falseQ2Beachbody Company, Inc.0001826889--12-311440357000P3YConsists of Canada and United Kingdom. In 2021, also includes France. Cash consideration includes, among other things, the payoff of certain of Myx’s existing debt obligations, payments of certain of Myx’s transaction expenses, and cash payments as consideration for certain Myx equity units.Share consideration was calculated based on 13,546,503 shares of Class A Common Stock issued multiplied by the share closing price on the Closing Date of $12.00.Fair value of Myx instrument held by Old Beachbody was effectively settled on the Closing Date, see Note 1.Includes 3,750,000 Forest Road Earn-out Shares.The number of Old Beachbody equity units - Class A Common Stock was determined from 20,220,589 common units and 10,068,841 preferred units of Old Beachbody outstanding immediately prior to the closing of the Business Combination converted at the Exchange Ratio.The number of Old Beachbody equity units - Class X Common Stock was determined from 42,042,850 common units of Old Beachbody outstanding immediately prior to the closing of the Business Combination converted at the Exchange Ratio.Cost of revenue not directly related to segments includes certain allocated costs related to management, facilities, and personnel-related expenses associated with quality assurance and supply chain logistics. Depreciation of certain software and production equipment and amortization of formulae and technology-based intangible assets are also included in this line.Selling and marketing not directly related to segments includes indirect selling and marketing expenses and certain allocated personnel-related expenses for employees and consultants. Depreciation of certain software and amortization of contract-based intangible assets are also included in this line.In April and June 2021, Old Beachbody entered into promissory note agreements with Myx. 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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 June 30, 2021
or
 
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:
001-39735
 
 
The Beachbody Company, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
85-3222090
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
3301 Exposition Blvd,
Santa Monica, California
 
90404
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code:
 
(
310
) 883-9000
 
 
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, par value $0.0001 per share
  
BODY
  
The New York Stock Exchange
Redeemable warrants, each whole warrant exercisable for one Class A common stock at an exercise price of $11.50
  
BODY WS
  
The New York Stock Exchang
e
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 Act).    Yes  ☐    No  
The number of shares of the registrant’s Class A Common Stock, par value $0.0001 per share outstanding was 166,925,632, and the number of shares of the registrant’s Class X Common Stock, par value $0.0001 per share outstanding was 141,250,310,
as of August 10, 2021
.
 
 
 

Table of Contents
 
 
 
 
  
Page
 
PART I.
 
  
Item 1.
 
  
 
  
 
1
 
 
  
 
2
 
 
  
 
3
 
 
  
 
4
 
 
  
 
5
 
 
  
 
6
 
Item 2.
 
  
 
28
 
Item 3.
 
  
 
42
 
Item 4.
 
  
 
43
 
PART II.
 
  
Item 1.
 
  
 
43
 
Item 1A.
 
  
 
43
 
Item 2.
 
  
 
73
 
Item 5.
 
  
 
73
 
Item 6.
 
  
 
74
 
  
 
75
 
 

PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
The Beachbody Company, Inc.
Unaudited Condensed Consolidated Balance Sheets
 
(in thousands)
            
    
As of June 30,
2021
   
As of December 31,
2020
 
Assets
    
Current assets:
    
Cash and cash equivalents
   $ 347,229     $ 56,827  
Accounts receivable, net
     3,165       855  
Inventory, net
     74,238       65,354  
Prepaid expenses
     10,438       8,650  
Other current assets
     46,286       37,364  
  
 
 
   
 
 
 
Total current assets
     481,356       169,050  
Property and equipment, net
     94,439       80,169  
Content assets, net
     30,955       19,437  
Intangible assets, net
     95,917       21,120  
Goodwill
     176,903       18,981  
Right-of-use
assets, net
     29,366       33,272  
Other assets
     7,026       14,224  
  
 
 
   
 
 
 
Total assets
   $ 915,962     $ 356,253  
  
 
 
   
 
 
 
Liabilities and Stockholders’ Equity
    
Current liabilities:
    
Accounts payable
   $ 50,648     $ 28,981  
Accrued expenses
     87,440       79,955  
Deferred revenue
     116,590       97,504  
Current portion of lease liabilities
     9,976       10,371  
Other current liabilities
     2,352       3,106  
  
 
 
   
 
 
 
Total current liabilities
     267,006       219,917  
Long-term lease liabilities, net
     26,466       31,252  
Deferred tax liabilities
     7,977       3,729  
Warrant liabilities
     50,173       —    
Other liabilities
     5,887       2,097  
  
 
 
   
 
 
 
Total liabilities
     357,509       256,995  
  
 
 
   
 
 
 
Commitments and contingencies (Note 14)
Stockholders’ equity:
    
Preferred stock, $0.0001 par value; 100,000,000 shares authorized, none issued and outstanding as of June 30, 2021 and December 31, 2020
     —         —    
Common stock, $0.0001 par value, 1,900,000,000 shares authorized (1,600,000,000 Class A, 200,000,000 Class X and 100,000,000 Class C); 166,925,632 and 101,762,614 Class A shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively; 141,250,310 Class X shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively and no Class C shares issued and outstanding at June 30, 2021 and December 31, 2020.
     31       24  
Additional
paid-in
capital
     597,598       96,097  
Accumulated other comprehensive loss
     (17     (202
Retained earnings (accumulated deficit)
     (39,159     3,339  
  
 
 
   
 
 
 
Total stockholders’ equity
     558,453       99,258  
  
 
 
   
 
 
 
Total liabilities and stockholders’ equity
   $ 915,962     $ 356,253  
  
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
1

The Beachbody Company, Inc.
Unaudited Condensed Consolidated Statements of Operations
 
(in thousands, except
per
share data)
                        
    
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
    
2021
   
2020
   
2021
   
2020
 
Revenue:
                                
Digital
   $ 94,325     $ 78,357     $ 189,475     $ 140,882  
Nutrition and other
     128,783       140,127       259,852       246,938  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total revenue
     223,108       218,484       449,327       387,820  
    
 
 
   
 
 
   
 
 
   
 
 
 
Cost of revenue:
                                
Digital
     11,612       9,292       22,734       17,664  
Nutrition and other
     57,158       50,097       114,153       90,572  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total cost of revenue
     68,770       59,389       136,887       108,236  
    
 
 
   
 
 
   
 
 
   
 
 
 
Gross profit
     154,338       159,095       312,440       279,584  
Operating expenses:
                                
Selling and marketing
     140,194       134,666       284,890       228,892  
Enterprise technology and development
     26,949       22,373       54,038       43,706  
General and administrative
     17,231       14,522       35,177       29,706  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total operating expenses
     184,374       171,561       374,105       302,304  
    
 
 
   
 
 
   
 
 
   
 
 
 
Operating loss
     (30,036     (12,466     (61,665     (22,720
Other income (expense)
                                
Change in fair value of warrant liabilities
     5,390       —         5,390       —    
Interest expense
     (305     (248     (428     (343
Other income, net
     1,654       34       2,953       442  
    
 
 
   
 
 
   
 
 
   
 
 
 
Loss before income taxes
     (23,297     (12,680     (53,750     (22,621
Income tax benefit
     10,857       2,677       11,252       4,290  
    
 
 
   
 
 
   
 
 
   
 
 
 
Net loss
   $ (12,440   $ (10,003   $ (42,498   $ (18,331
    
 
 
   
 
 
   
 
 
   
 
 
 
Net loss per common share, basic
   $ (0.05   $ (0.04   $ (0.17   $ (0.08
    
 
 
   
 
 
   
 
 
   
 
 
 
Net loss per common share, diluted
   $ (0.05   $ (0.04   $ (0.17   $ (0.08
    
 
 
   
 
 
   
 
 
   
 
 
 
