UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December 31, 2021~~June 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-39795

RESERVOIR MEDIA, INC.

(Exact name of registrant as specified in its charter)

Delaware

83-3584204

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

75 Varick Street

9th Floor

New York, New York 10013

(Address of principal executive offices, including zip code)

(212) 675-0541

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share (the “Common Stock”)	RSVR	The Nasdaq Stock Market LLC
Warrants to purchase one share of Common Stock, each at an exercise price of $11.50 per share	RSVRW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~January 31,~~August 1, 2022, there were ~~64,138,639~~64,373,904 shares of Common Stock of Reservoir Media, Inc. issued and outstanding.

Table of Contents

RESERVOIR MEDIA, INC.

FORM 10-Q FOR THE QUARTER ENDED ~~DECEMBER 31, 2021~~June 30, 2022

TABLE OF CONTENTS


			Page
Part I. Financial Information			1
Item 1. Financial Statements			1
Condensed Consolidated Statements of Income for the Three ~~and Nine~~ Months Ended ~~December 31,~~June 30, 2022 and 2021 ~~and 2020~~ (unaudited)			1
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three ~~and Nine~~ Months Ended ~~December 31,~~June 30, 2022 and 2021 ~~and 2020~~ (unaudited)			2
Condensed Consolidated Balance Sheets as of ~~December 31, 2021~~June 30, 2022 and March 31, ~~2021~~2022 (unaudited)			3
Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three ~~and Nine~~ Months Ended ~~December 31,~~June 30, 2022 and 2021 ~~and 2020~~ (unaudited)			4
Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~December 31,~~June 30, 2022 and 2021 ~~and 2020~~ (unaudited)			5
Notes to Condensed Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2821
Item 3. Quantitative and Qualitative Disclosures About Market Risk			4936
Item 4. Controls and Procedures			4937
Part II. Other Information			5038
Item 1. Legal Proceedings			5038
Item 1A. Risk Factors			5038
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			5038
Item 3. Defaults Upon Senior Securities			5038
Item 4. Mine Safety Disclosures			5038
Item 5. Other Information			5138
Item 6. Exhibits			5139
Part III. Signatures			5240

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Interim Financial Statements.

RESERVOIR MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In U.S. dollars, except share data)

(Unaudited)


	Three Months Ended				Nine Months Ended
	December 31,				December 31,				Three Months Ended June 30,
	2021		2020		2021		2020		2022		2021

Revenues	$	27,127,779	$	21,554,880	$	74,281,417	$	56,184,190	$	24,278,770	$	16,632,631
Costs and expenses:
Cost of revenue		11,436,180		9,687,489		31,220,470		23,819,732		9,975,131		7,692,387
Amortization and depreciation		4,981,748		3,157,879		13,838,676		10,447,015		5,361,503		4,059,723
Administration expenses		6,731,953		3,816,176		17,051,623		10,400,158		7,621,610		4,664,830
Total costs and expenses		23,149,881		16,661,544		62,110,769		44,666,905		22,958,244		16,416,940

Operating income		3,977,898		4,893,336		12,170,648		11,517,285		1,320,526		215,691

Interest expense		(2,499,576)		(2,259,131)		(8,007,453)		(6,667,917)		(2,976,060)		(2,779,052)
Gain (loss) on foreign exchange		(48,304)		(342,448)		126,635		(549,708)		107,343		(18,321)
Gain on fair value of swaps		1,663,743		852,449		2,888,961		1,259,738		1,570,337		547,488
Interest and other income		2		1,307		357		6,152		13		68
Income before income taxes		3,093,763		3,145,513		7,179,148		5,565,550
Income tax expense		717,379		758,761		1,782,058		1,336,424
Net income		2,376,384		2,386,752		5,397,090		4,229,126
Net (income) loss attributable to noncontrolling interests		(226,930)		(115,506)		(95,439)		(12,085)
Net income attributable to Reservoir Media, Inc.	$	2,149,454	$	2,271,246	$	5,301,651	$	4,217,041
Income (loss) before income taxes										22,159		(2,034,126)
Income tax expense (benefit)										5,338		(527,145)
Net income (loss)										16,821		(1,506,981)
Net loss attributable to noncontrolling interests										59,218		53,983
Net income (loss) attributable to Reservoir Media, Inc.									$	76,039	$	(1,452,998)

Earnings per common share (Note 14):
Earnings (loss) per common share (Note 15):
Basic	$	0.03	$	0.05	$	0.10	$	0.09	$	0.00	$	(0.05)
Diluted	$	0.03	$	0.05	$	0.09	$	0.09	$	0.00	$	(0.05)

Weighted average common shares outstanding (Note 14):
Weighted average common shares outstanding (Note 15):
Basic		64,106,963		28,539,299		48,836,288		28,318,769		64,223,531		28,539,299
Diluted		64,716,756		44,714,705		56,405,487		44,494,175		64,781,739		28,539,299

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

RESERVOIR MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In U.S. dollars)

(Unaudited)


	Three Months Ended				Nine Months Ended				Three Months Ended June 30,
	December 31,				December 31,				2022		2021
	2021		2020		2021		2020

Net income	$	2,376,384	$	2,386,752	$	5,397,090	$	4,229,126
Net income (loss)									$	16,821	$	(1,506,981)
Other comprehensive income (loss):
Translation adjustments		155,092		3,933,558		(1,409,203)		5,912,547		(5,011,563)		215,142
Total comprehensive income		2,531,476		6,320,310		3,987,887		10,141,673
Comprehensive (income) loss attributable to noncontrolling interests		(226,930)		(115,506)		(95,439)		(12,085)
Total comprehensive income attributable to Reservoir Media, Inc.	$	2,304,546	$	6,204,804	$	3,892,448	$	10,129,588
Total comprehensive loss										(4,994,742)		(1,291,839)
Comprehensive loss attributable to noncontrolling interests										59,218		53,983
Total comprehensive loss attributable to Reservoir Media, Inc.									$	(4,935,524)	$	(1,237,856)

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

RESERVOIR MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In U.S. dollars, except share data)

(Unaudited)

December 31,

March 31,


2021

2021
Assets




Current assets




Cash and cash equivalents

$
14,632,795

$
9,209,920
Accounts receivable

18,547,999

15,813,384
Current portion of royalty advances

13,071,082

12,840,855
Inventory and prepaid expenses

4,542,654

1,406,379
Total current assets

50,794,530

39,270,538

Intangible assets, net

538,787,661

393,238,010
Investment in equity affiliates

4,011,250

1,591,179
Royalty advances, net of current portion

38,391,462

28,741,225
Property, plant and equipment, net

319,054

321,766
Other assets

753,066

781,735
Total assets

$
633,057,023

$
463,944,453

Liabilities

Current liabilities

Accounts payable and accrued liabilities

$
5,168,739

$
3,316,768
Royalties payable

23,117,300

14,656,566
Accrued payroll

1,138,513

1,634,852
Deferred revenue

1,638,317

1,337,987
Other current liabilities

10,352,541

2,615,488
Amounts due to related parties (Note 11)

—

290,172
Current portion of loans and secured notes payable

—

1,000,000
Income taxes payable

524,442

533,495
Total current liabilities

41,939,852

25,385,328

Loans and secured notes payable

225,277,214

211,531,875
Deferred income taxes

20,599,049

19,735,537
Fair value of swaps

1,677,576

4,566,537
Other liabilities

1,017,591

6,739,971
Total liabilities

290,511,282

267,959,248

Contingencies and commitments (Note 16)

Shareholders' Equity

Preferred stock, $0.0001 par value 75,000,000 shares authorized, 0 shares issued and outstanding at December 31, 2021; 98,032,767 shares authorized, 16,175,413 shares issued and outstanding at March 31, 2021

—

81,632,500
Common stock, $0.0001 par value; 750,000,000 shares authorized, 64,138,639 issued and outstanding at December 31, 2021; 196,065,534 shares authorized, 28,539,311 shares issued and outstanding at March 31, 2021

6,414

2,854
Additional paid-in capital

334,697,889

110,496,300
Retained earnings

6,053,147

751,496
Accumulated other comprehensive income

687,155

2,096,358
Total Reservoir Media, Inc. shareholders' equity

341,444,605

194,979,508
Noncontrolling interest

1,101,136

1,005,697
Total shareholders' equity

342,545,741

195,985,205
Total liabilities and shareholders' equity

$
633,057,023

$
463,944,453


	June 30,		March 31,
	2022		2022
Assets
Current assets
Cash and cash equivalents	$	12,570,147	$	17,814,292
Accounts receivable		25,604,221		25,210,936
Current portion of royalty advances		13,539,768		12,375,420
Inventory and prepaid expenses		4,533,111		4,041,471
Total current assets		56,247,247		59,442,119

Intangible assets, net		564,416,843		571,383,855
Equity method and other investments		3,676,072		3,912,978
Royalty advances, net of current portion		50,392,471		44,637,334
Property, plant and equipment, net		359,633		342,080
Operating lease right of use assets, net		2,002,931		—
Fair value of swap assets		5,562,139		3,991,802
Other assets		662,110		559,922
Total assets	$	683,319,446	$	684,270,090

Liabilities
Current liabilities
Accounts payable and accrued liabilities	$	5,351,476	$	4,436,943
Royalties payable		26,269,490		21,235,815
Accrued payroll		388,080		1,938,281
Deferred revenue		725,438		1,103,664
Other current liabilities		3,387,361		12,272,577
Income taxes payable		116,324		77,496
Total current liabilities		36,238,169		41,064,776

Secured line of credit		277,428,149		269,856,169
Deferred income taxes		24,040,179		24,884,170
Operating lease liabilities, net of current portion		1,404,826		—
Other liabilities		905,509		1,012,651
Total liabilities		340,016,832		336,817,766

Contingencies and commitments (Note 17)

Shareholders' Equity
Preferred stock, $0.0001 par value 75,000,000 shares authorized, 0 shares issued and outstanding at June 30, 2022 and March 31, 2022		—		—
Common stock, $0.0001 par value; 750,000,000 shares authorized, 64,290,324 issued and outstanding at June 30, 2022; 64,150,186 issued and outstanding at March 31, 2022		6,429		6,415
Additional paid-in capital		336,217,999		335,372,981
Retained earnings		12,289,558		12,213,519
Accumulated other comprehensive loss		(6,209,621)		(1,198,058)
Total Reservoir Media, Inc. shareholders’ equity		342,304,365		346,394,857
Noncontrolling interest		998,249		1,057,467
Total shareholders’ equity		343,302,614		347,452,324
Total liabilities and shareholders’ equity	$	683,319,446	$	684,270,090

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

RESERVOIR MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In U.S. dollars, except share data)

(Unaudited)


	For the Nine Months Ended December 31, 2021																For the Three Months Ended June 30, 2022
	Preferred Stock			Common Stock																							Accumulated
									Retained		Accumulated						Preferred Stock			Common Stock							other
									earnings		other												Additional		Retained		comprehensive		Noncontrolling		Shareholders'
							Additional		(accumulated		comprehensive		Noncontrolling		Shareholders'		Shares	Amount		Shares	Amount		paid-in capital		earnings		loss		interests		equity
	Shares	Amount		Shares	Amount		paid-in capital		deficit)		income (loss)		interests		equity
Balance, March 31, 2021	82,500	$	81,632,500	145,560	$	1	$	110,499,153	$	751,496	$	2,096,358	$	1,005,697	$	195,985,205
Retrospective application of reverse recapitalization	16,092,906		—	28,393,739		2,853		(2,853)		—		—		—		—
Balance, March 31, 2021 after effect of reverse recapitalization conversion	16,175,406	$	81,632,500	28,539,299	$	2,854	$	110,496,300	$	751,496	$	2,096,358	$	1,005,697	$	195,985,205
Balance, March 31, 2022																	—	$	—	64,150,186	$	6,415	$	335,372,981	$	12,213,519	$	(1,198,058)	$	1,057,467	$	347,452,324
Share-based compensation	—		—	—		—		25,675		—		—		—		25,675	—		—	—		—		359,461		—		—		—		359,461
Net loss	—		—	—		—		—		(1,403,500)		—		(53,983)		(1,457,483)
Other comprehensive income	—		—	—		—		—		—		215,142		—		215,142
Balance, June 30, 2021	16,175,406	$	81,632,500	28,539,299	$	2,854	$	110,521,975	$	(652,004)	$	2,311,500	$	951,714	$	194,768,539
RHI Preferred Stock Conversion	(16,175,406)		(81,632,500)	16,175,406		1,618		81,630,882		—		—		—		—
Business Combination and PIPE Investment, net of transaction costs	—		—	19,354,548		1,935		141,144,876		—		—		—		141,146,811
Share-based compensation	—		—	—		—		191,478		—		—		—		191,478
Vesting of restricted stock units, net of shares withheld for employee taxes																	—		—	140,138		14		(475,872)		—		—		—		(475,858)
Reclassification of liability-classified awards to equity-classified awards																	—		—	—		—		961,429		—		—		—		961,429
Net income (loss)	—		—	—		—		—		4,555,697		—		(77,508)		4,478,189	—		—	—		—		—		76,039		—		(59,218)		16,821
Other comprehensive loss	—		—	—		—		—		—		(1,779,437)		—		(1,779,437)	—		—	—		—		—		—		(5,011,563)		—		(5,011,563)
Balance, September 30, 2021	—	$	—	64,069,253	$	6,407	$	333,489,211	$	3,903,693	$	532,063	$	874,206	$	338,805,580
Share-based compensation	—		—	—		—		1,208,685		—		—		—		1,208,685
Issuance of shares	—		—	69,386		7		(7)		—		—		—		—
Net income	—		—	—		—		—		2,149,454		—		226,930		2,376,384
Other comprehensive loss	—		—	—		—		—		—		155,092		—		155,092
Balance, December 31,2021	—	$	—	64,138,639	$	6,414	$	334,697,889	$	6,053,147	$	687,155	$	1,101,136	$	342,545,741
Balance, June 30, 2022																	—	$	—	64,290,324	$	6,429	$	336,217,999	$	12,289,558	$	(6,209,621)	$	998,249	$	343,302,614


	For the Nine Months Ended December 31, 2020																For the Three Months Ended June 30, 2021
	Preferred Stock			Common Stock																							Accumulated
									Retained		Accumulated						Preferred Stock			Common Stock							other
									earnings		other												Additional		Accumulated		comprehensive		Noncontrolling		Shareholders’
							Additional		(accumulated		comprehensive		Noncontrolling		Shareholders’		Shares	Amount		Shares	Amount		paid-in capital		deficit		income		interests		equity
	Shares	Amount		Shares	Amount		paid-in capital		deficit)		income (loss)		interests		equity
Balance, March 31, 2020	82,500	$	81,632,500	140,227	$	1	$	102,423,444	$	(9,537,465)	$	(4,385,615)	$	959,024	$	171,091,889
Retrospective application of reverse recapitalization	16,092,906		—	27,353,454		2,734		(2,734)		—		—		—		—
Balance, March 31, 2020 after effect of reverse recapitalization conversion	16,175,406	$	81,632,500	27,493,681	$	2,735	$	102,420,710	$	(9,537,465)	$	(4,385,615)	$	959,024	$	171,091,889
Issuance of common shares	—		—	1,045,618		104		7,972,906		—		—		—		7,973,010
Balance, March 31, 2021																	16,175,406	$	81,632,500	28,539,299	$	2,854	$	110,496,300	$	(863,108)	$	2,096,358	$	1,005,697	$	194,370,601
Share-based compensation	—		—	—		—		25,674		—		—		—		25,674	—		—	—		—		25,675		—		—		—		25,675
Net loss	—		—	—		—		0		(886,014)		—		(58,790)		(944,804)	—		—	—		—		0		(1,452,998)		—		(53,983)		(1,506,981)
Other comprehensive income	—		—	—		—		0		—		1,974,652		—		1,974,652	—		—	—		—		0		—		215,142		—		215,142
Balance, June 30, 2020	16,175,406	$	81,632,500	28,539,299	$	2,839	$	110,419,290	$	(10,423,479)	$	(2,410,963)	$	900,234	$	180,120,421
Share-based compensation	—		—	—		—		25,675		—		—		—		25,675
Net income (loss)	—		—	—		—		0		2,831,809		—		(44,631)		2,787,178
Other comprehensive income	—		—	—		—		0		—		4,337		—		4,337
Balance, September 30, 2020	16,175,406	$	81,632,500	28,539,299	$	2,839	$	110,444,965	$	(7,591,670)	$	(2,406,626)	$	855,603	$	182,937,611
Share-based compensation	—		—	—		—		25,675		—		—		—		25,675
Net income	—		—	—		—		0		2,271,246		—		115,506		2,386,752
Other comprehensive income	—		—	—		—		0		—		3,933,558		—		3,933,558
Balance, December 31,2020	16,175,406	$	81,632,500	28,539,299	$	2,839	$	110,470,640	$	(5,320,424)	$	1,526,932	$	971,109	$	189,283,596
Balance, June 30, 2021																	16,175,406	$	81,632,500	28,539,299	$	2,854	$	110,521,975	$	(2,316,106)	$	2,311,500	$	951,714	$	193,104,437

