UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2021

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 001-35048

LEAF GROUP LTD.

(Exact name of registrant as specified in its charter)

Delaware	20-4731239
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1655 26th Street Santa Monica, CA	90404
(Address of principal executive offices)	(Zip Code)

(310) 656-6253

(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
Common Stock, $0.0001 par value	LEAF	New York Stock Exchange

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 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 ☒

As of May 3, 2021, there were 36,032,095 shares of the registrant’s common stock, $0.0001 par value, outstanding.

LEAF GROUP LTD.

INDEX TO FORM 10-Q

			Page
Part I	Financial Information
	Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
		Condensed Consolidated Balance Sheets	1
		Condensed Consolidated Statements of Operations	2
		Condensed Consolidated Statements of Comprehensive Income (Loss)	3
		Condensed Consolidated Statements of Stockholders’ Equity	4
		Condensed Consolidated Statements of Cash Flows	5
		Notes to the Condensed Consolidated Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
	Item 4.	Controls and Procedures	38
Part II	Other Information
	Item 1.	Legal Proceedings	39
	Item 1A.	Risk Factors	39
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
	Item 3.	Defaults Upon Senior Securities	40
	Item 4.	Mine Safety Disclosures	40
	Item 5.	Other Information	40
	Item 6.	Exhibits	40
		Signatures	42

Part I.       FINANCIAL INFORMATION

Item 1.      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Leaf Group Ltd. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

	March 31,		December 31,
	2021		2020
Assets
Current assets
Cash and cash equivalents	$	51,950	$	67,080
Accounts receivable, net		14,061		13,135
Prepaid expenses and other current assets		3,796		4,358
Total current assets		69,807		84,573
Property and equipment, net		14,619		14,789
Operating lease right-of-use assets		9,540		10,266
Intangible assets, net		10,251		10,784
Goodwill		19,303		19,295
Other assets		1,169		1,220
Total assets	$	124,689	$	140,927
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	6,221	$	13,515
Accrued expenses and other current liabilities		21,883		25,876
Deferred revenue		3,971		3,609
Debt, current		10,293		7,614
Total current liabilities		42,368		50,614
Deferred tax liability		131		115
Operating lease liabilities		7,126		7,943
Debt, non-current		1,073		3,762
Other liabilities		168		190
Total liabilities		50,866		62,624
Commitments and contingencies (Note 9)
Stockholders’ equity
Common stock, $0.0001 par value. Authorized 100,000 shares; 37,503 and 35,848 shares issued and outstanding at March 31, 2021 and 37,351 and 35,696 shares issued and outstanding at December 31, 2020		4		4
Additional paid-in capital		603,504		601,687
Treasury stock at cost, 1,655 shares at March 31, 2021 and December 31, 2020		(35,706)		(35,706)
Accumulated other comprehensive loss		(25)		(23)
Accumulated deficit		(493,954)		(487,659)
Total stockholders’ equity		73,823		78,303
Total liabilities and stockholders’ equity	$	124,689	$	140,927

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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1

Leaf Group Ltd. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

	Three months ended March 31,
	2021		2020
Revenue:
Product revenue	$	33,679	$	16,382
Service revenue		18,198		16,483
Total revenue		51,877		32,865
Operating expenses:
Product costs (exclusive of amortization of intangible assets shown separately below)		25,370		12,449
Service costs (exclusive of amortization of intangible assets shown separately below)		9,369		8,977
Sales and marketing		9,380		7,670
Product development		4,829		5,520
General and administrative		8,521		8,084
Amortization of intangible assets		533		733
Total operating expenses		58,002		43,433
Loss from operations		(6,125)		(10,568)
Interest income		2		23
Interest (expense)		(125)		(89)
Other income (expense), net		(5)		10
Loss before income taxes		(6,253)		(10,624)
Income tax (expense)		(42)		(52)
Net loss	$	(6,295)	$	(10,676)
Net loss per share—basic and diluted	$	(0.18)	$	(0.40)
Weighted average number of shares—basic and diluted		35,784		26,424

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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2

Leaf Group Ltd. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(Unaudited)