Weighted-average common shares outstanding, basic
     247,062       238,143       245,049       238,143  
    
 
 
   
 
 
   
 
 
   
 
 
 
Weighted-average common shares outstanding, diluted
     247,062       238,143       245,049       238,143  
    
 
 
   
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
2

The Beachbody Company, Inc.
Unaudited Condensed Consolidated Statements of Comprehensive Loss
 
(in thousands)
                        
    
Three Months Ended June 30,
   
Six Months Ended June 30,
 
    
2021
   
2020
   
2021
   
2020
 
Net loss
   $ (12,440   $ (10,003   $ (42,498   $ (18,331
Other comprehensive income (loss):
                                
Change in fair value of derivative financial instruments, net of tax
     (99     (217     (208     193  
Reclassification of losses on derivative financial instruments included in net
 
loss
     172       (73     339       (47
Foreign currency translation adjustment
     12       49       54       (327 )
    
 
 
   
 
 
   
 
 
   
 
 
 
Total other comprehensive income (loss)
     85       (241 )     185       (181 )
    
 
 
   
 
 
   
 
 
   
 
 
 
Total comprehensive loss
   $ (12,355   $ (10,244   $ (42,313   $ (18,512
    
 
 
   
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
3

 
The Beachbody Company, Inc.
Unaudited Condensed Consolidated Statements of Stockholders’ Equity
 
(in thousands)
  
 
 
 
 
 
 
 
 
  
 
 
  
 
 
  
 
 
 
 
 
 
 
 
 
  
Redeemable
 
 
 
 
 
 
 
  
 
 
  
 
 
  
 
 
 
 
 
 
 
 
 
  
Convertible
 
 
 
 
 
 
 
  
 
 
  
 
 
  
Accumulated
 
 
Retained
 
 
 
 
 
  
Series A
 
 
 
 
 
 
 
  
 
 
  
Additional
 
  
Other
 
 
Earnings
 
 
Total
 
 
  
Preferred
 
 
Common
 
 
Common Stock
 
  
Paid-In
 
  
Comprehensive
 
 
(Accumulated
 
 
Stockholders’
 
 
  
Units
 
 
Units
 
 
Shares
 
  
Amount
 
  
Capital
 
  
Income (Loss)
 
 
(Deficit)
 
 
Equity
 
Balances at December 31, 2019, as previously reported
  
$
98,245
 
 
$
(35,626
 
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
12
 
 
$
24,771
 
 
$
(10,843
Retroactive application of recapitalization
  
 
(98,245
 
 
35,626
 
 
 
238,142,972
 
  
 
24
 
  
 
62,595
 
  
 
—  
 
 
 
—  
 
 
 
98,245
 
 
  
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2019, after effect of reverse
 
acquisition
  
 
—  
 
 
 
—  
 
 
 
238,142,972
 
  
 
24
 
  
 
62,595
 
  
 
12
 
 
 
24,771
 
 
 
87,402
 
Net loss
  
 
—  
 
 
 
—  
 
 
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
(8,328
 
 
(8,328
Other comprehensive income
  
 
—  
 
 
 
—  
 
 
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
60
 
 
 
—  
 
 
 
60
 
Equity-based compensation
  
 
—  
 
 
 
—  
 
 
 
—  
 
  
 
—  
 
  
 
895
 
  
 
—  
 
 
 
—  
 
 
 
895
 
 
  
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
Balances at March 31, 2020
  
$
—  
 
 
$
—  
 
 
 
238,142,972
 
  
$
24
 
  
$
63,490
 
  
$
72
 
 
$
16,443
 
 
$
80,029
 
 
  
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
Net loss
  
 
—  
 
 
 
—  
 
 
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
(10,003
 
 
(10,003
Other comprehensive loss
  
 
—  
 
 
 
—  
 
 
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
(241
 
 
—  
 
 
 
(241
Equity-based compensation
  
 
—  
 
 
 
—  
 
 
 
—  
 
  
 
—  
 
  
 
1,013
 
  
 
—  
 
 
 
—  
 
 
 
1,013
 
 
  
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
Balances at June 30, 2020
  
$
—  
 
 
$
—  
 
 
 
238,142,972
 
  
$
24
 
  
$
64,503
 
  
$
(169
 
$
6,440
 
 
$
70,798
 
 
  
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    
Redeemable
                                              
    
Convertible
                              
Accumulated
   
Retained
       
    
Series A
                       
Additional
    
Other
   
Earnings
   
Total
 
    
Preferred
   
Common
   
Common Stock
    
Paid-In
    
Comprehensive
   
(Accumulated
   
Stockholders’
 
    
Units
   
Units
   
Shares
    
Amount
    
Capital
    
Income (Loss)
   
(Deficit)
   
Equity
 
Balances at December 31, 2020, as previously reported
   $ 98,110     $ (1,989     —        $ —        $ —        $ (202   $ 3,339     $ 1,148  
Retroactive application of recapitalization
     (98,110     1,989       243,012,924        24        96,097        —         —         98,110  
    
 
 
   
 
 
   
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balance at December 31, 2020, after effect of reverse acquisition
     —         —         243,012,924        24        96,097        (202     3,339       99,258  
Net loss
     —         —         —          —          —          —         (30,058     (30,058
Other comprehensive income
     —         —         —          —          —          100       —         100  
Equity-based compensation
     —         —         —          —          2,573        —         —         2,573  
    
 
 
   
 
 
   
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balances at March 31, 2021
   $ —       $ —         243,012,924      $ 24      $ 98,670      $ (102   $ (26,719   $ 71,873  
    
 
 
   
 
 
   
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Net loss
     —         —         —          —          —          —         (12,440     (12,440
Other comprehensive income
     —         —         —          —          —         
85
      —        
85
 
Equity-based compensation
     —         —         —          —          2,522        —         —         2,522  
Business Combination, net of redemptions and equity issuance costs of $47.0 million
     —         —         51,616,515        5        333,850        —         —         333,855  
Myx acquisition
     —         —         13,546,503        2        162,556        —         —         162,558  
    
 
 
   
 
 
   
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balances at June 30, 2021
   $ —       $ —         308,175,942      $ 31      $ 597,598      $ (17   $ (39,159   $ 558,453  
    
 
 
   
 
 
   
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
4

The Beachbody Company, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
 
(in thousands)
            
    
Six Months Ended June 30,
 
    
2021
   
2020
 
Cash flows from operating activities:
                
Net loss
   $ (42,498   $ (18,331
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
                
Depreciation and amortization expense
     25,941       20,678  
Amortization of content assets
     6,119       3,196  
Provision for excess and obsolete inventory
     2,791       (76
Allowance for doubtful accounts
     —         32  
Change in fair value of derivative financial instruments
     169       199  
Gain on investment in convertible instrument
     (3,114     —    
Change in fair value of warrant liabilities
     (5,390     —    
Equity-based compensation
     5,095       1,908  
Deferred income taxes
     (11,349     (3,973
Changes in operating assets and liabilities:
                
Accounts receivable
     (2,007     (2,184
Inventory
     (194     (2,477
Content assets
     (14,237     (6,399
Prepaid expenses
     (1,789 )     6,502  
Other assets
     (5,604     (5,487
Accounts payable
     6,656       (1,013
Accrued expenses
     (461     17,831  
Deferred revenue
     16,547       40,502  
Other liabilities
     (2,162     (6,862
    
 
 
   
 
 
 
Net cash provided by (used in) operating activities
     (25,487     44,046  
    
 
 
   
 
 
 
Cash flows from investing activities:
                
Purchase of property and equipment
     (27,200     (18,756
Investment in convertible instrument
     (5,000     —    
Equity investment
     (5,000     —    
Cash paid for acquisition of Myx, net of cash acquired
     (37,280     —    
    
 
 
   
 
