UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
| ☒ | 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
For the transition period fromto Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a Indicate by check mark whether the registrant is a shell company (as defined in Rule As of CURIOSITYSTREAM INC. FORM 10-Q FOR THE QUARTER ENDED TABLE OF CONTENTS Part I. Financial Information Item 1. Financial Statements Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk Item 2. Unregistered Sales of Equity Securities and Use of Proceeds i The accompanying notes are an integral part of these consolidated financial statements. The accompanying notes are an integral part of these consolidated financial statements. The accompanying notes are an integral part of these consolidated financial statements. Accumulated Other Additional Paid-in The accompanying notes are an integral part of these consolidated financial statements. 11,893 (157 The principal business of CuriosityStream Inc. (the “Company” or “CuriosityStream”) is to provide customers with access to high quality factual content via a direct subscription video 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 There have been no material changes in the Company’s significant accounting policies other than the effects of adopting new accounting guidance related to leases (see below) compared to the significant accounting policies described in the Company’s consolidated financial statements as of and for the year ended December 31, 2021. Accounts 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. In February 2016, the Financial Accounting Standards Board The adoption of this standard resulted in the recognition of operating lease liabilities of $5.3 million, with corresponding In June 2016, the FASB issued ASU Note 4 —Balance sheet components The following tables summarize the Company’s corporate, U.S. government, and municipal debt securities: There were no material realized gains or losses recorded during the three and As of During the The determination of the fair value of the Company’s reporting unit was based on a combination of the income and the market approach. The Company applied equal weighting to each of the approaches in determining the fair value of the reporting unit. Under the income approach, the Company utilized discounted cash flows of forecasted future cash flows based on future operational expectations and discounted these cash flows to reflect their relative risk. The cash flows used are consistent with those the Company uses in its internal planning, which reflect actual business trends experienced and the Company’s long-term business strategy. Under the market approach, the Company utilized the guideline public company method and guideline transaction method to develop valuation multiples and compare the Company to similar publicly traded companies. The significant assumptions under each of the approaches include, among others: revenue projections (which are dependent on future customer subscriptions and content licensing agreements), operating expenses, discount rate, control premium and a terminal growth rate. The cash flows used to determine the fair values are dependent on a number of significant management assumptions, such as the Company’s expectations of future performance and the expected future economic environment, which are partly based upon the Company’s historical experience. The Company also considered its market capitalization in assessing the reasonableness of the reporting unit fair value. During the As described in Note Revenues expected to be recognized in the future related to performance obligations that are unsatisfied These amounts include only fixed consideration or minimum guarantees and do not include amounts related to (i) contracts with an original expected term of one year or less or (ii) licenses of content that are solely based on sales or usage-based royalties. 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 Note There were no options exercised during the three and 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. Note The Company adopted the new leases guidance contained in Company as a Lessee The Company Maturity of Lease Liabilities 2023. Content obligations include amounts related to licensed, commissioned and internally produced streaming content. An obligation for the production of content includes Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis provide information that management believes is relevant to an assessment and understanding of our results of operations and financial condition. 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. Cautionary Note Regarding Forward-looking Statements 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,” “could,” “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 Overview CuriosityStream is a media and entertainment company that offers premium video 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, partner bulk sales, brand partnerships and content sales. We believe we are well-positioned for growth as a digital-native video platform monetizing content across this broad revenue stack. We operate our business as a single operating segment that provides premium streaming content through multiple channels, including the use of various applications, partnerships and affiliate relationships. We generate our revenue through six products and services: Direct to Consumer Business, Partner Direct Business, Bundled Distribution, Direct to Consumer (Subscriptions – O&O and App Services) Partner Direct Business (License Fees – Affiliates) Bundled Distribution (License Fees – Affiliates) Content Licensing Enterprise (Subscriptions – O&O Service) Other Total Revenues 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 9,500 short-, mid- and long-form video and audio titles, including One Day University and Learn25 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 5,500 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 in ten different Our video content is available directly through our O&O Service and App Services. 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, all major smart TV brands (e.g., LG, Vizio, Samsung, Sony) and gaming consoles like Xbox. Our Direct Service is available to any household in the world with a broadband connection for $2.99 per month or $19.99 per year. We also provide a premium service for $9.99 per month or $69.99 per year. Our Premium membership includes everything in our standard service, plus subscriptions to third-party platforms Tastemade, Topic, and SommTV, our equity investee Nebula, and our new service, One Day University. 20 The MVPD, vMVPD and digital distributor partners making up our Partner Direct Business pay us a license fee for sales to individuals who subscribe to CuriosityStream via the partners’ respective platforms. We have affiliate agreement relationships with, and our service is available directly from, major MVPDs that include Comcast, Cox, Dish and vMVPDs and digital distributors that include Amazon Prime Video Channels, Apple Channel, Roku Channel, Sling TV and YouTube TV. In addition to our Direct to Consumer Business and Partner Direct Business, we have affiliate relationships with our Bundled MVPD Partners and MVPDs, 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 Our 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 in front of the paywall, and digital display ads. Key Factors Affecting Results of Operations Our future operating results and cash flows are dependent upon a number of opportunities, challenges, and other factors, including our ability to efficiently grow our subscriber base and expand our service offerings to maximize subscriber lifetime value. In particular, we believe that the following factors significantly affected our results of operations over the periods presented below and are expected to continue to have such significant effects: Revenues Currently, the main sources of our revenue are (i) subscriber fees from the Direct to Consumer Business and Direct Subscribers, (ii) 21 Since our founding in 2015, we have generated a significant portion of our revenues from Direct Subscribers in the form of monthly or annual subscription plans. We may in the future increase the price of our subscription plans, which may have a positive effect on our revenue from this line of our business. The MVPD, vMVPD and digital distributor partners making up our Partner Direct Business pay us a license fee. We recognize subscription revenues ratably during each subscriber’s monthly or yearly subscription period. 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. Our MVPD, vMVPD and digital distributor partners 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 content acquired through licenses. The Company’s 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 have been and intend to continue 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. 22 Results of Operations The financial data in the following table sets forth selected financial information derived from our unaudited consolidated financial statements for the three and Comparison of the three months ended % Change Revenues Subscriptions License fee Other Total Revenues Operating expenses Cost of revenues Advertising and marketing General and administrative Impairment of goodwill and intangible assets Total operating expenses Operating loss Other income (expense) Change in fair value of warrant liability Interest and other (expense) income Equity interests (loss) income Loss before income taxes Provision for income taxes Net (loss) income n/m - percentage not meaningful Revenue Revenue for the three months ended The increase in subscription revenue of The increase in license fees of The Operating Expenses Operating expenses for the three months ended Cost of Revenues: 23 Advertising & Marketing: General and Administrative: Operating Loss Operating loss for the three months ended Change in Fair Value of Warrant Liability For the three months ended Interest and Other (Expense) Income Interest and other (expense) income Equity Interests Loss For the three months ended Provision for Income Taxes Due to generating 24 Net Net loss for the three months ended Comparison of the Revenues Subscriptions License fee Other Total Revenues Operating expenses Cost of revenues Advertising and marketing General and administrative Impairment of goodwill and intangible assets Total operating expenses Operating loss Other income (expense) Change in fair value of warrant liability Interest and other (expense) income Equity interests (loss) income Loss before income taxes Provision for income taxes Net loss n/m - percentage not meaningful Revenue Revenue for the The increase in subscription revenue of The increase in license fees of Operating Expenses Operating expenses for the Cost of Revenues: 25 Advertising & Marketing: General and Administrative: Impairment of Goodwill and Intangible Assets: Operating Loss Operating loss for the Change in