CuriosityStream Inc. (CURI)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our results of operations and financial condition. The following discussion should be read in conjunction with the Company’s consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described in Risk Factors and elsewhere in this Annual Report on Form 10-K. 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.

OVERVIEW

Founded by John Hendricks, former Chairman of Discovery Communications and founder of the Discovery Channel, 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, content licensing, bundled content licenses for SVOD and linear offerings, talks and courses and partner bulk sales.

The main sources of our revenue are:

1.Subscription and license fees earned from our Direct-to-Consumer business and Partner Direct subscribers ("Direct Business"),

2.License fees from content licensing arrangements ("Content Licensing"),

3.Bundled license fees from distribution affiliates (“Bundled Distribution”), and

4.Other revenue, including advertising and sponsorships ("Other").

We operate our business as a single operating segment that provides premium content through multiple channels, including the use of various applications, partnerships and affiliate relationships.

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, and includes shows and series from leading nonfiction producers. Each week we launch new video titles, which are available on-demand in high- or ultra-high definition. Through new and long-standing international partnerships, substantial portions of our video library have been localized from English into eleven different languages. The Company also aggregates rights to hundreds of thousands of video and audio programs, course materials and other assets to utilize on our own services as well as license to other media and technology companies.

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RESULTS OF OPERATIONS

The following table represents a summary of our Consolidated Statements of Operations for the years ended December 31, 2024, and 2023, and the discussion that follows compares the financial results for year ended December 31, 2024, to the year ended December 31, 2023:

Operating loss for the years ended December 31, 2024, and 2023, was $13.3 million and $44.5 million, respectively. The decline in operating loss of $31.1 million, or 70%, primarily resulted from the decreases to our operating expenses of $36.9 million, or 36%, which more than offset the decline in revenues of $5.8 million, or 10%, for the year ended December 31, 2024, compared to the year ended December 31, 2023.

Net loss for the years ended December 31, 2024, and 2023, was $12.9 million and $48.9 million, respectively, a decrease in net loss of $36.0 million, or 74%. This improvement was primarily driven by a $31.1 million reduction in operating loss for 2024, which includes the absence of the $19.0 million impairment of content assets recognized in 2023. A decrease in equity interests loss and an increase in interest income also contributed to this improvement, while the change in fair value of the warrant liability had a minimal offsetting effect.

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.

Revenue

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.

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For the years ended December 31, 2024, and 2023, revenues totaled $51.1 million and $56.9 million, respectively, a decrease of $5.8 million, or 10%. This decline was primarily driven by declines in Content Licensing and Bundled Distribution of $6.2 million, and $2.2 million, respectively, while our Direct Business revenue increased by $3.6 million or approximately 10%.

Companies in the media industry 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, reported as content licensing revenue. Certain transactions may also include the exchange of advertising, whereby we exchange media campaigns or other promotional services, reported as other revenue.

For more information, see Note 5 - Revenue in the Notes to Consolidated Financial Statements.

Direct Business

Our Direct Business revenue is derived from consumers subscribing directly through our owned and operated website (“O&O Consumer Service”), mobile applications developed for iOS and Android operating systems (“App Services”) and through Partner Direct relationships. Our O&O Consumer Service is available in more than 175 countries to any household with a broadband connection. 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.

In addition to our standard subscription offerings, we generate revenue from Transactional Video-On-Demand (TVOD), which allows consumers to purchase or rent individual titles on a pay-per-view basis.

We began implementing a price increase for legacy subscribers in March 2023, starting with English-speaking countries, and it has now been applied globally across all markets. This adjustment impacted the majority of our Direct Business revenue. Alongside our standard subscription, we continue to offer the Smart Bundle service, which includes access to Tastemade, Kidstream, SommTV, and Curiosity University, with its pricing unchanged. Future adjustments to these subscription plans may be considered to further enhance revenue from this segment.

The multichannel video programming distributors (“MVPDs”), virtual MVPDs (“vMVPDs”) and digital distributor partners making up our Partner Direct pay us a license fee for 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, and Dish, and vMVPDs and digital distributors that include Amazon Prime Video Channels, Apple Channel, Roku Channel, Sling TV and YouTube TV.

The following table details our Direct Business for the years ended December 31, 2024, and 2023:

For the year ended December 31, 2024, our Direct-to-Consumer and Partner Direct revenue increased by $1.2 million, or 4%, and $2.6 million, or 54%, respectively, compared to 2023. Although our overall DTC subscriber count declined, this was more than offset by the higher pricing we began rolling out in 2023. Additionally, our Partner Direct primarily benefited from continued subscriber growth as well as the price increase.

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Content Licensing

Through our Content Licensing business, we license to certain media companies a collection of existing titles from our content library. In addition, we license and sublicense hundreds of thousands of content and data assets to companies developing large-language learning models for artificial intelligence products. We also pre-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. The following table details our Content Licensing results for the years ended December 31, 2024, and 2023:

For the year ended December 31, 2024, Content Licensing reflected our change in focus as we attempted to acquire content for lower costs during the year. Library sales decreased by 37%, due mostly to trade and barter transactions whereby we licensed our content to counterparties in the media industry and acquired their content for no cash outlay. Presales declined by 81% as we began to focus more on acquiring content for lower investment cost while reducing our overall spending on new content.

Bundled Distribution

Our Bundled Distribution business includes affiliate relationships with our Bundled MVPD and vMVPD partners, 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 video-on-demand content library, mobile rights and pricing and packaging flexibility, in exchange for an annual fixed fee or fee per subscriber.

For the years ended December 31, 2024, and 2023, our Bundled Distribution revenue was $3.9 million and $6.1 million, respectively. This 35% decline was primarily the result of revised affiliate agreements and the non-renewal of certain partnerships. Bundled Distribution remains a challenging business given the ongoing disruption in the linear pay television business worldwide.

Other

We provide advertising and sponsorships services through developing integrated digital brand partnerships designed to offer CuriosityStream content in a variety of forms, including short- and long-form program integration; branded social media promotional videos; broadcast advertising spots in our video and audio programs that are made available on our linear programming channels or in front of the paywall; and our increasing focus on digital display ads while delivering our content through advertising-based video-on-demand (AVOD), free advertising-supported streaming television (FAST), YouTube and other similar distribution channels.

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 result in verifiable metrics for the clients.

For the year ended December 31, 2024, other revenue was $0.8 million, a decline of $1.0 million or 54% from 2023. These declines were largely due to certain short-term marketing partnerships that we entered into during the early part of 2023, including a campaign that we provided through a trade and barter arrangement that was not renewed in 2024.

Operating Expenses

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.

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For the years ended December 31, 2024, and 2023, our operating expenses were $64.5 million and $101.4 million, respectively, a decrease of $36.9 million, or 36%.

Cost of Revenues

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. Producing and co-producing content and commissioned content is generally more costly than content acquired through licenses.

Distribution fees include payment processing fees and revenue share arrangements with Smart Bundle and digital distributor partners, as well as fees owed to the Spiegel Venture related to JV's streaming service. 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.

The following table details cost of revenues for the years ended December 31, 2024, and 2023:

For the year ended December 31, 2024, cost of revenues decreased to $25.4 million from $35.6 million, a 29% reduction. This decrease was mostly driven by a 16% decline in content amortization primarily due to fewer new productions, a reduction in content acquisitions and releases during the year and the content impairment recorded in the third quarter of 2023. Additionally, other costs of revenues declined mainly due to a reduction in revenue share arrangements, including our arrangement with Nebula that expired at the end of 2023.

Advertising and Marketing

Our advertising and marketing expenditures are a primary operating cost for our business. While these costs may fluctuate based on advertising and marketing objectives, we generally focus marketing dollars on efficient customer acquisition methods. For the year ended December 31, 2024, advertising and marketing expenses decreased to $14.4 million from $17.4 million in 2023. This decrease of 3.0 million, or 17%, reflects our efforts to optimize spending while maintaining our market presence and continuing to invest in strategic initiatives aimed at enhancing subscriber engagement and retention, and driving growth.

General and Administrative

Our general and administrative costs are associated with certain administrative functions, including corporate governance, executive management, information technology, finance and human resources. These costs consist largely of compensation expense, subscriptions that support our business, professional services, and rent. While personnel levels may fluctuate based on our needs, we tend to focus on hiring and retaining revenue-generating personnel, such as sales staff and roles that support the improvement, maintenance and marketing of our different revenue streams.

