10-Q

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 June 30, 2020

OR

☐ 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 July 30, 2020
Class A Common Stock ($.0001 par value)	13,782,950
Class B Common Stock ($.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 June 30, 2020 and December 31, 2019	4
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019	5
	Condensed Consolidated Statements of Changes in Equity for the three and six months ended June 30, 2020 and 2019	6
	Condensed Consolidated Statements of Cash Flows for six months ended June 30, 2020 and 2019	7
	Notes to interim condensed consolidated financial statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	14
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

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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. 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, although 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 June 30, 2020, the interim results of operations for the three and six months ended June 30, 2020 and 2019, and cash flows for the six months ended June 30, 2020 and 2019. Operating results for the three and six months ended June 30, 2020 and 2019 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, 2019 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, 2019.

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GAIA, INC.

Condensed Consolidated Balance Sheets

	June 30,			December 31,
(in thousands, except share and per share data)	2020			2019
	(unaudited)
ASSETS
Current assets:
Cash	$	8,458		$	11,494
Accounts receivable		2,617			2,310
Prepaid expenses and other current assets		1,767			2,443
Total current assets		12,842			16,247
Building and land, net		22,351			22,681
Media library, software and equipment, net		38,580			36,921
Goodwill		17,289			17,289
Investments and other assets		13,117			13,034
Total assets	$	104,179		$	106,172
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable, accrued and other liabilities	$	8,099		$	10,594
Deferred revenue		12,320			8,025
Total current liabilities		20,419			18,619
Long-term debt, net		16,751			18,433
Deferred taxes		276			206
Total liabilities		37,446			37,258
Equity:
Gaia, Inc. shareholders’ equity:
Class A common stock, $.0001 par value, 150,000,000 shares    authorized, 13,772,750 and 13,023,231 shares issued and outstanding    at June 30, 2020 and December 31, 2019, respectively		1			1
Class B common stock, $.0001 par value, 50,000,000 shares    authorized, 5,400,000 shares issued and outstanding    at June 30, 2020 and December 31, 2019		1			1
Additional paid-in capital		149,189			145,265
Accumulated deficit		(82,458	)		(76,353	)
Total equity		66,733			68,914
Total liabilities and equity	$	104,179		$	106,172

See accompanying notes to the interim condensed consolidated financial statements.

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GAIA, INC.

Condensed Consolidated Statements of Operations

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(in thousands, except per share data)	2020			2019			2020			2019
	(unaudited)						(unaudited)
Revenues, net	$	16,153		$	13,164		$	30,664		$	25,631
Cost of revenues		2,083			1,785			3,984			3,385
Gross profit		14,070			11,379			26,680			22,246
Expenses:
Selling and operating		14,417			14,173			28,875			29,895
Corporate, general and administration		1,873			1,493			3,290			3,086
Total operating expenses		16,290			15,666			32,165			32,981
Loss from operations		(2,220	)		(4,287	)		(5,485	)		(10,735	)
Interest and other expense, net		(305	)		(196	)		(551	)		(159	)
Loss before income taxes		(2,525	)		(4,483	)		(6,036	)		(10,894	)
Income tax expense		—			42			69			42
Loss from continuing operations		(2,525	)		(4,525	)		(6,105	)		(10,936	)
Income (loss) from discontinued operations		—			57			—			(258	)
Net loss	$	(2,525	)	$	(4,468	)	$	(6,105	)	$	(11,194	)
Loss per share-basic and diluted:
Continuing operations	$	(0.13	)	$	(0.25	)	$	(0.33	)	$	(0.61	)
Discontinued operations		—			—			—			(0.01	)
Basic and diluted net loss per share	$	(0.13	)	$	(0.25	)	$	(0.33	)	$	(0.62	)
Weighted-average shares outstanding:
Basic and diluted		18,837			17,944			18,660			17,917

See accompanying notes to the interim condensed consolidated financial statements.

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GAIA, INC.

Condensed Consolidated Statements of Changes in Equity

				Gaia, Inc. Shareholders
				(unaudited)
(in thousands, except shares)	Total Equity			Accumulated Deficit			Common Stock Amount		Additional Paid-in Capital		Common Stock Shares
Balance at January 1, 2019	$	81,465		$	(58,203	)	$	2	$	139,666		17,900,139
Issuance of Gaia, Inc. common stock for stock option exercises and share-based compensation	$	594			—			—		594		—
Net loss	$	(6,726	)		(6,726	)		—		—		—
Balance at March 31, 2019	$	75,333		$	(64,929	)	$	2	$	140,260	$	17,900,139
Issuance of Gaia, Inc. common stock for stock option exercises and share-based compensation		515			—			—		515		—
Issuance of Gaia, Inc. common stock asset acquisition and business combination		3,500			—			—		3,500		484,832
Net loss		(4,468	)		(4,468	)		—		—		—
Balance at June 30, 2019	$	74,880		$	(69,397	)	$	2	$	144,275		18,384,971
Balance at January 1, 2020	$	68,914		$	(76,353	)	$	2	$	145,265		18,423,231
Issuance of Gaia, Inc. common stock for RSU releases, stock option exercises and share-based compensation		585			—			—		585		335,712
Net loss		(3,580	)		(3,580	)		—		—		—
Balance at March 31, 2020	$	65,919		$	(79,933	)	$	2	$	145,850	$	18,758,943
Issuance of Gaia, Inc. common stock for RSU releases, stock option exercises and share-based compensation		410			—			—		410		26,920
Issuance of Gaia, Inc. common stock for note conversion and business combination		2,929			—			—		2,929		386,887
Net loss		(2,525	)		(2,525	)		—		—		—
Balance at June 30, 2020	$	66,733		$	(82,458	)	$	2	$	149,189		19,172,750

See accompanying notes to the interim condensed consolidated financial statements.

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GAIA, INC.

