the Company’s investments in money market funds and U.S. government debt securities. Level 2 inputs were derived using prices for similar investments and were used to value the Company’s investments in corporate and municipal debt securities.
The Company’s liabilities measured at fair value on a recurring basis include its private placement warrants issued to Software Acquisition Holdings LLC, the Company’s former Sponsor, in a private placement offering (the “Private Placement Warrants”). The fair value of the Private Placement Warrants is considered a Level 3 valuation and is determined using the Black-Scholes valuation model. Refer to Note 6 - Stockholders’ Equity for significant assumptions which the Company used in the fair value model for the Private Placement Warrants.
Certain assets are measured at fair value on a nonrecurring basis and are subject to fair value adjustments only in certain circumstances, e.g., when there is evidence of impairment indicators. During the three-months ended September 30, 2023, the Company performed an analysis of its investments in equity method investees to determine if an “other-than-temporary” impairment exists. In addition, the Company assessed the fair value of its content as a result of identifying indicators of impairment related to those assets. The resulting fair value measurements of the equity-method investments and content assets are considered to be Level 3 measurements. Refer to Note 3 - Equity Investments and Note 4 - Balance Sheet Components for further discussion of the results of these analyses.
The Company’s remaining financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses and other liabilities are carried at cost, which approximates fair value because of the short-term maturity of these instruments.
RECENTLY ADOPTED FINANCIAL ACCOUNTING STANDARDS
The Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company, as an emerging growth company (“EGC”), to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act until such time as the Company is no longer considered to be an EGC.
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).” The amendments in this update introduce a new standard to replace the incurred loss impairment methodology under prior U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company determines its allowance for doubtful accounts based on historical loss experience, customer financial condition, and current economic conditions. The Company adopted the new standard effective January 1, 2023, which has not had a material impact on its consolidated financial statements.
NOTE 3 - EQUITY INVESTMENTS
The Company’s carrying values for its equity method investments as of September 30, 2023, and December 31, 2022, were as follows:
(In thousands)
Spiegel
Venture
Nebula
Total
Balance at December 31, 2022$2,899 $7,867 $10,766 
Investments in equity method investees 992  992 
Equity method investment loss(2,025)(3,067)(5,092)
Balance at September 30, 2023$1,866 $4,800 $6,666 
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SPIEGEL VENTURE
In July 2021, the Company acquired a 32% ownership in Spiegel TV Geschichte und Wissen GmbH & Co. KG (the “Spiegel Venture”) for an initial investment of $3.3 million. The Spiegel Venture, which prior to the Company’s equity purchase, was jointly owned and operated by Spiegel TV GmbH (“Spiegel TV”) and Autentic GmbH (“Autentic”), operates two documentary channels, together with an SVOD service as well as a FAST channel, which provide factual content to pay television audiences in Germany and certain German-speaking countries. The Company has not received any dividends from the Spiegel Venture as of September 30, 2023.
Per the Share Purchase Agreement (as amended in early 2023, the “SPA”), in the event Spiegel Venture achieved certain financial targets during its 2022 fiscal period, the Company is required to make an additional payment related to its 32% equity ownership to both Spiegel TV and Autentic (the “Holdback Payment”). During the three months ended June 30, 2023, the Company determined Spiegel Venture had achieved such financial targets, resulting in the Company paying a Holdback Payment in the amount of $0.9 million to Spiegel Venture during July 2023.
The Company has a call option that permits it to require Spiegel TV and Autentic to sell their ownership interests in Spiegel Venture (“Call Option”) to the Company. The Call Option, exercisable at a value based on a determinable calculation in the SPA, is initially exercisable only during the period that is the later of (i) the 30-day period following the adoption of Spiegel Venture’s audited financial statements for the fiscal year 2025, and (ii) the period between March 1, 2026, and March 30, 2026.
Together with the Call Option, each of Spiegel TV and Autentic has a put option that permits it to require the Company to purchase their interest (“Put Option”) at a value based on a determinable calculation outlined in the SPA. The Put Option is only exercisable upon the achievement of certain defined conditions, as outlined in the SPA, and is initially exercisable only during the period that is the later of (i) the 60-day period following the adoption of Spiegel Venture’s audited financial statements for the fiscal year 2025, and (ii) the period between April 1, 2026 and April 30, 2026.
In the event the Call Option or Put Option is not exercised, both options will continue to be available to each respective party in the following year through perpetuity, with its exercise limited to the same date range as outlined above. The Put Option is not currently considered to be probable of becoming exercisable based on the defined conditions in the SPA.
NEBULA
Watch Nebula LLC (“Nebula”) is an SVOD technology platform built for and by a group of independent content creators. On August 23, 2021, the Company purchased a 12% ownership interest in Nebula for $6.0 million. Upon its initial investment, the Company obtained 25% representation on Nebula’s Board of Directors, providing the Company with significant influence, but not a controlling interest.
Since the time of its original investment, the Company has been obligated to purchase additional incremental ownership interests, each for a payment of $0.8 million and representing 1.625% of equity ownership, if Nebula meets certain quarterly targets. The Company has made three subsequent incremental purchases, bringing its total ownership interest in Nebula to 16.875% as of September 30, 2023. The Company did not make further investments in Nebula during the three and nine months ended September 30, 2023, and the obligation to make additional purchases ended as of September 30, 2023. The Company has not received dividends from Nebula as of September 30, 2023.
