gaia-10q_20220331.htm

United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-27517

GAIA, INC.

(Exact name of registrant as specified in its charter)

COLORADO

84-1113527

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

833 WEST SOUTH BOULDER ROAD,

LOUISVILLE, COLORADO 80027

(Address of principal executive offices)

(303) 222-3600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock	GAIA	NASDAQ Global Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class		Outstanding at April 27, 2022
Class A Common Stock ($0.0001 par value)		15,375,160
Class B Common Stock ($0.0001 par value)		5,400,000

GAIA, INC.

FORM 10-Q

INDEX

PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):	3

	Condensed Consolidated Balance Sheets at March 31, 2022 and December 31, 2021	4

	Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021	5

	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2022 and 2021	6

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021	7

	Notes to interim condensed consolidated financial statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15

Item 4.	Controls and Procedures	15

PART II—OTHER INFORMATION		16

Item 1.	Legal Proceedings	16

Item 1A.	Risk Factors	16

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16

Item 3.	Defaults Upon Senior Securities	16

Item 4.	Mine Safety Disclosures	16

Item 5.	Other Information	16

Item 6.	Exhibits	17

	SIGNATURES	18

PART I—FINANCIAL INFORMATION

Item 1.Financial Statements (Unaudited)

Unaudited Interim Condensed Consolidated Financial Statements

We have prepared our unaudited interim condensed consolidated financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission. While certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to these rules and regulations, we believe that the disclosures made are adequate to make the information not misleading. In our opinion, the unaudited interim condensed consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly, in all material respects, our consolidated financial position as of March 31, 2022, the interim results of operations for the three months ended March 31, 2022 and 2021, and cash flows for the three months ended March 31, 2022 and 2021. Operating results for the three months ended March 31, 2022 and 2021 are not necessarily indicative of the results that may be expected for a full year or any future interim period. These interim statements have not been audited. The balance sheet as of December 31, 2021 was derived from our audited consolidated financial statements included in our Annual Report on Form 10-K. The interim condensed consolidated financial statements contained herein should be read in conjunction with our audited consolidated financial statements, including the notes thereto, for the year ended December 31, 2021.

GAIA, INC.

Condensed Consolidated Balance Sheets

	March 31,			December 31,
(in thousands, except share and per share data)	2022			2021
	(unaudited)
ASSETS
Current assets:
Cash	$	8,398		$	10,269
Accounts receivable		2,900			2,728
Prepaid expenses and other current assets		1,912			1,986
Total current assets		13,210			14,983
Media library, software and equipment, net		51,898			50,558
Right-of-use lease asset, net		7,679			7,871
Real estate, investment and other assets, net		31,128			31,394
Goodwill		28,870			28,870
Total assets	$	132,785		$	133,676
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued and other liabilities	$	12,657		$	14,962
Deferred revenue		15,854			14,847
Total current liabilities		28,511			29,809
Long-term mortgage, net		6,074			6,109
Long-term lease liability		7,050			7,234
Deferred taxes		309			309
Total liabilities		41,944			43,461
Shareholders' equity:
Class A common stock, $0.0001 par value, 150,000,000 shares authorized, 15,375,160 and 15,061,337 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively		1			1
Class B common stock, $0.0001 par value, 50,000,000 shares authorized, 5,400,000 shares issued and outstanding at March 31, 2022 and December 31, 2021		1			1
Additional paid-in capital		162,856			162,316
Accumulated deficit		(72,017	)		(72,103	)
Total shareholders' equity		90,841			90,215
Total liabilities and shareholders' equity	$	132,785		$	133,676

The year-end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. See accompanying notes to the interim condensed consolidated financial statements.

GAIA, INC.

