CuriosityStream Inc

NOTE 1 -ORGANIZATION AND BUSINESS

On October 14, 2020, Software Acquisition Group Inc., a special purpose acquisition company and a Delaware corporation (“SAQN”), consummated a reverse merger pursuant to that certain Agreement and Plan of Merger, dated August 10, 2020 (the “Business Combination”). Upon the consummation of the Business Combination, CuriosityStream Operating Inc., a Delaware corporation (“Legacy CuriosityStream”) became a wholly owned subsidiary of SAQN, and the registrant changed its name from “Software Acquisition Group Inc.” to “CuriosityStream Inc.” Following the consummation of the Business Combination, Legacy CuriosityStream changed its name from “CuriosityStream Operating Inc.” to “Curiosity Inc.”

The principal business of CuriosityStream Inc. (the "Company" or "CuriosityStream") is providing customers with access to high quality factual content via a direct subscription video on-demand (SVOD) platform accessible by internet connected devices, or indirectly via distribution partners who deliver CuriosityStream content via the distributor’s platform or system. The Company's online library available for streaming spans the entire category of factual entertainment including science, history, society, nature, lifestyle, and technology. The Company's SVOD platform offers more than 6,000 accessible on-demand and ad-free productions and includes shows and series from leading non-fiction producers.

The Company’s content assets are available for consuming directly through its owned and operated website (“O&O Consumer Service”), mobile applications developed for iOS and Android operating systems (“App Services”), and via the platforms and systems of third-party partners in exchange for license fees. The Company offers subscribers a monthly or annual subscription. The price for a subscription varies depending on the location of the subscriber, the content included (e.g., Direct Service or Smart Bundle service) and the length of the subscription (e.g., monthly or annual) selected by the customer. As an additional part of the Company’s App Services, it has built applications to make its service accessible on almost every major customer device, including streaming media players like Roku, Apple TV and Amazon Fire TV, major smart TV brands (e.g., LG, Vizio, Samsung) and gaming consoles. In addition, CuriosityStream has affiliate agreement relationships with, and its content assets are available through, certain multichannel video programming distributors (“MVPDs”) and virtual MVPDs (“vMVPDs”). The Company also has distribution agreements which grant other media companies certain distribution rights to the Company’s programs, referred to as content licensing arrangements. The Company also sells selected rights to content created before production begins.

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. Intercompany balances and transactions have been eliminated.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with U.S. GAAP and the rules and regulations of the U.S Securities and Exchange Commission (the “SEC”) requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Significant items subject to such estimates include the content asset amortization, the assessment of the recoverability of content assets and equity method investments, and the determination of fair value estimates related to non-monetary transactions, share-based awards and liability classified warrants.

CONCENTRATION OF RISK

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

Accounts receivables, net are typically unsecured and are derived from revenues earned from customers primarily located in the U.S. and Germany.

During the year ended December 31, 2023, the top three customers accounted for 11% of the Company’s revenues with no customer individually accounting for 10% of the Company’s revenues. These same three customers accounted for 18% of the Company’s accounts receivables as of December 31, 2023.

During the year ended December 31, 2022, the top three customers accounted for 21% of the Company’s revenues with no customer individually accounting for 10% of the Company’s revenues. These same three customers accounted for 28% of the Company’s accounts receivables as of December 31, 2022.

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

The Company considers investments in instruments purchased with an original maturity of 90 days or less to be cash equivalents. Restricted cash maintained under agreements that legally restrict the use of such funds is not included within cash and cash equivalents and is reported in a separate line item on the consolidated balance sheets as of December 31, 2023, and 2022.

FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS

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

The accounting guidance establishes three levels of inputs that may be used to measure fair value:

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

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

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

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

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

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

Certain assets are measured at fair value on a nonrecurring basis and are subject to fair value adjustments only in certain circumstances, e.g., when there is evidence of impairment indicators. During the three months ended June 30, 2023, and September 30, 2023, the Company performed certain analyses of its investments in equity method investees to determine if an “other-than-temporary” impairment existed. In addition, the Company assessed the fair value of its content as a result of identifying indicators of impairment related to those assets. The resulting fair value measurements of the equity-method investments and content assets are considered to be Level 3 measurements. Refer to Note 3 - Equity Investments and Business Combinationsand Note 4 - Balance Sheet Componentsfor further discussion of the results of these analyses.

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

INVESTMENTS

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

Unrealized gains and losses are recorded in accumulated other comprehensive income or loss, a component of stockholders’ equity (deficit). Realized gains and losses are reclassified from accumulated other comprehensive income or loss into earnings as a component of net income or loss. The Company evaluates unrealized losses on investments, if any, to determine if other-than-temporary impairment is required to be recognized. No such other-than-temporary impairments were recognized during the years ended December 31, 2023, and 2022. Investments in debt securities that will mature within one year of the balance sheet dates are reflected as short-term investments in debt securities in the accompanying consolidated balance sheets.

