UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM i 8-K
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CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
i GAIA, INC
(Exact name of registrant as specified in its charter)
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Colorado
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i 84-1113527
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(State or other jurisdiction
of incorporation)
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(Commission file number)
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(IRS Employer
Identification No.)
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i 833 West South Boulder Road
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i Louisville, Colorado
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i 80027
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s Telephone Number, Including Area Code: ( i 303) i 222-3600
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of
the registrant under any of the
following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class
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Trading
Symbol(s)
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Name of Each Exchange on Which Registered
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i Class A Common Stock
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i GAIA
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i Nasdaq Global Market
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Indicate by check mark whether
the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this
chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company i ☐
If an emerging growth company, indicate by check mark if
the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02. |
Results of Operations and Financial Condition.
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In accordance with General Instruction B.2 of Form 8-K, the information contained in this Item 2.02 and in
Exhibit 99.1 shall not be deemed
“filed” for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), or
incorporated by reference into any of
the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be
expressly set forth by specific reference in any such filing.
| Item 4.02. |
Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.
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The restatements described below have been incorporated
in the information contained in the press release furnished as Exhibit 99.1 hereto. On March 21, 2024, the Audit Committee (the “Audit
Committee”) of the Board of Directors of the Company, after discussion with the Company’s management and its current independent registered public accounting firm, Frank, Rimerman + Co. LLP, concluded that the Company’s audited and unaudited
consolidated financial statements for the year ended December 31, 2022 and each of its interim periods ended March 31, 2022
through September 30, 2023 (the “Non-Reliance Periods”) included in the associated Annual Report on Form 10-K and Quarterly Reports on Forms 10-Q for each of the Non-Reliance Periods, filed with the U.S. Securities and Exchange Commission (the
“SEC”), should no longer be relied upon due to the errors described below and should be restated.
In preparation of the
December 31, 2023 consolidated financial statements,
the Company identified certain prior period misstatements in relation to the
Company’s consolidated financial statements as of and for each of the Non-Reliance Periods.
As a result of the errors described below, the audited and unaudited consolidated financial statements for each of the Non-Reliance Periods, and the
related audit report of
the Company’s previous independent registered public accounting firm, Armanino LLP, should no longer be relied upon. Similarly, any previously issued or filed reports,
press releases, earnings releases, and investor
presentations or other communications describing
the Company’s consolidated financial statements and other related financial information covering the Non-Reliance Periods should no longer be relied upon.
The Company will disclose in its Annual Report on Form 10-K for the year ended
December 31, 2023 the restated consolidated financial statements for each
of the Non-Reliance Periods (
“Restatements”).
The Company expects to file its Annual Report on Form 10-K for the year ended
December 31, 2023 with the SEC on a timely basis, on or prior to the
deadline for the Annual Report on Form 10-K for the year ended
December 31, 2023.
Media Library, Consolidated Statement of Cash Flows Impact
As part of the Company’s operations, it spends a significant amount of resources on
developing media library content that is made available to its subscribers. Historically, the Company has classified amounts spent to produce media content as investing cash outflows. However, the Company revisited the Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 920 (“ASC 920”), Entertainment-Broadcasters, and Topic 926 (“ASC 926”), Entertainment-Films, and determined that the nature of the media library costs is consistent with the capitalizable costs described in ASC 920 and ASC 926 and, therefore, applying this
guidance to the Company’s media library costs is appropriate. This guidance requires these costs to be classified as operating cash outflows rather than investing cash outflows in the consolidated statement of cash flows. Therefore, the Company
determined the prior year presentation was incorrect resulting in an overstatement of investing cash outflows and corresponding understatement of operating cash outflows for the Non-Reliance Periods.
The misstatement did not have any impact on the consolidated statement of operations or the consolidated balance sheet.
Line of Credit, Consolidated Statement of Cash Flows Impact
In August 2022,
the Company obtained a new line of credit for which the first draw was done in September 2022. In October 2022, the outstanding balance
was paid off and the loan was at $0. Shortly thereafter, in November 2022 and December 2022,
the Company drew down additional amounts. In
the Company’s consolidated statement of cash flows for the year ended
December 31, 2022,
the Company presented
the borrowings and payments on a net basis. However, GAAP requires companies to present the gross borrowings and payments for cash flow presentation purposes. The misstatement did not have any impact on the net cash provided by financing activities
on the consolidated statement of cash flows, or any impact on the consolidated statement of operations, or consolidated balance sheet as of or for the year ended
December 31, 2022.