Fair Value of Warrant Liability For the Interest and Other (Expense) Income Interest and other (expense) income Equity Interests For the Provision for Income Taxes Due to generating 26 Net Loss Net loss for the Liquidity and Capital Resources As of We believe that our current cash levels and investments in debt securities 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. Our principal uses of cash 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 Net cash used in operating activities Net cash provided by (used in) investing activities Net cash (used in) provided by financing activities Net increase in cash, cash equivalents and restricted cash Cash Flows from Operating Activities Cash flow from operating activities primarily consists of net losses, changes to our content assets (including acquisitions and amortization), and other working capital items. During the 27 Cash Flows from Investing Activities Cash flow from investing activities consists of purchases, sales and maturities of investments, as well as business combinations, equity investments and purchases of property and equipment. During the Cash Flows from Financing Activities During the Capital Expenditures Going forward, we expect to make expenditures for additions to our content assets, and purchases of property and equipment. The amount, timing and allocation of capital expenditures are largely discretionary and within management’s control. Depending on market conditions, we may choose to defer a portion of our budgeted expenditures until later periods to achieve the desired balance between sources and uses of liquidity and prioritize capital projects that we believe have the highest expected returns and potential to generate cash flow. Subject to financing alternatives, we may also increase our capital expenditures significantly to take advantage of opportunities we consider to be attractive. Off Balance Sheet Arrangements As of Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operation is based upon our financial statements, which have been prepared in accordance with U.S. GAAP. Certain amounts included in or affecting the financial statements presented in this Annual Report and related disclosure must be estimated, requiring management to make assumptions with respect to values or conditions which cannot be known with certainty at the time the financial statements are prepared. Management believes that the accounting policies set forth below comprise the most important “critical accounting policies” for the Company. A critical accounting policy is one which is both important to the portrayal of a company’s financial condition and results of operations and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management evaluates such policies on an ongoing basis, based upon historical results and experience, consultation with experts and other methods that management considers reasonable in the particular circumstances under which the judgments and estimates are made, as well as management’s forecasts as to the manner in which such circumstances may change in the future. Content Assets The Company acquires, licenses and produces content, including original programming, in order to offer customers unlimited viewing of factual entertainment content. The content licenses are for a fixed fee and specific windows of availability. Payments for content, including additions to content assets and the changes in related liabilities, are classified within “Net cash used in operating activities” on the 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. Based on factors including historical and estimated viewing patterns, the Company previously amortized the content assets (licensed and produced) in “Cost of revenues” on the unaudited consolidated statements of operations on a straight-line basis over the shorter of each title’s contractual window of availability or estimated period of use, beginning 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 28 The Company’s business model is generally 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 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 be, abandoned are written off. Goodwill and Intangible Assets Goodwill represents the excess of the cost of acquisitions over the amount assigned to tangible and identifiable intangible assets acquired less liabilities assumed. At least annually, in the fourth quarter of each fiscal year or more frequently if indicators of impairment exist, management performs a review to determine if the carrying value of goodwill is impaired. The identification and measurement of goodwill impairment involves the estimation of fair value at the Company’s reporting unit level, which is the same or one level below the operating segment level. The Company determined that it has one reporting unit. The Company performs an initial assessment of qualitative factors to determine whether the existence of events and circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of relevant events and circumstances, the Company determines that it is more likely than not that the fair value of the reporting unit exceeds its carrying value and there is no indication of impairment, no further testing is performed; however, if the Company concludes otherwise, an impairment test must be performed by estimating the fair value of the reporting unit and comparing it with its carrying value, including goodwill. Intangible assets other than goodwill are carried at cost and amortized over their estimated useful lives. Amortization is recorded within General and administrative expenses on the consolidated statements of operations. The Company reviews identifiable finite-lived intangible assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset and its ultimate disposition. Measurement of any impairment loss is based on the amount by which the carrying value of the asset exceeds its fair value. During the The determination of the fair value of the Company’s reporting unit was based on a combination of the income and the market approach. The Company applied equal weighting to each of the approaches in determining the fair value of the reporting unit. Under the income approach, the Company utilized discounted cash flows of forecasted future cash flows based on future operational expectations and discounted these cash flows to reflect their relative risk. The cash flows used are consistent with those the Company uses in its internal planning, which reflect actual business trends experienced and the Company’s long-term business strategy. Under the market approach, the Company utilized the guideline public company method and guideline transaction method to develop valuation multiples and compare the Company to similar publicly traded companies. The significant assumptions under each of the approaches include, among others: revenue projections (which are dependent on future customer subscriptions and content licensing agreements), operating expenses, discount rate, control premium and a terminal growth rate. The cash flows used to determine the fair values are dependent on a number of significant management assumptions, such as the Company’s expectations of future performance and the expected future economic environment, which are partly based upon the Company’s historical experience. The Company also considered its market capitalization in assessing the reasonableness of the reporting unit fair value. During the 29 In order to further validate the reasonableness of fair value as determined by the income and market approaches described above, a reconciliation to market capitalization is then performed by estimating a reasonable control premium and other market factors. Future changes in the judgments, assumptions and estimates that are used in the impairment testing for our asset group could result in significantly different estimates of fair value. 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 annual subscriptions with the Company. The Company bills the monthly subscriber on each subscriber’s monthly anniversary date and recognizes the revenue ratably over each monthly membership period. The annual subscription fees are collected by the Company at the start of the annual subscription period and are recognized ratably over the subsequent twelve-month period. Revenues are presented net of the taxes that are collected from subscribers and remitted to governmental authorities. Subscriptions — App Services The Company also earns subscription revenues through its App Services. These subscriptions are similar to the O&O Service subscriptions but are generated based on agreements with certain streaming media players as well as with Smart TV brands and gaming consoles. Under these agreements, the streaming media player typically bills the subscriber directly and then remits the collected subscriptions to the Company, net of a distribution fee. The Company recognizes the gross subscription revenues when earned and simultaneously recognizes the corresponding distribution fees as an expense. The Company is the principal in these relationships as the Company retains control over service delivery to its subscribers. License Fees — AffiliatesJuneSeptember 30, 2022☐ ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934CuriosityStream Inc.Delaware84-1797523(301) 755-2050 (§Large accelerated filer ☐☐ Accelerated filer ☐ Non-accelerated filer☒☒ Smaller reporting company ☒ Emerging growth company ☒ August 11,November 52,791,99352,806,115 shares of Common Stock of the registrant issued and outstanding.JUNESEPTEMBER 30, 2022PagePage 1 2 3 4 5 6 20 31 31 32 32 32 32 32 33 33 34
2022
(unaudited) $ 46,826 $ 15,216 500 2,331 16,947 65,833 17,151 23,493 1,561 6,413 82,985 113,286 — 15,430 11,045 9,987 1,183 1,342 74,901 72,682 283 1,369 — 2,793 3,769 — 546 689 $ 174,712 $ 217,578 $ 4,978 $ 9,684 7,594 3,428 7,463 12,429 17,786 22,430 37,821 47,971 809 5,661 4,735 — 866 2,011 44,231 55,643 5 5 357,211 352,334 (182 ) (222 ) (226,553 ) (190,182 ) 130,481 161,935 $ 174,712 $ 217,578 June 30, December 31, 2022 2021 (unaudited) Assets Current assets Cash and cash equivalents $ 22,761 $ 15,216 Restricted cash 500 2,331 Short-term investments in debt securities 54,506 65,833 Accounts receivable 11,600 23,493 Other current assets 2,474 6,413 Total current assets 91,841 113,286 Investments in debt securities - 15,430 Investments in equity method investees 11,140 9,987 Property and equipment, net 1,272 1,342 Content assets, net 78,855 72,682 Intangibles, net 316 1,369 Goodwill - 2,793 Operating lease right-of-use assets 3,835 - Other assets 588 689 Total assets $ 187,847 $ 217,578 Liabilities and stockholders’ equity (deficit) Current liabilities Content liabilities $ 5,976 $ 9,684 Accounts payable 9,552 3,428 Accrued expenses and other liabilities 10,122 12,429 Deferred revenue 22,297 22,430 Total current liabilities 47,947 47,971 Warrant liability 1,323 5,661 Non-current operating lease liabilities 4,821 - Other liabilities 699 2,011 Total liabilities 54,790 55,643 Stockholders’ equity (deficit) Preferred stock, $0.0001 par value – 1,000 shares authorized as of June 30, 2022 and December 31, 2021; 0 shares issued and outstanding as of June 30, 2022 and December 31, 2021 - - Common stock, $0.0001 par value – 125,000 shares authorized as of June 30, 2022 and December 31, 2021; 52,786 shares issued and outstanding as of June 30, 2022; 52,677 issued and outstanding as of December 31, 2021 5 5 Additional paid-in capital 355,555 352,334 Accumulated other comprehensive loss (452 ) (222 ) Accumulated deficit (222,051 ) (190,182 ) Total stockholders’ equity (deficit) 133,057 161,935 Total liabilities and stockholders’ equity (deficit) $ 187,847 $ 217,578 $ 23,569 $ 18,705 $ 63,544 $ 43,985 13,566 9,553 38,404 19,433 5,626 9,320 31,602 33,089 8,757 8,058 29,863 25,943 — — 3,603 — 27,949 26,931 103,472 78,465 (4,380 ) (8,226 ) (39,928 ) (34,480 ) 514 8,345 4,852 6,323 (478 ) 595 (564 ) 1,891 (94 ) 165 (566 ) 165 (4,438 ) 879 (36,206 ) (26,101 ) 64 49 165 128 $ (4,502 ) $ 830 $ (36,371 ) $ (26,229 ) $ (0.09 ) $ 0.02 $ (0.69 ) $ (0.51 ) $ (0.09 ) $ (0.14 ) $ (0.69 ) $ (0.63 ) 52,793 52,593 52,773 51,091 52,793 52,677 52,773 51,736 (unaudited) For the three months ended