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

RESERVOIR MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In U.S. dollars)

(Unaudited)

Nine Months Ended December 31,


2021

2020
Cash flows from operating activities




Net income

$
5,397,090

$
4,229,126
Adjustments to reconcile net income to net cash provided by operating activities:

Amortization of intangible assets

13,713,202

10,278,508
Depreciation of property, plant and equipment

125,474

168,507
Share-based compensation

1,425,838

77,025
Non-cash interest charges

1,067,946

577,613
Gain on fair value of swaps

(2,888,961)

(1,259,738)
Dividend from equity affiliates

17,584

—
Deferred income taxes

863,512

833,768
Changes in operating assets and liabilities:

Accounts receivable

(2,734,615)

(3,003,789)
Inventory and prepaid expenses

(3,136,275)

(465,120)
Royalty advances

(9,880,464)

(3,181,225)
Other assets

345,682

240,168
Accounts payable and accrued expenses

10,107,397

8,477,794
Income tax payable

(9,053)

358,902
Net cash provided by operating activities

14,414,357

17,331,539
Cash flows from investing activities:

Purchases of music catalogs

(157,555,894)

(107,225,238)
Investment in equity affiliates

(2,464,486)

(18,839)
Purchase of property, plant and equipment

(122,762)

(69,157)
Net cash used for investing activities

(160,143,142)

(107,313,234)
Cash flows from financing activities:

Issuance of common shares, net of issuance costs

—

7,973,009
Proceeds from Business Combination and PIPE Investment, net of issuance costs

141,146,811

—
Proceeds from secured line of credit

89,554,866

31,500,000
Repayments of secured line of credit

(55,000,000)

—
Repayments of secured loans

(18,500,000)

(750,000)
Deferred financing costs paid

(4,377,473)

(609,212)
Repayments of related party loans

(81,203,792)

—
Draws on related party loans

80,913,620

116,797
Net cash provided by financing activities

152,534,032

38,230,594
Foreign exchange impact on cash

(1,382,372)

5,912,546
Increase (decrease) in cash and cash equivalents

5,422,875

(45,838,555)
Cash and cash equivalents beginning of period

9,209,920

58,240,123
Cash and cash equivalents end of period

$
14,632,795

$
12,401,568


	Three Months Ended June 30,
	2022		2021
Cash flows from operating activities:
Net income (loss)	$	16,821	$	(1,506,981)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization of intangible assets		5,315,265		4,028,444
Depreciation of property, plant and equipment		46,238		31,279
Share-based compensation		765,503		25,675
Non-cash interest charges		578,955		218,498
Gain on fair value of swaps		(1,570,337)		(547,488)
Share of earnings of equity affiliates, net of tax		(25,721)		—
Dividend from equity affiliates		6,168		8,088
Deferred income taxes		—		20,020
Changes in operating assets and liabilities:
Accounts receivable		(393,285)		1,823,488
Inventory and prepaid expenses		(491,640)		(2,382,719)
Royalty advances		(6,919,485)		(3,868,620)
Other assets and liabilities		96,506		—
Accounts payable and accrued expenses		4,339,141		5,891,735
Income tax payable		38,828		442
Net cash provided by operating activities		1,802,957		3,741,861
Cash flows from investing activities:
Purchases of music catalogs		(12,708,782)		(112,178,528)
Investment in equity method and other investments		—		(500,000)
Purchase of property, plant and equipment		(63,791)		(21,308)
Net cash used for investing activities		(12,772,573)		(112,699,836)
Cash flows from financing activities:
Proceeds from secured line of credit		7,000,000		32,900,000
Repayments of secured loans		—		(250,000)
Taxes paid related to net share settlement of restricted stock units		(475,858)		—
Deferred financing costs paid		(6,975)		—
Draws on related party loans		—		80,913,620
Net cash provided by financing activities		6,517,167		113,563,620
Foreign exchange impact on cash		(791,696)		209,139
(Decrease) increase in cash and cash equivalents		(5,244,145)		4,814,784
Cash and cash equivalents beginning of period		17,814,292		9,209,920
Cash and cash equivalents end of period	$	12,570,147	$	14,024,704

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

RESERVOIR MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~DECEMBER 31, 2021~~JUNE 30, 2022

(Unaudited)

NOTE 1. DESCRIPTION OF BUSINESS

Reservoir Media, Inc. (formerly known as Roth CH Acquisition II Co. (“ROCC”)), a Delaware corporation (the “Company”), is an independent music company based in New York City, New York and with offices in Los Angeles, Nashville, Toronto, London and Abu Dhabi.

On July 28, 2021 (the “Closing Date”), ROCC consummated the acquisition of Reservoir Holdings, Inc., a Delaware corporation (“RHI”), pursuant to the agreement and plan of merger, dated as of April 14, 2021 (the “Merger Agreement”), by and among ROCC, Roth CH II Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of ROCC (“Merger Sub”), and RHI. On the Closing Date, Merger Sub merged with and into RHI, with RHI surviving the merger as a wholly-owned subsidiary of ROCC (the “Business Combination”). In connection with the consummation of the Business Combination, “Roth CH Acquisition II Co.” was renamed “Reservoir Media, Inc.” effective as of the Closing Date. The common stock, $0.0001 par value per share, of the Company (the “Common Stock”) and warrants are traded on The Nasdaq Stock Market LLC (“NASDAQ”) under the ticker symbols “RSVR” and “RSVRW,” respectively.

The Business Combination was accounted for as a reverse recapitalization, with RHI determined to be the accounting acquirer and the Company as the acquired company for accounting purposes. All historical financial information presented in the unaudited condensed consolidated financial statements represents the accounts of RHI and its consolidated subsidiaries as if RHI is the predecessor to the Company. See Note 3,4, “Business Combination and PIPE Investment” for additional information with respect to the Business Combination and related transactions.

The Company’s activities are organized into 2 operating segments: Music Publishing and Recorded Music. Operations of the Music Publishing segment involve the acquisition of interests in music catalogs from which royalties are earned as well as signing songwriters to exclusive agreements which give the Company an interest in the future delivery of songs. The publishing catalog includes ownership or control rights to more than 140,000 musical compositions that span across historic pieces, motion picture scores and current award-winning hits. Operations of the Recorded Music segment involve the acquisition of sound recording catalogs as well as the discovery and development of recording artists and the marketing, distribution, sale and licensing of the music catalog. The Recorded Music operations are primarily conducted through the Chrysalis Records platform and Tommy Boy Music, LLC (“Tommy Boy”), acquired in June 2021, and include the ownership of over 36,000 sound recordings. See Note 5,6, “Acquisitions” for additional information with respect to the Tommy Boy acquisition.

COVID-19 Pandemic

In March 2020, the World Health Organization characterized the coronavirus (“COVID-19”) as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. ~~The rapid spread of COVID-19 and the continuously evolving responses to combat it have had a negative impact on the global economy.~~

~~The Company has evaluated and continues to evaluate the potential impact of the COVID-19 pandemic on its consolidated financial statements.~~ Government-imposed restrictions and general behavioral changes in response to the pandemic adversely affected the Company’s results of operations for the three ~~and nine~~ months ended ~~December 31, 2021~~June 30, 2022 and ~~2020.~~2021. This included performance revenue generated from retail, restaurants, bars, gyms and live shows, synchronization revenue, and the release schedule of physical product. Even as government restrictions are lifted and consumer behavior starts to return to pre-pandemic norms, it is unclear for how long and to what extent the Company’s operations will continue to be affected.

Although the Company has not made material changes to any estimates or judgments that impact its consolidated financial statements as a result of COVID-19, the extent to which the COVID-19 pandemic may impact the Company will depend on future developments, which are highly uncertain and cannot be predicted. Future developments surrounding the COVID-19 pandemic could negatively affect the Company’s operating results, including reductions in revenue and cash flow and could impact the Company’s impairment assessments of accounts receivable or intangible assets, which may be material to our consolidated financial statements.

Table of Contents

RESERVOIR MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~DECEMBER 31, 2021~~JUNE 30, 2022

(Unaudited)

~~Paycheck Protection Program Loan~~

~~During the nine months ended December 31, 2020, the Company borrowed $616,847 (the “PPP Loan”) under the Paycheck Protection Program (the “PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act of 2020, as amended (the “CARES Act~~”), provided loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. In accordance with the terms of the PPP, the Company applied for and received confirmation of loan forgiveness for the entire amount borrowed under the PPP.

The Company accounted for the PPP Loan as an in-substance government grant because it expected to meet the PPP Loan eligibility criteria and concluded that the loan represented, in substance, a grant that was expected to be forgiven. Proceeds from the PPP Loan were initially recognized as a deferred income liability and presented as an operating activity within the Company’s consolidated statement of cash flows. Subsequently, the Company reduced this liability and recognized a reduction in payroll expenses on a systematic basis over the period in which the related costs for which the PPP Loan was intended were incurred. NaN interest for the PPP Loan was recognized in the Company’s consolidated financial statements.

NOTE 2. ~~SIGNIFICANT ACCOUNTING POLICIES~~

~~Basis of Presentation~~BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and its majority-owned subsidiaries and have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. All intercompany transactions and balances have been eliminated in these condensed consolidated financial statements. Certain information and note disclosures typically included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s audited financial statements as of and for the fiscal years ended March 31, ~~2021~~2022 and ~~2020.~~2021.

The condensed consolidated balance sheet of the Company as of March 31, ~~2021,~~2022, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures, including certain notes required by US GAAP on an annual reporting basis.

In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods. The results for the three ~~and nine~~ months ended ~~December 31, 2021~~June 30, 2022 are not necessarily indicative of the results to be expected for any subsequent quarter, the fiscal year ending March 31, ~~2022~~2023 or any other period.

~~The following include significant accounting policies that have been adopted by the Company:~~

~~Use of Significant Accounting Estimates~~

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities. Significant estimates are used for, but not limited to, determining useful lives of intangible assets, intangible asset recoverability and impairment and accrued revenue. Actual results could differ from these estimates.

~~Table of Contents~~

~~RESERVOIR MEDIA, INC. AND SUBSIDIARIES~~NOTE 3.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~DECEMBER 31, 2021~~

~~(Unaudited)~~

~~Foreign Currencies~~

The Company has determined the U.S. dollar to be the functional currency of the Company and certain subsidiaries as it is the currency of the primary economic environment in which the companies operate while other subsidiaries have been determined to have the British Pound as their functional currencies.

Monetary assets and liabilities denominated in foreign currencies other than the functional currency are translated into the respective functional currencies at the exchange rate in effect at the balance sheet date and non-monetary assets and liabilities at the exchange rates in effect at the time of acquisition or issue. Revenues and expenses are translated at rates approximating the exchange rates in effect at the time of the transactions. All exchange gains and losses are included in operations.

Financial statements of subsidiaries with functional currencies other than the U.S. dollar are translated into U.S. dollars using the current rate method. Under this method, assets and liabilities are translated at the rate of exchange in effect at the balance sheet date. Revenue and expenses are translated at the average rate of exchange for the fiscal year. Exchange gains and losses are deferred and reflected on the balance sheet in accumulated other comprehensive income and subsequently recognized in income upon substantial disposal of the net investment in the foreign operation.

~~Cash and Cash Equivalents~~

~~The Company considers all highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents.~~

~~Accounts Receivable~~

Credit is extended to customers based upon an evaluation of the customer’s financial condition. The time between the Company’s issuance of an invoice and payment due date is not significant. Customer payments that are not collected in advance of the transfer of promised services or goods are generally due 30-60 days from the invoice date. The Company monitors customer credit risk related to accounts receivable and, when deemed necessary, maintains a provision for estimated uncollectible accounts, which is estimated based on historical experience, aging trends and in certain cases, management judgments about specific customers. Based on this analysis, the Company did not record a provision for estimated uncollectible accounts as of December 31, 2021 or March 31, 2021.

~~Concentrations of Credit Risk~~

~~Customer credit risk represents the potential for financial loss if a customer is unwilling or unable to meet its agreed upon contractual payment obligations.~~

In the Music Publishing segment, the Company collects a significant portion of its royalties from global copyright collecting societies. Collecting societies and associations are generally not-for-profit organizations that represent composers, songwriters and music publishers. These organizations seek to protect the rights of their members by licensing, collecting license fees and distributing royalties for the use of the members’ works. The Company does not believe there is any significant collection risk from such societies and associations.

In the Recorded Music segment, the majority of the revenue is collected from the Company’s distribution partners, rather than directly from the customers. These distribution partners primarily pay through the revenue to the Company on a monthly basis. The Company routinely assesses the financial strength of its distribution partners and the Company does not believe there is any significant collection risk.

~~Table of Contents~~

~~RESERVOIR MEDIA, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~DECEMBER 31, 2021~~

~~(Unaudited)~~

~~Acquisitions and Business Combinations~~

In conjunction with each acquisition transaction, the Company assesses whether the transaction should follow accounting guidance applicable to an asset acquisition or a business combination. This assessment requires an evaluation of whether the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, resulting in an asset acquisition or, if not, resulting in a business combination. If treated as an asset acquisition, the asset is recorded in accordance with the Company’s intangible asset policy and related acquisition costs are capitalized as part of the asset.

In a business combination, the Company recognizes identifiable assets acquired, liabilities assumed, and non-controlling interests at their fair values at the acquisition date. Any consideration paid in excess of the net fair value of the identifiable assets and liabilities acquired in a business combination is recorded to goodwill and acquisition-related costs are expensed as incurred.

~~Intangible Assets~~

Intangible assets consist primarily of publishing and recorded music catalogs. Intangible assets are recorded at fair value in a business combination and relative fair value in an asset acquisition. Intangible assets are amortized over their expected useful lives using the straight-line method.

The Company periodically reviews the carrying value of its amortizable intangible assets, whenever events or changes in circumstances indicate that the carrying value may not be recoverable or that the lives assigned may no longer be appropriate. To the extent the estimated future cash inflows attributable to the asset, less estimated future cash outflows, are less than the carrying amount, an impairment loss is recognized in an amount equal to the difference between the carrying value of such asset and its fair value. If the Company determines that events and circumstances warrant a revision to the remaining period of amortization, an asset’s remaining useful life would be changed, and the remaining carrying amount of the asset would be amortized prospectively over that revised remaining useful life.

~~Goodwill~~

The Company had $402,067 of goodwill as of December 31, 2021 and March 31, 2021, which is classified with “Other assets” in the Company’s condensed consolidated balance sheets. All of the goodwill arose in connection with an acquisition on December 29, 2019 and has been assigned to a reporting unit within the Music Publishing segment. There were 0 impairments, disposals or other acquisitions of goodwill in the nine months ended December 31, 2021 and 2020.

Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. The Company evaluates goodwill for potential impairment on an annual basis on the first day of the fiscal fourth quarter (January 1), or at other times during the year if events or circumstances indicate that it is more-likely-than-not (greater than 50%) that the fair value of a reporting unit is below the carrying amount.

In reviewing goodwill for impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the estimated fair value of a reporting unit is less than its carrying amount. If the Company elects to bypass the qualitative assessment for any reporting unit, or if a qualitative assessment indicates it is more-likely-than-not that the estimated fair value of a reporting unit is less than its carrying amount, the Company performs a quantitative goodwill impairment test by comparing the fair value of the reporting unit with its carrying amount. If the fair value of the reporting unit is less than its carrying amount, the Company will measure any goodwill impairment loss as the amount by which the carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit.

