# CuriosityStream Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [CuriosityStream Inc.](/companies/curi.md) (CIK 1776909)
- Form: 10-Q
- Filed: 2023-11-13
- Accepted by EDGAR: Nov 13, 2023, 16:49 ET
- Period: 2023-09-30
- Accession: 0001628280-23-038664
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1776909/000162828023038664/curi-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1776909/000162828023038664/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $15.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $42.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$23.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$39.7m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $100.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $500.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$26.6m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$44.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.50 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.83 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.50 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.83 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 53,040,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 52,999,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$13.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $5.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-09-30 | $40.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $49.1m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $106.3m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $24.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $29.4m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | $76.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 43,817 characters.

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our results of operations and financial condition. The following discussion should be read in conjunction with the Company’s unaudited consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “we,” “us,” “our,” and “the Company” are intended to mean the business and operations of CuriosityStream Inc.

### CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain statements that are, or may deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding the Company’s plans, expectations, thoughts, beliefs, estimates, goals and outlook for the future that are intended to be covered by the protections provided under the Private Securities Litigation Reform Act of 1995.

All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q including, without limitation, statements under this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Quarterly Report on Form 10-Q, words such as “anticipate,” “attribute,” “believe,” “continue,” “hope,” “estimate,” “expect,” “intend,” “may,” “might,” “potential,” “seek,” “should,” “will” and “would,” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on the Company’s behalf are qualified in their entirety by this paragraph. These forward-looking statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those included in forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 31, 2023, and any other subsequent periodic reports and future periodic reports. We assume no obligation to revise or publicly release any revision to any forward-looking statements contained in this Quarterly Report on Form 10-Q, unless required by law.

### OVERVIEW

Created by John Hendricks, founder of the Discovery Channel and former Chairman of Discovery Communications, CuriosityStream is a media and entertainment company that offers premium video and audio programming across the principal categories of factual entertainment, including science, history, society, nature, lifestyle and technology. Our mission is to provide premium factual entertainment that informs, enchants and inspires.

We seek to meet demand for high-quality factual entertainment via subscription video on-demand (“SVOD”) platforms, as well as via bundled content licenses for SVOD and linear offerings, content licensing, brand sponsorship and advertising, talks and courses and partner bulk sales.

The main sources of our revenue are (a) subscriber and license fees earned from our Direct Business (“Direct Business”), (b) license fees from content licensing arrangements (“Content Licensing”), (c) bundled license fees from distribution affiliates (“Bundled Distribution”), (d) subscriber fees from our Enterprise business (“Enterprise”), and (e) Other revenue, including advertising and sponsorships (“Other”).

We operate our business as a single operating segment that provides premium streaming content through multiple channels, including the use of various applications, partnerships and affiliate relationships. We generate our revenue through five products and services: Direct Business, Bundled Distribution, Content Licensing, Enterprise and Other.

The following table is a summary of our revenues for the three and nine months ended September 30, 2023, and 2022:

*(In thousands)*

|  | Three Months Ended September 30, 2023 |  | 2022 |  | Nine Months Ended September 30, 2023 |  | 2022 |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Direct Business | $8,574 | 55% | $8,589 | 36% | $25,466 | 60% | $25,476 | 40% |
| Content Licensing | 5,082 | 33% | 10,790 | 46% | 10,715 | 25% | 21,692 | 34% |
| Bundled Distribution | 1,504 | 10% | 2,595 | 11% | 4,487 | 12% | 10,250 | 16% |
| Enterprise | 34 | 0% | 1,418 | 6% | 115 | 0% | 4,143 | 7% |
| Other | 436 | 3% | 177 | 1% | 1,331 | 3% | 1,983 | 3% |
| **Revenues** | **$15,630** |  | **$23,569** |  | **$42,114** |  | **$63,544** |  |

CuriosityStream’s award-winning content library features more than 15,000 programs that explore topics ranging from space engineering to ancient history to the rise of Wall Street. Our extensive catalog of originally produced and owned content includes approximately 10,000 short-, mid- and long-form video and audio titles, including One Day University and Learn 25 recorded lectures that are led by some of the most acclaimed college and university professors in the world. Our library also features a rotating catalog of more than 5,000 internationally licensed videos and audio programs. Every month, we launch dozens of new video titles, which are available on-demand in high- or ultra-high definition. Through new and long-standing international partnerships, we have localized a large portion of our video library from English to ten different languages.