June 30, For the six months ended
June 30, 2022 2021 2022 2021 Revenues $ 22,348 $ 15,344 $ 39,975 $ 25,280 Operating expenses Cost of revenues 12,988 5,722 24,838 9,880 Advertising and marketing 11,208 11,520 25,976 23,769 General and administrative 10,603 9,153 21,106 17,885 Impairment of goodwill and intangible assets 3,603 - 3,603 - 38,402 26,395 75,523 51,534 Operating loss (16,054 ) (11,051 ) (35,548 ) (26,254 ) Change in fair value of warrant liability 478 1,764 4,338 (2,022 ) Interest and other (expense) income (29 ) 1,036 (86 ) 1,296 Equity interests loss (316 ) - (472 ) - Loss before income taxes (15,921 ) (8,251 ) (31,768 ) (26,980 ) Provision for income taxes 56 53 101 79 Net loss $ (15,977 ) $ (8,304 ) $ (31,869 ) $ (27,059 ) Net loss per share Basic $ (0.30 ) $ (0.16 ) $ (0.60 ) $ (0.54 ) Diluted $ (0.30 ) $ (0.19 ) $ (0.60 ) $ (0.54 ) Weighted average number of common shares outstanding Basic 52,775 52,567 52,762 50,327 Diluted 52,775 52,968 52,762 50,327
September 30,
September 30, $ (4,502 ) $ 830 $ (36,371 ) $ (26,229 ) 270 (200 ) 40 (1,423 ) $ (4,232 ) $ 630 $ (36,331 ) $ (27,652 ) (unaudited) For the three months ended
June 30, For the six months ended
June 30, 2022 2021 2022 2021 Net loss $ (15,977 ) $ (8,304 ) $ (31,869 ) $ (27,059 ) Other comprehensive income (loss) Unrealized gain (loss) on available for sale securities 3 (769 ) (230 ) (1,223 ) Total comprehensive loss $ (15,974 ) $ (9,073 ) $ (32,099 ) $ (28,282 )
Capital
Equity — — — — (4,502 ) (4,502 ) 16 — 1,656 — — 1,656 — — — 270 — 270 — — — — (36,371 ) (36,371 ) 125 — 4,877 — — 4,877 — — — 40 — 40
Capital
Equity — — — — 830 830 9 — 1,519 — — 1,519 15 — 60 — — 60 — — — (200 ) — (200 ) — — — — (26,229 ) (26,229 ) 12 — 5,357 — — 5,357 7,475 1 94,100 — — 94,101 — — (707 ) — — (707 ) 118 — 497 — — 497 4,733 — 54,422 — — 54,422 (20 ) — — — — — — — — (1,423 ) — (1,423 ) (unaudited) Total Common Stock Preferred Stock Comprehensive
Income Accumulated Stockholders’
Equity Shares Amount Shares Amount Capital (Loss) Deficit (Deficit) 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 Balance at March 31, 2021 52,549 $ 5 - $ - $ 347,967 $ (444 ) $ (171,302 ) $ 176,226 Net loss - - - - - - (8,304 ) (8,304 ) Stock-based compensation, net 3 - - - 1,515 - - 1,515 Exercise of Options 31 - - - 115 - - 115 Other comprehensive loss - - - - - (769 ) - (769 ) Balance at June 30, 2021 52,583 $ 5 - $ - $ 349,597 $ (1,213 ) $ (179,606 ) $ 168,783 Balance at December 31, 2020 40,289 $ 4 - $ - $ 197,507 $ 10 $ (152,547 ) $ 44,974 Net loss - - - - - - (27,059 ) (27,059 ) Stock-based compensation, net 3 - - - 3,838 - - 3,838 Issuance of Common Stock 7,475 1 - - 94,100 - - 94,101 Common Stock issuance costs - - - - (707 ) - - (707 ) Exercise of Options 103 - - - 437 - - 437 Exercise of Warrants 4,733 - - - 54,422 - - 54,422 Cancellation of escrow shares (20 ) - - - - - - - Other comprehensive loss - - - - - (1,223 ) - (1,223 ) Balance at June 30, 2021 52,583 $ 5 - $ - $ 349,597 $ (1,213 ) $ (179,606 ) $ 168,783 (36,371 ) $ (26,229 ) (4,852 ) (6,323 ) (31,729 ) (40,954 ) (4,706 ) 5,390 29,510 14,143 573 403 3,603 — 1,087 638 5,055 5,446 566 (165 ) 288 — 6,342 (6,046 ) 4,994 274 4,188 1,943 (4,792 ) 641 (4,500 ) 9,042 (30,744 ) (41,797 ) (130 ) (291 ) — (5,362 ) (2,438 ) (9,260 ) (304 ) 22,893 15,676 41,873 50,792 (1,497 ) (151,861 ) 60,701 (100,610 ) — 497 — 54,898 (178 ) (89 ) — 94,101 — (707 ) (178 ) 148,700 29,779 6,293 17,547 17,384 47,326 $ 23,677 571 $ 31 $ 352 $ 173 3,965 — (unaudited) For the six months ended
June 30, 2022 2021 Cash flows from operating activities Net loss $ (31,869 ) $ (27,059 ) Adjustments to reconcile net loss to net cash used in operating activities Change in fair value of warrant liability (4,338 ) 2,022 Additions to content assets (25,303 ) (22,199 ) Change in content liabilities (3,708 ) 4,465 Amortization of content assets 19,130 6,989 Depreciation and amortization expenses 441 217 Impairment of goodwill and intangible assets 3,603 - Amortization of premiums and accretion of discounts associated with investments in debt securities, net 758 352 Stock-based compensation 3,382 3,860 Equity interests loss 472 - Other non-cash items 211 - Changes in operating assets and liabilities Accounts receivable (3,526 ) Other assets 4,040 185 Accounts payable 6,146 1,773 Accrued expenses and other liabilities (2,850 ) 1,091 Deferred revenue ) 8,474 Net cash used in operating activities (18,149 ) (23,356 ) Cash flows from investing activities Purchases of property and equipment (120 ) (175 ) Business acquisitions - (4,000 ) Investment in equity method investees (1,625 ) - Sales of investments in debt securities 2,893 4,882 Maturities of investments in debt securities 24,373 11,980 Purchases of investments in debt securities (1,497 ) (141,644 ) Net cash provided by (used in) investing activities 24,024 (128,957 ) Cash flows from financing activities Exercise of stock options - 409 Exercise of warrants - 54,898 Payments related to tax withholding (161 ) (22 ) Proceeds from issuance of Common Stock - 94,101 Payment of offering costs - (707 ) Net cash (used in) provided by financing activities (161 ) 148,679 Net increase in cash, cash equivalents and restricted cash 5,714 (3,634 ) Cash, cash equivalents and restricted cash, beginning of period 17,547 17,384 Cash, cash equivalents and restricted cash, end of period $ 23,261 $ 13,750 Supplemental disclosure: Cash paid for taxes $ 398 $ 30 Cash paid for operating leases $ 219 $ 43 Right-of-use assets obtained in exchange for new operating lease liabilities (1) $ 3,965 $ - (1) 121share and per share data)program salescontent licensing deals. The Company also sells selected rights (such as in territories or on platforms that are not currently being exploited by the Company) to content created before production begins.and ansixnine months ended JuneSeptember 30, 2022, are not necessarily indicative of the results to be expected for the year ending December 31, 2022.Certain amounts presented in prior periods have been reclassified to conform to the current period presentation.GAAPSecurities 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 areas in which management uses estimates include content asset amortization, the assessment of the recoverability of content assets, equity method investments, intangible assets and goodwill, the fair value of assets and liabilities for allocation of the purchase price of companies acquired, and the fair value of share-based awards and liability classified warrants.receivablereceivables, net are typically unsecured and are derived from revenues earned from customers primarily located in the United States.●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. 7(FASB)(“FASB”) issued(ASU)(“ASU”) No.(Topic 842)(“Topic 842”)(ASC) 840. (“ASC”) 840121(Topic 326)(“Topic 326”) (“ASUoperatesoperate two documentary channels, together with various SVoD services,sJuneSeptember 30, 2022.Watch Nebula LLC for $6.0 million. Nebula is an SVoD technology platform built for and by a group of content creators. TheShould Nebula meet certain quarterly targets through the third quarter of 2023, the Company is committedobligated to purchasing anpurchase additional 13% ownership interest through eight quarterly paymentsinterests, each for a payment of $0.8 million, which after each payment the Company will obtain an additional 1.625% of equity ownership interests. During the nine months ended September 30, 2022, the Company purchased additional equity interests totaling 3.25%, and during the year ended December 31, 2021, the Company purchased additional equity interests subsequent to the initial investment totaling 1.625%. These additional equity interest purchases have increased the Company’s total ownership interest in Nebula to 16.875% as of September 30, 2022. Prior to the Company’s investment, Nebula was a 100% wholly owned subsidiary of Standard Broadcast LLC (“Standard”). The Company obtained 25% of the representation on Nebula’s Board of Directors, providing the Company with significant influence, but not a controlling interest. The Company has not received dividends from Nebula as of JuneSeptember 30, 2022.JuneSeptember 30, 2022, and December 31, 2021, is as follows:
Venture $ 3,089 $ 6,898 $ 9,987 — 1,624 1,624 (127 ) (439 ) (566 ) $ 2,962 $ 8,083 $ 11,045 Spiegel
Venture Nebula Total (in thousands) Balance at December 31, 2021 $ 3,089 $ 6,898 $ 9,987 Investments in equity method investees (1) - 1,625 1,625 Equity interests loss (122 ) (350 ) (472 ) Balance at June 30, 2022 $ 2,967 $ 8,173 $ 11,140 (1)Nebula’s investment in equity method investees balance includes an accrual of $0.8 million also reported in Accrued expenses and other liabilities as of June 30, 2022.JuneSeptember 30, 2022, and December 31, 2021 is as follows: June 30, December 31, 2022 2021 (in thousands) Cash and cash equivalents $ 22,761 $ 15,216 Restricted cash 500 2,331 Cash and cash equivalents and restricted cash $ 23,261 $ 17,547 $ 46,826 $ 15,216 500 2,331 $ 47,326 $ 17,547 At JuneAs of September 30, 2022, restricted cash includes cash deposits required by a bank as collateral related to corporate credit card agreements of $0.5 $1.2 equivalents (see Note 6).equivalents. On May 11, 2022, the One Day University (ODU)(“ODU”) holdback of $0.5
Cash
Equivalents
Investments
Cash
Equivalents
Investments $ 15,607 $ — $ — $ 15,607 $ 11,709 $ — $ — $ 11,709 — 1,996 — 1,996 — 13,582 — 13,582 15,607 1,996 — 17,603 11,709 13,582 — 25,291 — 14,951 — 14,951 — 50,641 15,430 66,071 — — — — — 1,610 — 1,610 — 14,951 — 14,951 — 52,251 15,430 67,681 $ 15,607 $ 16,947 $ — $ 32,554 $ 11,709 $ 65,833 $ 15,430 $ 92,972 As of June 30, 2022 As of December 31, 2021 Cash and
Cash
Equivalents Short-term
Investments Investments
(non-current) Total Cash and
Cash