~~Table of Contents~~

~~RESERVOIR MEDIA, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~DECEMBER 31, 2021~~

~~(Unaudited)~~

The Company performed its annual impairment testing of goodwill as of January 1, 2022 and no impairment was required. Our impairment testing consisted of a qualitative assessment. Changes in market conditions, laws and regulations, and key assumptions could negatively impact the results of future impairment testing and could result in the recognition of an impairment charge.

~~Investments in Equity Affiliates~~

The Company accounts for investments in affiliates using the equity method of accounting when it has significant influence over an affiliate’s operations. The Company’s share of investee’s net income or loss and basis difference amortization is classified as “Interest and other income” in the consolidated statements of income.

~~Deferred Revenue~~

Deferred revenue principally relates to fixed fees and minimum guarantees received in advance of the Company’s performance or usage by the licensee. Reductions in deferred revenue are a result of the Company’s performance under the contract or usage by the licensee.

~~Deferred Finance Costs~~

~~Deferred finance costs are amortized on an effective interest basis over the term of the related obligation. Deferred finance charges are netted against the loans. See Note 8, “~~~~Loans~~~~” for additional information with respect to the Company’s financing arrangements.~~

~~Deferred Charges~~

Deferred charges consist of direct costs incurred in connection with the potential acquisition of entertainment interests in music compositions pursued by the Company. Such costs are deferred when closing of the transaction is deemed probable and are added to the cost of the asset once acquired or expensed if the acquisition does not proceed.

~~Revenues~~

The Company recognizes revenue when, or as, control of the promised services or goods is transferred to its customers and in an amount that reflects the consideration the Company is contractually due in exchange for those services or goods.

~~Music Publishing~~

Music Publishing revenues are earned in the form of royalties relating to the licensing of rights in musical compositions and the sale of published sheet music and songbooks. Royalties principally relate to amounts earned from the public performance of musical compositions, the mechanical reproduction of musical compositions on recorded media including digital formats and the use of musical compositions in synchronization with visual images. Music publishing royalties, except for synchronization royalties, are recognized when the sale or usage occurs. The most common form of consideration for publishing contracts is sales- and usage-based royalties. The collecting societies submit usage reports, typically with payment for royalties due, often on a quarterly or biannual reporting period, in arrears. Royalties are recognized as the sale or usage occurs based upon usage reports when these reports are available for the reporting period or estimates of royalties based on historical data, such as recent royalties reported, company-specific information with respect to changes in repertoire, industry information and other relevant trends when usage reports are not available for the reporting period. Synchronization revenue is recognized as revenue when control of the license is transferred to the customer.

~~Recorded Music~~

Revenues from the sale or license of Recorded Music products through digital distribution channels are recognized when the sale or usage occurs based on usage reports received from the customer. Digital licensing contracts are generally long-term with consideration

~~Table of Contents~~

~~RESERVOIR MEDIA, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~DECEMBER 31, 2021~~

~~(Unaudited)~~

in the form of sales- and usage-based royalties that are primarily received monthly. For certain licenses where the consideration is fixed and the intellectual property being licensed is static, revenue is recognized at the point in time when control of the licensed content is transferred to the customer.

~~Revenues from the sale of physical Recorded Music products are recognized upon delivery, which occurs once the product has been shipped and control has been transferred.~~

~~Principal versus Agent Revenue Recognition~~

The Company reports revenue on a gross or net basis based on management’s assessment of whether the Company acts as a principal or agent in a transaction. The determination of whether the Company acts as a principal or an agent in a transaction is based on an evaluation of whether the Company controls the good or service before transfer to the customer. When the Company concludes that it controls the good or service before transfer to the customer, the Company is considered a principal in the transaction and records revenue on a gross basis. When the Company concludes that it does not control the good or service before transfer to the customer but arranges for another entity to provide the good or service, the Company acts as an agent and records revenue on a net basis in the amount it earns for its agency service.

The Company is typically required to pay a specified portion of the fees, earnings, payments and revenues received from the exploitation of the underlying music compositions to the original songwriter (the “~~Royalty Costs~~”). The Company records revenues on a gross basis reflecting its position as a principal in the transaction and any royalties payable to third parties, including the writer’s fees, are recorded as expenses.

~~Royalty Costs and Royalty Advances~~

The Company incurs Royalty Costs that are payable to its songwriters and recording artists generated from the sale or license of its music publishing copyrights and recorded music catalog. Royalties are calculated using negotiated rates in accordance with the recording artist and songwriter contracts. Calculations are based on revenue earned or user/usage measures or a combination of these. There are instances where such data is not available to be processed and royalty cost calculations may be complex or involve judgments about significant volumes of data to be processed and analyzed.

In many instances, the Company commits to pay its recording artists and songwriters royalties in advance of future sales. The Company accounts for these advances under the related guidance in the Financial Accounting Standards Board (the “~~FASB”) Accounting Standards Codification (“ASC”) Topic 928, “~~~~Entertainment—Music~~~~” (“ASC 928~~”). Under ASC 928, the Company capitalizes as assets certain advances, which it believes are recoverable from future royalties to be earned by the recording artist or songwriter when paid. Recoverability is assessed upon initial commitment of the advance based upon the Company’s forecast of anticipated revenue from the sale of future and existing albums or musical compositions. In determining whether the advance is recoverable, the Company evaluates the current and past popularity of the recording artist or songwriter, the sales history of the recording artist or songwriter, the initial or expected commercial acceptability of the product, the current and past popularity of the genre of music that the product is designed to appeal to, and other relevant factors. Advances vary in both amount and expected life based on the underlying recording artist or songwriter. To the extent that a portion of an outstanding advance is no longer deemed recoverable, that amount will be expensed in the period the determination is made.

~~Share-Based Compensation~~

Compensation expense related to the issuance of share-based awards to the Company’s employees is measured at fair value on the grant date. The Company uses the Black-Scholes option pricing model to value stock options. The compensation expense for awards that vest over a future service period is recognized over the requisite service period on a straight-line basis. The Company recognizes share-based award forfeitures as they occur rather than estimating by applying a forfeiture rate.

~~Table of Contents~~

~~RESERVOIR MEDIA, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~DECEMBER 31, 2021~~

~~(Unaudited)~~

~~Earnings Per Share~~

~~The consolidated statements of income present basic and diluted earnings per share (“EPS~~”). Basic EPS is computed using the two-class method, which includes the weighted average number of shares of Common Stock outstanding during the period and other securities that participate in dividends (the “~~participating securities~~”). Under the two-class method, all earnings, both distributed and undistributed, are allocated to shares of Common Stock and participating securities based on their respective rights to receive dividends.

Diluted EPS is computed similar to basic EPS, except that the denominator is increased to include the number of additional shares for potential dilutive effects of the RHI Preferred Stock (as defined below), stock options and warrants outstanding during the period. The dilutive effects of the RHI Preferred Stock were calculated in accordance with the if-converted method, or two-class method, whichever was more dilutive. The dilutive effects of stock options and warrants are calculated in accordance with the treasury stock method. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

As a result of the reverse recapitalization, the Company has retroactively adjusted the weighted average shares outstanding prior to the Closing Date to give effect to the Exchange Ratio (as defined in the Merger Agreement) to determine the number of shares of Common Stock into which they were converted.

~~Employee Benefit Plans~~

The Company has a 401(k) retirement savings plan open to U.S. based employees who have completed three months of eligible service. The Company contributes $0.60 for every $1.00 of employee contributions up to a maximum of 6% of the employee’s salary based upon each individual participant’s election.

~~Income Taxes~~

Income taxes are determined using the asset and liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the differences between the accounting bases of assets and liabilities and their corresponding tax basis. Deferred taxes are measured using enacted tax rates expected to apply when the asset is realized, or the liability is settled. A deferred tax asset is recognized when it is considered more likely than not to be realized.

~~Companies subject to the Global Intangible Low-Taxed Income provision (“GILTI~~”) have the option to account for the GILTI tax as a period cost if and when incurred, or to recognize deferred taxes for outside basis temporary differences expected to reverse as GILTI. The Company has elected to treat taxes on GILTI as period costs and no deferred tax asset or liability is recorded.

~~Comprehensive Income~~

~~The Company reports in accordance with ASC Topic 220, “~~~~Comprehensive Income~~~~” (“ASC 220~~”). ASC 220 requires companies to classify items of other comprehensive income/loss by their nature in the financial statements and display the accumulated balance of other comprehensive income (loss) separately from capital stock and accumulated deficit in the shareholders’ equity section of a statement of financial position.

~~Derivative Financial Instruments~~

The Company’s interest rate swaps have not been designated as a hedging instrument and, therefore, are recognized at fair value at the end of each reporting period with changes in fair value recorded in the condensed consolidated statements of income.

~~Table of Contents~~

~~RESERVOIR MEDIA, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~DECEMBER 31, 2021~~

~~(Unaudited)~~

~~Fair Value Measurement and Hierarchy~~

~~The Company reports in accordance with ASC Topic 820, “~~~~Fair Value Measurements and Disclosures~~~~” (“ASC 820”). Under ASC 820, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (~~~~i.e.~~~~, the “exit price”) in an orderly transaction between market participants at the measurement date.~~

ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions as to what market participants would use in pricing the asset or liability and are based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the observability of inputs as follows:

●

~~Level 1~~––Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

●

~~Level 2~~~~––Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.~~

●

~~Level 3~~~~––Valuations based on inputs that are unobservable and significant to the overall fair value measurement.~~

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes the level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. See Note 15, “~~Financial Instruments~~~~” for additional information.~~

~~Emerging Growth Company~~

~~The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1993, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act~~”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the “~~Sarbanes-Oxley Act~~”), reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement declared effective under the Securities Act or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “~~Exchange Act~~”) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used.

~~Table of Contents~~

~~RESERVOIR MEDIA, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~DECEMBER 31, 2021~~

~~(Unaudited)~~

~~Recent Accounting Pronouncements~~RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Standards Not Yet Adopted

~~In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, “~~~~Leases (Topic 842)~~~~” (“ASU 2016-02”), which establishes a right-of-use (“ROU~~”) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the consolidated statements of income. For public entities, ASU 2016-02 was effective for annual reporting periods beginning after December 15, 2018, including interim periods within that annual reporting period. Under ASU 2020-05, “~~Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842)~~~~,” the new standard is effective for the Company beginning April 1, 2022 and interim periods within the fiscal year beginning April 1, 2023.~~

ASU 2016-02 requires a modified retrospective transition approach with application in all comparative periods presented (the “comparative method”), or alternatively, as of the effective date as the date of initial application without restating comparative period financial statements (the “effective date method”). The new guidance also provides several practical expedients and policies that companies may elect under either transition method. The Company currently expects to apply the effective date method and elect the package of practical expedients under which it will not reassess the classification of its existing leases, reevaluate whether any expired or existing contracts are or contain leases or reassess initial direct costs under the new guidance. Rather, the Company will retain the conclusions reached for these items under ASC Topic 840, ~~Leases~~. Additionally, the Company expects to elect a practical expedient to not separate non-lease components, such as common area maintenance, from lease components. The Company does not expect to elect the practical expedient that permits a reassessment of lease terms for existing leases.

The Company has commenced an analysis of the impact of ASU 2016-02 and developed a plan for its implementation. The project plan includes analyzing the impact of the new guidance on our current lease contracts, reviewing the completeness of the Company’s existing lease portfolio, comparing the Company’s accounting policies under current accounting guidance to the new accounting guidance and identifying potential differences from applying the requirements of the new guidance to the Company’s lease contracts. Under current accounting guidance for leases, the Company does not recognize an asset or liability created by operating leases where the Company is the lessee. Therefore, the Company expects an increase to its assets and liabilities on the Company’s consolidated balance sheet as a result of recognizing assets and liabilities for operating leases where the Company is the lessee on the date of initial application of the new guidance. The Company does not expect the adoption of this new guidance will have a material impact on the amount or timing of the Company’s cash flows or liquidity.

In June 2016, the FASB issued ASU 2016-03, “Financial Instruments–Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-03”), which replaces the incurred loss impairment methodology in current US GAAP with a methodology that reflects expected credit losses. Subsequent to ASU 2016-03, the FASB has issued several related ASUs amending the original ASU 2016-03. The updates are intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. For public entities, ASU 2016-03 was effective for annual reporting periods beginning after December 15, 2019, including interim periods within that annual reporting period. For the Company, ASU 2016-03 is effective beginning April 1, 2023, including interim periods within that fiscal year, with early adoption permitted for annual periods beginning after December 15, 2018. The Company is currently evaluating the effect that ASU 2016-03 will have on the Company’s consolidated financial statements.

In ~~December 2019, the FASB issued ASU 2019-12, “~~~~Simplifying the Accounting for Income Taxes~~~~” (“ASU 2019-12~~”). ASU 2019-12 simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. For public entities, ASU 2019-12 was effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020. For the Company, ASU 2019-12 is effective beginning April 1, 2022 and interim periods beginning April 1, 2023. Early adoption of ASU 2019-12 is permitted. The Company does not expect a material impact to its consolidated financial statements or the Company’s disclosures as a result of the adoption of ASU 2019-12.

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~~DECEMBER 31, 2021~~

~~(Unaudited)~~

In April 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848)” (“ASU 2020-04”), which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting; particularly as it relates to the risk of cessation of LIBOR. The amendments in ASU 2020-04 apply only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by ASU 2020-04 do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The discontinuation of LIBOR will impact the Senior Credit Facility as well as the Interest Rate Swaps which will be outstanding as of the effective date of the discontinuation. The Company is currently evaluating the effect that ASU 2020-04 will have on the Company’s consolidated financial ~~statements.~~statements, but does not expect it will have a material effect.

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Accounting Standards Recently Adopted

In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), which established a new ASC Topic 842, “Leases” (“ASC 842”) that introduced a right-of-use (“ROU”) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than twelve months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the consolidated statements of income. The Company adopted the new standard beginning April 1, 2022 (the “effective date”), using a modified retrospective transition approach with application as of the effective date as the date of initial application without restating comparative period financial statements.

The new guidance also provides several practical expedients and policies that companies may elect. The Company elected the package of practical expedients under which it did not reassess the classification of its existing leases, reevaluate whether any expired or existing contracts are or contain leases or reassess initial direct costs under the new guidance. Rather, the Company retained the conclusions reached for these items under ASC Topic 840, Leases. Additionally, the Company elected a practical expedient to not separate non-lease components, such as common area maintenance, from lease components. The Company did not elect the practical expedient that permits a reassessment of lease terms for existing leases.

Upon its transition to the new guidance, the Company recognized approximately $2.1 million of operating lease liabilities and corresponding ROU assets. As the rates implicit in the Company’s leases are not readily determinable, the Company used its incremental borrowing rate based on the information available at the effective date to determine the present value of lease payments. This rate is based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments. The adoption of this new guidance will not have a material impact on the amount or timing of the Company’s cash flows or liquidity.

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. The Company adopted ASU 2019-12 on April 1, 2022 and this adoption did not have a material impact to the Company’s consolidated financial statements or the Company’s disclosures.

NOTE 3.4. BUSINESS COMBINATION AND PIPE INVESTMENT

As discussed in Note 1, “Description of Business,” on the Closing Date, the Company consummated the Business Combination pursuant to the terms of the Merger Agreement. The Business Combination was accounted for as a reverse recapitalization in accordance with US GAAP, primarily because former shareholders of RHI continue to control the Company upon closing of the Business Combination. Under this method of accounting, the Company is treated as the “acquired” company for accounting purposes and the Business Combination is treated as the equivalent of RHI issuing stock for the net assets of the Company, accompanied by a recapitalization. The net assets of the Company are stated at historical cost, with no goodwill or intangible assets recorded. In addition, all historical financial information presented in the unaudited condensed consolidated financial statements represents the accounts of RHI and its consolidated subsidiaries as if RHI is the predecessor to the Company.

