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What changed in GAIA, INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of GAIA, INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+135 added−132 removedSource: 10-K (2024-03-29) vs 10-K (2023-03-06)

Top changes in GAIA, INC's 2023 10-K

135 paragraphs added · 132 removed · 99 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWebsite and Available Information Our corporate website www.gaia.com provides information about us, our history, goals and philosophy, as well as certain financial reports and corporate press releases. Our www.gaia.com website also features a library of information and articles on personal development and healthy lifestyles, along with an extensive offering of video content.
Biggest changeWe cannot provide assurance that we will prevail in any intellectual property disputes. 5 Website and Available Information Our corporate website www.gaia.com provides information about us, our history, goals and philosophy, as well as certain financial reports and corporate press releases.
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. Human Capital We view our employees and our culture as keys to our success.
As we continue to expand internationally, we 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. Human Capital We view our employees and our culture as keys to our success.
Our members have unlimited access to this vast 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 anytime, anywhere, commercial free. Our mission is to create a transformational network that empowers a global conscious community.
Our members have unlimited access to this vast library of inspiring films, cutting edge documentaries, interviews, yoga classes, live events, transformation-related content and more – 88% 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.
The streaming video market includes various free, ad-supported and subscription service offerings focused on various genres, including films, broadcast and original series, fitness and educational content. 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, mostly entertainment-based, streaming video services.
The streaming video market includes various free, ad-supported and subscription service offerings focused on various genres, including films, broadcast and original series, fitness and educational content. Gaia’s position in the streaming video landscape is firmly supported by its wide variety of exclusive and unique content and lifestyle events, which provides a complementary offering to other, mostly entertainment-based, streaming video services.
Today, approximately 47% of our members are outside of the United States. Events+ Premium Membership and GaiaSphere – In 2019, we held our inaugural event at the GaiaSphere, a 300-person live event studio located on our campus in Colorado.
Today, approximately 43% of our members are outside of the United States. Events+ Premium Membership and GaiaSphere – In 2019, we held our inaugural event at the GaiaSphere, a 300-person live event studio located on our campus in Colorado.
Our principal competitors vary by world geographic region and include multichannel video programming distributors and internet-based movie and TV content providers, including those that provide legal and illegal (pirated) streaming video content.
Our principal competitors vary by world geographic region and include multichannel video programming distributors and internet-based movie and TV content providers, including those that provide legal and illegal (pirated) streaming video content and various communities.
With the growth in demand for digital rights, we expect that our large library of produced and acquired content combined with our internal production capabilities will be a key driver in our ability to grow efficiently and act as a hedge against the rising costs of digital rights.
With the growth in demand for digital rights, we expect that our large library of produced and acquired content combined with our internal production capabilities, live events and community will be a key driver in our ability to grow efficiently and act as a hedge against the rising costs of digital rights.
In October 2012, we launched our streaming video service and focused our efforts on growing domestically and internationally by expanding our streaming content, enhancing our user interface and extending our streaming content to even more internet-connected devices. In 2016, we divested all of our non-streaming businesses and focused on scaling our streaming video service.
In October 2012, we launched our streaming video service and focused our efforts on growing domestically and internationally by expanding our streaming content, enhancing our user interface and extending our streaming content to even more internet-connected devices. In 2016, we divested all of our product businesses and focused on scaling our streaming video service and community.
However, we will consider strategic acquisitions that complement our existing business, increase our content library, expand our geographical reach and add to our member base. We will focus on companies with unique media content, a strong brand identity and members that augment our existing member base.
However, we will consider strategic acquisitions that complement our existing business, increase our content library, expand our geographical reach and add to our member base. When evaluating potential acquisitions, we focus on companies with unique media content, a strong brand identity and members that augment our existing member base.
Our original content is developed and produced in-house in our production studios near Boulder, Colorado. Over 88% of our content is available for streaming exclusively on Gaia to most internet-connected devices. By offering 1 exclusive and unique content over a streaming service, we believe we will be able to significantly expand our target member base.
Our original content is developed and produced in-house in our lifestyle campus near Boulder, Colorado. Over 88% of our content is available for streaming exclusively on Gaia to most 1 internet-connected devices. By offering exclusive and unique content over a streaming service, we believe we will be able to significantly expand our target member base.
Our revenues are primarily derived from subscription fees for services related to streaming content to our members. See Note 2, Significant Accounting Policies – Segment Information , and Note 15, Segment Information and Geographic Information , in the accompanying notes to our consolidated financial statements for further detail.
Our revenues are primarily derived from subscription fees for services related to streaming content to our members. See Note 2, Summary of Significant Accounting Policies – Segment Information , and Note 16, Segment Information and Geographic Information , in the accompanying notes to our consolidated financial statements for further detail.
Content on our network is currently organized into four primary channels— Yoga, Transformation, Alternative Healing, and Seeking Truth— and delivered directly to our members through our streaming platform. We curate programming for these channels by producing content in our in-house production studios with a staff of media professionals.
Content on our network is currently organized into four primary channels— Yoga, Transformation, Alternative Healing, and Seeking Truth— and delivered directly to our members through our streaming platform. We curate programming for these channels by producing content in our lifestyle campus with a staff of media professionals.
As of February 28, 2023, Gaia had approximately 111 full time employees, all of which are located in the United States. None of our employees are covered by a collective bargaining agreement. We supplement our full-time employees, with services provided by staffing organizations in other countries to support our customer service, content production and software engineering needs.
As of February 29, 2024, Gaia had approximately 109 full time employees, all of which are located in the United States. None of our employees are covered by a collective bargaining agreement. We supplement our full-time employees, with services provided by staffing organizations in other countries to support our customer service, content production and software engineering needs.
We believe a critical component of our success is our company culture, which begins with focusing our hiring on our current member base. The majority of our current employees came to work at Gaia after discovering our content offering and being passionate members that have been called to join our team to help expand the impact of our mission globally.
We believe a critical component of our success is our company culture, which begins with focusing our hiring on our current member base. The majority of our current employees came to work at Gaia after discovering our content offering and have become passionate team members that continue to help expand the impact of our mission globally.
Item 1. B usiness Our Business Gaia, Inc. (“Gaia,” “we” or “us”) 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 over 10,000 titles, with a growing selection of titles available in Spanish, German and French.
Item 1. B usiness Our Business Gaia, Inc. (“Gaia,” “we” or “us”) operates a global digital video subscription service and community that strives to connect a unique and underserved member base. Our digital content library includes over 10,000 titles and live events, with a growing selection of titles available in Spanish, German and French.
Gaia believes the current size of our potential target market represents approximately 15% of internet users that currently pay for a subscription streaming video service.
Gaia believes the current size of our potential target market can be defined as approximately 15% of internet users that currently pay for a subscription streaming video service.
This product feature allows us to leverage our existing members’ desire to share our content to ultimately drive more interest and awareness, which will lead to member growth that is not wholly dependent on marketing expenditures.
This product feature allows us to leverage our existing members’ desire to share our content to ultimately drive more interest and awareness, which will lead to member growth that is not wholly dependent on marketing expenditures. Complement our Existing Business with Selective Strategic Acquisitions – Our growth strategy is not dependent on acquisitions.
Our ability to protect and enforce our intellectual property rights is subject to certain risks, and from time to time we encounter disputes over 5 rights and obligations concerning intellectual property. We cannot provide assurance that we will prevail in any intellectual property disputes.
Our ability to protect and enforce our intellectual property rights is subject to certain risks, and from time to time we encounter disputes over rights and obligations concerning intellectual property.
Seasonality Our member base 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.
Seasonality Our member base 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. We have generally experienced the greatest member growth in the fourth and first quarters (October through February), and slowest during May through August.
As part of this commitment, we have a link on our corporate website to our Securities and Exchange Commission filings, including our reports on Forms 10-K, 10-Q and 8-K and amendments thereto. We make those reports available through our website, free of charge, as soon as reasonably practicable after these reports are filed with the Securities and Exchange Commission.
As part of this commitment, we have a link on our corporate website to our Securities and Exchange Commission filings, including our reports on Forms 10-K, 10-Q and 8-K and amendments thereto.
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 does not result in a corresponding seasonality in net revenue. As the world emerges from the effects of the pandemic, we expect these seasonal trends to return.
