Beachbody Company, Inc. 10-Q

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 Table of Contents 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 Table of Contents 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 Table of Contents 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 Table of Contents 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 Table of Contents 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 Table of Contents 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 Table of Contents 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 Table of Contents 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 Table of Contents 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 Table of Contents 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 Table of Contents 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 Table of Contents 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 Table of Contents 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 Table of Contents 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 Table of Contents 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 Table of Contents 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 Table of Contents 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 Table of Contents 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 $ 8 $ 11 Operating cash flows from operating leases 6,179 6,221 Financing cash flows from finance leases 73 70 Right-of-use asset obtained in exchange for new operating lease liabilities — — Weighted-average remaining lease term—finance leases 2.8 3.8 Weighted-average remaining lease term—operating leases 3.5 4.4 Weighted-average discount rate—finance leases 4.0 % 4.0 % Weighted-average discount rate - operating leases 5.5 % 5.5 % Maturities of our operating and finance leases, excluding short-term leases, are as follows (in thousands): Operating Leases Finance Leases Total Six Months Ended December 31, 2021 $ 4,343 $ 81 $ 4,424 Year ended December 31, 2022 11,183 161 11,344 Year ended December 31, 2023 11,780 123 11,903 Year ended December 31, 2024 12,616 3 12,619 Year ended December 31, 2025 — — — Thereafter — — — Total 39,922 368 40,290 Less present value discount ( 3,831 ) ( 17 ) ( 3,848 ) Lease liabilities at June 30, 2021 $ 36,091 $ 351 $ 36,442 As the Company’s lease agreements do not provide an implicit rate, the discount rates used to determine the present value of lease payments are generally based on the Company’s estimated incremental borrowing rate for a secured borrowing of a similar term as the lease. 14. Commitments and Contingencies Inventory Purchase and Service Agreements The Company has noncancelable inventory purchase and service agreements with multiple service providers which expire at varying dates through 2025. Service agreement obligations include amounts related to fitness and nutrition trainers, future events, information systems support, and other technology projects. Future minimum payments under noncancelable service and inventory purchase agreements for the periods succeeding June 30, 2021 are as follows (in thousands): Six Months Ended December 31, 2021 $ 124,020 Year ended December 31, 2022 7,413 Year ended December 31, 2023 1,431 Year ended December 31, 2024 1,250 Year ended December 31, 2025 1,250 $ 135,364 The preceding table excludes royalty payments to fitness trainers, talent, and others that are based on future sales as such amounts cannot be reasonably estimated. 19 Table of Contents The Beachbody Company, Inc. Notes to Unaudited Condensed Consolidated Financial Statements Contingencies The Company is subject to litigation from time to time in the ordinary course of business. Such claims typically involve its products, intellectual property, and relationships with suppliers, customers, distributors, employees, and others. Contingent liabilities are recorded when it is both probable that a loss has occurred and the amount of the loss can be reasonable estimated. Although it is not possible to predict how litigation and other claims will be resolved, the Company does not believe that any currently identified claims or litigation matters will have a material adverse effect on its consolidated financial position or results of operations. 