Immediately prior to the consummation of the Business Combination, each share of Series A preferred stock, par value $0.00001 per share, of RHI (the “RHI Preferred Stock”) that was issued and outstanding was automatically converted into a number of shares of common stock, par value $0.00001 per share, of RHI (the “RHI Common Stock”) at the then-effective conversion rate as calculated pursuant RHI’s second amended and restated certificate of incorporation (the “RHI Preferred Stock Conversion”). Additionally, each share of RHI Common Stock (including the RHI Common Stock resulting from the RHI Preferred Stock Conversion) that was issued and outstanding immediately prior to the consummation of the Business Combination was canceled and converted into the right to receive 196.06562028646 (the “Exchange Ratio”) shares of Common Stock. Furthermore, each option to acquire a share of RHI Common Stock that was outstanding immediately prior to the consummation of the Business Combination became fully vested in accordance with the original terms of the awards and was converted into an option to purchase shares of Common Stock (each option,

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JUNE 30, 2022

(Unaudited)

an “RMI Exchanged Option”), with the number of shares of Common Stock subject to the options and exercise price of each RMI Exchanged Option adjusted commensurately with the Exchange Ratio.

In connection with the Business Combination, ROCC entered into subscription agreements with certain accredited investors (the “PIPE Investors”), pursuant to which ROCC issued 15,000,000 shares of common stock, par value $0.0001 per share, of ROCC (the “ROCC Common Stock”) at a purchase price of $10.00 per share for an aggregate purchase price of $150.0 million (the “PIPE Investment”). ROCC consummated the PIPE Investment immediately prior to the consummation of the Business Combination.

Approximately $20,900,000 of transaction fees and expenses were incurred in connection with the closing of the Business Combination and the PIPE Investment, which have been accounted for as a reduction in proceeds.

A portion of the proceeds from the Business Combination and the PIPE Investment was used to pay transaction fees and expenses, and approximately $81,300,000 was used to retire the Tommy Boy Related Party Notes (as defined below) and related accrued interest, repay the secured loan outstanding in an amount of $18,250,000 and make a payment totaling $36,750,000 on the secured line of credit in connection with a refinancing of the Previous Credit Facilities. See Note 8,9, “~~Loans~~Secured Line of Credit” for additional information with respect to the Company’s financing arrangements.

On the Closing Date, the Company also amended and restated its certificate of incorporation to adjust the number of its authorized shares of capital stock to 750,000,000 shares of Common Stock and 75,000,000 shares of preferred stock.

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~DECEMBER 31, 2021~~

~~(Unaudited)~~

NOTE 4.5. REVENUE RECOGNITION

For the Company’s operating segments, Music Publishing and Recorded Music, the Company accounts for a contract when it has legally enforceable rights and obligations and collectability of consideration is probable. The Company identifies the performance obligations and determines the transaction price associated with the contract. Revenue is recognized when, or as, control of the promised services or goods is transferred to the Company’s customers, and in an amount that reflects the consideration the Company is contractually due in exchange for those services or goods. Certain of the Company’s arrangements include licenses of intellectual property with consideration in the form of sales- and usage-based royalties. Royalty revenue is recognized when the subsequent sale or usage occurs using the best estimates available of the amounts that will be received by the Company. The Company recognized revenue of ~~$1,210,132~~$1,038,536 and ~~$2,263,778~~$82,148 from performance obligations satisfied in previous periods for the ~~nine~~three months ended ~~December 31,~~June 30, 2022 and 2021, ~~and 2020,~~ respectively.

~~Disaggregation of Revenue~~

~~The Company’s revenue consisted of the following categories during the three and nine months ended December 31, 2021 and 2020:~~

Three Months Ended

Nine Months Ended

December 31,

December 31,

2021

2020

2021

2020

Revenue by Type

Performance

$
3,997,209

$
3,759,701

$
11,046,058

$
11,735,057

Digital

8,480,193

11,654,043

26,709,781

25,595,232

Mechanical

744,416

510,330

2,113,506

1,988,951

Synchronization

2,443,767

1,366,885

8,540,525

5,715,107

Other

2,737,128

454,995

4,406,722

1,636,680

Total Music Publishing

18,402,713

17,745,954

52,816,592

46,671,027

Digital

4,891,724

1,541,215

12,465,615

5,025,607
^(a)
Physical

1,279,588

1,169,102

4,786,531

2,187,300
^(a)
Synchronization

1,189,929

90,138

1,610,310

440,215
^(a)
Neighboring rights

748,972

476,098

1,552,167

1,051,878
^(a)
Total Recorded Music

8,110,213

3,276,553

20,414,623

8,705,000

Other revenue

614,853

532,373

1,050,202

808,163

Total revenue

$
27,127,779

$
21,554,880

$
74,281,417

$
56,184,190

^(a)Reflects correction of misclassifications of $828,177 between previously reported types of Recorded Music revenue for the nine months ended December 31, 2020. The corrections had no impact on the Company’s consolidated statements of income, Recorded Music total revenue or segment income.

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(Unaudited)

Three Months Ended

Nine Months Ended

December 31,

December 31,

2021

2020

2021

2020
Revenue by Geographical Location








United States Music Publishing

$
9,013,231

$
7,359,825

$
26,683,184

$
24,312,965
United States Recorded Music

4,010,666

583,430

10,686,201

2,667,853
United States other revenue

614,853

532,374

1,050,202

808,164
Total United States

13,638,750

8,475,629

38,419,587

27,788,982
International Music Publishing

9,389,482

10,386,128

26,133,408

22,358,061
International Recorded Music

4,099,547

2,693,123

9,728,422

6,037,147
Total International

13,489,029

13,079,251

35,861,830

28,395,208
Total revenue

$
27,127,779

$
21,554,880

$
74,281,417

$
56,184,190

Disaggregation of Revenue

The Company’s revenue consisted of the following categories during the three months ended June 30, 2022 and 2021:


	Three Months Ended June 30,
	2022		2021
Revenue by Type
Digital	$	8,463,870	$	6,610,811
Performance		3,536,424		2,649,213
Synchronization		3,299,346		1,941,916
Mechanical		514,468		408,967
Other		632,599		592,866
Total Music Publishing		16,446,707		12,203,773

Digital		4,563,542		2,811,841
Physical		1,297,178		966,637
Neighboring rights		685,349		327,275
Synchronization		1,024,642		102,042
Total Recorded Music		7,570,711		4,207,795

Other revenue		261,352		221,063
Total revenue	$	24,278,770	$	16,632,631


	Three Months Ended June 30,
	2022		2021
Revenue by Geographical Location
United States Music Publishing	$	9,843,294	$	6,823,175
United States Recorded Music		3,802,836		1,570,937
United States other revenue		261,352		221,063
Total United States		13,907,482		8,615,175
International Music Publishing		6,603,413		5,380,598
International Recorded Music		3,767,875		2,636,858
Total International		10,371,288		8,017,456
Total revenue	$	24,278,770	$	16,632,631

Only the United States represented 10% or more of the Company’s total revenues in the three ~~and nine~~ months ended ~~December 31, 2021~~June 30, 2022 and ~~2020.~~2021.

~~Music Publishing~~

Music publishers act as copyright owners and/or administrators of the musical compositions and generate revenues related to the exploitation of musical compositions (as opposed to recorded music). Music publishers receive royalties from the use of the musical compositions in public performances, digital and physical recordings, and through synchronization (the combination of music with visual images).

~~Performance revenues are received when the musical composition is performed publicly through broadcast of music on television, radio and cable and in retail locations (~~~~e.g.~~~~, bars and restaurants), live performance at a concert or other venue (~~~~e.g.~~, arena concerts and nightclubs) and performance of musical compositions in staged theatrical productions. Digital revenues are derived from musical compositions being embodied in recordings licensed to digital streaming services and digital download services and for digital performance. Mechanical revenues are generated with respect to the musical compositions embodied in recordings sold in any physical format such as vinyl, CDs and DVDs. Synchronization revenues represent the right to use the composition in combination with visual images such as in films or television programs, television commercials and video games as well as from other uses such as in toys or novelty items and merchandise. Other revenues represent earnings for use in printed sheet music and other uses. Digital and synchronization revenue recognition is similar for both Recorded Music and Music Publishing, therefore refer to the discussion within Recorded Music.

~~Included in these revenue streams, excluding synchronization and other revenues, are licenses with performing rights organizations or collecting societies (~~~~e.g~~., ASCAP, BMI, SESAC and GEMA), which are long-term contracts containing a single performance obligation, which is ongoing access to all intellectual property in an evolving content library. The most common form of consideration for these contracts is sales- and usage-based royalties. The collecting societies submit usage reports, typically with payment for royalties due, often on a quarterly or biannual reporting period, in arrears. Royalties are recognized as the sale or usage occurs based upon usage reports and, when these reports are not available, royalties are estimated based on historical data, such as recent royalties reported, company-specific information with respect to changes in repertoire, industry information and other relevant trends.Deferred Revenue

The ~~Company excludes from~~following table reflects the ~~measurement of transaction price all taxes assessed by governmental authorities that are both (i) imposed on~~change in deferred revenue during the three months ended June 30, 2022 and ~~concurrent with a specific revenue-producing transaction, and (ii) collected from customers.~~2021:

~~Recorded Music~~


	June 30 2022		June 30 2021
Balance at beginning of period	$	1,103,664	$	1,337,987
Cash received during period		156,140		898,661
Revenue recognized during period		(534,366)		(392,605)
Balance at end of period	$	725,438	$	1,844,043

Recorded Music mainly involves selling, marketing, distribution and licensing of recorded music owned by the Company. Recorded Music revenues are derived from four main sources, which include digital, physical, synchronization and neighboring rights.

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(Unaudited)

Digital revenues are generated from the expanded universe of digital partners, including digital streaming services and download services. Digital licensing contracts are generally long-term with consideration in the form of sales- and usage-based royalties that are typically received monthly. Additionally, for certain licenses, including synchronization licenses, where the consideration is fixed and the intellectual property being licensed is static, revenue is recognized at the point in time when control of the licensed content is transferred to the customer.

Physical revenues are generated from the sale of physical products such as vinyl, CDs and DVDs. The Company uses distribution partners to facilitate the sale of physical products. Revenues from the sale of physical Recorded Music products are recognized upon transfer of control to the customer, which typically occurs once the product has been shipped and the ability to direct use and obtain substantially all of the benefit from the asset have been transferred. In accordance with industry practice and as is customary in many territories, certain products, such as CDs and DVDs, are sold to customers with the right to return unsold items. Revenues from such sales are generally recognized upon shipment based on gross sales.

Synchronization revenues represent royalties or fees for the right to use sound recordings in combination with visual images such as in films or television programs, television commercials and video games. In certain territories, the Company may also receive royalties when sound recordings are performed publicly through broadcast of music on television, radio and cable and in public spaces such as shops, workplaces, restaurants, bars and clubs. These public performance royalties on sound recordings are classified as “Neighboring rights” revenue. For fixed-fee contracts, revenue is recognized at the point in time when control of the licensed content is transferred to the customer. Royalty based contracts are recognized as the underlying sales or usage occurs.

~~Deferred Revenue~~

~~The following table reflects the change in deferred revenue during the nine months ended December 31, 2021 and 2020:~~

Nine Months Ended

December 31,


2021

2020
Balance at beginning of period

$
1,337,987

$
473,022
Cash received during period

3,891,627

6,464,140
Revenue recognized during period

(3,591,297)

(5,063,609)
Balance at end of period

$
1,638,317

$
1,873,553

NOTE 5.6. ACQUISITIONS

In the ordinary course of business, the Company regularly acquires publishing and recorded music catalogs, which are typically accounted for as asset acquisitions. During the ~~nine~~three months ended ~~December 31,~~June 30, 2022 and 2021, ~~and 2020,~~ the Company completed such acquisitions totaling ~~$160,566,608~~$3,391,376 and ~~$98,991,836,~~$111,070,099, respectively, inclusive of deferred acquisition payments. ~~Significant~~

The Company did not complete any individually significant acquisition transactions ~~all~~during the three months ended June 30, 2022. On June 2, 2021, the Company acquired U.S. based record label and music publishing company Tommy Boy for approximately $100 million, which was the most significant acquisition transaction during the three months ended June 30, 2021. NaN members of ~~which have been~~the Company’s board of directors (the “Board”) were also members of Tommy Boy’s board of managers and had an equity interest in both companies. The acquisition of Tommy Boy was accounted for as ~~asset acquisitions, completed during the nine months ended December 31, 2021 and 2020 included the following:~~

●

~~On June 2, 2021, the Company acquired U.S. based record label and music publishing company Tommy Boy for approximately $100 million. NaN members of the Company’s board of directors (the “Board”) were also members of Tommy Boy’s board of managers and had an equity interest in both companies. The acquisition of Tommy Boy was accounted for as~~ an asset acquisition as a result of the significant concentration of the fair value of gross assets acquired in a recorded music catalog intangible asset (weighted average useful life of 30 years).

●

~~On April 13, 2020, the Company acquired all of the copyrights to the musical compositions owned by Shapiro, Bernstein & Co., Inc. (“SBI~~”), one of the oldest music publishers in the United States. The transaction was accounted for as an asset acquisition as a result of the significant concentration of the fair value of gross assets acquired in a publishing catalog intangible asset (weighted average useful life of 30 years).

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~~RESERVOIR MEDIA, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~DECEMBER 31, 2021~~

~~(Unaudited)~~

NOTE 6.7. INTANGIBLE ASSETS

Intangible assets subject to amortization consist of the following as of ~~December 31, 2021~~June 30, 2022 and March 31, ~~2021:~~2022:


	December 31,		March 31,
	2021		2021		June 30, 2022		March 31, 2022
Intangible assets subject to amortization:
Publishing and recorded music catalogs	$	616,806,912	$	457,662,303	$	652,123,466	$	654,284,671
Artist management contracts		974,851		995,464		876,509		947,723
Gross intangible assets		617,781,763		458,657,767		652,999,975		655,232,394
Accumulated amortization		(78,994,102)		(65,419,757)		(88,583,132)		(83,848,539)
Intangible assets, net	$	538,787,661	$	393,238,010	$	564,416,843	$	571,383,855

Straight-line amortization expense totaled ~~$4,933,056~~$5,315,265 and ~~$3,101,738~~$4,028,444 in the three months ended ~~December 31,~~June 30, 2022 and 2021, ~~and 2020,~~ respectively. ~~Straight-line amortization expense totaled $13,713,202 and $10,278,508 in the nine months ended December 31, 2021 and 2020, respectively.~~

NOTE 7.8. ROYALTY ADVANCES

The Company made royalty advances totaling ~~$17,888,739~~$10,227,209 and ~~$10,951,740~~$6,258,299 during the ~~nine~~three months ended ~~December 31,~~June 30, 2022 and 2021, ~~and 2020,~~ respectively, recoupable from the writer’s or artist’s share of future royalties otherwise payable, in varying amounts. Advances expected to be recouped within the next twelve months are classified as current assets, with the remainder classified as noncurrent assets.


	Nine Months Ended
	December 31
	2021		2020		June 30, 2022		June 30, 2021
Balance at beginning of period	$	41,582,080	$	40,263,439	$	57,012,754	$	41,582,080
Additions		17,888,739		10,951,740		10,227,209		6,258,299
Recoupments		(8,008,275)		(7,770,515)		(3,307,724)		(2,389,679)
Balance at end of period	$	51,462,544	$	43,444,664	$	63,932,239	$	45,450,700

NOTE ~~8. LOANS~~9. SECURED LINE OF CREDIT

Long-term debt consists of the following:


	December 31,		March 31,		June 30, 2022		March 31, 2022
	2021		2021
Secured loan bearing interest at LIBOR plus a spread	$	—	$	18,500,000
Secured line of credit bearing interest at LIBOR plus a spread		231,645,715		197,090,848	$	282,645,715	$	275,645,715
Debt issuance costs, net		(6,368,501)		(3,058,973)		(5,217,566)		(5,789,546)
		225,277,214		212,531,875	$	277,428,149	$	269,856,169
Less: short term portion of secured loan		—		1,000,000
	$	225,277,214	$	211,531,875

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~~DECEMBER 31, 2021~~JUNE 30, 2022

(Unaudited)

Credit Facilities

On December 19, 2014, Reservoir Media Management, Inc. (“RMM”), a subsidiary of RHI, entered into a credit agreement (the “RMM Credit Agreement”) governing RMM’s secured term loan (the “Secured Loan”) and secured revolving credit facility (the “Secured Line of Credit” and together with the Secured Loan, the “Credit Facilities”). The Credit Facilities were subsequently amended multiple times and were refinanced in July 2021 in connection with the consummation of the Business Combination, pursuant to that certain Fourth Amended and Restated Credit Agreement, dated as of July 28, 2021 (the “Debt Refinancing”). On December 7, 2021, RMM entered into an amendment (the “First Amendment”) to the RMM Credit Agreement. The First Amendment amended the RMM Credit Agreement to increase RMM’s senior secured revolving credit facility from $248,750,000 to an aggregate amount of $350,000,000 (the “~~New~~ Senior Credit Facility”) and modified certain covenants (discussed below).