This drives quarterly variations in our spending on member acquisition efforts and the number of net new subscribers we add each quarter but does not result in a corresponding seasonality in net revenue.
We believe our website provides us with an opportunity to deepen our relationships with our members and investors, educate them on a variety of issues, and improve our service.
Our www.gaia.com website also features a library of information and articles on personal development and healthy lifestyles, along with an extensive offering of video content. We believe our website provides us with an opportunity to deepen our relationships with our members and investors, educate them on a variety of issues, and improve our service.
We have included our website address only as inactive textual reference, and the information contained on our website is not incorporated by reference into this Form 10-K.
We make those reports available through our website, free of charge, as soon as reasonably practicable after these reports are filed or furnished with the Securities and Exchange Commission. We have included our website address only as inactive textual reference, and the information contained on our website is not incorporated by reference into this Form 10-K.
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In November 2022, we launched the ability for existing members to give the gift of Gaia allowing us to further expand our member base through existing members. Complement our Existing Business with Selective Strategic Acquisitions – Our growth strategy is not dependent on acquisitions.
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In December 2021, through our acquisition of Yoga International, we expanded our ability to serve yoga focused consumers with a stand-alone yoga offering and the addition of unique content focused on the lifestyle and philosophy of yoga.
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The effects of the global pandemic have shifted our historical pattern over the past three years, but we have historically experienced the greatest member growth in the fourth and first quarters (October through February), and slowest during May through August.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we are unable to effectively upgrade our systems and network infrastructure, and take other steps to improve the efficiency of our systems, we could face system interruptions or delays that may adversely affect our operating results.
Biggest changeIf we are unable to effectively upgrade our systems and network infrastructure, and take other steps to improve the efficiency of our systems, we could face system interruptions or delays that may adversely affect our operating results. 10 Our systems may be subject to damage or interruption from adverse weather conditions, natural disasters, public health issues such as pandemics or epidemics, national or international conflicts, including war, civil disturbances and terrorist attacks, rogue employees, power loss, telecommunications failures, computer viruses, computer denial of service attacks, or other attempts to harm these systems.
As a result of our services being internet-based and the fact that we process, store, and transmit data, including personal information, for our members, failure to prevent or mitigate data loss or other security breaches, including 10 breaches of our suppliers’ technology and systems, could expose us or our members to a risk of loss or misuse of such information, adversely affect our operating results, result in litigation or potential liability for us, and otherwise harm our business.
As a result of our services being internet-based and the fact that we process, store, and transmit data, including personal information, for our members, failure to prevent or mitigate data loss or other security breaches, including breaches of our suppliers’ technology and systems, could expose us or our members to a risk of loss or misuse of such information, adversely affect our operating results, result in litigation or potential liability for us, and otherwise harm our business.
For example, as a result of the repeal of internet neutrality regulations in the United States, broadband internet access providers may be able to charge web-based services such as ours for priority access to members, which could result in increased costs and a loss of existing users, impairment of our ability to attract new users, and material adverse effects on our business and opportunities for growth.
For example, as a result of the repeal of internet neutrality regulations in the United States, 13 broadband internet access providers may be able to charge web-based services such as ours for priority access to members, which could result in increased costs and a loss of existing users, impairment of our ability to attract new users, and material adverse effects on our business and opportunities for growth.
Our revenues and results of operations have fluctuated in the past, and will likely continue to fluctuate, on a quarterly basis. Such fluctuation is the result of a seasonal pattern that reflects variations when consumers are 9 typically spending more time indoors and, as a result, tend to increase their viewing, similar to those of general video streaming services.
Our revenues and results of operations have fluctuated in the past, and will likely continue to fluctuate, on a quarterly basis. Such fluctuation is the result of a seasonal pattern that reflects variations when consumers are typically spending more time indoors and, as a result, tend to increase their viewing, similar to those of general video streaming services.
To the extent our content is deemed controversial or offensive by government regulators, we may face direct or indirect retaliatory action or behavior, including being required to remove such content from our service, our entire service could be banned and/or become subject to heightened regulatory scrutiny across our business and operations.
To the extent our content is deemed controversial or offensive by government regulators, we may face direct or indirect retaliatory action or behavior, including being required to remove such content from our service, our entire service 8 could be banned and/or become subject to heightened regulatory scrutiny across our business and operations.
There is an increasing focus from regulators, investors, members and other stakeholders on environmental, social 8 and governance (“ESG”) matters, both in the United States and internationally. To the extent the content we distribute and the manner in which we produce content creates ESG related concerns, our reputation may be harmed.
There is an increasing focus from regulators, investors, members and other stakeholders on environmental, social and governance (“ESG”) matters, both in the United States and internationally. To the extent the content we distribute and the manner in which we produce content creates ESG related concerns, our reputation may be harmed.
The proliferation of unauthorized copies of our content could have an adverse effect on our business, by reducing the revenues we receive from our subscription service. 13 Risks Related to Litigation, Regulatory Proceedings and Government Regulation We may be subject to litigation or regulatory proceedings that could cause us to incur substantial losses.
The proliferation of unauthorized copies of our content could have an adverse effect on our business, by reducing the revenues we receive from our subscription service. Risks Related to Litigation, Regulatory Proceedings and Government Regulation We may be subject to litigation or regulatory proceedings that could cause us to incur substantial losses.
With respect to our expansion into international markets, we will also need to establish our brand identity in new markets and languages, and to the extent we are not successful, our business in new markets may be adversely impacted. Changes in our member acquisition sources could adversely affect our marketing expenses and member levels may be adversely affected.
With respect to our expansion into international markets, we will also need to establish our brand identity in new markets and languages, and to the extent we are not successful, our business in new markets may be adversely impacted. 7 Changes in our member acquisition sources could adversely affect our marketing expenses and member levels may be adversely affected.
We may limit or discontinue use or 7 support of certain marketing sources or activities if advertising rates increase or if we become concerned that members or potential members deem certain marketing practices intrusive or damaging to our brand. If available marketing channels are limited or curtailed, our ability to attract new members may be adversely affected.
We may limit or discontinue use or support of certain marketing sources or activities if advertising rates increase or if we become concerned that members or potential members deem certain marketing practices intrusive or damaging to our brand. If available marketing channels are limited or curtailed, our ability to attract new members may be adversely affected.
In addition, technology changes to our streaming functionality may require that partners update their devices. If partners do not update or otherwise modify their devices, our service and our members’ use and enjoyment could be negatively impacted. We may face quarterly and seasonal fluctuations that could harm our business.
In addition, technology changes to our streaming functionality may require that partners update their devices. If partners do not update or otherwise modify their devices, our service and our members’ use and enjoyment could be negatively impacted. 9 We may face quarterly and seasonal fluctuations that could harm our business.
Further, a penetration of our systems or a third party’s systems or other misappropriation or misuse of personal information could subject us to business, 11 regulatory, litigation and reputation risk, which could have a negative effect on our business, financial condition and results of operations.
Further, a penetration of our systems or a third party’s systems or other misappropriation or misuse of personal information could subject us to business, regulatory, litigation and reputation risk, which could have a negative effect on our business, financial condition and results of operations.
Rysavy holds approximately 78% of our voting stock and is able to exert substantial influence over and control matters requiring approval by shareholders, including the election of directors, increasing our authorized capital stock, or a merger or sale of substantially all of our assets. As a result of Mr.
Rysavy holds approximately 76% of our voting stock and is able to exert substantial influence over and control matters requiring approval by shareholders, including the election of directors, increasing our authorized capital stock, or a merger or sale of substantially all of our assets. As a result of Mr.
In addition to the risks that we face in the United States, our international operations may involve risks that could adversely affect our business, including the following: the need to adapt our content and user interfaces for specific cultural and language differences, including licensing a certain portion of our content library before we have developed a full appreciation for its performance within a given territory; difficulties and costs associated with staffing and managing foreign operations; management distraction; political or social unrest and economic instability; compliance with U.S. laws, such as the Foreign Corrupt Practices Act, export controls and economic sanctions, and local laws prohibiting corrupt payments to government officials; unexpected changes in regulatory requirements; less favorable foreign intellectual property laws; adverse tax consequences such as those related to repatriation of cash from foreign jurisdictions into the United States, non-income related taxes such as value-added tax or other indirect taxes, changes in tax laws or their interpretations, or the application of judgment in determining our global provision for income taxes and other tax liabilities given inter-company transactions and calculations where the ultimate tax determination is uncertain; fluctuations in currency exchange rates, which could impact revenues and expenses of our international operations and expose us to foreign currency exchange rate risk; profit repatriation and other restrictions on the transfer of funds; differing payment processing systems as well as consumer use and acceptance of electronic payment methods, such as credit and debit cards; new and different sources of competition; different and more stringent user protection, data protection, privacy and other laws; and availability of reliable broadband connectivity and wide area networks in targeted areas for expansion.