 
 
Net cash used in investing activities
     (74,480     (18,756
    
 
 
   
 
 
 
Cash flows from financing activities:
                
Borrowings under Credit Facility
     42,000       32,000  
Repayments under Credit Facility
     (42,000     (32,000
Business Combination, net of issuance costs paid
     389,775       —    
    
 
 
   
 
 
 
Net cash provided by financing activities
     389,775       —    
    
 
 
   
 
 
 
Effect of exchange rates on cash
     594       (638
Net increase in cash and cash equivalents
     290,402       24,652  
Cash and cash equivalents, beginning of period
     56,827       41,564  
    
 
 
   
 
 
 
Cash and cash equivalents, end of period
   $ 347,229     $ 66,216  
    
 
 
   
 
 
 
Supplemental disclosure of cash flow information:
                
Cash paid during the year for interest
   $
283
    $
84
 
Cash paid during the year for income taxes, net
   $
198
    $
11
4
 
Supplemental disclosure of noncash investing activities:
                
Property and equipment acquired but not yet paid for
   $ 15,322     $ 3,103  
Class A Common Stock issued in connection with the acquisition of Myx
   $ 162,558     $ —    
Fair value of Myx instrument and promissory note held by Old Beachbody
 
$
22,618
 
 
$
 
 
 
Supplemental disclosure of noncash financing activities:
                
Business Combination transaction costs, accrued
but
not paid
   $
650
    $ —    
Net assets assumed from Forest Road in the Business Combination
   $ 293     $ —    
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
5

The Beachbody Company, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
 
 
1.
Organization, Business and Summary of Accounting Policies
Organization
On June 2
5
, 2021 (the “Closing Date”), Forest Road Acquisition Corp. (“Forest Road”), a special purpose acquisition company, consummated the Business Combination Agreement (the “Business Combination Agreement”) dated as of February 9, 2021, by and among Forest Road, the Beachbody Company Group, LLC (“Old Beachbody”), BB Merger Sub, LLC, (“BB Merger Sub”), MFH Merger Sub, LLC (“Myx Merger Sub”), and Myx Fitness Holdings, LLC (“Myx”).
Pursuant to the terms of the Business Combination Agreement, BB Merger Sub merged with and into Old Beachbody, with Old Beachbody surviving as a wholly-owned subsidiary of Forest Road (the “Surviving Beachbody Entity”); (2) Myx Merger Sub merged with and into Myx, with Myx surviving as a wholly-owned subsidiary of Forest Road; and (3) the Surviving Beachbody Entity merged with and into Forest Road, with Forest Road surviving such merger (the “Surviving Company”, and such mergers the “Business Combination”). On the Closing Date, the Surviving Company changed its name to The Beachbody Company, Inc. (the “Company”, “Beachbody”, “we” or “us”).
Business
Beachbody is a leading subscription health and wellness company. Beachbody is focused on digital platform development, fitness content and brand creation, proprietary nutritional product formulation and connected fitness across three brands: Beachbody, Openfit and Myx. The Beachbody On Demand streaming service with workouts from Beachbody’s programs such as P90X, Insanity, and 21 Day Fix, and Openfit, that includes
live trainer-led workouts
and personalized nutrition, are each available as an app on iOS and Android mobile devices; a streaming channel on OTT devices such as Apple TV, Roku, Amazon Fire, and Chromecast; and online. Myx’s interactive fitness platform provides commercial grade stationary bikes and accessories and
on-demand
subscription-based
instructor-led
fitness classes that enable customers to have an
all-in-one
home fitness studio. Beachbody’s revenue is primarily generated through a network of independent distributors (“Coaches” or “micro-influencers”), internet marketing channels, and direct response advertising. Beachbody markets and sells its products primarily in the United States, United Kingdom, and Canada, and approximately 35% of Beachbody’s revenues for the three and six months ended June 30, 2021 are attributable to Shakeology, Beachbody’s premium nutritional shake.
Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”).
The merger between BB Merger Sub and Old Beachbody was accounted for as a reverse recapitalization in accordance with GAAP (the “Reverse Recapitalization”). Under this method of accounting, Forest Road is treated as the acquired company and Old Beachbody is treated as the acquirer for financial reporting purposes.
Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of Old Beachbody issuing stock for the net assets of Forest Road, accompanied by a recapitalization. The net assets of Forest Road are stated at historical cost, with no goodwill or other intangible assets recorded, see Note 2.
Old Beachbody was determined to be the accounting acquirer based on the following predominant factors:
 
 
 
Old Beachbody’s shareholders have the largest portion of the voting rights in the Company;
 
 
 
the board and management are primarily composed of individuals associated with Old Beachbody; and
 
 
 
Old Beachbody was the larger entity based on historical operating activity and Old Beachbody had the larger employee base at the time of the Business Combination.
The consolidated assets, liabilities and results of operations prior to the Reverse Recapitalization are those of Old Beachbody. The shares and corresponding capital amounts and losses per share, prior to the Business Combination, have been retroactively restated based on shares reflecting the exchange ratio established in the Business Combination.
 
6

The Beachbody Company, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
 
Old Beachbody was determined to be the accounting acquirer in the acquisition of Myx. As such, the acquisition is considered a business combination under ASC 805,
Business Combinations
, and was accounted for using the acquisition method of accounting. Beachbody recorded the fair value of assets acquired and liabilities assumed from Myx, see Note 9. The presented financial information for the three months and six months ended June 30, 2021 includes the financial information and activities for Myx for the period from June 26, 2021 to June 30, 2021.
The unaudited condensed consolidated financial statements include the accounts of the Company and its controlled subsidiaries. All intercompany transactions and balances have been eliminated.
Use of Estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Significant estimates include, but are not limited to, the valuation of acquired intangible assets, revenue arrangements with multiple performance obligations, equity-based compensation, amortization of content assets, impairment of goodwill, and the useful lives and recoverability of long-lived assets. The Company bases these estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgements about the carrying amounts of assets and liabilities. Actual results could differ from those estimates.
Unaudited Interim Condensed Financial Statements
The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, include all adjustments consisting of only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of June 30, 2021, its results of operations for the three and six months ended June 30, 2021 and 2020 and cash flows for the six months ended June 30, 2021 and 2020. The financial data and other financial information disclosed in the notes to these condensed consolidated financial statements related to the three- and
six-month
periods are also unaudited. The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results expected for the full fiscal year or any other period.
These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes included in the Company’s annual financial statements as of and for the fiscal year ended December 31, 2020.
Fair Value Option
The guidance in ASC 825,
Financial Instruments
, provides a fair value option election that allows entities to make an irrevocable election of fair value as the initial and subsequent measurement attribute for certain eligible financial assets and liabilities. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. The decision to elect the fair value option is determined on an
instrument-by-instrument
basis, must be applied to an entire instrument, and is irrevocable once elected. The Company elected to measure the investment in the convertible instrument from Myx using the fair value option at each reporting date. Assets and liabilities measured at fair value pursuant to this guidance are required to be reported separately in the unaudited condensed consolidated balance sheets or the footnotes from those instruments using another measurement method.
Fair Value
The Company applies fair value accounting for assets and liabilities measured on a recurring and nonrecurring basis. For assets and liabilities that are measured using quoted prices in active markets for identical assets or liabilities, the total fair value is the published market price per unit multiplied by the number of units held without consideration of transaction costs (Level 1). Assets and liabilities that are measured using significant other observable inputs are valued by reference to similar assets or liabilities, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data (Level 2). For all remaining assets and liabilities for which there are no significant observable inputs, fair value is derived using an assessment of various discount rates, default risk, credit quality, and the overall capital market liquidity (Level 3). These valuations require significant judgment.
 