15. Common Stock Warrant Liability At June 30, 2021, there were 10,000,000 Public Warrants and 5,333,333 Private Placement warrants outstanding. As part of Forest Road’s initial public offering, 10,000,000 Public Warrants were sold. The Public Warrants entitle the holder thereof to purchase one share of Class A Common Stock at a price of $ 11.50 per share, subject to adjustments. The Public Warrants may only be exercised for a whole number of shares of Class A Common Stock. No fractional shares will be issued upon exercise of the warrants. The Public Warrants will become exercisable on November 30, 2021, provided that the Company has an effective registration statement. Simultaneously with Forest Road’s initial public offering, Forest Road consummated a private placement of 5,333,333 Private Placement Warrants with Forest Road’s sponsor. Each Private Placement warrant is exercisable for one share of Class A Common Stock at a price of $ 11.50 per share, subject to adjustment. The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the Class A Common Stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until July 25, 2021, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the initial purchasers or such purchasers’ permitted transferees. If the Private Placement Warrants are held by someone other than the initial shareholders or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. Once the warrants become exercisable, the Company may redeem the Public Warrants: • in whole and not in part; • at a price of $ 0.01 per warrant; • upon not less than 30 days’ prior written notice of redemption to each warrant holder; and • if, and only if, the closing price of Class A Common Stock equals or exceeds $ 18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders. The Company will not redeem the warrants as described above unless an effective registration statement under the Securities Act covering the Class A Common Stock issuable upon exercise of the warrants is effective and a current prospectus relating to those Class A Common Stock is available throughout the 30-day redemption period, except if the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act. If and when the warrants become redeemable, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. The exercise price and number of shares of common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances, including in the event of a share dividend, or recapitalization, reorganization, merger or consolidation. If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. In no event will the Company be required to net cash settle any warrant. The Company concluded the Public Warrants and Private Placement Warrants meet the definition of a derivative under ASC 815 (as described in Note 1) and are recorded as liabilities. Upon consummation of the Business Combination, the fair value of the Public Warrants and Private Placement Warrants were recorded in the unaudited condensed consolidated balance sheets. The fair value of the Public Warrants and Private Placement Warrants was remeasured as of June 30, 2021, resulting in a $ 10.7 million non-cash change in fair value in the unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2021. Transaction costs and advisory fees allocated to the issuance of the Public and Private Placement Warrants of $ 5.3 million were also recorded as a component of change in fair value of warrant liabilities in the unaudited condensed consolidated statements of operations, resulting in a net change in fair value of warrant liabilities of $ 5.4 million. 20 Table of Contents The Beachbody Company, Inc. Notes to Unaudited Condensed Consolidated Financial Statements 16. Stockholders’ Equity As of June 30, 2021, 2,000,000,000 shares, $ 0.0001 par value per share are authorized, 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. Common Stock Holders of each share of Class A Common Stock are entitled to dividends when, as and if declared by the Company’s board of directors, subject to the rights and preferences of any holders of outstanding series of Preferred Stock holders. As of June 30, 2021, the Company had not declared any dividends. The holder of each Class A Common Stock 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. Old Beachbody Prior to the Business Combination, Old Beachbody’s preferred units were convertible into common units, at the option of the holders at any time, with no additional consideration required. The preferred units were to convert to common units at a rate of 1-for-1 , subject to adjustment for certain events including unit split, unit dividend or recapitalization. The preferred units were subject to automatic conversion if the Company consummates an initial public offering that meets certain criteria. The holders could redeem the preferred units at any time after December 14, 2024, at a price equal to the greater of (i) the fair market value of the common units into which such preferred units are convertible or (ii) approximately $ 9.93 per unit, or $ 100.0 million in aggregate (the “Capital Contribution”), reduced by general distributions previously made to the holders plus any declared but unpaid distributions as of the date of the redemption notice. The holders were entitled to distributions, in the amount, if any, of available cash flows, as determined by a majority of the Board of Managers. Distributions were to be made to