gaia-10q_20210331.htm

United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-27517

GAIA, INC.

(Exact name of registrant as specified in its charter)

COLORADO

84-1113527

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

833 WEST SOUTH BOULDER ROAD,

LOUISVILLE, COLORADO 80027

(Address of principal executive offices)

(303) 222-3600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock	GAIA	NASDAQ Global Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class		Outstanding at April 28, 2021
Class A Common Stock ($.0001 par value)		13,800,846
Class B Common Stock ($.0001 par value)		5,400,000

GAIA, INC.

FORM 10-Q

INDEX

PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):	3

	Condensed Consolidated Balance Sheets at March 31, 2021 and December 31, 2020	4

	Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020	5

	Condensed Consolidated Statements of Changes in Equity for the three months ended March 31, 2021 and 2020	6

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020	7

	Notes to interim condensed consolidated financial statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15

Item 4.	Controls and Procedures	15

PART II—OTHER INFORMATION		16

Item 1.	Legal Proceedings	16

Item 1A.	Risk Factors	16

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16

Item 3.	Defaults Upon Senior Securities	16

Item 4.	Mine Safety Disclosures	16

Item 5.	Other Information	16

Item 6.	Exhibits	17

	SIGNATURES	18

PART I—FINANCIAL INFORMATION

Item 1.Financial Statements (Unaudited)

Unaudited Interim Condensed Consolidated Financial Statements

We have prepared our unaudited interim condensed consolidated financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to these rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. In our opinion, the unaudited interim condensed consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly, in all material respects, our consolidated financial position as of March 31, 2021, the interim results of operations for the three months ended March 31, 2021 and 2020, and cash flows for the three months ended March 31, 2021 and 2020. Operating results for the three months ended March 31, 2021 and 2020 are not necessarily indicative of the results that may be expected for a full year or any future interim period. These interim statements have not been audited. The balance sheet as of December 31, 2020 was derived from our audited consolidated financial statements included in our Annual Report on Form 10-K. The interim condensed consolidated financial statements contained herein should be read in conjunction with our audited consolidated financial statements, including the notes thereto, for the year ended December 31, 2020.

GAIA, INC.

Condensed Consolidated Balance Sheets

	March 31,			December 31,
(in thousands, except share and per share data)	2021			2020
	(unaudited)
ASSETS
Current assets:
Cash	$	13,045		$	12,605
Accounts receivable		2,529			2,024
Prepaid expenses and other current assets		1,464			1,746
Total current assets		17,038			16,375
Media library, software and equipment, net		40,293			39,231
Right-of-use lease asset, net		8,437			8,622
Real estate, investment and other assets		29,113			28,500
Goodwill		17,289			17,289
Total assets	$	112,170		$	110,017
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable, accrued and other liabilities	$	8,228		$	8,947
Deferred revenue		14,415			12,376
Total current liabilities		22,643			21,323
Long-term mortgage, net		6,218			6,250
Long-term lease liability		7,775			7,952
Deferred taxes		257			257
Total liabilities		36,893			35,782
Equity:
Gaia, Inc. shareholders’ equity:
Class A common stock, $.0001 par value, 150,000,000 shares authorized, 13,800,846 and 13,782,951 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively		1			1
Class B common stock, $.0001 par value, 50,000,000 shares authorized, 5,400,000 shares issued and outstanding at March 31, 2021 and December 31, 2020		1			1
Additional paid-in capital		150,751			150,067
Accumulated deficit		(75,476	)		(75,834	)
Total equity		75,277			74,235
Total liabilities and equity	$	112,170		$	110,017

See accompanying notes to the interim condensed consolidated financial statements.

GAIA, INC.

