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 September 30, 2023

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 October 27, 2023
Class A Common Stock ($0.0001 par value)		17,609,425
Class B Common Stock ($0.0001 par value)		5,400,000

 

 

---

 

GAIA, INC.

FORM 10-Q

INDEX

 

PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):	3
	Condensed Consolidated Balance Sheets at September 30, 2023 and December 31, 2022	4
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022	5
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the nine months ended September 30, 2023 and 2022	6
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022	7
	Notes to interim condensed consolidated financial statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	16
Item 4.	Controls and Procedures	16
PART II—OTHER INFORMATION		17
Item 1.	Legal Proceedings	17
Item 1A.	Risk Factors	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3.	Defaults Upon Senior Securities	17
Item 4.	Mine Safety Disclosures	17
Item 5.	Other Information	17
Item 6.	Exhibits	18
	SIGNATURES	19

 

 

 

2

---

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Unaudited Interim Condensed Consolidated Financial Statements

We have prepared our unaudited interim condensed consolidated financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission. While certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to these rules and regulations, we believe that the disclosures made are adequate to make the information not misleading. In our opinion, the unaudited interim condensed consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly, in all material respects, our consolidated financial position as of September 30, 2023, the interim results of operations for the three and nine months ended September 30, 2023 and 2022, and cash flows for the nine months ended September 30, 2023 and 2022. Operating results for the three and nine months ended September 30, 2023 and 2022 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, 2022 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, 2022.

3

---

 

GAIA, INC.

Condensed Consolidated Balance Sheets

		September 30,				December 31,
(in thousands, except share and per share data)		2023				2022
		(unaudited)
ASSETS
Current assets:
Cash		$	11,229			$	11,562
Accounts receivable			3,829				2,955
Prepaid expenses and other current assets			4,132				2,656
Total current assets			19,190				17,173
Media library, software and equipment, net			50,481				51,115
Right-of-use lease asset, net			6,492				7,093
Real estate, investment and other assets, net			30,296				30,979
Goodwill			31,943				31,943
Total assets		$	138,402			$	138,303
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued and other liabilities		$	14,051			$	12,355
Short-term debt and lease liability			9,920				894
Deferred revenue			15,334				14,124
Total current liabilities			39,305				27,373
Long-term debt, net			5,842				14,958
Long-term lease liability			5,911				6,489
Deferred taxes			499				499
Total liabilities			51,557				49,319
Shareholders’ equity:
Class A common stock, $0.0001 par value, 150,000,000 shares    authorized, 15,754,425 and 15,406,186 shares issued and outstanding    at September 30, 2023 and December 31, 2022, respectively			1				1
Class B common stock, $0.0001 par value, 50,000,000 shares    authorized, 5,400,000 shares issued and outstanding    at September 30, 2023 and December 31, 2022, respectively			1				1
Additional paid-in capital			165,490				164,180
Accumulated deficit			(78,647	)			(75,198	)
Total shareholders’ equity			86,845				88,984
Total liabilities and shareholders’ equity		$	138,402			$	138,303

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

4

---

 

GAIA, INC.

Condensed Consolidated Statements of Operations

 

		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
(in thousands, except per share data)		2023				2022				2023				2022
		(unaudited)								(unaudited)
Revenues, net		$	20,223			$	19,907			$	59,709			$	62,458
Cost of revenues			2,983				2,648				8,595				8,312
Gross profit			17,240				17,259				51,114				54,146
Expenses:
Selling and operating			16,254				15,543				49,462				48,197
Corporate, general and administration			1,433				2,019				4,726				5,598
Acquisition costs			—				—				—				49
Total operating expenses			17,687				17,562				54,188				53,844
Income (loss) from operations			(447	)			(303	)			(3,074	)			302
Interest and other expense, net			(141	)			(65	)			(375	)			(175	)
SEC settlement			—				(2,000	)			—				(2,000	)
Loss before income taxes			(588	)			(2,368	)			(3,449	)			(1,873	)
Provision for (benefit from) income taxes			—				—				—				—
Loss from continuing operations			(588	)			(2,368	)			(3,449	)			(1,873	)
Loss from discontinued operations			—				(7	)			—				(300	)
Net loss		$	(588	)		$	(2,375	)		$	(3,449	)		$	(2,173	)
Earnings (loss) per share:
Basic
Continuing operations		$	(0.03	)		$	(0.11	)		$	(0.16	)		$	(0.09	)
Discontinued operations		$	—			$	—			$	—			$	(0.01	)
Basic earnings (loss) per share		$	(0.03	)		$	(0.11	)		$	(0.16	)		$	(0.10	)
Diluted
Continuing operations		$	(0.03	)		$	(0.11	)		$	(0.16	)		$	(0.09	)
Discontinued operations		$	—			$	—			$	—			$	(0.01	)
Diluted earnings (loss) per share		$	(0.03	)		$	(0.11	)		$	(0.16	)		$	(0.10	)
Weighted-average shares outstanding:
Basic			21,154				20,806				20,951				20,686
Diluted			21,154				20,806				20,951				20,686