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The following table details general and administrative costs for the years ended December 31, 2024, and 2023:

For the year ended December 31, 2024, general and administrative expenses decreased to $24.7 million from $29.4 million for the year ended December 31, 2023. This decrease of $4.8 million, or 16%, was primarily the result of lower payroll and related costs and professional services, which declined by $1.7 million and $3.1 million, respectively. The reduction in payroll costs was mainly driven by a smaller average workforce size and reduced incentive compensation. Additionally, professional services costs decreased by 50% as we streamlined various external services and brought certain finance and operations functions in-house. Stock-based compensation increased by $2.6 million, reflecting performance-based equity awards granted during the period.

Impairment of Content Assets and Intangible Assets

The Company’s primary business model is 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 library 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. For a discussion of the accounting policies for content impairment write-down and management estimates involved therein, see Critical Accounting Policies and Estimates below.

For the year ended December 31, 2024, no impairment charges were recorded related to our content assets. In comparison, we incurred an impairment charge of $19.0 million in 2023. For a more detailed discussion of the 2023 impairment charge and the underlying factors contributing to it, refer to Note 4 - Balance Sheet Components in the Notes to Unaudited Consolidated Financial Statements.

Other Income (Expense)

Change in Fair Value of Warrant Liability

The fair value of our warrant liability is estimated using the Black-Scholes valuation model that takes into account a number of economic assumptions, including the market price of our Common Stock and its expected volatility. Changes in these inputs from period to period may significantly affect changes in fair values.

Interest and Other Income

For the year ended December 31, 2024, interest and other income increased by $1.8 million, primarily due to income recorded for the Company’s Employee Retention Credit (ERC) claim totaling $1 million.

Equity Method Investment Loss

During the year ended December 31, 2024, we recorded a $2.5 million equity interests loss related to the equity investments in the Spiegel Venture and Nebula, compared to a $5.4 million loss in 2023. The decrease in losses is primarily due to the $2.0 million impairment charge recorded by the Company to its investment in Spiegel Venture during the year ended December 31, 2023.

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Income Taxes

For the years ended December 31, 2024, and 2023, we had a provision for income taxes of $0.1 million and $0.5 million, respectively, due to generating losses before income taxes in each year. The provision for income taxes is primarily related to foreign withholding income taxes. Our provision for income taxes differs from the federal statutory rate primarily due to the Company being in a full valuation allowance position and not recognizing a tax benefit attributable to generated losses for either federal or state income tax purposes.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

As of December 31, 2024, the Company’s cash and cash equivalents and restricted cash totaled $8.0 million, with an additional $31.7 million held in investments in debt securities that can be readily converted to cash to support ongoing operating cash flow needs.

Our cash and cash equivalents mainly consist of investments and short-term deposits held at major global financial institutions. We regularly monitor the creditworthiness of the financial institutions and money market fund asset managers with whom we invest our funds, and we maintain a level of liquidity sufficient to allow us to meet our cash needs in both the short term and long term.

We believe that our current cash levels, including investments that are readily convertible to cash, will be adequate to support our ongoing operations, capital expenditures, dividend payments 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 while we generate positive cash flow from operating activities, we anticipate that we will continue to incur net losses due to the investments needed to support our business plan.

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.

The following table provides details of the dividends declared and paid as of December 31, 2024.

On November 5, 2024, the Board declared the cash dividend of $0.025 per share to be paid on March 28, 2025, to all holders of record of Common Stock at the close of business on March 14, 2025. On January 30, 2025, the Board increased the dividend from $0.025 per share to $0.030 per share. Subsequently, on March 10, 2025, the Board further increased the dividend to $0.040 per share for an expected aggregate amount of $2.3 million. Subject to future declaration by our Board, we intend to continue to pay regular quarterly cash dividends.

On June 10, 2024, our Board authorized and approved a share repurchase program for up to $4 million of the then-outstanding shares of our common stock. Under the stock repurchase program, we may repurchase shares through open market purchases, privately negotiated transactions, block purchases, or otherwise in accordance with applicable federal securities laws. As of December 31, 2024, we had repurchased $251 thousand of Common Stock under this program.

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We cannot predict when or if we will repurchase any additional shares of common stock as this stock repurchase program will depend on a number of factors, including constraints imposed by applicable federal securities laws, price, general business and market conditions, and alternative investment opportunities. This program does not obligate us to acquire any particular amount of common stock. The program has no expiration date and may be modified, suspended or discontinued at any time at our discretion.

Cash Flow Analysis

The following table presents our cash flows from operating, investing and financing activities for the years ended December 31, 2024, and 2023:

Operating Activities

Cash flow from operating activities primarily consists of net losses, changes to our content assets (including additions and amortization), and other working capital items. The following table presents a summary of our cash flows from operating activities for the years ended December 31, 2024, and 2023:

During the years ended December 31, 2024, our net cash inflow from operating activities was $8.2 million compared to net cash used in operating activities of $16.2 million for 2023, an increase in operating cash outflow of of $24.3 million.

Although we reported a net loss of $12.9 million for the year ended December 31, 2024, this amount reflected noncash items such as amortization of content assets, stock-based compensation and equity method investment loss of $19.1 million, $6.6 million, and $2.5 million, respectively. Cash used during the year included a $1.8 million change in operating assets and liabilities and additions to content assets and change of content liabilities of $5.7 million and $0.1 million, respectively.

For the year ended December 31, 2023, we reported a net loss of $48.9 million. This amount reflected noncash items such as amortization of content assets, stock-based compensation and equity method investment loss of $22.9 million, $4.0 million and $5.4 million, respectively. Cash used during the year included additions to content assets and changes in content liabilities of $18.3 million and $2.5 million, respectively, and changes in operating assets and liabilities of $1.4 million.

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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 year ended December 31, 2024, we recorded a net cash outflow used in investing activities of $31.4 million. The net cash outflow used in investing activities was solely due to purchases of investments in debt securities. In contrast, for the year ended December 31, 2023, our cash inflows were primarily due to maturities of investments in debt securities.

Financing Activities

For the years ended December 31, 2024, and 2023, net cash used in financing activities was $7.0 million and $0.1 million, respectively, an increase of $6.9 million primarily due to dividends paid and tax withholding

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 December 31, 2024, 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 Annual Report 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. Content license terms generally include 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 provided by (used in) operating activities on the 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 on the 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.

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Amortization of content assets is reported within Cost of revenues in the consolidated statements of operations. Based on factors including historical and estimated viewing patterns, the Company amortizes 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 generally accelerated at a higher amortization rate 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 primary business model is 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 library will be stated at the lower of unamortized cost or fair value. In addition, unamortized costs are written off for content assets that have been, or are expected to be abandoned.

During the three months ended September 30, 2023, the Company assessed the fair value of its content assets as a result of identifying indicators of impairment related to those assets. The Company determined that the unamortized cost exceeded the fair value, and as such, the Company recorded a $19.0 million impairment of its content assets. Refer to Note 4 - Balance Sheet Components for further discussion of the results of these analyses.

Revenue Recognition

The Company’s performance obligations include:

1.Access to its SVOD platform on a subscription basis either directly or through a partner, whereby the performance obligation is satisfied as access is provided following any free trial period;

2.Access to the Company’s content assets, whereby the performance obligation is satisfied as access to the content is provided; and

3.Licenses of specific program titles, whereby the performance obligation is satisfied as that content is made available for the customer to use.

Subscriptions

Direct-to-Consumer - O&O Consumer Service. The Company generates revenue from subscription fees from its O&O Consumer 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.

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Direct-to-Consumer - 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.

Enterprise. The Company's Enterprise business is comprised primarily of selling subscriptions in bulk to companies and organizations that in turn offer these subscriptions to their employees and members as an employment benefit or “gift of curiosity.”

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 Prime 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. The primary purpose of the transactions is the exchange of 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.

RECENT ACCOUNTING PRONOUNCEMENTS

The Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company, as an emerging growth company (“EGC”), to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act until such time as the Company is no longer considered to be an EGC. The Company expects to no longer be eligible to qualify as an EGC after December 31, 2025, which is the last day of the fiscal year following the fifth anniversary of its first sale of common equity securities in an offering registered under the Securities Act.

Recently Adopted Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, requiring public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. The Company adopted ASU 2023-07 during the year ended December 31, 2024. See Note 9 - Segment and Geographic Information in the accompanying notes to the consolidated financial statements for further detail.