Since August 2021, the Company has included access to Nebula’s SVOD service as a part of a combined CuriosityStream / Watch Nebula subscription offer and as part of the Company’s Smart Bundle subscription package. As part of this arrangement, the Company has shared revenue with Nebula, based on certain metrics, and paid monthly. On September 26, 2023, Nebula provided the Company with a notice of non-renewal (the “Nebula Non-Renewal”), which will result in the expiration of the revenue share at the end of 2023. Nebula is still required to make its service available to subscribers to either of these offerings through the end of the term of any such subscription that exists as of December 31, 2023.
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IMPAIRMENT ASSESSMENT
The Company regularly reviews its Investments in equity method investees for impairment, including when the carrying value of an investment exceeds its related market or fair value. If it has been determined that an investment has sustained an “other-than-temporary” decline in value, the investment is written-down to its fair value. The factors the Company considers in determining an “other-than-temporary” decline has occurred includes, but is not limited to, (i) the determined market value of the investee in relation to its cost basis, (ii) the financial condition and operating performance of the investee, and (iii) the Company’s intent and ability to retain the investment for a sufficient period of time to allow for recovery in the market value of the investment.
As a result of the Company’s impairment analysis, it determined the fair value of its investment in the Spiegel Venture exceeded the carrying value as of September 30, 2023, and as such no “other-than-temporary” impairment charge was required.
As a result of the Company’s impairment analysis related to Nebula, it determined that the carrying value of this investment exceeded the fair value as of September 30, 2023. As such, the Company recorded a $2.3 million impairment, which is included in equity method investment loss, for the three months ended September 30, 2023. The primary factor impacting the decrease in fair value of this investment is the expected decrease in Nebula’s revenue share as a result of the Nebula Non-Renewal, as discussed above.
NOTE 4 - BALANCE SHEET COMPONENTS
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
A reconciliation of the Company’s cash and cash equivalents in the consolidated balance sheets to cash, cash equivalents and restricted cash in the consolidated statements of cash flows is:
 (In thousands)
September 30,
2023
December 31,
2022
Cash and cash equivalents$40,304 $40,007 
Restricted cash500 500 
Cash and cash equivalents and restricted cash$40,804 $40,507 
As of September 30, 2023, and December 31, 2022, restricted cash includes cash deposits required by a bank as collateral related to corporate credit card agreements.
To determine the fair value of its investments in money market funds and corporate debt securities, the Company uses unadjusted quoted market prices (Level 1 inputs), and quoted prices for comparable assets (Level 2 inputs), respectively. As of September 30, 2023, and December 31, 2022, the fair values of the Company’s securities investments was as follows:
 September 30, 2023December 31, 2022
 (In thousands)
Cash and
cash
equivalents
Short-term
investments
Total
Cash and
cash
equivalents
Short-term
investments
Total
Level 1 securities:
Money market funds$38,375 $ $38,375 $17,724 $ $17,724 
Total Level 1 securities$38,375  $38,375 $17,724  $17,724 
Level 2 securities:
Corporate debt securities    $14,986 $14,986 
Total Level 2 securities    $14,986 $14,986 
Total$38,375  $38,375 $17,724 $14,986 $32,710 
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December 31, 2022
 (In thousands)
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Debt securities:
Corporate$15,026  $(40)$14,986 
Total$15,026  $(40)$14,986 
The Company recorded no material realized gains or losses during the three and nine months ended September 30, 2023, and 2022.
CONTENT ASSETS
Content assets consisted of the following as of the dates indicated:
(in thousands)
September 30,
2023
December 31,
2022
Licensed content, net:
Released, less amortization and impairment1
$6,308 $11,154 
Prepaid and unreleased7,997 4,014 
Total Licensed content, net
14,305 15,168 
Produced content, net:
Released, less amortization and impairment2
20,792 33,094 
In production10,803 20,240 
Total produced content, net
31,595 53,334 
Total content assets
$45,900 $68,502 
1 The September 30, 2023, amount reflects a $4.4 million impairment charge recorded for the three months ended September 30, 2023. See Impairment Assessment below.
2 The September 30, 2023, amount reflects a $14.6 million impairment charge recorded for the three months ended September 30, 2023. See Impairment Assessment below.
Of the $6.3 million unamortized cost of licensed content that had been released as of September 30, 2023, the Company expects that $3.1 million, $1.6 million and $0.9 million will be amortized in each of the next three years. Of the $20.8 million unamortized cost of produced content that had been released as of September 30, 2023, the Company expects that $6.4 million, $5.9 million and $4.9 million will be amortized in each of the next three years.
Impairment Assessment
The Company’s business model is generally subscription-based as opposed to a model based on generating revenues at a specific title level. Content assets are predominantly monetized as a group and therefore are reviewed in aggregate at a group level when an event or change in circumstances indicates a change in the expected usefulness of the content or that the fair value may be less than unamortized cost. If such changes are identified, the aggregated content assets will be stated at the lower of unamortized cost or fair value. In addition, unamortized costs are written off for content assets that have been or are expected to be abandoned.
During the three months ended September 30, 2023, due to the continued adverse macro and microeconomic conditions, including the competitive environment and its impact on the Company’s subscriber growth, the Company revised its forecasted subscriber growth and forecasted cash flow assumptions. Additionally, companies in the streaming industry have experienced a decline in market valuations, and reflecting this market trend and the factors above, the market price of the Company’s common shares had declined significantly through September 30, 2023.