Our Direct Business revenue is derived from consumers subscribing directly through our owned and operated website (“O&O Service”), App Services, and Partner Direct relationships. Our O&O Direct-to-Consumer service is available in more than 175 countries to any household with a broadband connection. As of March 27, 2023, we increased our standard pricing for new subscribers to this service to $4.99 per month or $39.99 per year. We are currently in the process of raising the prices for our legacy subscribers, who had previously paid $2.99 per month or $19.99 per year. We also provide a Smart Bundle service for $9.99 per month or $69.99 per year. Our Smart Bundle membership includes everything in our standard service, plus subscriptions to third-party platforms Tastemade, Topic, SommTV, DaVinci Kids, our equity investee Watch Nebula, LLC (“Nebula”), and our One Day University stand-alone service.

Our App Services enable access to CuriosityStream on almost every major consumer device, including streaming media players like Roku, Apple TV and Amazon Fire TV, major smart TV brands (e.g., LG, Vizio, Samsung) and gaming consoles. The multichannel video programming distributors (“MVPDs”), virtual MVPDs (“vMVPDs”) and digital distributor partners making up our Partner Direct Business pay us a license fee for sales to individuals who subscribe to CuriosityStream via the partners’ respective platforms. We have affiliate agreement relationships with, and our service is available directly from, major MVPDs that include Comcast, Cox, Dish and vMVPDs and digital distributors that include Amazon Prime Video Channels, Apple Channel, Roku Channel, Sling TV and YouTube TV.

With our Content Licensing business, we license to certain media companies a collection of our existing titles in a traditional content licensing deal. We also sell selected rights (such as in territories or on platforms that are lower priority for us) to content we create before we even begin production. This latter model reduces risk in our content development decisions and creates content licensing revenue.

In addition to our Direct Business described above, our Bundled Distribution business includes affiliate relationships with our Bundled MVPD Partners and vMVPDs, which are broadband and wireless companies in the U.S. and international territories to whom we can offer a broad scope of rights, including 24/7 “linear” channels, our on-demand content library, mobile rights and pricing and packaging flexibility, in exchange for an annual fixed fee or fee per subscriber.

Our Enterprise business is comprised primarily of providing subscriptions in bulk to companies and organizations that in turn offer these subscriptions to their employees and members as an employment benefit or “gift of curiosity.” Revenues from our Enterprise business are included within Subscriptions: O&O Services in *Note 5 - Revenue* in the *Notes to Unaudited Consolidated Financial Statements.*

Other revenue is primarily comprised of advertising and sponsorship revenue. We offer companies the opportunity to be associated with CuriosityStream content in a variety of forms, including short- and long-form program integration, branded social media promotional videos, advertising spots in our video and audio programs that are made available on our linear programming channels or in front of the paywall, and digital display ads.

Companies in the media industry commonly utilize trade and barter agreements in the normal course of business to reduce cash outlays for new content assets or other expenditures by exchanging existing content assets, advertising and other services. In the second quarter of 2023, we began entering into trade and barter transactions primarily for the purpose of exchanging content assets through licensing agreements with media counterparties. Certain transactions may also include the exchange of advertising, whereby we exchange media campaigns or other promotional services.

In the future, we hope to continue developing integrated digital brand partnerships with advertisers. These sponsorship campaigns offer companies the chance to be associated with CuriosityStream content in the forms described above. We believe the impressions accumulated in these multi-faceted campaigns would roll up to verifiable metrics for the clients.

### KEY FACTORS AFFECTING RESULTS OF OPERATIONS

Our future operating results and cash flows are dependent upon a number of opportunities, challenges, and other factors, including our ability to efficiently grow our subscriber base, increase our prices, and expand our service offerings to maximize subscriber lifetime value. In particular, we believe that the following factors significantly affected our results of operations over the last fiscal quarter and are expected to continue to have such significant effects:

### Revenues

Since the Company was founded in 2015, we have generated the majority of our revenues from consumers directly accessing our content in the form of monthly or annual subscription plans. We are currently in the process of raising the prices for our legacy subscribers, who had previously paid $2.99 per month or $19.99 per year. As of March 27, 2023, we increased our standard pricing for new subscribers to this service to $4.99 per month or $39.99 per year. We also provide a Smart Bundle service for $9.99 per month or $69.99 per year. Currently, our Smart Bundle pricing and pricing for most legacy subscribers remain unchanged. However, we may in the future increase the price of these existing subscription plans, which may have a positive effect on our revenue from this line of our business.