Condensed Consolidated Statements of Operations

	For the Three Months Ended March 31,
(in thousands, except per share data)	2022			2021
	(unaudited)
Revenues, net	$	21,831		$	18,896
Cost of revenues		2,905			2,438
Gross profit		18,926			16,458
Expenses:
Selling and operating		16,785			14,538
Corporate, general and administration		1,785			1,496
Acquisition costs		49			—
Total operating expenses		18,619			16,034
Income from operations		307			424
Interest and other expense, net		(60	)		(66	)
Income before income taxes		247			358
Provision for (benefit from) income taxes		—			—
Income from continuing operations		247			358
Loss from discontinued operations		(161	)		—
Net income	$	86		$	358

Earnings per share:
Basic
Continuing operations	$	0.01		$	0.02
Discontinued operations		(0.01	)		—
Basic earnings per share	$	—		$	0.02
Diluted
Continuing operations	$	0.01		$	0.02
Discontinued operations		(0.01	)		—
Diluted earnings per share	$	—		$	0.02
Weighted-average shares outstanding:
Basic		20,465			19,201
Diluted		20,816			19,724

See accompanying notes to the interim condensed consolidated financial statements.

GAIA, INC.

Condensed Consolidated Statements of Changes in Shareholders’ Equity

	(unaudited)
(in thousands, except shares)	Total Shareholders' Equity		Accumulated Deficit			Common Stock Amount		Additional Paid-in Capital		Common Stock Shares
Balance at January 1, 2021	$	74,235	$	(75,834	)	$	2	$	150,067		19,182,951
Issuance of Gaia, Inc. common stock for RSU releases, employee stock purchase plan and share-based compensation		684		—			—		684		17,895
Net income		358		358			—		—		—
Balance at March 31, 2021	$	75,277	$	(75,476	)	$	2	$	150,751		19,200,846

Balance at January 1, 2022	$	90,215	$	(72,103	)	$	2	$	162,316		20,461,337
Issuance of Gaia, Inc. common stock for RSU releases and share-based compensation		540		—			—		540		313,823
Net income		86		86			—		—		—
Balance at March 31, 2022	$	90,841	$	(72,017	)	$	2	$	162,856		20,775,160

See accompanying notes to the interim condensed consolidated financial statements.

GAIA, INC.

Condensed Consolidated Statements of Cash Flows

	For the Three Months Ended March 31,
(in thousands)	2022			2021
	(unaudited)
Operating activities:
Net income	$	86		$	358
Loss from discontinued operations		161			—
Income from continuing operations		247			358
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,907			3,099
Share-based compensation expense		540			613
Changes in operating assets and liabilities:
Accounts receivable		(172	)		(505	)
Prepaid expenses and other assets		74			282
Accounts payable and accrued liabilities		(1,439	)		(698	)
Deferred revenue		1,007			2,039
Net cash provided by operating activities - continuing operations		4,164			5,188
Net cash used in operating activities - discontinued operations		(161	)		—
Net cash provided by operating activities		4,003			5,188
Investing activities:
Additions to media library, property and equipment		(4,981	)		(4,774	)
Acquisitions, net of cash acquired, and purchase of intangible assets		(847	)		—
Net cash used in investing activities		(5,828	)		(4,774	)
Financing activities:
Repayment of debt		(46	)		(45	)
Proceeds from the issuance of common stock		—			71
Net cash provided by (used in) financing activities		(46	)		26
Net change in cash		(1,871	)		440
Cash at beginning of period		10,269			12,605
Cash at end of period	$	8,398		$	13,045
Supplemental cash flow information
Interest paid	$	65		$	67

See accompanying notes to the interim condensed consolidated financial statements.

Notes to interim condensed consolidated financial statements

References in this report to “we”, “us”, “our” or “Gaia” refer to Gaia, Inc. and its consolidated subsidiaries, unless we indicate otherwise. All textual currency references are expressed in thousands of U.S. dollars (unless otherwise indicated).

1. Organization, Nature of Operations, and Principles of Consolidation

Gaia, Inc. operates a global digital video subscription service and on-line community that caters to a unique and underserved member base. Our digital content library includes over 10,000 titles, with a growing selection of titles available in Spanish, German and French. Our members have unlimited access to this vast library of inspiring films, cutting edge documentaries, interviews, yoga classes, transformation-related content, and more – 80% of which is exclusively available to our members for digital streaming on most internet-connected devices anytime, anywhere, commercial free.

Our mission is to create a transformational network that empowers a global conscious community. Content on our network is currently curated into four primary channels— Yoga, Transformation, Alternative Healing, and Seeking Truth— and delivered directly to our members through our streaming platform. We curate programming for these channels by producing content in our in-house production studios with a staff of media professionals. This produced and owned content currently represents approximately 75% of our viewership. We complement our produced and owned content through long-term licensing agreements.