Equivalents Short-term
Investments Investments
(non-current) Total (in thousands) (in thousands) Level 1 Securities Money market funds $ 12,064 $ - $ - $ 12,064 $ 11,709 $ - $ - $ 11,709 U.S. Government debt securities - 9,471 - 9,471 - 13,582 - 13,582 Total Level 1 Securities 12,064 9,471 - 21,535 11,709 13,582 - 25,291 Level 2 Securities Corporate debt securities - 45,035 - 45,035 - 50,641 15,430 66,071 Municipal debt securities - - - - - 1,610 - 1,610 Total Level 2 Securities - 45,035 - 45,035 - 52,251 15,430 67,681 Total $ 12,064 $ 54,506 $ - $ 66,570 $ 11,709 $ 65,833 $ 15,430 $ 92,972 As of June 30, 2022 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value (in thousands) Debt Securities: Corporate $ 45,461 $ - $ (426 ) $ 45,035 U.S. Government 9,497 - (26 ) 9,471 Total $ 54,958 $ - $ (452 ) $ 54,506
Unrealized Gains
Losses
Fair Value $ 15,129 $ — $ (178 ) $ 14,951 2,000 — (4 ) 1,996 $ 17,129 $ — $ (182 ) $ 16,947
Unrealized Gains
Losses
Fair Value $ 66,281 $ — $ (210 ) $ 66,071 13,594 — (12 ) 13,582 1,610 — — 1,610 $ 81,485 $ — $ (222 ) $ 81,263 As of December 31, 2021 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value (in thousands) Debt Securities: Corporate $ 66,281 $ - $ (210 ) $ 66,071 U.S. Government 13,594 - (12 ) 13,582 Municipalities 1,610 - - 1,610 Total $ 81,485 $ - $ (222 ) $ 81,263 sixnine months ended JuneSeptember 30, 2022 or 2021. As of June 30,
2022 December 31,
2021 (in thousands) Licensed content, net Released, less amortization $ 12,345 $ 11,406 Prepaid and unreleased 6,413 9,119 18,758 20,525 Produced content, net Released, less amortization 26,711 18,507 In production 33,386 33,650 60,097 52,157 Total $ 78,855 $ 72,682
2022
2021 $ 11,783 $ 11,406 5,774 9,119 17,557 20,525 33,726 18,507 23,618 33,650 57,344 52,157 $ 74,901 $ 72,682 JuneSeptember 30, 2022, $5.4$5.3 million, $3.3$3.1 million, and $1.6$1.5 million of the $12.3$11.8 million unamortized cost of the licensed content that has been released is expected to be amortized in each of the next three years. As of JuneSeptember 30, 2022, $7.2$9.1 million, $6.9$8.6 million, and $6.0$7.6 million of the $26.7$33.7 million unamortized cost of the produced content that has been released is expected to be amortized in each of the next three years. Three Months Ended
June 30, Six Months Ended
June 30, 2022 2021 2022 2021 (in thousands) (in thousands) Licensed content $ 1,798 $ 1,595 $ 4,797 $ 3,278 Produced content 8,293 2,658 14,333 3,711 Total $ 10,091 $ 4,253 $ 19,130 $ 6,989 $ 1,793 $ 2,091 $ 6,590 $ 5,369 8,588 5,063 22,920 8,774 $ 10,381 $ 7,154 $ 29,510 $ 14,143 sixnine months ended JuneSeptember 30, 2022 is as follows (in thousands):Balance at December 31, 2021 $ 2,793 Impairment of goodwill 2,793 Balance at June 30, 2022 $ - $ 2,793 2,793 $ — three months ended June 30,second quarter of 2022, the Company experienced a sustained decrease in its share price, and this triggering event was an indication that it was more likely than not that the fair value of the Company’s single reporting unit was below its carrying value. The Company performed an interim goodwill impairment test of its goodwill as of June 30, 2022 and recognized a goodwill impairment charge of $2.8 operations.operations for the nine months ended September 30, 2022.three months ended June 30,second quarter of 2022, the Company also determined there were impairment indicators with respect to certain of the Company’s definite-lived intangible assets. As a result, the Company performed an impairment test by comparing the carrying values of the intangible assets to their respective fair values, which were determined based on forecasted future cash flows. As a result of this impairment test, the Company recorded an impairment charge of $0.8 million during the three months ended June 30, 2022, which is reflected as a component of impairment of goodwill and intangible assets on the Company’s unaudited consolidated statements of operations. 7,JuneSeptember 30, 2022, and December 31, 2021, was as follows: As of
June 30,
2022 As of
December 31,
2021 (in thousands) Level 3 Private Placement Warrants $ 1,323 $ 5,661 Total Level 3 $ 1,323 $ 5,661
September 30,
2022
December 31,
2021 $ 809 $ 5,661 $ 809 $ 5,661 sixnine months ended JuneSeptember 30, 2022, and 2021, as well as the relative percentage of each revenue type to total revenue. Three Months Ended
June 30, Six Months Ended
June 30, 2022 2021 2022 2021 (in thousands) (in thousands) Subscriptions – O&O Service $ 7,912 35 % $ 4,705 31 % $ 15,218 38 % $ 8,671 34 % Subscriptions – App Services 1,010 5 % 975 6 % 2,058 5 % 1,886 7 % Subscriptions – Total 8,922 40 % 5,680 37 % 17,276 43 % 10,557 41 % License Fees – Affiliates 5,079 23 % 4,579 30 % 9,989 25 % 9,082 36 % License Fees – Program Sales (1) 6,655 30 % 5,031 33 % 10,904 27 % 5,517 22 % License Fees – Total 11,734 53 % 9,610 63 % 20,893 52 % 14,599 58 % Other – Total (1)(2) 1,692 7 % 54 0 % 1,806 5 % 124 1 % Total Revenues $ 22,348 $ 15,344 $ 39,975 $ 25,280 $ 7,890 33 % $ 5,382 29 % $ 23,110 36 % $ 14,053 32 % 960 4 % 1,003 5 % 3,018 5 % 2,889 7 % 8,850 37 % 6,385 34 % 26,128 41 % 16,942 39 % 3,752 16 % 4,631 25 % 13,741 22 % 13,713 31 % 10,790 46 % 6,760 36 % 21,692 34 % 12,277 28 % 14,542 62 % 11,391 61 % 35,433 56 % 25,990 59 % 177 1 % 929 5 % 1,983 3 % 1,053 2 % $ 23,569 $ 18,705 $ 63,544 $ 43,985 (1) sixnine months ended JuneSeptember 30, 2022, total related party revenue was $2.1$2.2 million consistingand $4.3 million, respectively. This consisted of $0.5$2.2 million and $2.7 million for the three and sixnine months ended JuneSeptember 30, 2022, respectively, for content licensed by the Company to the Spiegel Venture included in License feeProgram Sales andContent Licensingthree and sixnine months ended JuneSeptember 30, 2022 for marketing services rendered to Nebula, which is included in Other revenue.(2) sixnine months ended JuneSeptember 30, 2022 includes other marketing services for $0.1$0.2 million and $0.2$0.4 million, respectively.at Juneas of September 30, 2022 are as follows: Remainder of
year ending
December 31, For the years ending December 31, 2022 2023 2024 2025 2026 Thereafter Total (in thousands) Remaining Performance Obligations $ 10,192 $ 7,962 $ 5,035 $ 3,339 $ 23 $ 158 $ 26,709
of year
ending
December 31, $ 4,806 $ 8,126 $ 5,004 $ 3,338 $ 26 $ 184 $ 21,484 program salesrevenues were $23.0revenue was $18.7 million and $23.2 at Juneas of September 30, 2022 and December 31, 2021, respectively.respectively, with the non-current portion of$6.2$4.5$16.1sixnine months ended JuneSeptember 30, 2022, respectively, related to the balance of deferred revenue atas of December 31, 2021.Paycheck Protection Program LoanOn May 1, 2020, the Company applied for and received funding from the Paycheck Protection Program (“PPP”) in the amount of $1.2 million under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) (the “PPP Loan”). The PPP Loan was set to mature in May 2022 and bore interest at a rate of 1.0% per annum. The PPP provides that the use of the PPP Loan amount shall be limited to certain qualifying expenses and may be partially or wholly forgiven in accordance with the requirements set forth in the CARES Act. The amount of loan proceeds eligible for forgiveness takes into account a number of factors, including the amount of loan proceeds used by the Company during the specified period after the loan origination for certain purposes including payroll costs, rent payments on certain leases, and certain qualified utility payments.The Company elected to recognize earnings as funds are applied to covered expenses and classify the application of funds as a reduction of the related expense in the unaudited consolidated statement of operations. On April 16, 2022, the Company received the loan forgiveness letter from the Small Business Administration (SBA) stating that the loan has been forgiven in full, including applicable interest. Following receipt of the loan forgiveness notification letter, funds of $1.2 million were released from escrow, and the Company reclassified this amount from restricted cash to cash and cash equivalents on the unaudited consolidated balance sheet.Note 7 — Stockholders’ equityJuneSeptember 30, 2022 and December 31, 2021, the Company has 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.WarrantsJuneSeptember 30, 2022, theA)(Aourthe business combination that closed on October 14, 2020 (the “Public Warrants”) andwill expire on October 14, 2025.Company;Company; (ii) they may be exercised by the holders on a cashless basis;basis; and (iii) they are subject to registration rights.sixnine months ended JuneSeptember 30, 2022. As of
June 30,
2022 As of
December 31,
2021 Exercise Price $ 11.50 $ 11.50 Stock Price (CURI) $ 1.69 $ 5.93 Expected volatility 89.00 % 58.00 % Expected warrant term (years) 3.3 3.8 Risk-free interest rate 2.99 % 1.12 % Dividend yield 0 % 0 % Fair Value per Private Placement Warrant $ 0.36 $ 1.54
September 30,
2022
December 31,
2021 $ 11.50 $ 11.50 $ 1.46 $ 5.93 86.00 % 58.00 % 3.0 3.8 4.25 % 1.12 % 0 % 0 % $ 0.22 $ 1.54 sixnine months ended JuneSeptember 30, 2022 resulted in a gain of $0.5 million and $4.3$4.9 million, respectively, and for the three and sixnine months ended JuneSeptember 30, 2021 resulted in a gain of $1.8$8.3 million and a loss of $2.0$6.3 million, respectively.87 — Earnings (loss) per share
September 30,
September 30, $ (4,502 ) $ 830 $ (36,371 ) $ (26,229 ) 52,793 52,593 52,773 51,091 $ (0.09 ) $ 0.02 $ (0.69 ) $ (0.51 ) $ (4,502 ) $ 830 $ (36,371 ) $ (26,229 ) $ — $ (8,345 ) $ — $ (6,323 ) (4,502 ) (7,515 ) (36,371 ) (32,552 ) 52,793 52,593 52,773 51,091 — 85 — 645 52,793 52,677 52,773 51,736 $ (0.09 ) $ (0.14 ) $ (0.69 ) $ (0.63 ) Three months ended
June 30, Six months ended
June 30, 2022 2021 2022 2021 (in thousands) (in thousands) Numerator - Basic EPS: Net loss $ (15,977 ) $ (8,304 ) $ (31,869 ) $ (27,059 ) Denominator - Basic EPS: Weighted–average shares – Basic 52,775 52,567 52,762 50,327 Net loss per share – Basic $ (0.30 ) $ (0.16 ) $ (0.60 ) $ (0.54 ) Numerator - Diluted EPS: Net loss $ (15,977 ) $ (8,304 ) $ (31,869 ) $ (27,059 ) Decrease in fair value of Private Placement Warrants - (1,764 ) - - Net loss – Diluted (15,977 ) (10,068 ) (31,869 ) (27,059 ) Denominator - Diluted EPS: Weighted–average shares – Basic 52,775 52,567 52,762 50,327 Incremental common shares from assumed exercise of Private Placement Warrants - 402 - - Weighted–average shares – Diluted 52,775 52,968 52,762 50,327 Net loss per share – Diluted $ (0.30 ) $ (0.19 ) $ (0.60 ) $ (0.54 ) sixnine months ended JuneSeptember 30, 2022 and 2021, the following share equivalents were excluded from the computation of diluted net loss per share as the inclusion of such shares would be anti-dilutive. Common shares issuable for warrants, options, and restricted stock units (RSUs)(“RSUs”) represent the total amount of outstanding warrants, stock options, and restricted stock units at Juneas of September 30, 2022 and 2021.2021, where antidilutive.