We pay a fixed percentage distribution fee to our partners for subscribers accessing our platform via App Services to compensate these partners for access to their customer and subscriber bases. The MVPD, vMVPD and digital distributor partners making up our Partner Direct Business pay us a license fee, and host and stream our content to their customers via their own platforms, such as set top boxes in the case of most MVPDs. We do not incur billing, streaming or backend costs associated with content distribution through our MVPD, vMVPD and digital distributor partners.

### Operating Costs

Our primary operating costs relate to the cost of producing and acquiring our content, the costs of advertising and marketing our service, personnel costs, and distribution fees. Producing and co-producing content and commissioned content is generally more costly than acquiring content through licenses. Cost of revenues encompasses content amortization, distribution fees, revenue sharing arrangements, hosting and streaming delivery costs, payment processing costs, commission costs, and subtitling and broadcast costs.

The Company’s primary business model is subscription based as opposed to a model generating revenues at a specific title level. Content assets (licensed and produced) are predominantly monetized as a group and therefore are reviewed in aggregate at a group level when an event or change in circumstances indicates a change in the expected usefulness of the content or that the fair value may be less than unamortized cost. If such changes are identified, the aggregated content library will be stated at the lower of unamortized cost or fair value. In addition, unamortized costs for assets that have been, or are expected to be, abandoned are written off. For a discussion of the accounting policies for content impairment write-down and management estimates involved therein, see *Critical Accounting Policies and Estimates* below.

Further, our advertising and marketing expenditures and personnel costs constitute primary operating costs for our business. These costs may fluctuate based on advertising and marketing objectives and personnel needs. In general, we intend to focus marketing dollars on efficient customer acquisition. With respect to personnel costs, we focus on revenue-generating personnel, such as sales staff and roles that support the improvement, maintenance and marketing of our Direct Service.

### RESULTS OF OPERATIONS

### Three Months Ended September 30, 2023

The financial data in the following table sets forth selected financial information derived from our unaudited consolidated financial statements for three months ended September 30, 2023, and 2022, and includes our results of operations as a percentage of revenue or as a percentage of costs, as applicable, for the periods indicated.

*(Unaudited and in thousands)*

| Revenues | Three Months Ended September 30, 2023 |  | 2022 |  | $ Change | % Change\* |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Subscriptions | $7,431 | 47% | $8,850 | 38% | $(1,419) | (16%) |
| License fee | 7,763 | 50% | 14,542 | 61% | (6,779) | (47%) |
| Other | 436 | 3% | 177 | 1% | 259 | 146% |
| Total revenue | $15,630 | 100% | $23,569 | 100% | $(7,939) | (34%) |
| **Operating expenses** |  |  |  |  |  |  |
| Cost of revenues | 8,494 | 21% | 13,566 | 49% | (5,072) | (37%) |
| Advertising and marketing | 5,106 | 13% | 5,626 | 20% | (520) | (9%) |
| General and administrative | 6,959 | 18% | 8,757 | 31% | (1,798) | (21%) |
| Impairment of content assets | 18,970 | 48% | — | —% | 18,970 | 100% |
| **Total operating expenses** | $39,529 | 100% | $27,949 | 100% | $11,580 | 41% |
| Operating loss | (23,899) |  | (4,380) |  | (19,519) | 446% |
| **Other income (expense)** |  |  |  |  |  |  |
| Change in fair value of warrant liability | 74 |  | 514 |  | (440) | n/m |
| Interest and other income (expense) | 31 |  | (478) |  | 509 | n/m |
| Equity method investment loss | (2,638) |  | (94) |  | (2,544) | 2706% |
| **Loss before income taxes** | $(26,432) |  | $(4,438) |  | $(21,994) | 496% |
| Provision for income taxes | 133 |  | 64 |  | 69 | n/m |
| **Net loss** | $(26,565) |  | $(4,502) |  | $(22,063) | 490% |
| \* n/m = percentage not meaningful |  |  |  |  |  |  |

### Revenue

For the three months ended September 30, 2023, and 2022, total revenue was $15.6 million and $23.6 million, respectively. This decrease of $7.9 million, or 34%, was primarily attributable to reductions in both License fees and Subscriptions.