common unit members and preferred unit members in proportion to their percentage of ownership interests, with priority to certain tax distributions and distributions to reimburse Beachbody Holdings and the holders for certain third-party expenses that have not been previously paid. The redemption by the holders or the completion of an initial public offering was not solely within the control of Old Beachbody, and as such, the preferred units were classified as mezzanine members’ equity. In connection with the Business Combination , 10,068,841 p referred u nits were converted into 33,828,030 shares of Class A Common Stock. As of December 31, 2020, 100,000,000 common units of Old Beachbody were authorized, and 62,263,439 common units were outstanding. In connection with the Business Combination, 62,263,439 common units of Old Beachbody were converted into 67,934,584 shares of Class A Common Stock and 141,250,310 shares of Class X Common Stock. Old Beachbody members’ personal liability for the obligations or debts of the Company were limited. The Company’s operating agreement called for the Company to be dissolved and terminated upon the earliest occurrence of the following events: bankruptcy of the Company, decision by a majority of both the common and preferred unit holders to dissolve the Company, or the date the Company may otherwise be dissolved by operation of law or judicial decree. 21 Table of Contents The Beachbody Company, Inc. Notes to Unaudited Condensed Consolidated Financial Statements Accumulated Other Comprehensive Income (Loss) The following tables summarize changes in accumulated other comprehensive income (loss), net of tax (in thousands): Unrealized Gain (Loss) on Derivatives Foreign Currency Translation Adjustment Total Balances at December 31, 2019 $ ( 99 ) $ 111 $ 12 Other comprehensive income (loss) before reclassifications 246 ( 327 ) ( 81 ) Amounts reclassified from accumulated other comprehensive income (loss) ( 47 ) — ( 47 ) Tax effect ( 53 ) — ( 53 ) Balances at June 30, 2020 $ 47 $ ( 216 ) $ ( 169 ) Balances at December 31, 2020 $ ( 246 ) $ 44 $ ( 202 ) Other comprehensive income (loss) before reclassifications ( 170 ) 54 ( 116 ) Amounts reclassified from accumulated other comprehensive income (loss) 339 — 339 Tax effect ( 38 ) — ( 38 ) Balances at June 30, 2021 $ ( 115 ) $ 98 $ ( 17 ) 17. Equity-Based Compensation Equity Compensation Plans Prior to the Business Combination, the Company maintained its 2020 Beachbody Company Group LLC Equity Compensation Plan (the “2020 Plan”), under which, grants were awarded to certain employees, consultants, and members of the Company’s board of directors through the granting of one or more of the following types of awards: (a) nonqualified unit options, (b) unit awards, and (c) unit appreciation rights. The Company granted nonqualified unit options with vesting periods ranging from three to five years . Upon closing of the Business Combination, awards under the 2020 Plan were converted at the Exchange Ratio, and the Company’s board of directors approved the 2021 Incentive Award Plan (the “2021 Plan”). The 2021 Plan provides for the grant of stock options, including ISOs and nonqualified stock options (“NSOs”), SARs, restricted stock, dividend equivalents, restricted stock units (“RSUs”) and other stock or cash-based awards. Under the 2021 Plan, up to 30,442,594 shares of Class A Common Stock will be available for issuance under the Plan. In addition, the number of shares of Class A Common Stock available for issuance under the 2021 Plan will be increased on January 1 of each calendar year beginning in 2022 and ending in 2031 by an amount equal to the lesser of (i) five percent ( 5 %) of the total number of shares of Class A and Class X Common Stock outstanding on the final day of the immediately preceding calendar year and (ii) the number of shares determined by the Company’s board of directors. As of June 30, 2021, 30,442,594 shares of Class A Common Stock are available for issuance under the 2021 Plan. All options and awards typically expire ten years from the date of grant if not exercised. In the event of a termination of employment, all unvested options are forfeited immediately. Generally, any vested options may be exercised within three months, depending upon the circumstances of termination, except for instances of termination “with cause” whereby any vested options or awards are forfeited immediately. 