Good afternoon and thank you for standing by for the fourth quarter 2008 financial results. Everyone now is in a listen-only mode. After the presentation, we will conduct a question-and-answer session. (Operator instructions) Today's conference is being recorded. If you have any objections you may disconnect at this time. And now, I would like to introduce Mr. John Mills. Mr. Mills, you may begin.

Thank you. Good afternoon everyone and welcome to Gaiam's fourth quarter and full year 2008 earnings conference call. The following constitutes the Safe Harbor statement of the Private Securities Litigation Reform Act of 1995. Except for historical information contained herein, the matters discussed in this call are forward-looking statements that involve risks and uncertainties including, but not limited to, general business conditions, integration of acquisitions, the timely development of new businesses, the impact of competition, and other risks detailed from time to time in the Company's SEC reports. The Company does not undertake any obligation to update forward-looking statements. On the call today representing Gaiam is Jirka Rysavy, Chairman and Chief Executive Officer, Lynn Powers, President, and Vilia Valentine, CFO. And now, I would like to turn the call over to the Company's Chairman and CEO, Jirka Rysavy. Go ahead, Jirka.

Thank you, John. So as widely discussed in the media as you probably know consumers took very conservative approach to holiday buying and retails heightened the focus on inventory, so our revenue for the quarter which ended December 31 decreased about 8.9% to $74.5 million from $81.8 million which we reported in the same period of ’07, and also driven by the decline in our market price of our common shares. In the fourth quarter, we have to look at FAS 142 and take goodwill impairment charge of about $42.3 million of which about $27.2 million was from consolidating our 56% on subsidiary impairment charge and $15.9 million was related to incurring goodwill in our direct segment of Gaiam. Including these charges, we reported a net loss of $30.1 million or a $1.26 per share, excluding these charges, the disposition of businesses and loss from consolidating our real goods, we have about $0.05 loss for the quarter. For the year, our revenue was $257.2 million, which is 2.2% decrease from $262.9 million in ’07, including impairments and the reported loss of $35.5 million or a $1.45 per share excluding that these impairment charges, disposed businesses and loss from consolidating real goods together with report a net income of $800,000 or $0.03 per share for the year. These impairment charges generated $8.4 million tax refund and also $7 million tax credit, both of those you can see as in a separate line in our current asset and balance sheet. We continue to evaluate the opportunities which this environment brings companies like ours and in the Company that no debt and good balance sheet and good credit position. We still see additional opportunities to drive additional controlled space at retailers, and also expand our category management program, but store-to-store definitely is going…

Thank you, Jirka. As Jirka mentioned, the first half of 2008 was profitable, the second half was impacted by the economic downturn. For the full year 2008, revenue was $257.2 million, a 2.2% decrease from $262.9 million in 2007. Revenue from our solar segment increased from $18.9 million to $39.2 million, reflecting the acquisitions of three California based solar companies in 2008. For more information concerning results about solar a separate earnings call will be held tomorrow, Wednesday March 11, 8:30 am pacific daylight time. Revenue was generated by direct to consumer segment decreased 2% to $129.8 million from $132.5 million in 2007. We reduced and focused our catalog circulation and direct response-marketing spend to improve our return during this challenging retail time. Revenue from our business segment decreased 20.2% to $88.9 million during 2008 from $111.5 million last year, primarily due to the conservative retail buying in the second half of the year and lower international revenues. International revenues were $5.1 million compared to $32.7 million in 2007 as it shifted to an international licensing model and disposed by UK operations in March 2008. Excluding international revenues, our business segment revenue increased 6.4%. Overall gross margin was 58% of revenue compared to 64% of revenue in 2007, with our lower margin solar business growth accounting for the 50% of the decline. Other factors contributing to the margin decline include discounting early in the fourth quarter to promote products and reduce inventory levels; a shift in our retail product mix includes solar margin category management fitness media associated with our category management rollouts and store-within-store strategies. In connection with these strategies we incurred charge backs from our retailers. We also made a decision to scale back our high margin [DRTV] business due to the high cost of media during the…