See accompanying notes to the interim condensed consolidated financial statements.

5

---

 

GAIA, INC.

Condensed Consolidated Statements of Changes in Shareholders’ Equity

		(unaudited)
(in thousands, except shares)		Total Shareholders’ Equity				Accumulated Deficit				Common Stock Amount				Additional Paid-in Capital				Common Stock Shares
Balance at January 1, 2022		$	90,215			$	(72,103	)		$	2			$	162,316				20,461,337
Issuance of Gaia, Inc. common stock for RSU releases and share-based compensation			540				—				—				540				313,823
Net income			86				86				—				—				—
Balance at March 31, 2022		$	90,841			$	(72,017	)		$	2			$	162,856				20,775,160
Issuance of Gaia, Inc. common stock for RSU releases, employee stock purchase plan, stock option exercises and share-based compensation			433				—				—				433				31,026
Net Income			116				116				—				—				—
Balance at June 30, 2022		$	91,390			$	(71,901	)		$	2			$	163,289				20,806,186
Share-based compensation			337				—				—				337				—
Net loss			(2,375	)			(2,375	)			—				—				—
Balance at September 30, 2022		$	89,352			$	(74,276	)		$	2			$	163,626				20,806,186
Balance at January 1, 2023		$	88,984			$	(75,198	)		$	2			$	164,180				20,806,186
Issuance of Gaia, Inc. common stock for RSU releases and share-based compensation			104				—				—				104				19,606
Net loss			(1,143	)			(1,143	)			—				—				—
Balance at March 31, 2023		$	87,945			$	(76,341	)		$	2			$	164,284				20,825,792
Issuance of Gaia, Inc. common stock for media library acquisition			669				—				—				669				272,980
Issuance of Gaia, Inc. common stock for RSU releases, employee stock purchase plan, and share-based compensation			481				—				—				481				55,653
Net loss			(1,718	)			(1,718	)			—				—				—
Balance at June 30, 2023		$	87,377			$	(78,059	)		$	2			$	165,434				21,154,425
Share-based compensation			56				—				—				56				—
Net loss			(588	)			(588	)			—				—				—
Balance at September 30, 2023		$	86,845			$	(78,647	)		$	2			$	165,490				21,154,425

See accompanying notes to the interim condensed consolidated financial statements.

6

---

 

GAIA, INC.

Condensed Consolidated Statements of Cash Flows

 

		For the Nine Months Ended September 30,
(in thousands)		2023				2022
		(unaudited)
Operating activities:
Net loss		$	(3,449	)		$	(2,173	)
Loss from discontinued operations			—				300
Loss from continuing operations			(3,449	)			(1,873	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			12,702				12,009
Share-based compensation expense			599				1,267
Changes in operating assets and liabilities:
Accounts receivable			(874	)			(393	)
Prepaid expenses and other assets			(1,821	)			(752	)
Accounts payable and accrued liabilities			1,714				(1,612	)
Deferred revenue			1,210				(273	)
Net cash provided by operating activities - continuing operations			10,081				8,373
Net cash used in operating activities - discontinued operations			—				(300	)
Net cash provided by operating activities			10,081				8,073
Investing activities:
Additions to media library, software and equipment			(10,371	)			(14,056	)
Acquisitions, net of cash acquired, and purchase of intangible assets			—				(847	)
Net cash used in investing activities			(10,371	)			(14,903	)
Financing activities:
Repayment of debt			(19,985	)			(141	)
Proceeds from short-term borrowings			19,900				7,500
Proceeds from the issuance of common stock			42				43
Net cash provided by (used in) financing activities			(43	)			7,402
Net change in cash			(333	)			572
Cash at beginning of period			11,562				10,269
Cash at end of period		$	11,229			$	10,841
Supplemental cash flow information
Interest paid		$	394			$	201
Value of shares issued for acquisition of content added to Media Library		$	669				—

See accompanying notes to the interim condensed consolidated financial statements.

