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 entire category 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 lines of business: Direct to
Consumer, Partner Direct Business, Bundled Distribution, Program Sales,
Corporate & Association Partnerships and Sponsorships. For the year ended
December 31, 2020, Direct to Consumer and Corporate & Association Partnerships
together represented approximately 42% of our revenue as of December 31, 2020,
followed by Bundled Distribution (approximately 35% of our revenue) and Partner
Direct Business (approximately 7% of our revenue), Program Sales (approximately
15% of our revenue) and Sponsorships (approximately 1% of our revenue). Our
product and service lines and channels through which we generate revenue are
described in further detail below.



Our content library features more than 3,100 nonfiction episodes, including more
than 1,000 original, commissioned or co-produced documentaries, of short-form,
mid-form and long-form duration, with an estimated $1 billion in original
production value. Our content, approximately one-third of which is originally
produced and the other two-thirds of which is 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 for high definition
resolution, or $9.99 per month or $69.99 per year for service in 4K.



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.



                                       37





In addition to our Direct and Partner Direct Businesses, we have affiliate
relationships with MVPDs and Bundled MVPD Partners to whom we can offer a broad
scope sets of rights, including 24/7 "linear" channels, our on-demand content
library, mobile rights and pricing and packaging flexibility, in exchange for an
annual fixed fee or fee per subscriber.



Our Corporate & Association Partnerships business to date has been 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 30 companies have
purchased annual subscriptions at bulk discounts for their employees. In the
future, we hope to enter into multi-year integrated partnerships where we create
and distribute content in support of these partners' CSR and membership
initiatives.



In the future, we hope to continue developing integrated digital brand
partnerships with advertisers. These sponsorship campaigns would 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 on two such sponsorships
in 2020: one in the financial services sector as well as a brand in the health
and fitness sector.



The sixth line of business in our revenue stack is our Program Sales Business.
We are able to sell to certain media companies a collection of our existing
titles in a traditional program sales deal and as of December 31, 2020, we were
party to a multi-year, multi-million dollar program sales agreement with one
such media company. We are also able to 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.



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



Equity Financing



On February 8, 2021, we consummated an underwritten public offering (the
"Offering") of 6,500,000 shares of the Company's common stock, par value per
share $0.0001 ("Common Stock"), plus an over-allotment option to purchase up to
975,000 additional shares of Common Stock granted to the underwriters who
participated in the Offering, which over-allotment option was exercised by the
underwriters in full on February 5, 2021. The net proceeds to us from the
Offering were $94.1 million, after deducting underwriting discounts and
commissions and the offering expenses payable by us in connection with the
Offering. The Offering was made pursuant to the Company's Registration Statement
on Form S-1, filed with the SEC on February 1, 2021 and declared effective on
February 3, 2021. During the months of January and February 2021, we received
funds of approximately $55 million for the exercise of 4.8 million Warrants. The
receipt of the net proceeds from the Offering as well as proceeds received from
the exercise of Warrants subsequent to December 31, 2020 has resulted in a
significant cash balance that has mitigated the Company's potential capital

risk
through at least 2021.



                                       38





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 safety of our employees, our
workforce has had and continues in most instances to spend a significant amount
of time working from home, 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. In an effort to contain COVID-19 or
slow its spread, governments around the world have also enacted various
measures, some of which have been subsequently rescinded, modified or
reinstated, including orders to close all businesses not deemed "essential,"
isolate residents to their homes or places of residence, and practice social
distancing. We anticipate that these actions and the global health crisis caused
by COVID-19, including any resurgences, 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.



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 Direct
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, 2020, we had approximately 15 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 Direct Service in
high-definition resolution, or $9.99 per month or $69.99 per year for service in
4K. 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, 2020, licensed content represented
2,041 titles and original titles represented 949 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.



                                       39





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, for the first several years of our existence, we
invested heavily in engineering, marketing and programming staff to build the
Company and its service offering. Beginning in 2019, however, we began to focus
on sales staff and other revenue-generating personnel.



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, 2020 and 2019 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.