The decrease in License fees of $6.8 million was primarily driven by the non-renewal of certain content presale licensing arrangements and Bundled Distribution agreements, partially offset by an increase of from new trade and barter license agreements. The decrease in Subscriptions of $1.4 million was primarily due to the termination of certain corporate subscriptions related to bulk agreements, which termination occurred in the third quarter of 2022.

### Operating Expenses

For the three months ended September 30, 2023, operating expenses were $39.5 million compared to $27.9 million for the same period in 2022, an increase of $11.6 million, or 41%.

**Cost of Revenues.** For the three months ended September 30, 2023, cost of revenues decreased to $8.5 million from $13.6 million in the same period of 2022. This reduction of $5.1 million, or 37%, primarily resulted from the decrease in content amortization and a decrease in revenue share expense related to bundled and premier tier arrangements with other streaming services.

**Advertising and Marketing.** For the three months ended September 30, 2023, advertising and marketing expenses decreased to $5.1 million from $5.6 million for the same period in 2022. This decrease of $0.5 million, or 9%, was primarily due to strategic changes in our marketing approach and cost-saving measures implemented in our advertising campaigns.

**General and Administrative.** For the three months ended September 30, 2023, general and administrative expenses decreased by $1.8 million, or 21%, from $8.8 million for the same period in 2022 to $7.0 million. The decrease was primarily due to cost controls and efficiency measures implemented across our administrative functions.

**Impairment of Content Assets.** For the three months ended September 30, 2023, we incurred an impairment charge of $19.0 million related to our content assets. In comparison, no such impairments were incurred for the same period in 2022. For a more detailed discussion of the impairment charge and the underlying factors contributing to the impairment, refer to *Note 4 - Content Assets* in the *Notes to Unaudited Consolidated Financial Statements.*

### Operating Loss

For the three months ended September 30, 2023, operating loss was $23.9 million, an increase in loss of $19.5 million compared to the operating loss of $4.4 million for the same period in 2022.This increase was almost entirely attributable to the $19.0 million content assets impairment.

### Other Income (Expense)

**Change in Fair Value of Warrant Liability.** For the three months ended September 30, 2023, the change in the fair value of warrant liability related to Private Placement Warrants resulted in income of $0.1 million, a decrease of $0.4 million from the income of $0.5 million in the same period in 2022. The change primarily stemmed from fluctuations in the market price of our common stock and the corresponding changes to the underlying assumptions used in the valuation model used for our Private Placement Warrants during the same period in 2022.

**Interest and Other Income (Expense).** Interest and other income (expense) for the three months ended September 30, 2023, was $0.1 million income compared to $0.5 million expense for the same period in 2022. The decrease was primarily related to a decrease in interest income during the current year period.

**Equity Method Investment Loss.** For the three months ended September 30, 2023, the Company recorded a loss of $2.6 million compared to a loss of $0.1 million for the same period in 2022, related to its investments in Spiegel Venture and Nebula. The increase was primarily due to the $2.3 million impairment charge recorded by the Company to its investment in Nebula during the third quarter of 2023.

### Income Taxes

Our provision for income taxes was $0.1 million for the three months ended September 30, 2023, compared to $0.1 million for the same period in 2022. The Company’s provision for income taxes is primarily related to foreign withholding income taxes and differs from the federal statutory rate primarily due to the Company being in a full valuation allowance position and not recognizing a benefit for either federal or state income tax purposes.

### Net Loss

The net loss for the three months ended September 30, 2023, was $26.6 million, compared to $4.5 million for the same period in 2022. The increase in our net loss of $22.1 million primarily resulted from an impairment charge of $19.0 million, the reduction in revenue of $7.9 million, or 34%, and an impairment charge to one of our equity method investments of $2.3 million, partially offset by decreases in cost of revenues of $5.1 million and general and administrative expense of $1.8 million.

### Nine Months Ended September 30, 2023

The financial data in the following table sets forth selected financial information derived from our unaudited consolidated financial statements for nine months ended September 30, 2023, and 2022, and includes our results of operations as a percentage of revenue or as a percentage of costs, as applicable, for the periods indicated.

