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, 2021

☐ 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 10, 2021, there were 52,594,879 shares of Common Stock of the registrant issued and outstanding.

CURIOSITYSTREAM INC.

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2021

TABLE OF CONTENTS

		Page
Part I. Financial Information
Item 1. Financial Statements		1
Consolidated Balance Sheets		1
Consolidated Statements of Operations		2
Consolidated Statements of Comprehensive Loss		3
Consolidated Statements of Redeemable Convertible Preferred Stock and 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		23
Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk		32
Item 4. Controls and Procedures		33

Part II. Other Information
Item 1. Legal Proceedings		34
Item 1A. Risk Factors		34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		34
Item 3. Defaults Upon Senior Securities		34
Item 4. Mine Safety Disclosures		34
Item 5. Other Information		34
Item 6. Exhibits		34

Part III. Signatures		35

PART I - FINANCIAL INFORMATION

Item 1. Interim Financial Statements.

CuriosityStream Inc.

Consolidated Balance Sheets

(in thousands, except par value)

	June 30,			December 31,
	2021			2020
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	7,069		$	11,203
Restricted cash		6,681			6,181
Short-term investments		92,487			22,171
Accounts receivable		10,811			7,222
Other current assets		3,830			4,467
Total current assets		120,878			51,244

Investments		55,716			2,825
Property and equipment, net		1,298			1,346
Content assets, net		49,136			32,926
Intangibles, net		1,253			-
Goodwill		2,565			-
Other assets		310			254
Total assets	$	231,156		$	88,595

Liabilities and stockholders’ equity (deficit)
Current liabilities
Current content liabilities	$	6,581		$	2,116
Accounts payable		5,364			3,577
Accrued expenses and other liabilities		4,627			3,313
Deferred revenue		21,462			12,678
Total current liabilities		38,034			21,684

Warrant liability		22,865			20,843
Non-current deferred rent liability		1,309			1,027
Other liabilities		165			67
Total liabilities		62,373			43,621

Stockholders’ equity (deficit)
Preferred stock, $0.0001 par value – 1,000 shares authorized at June 30, 2021 and December 31, 2020; zero shares issued and outstanding as of June 30, 2021 and December 31, 2020		-			-
Common stock, $0.0001 par value – 125,000 shares authorized at June 30, 2021 and December 31, 2020; 52,583 shares issued and outstanding at June 30, 2021; 40,289 shares issued and 39,542 shares outstanding as of December 31, 2020		5			4
Additional paid-in capital		349,597			197,507
Accumulated other comprehensive income (loss)		(1,213	)		10
Accumulated deficit		(179,606	)		(152,547	)
Total stockholders’ equity (deficit)		168,783			44,974
Total liabilities and stockholders’ equity (deficit)	$	231,156		$	88,595

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,
	2021			2020			2021			2020

Revenues	$	15,344		$	12,049		$	25,280			19,516

Operating expenses
Cost of revenues		5,722			4,671			9,880			7,337
Advertising and marketing		11,520			8,304			23,769			21,009
General and administrative		9,153			3,437			17,885			7,621
		26,395			16,412			51,534			35,967
Operating loss		(11,051	)		(4,363	)		(26,254	)		(16,451	)

Other income (expense)
Change in fair value of warrant liability		1,764			-			(2,022	)		-
Interest and other income		1,036			86			1,296			418
Loss before income taxes		(8,251	)		(4,277	)		(26,980	)		(16,033	)
Provision for income taxes		53			40			79			77
Net loss	$	(8,304	)	$	(4,317	)	$	(27,059	)	$	(16,110	)

Less preferred dividends and accretion of issuance costs		-			(4,354	)		-			(8,591	)
Net loss attributable to common stockholders	$	(8,304	)	$	(8,671	)	$	(27,059	)	$	(24,701	)

Net loss per share attributable to common stockholders
Basic	$	(0.16	)	$	(0.66	)	$	(0.54	)	$	(1.88	)
Diluted	$	(0.19	)	$	(0.66	)	$	(0.54	)	$	(1.88	)

Weighted average number of common shares outstanding
Basic		52,567			13,165			50,327			13,165
Diluted		52,968			13,165			50,327			13,165

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,
	2021			2020			2021			2020

Net loss	$	(8,304	)	$	(4,317	)	$	(27,059	)	$	(16,110	)
Other comprehensive loss
Unrealized (loss) gain on available for sale securities		(769	)		320			(1,223	)		(92	)
Total comprehensive loss	$	(9,073	)	$	(3,997	)	$	(28,282	)	$	(16,202	)

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

CuriosityStream Inc.

Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholder’s Equity (Deficit)

(in thousands)

(unaudited)

													Accumulated
										Additional			Other Comprehensive						Total Stockholders’
	Common Stock					Preferred Stock				Paid-in			Income			Accumulated			Equity
	Shares			Amount		Shares		Amount		Capital			(Loss)			Deficit			(Deficit)
Balance as of 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 as of 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 as of June 30, 2021		52,583		$	5		-	$	-	$	349,597		$	(1,213	)	$	(179,606	)	$	168,783

	Redeemable															Accumulated
	Convertible Series A												Additional			Other Comprehensive						Total Stockholders’
	Preferred Stock				Common Stock				Preferred Stock				Paid-in			Income			Accumulated			Equity
	Shares		Amount		Shares		Amount		Shares		Amount		Capital			(Loss)			Deficit			(Deficit)
Balance at March 31, 2020		18,383	$	159,411		13,165	$	1		-	$	-	$	-		$	(223	)	$	(107,210	)	$	(107,432	)
Net loss		-		-		-		-		-		-		-			-			(4,317	)		(4,317	)
Stock-based compensation		-		-		-		-		-		-		438			-			-			438
Redeemable convertible preferred stock adjustment to redemption value		-		4,354		-		-		-		-		(438	)		-			(3,916	)		(4,354	)
Other comprehensive loss		-		-		-		-		-		-		-			320			-			320
Balance at June 30, 2020		18,383	$	163,765		13,165	$	1		-	$	-	$	-		$	97		$	(115,443	)	$	(115,345	)

Balance at December 31, 2019		18,383	$	155,174		13,165	$	1		-	$	-	$	-		$	189		$	(91,506	)	$	(91,316	)
Net loss		-		-		-		-		-		-		-			-			(16,110	)		(16,110	)
Stock-based compensation		-		-		-		-		-		-		764			-			-			764
Redeemable convertible preferred stock adjustment to redemption value		-		8,591		-		-		-		-		(764	)		-			(7,827	)		(8,591	)
Other comprehensive loss		-		-		-		-		-		-		-			(92	)		-			(92	)
Balance at June 30, 2020		18,383	$	163,765		13,165	$	1		-	$	-	$	-		$	97		$	(115,443	)	$	(115,345	)

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,
	2021			2020
Cash flows from operating activities
Net loss	$	(27,059	)	$	(16,110	)
Adjustments to reconcile net loss to net cash used in operating activities
Change in fair value of warrant liability		2,022			-
Additions to content assets		(22,199	)		(10,285	)
Change in content liabilities		4,465			(2,056	)
Amortization of content assets		6,989			4,697
Amortization, depreciation and accretion		569			269
Stock-based compensation		3,860			764
Changes in operating assets and liabilities
Accounts receivable		(3,526	)		(4,708	)
Other assets		185			434
Accounts payable		1,773			(2,967	)
Accrued expenses and other liabilities		1,091			(509	)
Deferred revenue		8,474			1,955
Net cash used in operating activities		(23,356	)		(28,516	)

Cash flows from investing activities
Purchases of property and equipment		(175	)		(220	)
Business acquisition		(4,000	)		-
Sales of investments		4,882			35,568
Maturities of investments		11,980			8,500
Purchases of investments		(141,644	)		(12,227	)
Net cash (used in) provided by investing activities		(128,957	)		31,621

Cash flows from financing activities
Exercise of stock options		409			-
Exercise of warrants		54,898			-
Tax withholding required for equity awards		(22	)		-
Proceeds from issuance of Common Stock		94,101			-
Payment of offering costs		(707	)		-
Borrowings on line of credit		-			1,000
Repayments on line of credit		-			(1,000	)
Net cash provided by financing activities		148,679			-

Net increase (decrease) in cash, cash equivalents and restricted cash		(3,634	)		3,105
Cash, cash equivalents and restricted cash, beginning of period		17,384			8,819
Cash, cash equivalents and restricted cash, end of period	$	13,750		$	11,924


Supplemental schedule of non-cash financing activities:
Preferred dividends and accretion of issuance costs	$	-		$	8,591

Supplemental disclosure:
Interest payments	$	-		$	-
Cash paid for taxes	$	30		$	98

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

On October 14, 2020 (the “Closing Date”), CuriosityStream Inc., a Delaware corporation (formerly named Software Acquisition Group Inc. (or “SAQN ”), a publicly traded special purpose acquisition company) consummated a merger pursuant to that certain Agreement and Plan of Merger (the “Merger Agreement”), dated August 10, 2020, by and among Software Acquisition Group Inc., CS Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Software Acquisition Group Inc. (“Merger Sub”), CuriosityStream Operating Inc., a Delaware corporation (formerly named CuriosityStream Inc.) (“Legacy CuriosityStream”), and Hendricks Factual Media LLC, a Delaware limited liability company (“HFM”).

Pursuant to the terms of the Merger Agreement, a business combination between Software Acquisition Group Inc. and Legacy CuriosityStream was effected through the merger of Merger Sub with and into Legacy CuriosityStream, with Legacy CuriosityStream surviving as the surviving company and a wholly-owned subsidiary of Software Acquisition Group Inc. (the “Merger” and collectively with the other transactions described in the Merger Agreement, the “Business Combination”). On the Closing Date, Software Acquisition Group Inc. changed its name to CuriosityStream Inc. (the “Company” or “CuriosityStream”) and Legacy CuriosityStream changed its name to CuriosityStream Operating Inc., and has subsequently changed its name to Curiosity Inc.