	Three months ended March 31,
	2021		2020
Net loss	$	(6,295)	$	(10,676)
Other comprehensive loss, net of tax:
Change in foreign currency translation adjustment		(2)		(62)
Comprehensive loss	$	(6,297)	$	(10,738)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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3

Leaf Group Ltd. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

	Three months ended March 31, 2021
								Accumulated
				Additional				other
				paid-in				comprehensive				Total
	Common stock			capital		Treasury		income		Accumulated		stockholders’
	Shares	Amount		amount		stock		(loss)		deficit		equity
Balance at December 31, 2020	35,696	$	4	$	601,687	$	(35,706)	$	(23)	$	(487,659)	$	78,303
Issuance of stock under employee stock awards and other, net	152		—		231		—		—		—		231
Tax withholdings related to vesting of share-based payments	—		—		(358)		—		—		—		(358)
Stock-based compensation expense	—		—		1,894		—		—		—		1,894
Issuance of common stock in connection with follow-on public offering, net of offering costs	—		—		50		—		—		—		50
Foreign currency translation adjustment	—		—		—		—		(2)		—		(2)
Net loss	—		—		—		—		—		(6,295)		(6,295)
Balance at March 31, 2021	35,848	$	4	$	603,504	$	(35,706)	$	(25)	$	(493,954)	$	73,823

	Three months ended March 31, 2020
								Accumulated
				Additional				other
				paid-in				comprehensive				Total
	Common stock			capital		Treasury		income		Accumulated		stockholders’
	Shares	Amount		amount		stock		(loss)		deficit		equity
Balance at December 31, 2019	26,283	$	3	$	562,332	$	(35,706)	$	(20)	$	(478,799)	$	47,810
Issuance of stock under employee stock awards and other, net	320		—		6		—		—		—		6
Tax withholdings related to vesting of share-based payments	—		—		(556)		—		—		—		(556)
Stock-based compensation expense	—		—		2,833		—		—		—		2,833
Foreign currency translation adjustment	—		—		—		—		(62)		—		(62)
Net loss	—		—		—		—		—		(10,676)		(10,676)
Balance at March 31, 2020	26,603	$	3	$	564,615	$	(35,706)	$	(82)	$	(489,475)	$	39,355

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

.

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4

Leaf Group Ltd. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three months ended March 31,
	2021		2020
Cash flows from operating activities
Net loss	$	(6,295)	$	(10,676)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,485		2,487
Non-cash lease expense		726		691
Deferred income taxes		16		7
Stock-based compensation		1,752		2,704
Other		—		42
Change in operating assets and liabilities, net of effect of acquisitions and disposals:
Accounts receivable, net		(903)		4,776
Prepaid expenses and other current assets		541		(506)
Other long-term assets		(87)		—
Operating lease ROU assets and liabilities		(781)		(702)
Accounts payable		(7,279)		(1,264)
Accrued expenses and other liabilities		(3,529)		(3,869)
Deferred revenue		361		2,430
Net cash used in operating activities		(12,993)		(3,880)
Cash flows from investing activities
Purchases of property and equipment		(1,651)		(1,708)
Net cash used in investing activities		(1,651)		(1,708)
Cash flows from financing activities
Proceeds from exercises of stock options and purchases under ESPP		231		6
Cash paid for common stock issuance costs		(293)		—
Taxes paid on net share settlements of restricted stock units		(358)		(556)
Purchases of intangible assets		(163)		—
Cash paid for acquisition holdback		—		(36)
Cash paid for debt issuance costs		—		(6)
Other		(27)		(16)
Net cash used in financing activities		(610)		(608)
Effect of foreign currency on cash, cash equivalents and restricted cash		(12)		2
Change in cash, cash equivalents and restricted cash		(15,266)		(6,194)
Cash, cash equivalents and restricted cash, beginning of period		68,364		19,126
Cash, cash equivalents and restricted cash, end of period	$	53,098	$	12,932
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents	$	51,950	$	11,648
Restricted cash included in other current assets		136		136
Restricted cash included in other long-term assets		1,012		1,148
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	53,098	$	12,932

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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5

Leaf Group Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Company Background and Overview

Leaf Group Ltd. (“Leaf Group” and, together with its consolidated subsidiaries, the “Company,” “our,” “we,” or “us”) is a Delaware corporation headquartered in Santa Monica, California. We are a diversified consumer internet company that builds enduring, creator-driven brands that reach passionate audiences in large and growing lifestyle categories, including fitness and wellness and home, art and design.