EQUITY METHOD INVESTMENTS

The Company applies the equity method of accounting to investments when it has the ability to exercise significant influence, but not control, over the investee. Significant influence is presumed to exist when the Company owns between 20% and 50% of the voting interests in the investee, but the Company also applies judgment regarding its level of influence over the investee by considering key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions.

The Company’s equity method investments are initially reported at cost and then adjusted each period for the Company’s share of the investee’s income or loss and dividends paid, if any. The Company’s proportionate share of the net income (loss) resulting from these investments is reported under the line item captioned “Equity method investment income (loss)” on the consolidated statements of operations. The Company classifies distributions received from equity method investments using the cumulative earnings approach in the consolidated statements of cash flows.

ACCOUNTS RECEIVABLE

Accounts receivable is comprised of receivables from subscriptions revenue, license fees revenue, and other revenue. The Company records accounts receivable net of an allowance for doubtful accounts. The allowance is determined based on a review of the estimated collectability of the specific accounts and historical loss experience and existing economic conditions. Uncollectible amounts are written off against the allowance for doubtful accounts once management determines collection of such amount, or a portion thereof, to be less than probable. As of December 31, 2023, and 2022, allowance for doubtful accounts amounted to $0.5 million and $0.1 million, respectively.

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.

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 Componentsfor further discussion of the results of these analyses.

PROPERTY AND EQUIPMENT

Property and equipment are stated at historical cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the non-cancelable lease term or the estimated useful lives. Repairs and maintenance expenses are expensed as incurred.

LONG-LIVED ASSETS

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amount to the future undiscounted cash flows the assets are expected to generate. If long-lived assets are considered impaired, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds its fair value. For the years ended December 31, 2023, and 2022, the Company recognizedno impairment charges related to long-lived assets .

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 hasone 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.

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.

WARRANT LIABILITY

The Company classifies its Private Placement Warrants as liabilities, as the terms of these warrants provide for potential changes to the settlement amounts dependent upon the characteristics of the warrant holder and because the holder of a warrant is not an input into the pricing of a fixed-for-fixed option on equity shares. Such provisions would preclude the warrant from classification as equity, and thus the warrant is classified as a liability. The Private Placement Warrants are recorded at fair value on the consolidated balance sheets and changes in their fair value each period are reported in “Change in fair value of warrant liability” in the consolidated statements of operations.

REVENUE RECOGNITION

Subscriptions

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.

App Services

The Company also earns subscription revenues through its App Services. These subscriptions are similar to the O&O Service subscriptions, but are generated based on agreements with certain streaming media players as well as with Smart TV brands and gaming consoles. Under these agreements, the streaming media player typically bills the subscriber directly and then remits the collected subscriptions to the Company, net of a distribution fee. The Company recognizes the gross subscription revenues when earned and simultaneously recognizes the corresponding distribution fees as an expense. The Company is the principal in these relationships as the Company retains control over service delivery to its subscribers.

License Fees

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.

COST OF REVENUES

Cost of revenues primarily includes content asset amortization, streaming delivery costs, payment processing costs and distribution fees.

ADVERTISING AND MARKETING

Advertising and marketing expenses include digital, radio, and television advertisements as well as brand awareness expenditures. These costs are expensed as incurred. For the years ended December 31, 2023, and 2022, advertising and marketing expenses were $17.4 million and $40.7 million, respectively, and are reflected in the accompanying consolidated statements of operations.

STOCK-BASED COMPENSATION

The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. The fair value is recognized in earnings over the period during which an employee is required to provide the service. The Company accounts for forfeitures as they occur. Refer to Note 9 - Stock-Based Compensation in the Notes to Consolidated Financial Statements for further information.

RESTRUCTURING

From time to time, the Company approves and implements restructuring plans for the purpose of internal resource alignment and cost saving measures. Such restructuring plans may include terminating employees and cancellation of contracts. In December 2023, the Company initiated a plan to eliminate 13 full-time positions, about 20% of its workforce at the time. As a result, the Company recorded a one-time, pre-tax restructuring charge of $0.8 million, comprised primarily of severance and workforce optimization costs and reflected within general and administrative expenses in the accompanying consolidated statements of operations. Of this amount, the Company paid $0.1 million in 2023 and expects to pay $0.7 million in 2024.

INCOME TAXES

The Company uses the asset and liability method of accounting for income taxes, in which deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the carrying amounts of existing assets and liabilities as reported in the consolidated balance sheets and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be reversed. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as a component of the income tax provision in the period that includes the enactment date. A valuation allowance is established if it is more likely than not that all or a portion of the deferred tax assets will not be realized.

The Company’s tax positions are subject to income tax audits. The Company recognizes the tax benefit of an uncertain tax position only if it is more likely than not that the position is sustainable upon examination by the taxing authority, based on the technical merits. The tax benefit recognized is measured as the largest amount of benefit which is more likely than not (greater than 50% likely) to be realized upon settlement with the taxing authority. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in its tax provision.