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Given these factors, as well as the Company’s declining market capitalization and operating losses during the quarter, the Company identified an indicator of impairment related to its content asset group and performed an analysis of content assets to assess if the fair value was less than unamortized cost. To determine if an impairment existed, the Company utilized a traditional discounted cash flow approach based on expectations for the monetization of its content assets in the aggregate, including estimates for future cash inflows and outflows. As a result of this impairment analysis of content assets, the Company determined that the unamortized cost exceeded the fair value, and as such, the Company recorded a $19.0 million impairment for the three months ended September 30, 2023.
The discounted cash flow analysis includes cash flow estimates of revenue and costs, as well as a discount rate (a Level 3 fair value measurement). Estimates of future revenue and costs involve measurement uncertainty, and it is therefore possible that further reductions in the carrying value of content assets may be required as a consequence of changes in management’s future revenue estimates. The discount rate utilized in the discount cash flow analysis was based on the weighted average cost of capital of the Company plus a risk premium representing the risk associated with the Company’s content assets. The discount rate may be impacted by adverse changes in the macroeconomic environment and volatility in the debt and equity markets.
Amortization
In accordance with its accounting policy for content assets, the Company amortizes licensed content costs and produced content costs, which is included within cost of revenues in the Company’s unaudited consolidated statements of operations. For the three and nine months ended September 30, 2023, and 2022, content amortization was as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands)2023202220232022
Licensed content$1,728 $1,793 $5,478 $6,590 
Produced content3,661 8,588 12,229 22,920 
Total$5,389 $10,381 $17,707 $29,510 
WARRANT LIABILITY
As described in Note 6 - Stockholders’ Equity, the Private Placement Warrants are classified as a non-current liability and reported at fair value at each reporting period. As of September 30, 2023, and December 31, 2022, the fair value of the Private Placement Warrants, as determined using Level 3 inputs, was as follows:
(in thousands)
September 30,
2023
December 31,
2022
Private Placement Warrants$74 $257 
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NOTE 5 - REVENUE
The following table sets forth the Company’s revenues disaggregated by type for the three and nine months ended September 30, 2023, and 2022, as well as the relative percentage of each revenue type to total revenue:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands)
2023202220232022
Subscriptions:
O&O Service$6,601 42 %$7,890 33 %$19,664 47 %$23,110 36 %
App Services830 5 %960 4 %2,556 6 %3,018 5 %
Subscriptions total7,431 47 %8,850 38 %22,220 53 %26,128 41 %
License fees:
Partner Direct Business1,177 8 %1,157 5 %3,361 8 %3,491 5 %
Bundled Distribution1,504 10 %2,595 11 %4,487 11 %10,250 16 %
Content Licensing5,082 32 %10,790 46 %10,715 25 %21,692 34 %
License fees total7,763 50 %14,542 62 %18,563 44 %35,433 56 %
Other*436 3 %177 1 %1,331 3 %1,983 3 %
Total revenues$15,630 $23,569 $42,114 $63,544 
* Other revenue primarily relates to other marketing services
REMAINING PERFORMANCE OBLIGATIONS
As of September 30, 2023, the Company expects to recognize revenues in the future related to performance obligations that were unsatisfied as follows:
Remainder of
year ending
December 31,
2023
 December 31,
(in thousands)
2024202520262027ThereafterTotal
Remaining performance obligations$1,671 $4,972 $2,179 $417 $34 $219 $9,492 
These amounts include only fixed consideration or minimum guarantees and do not include amounts related to (a) contracts with an original expected term of one year or less or (b) licenses of content that are solely based on sales or usage-based royalties.
DEFERRED REVENUES
Contract liabilities (i.e., deferred revenue) consist of subscriber and affiliate license fees billed that have not been recognized, amounts contractually billed or collected for content licensing sales in advance of the related content being made available to the customer, and unredeemed gift cards and other prepaid subscriptions that have not been redeemed. Total deferred revenues were $13.7 million and $14.9 million as of September 30, 2023, and December 31, 2022, respectively. For the nine months ended September 30, 2023, the Company recognized revenues of $12.9 million related to amounts deferred as December 31, 2022, primarily resulting from recognition of annual subscription plan balances.
TRADE AND BARTER TRANSACTIONS
In the second quarter of 2023, the Company began entering into trade and barter transactions primarily for the purpose of exchanging content assets through licensing agreements with media counterparties. Certain transactions may also include the exchange of advertising, whereby the Company and its counterparty exchange media campaigns or other promotional services.
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For content acquired through trade and barter transactions, the Company records the acquired assets in the consolidated balance sheet and amortizes those assets over the term of the content license, in accordance with the Company’s content and amortization policies. For other products and services received through trade and barter transactions, the Company records operating expenses upon receipt of such products and services, as applicable.
The transaction price for these contracts is measured at the estimated fair value of the non-cash consideration received unless this is not reasonably estimable; in which case, the consideration is measured based on the standalone selling price of the services provided. For an exchange of content, the performance obligation is satisfied at the time the content is made available for the counterparty to use, which represents the point in time that control is transferred. For advertising, the performance obligation is satisfied upon the Company’s delivery of the media campaign or other service to the counterparty.
