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

For the quarter ended June 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-39139

CuriosityStream Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

84-1797523

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

8484 Georgia Ave., Suite 700
Silver Spring, Maryland 20910

(Address of principal executive offices)

(301) 755-2050

(Issuer’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001	CURI	NASDAQ
Warrants, each exercisable for one share of Common Stock at an exercise price of $11.50 per share	CURIW	NASDAQ

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 11, 2022, there were 52,791,993 shares of Common Stock of the registrant issued and outstanding.

CURIOSITYSTREAM INC.

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2022

TABLE OF CONTENTS

		Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets		1
Consolidated Statements of Operations		2
Consolidated Statements of Comprehensive Loss		3
Consolidated Statements of Stockholder’s Equity (Deficit)		4
Consolidated Statements of Cash Flows		5
Notes to Unaudited Consolidated Financial Statements		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk		31
Item 4. Controls and Procedures		31
Part II. Other Information
Item 1. Legal Proceedings		32
Item 1A. Risk Factors		32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		32
Item 3. Defaults Upon Senior Securities		32
Item 4. Mine Safety Disclosures		32
Item 5. Other Information		33
Item 6. Exhibits		33
Part III. Signatures		34

CuriosityStream Inc.
Consolidated Balance Sheets
(in thousands, except par value)

	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; zero 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

The accompanying notes are an integral part of these consolidated financial statements.

CuriosityStream Inc.

Consolidated Statements of Operations

(in thousands, except for per share data)

(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

The accompanying notes are an integral part of these consolidated financial statements.

CuriosityStream Inc.

Consolidated Statements of Comprehensive Loss

(in thousands)

(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	)

The accompanying notes are an integral part of these consolidated financial statements.

CuriosityStream Inc.

Consolidated Statements of Stockholder’s Equity (Deficit)

(in thousands)

(unaudited)

													*Accumulated* *Other*						*Total*
	*Common Stock*					*Preferred Stock*				*Additional* *Paid-in*			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

The accompanying notes are an integral part of these consolidated financial statements.

CuriosityStream Inc.

Consolidated Statements of Cash Flows

(in thousands)

(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		11,893			(3,526	)
Other assets		4,040			185
Accounts payable		6,146			1,773
Accrued expenses and other liabilities		(2,850	)		1,091
Deferred revenue		(157	)		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⁾	Includes adoption of new leasing guidance effective January 1, 2022. See Note 12 for further details.

The accompanying notes are an integral part of these consolidated financial statements.

CuriosityStream Inc.
Notes to the Unaudited Consolidated Financial Statements
(in thousands, except share and per share data)

Note 1 — Organization and business

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 on-demand (SVoD) platform accessible by internet connected devices, or indirectly via distribution partners who deliver CuriosityStream content via the distributor’s platform or system. The online library available for streaming spans the entire category of factual entertainment including science, history, society, nature, lifestyle, and technology.

The Company’s content assets are available directly through its owned and operated website (“O&O Service”), mobile applications developed for iOS and Android operating systems (“App Services”), and via the platforms and systems of third-party partners in exchange for license fees. The Company offers subscribers a monthly or annual subscription. The price for a subscription varies depending on the streaming resolution (e.g., HD or 4K) and the length of the subscription (e.g., monthly or annual) selected by the customer. As an additional part of the Company’s App Services, it has built applications to make its service accessible on almost every major customer device, including streaming media players like Roku, Apple TV and Amazon Fire TV, all major smart TV brands (e.g., LG, Vizio, Samsung, Sony) and gaming consoles. In addition, CuriosityStream has affiliate agreement relationships with, and its content assets are available through, certain multichannel video programming distributors (“MVPDs”) and virtual MVPDs (“vMVPDs”). The Company also has distribution agreements which grant other media companies certain distribution rights to the Company’s programs, referred to as program sales deals. The Company also sells selected rights (such as in territories or on platforms that are not currently being exploited by the Company) to content created before production begins.

Note 2 — Basis of presentation and summary of significant accounting policies

Basis of presentation

The accompanying unaudited consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and are consistent in all material respects with those applied in the Company’s consolidated financial statements as of and for the year ended December 31, 2021.

In the opinion of management, the unaudited consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair presentation of the Company’s financial position, results of operations, and cash flows. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes and Management’s Discussion and Analysis of Financial Condition, and Results of Operations included in the Annual Report on Form 10-K for the year ended December 31, 2021. The results of operations for the three and six months ended June 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.

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.

Use of estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP 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.

Concentration of risk

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents, investments, and accounts receivable. The Company maintains its cash, cash equivalents, and investments with high credit quality financial institutions; at times, such balances with the financial institutions may exceed the applicable FDIC-insured limits.

Accounts receivable are typically unsecured and are derived from revenues earned from customers primarily located in the United States.

Fair value measurement of financial instruments

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The applicable accounting guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:

●

Level 1 — Quoted prices in active markets for identical assets or liabilities.