*(Unaudited and in thousands)*

| Revenues | Nine Months Ended September 30, 2023 2023 |  | 2022 |  | $ Change | % Change\* |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Subscriptions | $22,220 | 53% | $26,128 | 41% | $(3,908) | (15%) |
| License fee | 18,563 | 44% | 35,433 | 56% | (10,094) | (28%) |
| Other | 1,331 | 3% | 1,983 | 3% | (911) | (46%) |
| Total revenue | $42,114 | 100% | $63,544 | 100% | $(21,430) | (34%) |
| **Operating expenses** |  |  |  |  |  |  |
| Cost of revenues | 27,428 | 34% | 38,404 | 37% | (10,976) | (29%) |
| Advertising and marketing | 12,424 | 15% | 31,602 | 31% | (19,178) | (61%) |
| General and administrative | 22,998 | 28% | 29,863 | 29% | (6,865) | (23%) |
| Impairment of content assets | 18,970 | 23% | — | —% | 18,970 | 100% |
| Impairment of goodwill and intangible assets | — | — | 3,603 | 3% | (3,603) | (100%) |
| Total operating expenses | $81,820 | 100% | $103,472 | 100% | $(21,652) | (21%) |
| Operating loss | (39,706) |  | (39,928) |  | 222 | (1%) |
| **Other income (expense)** |  |  |  |  |  |  |
| Change in fair value of warrant liability | 184 |  | 4,852 |  | (4,668) | (96%) |
| Interest and other income (expense) | 856 |  | (564) |  | 1,420 | n/m |
| Equity method investment loss | (5,092) |  | (566) |  | (4,526) | (420%) |
| Loss before income taxes | $(43,758) |  | $(36,206) |  | $(7,552) | 21% |
| Provision for income taxes | 479 |  | 165 |  | 314 | n/m |
| **Net loss** | $(44,237) |  | $(36,371) |  | $(7,866) | 22% |

### Revenue

For the nine months ended September 30, 2023, and 2022, total revenue was $42.1 million and $63.5 million, respectively. This decrease of $21.4 million, or 34%, was primarily attributable to reductions in both license fees and subscriptions.

The decrease in license fees of $10.1 million was primarily driven by the non-renewal of certain content licensing arrangements as well as the non-renewal of certain Bundled Distribution agreements, partially offset by an increase in new trade and barter license agreements. The decrease in Subscriptions revenue of $3.9 million was primarily due to the termination of certain corporate subscriptions related to bulk agreements, which occurred in the third quarter of 2022.

### Operating Expenses

For the nine months ended September 30, 2023, total operating expenses were $81.8 million, compared to $103.5 million for the same period in 2022, marking a reduction of $21.7 million, or 21%.

**Cost of Revenues.** For the nine months ended September 30, 2023, cost of revenues decreased to $27.4 million from $38.4 million in the same period of 2022. This reduction of $11.0 million, or 29%, primarily resulted from the decrease in content amortization and a decrease in revenue share expense related to bundled and premier tier arrangements with other streaming services.

**Advertising and Marketing.** For the nine months ended September 30, 2023, advertising and marketing decreased to $12.4 million from $31.6 million for the same period in 2022. This decrease of $19.2 million, or 21%, was primarily due to strategic changes in our marketing approach and cost-saving measures implemented in our advertising campaigns.

**General and Administrative.** For the nine months ended September 30, 2023, general and administrative decreased to $23.0 million, from $29.9 million for same period in 2022. The decrease of $6.9 million, or 21%, was primarily due to cost controls and efficiency measures implemented across our administrative functions.

**Impairment of Content Assets.** For the nine months ended September 30, 2023, We incurred an impairment charge of $19.0 million relating to our content assets. In contrast, no such impairments were identified for the for same period in 2022. For a more detailed discussion of the impairment charge and the underlying factors contributing to the impairment, refer to *Note 4 - Content Assets* in the *Notes to Unaudited Consolidated Financial Statements.*

**Impairment of Goodwill and Intangible Assets.** For the nine months ended September 30, 2023, we incurred no impairment charges in contrast to the $3.6 million incurred for the same period in 2022.

### Operating Loss

For the nine months ended September 30, 2023, operating loss was $39.7 million, a decrease of $0.2 million, or 1%, compared to the operating loss of $39.9 million for the same period in 2022. The declines in cost of revenues, advertising and marketing, and general and administrative expenses were almost entirely offset by the content impairment charge and the decline in revenue.