Condensed Consolidated Statements of Operations

	For the Three Months Ended March 31,
(in thousands, except per share data)	2021			2020
	(unaudited)
Revenues, net	$	18,896		$	14,511
Cost of revenues		2,438			1,901
Gross profit		16,458			12,610
Expenses:
Selling and operating		14,538			14,458
Corporate, general and administration		1,496			1,417
Total operating expenses		16,034			15,875
Income (loss) from operations		424			(3,265	)
Interest and other expense, net		(66	)		(246	)
Income (loss) before income taxes		358			(3,511	)
Provision for income taxes		—			69
Net income (loss)	$	358		$	(3,580	)

Earnings per share:
Basic earnings per share	$	0.02		$	(0.19	)
Diluted earnings per share	$	0.02		$	(0.19	)
Weighted-average shares outstanding:
Basic		19,201			18,482
Diluted		19,724			18,482

See accompanying notes to the interim condensed consolidated financial statements.

GAIA, INC.

Condensed Consolidated Statements of Changes in Equity

				Gaia, Inc. Shareholders
				(unaudited)
(in thousands, except shares)	Total Equity			Accumulated Deficit			Common Stock Amount		Additional Paid-in Capital		Common Stock Shares
Balance at January 1, 2020	$	68,914		$	(76,353	)	$	2	$	145,265		18,423,231
Issuance of Gaia, Inc. common stock for RSU releases, employee stock purchase plan, stock option exercises and share-based compensation		585			—			—		585		335,712
Net loss		(3,580	)		(3,580	)		—		—		—
Balance at March 31, 2020	$	65,919		$	(79,933	)	$	2	$	145,850		18,758,943

Balance at January 1, 2021	$	74,235		$	(75,834	)	$	2	$	150,067		19,182,951
Issuance of Gaia, Inc. common stock for RSU releases, employee stock purchase plan, stock option exercises and share-based compensation		684			—			—		684		17,895
Net income		358			358			—		—		—
Balance at March 31, 2021	$	75,277		$	(75,476	)	$	2	$	150,751		19,200,846

See accompanying notes to the interim condensed consolidated financial statements.

GAIA, INC.

Condensed Consolidated Statements of Cash Flows

	For the Three Months Ended March 31,
(in thousands)	2021			2020
	(unaudited)
Operating activities:
Net income (loss)	$	358		$	(3,580	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		3,099			2,969
Share-based compensation expense		613			465
Changes in operating assets and liabilities:
Accounts receivable		(505	)		366
Prepaid expenses and other assets		282			134
Accounts payable and accrued liabilities		(698	)		(1,000	)
Deferred revenue		2,039			2,652
Net cash provided by operating activities		5,188			2,006
Investing activities:
Additions to media library, property and equipment		(4,774	)		(3,601	)
Net cash used in investing activities		(4,774	)		(3,601	)
Financing activities:
Repayment of debt		(45	)		—
Proceeds from the issuance of common stock		71			120
Net cash provided by financing activities		26			120
Net change in cash		440			(1,475	)
Cash at beginning of period		12,605			11,494
Cash at end of period	$	13,045		$	10,019

See accompanying notes to the interim condensed consolidated financial statements.

Notes to interim condensed consolidated financial statements

References in this report to “we”, “us”, “our” or “Gaia” refer to Gaia, Inc. and its consolidated subsidiaries, unless we indicate otherwise.

1. Organization, Nature of Operations, and Principles of Consolidation

Gaia, Inc. was incorporated under the laws of the State of Colorado on July 7, 1988, and operates a global digital video subscription service and on-line community that caters to a unique and underserved member base. Our digital content library includes approximately 8,000 titles, with a growing selection of titles available in Spanish, German and French. Our members have unlimited access to this vast library of inspiring films, cutting edge documentaries, interviews, yoga classes, transformation-related content, and more – 80% of which is exclusively available to our members for digital streaming on most internet-connected devices anytime, anywhere, commercial free.