We have prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”), and they include our accounts and those of our subsidiaries. Intercompany transactions and balances have been eliminated. The unaudited condensed consolidated financial position, results of operations and cash flows for the interim periods disclosed in this report are not necessarily indicative of future financial results.

There have been no material changes in our significant accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2021.

On December 22, 2021, Gaia completed the acquisition of Yoga International, Inc. (“Yoga International”). Yoga International was founded by the Himalayan Institute in 1991, as a print magazine considered by many to be an authentic voice of yoga in the West. In 2013, Yoga International transformed into a digital-only publication, and over the past 8 years has evolved into an online platform for yoga practice and education, with more than 60% of its current membership outside the United States. See our Annual Report on Form 10-K for the year ended December 31, 2021 for additional information regarding the Yoga International acquisition.

Use of Estimates and Reclassifications

The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the accompanying financial statements and disclosures. Although we base these estimates on our best knowledge of current events and actions that we may undertake in the future, actual results may be different from the estimates. We have made certain reclassifications to prior period amounts to conform to the current period presentations.

Discontinued Operations

Yoga International historically had a line of business focused on one-time transactional course sales. With the launch of a premium membership tier that includes this content, this line of business is being discontinued in 2022 as the contractual commitments related to this line of business lapse. The course content will be utilized as part of the premium membership tier going forward. There are no other assets or liabilities associated with this revenue stream. As this represents a strategic shift with a major effect on our operations and financial results, we have presented the results of operations related to winding up this line of business as discontinued operations on the accompanying statement of operations.

2. Revenue Recognition

Revenues consist primarily of subscription fees paid by our members. We present revenues net of taxes collected from members. Members are billed in advance and revenues are recognized ratably over the subscription term. Deferred revenue consists of subscription fees collected from members that have not been earned and is recognized ratably over the remaining term of the subscription. We recognize revenue on a net basis for relationships where our partners have the primary relationship, including billing and service delivery, with the member. Payments made to partners to assist in promoting our service on their platforms are expensed as marketing expenses in the period incurred. We do not allow access to our service to be provided as part of a bundle by any of our partners.

3. Equity and Share-Based Compensation

During the first three months of 2022 and 2021, we recognized approximately $540 and $613, respectively, of share-based compensation expense. Total share-based compensation expense is reported in selling and operating expenses and corporate, general and administration expenses on our condensed consolidated statements of operations. There were no options exercised during the first three months of 2022 or during the first three months of 2021.

4. Goodwill and Other Intangible Assets

There were no changes in goodwill for the period from December 31, 2021 through March 31, 2022.

The following table represents our other intangible assets by major asset class as of the dates indicated, which are included in Real estate, investment and other assets, net on the accompanying condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021.

(in thousands)	March 31, 2022			December 31, 2021
Amortizable Intangible Assets
Customer relationships	$	2,000		$	2,000
Tradenames		270			270
Accumulated amortization		(154	)		(12	)
	$	2,116		$	2,258

Unamortized Intangible Assets
Domain names	$	563		$	563

Our amortizable assets are expected to be amortized on a straight-line basis over 48 months. Amortization expense was $142 for the first three months of 2022. There was no amortization expense for the first three months of 2021. Future amortization of our amortizable intangible assets as of March 31, 2022 is expected to be as follows:

(in thousands)
2022 (remaining)	$	426
2023		568
2024		568
2025		554
	$	2,116

5. Debt

On September 9, 2020, our wholly owned subsidiary Boulder Road LLC (“Boulder Road”) sold a 50% undivided interest in a portion of our corporate campus to Westside Boulder, LLC (“Westside”). Boulder Road retained a 50% undivided interest in the property as well as full ownership of our studio and production facilities. On December 28, 2020, Boulder Road and Westside entered into a loan agreement with Great Western Bank, as lender, providing for a mortgage in the principal amount of $13,000. The mortgage bears interest at a fixed rate of 3.75% per annum, matures on December 28, 2025, and is secured by a deed of trust on our corporate campus, a portion of which is owned by Boulder Road and Westside as tenants-in-common and the remainder of which is owned by Boulder Road. Westside and Boulder Road each received 50% of the proceeds and are each responsible for 50% of the monthly installments. Gaia guaranteed payment of the mortgage. The mortgage is subject to certain financial covenants related to the underlying property.