In addition to the risks that we face in the United States, our international operations may involve risks that could adversely affect our business, including the following: the need to adapt our content and user interfaces for specific cultural and language differences, including licensing a certain portion of our content library before we have developed a full appreciation for its performance within a given territory; difficulties and costs associated with staffing and managing foreign operations; management distraction; international conflicts, including war, civil disturbances and terrorist attacks; political or social unrest and economic instability; public health issues such as pandemics or epidemics; compliance with U.S. laws, such as the Foreign Corrupt Practices Act, export controls and economic sanctions, and local laws prohibiting corrupt payments to government officials; unexpected changes in regulatory requirements; less favorable foreign intellectual property laws; adverse tax consequences such as those related to repatriation of cash from foreign jurisdictions into the United States, non-income related taxes, changes in tax laws or their interpretations, or the application of judgment in determining our global provision for income taxes and other tax liabilities given inter-company transactions and calculations where the ultimate tax determination is uncertain; fluctuations in currency exchange rates, which could impact revenues and expenses of our international operations and expose us to foreign currency exchange rate risk; profit repatriation and other restrictions on the transfer of funds; differing payment processing systems as well as consumer use and acceptance of electronic payment methods, such as credit and debit cards; new and different sources of competition; different and more stringent user protection, data protection, privacy and other laws; and availability of reliable broadband connectivity and wide area networks in targeted areas for expansion.
Any large equity or equity-linked offering could also negatively impact our stock price. Risks Related to Human Resources We may lose key employees or may be unable to hire qualified employees. We rely on the continued service and performance of our senior management, in particular Jirka Rysavy, our Chairman, CEO and founder.
Any large equity or equity-linked offering could also negatively impact our stock price. Risks Related to Human Resources We may lose key employees or may be unable to hire qualified employees. We rely on the continued service and performance of our senior management.
From time to time, we may seek to obtain additional capital, either through equity, equity-linked or debt securities. Our cash flows provided by our operating activities were negative in 2019, but as planned have been positive since 2020. To the extent we are unable to maintain positive cash flows from operations, we may seek additional capital.
From time to time, we may seek to obtain additional capital, either through equity, equity-linked or debt securities. Our cash flows provided by our operating activities have been positive since 2020. To the extent we are unable to maintain positive cash flows from operations, we may seek additional capital.
Operating in international markets requires significant resources and management attention and will subject us to regulatory, economic and political risks that may be different from and incremental to those in the United States.
Risks Related to International Operations We could be subject to economic, political, regulatory and other risks arising from international operations. Operating in international markets requires significant resources and management attention and will subject us to regulatory, economic and political risks that may be different from and incremental to those in the United States.
We reported net loss of $3.1 million in 2022 compared to net income of $3.7 million in 2021. Additionally, we reported net losses during several prior years as a result of continued investment in member acquisition efforts to drive revenue growth.
We reported net loss of $5.6 million in 2023 compared to net loss of $3.6 million in 2022. Additionally, we reported net losses during several prior years as a result of continued investment in member acquisition efforts to drive revenue growth.
Within such a regulatory environment, coupled with potentially significant political and economic power of local network operators, we could experience discriminatory or anti-competitive practices that could impede our growth, cause us to incur additional expense or otherwise negatively affect our business. 14 Risks Related to International Operations We could be subject to economic, political, regulatory and other risks arising from international operations.
Within such a regulatory environment, coupled with potentially significant political and economic power of local network operators, we could experience discriminatory or anti-competitive practices that could impede our growth, cause us to incur additional expense or otherwise negatively affect our business.
We use the intellectual property of third parties in marketing and providing our services through contractual and other rights. From time to time, third parties may allege that we have violated their intellectual property rights.
Our intellectual property rights extend to our technology, business processes and the content on our website. We use the intellectual property of third parties in marketing and providing our services through contractual and other rights. From time to time, third parties may allege that we have violated their intellectual property rights.
Risks Related to Information Technology and Privacy We could be harmed by data loss or other security breaches.
These fluctuations could adversely affect our results. Risks Related to Information Technology and Privacy We could be harmed by data loss or other security breaches.
Any of these events, in combination or individually, could disrupt our business and adversely affect our business, financial condition, results of operations and cash flows. Item 1B. Unresolve d Staff Comments Not Applicable.
The discovery of material environmental liabilities attached to such real property could adversely affect our results of operations and financial condition. Any of these events, in combination or individually, could disrupt our business and adversely affect our business, financial condition, results of operations and cash flows. Item 1B. Unresolve d Staff Comments Not applicable.
Because our common stock is publicly traded, we are subject to certain rules and regulations of federal, state and financial market exchange entities charged with the protection of investors and the oversight of companies whose securities are publicly traded. These entities, including the Public Company Accounting Oversight Board, the SEC and NASDAQ, periodically issue new requirements and regulations.
Because our common stock is publicly traded, we are subject to certain rules and regulations of federal, state and financial market exchange entities charged with the protection of investors and the oversight of companies whose securities are publicly traded.
In our industry, there is substantial and continuous competition for highly skilled business, product development, technical and other personnel. Hiring qualified management is difficult due to the limited number of qualified professionals in our industry.
In our industry, there is substantial and continuous competition for highly skilled business, product development, technical and other personnel. Hiring qualified management is difficult due to the limited number of qualified professionals in our industry. Failure to recruit, attract and retain personnel, particularly management personnel, could materially harm our business, financial condition, and results of operations.
We rely on proprietary technology to stream content and to manage other aspects of our operations, and the failure of this technology to operate effectively could adversely affect our business. We continually enhance or modify the technology used for our operations.
For these reasons, should an unauthorized intrusion into our members’ data occur, our business could be adversely affected. 11 We rely on proprietary technology to stream content and to manage other aspects of our operations, and the failure of this technology to operate effectively could adversely affect our business. We continually enhance or modify the technology used for our operations.
Each share of Class B common stock has ten votes per share, and each share of Class A common stock has one vote per share. Consequently, Mr.
The shares of Class B common stock are convertible into shares of Class A common stock at any time. Each share of Class B common stock has ten votes per share, and each share of Class A common stock has one vote per share. Consequently, Mr.
New entrants may enter the market with unique service offerings or approaches to providing streaming content and other companies also may enter into business combinations or alliances that strengthen their competitive positions.
New entrants may enter the market with unique service offerings or approaches to providing streaming content and other companies also may enter into business combinations or alliances that strengthen their competitive positions. In addition, new technological developments, including the development and use of generative artificial intelligence, are rapidly evolving.
Our failure to manage any of these risks successfully could harm our international operations and our overall business, and results of our operations. Risks Related to Liquidity We may seek additional capital that may result in shareholder dilution or that may have rights senior to those of our common shareholders.
Such tax assessments, penalties and interest or future requirements by any government agencies related to indirect tax laws could harm our international operations and our overall business, and results of our operations. 15 Risks Related to Liquidity We may seek additional capital that may result in shareholder dilution or that may have rights senior to those of our common shareholders.
If our online activities were to violate any applicable current or future laws and regulations, we could be subject to litigation and regulatory actions, including fines and other penalties. 12 Risks Related to Intellectual Property If our trademarks and other proprietary rights are not adequately protected to prevent unauthorized use or appropriation, the value of our brand and other intangible assets may be diminished, and our business may be adversely affected.
Risks Related to Intellectual Property If our trademarks and other proprietary rights are not adequately protected to prevent unauthorized use or appropriation, the value of our brand and other intangible assets may be diminished, and our business may be adversely affected.
We may be unable, without significant cost or at all, to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our trademarks and other proprietary rights.