Our mission is to create a transformational network that empowers a global conscious community. Content on our network is currently curated into four primary channels— Yoga, Transformation, Alternative Healing, and Seeking Truth— and delivered directly to our members through our streaming platform. We develop programming for these channels by producing content in our in-house production studios with a staff of media professionals. This produced and owned content currently represents over 80% of our viewership. We complement our produced and owned content through long-term licensing agreements.

We have prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) and they include our accounts and those of our subsidiaries. Intercompany transactions and balances have been eliminated. The unaudited condensed consolidated financial position, results of operations and cash flows for the interim periods disclosed in this report are not necessarily indicative of future financial results.

There have been no material changes in our significant accounting policies, other than the adoption of accounting pronouncements below, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2020.

Use of Estimates and Reclassifications

The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the accompanying financial statements and disclosures. Although we base these estimates on our best knowledge of current events and actions that we may undertake in the future, actual results may be different from the estimates. We have made certain reclassifications to prior period amounts to conform to the current period presentations.

Accounting Pronouncements Implemented in 2021

In June 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740), which removes certain exceptions for performing intraperiod tax allocations, recognizing deferred taxes for investments, and calculating income taxes in interim periods. The guidance also simplifies the accounting for franchise taxes, transactions that result in step-up in the tax basis of goodwill, and the effect of enacted changes in tax laws or rates in interim periods. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020. We adopted the new standard on January 1, 2021 with no material impact to our reported financial position or results of operations in the three months ended March 31, 2021.

With the exception of the new standard discussed above, no other new accounting pronouncements have significance, or potential significance, to our reported financial position or results of operations.

2. Revenue Recognition

Revenues consist primarily of subscription fees paid by our members. We present revenues net of taxes collected from members. Members are billed in advance and revenues are recognized ratably over the subscription term. Deferred revenue consists of subscription fees collected from members that have not been earned and is recognized ratably over the remaining term of the subscription. We recognize revenue on a net basis for relationships where our partners have the primary relationship, including billing and service delivery, with the member. Payments made to partners to assist in promoting our service on their platforms are expensed as marketing expenses in the period incurred. We do not allow access to our service to be provided as part of a bundle by any of our partners.

3. Equity and Share-Based Compensation

During the first three months of 2021 and 2020, we recognized approximately $613,000 and $465,000, respectively, of share-based compensation expense. Total share-based compensation expense is reported in selling and operating expenses and corporate, general and administration expenses on our condensed consolidated statements of operations. During the first three months of 2021, no options were exercised. During the first three months of 2020, 24,000 options were exercised with net proceeds of $120,000.

4. Goodwill and Other Intangible Assets

There were no changes in goodwill for the period from December 31, 2020 through March 31, 2021. Other unamortized intangible assets included in Real estate, investments and other assets on the accompanying condensed consolidated balance sheet consists of $571,000 for domain names as of March 31, 2021 and December 31, 2020.

5. Debt

On December 28, 2020, our wholly owned subsidiary Boulder Road LLC (“Boulder Road”) and Westside Boulder, LLC (“Westside”) entered into a loan agreement with Great Western Bank, as lender, providing for a mortgage in the principal amount of $13 million. The mortgage bears interest at a fixed rate of 3.75% per annum, matures on December 28, 2025, is secured by a deed of trust on our corporate campus, a portion of which is owned by Boulder Road and Westside as tenants-in-common and the remainder of which is owned by Boulder Road. Westside and Boulder Road each received 50% of the proceeds and are each responsible for 50% of the monthly installments. Gaia guaranteed payment of the mortgage. The mortgage is subject to certain financial covenants related to the corporate campus.

Maturities on long-term debt, net are as follows:

(in thousands)
2021 (remaining)	$	105
2022		144
2023		150
2024		156
2025		5,800
	$	6,355

6. Leases

We have an operating lease for the portion of our corporate campus that Boulder Road and Westside own. We record the right to use the underlying asset for the operating lease term as an asset and our obligation to make lease payments as a liability for the 50% related to Westside.