22 Table of Contents The Beachbody Company, Inc. Notes to Unaudited Condensed Consolidated Financial Statements A summary of the activity under the plans are as follows: Options Outstanding Number of Options Weighted- Average Exercise Price (per option) Weighted- Average Remaining Contractual Term (in years) Outstanding at December 31, 2020 (as previously reported) 10,170,288 $ 7.04 5.70 Conversion of awards due to recapitalization 23,998,437 ( 4.94 ) Outstanding at December 31, 2020, after effect of reverse acquisition 34,168,725 2.10 Granted 890,300 9.65 Exercised — — Forfeited ( 470,505 ) 2.48 Outstanding at June 30, 2021 34,588,520 $ 2.29 5.28 Exercisable at June 30, 2021 23,444,367 $ 1.88 3.89 The fair value of each award as of the date of grant is estimated using a Black-Scholes option-pricing model. The following table summarizes the assumptions used to determine the fair value of option grants: Six Months Ended June 30, 2021 2020 Risk-free rate 0.7 % 0.5 % Dividend yield rate 0.0 % 0.0 % Volatility 53.9 % 55.0 % Expected term (in years) 6.23 6.23 Weighted-average exercise price $ 9.65 $ 2.52 The vesting periods are based on the terms of the option grant agreements. The risk-free interest rates are based on the U.S. Treasury rates as of the grant dates for the expected terms of the options. Given the lack of public market for the Company’s common units prior to the Business Combination and minimal history as a public company subsequent to the Business Combination, the price volatilities represent calculated values based on the historical price volatilities of publicly traded companies within the Company’s industry group over the options’ expected terms. The expected terms of the options granted were estimated using the simplified method by taking an average of the vesting periods and the original contractual terms. Prior to the Business Combination, the exercise prices represent the estimated fair values of one common unit of the Company’s equity on the grant dates. Subsequent to the Business Combination, the Company’s b oard of d irectors determines the fair value of the Common Stock based on the closing market price on or around the date of grant. A summary of the unvested option activity is as follows: Number of Options Weighted- Average Grant Date Fair Value (per option) Unvested at December 31, 2020 (as previously reported) 3,701,114 $ 4.34 Conversion of awards due to recapitalization 8,733,309 ( 3.05 ) Unvested at December 31, 2020, after effect of reverse acquisition 12,434,423 1.29 Granted 890,300 4.91 Vested ( 1,710,066 ) 1.29 Forfeited ( 470,504 ) 1.19 Unvested at June 30, 2021 11,144,153 $ 1.58 23 Table of Contents The Beachbody Company, Inc. Notes to Unaudited Condensed Consolidated Financial Statements The fair value of options granted during the six months ended June 30, 2021 and 2020 was $ 4.4 million, (or $ 4.91 weighted average per option) and $ 4.4 million (or $ 1.29 weighted average per option), respectively. The total fair value of awards which vested during the six months ended June 30, 2021 and 2020 was $ 2.2 million and $ 1.7 million, respectively. Compensation Warrants During the year ended December 31, 2020, the Company issued warrants for the purchase of 1,184,834 of Old Beachbody’s common units at an exercise price of $ 8.44 per unit. The warrants vest 25 % at the grant date and 25 % at each of the first, second, and third anniversaries of the grant date. The warrants have a 10 -year contractual term. In connection with the Business Combination, the Old Beachbody warrants were exchanged for 3,980,656 warrants for the purchase of the Company’s Class A Common Stock at an exercise price of $ 2.52 per share. As of June 30, 2021, 995,164 warrants were exercisable. Compensation cost associated with the warrants will be recognized over the requisite service period, which is 4.25 years. Equity-Based Compensation Expense Equity-based compensation expense for the three and six months ended June 30, 2021 and 2020 was as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Cost of revenue $ 91 $ 50 $ 182 $ 106 Selling and marketing 1,616 265 3,333 393 Enterprise technology and development 357 306 663 594 General and administrative 458 392 917 815 Total equity-based compensation $ 2,522 $ 1,013 $ 5,095 $ 1,908 As of June 30, 2021, the total unrecognized equity-based compensation expense was $ 31.9 million and has a weighted-average recognition period of 3.02 years. 18. Derivative Financial Instruments As of June 30, 2021 and December 31, 2020, the notional amount of the Company’s outstanding foreign exchange options was $ 24.5 million and $ 34.0 million, respectively. There were no outstanding forward contracts as of June 30, 2021 and December 31, 2020. The following table presents the fair value of the Company’s derivative instruments which are included in other current assets in the unaudited condensed consolidated balance sheets (in thousands): June 30, December 31, 2021 2020 Derivatives designated as hedging instruments $ 18 $ 134 Derivatives not designated as hedging instruments 4 30 Total derivative assets $ 22 $ 164 There were no derivative liabilities as of June 30, 2021 and December 31, 2020. The following table shows the pre-tax effects of the Company’s