For the three and nine months ended September 30, 2023, and 2022, trade and barter revenues were as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands)
2023202220232022
Trade and barter license fees: Content Licensing
$4,949 $ $7,416 $ 
Other trade and barter revenue*
250  774  
Total trade and barter revenues$5,199 $ $8,190 $ 
* Other revenue primarily relates to other marketing services
For the three and nine months ended September 30, 2023, and 2022, trade and barter advertising and marketing expenses were as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands)
2023202220232022
Trade and barter advertising and marketing
$648 $ $1,172 $ 
For the nine months ended September 30, 2023, and 2022, additions to content assets resulting from trade and barter transactions were as follows:
Nine Months Ended
September 30,
(in thousands)
20232022
Trade and barter additions to content assets
$7,124 $ 
NOTE 6 - STOCKHOLDERS’ EQUITY
COMMON STOCK
As of September 30, 2023, and December 31, 2022, the Company had authorized the issuance of 126,000,000 shares of capital stock, par value of $0.0001 per share, consisting of (a) 125,000,000 shares of common stock, and (b) 1,000,000 shares of preferred stock.
WARRANTS
As of September 30, 2023, the Company had 3,054,203 publicly traded warrants outstanding that were sold as part of the units of Software Acquisition Group Inc. in its initial public offering on November 22, 2019, and that were issued to the PIPE Investors in connection with the business combination that closed on October 14, 2020 (the “Public Warrants” and, together with the Private Placement Warrants, the “Warrants”) and 3,676,000 Private Placement Warrants outstanding. The Private Placement Warrants are liability-classified, and the Public Warrants are equity-classified.
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Each whole warrant entitles the registered holder to purchase one share of the Company’s common stock at an exercise price of $11.50 per share. All Warrants expire on October 14, 2025.
The Company has the right to redeem the outstanding Public Warrants in whole and not in part at a price of $0.01 per warrant upon a minimum of 30 days’ prior written notice of redemption, if and only if the last sale price of the Company’s common stock matched or exceeded $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sent the notice of redemption to the warrant holders.
The Private Placement Warrants are identical to the Public Warrants except that, so long as they are held by Software Acquisition Holdings LLC or its permitted transferees: (a) they will not be redeemable by the Company; (b) they may be exercised by the holders on a cashless basis; and (c) they are subject to registration rights.
There were no exercises of warrants during the three and nine months ended September 30, 2023.
The warrant liability related to the Private Placement Warrants is recorded at fair value as of each reporting date with the change in fair value reported within other income (expense) in the accompanying unaudited consolidated statements of operations as “Change in fair value of warrant liability” until the warrants are exercised, expired or other facts and circumstances lead the warrant liability to be reclassified to stockholders’ equity. The fair value of the warrant liability for the Private Placement Warrants was estimated using a Black-Scholes pricing model using Level 3 inputs. The significant assumptions used in preparing the Black-Scholes option pricing model to determine fair value as of September 30, 2023, and December 31, 2022, were as follows:
September 30,
2023
December 31,
2022
Exercise price$11.50 $11.50 
Stock price (CURI)$0.71 $1.14 
Expected volatility92.00 %77.00 %
Expected warrant term (years)2.02.8
Risk-free interest rate5.03 %4.22 %
Dividend yield0 %0 %
Fair Value per Private Placement Warrant$0.02 $0.07 
The change in fair value of the private placement warrant liability for the three and nine months ended September 30, 2023, resulted in a gain of $0.1 million and $0.2 million, respectively, and for the three and nine months ended September 30, 2022, resulted in a gain of $0.5 million and $4.9 million, respectively.
NOTE 7 - EARNINGS (LOSS) PER SHARE
Basic and diluted earnings (loss) per share are calculated on the basis of the weighted average number of shares of the Company’s common stock outstanding during the respective periods. Diluted earnings (loss) per share give effect to all dilutive potential common shares outstanding during the period using the treasury stock method for stock options and other potentially dilutive securities. In computing diluted earnings (loss) per share, the average fair value of the Company’s common stock for the period is used to determine the number of shares assumed to be purchased from the exercise price of the options. Purchases of treasury stock reduce the outstanding shares commencing on the date that the stock is purchased. Common stock equivalents are excluded from the calculation when a loss is incurred as their effect would be anti-dilutive.
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For the three and nine months ended September 30, 2023, and 2022, the components of basic and diluted net loss per share were as follows:
(In thousands except per share amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Numerator — Basic and Diluted EPS:
Net loss$(26,565)$(4,502)$(44,237)$(36,371)
Denominator — Basic and Diluted EPS:
Weighted–average shares53,04052,79352,99952,773
Net loss per share — Basic and Diluted$(0.50)$(0.09)$(0.83)$(0.69)
Common shares issuable for warrants, options, and restricted stock units (RSU) represent the total amount of outstanding warrants, stock options, and restricted stock units at September 30, 2023, and 2022. For the three and nine months ended September 30, 2023, and 2022, the following share equivalents were excluded from the computation of diluted net loss per share as the inclusion of such shares would have been anti-dilutive.
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In thousands)
2023202220232022
(in thousands)(in thousands)
Options335,190335,190
Restricted stock units2,4301,0472,4301,047
Warrants6,7306,7306,7306,730
Total
9,19312,9679,19312,967
NOTE 8 - STOCK-BASED COMPENSATION
The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. The fair value is recognized in earnings over the period during which an employee is required to provide the service. The Company accounts for forfeitures as they occur.
