Company Quick10K Filing
Gaia
Price6.79 EPS-1
Shares18 P/E-5
MCap125 P/FCF-21
Net Debt7 EBIT-26
TEV132 TEV/EBIT-5
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-09-30 Filed 2020-11-09
10-Q 2020-06-30 Filed 2020-08-03
10-Q 2020-03-31 Filed 2020-04-27
10-K 2019-12-31 Filed 2020-02-24
10-Q 2019-09-30 Filed 2019-11-05
10-Q 2019-06-30 Filed 2019-08-06
10-Q 2019-03-31 Filed 2019-04-29
10-K 2018-12-31 Filed 2019-03-04
10-Q 2018-09-30 Filed 2018-11-06
10-Q 2018-06-30 Filed 2018-08-06
10-Q 2018-03-31 Filed 2018-05-07
10-K 2017-12-31 Filed 2018-02-27
10-Q 2017-09-30 Filed 2017-11-07
10-Q 2017-06-30 Filed 2017-08-07
10-Q 2017-03-31 Filed 2017-05-05
10-K 2016-12-31 Filed 2017-02-28
10-Q 2016-09-30 Filed 2016-11-04
10-Q 2016-06-30 Filed 2016-08-09
10-Q 2016-03-31 Filed 2016-05-10
10-K 2015-12-31 Filed 2016-03-15
10-Q 2015-09-30 Filed 2015-11-06
10-Q 2015-06-30 Filed 2015-08-07
10-Q 2015-03-31 Filed 2015-05-08
10-K 2014-12-31 Filed 2015-03-16
10-Q 2014-09-30 Filed 2014-11-10
10-Q 2014-06-30 Filed 2014-08-08
10-Q 2014-03-31 Filed 2014-05-09
10-K 2013-12-31 Filed 2014-03-31
10-Q 2013-09-30 Filed 2013-11-12
10-Q 2013-06-30 Filed 2013-08-09
10-Q 2013-03-31 Filed 2013-05-09
10-K 2012-12-31 Filed 2013-03-18
10-Q 2012-09-30 Filed 2012-11-09
10-Q 2012-06-30 Filed 2012-08-09
10-Q 2012-03-31 Filed 2012-05-10
10-K 2011-12-31 Filed 2012-03-15
10-Q 2011-09-30 Filed 2011-11-09
10-Q 2011-06-30 Filed 2011-08-09
10-Q 2011-03-31 Filed 2011-05-10
10-K 2010-12-31 Filed 2011-03-11
10-Q 2010-09-30 Filed 2010-11-08
10-Q 2010-06-30 Filed 2010-08-09
10-Q 2010-03-31 Filed 2010-05-10
10-K 2009-12-31 Filed 2010-03-16
8-K 2020-11-05
8-K 2020-09-09
8-K 2020-08-03
8-K 2020-06-09
8-K 2020-04-23
8-K 2020-02-24
8-K 2019-11-01
8-K 2019-08-05
8-K 2019-04-25
8-K 2019-03-04
8-K 2018-11-05
8-K 2018-10-01
8-K 2018-08-06
8-K 2018-05-03
8-K 2018-03-21
8-K 2018-02-26

GAIA 10Q Quarterly Report

Part I - Financial Information
Item 1.Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits
EX-31.1 gaia-ex311_9.htm
EX-31.2 gaia-ex312_7.htm
EX-32.1 gaia-ex321_8.htm
EX-32.2 gaia-ex322_6.htm

Gaia Earnings 2020-09-30

Balance SheetIncome StatementCash Flow
195156117783902012201420172020
Assets, Equity
105774921-7-352012201420172020
Rev, G Profit, Net Income
1451005510-35-802012201420172020
Ops, Inv, Fin

gaia-10q_20200930.htm
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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, 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 November 6, 2020

Class A Common Stock ($.0001 par value)

 

13,782,951

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 September 30, 2020 and December 31, 2019

4

 

 

 

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019

5

 

 

 

 

Condensed Consolidated Statements of Changes in Equity for the nine months ended September 30, 2020 and 2019

6

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 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

13

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

17

 

 

 

Item 4.

Controls and Procedures

17

 

 

 

PART II—OTHER INFORMATION

18

 

 

Item 1.

Legal Proceedings

18

 

 

 

Item 1A.

Risk Factors

18

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

18

 

 

 

Item 3.

Defaults Upon Senior Securities

18

 

 

 

Item 4.

Mine Safety Disclosures

18

 

 

 

Item 5.

Other Information

18

 

 

 

Item 6.

Exhibits

19

 

 

 

 

SIGNATURES

20

 

 

 

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. 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 September 30, 2020, the interim results of operations for the three and nine months ended September 30, 2020 and 2019, and cash flows for the nine months ended September 30, 2020 and 2019. Operating results for the three and nine months ended September 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.

3


 

GAIA, INC.