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Accounting Pronouncements Issued but not Adopted

In December 2023, the FASB issued ASU No. 2023-09 ("ASU 2023-09"), Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-09.

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, requiring public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2024-03.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our results of operations and financial condition. The following discussion should be read in conjunction with the Company’s consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described in Risk Factors and elsewhere in this Annual Report on Form 10-K. 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.

OVERVIEW

Founded 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 SVOD platforms, content licensing, bundled content licenses for SVOD and linear offerings, talks and courses and partner bulk sales.

The main sources of our revenue are:

1.Subscription and license fees earned from our Direct-to-Consumer business and Partner Direct subscribers ("Direct Business"),

2.License fees from content licensing arrangements ("Content Licensing"),

3.Bundled license fees from distribution affiliates (“Bundled Distribution”),

4.Subscriber fees from our Enterprise business ("Enterprise"), and

5.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.

CuriosityStream’s award-winning content library features more than 17,000 programs that explore topics ranging from space engineering to ancient history to the rise of Wall Street and includes shows and series from leading nonfiction producers. Our library includes:

•An extensive catalog of originally produced and owned content of approximately 7,000 short-, mid- and long-form video and audio titles, including Curiosity University recorded lectures that are led by some of the most acclaimed college and university professors in the world.

•A rotating catalog of nearly 7,000 internationally licensed videos and audio programs.

•More than 6,000 on-demand and ad-free productions available on-demand through our SVOD offerings.

Each week we launch 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.

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RESULTS OF OPERATIONS

The following table represents a summary of our Consolidated Statements of Operations for the years ended December 31, 2023, and 2022, and the discussion that follows compares the financial results for year ended December 31, 2023, to the year ended December 31, 2022:

Operating loss for the years ended December 31, 2023, and 2022, was $44.5 million and $55.3 million, respectively. The decline in operating loss of $10.8 million, or 20%, primarily resulted from the decreases to our operating expenses of $32.0 million, or 24%, which more than offset the decline in revenues of $21.2 million, or 27%, for the year ended December 31, 2023, compared to the year ended December 31, 2022.

Net loss for the years ended December 31, 2023, and 2022, was $48.9 million and $50.9 million, respectively, a decrease in net loss of $2.0 million, or 4%. The $10.8 million decline in operating loss for 2023 was almost entirely offset by a decline in change in value of warrant liability and an increase in our equity interest loss.

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.

Revenue

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.

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For the years ended December 31, 2023, and 2022, revenues totaled $56.9 million and $78.0 million, respectively, a decrease of $21.2 million, or 27%. This decline was primarily driven by declines in Content Licensing, Enterprise services and Bundled Distribution of $10.6 million, $5.4 million and $5.4 million, respectively, while our Direct Business revenue increased by $0.5 million or approximately 1%.

Companies in the media industry 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, reported as content licensing revenue. Certain transactions may also include the exchange of advertising, whereby we exchange media campaigns or other promotional services, reported as other revenue.

For more information, see Note 5 - Revenue in the Notes to Consolidated Financial Statements.

Direct Business

Our Direct Business revenue is derived from consumers subscribing directly through our O&O Consumer Service and App Services and through Partner Direct relationships. Our O&O Consumer Service is available in more than 175 countries to any household with a broadband connection. 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.

We are currently in the process of raising the prices for our legacy subscribers in our U.S. dollar-based markets, which represent the vast majority of our Direct Business revenue. These legacy subscribers 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. Our Smart Bundle membership currently includes our standard service, plus subscriptions to third-party platforms Tastemade, Topic, Kidstream (added in January 2024), SommTV, Da Vinci Kids, and our Curiosity University stand-alone service. Our Smart Bundle pricing remains 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.

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.

The following table details our Direct Business for the years ended December 31, 2023, and 2022:

For the year ended December 31, 2023, our O&O Consumer Service increased by $1.0 million, or 4%, which was partially offset by a decline in App Services of $0.6 million, or 14%. Although our DTC subscriber count declined during 2023, our O&O Consumer Service revenue reflected the higher pricing that we began to roll out ahead of higher pricing for App Services during the year.

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Content Licensing

Through our Content Licensing business, we license to certain media companies a collection of existing titles from our content library in a traditional content licensing deal. We also pre-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. The following table details our Content Licensing results for the years ended December 31, 2023, and 2022:

For the year ended December 31, 2023, Content Licensing reflected our change in focus as we attempted to acquire content for lower costs during the year. Library sales were higher by 91%, due mostly to trade and barter transactions whereby we licensed our content to counterparties in the media industry and acquired their content for no cash outlay. Presales declined by 88% as we began to focus more on acquiring content for lower investment cost while reducing our overall spending on new content.

Bundled Distribution

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 video-on-demand content library, mobile rights and pricing and packaging flexibility, in exchange for an annual fixed fee or fee per subscriber.

For the years ended December 31, 2023, and 2022, our Bundled Distribution revenue was $6.3 million and $11.7 million, respectively. This 46% decline was primarily due to the non-renewal of a bundled distribution agreement in the third quarter of 2022.

Enterprise

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.”

For the years ended December 31, 2023, and 2022, our Enterprise revenue was $0.1 million and $5.5 million, respectively. This decline was due to the expiration of certain Enterprise subscription agreements.

Other

We provide advertising and sponsorships services through developing integrated digital brand partnerships designed to offer the chance to be associated with CuriosityStream content in a variety of forms, including short- and long-form program integration; branded social media promotional videos; broadcast advertising spots in our video and audio programs that are made available on our linear programming channels or in front of the paywall; and our increasing focus on digital display ads while delivering our content through advertising-based video-on-demand (AVOD), transactional video-on-demand (TVOD), free advertising-supported streaming television (FAST), YouTube and other similar distribution channels.

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.

For the year ended December 31, 2023, other revenue was $1.8 million, a decline of $0.2 million or 10% from 2022. This decline was largely due to the expiration of certain marketing arrangements during 2022 and the early part of 2023, partially offset by new marketing services we provided as part of trade and barter transactions, which totaled $1.1 million for 2023.

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Operating Expenses

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.

For the years ended December 31, 2023, and 2022, our operating expenses were 101.4 million and 133.3 million, respectively, a decrease of $32.0 million, or 24%.

Cost of Revenues

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. Producing and co-producing content and commissioned content is generally more costly than content acquired through licenses.

Distribution fees include payment processing fees and revenue share arrangements with Smart Bundle and digital distributor partners, as well as fees owed to the Spiegel Venture related to our German SVOD service. 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.

The following table details cost of revenues for the years ended December 31, 2023, and 2022:

For the year ended December 31, 2023, cost of revenues decreased to $35.6 million from $51.5 million, a 31% reduction. This decrease was mostly driven by a 42% decline in content amortization due to fewer presale agreements, as discussed above, a reduction in content acquisitions and releases during the year and the content impairment that we recorded in the third quarter of 2023. This decline was partially offset by an increase in other cost of revenues, resulting mainly from new promotional arrangements that we entered into during the year.

Advertising and Marketing

Our advertising and marketing expenditures are a primary operating cost for our business. While these costs may fluctuate based on advertising and marketing objectives, we generally focus marketing dollars on efficient customer acquisition methods. For the year ended December 31, 2023, advertising and marketing expenses decreased to $17.4 million from $40.7 million in 2022. This decrease of $23.3 million, or 57%, is primarily due to fewer contractual marketing commitments during 2023, as we ended partnerships with significant marketing commitments and refocused on lower-cost paid-marketing campaigns.

General and Administrative

Our general and administrative costs are associated with certain administrative functions, including corporate governance, executive management, information technology, finance and human resources. These costs consist largely of compensation expense, subscriptions that support our business, professional services, licenses and rent. While personnel levels may fluctuate based on our needs, we tend to focus on hiring and retaining revenue-generating personnel, such as sales staff and roles that support the improvement, maintenance and marketing of our different revenue streams.

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The following table details general and administrative costs for the years ended December 31, 2023, and 2022:

For the year ended December 31, 2023, general and administrative expenses decreased to $29.4 million from $37.5 million for the year ended December 31, 2022. This decrease of $8.0 million, or 21%, was primarily the result of lower stock-based compensation and payroll and related costs of a $2.6 million and $2.8 million, driven by our smaller average workforce size in 2023 as well as reduced incentive compensation. Professional services costs also declined 23% as we streamlined various outside services during the year and brought certain finance and operations functions internal.