September 30,
September 30, 5,190 4,775 5,190 4,775 1,047 923 1,047 923 6,730 3,054 6,730 3,054 12,967 8,752 12,967 8,752 Antidilutive shares excluded: Three months ended
June 30, Six months ended
June 30, 2022 2021 2022 2021 (in thousands) (in thousands) Options 5,244 4,737 5,244 4,737 Restricted Stock Units 1,114 772 1,114 772 Warrants 6,730 3,054 6,730 6,730 13,088 8,563 13,088 12,239 98 — Stock-based compensationsixnine months ended JuneSeptember 30, 2022: 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, 2021 1,821 4,747 $ 7.61 850 $ 11.41 Granted (1,370 ) 821 3.18 549 3.15 Options exercised and RSUs vested 39 - - (104 ) 11.28 Forfeited or expired 505 (324 ) 8.20 (181 ) 11.66 Balance at June 30, 2022 995 5,244 $ 6.88 1,114 $ 7.17
Shares
Available
for Issuance
Under the
Plan
of
Shares
Average
Exercise
Price
of
Shares
Average
Grant
Date Fair
Value 1,821 4,747 $ 7.61 850 $ 11.41 (1,370 ) 821 3.18 549 3.15 49 — — (130 ) 11.17 600 (378 ) 7.61 (222 ) 11.51 1,100 5,190 $ 6.91 1,047 $ 6.96 sixnine months ended JuneSeptember 30, 2022. The intrinsic value of options exercised during the three and sixnine months ended JuneSeptember 30, 2021 was $0.3$0.1 and $1.3$1.4 million, respectively.sixnine months ended JuneSeptember 30, 2022 and 2021 were as follows: Three months ended
June 30, Six months ended
June 30, 2022 2021 2022 2021 Dividend yield 0 % N/A 0 % 0 % Expected volatility 65% - 70 % N/A 60% - 70 % 60 % Expected term (years) 6.25 N/A 6.00 - 6.50 2.50 - 6.25 Risk-free interest rate 2.81% - 2.95 % N/A 1.40% - 2.95 % 0.14% - 1.11 % Weighted average grant date fair value $ 1.12 N/A $ 1.91 $ 6.61 (in thousands) (in thousands) Stock-based compensation - Options $ 946 $ 910 $ 1,914 $ 2,729 Stock-based compensation - RSUs $ 648 $ 627 $ 1,468 $ 1,131 N/A 0 % 0 % 0 % N/A 60 % 60% - 70 % 60 % N/A 6.25 6.00 - 6.50 2.50 - 6.25 N/A 1.01 % 1.40% - 2.95 % 0.14% - 1.11 % N/A $ 6.51 $ 1.91 $ 6.58 $ 999 $ 882 $ 2,913 $ 3,611 $ 674 $ 704 $ 2,142 $ 1,835 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.109 — Segment and geographic information1one reporting segment. The Company’s chief operating decision maker (“CODM”) is its chief executive officer, who reviews financial information presented on an entity-wide basis for purposes of making operating decisions, assessing financial performance and allocating resources. $ 13,845 59 % $ 10,665 57 % $ 40,348 63 % $ 29,931 68 % 3,287 14 % 1,894 10 % 4,704 8 % 3,007 7 % 6,437 27 % 6,146 33 % 18,492 29 % 11,047 25 % 9,724 41 % 8,040 43 % 23,196 37 % 14,054 32 % 23,569 100 % 18,705 100 % 63,544 100 % 43,985 100 % Three months ended
June 30, Six months ended
June 30, 2022 2021 2022 2021 United States $ 14,704 66 % $ 12,111 79 % $ 26,503 66 % $ 19,266 76 % International: United Kingdom 2,533 11 % 210 1 % 4,434 11 % 379 2 % Other 5,111 23 % 3,023 20 % 9,038 23 % 5,635 22 % Total International 7,644 34 % 3,233 21 % 13,472 34 % 6,014 24 % 22,348 100 % 15,344 100 % 39,975 100 % 25,280 100 % 1110 — Related party transactions$0.5$2.2 million and $2.7 million of revenue related to the Spiegel Venture during the three and sixnine months ended JuneSeptember 30, 2022.sixnine months ended JuneSeptember 30, 2022. 2021.$1.0$1.1 million and $2.0$3.1 million for the three and sixnine months ended JuneSeptember 30, 2022, respectively, and $0.3 million during the three and nine months ended September 30, 2021, in revenue share to Nebula from subscription sales related to the Bundled Marketing and Premium Tier Agreement. This revenue share is recorded in Cost of revenues on the unaudited consolidated statement of operations. The Bundled and Premium Tier subscriptions bundles the Nebula SVoD subscription with the CuriosityStream subscription for a single subscription fee through the CuriosityStream Premium Tier.121sixnine months ended JuneSeptember 30, 2022 and the financial position as of JuneSeptember 30, 2022 reflect the application of this new guidance, while the reported results for the three and sixnine months ended JuneSeptember 30, 2021 and the financial position as of December 31, 2021 were not adjusted and continue to be reported under the prior lease accounting guidance in effect for the prior periods.has entered intois party to a non-cancellable operating lease agreement for office space, which expires in 2033.has elected not to not separate lease andassetsasset and leases liabilities, andwith variable lease payments arebeing recognized as lease expense. The Company has determined that no renewal clauses are reasonably certain of being exercised and have not included any renewal periods within the lease term for this lease.At JuneAs of September 30, 2022, the Company had operating lease ROU assets of $3.8 million, current lease liabilities of $0.3 million, and$4.8$4.7 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. The weighted average remaining lease term at Juneas of September 30, 2022 was 10.710.4 years.sixnine months ended JuneSeptember 30, 2022 was comprised of the following (in thousands): Three months ended
June 30,
2022 Six months ended
June 30,
2022 Operating lease cost $ 121 $ 242 Short-term lease cost 18 36 Variable lease cost 13 24 Total lease cost $ 152 $ 302 Three months ended
September 30, 2022 Nine months ended
September 30, 2022 $ 121 $ 363 6 42 12 36 $ 139 $ 441 JuneSeptember 30, 2022, maturities of our operating lease liabilities, which do not include short-term leases and variable lease payments, are as follows (in thousands):Remaining six months of 2022 $ 268 2023 543 2024 557 2025 571 2026 585 Thereafter 3,946 Total Lease Payments $ 6,470 Less: imputed interest (1,326 ) Present value of total lease liabilities $ 5,144 $ 134 543 557 571 585 3,946 6,336 (1,271 ) $ 5,065 sixnine months ended JuneSeptember 30, 2022, operating lease income from the Company’s sublet was less than $0.1 million.immaterial. As of JuneSeptember 30, 2022, total remaining future minimum lease payments receivable on the Company’s operating lease was $0.61312 — Commitments and contingenciesAt June$18.9$16.5 million of content obligations comprised of $6.0$5.0 million included in content liabilities in the accompanying unaudited consolidated balance sheets, and $12.9$11.5 million of obligations that are not reflected in the accompanying consolidated balance sheets as they did not yet meet the asset recognition criteria for content assets. Content obligations of $16.4 million and $2.5$9.8 million are expected to be paid during the six months endingthrough December 31, 2022, and $6.7 million 2023, respectively.At$29.4$29.3 million of obligations that are not reflected in the accompanying unaudited consolidated balance sheets as they did not yet meet the asset recognition criteria for content assets.regardsrespect to future advertising and marketing expenses as stated in the various licensee agreements.agreements to which the Company is party. Certain of the agreements do not specify the amount of advertising and marketing commitment; however, the total commitments for agreements which do specify the amount are $10.8JuneSeptember 30, 2022, of which $10.1$6.0 million $0.5is expected to be paid through December 31, 2022, and $0.6 million and $0.2 $0.5 six months ending December 31, 2022 and years ending December1413 — Income taxesand six months ended JuneSeptember 30, 2022 and 2021, and $0.2 million andItem 2. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsSEC.Securities Exchange Commission (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. FactorsRisk 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, 2021, filed with the Securities and Exchange Commission (“SEC”)SEC on March 31, 2022, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, filed with the SEC on May 16, 2022. 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.OverviewProgram Sales, Corporate & Association PartnershipsContent Licensing, Enterprise subscriptions and Other. The table below shows our revenue generated through each of the foregoing products and services for the three and sixnine months ended JuneSeptember 30, 2022 and 2021: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Direct to Consumer (Subscriptions – O&O and App Services) $ 7,363 33 % $ 5,647 37 % $ 14,554 36 % $ 10,462 41 % Partner Direct Business (License Fees – Affiliates) 1,191 5 % 1,041 7 % 2,334 6 % 2,018 8 % Bundled Distribution (License Fees – Affiliates) 3,888 18 % 3,538 23 % 7,655 19 % 7,064 28 % Program Sales 6,655 30 % 5,031 33 % 10,904 27 % 5,517 22 % Corporate & Association Partnerships (Subscriptions – O&O Service) 1,559 7 % 33 0 % 2,722 7 % 95 0 % Other 1,692 7 % 54 0 % 1,806 5 % 124 1 % Total Revenues $ 22,348 $ 15,344 $ 39,975 $ 25,280 Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (in thousands,
except percentages) (in thousands, except
percentages) $ 7,432 32 % $ 6,346 34 % $ 21,985 35 % $ 16,808 39 % $ 1,157 5 % $ 1,057 6 % $ 3,491 5 % $ 3,075 7 % $ 2,595 11 % $ 3,574 19 % $ 10,250 16 % $ 10,638 24 % $ 10,790 45 % $ 6,760 36 % $ 21,692 34 % $ 12,277 28 % $ 1,418 6 % $ 39 0 % $ 4,143 7 % $ 134 0 % $ 177 1 % $ 929 5 % $ 1,983 3 % $ 1,053 2 % $ 23,569 $ 18,705 $ 63,544 $ 43,985 languages—so far.languages.Program Sales Business,Content Licensing business, we sell to certain media companies a collection of our existing titles in a traditional program sales 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 program sales revenue.Corporate & Association PartnershipsEnterprise 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.” ToAs of the date over 27of this Quarterly Report on Form 10-Q, 25 companies have purchased annual subscriptions at bulk discounts for their employees.discounts.Revenues subscriber fees from Corporate & Association Partnerships, (iii) license fees from affiliates who receive subscriber fees for CuriosityStream from such affiliates’ subscribers (“Partner Direct Business” and “Partner Direct Subscribers”), (iv) license fees from(iii) bundled license fees from distribution affiliates (“Bundled MVPD Business” and “Bundled MVPD Subscribers”), (v)(iv) license fees from program salescontent licensing arrangements (“Content Licensing”), (v) subscriber fees from our Enterprise business, and (vi) Other revenue, including advertising and sponsorships. As of JuneSeptember 30, 2022, we had approximately 2523.0 million total paying subscribers, including Direct Subscribers, Partner Direct Subscribers, Bundled MVPD Subscribers and Corporate & Association PartnershipsEnterprise subscribers.sixnine months ended JuneSeptember 30, 2022 and 2021 and shows our results of operations as a percentage of revenue or as a percentage of costs, as applicable, for the periods indicated. We conduct business through one operating segment, CuriosityStream.JuneSeptember 30, 2022 and 2021 Three months ended September 30, 2022 2021 $ Change (unaudited) (in thousands) $ 8,850 38 % $ 6,385 34 % $ 2,465 39 % 14,542 61 % 11,391 61 % 3,151 28 % 177 1 % 929 5 % (752 ) (81 %) $ 23,569 100 % $ 18,705 100 % $ 4,864 26 % 13,566 49 % 9,553 35 % 4,013 42 % 5,626 20 % 9,320 35 % (3,694 ) (40 %) 8,757 31 % 8,058 30 % 699 9 % — 0 % — 0 % — n/m $ 27,949 100 % $ 26,931 100 % $ 1,018 4 % (4,380 ) (8,226 ) 3,846 (47 %) 514 8,345 (7,831 ) (94 %) (478 ) 595 (1,073 ) (180 %) (94 ) 165 (259 ) (157 %) $ (4,438 ) $ 879 $ (5,317 ) n/m 64 49 15 31 % $ (4,502 ) $ 830 $ (5,332 ) n/m Three months ended June 30, 2022 2021 $ Change % Change (unaudited)