                                    Year ended December 31,
                                       2020                       2019              $ Change      % Change
                                                (in thousands)
Revenues:
Subscriptions                 $  16,508           42 %   $   9,793           54 %   $   6,715            69 %
License fee                      22,523           57 %       8,219           46 %      14,304           174 %
Other                               590            1 %          14            0 %         576            nm
Total Revenues                $  39,621          100 %   $  18,026          100 %   $  21,595           120 %
Operating expenses:
Cost of revenues                 15,418           20 %       6,810           11 %       8,608           126 %
Advertising and marketing        42,016           53 %      41,628           67 %         388             1 %
General and administrative       21,135           27 %      14,035           22 %       7,100            51 %
Total operating expenses      $  78,569          100 %   $  62,473          100 %   $  16,096            26 %
Operating loss                  (38,948 )                  (44,447 )                    5,499           (12 %)
Other income (expense)
Interest and other income
(expenses)                          500                      2,072                     (1,572 )         (76 %)
Loss before income taxes        (38,448 )                  (42,375 )                    3,927            (9 %)
Provision for income taxes          179                        142                         37            26 %
Net loss                      $ (38,627 )                $ (42,517 )                $   3,890            (9 %)



nm - Percentage not meaningful





Revenue



Revenue for the years ended December 31, 2020 and 2019 was $39.6 million and $18
million, respectively. The increase of $21.6 million, or 120% is due to a $6.7
million increase in subscription revenue, a $14.3 million increase in license
fee revenue, and $0.6 million increase in other revenue. The increase in
subscription revenue of $6.7 million resulted from a $5.6 million increase in
subscriber fees received by us from Direct subscribers for annual plans  which
resulted from increased brand awareness from greater advertising and marketing
spending, as well as a $1.1 million increase in Corporate & Association
Partnership sales. The increase of $14.3 million in license fees resulted
primarily from a $8.4 million increase in revenue from Bundled MVPD partners
mainly due to third-party affiliate agreements entered into during late 2019,
and a $0.6 million increase in license fees from Partner Direct Business, in
each case as a result of an increase in the number of users and/or subscribers
for our service, as well as a $5.2 million increase in license fees received by
us related to program sales contracts. The increase in other revenue of $0.6
million is due to new sponsorship revenue deals with customers.



                                       40





Operating Expenses



Operating expenses for the years ended December 31, 2020 and 2019 were $78.6
million and $62.5 million, respectively. This increase of $16.1 million, or 26%,
primarily resulted from the following:



Cost of Revenues: Cost of revenues for the year ended December 31, 2020
increased to $15.4 million from $6.8 million for the year ended December 31,
2019. 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
$8.6 million, or 126%, is due primarily to the increase in content amortization
of $5.8 million, of which $4.0 million is due to the timing and number of titles
published during the year ended December 31, 2020 as compared to the year ended
December 31, 2019 and $1.8 million is due to accelerated content amortization
related to our program sales contracts during the year ended December 31, 2020
with no comparable amounts in the prior year. The balance of the increase in
cost of revenue is due to increases in hosting and streaming delivery costs
(increase of $0.4 million), processing and distribution fees (increase of $0.6
million), commission costs (increase of $0.4 million), subtitling and broadcast
costs (increase of $1.0 million), and other costs (increase of $0.4 million).
The increase of cost of revenues is in line with the increase in revenue during
the year ended December 31, 2020.



Advertising & Marketing: Advertising and marketing expenses for the year ended
December 31, 2020 increased to $42.0 million from $41.6 million for the year
ended December 31, 2019. This increase of $0.4 million, or 1%, primarily
resulted from increased marketing to support subscriber growth on various social
media platforms during the year ended December 31, 2020.



General and Administrative: General and administrative expenses for the year
ended December 31, 2020 increased to $21.1 million from $14.0 million for the
year ended December 31, 2019. This increase of $7.1 million, or 51%, was
attributable to $1.4 million for incremental salaries and benefits, $0.5 million
for accrued bonuses and $3.6 million for increased stock-based compensation
expense due to higher volume and grant-date fair value of grants made to key
executives, as well some incremental increased head count. This was offset by
the recognized benefit from the Paycheck Protection Plan (PPP) Loan of $1.2
million we received in May 2020. In addition, an increase of $1.6 million was
primarily attributable to finance and legal professional fees related to
becoming a public company and an increase of $0.4 million was due to additional
insurance incurred necessary for a public company. We expect to incur additional
expenses in future periods as we continue to invest in corporate infrastructure
to support public activities of the Company, including adding personnel and
systems to our administrative and revenue-generating functions.