derivative instruments on its unaudited condensed consolidated statements of operations (in thousands): Three Months Ended June 30, Six Months Ended June 30, Financial Statement Line Item 2021 2020 2021 2020 Unrealized (losses) gains Other comprehensive income (loss) $ ( 78 ) $ ( 308 ) $ ( 170 ) $ 246 (Losses) gains reclassified from accumulated other comprehensive income (loss) into net loss Cost of revenue ( 65 ) 22 ( 138 ) 13 General and administrative ( 107 ) 51 ( 201 ) 34 Total amounts reclassified ( 172 ) 73 ( 339 ) 47 (Losses) gains recognized derivatives not designated as hedging instruments Cost of revenue ( 20 ) ( 73 ) ( 41 ) 31 24 Table of Contents The Beachbody Company, Inc. Notes to Unaudited Condensed Consolidated Financial Statements The Company expects that $ 0.2 million of existing losses recorded in accumulated other comprehensive income (loss) will be reclassified into net income (loss) over the next 12 months . The Company assessed its derivative instruments and determined that they were effective during the three and six months ended June 30, 2021 and 2020. 19. Income Taxes The Company recorded a benefit for income taxes of $ 10.9 million and $ 11.3 million for the three and six months ended June 30, 2021, respectively. The Company recorded a benefit for income taxes of $ 2.7 million and $ 4.3 million for the three and six months ended June 30, 2020, respectively. The Company’s effective benefit tax rate was 46.6 % and 20.9 % for the three and six months ended June 30, 2021, respectively. The Company’s effective benefit tax rate was 21.1 % and 19.0 % for the three and six months ended June 30, 2020, respectively. Our tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items arising in that quarter. Our effective tax rate differs from the U.S. statutory tax rate in the three and six months ended June 30, 2021 primarily due to changes in valuation allowances on our deferred tax assets as it is more likely than not that some or all of our deferred tax assets will not be realized. As a result of the Myx acquisition, which was a discrete second quarter 2021 event, the Company recorded deferred tax liabilities which partially reduced our need for a valuation allowance, resulting in an income tax benefit being recorded. The Company evaluates its tax positions on a quarterly basis and revises its estimate accordingly. There are no material changes to the Company’s uncertain tax positions, interest, or penalties during the three and six months ended June 30, 2021. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted into law, and the new legislation contains several key tax positions, including the five-year net operating loss carryback, an adjustment business interest limitation, and payroll tax deferral. The Company is required to recognize the effect of tax law changes in the period of enactment. The Company has assessed the applicability of the CARES Act and determined there to be no material impact to the Company other than its ability to use the entire $ 4.6 million of net operating loss carryback from 2020 to 2019 for federal income tax purposes. On December 27, 2020 the Consolidated Appropriations Act, 2021 was signed into law. It provides additional COVID-19 focused relief and extends certain provisions of the CARES Act. At this time, the Company does not believe that the Consolidated Appropriations Act, 2021 will have a material impact on its consolidated financial statements. 20. Earnings per Share Basic net loss per common share is calculated by dividing net loss allocable to common shareholders by the weighed-average number of common shares outstanding during the period. Diluted net loss per common share adjusts net loss and net loss per common share for the effect of all potentially dilutive shares of the Company’s common stock. Basic and diluted earnings per share are the same for each class of common stock because they are entitled to the same liquidation and dividend rights. The computation of earnings (loss) per share of Class A and Class X Common Stock is as follows (in thousands, except share and per share information): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Numerator: Net loss available to common shareholders-basic and diluted $ ( 12,440 ) $ ( 10,003 ) $ ( 42,498 ) $ ( 18,331 ) Denominator: Weighted-average common shares outstanding- basic and diluted 247,062,134 238,142,972 245,048,715 238,142,972 Net loss per common shareholder, basic $ ( 0.05 ) $ ( 0.04 ) $ ( 0.17 ) $ ( 0.08 ) Net loss per common shareholder, diluted $ ( 0.05 ) $ ( 0.04 ) $ ( 0.17 ) $ ( 0.08 ) Basic net loss per common share is the same as dilutive net loss per common share for the three and six months ended June 30, 2021 and 2020 as the inclusion of all potential common shares would have been antidilutive. The following table presents the common shares that are excluded from the computation of diluted net loss per common share as of the periods presented because including them would have been antidilutive. 