Condensed Consolidated Statements of Cash Flows

	For the Six Months Ended June 30,
(in thousands)	2020			2019
	(unaudited)
Operating activities:
Net loss	$	(6,105	)	$	(11,194	)
Loss from discontinued operations		—			258
Loss from continuing operations		(6,105	)		(10,936	)
Adjustments to reconcile net loss from continuing operations to net cash provided by (used in) operating activities:
Depreciation and amortization		6,022			4,361
Share-based compensation expense		1,528			1,109
Changes in operating assets and liabilities:
Accounts receivable		(307	)		(744	)
Prepaid expenses and other assets		391			(497	)
Accounts payable and accrued liabilities		(1,960	)		720
Deferred revenue		4,295			670
Net cash provided by (used in) operating activities - continuing operations		3,864			(5,317	)
Net cash provided by operating activities - discontinued operations		—			76
Net cash provided by (used in) operating activities		3,864			(5,241	)
Investing activities:
Acquisitions, net of cash acquired, and purchases of intangible assets		—			(1,575	)
Additions to media library, property and equipment		(7,081	)		(9,763	)
Net cash used in investing activities		(7,081	)		(11,338	)
Financing activities:
Repayments on line of credit		—			(12,500	)
Proceeds from issuance of term mortgage, net of issuance costs		—			16,592
Proceeds from the issuance of common stock		181			—
Net cash provided by financing activities		181			4,092
Net decrease in cash		(3,036	)		(12,487	)
Cash at beginning of period		11,494			29,964
Cash at end of period	$	8,458		$	17,477

See accompanying notes to the interim condensed consolidated financial statements.

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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.

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

Gaia, Inc. was incorporated under the laws of the State of Colorado on July 7, 1988, and 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 approximately 8,000 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 – 90% 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 develop 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 over 80% of our viewership.  We complement our produced and owned content through long term, predominately exclusive, 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, other than the adoption of accounting pronouncements below, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2019.

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.

Recently Adopted Accounting Policies

In March 2019, the FASB issued ASU 2019-02, Improvements to Accounting for Costs of Films and License Agreements for Program Materials, in order to align the accounting for production costs of an episodic television series with the accounting for production costs of films by removing the content distinction for capitalization. ASU 2019-02 also requires reassessing estimates of the use of a film in a film group and accounting for any changes prospectively. In addition, ASU 2019-02 requires testing films and program material license agreements for impairment at a film group level when the films or license agreements are predominantly monetized with other films and license agreements. We adopted the new standard on January 1, 2020 with no material impact to our reported financial position or results of operations in the three and six months ended June 30, 2020.

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.

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3. Equity and Share-Based Compensation

In June 2019, we issued 404,891 shares of Class A common stock as part of the consideration for an acquisition of a complementary streaming platform focused on Alternative Healing. We also issued 79,941 shares of Class A common stock as part of the consideration to acquire over 450 titles of original content that has been integrated into our Alternative Healing channel.

In June 2020, we issued 139,617 shares of Class A common stock as additional consideration for an earnout based on the acquired platform maintaining profitability and exceeding the upper threshold of a member growth target as of June 30, 2020.

During the first six months of 2020 and 2019, we recognized approximately $1,528,000 and $1,109,000, respectively, of share-based compensation expense. This included $715,000 in additional expense for the shares issued in June 2020 noted above. 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. During the first six months of 2020, 32,200 options were exercised with net proceeds of $181,000. No options were exercised during the first six months of 2019.

4. Goodwill and Other Intangible Assets

There were no changes in goodwill for the period from December 31, 2019 through June 30, 2020.

The following table represents our other intangible assets by major asset class as of the dates indicated, which are included in Investments and Other Assets on the accompanying condensed consolidated balance sheet:

	June 30,			December 31,
(in thousands)	2020			2019
Amortizable Intangible Assets
Customer related
Gross carrying amount	$	550		$	550
Accumulated amortization		(550	)		(321	)
	$	—		$	229
Unamortized Intangible Assets
Domain names	$	571		$	571

The customer related intangible assets are being amortized on a straight-line basis over 12 months. Amortization expense was $92,000 and $229,000 for the three and six months ended June 30, 2020, respectively.

5. Debt

On April 26, 2019, we replaced the line of credit of our wholly owned subsidiary Boulder Road LLC with a $17.0 million mortgage with BDS III Mortgage Capital B LLC, as lender.  The mortgage bears interest at a fixed spread over LIBOR, matures on May 1, 2022, with a two year extension option, is secured by our corporate campus and is guaranteed by Gaia with no recourse against other assets. The current interest rate is 5.75%. Boulder Road’s financial statements are included within our consolidated financial statements; however, as long as the mortgage is outstanding, Boulder Road’s assets and credit are only available to pay its own debts and obligations and are not available to satisfy the debts or obligations of any other entity.

In June 2019, one of our wholly owned subsidiaries issued a $1.45 million secured convertible promissory note as part of the consideration for the platform acquisition discussed in Note 3. This note was converted into 206,542 shares of Class A common stock in June 2020 and cancelled.

Also in June 2019, one of our wholly owned subsidiaries issued a $300,000 secured convertible promissory note as part of the consideration for the acquisition of a library of original content discussed in Note 3. This note was converted into 40,728 shares of Class A common stock in June 2020 and cancelled.

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6. Net Loss per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all shares of common stock underlying stock options, restricted stock units and convertible notes payable, to the extent dilutive. Basic and diluted net loss per share were the same for the three and six months ended June 30, 2020 and 2019, respectively, as the inclusion of all underlying common shares would have been anti-dilutive.

7. Income Taxes

Our provision for income taxes is comprised of the following:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands)	2020		2019		2020		2019
Current:
Federal	$	—	$	—	$	—	$	—
State		—		—		—		—
Total current		—		—		—		—
Deferred:
Federal		—		42		69		42
State		—		—		—		—
Total deferred		—		42		69		42
Total income tax expense	$	—	$	42	$	69	$	42

The income tax expense recorded in 2020 is a result of the amortization of goodwill over 15 years for tax purposes. 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 generate losses through 2020, we have a full valuation allowance on our deferred tax assets. As of June 30, 2020, our net operating loss carryforwards on a gross basis were $103.9 million and $28.0 million for federal and state, respectively.