Operating Loss



Operating loss for the years ended December 31, 2020 and 2019 was $38.9 million
and $44.4 million, respectively. The decrease of $5.5 million, or 12%, in
operating loss resulted from the increase in revenue of $21.6 million, or 120%,
offset by the increase in operating expenses of $16.1 million, or 26%, in each
case during the year ended December 31, 2020 as compared to the year ended
December 31, 2019, as described above.



Interest and other income (expense)





Interest and other income (expense) for the year ended December 31, 2020
decreased to $0.5 million from $2.1 million for the year ended December 31,
2019. This decrease of $1.6 million, or 76%, primarily resulted from a decrease
in interest income as a result of the average invested amount decreasing as well
as decreasing interest rates during the year ended December 31, 2020 as compared
to the year ended December 31, 2019.



Provision for Income Taxes



Due to generating a loss before income taxes in each of the years ended December
31, 2020 and 2019, we had a provision for income taxes of $179 thousand and $142
thousand, respectively. This increase of $37 thousand, or 26%, was primarily due
to an increase in foreign withholding tax expense due to an increase in
contracts executed with third parties in foreign jurisdictions. The Company's
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 benefit for either federal or state income tax purposes.



                                       41





Net Loss



Net loss for the years ended December 31, 2020 and 2019 was $38.6 million and
$42.5 million, respectively. The decrease of $3.9 million, or 9%, resulted
primarily from the increase in revenue, offset by a smaller increase in
operating expenses and a decrease in interest and other income (expense), in
each case during the year ended December 31, 2020 as compared to the year ended
December 31, 2019, as described above.



Liquidity and Capital Resources





As of December 31, 2020, we had cash and cash equivalents, including restricted
cash, of $17.4 million. For the year ended December 31, 2020, we incurred a net
loss of $38.6 million and used $52.9 million of net cash in operating
activities, while investing activities provided $25.5 million of net cash and
financing activities provided $36.0 million of net cash.



During the year ended December 31, 2019 and through the date of the Merger, we
have financed our operations primarily from the net proceeds of our sale of
Series A Preferred Stock in November and December 2018. An additional source of
liquidity includes borrowings under our Line of Credit Facility with a bank (the
"Line of Credit"). This Line of Credit provides for borrowings of up to $4.5
million with interest-only monthly payments at a rate equal to the LIBOR Daily
Floating Rate plus 2.25%. The Line of Credit carries an unused fee of 0.25%
annually on all committed but unused capital, payable quarterly in arrears. The
entire unpaid principal balance is due when the Line of Credit matures on
February 28, 2022, following the execution of a one year extension during
February 2021. The Line of Credit is collateralized by cash of $4.5 million that
is held in restricted cash in current assets on the consolidated balance sheet.



In connection with the Business Combination, we received net cash proceeds of
approximately $41.5 million, prior to the payment of $5.7 million of offering
costs. On February 8, 2021, we consummated the Offering. The net proceeds to us
from the Offering were $94.1 million, after deducting underwriting discounts and
commissions and offering expenses payable by us in connection with the Offering.
During the months of January and February 2021, we received funds of
approximately $55 million for the exercise of 4.8 million Warrants. There were
no Warrants exercised in March 2021.



We believe that our cash flows from financing, combined with our current cash
levels and available borrowing capacity, will be adequate to support our ongoing
operations, capital expenditures and working capital for at least the next
twelve months, as evidenced by our cash flows from financing activities and
subsequent cash balances in 2021. 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.



                                       42





Cash Flows



The following table presents our cash flows from operating, investing and
financing activities for the years ended December 31, 2020 and December 31,
2019:



                                                                 Year ended December 31,
                                                                   2020             2019
                                                                      (in thousands)

Net cash used in operating activities                               (52,914 )       (44,711 )
Net cash provided by (used in) investing activities                  25,455          (8,986 )
Net cash provided by financing activities                            36,024               -
Net increase (decrease) in cash, cash equivalents and
restricted cash                                                       8,565         (53,697 )