Maturities on long-term debt, net are:

(in thousands)
2022 (remaining)	$	108
2023		150
2024		156
2025		5,801
	$	6,215

6. Leases

In connection with the sale of a portion of our corporate campus as further discussed in Note 5, we leased the property pursuant to a master lease for an initial term extending through September 30, 2030, with two five-year extensions. We record the right to use the underlying asset for the operating lease term as an asset and our obligation to make lease payments as a liability, based on the present value of the lease payments over the initial lease term. On commencement of the lease, we recorded a right-of-use asset and operating lease liability of $8,800.

Because the rate implicit in the lease is not readily determinable, we used our incremental borrowing rate to determine the present value of lease payments. Information related to our right-of-use asset and related lease liability were as follows:

		March 31,		December 31,
(in thousands)	Balance Sheet Classification	2022		2021
Right-of-use asset	Right-of-use lease asset, net	$	7,679	$	7,871

Operating lease liability (current)	Accounts payable, accrued and other liabilities	$	725	$	718
Operating lease liability (non-current)	Long-term lease liability		7,050		7,234
		$	7,775	$	7,952

	For the Three Months Ended March 31,
(in thousands)	2022		2021
Cash paid for operating lease liabilities	$	250	$	250

Operating lease expense is recognized on a straight-line basis over the lease term. Future amortization of our lease liability as of March 31, 2022 is expected to be:

(in thousands)
2022 (remaining)	$	750
2023		1,001
2024		1,008
2025		1,035
2026		1,064
Thereafter		4,253
Future lease payments, gross		9,111
Less: Imputed interest		(1,336	)
Operating lease liability	$	7,775

7. Earnings Per Share

Basic earnings per share is computed using the weighted-average number of outstanding shares of common stock during the period. Diluted earnings per share is computed using the weighted-average number of outstanding shares of common stock and, when dilutive, potential shares of common stock outstanding during the period (“common stock equivalents”). Common stock equivalents consist of incremental shares issuable upon the assumed exercise of stock options and vesting of restricted stock units utilizing the treasury stock method.

The weighted-average diluted shares outstanding computation is:

	For the Three Months Ended March 31,
(in thousands, except per share data)	2022		2021
	(unaudited)
Weighted-average common stock outstanding		20,465		19,201
Common stock equivalents		351		523
Weighted-average number of shares		20,816		19,724

Employee stock options with exercise prices greater than the average market price of the common stock were excluded from the diluted calculation as their inclusion would have been anti-dilutive. The following table summarizes the potential shares of common stock excluded from the diluted calculation:

	For the Three Months Ended March 31,
(in thousands)	2022		2021
	(unaudited)
Employee stock options and RSU's		228		30

8. Income Taxes

Periodically, we perform assessments of the realization of our net deferred tax assets considering all available evidence, both positive and negative. Based on our historical operating losses, combined with our plans to continue to invest in our revenue growth and content library, we have a full valuation allowance on our deferred tax assets as of March 31, 2022. As of March 31, 2022, our net operating loss carryforwards on a gross basis were $76,800 and $20,700 for federal and state, respectively.

9. Contingencies

From time to time, we are involved in legal proceedings that we consider to be in the normal course of business. We record accruals for losses related to those matters against us that we consider to be probable and that can be reasonably estimated. Based on available information, in the opinion of management, settlements, arbitration awards and final judgments, if any, that are considered probable of being rendered against us in litigation or arbitration in existence at March 31, 2022 and that can be reasonably estimated are either reserved against or would not have a material adverse effect on our financial condition, results of operations or cash flows.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This report contains forward-looking statements that involve risks and uncertainties. When used in this discussion, we intend the words “anticipate,” “believe,” “plan,” “estimate,” “expect,” “strive,” “future,” “intend”, “will” and similar expressions as they relate to us to identify such forward-looking statements. Our actual results could differ materially from the results anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Form 10-Q and under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021. Risks and uncertainties that could cause actual results to differ include, without limitation, general economic conditions, future losses, competition, loss of key personnel, price changes, membership growth, brand reputation, acquisitions, new initiatives we undertake, security and information systems, legal liability for website content, failure of third parties to provide adequate service, future internet-related taxes, our founder’s control of us, litigation, fluctuations in quarterly operating results, consumer trends, the effect of government regulation and programs, the impact of the coronavirus (COVID-19) pandemic and our response to it, and other risks and uncertainties included in our filings with the Securities and Exchange Commission. We caution you that no forward-looking statement is a guarantee of future performance, and you should not place undue reliance on these forward-looking statements which reflect our views only as of the date of this report. We undertake no obligation to update any forward-looking information.