8. 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 June 30, 2020 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.

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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 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, 2019. Risks and uncertainties that could cause actual results to differ include, without limitation, general economic conditions, ongoing losses, competition, loss of key personnel, pricing, 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 condensed consolidated financial statements and related notes included elsewhere in this document. This section is designed to provide information that will assist in understanding our condensed consolidated financial statements, changes in certain items in those statements from period to period, the primary factors that caused those changes and how certain accounting principles, policies and estimates affect the condensed consolidated financial statements.

Overview and Outlook

We operate a global digital video subscription service with a library of approximately 8,000 titles, with a growing selection of titles available in Spanish, German and French, that caters to a unique, underserved member base. Our digital content is available to our members on most internet-connected devices anytime, anywhere, commercial-free. Through our online Gaia subscription service our members have unlimited access to a library of inspiring films, cutting edge documentaries, interviews, yoga classes, transformation related content, and more – 85% of which is exclusively available to our members for digital streaming on most internet-connected devices.

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 entertainment-based streaming video services. Our original content is developed and produced in-house in our production studios near Boulder, Colorado. By offering exclusive and unique content through our streaming service, we believe we will be able to significantly expand our target member base.

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.

Our focus for 2019 was on disciplined investment in our product, content library and member acquisition efforts to allow us to reduce the cash used in operations meaningfully over the year, with a continued focus on driving sustainable growth into the future. We reduced cash used in operations over 88% from 2018 to 2019 and generated cash flows from operations in the fourth quarter of 2019. We continued this trend in the first half of 2020, generating $3.9 million in cash flows from operations, an improvement of $9.2 million or 174% from the year ago period. We are now focused on generating net income and cash while continuing to grow revenues.

In March 2020, the World Health Organization declared the outbreak of a novel strain of coronavirus, or COVID-19, as a pandemic, which continues to spread throughout the United States and the world. The full impact that COVID-19 will have on our business will depend on a number of factors such as the duration and extent of COVID-19, the effect of governmental actions, changes in consumer behavior, responses of our third-party business partners that offer our content through their platforms, and general economic activity, as described in Part II, Item 1A “Risk Factors” in this Form 10-Q.

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In the second half of March 2020 continuing through June 2020, we saw an increase in demand for our content from both current and potential members, which has 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. While we do not know when these trends might dissipate, they are providing incremental momentum in an otherwise historically slower period for new member growth.

We reported net losses of $6.1 million and $11.2 million for the six months ended June 30, 2020 and 2019, respectively.

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. We maintain a website at www.gaia.com. The website address has been included only as a textual reference. Our website and the information contained on it, or connected to it, are not incorporated by reference into this Form 10-Q. We are a “smaller reporting company” as defined in Rule 12b-2 of the Securities Exchange Act of 1934 and have elected to take advantage of certain scaled disclosures available to smaller reporting companies.

Results of Operations

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

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(in thousands, except per share data)	2020			2019			2020			2019
Revenues, net	$	16,153		$	13,164		$	30,664		$	25,631
Cost of revenues		2,083			1,785			3,984			3,385
Gross profit		87.1	%		86.4	%		87.0	%		86.8	%
Selling and operating expenses		14,417			14,173			28,875			29,895
Corporate, general and administration expenses		1,873			1,493			3,290			3,086
Loss from operations		(2,220	)		(4,287	)		(5,485	)		(10,735	)
Interest and other expense, net		(305	)		(196	)		(551	)		(159	)
Loss before income taxes		(2,525	)		(4,483	)		(6,036	)		(10,894	)
Income tax expense		—			42			69			42
Loss from continuing operations		(2,525	)		(4,525	)		(6,105	)		(10,936	)
Income (loss) from discontinued operations		—			57			—			(258	)
Net loss	$	(2,525	)	$	(4,468	)	$	(6,105	)	$	(11,194	)

The following table sets forth certain financial data as a percentage of revenue for the periods indicated:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2020			2019			2020			2019
Revenues, net		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenues		12.9	%		13.6	%		13.0	%		13.2	%
Gross profit		87.1	%		86.4	%		87.0	%		86.8	%
Expenses:
Selling and operating		89.3	%		107.7	%		94.2	%		116.6	%
Corporate, general and administration		11.6	%		11.3	%		10.7	%		12.0	%
Total expenses		100.8	%		119.0	%		104.9	%		128.7	%
Loss from operations		(13.7	)%		(32.6	)%		(17.9	)%		(41.9	)%
Interest and other expense, net		(1.9	)%		(1.5	)%		(1.8	)%		(0.6	)%
Loss before income taxes		(15.6	)%		(34.1	)%		(19.7	)%		(42.5	)%
Income tax expense		0.0	%		0.3	%		0.2	%		0.2	%
Loss from continuing operations		(15.6	)%		(34.4	)%		(19.9	)%		(42.7	)%
Income (loss) from discontinued operations		0.0	%		0.4	%		0.0	%		(1.0	)%
Net loss		(15.6	)%		(33.9	)%		(19.9	)%		(43.7	)%

Three months ended June 30, 2020 compared to three months ended June 30, 2019

Revenues, net. Revenues increased $3.0 million, or 22.7%, to $16.2 million during the second quarter of 2020, compared to $13.2 million during the second quarter of 2019. The increase was primarily driven by an increase in both members and average monthly revenue per member compared to the year-earlier period. Revenues were not significantly impacted by inflation.

12

Cost of revenues. Cost of revenues increased $0.3 million, or 16.7%, to $2.1 million during the second quarter of 2020, from $1.8 million during the second quarter of 2019 and, as a percentage of net revenues, decreased to 12.9% during the second quarter of 2020 from 13.6% during the second quarter of 2019 primarily due to increased revenues.