Cash Flow from Operating Activities





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



During the years ended December 31, 2020 and 2019, we recorded a net cash
outflow from operating activities of $52.9 million and $44.7 million,
respectively, or an increased outflow of $8.2 million, or 18%. The increase in
cash outflows from operating activities was attributable to an increase of $12.3
million in our content investment (additions to content assets and change in
content liabilities) from $14.9 million during the year ended December 31, 2019
to $27.2 million during the year ended December 31, 2020. The increase in cash
outflows is also due to an increase in the change in our accounts receivable of
$0.5 million during the year ended December 31, 2019 as compared to $5.4 million
during the year ended December 31, 2020 due primarily to increased receivables
from the program sales contracts. In addition, the increase in cash outflows is
due to a reduction in accounts payable of $1.5 million during the year ended
December 31, 2020 as compared to an increase in accounts payable of $2.4 million
during the year ended December 31, 2019, which was primarily due to increased
digital marketing investment. These increases were partially offset by a
decrease in our net loss minus our content amortization and stock-based
compensation, from $37.7 million during the year ended December 31, 2019 to
$24.3 million during the year ended December 31, 2020.



Cash Flow Provided by (Used in) Investing Activities

Cash flow provided by (used in) investing activities consists of purchases, sales and maturities of investments and purchases of property and equipment.





During the years ended December 31, 2020 and 2019, we recorded a net cash inflow
from investing activities of $25.5 million and net cash outflow from investing
activities of ($9.0) million, respectively, or an increased inflow of
$34.5 million. The significant increase in cash inflow from investing activities
was primarily attributable to less purchases and higher sales and maturities of
investments.


Cash Flow from Financing Activities





During the year ended December 31, 2020, we recorded a net cash inflow provided
by financing activities of $36.0 million, which was mainly attributable to
proceeds from the Business Combination of $41.5 offset by the offering costs of
$5.7 million related to the Business Combination. There were no similar
financing cash activities during the year ended December 31, 2019.



Capital Expenditures



Going forward, we expect to make expenditures for additions to our content
assets, and purchases of property and equipment. 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.



                                       43




Off Balance Sheet Arrangements

As of December 31, 2020, 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 members unlimited viewing of factual
entertainment content. The content licenses are for a fixed fee and specific
windows of availability. Payments for content, including additions to content
library and the changes in related liabilities, are classified within "Net cash
used in operating activities" on the consolidated statements of cash flows.



The Company recognizes its content library (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 generally amortizes the content library (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. The
Company reviews factors impacting the amortization of the content library on an
ongoing basis and will record amortization on an accelerated basis when there is
more upfront use of a title, for instance due to significant program sales.




Revenue recognition


Subscriptions - O&O Service





The Company generates revenue from monthly subscription fees from its O&O
Service. CuriosityStream subscribers enter into non-refundable, 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.



Subscription - App Services



The Company also earns subscription revenues through its App Services. These
subscriptions are similar to the O&O Service subscriptions, but these
subscriptions 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.



                                       44





Licensing - Affiliates



The Company generates license fee revenues from MVPDs such as Altice, 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.



Licensing - Program Sales



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 Financial Accounting Standards





In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), 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 that a lessee should recognize a liability to make lease
payments (the lease liability) and a right-of-use asset representing its right
to use the underlying asset for the lease term on the balance sheet. The new
guidance also requires qualitative and quantitative disclosures related to the
nature, timing and uncertainty of cash flows arising from leases. The guidance
is effective for the Company's fiscal year beginning January 1, 2022, with early
adoption permitted, and is required to be implemented using a modified
retrospective approach. The Company is currently assessing the impact of the new
standard on its financial statements, but anticipates a material increase in
assets and liabilities due to the recognition of the required right-of-use asset
and corresponding lease liability for all lease obligations that are currently
classified as operating leases, such as real estate leases for corporate
headquarters, as well as additional disclosure on all its lease obligations. The
income statement recognition of lease expense is not expected to significantly
change from the current methodology.



In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses
(Topic 326), which requires that an entity measure and recognize expected credit
losses for financial assets held at amortized cost and replaces the incurred
loss impairment methodology in current U.S. GAAP with a methodology that
requires consideration of a broader range of information to estimate credit
losses. The guidance also modifies the impairment model for available-for-sale
debt securities. ASU 2016-13 is effective for the Company's fiscal year
beginning January 1, 2023. The Company is continuing to assess the potential
impacts of ASU 2016-13 on its financial statements.

© Edgar Online, source Glimpses