In October 2020, the Company’s Board of Directors adopted the CuriosityStream 2020 Omnibus Plan (the “2020 Plan”). Upon adoption of the 2020 Plan, a total of 7,725,000 shares were approved to be issued as stock options, share appreciation rights, restricted stock units and restricted stock.
The following table summarizes stock option and RSU activity, prices, and values for the nine months ended September 30, 2023:
Number of
Shares
Available
for
Issuance
Under the
Plan
Stock OptionsRestricted Stock Units
(In thousands except share price and fair value amounts)
Number of
Shares
Weighted-
Average
Exercise
Price
Number of
Shares
Weighted-
Average
Grant
Date
Fair Value
Balance at December 31, 20221,8154,632$7.13 759$7.14 
Granted(1,923) 1,9231.06 
Options exercised and RSUs vested71 (209)8.75 
Forfeited or expired4,642(4,599)7.17 (43)11.91 
Balance at September 30, 20234,60533$5.30 2,430$2.46 
There were no options exercised during the three and nine months ended September 30 2023, and 2022.
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Stock options and RSU awards generally vest on a monthly, quarterly or annual basis over a period of four years from the grant date. When options are exercised, the Company issues previously unissued shares of Common Stock to satisfy share option exercises. Upon vesting and distribution of RSUs, the Company issues previously unissued shares of Common Stock to satisfy restricted stock units vested, net of shares withheld for taxes if elected by the RSU holder.
The fair value of stock option awards is estimated using the Black-Scholes option pricing model, which includes a number of assumptions including Company’s estimates of stock price volatility, employee stock option exercise behaviors, future dividend payments, and risk-free interest rates.
The expected term of options granted is the estimated period of time from the beginning of the vesting period to the date of expected exercise or other settlement, based on historical exercises and post-vesting terminations. The Company generally estimates expected term based on the midpoint between the vesting date and the end of the contractual term, also known as the simplified method, given the lack of historical exercise behavior.
On April 28, 2023, the Company’s Board of Directors authorized, and on June 14, 2023, the Company’s shareholders approved, a stock option exchange program (the “Exchange“) that permitted certain current employees and executive officers to exchange certain outstanding stock options with exercise prices substantially above the current market price of the Company’s common stock for RSUs of an equivalent fair value. The Exchange was completed in July 2023. For options that had already vested at the time of the Exchange, the resulting RSUs will vest in July 2024. Otherwise, the vesting schedules for unvested options at the time of the Exchange will remain the same for the resulting RSUs. As a result of the Exchange, 4.6 million of outstanding eligible stock options were exchanged for 1.6 million new RSUs, with a fair value of $0.99 per share on the date of the Exchange. There was no incremental compensation expense recorded by the Company as a result of the Exchange.
The Company uses its own historical volatility as well as the historical volatility of similar public companies for estimating volatility. The risk-free interest rate is estimated using the rate of return on U.S. Treasury securities with maturities that approximate to the expected term of the option. The Company does not currently anticipate declaring any dividends.
For the three and nine months ended September 30, 2023, and 2022, the assumptions used to value the options granted and the resulting weighted-average grant date fair value and stock-based compensation expense were as follows:
(Stock-based compensation data in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Dividend yieldN/AN/AN/A0 %
Expected volatilityN/A
65% - 70%
N/A
60% - 70%
Expected term (years)N/AN/AN/A
6.00 - 6.50
Risk-free interest rateN/A
2.81% - 2.95%
N/A
1.40% - 2.95%
Weighted average grant date fair valueN/AN/AN/A$1.91 
Stock-based compensation — Options$5 $999 $1,553 $2,913 
Stock-based compensation — RSUs$892 $674 $2,033 $2,142 
Total stock-based compensation
$897 $1,673 $3,586 $5,055 
Stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized on a straight-line basis over the requisite service period.
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NOTE 9 - SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates as one reporting segment. The Company’s chief operating decision maker is its chief executive officer, who reviews financial information presented on an entity-wide basis for purposes of making operating decisions, assessing financial performance and allocating resources.
All long-lived tangible assets are located in the United States. For the three and nine months ended September 30, 2023, and 2022, revenue by geographic location based on customer location was as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
United States$8,973 57 %$13,845 59 %$23,595 56 %$40,348 63 %
International:
 Canada 1,674 11 %412 2 %2,566 6 %1,215 2 %
 Germany 149 1 %3,287 14 %1,797 4 %4,704 7 %
 Netherlands 1,566 10 %516 2 %3,216 8 %1,068 2 %
 Other 3,268 21 %5,509 23 %10,940 26 %16,209 26 %
Total International6,657 43 %9,724 41 %18,519 44 %23,196 37 %
Total revenue
$15,630 100 %$23,569 100 %$42,114 100 %$63,544 100 %
Revenue from three foreign countries, Canada, Germany and Netherlands, each comprised 10% or greater of total revenue for one or more of the periods presented.
NOTE 10 - RELATED PARTY TRANSACTIONS
EQUITY INVESTMENTS
For the three months ended September 30, 2023, the Company recognized no revenue related to license fees from the Spiegel Venture. For the nine months ended September 30, 2023, the Company recognized $1.1 million of revenue related to license fees from the Spiegel Venture. The Company also incurred $1.1 million and $3.4 million in cost of revenues during the three and nine months ended September 30, 2023, respectively, from its revenue share to Nebula from subscription sales to certain bundled subscription packages. This revenue share is recorded in Cost of revenues on the consolidated statements of operations.