●

Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

●

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification at each reporting period. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

The Company’s assets measured at fair value on a recurring basis include its investments in money market funds and corporate, U.S. government, and municipal debt securities. Level 1 inputs were derived by using unadjusted quoted prices for identical assets in active markets and were used to value the Company’s investments in money market funds and U.S. government debt securities. Level 2 inputs were derived using prices for similar investments and were used to value the Company’s investments in corporate and municipal debt securities.

The Company’s liabilities measured at fair value on a recurring basis include its private placement warrants issued to Software Acquisition Holdings LLC in a private placement that closed concurrently with the Company’s initial public offering (the “Private Placement Warrants”). The fair value of the Private Placement Warrants is considered a Level 3 valuation and is determined using the Black-Scholes valuation model. Refer to Note 7 for significant assumptions which the Company used in the fair value model for the Private Placement Warrants.

The Company’s remaining financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses and other liabilities are carried at cost, which approximates fair value because of the short-term maturity of these instruments.

Recently Issued and Adopted Financial Accounting Standards

As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act until such time as the Company is no longer considered to be an EGC.

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), which supersedes the historical lease guidance under Accounting Standards Codification (ASC) 840. Topic 842 increases transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements for both lessees and lessors. The Company adopted the new standard effective January 1, 2022, using the modified retrospective method and electing to use the package of practical expedients permitted under the transition guidance, which allows for the carry forward of historical lease classification for existing leases on the adoption date and does not require the assessment of existing lease contracts to determine whether the contracts contain a lease or initial direct costs. Prior periods were not retrospectively adjusted.

The adoption of this standard resulted in the recognition of operating lease liabilities of $5.3 million with corresponding right-of-use (ROU) assets in the amount of $4.0 million, net of existing deferred rent and lease incentives of $1.3 million. The Company did not have any finance lease liabilities as of the adoption date. There was no cumulative effect adjustment to the opening balance of accumulated deficit as of January 1, 2022. Adoption of this new guidance did not have an impact on the unaudited consolidated statements of operations or cash flows. Refer to Note 12 for further information regarding the impact of adoption of Topic 842 on the Company’s unaudited consolidated financial statements.

Accounting Standards Effective in Future Periods

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326), which requires that an entity measure and recognize expected credit losses for financial assets held at amortized cost and replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that requires consideration of a broader range of information to estimate credit losses. The guidance also modifies the impairment model for available-for-sale debt securities. ASU 2016-13 is effective for the Company’s fiscal year beginning January 1, 2023. The Company does not expect the implementation of ASU 2016-13 to have a material impact on its consolidated financial statements.

Note 3 – Equity Investments

Spiegel TV Geschichte und Wissen GmbH & Co. KG (the “Spiegel Venture”)

In July 2021, the Company acquired 32% ownership in the Spiegel Venture for $3.3 million. The Spiegel Venture, which prior to the Company’s equity purchase, was jointly owned and operated by Spiegel TV and Autentic, operates two documentary channels, together with various SVoD services, which provide factual content to pay television audiences in Germany. The Company has not received any dividends from the Spiegel Venture as of June 30, 2022.

Watch Nebula LLC (“Nebula”)

On August 23, 2021, the Company purchased a 12% ownership interest in Watch Nebula LLC for $6.0 million. Nebula is an SVoD technology platform built for and by a group of content creators. The Company is committed to purchasing an additional 13% ownership interest through eight quarterly payments of $0.8 million, which after each payment, the Company will obtain an additional 1.625% of equity ownership interests. Prior to the Company’s investment, Nebula was a 100% wholly owned subsidiary of Standard Broadcast LLC (“Standard”). 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 June 30, 2022.

The Company’s carrying values for its equity method investments as of June 30, 2022 and December 31, 2021 is as follows:

	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.

Note 4 —Balance sheet components

Cash and cash equivalents and restricted cash

A reconciliation of the Company’s cash and cash equivalents in the consolidated balance sheets to cash, cash equivalents and restricted cash in the consolidated statements of cash flows as of June 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

At June 30, 2022, restricted cash includes cash deposits required by a bank as collateral related to corporate credit card agreements of $0.5 million. On April 16, 2022, the Paycheck Protection Program (PPP) loan was forgiven, and $1.2 million of funds were released from escrow to the Company and reclassified from restricted cash to cash and cash equivalents (see Note 6). On May 11, 2022, the One Day University (ODU) holdback of $0.5 million was paid to ODU from escrow funds previously classified as restricted cash.

Investments in debt securities

The Company’s investments in debt securities at fair value based on unadjusted quoted market prices (Level 1) and quoted prices for comparable assets (Level 2) are:

	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

The following tables summarize the Company’s corporate, U.S. government, and municipal debt securities:

	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

	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

There were no material realized gains or losses recorded during the three and six months ended June 30, 2022 or 2021.

Content assets

Content assets consisted of the following:

	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

As of June 30, 2022, $5.4 million, $3.3 million, and $1.6 million of the $12.3 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 June 30, 2022, $7.2 million, $6.9 million, and $6.0 million of the $26.7 million unamortized cost of the produced content that has been released is expected to be amortized in each of the next three years.