The Company calculates the current and deferred income tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed in subsequent years. Adjustments based on filed income tax returns are recorded when identified. The amount of income tax paid is subject to examination by U.S. federal and state tax authorities. The estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of the relevant risks, facts, and circumstances existing at that time. To the extent the assessment of such tax position changes, the change in estimate is recorded in the period in which the determination is made.

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.

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.

NOTE 3 -EQUITY INVESTMENTS AND BUSINESS COMBINATIONS

EQUITY INVESTMENTS

The Company’s holds equity investments in Spiegel TV Geschichte und Wissen GmbH & Co. KG (the “Spiegel Venture”) and Watch Nebula LLC (“Nebula”). The Company accounts for these investments under the equity method of accounting. The carrying values for these investments as of December 31, 2023, and 2022, were as follows:

Spiegel Venture

In July 2021, the Company acquired a 32% ownership in the Spiegel Venture for an initial investment of $3.3 million. The Spiegel Venture, which prior to the Company’s equity purchase, was jointly owned and operated by Spiegel TV GmbH ("Spiegel TV") and Autentic GmbH ("Autentic"), operates two documentary channels, together with an SVOD service as well as a free advertising-supported streaming television (FAST) channel, which provide factual content to pay television audiences in Germany and certain German-speaking regions of other countries. The Company has not received any dividends from the Spiegel Venture as of December 31, 2023.

Per the Share Purchase Agreement (as amended in early 2023, the “SPA”), in the event Spiegel Venture achieved certain financial targets during its 2022 fiscal period, the Company is required to make an additional payment related to its 32% equity ownership to both Spiegel TV and Autentic (the “Holdback Payment”). During the three months ended June 30, 2023, the Company determined Spiegel Venture had achieved such financial targets, resulting in the Company paying the Holdback Payment in the amount of $0.9 million during July 2023.

The Company has a call option that permits it to require Spiegel TV and Autentic to sell its ownership interests in Spiegel Venture (“Call Option”) to the Company. The Call Option, exercisable at a value based on a determinable calculation in the SPA, is initially exercisable only during the period that is the later of (i) the 30-day period following the adoption of Spiegel Venture’s audited financial statements for the fiscal year 2024, and (ii) the period between March 1, 2025 and March 31, 2025.

Together with the Call Option, each of Spiegel TV and Autentic has a put option that permits it to require the Company to purchase their interest (“Put Option”) at a value based on a determinable calculation outlined in the SPA. The Put Option is only exercisable upon the achievement of certain defined conditions, as outlined in the SPA, and is initially exercisable only during the period that is the later of i) the 60-day period following the adoption of Spiegel Venture’s audited financial statements for the fiscal year 2025, and (ii) the period between April 1, 2026, and April 30, 2026.

In the event the Call Option or Put Option is not exercised, both options shall continue to be available to each respective party in the following year through perpetuity, with its exercise limited to the same date range as outlined above. The Put Option is not currently considered to be probable of becoming exercisable based on the defined conditions in the SPA.

Nebula

Nebula is an SVOD technology platform built for and by a group of independent content creators. Prior to the Company’s investment, Nebula was a 100% wholly owned subsidiary of Standard Broadcast LLC (“Standard”). On August 23, 2021, the Company purchased a 12% ownership interest in Nebula for $6.0 million. Upon its initial investment, the Company obtained 25% representation on Nebula’s board of directors, providing the Company with significant influence, but not a controlling interest.

Since the time of its original investment, the Company has been obligated to purchase additional incremental ownership interests, each for a payment of $0.8 million and representing 1.625% of equity ownership, if Nebula meets certain quarterly targets. The Company has made three subsequent incremental purchases, bringing its total ownership interest in Nebula to 16.875% as of December 31, 2023. The Company did not make further investments in Nebula during the year ended December 31, 2023, and the obligation to make additional purchases ended as of September 30, 2023. The Company has not received dividends from Nebula as of December 31, 2023.

Since August 2021, the Company has included access to Nebula’s SVOD service as a part of a combined CuriosityStream /Watch Nebula subscription offer and as part of the Company’s Smart Bundle subscription package. As part of this arrangement, the Company has shared revenue with Nebula, based on certain metrics, and paid monthly. On September 26, 2023, Nebula provided the Company with a notice of non-renewal (the “Nebula Non-Renewal”), which resulted in the expiration of the revenue share at the end of 2023. Nebula is still required to make its service available to subscribers to either of these offerings through the end of the term of any such subscription that exists as of December 31, 2023.

Impairment Assessment

The Company regularly reviews its investments in equity method investees for impairment, including when the carrying value of an investment exceeds its related market or fair value. If it has been determined that an investment has sustained an “other-than-temporary” decline in value, the investment is written-down to its fair value. The factors the Company considers in determining an “other-than-temporary” decline has occurred include, but are not limited to, (i) the determined market value of the investee in relation to its cost basis, (ii) the financial condition and operating performance of the investee and (iii) the Company’s intent and ability to retain the investment for a sufficient period of time to allow for recovery in the market value of the investment.