Condensed Consolidated Balance Sheets

 

 

September 30,

 

 

December 31,

 

(in thousands, except share and per share data)

 

2020

 

 

2019

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash

 

$

8,721

 

 

$

11,494

 

Accounts receivable

 

 

2,358

 

 

 

2,310

 

Prepaid expenses and other current assets

 

 

2,043

 

 

 

2,443

 

Total current assets

 

 

13,122

 

 

 

16,247

 

Building and land, net

 

 

24,653

 

 

 

22,681

 

Media library, software and equipment, net

 

 

39,084

 

 

 

36,921

 

Goodwill

 

 

17,289

 

 

 

17,289

 

Investments and other assets

 

 

12,647

 

 

 

13,034

 

Total assets

 

$

106,795

 

 

$

106,172

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable, accrued and other liabilities

 

$

8,385

 

 

$

10,594

 

Deferred revenue

 

 

12,556

 

 

 

8,025

 

Total current liabilities

 

 

20,941

 

 

 

18,619

 

Long-term debt and other liabilities, net

 

 

12,127

 

 

 

18,433

 

Deferred taxes

 

 

276

 

 

 

206

 

Total liabilities

 

 

33,344

 

 

 

37,258

 

Equity:

 

 

 

 

 

 

 

 

Gaia, Inc. shareholders’ equity:

 

 

 

 

 

 

 

 

Class A common stock, $.0001 par value, 150,000,000 shares

   authorized, 13,782,951 and 13,023,231 shares issued and outstanding

   at September 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 September 30, 2020 and December 31, 2019

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

149,593

 

 

 

145,265

 

Accumulated deficit

 

 

(76,144

)

 

 

(76,353

)

Total equity

 

 

73,451

 

 

 

68,914

 

Total liabilities and equity

 

$

106,795

 

 

$

106,172

 

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)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

(unaudited)

 

 

(unaudited)

 

Revenues, net

 

$

17,537

 

 

$

13,660

 

 

$

48,201

 

 

$

39,291

 

Cost of revenues

 

 

2,264

 

 

 

1,801

 

 

 

6,248

 

 

 

5,186

 

Gross profit

 

 

15,273

 

 

 

11,859

 

 

 

41,953

 

 

 

34,105

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and operating

 

 

13,479

 

 

 

14,319

 

 

 

42,354

 

 

 

44,214

 

Corporate, general and administration

 

 

1,426

 

 

 

1,440

 

 

 

4,716

 

 

 

4,526

 

Total operating expenses

 

 

14,905

 

 

 

15,759

 

 

 

47,070

 

 

 

48,740

 

Income (loss) from operations

 

 

368

 

 

 

(3,900

)

 

 

(5,117

)

 

 

(14,635

)

Interest and other income (expense), net

 

 

5,946

 

 

 

(241

)

 

 

5,395

 

 

 

(400

)

Income (loss) before income taxes

 

 

6,314

 

 

 

(4,141

)

 

 

278

 

 

 

(15,035

)

Provision for income taxes

 

 

 

 

 

3

 

 

 

69

 

 

 

45

 

Income (loss) from continuing operations

 

 

6,314

 

 

 

(4,144

)

 

 

209

 

 

 

(15,080

)

Loss from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

(258

)

Net income (loss)

 

$

6,314

 

 

$

(4,144

)

 

$

209

 

 

$

(15,338

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.33

 

 

$

(0.23

)

 

$

0.01

 

 

$

(0.83

)

Discontinued operations

 

 

 

 

 

 

 

 

 

 

 

(0.01

)

Basic earnings per share

 

$

0.33

 

 

$

(0.23

)

 

$

0.01

 

 

$

(0.84

)

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.32

 

 

$

(0.23

)

 

$

0.01

 

 

$

(0.83

)

Discontinued operations

 

 

 

 

 

 

 

 

 

 

 

(0.01

)

Diluted earnings per share

 

$

0.32

 

 

$

(0.23

)

 

$

0.01

 

 

$

(0.84

)

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

19,183

 

 

 

18,375

 

 

 

18,834

 

 

 

18,070

 

Diluted

 

 

19,737

 

 

 

18,375

 

 

 

19,442

 

 

 

18,070

 

See accompanying notes to the interim condensed consolidated financial statements.

 


5


 

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

 

Issuance of Gaia, Inc. common stock for stock option exercises and share-based compensation

 

 

488

 

 

 

 

 

 

 

 

 

488

 

 

 

 

Net loss

 

 

(4,144

)

 

 

(4,144

)

 

 

 

 

 

 

 

 

 

Balance at September 30, 2019

 

$

71,224

 

 

$

(73,541

)

 

$

2

 

 

$

144,763

 

 

 

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, employee stock purchase plan, 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 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

 

Issuance of Gaia, Inc. common stock for employee stock purchase plan, stock option exercises and share-based compensation

 

 

404

 

 

 

 

 

 

 

 

 

404

 

 

 

10,201

 

Net income

 

 

6,314

 

 

 

6,314

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2020

 

$

73,451

 

 

$

(76,144

)

 

$

2

 

 

$

149,593

 

 

 

19,182,951

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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)

 

2020

 

 

2019

 

 

 

(unaudited)

 

Operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

209

 

 

$

(15,338

)

Loss from discontinued operations

 

 

 

 

 

258

 

Income (loss) from continuing operations

 

 

209

 

 

 

(15,080

)