The ~~New~~ Senior Credit Facility has a scheduled maturity date of October 16, 2024. Borrowings under the ~~New~~ Senior Credit Facility bear interest at a rate equal to either the sum of a base rate plus a margin of 1.25% or the sum of a LIBO rate plus a margin of 2.25%. RMM is also required to pay an unused fee in respect of unused commitments under the ~~New~~ Senior Credit Facility, if any, at a rate of 0.25% per annum. Substantially all tangible and intangible assets of the Company, RHI, RMM and the other subsidiary guarantors are pledged as collateral to secure the obligations of RMM under the RMM Credit Agreement.

The RMM Credit Agreement contains customary covenants limiting the ability of the Company, RHI, RMM and certain of its subsidiaries to, among other things, incur debt or liens, merge or consolidate with others, make investments, make cash dividends, redeem or repurchase capital stock, dispose of assets, enter into transactions with affiliates or enter into certain restrictive agreements. In addition, the Company, on a consolidated basis with its subsidiaries, must comply with financial covenants requiring the Company to maintain (i) a total leverage ratio (net of up to $20,000,000 of certain cash balances) of no greater than 7.50:1.00 as of the end of each fiscal quarter, (ii) a fixed charge coverage ratio of not less than 1.25:1.00 for each four fiscal quarter period, and (iii) a consolidated senior debt to library value ratio of 0.475, subject to certain adjustments. If RMM does not comply with the covenants in the RMM Credit Agreement, the lenders may, subject to customary cure rights, require the immediate payment of all amounts outstanding under the ~~New~~ Senior Credit Facility.

The ~~New~~ Senior Credit Facility also includes an “accordion feature” that permits RMM to seek additional commitments in an amount not to exceed $50,000,000 that would increase the ~~New~~ Senior Credit Facility. As of ~~December 31, 2021,~~June 30, 2022, the ~~New~~ Senior Credit Facility had a borrowing capacity of ~~$350,000,000.~~$350,000,000, with remaining borrowing availability of $67,354,285.

Interest Rate Swaps

~~As of~~At March 31, ~~2019,~~2022, RMM had ~~entered into 2~~the following interest rate swaps ~~both of~~outstanding, under which ~~expire on March 10, 2022, one with a notional amount of $40,228,152 and one for $59,325,388. Under the terms of the interest rate swaps, RMM~~it pays a fixed rate ~~of 2.812% and 2.972% respectively, to the counterparty~~ and receives a floating interest payment from the counterparty based on LIBOR with reference to notional amounts adjusted to match the original scheduled principal repayments pursuant to the indenture ~~agreement. The notional amount of the~~agreement:


	Notional
	Amount at		Pay
	June 30,		Fixed
Effective Date	2022		Rate		Maturity
March 10, 2022	$	8,625,000	1.602	%	September 2024
March 10, 2022	$	87,979,412	1.492	%	September 2024
December 31, 2021	$	53,395,588	1.042	%	September 2024

On March 10, 2022, two previous interest rate swaps ~~was $96,969,763 as~~expired with original notional amounts of ~~December 31, 2021~~$40,228,152 and ~~$97,533,496 as~~$59,325,388. Through the expiration date of ~~March 31, 2021.~~

~~In October 2019 and January 2020, RMM added two additional~~these previous interest rate swaps, ~~in the amounts~~RMM paid fixed rates of ~~$8,875,000~~2.812% and ~~$88,098,862, respectively. These swaps have an effective date of March 10, 2022, and expire in September 2024. RMM pays a fixed rate of 1.602% and 1.492%~~2.972%, respectively, to the counterparty and ~~receives~~received a floating interest from the counterparty based on LIBOR with reference to notional amounts adjusted to match the original scheduled principal repayments pursuant to the indenture agreement. On December 1, 2021, RMM added an additional interest rate swap in the amount of $53,030,237, which has an effective date of December 31, 2021, and expires in September 2024. RMM pays a fixed rate of 1.042% and receives a floating interestpayment from the counterparty based on LIBOR with reference to notional amounts adjusted to match the original scheduled principal repayments pursuant to the indenture agreement.

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~~DECEMBER 31, 2021~~JUNE 30, 2022

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NOTE 9.10. INCOME TAXES

Income tax expense (benefit) for the three months ended ~~December 31,~~June 30, 2022 and 2021 ~~and 2020~~ was ~~$717,379 (23.2%~~$5,338 (24.1% effective tax rate) and ~~$758,761 (24.1% effective tax rate), respectively. Income tax expense for the nine months ended December 31, 2021 and 2020 was $1,782,058 (24.8% effective tax rate) and $1,336,424 (24.0%~~$(527,145) (25.9% effective tax rate), respectively. The effective tax rates during these periods reflect the amount and mix of income from multiple tax jurisdictions.

NOTE ~~10.~~11. SUPPLEMENTARY CASH FLOW INFORMATION

Interest paid and income taxes paid for the ~~nine~~three months ended ~~December 31,~~June 30, 2022 and 2021 ~~and 2020~~ were comprised of the following:


	2021		2020
					2022		2021
Interest paid	$	6,939,505	$	6,090,304	$	2,397,105	$	2,214,072
Income taxes paid	$	727,431	$	106,607	$	10,000	$	—

Non-cash investing and financing activities for the ~~nine~~three months ended ~~December 31,~~June 30, 2022 and 2021 ~~and 2020~~ were comprised of the following:


	2021		2020
					2022		2021
Acquired intangible assets included in other liabilities	$	4,625,990	$	1,782,500	$	315,455	$	—
Conversion of RHI Preferred Stock to Common Stock	$	81,632,500	$	—
Reclassification of liability-classified awards to equity-classified awards					$	961,429	$	—

NOTE ~~11.~~12. AMOUNTS DUE TO / (FROM) RELATED PARTIES

The Company has various shared services agreements with a shareholder and other affiliated entities under the control of its shareholder. These agreements cover services such as IT support and re-billed services of staff who perform services across multiple entities. Amounts due to this shareholder and other affiliated entities totaled $0 as of ~~December 31, 2021~~June 30, 2022 and ~~$290,172 as of~~ March 31, ~~2021.~~2022.

The acquisition of Tommy Boy was financed using cash on hand and borrowings from related parties (the “Tommy Boy Related Party Notes”). The Tommy Boy Related Party Notes bore interest of 4.66% per year and were payable upon the earlier of the consummation of the Business Combination and December 21, 2021. The Tommy Boy Related Party Notes and accrued interest were paid on the Closing Date. See Note 3,4, “Business Combination and PIPE Investment” for additional information with respect to the consummation of the Business Combination.

NOTE ~~12.~~13. SHAREHOLDERS’ EQUITY

The condensed consolidated statements of shareholders’ equity reflect the reverse capitalization as of the Closing Date. Because RHI was deemed to be the accounting acquirer in the reverse capitalization with ROCC, all periods prior to the Closing Date reflect the balances and activity of RHI. The consolidated balances, share activity and per share amounts in these condensed consolidated statements of equity were retroactively adjusted, where applicable, using the Exchange Ratio. See Note 1, “Description of Business” and Note 3,4, “Business Combination and PIPE Investment” for additional information.

RHI Preferred Stock

Prior to the Business Combination, RHI had 16,175,406 shares of RHI Preferred Stock outstanding. The RHI Preferred Stock was convertible into an equal number of shares of RHI Common Stock at the option of the preferred shareholder and was mandatorily

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converted into an equal number of shares of RHI Common Stock upon a qualified public offering of RHI Common Stock. Immediately prior to the effective time of the Business Combination, each share of RHI Preferred Stock that was issued and outstanding was automatically converted into a number of shares of RHI Common Stock pursuant to the RHI Preferred Stock Conversion. See Note 3,4, “Business Combination and PIPE Investment” for additional information with respect to the RHI Preferred Stock Conversion.

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While outstanding, the RHI Preferred Stock participated in dividends declared on common shares, if any, on the basis as if the shares of RHI Preferred Stock were converted into shares of RHI Common Stock. The Company did not declare any dividends subsequent to the issuance of RHI Preferred Stock through the RHI Preferred Stock Conversion.

As of ~~December~~June 30, 2022 and March 31, ~~2021,~~2022, the Company had 0 shares of RHI Preferred Stock outstanding.

~~RHI Common Stock Issuance~~

During the nine months ended December 31, 2020, RHI issued 1,045,617 shares of RHI Common Stock for an aggregate consideration of $8,000,009 to existing shareholders to fund its publishing and recorded music catalog acquisitions. RHI incurred $27,000 of issuance costs in connection with this issuance, which RHI accounted for as a reduction in the proceeds from the RHI Common Stock.

Warrants

As of ~~December 31, 2021,~~June 30, 2022, the Company’s outstanding warrants included 5,750,000 publicly-traded warrants (the “Public Warrants”), which were issued during ROCC’s initial public offering on December 15, 2020, and 137,500 warrants sold in a private placement to ROCC’s sponsor (the “Private Warrants” and together with the Public Warrants, the “Warrants”), which were assumed by the Company in connection with the Business Combination and exchanged into warrants for shares of Common Stock. Each whole Warrant entitles the registered holder to purchase 1 whole share of Common Stock at a price of $11.50 per share, provided that the Company has an effective registration statement under the Securities Act covering the shares of Common Stock issuable upon exercise of the Warrants and a current prospectus relating to them is available and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder. Pursuant to the warrant agreement, a registered holder may exercise its Warrants only for a whole number of shares of Common Stock. The Warrants will expire five years after the completion of the Business Combination, or earlier upon redemption or liquidation.

The Company may redeem the outstanding Public Warrants in whole, but not in part, at a price of $0.01 per warrant upon a minimum of 30 days’ prior written notice of redemption, if and only if the last sale price of Common Stock equals or exceeds $18.00 per share for any 20-trading days within a 30-trading day period ending 3 business days before the Company sends the notice of redemption to the registered holders. If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the warrants to do so on a cashless basis. In no event will the Company be required to net cash settle the warrant exercise. The Private Warrants are identical to the Public Warrants, except that the Private 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 Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

The Company evaluated the Warrants under ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC Topic 815, Derivatives and Hedging (“ASC 815”), and in accordance with its accounting policies, concluded they meet the criteria to be equity classified as they were determined to be indexed in the Company’s stock and meet the requirements for equity classification.

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NOTE ~~13.~~14. SHARE-BASED COMPENSATION

2021 Incentive Plan

On July 28, 2021, in connection with the Business Combination, the Company adopted the Reservoir Media, Inc. 2021 Omnibus Incentive Plan (the “2021 Incentive Plan”), which became effective on such date. ~~9,726,247 authorized shares of Common Stock were reserved for issuance under the 2021 Incentive Plan.~~ In addition, pursuant to terms of the Merger Agreement, at the effective time of the Business Combination, options previously granted under the Reservoir Holdings, Inc. 2019 Long Term Incentive Plan (the “Previous RHI 2019 Incentive Plan”) to purchase shares of RHI Common Stock were converted into options to purchase 1,494,848 shares of Common Stock pursuant to the 2021 Incentive Plan.

Beginning on April 1, 2022 and ending on March 31, 2031, the aggregate number of shares of Common Stock that may be issued under the 2021 Incentive Plan will automatically increase by the lesser of (a) 3% of the total number of shares of Common Stock issued and outstanding on the last day of the preceding fiscal year on a fully diluted basis and assuming that all shares available for issuance under the 2021 Incentive Plan are issued and outstanding, or (b) such number of Shares determined by the Board. As of the effective date of the 2021 Incentive Plan, no further stock awards have been or will be granted under the Previous RHI 2019 Incentive Plan, and the Previous RHI 2019 Incentive Plan is no longer in effect.

In October 2021, the Company granted an aggregate of 247,045 restricted stock units (“RSUs”) with an aggregate grant date fair value of approximately $2.2 million to certain employees and executive officers under the 2021 Incentive Plan. During the three months ended December 31, 2021, 69,386 of these RSUs vested, with another 114,088 expected to vest during the three months ending March 31, 2022. The remainder will vest in the following two years. As of December 31, 2021, 7,984,354 shares of Common Stock were available for the Company to grant under the 2021 Incentive Plan.

~~The 2021 Incentive Plan is administered by the compensation committee of the Board (the “Compensation Committee~~”). The exercise prices, vesting and other restrictions are determined by the Board, except that the exercise price per share of a stock option may not be less than 100% of the fair value of the Common Stock on the date of grant. Stock options awarded under the 2021 Incentive Plan typically expire 10 years after the date of the grant and generally have vesting conditions that the Compensation Committee will determine.

~~Stock Option Activity~~

~~As discussed in Note 3, “~~~~Business Combination and PIPE Investment~~,” each option to acquire a share of RHI Common Stock issued under the Previous RHI 2019 Incentive Plan that was outstanding immediately prior to the consummation of the Business Combination became fully vested in accordance with the original terms of the awards. Each fully vested option was then converted into an option to purchase shares of Common Stock, with the number of shares of Common Stock subject to the options and exercise price adjusted commensurately with the Exchange Ratio.

Share-based compensation expense totaled ~~$1,208,685~~$765,503 ($~~931,705,~~590,032, net of taxes) and ~~$1,425,838~~$25,675 ($~~1,099,096,~~19,791, net of taxes) during the three ~~and nine~~ months ended ~~December 31,~~June 30, 2022 and 2021, ~~respectively. Share-based compensation expense totaled $25,675 ($19,791, net of taxes) and $77,025 ($59,373, net of taxes) during the three and nine months ended December 31, 2020,~~ respectively. Share-based compensation expense is classified as “Administration expenses” in the accompanying condensed consolidated statements of income. The increase in share-based compensation expense during the nine months ended December 31, 2021 reflects the accelerated vesting discussed above.

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~~DECEMBER 31, 2021~~JUNE 30, 2022

(Unaudited)

the accompanying condensed consolidated statements of income. The increase in share-based compensation expense during the three months ended June 30, 2022 reflects the restricted stock units (“RSUs”) granted subsequent to the Merger.

During the three months ended June 30, 2022, the Company granted RSUs to satisfy previous obligations to issue a variable number of equity awards based on a fixed monetary amount. Prior to the issuance of these RSUs, the Company classified these awards as liabilities. Upon issuance of the RSU’s the awards became equity-classified as they no longer met the criteria to be liability-classified and a liability of $961,429 was reclassified from accounts payable and accrued liabilities to additional paid-in capital.