Selling and operating expenses. Selling and operating expenses increased $0.2 million, or 1.4%, to $14.4 million during the second quarter of 2020 from $14.2 million during the second quarter of 2019 and, as a percentage of net revenues, decreased to 89.3% during the second quarter of 2020 from 107.7% during the second quarter of 2019. We increased our spending on marketing during the second quarter of 2020 by approximately $0.9 million compared to the year ago quarter to take advantage of the favorable environment for attracting new members. The increase in marketing spend was offset by operating expense efficiencies overall as we have continued to reduce our operating expense base through disciplined expense management.

Corporate, general and administration expenses. Corporate, general and administration expenses increased $0.4 million, or 26.7%, to $1.9 million during the second quarter of 2020 compared to the same period of 2019 and, as a percentage of net revenues, increased to 11.6% during the second quarter of 2020 from 11.3%. The second quarter of 2020 includes $0.7 million in non-recurring share-based compensation expense, which was offset by reductions in other expenses as a result of our disciplined expense management.

Net loss. As a result of the above factors net loss decreased to $2.5 million, or $0.13 per share, during the second quarter of 2020 compared to a net loss of $4.5 million, or $0.25 per share, during the first quarter of 2019.

Six months ended June 30, 2020 compared to six months ended June 30, 2019

Revenues, net. Revenues increased $5.1 million, or 19.9%, to $30.7 million during the first six months of 2020, compared to $25.6 million during the first six months of 2019. The increase was primarily driven by an increase in both members and average monthly revenue per member compared to the year-earlier period. Revenues were not significantly impacted by inflation.

Cost of revenues. Cost of revenues increased $0.6 million, or 17.6%, to $4.0 million during the first six months of 2020, from $3.4 million during the first six months of 2019 and, as a percentage of net revenues, decreased to 13.0% during the first six months of 2020 from 13.2% during the first six months of 2019 primarily due to increased revenues.

Selling and operating expenses. Selling and operating expenses decreased $1.0 million, or 3.3%, to $28.9 million during the first six months of 2020 from $29.9 million during the first six months of 2019, and, as a percentage of net revenues, decreased to 94.2% during the first six months of 2020 from 116.6% during the first six months of 2019 primarily due to operating expense efficiencies overall as we have continued to reduce our operating expense base through disciplined expense management.

Corporate, general and administration expenses. Corporate, general and administration expenses decreased $0.2 million or 6.5%, to $3.3 million during the first six months of 2020 from $3.1 million during the first six months of 2019 and, as a percentage of net revenues, decreased to 10.7% during the first six months of 2020 from 12.0% during the first six months of 2019, due to increased revenues in 2020 and disciplined expense management.

Net loss. As a result of the above factors, net loss was $6.1 million, or $0.33 per share, during the first six months of 2020 compared to a net loss of $11.2 million, or $0.62 per share, during the first six months of 2019.  

Seasonality

Our member base growth reflects seasonal variations driven primarily by when consumers typically spend more time indoors and, as a result, tend to increase their viewing, similar to those of traditional TV and cable networks. Historically, our member growth is generally greatest in the fourth and first quarters (October through February), and slowest in May through August. This drives quarterly variations in our spending on member acquisition efforts but does not drive a corresponding seasonality in net revenue.

Liquidity and Capital Resources

Our capital needs arise from working capital required to fund operations, capital expenditures related to acquisition and development of media content, development and marketing of our digital platforms, acquisitions of new businesses and other investments, replacements, expansions and improvements to our infrastructure, and future growth. These capital requirements depend on numerous factors, including the rate of market acceptance of our offerings, our ability to expand our customer base, the cost of ongoing upgrades to our offerings, our expenditures for marketing, and other factors. Additionally, we will continue to pursue opportunities to expand our media libraries, evaluate possible investments in businesses and technologies, and increase our marketing programs as needed. At June 30, 2020, our cash balance was $8.5 million. We estimate that our capital expenditures, including investments in our media

13

library, will total approximately $6.0 million for the remainder of 2020. Since beginning to generate cash flows from operations in October 2019, we have generated $7.3 million in cash flows from operations and we expect to continue generating cash for the remainder of 2020. These planned capital expenditures will be predominately utilized to expand our content library and build out the capabilities of our digital platforms. The planned expenditures are discretionary and with our in-house production capabilities we can scale the planned expenditures based on the available cash flows from operations as there are no contractual commitments with, or dependencies on, third parties.

On April 26, 2019, we replaced the line of credit of our wholly owned subsidiary Boulder Road LLC with a $17.0 million mortgage with BDS III Mortgage Capital B LLC, as lender. The mortgage bears interest at a fixed spread over LIBOR, matures on May 1, 2022, with a two year extension option, is secured by our corporate campus and is guaranteed by Gaia with no recourse against other assets. Boulder Road’s financial statements are included within our consolidated financial statements; however, as long as the mortgage is outstanding, Boulder Road’s assets and credit are only available to pay its own debts and obligations and are not available to satisfy the debts or obligations of any other entity.

In the normal course of our business, we investigate, evaluate and discuss acquisition, joint venture, minority investment, strategic relationship and other business combination opportunities in our market. For any future investment, acquisition or joint venture opportunities, we may consider using then-available liquidity, issuing equity securities or incurring indebtedness.

While there can be no assurances, we believe our cash on hand, cash expected to be generated from operations, and potential borrowing capabilities should be sufficient to fund our operations on both a short-term and long-term basis. In addition, we own our corporate headquarters and could enter into a sale/leaseback transaction to provide additional funds. However, our projected cash needs may change as a result of acquisitions, product development, unforeseen operational difficulties or other factors.