Thanks, Vilia. In the next, due to the adverse macroeconomic conditions, we remained focus on the quarter growth strategies that we have discussed on past calls. These strategies will leverage our sound financial position to capture additional market share, increase sales, expand our rollouts category manager and then enhance existing distribution to the store-in-store concept. In addition to these growth strategies, we are mindful of the revenue impact of the current macroeconomic shift that has occurred and implement cost saving measures, aligning our overhead structure with the revenue base, ultimately realizing meaningful efficiencies. This year we will focus our efforts on free cash flow and run the business accordingly. We are committed to a long term outlook of growth and profitability while maintaining a strong commitment to our brand and mission to provide products and services that better the lives of our customers especially in times like this where consumers are facing, but ever increasing financial pressures and stress. I would now like to provide you some more detail on results by business segment. In 2008, cost sales to the domestic business segment were flat year-over-year, reflecting strong first half performance of 25% comps highlighted by the launch of our fitness media category management initiative followed by the circle of second half that was impacted by average of sales by the economic downturn which begun in third quarter and intensified in the fourth quarter. To the last half, cost sales in the business segment declined 16% reflecting the conservative inventory positions taken by many of our retail partners leading into the holiday season. Many of our largest retail partners cut their buying significantly in the fourth quarter resulting in low stock positions at retail that were carried through the holiday buying season. Well, we have seen some nice resurgent with…

(Operator instructions) Your first question comes from the line of Mark Argento.

Questions around kind of trends you are seeing kind of selling versus sell through, I know you had mentioned some numbers for ’08, but can you give us any granularity around kind of severity of the fullback in terms of buying in Q4 relative to kind of sell through, and maybe what you are seeing until able to gain back some of those sales that might have slipped out at Q4?

Mark, it is Lynn. In our largest account, our sell through comp in fourth quarter was over double digit and then net orders to us were negative double digit costs, so that gives you some indication that consumers were still buying but the retailers were limiting their inventory purchases.

I assume at some point they run out of inventory, so have you seen a pick up then, a corresponding pick up for Q1 in terms of replenishment?

We are seeing some nice resurgence there and they were definitely some out of stock that I noted throughout fourth quarter and many of our major accounts.

In terms of the new, I know you guys, it looks like you did a good job in terms o getting additional store-to-stores, even despite tough environment. I am sure retailers took up on your an offer in terms moving some products through and taking shelf space but any specific new accounts that you can talk about and what brands you have at new account?

Most of the gain came from our rack accounts which is mostly direct drug and grocery and that would include mostly the FIRM brands.

The FIRM, is that brand formed in performing better or worse in this environment? I know it is more of a value focused mass market brand, is a brand that people trading down to that brand?

I think it is more. We look at the brand by channel and we keep the Gaiam brand in Target and above in the specialty retailers in sporting goods and then we use the FIRM brand more in the grocery and drug channel. So as people change the channel in which they shop and trade down, we are seeing a growth in the FIRM brand.

In terms of the catalog, two brands to one brand, is that impacted at all in terms of your customer acquisitions vehicle, I know that has always been a key vehicle for you guys in the catalogs. Any thought about how you could continue to drive customers even though you might have fewer, one less brand and fewer catalogs out there?

As I stated earlier, we are really moving from prospecting through direct mail, the prospecting through internet or using affiliate marketing, search engine marketing, email campaigns to acquire our customers. It is about half of the cost of traditional direct mail, and it is working very well for us right now.

And then Jirka in terms of the communities, it seems like that is still a part and going to be increasingly bigger focus for you. Can you talk about some of the ways here that we will reduce the losses and then I think you said it was about $7 million loss if I am not mistaken for the full year ’08, anything that you can point to here in terms of ability to take down those burn rates?

Yes. So, you are exactly right. My focus will be…yes, I mean we try to really aggressively build it this year and we kind of said we kind of have a lot of cost, we kind of launch couple new program as actually even recently right now in fourth quarter. Right before Christmas we launched Illumination University, which is an educational and just right now in first quarter, we launched Gaia Soul Mate which is a dating site, and so we go into probably pair down to the new club developments and because that is mostly a lot of cost is and development and testing new clubs, so rather than that then we kind of plan to also in fourth quarter before aggressively market but because of the consumer spending, we decided not to do that. And while we want obviously grow the communities we refocused on the clubs that are already established and more profitable, and counted costs from development and new clubs and so that is the most savings will come from but they are going to put several club together and start to do more offering across the clubs. We spend a lot of money to putting new community, so we will continue this system for the community because we could not really get one on the market. There is not one existed, so we have to write it. So we did it and I assume that all these launches will cut the additional club launches and so that is mainly most of the savings will come from. So, it is not we do not want to keep growing, but we really want to make it as soon as possible, income contributor rather than chasing the number of members, we really want to get positive cash flow as soon as possible.

And you have mentioned that you guys had reduced payroll by over $6 million, in what areas did you find that you could trim back and not really jeopardize the future growth of Company?

We trimmed back in all areas with the exception of sales.

We cannot trim…

Priority came from the integration of acquired businesses such as SPRI and [New Mart] bringing them all in house and really leveraging our corporate facility and shared services here in Colorado.