7

The Beachbody Company, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
 
Accounts Receivable, Net
The Company provides credit in the normal course of business to its customers. Accounts receivable consist primarily of credit card receivables arising from the sale of products to customers on an installment basis, which generally have payment terms ranging from one to three months. Receivables are individually insignificant and are due from a large number of geographically dispersed customers. Accounts receivable is reported net of allowances for doubtful accounts which were approximately zero as of June 30, 2021 and December 31, 2020. The allowance for doubtful accounts is evaluated and adjusted to reflect the Company’s expected credit losses based on collection history and an analysis of the accounts receivable aging. The change in the allowance for doubtful accounts during the three and six months ended June 30, 2021 and 2020 is as follows (in thousands):
 
  
Three Months Ended June 30,
 
  
Six Months Ended June 30,
 
 
  
2021
 
  
2020
 
  
2021
 
  
2020
 
Balance, beginning of period
   $ 16      $ 55      $ 16      $ 69  
Charges
     —         —          —          32  
Write-offs
     —          (14 )      —          (60 )
    
 
 
    
 
 
    
 
 
    
 
 
 
Balance, end of period
   $ 16      $ 41      $ 16      $ 41  
    
 
 
    
 
 
    
 
 
    
 
 
 
Business Combinations
The Company accounts for business combinations under the acquisition method of accounting. The cost of an acquired company is assigned to the tangible and identifiable assets purchased and the liabilities assumed on the basis of their fair values at the date of acquisition. Any excess of the purchase price over the fair value of tangible and intangible assets acquired is assigned to goodwill.
The transaction costs associated with business combinations are expensed as they are incurred.
Common Stock Warrant Liability
The Company assumed 10,000,000 warrants originally issued in Forest Road’s initial public offering (the “Public Warrants”) and 5,333,333
 
warrants issued in a private placement that closed concurrently with Forest Road’s initial public offering, (the “Private Placement Warrants”) upon the Business Combination. The Public and Private Placement Warrants entitle the holder to purchase 
one
share of Class A Common Stock at an exercise price of $
11.50 per share. All of the Public and Private Placement Warrants remained outstanding as of June 30, 2021. The Public Warrants are publicly traded and become exercisable on November 30, 2021 provided that the Company has an effective registration statement and
 are
exercisable for cash unless certain conditions occur, such as the failure to have an effective registration statement related to the shares issuable upon exercise or redemption by the Company under certain conditions, at which time the warrants may be cashless exercised. The Private Placement Warrants are transferable, assignable or salable in certain limited exceptions. The Private Placement Warrants
were
 not transferable, assignable or salable until July 25, 2021, subject to certain limited exceptions. The Private Placement Warrants are exercisable for cash or on a cashless basis, at the holder’s option, and are
non-redeemable
so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will cease to be Private Placement Warrants, and become Public Warrants and will be redeemable by the Company and exercisable by such holders on the same basis as the other Public Warrants.
The Company evaluated the Public and Private Placement Warrants under ASC 815,
 Derivatives and Hedging—Contracts in Entity’s Own Equity
, and concluded they do not meet the criteria to be classified in stockholders’ equity. Specifically, the exercise of the Public and Private Placement Warrants may be settled in cash upon the occurrence of a tender offer or exchange that involves 50% or more of our Class A stockholders. Because not all of the voting stockholders need to participate in such tender offer or exchange to trigger the potential cash settlement and the Company does not control the occurrence of such an event, the Company concluded that the Public and Private Placement Warrants do not meet the conditions to be classified in equity. Since the Public and Private Placement Warrants meet the definition of a derivative under ASC 815, the Company recorded these warrants as liabilities in the unaudited condensed consolidated balance sheets at fair value, with subsequent changes in their respective fair values recognized in the change in fair value of warrant liabilities within the unaudited condensed consolidated statements of operations at each reporting date. The Public Warrants were publicly traded and thus had an observable market price to estimate fair value. The Private Placement Warrants were valued using a Black-Scholes option-pricing model as described in Note 4 to the unaudited condensed consolidated financial statements.
 
8

The Beachbody Company, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
 
Investment in Convertible Instrument
In December 2020, the Company purchased a $10.0 million convertible instrument from Myx. The convertible instrument was scheduled to mature
18 months
from issuance and bore interest of 11% per annum. The principal and accrued interest on the convertible instrument was to automatically convert into preferred shares upon the closing by Myx of a convertible preferred equity financing with gross proceeds of at least $35.0 million (a “Qualified Financing”) at a conversion price equal to 85% of the lowest price per unit paid in cash by investors in such Qualified Financing. Upon a change in control involving the Company and a special purpose acquisition company, immediately prior to the change in control transaction, the principal and accrued interest was to be automatically converted into preferred equity units of Myx at a conversion price equal to 85% of the price per unit contemplated in the change of control transaction. Such preferred equity units were to automatically convert into common shares of the surviving entity.
In March 2021, the Company increased the principal of the convertible instrument from Myx from $10.0 million to $15.0 million.
In connection with the Business Combination, the principal and interest were effectively settled at a fair value 
of $18.4 million. As of December 31, 2020, the convertible instrument
wa
s
 included within other assets in the consolidated balance sheets.
Prior to the Business Combination, the Company elected to measure the investment in convertible instrument from Myx using the fair value option at each reporting date. Under the fair value option, bifurcation of an embedded derivative was not necessary, and all related gains and losses on the host contract and derivative due to change in the fair value was reflected in other income, net in the condensed consolidated statements of operations.
Revenue Recognition
The Company’s primary sources of revenue are from sales of digital subscriptions, nutritional products and connected fitness equipment. The Company records revenue when it fulfills its performance obligation to transfer control of the goods or services to its customer. Control of shipped items is generally transferred when the product is delivered to the customer.
The amount of revenue recognized is the consideration that the Company expects it will be entitled to receive in exchange for transferring goods or services to its customers. Control of services, which are primarily digital subscriptions, transfers over time, and as such, revenue is recognized ratably over the subscription period (up to 12 months), using
a mid-month convention.
The Company sells a variety of bundled products that combine digital subscriptions, nutritional products, and/or other fitness products. The Company considers these sales to be revenue arrangements with multiple performance obligations and allocates the transaction price to each performance obligation based on its relative stand-alone selling price. The Company defers revenue when it receives payments in advance of delivery of products or the performance of services.
Revenue is recorded net of expected returns, discounts, and credit card chargebacks, which are estimated using the Company’s historical experience. Revenue is presented net of sales taxes and value added taxes (VAT and GST/HST) which are collected from customers and remitted to applicable government agencies.
The Company is the principal in all its relationships where third parties sell or distribute the Company’s goods or services. Payments made to the third parties are recorded in selling and marketing expenses within the unaudited condensed consolidated statements of operations.
Recently Adopted Accounting Pronouncements or Accounting Pronouncements Not Yet Adopted
In December 2019, the FASB issued
ASU 2019-12,
 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
, which removes specific exceptions to the general principles in Topic 740 in addition to simplifying other areas of Topic 740. The guidance in this update is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 and is effective for all other entities for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted. The Company adopted
ASU 2019-12 in
the first quarter of 2021 and the adoption had no material impact to the Company’s unaudited condensed consolidated financial statements.
 