Prior to the third quarter of fiscal 2020, our two reportable segments, Marketplaces and Media, also represented our two reporting units for goodwill impairment testing. During the third quarter of fiscal 2020, our Chief Operating Decision Maker (“CODM”) realigned our operational structure into three reportable segments: Society6 Group, Saatchi Art Group, and Media Group. The reorganization consisted of separating our former Marketplaces segment into two separate segments, Society6 Group and Saatchi Art Group, with our Media segment remaining intact and renamed Media Group. The three reportable segments now represent our three reporting units, and also represent our three operating segments. We have recast all prior period amounts and segment information to conform to the way our CODM regularly reviews the segment performance.

Society6 Group

Through our Society6 Group segment, we operate leading art and design marketplaces where large communities of artists and designers can market and sell their original art and designs printed on a wide variety of products. Our made-to-order marketplaces, consisting of Society6.com (“Society6”) and our wholesale channel (collectively, “Society6 Group”), provide artists and designers with an online commerce platform to feature and sell their original art and designs on an array of consumer products primarily in the home décor category.

Saatchi Art Group

Saatchi Art Group segment, inclusive of SaatchiArt.com (“Saatchi Art”) and its art fair event brand, The Other Art Fair, is a leading online art gallery where a global community of artists exhibit and sell their original artwork directly to consumers through a curated online gallery, virtual reality or in-person at art fairs hosted in the United Kingdom, Australia, Canada, and the United States. Saatchi Art’s online art gallery features a wide selection of original paintings, drawings, sculptures and photography.

Media Group

Our Media Group segment brands educate and entertain consumers across a wide variety of life topics, including the popular fitness and wellness and home and design verticals. In the fitness and wellness vertical, our leading brands include Well+Good and Livestrong.com, which aim to inspire people to lead healthier lives. In the home and design vertical, Hunker is our leading brand inspiring people to improve the space around them. These brands are the leaders in our catalog of over 55 websites focused on specific categories or interests that we either own and operate or host and operate for our partners.

2. Basis of Presentation

The accompanying interim condensed consolidated balance sheet as of March 31, 2021, the condensed consolidated statements of operations and condensed consolidated statements of comprehensive (loss) income for the three months ended March 31, 2021 and 2020, the condensed consolidated statements of cash flows for the three months ended March 31, 2021 and 2020 and the condensed consolidated statement of stockholders’ equity for the three months ended March 31, 2021 and 2020 are unaudited and have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities during the normal course of business.

In the opinion of management, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair statement of our statement of financial position as of March 31, 2021, our results of operations for the three months ended March 31, 2021 and 2020, and our cash flows for the three months ended March 31, 2021 and 2020. The results for the three

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months ended March 31, 2021 are not necessarily indicative of the results expected for the full year. The condensed consolidated balance sheet as of December 31, 2020 has been derived from our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020.

The interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”), for interim financial information and with the instructions from the U.S. Securities and Exchange Commission (“SEC”) for Quarterly Reports on Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and footnotes required by GAAP for complete financial statements. Therefore, these interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Leaf Group and its wholly owned subsidiaries. Acquisitions are included in our condensed consolidated financial statements from the date of the acquisition. Our purchase accounting resulted in all assets and liabilities of acquired businesses being recorded at their estimated fair values on the acquisition dates. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates and assumptions include revenue, allowance for doubtful accounts, the assigned value of acquired assets and assumed liabilities in business combinations, useful lives and impairment of property and equipment, intangible assets, goodwill and other assets, the fair value of equity-based compensation awards, and deferred income tax assets and liabilities. Actual results could differ materially from those estimates. On an ongoing basis, we evaluate our estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of our assets and liabilities.

