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Business Combinations

6 Months Ended

Jun. 30, 2021

Note 3 – Business Combinations

Acquisition of One Day University

On May 11, 2021, the Company consummated the acquisition of 100% ownership of One Day University (ODU) pursuant to that certain Asset Purchase Agreement, (APA) dated May 11, 2021 (“the Acquisition Date”), by and among ODU and the Company for the aggregate consideration of $4,500 (“the Acquisition”). ODU provides access to talks and lectures from professors at colleges and universities in the United States.

At closing of the Acquisition, the Company paid $4,000 of cash consideration with the remaining $500 to be held by the Company as a holdback for indemnification purposes. The holdback of $500 will be released twelve months after the Acquisition Date and is recorded in restricted cash and in accrued expenses and other liabilities as of June 30, 2021 on the unaudited consolidated balance sheets.

The acquisition was accounted for as a purchase, with the results of operations, which were not material, of ODU included in the Company's consolidated results from May 11, 2021. Based on a preliminary purchase price allocation, the purchase consideration was allocated to assets acquired and liabilities assumed based on their fair values as of the Acquisition Date as follows:

Accounts receivable	$	35
Property and equipment		11
Content and intangibles		2,300
Goodwill		2,565
Accounts payable		(3	)
Deferred revenue		(408	)
	$	4,500

The preliminary allocation of the estimated purchase price is based upon management's estimates and is subject to revision, as a more detailed analysis of intangible assets, certain tangible assets, and other assets and liabilities is completed and additional information on the fair value of assets and liabilities becomes available, including receipt of final appraisals of the net assets acquired. A change in the fair value of the net assets may change the amount of the purchase price allocable to goodwill and could impact the amounts of amortization expense. The Company used discounted cash flows analyses, which represent Level 3 fair value measurements, to assess certain components of its purchase price allocation, including acquired intangible assets.

The acquisition of goodwill arises from the opportunity for synergies of the combined companies to grow and strengthen the Company's content proposition by adding lectures from top professors and expanding the customer base. The acquisition expands the Company's subscription video on demand services by adding monthly and annual subscribers. The goodwill is not amortized for financial reporting purposes, but is deductible for federal tax purposes.

The Company incurred approximately $21 in Acquisition-related expenses, which are reported in general and administrative expenses of the consolidated statement of operations for the three and six months ended June 30, 2021.

The amounts allocated to content and intangibles has been attributed to the following categories and will be amortized over the useful lives of each individual asset identified on a straight-line basis as follows:

	Fair value		Estimated useful life (Years)

Content	$	1,000	4.2

Customer relationships		700	3.0
Trademark		500	6.5
Covenant-not-to-compete		100	3.0
Total intangibles		1,300

Total content and intangibles	$	2,300

Content relates to the lectures available on the ODU library as well as premium programs available for purchase on the ODU platform. The cost approach was used to estimate the value of the content library as of the valuation date. The economic life was determined based on the lecturer’s license period of 5 years starting on the date the titles were published. ODU content is recorded as part of Content assets, net on the unaudited consolidated balance sheets.

Customer relationships represent the fair value of the future projected revenue that will be derived from the sales of lectures to existing customers of ODU. Customer relationships were valued using the discounted cash flow method under the income approach. The underlying cash flows are based on historical attrition rates. The economic life was determined based on the period in which the Company expects to receive most of the cash flows from the existing customers.

The trademark intangible relates to the “One Day University” trade name. The fair value was determined using the relief-from-royalty method under the income approach. This valuation method estimates the fair value of an asset calculating the revenues attributable to the trademark for the use of the asset, multiplied by a royalty rate. The economic life was determined based on the remaining expected period of use of the trademark.

Covenant-not-to-compete relates to an agreement between the Company and ODU’s management not to work for a competitor of the Company and limits ODU management’s ability to compete with the Company. The valuation method used to estimate the fair value was the income approach. The economic life was determined based on the remaining contractual life of the covenant-not-to-compete agreement.

Intangible assets as of June 30, 2021 were comprised of the following:

		As of June 30, 2021
	Remaining Amortization Period (in years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount

Trademark	6.4	$	500	$	11	$	489
Covenant-not-to-compete	2.9		100		5		95
Customer relationships	2.9		700		31		669
Intangible assets, net		$	1,300	$	47	$	1,253

Reverse merger acquisition

On October 14, 2020, the Company consummated the Merger, pursuant to the terms of the Merger Agreement dated August 10, 2020, with Legacy CuriosityStream surviving the merger as a wholly owned subsidiary of the Company.

At the effective time of the Merger (the “Effective Time”), all (100%) of the issued and outstanding shares of capital stock of Legacy CuriosityStream were converted into an aggregate of 31,556,837 shares (the “Merger Shares”) of Common Stock. Pursuant to the Merger Agreement, 1,501,758 Merger Shares issued by the Company at closing would be held in escrow for a period of twelve months after the Closing Date to satisfy indemnification obligations and an additional 19,924 Merger Shares would be held in escrow pending final working capital calculations (collectively, the “Escrow Shares”). On February 22, 2021, the 19,924 Merger Shares held in escrow pending final working capital calculations were released and cancelled from escrow.

In connection with the Closing, and pursuant to the terms of a PIPE Subscription Agreement entered into by the Company with certain third-party investors (the “PIPE Investors”) in connection with the execution of the Merger Agreement, the Company completed the issuance of an aggregate of 2,500,000 newly-issued shares of Common Stock for an aggregate purchase price of $25.0 million (the “PIPE”). The shares of Common Stock issued by the Company pursuant to the PIPE were issued concurrently with the Closing of the Merger on the Closing Date.

The Company received $16.5 million in cash from the SAQN trust account and $25.0 million from the PIPE investors related to the issuance of 2,500,000 shares of Common Stock. The Company paid a total of $5.7 million of transaction costs related to the Business Combination.