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and related notes included elsewhere in this document. This section is designed to provide information that will assist readers in understanding our consolidated financial statements, changes in certain items in those statements from year to year, the primary factors that caused those changes and how certain accounting principles, policies and estimates affect the consolidated financial statements.

Overview and Outlook

Gaia, Inc. (“Gaia,” “we” or “us”) operates a global digital video subscription service and on-line community that caters to a unique and underserved member base. Our digital content library includes over 10,000 titles, with a growing selection of titles available in Spanish, German and French. Our members have unlimited access to this vast library of inspiring films, cutting edge documentaries, interviews, yoga classes, transformation-related content, and more – 80% of which is exclusively available to our members for digital streaming on most internet-connected devices anytime, anywhere, commercial free.

Gaia’s position in the streaming video landscape is firmly supported by its wide variety of exclusive and unique content, which provides a complementary offering to other, mostly entertainment-based, streaming video services. With the acquisition of Yoga International in December 2021, Gaia now has a standalone yoga offering to be able to better serve the needs of consumers focused on this portion of our content offering. Our original content is developed and produced in-house in our production studios near Boulder, Colorado.

Our available content is currently focused on yoga, transformation, alternative healing, seeking truth and conscious films. This content is specifically targeted to a unique member base that is interested in alternatives and supplements to the content provided by mainstream media. We have grown these content options both organically through our own productions and through strategic acquisitions. In addition, through investments in our streaming video technology and our user interface, we have expanded the many ways our subscription member base can access our unique library of media titles.

Our core strategy is to grow our subscription business domestically and internationally by expanding our unique and exclusive content library, enhancing our user interface, extending our streaming service to new internet-connected devices as they are developed and creating a conscious community built around our content.

The full impact that the COVID-19 pandemic will have on our business, operations and financial results will depend on a number of evolving factors that we may not be able to accurately predict. See Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021 for additional discussion regarding risks related to the COVID-19 pandemic.

Commencing during the second half of March 2020 and continuing through July 2020, we saw an increase in demand for our content from both current and potential members. This created a positive trend in existing member retention, costs to acquire new members, and the corresponding revenue and cash flow impacts from these higher volumes. This trend dissipated beginning in August 2020, when we saw the online paid media advertising market start to return to historical norms with a corresponding effect on the cost of our online advertising efforts. With the expansion of privacy regulations affecting a large number of mobile consumers during the summer

of 2021, we have continued to see an increase in the cost of our online advertising efforts which has reduced the number of new members we can add with our allocated marketing spend.

We reported net income from continuing operations of $0.2 million for the first three months of 2022, a decrease of $0.2 million from $0.4 million for the first three months of 2021. The decrease is primarily due to ongoing integration activities related to the Yoga International acquisition.

We are a Colorado corporation. Our principal and executive office is located at 833 West South Boulder Road, Louisville, CO 80027-2452. Our telephone number at that address is (303) 222-3600.

Results of Operations

The table below summarizes certain detail of our financial results for the periods indicated:

	For the Three Months Ended March 31,
(in thousands, except per share data)	2022			2021
Revenues, net	$	21,831		$	18,896
Cost of revenues		2,905			2,438
Gross profit margin		86.7	%		87.1	%
Selling and operating		16,785			14,538
Corporate, general and administration		1,785			1,496
Acquisition costs		49			—
Total operating expenses		18,619			16,034
Income from operations		307			424
Interest and other expense, net		(60	)		(66	)
Income before income taxes		247

SEC Form 10-Q filed by Gaia Inc.