Impairment of Content Assets, Goodwill and Intangible Assets

The Company’s primary business model is 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 library 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. For a discussion of the accounting policies for content impairment write-down and management estimates involved therein, see Critical Accounting Policies and Estimates below.

During the three months ended September 30, 2023, we identified certain indicators of impairment related to content assets and performed an analysis of these assets to assess if their fair value was less than their unamortized costs. Refer to Note 4 - Balance Sheet Components for further discussion. As a result of this analysis, we incurred an impairment charge of $19.0 million related to our content assets for the year ended December 31, 2023. In comparison, no such impairment of content assets was incurred during 2022.

In addition, during the year ended December 31, 2023, we separately performed an analysis of our investments in equity method investees to determine if an “other-than-temporary” impairment existed. During the year ended December 31, 2022, we recorded a goodwill and intangibles asset impairment charge of $3.6 million as a result of the impairment analyses performed. The impairment charge was applied against the entire balance of goodwill and substantially all of the intangible assets balance.

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Fair Value of Warrant Liability, Interest and Other Income and Equity Method Investment Loss

Change in Fair Value of Warrant Liability

The fair value of our warrant liability is estimated using the Black-Scholes valuation model that takes into account a number of economic assumptions, including the market price of our Common Stock and its expected volatility. Changes in these inputs from period to period may significantly affect changes in fair values. For the year ended December 31, 2023, the Company recognized a $0.2 million gain in the fair value of our warrant liability, compared to a $5.4 million gain recognized in 2022. These gains are primarily the result of decreases in the fair value of the liabilities related to the Private Placement Warrants for the respective periods. For additional information, including the significant assumptions used to determine fair value, see Note 7 - Stockholders Equity, in the Notes to Consolidated Financial Statements.

Interest and Other Income

For the year ended December 31, 2023, interest and other income increased by $1.1 million, primarily due to our cash and cash equivalents accounts benefiting from higher market interest rates.

Equity Method Investment Loss

During the year ended December 31, 2023, we recorded a $5.4 million equity interests loss related to the equity investments in the Spiegel Venture and Nebula, compared to a $0.8 million loss in 2022. The increase in loss in 2023 was primarily the result of impairment charges we recorded during the year for the Spiegel Venture and Nebula of $2.0 million and $2.3 million, respectively.

Income Taxes

For the years ended December 31, 2023, and 2022, we had a provision for income taxes of $0.5 million and $0.4 million, respectively, due to generating losses before income taxes in each year. The provision for income taxes is primarily related to foreign withholding income taxes. Our provision for income taxes differs from the federal statutory rate primarily due to the Company being in a full valuation allowance position and not recognizing a tax benefit attributable to generated losses for either federal or state income tax purposes.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

As of December 31, 2023, our cash and cash equivalents, including restricted cash, totaled $38.2 million. Our cash and cash equivalents mainly consist of investments in institutional money market funds and short-term deposits held at major global financial institutions. We continuously monitor the creditworthiness of the financial institutions and money market fund asset managers with whom we invest our funds, and we maintain a level of liquidity sufficient to allow us to meet our cash needs in both the short term and long term.

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.

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.

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Cash Flow Analysis

The following table presents our cash flows from operating, investing and financing activities for the years ended December 31, 2023 and 2022:

Operating Activities

Cash flow from operating activities primarily consists of net losses, changes to our content assets (including additions and amortization), and other working capital items. The following table presents a summary of our cash flows from operating activities for the years ended December 31, 2023, and 2022:

During the years ended December 31, 2023, and 2022, we recorded a net cash outflow from operating activities of $16.2 million and $39.5 million, respectively, or a decline in outflow in 2023 of $23.4 million, or 59%.

Our 2023 net cash outflow was primarily due to the $48.9 million net loss, additions to content assets and change in content liabilities of $18.3 million and $2.5 million, respectively, as well as changes in accrued expenses and other liabilities and accounts payable of $4.5 million and $1.3 million, respectively. This was partially offset by noncash items such as amortization of content assets of $22.9 million, impairment of content assets of $19.0 million, stock-based compensation of $4.0 million and equity method investment loss of $5.4 million. Additionally, the change in accounts receivable was $6.1 million. Of the $18.3 million in additions to content assets for the year ended December 31, 2023, $9.5 million was attributable to non-cash trade and barter arrangements.

For the year ended December 31, 2022, net cash used by operating activities was primarily driven by our $50.9 million net loss, $6.4 million addback of net non-cash expenses net of content additions, and $5.0 million of net cash provided by changes in operating assets and liabilities. The most significant components of net non-cash expenses include amortization of content assets of $39.3 million and stock-based compensation expense of $6.6 million, substantially offset by additions to content assets of $34.8 million and the change in the fair value of warrant liability of $5.4 million. The components of changes in operating assets and liabilities were primarily attributed to an increase in accounts receivable of $11.9 million and increase in other assets of $3.4 million, partially offset by a decrease in deferred revenue of $8.3 million, increase in accounts payable of $2.7 million and decrease in accrued expenses and other liabilities of $4.6 million.

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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 years ended December 31, 2023, and 2022, we recorded net cash inflows from investing activities of $14.0 million and $62.7 million, respectively, or a decrease of cash inflow of $48.7 million, or 78%.

Our 2023 cash inflow was primarily due to maturities of investments in debt securities of $15.0 million, offset by our investment in the Spiegel Venture of $1.0 million.

For the year ended December 31, 2022, we recorded a net cash inflow from investing activities of $62.7 million. The net cash inflow provided by investing activities was primarily due to the sale and maturities of investments in debt securities of $66.8 million, partially offset by purchases of investments in debt securities of $1.5 million and investments in Nebula of $2.4 million.

Financing Activities

For the years ended December 31, 2023, and 2022, net cash used in financing activities was $0.1 million and $0.2 million, respectively, primarily due to payments related to tax withholding.

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 December 31, 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 Annual Report 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. Content license terms generally include 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. Content acquired or licensed through trade and barter transactions is also reported within additions to content assets.

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The Company recognizes its content assets as “Content assets, net” on the 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 consolidated statements of operations. Based on factors including historical and estimated viewing patterns, the Company amortizes 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 primary business model is 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 library will be stated at the lower of unamortized cost or fair value. In addition, unamortized costs are written off for content assets that have been, or are expected to be abandoned.

During the three months ended September 30, 2023, the Company assessed the fair value of its content assets as a result of identifying indicators of impairment related to those assets. The Company determined that the unamortized cost exceeded the fair value, and as such, the Company recorded a $19.0 million impairment of its content assets. Refer to Note 4 - Balance Sheet Components for further discussion of the results of these analyses.

Goodwill and Intangible Assets

Goodwill represents the excess of the cost of acquisitions over the amount assigned to tangible and identifiable intangible assets acquired less liabilities assumed. At least annually, in the fourth quarter of each fiscal year or more frequently if indicators of impairment exist, management performs a review to determine if the carrying value of goodwill is impaired. The identification and measurement of goodwill impairment involves the estimation of fair value at the Company’s reporting unit level, which is the same or one level below the operating segment level. The Company has determined that it has one reporting unit.

The Company performs an initial assessment of qualitative factors to determine whether the existence of events and circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of relevant events and circumstances, the Company determines that it is more likely than not that the fair value of the reporting unit exceeds its carrying value and there is no indication of impairment, no further testing is performed. However, if the Company concludes otherwise, an impairment test must be performed by estimating the fair value of the reporting unit and comparing it with its carrying value, including goodwill.

Intangible assets other than goodwill are carried at cost and amortized over their estimated useful lives. Amortization is recorded within general and administrative expenses in the consolidated statements of operations. The Company reviews identifiable finite-lived intangible assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset and its ultimate disposition. Measurement of any impairment loss is based on the amount by which the carrying value of the asset exceeds its fair value.

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During the second quarter of 2022, the Company experienced a sustained decrease in its share price, and this triggering event was an indication that it was more likely than not that the fair value of the Company’s single reporting unit was below its carrying value. The Company performed an interim goodwill impairment test of its goodwill as of June 30, 2022, and recognized a goodwill impairment charge of $2.8 million for the three months ended June 30, 2022, as the fair value of the reporting unit was less than the related carrying value. This charge was included in impairment of goodwill and intangible assets in the Company’s consolidated statements of operations for the year ended December 31, 2022.

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 second quarter of 2022, the Company also identified the existence of 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 was included within impairment of goodwill and intangible assets in the Company’s consolidated statement of operations for the year ended December 31, 2022.

