**United States**

**Securities and Exchange Commission**

**Washington, D.C. 20549**

 

#### **Form10-Q/A**

 

**ý****          ****QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15 (d)**

**OF THE SECURITIES AND EXCHANGE ACT OF 1934**

** **

**For the quarterly period ended September 30,2005**

** **

**OR**

** **

**o****          ****TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15 (d)**

**OF THESECURITIES AND EXCHANGE ACT OF 1934**

** **

**Commission File Number 0-27517**

 

**GAIAM, INC.**

(Exactname of registrant as specified in its charter)

 

| **COLORADO**                    | ** ** | **84-1113527**      |
|---------------------------------|------------|---------------------|
| (State or other jurisdiction of |       | (I.R.S. Employer    |
| incorporation or organization)  |       | Identification No.) |

 

**360 INTERLOCKEN BLVD.,**

**BROOMFIELD, COLORADO 80021**

(Address of principal executive offices)

 

**(303) 222-3600**

(Registrant’s telephone number, including area code)

 

Indicateby check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d)of the Securities and Exchange Act of 1934 during the preceding 12 months (orfor 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  ý       NO o

 

Indicateby check mark whether the registrant is an accelerated filer (as defined inRule 12b-2 of the Exchange Act).    YES ý  NO o

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).      YES  o   NO  ý

 

Indicatethe number of shares outstanding of each of the issuer’s classes of commonstock, as of the latest practicable date:

 

| **Class**            | ** ** | **Shares outstanding as of November 8, 2005** |
|----------------------|------------|-----------------------------------------------------------------------------|
| Class A Common Stock |       |                                                                        |
| ($.0001 par value)   |       | 14,846,485                                                                  |   |
|                 |       |                                                                        |   |
| Class B Common Stock |       |                                                                        |   |
| ($.0001 par value)   |       | 5,400,000                                                                   |   |

 

 

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**EXPLANATORY NOTE**

 

This 10-Q/A is being filed to amend Gaiam’sConsolidated Balance Sheet at September 30, 2005 and Note 2 — Mergers andAcquisitions included in Gaiam’s Notes to the Interim Condensed ConsolidatedFinancial Statements.  These changes werenecessitated by a change in the accounting treatment of the GoodTimesEntertainment acquisition.  Gaiam hadreflected the transaction as a business combination in accordance with SFAS No.141.  Based on further review of therequirements of SFAS 141 and the related guidance in EITF 98-3, Gaiam hasconcluded that it is more appropriate to treat the transaction as an assetacquisition, rather than a business combination.  Accordingly, the balance sheet and footnotehave been revised to reflect this treatment. The remaining information remains unchanged.

 

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GAIAM, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(In thousands, except share information)

 
| ** **                                                                                                                                                                                | ** ** | **September 30,  2005** | ** ** | **December 31,  2004** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                                                                | ** ** | **(Unaudited)**              | ** ** | ** **                  | ** ** |
| **Assets**                                                                                                                                                                                |       |                         |       |                        |       |
| Current assets:                                                                                                                                                                           |       |                         |       |                        |       |
| Cash and cash equivalents                                                                                                                                                                 |       | $                            | 10,247     |                        | $          | 10,439 |   |
| Accounts receivable, net                                                                                                                                                                  |       | 20,863                       |       | 13,914                      |       |
| Income tax and other receivables                                                                                                                                                          |       | 3,008                        |       | 3,000                       |       |
| Inventory, less allowances                                                                                                                                                                |       | 21,186                       |       | 16,503                      |       |
| Prepaid expenses                                                                                                                                                                          |       | 5,466                        |       | 1,324                       |       |
| Deferred advertising costs                                                                                                                                                                |       | 4,312                        |       | 2,635                       |       |
| Deferred tax assets                                                                                                                                                                       |       | 523                          |       | 1,145                       |       |
| Total current assets                                                                                                                                                                      |       | 65,605                       |       | 48,960                      |       |
|                                                                                                                                                                                      |       |                         |       |                        |       |
| Property and equipment, net                                                                                                                                                               |       | 7,683                        |       | 7,857                       |       |
| Investments                                                                                                                                                                               |       | 15,318                       |       | 7,865                       |       |
| Capitalized production costs, net                                                                                                                                                         |       | 5,161                        |       | 5,457                       |       |
| Media library, net                                                                                                                                                                        |       | 30,187                       |       | 5,427                       |       |
| Intangible assets and goodwill                                                                                                                                                            |       | 9,886                        |       | 9,757                       |       |
| Non-current deferred tax assets                                                                                                                                                           |       | 3,883                        |       | 2,657                       |       |
| Other assets                                                                                                                                                                              |       | 1,417                        |       | 307                         |       |
| Total assets                                                                                                                                                                              |       | $                            | 139,140    |                        | $          | 88,287 |   |
|                                                                                                                                                                                      |       |                         |       |                        |       |
| **Liabilities  and stockholders’ equity**                                                                                                                                            |       |                         |       |                        |       |
| Current liabilities:                                                                                                                                                                      | ** ** | ** **                   | ** ** | ** **                  | ** ** |
| Accounts payable                                                                                                                                                                          |       | $                            | 11,539     |                        | $          | 12,910 |   |
| Accrued liabilities                                                                                                                                                                       |       | 7,673                        |       | 3,160                       |       |
| Accrued royalties                                                                                                                                                                         |       | 9,305                        |       | 538                         |       |
| Income taxes payable                                                                                                                                                                      |       | 397                          |       | 864                         |       |
| Total current liabilities                                                                                                                                                                 |       | 28,914                       |       | 17,472                      |       |
|                                                                                                                                                                                      |       |                         |       |                        |       |
| Long-term liabilities                                                                                                                                                                     |       | 989                          |       | —                      |       |
| Total liabilities                                                                                                                                                                         |       | 29,903                       |       | 17,472                      |       |
|                                                                                                                                                                                      |       |                         |       |                        |       |
| Minority interest                                                                                                                                                                         |       | 4,487                        |       | 4,469                       |       |
|                                                                                                                                                                                      |       |                         |       |                        |       |
| Commitments and contingencies                                                                                                                                                             |       |                         |       |                        |       |
|                                                                                                                                                                                      |       |                         |       |                        |       |
| Stockholders’ equity:                                                                                                                                                                |       |                         |       |                        |       |
| Class A common stock, $.0001 par value,  150,000,000 shares authorized, 14,833,555 and 9,411,897 shares issued and outstanding  at September 30, 2005 and December 31, 2004, respectively |       | 1                            |       | 1                           |       |
| Class B common stock, $.0001 par value, 50,000,000 shares authorized, 5,400,000  issued and outstanding at September 30, 2005 and December 31, 2004                                       |       | 1                            |       | 1                           |       |
| Additional paid-in capital                                                                                                                                                                |       | 93,890                       |       | 54,933                      |       |
| Accumulated other comprehensive income                                                                                                                                                    |       | 442                          |       | 850                         |       |
| Retained earnings                                                                                                                                                                         |       | 10,416                       |       | 10,561                      |       |
| Total stockholders’ equity                                                                                                                                                           |       | 104,750                      |       | 66,346                      |       |
| Total liabilities and stockholders’ equity                                                                                                                                           |       | $                            | 139,140    |                        | $          | 88,287 |   |