As of September 30, 2023, and December 31, 2022, the impacts of the arrangements with the Spiegel Venture and Nebula on the Company’s consolidated balance sheets were as follows:
(In thousands)
September 30,
2023
December 31,
2022
Accounts receivable$1,045 $3,358 
Accounts payable$376 $404 
For the three and nine months ended September 30, 2023, and 2022, the impacts of arrangements with the Spiegel Venture and Nebula on the Company’s consolidated statements of operations were as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In thousands)
2023202220232022

Revenues$ $2,192 $1,084 $4,233 
Cost of revenues$1,142 $1,096 $3,508 $3,135 
OPERATING LEASE
The Company sublets a portion of its office space to Hendricks Investment Holdings, LLC, which is considered a related party as it is managed by various members of the Company’s Board of Directors. The Company accounts for the arrangement as an operating lease. Refer to Note 11 - Leases for additional information.
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NOTE 11 - LEASES
COMPANY AS LESSEE
The Company is a party to a non-cancellable operating lease agreement for office space, which expires in 2033. The Company’s operating lease for this office space includes fixed rent payments and variable lease payments, which are primarily related to common area maintenance and utility charges. The Company elected not to separate lease and non-lease components, and as such, all amounts paid under the lease are classified as either fixed or variable lease payments. Fixed lease payments were included in the calculation of right of use (“ROU”) asset and leases liabilities with variable lease payments being recognized as lease expense as incurred. The Company has determined that no renewal clauses are reasonably certain of being exercised and therefore has not included any renewal periods within the lease term for this lease.
As of September 30, 2023, the Company had operating lease ROU assets of $3.4 million, current lease liabilities of $0.3 million, and non-current lease liabilities of $4.4 million. In measuring operating lease liabilities, the Company used a weighted average discount rate of 4.4% in existence as of the January 1, 2022, adoption date of the new lease accounting standard. The weighted average remaining lease term as of September 30, 2023, was 9.42 years.
Components of Lease Cost
For the three and nine months ended September 30, 2023, the Company’s total operating lease cost was comprised of the following:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In thousands)
2023202220232022
Operating lease cost$120 $121 $362 $363 
Short-term lease cost* 6 (16)42 
Variable lease cost13 12 38 36 
Total lease cost$133 $139 $384 $441 
* Short term lease cost includes a refund received by the Company during the nine months ended September 30, 2023, for office space it previously occupied.
Maturity of Lease Liabilities
As of September 30, 2023, maturities of the Company’s operating lease liabilities, which do not include short-term leases and variable lease payments, were as follows:
(In thousands)
Three remaining months of 2023 $106 
2024557 
2025571 
2026585 
2027600 
Thereafter3,346 
Total lease payments$5,765 
Less: imputed interest(1,061)
Present value of total lease liabilities$4,704 
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COMPANY AS LESSOR
The Company subleases a portion of its office space to a related party and accounts for the arrangement as an operating lease. Related party sublease rental income is recognized on a straight-line basis and is included in Interest and other income (expense) in the accompanying consolidated statements of operations. For the three and nine months ended September 30, 2023, operating lease income from the Company’s sublet was less than $0.1 million. As of September 30, 2023, total remaining future minimum lease payments receivable on the Company’s operating lease were $0.3 million.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
CONTENT COMMITMENTS
As of September 30, 2023, the Company’s content obligations amounted to $1.6 million, including $0.1 million recorded within in content liabilities in the accompanying unaudited consolidated balance sheets, and $1.5 million of obligations not yet recorded as they did not yet meet the asset recognition criteria for content assets. Of the content obligations amount, $0.8 million and $0.6 million are expected to be paid by December 31, 2023, and December 31, 2024, respectively.
As of December 31, 2022, the Company’s content obligations amounted to $11.5 million, including $2.9 million recorded within current content liabilities in the accompanying unaudited consolidated balance sheets and $8.6 million of obligations not yet recorded as they did not yet meet the asset recognition criteria for content assets.
Content obligations include amounts related to licensed, commissioned and internally produced streaming content. An obligation for the production of content includes non-cancelable commitments under creative talent and employment agreements. An obligation for the licensed and commissioned content is incurred at the time the Company enters into an agreement to obtain future titles. Once a title becomes available, a content liability is generally recorded. Certain agreements include the obligation to license rights for unknown future titles, the ultimate quantity and/or fees for which are not yet determinable as of the reporting date.
ADVERTISING COMMITMENTS
The Company periodically enters into agreements to receive future advertising and marketing services as part of various licensee arrangements, and the Company reports commitments when the applicable agreements provide for specific committed amounts. As of September 30, 2023, the Company’s future advertising commitments totaled $1.3 million, of which the Company expects to pay $0.5 million and $0.8 million during the three months ending December 31, 2023, and year ending December 31, 2024, respectively.