Equity Method Investment
In September 2016,
the Company purchased a 10% equity ownership interest in Telomeron, Inc. (
“Telomeron”), wherein the parent company of Telomeron,
Exagon Industries Limited (
“Exagon”) contributed intellectual property with an agreed upon value of $100.0 million and
the Company paid Exagon $10.0 million in exchange for the 10%
equity ownership interest.
The Company’s historical accounting conclusion was that the ownership interest represented an investment in equity securities rather than an equity method investment. However,
the Company revisited the original conclusion
and concluded that
the Company had the ability to exercise influence over Telomeron and therefore, should have been accounted for and disclosed as an equity method investment from inception. As Telomeron holds certain contributed technology from
its parent that does not have a recognized carrying value,
the Company’s cost of the investment exceeds its proportionate share of the net assets by $10.0 million. Management of
the Company determined that
the Company’s excess basis allocated to
amortizable assets should have been recognized on a straight-line basis over the estimated 20-year life of the contributed technology. The accumulated impact of the misstatement as of
December 31, 2022 was an overstatement of the equity method
investment
and a corresponding understatement of the accumulated deficit.
BioWell Noncontrolling Interest
The Company holds a 51% controlling equity ownership in Bio-Well, LLC (
“BioWell”), an entity that sells certain goods and services to
the Company’s
customers and has had activity since 2015.
The Company has historically consolidated the results of BioWell; however,
the Company did not appropriately record, present or disclose a noncontrolling interest in relation to the 49% portion of the
Company not controlled by
the Company within either the consolidated statement of operations or the consolidated balance sheet.
Management is assessing the effect of the Restatements on
the Company’s internal control over financial reporting and its disclosure controls and
procedures.
The Company expects to report at least one material weakness following completion of its analysis of the cause of these Restatements. A material weakness is a deficiency, or a combination of deficiencies, in internal control over
financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. The existence of one or more material
weaknesses precludes a conclusion by management that
the Company’s disclosure controls and procedures and internal control over financial reporting are effective. As a result of the material weakness or material weaknesses,
the Company believes
that its internal control over financial reporting was not effective, and its disclosure controls and procedures were not effective for the Non-Reliance Periods.
The Company’s management and the Audit Committee have discussed the matters disclosed in this Current Report on Form 8-K pursuant to this Item 4.02 with
the Company’s current and former independent registered public accounting firms, Frank, Rimerman + Co. LLP and Armanino LLP, respectively.
Forward-Looking Statements:
This Current Report on Form 8-K contains forward-looking statements within the meaning of the federal securities laws. All statements
other than statements of historical fact are forward looking statements that involve risks and uncertainties. When used in this discussion, we intend the words
“anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,”
“future,” “hope,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “strive,” “target,” “will,” “would” and similar expressions as they relate to us to identify such forward-looking statements.
Forward-looking statements include, without limitation,
the Company’s plans related to restatement of the financial statements as of and for each of the Non-Reliance Periods; our ability to attract new members and retain existing members; our
ability to compete effectively, including for customer engagement with different modes of entertainment; maintenance and expansion of devise platforms for streaming; fluctuation in customer usage of our service; fluctuations in quarterly operating
results; service disruptions; production risks; general economic conditions; future losses; loss of key personnel; price changes; brand reputation; acquisitions; new initiatives we undertake; security and information systems; legal liability for
website content; failure of third parties to provide adequate service; future internet-related taxes; our founder’s control of us; litigation; consumer trends; the effect of government regulation and programs; the impact of public health threats,
including the coronavirus (COVID-19) pandemic and our response to it; and other risks and uncertainties included in our filings with the SEC. These statements involve known and unknown risks, uncertainties and other factors that may cause actual
results to differ materially from those implied by forward-looking statements, including the outcome of
the Company’s completion of the quantification and evaluation of the specific impact of the errors identified in
the Company’s financial results
and previously issued financial statements, including the possibility of material adjustments thereto, the discovery of additional and unanticipated information during the procedures required to be completed before
the Company is able to file its
Annual Report on Form 10-K for the year ended
December 31, 2023, and the application of accounting or tax principles in an unanticipated manner. See also additional risk factors set forth in
the Company’s periodic filings with the SEC, including,
but not limited to, those risks and uncertainties listed in the section entitled
“Risk Factors,” in
the Company’s Annual Report on Form 10-K filed with the SEC. We caution you that no forward-looking statement is a guarantee of future performance,
and you should not place undue reliance on these forward-looking statements which reflect our views only as of the date of this Current Report on Form 8-K. We undertake no obligation to update any forward-looking information.
| Item 9.01. |
Financial Statements and Exhibits.
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Exhibit No.
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Description
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104
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Cover Page Interactive Data File (formatted as inline XBRL).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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Gaia, Inc.
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Name:
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Title:
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Chief Financial Officer
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