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

		March 31,		December 31,
(in thousands)	Balance Sheet Classification	2021		2020
Right-of-use asset	Right-of-use lease asset, net	$	8,437	$	8,622

Operating lease liability (current)	Accounts payable, accrued and other liabilities	$	698	$	691
Operating lease liability (non-current)	Long-term lease liability		7,775		7,952
		$	8,473	$	8,643

	For the Three Months Ended March 31,
(in thousands)	2021		2020
Cash paid for operating lease liabilities	$	250	$	—

Operating lease expense is recognized on a straight-line basis over the lease term. Future amortization of our lease liability as of March 31, 2021 was as follows:

(in thousands)
2021 (remaining)	$	751
2022		1,001
2023		1,001
2024		1,008
2025		1,035
Thereafter		5,317
Future lease payments, gross		10,113
Less: Imputed interest		(1,640	)
Operating lease liability	$	8,473

7. Earnings Per Share

Basic earnings per share is computed using the weighted-average number of outstanding shares of common stock during the period. Diluted earnings per share is computed using the weighted-average number of outstanding shares of common stock and, when dilutive, potential shares of common stock outstanding during the period. Potential shares of common stock consist of incremental shares issuable upon the assumed exercise of stock options and vesting of restricted stock units utilizing the treasury stock method. The computation of earnings per share is as follows:

	For the Three Months Ended March 31,
(in thousands, except per share data)	2021		2020
	(unaudited)
Basic earnings per share:
Net income (loss)	$	358	$	(3,580	)
Shares used in computation:
Weighted-average common stock outstanding		19,201		18,482
Basic earnings per share	$	0.02	$	(0.19	)

Diluted earnings per share:
Net income (loss)	$	358	$	(3,580	)
Shares used in computation:
Weighted-average common stock outstanding		19,201		18,482
Common stock equivalents		523		—
Weighted-average number of shares		19,724		18,482
Diluted earnings per share	$	0.02	$	(0.19	)

Employee stock options with exercise prices greater than the average market price of the common stock were excluded from the diluted calculation as their inclusion would have been anti-dilutive. The following table summarizes the potential shares of common stock excluded from the diluted calculation:

	For the Three Months Ended March 31,
(in thousands)	2021		2020
	(unaudited)
Common stock equivalents excluded due to net loss		—		520
Employee stock options		30		84
		30		604

8. Income Taxes

Our provision for income taxes is comprised of the following:

	For the Three Months Ended March 31,
(in thousands)	2021		2020
Current:
Federal	$	—	$	—
State		—		—
Total current		—		—
Deferred:
Federal		—		69
State		—		—
Total deferred		—		69
Total income tax expense	$	—	$	69

The income tax expense recorded in 2020 is a result of the amortization of goodwill over 15 years for tax purposes. Periodically, we perform assessments of the realization of our net deferred tax assets considering all available evidence, both positive and negative. Based on our historical operating losses, combined with our plans to continue to invest in our revenue growth and content library we have a full valuation allowance on our deferred tax assets as of March 31, 2021. As of March 31, 2021, our net operating loss carryforwards on a gross basis were $90.1 million and $24.3 million for federal and state, respectively.

9. Contingencies

From time to time, we are involved in legal proceedings that we consider to be in the normal course of business. We record accruals for losses related to those matters against us that we consider to be probable and that can be reasonably estimated. Based on available information, in the opinion of management, settlements, arbitration awards and final judgments, if any, that are considered probable of being rendered against us in litigation or arbitration in existence at March 31, 2021 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.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This report contains forward-looking statements that involve risks and uncertainties. When used in this discussion, we intend the words “anticipate,” “believe,” “plan,” “estimate,” “expect,” “strive,” “future,” “intend”, “will” and similar expressions as they relate to us to identify such forward-looking statements. Our actual results could differ materially from the results anticipated in these forward-looking statements as a result of certain factors set forth under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Form 10-Q and under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020. Risks and uncertainties that could cause actual results to differ include, without limitation, general economic conditions, future profitability or losses, continued membership growth, competition, loss of key personnel, pricing, 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, fluctuations in quarterly operating results, consumer trends, the effect of government regulation and programs, the impact of 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. We caution you that no forward-looking statement is a guarantee of future performance, and you should not place undue reliance on these forward-looking statements which reflect our views only as of the date of this report. We undertake no obligation to update any forward-looking information.