**Change in Fair Value of Warrant Liability.** For the nine months ended September 30, 2023, the Company recognized a gain of $0.2 million, compared to a gain of $4.9 million for the same period in 2022. This reduction in gain of $4.7 million, or 96%, primarily resulted from fluctuations in the market price of our common stock and the corresponding changes to the underlying assumptions used in the valuation model for our Private Placement Warrants.

**Interest and Other Income (Expense).** For the nine months ended September 30, 2023, Interest and other income (expense) amounted to $0.9 million an increase of $1.4 million compared to an expense of $0.6 million for the same period in 2022. The change was primarily due to increased interest income.

**Equity Method Investment Loss.** For the nine months ended September 30, 2023, the Company recorded a loss of $5.0 million compared to a loss of $0.6 million for the same period in 2022, related to its investments in Spiegel Venture and Nebula. The increase was primarily due to the $2.3 million impairment charge recorded by the Company to its investment in Nebula during the third quarter of 2023.

### Income Taxes

Our provision for income taxes was $0.5 and $0.2 million for the nine months ended September 30, 2023, and 2022, respectively. The Company’s provision for income taxes is primarily related to foreign withholding income taxes and differs from the federal statutory rate primarily because the Company has taken a full valuation allowance and has not recognized a benefit for either federal or state income tax purposes.

### Net Loss

Net loss for the nine months ended September 30, 2023, was $44.2 million, compared to a net loss of $36.4 million for the same period in 2022. The increase in our net loss of $7.9 million, or 22%, was primarily due to a decrease in revenue of $21.4 million, the $19.0 million impairment charge to our content assets, a reduction in gain from the change in the fair value of warrant liability of $4.7 million and an increase in equity method investment loss of $4.5 million, partially offset by decreases in advertising and marketing of $19.2 million, cost of revenues of $11.0 million and general and administrative expenses of $6.9 million.

### LIQUIDITY AND CAPITAL RESOURCES

### Liquidity

As of September 30, 2023, the Company’s cash and cash equivalents, including restricted cash, totaled $40.8 million. For the nine months ended September 30, 2023, the Company incurred a net loss of $44.2 million and used $13.6 million of net cash in operating activities and $0.1 million of net cash in financing activities, while investing activities provided $14.0 million of net cash.

As previously discussed, we began entering into trade and barter transactions in the second quarter of 2023 primarily for the purpose of exchanging content assets through licensing agreements with media counterparties. Our use of these transactions has enabled us to acquire quality content that we can monetize through various distribution channels while preserving our liquidity.

We believe that our current cash levels, including investments in money market funds that are readily convertible to cash, will be adequate to support our ongoing operations, capital expenditures and working capital for at least the next twelve months. We believe that we have access to additional funds in the short term and the long term, if needed, through the capital markets to obtain further financing.

We use cash principally 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 Flow Analysis

The following table presents our cash flows from operating, investing and financing activities for the nine months ended September 30, 2023, and 2022:

*(Unaudited and in thousands)*

|  | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(13,630) | $(30,744) |
| Net cash provided by investing activities | 14,003 | 60,701 |
| Net cash used in financing activities | (76) | (178) |
| Net increase in cash, cash equivalents and restricted cash | $297 | $29,779 |

### Cash Flows from Operating Activities

Cash flows from operating activities primarily consist of net losses, changes to our content assets (including additions and amortization), and other working capital items.

For the nine months ended September 30, 2023, and 2022, we recorded a net cash outflow from operating activities of $13.6 million and $30.7 million, respectively, or a decline in outflow of $17.1 million, or 56%.

For the nine months ended September 30, 2023, our use of cash was primarily due to our $44.2 million net loss, additions to content assets and change in content liabilities of $14.1 million and $2.7 million, respectively, as well as changes in accrued expenses and other liabilities, and deferred revenue of $3.9 million and $1.2 million, respectively. This was partially offset by noncash items such as amortization of content assets, stock-based compensation and equity method investment loss of $17.7 million, $3.6 million and $5.1 million, respectively. Additionally, changes in accounts receivable and other assets were $4.0 million and $1.7 million, respectively.

Of the $14.1 million in additions to content assets for the nine months ended September 30, 2023, $7.1 million was attributable to non-cash trade and barter arrangements.