9

The Beachbody Company, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
 
 
2.
Business Combination
As discussed in Note 1, on June 25, 2021, the Company consummated the Business Combination Agreement dated February 9, 2021, with Old Beachbody surviving the merger as a wholly-owned subsidiary of the Company.
At the effective time of the Merger (the “Effective Time”), and subject to the terms and conditions of the Business Combination Agreement, each equity unit of Old Beachbody, other than those held by Carl Daikeler and certain of his affiliated and related entities, was canceled and converted into the right to receive 3.359674941 shares (the “Exchange Ratio”) of the Company’s Class A Common Stock,
 
$
0.0001
 par
value per share (the “Class A Common Stock”), and each equity unit of Old Beachbody held by Carl Daikeler and certain of his affiliated and related entities was canceled and converted into the right to receive the number of shares of the Company’s Class X Common Stock, par value
 
$
0.0001
 per share, (the “Class X Common Stock,” and, together with the Class A Common Stock, the “Common Stock”) equal to the Exchange Ratio.
Pursuant to the Business Combination Agreement, 3,750,000 shares held by Forest Road Acquisition Sponsor LLC (the “Sponsor”) will be unvested and are subject to forfeiture if certain earnout conditions are not satisfied (“Forest Road
Earn-out
Shares”). Subject to certain other terms and conditions, the Forest Road
Earn-out
Shares will vest, in equal tranches of 10% each, commencing on December 22, 2021, upon the occurrence of the Company’s last sale price on the New York Stock Exchange (“NYSE”) exceeding each of the following
price-per-share
thresholds for any 20 trading days within any consecutive
30-day
trading period,: $12.00, $13.00, $14.00, $15.00 and $16.00. Any Sponsor Shares that do not vest within 10
years after Closing will be forfeited. The Forest Road
Earn-out
Shares are accounted for as equity-classified equity instruments, were included as merger consideration as part of the Reverse Recapitalization, and recorded in additional
paid-in
capital. As of June 30, 2021, all Forest Road
Earn-out
Shares are unvested.
Upon the closing of the Business Combination, the Company’s certificate of incorporation was amended and restated to, among other things, increase the total number of authorized shares of all classes of capital stock to 2,000,000,000 shares, $0.0001 par value per share, of which, 1,600,000,000 shares are designated as Class A Common Stock, 200,000,000 shares are designated as Class X Common Stock, 100,000,000 shares are designated as Class C Common Stock and 100,000,000 shares are designated as Preferred Stock. The holder of each share of Class A
C
ommon
S
tock is entitled to one vote, the holder of each share of Class X Common Stock is entitled to ten votes and except as otherwise required by law, the holder of each share of Class C Common Stock is not entitled to any voting powers.
In
connection with the Business Combination, a number of subscribers purchased an aggregate of
 
22,500,000 shares of Class A Common Stock (the
“PIPE”) from the Company,
for a purchase price of $10.00 per share and an aggregate purchase price of $225.0 million (the “PIPE Shares”), pursuant to separate subscription agreements entered into effective as of February 9, 2021.
At the Effective Time, and subject to the terms and conditions of the Business Combination Agreement, each Myx equity unit was canceled and converted into the right to receive approximately 13.5 million shares of Class A Common Stock; provided, however, that certain holders of Myx units received an amount in cash equal to the value of such shares not to exceed $37.7 
million.
 
10

The Beachbody Company, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
 
The following table reconciles the elements of the Business Combination to the unaudited condensed consolidated statement of cash flows and the unaudited condensed consolidated statement of stockholders’ equity for the six months ended June 30, 2021 (amounts in thousands):
 
 
  
Recapitalization
 
Cash- Forest Road trust and cash, net of redemptions
  
$
216,444
 
Cash- PIPE Financing
  
 
225,000
 
Less:
Non-cash
net assets assumed from Forest Road
  
 
293
 
Less: Fair value of Public and Private Warrants
  
 
(60,900
Less: Transaction costs and advisory fees for Beachbody allocated to equity
  
 
(19,923
Less: Transaction costs and advisory fees for Forest Road
  
 
(27,059
 
  
 
 
 
Net Business Combination
  
 
333,855
 
Less:
Non-cash
net assets assumed from Forest Road
  
 
(293
Less: Transaction costs and advisory fees for Beachbody allocated to warrants
  
 
(5,337
Add:
Non-cash
fair value of Forest Road warrants
  
 
60,900
 
Add: Accrued transaction costs and advisor fees
  
 
650
 
 
  
 
 
 
Net cash contributions from Business Combination
  
$
389,775
 
 
  
 
 
 
The Company recorded transaction costs and advisory fees allocated to warrants as a component of change in fair value of warrant liabilities in the unaudited condensed consolidated statements of operations.
The number of shares of common stock issued immediately following the consummation of the Business Combination:
 
Common stock of Forest Road, net of redemptions
  
 
21,616,515
 
Forest Road shares held by the Sponsor (1)
  
 
7,500,000
 
Shares issued in PIPE Financing
  
 
22,500,000
 
 
  
 
 
 
Business Combination and PIPE Financing shares - Class A
C
ommon
S
tock
  
 
51,616,515
 
Myx equity units - Class A Common Stock
  
 
13,546,503
 
Old Beachbody equity units - Class A
C
ommon
S
tock
 
(2)
  
 
101,762,614
 
Old Beachbody equity units - Class X
C
ommon
S
tock
(3)
  
 
141,250,310
 
 
  
 
 
 
Total shares of common stock immediately after Business Combination
  
 
308,175,942
 
 
 
(1)
Includes 3,750,000 Forest Road Earn-out Shares.
 
(2) 
The number of Old Beachbody equity units - Class A Common Stock was determined from 
20,220,589 common units and 10,068,841
preferred units of Old Beachbody outstanding immediately prior to the closing of the Business Combination converted at the Exchange Ratio. 
 
(3) 
The number of Old Beachbody equity units - Class X Common Stock was determined from
 42,042,850
common units of Old Beachbody outstanding immediately prior to the closing of the Business Combination converted at the Exchange Ratio. 
 
 
3.
Revenue
The Company’s revenue disaggregated by geographic region is as follows (in thousands):
 
    
Three Months Ended June 30,
    
Six Months Ended June 30,
 
    
2021
    
2020
    
2021
    
2020
 
United States
  
$
198,529     
$
200,008     
$
401,245     
$
355,032  
Rest of world
1
     24,579        18,476        48,082        32,788  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total revenue
   $ 223,108      $ 218,484      $ 449,327      $ 387,820  
 
(1)
Consists of Canada, United Kingdom and France.
Deferred Revenue
Deferred revenue is recorded for nonrefundable cash payments received for the Company’s performance obligation to transfer, or stand ready to transfer, goods or services in the future. Deferred revenue consists of subscription fees billed that have not been recognized and physical products sold that have not yet been delivered. During the three and six months ended June 30, 2021 the Company recognized $
23.6
 million and $
79.2
 million, respectively of revenue that was included in the deferred revenue balance as of December 31, 2020. During the three and six months ended June 30, 2020, the Company recognized $
17.8
 million and $
56.2
 million, respectively of revenue that was included in the deferred revenue balance as of December 31, 2019. 
 