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. For public companies, these amendments are effective for the fiscal years and interim periods within those fiscal years beginning after December 15, 2020. The Company adopted this standard in the first quarter of 2021 and the impact to the income tax provision for the three months ending March 31, 2021 was immaterial.

3. Revenue Recognition

Revenue

Revenue is recognized when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate the transaction price to each performance obligation based on the estimated standalone selling price of the promised good or service. We allocate any arrangement fee or other incentive or promotional offers to each of the elements based on their relative selling prices.

We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within sales and marketing expenses. We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts where we recognize revenue in the amount which we have the right to invoice for services performed. We do not capitalize costs incurred to fulfill a contract when the contract term is one year or less.

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Our revenue is principally derived from the following products and services:

Product Revenue

For Society6 Group and Saatchi Art Group, we recognize product revenue from sales of products when we transfer control of promised goods to our customers in an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods. In determining the amount of consideration we expect to be entitled to, we take into account sales allowances, estimated returns based on historical experience and any incentive offers provided to customers to encourage purchases, including percentage discounts off current purchases, free shipping and other promotional offers. Because we are the principal in a transaction and obtain control of the goods before they are transferred to the customer, we record product revenue at the gross amount. Value-added taxes (“VAT”), sales tax and other taxes are not included in product revenue because we are a pass-through conduit for collecting and remitting any such taxes.

Society6 Group

Product revenue includes e-commerce, wholesale, and shipping revenue.

Saatchi Art Group

Product revenue includes e-commerce and shipping revenue for limited and open edition prints.

Media Group

Product revenue includes revenue from products sold on our online media properties.

Service Revenue

Society6 Group

Service revenue includes advertising revenue generated from advertisements displayed on our website.

Saatchi Art Group

Service revenue includes revenue from commissions we receive from facilitating the sale of original art by artists to customers through Saatchi Art. We also generate Saatchi Art Group service revenue from various sources relating to Saatchi Art’s The Other Art Fair, including commissions from the sale of original art, fees paid by artists for stands at fairs and through sponsorship opportunities with third-party brands and advertisers. We recognize fair-related service revenue upon completion of each fair. We recognize service revenue arising from the sale of original art net of amounts paid to the artist because we are not the principal in the transaction and we do not obtain control over the original art. Revenue is recognized when we transfer control of the promised service, which is after the original art has been delivered and the return period has expired. We provide incentive offers to Saatchi Art customers to encourage purchases, including percentage discounts off current purchases, free shipping and other promotional offers. VAT, sales tax and other taxes are not included in service revenue because we are a pass-through conduit for collecting and remitting any such taxes.

Media Group

Advertising Revenue. We generate Media Group service revenue primarily from advertisements displayed on our online media properties and on certain webpages of our partners’ media properties that are hosted by our content services. Articles, videos and other forms of content generate advertising revenue from a diverse mix of advertising methods including display advertisements, where revenue is dependent upon the number of advertising impressions delivered; performance-based cost-per-click advertising, in which an advertiser pays only when a visitor clicks on an advertisement; sponsored content; or advertising links. Performance obligations pursuant to our advertising revenue arrangements typically include a minimum number of impressions or the satisfaction of other performance criteria. Revenue from performance-based arrangements is recognized as the related performance criteria are met. We assess whether performance criteria have been met based on a reconciliation of the performance criteria. The reconciliation of the performance criteria generally includes a comparison of third-party performance data to the contractual performance obligation and to internal or partner-performance data in circumstances where that data is available.

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Where we enter into revenue-sharing arrangements with our partners, such as those relating to our advertiser network, we report revenue on a gross or net basis depending on whether we are considered the principal in the transaction. In addition, we consider which party controls the service, including which party is primarily responsible for fulfilling the promise to provide the service. We also consider which party has the latitude to establish the sales prices to advertisers. When we are considered the principal, we report the underlying revenue on a gross basis in our condensed consolidated statements of operations, and record these revenue-sharing payments to our partners in service costs.