As a result of the Company’s impairment analysis related to the Spiegel Venture, the Company determined the carrying value of its investment in the Spiegel Venture exceeded the fair value as of June 30, 2023, and as such the Company recorded a $2.0 million impairment for the three months ended June 30, 2023. This impairment charge in included within equity method investment loss for the year ended December 31, 2023.

As a result of the Company’s impairment analysis related to Nebula, the Company determined that the carrying value of this investment exceeded the fair value as of September 30, 2023. As such, the Company recorded a $2.3 million impairment for the three months ended September 30, 2023. The primary factor impacting the decrease in fair value of this investment was the expected decrease in Nebula’s revenue share as a result of the Nebula Non-Renewal, as discussed above. This impairment charge in included within equity method investment loss for the year ended December 31, 2023.

BUSINESS COMBINATIONS

Acquisition of One Day University

On May 11, 2021, the Company entered into an asset purchase agreement to acquire 100% of One Day University ("ODU") for the aggregate consideration of $4.5 million. ODU provides access to talks and lectures from professors at colleges and universities in the U.S. The Company paid $4.0 million of cash consideration with the remaining $0.5 million to be held by the Company as a holdback for indemnification purposes. On May 11, 2022, the ODU holdback of $0.5 million was paid to the previous owners from escrow funds previously classified as restricted cash.

Acquisition of Learn25

On August 13, 2021, the Company entered into an asset purchase agreement to acquire 100% of Now You Know Media Inc. (“Learn25”) for fixed cash consideration of $1.5 million in addition to an earnout of up to $0.6 million based on the achievement of certain revenue targets post-acquisition through fiscal year 2021. 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. The Company paid $1.4 million of cash consideration with the remaining $0.2 million to be held by the Company as a holdback for indemnification purposes. On February 11, 2022, the Company paid an earnout of $0.5 million pursuant to the achievement of revenue targets in 2021. On March 4, 2022, the Learn25 holdback of $0.2 million was paid to the previous owners from escrow funds previously classified as restricted cash.

NOTE 4 -BALANCE SHEET COMPONENTS

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND SHORT-TERM INVESTMENTS

A reconciliation of the Company’s cash and cash equivalents in the consolidated balance sheets to cash, cash equivalents and restricted cash in the consolidated statements of cash flows as of December 31, 2023, and 2022 is as follows:

As of December 31, 2023, and 2022, restricted cash included cash deposits of $0.5 million required by a bank as collateral related to corporate credit card agreements.

On March 4, 2022, the Company paid the Learn25 holdback of $0.2 million to the previous owners of Learn25 from escrow funds previously classified as restricted cash. On April 16, 2022, the Paycheck Protection Program (PPP) loan was forgiven, and $1.2 million of funds were released from escrow to the Company and reclassified from restricted cash to cash and cash equivalents. On May 11, 2022, the Company paid the ODU holdback of $0.5 million to the previous owners of ODU from escrow funds previously classified as restricted cash.

To determine the fair value of its investments in money market funds and corporate debt securities, the Company uses unadjusted quoted market prices (Level 1 inputs), and quoted prices for comparable assets (Level 2 inputs), respectively. As of December 31, 2023, and December 31, 2022, the fair value of the Company’s securities investments was as follows:

The Company did not hold any debt securities as of December 31, 2023.

The following table summarizes the Company’s corporate, U.S. government, and municipal debt securities as of December 31, 2022:

Realized losses were less than $0.1 million reported in interest and other income in the accompanying consolidated statements of operations for the years ended December 31, 2023 and 2022.

The fair value of the Company’s investments in corporate, U.S. government, and municipal debt securities as of December 31, 2022, by contractual maturity is as follows:

CONTENT ASSETS

As of December 31, 2023, and 2022, content assets consisted of the following:

Of the$8.3 million unamortized cost of licensed content that had been released as of December 31, 2023, the Company expects that $3.8 million, $2.3 million, and $1.5 million will be amortized in each of the next three years. Of the$22.9 million unamortized cost of produced content that had been released as of December 31, 2023, the Company expects that $8.7 million, $6.0 million, and $4.9 million will be amortized in each of the next three years.

Impairment Assessment

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, due to the continued adverse macro and microeconomic conditions, including the competitive environment and its impact on the Company’s subscriber growth, the Company revised its forecasted subscriber growth and forecasted cash flow assumptions. Additionally, companies in the streaming industry experienced a decline in market valuations, and reflecting this market trend and the factors above, the market price of the Company’s common shares had declined significantly through September 30, 2023.

Given these factors, as well as the Company’s declining market capitalization and operating losses during the quarter, the Company identified an indicator of impairment related to its content asset group and performed an analysis of content assets to assess if the fair value was less than unamortized cost. To determine if an impairment existed, the Company utilized a traditional discounted cash flow approach based on expectations for the monetization of its content assets in the aggregate, including estimates for future cash inflows and outflows. As a result of this impairment analysis of content assets, the Company determined that the unamortized cost exceeded the fair value, and as such, the Company recorded a $19.0 million impairment for the three months ended September 30, 2023.