NOTE 14 - INCOME TAXES
The Company recorded a provision for income taxes of $0.1 million for the three months ended September 30, 2023 and 2022, and $0.5 million and $0.2 million for the nine months ended September 30, 2023 and 2022, respectively, primarily related to foreign withholding income taxes. The Company’s provision for income taxes differs from the federal statutory rate primarily due to the Company being in a full valuation allowance position and not recognizing a tax benefit attributable to generated losses for either federal or state income tax purposes.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our results of operations and financial condition. The following discussion should be read in conjunction with the Company’s unaudited consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “we,” “us,” “our,” and “the Company” are intended to mean the business and operations of CuriosityStream Inc.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains certain statements that are, or may deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding the Company’s plans, expectations, thoughts, beliefs, estimates, goals and outlook for the future that are intended to be covered by the protections provided under the Private Securities Litigation Reform Act of 1995.
All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q including, without limitation, statements under this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Quarterly Report on Form 10-Q, words such as “anticipate,” “attribute,” “believe,” “continue,” “hope,” “estimate,” “expect,” “intend,” “may,” “might,” “potential,” “seek,” “should,” “will” and “would,” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on the Company’s behalf are qualified in their entirety by this paragraph. These forward-looking statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those included in forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 31, 2023, and any other subsequent periodic reports and future periodic reports. We assume no obligation to revise or publicly release any revision to any forward-looking statements contained in this Quarterly Report on Form 10-Q, unless required by law.
OVERVIEW
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 seek to meet demand for high-quality factual entertainment via subscription video on-demand (“SVOD”) platforms, as well as via bundled content licenses for SVOD and linear offerings, content licensing, brand sponsorship and advertising, talks and courses and partner bulk sales.
The main sources of our revenue are (a) subscriber and license fees earned from our Direct Business (“Direct Business”), (b) license fees from content licensing arrangements (“Content Licensing”), (c) bundled license fees from distribution affiliates (“Bundled Distribution”), (d) subscriber fees from our Enterprise business (“Enterprise”), and (e) Other revenue, including advertising and sponsorships (“Other”).
We operate our business as a single operating segment that provides premium streaming content through multiple channels, including the use of various applications, partnerships and affiliate relationships. We generate our revenue through five products and services: Direct Business, Bundled Distribution, Content Licensing, Enterprise and Other.
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The following table is a summary of our revenues for the three and nine months ended September 30, 2023, and 2022:
Three Months Ended September 30,Nine Months Ended September 30,
(In thousands)
2023202220232022
Direct Business$8,574 55 %$8,589 36 %$25,466 60 %$25,476 40 %
Content Licensing5,082 33 %10,790 46 %10,715 25 %21,692 34 %
Bundled Distribution1,504 10 %2,595 11 %4,487 12 %10,250 16 %
Enterprise34 %1,418 %115 %4,143 %
Other436 %177 %1,331 %1,983 %
Revenues$15,630 $23,569 $42,114 $63,544 
CuriosityStream’s award-winning content library features more than 15,000 programs that explore topics ranging from space engineering to ancient history to the rise of Wall Street. Our extensive catalog of originally produced and owned content includes approximately 10,000 short-, mid- and long-form video and audio titles, including One Day University and Learn 25 recorded lectures that are led by some of the most acclaimed college and university professors in the world. Our library also features a rotating catalog of more than 5,000 internationally licensed videos and audio programs. Every month, we launch dozens of new video titles, which are available on-demand in high- or ultra-high definition. Through new and long-standing international partnerships, we have localized a large portion of our video library from English to ten different languages.
Our Direct Business revenue is derived from consumers subscribing directly through our owned and operated website (“O&O Service”), App Services, and Partner Direct relationships. Our O&O Direct-to-Consumer service is available in more than 175 countries to any household with a broadband connection. As of March 27, 2023, we increased our standard pricing for new subscribers to this service to $4.99 per month or $39.99 per year. We are currently in the process of raising the prices for our legacy subscribers, who had previously paid $2.99 per month or $19.99 per year. We also provide a Smart Bundle service for $9.99 per month or $69.99 per year. Our Smart Bundle membership includes everything in our standard service, plus subscriptions to third-party platforms Tastemade, Topic, SommTV, DaVinci Kids, our equity investee Watch Nebula, LLC (“Nebula”), and our One Day University stand-alone service.
Our App Services enable access to CuriosityStream on almost every major consumer device, including streaming media players like Roku, Apple TV and Amazon Fire TV, major smart TV brands (e.g., LG, Vizio, Samsung) and gaming consoles. The multichannel video programming distributors (“MVPDs”), virtual MVPDs (“vMVPDs”) and digital distributor partners making up our Partner Direct Business pay us a license fee for sales to individuals who subscribe to CuriosityStream via the partners’ respective platforms. We have affiliate agreement relationships with, and our service is available directly from, major MVPDs that include Comcast, Cox, Dish and vMVPDs and digital distributors that include Amazon Prime Video Channels, Apple Channel, Roku Channel, Sling TV and YouTube TV.
With our Content Licensing business, we license to certain media companies a collection of our existing titles in a traditional content licensing deal. We also sell selected rights (such as in territories or on platforms that are lower priority for us) to content we create before we even begin production. This latter model reduces risk in our content development decisions and creates content licensing revenue.
In addition to our Direct Business described above, our Bundled Distribution business includes affiliate relationships with our Bundled MVPD Partners and vMVPDs, which are broadband and wireless companies in the U.S. and international territories to whom we can offer a broad scope of rights, including 24/7 “linear” channels, our on-demand content library, mobile rights and pricing and packaging flexibility, in exchange for an annual fixed fee or fee per subscriber.