(in thousands) Revenues Subscriptions $ 8,922 40 % $ 5,680 37 % $ 3,242 57 % License fee 11,734 52 % 9,610 63 % 2,124 22 % Other 1,692 8 % 54 0 % 1,638 n/m Total Revenues $ 22,348 100 % $ 15,344 100 % $ 7,004 46 % Operating expenses Cost of revenues 12,988 34 % 5,722 22 % 7,266 127 % Advertising and marketing 11,208 29 % 11,520 44 % (312 ) (3 %) General and administrative 10,603 28 % 9,153 34 % 1,450 16 % Impairment of goodwill and intangible assets 3,603 9 % - 0 % 3,603 n/m Total operating expenses $ 38,402 100 % $ 26,395 100 % $ 12,007 45 % Operating loss (16,054 ) (11,051 ) (5,003 ) 45 % Other income (expense) Change in fair value of warrant liability 478 1,764 (1,286 ) (73 %) Interest and other (expense) income (29 ) 1,036 (1,065 ) n/a Equity interests loss (316 ) - (316 ) n/m Loss before income taxes $ (15,921 ) $ (8,251 ) $ (7,670 ) 93 % Provision for income taxes 56 53 3 6 % Net loss $ (15,977 ) $ (8,304 ) $ (7,673 ) 92 % RevenueJuneSeptember 30, 2022 and 2021 was $22.3$23.6 million and $15.3$18.7 million, respectively. The increase of $7.0$4.9 million, or 46%26%, is primarily due to a $3.2$2.5 million increase in subscription revenue, and a $2.1$3.2 million increase in license fee revenue, andpartially offset by a $1.6$0.8 million increasedecrease in other revenue.$3.2$2.5 million resulted primarily from a $1.6 million increase in subscriber fees received from Direct Subscribers for annual and monthly plans and a $1.3$1.4 million increase in corporate subscriptions related to the bulk agreements executed in the last quarter of 2021. 2021 and a $1.1 million net increase in subscriber fees received from Direct Subscribers for annual and monthly plans.$2.1$3.2 million resulted primarily from a $1.6$4.0 million increase in license fees related to a larger volume of program salescontent licensing arrangements and a $0.5$0.4 million increase in revenue from new bundled distribution agreements, partially offset by a decrease of $1.4 million due to new agreements launchedthe non-renewal of a bundled distribution agreement in the second halfthird quarter of 2021. 2022.increasedecrease in other revenue of $1.6$0.8 million is primarily due to revenue generated in the current quarter related to an advertisinga one-time services agreement entered into with an affiliate.affiliate during the three months ended September 30, 2021 that did not have any corresponding revenue during the three months ended September 30, 2022.JuneSeptember 30, 2022 and 2021 were $38.4$27.9 million and $26.4$26.9 million, respectively. ThisThe increase of $12.0$1.0 million, or 45%4%, primarily resulted from the following:JuneSeptember 30, 2022 increased to $13.0$13.6 million from $5.7$9.6 million for the three months ended JuneSeptember 30, 2021. Cost of revenues primarily includes content amortization, hosting and streaming delivery costs, payment processing costs and distribution fees, commission costs and subtitling and broadcast costs. ThisThe increase of $7.3$4.0 million, or 127%42%, is primarily due to thean increase in content amortization of $5.8$3.2 million, which is primarily driven by thean increase in program sales arrangements resulting in significant accelerated amortization as well ason certain content licensing arrangements and an increase in the number and cost of titles published during the three months ended JuneSeptember 30, 2022 compared to the three months ended JuneSeptember 30, 2021. The balance of the increase in cost of revenues is primarily due to a $1.3$0.9 million increase in revenue share expense related to bundled and premier tier arrangements with other streaming services as well as cost of advertising and an increase of $0.2 million in sales commissions, subtitling and broadcast costs.services.JuneSeptember 30, 2022, decreased to $11.2$5.6 million from $11.5$9.3 million for the three months ended JuneSeptember 30, 2021. This decrease of $0.3$3.7 million, or 3%40%, is primarily due to a decrease in digital and TV advertising, partner platforms and agency fees of $2.5$5.9 million, partially offset by an increase of $2.2 million in radio and TV advertising compared to the prior year period.JuneSeptember 30, 2022 increased to $10.6$8.8 million from $9.2$8.1 million for the three months ended JuneSeptember 30, 2021. This increase of $1.4$0.7 million, or 16%9%, is primarily attributable to incrementalan increase in legal, tax and accounting fees of $1.6 million, partially offset by a decrease of $0.9 million in salaries and benefits.other compensation expenses.Impairment of Goodwill and Intangible Assets: The increase of $3.6 million in operating expenses for the three months ended June 30, 2022 was the result of the impairment analysis performed during the current quarter. The analysis resulted in an impairment charge of $0.8 million related to intangible assets and an impairment charge against the entire balance of goodwill for $2.8 million. There were no such impairment charges recorded during the three months ended June 30, 2021.JuneSeptember 30, 2022 and 2021 was $16.1$4.4 million and $11.1$8.2 million, respectively. The increasedecrease in our operating loss of $5.0$3.8 million, or 45%47%, resulted primarily from the increase in operating loss resulted fromrevenue of $4.9 million, or 26%, partially offset by the increase in operating expenses of $12.0$1.0 million, or 45%, including the impairment of goodwill and intangible assets of $3.6 million, offset by an increase in revenue of $7.0 million, or 46%4%, in each case during the three months ended JuneSeptember 30, 2022 compared to the three months ended JuneSeptember 30, 2021, as described above.JuneSeptember 30, 2022, the Company recognized a $0.5 million gain compared to a gain of $1.8$8.3 million recognized during the three months ended JuneSeptember 30, 2021, each resulting from a decrease in the fair value of the liabilities related to the Private Placement Warrants for the respective periods. (Expense) (expense) for the three months ended JuneSeptember 30, 2022 was less than $0.1$0.5 million in expense compared to $1.0$0.6 million in income for the three months ended JuneSeptember 30, 2021, primarily due to greaterlower interest income from debt investments incompared to the prior year period.JuneSeptember 30, 2022, the Company recorded $0.3a $0.1 million equity interests loss related to theon its equity investments in theNebula and Spiegel Venture, and Nebula with no comparablecompared to $0.2 million equity interests income or loss in the three months ended JuneSeptember 30, 2021.a losslosses before income taxes in each of the three months ended JuneSeptember 30, 2022 and 2021, we had a provision for income taxes of $56 thousand and $53 thousand, respectively. This slight increase of $3 thousand, or 6%, was$0.1 million in each respective period. The provision for income taxes is primarily duerelated to an increase in foreign withholding tax expense due to an increase in contracts executed with parties in foreign jurisdictions. The Company’sincome taxes. Our provision for income taxes differs from the federal statutory rate primarily due to the Company being in a full valuation allowance position and not recognizing a tax benefit attributable to generated losses for either federal or state income tax purposes.Loss(Loss) IncomeJuneSeptember 30, 2022 andwas $4.5 million, compared to net income for the three months ended September 30, 2021 was $16.0 million and $8.3 million, respectively.of $0.8 million. The increase ofto the net loss of $7.7$5.3 million, or 92%, is primarily due to the increase in total operating expenses of $12$1.0 million, or 45%, consisting primarily of the increase in cost of revenues and goodwill and intangible assets impairment charges, the $1.3 milliona decrease in the gain related to the change in the fair value of the warrant liability of $7.8 million, and the $1.1 milliona decrease in interest and other (expense) income of $1.1 million, partially offset by the increase in total revenues of $7.0 million or 46%, in$4.9 million. In each case duringthe impacts to net (loss) income compare the three months ended JuneSeptember 30, 2022 compared to the three months ended JuneSeptember 30, 2021, as described above.sixnine months ended JuneSeptember 30, 2022 and 2021 Six months ended June 30, 2022 2021 $ Change % Change (unaudited) (in thousands) Revenues Subscriptions $ 17,276 43 % $ 10,557 42 % $ 6,719 64 % License fee 20,893 52 % 14,599 58 % 6,294 43 % Other 1,806 5 % 124 0 % 1,682 n/m Total Revenues $ 39,975 100 % $ 25,280 100 % $ 14,695 58 % Operating expenses Cost of revenues 24,838 33 % 9,880 19 % 14,958 151 % Advertising and marketing 25,976 34 % 23,769 46 % 2,207 9 % General and administrative 21,106 28 % 17,885 35 % 3,221 18 % Impairment of goodwill and intangible assets 3,603 5 % - 0 % 3,603 n/m Total operating expenses $ 75,523 100 % $ 51,534 100 % $ 23,989 47 % Operating loss (35,548 ) (26,254 ) (9,294 ) 35 % Other income (expense) Change in fair value of warrant liability 4,338 (2,022 ) 6,360 n/m Interest and other (expense) income (86 ) 1,296 (1,382 ) n/m Equity interests loss (472 ) - (472 ) n/m Loss before income taxes $ (31,768 ) $ (26,980 ) $ (4,788 ) 18 % Provision for income taxes 101 79 22 28 % Net loss $ (31,869 ) $ (27,059 ) $ (4,810 ) 18 % Nine months ended September 30, 2022 2021 $ Change % Change (unaudited) (in thousands) $ 26,128 41 % $ 16,942 39 % $ 9,186 54 % 35,433 56 % 25,990 59 % 9,443 36 % 1,983 3 % 1,053 2 % 930 88 % $ 63,544 100 % $ 43,985 100 % $ 19,559 44 % 38,404 37 % 19,433 25 % 18,971 98 % 31,602 31 % 33,089 42 % (1,487 ) (4 %) 29,863 29 % 25,943 33 % 3,920 15 % 3,603 3 % — 0 % 3,603 n/m $ 103,472 100 % $ 78,465 100 % $ 25,007 32 % (39,928 ) (34,480 ) (5,448 ) 16 % 4,852 6,323 (1,471 ) (23 %) (564 ) 1,891 (2,455 ) (130 %) (566 ) 165 (731 ) n/m $ (36,206 ) $ (26,101 ) $ (10,105 ) 39 % 165 128 37 29 % $ (36,371 ) $ (26,229 ) $ (10,142 ) 39 % Revenuesixnine months ended JuneSeptember 30, 2022 and JuneSeptember 30, 2021 was $40.0$63.5 million and $25.3$44.0 million, respectively. The increase of $14.7$20.0 million, or 58%44%, is due to a $6.7$9.2 million increase in subscription revenue, a $6.3$9.4 million increase in license fee revenue and a $1.7$0.9 million increase in other revenuerevenue.