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Gaia(GAIA) - 2023 Q2 - Quarterly Report
GaiaGaia(US:GAIA)2023-07-30 16:00

PART I—FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents Gaia, Inc.'s unaudited interim condensed consolidated financial statements for Q2 and H1 2023, reporting a net loss for both periods Condensed Consolidated Balance Sheets As of June 30, 2023, Gaia's total assets slightly decreased to $137.6 million, with liabilities increasing and shareholders' equity decreasing Condensed Consolidated Balance Sheets (in thousands) | Account | June 30, 2023 (unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Total current assets | $17,229 | $17,173 | | Total assets | $137,633 | $138,303 | | Total current liabilities | $28,771 | $27,373 | | Total liabilities | $50,256 | $49,319 | | Total shareholders' equity | $87,377 | $88,984 | | Total liabilities and shareholders' equity | $137,633 | $138,303 | Condensed Consolidated Statements of Operations Revenues decreased for both Q2 and H1 2023, resulting in net losses of $1.7 million and $2.9 million respectively, reversing prior year net income Q2 2023 vs Q2 2022 Performance (in thousands, except per share data) | Metric | Q2 2023 (unaudited) | Q2 2022 | | :--- | :--- | :--- | | Revenues, net | $19,839 | $20,720 | | Gross profit | $17,000 | $17,961 | | Income (loss) from operations | $(1,605) | $298 | | Net income (loss) | $(1,718) | $116 | | Diluted EPS | $(0.08) | $0.00 | H1 2023 vs H1 2022 Performance (in thousands, except per share data) | Metric | H1 2023 (unaudited) | H1 2022 | | :--- | :--- | :--- | | Revenues, net | $39,486 | $42,551 | | Gross profit | $33,874 | $36,887 | | Income (loss) from operations | $(2,627) | $605 | | Net income (loss) | $(2,861) | $202 | | Diluted EPS | $(0.14) | $0.01 | Condensed Consolidated Statements of Cash Flows Net cash from operations was $6.5 million for H1 2023, with net cash used in investing activities decreasing, and the period ending cash balance at $10.9 million Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Activity | 2023 (unaudited) | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $6,480 | $6,395 | | Net cash used in investing activities | $(7,119) | $(10,419) | | Net cash used in financing activities | $(44) | $(50) | | Net change in cash | $(683) | $(4,074) | | Cash at end of period | $10,879 | $6,195 | Notes to interim condensed consolidated financial statements The notes detail Gaia's global digital video subscription service, its debt structure including a mortgage and credit facility, and a $2.0 million SEC settlement - Gaia operates a global digital video subscription service with over 10,000 titles, of which 88% are exclusive1920 - The company has a mortgage loan maturing in 2025 and a revolving credit facility of up to $10.0 million with KeyBank, under which $9.0 million was drawn as of March 31, 20233132 - On May 23, 2023, Gaia settled an SEC investigation related to misstating subscriber numbers in 2019 and whistleblower protection issues, agreeing to pay a $2.0 million civil penalty over one year45 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the 7.3% revenue decline in H1 2023 due to post-COVID subscriber contraction, while expecting continued positive cash flow and budgeting $6.0 to $8.0 million for expenditures Results of Operations Q2 2023 revenue decreased 4.3% to $19.8 million and H1 2023 revenue decreased 7.3% to $39.5 million due to post-COVID subscriber contraction, with increased selling expenses - Q2 2023 revenue decreased 4.3% to $19.8 million, and H1 2023 revenue decreased 7.3% to $39.5 million, primarily due to post-COVID subscriber contraction in the second half of 20225862 - Selling and operating expenses increased 7.5% in Q2 2023, driven by higher marketing spend60 - Gross profit margin decreased to 85.7% in Q2 2023 from 86.7% in Q2 2022, due to increased content amortization from investment in original content59 Liquidity and Capital Resources As of June 30, 2023, Gaia had a cash balance of $10.9 million, generated $6.5 million in cash from operations, and expects to remain cash flow positive with sufficient resources - The company generated $6.5 million in cash from operations during the first six months of 2023 and ended the period with a cash balance of $10.9 million68 - Budgeted content and capital expenditures for the remainder of 2023 are expected to be between $6.0 million and $8.0 million, funded by cash from operations68 - As of June 30, 2023, $9.0 million was drawn under the company's $10.0 million revolving credit facility with KeyBank69 Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Gaia, Inc. is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Gaia is not required to provide quantitative and qualitative disclosures about market risk74 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 202375 - No material changes were made to the internal control over financial reporting during the quarter ended June 30, 202376 PART II—OTHER INFORMATION Item 1. Legal Proceedings This section details the settlement of an SEC investigation where Gaia agreed to pay a $2.0 million civil penalty for misstating subscriber numbers and whistleblower protection failures - Gaia settled an SEC investigation concerning a 2019 misstatement of paying subscriber numbers and whistleblower protection requirement failures78 - As part of the settlement, Gaia consented to a cease-and-desist order and is required to pay a total civil monetary penalty of $2.0 million over a one-year period78 Item 1A. Risk Factors The company incorporates by reference the Risk Factors section from its Annual Report on Form 10-K for the year ended December 31, 2022 - Risk factors are incorporated by reference from the company's Annual Report on Form 10-K for the year ended December 31, 202279 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds On June 26, 2023, Gaia issued 272,980 shares of Class A Common Stock upon conversion of a $701,558 convertible note for intellectual property acquisition - The company issued 272,980 shares of Class A Common Stock to acquire intellectual property and content assets from Food Matters Institute LTD80 - The shares were issued upon conversion of a $701,558 convertible note, in a transaction exempt from registration8081 Other Items This section covers standard reporting items, including no defaults on senior securities, non-applicability of mine safety disclosures, and a list of filed exhibits - Item 3: No defaults upon senior securities were reported82 - Item 4: Mine safety disclosures are not applicable83 - Item 6: A list of exhibits filed with the 10-Q is provided, including officer certifications and XBRL data files86 SIGNATURES Signatures The report was duly signed and authorized on July 31, 2023, by the Chief Executive Officer and Chief Financial Officer - The Form 10-Q was signed on July 31, 2023, by the company's CEO and CFO90