Cash Flows

The following table summarizes our primary sources (uses) of cash during the periods presented:

	For the Six Months Ended June 30,
(in thousands)	2020			2019
Net cash provided by (used in):
Operating activities - continuing operations	$	3,864		$	(5,317	)
Operating activities - discontinued operations		—			76
Operating activities		3,864			(5,241	)
Investing activities		(7,081	)		(11,338	)
Financing activities		181			4,092
Net decrease in cash	$	(3,036	)	$	(12,487	)

Operating activities. Cash flows used in operations improved $9.1 million during the first six months of 2020 compared to the same period in 2019. The improvement was primarily driven by disciplined expense management, growth in our member base and an increase in the number of members electing to pay for an annual membership in advance.

Investing activities. Cash flows used in investing activities decreased $4.3 million during the first six months of 2020 compared to the same period in 2019 primarily due to alignment of our content and product investments to our cash flows from operations and planned revenue growth.

Financing activities. Cash flows provided by financing activities decreased $3.9 million during the first six months of 2020 compared to the same period in the prior year, as we did not undertake financing activities during the first six months of 2020 while in 2019 we replaced our line of credit with the mortgage discussed above.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined in Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

14

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934. Based upon its evaluation as of June 30, 2020, our management has concluded that those disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

15

PART II—OTHER INFORMATION

Item 1.  Legal Proceedings.

None.

Item 1A. Risk Factors.

The disclosure below modifies the risk factors previously disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2019. These risks and uncertainties, along with those previously disclosed, could materially adversely affect our business or financial results.

Impacts of COVID-19 on our business

The global spread of COVID-19 and the various measures to contain it are affecting the macroeconomic environment and while the full impact is uncertain, our business and results of operations could be materially adversely affected. Gaia has experienced some increase in member growth and utilization as more people stay at home and rely on video content, but the longer-term economic impact is expected to adversely affect consumer spending on discretionary items and may decrease demand for our service. The impact on our business will depend on a number of factors such as the duration and extent of COVID-19, governmental actions, changes in consumer behavior, responses of our third-party business partners that offer our content through their platforms, and general economic activity.

We are attempting to conduct business as usual to the extent possible and are complying with the applicable safer at home orders issued by the Governor of Colorado. We canceled and postponed live events that were scheduled for March through July and will be operating at limited in person capacity for events held at GaiaSphere, our 300-person live event studio located on our campus in Colorado, for the foreseeable future. The loss of revenue and exposure from such events will negatively affect us. We lease a portion of our corporate campus, and the failure of one or more of our tenants to meet their rent and other obligations to us for an extended period could negatively affect us.

The impact of the COVID-19 pandemic may also exacerbate other risks discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K, any of which could have a material effect on us.

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

On June 18, 2020, Gaia issued 139,617 unregistered shares of its Class A common stock to settle the additional consideration for the platform acquisition completed in June 2019 discussed above. In addition, Gaia issued 247,270 unregistered shares of its Class A common stock for the conversion of $1.75 million in secured convertible promissory notes issued as partial consideration for the acquisitions described above.

The unregistered shares were issued in reliance on the exemption from registration afforded by Regulation S under the Securities Act of 1933.

Item 3. Defaults Upon Senior Securities.

None.

Item 4.  Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

16

Item 6. Exhibits

Exhibit No.	Description
31.1*	Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
31.2*	Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
32.1**	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File

* Filed herewith

** Furnished herewith

17

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Gaia, Inc.
		(Registrant)
August 3, 2020	By:	/s/ Jirka Rysavy
Date		Jirka Rysavy
		Chief Executive Officer
		(authorized officer)
August 3, 2020	By:	/s/ Paul Tarell
Date		Paul Tarell
		Chief Financial Officer
		(principal financial and accounting officer)

18

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Jirka Rysavy, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Gaia, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15((f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 3, 2020

/s/ Jirka Rysavy

Jirka Rysavy

Chief Executive Officer

(principal executive officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Paul Tarell, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Gaia, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15((f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 3, 2020

/s/ Paul Tarell

Paul Tarell

Chief Financial Officer

(principal financial officer)

EX-32.1

Exhibit 32.1

CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Gaia, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2020, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Jirka Rysavy, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 3, 2020

/s/ Jirka Rysavy

Jirka Rysavy

Chief Executive Officer

(principal executive officer)

A signed original of the written statement required by Section 906 has been provided to Gaia will be retained by Gaia and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Gaia, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2020, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Paul Tarell, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 3, 2020

/s/ Paul Tarell

Paul Tarell

Chief Financial Officer

(principal financial officer)

A signed original of the written statement required by Section 906 has been provided to Gaia and will be retained by Gaia and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2020	Jul. 30, 2020
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Trading Symbol	GAIA
Entity Registrant Name	GAIA, INC
Entity Central Index Key	0001089872
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity File Number	000-27517
Entity Tax Identification Number	84-1113527
Entity Address, Address Line One	833 WEST SOUTH BOULDER ROAD
Entity Address, City or Town	LOUISVILLE
Entity Address, State or Province	CO
Entity Address, Postal Zip Code	80027
City Area Code	303
Local Phone Number	222-3600
Entity Interactive Data Current	Yes
Title of 12(b) Security	Class A Common Stock
Security Exchange Name	NASDAQ
Entity Incorporation, State or Country Code	CO
Document Quarterly Report	true
Document Transition Report	false
Class A Common Stock [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		13,782,950
Class B Common Stock [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		5,400,000

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Current assets:
Cash	$ 8,458	$ 11,494
Accounts receivable	2,617	2,310
Prepaid expenses and other current assets	1,767	2,443
Total current assets	12,842	16,247
Building and land, net	22,351	22,681
Media library, software and equipment, net	38,580	36,921
Goodwill	17,289	17,289
Investments and other assets	13,117	13,034
Total assets	104,179	106,172
Current liabilities:
Accounts payable, accrued and other liabilities	8,099	10,594
Deferred revenue	12,320	8,025
Total current liabilities	20,419	18,619
Long-term debt, net	16,751	18,433
Deferred taxes	276	206
Total liabilities	37,446	37,258
Gaia, Inc. shareholders’ equity:
Additional paid-in capital	149,189	145,265
Accumulated deficit	(82,458)	(76,353)
Total equity	66,733	68,914
Total liabilities and equity	104,179	106,172
Class A Common Stock [Member]
Gaia, Inc. shareholders’ equity:
Common stock	1	1
Class B Common Stock [Member]
Gaia, Inc. shareholders’ equity:
Common stock	$ 1	$ 1