NOTE ~~14.~~15. EARNINGS (LOSS) PER SHARE

The following table summarizes the basic and diluted earnings (loss) per common share calculation for the three ~~and nine~~ months ended ~~December 31, 2021~~June 30, 2022 and ~~2020:~~2021:


		Three Months Ended			Nine Months Ended					Three Months Ended
		December 31,			December 31,					June 30,
		2021	2020		2021		2020			2022	2021

Basic earnings per common share
Net income attributable to Reservoir Media, Inc.	$	2,149,454	$	2,271,246	$	5,301,651	$	4,217,041
Less: income allocated to participating securities		—		(821,616)		(659,721)		(1,533,091)
Net income attributable to common shareholders	$	2,149,454	$	1,449,630	$	4,641,930	$	2,683,950
Basic earnings (loss) per common share
Net income (loss) attributable to Reservoir Media, Inc.									$	76,039	$	(1,452,998)
Weighted average common shares outstanding - basic		64,106,963		28,539,299		48,836,288		28,318,769		64,223,531		28,539,299
Earnings per common share - basic	$	0.03	$	0.05	$	0.10	$	0.09
Earnings (loss) per common share - basic									$	—	$	(0.05)

Diluted earnings per common share
Net income attributable to common shareholders	$	2,149,454	$	1,449,630	$	4,641,930	$	2,683,950
Add: income allocated to participating securities		—		821,616		659,721		1,533,091
Net income attributable to Reservoir Media, Inc.	$	2,149,454	$	2,271,246	$	5,301,651	$	4,217,041

Diluted earnings (loss) per common share
Net income (loss) attributable to Reservoir Media, Inc.									$	76,039	$	(1,452,998)
Weighted average common shares outstanding - basic		64,106,963		28,539,299		48,836,288		28,318,769		64,223,531		28,539,299
Weighted average effect of potentially dilutive securities:
Assumed conversion of RHI Preferred Stock		—		16,175,406		6,940,720		16,175,406
Effect of dilutive stock options and RSUs		609,793		—		628,479		—		558,208		—
Weighted average common shares outstanding - diluted		64,716,756		44,714,705		56,405,487		44,494,175		64,781,739		28,539,299
Earnings per common share - diluted	$	0.03	$	0.05	$	0.09	$	0.09
Earnings (loss) per common share - diluted									$	—	$	(0.05)

~~Prior to the RHI Preferred Stock Conversion in connection with the Business Combination, shares of the RHI Preferred Stock were considered participating securities.~~

Because of their anti-dilutive effect, 5,887,500 shares of Common Stock equivalents comprised of warrants have been excluded from the diluted earnings per share calculation for the three ~~and nine~~ months ended ~~December 31, 2021. Because~~June 30, 2022.

Prior to the RHI Preferred Stock Conversion in connection with the Business Combination, shares of the RHI Preferred Stock were considered participating securities. The RHI Preferred Shares are excluded from the loss per share calculation for the three months ended June 30, 2021 as they did not have an obligation to share or fund in the Company’s net losses and their inclusion would be anti-dilutive. Additionally, because of their anti-dilutive effect, 1,494,848 shares of Common Stock equivalents comprised of stock options have been excluded from the diluted earnings per share calculation for the three ~~and nine~~ months ended ~~December 31, 2020.~~June 30, 2021.

NOTE ~~15.~~16. FINANCIAL INSTRUMENTS

The Company is exposed to the following risks related to its financial instruments:

(a)

Credit Risk

Credit risk arises from the possibility that the Company’s debtors may be unable to fulfill their financial obligations. Revenues earned from publishing and distribution companies are concentrated in the music and entertainment industry. The Company monitors its exposure to credit risk on a regular basis.

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(Unaudited)

(b)

Interest Rate Risk

The Company is exposed to market risk from changes in interest rates on its secured loan. As described in Note 8,9, “~~Loans,~~Secured Line of Credit,” the Company entered into interest rate swap agreements to partially reduce its exposure to fluctuations in interest rates on its Credit Facilities.

The fair value of the outstanding interest rate swaps was a ~~$1,677,576 liability~~$5,562,139 asset as of ~~December 31, 2021~~June 30, 2022 and a ~~$4,566,537 liability~~$3,991,802 asset as of March 31, ~~2021.~~2022. Fair value is determined using Level 2 inputs, which are based on quoted prices and market observable data of similar instruments. The change in the unrealized fair value of the swaps during the three ~~and nine~~ months ended ~~December 31, 2021~~June 30, 2022 of ~~$1,663,743 and $2,888,961, respectively,~~$1,570,337 was recorded as a gain on changes in fair value of derivative instruments. The change in the unrealized fair value of the swaps during the three ~~and nine~~ months ended ~~December 31, 2020~~June 30, 2021 of ~~$852,449 and $1,259,738 , respectively,~~$547,488 was recorded as a gain on changes in fair value of derivative instruments.

(c)

Foreign Exchange Risk

The Company is exposed to foreign exchange risk in fluctuations of currency rates on its revenue from royalties, writers’ fees and its subsidiaries’ operations.

(d)

Financial Instruments

Financial instruments not described elsewhere include cash, accounts receivable, accounts payable, accrued liabilities, secured loans payable and borrowing under its line of credit. The carrying values of these instruments as of ~~December 31, 2021~~June 30, 2022 do not differ materially from their respective fair values due to the immediate or short-term duration of these items or their bearing market-related rates of interest.

The fair value of amounts due from and owed to related parties are impracticable to determine due to the related party nature of such amounts and the lack of a readily determinable secondary market.

NOTE ~~16.~~17. CONTINGENCIES AND COMMITMENTS

(a)

Leases

~~On September 8, 2020,~~The Company leases its business premises under operating leases which have expiration dates between 2022 – 2027. The Company determines if an ~~action was filed~~arrangement is or contains a lease at inception of the contract. Beginning April 1, 2022, the Company recognizes on the balance sheet a lease liability for its obligation to make lease payments arising from the lease and a corresponding ROU asset representing its right to use the underlying asset over the period of use based on the present value of lease payments over the lease term as of the lease commencement date in accordance with ASC 842.

Certain leases contain fixed rent escalations and/or renewal options. None of the Company’s operating leases include variable lease payments. Subsequent amortization of the ROU asset and accretion of the lease liability for an operating lease is recognized as a single lease cost, on a straight-line basis, over the lease term. Reductions of the ROU asset and the change in the ~~U.S. District Court for~~lease liability are included in changes in Other assets and liabilities in the ~~Southern District~~Consolidated Statement of ~~New York against a consolidated subsidiary of~~Cash Flows.

During the three months ended June 30, 2022, the Company ~~and certain prior owners (the “Prior Owners”) of certain music copyrights acquired~~extended one operating lease by ~~such consolidated subsidiary of~~two months. The resulting increase to the ~~Company. The legal action asserts that in 2000, the plaintiff entered into certain engagement letters (the “Engagement Letters~~”) with certain of the Prior Owners, which purportedly gave the plaintiff, among other things, an exclusive right to broker any future sale by the Prior Owners of the music copyrights acquired by such consolidated subsidiary of the Company, as well as a commission fee. Based on the Engagement Letters’ alleged grant of a security interest in such music copyrights, the plaintiff filed UCC financing statements and various notices of liens in the amount of $2,651,125 in the U.S. Copyright Office between 2000 and 2018. The plaintiff alleges, among other things, that the Prior Owners breached the Engagement Letters by consummating a purchase agreementlease liability totaled approximately $74,000, with a ~~consolidated subsidiary of~~corresponding increase to the Company in 2018 without involving the plaintiff; that a consolidated subsidiary of the Company tortiously interfered with the Engagement Letters; and that the plaintiff is permitted to foreclose on the liens, including foreclosing on those music copyrights acquired by a consolidated subsidiary of the Company under the 2018 purchase agreement. Effective January 10,ROU asset.

In April 2022, ~~the plaintiff, the Prior Owners, and such consolidated subsidiary of~~ the Company entered into ~~a settlement~~an agreement ~~and mutual release which required~~for its new headquarter office facility consisting of 12,470 square feet of leased office space at 200 Varick Street, Suite 801A, New York, NY (the “New HQ Lease”). The New HQ Lease is expected to commence during the Prior Owners to pay a settlement amount to the plaintiff no later than February 1, 2022. The Prior Owners made such payment prior to the stipulated deadline. Accordingly, the liens granted to plaintiff have been automatically released and terminated. The consolidated subsidiaryCompany’s third quarter of the ~~Company has filed a notice~~fiscal year ending March 31, 2023. The total commitment of ~~termination (executed by plaintiff)~~approximately $8.4 million will be payable monthly with escalating rental payments over the U.S. Copyright Office and is in the process of terminating all UCC financing statements naming the Prior Owners as debtor and the plaintiff as secured party. Finally, the plaintiff is then required to file an agreed-upon notice of dismissal with prejudice with the U.S. District Court for the Southern District of New York. Neither the Company nor its consolidated subsidiary named in the action were required to pay any portion of the settlement amounts pursuant to such settlement agreement and mutual release.130-month lease term.

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(Unaudited)

(b)

Litigation

~~In addition to the foregoing, the~~The Company is subject to claims and contingencies in the normal course of business. To the extent the Company cannot predict the outcome of the claims and contingencies or estimate the amount of any loss that may result, 0 provision for any contingent liabilities has been made in the consolidated financial statements. The Company believes that losses resulting from these matters, if any, would not have a material adverse effect on the financial position, results of operations or cash flows of the Company. All such matters which the Company concludes are probable to result in a loss and for which management can reasonably estimate the amount of such loss have been accrued for within these condensed consolidated financial statements.

NOTE ~~17.~~18. SEGMENT REPORTING

The Company’s business is organized in 2 reportable segments: Music Publishing and Recorded Music. The Company identified its Chief Executive Officer as its Chief Operating Decision Maker (“CODM”). The Company’s CODM evaluates financial performance of its segments based on several factors, of which the primary financial measure is operating income before depreciation and amortization (“OIBDA”). While each segment incurs direct administration expenses reflected in segment income, all corporate-level administration expenses, such as executive management, are included in the Music Publishing segment and are not allocated between segments.

The accounting policies of the Company’s business segments are consistent with the Company’s policies for the consolidated financial statements. The Company does not have sales between segments.

The following tables present total revenue and reconciliation of OIBDA to operating income by segment for the three months ended June 30, 2022 and 2021:


	Three Months Ended June 30, 2022
	Music		Recorded
	Publishing		Music		Other		Consolidated
Total revenue	$	16,446,707	$	7,570,711	$	261,352	$	24,278,770

Reconciliation of OIBDA to operating income (loss):
Operating income (loss)		(261,308)		1,581,310		524		1,320,526
Amortization and depreciation		3,954,370		1,384,481		22,652		5,361,503
OIBDA	$	3,693,062	$	2,965,791	$	23,176	$	6,682,029


	Three Months Ended June 30, 2021
	Music		Recorded
	Publishing		Music		Other		Consolidated
Total revenue	$	12,203,773	$	4,207,795	$	221,063	$	16,632,631

Reconciliation of OIBDA to operating income (loss):
Operating income (loss)^(a)		229,167		(73,301)		59,825		215,691
Amortization and depreciation		3,169,209		865,458		25,056		4,059,723
OIBDA	$	3,398,376	$	792,157	$	84,881	$	4,275,414

(a)During the fourth quarter the fiscal year ended March 31, 2022, the Company revised the methodology it uses to allocate corporate general and administrative expenses to its operating segments to better align usage of corporate resources allocated to the Company segments. The updated allocation methodology had no impact on the Company’s consolidated statements of operations. This change was applied retrospectively, and segment OIBDA for all comparative periods has been updated to reflect this change.

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(Unaudited)

NOTE 19. CORRECTION OF PRIOR PERIOD ERRORS

As previously disclosed in Note 19 to the Company’s consolidated financial statements as of and for the fiscal year ended March 31, 2022, the Company identified prior period accounting errors that the Company has concluded are not material to the Company’s previously reported consolidated financial statements and unaudited interim condensed consolidated financial statements.

Based on management’s evaluation of the accounting errors in consideration of the SEC Staff’s Accounting Bulletins Nos. 99 (“SAB 99”) and 108 (“SAB 108”) and interpretations therewith, the Company concluded the errors are not material, on an individual or aggregate basis, to the Company’s previously reported annual and interim consolidated financial statements affected by the errors, which includes the Company’s previously reported unaudited interim condensed consolidated financial information for the three months ended June 30, 2021 (the “previously reported financial statements”). However, the Company further concluded the accounting errors cannot be corrected as an out-of-period adjustment in the Company’s consolidated financial statements as of and for the year ended March 31, 2022, because to do so would cause a material misstatement in those financial statements. Accordingly, the Company referred to the guidance prescribed by SAB 108 which specifies that the errors must be corrected the next time the previously reported financial statements are filed. Therefore, the Company corrected the accounting errors in all of the Company’s previously reported annual and interim consolidated financial statements impacted by the errors, which includes the accompanying unaudited condensed consolidated financial statements as of and for the three months ended June 30, 2021.

The following is a description of the accounting errors and their impact on the Company’s previously reported financial statements:

The Company identified certain accounting errors that originated in the fourth quarter of fiscal year 2020 related to the recognition of royalty revenue associated with royalties generated from the pre-acquisition usage of intellectual property rights that the Company acquired in certain of its music catalog acquisitions for which the Company was entitled to collect pre-acquisition royalties from the sellers for a specified period prior to the closing date of these acquisitions. The Company’s historical accounting practice with respect to pre-acquisition royalties was to recognize revenue upon closing of the acquisitions. Upon further review, the Company concluded that the pre-acquisition royalties should have been accounted for as reduction of the purchase price of the acquired music catalogs, as prescribed by ASC 805-50, Business Combinations – Related Issues (“ASC 805-50”) rather than recognized as revenue under ASC 606, Revenue from Contracts with Customers (“ASC 606”).

As part of its review, the Company further concluded that certain royalty revenue generated from pre-acquisition usage that remained uncollected at closing, as well as the related royalties due to certain artists or songwriters associated with each of the acquired music catalogs, should have been recognized as accounts receivable and royalties payable, respectively, on the closing date of the acquired music catalog based on the Company’s best estimate of the uncollected royalties due to the Company and payables due to the artists or songwriters on the closing date. The Company’s historical accounting practice associated with these uncollected royalties and royalties payable was to recognize the uncollected royalties as revenue under ASC 606 as they were collected after the closing date, and to recognize cost of revenue as the royalties due to the artists or songwriters when the related royalty revenue was collected. The Company also concluded that the acquired accounts receivable and royalties payable assumed on the date of closing should have been included in the purchase price allocation of the Company’s acquired music catalogs, as prescribed by ASC 805-50. The financial tables below present the impact of correcting the accounting errors on the Company’s previously reported financial statements.