The discounted cash flow analysis includes cash flow estimates of revenue and costs, as well as a discount rate (a Level 3 fair value measurement). Estimates of future revenue and costs involve measurement uncertainty, and it is therefore possible that further reductions in the carrying value of content assets may be required as a consequence of changes in management’s future revenue estimates.

Within the discounted cash flow analysis used in the content impairment assessment, the Company used EBITDA margin rates ranging from 50.0% to 68.0%. These rates are generally dependent on overall market growth rates, the competitive environment, inflation and relative currency exchange rates and could be adversely impacted by a sustained decrease in any of these measures, all of which the Company considered in determining the assumptions used in the analysis.

The Company used a discount rate of 14.0% in the discounted cash flow analysis. This rate was based on the weighted average cost of capital of the Company plus a risk premium representing the risk associated with the Company’s content assets. The discount rate may be impacted by adverse changes in the macroeconomic environment and volatility in the debt and equity markets.

Amortization

In accordance with its accounting policy for content assets, the Company amortizes licensed content costs and produced content costs, which is included within cost of revenues in the Company’s consolidated statements of operations. For the years ended December 31, 2023, and 2022, content amortization was as follows:

PROPERTY AND EQUIPMENT

As of December 31, 2023, and 2022, property and equipment, summarized by major classifications, were as follows:

Depreciation and amortization expense related to property and equipment, including the amortization of leasehold improvements, was $0.4 million and $0.4 million for the years ended December 31, 2023, and 2022, respectively.

GOODWILL

The change in goodwill for the year ended December 31, 2022, was as follows:

WARRANT LIABILITY

As described in Note 7 - Stockholders' Equity, the Private Placement Warrants are classified as a non-current liability and reported at fair value at each reporting period. The fair value of the Private Placement Warrants as of December 31, 2023, and 2022, was as follows:

NOTE 5 -REVENUE

The following table sets forth the Company’s disaggregated revenues for the years ended December 31, 2023, and 2022, as well as the relative percentage to total revenue.

REMAINING PERFORMANCE OBLIGATIONS

As of December 31, 2023, the Company expects to recognize revenues in the future related to performance obligations that are unsatisfied as follows:

These amounts include only fixed consideration or minimum guarantees and do not include amounts related to (i) contracts with an original expected term of one year or less or (ii) licenses of content that are solely based on sales or usage-based royalties.

DEFERRED REVENUE

Contract liabilities (i.e., deferred revenue) consists of subscriber and affiliate license fees billed that have not been recognized, amounts contractually billed or collected for content licensing sales in advance of the related content being made available to the customer, and unredeemed gift cards and other prepaid subscriptions that have not been redeemed.

As of December 31, 2023, and 2022, total deferred revenues were $15.2 million and $14.9 million, respectively, with the non-current portions of $0.6 million as of December 31, 2023, and 2022, included in other liabilities on the consolidated balance sheets. The increase in deferred revenue was primarily due to higher subscription rates that the Company began to implement during 2023.

For the year ended December 31, 2023, the Company recognized revenues of $14.3 million related to amounts deferred as of December 31, 2022.

TRADE AND BARTER TRANSACTIONS

In the second quarter of 2023, the Company began entering into trade and barter transactions primarily for the purpose of exchanging content assets through licensing agreements with media counterparties. Certain transactions may also include the exchange of advertising, whereby the Company and its counterparty exchange media campaigns or other promotional services.

For content acquired through trade and barter transactions, the Company records the acquired assets in the consolidated balance sheet and amortizes those assets over the term of the content license, in accordance with the Company’s content and amortization policies. For other products and services received through trade and barter transactions, the Company records operating expenses upon receipt of such products and services, as applicable.

The transaction price for these contracts is measured at the estimated fair value of the non-cash consideration received unless this is not reasonably estimable; in which case, the consideration is measured based on the standalone selling price of the services provided. 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. For advertising, the performance obligation is satisfied upon the Company’s delivery of the media campaign or other service to the counterparty.

For the years ended December 31, 2023, and 2022, trade and barter revenues were as follows:

For the years ended December 31, 2023, and 2022, trade and barter advertising and marketing expenses were as follows:

For the years ended December 31, 2023, and 2022, additions to content assets resulting from trade and barter transactions were as follows:

NOTE 6 -PAYCHECK PROTECTION PROGRAM LOAN

In early 2020, the Company applied for funding from the Paycheck Protection Program (“PPP”) in the amount of $1.2 million under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) (the “PPP Loan”). The PPP Loan was approved on May 1, 2020, was set to mature in May 2022 and bore interest at a rate of 1.0% per annum. The PPP provides that the use of the PPP Loan amount shall be limited to certain qualifying expenses and may be partially or wholly forgiven in accordance with the requirements set forth in the CARES Act. The amount of loan proceeds eligible for forgiveness takes into account a number of factors, including the amount of loan proceeds used by the Company during the specified period after the loan origination for certain purposes including payroll costs, rent payments on certain leases, and certain qualified utility payments.