Content Sales and Licensing Revenue. We generate revenue from the sale or license of media content, including the creation and distribution of content for third-party brands and publishers. Revenue from the sale or perpetual license of media content is recognized when the control of content is transferred or when the right to use is transferred and the contractual performance obligations have been fulfilled. Revenue from the non-perpetual license of media content is recognized over the period of the license as the right to access content is delivered or when other related performance criteria are fulfilled. In circumstances where we distribute our content on third-party properties and the customer acts as the principal, we recognize revenue on a net basis.

Disaggregation of Revenue

The following table presents our revenues disaggregated by revenue source (in thousands):

	Three months ended March 31,
	2021		2020
Product revenue
Society6 Group	$	32,762	$	15,770
Saatchi Art Group		909		611
Media Group		8		1
Total product revenue		33,679		16,382
Service revenue
Society6 Group		116		223
Saatchi Art Group		4,201		2,137
Media Group		13,881		14,123
Total service revenue		18,198		16,483
Total revenue	$	51,877	$	32,865

Deferred Revenue

Deferred revenue consists of amounts received from or invoiced to customers in advance of our performance obligations being satisfied, including amounts which are refundable. Deferred revenue includes payments received from sales of our products within the Society6 Group segment prior to the transfer of control of such products to the customers; payments made for original art sold via Saatchi Art that are collected prior to the completion of the return period upon which our service is considered completed; and amounts billed to media customers prior to delivery of content; and sales of subscriptions for premium content or services not yet delivered. During the three months ended March 31, 2021, we recognized $2.6 million of revenues that were included in the deferred revenue balance as of December 31, 2020.

Our payment terms vary by the type and location of our customer and the products or services offered. The term between invoicing and when payment is due is not significant. For certain products or services, we require payment before the products or services are delivered to the customer.

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4. Property and Equipment

Property and equipment consisted of the following (in thousands):

	March 31,		December 31,
	2021		2020
Computers and other related equipment	$	12,016	$	11,860
Purchased and internally developed software		42,458		40,832
Furniture and fixtures		1,514		1,514
Leasehold improvements		6,795		6,795
Machinery and related equipment		782		782
		63,565		61,783
Less accumulated depreciation		(48,946)		(46,994)
Property and equipment, net	$	14,619	$	14,789

Depreciation and software amortization expense, which includes no losses on disposal of property and equipment for the three months ended March 31, 2021 and less than $0.1 million for the three months ended March 31, 2020, is shown by classification below (in thousands):

	Three months ended March 31,
	2021		2020
Product costs	$	463	$	522
Service costs		1,335		1,047
Sales and marketing		11		9
Product development		17		13
General and administrative		126		163
Total depreciation	$	1,952	$	1,754

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5. Goodwill and Intangible Assets

The following table presents the changes in our goodwill balance (in thousands):

	Society6 Group		Saatchi Art Group		Media Group		Total
Balance at December 31, 2020	$	14,757	$	2,413	$	2,125	$	19,295
Foreign currency impact		—		8		—		8
Balance at March 31, 2021	$	14,757	$	2,421	$	2,125	$	19,303

We reorganized our segments in the third quarter of 2020, which resulted in separating one of our reporting units, Marketplaces, into two, Society6 Group and Saatchi Art Group. We evaluate our reporting units when changes in our operating structure occur, and reassign goodwill using a relative fair value allocation approach. As of the third quarter of 2020, we have three reporting units, Society6 Group, Saatchi Art Group, and Media Group.

We recorded a goodwill reduction in the Media Group reporting unit of $0.2 million in connection with the sale of content to Hearst Newspapers, a division of Hearst Communications, Inc. (“Hearst”) on April 24, 2020. Refer to Note 13 for additional information.