11

The Beachbody Company, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
 
4.
Fair Value Measurements
The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):
 
 
    
June 30, 2021
 
    
Level 1
    
Level 2
    
Level 3
 
Assets
                          
Derivative assets
  
$
—       
$
22     
$
—    
    
 
 
    
 
 
    
 
 
 
Total Assets
   $ —        $ 22      $ —    
    
 
 
    
 
 
    
 
 
 
Liabilities
                          
Public Warrants
  
$
29,800
     $ —        $ —    
Private Placement Warrants
    
—  
      
 
 
      
20,373
 
    
 
 
    
 
 
    
 
 
 
Total Liabilities
   $ 29,800      $      $
20,373
 
    
 
 
    
 
 
    
 
 
 
   
    
December 31, 2020
 
    
Level 1
    
Level 2
    
Level 3
 
Assets
                          
Derivative assets
  
$
—       
$
164     
$
—    
Investment in convertible instrument
     —          —          10,288  
    
 
 
    
 
 
    
 
 
 
Total Assets
   $ —        $ 164      $ 10,288  
Fair values of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate the recorded value due to the short period of time to maturity. The fair value of the Public Warrants, which trade in active markets, is based on quoted market prices for identical instruments. The fair value of derivative instruments is based on Level 2 inputs such as observable forward rates, spot rates, and foreign currency exchange rates. The Company’s Private Placement warrants and investment in the convertible instrument are classified within Level 3 of the fair value hierarchy because their fair values are is based on significant inputs that are unobservable in the market. The fair value of goodwill and intangible assets is based on a valuation performed by a third-party using Level 3 inputs.
The valuation of the Private Placement Warrants and, prior to the Business Combination, the investment in convertible instrument use assumptions and estimates the Company believes would be made by a market participant in making the same valuations. The Company assesses these assumptions and estimates on
an on-going basis
as additional data impacting the assumptions and estimates are obtained.
The Company determined the fair value of the Private Placement Warrants using a Black-Scholes option-pricing model and the quoted price of the Company’s common stock. Volatility was based on the implied volatility derived from the average of the actual market activity of the Company’s peer group. The expected life was based on the remaining contractual term of the Private Placement Warrants, and the risk-free interest rate was based on the implied yield available on U.S. Treasury Securities with a maturity equivalent to the warrants’ expected life. The significant unobservable input used in the fair value measurement of the Private Placement Warrants is the implied volatility. Significant changes in the implied volatility would result in a significantly higher or lower fair value measurement, respectively.
The following table presents significant assumptions utilized in the valuation of the Private Placement Warrants on the Closing Date of the Business Combination and at June 30, 2021:
 
 
  
As of June 25,
2021
 
 
As of June 30,
2021
 
Risk-free rate
  
 
0.9
 
 
0.9
Dividend yield rate
  
 
0.0
 
 
0.0
Volatility
  
 
45.0
 
 
45.0
Contractual term (in years)
  
 
5.00
 
 
 
4.99
 
Exercise price
  
$
11.50
 
 
$
11.50
 
The following table presents changes in the fair value of the Private Placement Warrants for the three and six months ended June 30, 2021:
 
 
  
Three Months
Ended June 30,
2021
 
  
Six Months
Ended June 30,
2021
 
Balance, beginning of period
  
$
—  
 
  
$
—  
 
Assumed in Business Combination
  
 
26,400
 
  
 
26,400
 
Change in fair value
  
 
(6,027
  
 
(6,027
 
  
 
 
 
  
 
 
 
Balance, end of period
  
$
20,373
 
  
$
20,373
 
 
  
 
 
 
  
 
 
 
 
12

The Beachbody Company, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
 
For the three and six months ended June 30, 2021, the change in the fair value of Private Placement Warrants resulted from the change in fair value of the Company’s Class A Common Stock. The changes in fair value are included in the unaudited condensed consolidated statements of operations as a component of change in fair value of warrant liabilities.
Prior to the Business Combination and as of December 31, 2020, the convertible instrument was valued using a scenario-based analysis. Two primary scenarios were considered to arrive at the valuation conclusion for the convertible instrument. The first scenario considers the probability-weighted value of conversion at the stated discount to the issue price in a change in control event. The second scenario considers the probability-weighted value of conversion at the stated discount to the issue price in a Qualified Financing event. As of the date of the investment in the convertible instrument, an implied yield was calculated such that the sum of the value of the straight debt and the value of the conversion feature was equal to the principal investment amount. The implied yield of the investment is carried forward with a market adjustment and used as the primary discount rate for subsequent valuation dates.
The significant unobservable inputs used in the fair value measurement of the Company’s investment in convertible instrument are the probabilities of Myx closing a future Qualified Financing or change of control, which would trigger conversion of the convertible instrument, probabilities as to the periods in which the outcomes are expected to be achieved and discount rate. Significant changes in the probabilities of the completion of the future Qualified Financing or change in control would result in a significantly higher or lower fair value measurement, respectively. Significant changes in the probabilities as the period in which outcomes will be achieved would result in a significantly lower or higher fair value measurement, respectively.
The following table presents changes in the Level 3 investment in convertible investment from Myx measured at fair value for the three and six months ended June 30, 2021:
 
 
  
Three Months Ended

June 30, 2021
 
  
Six Months Ended June

30, 2021
 
Balance, beginning of period
   $ 16,667      $ 10,288  
Investment in convertible
instrument
     —          5,000  
Change in fair value
     1,735        3,114  
Conversion of investment
     (18,402      (18,402
    
 
 
    
 
 
 
Balance, end of period
   $ —        $ —    
For the three and six months ended June 30, 2021, the change in the fair value of the investment in convertible instrument resulted from the effective settlement of the instrument. The changes in fair value are included in the
unaudited
condensed consolidated statements of operations as a component of other income, net.
5. Inventory, net
Inventory, net consists of the follo
w
ing (in thousands):
                      
                      
 
  
June 30,

2021
 
  
December 31,
2020
 
Raw materials and work in process
   $  26,046      $  26,480  
Finished goods
     48,192        38,874  
    
 
 
    
 
 
 
Total inventory
   $ 74,238      $ 65,354  
Adjustments to change the carrying value of excess and obsolete inventory to the lower of cost or net realizable value were $0.8 million and $2.8 million during the three and six months ended June 30, 2021, respectively and ($0.5) million and ($0.1)
 million during the three and six months ended June 30, 2020, respectively. The gains in 2020 were attributable to increased demand on reserved excess inventory. These adjustments are included in the unaudited condensed consolidated statements of operations as a component of nutrition and other
 
cost of revenue.
 
 
6.
Other Current Assets
Other current assets consist of the following (in thousands):
                      
                      
 
  
June 30,
2021
 
  
December 31,
2020
 
Deferred coach costs
   $  33,510      $  29,967  
Deposits
     9,945        3,035  
Other
     2,831        4,362  
    
 
 
    
 
 
 
Total other current assets
   $ 46,286      $ 37,364  
 
13
The Beachbody Company, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
 
 
7.
Property and Equipment, Net
Property and equipment, net consists of the following (in thousands):
 
                      
                      
 
  
June 30,
2021
 
  
December 31,
2020
 
Computer software
   $ 203,741      $ 194,314  
Leasehold improvements
     24,197        24,197  
Computer equipment
     21,264        21,172  
Computer software and web development projects
in-process
     26,013        12,380  
Furniture, fixtures and equipment
     6,978        7,016  
    
 
 
    
 
 
 
Property and equipment, gross
     282,193        259,079  
Less: Accumulated depreciation
     (187,754      (178,910
    
 
 
    
 
 
 
Property and equipment, net
   $ 94,439      $ 80,169  
    
 
 
    
 
 
 
 
The Company recorded depreciation expense related to property and equipment in the following e
x
pense categories of its unaudited condensed consolidated statements
o
f operations as follows (in thousands):
 
    
Three Months Ended June 30,
    
Six Months Ended June 30,
 
    
2021
    
2020
    
2021
    
2020
 
Cost of revenue
   $ 4,146      $  3,037      $ 7,884      $ 6,076  
Selling and marketing
     389        552        840        1,068  
Enterprise technology 
and development
     5,340        5,277        12,651        10,214  
General and administrative
     617        818        1,263        1,620  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total depreciation
   $  10,492      $  9,684      $  22,638      $  18,978  
 
 
8.
Content Assets, Net
Content assets, net consist of the following (in thousands):
 
                      
                      
 
  
June 30,
2021
 
  
December 31,
2020
 
Released, less amortization
   $  25,215      $  17,306  
In production
     5,740        2,131  
    
 
 
    
 
 
 
Content assets, net
   $  30,955      $  19,437  
    
 
 
    
 
 
 
The Company expects $
14.8
 million of content assets to be amortized during the next 12 months and 
100
%
of the balance
within four years. The Company recorded amortization expense for content assets of $
3.3
million and $
6.1
 million during the three and six months ended June 30, 2021, respectively and $
1.7
 million and $
3.2
 million during the three and six months ended June 30, 2020, respectively. 
 