We may be unable, without significant cost or at all, to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our trademarks and other proprietary rights. 12 Intellectual property claims against us could be costly and result in the loss of significant rights related to, among other things, our website, title selection processes, content and marketing activities.
The costs relating to any data breach could be material, and we currently do not carry insurance against the risk of a data breach. For these reasons, should an unauthorized intrusion into our members’ data occur, our business could be adversely affected.
The costs relating to any data breach could be material, and we currently do not carry insurance against the risk of a data breach.
Under various U.S. federal, state and local laws, an owner or operator of real property may become liable for the costs of removal of certain hazardous substances released on its property. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of such hazardous substances.
We may be subject to environmental liabilities arising from our ownership of real property. Under various U.S. federal, state and local laws, an owner or operator of real property may become liable for the costs of removal of certain hazardous substances released on its property.
Legislative bodies also review and revise applicable laws. As interpretation and implementation of these laws and rules and promulgation of new regulations continues, we will continue to be required to commit significant financial and managerial resources and incur additional expenses.
As interpretation and implementation of these laws and rules and promulgation of new regulations continues, we will continue to be required to commit significant financial and managerial resources and incur additional expenses. Risks Related to our Ownership of Real Property Liability relating to environmental matters may impact the value of our real property.
The presence of hazardous substances on real property owned by us may adversely affect our ability to sell such real property and we may incur substantial remediation costs, thus harming our financial condition. The discovery of material environmental liabilities attached to such real property could adversely affect our results of operations and financial condition.
These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of such hazardous substances. 16 The presence of hazardous substances on real property owned by us may adversely affect our ability to sell such real property and we may incur substantial remediation costs, thus harming our financial condition.
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 does not result in a corresponding seasonality in net revenue. As the world emerges from the effects of the pandemic, we expect these seasonal trends to return.
We have generally experienced the greatest member growth in the fourth and first quarters (October through February), and slowest during May through August. This drives quarterly variations in our spending on member acquisition efforts and the number of net new subscribers we add each quarter but does not result in a corresponding seasonality in net revenue.
Rysavy holds 100% of our 5,400,000 outstanding shares of Class B common stock and also owns 475,061 shares of Class A common stock. The shares of Class B common stock are convertible into shares of Class A common stock at any time.
Risks Related to Ownership of Our Class A Common Stock Our founder and chairman, Jirka Rysavy, has voting control over us. Mr. Rysavy holds 100% of our 5,400,000 outstanding shares of Class B common stock and also owns 575,061 shares of Class A common stock.
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The effects of the global pandemic have shifted our historical pattern over the past three years, but we have historically experienced the greatest member growth in the fourth and first quarters (October through February), and slowest during May through August.
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If our online activities were to violate any applicable current or future laws and regulations, we could be subject to litigation and regulatory actions, including fines and other penalties.
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These fluctuations could adversely affect our results. The coronavirus (COVID 19) pandemic, or other outbreaks of disease or similar public health threats, including responses to such outbreaks, could materially and adversely impact our business and results of operations.
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Risks Related to our Material Weakness and Restatements We have identified material weaknesses in our internal control over financial reporting and those weaknesses have led to a conclusion that our internal control over financial reporting and disclosure controls and procedures were not effective as of December 31, 2023.
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The outbreak of COVID-19, and any other outbreaks of contagious diseases or other adverse public health developments in the United States or worldwide, could have a material adverse effect on our business and results of operations. The ongoing COVID-19 pandemic and the various responses to it have created significant volatility, uncertainty and economic disruption.
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Our inability to remediate the material weaknesses, our discovery of additional weaknesses, and our inability to achieve and maintain effective disclosure controls and procedures and internal control over financial reporting, could adversely affect our results of operations, our stock price and investor confidence in our company.
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The full extent to which the ongoing COVID-19 pandemic and the various responses to it impacts our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of the pandemic; governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; the effect on our members and consumer demand for and ability to pay for our services; and disruptions or restrictions on our employees’ ability to work and travel.
Added
Section 404 of the Sarbanes-Oxley Act of 2002 requires that companies evaluate and report on the effectiveness of their internal control over financial reporting. As disclosed in more detail under Item 9A, “Controls and Procedures” below, we have identified material weaknesses as of December 31, 2023 in our internal control over financial reporting.
Removed
We will continue to actively monitor the issues raised by the COVID-19 pandemic and may take further actions that alter our business operations, as may be required by federal, state, local or foreign authorities, or that we determine are in the best interests of our employees, members, partners and stockholders.
Added
Due to the material weaknesses in our internal control over financial reporting, we have also concluded our disclosure controls and procedures were not effective as of December 31, 2023.
Removed
It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our members, suppliers or vendors, or on our financial results.
Added
Failure to have effective internal control over financial reporting and disclosure controls and procedures can impair our ability to produce accurate financial statements on a timely basis and has led and could again lead to a restatement of our financial statements.
Removed
In addition to the potential direct impacts to our business, the global economy may continue to be impacted as a result of the actions taken in response to COVID-19.
Added
For example, the identified material weaknesses resulted in material adjustments to the consolidated financial statements for the year ending December 31, 2022, and each of the interim periods ended March 31, 2022 through September 30, 2023.
Removed
To the extent that such a weakened global economy impacts consumers’ ability or willingness to pay for our service or vendors’ ability to provide services to us, especially those related to our content productions, we could see our business and results of operations negatively impacted.
Added
If, as a result of the ineffectiveness of our internal control over financial reporting and disclosure controls and procedures, we cannot provide reliable financial statements, our business decision processes may be adversely affected, our business and results of operations could be harmed, investors could lose confidence in our reported financial information and our ability to obtain additional financing, or additional financing on favorable terms, could be adversely affected.
Removed
Our systems may be subject to damage or interruption from adverse weather conditions, natural disasters, terrorist attacks, power loss, telecommunications failures, computer viruses, computer denial of service attacks, or other attempts to harm these systems.
Added
Our management has taken action to begin remediating the material weaknesses; however, certain remedial actions have not started or have only recently been undertaken, and while we expect to continue to implement our remediation plans throughout the fiscal year ending December 31, 2024, we cannot be certain as to when remediation will be fully completed.
Removed
Intellectual property claims against us could be costly and result in the loss of significant rights related to, among other things, our website, title selection processes, content and marketing activities. Our intellectual property rights extend to our technology, business processes and the content on our website.
Added
Additional details regarding the initial remediation efforts are disclosed in more detail in Part II, Item 9A, “Controls and Procedures” below. In addition, we could in the future identify additional internal control deficiencies that could rise to the level of a material weakness or uncover other errors in financial reporting.
Removed
Failure to recruit, attract and retain personnel, particularly management personnel, could materially harm our business, financial condition, and results of operations. 15 Risks Related to Ownership of Our Class A Common Stock Our founder, chairman and CEO, Jirka Rysavy, has voting control over us. Mr.
Added
During the course of our evaluation, we may identify areas requiring improvement and may be required to design additional enhanced processes and controls to address issues identified through this review.
Removed
Risks Related to our Ownership of Real Property Liability relating to environmental matters may impact the value of our real property. We may be subject to environmental liabilities arising from our ownership of real property.
Added
In addition, there can be no assurance that such remediation efforts will be successful, that our internal control over financial reporting will be effective as a result of these efforts or that any such future deficiencies identified may not be material weaknesses that would be required to be reported in future periods.
Added
If we fail to remediate these material weaknesses and maintain effective disclosure controls and procedures or internal control over financial reporting, we may not be able to rely on the integrity of our financial results, which could result in inaccurate or additional late reporting of our financial results, as well as delays or the inability to meet our future reporting obligations or to comply with SEC rules and regulations.
Added
This could result in claims or proceedings against us, including by shareholders or the SEC. The defense of any such claims could cause the diversion of the Company’s attention and resources and could cause us to incur significant legal and other expenses even if the matters are resolved in our favor.
Added
We reached a determination to restate certain of our previously issued consolidated financial statements, which resulted in unanticipated costs and may affect investor confidence and raise reputational issues. 14 As discussed in Part II, Item 8 “Financial Statements and Supplementary Data - “Notes to Consolidated Financial Statements,” we reached a determination to restate our consolidated financial statements and related disclosures for the year ending December 31, 2022, and each of the interim periods ended March 31, 2022 through September 30, 2023.