The Company elected to recognize earnings as funds are applied to covered expenses and classify the application of funds as a reduction of the related expense in the consolidated statement of operations. On April 16, 2022, the Company received the loan forgiveness letter from the Small Business Administration (SBA) stating that the loan had been forgiven in full, including applicable interest. Following receipt of the loan forgiveness notification letter, funds of $1.2 million were released from escrow, and the Company reclassified this amount from restricted cash to cash and cash equivalents on the consolidated balance sheet.

NOTE 7 -STOCKHOLDERS’ EQUITY

COMMON STOCK

As of December 31, 2023, and 2022, the Company had authorized the issuance of 126,000,000 shares of capital stock, par value of $0.0001 per share, consisting of (i)125,000,000 shares of Common Stock and (ii)1,000,000 shares of preferred stock.

WARRANTS

As of December 31, 2023, the Company had 3,054,203 publicly traded warrants outstanding that were sold as part of the units of Software Acquisition Group Inc. in its initial public offering on November 22, 2019, and that were issued to the PIPE Investors in connection with the Business Combination (the “Public Warrants” and, together with the Private Placement Warrants, the "Warrants") and 3,676,000 Private Placement Warrants outstanding. The Private Placement Warrants are liability-classified, and the Public Warrants are equity-classified.

Each whole warrant entitles the registered holder to purchaseone share of the Company’s Common Stock at an exercise price of $11.50 per share. All Warrants expire on October 14, 2025.

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

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

No warrants were exercised during the years ended December 31, 2023, and 2022.

The warrant liability related to the Private Placement Warrants is recorded at fair value as of each reporting date with the change in fair value reported within other income (expense) in the accompanying consolidated statements of operations as “Change in fair value of warrant liability” until the warrants are exercised, expired or other facts and circumstances lead the warrant liability to be reclassified to stockholder’s equity (deficit). The fair value of the warrant liability for the Private Placement Warrants was estimated using a Black-Scholes pricing model using Level 3 inputs. The significant assumptions used in preparing the Black-Scholes option pricing model to determine fair value as of December 31, 2023, and 2022 were as follows:

The changes in fair value of the private placement warrant liability for the years ended December 31, 2023, and 2022 resulted in a gain of $0.2 million and $5.4 million, respectively.

NOTE 8 -EARNINGS (LOSS) PER SHARE

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

For the years ended December 31, 2023, and 2022, the components of basic and diluted net loss per share were as follows:

Common shares issuable for warrants, options, and restricted stock units (RSU) represent the total amount of outstanding warrants, stock options, and restricted stock units as of December 31, 2023, and 2022. For the years ended December 31, 2023, and 2022, the following share equivalents were excluded from the calculation of diluted net loss per share as the inclusion of such shares would have been be anti-dilutive.

NOTE 9 -STOCK-BASED COMPENSATION

The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. The fair value is recognized in earnings over the period during which an employee is required to provide the service. The Company accounts for forfeitures as they occur.

In October 2020, the Company's board of directors (the "Board") adopted the CuriosityStream 2020 Omnibus Plan (the “2020 Plan”). The 2020 Plan became effective upon consummation of the Business Combination and succeeds the Legacy CuriosityStream Stock Option Plan. Upon adoption of the 2020 Plan, a total of 7,725,000 shares were approved to be issued as stock options, share appreciation rights, restricted stock units and restricted stock.

The following table summarizes stock option and RSU activity, prices, and values from December 31, 2022, to December 31, 2023:

No options were exercised during the years ended December 31, 2023, and 2022.

Stock options and RSU awards generally vest on a monthly, quarterly, or annual basis over a period offour years from the grant date. When options are exercised, the Company issues previously unissued shares of Common Stock to satisfy share option exercises. Upon vesting and distribution of RSUs, the Company issues previously unissued shares of Common Stock to satisfy restricted stock units vested, net of shares withheld for taxes if elected by the RSU holder.

The fair value of stock option awards is estimated using the Black-Scholes option pricing model, which includes a number of assumptions including Company’s estimates of stock price volatility, employee stock option exercise behaviors, future dividend payments, and risk-free interest rates.

The expected term of options granted is the estimated period of time from the beginning of the vesting period to the date of expected exercise or other settlement, based on historical exercises and post-vesting terminations. The Company generally estimates expected term based on the midpoint between the vesting date and the end of the contractual term, also known as the simplified method, given the lack of historical exercise behavior.

On April 28, 2023, the Board authorized, and on June 14, 2023, the Company’s shareholders approved, a stock option exchange program (the “Exchange“) that permitted certain current employees and executive officers to exchange certain outstanding stock options with exercise prices substantially above the current market price of the Company’s Common Stock for RSUs of an equivalent fair value. The Exchange was completed in July 2023. For options that had already vested at the time of the Exchange, the resulting RSUs will vest in July 2024. Otherwise, the vesting schedules for unvested options at the time of the Exchange will remain the same for the resulting RSUs. As a result of the Exchange,4.6 million of outstanding eligible stock options were exchanged for 1.6 million new RSUs, with a fair value of $0.99 per share on the date of the Exchange. There wasno incremental compensation expense recorded by the Company as a result of the Exchange.