In order to further validate the reasonableness of fair value as determined by the income and market approaches described above, a reconciliation to market capitalization is then performed by estimating a reasonable control premium and other market factors. Future changes in the judgments, assumptions and estimates that are used in the impairment testing for our asset group may result in significantly different estimates of fair value.

Revenue Recognition

The Company’s performance obligations include:

1.Access to its SVOD platform on a subscription basis either directly or through a partner, whereby the performance obligation is satisfied as access is provided following any free trial period;

2.Access to the Company’s content assets, whereby the performance obligation is satisfied as access to the content is provided; and

3.Licenses of specific program titles, whereby the performance obligation is satisfied as that content is made available for the customer to use.

Subscriptions

Direct-to-Consumer - O&O Consumer Service. The Company generates revenue from subscription fees from its O&O Consumer 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.

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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.

Direct-to-Consumer - 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.

Enterprise. The Company's Enterprise business is comprised primarily of selling subscriptions in bulk to companies and organizations that in turn offer these subscriptions to their employees and members as an employment benefit or “gift of curiosity.”

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 Prime 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. The primary purpose of the transactions is the exchange of 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.

RECENT ACCOUNTING PRONOUNCEMENTS

The JOBS Act allows the Company, as an EGC, to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act until such time as the Company is no longer considered to be an EGC.

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Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASU 2016-02”), which requires lessees to recognize lease assets and lease liabilities in the balance sheet for those leases classified as operating leases under current U.S. GAAP. ASU 2016-02 requires a lessee to recognize a lease liability and a right-of-use asset for each lease with a term longer than twelve months. The new guidance also requires additional qualitative and quantitative disclosures related to the nature, timing and uncertainty of cash flows arising from leases.

The Company adopted the new standard effective January 1, 2022, using a modified retrospective approach 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 a material impact on the consolidated statements of operations or cash flows. Refer to Note 13 - Leases in the Notes to Consolidated Financial Statements for further information regarding the impact of adoption of Topic 842 on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) ("ASU 2016-02'). The amendments in this update introduced a new standard to replace the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company determines its allowance for doubtful accounts based on historical loss experience, customer financial condition, and current economic conditions. The Company adopted the new standard effective January 1, 2023. This adoption did not have a material impact on the Company's consolidated financial statements.

Accounting Pronouncements Issued but not Adopted

In November 2023, the FASB" issued ASU No. 2023-07 ("ASU 2023-07"), Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-07.

In December 2023, the FASB issued ASU No. 2023-09 ("ASU 2023-09"), Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-09.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our results of operations and financial condition. The following discussion should be read in conjunction with the Company’s consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described in “Risk Factors” and elsewhere in this Annual Report on Form 10-K. 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.

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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 are seeking to meet demand for high-quality factual entertainment via SVOD platforms, as well as via bundled content licenses for SVOD and linear offerings, content licensing, brand sponsorship and advertising, talks and courses and partner bulk sales.

We operate our business as a single operating segment that provides premium streaming content through multiple channels, including the use of various applications, partnerships and affiliate relationships. We generate our revenue through six products and services: Direct to Consumer Business, Partner Direct Business, Bundled Distribution, Content Licensing, Enterprise Subscriptions and Other. The table below shows our revenue generated through each of the foregoing products and services for the years ended December 31, 2022, and 2021:

CuriosityStream’s award-winning content library features more than 15,000 programs that explore topics ranging from space engineering to ancient history to the rise of Wall Street. Our extensive catalog of originally produced and owned content includes more than 9,500 short-, mid- and long-form video and audio titles, including One Day University and Learn25 recorded lectures that are led by some of the most acclaimed college and university professors in the world. Our library also features a rotating catalog of more than 5,500 internationally licensed videos and audio programs. Every month, we launch dozens of new video titles, which are available on-demand in high- or ultra-high definition. Through new and long-standing international partnerships, we have localized a large portion of our video library in ten different languages.

Our video content is available directly through our O&O Service and App Services. Our App Services enable access to CuriosityStream on almost every major consumer device, including streaming media players like Roku, Apple TV and Amazon Fire TV, major smart TV brands (e.g., LG, Vizio, Samsung, Sony) and gaming consoles like Xbox. Our Direct Service is available in more than 175 countries to any household with a broadband connection. Our existing subscribers currently pay $2.99 per month or $19.99 per year for our standard Direct Service. All new subscribers to our standard Direct Service on and after March 27, 2023, will start to be charged $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. Our Smart Bundle membership includes everything in our standard service, plus subscriptions to third-party platforms Tastemade, Topic, SommTV, DaVinci Kids, our equity investee Nebula, and our One Day University stand-alone service.

The MVPD, vMVPD and digital distributor partners making up our Partner Direct Business pay us a license fee for sales to individuals who subscribe to CuriosityStream via the partners’ respective platforms. We have affiliate agreement relationships with, and our service is available directly from, major MVPDs that include Comcast, Cox, Dish and vMVPDs and digital distributors that include Amazon Prime Video Channels, Apple Channel, Roku Channel, Sling TV and YouTube TV.

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In addition to our Direct to Consumer and Partner Direct businesses, we have 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.

In 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.

Our Enterprise business is comprised primarily of selling subscriptions in bulk to companies and organizations that in turn offer these subscriptions to their employees and members as an employment benefit or “gift of curiosity.” As of the date of the filing of this Annual Report on Form 10-K, 25 companies have purchased annual subscriptions at volume discounts.

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

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. We executed one such advertising agreement in 2021 with Nebula and two such sponsorships in 2020.

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 two fiscal years and are expected to continue to have significant effects:

Revenues

Currently, the main sources of our revenue are (i) subscriber fees from the Direct to Consumer Business and Direct Subscribers, (ii) license fees from affiliates who receive subscriber fees for access to CuriosityStream content from such affiliates’ subscribers (“Partner Direct Business” and “Partner Direct Subscribers”), (iii) bundled license fees from distribution affiliates (“Bundled MVPD Business” and “Bundled MVPD Subscribers”), (iv) license fees from content licensing arrangements (“Content Licensing”), (v) subscriber fees from our Enterprise business, and (vi) Other revenue, including advertising and sponsorships. As of December 31, 2022, we had approximately 23 million paying subscribers, including Direct Subscribers, Partner Direct Subscribers, Bundled MVPD Subscribers, and Enterprise subscribers.

Since the Company was founded in 2015, we have generated the majority of our revenues from Direct Subscribers in the form of monthly or annual subscription plans. Our existing subscribers currently pay $2.99 per month or $19.99 per year for our standard Direct Service, or $9.99 per month or $69.99 per year for our premium Direct Service. All new subscribers to our standard Direct Service on and after March 27, 2023 will start to be charged $4.99 per month or $39.99 per year. Currently, our premium Direct Service pricing and pricing for existing subscribers will remain unchanged. However, we may in the future increase the price of these existing

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subscription plans, which may have a positive effect on our revenue from this line of our business. The MVPD, vMVPD and digital distributor partners making up our Partner Direct Business pay us a license fee. We recognize subscription revenues ratably during each subscriber’s monthly or yearly subscription period. We pay a fixed percentage distribution fee to our partners for subscribers accessing our platform via App Services to compensate these partners for access to their customer and subscriber bases. Our MVPD, vMVPD and digital distributor partners host and stream our content to their customers via their own platforms, such as set top boxes in the case of most MVPDs. We do not incur billing, streaming or backend costs associated with content distribution through our MVPD, vMVPD and digital distributor partners.

Operating Costs

Our primary operating costs relate to the cost of producing and acquiring our content, the costs of advertising and marketing our service, personnel costs, and distribution fees. Producing and co-producing content and commissioned content is generally more costly than content acquired through licenses.

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

Further, our advertising and marketing expenditures and personnel costs constitute primary operating costs for our business. These costs may fluctuate based on advertising and marketing objectives and personnel needs. In general, we 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.

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Results of Operations

The financial data in the following table sets forth selected financial information derived from our audited consolidated financial statements for the years ended December 31, 2022 and 2021 and shows our results of operations as a percentage of revenue or as a percentage of costs, as applicable, for the periods indicated. We conduct business through one operating segment, CuriosityStream.

n/m – percentage not meaningful

Revenue

Revenue for the years ended December 31, 2022 and 2021 was $78.0 million and $71.2 million, respectively. The increase of $6.8 million, or 10% is primarily due to a $10.2 million increase in subscription revenue, partially offset by a $2.3 million decrease in license fee revenue, and a $1.1 million decrease in license fee revenue.