$6.7$9.2 million resulted primarily from a $4.1$5.2 million increase in subscriber fees received from Direct Subscribers for annual and monthly plans and a $2.6$4.0 million increase in corporate subscriptions related to subscription bulk agreements. agreements.$6.3$9.4 million resultedis primarily fromdue to a $5.3$9.4 million increase in license fees related toas a result of a larger volume of program salescontent licensing arrangements, a $0.6 millionan increase in bundled distribution due to new agreements launched in the second half of 2021 and a $0.4 million increase in Partner Direct revenues due to increasedfrom an increase in subscribers to our partner’s respective platforms.platforms and $1.0 million in revenue from new bundled distribution agreements, partially offset by a decrease of $1.4 million from the non-renewal of a bundled distribution agreement in the third quarter of 2022.sixnine months ended JuneSeptember 30, 2022 and 2021 were $75.5$103.5 million and $51.5$78.5 million, respectively. ThisThe increase of $24.0$25.0 million, or 47%32%, primarily resulted from the following:sixnine months ended JuneSeptember 30, 2022 increased to $24.8$38.4 million from $9.8$19.4 million for the sixnine months ended JuneSeptember 30, 2021. Cost of revenues primarily includes content amortization, hosting and streaming delivery costs, payment processing costs and distribution fees, commission costs and subtitling and broadcast costs. ThisThe increase of $15.0$19.0 million, or 151%98%, is primarily due to the increase in content amortization of $12.2$15.3 million, which is primarily driven by thean increase in program sales arrangements resulting in significant accelerated amortization as well ason certain content licensing arrangements and an increase in the number and cost of titles published during the sixnine months ended JuneSeptember 30, 2022 compared to the sixnine months ended JuneSeptember 30, 2021. The balance of the increase in cost of revenues is primarily due to a $2.5$3.0 million increase in revenue share expense related to bundled and premier tier arrangements with other streaming services and an increase of $0.3 million in subtitling and broadcast costs.costs of $0.4 million.sixnine months ended JuneSeptember 30, 2022, increaseddecreased to $26.0$31.6 million from $23.8$33.1 million for the sixnine months ended JuneSeptember 30, 2021. This increaseThe decrease of $2.2$1.5 million, or 9%4%, is primarily due to a decrease in digital and TV advertising, partner platforms and agency fees of $9.3 million, partially offset by an increase in radio advertising of $5.6$7.8 million and an increase in digital advertising of $0.6 million, partially offset by a decrease of $4.0 million in partner platforms, TV advertising and agency fees compared to the prior year period.sixnine months ended JuneSeptember 30, 2022 increased to $21.1$29.9 million from $17.9$25.9 million for the sixnine months ended JuneSeptember 30, 2021. This increase of $3.2$4.0 million, or 18%15%, is primarily attributable to $2.2an increase in legal, tax and accounting fees of $2.4 million for incrementaland an increase in salaries and benefits as well as smaller increases to various other expense categories, including licenses and subscriptions and professional fees.compensation expenses of $0.8 million.sixnine months ended JuneSeptember 30, 2022 is the result of the impairment analysis performed as of June 30, 2022. The analysis resulted in an impairment charge of $0.8$2.8 million related to intangible assets and an impairment charge against the entire balance of goodwill for $2.8 million.and $0.8 million to intangible assets. There were no such impairment charges recorded during the sixnine months ended JuneSeptember 30, 2021.sixnine months ended JuneSeptember 30, 2022 and 2021 was $35.6$39.9 million and $26.3$34.5 million, respectively. The increase of $9.3$5.4 million, or 35%16%, in operating loss resulted from the increase in operating expenses of $24.0$25.0 million, or 47%, including the impairment of goodwill and intangible assets of $3.6 million, offset by an increase in revenue of $14.7$20.0 million, or 58%, in each case during the sixnine months ended JuneSeptember 30, 2022 compared to the sixnine months ended JuneSeptember 30, 2021, as described above.sixnine months ended JuneSeptember 30, 2022, the Company recognized a $4.3$4.9 million gain relatedcompared to a $6.3 million gain recognized during the nine months ended September 30, 2021, each resulting from a decrease in the fair value of the liability related to Private Placement Warrants, compared to a loss of $2.2 million recognized during the six months ended June 30, 2021, which was due to an increase in the fair value of the liabilityliabilities related to the Private Placement Warrants infor the prior period.respective periods. (Expense) (expense) for the sixnine months ended JuneSeptember 30, 2022 was a $0.1$0.6 million in expense compared to $1.3$1.9 million in income for the sixnine months ended JuneSeptember 30, 2021, primarily due to greaterlower interest income from investments incompared to the prior year period.Loss(Loss) Incomesixnine months ended JuneSeptember 30, 2022, the Company recorded $0.5a $0.6 million equity interests loss related to theon its equity investments in theNebula and Spiegel Venture, and Nebula with no comparablecompared to $0.2 million equity interests income or loss in the sixnine months ended JuneSeptember 30, 2021.a losslosses before income taxes in each of the sixnine months ended JuneSeptember 30, 2022 and 2021, we had a provision for income taxes of $101 thousand$0.2 million and $79 thousand,$0.1 million, respectively. This increase of $22 thousand, or 28%, was primarily due to an increase in foreign withholding tax expense due to an increase in contracts executed with parties in foreign jurisdictions. The Company’s provision for income taxes differs from the federal statutory rateis primarily duerelated to the Company being in a full valuation allowance position and not recognizing a benefit for either federal or stateforeign withholding income tax purposes.taxes.sixnine months ended JuneSeptember 30, 2022 and 2021 was $31.9$36.4 million and $27.1$26.2 million, respectively. The increase ofin the net loss of $4.8$10.2 million, or 18%39%, is primarily due to the increase in total operating expenses of $24.0$25.0 million, or 47%, consisting of the increase in cost of revenues, general and administrative expenses, and goodwill and intangible assets impairment charges, and the $1.4 milliona decrease in interest and other (expense) income partially offset by the increaseof $2.5 million, and a decrease in total revenues of $14.7 million or 58% and the increase in gain related to the change in fair value of the warrant liability of $6.4$1.5 million, partially offset by the increase in total revenues of $20.0 million. In each case during the siximpacts to net loss compare the nine months ended JuneSeptember 30, 2022 compared to the sixnine months ended JuneSeptember 30, 2021, as described above.JuneSeptember 30, 2022, we had cash and cash equivalents, including restricted cash, of $23.3$47.3 million. In addition, the Company had available for sale investments in debt securities totaling $54.5$16.9 million, all of which were classified as short-term investments. All of the Company’s investments in debt securities can be readily converted to cash to meet the Company’s ongoing operating cash flow needs. For the sixnine months ended JuneSeptember 30, 2022, we incurred a net loss of $31.9$36.4 million and used $18.1$30.7 million of net cash in operating activities, while investing activities provided $24$60.7 million of net cash, and financing activities used $0.2 million of net cash.sixnine months ended JuneSeptember 30, 2022 and 2021: For the
six months ended
June 30, 2022 2021 (unaudited) (in thousands) Net cash used in operating activities $ (18,149 ) $ (23,356 ) Net cash provided by (used in) investing activities 24,024 (128,957 ) Net cash (used in) provided by financing activities (161 ) 148,679 Net increase (decrease) in cash, cash equivalents and restricted cash $ 5,714 $ (3,634 ) For the nine months ended September 30, 2022 2021 (unaudited) (in thousands) $ (30,744 ) $ (41,797 ) 60,701 (100,610 ) (178 ) 148,700 $ 29,779 $ 6,293 sixnine months ended JuneSeptember 30, 2022 and 2021, we recorded a net cash outflow from operating activities of $18.2$30.7 million and $23.4$41.8 million, respectively, or a decreased outflow of $5.2$11.1 million, or 22%26%. The decreased cash outflow from operating activities was primarily due to increased collections of our accounts receivable of $15.4 million,an increase in the volume of ourchange in accounts payable outstanding of $4.4$2.2 million increase in theand other assets of $4.7 million, increased amortization of content assets of $12.1$15.3 million, increase in other assets of $3.9 million, and the impairment of goodwill and intangibles of $3.6 million, and increased collections on accounts receivable from our customers of $12.4 million during the sixnine months ended JuneSeptember 30, 2022 compared to the sixnine months ended JuneSeptember 30, 2021. The decrease in outflow from operating activities was partially offset by increased investmentthe increase in content (shown bynet loss of $10.2 million, the decrease in the change in contentaccrued expenses and other liabilities and additions to content assets) of $11.3$5.4 million, and the decrease in deferred revenue change of $8.6$13.5 million for the sixnine months ended JuneSeptember 30, 2022, compared to the sixnine months ended JuneSeptember 30, 2021.sixnine months ended JuneSeptember 30, 2022 and JuneSeptember 30, 2021, we recorded a net cash inflow fromprovided by investing activities of $24.0$60.7 million and a net cash outflow fromused in investing activities of $129.0$100.6 million, respectively, or a decrease ofrespectively. The net cash outflow of $153.0 million, or 119%. The decrease in cash outflow frominflow provided by investing activities for the nine months ended September 30, 2022, was primarily due to the decreasesale and maturities of investments in debt securities of $64.8 million, partially offset by investments in Nebula of $2.4 million. The net cash outflow used in investing activities for the nine months ended September 30, 2021, was primarily due to purchases of available for sale investments in debt securities of $140.1$151.9 million, a net increaseinvestment in Nebula and Spiegel Venture of $9.3 million and business combinations of $5.4 million, which were partially offset by sales and maturities of those investments in debt securities of $10.4 million, as well as $1.6 million cash outflows related to equity investments during the three months ended June 30, 2022 as compared to $4.0 million cash outflows related to a business combination during the three months ended June 30, 2021.