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RESERVOIR MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

(Unaudited)

The following table presents the impact of correcting the accounting errors on the Company’s previously reported unaudited condensed consolidated statement of income for the three months ended June 30, 2021:


	Three Months Ended June 30, 2021
	As Reported		Adjustment		Revised
Revenues	$	16,718,150	$	(85,519)	$	16,632,631
Amortization and depreciation		4,079,245		(19,522)		4,059,723
Total costs and expenses		16,436,462		(19,522)		16,416,940
Operating income		281,688		(65,997)		215,691
Loss before income taxes		(1,968,129)		(65,997)		(2,034,126)
Income tax benefit		(510,646)		(16,499)		(527,145)
Net loss		(1,457,483)		(49,498)		(1,506,981)
Net loss attributable to Reservoir Media, Inc.		(1,403,500)		(49,498)		(1,452,998)

Loss per common share - basic	$	(0.05)	$	—	$	(0.05)
Loss per common share - diluted	$	(0.05)	$	—	$	(0.05)

The following table presents the impact of correcting the accounting errors on the Company’s previously reported unaudited condensed consolidated statement of comprehensive income (loss) for the three months ended June 30, 2021:


	Three Months Ended June 30, 2021
	As Reported		Adjustment		Revised
Net loss	$	(1,457,483)	$	(49,498)	$	(1,506,981)
Total comprehensive loss		(1,242,341)		(49,498)		(1,291,839)
Total comprehensive loss attributable to Reservoir Holdings, Inc.		(1,188,358)		(49,498)		(1,237,856)

The following table presents the impact of correcting the accounting errors on the Company’s previously reported unaudited condensed consolidated balance sheet and consolidated statement of changes in shareholders’ equity as of June 30, 2021:


	June 30, 2021
	As Reported		Adjustment		Revised
Intangible assets, net	$	500,591,041	$	(2,154,844)	$	498,436,197
Total assets		580,983,613		(2,154,844)		578,828,769
Income taxes payable		533,937		(6,323)		527,614
Deferred income taxes		19,772,056		(484,419)		19,287,637
Total liabilities		386,215,074		(490,742)		385,724,332
Accumulated deficit		(652,004)		(1,664,102)		(2,316,106)
Total Reservoir Media, Inc, shareholders’ equity		193,816,825		(1,664,102)		192,152,723
Total shareholders’ equity		194,768,539		(1,664,102)		193,104,437
Total liabilities and shareholders’ equity		580,983,613		(2,154,844)		578,828,769

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RESERVOIR MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

(Unaudited)

The following ~~tables present total revenue and reconciliation~~table presents the impact of ~~OIBDA to operating income by segment~~correcting the accounting errors on the Company’s previously reported unaudited condensed consolidated statement of cash flows for the three ~~and nine~~ months ended ~~December 31, 2021 and 2020:~~June 30, 2021:


	Three Months Ended December 31, 2021								Three Months Ended June 30, 2021
	Music		Recorded						As Reported		Adjustment		Revised
	Publishing		Music		Other		Consolidated

Total revenue	$	18,402,713	$	8,110,213	$	614,853	$	27,127,779

Reconciliation of OIBDA to operating income:
Operating income		908,425		2,747,216		322,257		3,977,898
Amortization and depreciation		3,541,393		1,416,039		24,316		4,981,748
OIBDA	$	4,449,818	$	4,163,255	$	346,573	$	8,959,646
Net loss									$	(1,457,483)	$	(49,498)	$	(1,506,981)
Amortization of intangible assets										4,047,966		(19,522)		4,028,444
Deferred income taxes										36,519		(16,499)		20,020
Net cash provided by operating activities										3,827,380		(85,519)		3,741,861
Purchases of music catalogs										(112,264,047)		85,519		(112,178,528)
Net cash used for investing activities										(112,785,355)		85,519		(112,699,836)

Nine Months Ended December 31, 2021

Music

Recorded


Publishing

Music

Other

Consolidated
Total revenue

$
52,816,592

$
20,414,623

$
1,050,202

$
74,281,417

Reconciliation of OIBDA to operating income:

Operating income

5,338,102

6,434,370

398,176

12,170,648
Amortization and depreciation

10,050,589

3,713,896

74,191

13,838,676
OIBDA

$
15,388,691

$
10,148,266

$
472,367

$
26,009,324

Three Months Ended December 31, 2020

Music

Recorded


Publishing

Music


Other

Consolidated

Total revenue

$
17,745,954

$
3,276,553

$
532,373

$
21,554,880

Reconciliation of OIBDA to operating income:



Operating income

3,928,495


904,195

60,646

4,893,336
Amortization and depreciation

2,529,098


628,781

0

3,157,879
OIBDA

$
6,457,593

$
1,532,976

$
60,646

$
8,051,215

NOTE 20. SUBSEQUENT EVENT

Nine Months Ended December 31, 2020

Music

Recorded


Publishing

Music

Other

Consolidated

Total revenue

$
46,671,027

$
8,705,000

$
808,163

$
56,184,190

Reconciliation of OIBDA to operating income:

Operating income

8,859,977

2,553,779

103,529

11,517,285
Amortization and depreciation

8,726,212

1,720,803

0

10,447,015
OIBDA

$
17,586,189

$
4,274,582

$
103,529

$
21,964,300

In July 2022, the U.S. Copyright Royalty Board (“CRB”), which is charged with setting statutory rates for mechanical royalties in the United States, issued their “Initial Ruling and Order After Remand” (the “Initial Ruling”). While specific details of how the Initial Ruling will impact the music industry have not yet been released by the CRB, it has been widely expected that the CRB will affirm an increase to the all-in headline royalty rates that it previously set for the period 2018 to 2022. Other aspects of the ruling are expected to clarify further components of the royalty calculation, such as the Total Content Cost. In connection with issuing the Initial Ruling, the Copyright Royalty Judges ordered the parties to respond in writing to their adversary’s Submission of Regulatory Provisions. Once this regulatory process is concluded, the CRB will issue a Final Determination, which will include the language of the new federal regulations, including the compulsory rates and terms.

For much of the period between 2018 and 2022, most digital service providers (“DSPs”) have accounted and submitted payment to the Company using the applicable 2017 rate while the remand process takes place. Once the Initial Ruling is formalized into a Final Determination and added to the Federal Register, and if the increased royalty rates are upheld, the DSPs will be required to make retroactive adjustments to apply the final rate structure to the period between 2018 and 2022. Through June 30, 2022, the Company has not recognized an estimate of any effects potentially arising from the Initial Ruling. The Company will continue to evaluate information issued by the CRB and factor this information into its estimates of revenues and cost of revenues in future periods.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of Reservoir Media, Inc.’s financial condition and results of operations should be read in conjunction with Reservoir Media, Inc.’s condensed consolidated financial statements, including the accompanying notes thereto contained elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”). Certain statements contained in the discussion and analysis set forth below include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. Unless the context otherwise requires, the terms “we,” “us,” “our,” the “Company” and “Reservoir” refer collectively to Reservoir Media, Inc. and its consolidated subsidiaries.

As disclosed in Note 19, “Correction of Prior Period Errors” to our consolidated financial statements, the Company’s consolidated financial statements as of and for the three months ended June 30, 2021, have been revised to give effect to the correction of certain accounting errors identified during the financial reporting process as of and for the fiscal year ended March 31, 2022. As a result, the Management’s Discussion and Analysis of the Company’s Financial Condition and Results of Operations set forth below has been revised to give effect to the correction of these errors.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are not historical facts, and are intended to be covered by the safe harbor created thereby. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “predict,” “project,” “target,” “goal,” “intend,” “continue,” “could,” “may,” “might,” “shall,” “should,” “will,” “would,” “plan,” “possible,” “potential,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. In addition, any statements that refer to expectations, projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current expectations, projections and beliefs based on information currently available. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about the Company that may cause its actual business, financial condition, results of operations, performance and/or achievements to be materially different from any future business, financial condition, results of operations, performance and/or achievements expressed or implied by these forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described under “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in the Company’s ~~Registration Statement~~Annual Report on Form ~~S-1 (file no. 333-257610)~~10-K (the “~~Registration Statement~~Annual Report”) filed with the U.S. Securities and Exchange Commission (the “SEC”) on ~~July 1, 2021, as amended on July 23, 2021 and July 26, 2021,~~June 21, 2022 and the Company’s other filings with the SEC. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Introduction

We are a holding company that conducts substantially all of our business operations through Reservoir Media Management, Inc. (“RMM”) and RMM’s subsidiaries. Our activities are generally organized into two operating segments: Music Publishing and Recorded Music. Operations of the Music Publishing segment involve the acquisition of interests in music catalogs from which royalties are earned as well as signing songwriters to exclusive agreements, which gives us an interest in the future delivery of songs. Operations of the Recorded Music segment involve the acquisition of sound recording catalogs as well as the discovery and development of recording artists and the marketing, distribution, sale and licensing of the music catalogs.

This management’s discussion and analysis of financial condition and results of operations is organized as follows:

●

Business Overview––This section provides a general description of our business, as well as a discussion of factors that we believe are important in understanding our results of operations and comparability and in anticipating future trends.

Table of Contents

●

Results of Operations––This section provides an analysis of our consolidated and operating segment results of operations for the three ~~and nine~~ months ended ~~December 31, 2021~~June 30, 2022 and ~~December 31, 2020.~~June 30, 2021.

●

~~Business Segment Results––This section provides an analysis of our business segment results for the three and nine months ended December 31, 2021 and December 31, 2020.~~

~~Table of Contents~~

●

Liquidity and Capital Resources––This section provides an analysis of our cash flows for the ~~nine~~three months ~~December 31,~~June 30, 2022 and June 30, 2021, ~~and December 31, 2020,~~ as well as a discussion of our liquidity and capital resources as of ~~December 31, 2021.~~June 30, 2022. The discussion of our liquidity and capital resources includes recent debt financings and a summary of the key debt covenant compliance measures under our debt agreements.

●

~~Critical Accounting Policies~~––This section identifies those accounting policies that are considered important to our results of operations and financial condition, require significant judgement and/or involve significant management estimates. Our significant accounting policies, including those considered to be critical accounting policies, are summarized in Note 2, “~~Significant Accounting Policies~~~~” to our condensed consolidated financial statements as of December 31, 2021 and for the three and nine months ended December 31, 2021 and 2020~~.

~~Use of OIBDA~~

We evaluate our operating performance based on several factors, including our primary financial measure of operating income (loss) before non-cash depreciation of tangible assets and non-cash amortization of intangible assets (“~~OIBDA~~”). We consider OIBDA to be an important indicator of the operational strengths and performance of our businesses and believe this non-US GAAP (as defined below) measure provides useful information to investors because it removes the significant impact of amortization from our results of operations. However, a limitation of the use of OIBDA as a performance measure is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses and other non-operating income (loss). Accordingly, OIBDA should be considered in addition to, not as a substitute for, operating income (loss), net income (loss) attributable to us and other measures of financial performance reported in accordance with accounting principles generally accepted in the United States of America (“~~US GAAP~~”). In addition, our definition of OIBDA may differ from similarly titled measures used by other companies. A reconciliation of consolidated OIBDA to operating income (loss) and net income (loss) attributable to us is provided in “—~~Results of Operations~~.”

Business Overview

We are an independent music company operating in music publishing and recorded music. We represent over 140,000 copyrights in our publishing business and over 36,000 master recordings in our recorded music business. Both of our business areas are populated with hit songs dating back to the early 1900s representing an array of artists across genre and geography. WeConsistent with how we classify and operate our business, ~~into~~our company is organized in two ~~fundamental operations:~~operating and reportable segments: Music Publishing and Recorded Music. A brief description of each ~~of those~~segment’s operations is presented below.

Music Publishing ~~Operations~~Segment

Music Publishing is an intellectual property business focused on generating revenue from uses of the musical composition itself. In return for promoting, placing, marketing and administering the creative output of a songwriter or engaging in those activities for other rightsholders, our Music Publishing business garners a share of the revenues generated from use of the musical compositions.

The operations of our Music Publishing business are conducted principally through RMM, our global music publishing company headquartered in New York City, with operations in multiple countries through various subsidiaries, affiliates and non-affiliated licensees and sub-publishers. We own or control rights to more than 140,000 musical compositions, including numerous pop hits, American standards, folk songs and motion picture and theatrical compositions. Assembled over many years, our current award-winning active songwriters exceed 100, while the catalog includes over 5,000 clients representing a diverse range of genres, including pop, rock, jazz, classical, country, R&B, hip-hop, rap, reggae, Latin, folk, blues, symphonic, soul, Broadway, techno, alternative and gospel.

Music Publishing revenues are derived from five main sources:

●

Digital––the rightsholder receives revenues with respect to musical compositions embodied in recordings distributed in streaming services, download services and other digital music services;

●

Performance––the rightsholder receives revenues if the musical composition is performed publicly through broadcast of music on television, radio and cable and in retail locations (e.g., bars and restaurants), live performance at a concert or other venue (e.g., arena concerts and nightclubs), and performance of music in staged theatrical productions;

●

~~Digital~~Synchronization––the rightsholder receives revenues for the right to use the musical composition in combination with ~~respect to musical compositions embodied~~visual images such as in ~~recordings distributed in streaming services, download services~~films or television programs, television commercials and ~~other digital music services;~~video games;

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●

Mechanical––the rightsholder receives revenues with respect to musical compositions embodied in recordings sold in any machine-readable format or configuration such as vinyl, CDs and DVDs;

●

~~Synchronization––the rightsholder receives revenues for the right to use the musical composition in combination with visual images such as in films or television programs, television commercials and video games;~~ and

●

Other––the rightsholder receives revenues for use in sheet music and other uses.

The principal costs associated with our Music Publishing business are as follows:

●

Writer Royalties and Other Publishing Costs––the artist and repertoire (“A&R”) costs associated with (i) paying royalties to songwriters, co-publishers and other copyright holders in connection with income generated from the uses of their works and (ii) signing and developing songwriters; and

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●

Administration Expenses––the costs associated with general overhead, and other administrative expenses, as well as selling and marketing.

Recorded Music ~~Operations~~Segment

Our Recorded Music business consists of three primary areas of sound recording ownership. First is the active marketing, promotion, distribution, sale and licensing of newly created frontline sound recordings from Current Artists that we own and control. This is a new area of focus for us and does not yet produce significant revenue. The second is the active marketing, promotion, distribution, sale and license of previously recorded and subsequently acquired Catalog recordings. The third is acquisition of full or partial interests in existing record labels, sound recording catalogs or income rights to a royalty stream associated with an established recording artist or producer contract in connection with existing sound recordings. Acquisition of these income participation interests are typically in connection with recordings that are owned, controlled, and marketed by other record labels.

Our Current Artist and Catalog recorded music businesses are both primarily handled by our Chrysalis Records label based in London and our Tommy Boy record label based in New York City. In the United States, we also manage some select Catalog recorded music under our Philly Groove Records and Reservoir Records labels. We also own income participation interests in recordings by The Isley Brothers, The Commodores, Wisin and Yandel, Alabama and Travis Tritt, and an interest in the Loud Records catalog containing recordings by the ~~Wu Tang~~Wu-Tang Clan. Our core Catalog includes recordings under the Chrysalis Records label by artists such as Sinéad O’Connor, The Specials, Generation X and The Waterboys, as well as recordings under the Tommy Boy record label by artists such as De La Soul, Coolio, House of Pain, Naughty By Nature, ~~Everlast~~ and ~~Digital Underground.~~Queen Latifah.

Our Current Artist and Catalog recorded music distribution is handled by a network of distribution partners. Chrysalis Records ~~Catalog~~current artist releases are distributed through ~~AWAL~~PIAS while our Chrysalis Records ~~Current Artist releases are distributed through PIAS.~~and Tommy Boy ~~Music Catalog releases~~catalogs are distributed via our membership with MERLIN, AMPED and other partners.

Through our distribution network, our music is being sold in physical retail outlets as well as in physical form to online physical retailers, such as amazon.com, and distributed in digital form to an expanding universe of digital partners, including streaming services such as Amazon, Apple, Deezer, SoundCloud, Spotify, Tencent Music Entertainment Group and YouTube, radio services such as iHeart Radio and SiriusXM, and download services. We also license music digitally to fitness platforms such as Apple Fitness+, Equinox, Hydrow and Peloton and social media outlets, such as Facebook, Instagram, TikTok and ~~Triller.~~Snap.

Recorded Music revenues are derived from four main sources:

●

Digital––the rightsholder receives revenues with respect to streaming and download services;

●

Physical––the rightsholder receives revenues with respect to sales of physical products such as vinyl, CDs and DVDs;

●

~~Synchronization~~––the rightsholder receives royalties or fees for the right to use sound recordings in combination with visual images such as in films or television programs, television commercials and video games; and

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●

Neighboring Rights––the rightsholder also receives royalties if sound recordings are performed publicly through broadcast of music on television, radio, and cable, and in public spaces such as shops, workplaces, restaurants, bars and ~~clubs.~~clubs; and

●

Synchronization––the rightsholder receives royalties or fees for the right to use sound recordings in combination with visual images such as in films or television programs, television commercials and video games.

The principal costs associated with our Recorded Music business are as follows:

●

Artist Royalties and Other Recorded Costs––the A&R costs associated with (i) paying royalties to recording artists, producers, songwriters, other copyright holders and trade unions, (ii) signing and developing recording artists and (iii) creating master recordings in the studio; and product costs to manufacture, package and distribute products to wholesale and retail distribution outlets; and

●

Administration Expenses––the costs associated with general overhead and other administrative expenses as well as the costs associated with the promotion and marketing of recording artists and music, including costs to produce music videos for promotional purposes and artist tour support.

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Business Combination

On July 28, 2021 (the “Closing Date”), we consummated the previously announced business combination (the “Business Combination ~~Combination”~~”) by and among Roth CH Acquisition II Co., a Delaware corporation (“ROCC”), Roth CH II Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of ROCC (“Merger Sub”) and Reservoir Holdings, Inc., a Delaware corporation (“RHI”). On the Closing Date, Merger Sub merged with and into RHI, with RHI surviving as a wholly-owned subsidiary of ROCC (the “Business Combination”). In connection with the consummation of the Business Combination, “Roth CH Acquisition II Co.” was renamed “Reservoir Media, Inc.” effective as of the Closing Date. Our common stock, $0.0001 par value per share (the “Common Stock”) and warrants are traded on The Nasdaq Stock Market LLC (“NASDAQ”) under the ticker symbols “RSVR” and “RSVRW,” respectively.