Added
The restatement also included other immaterial adjustments to historical periods.
Added
As a result, we have incurred unanticipated costs for accounting and legal fees in connection with or related to the restatement, and have become subject to a number of additional risks and uncertainties, which may affect investor confidence in the accuracy of our financial disclosures and may raise reputational issues for our business.
Added
Our failure to manage any of these risks successfully could harm our international operations and our overall business, and results of our operations. We must comply with indirect tax laws in multiple jurisdictions.
Added
Taxing authorities have in the past and may successfully in the future assert that we should have collected or in the future should collect non-income related taxes, and we could be subject to liability with respect to past or future sales, which could adversely affect our business. Our operations are routinely subject to audit by tax authorities in various countries.
Added
Many countries have indirect tax systems where the sale and purchase of goods and services are subject to tax based on the transaction value. Several taxing jurisdictions have presented or threatened us with assessments, alleging that we are required to collect and remit certain taxes there.
Added
While we believe we are in compliance with local laws, we cannot assure that tax and customs authorities will agree with our reporting positions and upon audit, such tax and customs authorities may assess additional taxes, duties, interest, and penalties against us.
Added
We also expect additional jurisdictions may make similar assessments or pass similar new laws in the future, and any of the jurisdictions where we have sales may apply more rigorous enforcement efforts or take more aggressive positions in the future that could result in greater tax liability allegations.
Added
These entities, including the Public Company Accounting Oversight Board, the Securities and Exchange Commission and NASDAQ, periodically issue new requirements and regulations. Legislative bodies also review and revise applicable laws.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn 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. 16 Gaia guaranteed Boulder Road’s obligations under the master lease. Our Colorado facility is subject to a $13.0 million mortgage with First Interstate Bank as lender.
Biggest changeIn 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. Our Colorado facility is subject to a $13.0 million mortgage with First Interstate Bank as lender.
Production Studio Owned On September 9, 2020, our wholly owned subsidiary Boulder Road sold a 50% undivided interest in a portion of our Colorado 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.
Production Studio Owned 17 On September 9, 2020, our wholly owned subsidiary Boulder Road sold a 50% undivided interest in a portion of our Colorado 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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings From time to time, we are involved in legal proceedings that we consider to be in the normal course of business. We record accruals that can be reasonably estimated for losses related to matters against us that we consider to be probable.
Biggest changeItem 3. Legal Proceedings In the normal course of business, we are subject to various legal proceedings and claims, including employment disputes, disputes on agreements, other commercial disputes, and tax matters, including non-income tax matters. We record accruals that can be reasonably estimated for losses related to matters against us that we consider to be probable.
In the opinion of management, based on available information, settlements, arbitration awards and final judgments, if any, that are considered probable of being rendered against us in litigation or arbitration in existence at December 31, 2022 and that can be reasonably estimated are either reserved against or would not have a material adverse effect on our financial condition, results of operations or cash flows.
In the opinion of management, based on available information, settlements, arbitration awards and final judgments, if any, that are considered probable of being rendered against us in litigation or arbitration in existence at December 31, 2023 and that can be reasonably estimated are either reserved against or would not have a material adverse effect on our financial condition, results of operations or cash flows.
Mine Saf ety Disclosures Not applicable. PAR T II
Item 4. Mine Saf ety Disclosures Not applicable. PAR T II
Removed
SEC Investigation In June 2020, Gaia received a request for voluntary production of documents in an investigation by the staff of the Denver Regional Office (the “Staff”) of the U.S. Securities and Exchange Commission (the “SEC”). Since that time, Gaia has responded to the initial voluntary requests and subsequent subpoenas issued by the Staff.
Removed
In September 2022, Gaia and Gaia's Chief Financial Officer (“CFO”) reached an agreement in principle with the Staff on a framework for a complete resolution of the investigation.
Removed
The agreement in principle contemplates that Gaia would consent, without admitting or denying any findings, to the entry of an administrative order: (1) finding that Gaia (a) misstated in its April 29, 2019 earnings release and earnings call the increase in the number of paying subscribers for the period ending March 31, 2019, a quarter during which Gaia extended a free month of service to certain subscribers in the midst of a transition to a new enterprise-wide data system and (b) failed to comply with SEC whistleblower protection requirements with respect to the termination of one employee and the language used in severance agreements for other employees; and (2) requiring Gaia to pay a total civil monetary penalty of $2.0 million over a one-year period for these violations.
Removed
At the same time, the CFO would consent, without admitting or denying any findings, to the entry of an administrative order: (1) finding that the CFO caused Gaia's misstatements in the April 29, 2019 earnings release and earnings call that is described above; and (2) requiring the CFO to pay a civil monetary penalty of $0.05 million.
Removed
The contemplated settlement with Gaia and the CFO involve violations that require only negligence rather than intentional conduct. There can be no assurance that the contemplated settlement will be finalized and approved. Based on the Gaia’s agreement in principle with the Staff, however, Gaia has accrued a liability in the amount of $2.0 million. Item 4.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+2 added−1 removed1 unchanged
Biggest changeEquity Compensation Plan Information The following table summarizes equity compensation plan information for our Class A common stock at December 31, 2022: Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted average exercise price of outstanding options Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column) Equity compensation plans approved by security holders 1,057,680 $ 8.17 1,354,614 Equity compensation plans not approved by security holders — — — Total 1,057,680 $ 8.17 1,354,614 Item 6.
Biggest changeEquity Compensation Plan Information The following table summarizes equity compensation plan information for our Class A common stock at December 31, 2023: Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted average exercise price of outstanding options Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column) Equity compensation plans approved by security holders 1,762,017 $ 8.19 517,115 Equity compensation plans not approved by security holders — — — Total 1,762,017 $ 8.19 517,115 Item 6.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Stock Price History Our Class A common stock is listed on the NASDAQ Global Market under the symbol “GAIA”. On February 21, 2023, we had 3,244 shareholders of record of our Class A common stock and one shareholder of record (Mr.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Stock Price History Our Class A common stock is listed on the NASDAQ Global Market under the symbol “GAIA”. On March 28, 2024, we had 3,218 shareholders of record of our Class A common stock and one shareholder of record (Mr.
Removed
Rysavy) of our Class B common stock. Issuer Purchases of Registered Equity Securities None. 17 Dividend Policy We have not paid any dividends since the start of the streaming business.
Added
Rysavy) of our Class B common stock. Stock Repurchases During 2023, we entered into various treasury stock transactions to buy and hold shares of our Class A common stock. The following table provides information with respect to purchases we made of our ordinary shares during the fourth quarter of 2023.
Added
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Amount That May Yet Be Purchased Under the Plans or Programs October 1, 2023 – October 31, 2023 — $ — — $ — November 1, 2023 – November 30, 2023 64,805 2.62 — — December 1, 2023 – December 31, 2023 — — — — Total 64,805 $ 2.62 — $ — Issuer Purchases of Registered Equity Securities None. 18 Dividend Policy We have not paid any dividends since the start of the streaming business.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

34 edited+11 added−12 removed29 unchanged
Biggest changeYear 2022 Quarters Ended (in thousands, except per share data) March 31 June 30 September 30 December 31 Revenues, net $ 21,831 $ 20,720 $ 19,907 $ 19,577 Gross profit 18,926 17,961 17,259 16,974 Gross margin 86.7 % 86.7 % 86.7 % 86.7 % Income (loss) from continuing operations 247 248 (2,368 ) (862 ) Loss from discontinued operations (161 ) (132 ) (7 ) (60 ) Net income (loss) 86 116 (2,375 ) (922 ) Earnings (loss) per share Basic Continuing operations $ 0.01 $ 0.01 $ (0.11 ) $ (0.04 ) Discontinued operations $ (0.01 ) $ (0.01 ) $ — $ — Basic earnings (loss) per share $ — $ — $ (0.11 ) $ (0.04 ) Diluted Continuing operations $ 0.01 $ 0.01 $ (0.11 ) $ (0.04 ) Discontinued operations $ (0.01 ) $ (0.01 ) $ — $ — Diluted earnings (loss) per share $ — $ — $ (0.11 ) $ (0.04 ) Weighted average shares outstanding Basic 20,465 20,788 20,806 20,806 Diluted 20,816 20,795 20,806 20,806 Year 2021 Quarters Ended (in thousands, except per share data) March 31 June 30 September 30 December 31 Revenues, net $ 18,896 $ 19,443 $ 20,405 $ 20,829 Gross profit 16,458 16,934 17,779 17,876 Gross margin 87.1 % 87.1 % 87.1 % 85.8 % Income (loss) from operations 424 695 726 140 Net income (loss) 358 643 647 2,083 Basic earnings (loss) per share $ 0.02 $ 0.03 $ 0.03 $ 0.11 Diluted earnings (loss) per share $ 0.02 $ 0.03 $ 0.03 $ 0.10 Weighted average shares outstanding Basic 19,201 19,268 19,318 19,441 Diluted 19,724 19,810 19,812 19,899 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.