Intangible assets consisted of the following (in thousands):

	March 31, 2021
	Gross carrying		Accumulated		Net carrying
	amount		amortization		amount
Customer relationships	$	4,003	$	(3,734)	$	269
Artist relationships		12,237		(11,566)		671
Media content		86,164		(86,058)		106
Technology		6,204		(6,204)		—
Non-compete agreements		25		(25)		—
Trade names		18,946		(9,741)		9,205
Total intangible assets	$	127,579	$	(117,328)	$	10,251

	December 31, 2020
	Gross carrying		Accumulated		Net carrying
	amount		amortization		amount
Customer relationships	$	4,003	$	(3,618)	$	385
Artist relationships		12,237		(11,566)		671
Media content		86,164		(86,048)		116
Technology		6,204		(6,204)		—
Non-compete agreements		25		(25)		—
Trade names		18,946		(9,334)		9,612
Total intangible assets	$	127,579	$	(116,795)	$	10,784

Identifiable finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives commencing on the date that the asset is available for its intended use.

Total amortization expense for the periods shown below includes (in thousands):

	Three months ended March 31,
	2021		2020
Service costs	$	10	$	13
Sales and marketing		116		285
Product development		—		46
General and administrative		407		389
Total amortization	$	533	$	733

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6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

	March 31,		December 31,
	2021		2020
Accrued payroll and related items	$	1,925	$	3,897
Artist payables		6,479		7,908
Accrued product costs		2,440		2,718
Operating lease liabilities		3,230		3,195
Other		7,809		8,158
Accrued expenses and other current liabilities	$	21,883	$	25,876

7. Debt

Current and non-current debt consisted of the following (in thousands):

	March 31,		December 31,
	2021		2020
Current debt
Credit facility	$	4,000	$	4,000
PPP loan		6,251		3,572
Other		42		42
Total current debt		10,293		7,614
Non-current debt
PPP loan		893		3,572
Other		180		190
Total non-current debt		1,073		3,762
Total debt	$	11,366	$	11,376

Credit Facility

On November 7, 2019, we entered into a credit facility. The loan and security agreement is a 364-day senior secured working capital revolving line of credit with Silicon Valley Bank (the “Lender”). Our credit facility is asset-based and provides for a maximum amount up to the lesser of (i) $10.0 million, or (ii) 80% of eligible accounts receivable, as described in the loan and security agreement. Any borrowed amounts outstanding under our credit facility bear interest at a floating rate equal to the greater of (i) WSJ Prime Rate plus 0.50%, or (ii) 5.0%. We must also pay an unused line fee of 0.20% per annum based on maximum commitments less outstanding balances on the line of credit, payable monthly in arrears. The agreement is secured by substantially all of our assets, including intellectual property.

The credit facility contains customary representations and warranties and customary reporting, affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers, acquisitions, dispositions, declarations of dividends and stock repurchases. In addition, we are required to maintain the required percentage (85%) of our global cash on account with the Lender (the “Required Percentage”), provided that such amount may fall below the Required Percentage for a period of time not to exceed 10 consecutive business days each calendar month (but in no event can the amount be less than 75% of our global cash). Furthermore, the credit facility contains customary events of default that include, among others, failure to pay principal, interest or fees when due, failure to comply with the other terms of the credit facility and related agreements, the occurrence of a material adverse change and certain insolvency-related events. The existence of an event of default would allow the Lender to terminate its lending commitments, demand repayment of its loans and otherwise exercise all rights and remedies of a secured creditor.

On June 1, 2020, we entered into the First Amendment to Loan and Security Agreement (the “First Amendment”) with the Lender. The First Amendment amends the original loan and security agreement to, among other things, extend the maturity date, add a financial covenant and modify the borrowing formula. The First Amendment extends the maturity date of any borrowings under our credit facility from November 5, 2020 to May 5, 2021. In addition, the First Amendment adds a liquidity maintenance ratio financial covenant (the

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“Liquidity Ratio”). The Liquidity Ratio is a ratio of (a) (i) unrestricted cash and cash equivalents held by us in accounts at the Lender, plus (ii) an amount equal to the product of (A) our net trade accounts receivable, multiplied by (B) sixty percent (60%), to (b) (i) the outstanding principal balance of any borrowings under our credit facility, plus (ii) our accounts payable owing to artists selling works on our platforms (Society6 and Saatchi Art). We are required to maintain a Liquidity Ratio of at least 1.50 to 1.00. The First Amendment also provides for incremental borrowing flexibility for six months, with aggregate borrowing still capped at $10.0 million.