$66.5 million.sixnine months ended JuneSeptember 30, 2022 and 2021, we recorded net cash outflow from financing activities of $0.2 million and a net cash inflow from financing activities of $148.7 million, respectively. The net cash inflow during the sixnine months ended JuneSeptember 30, 2021 of $148.7 million was attributable to the receipt of proceeds from the issuance of common stock of $94.1 million (net of $6.8 million of underwriting discounts and commissions), the exercise of 4.8 million Public Warrants resulting in cash proceeds of $54.9 million, and the exercise of stock options of $0.4 million, partially offset by the payments of transaction costs related to the issuance of common stock of $0.7 million. There was no comparable activity during the sixnine months ended JuneSeptember 30, 2022.JuneSeptember 30, 2022, we had no off-balance sheet arrangements.program sales.content licensing.As a result of a sustained decrease in the Company’s share price during the six months ended June 30, 2022, we concluded that a triggering event had occurred and conducted impairment testing of our content assets. As a result of this review, we determined no impairment charges were necessary. Refer to the “Goodwill and intangible assets” section below for further details with respect to the impairment testing performed by the Company over its goodwill and definite-lived intangible assets as of June 30, 2022.As a result of a sustained decrease in the Company’s share price during the six months ended June 30, 2022, we concluded that a triggering event had occurred and conducted impairment testing of our goodwill and intangible assets.three months ended June 30,second quarter of 2022, the Company experienced a sustained decrease in its share price, and this triggering event was an indication that it was more likely than not that the fair value of the Company’s single reporting unit was below its carrying value. The Company performed an interim goodwill impairment test of its goodwill as of June 30, 2022 and recognized a goodwill impairment charge of $2.8 million during the three months ended June 30, 2022 as the fair value of the reporting unit was less than the related carrying value. This charge is included in impairment of goodwill and intangible assets on the Company’s unaudited consolidated statements of operations.operations for that period.three months ended June 30,second quarter of 2022, the Company also determined there were impairment indicators with respect to certain of the Company’s definite-lived intangible assets. As a result, the Company performed an impairment test by comparing the carrying values of the intangible assets to their respective fair values, which were determined based on forecasted future cash flows. As a result of this impairment test, the Company recorded an impairment charge of $0.8 million during the three months ended June 30, 2022, which is reflected as a component of impairment of goodwill and intangible assets on the Company’s unaudited consolidated statements of operations.operations for that period.
The Company generates license fee revenues from MVPDs such as Altice, Comcast and Cox as well as from vMVPDs such as Amazon and Sling TV (MVPDs and vMVPDs are also referred to as affiliates). Under the terms of the agreements with these affiliates, the Company receives license fees based upon contracted programming rates and subscriber levels reported by the affiliates. In exchange, the Company licenses its content to the affiliates for distribution to their subscribers. The Company earns revenue under these agreements either based on the total number of subscribers multiplied by rates specified in the agreements or based on fixed fee arrangements. These revenues are recognized over the term of each agreement when earned.
License Fees — Program SalesContent 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 Issued Financial Accounting Standards
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.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Not applicable.
| Item 4. | Controls and Procedures |
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in our reports that we file or submits under the Exchange Act are recorded, processed, summarized and reported within the specified time periods in the rules and forms of the SEC, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.
Our management, with the participation of the CEO and the CFO, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) promulgated under the Exchange Act) as of JuneSeptember 30, 2022. Based on these evaluations, our CEO and the CFO concluded that our disclosure controls and procedures were effective as of JuneSeptember 30, 2022.
Changes in Internal Control Over Financial Reporting
Our management is required to evaluate, with the participation of our CEO and our CFO, any changes in internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during each fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. There were no changes in our internal control over financial reporting during the quarter ended JuneSeptember 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
| Item 1. | Legal Proceedings. |
From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, if determined adversely to us, we believe would individually or in the aggregate have a material adverse effect on our business, results of operations, financial condition or cash flows.
| Item 1A. | Risk Factors. |
Item 1A. Risk Factors.
Factorsfactors that could cause our actual results to differ materially from those in this Quarterly Report on Form 10-Q are any of the risks described in our Annual Report on Form 10-K filed with the SEC on March 31, 2022 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, filed with the SEC on May 16, 2022. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
There have been no material changes from the risk factors previously disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 31, 2022 and our Quarterly Report on Form 10-Q filed with the SEC on May 16, 2022.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.None.
None.
| Item 3. | Defaults Upon Senior Securities. |
Item 3. Defaults Upon Senior Securities.None.
None.
Item 4. Mine Safety Disclosures.
| Item 4. | Mine Safety Disclosures. |
Not Applicable.
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| Item 5. | Other Information. |
Item 5. Other Information.None.
None.
Item 6. Exhibits
| Item 6. | Exhibits |
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| Incorporated By Reference | ||||||||||||
| Exhibit No. | Description | Form | File No. | Exhibit | Filing Date | Filed/Furnished Herewith | ||||||
| 3.1 | Second Amended and Restated Certificate of Incorporation | 8-K | 001-39139 | 3.1 | 10/15/2020 | |||||||
| 3.2 | Amended and Restated Bylaws | 8-K | 001-39139 | 3.2 | 10/15/2020 | |||||||
| 10.1 | Offer Letter between CuriosityStream Inc. and Peter Westley, dated May 21, 2022 | 8-K | 001-39139 | 10.1 | 5/24/2022 | |||||||
| 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 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||
| 101. INS** | Inline XBRL Instance Document | X | ||||||||||
| 101. SCH | Inline XBRL Taxonomy Extension Schema Document | X | ||||||||||
| 101. CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||||||
| 101. LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | X | ||||||||||
| 101. PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||||||||
| 101. DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||||
| 104 | Cover Page Interactive Data File (as formatted as Inline XBRL and contained in Exhibit 101) | X | ||||||||||
| Incorporated By Reference | ||||||||||||||||||||
Exhibit No. | Description | Form | File | Exhibit | Filing | 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 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||||||||||
| 101. INS** | Inline XBRL Instance Document | X | ||||||||||||||||||
| 101. SCH | Inline XBRL Taxonomy Extension Schema Document | X | ||||||||||||||||||
| 101. CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||||||||||||||
| 101. LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | X | ||||||||||||||||||
| 101. PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||||||||||||||||
| 101. DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||||||||||||
| 104 | Cover Page Interactive Data File (as formatted as Inline XBRL and contained in Exhibit 101) | X | ||||||||||||||||||
| * | 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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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.
| CURIOSITYSTREAM INC. | ||||||
| Date: November 10, 2022 | ||||||
/s/ Clint Stinchcomb | ||||||
| Name: | Clint Stinchcomb | |||||
| Title: | President and Chief Executive Officer | |||||
| (Principal Executive Officer) | ||||||
| Date: November 10, 2022 | ||||||
/s/ Peter Westley | ||||||
| Name: | Peter Westley | |||||
| Title: | Chief Financial Officer and Treasurer | |||||
| (Principal Financial and Accounting Officer) | ||||||
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