The increase in subscription revenue of $10.2 million resulted primarily from a $6.0 million increase in subscriber fees received from Direct Subscribers for annual and monthly plans and a $4.2 million increase in corporate subscriptions related to subscription bulk agreements.

The decrease in license fee revenue of $2.3 million is due to an adjustment recorded as a result of an amendment to one of the Company’s content licensing agreements.

The decrease in other revenue of $1.1 million is primarily due to a one-time services agreement entered into with an affiliate during the year ended December 31, 2021.

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Operating Expenses

Operating expenses for the years ended December 31, 2022, and 2021 were $133.3 million and $123.7 million, respectively. This increase of $9.6 million, or 8%, primarily resulted from the following:

Cost of Revenues: Cost of revenues for the year ended December 31, 2022 increased to $51.5 million from $36.7 million for the year ended December 31, 2021. Cost of revenues primarily includes content amortization, hosting and streaming delivery costs, payment processing costs and distribution fees, commission costs and subtitling and broadcast costs. This increase of $14.8 million, or 41%, is primarily due to the increase in content amortization of $11.4 million, primarily driven by the increase in content licensing arrangements and an increase in the number and cost of titles published during 2022 compared to 2021. The balance of the increase in cost of revenues is due to an increase in revenue share expense related to bundled arrangements with other streaming services of $3.4 million compared to the prior period.

Advertising & Marketing: Advertising and marketing expenses for the year ended December 31, 2022, decreased to $40.7 million from $52.2 million for the year ended December 31, 2021. This decrease of $11.5 million, or 22% is primarily due to a net decrease in digital and tv advertising of $11.7 million, and a decrease of $10.0 million in agency fees, partner platforms, and brand awareness advertising compared to the prior year, partially offset by an increase in radio and print advertising of $10.2 million compared to the prior period.

General and Administrative: General and administrative expenses for the year ended December 31, 2022, increased to $37.5 million from $34.9 million for the year ended December 31, 2021. This increase of $2.6 million, or 8%, is primarily attributed to an increase in legal, accounting, and other professional fees of $1.3 million, an increase in salaries and other compensation expense of $0.2 million, as well as immaterial changes across various cost categories totaling a $1.1 million increase.

We expect to incur additional expenses in future periods as we continue to invest in our corporate governance to support the Company’s activities as a public company, including adding personnel and systems to our administrative and revenue-generating functions.

Impairment of Goodwill and Intangible Assets: We also recorded a goodwill and intangibles asset impairment charge of $3.6 million during the year ended December 31, 2022 as a result of the impairment analyses performed. The impairment charge was applied against the entire balance of goodwill and substantially all of the intangible assets balance. There were no such impairment charges recorded during the year ended December 31, 2021.

Operating Loss

Operating loss for the years ended December 31, 2022, and 2021 was $55.3 million and $52.5 million, respectively. The increase of $2.8 million, or 5%, in operating loss primarily resulted from the increases to our operating expenses of $9.6 million, or 8%, partially offset by the increase in revenue of $6.8 million, or 10%, in each case during the year ended December 31, 2022, compared to the year ended December 31, 2021, as described above.

Change in Fair Value of Warrant Liability

During the year ended December 31, 2022, the Company recognized a $5.4 million gain compared to a $15.2 million gain recognized during the year ended December 31, 2021, each resulting from a decrease in the fair value of the liabilities related to the Private Placement Warrants for the respective periods.

Interest and other income (expense)

Interest and other income for the year ended December 31, 2022 was comparable to the year ended December 31, 2021.

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Equity Interests Loss

During the year ended December 31, 2022, the Company recorded $0.8 million equity interests loss related to the equity investments in the Spiegel Venture and Nebula, compared to $0.5 million equity interests loss during the year ended December 31, 2021.

Provision for Income Taxes

Due to generating losses before income taxes in each of the years ended December 31, 2022, and 2021, we had a provision for income taxes of $0.4 million in each respective period. The provision for income taxes is primarily related to foreign withholding income taxes. Our provision for income taxes differs from the federal statutory rate primarily due to the Company being in a full valuation allowance position and not recognizing a tax benefit attributable to generated losses for either federal or state income tax purposes.

Net Loss

Net loss for the years ended December 31, 2022, and 2021 was $50.9 million and $37.6 million, respectively. The increase in net loss of $13.3 million, or 35%, is primarily due to the decrease in the change in the fair value of warrant liability of $9.8 million and the increase in total operating expenses of $9.6 million, partially offset by the increase in total revenues of $6.8 million, in each case during the year ended December 31, 2022 compared to the year ended December 31, 2021, as described above.

Liquidity and Capital Resources

As of December 31, 2022, we had cash and cash equivalents, including restricted cash, of $40.5 million. In addition, the Company had debt securities classified as available for sale investments totaling $15.0 million, which were classified as short-term investments. All of the Company’s investments in debt securities can be readily converted to cash to meet the Company’s ongoing operating cash flow needs. For the year ended December 31, 2022, we incurred a net loss of $50.9 million and used $39.5 million of net cash in operating activities, used $0.2 million of net cash in financing activities, while investing activities provided $62.7 million of net cash.

On February 8, 2021, we consummated a registered public offering (the “Offering”) of 6,500,000 shares of Common Stock plus an over- allotment option, exercised in full by the underwriters, to purchase up to 975,000 additional shares of Common Stock. The net proceeds to us from the Offering were $94.1 million, after deducting $6.8 million in underwriting discounts and commissions and transaction expenses. We also incurred offering expenses in connection with the Offering of $0.7 million. During the year ended December 31, 2021, we received funds of approximately $54.9 million for the exercise of 4.8 million Public Warrants.

We believe that our cash flows from financing, combined with our current cash levels and investments in debt securities that are readily convertible to cash will be adequate to support our ongoing operations, capital expenditures and working capital for at least the next twelve months. We believe that we have access to additional funds, if needed, through the capital markets to obtain further financing under the current market conditions.

Our principal uses of cash are to acquire content, promote our service through advertising and marketing, and provide for working capital to operate our business. We have experienced significant net losses since our inception, and, given the significant operating and capital expenditures associated with our business plan, we anticipate that we will continue to incur net losses.

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Cash Flows

The following table presents our cash flows from operating, investing and financing activities for the years ended December 31, 2022 and 2021:

Cash Flow from Operating Activities

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

During the years ended December 31, 2022 and 2021, we recorded a net cash outflow from operating activities of $39.5 million and $73.2 million, respectively, or a decreased outflow of $33.7 million, or 46%.

The net cash outflow used by operating activities for the year ended December 31, 2022, was primarily due to our $50.9 million net loss, $6.4 million addback of net non-cash expenses net of content additions, and $5.0 million of net cash provided by changes in operating assets and liabilities. The most significant components of net non-cash expenses include amortization of content assets of $39.3 million and stock-based compensation expense of $6.6 million, substantially offset by additions to content assets of $34.8 million and the change in the fair value of warrant liability of $5.4 million. The components of changes in operating assets and liabilities were primarily attributed to an increase in accounts receivable of $11.9 million, and increase in other assets of $3.4 million, partially offset by a decrease in deferred revenue of $8.3 million, increase in accounts payable of $2.7 million, and decrease in accrued expenses and other liabilities of $4.6 million.

The net cash outflow used by operating activities for the year ended December 31, 2021, was primarily due to our $37.6 million net loss, $34.0 million of net non-cash expenses and net of content additions, and $1.6 million of net cash used by changes in operating assets and liabilities. The most significant component of net non-cash expenses include amortization of content assets of $27.9 million and stock-based compensation expense of $7.0 million, partially offset by additions to content assets of $65.6 million and the change in the fair value of warrant liability of $15.2 million. The most significant components of changes in operating assets and liabilities were primarily attributed to an increase in deferred revenue of $10.0 million and increase in accrued expenses and other liabilities of $7.4 million, partially offset by a decrease in accounts receivable of $16.2 million, and decrease in other assets of $2.7 million.

Cash Flow Provided by (Used in) 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.