7

---

 

Notes to interim condensed consolidated financial statements

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

 

 

 

 

11

---

 

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

Forward-Looking Statements

This report contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact are forward looking statements that involve risks and uncertainties. When used in this discussion, we intend the words “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “future,” “hope,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “strive,” “target,” “will,” “would” 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, 2022. Risks and uncertainties that could cause actual results to differ include, without limitation: our ability to attract new members and retain existing members; our ability to compete effectively, including for customer engagement with different modes of entertainment; maintenance and expansion of devise platforms for streaming; fluctuation in customer usage of our service; fluctuations in quarterly operating results; service disruptions; production risks; general economic conditions; future losses; loss of key personnel; price changes; 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; consumer trends; the effect of government regulation and programs; the impact of public health threats, including the coronavirus (COVID-19) pandemic and our response to it; and other risks and uncertainties included in our filings with the SEC. We caution you that no forward-looking statement is a guarantee of future performance, and you should not place undue reliance on these forward-looking statements which reflect our views only as of the date of this report. We undertake no obligation to update any forward-looking information.

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

Overview and Outlook

We operate a global digital video subscription service with a library of over 10,000 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 – 88% 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 our investments in our streaming video technology and our user interface, we have expanded the many ways our subscription member base can access our unique library of media titles.

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

The full impact that the COVID-19 pandemic will have on our business, operations and financial results will depend on a number of evolving factors that we may not be able to accurately predict. See Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022 for additional discussion regarding risks related to the COVID-19 pandemic.

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

12

---

 

With the rollout of privacy changes affecting a large number of mobile consumers during the summer of 2021 we saw an increase in the costs of our online advertising efforts which reduced the number of new members we add each period with our allocated marketing spend. In addition, in the period of March through October 2022, we lost about 40% of the members we added during the COVID-19 lockdowns in 2020 and 2021.

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

Results of Operations

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

 

		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
(in thousands, except per share data)		2023				2022				2023				2022
Revenues, net		$	20,223			$	19,907			$	59,709			$	62,458
Cost of revenues			2,983				2,648				8,595				8,312
Gross profit margin			85.2	%			86.7	%			85.6	%			86.7	%
Selling and operating			16,254				15,543				49,462				48,197
Corporate, general and administration			1,433				2,019				4,726				5,598
Acquisition costs			—				—				—				49
Total operating expenses			17,687				17,562				54,188				53,844
Income (loss) from operations			(447	)			(303	)			(3,074	)			302
Interest and other expense, net			(141	)			(65	)			(375	)			(175	)
SEC settlement			—				(2,000	)			—				(2,000	)
Loss before income taxes			(588	)			(2,368	)			(3,449	)			(1,873	)
Provision for (benefit from) income taxes			—				—				—				—
Loss from continuing operations			(588	)			(2,368	)			(3,449	)			(1,873	)
Loss from discontinued operations			—				(7	)			—				(300	)
Net loss		$	(588	)		$	(2,375	)		$	(3,449	)		$	(2,173	)

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

		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
		2023				2022				2023				2022
Revenues, net			100.0	%			100.0	%			100.0	%			100.0	%
Cost of revenues			14.8	%			13.3	%			14.4	%			13.3	%
Gross profit			85.2	%			86.7	%			85.6	%			86.7	%
Expenses:
Selling and operating			80.4	%			78.1	%			82.8	%			77.2	%
Corporate, general and administration			7.1	%			10.1	%			7.9	%			9.0	%
Acquisition costs			—	%			—	%			—	%			0.1	%
Total operating expenses			87.5	%			88.2	%			90.8	%			86.2	%
Income (loss) from operations			(2.2	)%			(1.5	)%			(5.1	)%			0.5	%
Interest and other expense, net			(0.7	)%			(0.3	)%			(0.6	)%			(0.3	)%
SEC settlement			—	%			(10.0	)%			—	%			(3.2	)%
Loss before income taxes			(2.9	)%			(11.9	)%			(5.8	)%			(3.0	)%
Provision for (benefit from) income taxes			—	%			—	%			—	%			—	%
Loss from continuing operations			(2.9	)%			(11.9	)%			(5.8	)%			(3.0	)%
Loss from discontinued operations			—	%			(0.0	)%			—	%			(0.5	)%
Net loss			(2.9	)%			(11.9	)%			(5.8	)%			(3.5	)%