Biggest changeYear 2023 Quarters Ended (Unaudited) (As restated) (in thousands, except per share data) March 31 June 30 September 30 December 31 Revenues, net $ 19,647 $ 19,839 $ 20,223 $ 20,714 Gross profit 16,874 17,000 17,240 17,680 Gross profit margin 85.9 % 85.7 % 85.2 % 85.4 % Equity method investment loss (125 ) (125 ) (125 ) (126 ) Loss from continuing operations (1,268 ) (1,843 ) (713 ) (1,771 ) Net loss (1,268 ) (1,843 ) (713 ) (1,771 ) Net income attributable to noncontrolling interests 38 45 59 65 Net loss attributable to common shareholders (1,306 ) (1,888 ) (772 ) (1,836 ) Loss per share Basic Continuing operations (attributable to common shareholders) $ (0.06 ) $ (0.09 ) $ (0.04 ) $ (0.08 ) Discontinued operations $ — $ — $ — $ — Basic loss per share $ (0.06 ) $ (0.09 ) $ (0.04 ) $ (0.08 ) Diluted Continuing operations (attributable to common shareholders) $ (0.06 ) $ (0.09 ) $ (0.04 ) $ (0.08 ) Discontinued operations $ — $ — $ — $ — Diluted loss per share $ (0.06 ) $ (0.09 ) $ (0.04 ) $ (0.08 ) Weighted average shares outstanding Basic 20,826 20,874 21,154 23,148 Diluted 20,826 20,874 21,154 23,148 23 Year 2022 Quarters Ended (Unaudited) (As restated) (in thousands, except per share data) March 31 June 30 September 30 December 31 Revenues, net $ 21,831 $ 20,720 $ 19,907 $ 19,577 Gross profit 18,926 17,961 17,259 16,974 Gross margin 86.7 % 86.7 % 86.7 % 86.7 % Equity method investment loss (129 ) (135 ) (125 ) (122 ) Income (loss) from continuing operations 122 123 (2,493 ) (987 ) Loss from discontinued operations (161 ) (132 ) (7 ) (60 ) Net loss (39 ) (9 ) (2,500 ) (1,047 ) Net income attributable to noncontrolling interests 65 65 34 132 Net loss attributable to common shareholders (104 ) (74 ) (2,534 ) (1,179 ) Loss per share Basic Continuing operations (attributable to common shareholders) $ — $ — $ (0.12 ) $ (0.05 ) Discontinued operations $ (0.01 ) $ (0.01 ) $ — $ — Basic loss per share $ (0.01 ) $ (0.01 ) $ (0.12 ) $ (0.05 ) Diluted Continuing operations (attributable to common shareholders) $ — $ — $ (0.12 ) $ (0.05 ) Discontinued operations $ (0.01 ) $ (0.01 ) $ — $ — Diluted loss per share $ (0.01 ) $ (0.01 ) $ (0.12 ) $ (0.05 ) Weighted average shares outstanding Basic 20,465 20,788 20,806 20,806 Diluted 20,816 20,795 20,806 20,806 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.
Critical Accounting Estimates We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States, which require us to make judgments, estimates and assumptions that affect the amounts reported in 22 the consolidated financial statements and accompanying notes.
Critical Accounting Estimates We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States, which require us to make judgments, estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
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.
Overview and Outlook We operate a global digital video subscription service with a library of over 10,000 titles and live events, 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.
The Credit Agreement provides for a revolving credit facility in an aggregate amount of up to $10.0 million with a sublimit of $1.0 million available for issuances of letters of credit. Borrowings under the Credit Agreement are 24 available for working capital and general corporate purposes, but not to fund any permitted acquisitions or other investments.
The Credit Agreement provides for a revolving credit facility in an aggregate amount of up to $10.0 million with a sublimit of $1.0 million available for issuances of letters of credit. Borrowings under the Credit Agreement are 26 available for working capital and general corporate purposes, but not to fund any permitted acquisitions or other investments.
No impairment charges were recorded during 2022 or 2021. Goodwill Goodwill represents the excess of the purchase consideration over the estimated fair value of assets acquired less liabilities assumed in a business acquisition. We have only one reporting unit; therefore, goodwill is assessed at the enterprise level.
No impairment charges were recorded during 2023 or 2022. Goodwill Goodwill represents the excess of the purchase consideration over the estimated fair value of assets acquired less liabilities assumed in a business acquisition. We have only one reporting unit; therefore, goodwill is assessed at the enterprise level.
The bulk of interest paid is attributed to the loan on our building and the newly acquired line of credit discussed in Note 9 to the consolidated financial statements in Item 8 of this Form 10-K. Provision for (benefit from) income taxes.
The bulk of interest paid is attributed to the loan on our building and the line of credit discussed in Note 9 to the consolidated financial statements in Item 8 of this Form 10-K. Provision for (benefit from) income taxes.
Recoverability of the film group is measured by a comparison of the carrying amount of the film group to estimated undiscounted future cash flows expected to be generated by the film group. If the carrying amount exceeds the estimated future cash flows, an impairment charge is recognized by the amount by which the carrying value exceeds the fair value.
Recoverability of the film group is measured by a comparison of the carrying amount of the film group to estimated discounted future cash flows expected to be generated by the film group. If the carrying amount exceeds the estimated future cash flows, an impairment charge is recognized by the amount by which the carrying value exceeds the fair value.
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.
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 report.
We review goodwill for impairment annually as of December 31 or more frequently if indicators of impairment are identified. We have the option of first assessing qualitative factors to determine whether events and circumstances indicate that it is more likely than not that the estimated fair value of goodwill is less than its carrying 23 amount.
We review goodwill for impairment annually as of October 1 or more frequently if indicators of impairment are identified. We have the option of first assessing qualitative factors to determine whether events and circumstances indicate that it is more likely than not that the estimated fair value of goodwill is less than its carrying amount.
This spending is entirely discretionary in nature with no contractual commitments and due to our in-house production capabilities, we can scale our content investment based on the cash flows generated from operations if necessary to ensure we have sufficient liquidity to operate our business into the future. As of December 31, 2022, our cash balance was $11.6 million.
This spending is entirely discretionary in nature with no contractual commitments and due to our in-house production capabilities, we can scale our content investment based on the cash flows generated from operations if necessary to ensure we have sufficient liquidity to operate our business into the future. As of December 31, 2023, our cash balance was $7.8 million.
We generated approximately $11.5 million in cash flows from operations during 2022, which helped fund the ongoing investment in our content library and the technology platform we use to deliver the content to our members. We intend to invest approximately 15%-20% of our consolidated revenues each year to support continued investment in our content library and technology platform.
We generated approximately $5.9 million in cash flows from operations during 2023, which helped fund the ongoing investment in our content library and the technology platform we use to deliver the content to our members. We intend to invest approximately 10%-20% of our consolidated revenues each year to support continued investment in our content library and technology platform.
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 Securities and Exchange Commission.
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 device 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; our ability to remediate the material weaknesses in our internal control over financial reporting; and other risks and uncertainties included in our filings with the SEC.
Generally, we pay an advance against a percentage royalty or an upfront license fee in exchange for the distribution rights for a specific license window, but we may also obtain a license for a fixed fee for perpetuity. These payments are capitalized at the time of payment.
Our licensed media library is obtained through license arrangements. Generally, we pay an advance against a percentage royalty or an upfront license fee in exchange for the distribution rights for a specific license window, but we may also obtain a license for a fixed fee for perpetuity. These payments are capitalized at the time of payment.
