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

Gaia, Inc., operates a global digital video subscription service and on-line community that caters to a unique and underserved subscriber base. Our digital content is available to our subscribers on most internet-connected devices anytime, anywhere commercial free. Through our online Gaia subscription service, our customers have unlimited access to a vast library of inspiring films, cutting edge documentaries, interviews, yoga classes, transformation related content, and more – 90% of which is exclusively available to our subscribers for digital streaming. A subscription also allows our subscribers to download and view files from our library without being actively connected to the internet. We were incorporated under the laws of the State of Colorado on July 7, 1988.

We have prepared the accompanying consolidated financial statements in accordance with accounting principles generally accepted in the United States, or GAAP, and they include our accounts and those of our subsidiaries, over which we exercise control. Intercompany transactions and balances have been eliminated.

Discontinued Operations

During 2016, Gaia sold its 51.4% interest in Natural Habitat, Inc. (“Natural Habitat”) and completed the sale of the Gaiam Brand consumer product business.

Accordingly, the assets and liabilities, operating results, and cash flows for these businesses are presented as discontinued operations, separate from our continuing operations, for all periods presented in these consolidated financial statements and footnotes, unless indicated otherwise. See Note 11 Discontinued Operations.

Prior to the sale of our interest in Natural Habitat, our operations in foreign countries exposed us to market risk associated with foreign currency exchange rate fluctuations between the U.S. dollar and various foreign currencies. We used derivative instruments to manage a portion of our exposure to changes in currency exchange rates due to payments made by our eco-travel subsidiary to tour operators in other countries. Our primary objective for entering into currency derivatives was to reduce the volatility that changes in currency exchange rates had. We did not enter into derivative contracts for trading purposes. With the sale of our interests in Natural Habitat, we no longer use derivative instruments.

Prior to our sale of our interest in Natural Habitat and the Gaiam Brand consumer product business, certain of our subsidiaries were partly owned by others and we accounted for minority shareholders’ ownership through non-controlling interest in our consolidated financial statements. These non-controlling interests were assumed by the new owners of the respective entities. We therefore no longer have any minority shareholders that require non-controlling interests in our consolidated financial statements.

Repurchases

During 2016 we made a tender offer to purchase in cash up to an aggregate of 12.0 million (i) shares of our issued and outstanding Class A common stock at a price of $7.75 per share, or (ii) vested and exercisable options to purchase shares of our Class A common stock at a price equal to $7.75 per option (less the exercise price of the option). A total of 9,636,848 shares and 842,114 options were validly tendered and not withdrawn. We made payments of $74.7 million for the shares and $1.4 million for the options. All repurchased shares were retired and all repurchased options were cancelled.