During the year ended December 31, 2022 and 2021, we recorded a net cash inflow from investing activities of $62.7 million and a net cash outflow from investing activities of $74.9 million, respectively. The net cash inflow provided by investing activities for the year ended December 31, 2022, was primarily due to the sale and maturities of investments in debt securities of $66.8 million, partially offset by purchases of investments in debt securities of $1.5 million and investments in Nebula of $2.4 million. The net cash outflow used in investing activities for the year ended December 31, 2021, was primarily due to purchases of investments in debt securities

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of $151.9 million, investment in Nebula and Spiegel Venture of $9.6 million and acquisitions of One Day University (“ODU”) and Now You Know Media Inc. (“Learn25”) of $5.4 million, which were partially offset by sales and maturities of investments in debt securities of $92.3 million.

Cash Flow from Financing Activities

During the year ended December 31, 2022, and 2021, we recorded net cash outflow from financing activities of $0.2 million and a net cash inflow from financing activities of $148.3 million, respectively. The net cash inflow during the year ended December 31, 2021 of $148.3 million was primarily attributable to the receipt of proceeds from the issuance of Common Stock of $94.1 million (net of $6.8 million of underwriting discounts and commissions), the exercise of 4.8 million Public Warrants resulting in cash proceeds of $54.9 million, and the exercise of stock options of $0.5 million, partially offset by the payments of transaction costs related to the issuance of Common Stock of $0.7 million, with no comparable activity during the year ended December 31, 2022. Further, the net cash outflow during the year ended December 31, 2022 was primarily attributed to withholding tax payments of $0.2 million related to the vesting of restricted stock units, compared to $0.5 million of such outflows during the year ended December 31, 2021.

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 December 31, 2022, 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 Annual Report and related disclosure must be estimated, requiring management to make assumptions with respect to values or conditions which cannot be known with certainty at the time the financial statements are prepared. Management believes that the accounting policies set forth below comprise the most important “critical accounting policies” for the Company. A critical accounting policy is one which is both important to the portrayal of a company’s financial condition and results of operations and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management evaluates such policies on an ongoing basis, based upon historical results and experience, consultation with experts and other methods that management considers reasonable in the particular circumstances under which the judgments and estimates are made, as well as management’s forecasts as to the manner in which such circumstances may change in the future.

Content Assets

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

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

Based on factors including historical and estimated viewing patterns, the Company previously amortized the content assets (licensed and produced) in “Cost of revenues” on the consolidated statements of operations on a straight-line basis over the shorter of each title’s contractual window of availability or estimated period of use, beginning with the month of first availability. Starting July 1, 2021, the Company amortizes content assets on an accelerated basis in the initial two months after a title is published on the Company’s platform, as the Company has observed and expects more upfront viewing of content, generally as a result of additional marketing efforts. Furthermore, the amortization of original content is more accelerated than that of licensed content. We review factors that impact the amortization of the content assets on a regular basis and the estimates related to these factors require considerable management judgment. The Company continues to review factors impacting the amortization of content assets on an ongoing basis and will also record amortization on an accelerated basis when there is more upfront use of a title, for instance due to significant content licensing.

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

Goodwill and Intangible Assets

Goodwill represents the excess of the cost of acquisitions over the amount assigned to tangible and identifiable intangible assets acquired less liabilities assumed. At least annually, in the fourth quarter of each fiscal year or more frequently if indicators of impairment exist, management performs a review to determine if the carrying value of goodwill is impaired. The identification and measurement of goodwill impairment involves the estimation of fair value at the Company’s reporting unit level, which is the same or one level below the operating segment level. The Company determined that it has one reporting unit.

The Company performs an initial assessment of qualitative factors to determine whether the existence of events and circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of relevant events and circumstances, the Company determines that it is more likely than not that the fair value of the reporting unit exceeds its carrying value and there is no indication of impairment, no further testing is performed; however, if the Company concludes otherwise, an impairment test must be performed by estimating the fair value of the reporting unit and comparing it with its carrying value, including goodwill.

Intangible assets other than goodwill are carried at cost and amortized over their estimated useful lives. Amortization is recorded within General and administrative expenses on the consolidated statements of operations. The Company reviews identifiable finite-lived intangible assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset and its ultimate disposition. Measurement of any impairment loss is based on the amount by which the carrying value of the asset exceeds its fair value.

During the second quarter of 2022, the Company experienced a sustained decrease in its share price, and this triggering event was an indication that it was more likely than not that the fair value of the Company’s single

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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 consolidated statement of operations for the year ended December 31, 2022.

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 second quarter of 2022, the Company also determined there were impairment indicators with respect to certain of the Company’s definite-lived intangible assets. As a result, the Company performed an impairment test by comparing the carrying values of the intangible assets to their respective fair values, which were determined based on forecasted future cash flows. As a result of this impairment test, the Company recorded an impairment charge of $0.8 million during the three months ended June 30, 2022, which is reflected as a component of impairment of goodwill and intangible assets on the Company’s consolidated statement of operations for the year ended December 31, 2022.

In order to further validate the reasonableness of fair value as determined by the income and market approaches described above, a reconciliation to market capitalization is then performed by estimating a reasonable control premium and other market factors. Future changes in the judgments, assumptions and estimates that are used in the impairment testing for our asset group could result in significantly different estimates of fair value.

Revenue recognition

Subscriptions—O&O Service

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

Subscriptions—App Services

The Company also earns subscription revenues through its App Services. These subscriptions are similar to the O&O Service subscriptions, but are generated based on agreements with certain streaming media players as well as with Smart TV brands and gaming consoles. Under these agreements, the streaming media player

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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—Affiliates

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.

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.

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

Recently Issued and Adopted Financial Accounting Standards

Leases

As an EGC, the 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”) 2016-02, Leases (Topic 842) (“ASU 2016-02”), which requires lessees to recognize lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under current U.S. GAAP. ASU 2016-02 requires a lessee to recognize a lease liability and a right-of-use asset for each lease with a term longer than twelve months. The new guidance also requires additional qualitative and quantitative disclosures related to the nature, timing and uncertainty of cash flows arising from leases. The Company adopted the new standard effective January 1, 2022, using a modified retrospective approach 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

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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 a material impact on the consolidated statements of operations or cash flows. Refer to Note 13 for further information regarding the impact of adoption of Topic 842 on the Company’s consolidated financial statements.

Accounting Standards Effective in Future Periods

Financial Instruments—Credit Losses

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-03”).” The amendments in this update introduce a new standard to replace the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Subsequent to the initial standards, the FASB has also issued several ASUs to clarify specific topics. 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.

Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations

On October 14, 2020, we acquired Legacy CuriosityStream. The Business
Combination was accounted for as a reverse recapitalization in accordance with Accounting Standards Codification (“ASC”)
805, Business Combinations. Under this method of accounting, Software Acquisition Group Inc., which was the legal acquirer in the Business
Combination, was treated as the “acquired” company for financial reporting purposes and Legacy CuriosityStream was treated
as the accounting acquirer. Except as otherwise provided herein, our financial statements presentation includes (1) the results of Legacy
CuriosityStream as our accounting predecessor for periods prior to the completion of the Business Combination, and (2) the results of
the Company for periods after the completion of the Business Combination.

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 financial statements and notes thereto included elsewhere in this Annual Report
on Form 10-K. This discussion contains forward-looking statements which involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described in “Risk
Factors” and elsewhere in this Annual Report on Form 10-K. 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 Legacy CuriosityStream prior to the Business Combination
and to CuriosityStream Inc. following the closing of the Business Combination.

Overview

CuriosityStream is a media and entertainment company that offers premium
video programming across the principal categories of factual entertainment, including science, history, society, nature, lifestyle and
technology. Our mission is to provide premium factual entertainment that informs, enchants and inspires. We are seeking to meet demand
for high-quality factual entertainment via SVoD platforms, as well as via bundled content licenses for SVoD and linear offerings, partner
bulk sales, brand partnerships and content sales. We are well-positioned for growth as a digital-native video platform monetizing content
across this broad revenue stack.

We operate our business as a single operating segment that provides premium
streaming content through multiple channels, including the use of various applications, partnerships and affiliate relationships. We generate
our revenue through six products and services: Direct to Consumer Business, Partner Direct Business, Bundled Distribution, Program Sales,
Corporate & Association Partnerships and Other. The table below shows our revenue generated through each of the foregoing products
and services for the years ended December 31, 2021, and 2020:

Our award-winning video content library features thousands of nonfiction
episodes, including more than 1,000 original, commissioned or co-produced documentaries, of short-form, mid-form and long-form duration.
Our content, approximately one-third of which is originally produced with the remaining two-thirds consisting of licensed programming,
is available directly through our O&O Service and App Services. Our App Services enable access to CuriosityStream on almost every
major consumer device, including streaming media players like Roku, Apple TV and Amazon Fire TV, all major smart TV brands (e.g., LG,
Vizio, Samsung, Sony) and gaming consoles like Xbox. Our Direct Service is available to any household in the world with a broadband connection
for $2.99 per month or $19.99 per year. We also provide a premium service for $9.99 per month or $69.99 per year.