Adjustments to reconcile net income (loss) from continuing operations to

  net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

9,026

 

 

 

6,849

 

Share-based compensation expense

 

 

1,864

 

 

 

1,597

 

Gain on sale of real estate

 

 

(6,125

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(204

)

 

 

(741

)

Prepaid expenses and other assets

 

 

517

 

 

 

(685

)

Accounts payable and accrued liabilities

 

 

(2,621

)

 

 

1,572

 

Deferred revenue

 

 

4,531

 

 

 

492

 

Net cash provided by (used in) operating activities - continuing operations

 

 

7,197

 

 

 

(5,996

)

Net cash provided by operating activities - discontinued operations

 

 

 

 

 

76

 

Net cash provided by (used in) operating activities

 

 

7,197

 

 

 

(5,920

)

Investing activities:

 

 

 

 

 

 

 

 

Acquisitions, net of cash acquired, and purchases of intangible assets

 

 

 

 

 

(1,575

)

Proceeds from sale of real estate

 

 

13,150

 

 

 

 

Additions to media library, property and equipment

 

 

(10,369

)

 

 

(14,914

)

Net cash provided by (used in) investing activities

 

 

2,781

 

 

 

(16,489

)

Financing activities:

 

 

 

 

 

 

 

 

Repayment of debt

 

 

(17,000

)

 

 

(12,500

)

Proceeds from issuance of debt, net of issuance costs

 

 

4,000

 

 

 

16,592

 

Proceeds from the issuance of common stock

 

 

249

 

 

 

 

Net cash provided by (used in) financing activities

 

 

(12,751

)

 

 

4,092

 

Net decrease in cash

 

 

(2,773

)

 

 

(18,317

)

Cash at beginning of period

 

 

11,494

 

 

 

29,964

 

Cash at end of period

 

$

8,721

 

 

$

11,647

 

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.

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 – 85% 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 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 nine months ended September 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.

8


 

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 nine months of 2020 and 2019, we recognized approximately $1,864,000 and $1,597,000, 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 nine months of 2020, 32,200 options were exercised with net proceeds of $181,000. No options were exercised during the first nine months of 2019.

4. Goodwill and Other Intangible Assets

There were no changes in goodwill for the period from December 31, 2019 through September 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:

 

 

September 30,

 

 

December 31,

 

(in thousands)

 

2020

 

 

2019

 

Amortizable Intangible Assets

 

 

 

 

 

 

 

 

Customer related

 

 

 

 

 

 

 

 

Gross carrying amount

 

$

 

 

$

550

 

Accumulated amortization

 

 

 

 

 

(321

)

 

 

$

 

 

$

229

 

 

 

 

 

 

 

 

 

 

Unamortized Intangible Assets

 

 

 

 

 

 

 

 

Domain names

 

$

571

 

 

$

571

 

The customer related intangible assets were being amortized on a straight-line basis over 12 months and were fully amortized as of June 30, 2020. Amortization expense was $229,000 for the nine months ended September 30, 2020.

5. Debt

On April 26, 2019, we replaced the line of credit of our wholly owned subsidiary Boulder Road LLC (“Boulder Road”) with a $17.0 million mortgage with BDS III Mortgage Capital B LLC, as lender, on the office campus that houses our headquarters.

On September 9, 2020, Boulder Road sold a 50% undivided interest in a portion of the campus to Westside Boulder, LLC. Boulder Road retained a 50% undivided interest in the property as well as full ownership of our studio and production facilities. Boulder Road received consideration of $13.15 million in the transaction. Simultaneously with the closing of the sale, Boulder Road used the sale proceeds, along with the proceeds of a $4 million loan to Gaia from an affiliate of Westside Boulder, to repay all outstanding amounts secured by the mortgage. The $4 million promissory note is unsecured, bears the same interest as the retired mortgage at 5.75% per annum, and is due on the earlier of January 3, 2022 or the date on which the owners of the property finance it through the incurrence of mortgage debt. We recorded a gain on the sale of $6.1 million which is included in Interest and other income (expense), net on the accompanying condensed consolidated statements of operations.

In connection with the transaction, Boulder Road leased the property pursuant to a master lease for a term extending through September 30, 2030, with two five-year extensions. Gaia guaranteed Boulder Road’s obligations under the master lease. See Note 6 for further discussion related to the accounting for the master lease.

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.

9


 

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.

6. Leases

As discussed in Note 5, we entered into an operating lease in connection with the sale of a portion of our corporate campus. We record the right to use the underlying asset for the operating lease term as an asset and our obligation to make lease payments as a liability.

 

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

 

 

 

 

September 30,

 

 

December 31,

 

(in thousands)

 

Balance Sheet Classification

 

2020

 

 

2019

 

Right-of-use asset

 

Building and land, net

 

$

8,806

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease liability (current)

 

Accounts payable, accrued and other liabilities

 

$

685

 

 

$

 

Operating lease liability (non-current)

 

Long-term debt and other liabilities, net

 

 

8,127

 

 

 

 

 

 

 

 

$

8,812

 

 

$

 

 

 

 

For the Nine Months Ended September 30,

 

(in thousands)