As of March 31, 2021, we had $4.0 million of borrowings outstanding under our credit facility at an interest rate of 5.25%. Our total borrowing capacity under the credit facility was $7.5 million as of March 31, 2021. We are in compliance with all restrictions and have met all debt payment obligations as of March 31, 2021.

On May 5, 2021, we repaid all amounts due and owed under the credit facility with Silicon Valley Bank for the principal, interest, and other amounts owed in the amount of $4.0 million. Effective immediately upon such repayment, (i) all obligations under the credit facility were paid and discharged in full; (ii) all unfunded commitments to make credit extensions or financial accommodations to us or any other person thereunder were terminated; (iii) all security interests and other liens granted to or held by the Lender were terminated and released; and (iv) all guaranties supporting the credit facility were released without further action from the Lender; provided that certain letter of credit and bank services obligations previously secured together with the credit facility survive such termination and are now separately cash collateralized.

Paycheck Protection Program Loan

On April 20, 2020, we entered into a Promissory Note (the “Promissory Note”) with Silicon Valley Bank and Silicon Valley Bank agreed to make available to us a loan in the amount of $7.1 million (the “PPP Loan”) under the Small Business Administration (the “SBA”) Paycheck Protection Program enabled by the Coronavirus Aid, Relief and Economic Security Act of 2020 (the “CARES Act”). We used the proceeds to support payroll costs, rent and utilities in accordance with the relevant terms and conditions of the CARES Act.

The advance under the PPP Loan bears interest at a rate per annum of 1.0%. The term of the PPP Loan is two years, ending April 20, 2022 (the “Maturity Date”). No payments are due on the PPP Loan until September 20, 2021, although interest of 1.0% per annum will accrue during the deferment period. Beginning September 20, 2021, we will pay equal monthly installments of principal and interest in the amount necessary to fully amortize the PPP Loan through the Maturity Date, less any amount of potential forgiveness. Under the terms of the CARES Act, all or a portion of the principal of the PPP Loan may be forgiven. Such forgiveness will be determined, subject to limitations, based on the use of the PPP Loan proceeds for payroll costs, mortgage interest payments, lease payments or utility payments. On November 30, 2020, we filed an application seeking forgiveness of the PPP Loan. On January 27, 2021, we received notification from Silicon Valley Bank that our loan forgiveness application has been submitted to the SBA. While we believe we used the PPP Loan proceeds in a manner that would permit forgiveness of the PPP Loan, no assurance can be provided that we will obtain forgiveness of the PPP Loan in whole or in part. We may also prepay the principal of the PPP Loan at any time without incurring any prepayment penalty or premium.

The Promissory Note also provides for customary events of default, including, among others, events of default relating to failure to make payments, bankruptcy, breaches of representations, and material adverse effects. Additionally, the Promissory Note is subject to the terms and conditions applicable to loans administered by the SBA under the CARES Act.

We did not provide any collateral or personal guarantees for the PPP Loan, nor did we pay any facility charge to the government or to Silicon Valley Bank. Additionally, Silicon Valley Bank consented to the PPP Loan as additional permitted indebtedness under our existing revolving credit facility.

As of March 31, 2021, we had $7.1 million of borrowings outstanding under the PPP Loan.

8. Leases

Operating lease expense for the three months ended March 31, 2021 and 2020 was $1.0 million and $1.0 million, respectively. As of March 31, 2021, short-term leases and finance leases were not material and are therefore not included in the following disclosures.

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Supplemental cash flow information related to leases was as follows (in thousands):

	Three months ended March 31,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,026	$	1,004

Supplemental balance sheet information related to leases was as follows (in thousands):

	March 31,			December 31,
	2021			2020
Operating leases:
Operating lease right-of-use assets	$	9,540	$	10,266
Accrued expenses and other current liabilities		3,230		3,195
Operating lease liabilities		7,126		7,943
Total operating lease liabilities	$	10,356	$	11,138
Weighted average remaining lease term:
Operating leases		3 years		3 years
Weighted average discount rate:
Operating leases		9%		9%

Maturities of operating lease liabilities as of March 31, 2021 were as follows (in thousands):