The Company uses its own historical volatility as well as the historical volatility of similar public companies for estimating volatility. The risk-free interest rate is estimated using the rate of return on U.S. Treasury securities with maturities that approximate to the expected term of the option. The Company does not currently anticipate declaring any dividends.

For the years ended December 31, 2023, and 2022, the assumptions used to value the options granted and the resulting weighted-average grant date fair value and stock-based compensation expense were as follows:

Stock-based compensation is measured at the grant date based on the fair value of the award and is recognized on a straight-line basis over the requisite service period.

The following table summarizes the total remaining unrecognized compensation cost as of December 31, 2023, related to non-vested options and RSUs, and the weighted average remaining years over which the cost will be recognized:

NOTE 10 -SEGMENT AND GEOGRAPHIC INFORMATION

The Company operates asone reporting segment. The Company’s chief operating decision maker is its chief executive officer, who reviews financial information presented on an entity-wide basis for purposes of making operating decisions, assessing financial performance and allocating resources.

All long-lived tangible assets are located in the U.S. For the years ended December 31, 2023, and 2022, revenue by geographic region based on customer location was as follows:

Revenue from one foreign country, the United Kingdom, comprised of 10% or greater of total revenue for one or more of the periods presented.

NOTE 11 -RELATED-PARTY TRANSACTIONS

EQUITY INVESTMENTS

For the years ended December 31, 2023, and 2022, the Company recognized $1.1 million and $0.3 million of revenue, respectively, related to license fees from the Spiegel Venture. For the years ended December 31, 2023, and 2022, the Company recognized zero and $1.6 million of revenue, respectively, related to advertising services provided to Nebula.

For the years ended December 31, 2023, and 2022, the Company also recorded $4.5 million and $4.3 million, respectively, in cost of revenues pertaining to the revenue share arrangement with Nebula from subscription sales to certain bundled subscription packages. This revenue share is recorded in cost of revenues on the consolidated statement of operations.

As of December 31, 2023, and 2022, the impacts of the arrangements with Spiegel Venture and Nebula on the Company’s consolidated balance sheets were as follows:

For the years ended December 31, 2023, and 2022, the impacts of arrangements with the Spiegel Venture and Nebula on the Company’s consolidated statements of operations were as follows:

OPERATING LEASE

The Company sublets a portion of its office space to Hendricks Investment Holdings, LLC, which is considered a related party as it is managed by various members of the Board. The Company accounts for the arrangement as an operating lease. Refer to Note 13 - Leases for further information.

PRODUCTION AGREEMENTS

The Company has entered into various agreements with a production company of which the Company’s Chief Executive Officer has a less than 10% ownership interest. For the year ended December 31, 2022, the Company paid a total of $2.4 million to this production company upon various milestones stated in the agreements. As of December 31, 2022, the Company no longer had any obligation under these agreements, and during the year ended December 31, 2023, the Company made no payments to this production company.

NOTE 12 -RETIREMENT PLAN

The Company administers and participates in a 401(k) plan that covers employees 21 years of age or older with three months or greater of service. The plan permits elective deferrals from each participant’s compensation up to the maximum allowed by law. The Company matches employee deferrals at 100% on up to 3% of compensation and 50% of employee deferrals between 3% and 5% of compensation. Participants are immediately vested in their elective deferrals and the Company matching contributions. The Company made matching contributions of $0.3 million for each of the years ended December 31, 2023, and 2022.

NOTE 13 -LEASES

COMPANY AS LESSEE

The Company is party to a non-cancellable operating lease agreement for office space, which expires in 2033. The Company’s operating lease for this office space includes fixed rent payments and variable lease payments, which are primarily related to common area maintenance and utility charges. The Company elected not to separate lease and non-lease components, and as such, all amounts paid under the lease are classified as either fixed or variable lease payments. Fixed leases payments were included in the calculation of the right-of-use ("ROU") asset and leases liabilities, with variable lease payments being recognized as lease expense as incurred. The Company has determined that no renewal clauses are reasonably certain of being exercised and therefore has not included any renewal periods within the lease term for this lease.

As of December 31, 2023, and 2022, the Company held operating lease ROU assets of $3.3 million and 3.7 million, respectively; current lease liabilities of $0.4 million and 0.3 million, respectively; and non-current lease liabilities of $4.3 million and $4.6 million, respectively. In measuring operating lease liabilities, the Company used a weighted average discount rate of 4.4% as of December 31, 2023. The weighted average remaining lease term as of December 31, 2023, was 9.2 years years.

Components of Lease Cost

For the years ended December 31, 2023, and 2022, the Company’s total operating lease cost was comprised of the following:

Maturity of Lease Liabilities

As of December 31, 2023, maturities of the Company's operating lease liabilities, which do not include short-term leases and variable lease payments, are as follows:

COMPANY AS LESSOR

The Company sublets a portion of its office space to a related party and accounts for the arrangement as an operating lease. Related party sublease rental income is recognized on a straight-line basis and is included in Interest and other (expense) income in the accompanying consolidated statements of operations. For the year ended December 31, 2023, operating lease income from the Company’s sublet was immaterial. As of December 31, 2023, total remaining future minimum lease payments receivable on the Company’s operating lease was $0.2 million.