 
9.
Acquisitions
Myx
The Company acquired 
100
% of the equity of Myx pursuant to the Business Combination Agreement. 
The following summarizes the consideration transferred
on the Closing Date for
 the Myx acquisition (in thousands): 
Purchase Price
        
Cash
c
onsideration (1)
   $  37,700  
Share consideration (2)
     162,558  
Fair value of Myx instrument held by Old Beachbody (3)
     18,402  
Promissory note held by Old Beachbody (4)
 
 
4,216
 
    
 
 
 
Total consideration
   $  222,876  
 
 
(1)
Cash consideration includes, among other things, the payoff of certain of Myx’s existing debt obligations
, payments of certain of Myx’s transaction expenses, and cash payments as consideration for certain Myx equity units.
 
(
2
)
Share consideration was calculated based on
 13,546,503
shares of Class A Common Stock issued multiplied by the share closing price on the Closing Date of $12.00.
 
14

The Beachbody Company, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
 
(3)
Fair value of Myx instrument held by Old Beachbody was effectively settled on the Closing Date, see Note 1. 
 
(4)
In April and June 2021, Old Beachbody entered into promissory note agreements with Myx. Such promissory notes were effectively settled on the Closing Date.
The acquired assets and assumed liabilities of Myx were recorded at their preliminary acquisition date fair values. The purchase price allocations are subject to material change as the Company continues to gather information relevant to its determination of the fair value of the assets and liabilities acquired primarily related to, but not limited to, inventory, intangible assets, deferred revenue, and deferred income taxes.
 
Any adjustments to the purchase price allocations will be made as soon as practicable but no later than one year from the acquisition date. The following table summarizes the preliminary fair value of assets acquired and liabilities assumed (in thousands):
 
Allocation
  
     
Goodwill
  
$
157,922
 
Intangible assets:
  
     
Trade name/ Trademark
  
 
43,700
 
Developed technology
  
 
14,000
 
Customer relationships
  
 
20,400
 
 
  
 
 
 
 
  
 
78,100
 
Cash acquired
  
 
420
 
Inventory, net
  
 
11,447
 
Other assets
  
 
3,354
 
Content assets
 
 
3,400
 
Deferred revenue
  
 
(2,168
Other liabilities
  
 
(14,039
Deferred tax liabilities
  
 
(15,560
 
  
 
 
 
 
  
$
222,876
 
 
  
 
 
 
The excess of the purchase price over the estimated fair values of the net assets acquired, including identifiable intangible assets, is recorded as goodwill. Goodwill is primarily attributable to the assembled workforce of Myx and expected synergies from combining operations. Goodwill recognized was allocated to the Other operating segment and is generally not deductible for tax purposes.
The fair values of the trade name and trademark intangible assets were determined using an “income approach”, specifically, the relief-from royalty approach, which is a commonly accepted valuation approach. This approach is based on the assumption that in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset. Therefore, a portion of Myx’s earnings, equal to
the after-tax royalty
that would have been paid for the use of the asset, can be attributed to the firm’s ownership. The fair value of the developed technology intangible asset was also determined by the relief-from-royalty approach. The fair values of the customer relationship intangible assets were determined by using an “income approach,” specifically a multi-period excess earnings approach, which is a commonly accepted valuation approach. Under this approach, the net earnings attributable to the asset or liability being measured are isolated using the discounted projected net cash flows. These projected cash flows are isolated from the projected cash flows of the combined asset group over the remaining economic life of the intangible asset or liability being measured. Both the amount and the duration of the cash flows are considered from a market participant perspective. Where appropriate, the net cash flows were adjusted to reflect the potential attrition of existing customers in the future, as existing customers are a “wasting” asset and are expected to decline over time.
The revenue and operating loss from Myx included in the Company’s unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2021 was $0.1 million and $0.3 million, respectively. During the three and six months ended June 30, 2021, Company incurred $1.7 million and $1.8 
million in transaction expenses associated with the Myx acquisition, which are included in general and administrative expenses in the unaudited condensed consolidated statements of operations.
The following unaudited pro forma financial information presents the combined results of operations of the Company and Myx as if the companies had been combined as of January 1, 2020. The pro forma financial information includes the accounting effects of the business combination, including amortization of intangible assets. The unaudited pro forma financial information is presented for information purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the periods presented, nor should it be taken as indication of the Company’s future consolidated results of operations.
 
 
  
Three Months Ended June 30,
 
  
Six Months Ended June 30,
 
 
  
2021
 
  
2020
 
  
2021
 
  
2020
 
Pro forma combined:
  
     
  
     
  
     
  
     
Revenue
   $ 237,286      $ 220,791      $ 480,543      $ 390,775  
Net
 
loss
  
  (25,362
)
 
  
  (14,597
)
 
  
  (67,747
)
 
  
  (27,073
)
 
 
15

The Beachbody Company, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
 
Ladder
On September 18, 2020, the Company acquired Ladder, a sports nutrition company, to enhance the Openfit platform by providing
premium, NSF-certified supplements
developed and endorsed by elite athletes.
 
The Company reco
g
nized the assets and liabilities of Ladder bas
e
d on its preliminary estimates of their acquisition date fair values. The purchase price allocations are subject to change as the Company continues to gather information relevant to its determination of the fair value of the assets and liabilities acquired primarily related to, but not limited to, deferred income taxes. Any adjustments to the purchase price allocations will be made as soon as practicable but no later than one year from the acquisition date. There were no adjustments to the purchase price allocations during the three and six months ended June 30, 2021. The following table summarizes the comp
o
nents of consideration and the preliminary fair value estimates of assets acquired and liabilities assumed (in thousands):
 
Purchase Price
        
Common units issued in connection with acquisition (1)
  
$
27,889  
Allocation
        
Goodwill
  
$
11,606  
Intangible assets:
        
Trade name
     7,500  
Customer-related
     300  
Formulae
     1,950  
Talent and representation contracts
     10,300  
    
 
 
 
       20,050  
Cash acquired
     1,247  
Other assets acquired
     1,132  
Liabilities acquired
     (1,834
Deferred tax liabilities
     (4,312
    
 
 
 
    
$
 27,889  
    
 
 
 
 
(1)
The fair value of common units issued in connection with the acquisition was calculated based on 1,449,537
common
units of
Old
 Beachbody
multiplied by the estimated fair value per unit of $19.24. 
The excess of the purchase price over the estimated fair values of the net assets acquired, including identifiable intangible assets, is recorded as goodwill. Goodwill is primarily attributable to the assembled workforce of Ladder and expected synergies from combining operations. Goodwill recognized was allocated to the Company’s Other operating segment and is generally not deductible for tax purposes.
The revenue from Ladder included in the Company’s unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2021 was $0.2 million and $0.5 million, respectively. The operating loss from Ladder included in the Company’s unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2021 was $0.1 million and $0.5 million, respectively.
The following unaudited pro forma financial information presents the combined results of operations as if Ladder had been combined with the Company as of January 1, 2020. The pro forma financial information includes the accounting effects of the business combination, including amortization of intangible assets. The unaudited pro forma financial information is presented for information purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the periods presented, nor should it be taken as indication of the Company’s future consolidated results of operations.
 