25 Table of Contents The Beachbody Company, Inc. Notes to Unaudited Condensed Consolidated Financial Statements June 30, 2021 2020 Options 34,588,520 33,389,285 Compensati o n Warrants 3,980,656 — Public and Private Placement Warrants 15,333,333 — Forest Road Earn-out Shares 3,750,000 — 57,652,509 33,389,285 21. Related Party Transactions In 2018, the Company entered into a lease agreement with a company owned by the controlling shareholder. Total payments to the related party were approximately zero and $ 0.1 million for the three and six months ended June 30, 2021, respectively and $ 0.1 million and $ 0.1 million for the three and six months ended June 30, 2020, respectively. There were no material amounts due to the related party as of June 30, 2021 and December 31, 2020. In July 2021, the Company purchased the building from the related party for its appraised value of $ 5.1 million. The Company has a royalty agreement with a company related to the controlling shareholder. The related party assisted the Company with the development of several products and receives royalties based on the sales of these products. Total payments to the related party were $ 0.1 million and $ 0.9 million during the three and six months ended June 30, 2021, respectively and were approximately zero and $ 0.1 million during the three and six months ended June 30, 2020, respectively. As of June 30, 2021 and December 31, 2020, $ 0.1 million and $ 0.7 million, respectively, was due to the related party pursuant to the royalty agreement. A minority shareholder and board member of Company is also a shareholder in a law firm that provides legal services to the Company. Total payments to the related party were $ 1.1 million and $ 1.6 million during the three and six months ended June 30, 2021, respectively and were $ 0.5 million and $ 0.5 million during the three and six months ended June 30, 2020, respectively. The Company’s accounts payable related to the firm was $ 0.2 million and $ 0.5 million as of June 30, 2021 and December 31, 2020, respectively . 22. Segment Information The Company applies ASC 280, Segment Reporting , in determining reportable segments for financial statement disclosure. Segment information is presented based on the financial information the Company uses to manage the business which is organized around our digital platforms. The Company has two operating segments, Beachbody and Other, and one reportable segment, Beachbody. The Beachbody segment primarily derives revenue from Beachbody on Demand digital subscriptions, nutritional products, and other fitness related products. Other derives revenue primarily from Openfit digital subscriptions and nutritional products and Myx connected fitness equipment (bikes and accessories) and monthly subscription revenue for workout content. The Company uses contribution as a measure of profit or loss, defined as revenue less directly attributable cost of revenue and certain selling and marketing expenses including media, Coach and social influencer compensation, royalties, and third-party sales commissions. Contribution does not include allocated costs as described below as the CODM does not include these costs in assessing performance. There are no inter-segment transactions. The Company manages its assets on a consolidated basis, and, as such, does not report asset information by segment. 26 Table of Contents The Beachbody Company, Inc. Notes to Unaudited Condensed Consolidated Financial Statements Summary information by reportable segment is as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Beachbody: Revenue $ 218,607 $ 216,370 $ 440,357 $ 384,733 Contribution 49,545 53,623 96,020 104,317 Other: Revenue 4,501 2,114 8,970 3,087 Contribution ( 6,411 ) ( 8,520 ) ( 11,547 ) ( 12,642 ) Consolidated: Revenue $ 223,108 $ 218,484 $ 449,327 $ 387,820 Contribution 43,134 45,103 84,473 91,675 Reconciliation of consolidated contribution to loss before income taxes (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Consolidated contribution $ 43,134 $ 45,103 $ 84,473 $ 91,675 Amounts not directly related to segments: Cost of revenue (1) 8,118 6,712 15,960 13,447 Selling and marketing (2) 20,872 13,962 40,963 27,536 Enterprise technology and development 26,949 22,373 54,038 43,706 General and administrative 17,231 14,522 35,177 29,706 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 ) (1) 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. (2) 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. 23. Subsequent Events The Company has evaluated subsequent events through August 12, 2021, the date which the unaudited condensed consolidated financial statements were issued. 27 Table of Contents