NOTE 14 -COMMITMENTS AND CONTINGENCIES

CONTENT COMMITMENTS

As of December 31, 2023, the Company's content obligations amounted to $1.1 million, including $0.4 million recorded within content liabilities in the accompanying consolidated balance sheets, and $0.7 million of obligations not recorded as they did not yet meet the asset recognition criteria for content assets. These obligations are expected to be paid during the year ending December 31, 2024.

As of December 31, 2022, the Company's content obligations amounted to $11.5 million, including $2.9 million recorded within content liabilities in the accompanying consolidated balance sheets, and $8.6 million of obligations not recorded as they did not yet meet the asset recognition criteria for content assets.

Content obligations include amounts related to licensed, commissioned and internally produced streaming content. An obligation for the production of content includes non-cancelable commitments under creative talent and employment agreements. An obligation for the licensed and commissioned content is incurred at the time the Company enters into an agreement to obtain future titles. Once a title becomes available, a content liability is generally recorded. Certain agreements include the obligation to license rights for unknown future titles, the ultimate quantity and/or fees for which are not yet determinable as of the reporting date.

ADVERTISING COMMITMENTS

The Company periodically enters into agreements to receive future advertising and marketing services as part of various licensee agreements, and the Company reports commitments when the applicable agreements provide for specific committed amounts. As of December 31, 2023, the Company's future advertising commitments totaled $0.6 million, all of which the Company expects to pay during the year ending December 31, 2024.

NOTE 15 -INCOME TAXES

For the years ended December 31, 2023, and 2022, the components of the provision for income taxes were as follows:

For the years ended December 31, 2023, and 2022, the following table reconciles the Company’s effective income tax rate to the U.S. federal statutory income tax rate:

For the years ended December 31, 2023, and 2022, the Company recorded a tax provision of $0.5 million and $0.4 million, respectively, primarily related to foreign withholding and income taxes. These provisions for income taxes differ from the federal statutory rate primarily due to the Company being in a full valuation allowance position and not recognizing a benefit for either federal or state income tax purposes.

Deferred income taxes reflect the net tax effect of temporary differences between the amounts recorded for financial reporting purposes and the bases recognized for tax purposes. As of December 31, 2023, and 2022, the significant components of deferred tax assets and liabilities were as follows:

As of December 31, 2023, and 2022, the Company maintained a valuation allowance on substantially all of its deferred tax assets. The deferred tax assets predominantly relate to operating losses, intangibles and content assets, and stock-based compensation. As a result of Legacy CuriosityStream’s conversion from an LLC to a C corporation in 2018, Legacy CuriosityStream recognized a partial step-up in the tax basis of intangibles and content assets that will be recovered as those assets are sold or the basis is amortized. On the date of the conversion, Legacy CuriosityStream recorded an estimated net deferred tax asset relating to this partial step-up in tax basis.

The valuation allowance was determined in accordance with applicable accounting guidance, which requires an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction-by-jurisdiction basis. The Company’s history of cumulative losses, along with expected future U.S. losses, required that the Company record a full valuation allowance against all net deferred tax assets. The Company intends to maintain a full valuation allowance on net deferred tax assets until sufficient positive evidence exists to support a reversal of the valuation allowance.

As of December 31, 2023, and 2022, the Company held federal net operating loss carryforwards of approximately $220.2 million and $196.9 million, respectively, which do not expire. As of December 31, 2023, and 2022, the Company held gross state net operating loss carryforwards of approximately $146.4 million and $135.0 million, respectively, which begin to expire in 2024. All of the federal and state net operating losses may be subject to change of ownership limitations provided by the Internal Revenue Code of 1986 and similar state provisions. An annual loss limitation may result in the expiration or reduced utilization of the net operating losses.

The Company has not been audited by the Internal Revenue Service or any state income or franchise tax agency, but tax returns remain open to examination subject to a three to four year statute of limitations, depending on the state.

The Company has not recorded a liability related to uncertain tax positions in the consolidated financial statements. The Company recognizes the tax benefit of an uncertain tax position only if it is more likely than not that the position is sustainable upon examination by the taxing authority, based on the technical merits. The tax benefit recognized is measured as the largest amount of benefit which is more likely than not (greater than 50% likely) to be realized upon settlement with the taxing authority. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in its tax provision.

NOTE 16 -SUBSEQUENT EVENTS

On March 13, 2024, the Board declared a regular quarterly cash dividend of $0.025 per share of Common Stock, equivalent to $0.10 per share of Common Stock on an annual basis. The first cash dividend will be paid on April 30, 2024, to all holders of record of Common Stock at the close of business on April 12, 2024. This cash dividend of approximately $1.3 million is expected to be paid from available cash on hand.