 
  
Three Months
Ended June 30,
 
  
Six Months Ended
June 30,
 
 
  
2020
 
  
2020
 
Pro forma combined:
  
     
  
     
Revenue
   $  219,302      $  389,244  
Net
loss income
     (11,582      (22,000
 
16
The Beachbody Company, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
 
10. Goodwill and Acquired Intangible Assets
Goodwill
Changes in goodwill for the six months ended June 30, 2021 is as follows (in thousands):
 
  
June 30,
2021
 
Goodwill, beginning of period
   $  18,981  
Acquisition of Myx
     157,922  
    
 
 
 
Goodwill, end of period
   $  176,903  
    
 
 
 
 
Intangible Assets, Net
Intangible assets as of June 30, 2021 and December 31, 2020 consisted of the following (in thousands):
 
    
June 30, 2021
    
December 31, 2020
        
    
Acquired
Intangibles,
Gross
    
Accumulated
Amortization
   
Acquired

Intangibles,

Net
    
Acquired
Intangibles,
Gross
    
Accumulated
Amortization
   
Acquired
Intangibles,
Net
    
Weighted-Average

Remaining Useful
Life (years)
 
Contract-based
   $ 300      $ (200   $ 100      $ 300      $ (150   $ 150        1.0  
Customer-related
     21,100        (606     20,494        700        (337     363        2.9  
Technology-based
     20,200        (6,249     13,951        6,200        (4,650     1,550       
2.8
 
Talent and representation contracts
     10,300        (1,931     8,369        10,300        (644     9,656        3.3  
Formulae
     1,950        (147     1,803        1,950        (49     1,901        9.3  
Trade name
     51,200       
 
 
      51,200        7,500        —         7,500        Indefinite  
    
 
 
    
 
 
   
 
 
    
 
 
    
 
 
   
 
 
          
     $  105,050      $ (9,133   $  95,917      $  26,950      $ (5,830 )   $  21,120           
    
 
 
    
 
 
   
 
 
    
 
 
    
 
 
   
 
 
          
Amortization expense for acquired intangible
assets
was $
1.7
 million and $
3.3
 million during the three and six months ended June 30, 2021 and $
0.9
 million and $
1.7
million during the three and six months ended June 30, 2020, respectively. The estimated future amortization expense of acquired intangible assets as of June 30, 2021 is as follows (in thousands):
 
Six months ended December 31, 2021
   $  6,660  
Year ended December 31, 2022
     13,233  
Year ended December 31, 2023
     13,070  
Year ended December 31, 2024
     8,932  
Year ended December 31, 2025
     1,896  
Thereafter
     926  
    
 
 
 
     $  44,717  
    
 
 
 
      
11. Accrued Expenses
Accrued expenses consist of
the
followings (in thousands):
                      
                      
 
  
June 30,
2021
 
  
December 31,
2020
 
Coach costs
 
$
20,508
 
 
$
19,126
 
Advertising
 
 
14,172
 
 
 
3,626
 
Employee compensation and benefits
     13,359         28,855  
Information technology
     11,878        5,621  
Inventory, shipping and fulfillment
     9,877        10,244  
Sales and income taxes
     4,114        4,132  
Other accrued expenses
     13,532        8,351  
    
 
 
    
 
 
 
Total accrued expenses
   $ 87,440      $ 79,955  
    
 
 
    
 
 
 
 
17

The Beachbody Company, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
 
12. Credit Facility
In December 2018, Beachbody, LLC, as borrower, and
Old
Beachbody and certain of Beachbody, LLC’s subsidiaries, as guarantors, entered into a credit agreement with Bank of America, N.A., as lender, administrative agent and letter of credit issuer for a $
35
 million revolving credit facility with a $
10
 million sublimit for letters of credit (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Facility”). 
The Credit Facility was amended in April 2020 to extend the maturity date to December 2021, amend certain pricing provisions and financial covenants, and amend other provisions including the definition of applicable rates based on consolidated EBITDA pricing levels. The Credit Facility was further amended in September 2020, whereby Old Beachbody assumed the Company’s obligations under the Credit Facility, and in March 2021 to extend the maturity date to June 2022, amend financial covenants, and temporarily increase the Credit Facility by $20
 million
 for a period of either 90 days, or
until
the consummation of the Business Combination.
In connection with the transactions contemplated by the Business Combination Agreement, on June 23, 2021, the Credit Facility was amended, which, among other things, (a) permitted the consummation of the Business Combination and certain other transactions contemplated by the Business Combination Agreement, and (b) amended certain terms of the Credit Facility to, among other things, (i) enable Old Beachbody and Beachbody, LLC to consummate the Business Combination and certain other transactions contemplated by the Business Combination Agreement, (ii) require that the Company join the Credit Facility as a parent guarantor thereunder, and (iii) require that Myx join the Credit Facility as a subsidiary guarantor thereunder.
As of June 30, 2021 and December 31, 2020, there were
 
no
 borrowings outstanding, and a letter of credit was issued under the Credit Facility for $
3.0
 million. 
Borrowings may be either Bloomberg Short-Term Bank Yield Index (“BSBY”)
 
rate loans or base rate loans at the Company’s election. BSBY rate loans bear interest at an annual rate equal to the BSBY
rate
 plus
 1.75% to 2.25%. Base rate loans are at the base rate, as defined in the amended Credit Facility, plus 0.75% to 1.25%. The Company also pays a 1.75% to 2.25% fee on the letters of credit outstanding and a 0.375% to 0.5% commitment fee on the unused Credit Facility. The Company incurred $0.2 million and $0.3 million of interest and approximately zero and $0.1 million of fees under the Credit Facility during the three and six months ended June 30, 2021 and $0.1 million and $0.2 million of interest and approximately zero and $0.1 million of fees under the Credit Facility during the three and six months ended June 30, 2020.
The Credit Facility contains certain reporting and financial covenants which require the Company to maintain a minimum consolidated EBITDA amount and comply with a maximum capital expenditures amount. The Company was in compliance with all covenants as of June 30, 2021.
13. Leases
The Company leases facilities under noncancelable operating leases expiring through 2025 and certain equipment under a finance lease expiring in 2024.
At June 30, 2021 and December 31, 2020, the Company had operating lease liabilities of $36.1 million and $41.2 million, respectively, and
right-of-use
assets of $29.0 million and $32.9 million, respectively. As of June 30, 202
1
 and December 31, 2020, the Company had finance lease liabilities $0.4 million and $0.4 million, respectively,
and right-of-use assets
of $0.4 million and $0.4 million, respectively.
The Company’s leases do not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees. Certain of the Company’s leases include renewal options and escalation clauses; renewal options have not been included in the calculation of lease liabilities
and right-of-use assets
as the Company is not reasonably certain to exercise these options. Variable expenses generally represent the Company’s share of the landlord operating expenses.
 
18
The Beachbody Company, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
 
The following summarizes the Company’s leases (in thousands):
 
 
  
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
 
  
2021
 
  
2020
 
 
2021
 
  
2020
 
Finance lease costs:
  
     
  
     
 
     
  
     
Amortization of
right-of-use
assets
  
$
36
 
  
$
36
 
 
$
73
 
  
$
73
 
Interest on lease liabilities
  
 
4
 
  
 
5
 
 
 
8
 
  
 
11
 
Operating lease costs
  
 
2,510
 
  
 
2,459
 
 
 
4,903
 
  
 
4,919
 
Short-term lease costs
  
 
21
 
  
 
75
 
 
 
22
 
  
 
132
 
Variable lease costs
  
 
165
 
  
 
(65
 
 
336
 
  
 
(113
 
  
 
 
 
  
 
 
 
 
 
 
 
  
 
 
 
Total lease costs
  
$
2,736
 
  
$
2,510
 
 
$
5,342
 
  
$
5,022
 
 
  
 
 
 
  
 
 
 
 
 
 
 
  
 
 
 
 
  
 
 
  
 
 
 
Six Months Ended June 30,
 
 
  
 
 
  
 
 
 
2021
 
 
2020
 
Cash paid for amounts included in the measurement of lease liabilities
 
 
 
 
 
 
 
 
  
     
 
     
Operating cash flows from finance leases