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2020	Dec. 31, 2019
Class A Common Stock [Member]
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	13,772,750	13,023,231
Common stock, shares outstanding	13,772,750	13,023,231
Class B Common Stock [Member]
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	5,400,000	5,400,000
Common stock, shares outstanding	5,400,000	5,400,000

XML

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Income Statement [Abstract]
Revenues, net	$ 16,153	$ 13,164	$ 30,664	$ 25,631
Cost of revenues	2,083	1,785	3,984	3,385
Gross profit	14,070	11,379	26,680	22,246
Expenses:
Selling and operating	14,417	14,173	28,875	29,895
Corporate, general and administration	1,873	1,493	3,290	3,086
Total operating expenses	16,290	15,666	32,165	32,981
Loss from operations	(2,220)	(4,287)	(5,485)	(10,735)
Interest and other expense, net	(305)	(196)	(551)	(159)
Loss before income taxes	(2,525)	(4,483)	(6,036)	(10,894)
Income tax expense		42	69	42
Loss from continuing operations	(2,525)	(4,525)	(6,105)	(10,936)
Income (loss) from discontinued operations		57		(258)
Net loss	$ (2,525)	$ (4,468)	$ (6,105)	$ (11,194)
Loss per share-basic and diluted:
Continuing operations	$ (0.13)	$ (0.25)	$ (0.33)	$ (0.61)
Discontinued operations				(0.01)
Basic and diluted net loss per share	$ (0.13)	$ (0.25)	$ (0.33)	$ (0.62)
Weighted-average shares outstanding:
Basic and diluted	18,837	17,944	18,660	17,917

XML

Condensed Consolidated Statements of Changes in Equity - USD ($) $ in Thousands	Total	Accumulated Deficit	Common Stock	Additional Paid-in Capital
Beginning balance at Dec. 31, 2018	$ 81,465	$ (58,203)	$ 2	$ 139,666
Beginning balance (in shares) at Dec. 31, 2018			17,900,139
Issuance of Gaia, Inc. common stock for RSU releases, stock option exercises and share-based compensation	594			594
Net loss	(6,726)	(6,726)
Ending balance at Mar. 31, 2019	75,333	(64,929)	$ 2	140,260
Ending balance (in shares) at Mar. 31, 2019			17,900,139
Beginning balance at Dec. 31, 2018	81,465	(58,203)	$ 2	139,666
Beginning balance (in shares) at Dec. 31, 2018			17,900,139
Net loss	(11,194)
Ending balance at Jun. 30, 2019	74,880	(69,397)	$ 2	144,275
Ending balance (in shares) at Jun. 30, 2019			18,384,971
Beginning balance at Mar. 31, 2019	75,333	(64,929)	$ 2	140,260
Beginning balance (in shares) at Mar. 31, 2019			17,900,139
Issuance of Gaia, Inc. common stock for RSU releases, stock option exercises and share-based compensation	515			515
Issuance of Gaia, Inc. common stock asset acquisition and business combination	3,500			3,500
Issuance of Gaia, Inc. common stock asset acquisition and business combination (in shares)			484,832
Net loss	(4,468)	(4,468)
Ending balance at Jun. 30, 2019	74,880	(69,397)	$ 2	144,275
Ending balance (in shares) at Jun. 30, 2019			18,384,971
Beginning balance at Dec. 31, 2019	68,914	(76,353)	$ 2	145,265
Beginning balance (in shares) at Dec. 31, 2019			18,423,231
Issuance of Gaia, Inc. common stock for RSU releases, stock option exercises and share-based compensation	585			585
Issuance of Gaia, Inc. common stock for RSU releases, stock option exercises and share-based compensation (in shares)			335,712
Net loss	(3,580)	(3,580)
Ending balance at Mar. 31, 2020	65,919	(79,933)	$ 2	145,850
Ending balance (in shares) at Mar. 31, 2020			18,758,943
Beginning balance at Dec. 31, 2019	68,914	(76,353)	$ 2	145,265
Beginning balance (in shares) at Dec. 31, 2019			18,423,231
Net loss	(6,105)
Ending balance at Jun. 30, 2020	66,733	(82,458)	$ 2	149,189
Ending balance (in shares) at Jun. 30, 2020			19,172,750
Beginning balance at Mar. 31, 2020	65,919	(79,933)	$ 2	145,850
Beginning balance (in shares) at Mar. 31, 2020			18,758,943
Issuance of Gaia, Inc. common stock for RSU releases, stock option exercises and share-based compensation	410			410
Issuance of Gaia, Inc. common stock for RSU releases, stock option exercises and share-based compensation (in shares)			26,920
Issuance of Gaia, Inc. common stock for note conversion and business combination	2,929			2,929
Issuance of Gaia, Inc. common stock for note conversion and business combination (in shares)			386,887
Net loss	(2,525)	(2,525)
Ending balance at Jun. 30, 2020	$ 66,733	$ (82,458)	$ 2	$ 149,189
Ending balance (in shares) at Jun. 30, 2020			19,172,750