Three months ended September 30, 2023 compared to three months ended September 30, 2022

Revenues, net. Revenues increased $0.3 million, or 1.5%, to $20.2 million during the three months ended September 30, 2023, compared to $19.9 million during the three months ended September 30, 2022. This was primarily driven by an increase in member count.

13

---

 

Cost of revenues. Cost of revenues increased $0.4 million or 15.4% to $3.0 million during the three months ended September 30, 2023, compared to $2.6 million during the three months ended September 30, 2022 related to the increase in revenues and increased content amortization. Gross profit margin decreased during the three months ended September 30, 2023 to 85.2% from 86.7% for the three months ended September 30, 2022 primarily due to increased content amortization related to an overall increase in our investment of our original content offerings.

Selling and operating expenses. Selling and operating expenses increased $0.8 million, or 5.2%, to $16.3 million during the three months ended September 30, 2023, compared to $15.5 million for the three months ended September 30, 2022, driven primarily by an increase in marketing spend expenses and tax accruals. These increased expenses are offset by a one-time Employee Retention Tax Credit (ERTC) against payroll tax expense. This ERTC tax credit was recognized upon completion of the filing. As a percentage of net revenues, selling and operating expenses increased to 80.4% for the three months ended September 30, 2023 compared to 78.1% for the three months ended September 30, 2022.

Corporate, general and administration expenses. Corporate, general and administration expenses decreased $0.6 million, or 30.0% to $1.4 million for three months ended September 30, 2023 from $2.0 million for three months ended September 30, 2022, driven primarily by decreases in salary and payroll related expenses. As a percentage of net revenues, these expenses decreased to 7.1% for the three months ended September 30, 2023 from 10.1% for the three months ended September 30, 2022.

Nine months ended September 30, 2023 compared to nine months ended September 30, 2022

Revenues, net. Revenues decreased $2.8 million, or 4.5%, to $59.7 million during the nine months ended September 30, 2023, compared to $62.5 million during the nine months ended September 30, 2022. This was primarily driven by a post-COVID subscriber contraction, experienced industry wide during the second half of 2022, which resulted in decreased revenue and overall member count into 2023. The reversal of this trend began during the first half of 2023, when we started to see member count growth along with revenues. This steady pace of growth culminated in the third quarter of 2023, when we started to see a return to the pre-contraction revenue levels.

Cost of revenues. Cost of revenues increased $0.3 million, or 3.6%, to $8.6 million during the nine months ended September 30, 2023, from $8.3 million during the nine months ended September 30, 2022 due to increased content amortization. Gross profit margin decreased during the nine months ended September 30, 2023 to 85.6% from 86.7% for the nine months ended September 30, 2022 primarily due to decreased revenues.

Selling and operating expenses. Selling and operating expenses increased $1.3 million, or 2.7%, to $49.5 million during the nine months ended September 30, 2023, compared to $48.2 million for the nine months ended September 30, 2022, driven primarily by an increase in marketing spend and tax accruals. These increased expenses are offset by a one-time Employee Retention Tax Credit (ERTC) against payroll tax expense. This ERTC tax credit was recognized upon completion of the filing. As a percentage of net revenues, these expenses increased to 82.8% for the nine months ended September 30, 2023 compared to 77.2% for the nine months ended September 30, 2022.

Corporate, general and administration expenses. Corporate, general and administration expenses decreased $0.9 million or 16.1% to $4.7 million for the nine months ended September 30, 2023 compared to $5.6 million for the nine months ended September 30, 2022, primarily driven by decreases in salary and payroll expenses. As a percentage of net revenues, these expenses decreased to 7.9% for the nine months ended September 30, 2023 from 9.0% for the nine months ended September 30, 2022, driven primarily by a decrease in revenues.