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

Overview and Outlook

We operate a global digital video subscription service with a library of approximately 8,000 titles, with a growing selection of titles available in Spanish, German and French that caters to a unique, underserved member base. Our digital content is available to our members on most internet-connected devices anytime, anywhere, commercial-free. Through our online Gaia subscription service our members have unlimited access to a library of inspiring films, cutting edge documentaries, interviews, yoga classes, transformation related content, and more – 80% of which is exclusively available to our members for digital streaming on most internet-connected devices.

Gaia’s position in the streaming video landscape is firmly supported by its wide variety of exclusive and unique content, which provides a complementary offering to other entertainment-based streaming video services. Our original content is developed and produced in-house in our production studios near Boulder, Colorado. By offering exclusive and unique content through our streaming service, we believe we will be able to significantly expand our target member base.

Our available content is currently focused on yoga, transformation, alternative healing, seeking truth and conscious films. This content is specifically targeted to a unique member base that is interested in alternatives and supplements to the content provided by mainstream media. We have grown these content options both organically through our own productions and through strategic acquisitions. In addition, through investments in our streaming video technology and our user interface, we have expanded the many ways our subscription member base can access our unique library of media titles.

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

In March 2020, the World Health Organization declared the outbreak of a novel strain of coronavirus, or COVID-19, as a pandemic. The global spread of COVID-19 and the various attempts to contain it have created significant volatility, uncertainty and economic disruption. The full impact that COVID-19 will have on our business will depend on a number of factors such as the duration and extent of the pandemic, the adoption and effectiveness of COVID-19 tests and vaccines, the effect of governmental actions, changes in consumer behavior, responses of our third-party business partners that offer our content through their platforms, and general economic activity, as described in Part II, Item 1A “Risk Factors” in our Annual Report on Form 10-K.

Commencing during the second half of March 2020 continuing through July 2020, we saw an increase in demand for our content from both current and potential members. This created a positive trend in existing member retention, costs to acquire new members, and the corresponding revenue and cash flow impacts from these higher volumes. Beginning in August 2020, 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.

We reported net income of $0.4 million for the first three months of 2021, an improvement of $4.0 million from a net loss of $3.6 million for the first three months of 2020.

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

Results of Operations

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

	For the Three Months Ended March 31,
(in thousands, except per share data)	2021			2020
Revenues, net	$	18,896		$	14,511
Cost of revenues		2,438			1,901
Gross profit margin		87.1	%		86.9	%
Selling and operating		14,538			14,458
Corporate, general and administration		1,496			1,417
Income (loss) from operations		424			(3,265	)
Interest and other expense, net		(66	)		(246	)
Income (loss) before income taxes		358			(3,511	)
Provision for income taxes		—			69
Net income (loss)	$	358		$	(3,580	)

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

	For the Three Months Ended March 31,
	2021			2020
Revenues, net		100.0	%		100.0	%
Cost of revenues		12.9	%		13.1	%
Gross profit		87.1	%		86.9	%
Expenses:
Selling and operating		76.9	%		99.6	%
Corporate, general and administration		7.9	%		9.8	%
Total operating expenses		84.9	%		109.4	%
Income (loss) from operations		2.2	%		(22.5	)%
Interest and other expense, net		(0.3	)%		(1.7	)%
Income (loss) before income taxes		1.9	%		(24.2	)%
Provision for income taxes		0.0	%		0.5	%
Net income (loss)		1.9	%		(24.7	)%

Three months ended March 31, 2021 compared to three months ended March 31, 2020

Revenues, net. Revenues increased $4.4 million, or 30.3%, to $18.9 million during the first three months of 2021, compared to $14.5 million during the first three months of 2020. The increase was primarily driven by an increase in both members and average monthly revenue per member compared to the year-earlier period. Revenues were not significantly impacted by inflation.