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Operating activities:
Net loss	$ (4,468)	$ (6,105)	$ (11,194)
Loss from discontinued operations	(57)		258
Loss from continuing operations	(4,525)	(6,105)	(10,936)
Adjustments to reconcile net loss from continuing operations to net cash provided by (used in) operating activities:
Depreciation and amortization		6,022	4,361
Share-based compensation expense		1,528	1,109
Changes in operating assets and liabilities:
Accounts receivable		(307)	(744)
Prepaid expenses and other assets		391	(497)
Accounts payable and accrued liabilities		(1,960)	720
Deferred revenue		4,295	670
Net cash provided by (used in) operating activities - continuing operations		3,864	(5,317)
Net cash provided by operating activities - discontinued operations			76
Net cash provided by (used in) operating activities		3,864	(5,241)
Investing activities:
Acquisitions, net of cash acquired, and purchases of intangible assets			(1,575)
Additions to media library, property and equipment		(7,081)	(9,763)
Net cash used in investing activities		(7,081)	(11,338)
Financing activities:
Repayments on line of credit			(12,500)
Proceeds from issuance of term mortgage, net of issuance costs			16,592
Proceeds from the issuance of common stock		181
Net cash provided by financing activities		181	4,092
Net decrease in cash		(3,036)	(12,487)
Cash at beginning of period		11,494	29,964
Cash at end of period	$ 17,477	$ 8,458	$ 17,477

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Organization, Nature of Operations, and Principles of Consolidation

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Organization, Nature of Operations, and Principles of Consolidation

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

Gaia, Inc. was incorporated under the laws of the State of Colorado on July 7, 1988, and 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 approximately 8,000 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 – 90% 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 develop 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 over 80% of our viewership.  We complement our produced and owned content through long term, predominately exclusive, 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, other than the adoption of accounting pronouncements below, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2019.

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.

Recently Adopted Accounting Policies

In March 2019, the FASB issued ASU 2019-02, Improvements to Accounting for Costs of Films and License Agreements for Program Materials, in order to align the accounting for production costs of an episodic television series with the accounting for production costs of films by removing the content distinction for capitalization. ASU 2019-02 also requires reassessing estimates of the use of a film in a film group and accounting for any changes prospectively. In addition, ASU 2019-02 requires testing films and program material license agreements for impairment at a film group level when the films or license agreements are predominantly monetized with other films and license agreements. We adopted the new standard on January 1, 2020 with no material impact to our reported financial position or results of operations in the three and six months ended June 30, 2020.

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Revenue Recognition

6 Months Ended

Jun. 30, 2020

Revenue Recognition [Abstract]

Revenue Recognition

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.

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Equity and Share-Based Compensation

6 Months Ended

Jun. 30, 2020

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Equity and Share-Based Compensation

3. Equity and Share-Based Compensation

In June 2019, we issued 404,891 shares of Class A common stock as part of the consideration for an acquisition of a complementary streaming platform focused on Alternative Healing. We also issued 79,941 shares of Class A common stock as part of the consideration to acquire over 450 titles of original content that has been integrated into our Alternative Healing channel.

In June 2020, we issued 139,617 shares of Class A common stock as additional consideration for an earnout based on the acquired platform maintaining profitability and exceeding the upper threshold of a member growth target as of June 30, 2020.

During the first six months of 2020 and 2019, we recognized approximately $1,528,000 and $1,109,000, respectively, of share-based compensation expense. This included $715,000 in additional expense for the shares issued in June 2020 noted above. 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. During the first six months of 2020, 32,200 options were exercised with net proceeds of $181,000. No options were exercised during the first six months of 2019.

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Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

4. Goodwill and Other Intangible Assets

There were no changes in goodwill for the period from December 31, 2019 through June 30, 2020.

The following table represents our other intangible assets by major asset class as of the dates indicated, which are included in Investments and Other Assets on the accompanying condensed consolidated balance sheet:

	June 30,			December 31,
(in thousands)	2020			2019
Amortizable Intangible Assets
Customer related
Gross carrying amount	$	550		$	550
Accumulated amortization		(550	)		(321	)
	$	—		$	229
Unamortized Intangible Assets
Domain names	$	571		$	571

The customer related intangible assets are being amortized on a straight-line basis over 12 months. Amortization expense was $92,000 and $229,000 for the three and six months ended June 30, 2020, respectively.

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Debt

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Debt

5. Debt

On April 26, 2019, we replaced the line of credit of our wholly owned subsidiary Boulder Road LLC with a $17.0 million mortgage with BDS III Mortgage Capital B LLC, as lender.  The mortgage bears interest at a fixed spread over LIBOR, matures on May 1, 2022, with a two year extension option, is secured by our corporate campus and is guaranteed by Gaia with no recourse against other assets. The current interest rate is 5.75%. Boulder Road’s financial statements are included within our consolidated financial statements; however, as long as the mortgage is outstanding, Boulder Road’s assets and credit are only available to pay its own debts and obligations and are not available to satisfy the debts or obligations of any other entity.

In June 2019, one of our wholly owned subsidiaries issued a $1.45 million secured convertible promissory note as part of the consideration for the platform acquisition discussed in Note 3. This note was converted into 206,542 shares of Class A common stock in June 2020 and cancelled.

Also in June 2019, one of our wholly owned subsidiaries issued a $300,000 secured convertible promissory note as part of the consideration for the acquisition of a library of original content discussed in Note 3. This note was converted into 40,728 shares of Class A common stock in June 2020 and cancelled.

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Net Loss per Share

6 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

Net Loss per Share

6. Net Loss per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all shares of common stock underlying stock options, restricted stock units and convertible notes payable, to the extent dilutive. Basic and diluted net loss per share were the same for the three and six months ended June 30, 2020 and 2019, respectively, as the inclusion of all underlying common shares would have been anti-dilutive.

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Income Taxes

6 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

7. Income Taxes

Our provision for income taxes is comprised of the following:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands)	2020		2019		2020		2019
Current:
Federal	$	—	$	—	$	—	$	—
State		—		—		—		—
Total current		—		—		—		—
Deferred:
Federal		—		42		69		42
State		—		—		—		—
Total deferred		—		42		69		42
Total income tax expense	$	—	$	42	$	69	$	42

The income tax expense recorded in 2020 is a result of the amortization of goodwill over 15 years for tax purposes. 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 generate losses through 2020, we have a full valuation allowance on our deferred tax assets. As of June 30, 2020, our net operating loss carryforwards on a gross basis were $103.9 million and $28.0 million for federal and state, respectively.