Our Enterprise business is comprised primarily of providing 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 - Revenue in the Notes to Unaudited Consolidated Financial Statements.
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Other revenue is primarily comprised of advertising and sponsorship revenue. We offer companies the opportunity to be associated with CuriosityStream content in a variety of forms, including short- and long-form program integration, branded social media promotional videos, advertising spots in our video and audio programs that are made available on our linear programming channels or in front of the paywall, and digital display ads.
Companies in the media industry commonly utilize trade and barter agreements in the normal course of business to reduce cash outlays for new content assets or other expenditures by exchanging existing content assets, advertising and other services. In the second quarter of 2023, we began entering into trade and barter transactions primarily for the purpose of exchanging content assets through licensing agreements with media counterparties. Certain transactions may also include the exchange of advertising, whereby we exchange media campaigns or other promotional services.
In the future, we hope to continue developing integrated digital brand partnerships with advertisers. These sponsorship campaigns offer companies the chance to be associated with CuriosityStream content in the forms described above. We believe the impressions accumulated in these multi-faceted campaigns would roll up to verifiable metrics for the clients.
KEY FACTORS AFFECTING RESULTS OF OPERATIONS
Our future operating results and cash flows are dependent upon a number of opportunities, challenges, and other factors, including our ability to efficiently grow our subscriber base, increase our prices, and expand our service offerings to maximize subscriber lifetime value. In particular, we believe that the following factors significantly affected our results of operations over the last fiscal quarter and are expected to continue to have such significant effects:
Revenues
Since the Company was founded in 2015, we have generated the majority of our revenues from consumers directly accessing our content in the form of monthly or annual subscription plans. We are currently in the process of raising the prices for our legacy subscribers, who had previously paid $2.99 per month or $19.99 per year. As of March 27, 2023, we increased our standard pricing for new subscribers to this service to $4.99 per month or $39.99 per year. We also provide a Smart Bundle service for $9.99 per month or $69.99 per year. Currently, our Smart Bundle pricing and pricing for most legacy subscribers remain unchanged. However, we may in the future increase the price of these existing subscription plans, which may have a positive effect on our revenue from this line of our business.
We pay a fixed percentage distribution fee to our partners for subscribers accessing our platform via App Services to compensate these partners for access to their customer and subscriber bases. The MVPD, vMVPD and digital distributor partners making up our Partner Direct Business pay us a license fee, and host and stream our content to their customers via their own platforms, such as set top boxes in the case of most MVPDs. We do not incur billing, streaming or backend costs associated with content distribution through our MVPD, vMVPD and digital distributor partners.
Operating Costs
Our primary operating costs relate to the cost of producing and acquiring our content, the costs of advertising and marketing our service, personnel costs, and distribution fees. Producing and co-producing content and commissioned content is generally more costly than acquiring content through licenses. Cost of revenues encompasses content amortization, distribution fees, revenue sharing arrangements, hosting and streaming delivery costs, payment processing costs, commission costs, and subtitling and broadcast costs.
The Company’s primary business model is subscription based as opposed to a model generating revenues at a specific title level. Content assets (licensed and produced) are predominantly monetized as a group and therefore are reviewed in aggregate at a group level when an event or change in circumstances indicates a change in the expected usefulness of the content or that the fair value may be less than unamortized cost. If such changes are identified, the aggregated content library will be stated at the lower of unamortized cost or fair value. In addition, unamortized costs for assets that have been, or are expected to be, abandoned are written off. For a discussion of the accounting policies for content impairment write-down and management estimates involved therein, see Critical Accounting Policies and Estimates below.
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Further, our advertising and marketing expenditures and personnel costs constitute primary operating costs for our business. These costs may fluctuate based on advertising and marketing objectives and personnel needs. In general, we intend to focus marketing dollars on efficient customer acquisition. With respect to personnel costs, we focus on revenue-generating personnel, such as sales staff and roles that support the improvement, maintenance and marketing of our Direct Service.
RESULTS OF OPERATIONS
Three Months Ended September 30, 2023
The financial data in the following table sets forth selected financial information derived from our unaudited consolidated financial statements for three months ended September 30, 2023, and 2022, and includes our results of operations as a percentage of revenue or as a percentage of costs, as applicable, for the periods indicated.
Three Months Ended September 30,
$ Change
% Change*
(Unaudited and in thousands)
20232022
Revenues
Subscriptions$7,431 47 %$8,850 38 %$(1,419)(16 %)
License fee7,763 50 %14,542 61 %(6,779)(47 %)
Other436 %177 %259 146 %
Total revenue
$15,630 100 %$23,569 100 %$(7,939)(34 %)
Operating expenses
Cost of revenues8,494 21 %13,566 49 %(5,072)(37 %)
Advertising and marketing5,106 13 %5,626 20 %(520)(9 %)
General and administrative6,959 18 %8,757 31 %(1,798)(21 %)
Impairment of content assets
18,970 48 %— — %18,970 100 %
Total operating expenses$39,529 100 %$27,949 100 %$11,580 41 %
Operating loss(23,899)(4,380)(19,519)446 %
Other income (expense)
Change in fair value of warrant liability74 514 (440)n/m
Interest and other income (expense)31 (478)509 n/m
Equity method investment loss(2,638)(94)(2,544)2706 %
Loss before income taxes$(26,432)$(4,438)