The MVPD, vMVPD and digital distributor partners
making up our Partner Direct Business pay us a license fee for sales to individuals who subscribe to CuriosityStream via the partners’
respective platforms. We have affiliate agreement relationships with, and our service is available directly from, major MVPDs that include
Comcast, Cox, Dish and vMVPDs and digital distributors that include Amazon Prime Video Channels, Roku Channels, Sling TV and YouTube
TV.

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

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

Our Corporate & Association Partnerships business is comprised
primarily of selling subscriptions in bulk to companies and organizations that in turn offer these subscriptions to their employees and
members as an employment benefit or “gift of curiosity.” To date, over 27 companies have purchased annual subscriptions at
bulk discounts for their employees.

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In the future, we also hope to continue developing integrated digital
brand partnerships with advertisers. These sponsorship campaigns offer companies the chance to be associated with CuriosityStream content
in a variety of forms, including short and long form program integration, branded social media promotional videos, broadcast advertising
spots, and digital display ads. We believe the impressions accumulated in these multi-faceted campaigns would roll up to verifiable metrics
for the clients. We executed one such advertising agreement in 2021 with Nebula. We executed on two such sponsorships in 2020: one in
the financial services sector as well as a brand in the health and fitness sector.

Prior to the Business Combination, Software Acquisition
Group Inc. was a blank check company, incorporated as a Delaware corporation on May 9, 2019, and formed for the purpose of effecting
a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more
businesses. Until the consummation of the Business Combination, Software Acquisition Group Inc. did not engage in any operations nor
generate any revenue. On October 14, 2020, upon the consummation of the Business Combination, Legacy CuriosityStream became Software
Acquisition Group Inc.’s direct subsidiary and in connection with the Closing, we changed our name from “Software Acquisition
Group Inc.” to “CuriosityStream Inc.”

Recent Developments

Acquisitions

On May 11, 2021, the Company
consummated the acquisition of 100% of One Day University for the aggregate consideration of $4.5 million. One Day University provides
access to talks and lectures from professors at colleges and universities in the United States.

On August 13, 2021, the Company
consummated the acquisition of 100% of Learn25 for fixed cash consideration of approximately $1.5 million in addition to an earnout capped
at $0.6 million. Learn25 provides access to hundreds of audio and video programs on history, science, psychology, health, religion, and
other topics from various professors and subject-matter experts around the world.

Each of these acquisitions
complements and enhances the Company’s offering of premium factual content and provides additional long-term revenue and promotional
opportunities by connecting directly with new audiences in new formats.

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Partnership with
SPIEGEL TV

On July 29, 2021, the Company acquired a 32% ownership in Spiegel TV Geschichte
und Wissen GmbH & Co. KG (Spiegel Venture) for $3.3 million, expanding its European footprint through a partnership with SPIEGEL TV,
the subsidiary of the German media conglomerate SPIEGEL, and its partner, Autentic, a factual content producer and distributor. Germany
is the Company’s top non-English-speaking market, and the partnership expands the Company’s reach through the addition of
hundreds of hours of German-dubbed programming to the Company’s SVoD service as well as a rebranded linear channel in German-speaking
Europe.

Nebula Investment

On August 23, 2021, the Company purchased a 12% ownership interest in Watch
Nebula LLC (Nebula) for $6.0 million with the commitment to purchase an additional 13% ownership interest for a total 25% stake,
for a total of $12.5 million (through eight quarterly payments of $0.8 million). The additional equity investment can be made or declined
on a quarterly basis or accelerated at any time. The Company obtained 25% representation on Nebula’s board of directors, providing
the Company with significant influence, but not a controlling interest.

COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of COVID-19
as a pandemic, which continues to spread throughout the United States and globally. The full extent of the impact of the COVID-19
pandemic on our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately
predict. See Item 1A: “Risk Factors” section set forth in this Annual Report on Form 10-K for additional details. In an effort
to protect the health and well-being of our employees, our workforce has had and continues in most instances to spend a significant amount
of time working from home, and international travel has been severely curtailed. Our other partners have similarly had their operations
disrupted, including those partners that we use for our operations as well as development, production, and post-production of content.
While we and our partners have resumed productions and related operations in many parts of the world, our ability to produce content remains
affected by the pandemic.

The widespread availability of COVID-19 vaccines and corresponding rates
of vaccination generally have been effective in curtailing rates of infection in many parts of the United States, mitigating many of the
adverse social and economic effects of the pandemic. COVID-19 vaccinations have continued to increase, including as a result of the approval
of vaccine boosters, access to the vaccine for school-aged children, and the implementation of vaccine requirements by certain public
sector and private sector employers. Notwithstanding, there remains significant resistance to vaccination in certain geographies and among
certain groupings of people. Additionally, regulators have approved oral antiviral treatment pills, which have proven effective in reducing
severe illness from COVID-19. In many locations throughout the United States, the spread of COVID-19 decreased substantially throughout
the spring and summer of 2021, and, as a result, certain activity restrictions were lifted in whole or in part; however, due in large
part to the increased spread of new, more transmissible coronavirus variants, the number of individuals diagnosed with COVID-19 increased
substantially at the end of 2021 and early 2022.

We anticipate that these actions and the global
health crisis caused by COVID-19, including any resurgences, such as by the “delta” and “omicron” variants of
the virus, will continue to negatively impact business activity across the globe. We will continue to actively monitor the situation
and may take further actions that alter our business operations as may be required by federal, state, local or foreign authorities, or
that we determine are in the best interests of our employees, customers, partners, and stockholders. It is not clear what potential effects
any such alterations or modifications may have on our business, including the effects on our customers, suppliers, or vendors, or on
our financial results.

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Key Factors Affecting Results of Operations

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

Revenues

Currently, the main sources of our revenue are
(i) subscriber fees from the Direct to Consumer Business and Direct Subscribers, (ii) license fees from affiliates who receive
subscriber fees for CuriosityStream from such affiliates’ subscribers (“Partner Direct Business” and “Partner
Direct Subscribers”), (iii) bundled license fees from distribution affiliates (“Bundled MVPD Business” and “Bundled
MVPD Subscribers”), and (iv) license fees from program sales arrangements. As of December 31, 2021, we had approximately 23 million
total paying subscribers, including Direct Subscribers, Partner Direct Subscribers and Bundled MVPD Subscribers.

Since our founding in 2015, we have generated the
majority of our revenues from Direct Subscribers in the form of monthly or annual subscription plans. We charge $2.99 per month or $19.99
dollars per year for our standard Direct Service, or $9.99 per month or $69.99 per year for our premium Direct Service. We may in the
future increase the price of our subscription plans, which may have a positive effect on our revenue from this line of our business. The
MVPD, vMVPD and digital distributor partners making up our Partner Direct Business pay us a license fee. We recognize subscription revenues
ratably during each subscriber’s monthly or yearly subscription period. We pay a fixed percentage distribution fee to our partners
for subscribers accessing our platform via App Services to compensate these partners for access to their customer and subscriber bases.
Our MVPD, vMVPD and digital distributor partners host and stream our content to their customers via their own platforms, such as set top
boxes in the case of most MVPDs. We do not incur billing, streaming or backend costs associated with content distribution through our
MVPD, vMVPD and digital distributor partners.

Operating Costs

Our primary operating costs relate to the cost
of producing and acquiring our content, the costs of advertising and marketing our service, personnel costs, and distribution fees. As
of December 31, 2021, licensed content represented 2,884 titles and original titles represented 1,043 titles. Producing and co-producing
content and commissioned content is generally more costly than content acquired through licenses.

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

Further, our advertising and marketing expenditures
and personnel costs constitute primary operating costs for our business. These costs may fluctuate based on advertising and marketing
objectives and personnel needs. In general, we 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.

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Results of Operations

The financial data in the following table sets
forth selected financial information derived from our audited financial statements for the years ended December 31, 2021 and 2020
and shows our results of operations as a percentage of revenue or as a percentage of costs, as applicable, for the periods indicated.
We conduct business through one operating segment, CuriosityStream.