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Contingencies

6 Months Ended

Jun. 30, 2020

Commitments And Contingencies Disclosure [Abstract]

Contingencies

8. 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 June 30, 2020 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.

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Organization, Nature of Operations, and Principles of Consolidation (Policies)

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Use of Estimates and Reclassifications

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.

Recently Adopted Accounting Policies

Recently Adopted Accounting Policies

In March 2019, the FASB issued ASU 2019-02, Improvements to Accounting for Costs of Films and License Agreements for Program Materials, in order to align the accounting for production costs of an episodic television series with the accounting for production costs of films by removing the content distinction for capitalization. ASU 2019-02 also requires reassessing estimates of the use of a film in a film group and accounting for any changes prospectively. In addition, ASU 2019-02 requires testing films and program material license agreements for impairment at a film group level when the films or license agreements are predominantly monetized with other films and license agreements. We adopted the new standard on January 1, 2020 with no material impact to our reported financial position or results of operations in the three and six months ended June 30, 2020.

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Goodwill and Other Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Other Intangible Assets by Major Asset Class

The following table represents our other intangible assets by major asset class as of the dates indicated, which are included in Investments and Other Assets on the accompanying condensed consolidated balance sheet:

	June 30,			December 31,
(in thousands)	2020			2019
Amortizable Intangible Assets
Customer related
Gross carrying amount	$	550		$	550
Accumulated amortization		(550	)		(321	)
	$	—		$	229
Unamortized Intangible Assets
Domain names	$	571		$	571

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Income Taxes (Tables)

6 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Provision for Income Taxes

Our provision for income taxes is comprised of the following:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands)	2020		2019		2020		2019
Current:
Federal	$	—	$	—	$	—	$	—
State		—		—		—		—
Total current		—		—		—		—
Deferred:
Federal		—		42		69		42
State		—		—		—		—
Total deferred		—		42		69		42
Total income tax expense	$	—	$	42	$	69	$	42

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Organization, Nature of Operations, and Principles of Consolidation - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2020 Title Channel
Organization Nature Of Operations And Principles Of Consolidation [Line Items]
Number of titles available in digital content library | Title	8,000
Number of channels | Channel	4
Minimum [Member]
Organization Nature Of Operations And Principles Of Consolidation [Line Items]
Percentage of digital streaming exclusively available for subscribers	90.00%
Percentage of produced and owned content views	80.00%

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Equity and Share-Based Compensation - Additional Information (Detail)	1 Months Ended		6 Months Ended
	Jun. 30, 2020 USD ($) shares	Jun. 30, 2019 Title shares	Jun. 30, 2020 USD ($) shares	Jun. 30, 2019 USD ($) shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense | $			$ 1,528,000	$ 1,109,000
Options exercised during period			32,200	0
Proceeds from stock options exercised | $			$ 181,000
Original Content Acquisition [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of titles of original content acquired to be integrated | Title		450
Class A Common Stock [Member] | Complementary Streaming Platform [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance of common stock as consideration for acquisition		404,891
Shares issued for consideration of earnout payments	139,617
Share-based compensation expense | $	$ 715,000
Class A Common Stock [Member] | Original Content Acquisition [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance of common stock as consideration for acquisition		79,941

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Goodwill and Other Intangible Assets - Additional Information (Detail) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2020
Goodwill [Line Items]
Changes in goodwill		$ 0
Customer Related Intangible Assets [Member]
Goodwill [Line Items]
Intangible assets, useful life		12 months
Intangible assets, amortization method		straight-line basis
Intangible assets, amortization expense	$ 92,000	$ 229,000

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Goodwill and Other Intangible Assets - Schedule of Other Intangible Assets by Major Asset Class (Detail) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Customer Related Intangible Assets [Member]
Intangible Assets Other Than Goodwill [Line Item]
Amortizable Intangible Assets, Gross carrying amount	$ 550	$ 550
Amortizable Intangible Assets, Accumulated amortization	(550)	(321)
Amortizable Intangible Assets, Net		229
Domain Names [Member]
Intangible Assets Other Than Goodwill [Line Item]
Unamortized Intangible Assets	$ 571	$ 571

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Debt - Additional Information (Detail) - USD ($)		1 Months Ended
	Apr. 26, 2019	Jun. 30, 2020	Jun. 30, 2019
Secured Convertible Promissory Note [Member] | Complementary Streaming Platform Acquisition [Member]
Debt Conversion [Line Items]
Debt instrument, face amount			$ 1,450,000
Secured Convertible Promissory Note [Member] | Complementary Streaming Platform Acquisition [Member] | Class A Common Stock [Member]
Debt Conversion [Line Items]
Debt instrument, converted, number of shares issued		206,542
Secured Convertible Promissory Note [Member] | Original Content Acquisition [Member]
Debt Conversion [Line Items]
Debt instrument, face amount			$ 300,000
Secured Convertible Promissory Note [Member] | Original Content Acquisition [Member] | Class A Common Stock [Member]
Debt Conversion [Line Items]
Debt instrument, converted, number of shares issued		40,728
Boulder Road LLC [Member] | BDS III Mortgage Capital B LLC [Member] | Mortgage [Member]
Debt Conversion [Line Items]
Borrowings converted, amount	$ 17,000,000.0
Borrowings converted, maturity date	May 01, 2022
Borrowings converted, extension term	2 years
Borrowings converted, interest rate	5.75%

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Income Taxes - Provision for Income Taxes (Detail) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Deferred:
Federal	$ 42	$ 69	$ 42
Total deferred	42	69	42
Total income tax expense	$ 42	$ 69	$ 42

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Income Taxes - Additional Information (Detail) $ in Millions	6 Months Ended
	Jun. 30, 2020 USD ($)
Income Taxes [Line Items]
Goodwill useful life for income tax purposes	15 years
Federal [Member]
Income Taxes [Line Items]
Net operating loss carryforwards	$ 103.9
State [Member]
Income Taxes [Line Items]
Net operating loss carryforwards	$ 28.0