In accordance with its accounting policy for content assets, the following tables represent the amortization of content assets:

	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

Goodwill and intangible assets

Changes in goodwill for the six months ended June 30, 2022 is as follows (in thousands):

Balance at December 31, 2021	$	2,793
Impairment of goodwill		2,793
Balance at June 30, 2022	$	-

During the three months ended June 30, 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.

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 three months ended June 30, 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.

Warrant liability

As described in Note 7, the Private Placement Warrants are classified as a non-current liability and reported at fair value at each reporting period. The fair value of the Private Placement Warrants as of June 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

Note 5 — Revenue

The following table sets forth the Company’s revenues disaggregated by type for the three and six months ended June 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

(1)

For the three and six months ended June 30, 2022, total related party revenue was $2.1 million, consisting of $0.5 million for the three and six months ended June 30, 2022 for content licensed by the Company to the Spiegel Venture included in License fee – Program Sales and $1.6 million for the three and six months ended June 30, 2022 for marketing services rendered to Nebula, which is included in Other revenue.

(2)

In addition to (1) above, Other revenue for the three and six months ended June 30, 2022 includes other marketing services for $0.1 million and $0.2 million, respectively.

Revenues expected to be recognized in the future related to performance obligations that are unsatisfied at June 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

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.

Contract liabilities (i.e., deferred revenue) consists of subscriber and affiliate license fees billed that have not been recognized, amounts contractually billed or collected for program sales in advance of the related content being made available to the customer, and unredeemed gift certificates and other prepaid subscriptions that have not been redeemed. Total deferred revenues were $23.0 million and $23.2 million at June 30, 2022 and December 31, 2021, respectively.

Revenues of $6.2 and $16.1 million were recognized during the three and six months ended June 30, 2022, related to the balance of deferred revenue at December 31, 2021.

Note 6 — Paycheck Protection Program Loan

On 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’ equity

Common Stock

As of June 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.

Warrants

As of June 30, 2022, the Company had A) 3,054,203 publicly traded warrants that were (i) sold as part of the units of Software Acquisition Group Inc. in its initial public offering on November 22, 2019 and (ii) issued to the PIPE Investors in connection with our business combination that closed on October 14, 2020 (the “Public Warrants”) and B) 3,676,000 Private Placement Warrants outstanding. Private Placement Warrants are liability-classified, and the Public Warrants are equity-classified.

Each whole warrant entitles the registered holder to purchase one share of the Company’s common stock at an exercise price of $11.50 per share. All Warrants will expire October 14, 2025.

The Company has the right to redeem the outstanding Public Warrants in whole and not in part at a price of $0.01 per warrant upon a minimum of 30 days’ prior written notice of redemption, if and only if the last sale price of the Company’s common stock matched or exceeded $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sent the notice of redemption to the warrant holders.

The Private Placement Warrants are identical to the Public Warrants except that, so long as they are held by Software Acquisition Group LLC or its permitted transferees: (i) they will not be redeemable by the Company; (ii) they may be exercised by the holders on a cashless basis; and (iii) they are subject to registration rights.

There were no exercises of warrants during the three and six months ended June 30, 2022.

The warrant liability related to the Private Placement Warrants is recorded at fair value as of each reporting date with the change in fair value reported within other income (expense) in the accompanying unaudited consolidated statements of operations as “Change in fair value of warrant liability” until the warrants are exercised, expired or other facts and circumstances lead the warrant liability to be reclassified to stockholder’s equity (deficit). The fair value of the warrant liability for the Private Placement Warrants was estimated using a Black-Scholes pricing model using Level 3 inputs. The significant assumptions used in preparing the Black-Scholes option pricing model are as follows:

	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

The change in fair value of the private placement warrant liability for the three and six months ended June 30, 2022 resulted in a gain of $0.5 million and $4.3 million, respectively, and for the three and six months ended June 30, 2021 resulted in a gain of $1.8 million and a loss of $2.0 million, respectively.

Note 8 — Earnings (loss) per share

Basic and diluted earnings (loss) per share calculations are calculated on the basis of the weighted average number of shares of the Company’s common stock outstanding during the respective periods. Diluted earnings (loss) per share give effect to all dilutive potential common shares outstanding during the period using the treasury stock method for stock options and other potentially dilutive securities. In computing diluted earnings (loss) per share, the average fair value of the Company’s common stock for the period is used to determine the number of shares assumed to be purchased from the exercise price of the options. Purchases of treasury stock reduce the outstanding shares commencing on the date that the stock is purchased. Common stock equivalents are excluded from the calculation when a loss is incurred as their effect would be anti-dilutive.

	Three months ended June 30,						Six months ended June 30,
	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	)

For the three and six months ended June 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) represent the total amount of outstanding warrants, stock options, and restricted stock units at June 30, 2022 and 2021.

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

SEC Form 10-Q filed by CuriosityStream Inc.