For the nine months ended September 30, 2022, our use of cash was primarily due to our $36.4 million net loss, additions to content assets and change in content liabilities of $31.7 million and $4.7 million, respectively, as well as changes in accrued expenses and other liabilities, and deferred revenue of $4.8 million and $4.5 million, respectively. This was partially offset by noncash items such as amortization of content assets and stock-based compensation of $29.5 million and $5.1 million, respectively. Additionally, changes in accounts receivable, other assets and accounts payable were $6.3 million, $5.0 million and $4.2 million, respectively.

### Cash Flows from Investing Activities

Cash flow from investing activities consists of purchases, sales and maturities of investments, business acquisitions and equity investments and purchases of property and equipment.

For the nine months ended September 30, 2023, and 2022, we recorded net cash inflows from investing activities of $14.0 million and $60.7 million, respectively, or a decrease of cash inflow of $46.7 million, or 77%.

For the nine months ended September 30, 2023, our cash inflow was primarily due to maturities of investments in debt securities of $15.0 million. For the nine months ended September 30, 2022, our cash inflow was primarily due to the sale and maturities of investments in debt securities of $64.8 million, partially offset by investments in Nebula of $2.4 million.

### Cash Flows from Financing Activities

For the nine months ended September 30, 2023, and 2022, we recorded net cash outflow from financing activities of $0.1 million and $0.2 million, respectively, attributable to payments of withholding taxes during each period.

### Capital Expenditures

Going forward, we expect to continue making expenditures for additions to our content assets and purchases of property and equipment, although at a slower rate than in previous periods. The amount, timing and allocation of capital expenditures are largely discretionary and within management’s control. Depending on market conditions, we may choose to defer a portion of our budgeted expenditures until later periods to achieve the desired balance between sources and uses of liquidity and prioritize capital projects that we believe have the highest expected returns and potential to generate cash flow. Subject to financing alternatives, we may also increase our capital expenditures significantly to take advantage of opportunities we consider to be attractive.

### OFF BALANCE SHEET ARRANGEMENTS

As of September 30, 2023, we had no off-balance sheet arrangements.

### CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our financial condition and results of operation is based upon our financial statements, which have been prepared in accordance with U.S. GAAP. Certain amounts included in or affecting the financial statements presented in this Quarterly Report on Form 10-Q and related disclosures must be estimated, requiring management to make assumptions with respect to values or conditions which cannot be known with certainty at the time the financial statements are prepared. Management believes that the accounting policies set forth below comprise the most important “critical accounting policies” for the Company. A critical accounting policy is one which is both important to the portrayal of a company’s financial condition and results of operations and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management evaluates such policies on an ongoing basis, based upon historical results and experience, consultation with experts and other methods that management considers reasonable in the particular circumstances under which the judgments and estimates are made, as well as management’s forecasts as to the manner in which such circumstances may change in the future.

### 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 license terms consist of a fixed fee for specific windows of availability. Cash payments for content are reported within additions to content assets and changes in related liabilities within “Net cash used in operating activities” in the unaudited consolidated statements of cash flows. Content acquired or licensed through trade and barter transactions is also reported within additions to content assets.

The Company recognizes its content assets as “Content assets, net” in the unaudited consolidated balance sheets. For licensed content, the Company capitalizes the fee per title and records a corresponding liability at the gross amount of the liability when the license period begins, the cost of the title is known, and the title is accepted and available for streaming. For productions, the Company capitalizes costs associated with the production, including development costs, direct costs, and production overhead.

Amortization of content assets is reported within “Cost of revenues” in the unaudited consolidated statements of operations. Based on factors including historical and estimated viewing patterns, the Company previously amortized the content assets on a straight-line basis over the shorter of each title’s contractual window of availability or estimated period of use, beginning at the time a title is published on the Company’s platform. Starting July 1, 2021, the Company began amortizing content assets on an accelerated basis in the initial two months after a title is published, as the Company has observed and expects more upfront viewing of content, generally as a result of additional marketing efforts.

Furthermore, the amortization of produced content is more accelerated than that of licensed content. The Company reviews factors that impact the amortization of the content assets on a regular basis and the estimates related to these factors require considerable management judgment. The Company continues to review factors impacting the amortization of content assets on an ongoing basis and will also record amortization on an accelerated basis when there is more upfront use of a title, for instance due to significant content licensing.