 

*See accompanying notes to the condensedconsolidated financial statements*

 

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Gaiam, Inc.

Notes to Interim Condensed ConsolidatedFinancial Statements

(Unaudited)

September 30, 2005

 

2.             Mergers and Acquisitions

 

In the third quarter of 2005, Gaiam acquired a media catalog businessand its customer mailing list.  The totalconsideration given for these assets was 60,000 shares of Class A common stock,valued at $390 thousand.  The customermailing list was valued at approximately $160 thousand, and the balance of thepurchase price was allocated to goodwill. Management believes that this media catalog, which is alreadyestablished in the marketplace, will augment our Internet marketing in thedirect to consumer distribution of our own media titles and those purchasedfrom GoodTimes Entertainment.  Theoperating results of this catalog are included in the results of operationsfrom August 1, 2005.  These results werenot significant to the overall consolidated Gaiam operations.

 

On August 4, 2005, Gaiam and its Chairman and Chief Executive Officer,Jirka Rysavy, entered into a series of agreements with Revolution Living, LLC;its founder, Steve Case, and Revolution Living’s LIME Media (“LIME”) subsidiaryto establish a multi-faceted strategic relationship.  Under the terms of the Transaction Agreement,Gaiam acquired a minority interest in LIME for approximately $7.5 million.

 

InSeptember 2005, Gaiam acquired the majority of the assets held by GoodTimesEntertainment and certain of its affiliates. GoodTimes Entertainment’s assets included entertainment programming andhome video products distributed through various channels, including television,retailers and the Internet.  The totalpurchase price consisted of the following (in thousands):

 
| Cash                                    |   | $   | 34,405 |   |
|-----------------------------------------|--------|-----|--------|--------|
| Acquisition, legal and accounting costs |   | 621 |   |
| Total purchase price                    |   | $   | 35,026 |   |

 

Ofthe total purchase price, Gaiam allocated $25,368 to the acquired media titlesand content, and $9,658 to the tangible assets purchased, net of assumedliabilities.  This allocation of thetotal purchase price of the assets acquired from GoodTimes Entertainment wasbased on their estimated fair values as of the date of acquisition.  Adjustments to these estimates will beincluded in the allocation of the purchase price, if the adjustment isdetermined within the purchase price allocation period of up to twelve months.

 

Gaiamcommenced distribution of titles and content acquired in this asset purchase onSeptember 13, 2005, and the results of sales in both the direct to consumer andbusiness segments are included in the consolidated financial statements ofGaiam from this date.

 

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## **PART II.**                OTHER INFORMATION

 

**Item 6.****                   ****Exhibits**

 

a)             Exhibits

 
| **Exhibit  No.** | ** ** | **Description**                                                                                                                                                               |
|------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1             |       | Certification of the Chief Executive Officer pursuant to Rule  13a-14(a) under the Securities Exchange Act of 1934 (filed herewith).                                          |
| 31.2             |       | Certification of the Chief Financial Officer pursuant to Rule  13a-14(a) under the Securities Exchange Act of 1934 (filed herewith).                                          |
| 32.1             |       | Certification of the Chief Executive Officer pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of  2002 (furnished herewith). |
| 32.2             |       | Certification of the Chief Financial Officer pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of  2002 (furnished herewith). |

 

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### **Signatures**

 

 

Inaccordance with the requirements of the Securities and Exchange Act, theregistrant caused this report to be signed on its behalf, by the undersigned,thereunto duly authorized.

 

 
|   | Gaiam,  Inc.    |
|--------|-----------------|
|   | (Registrant)    |
|   | March  16, 2006 |
|   |            |   |
|   | By:             | /s/  Janet Mathews |   |
|   |            | Janet Mathews |
|   |            | Chief Financial Officer |

 

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