Basically, consolidating acquisition was a big part and we are not really planning not saying we will not do but we will not definitely focus acquisitions, and so we can try to reap the benefit from the work we already did, but so have in mind, a lot of the savings actually came now just recently in March so there are also some severances and stuff by that and it is a big hit on the net of...possible $6.5 million annual basis, annualized basis obviously now going on, moving forward.

The freight paper printing, what have you that take that number up to $8 million for the full year?

That is correct.

Then last, in terms of, it sounds like that you are going to be more focused on trying to generate cash especially in this environment, is this operating cash flow less CapEx kind of [pre-tax metrics], if I look back in ’07 you guys did over $30 million in operating cash flow so it is basically that number less whatever CapEx that you spend that is how you guys define free cash flow, I just want to make sure I look at this the right way going forward?

Yes. It is right from our cash flow statement in the Qs, okay, so basically you take the cash flow from operation in the less CapEx, so that is how we define it. So you can kind of see it right, it is technically reported number.

And for ’09, so you had mentioned of about $4.5 million in CapEx is kind of your assumption that this $9 million stock comp on the first half and have less CapEx.

Yes, that is roughly as you know our maintenance CapEx is probably like $2 million minus. The rest is kind of immune titles for our media and we are also probably going to have this year like $1.5 million to finish our facilities so we can do all the production and catalogs, photographs, everything in house, so that will still be well it is pretty much already finished, but it is kind of run through this first quarter but X of that it is probably really less than $4 million.

And in terms of, any of the additional write-downs, I know in the last couple of quarters you took some impairment and you are able to use tax benefits, any additional tax benefits from any of the additional write-downs in the second quarter?

Not really meaningful because this was really goodwill and so the goodwill was pretty much just driven by the FAS 142, because our stock price went so low that our carrying value, the book is effectively higher than market values so the goodwill is in excess, so in the segments where we experienced losses like solar and direct we basically had to impair goodwill. So there is really no tax saving on that and we basically generated $15.5 million of tax and we already received for $3 million from IRS and now we are still going to get another $5.5 million. So, obviously cash flow position is going to…at the end of the year was $32 million and it is really a question where we are going to have a really nice cash flow this year as to deliver, we expect over $20 million of free cash flow. So that should stay in balance sheet unless we buy shares or do something like that.

(Operators Instructions) Your next question comes from the line of Ed Aaron.

Thanks. Good afternoon everybody. Lynn, congrats on the promotion.

Thank you.

At this time I had better understand your retail strategies and I was just hoping you can help me give my head around some of the structural differences between the category management and store-within-store, and also could give me a sense where the penetration rates on both those could kick over time and what that might mean for margins from the mix standpoint?

First, the category management strategy or media category management as where we go in and offer to manage the media section for retail, by doing this we bring in third party product to round out the assortment and on the third party product we take a lower margin but we do then control the space and we manage it for the retailer to spend very successful for us at Target, and we are looking to really grow that business particularly in the sporting goods channel, and we are talking to most of our major sporting goods retailers about this kind of category management right now. So, that is one position. Then on store-within-store which is really all Gaiam branded product, Gaiam branded or FIRM branded or a combination of the two, there is still additional growth just within even our own retailers that we already have store-within-store by expanding our footprint. We are working with several of our sporting goods chains right now to develop the yoga shops versus just the fitness category and to expand our footprint and the book channel with our personal development media. So, lots of opportunity with current retailers and then expansion in grocery and drug with our mass market brand under the FIRM.

Okay. How much of your sales fall into what you might call it in other bucket not a store-within-store and not category management?

I do not have a break out on that.

We never, never…

Never look at that way but our largest accounts all the store-within-store with the exception of Wal-Mart that buys individual titles.

Yes, okay. And then just one last question, did you see any differences on the inventory destocking when you are comparing your category management versus store-within-store versus other?

In the destocking?

Yes. It sounds like your retail accounts were working down inventories in the last quarter. I just wondering if that consistently happened regardless of the way you service those accounts or if where you manage the store-within-store that maybe it would have been less?

Where we did the racking then we control that inventory and yes we saw that those were filled in because we actually do the racking and write the orders, but any of the other retailers I believe it probably came down from upper management to cut their inventories and it did not matter where, they just had to cut their buying.

Your next question comes from the line of Michael Harkins. Michael Harkins - Levy, Harkins & Co.: But my question has been about the destocking. It is really quite remarkable but you have answered it. Thank you very much.

We have no other questions in queue at this time.

Thank you. So, we would like to thank everybody for being with us in these difficult times, hopefully you will be with us next time. Thank you very much.