The Company’s business model is generally subscription-based as opposed to a model based on generating revenues at a specific title level. Content assets are predominantly monetized as a group and therefore are reviewed in aggregate at a group level when an event or change in circumstances indicates a change in the expected usefulness of the content or that the fair value may be less than unamortized cost. If such changes are identified, the aggregated content assets will be stated at the lower of unamortized cost or fair value. In addition, unamortized costs are written off for content assets that have been or are expected to be abandoned.

### Revenue Recognition

The Company’s performance obligations include (1) access to its SVOD platform via the Company’s O&O Service and App Services, (2) access to the Company’s content assets, and (3) licenses of specific program titles. In contracts containing the right to access the Company SVOD platform, the performance obligation is satisfied as access to the SVOD platform is provided post any free trial period. In contracts which contain access to the Company’s content assets, the performance obligation is satisfied as access to the content is provided. For contracts with licenses of specific program titles, the performance obligation is satisfied as that content is made available for the customer to use.

### Subscriptions

**O&O Service.** The Company generates revenue from monthly subscription fees from its O&O Service. CuriosityStream subscribers enter into month-to-month or annual subscriptions with the Company. The Company bills the monthly subscriber on each subscriber’s monthly anniversary date and recognizes the revenue ratably over each monthly membership period. The annual subscription fees are collected by the Company at the start of the annual subscription period and are recognized ratably over the subsequent twelve-month period. Revenues are presented net of the taxes that are collected from subscribers and remitted to governmental authorities.

The Company also provides a *Smart Bundle* membership that includes access to our standard service, as well as subscriptions to certain third-party platforms. The Company recognizes the gross subscription revenues when earned and simultaneously recognizes the corresponding fees for the third-party platforms as an expense. The Company is the principal in these relationships as it has control over providing the customer with access to the third-party platforms and the determination of the *Smart Bundle* pricing.

**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***

**Content Licensing.** The Company has distribution agreements which grant a licensee limited distribution rights to the Company’s programs for varying terms, generally in exchange for a fixed license fee. Revenue is recognized once the content is made available for the licensee to use.

**Partner Direct and Bundled Distribution.** The Company generates license fee revenues from MVPDs such as Comcast and Cox as well as from vMVPDs such as Amazon and Sling TV (MVPDs and vMVPDs are also referred to as affiliates). Under the terms of the agreements with these affiliates, the Company receives license fees based upon contracted programming rates and subscriber levels reported by the affiliates. In exchange, the Company licenses its content to the affiliates for distribution to their subscribers. The Company earns revenue under these agreements either based on the total number of subscribers multiplied by rates specified in the agreements or based on fixed fee arrangements. These revenues are recognized over the term of each agreement when earned.

**Trade and Barter Transactions**. In the second quarter of 2023, the Company began entering into trade and barter transactions primarily for the purpose of exchanging content assets through licensing agreements with media counterparties, while certain transactions may also include the exchange of advertising, whereby the Company and its counterparty exchange media campaigns or other promotional services. The Company reviews each transaction to confirm that the content assets, advertising or other services it receives have economic substance, and records revenue in an amount equal to the fair value of what it receives and at the time that it completes its performance obligation. For advertising, the performance obligation is satisfied upon the Company’s delivery of the media campaign or other service to the counterparty. For an exchange of content, the performance obligation is satisfied at the time the content is made available for the counterparty to use, which represents the point in time that control is transferred.

### RECENTLY ADOPTED FINANCIAL ACCOUNTING STANDARDS

The information set forth in *Note 2 - Basis of Presentation and Summary of Significant Accounting Policies* in the Unaudited Notes to Interim Consolidated Financial Statements is incorporated herein by reference.

## Controls and procedures

As filed, 1,691 characters.

### DISCLOSURE CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in our reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are recorded, processed, summarized and reported within the specified time periods in the rules and forms of the SEC, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation of the CEO and the CFO, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) promulgated under the Exchange Act) as of September 30, 2023. Based on these evaluations, our CEO and CFO concluded that our disclosure controls and procedures were effective as of September 30, 2023.

### 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 September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 674 characters.

Factors that could cause our actual results to differ materially from those in this Quarterly Report on Form 10-Q are any of the risks described in our Annual Report on Form 10-K filed with the SEC on March 31, 2023. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.

There have been no material changes from the risk factors previously disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 31, 2023.

Filed Nov 13, 2023.
Source: SEC EDGAR, the filing index for accession 0001628280-23-038664. Last ingested by Listed: Oct 24, 2026, 15:07 ET. No prices; not investment advice.