Seasonality

Our member base growth reflects seasonal variations driven primarily by periods 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. The effects of the global pandemic have shifted our historical pattern over the past two years, but we have historically experienced the greatest member growth in the fourth and first quarters (October through February), and slowest growth during May through August. This has historically driven quarterly variations in our spending on member acquisition efforts and the number of net new subscribers we add each quarter but has not historically resulted in corresponding seasonality in net revenue. As we continue to expand internationally, we also expect regional seasonality trends to demonstrate more predictable seasonal patterns as our service offering in each market becomes more established and we have a longer history to assess such patterns.

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.

14

---

 

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.

Our budgeted content and capital expenditures for the remainder of 2023 are expected to be between $3.0 to $4.0 million which we intend to fund with cash flows generated from operations. These planned 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 have the ability to scale expenditures based on the available cash flows from operations. We began to generate positive cash flows from operations in October 2019 and have continued to generate cash flows from operations since. We expect to continue generating positive cash flows from operations during the remainder of 2023. We generated approximately $10.1 million in cash flows from operations during the nine months ended September 30, 2023. As of September 30, 2023, our cash balance was $11.2 million.

As described in Note 5, during August 2022, we entered into a Credit Agreement with KeyBank, which provides for a revolving credit facility in an aggregate amount of up to $10.0 million. Funds from the Credit Agreement are available for working capital and general corporate purposes, but not to fund any permitted acquisitions or other investments. As of September 30, 2023, $9.0 million was drawn under the Credit Agreement, which is included in Long-term debt, net on the accompanying condensed consolidated balance sheets.

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, our cash expected to be generated from operations, our $10 million revolving line of credit, our potential additional borrowing capabilities now that we have a history of generating positive operating cash flows, and our potential capital raising capabilities will be sufficient to fund our operations on both a short-term and long-term basis. However, our projected cash needs may change as a result of acquisitions, product development, unforeseen operational difficulties, or other factors.

Class A Common Stock Offering

On October 2, 2023, we entered into an underwriting agreement with Lake Street Capital Markets, LLC (the Underwriter) relating to the offer and sale of 1,855,000 shares of our Class A Common Stock ($0.0001 par value) (the Shares). We sold the Shares to the Underwriter at the public offering price of $2.70 per share less underwriting discounts and commissions, resulting in net proceeds of $4,678. We provided a 30-day option to the Underwriter to purchase up to an additional 278,250 Shares to cover over-allotments. At time of filing, the over-allotment option was not exercised. Proceeds were, and are, expected to be used for general corporate purposes, which may include additions to working capital, financing of capital expenditures, repayment of indebtedness, acquisitions and strategic investment opportunities.

Cash Flows

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

		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
(in thousands)		2023				2022				2023				2022
Net cash provided by (used in):
Operating activities - continuing operations		$	3,601			$	1,686			$	10,081			$	8,373
Operating activities - discontinued operations			—				(7	)			—				(300	)
Operating activities			3,601				1,679				10,081				8,073
Investing activities			(3,252	)			(4,484	)			(10,371	)			(14,903	)
Financing activities			1				7,451				(43	)			7,402
Net change in cash		$	350			$	4,646			$	(333	)		$	572

Operating activities. Cash flows provided by operations increased approximately $2.0 million during the first nine months of 2023 compared to the same period in 2022. The increase was primarily driven by changes in earnings, timing of working capital, primarily accounts payable and deferred revenues.

15

---

 

Investing activities. Cash flows used in investing activities decreased $4.5 million during the first nine months of 2023 compared to the same period in 2022 due primarily to the cost reduction initiatives we completed in the first quarter of 2023.

Financing activities. Cash flows provided by financing activities were primarily impacted by borrowing and repayment activities associated with our revolving line of credit.

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.

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 September 30, 2023, 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 September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

16

---

 

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

We incorporate by reference the Risk Factors included as Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 that we filed with the SEC on March 6, 2023.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

17

---

 

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 Principal 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 Principal 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

18

---

 

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)
October 30, 2023	By:	/s/ Jirka Rysavy
Date		Jirka Rysavy
		Chief Executive Officer
		(Authorized Officer)
October 30, 2023	By:	/s/ Ned Preston
Date		Ned Preston
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

 

19

---