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.
Our original content is developed and produced in-house in our lifestyle campus 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.
If the estimated fair value of goodwill exceeds its carrying amount, we consider the goodwill to not be impaired. If the carrying amount of goodwill exceeds its estimated fair value, we use either a comparable market approach or a traditional present value method to test for potential impairment.
If the estimated fair value of goodwill exceeds its carrying amount, we consider the goodwill to not be impaired. If the carrying amount of goodwill exceeds its estimated fair value, we use both a comparable market approach and an income approach to test for potential impairment.
Income Taxes and Deferred Tax Balances Deferred income tax assets and liabilities are recorded with respect to temporary differences in the accounting treatment of items for financial reporting purposes and for income tax purposes.
During 2023 and 2022, no impairment of goodwill was indicated. 25 Income Taxes and Deferred Tax Balances Deferred income tax assets and liabilities are recorded with respect to temporary differences in the accounting treatment of items for financial reporting purposes and for income tax purposes.
We began to generate positive cash flows from operations in October 2019 and have continued to generate cash flows from operations each subsequent quarter. We expect to continue generating positive cash flows from operations during 2023.
We began to generate positive cash flows from operations since 2020 and have continued to generate cash flows from operations each subsequent quarter. We expect to continue generating positive cash flows from operations during 2024.
Media library Media library represents the lower of unamortized cost or net realizable value of capitalized costs to produce our proprietary media content, rights obtained through license arrangements and digital media content acquired through asset purchases or business combinations.
Media library Media library represents the lower of unamortized cost or net realizable value of capitalized costs to produce our proprietary media content, rights obtained through license arrangements and digital media content acquired through asset purchases or business combinations. 24 The value of our produced media library consists of capitalized costs incurred to produce original media content, including salary and overhead costs of our in-house production team and other third-party costs.
The process of evaluating the potential impairment of goodwill is highly subjective and requires significant judgment at many points during the analysis. Application of alternative assumptions and definitions could yield significantly different results. During 2022 and 2021, no impairment of goodwill was indicated.
The results of these approaches are evaluated against the Company’s market capitalization for reasonableness. The process of evaluating the potential impairment of goodwill is highly subjective and requires significant judgment at many points during the analysis. Application of alternative assumptions and definitions could yield significantly different results.
Results of Operations The table below summarizes certain of our results for the periods indicated: Years ended December 31, (in thousands, except per share data) 2022 2021 Revenues, net $ 82,035 $ 79,573 Cost of revenues 10,915 10,526 Gross profit margin 86.7 % 86.8 % Selling and operating 64,155 60,577 Corporate, general and administration 7,181 6,125 Acquisition costs 49 360 Income (loss) from operations (265 ) 1,985 Interest and other expense, net (268 ) (265 ) Anticipated SEC settlement (2,000 ) — Income (loss) before income taxes (2,533 ) 1,720 Provision for (benefit from) income taxes 202 (2,011 ) Income (loss) from continuing operations (2,735 ) 3,731 Loss from discontinued operations (360 ) — Net income (loss) $ (3,095 ) $ 3,731 20 The following table sets forth certain financial data as a percentage of net revenues for the periods indicated: Years ended December 31, 2022 2021 Revenues, net 100.0 % 100.0 % Cost of revenues 13.3 % 13.2 % Gross profit 86.7 % 86.8 % Expenses: Selling and operating 78.2 % 76.1 % Corporate, general and administration 8.8 % 7.7 % Acquisition costs 0.1 % 0.5 % Total operating expenses 87.0 % 84.3 % Income (loss) from operations (0.3 )% 2.5 % Interest and other expense, net (0.3 )% (0.3 )% Anticipated SEC settlement (2.4 )% 0.0 % Income (loss) before income taxes (3.1 )% 2.2 % Provision for (benefit from) income taxes 0.2 % (2.5 )% Income (loss) from continuing operations (3.3 )% 4.7 % Loss from discontinued operations (0.4 )% 0.0 % Net income (loss) (3.8 )% 4.7 % Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Revenues, net .
Results of Operations The table below summarizes certain of our results for the periods indicated: Years ended December 31, (in thousands, except per share data) 2023 2022 (As restated) Revenues, net $ 80,423 $ 82,035 Cost of revenues 11,629 10,915 Gross profit margin 85.5 % 86.7 % Selling and operating 67,156 64,155 Corporate, general and administration 6,205 7,181 Acquisition costs — 49 Loss from operations (4,567 ) (265 ) Equity method investment loss (501 ) (511 ) Interest and other expense, net (467 ) (257 ) SEC settlement — (2,000 ) Loss before income taxes (5,535 ) (3,033 ) Provision for income taxes 60 202 Loss from continuing operations (5,595 ) (3,235 ) Loss from discontinued operations — (360 ) Net loss $ (5,595 ) $ (3,595 ) Net income attributable to noncontrolling interests 207 296 Net loss attributable to common shareholders (5,802 ) (3,891 ) 21 The following table sets forth certain financial data as a percentage of revenues, net for the periods indicated: Years ended December 31, 2023 2022 (As restated) Revenues, net 100.0 % 100.0 % Cost of revenues 14.5 % 13.3 % Gross profit margin 85.5 % 86.7 % Expenses: Selling and operating 83.5 % 78.2 % Corporate, general and administration 7.7 % 8.8 % Acquisition costs 0.0 % 0.1 % Total operating expenses 91.2 % 87.0 % Loss from operations (5.7 )% (0.3 )% Equity method investment loss (0.6 )% (0.6 )% Interest and other expense, net (0.6 )% (0.3 )% SEC settlement 0.0 % (2.4 )% Loss before income taxes (6.9 )% (3.7 )% Provision for (benefit from) income taxes 0.1 % 0.2 % Loss from continuing operations (7.0 )% (3.9 )% Loss from discontinued operations 0.0 % (0.4 )% Net loss (7.0 )% (4.4 )% Net income attributable to noncontrolling interests 0.3 % 0.4 % Net loss attributable to common shareholders (7.2 )% (4.7 )% Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Revenues, net .
Cash Flows The following table summarizes our primary sources (uses) of cash during the periods presented: Years ended December 31, (in thousands) 2022 2021 Net cash provided by (used in): Operating activities - continuing operations $ 11,880 $ 20,867 Operating activities - discontinued operations $ (360 ) $ — Operating activities $ 11,520 $ 20,867 Investing activities (19,104 ) (23,858 ) Financing activities 8,877 655 Net increase (decrease) in cash $ 1,293 $ (2,336 ) 2022 Compared to 2021 Operating activities .
Cash Flows The following table summarizes our primary sources (uses) of cash during the periods presented: Years ended December 31, (in thousands) 2023 2022 (As restated) Net cash provided by (used in): Operating activities - continuing operations $ 5,870 $ 2,040 Operating activities - discontinued operations $ — $ (360 ) Operating activities $ 5,870 $ 1,680 Investing activities $ (5,282 ) $ (9,264 ) Financing activities $ (4,384 ) $ 8,877 Net (decrease) increase in cash $ (3,796 ) $ 1,293 2023 Compared to 2022 Operating activities .
Corporate, general and administration expenses increased $1.1 million, or 18.0%, to $7.2 million during 2022 from $6.1 million during 2021 and, as a percentage of net revenue, increased to 8.8% during 2022 from 7.7% during 2021. The increase was primarily driven by legal fees and the additional expenses incurred as a result of the Yoga International acquisition.
The increase was primarily driven by tax accruals for 2023. Corporate, general and administration expenses . Corporate, general and administration expenses decreased $1.0 million, or 13.9%, to $6.2 million during 2023 from $7.2 million during 2022 and, as a percentage of net revenue, decreased to 7.7% during 2023 from 8.8% during 2022.
Since 2019, we have only granted restricted stock units, for which we utilize the intrinsic valuation model to estimate fair value.
Since 2019, we have only granted restricted stock units, for which we utilize the market price of our common stock on the date of grant to estimate fair value.
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 – 80% of which is exclusively available to our members for digital streaming on most internet-connected devices.
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, live events, and more – 88% of which is exclusively available to our members for digital streaming on most internet-connected devices. 20 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 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. 19 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.
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. We are a Colorado corporation.