Cost of revenues. Cost of revenues increased $0.5 million, or 26.3%, to $2.4 million during the first three months of 2021, from $1.9 million during the first three months of 2020 due to increased revenues and, as a percentage of net revenues, decreased to 12.9% during the first three months of 2021 from 13.1% during the first three months of 2020 primarily due to increased revenues and an improvement in gross profit margin.

Selling and operating expenses. Selling and operating expenses were unchanged at $14.5 million during the first three months of 2021 and the first three months of 2020, and, as a percentage of net revenues, decreased to 76.9% during the first three months of 2021 from 99.6% during the first three months of 2020. The decrease was primarily due to an increase in revenues and flat expenses in absolute dollars.

Corporate, general and administration expenses. Corporate, general and administration expenses increased $0.1 million or 7.1%, to $1.5 million during the first three months of 2021 from $1.4 million during the first three months of 2020 due primarily to increased costs of insurance and, as a percentage of net revenues, decreased to 7.9% during the first three months of 2021 from 9.8% during the first three months of 2020, due to increased revenues in 2021.

Net income. As a result of the above factors, net income was $0.4 million, or $0.02 per share, during the first three months of 2021 an improvement of $4.0 million from a net loss of $3.6 million, or $0.19 per share, during the first three months of 2020.

Seasonality

Our member base growth reflects seasonal variations driven primarily by 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. Historically, our member growth is generally greatest in the fourth and first quarters (October through February), and slowest in May through August. This drives quarterly variations in our spending on member acquisition efforts but does not drive a corresponding seasonality in net revenue.

Liquidity and Capital Resources

Our capital needs arise from working capital required to fund operations, capital expenditures related to acquisition and development of media content, development and marketing of our digital platforms, acquisitions of new businesses and other investments, replacements, expansions and improvements to our infrastructure, and future growth. These capital requirements depend on numerous factors, including the rate of market acceptance of our offerings, our ability to expand our customer base, the cost of ongoing upgrades to our offerings, our expenditures for marketing, and other factors. Additionally, we will continue to pursue opportunities to expand our media libraries, evaluate possible investments in businesses and technologies, and increase our marketing programs as needed.

Our budgeted content and capital expenditures for the remainder of 2021 are $12 million to $16 million which we intend to fund with cash flows generated from operations. These planned expenditures will be predominately utilized to expand our content library and build out the capabilities of our digital platforms. The planned expenditures are discretionary and with our in-house production capabilities we have the ability to scale expenditures based on the available cash flows from operations. We began to generate cash flows from operations in October 2019 and have continued to increase the cash flows generated from operations each subsequent quarter. We expect to continue generating cash flows from operations during 2021. We generated approximately $5.2 million in cash flows from operations during the first quarter of 2021, which covered our investment of $4.8 million in our media library and product during the period. As of March 31, 2021, our cash balance increased to $13.0 million.

In the normal course of our business, we investigate, evaluate and discuss acquisition, joint venture, minority investment, strategic relationship and other business combination opportunities in our market. For any future investment, acquisition or joint venture opportunities, we may consider using then-available liquidity, issuing equity securities or incurring indebtedness.

While there can be no assurances, we believe our cash on hand, cash expected to be generated from operations, and potential capital raising capabilities should be sufficient to fund our operations on both a short-term and long-term basis. However, our projected cash needs may change as a result of acquisitions, product development, unforeseen operational difficulties or other factors.

Cash Flows

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

	For the Three Months Ended March 31,
(in thousands)	2021	2020
Net cash provided by (used in):

SEC Form 10-Q filed by Gaia, Inc.