The principal business of 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 library is composed of more than three thousand accessible on-demand and ad-free productions and includes shows and series from leading non-fiction producers.

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, major multichannel video programming distributors (“MVPDs”) and virtual MVPDs (“vMVPDs”).

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, 2020.

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, 2020, as amended. The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021.

There have been no material changes in the Company’s significant accounting policies as compared to the significant accounting policies described in the Company’s consolidated financial statements as of and for the year ended December 31, 2020.

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 the content assets, the fair value of assets and liabilities for allocation of the purchase price of companies acquired, and the fair value of common stock, 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.

Cash and cash equivalents and restricted cash

The Company considers all highly liquid short-term investments purchased with an original maturity of three months or less to be cash equivalents.

At June 30, 2021, restricted cash represents cash deposits required by a bank as collateral related to the Company’s line of credit of $4,500 and corporate credit card agreements of $500. The Company has also reserved funds of $1,181 related to the Paycheck Protection Program (PPP) loan (see Note 5) in an escrow account until the PPP loan is forgiven. In addition, as part of the acquisition of One Day University (see Note 3), a holdback amount of $500 is reserved for indemnification purposes until one year after the acquisition date.

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 corporate debt securities and government 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 government debt securities. Level 2 inputs were derived using prices for similar investments and were used to value the Company’s investments in corporate debt securities.

The Company’s liabilities measured at fair value on a recurring basis include its Private Placement Warrants. The fair value of the Private Placement Warrants is considered a Level 3 valuation and is determined using the Black-Scholes valuation model. Refer to Note 6 for significant assumptions which the Company used in the fair value model for the Private Placement Warrants.

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

Investments

The Company holds investments in money market funds, government debt securities, and corporate debt securities which the Company classifies as available-for-sale. The investments are therefore carried at fair value based on unadjusted quoted market prices (Level 1) and quoted prices for comparable assets (Level 2), as noted below:

	As of June 30, 2021								As of December 31, 2020
	Cash and Cash		Short-term		Investments				Cash and Cash		Short-term		Investments
	Equivalents		Investments		(non-current)		Total		Equivalents		Investments		(non-current)		Total
Level 1 Securities
Money market funds	$	4,097	$	-	$	-	$	4,097	$	2,165	$	-	$	-	$	2,165
Government debt securities		-		27,722		7,999		35,721		5,999		12,892		-		18,891
Total Level 1 Securities		4,097		27,722		7,999		39,818		8,164		12,892		-		21,056

Level 2 Securities
Corporate debt securities		-		61,916		47,717		109,633		-		8,054		2,825		10,879
Municipal debt securities		-		2,849		-		2,849		-		1,225		-		1,225
Total Level 2 Securities		-		64,765		47,717		112,482		-		9,279		2,825		12,104
Total	$	4,097	$	92,487	$	55,716	$	152,300	$	8,164	$	22,171	$	2,825	$	33,160

Unrealized gains and losses are recorded in accumulated other comprehensive income or loss, a component of stockholders’ equity (deficit). Realized gains and losses are reclassified from accumulated other comprehensive income or loss into earnings as a component of net income or loss. Realized gains reported in interest and other income in the accompanying consolidated statements of operations were not significant in the three and six months ended June 30, 2021 and 2020. The Company evaluates unrealized losses on investments, if any, to determine if other-than-temporary impairment is required to be recognized. No such other-than-temporary impairments were recognized during the three and six months ended June 30, 2021 and 2020. Investments in debt securities that will mature within one year of the balance sheet dates are reflected as Short-term investments in the accompanying consolidated balance sheets.

The following tables summarize the Company’s corporate and government debt securities:

	As of June 30, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Debt Securities:
Corporate	$	110,843	$	1	$	(1,211	)	$	109,633
U.S. Government		35,723		1		(3	)		35,721
Municipalities		2,850		-		(1	)		2,849
Total	$	149,416	$	2	$	(1,215	)	$	148,203

The fair value of the Company’s investments in corporate and government debt securities at June 30, 2021 by contractual maturity is as follows:

	June 30, 2021
	Amortized Cost		Estimated Fair Value
Due in one year or less	$	93,160	$	92,487
Due after one year through five years		56,256		55,716
Due after five years		-		-
Total	$	149,416	$	148,203

Warrants

As described in Note 6, 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, 2021 and December 31, 2020 was as follows:

	As of June 30, 2021		As of December 31, 2020
Level 3
Private Placement Warrants	$	22,865	$	20,843
Total Level 3	$	22,865	$	20,843

Content assets, net

The Company acquires, licenses and produces content, including original programming, in order to offer members unlimited viewing of factual entertainment content. The content licenses are for a fixed fee and specific windows of availability. Payments for content, including additions to content assets and the changes in related liabilities, are classified within “Net cash used in operating activities” on the consolidated statements of cash flows.

The Company recognizes its

SEC Form 10-Q filed by CuriosityStream Inc.