Provision for (benefit from) income taxes reflects a current year provision of $0.2 million compared to the prior year benefit from income taxes due to the partial valuation allowance release related to the recognition of deferred tax liabilities associated with the acquisition of Yoga International.
Provision for income taxes reflects a current year provision of $0.1 million compared to the prior year provision of $0.2 million from income taxes due to the partial valuation allowance release related to the recognition of deferred tax liabilities associated with the acquisition of Yoga International, Food Matters, and My Yoga Online. 22 Quarterly and Seasonal Fluctuations The following tables set forth our unaudited results of operations for each of the quarters in 2023 and 2022.
Quarterly and Seasonal Fluctuations The following tables set forth our unaudited results of operations for each of the quarters in 2022 and 2021. In our opinion, this unaudited financial information includes all adjustments, consisting solely of normal recurring accruals and adjustments, necessary for a fair presentation of the results of operations for the quarters presented.
In our opinion, this unaudited financial information includes all adjustments, consisting solely of normal recurring accruals and adjustments, necessary for a fair presentation of the results of operations for the quarters presented. You should read this financial information in conjunction with our consolidated financial statements and related notes included elsewhere in this Form 10-K.
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 does not result in a corresponding seasonality in net revenue. As the world emerges from the effects of the pandemic, we expect these seasonal trends to return.
We have generally experienced the greatest member growth in the fourth and first quarters (October through February), and slowest during May through August. This drives quarterly variations in our spending on member acquisition efforts and the number of net new subscribers we add each quarter but does not result in a corresponding seasonality in net revenue.
Selling and operating expenses increased $3.6 million, or 5.9%, to $64.2 million during 2022 from $60.6 million during 2021 and, as a percentage of revenues, increased to 78.2% during 2022 from 76.1% during 2021.
The gross profit margin decrease is due to the combination of increased costs with lower revenues. Selling and operating expenses . Selling and operating expenses increased $3.0 million, or 4.7%, to $67.2 million during 2023 from $64.2 million during 2022 and, as a percentage of revenues, increased to 83.5% during 2023 from 78.2% during 2022.
Cost of revenues increased $0.4 million, or 3.8%, to $10.9 million during 2022 from $10.5 million during 2021, with gross margin of 86.7% in the current year compared to 86.8% in 2021. The slight gross margin decline was primarily due to increased content amortization as we continue to invest in our content library. Selling and operating expenses .
Cost of revenues increased $0.7 million, or 6.4%, to $11.6 million during 2023 from $10.9 million during 2022, with gross profit margin of 85.5% in the current year compared to 86.7% in 2022. The increase in the cost of revenues is driven mainly by increased paid advertising costs.
The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Share-Based Compensation We recognize compensation cost for share-based awards based on the estimated fair value of the award on the date of grant.
The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Non-Income Taxes The Company accrues for non-income tax assessments from foreign jurisdictions related to prior periods and recognizes the expense within selling and operating, when deemed probable and estimable.
Cash flows from operations decreased $9.3 million during 2022 compared to 2021. The decrease was primarily driven by the net loss in 2022 and a $7.5 million decrease due to working capital changes. Investing activities .
Cash flow used in investing activities decreased $4.0 million during 2023 compared to 2022 due to impacts from investments and planned decrease in capital expenditures. Financing activities . Cash flows from financing activities decreased $13.3 million during 2023 compared to 2022 primarily related to debt repayments in 2023.
You should 21 read this financial information in conjunction with our consolidated financial statements and related notes included elsewhere in this Form 10-K. The results of operations for any quarter are not necessarily indicative of future results of operations.
The results of operations for any quarter are not necessarily indicative of future results of operations.
Interest and other income (expense), net. Interest and other income (expense), net remained relatively flat during 2022 compared to 2021 at $0.3 million for both years.
The decrease was primarily driven by higher legal fees and stock compensation expense during 2022. Interest and other income (expense), net. Interest and other income (expense), net decreased $(0.2) million to $(0.5) million during 2023 compared to $(0.3) million during 2022.
Removed
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.
Added
Restatement of Previously Issued Consolidated Financial Statements: We have restated our previously issued consolidated financial statements contained in this Annual Report on Form 10-K. Refer to the “Explanatory Note” preceding Item 1, Business, for background on the restatement, the fiscal periods impacted, control considerations, and other information.
Removed
See Item 1A “Risk Factors” in this Form 10-K for additional details. 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.
Added
In addition, we have restated certain previously reported consolidated financial information at December 31, 2022 and for the fiscal year ended December 31, 2022, and for each of the interim periods ended March 31, 2022 through September 30, 2023 in this Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, including but not limited to information within the Results of Operations, Quarterly and Seasonal Fluctuations, and Cash Flows sections.
Removed
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.
Added
See Note 3, Restatement of Previously Issued Consolidated Financial Statements, and Note 17 Quarterly Financial Data (Unaudited), in Item 8, Financial Statements and Supplementary Data, for additional information related to the restatement, including descriptions of the misstatements and the impacts on our consolidated financial statements.
Removed
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.
Added
Revenues, net decreased $1.6 million, or 2.0%, to $80.4 million during 2023, compared to $82.0 million during 2022. The primary contributing factor to the decrease in revenue is a lower average-subscriber count for 2023 versus 2022. The reduced count is due to the industry-wide post-COVID subscriber contraction in the second half of 2022 and subsequent recovery. Cost of revenues .
Removed
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.
Added
The market approach follows the guideline public company method to establish valuation multiples for comparison. The income approach follows a traditional discounted cash flow model. Primary assumptions for each approach include revenue projections, operating expenses, discount rate, control premium, and terminal growth rate. Projections are dependent on management assumptions, which are partly based on the Company’s historical experience.
Removed
During the last 90 days, we have eliminated approximately $5 million in annualized spending, which includes approximately 36 full time equivalent headcount that were added over the past two years to offset reduced efficiency we experienced as a result of work from home mandates. We are a Colorado corporation.
Added
Once the requirement to remit non-income taxes to foreign jurisdictions has been established, we present revenues net of the non-income taxes collected from members and remit such amounts to foreign tax authorities. Share-Based Compensation We recognize compensation cost for share-based awards based on the estimated fair value of the award on the date of grant.
Removed
Revenues increased $2.4 million, or 3.0%, to $82.0 million during 2022, compared to $79.6 million during 2021. The increase was primarily driven by an increase in our average number of members in 2022 compared to 2021. Cost of revenues .
Added
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).
Removed
The increase was primarily driven by increased technology operating costs as we focus on expanding our international member base and completing a business continuity initiative during 2022, as well as incremental expenses incurred related to the Yoga International acquisition. Corporate, general and administration expenses .
Added
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 $4.7 million. We provided a 30-day option to the Underwriter to purchase up to an additional 278,250 Shares to cover over-allotments.
Removed
The effects of the global pandemic have shifted our historical pattern over the past three years, but we have historically experienced the greatest member growth in the fourth and first quarters (October through February), and slowest during May through August.
Added
On November 3, 2023, the Underwriter purchased an additional 203,754 Shares generating additional net proceeds of $0.5 million pursuant to the partial exercise of the over-allotment option.
Removed
The value of our produced media library consists of capitalized costs incurred to produce original media content, including salary and overhead costs of our in-house production team and other third-party costs. Our licensed media library is obtained through license arrangements.
Added
Cash flows from operations increased $4.2 million during 2023 compared to 2022. This increase was primarily driven by improvements in working capital driven by several factors including timing of payments to vendors and an increase in direct membership subscriptions. 27 Investing activities .
Removed
Cash flow used in investing activities decreased $4.8 million during 2022 compared to 2021 primarily due to 2021 including cash utilization of $6.5 million to fund the cash consideration portion of the acquisition of Yoga International, offset by a planned increase during 2022 in investment in our content library and technology platform. Financing activities .
Added
Debt repayments were partially offset by proceeds from the issuance of common stock. We had no outstanding borrowings at December 31, 2023.
Removed
Cash flows from financing activities improved $8.2 million during 2022 compared to 2021. In September 2022, we obtained a line of credit with KeyBank, as described in Note 9 to the consolidated financial statements in Item 8 of this Form 10-K, and had borrowed $9.0 million at December 31, 2022.

Other GAIA 10-K year-over-year comparisons