The Business Combination was accounted for as a reverse capitalization. Under this method of accounting, ROCC was treated as the “acquired” company for accounting purposes, and the Business Combination was accounted as the equivalent of RHI issuing stock for the net assets of ROCC, accompanied by a recapitalization. RHI is deemed to be the accounting predecessor of the combined business and the successor SEC registrant, meaning that RHI’s financial statements for ~~previous~~ periods ~~will be~~prior to the closing date are disclosed in ~~future~~ periodic reports filed with the SEC. See Note 3,4, “Business Combination and PIPE Investment” to the accompanying unaudited condensed consolidated financial statements for additional information with respect to the Business Combination and related transactions.

COVID-19 Pandemic

In January 2020, a new strain of coronavirus, COVID-19, was identified in Wuhan, China. In March 2020, the World Health Organization declared a global pandemic. The global pandemic and governmental responses thereto have disrupted physical and manufacturing supply chains and required the closures of physical retailers. Additionally, stay-at-home orders, limited indoor and outdoor gatherings and other restrictions have negatively affected our business in other ways, such as, making it impossible to hold live concert tours, delaying the release of new recordings and disrupting the production and release of motion pictures and television programs. However, the disruption from the COVID-19 pandemic may have accelerated growth of other revenue streams such as fitness and interactive gaming (including augmented reality and virtual reality).

Factors Affecting Results of Operations and Comparability

Throughout our history, we have constantly acquired new assets and subsidiaries and signed new writers and more recently new recording artists. These investing activities have had the largest impact on our growth over time. We have also invested in our operations to create a platform for the Music Publishing and Recorded Music segments to scale and grow. ~~The most~~We did not complete any individually significant ~~acquisitions of size~~acquisition transactions during the ~~nine~~three months ended ~~December 31,~~June 30, 2022. On June 2, 2021, we acquired, through a membership interest purchase agreement, Tommy Boy Music, LLC (“Tommy Boy”), a 40-year-old record label, which included a diverse catalog of primarily recorded music rights and ~~2020 were as follows:~~some music publishing rights.

●

On April 13, 2020, we acquired, through an asset purchase agreement, all of the music assets of three entities doing business as Shapiro, Bernstein & Co., a century old U.S. music publishing company, which included a diverse catalog of primarily music publishing rights and some ancillary rights. The investment also included the acquisition, through a share purchase agreement, of Shapiro, Bernstein & Co. Limited, a U.K. company, which enabled us to take advantage of its at-source network of collections across Europe.

Use of Non-GAAP Financial Measures

We prepare our financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP” or “GAAP”). However, this Management’s Discussion and Analysis of Financial Condition and Results of Operations also contains certain non-GAAP financial measures to assist readers in understanding our performance. Non-GAAP financial measures either exclude or include amounts that are not reflected in the most directly comparable measure calculated and presented in accordance with GAAP. Where non-GAAP financial measures are used, we have provided the most directly comparable measures calculated and presented in accordance with U.S. GAAP, a reconciliation to GAAP measures and a discussion of the reasons why management believes this information is useful to it and may be useful to investors.

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●

~~On June 2, 2021, we acquired, through a membership interest purchase agreement, Tommy Boy Music, LLC ("Tommy Boy"), a 40-year-old record label, which included a diverse catalog of primarily recorded music rights and some music publishing rights.~~

Results of Operations

Income Statement

Our income statement was composed of the following amounts (in thousands):


	For the Three Months Ended								For the Nine Months Ended								For the Three Months
	December 31,				2021 vs. 2020				December 31,				2021 vs. 2020				Ended June 30,				2022 vs. 2021
	2021		2020		$ Change		% Change		2021		2020		$ Change		% Change		2022		2021		$ Change		% Change
Revenues	$	27,128	$	21,555	$	5,573	26	%	$	74,281	$	56,184	$	18,097	32	%	$	24,279	$	16,633	$	7,646	46	%
Costs and expenses:
Cost of revenue		11,436		9,687		1,749	18	%		31,220		23,820		7,401	31	%		9,975		7,692		2,283	30	%
Amortization and depreciation		4,982		3,158		1,824	58	%		13,839		10,447		3,392	32	%		5,362		4,060		1,302	32	%
Administration expenses		6,732		3,816		2,917	76	%		17,052		10,400		6,651	64	%		7,622		4,665		2,957	63	%
Total costs and expenses		23,150		16,662		6,488	39	%		62,111		44,667		17,444	39	%		22,958		16,417		6,541	40	%

Operating income		3,978		4,893		(916)	(19)	%		12,171		11,517		653	6	%		1,321		216		1,105	512	%

Interest expense		(2,500)		(2,259)		(240)	11	%		(8,007)		(6,668)		(1,340)	20	%		(2,976)		(2,779)		(197)	7	%
Gain (loss) on foreign exchange		(48)		(342)		294	(86)	%		127		(550)		676	(123)	%		107		(18)		126	(686)	%
Gain on fair value of swaps		1,664		852		811	95	%		2,889		1,260		1,629	129	%		1,570		547		1,023	187	%
Interest and other income		—		1		(1)	N/A	%		—		6		(6)	(100)	%
Income before income taxes		3,094		3,146		(52)	(2)	%		7,179		5,566		1,614	29	%
Income tax expense		717		759		(41)	(6)	%		1,782		1,336		446	33	%
Net income		2,376		2,387		(10)	(0)	%		5,397		4,229		1,168	28	%
Net (income) loss attributable to noncontrolling interests		(227)		(116)		(111)	96	%		(95)		(12)		(83)	692	%
Net income attributable to Reservoir Media, Inc.	$	2,149	$	2,271	$	(122)	(5)	%	$	5,302	$	4,217	$	1,085	26	%
Income (loss) before income taxes																		22		(2,034)		2,056	(101)	%
Income tax expense (benefit)																		5		(527)		532	(101)	%
Net income (loss)																		17		(1,507)		1,524	(101)	%
Net loss attributable to noncontrolling interests																		59		54		5	10	%
Net income (loss) attributable to Reservoir Media, Inc.																	$	76	$	(1,453)	$	1,529	(105)	%

3225

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Revenues

Our revenues were composed of the following amounts (in thousands):



	For the Three Months Ended								For the Nine Months Ended								For the Three Months
	December 31,				2021 vs. 2020				December 31,				2021 vs. 2020				Ended June 30,				2022 vs. 2021
	2021		2020		$ Change		% Change		2021		2020		$ Change		% Change		2022		2021		$ Change		% Change
Revenue by Type
Digital																	$	8,464	$	6,611	$	1,853	28	%
Performance	$	3,997	$	3,760	$	238	6	%	$	11,046	$	11,735	$	(689)	(6)	%		3,536		2,649		887	33	%
Digital		8,480		11,654		(3,174)	(27)	%		26,710		25,595		1,115	4	%
Synchronization																		3,299		1,942		1,357	70	%
Mechanical		744		510		234	46	%		2,114		1,989		125	6	%		514		409		106	26	%
Synchronization		2,444		1,367		1,077	79	%		8,541		5,715		2,825	49	%
Other		2,737		455		2,282	502	%		4,407		1,637		2,770	169	%		633		593		40	7	%
Total Music Publishing		18,403		17,746		657	4	%		52,817		46,671		6,146	13	%		16,447		12,204		4,243	35	%

Digital		4,892		1,541		3,351	217	%		12,466		5,026		7,440	148	%		4,564		2,812		1,752	62	%
Physical		1,280		1,169		110	9	%		4,787		2,187		2,599	119	%		1,297		967		331	34	%
Neighboring rights																		685		327		358	109	%
Synchronization		1,190		90		1,100	1222	%		1,610		440		1,170	266	%		1,025		102		923	904	%
Neighboring rights		749		476		273	57	%		1,552		1,052		500	48	%
Total Recorded Music		8,110		3,277		4,834	147	%		20,415		8,705		11,710	135	%		7,571		4,208		3,363	80	%

Other revenue		615		532		82	16	%		1,050		808		242	30	%		261		221		40	18	%
Total Revenue	$	27,128	$	21,555	$	5,573	26	%	$	74,281	$	56,184	$	18,097	32	%	$	24,279	$	16,633	$	7,646	46	%
Revenue by Geographical Location
U.S. Music Publishing	$	9,013	$	7,360	$	1,653	22	%	$	26,683	$	24,313	$	2,370	10	%	$	9,843	$	6,823	$	3,020	44	%
U.S. Recorded Music		4,011		583		3,427	588	%		10,686		2,668		8,018	301	%		3,803		1,571		2,232	142	%
U.S. Other Revenue		615		532		82	16	%		1,050		808		242	30	%		261		221		40	18	%
Total U.S.		13,639		8,476		5,163	61	%		38,420		27,789		10,631	38	%		13,907		8,615		5,292	61	%
International Music Publishing		9,389		10,386		(997)	(10)	%		26,133		22,358		3,775	17	%		6,603		5,381		1,223	23	%
International Recorded Music		4,100		2,693		1,406	52	%		9,728		6,037		3,691	61	%		3,768		2,637		1,131	43	%
Total International		13,489		13,079		410	3	%		35,862		28,395		7,467	26	%		10,371		8,017		2,354	29	%
Total Revenue	$	27,128	$	21,555	$	5,573	26	%	$	74,281	$	56,184	$	18,097	32	%	$	24,279	$	16,633	$	7,646	46	%

~~Total~~ Revenues

~~Three Months Ended December 31, 2021 vs. Three Months Ended December 31, 2020~~

Total revenues increased by ~~$5,573~~$7,646 thousand, or ~~26%~~46%, ~~to $27,128 thousand for~~during the three months ended ~~December 31, 2021 from $21,555 thousand for~~June 30, 2022 compared to the three months ended ~~December 31, 2020.~~June 30, 2021, driven by a 35% increase in Music Publishing revenue and an 80% increase in Recorded Music revenue. Music Publishing revenues represented 68% and ~~82%~~73% of total revenues for the three months ended ~~December 31,~~June 30, 2022 and the three months ended June 30, 2021, ~~and December 31, 2020,~~ respectively. Recorded Music revenues represented ~~30%~~31% and ~~15%~~25% of total revenues for the three months ended ~~December 31,~~June 30, 2022 and the three months ended June 30, 2021, ~~and December 31, 2020,~~ respectively. U.S. and international revenues ~~each~~ represented ~~50% of total revenues for the three months ended December 31, 2021,~~57% and ~~39% and 61%~~43%, respectively of total revenues for the three months ended ~~December 31, 2020.~~June 30, 2022. U.S. and international revenues represented 52% and 48%, respectively of total revenues for the three months ended June 30, 2021. The shift in mix between Music Publishing and Recorded Music and the shift in geographic mix are both primarily attributable to the Tommy Boy Acquisition.

Total digital revenues increased by ~~$177~~$3,605 thousand, or 1%38%, ~~to $13,372 thousand for~~during the three months ended ~~December 31, 2021 from $13,195 thousand for~~June 30, 2022 compared to the three months ended ~~December 31, 2020.~~June 30, 2021. Total digital revenues represented ~~49%~~54% and ~~61%~~57% of consolidated revenues for the three months ended ~~December 31, 2021~~June 30, 2022 and December 31, 2020, respectively. The decrease in digital revenue as a percentage of consolidated revenue is primarily due to the inclusion of a one-time settlement with a previously unlicensed platform during the three months ended ~~December 31, 2020. There was no such settlement included in the revenue for the three months ended~~

~~Table of Contents~~

~~December 31, 2021. Adjusting for the impact of the one-time settlement for the three months ended December 31, 2020, total digital revenue increased by $2,877 thousand or 28%.~~June 30, 2021, respectively.

Music Publishing revenues increased by ~~$657~~$4,243 thousand, or 4%35%, to $18,403 thousand for the three months ended December 31, 2021 from $17,746 thousand for the three months ended December 31, 2020. U.S. Music Publishing revenues were $9,013 thousand, or 49% of consolidated Music Publishing revenues for the three months ended December 31, 2021, and $7,360 thousand, or 41% of consolidated Music Publishing revenues for the three months ended December 31, 2020. International Music Publishing revenues were $9,389 thousand, or 51% of consolidated Music Publishing revenues for the three months ended December 31, 2021, and $10,386 thousand, or 59% of consolidated Music Publishing revenues for the three months ended December 31, 2020.

~~The overall increase in Music Publishing revenue~~ during the three months ended ~~December 31, 2021~~June 30, 2022 compared to the three months ended June 30, 2021. This increase in Music Publishing revenue was mainly driven by acquisitions of catalogs and revenue from the existing catalog, which led to ~~an increase~~increases in synchronization revenue, ~~of $1,077 thousand, or 79%, other revenue of $2,282 thousand, or 502%, mechanical revenue of $234 thousand, or 46%, and~~ performance revenue, ~~of $238 thousand, or 6%. These increases were partially offset by a decrease in~~ digital revenue ~~of $3,174 thousand, or 27%, which is~~and mechanical revenue. Additionally, other revenues increased, driven primarily ~~attributed to the one-time settlement during the three months ended December 31, 2020, as described above. The increase in other revenue is primarily the due to the launch of a~~by our rights management subsidiary in the Middle East.

~~Recorded~~26

Table of Contents

On a geographic basis, U.S. Music Publishing revenues ~~increased by $4,834 thousand, or 147%, to $8,110 thousand for the three months ended December 31, 2021 from $3,277 thousand for the three months ended December 31, 2020. U.S. Recorded~~represented 60% of total Music ~~revenues were $4,011 thousand and $583 thousand, or 49% and 18% of consolidated Recorded Music~~Publishing revenues for the three months ended ~~December 31, 2021 and December 31, 2020, respectively.~~June 30, 2022 compared to 56% for the three months ended June 30, 2021. International ~~Recorded~~ Music Publishing revenues ~~were $4,100 thousand and $2,693 thousand, or 51% and 82%~~represented 40% of ~~consolidated Recorded~~total Music Publishing revenues for the three months ended ~~December 31, 2021 and December 31, 2020, respectively.~~June 30, 2022 compared to 44% for the three months ended June 30, 2021.

Recorded Music revenues increased by $3,363 thousand, or 80%, during the three months ended June 30, 2022 compared to the three months ended June 30, 2021. The ~~overall~~ increase in Recorded Music revenue ~~during the three months ended December 31, 2021,~~ was driven in part by the acquisition of Tommy Boy in June 2021, which contributed ~~$3,829~~$3,744 thousand to Recorded Music revenue during the three months ended ~~December 31, 2021.~~June 30, 2022. Digital revenue increased by ~~$3,351~~$1,752 thousand primarily due to the acquisition of Tommy Boy and due to the continued growth at music streaming services. ~~Physical~~Increases in physical revenue ~~increased by $110 thousand~~and neighboring rights revenue were also primarily due to the acquisition of Tommy Boy. ~~Synchronization revenue increased by $1,100~~The $923 thousand primarily due to the acquisition of Tommy boy and the recovery in the film and television industry from the impacts of the COVID-19 pandemic. Neighboring rights revenue increased by $273 thousand primarily due to the acquisition of Tommy Boy.

~~Nine Months Ended December 31, 2021 vs. Nine Months Ended December 31, 2020~~

Total revenues increased by $18,097 thousand, or 32%, to $74,281 thousand for the nine months ended December 31, 2021 from $56,184 thousand for the nine months ended December 31, 2020. Music Publishing revenues represented 71% and 83% of total revenues for the nine months ended December 31, 2021 and December 31, 2020, respectively. Recorded Music revenues represented 27% and 15% of total revenues for the nine months ended December 31, 2021 and December 31, 2020, respectively. U.S. and international revenues represented 52% and 48%, respectively, of total revenues for the nine months ended December 31, 2021, and 49% and 51%, respectively, of total revenues for the nine months ended December 31, 2020.

Total digital revenues increased by $8,555 thousand, or 28%, to $39,175 thousand for the nine months ended December 31, 2021 from $30,621 thousand for the nine months ended December 31, 2020. Total digital revenues represented 53% and 55% of consolidated revenues for the nine months ended December 31, 2021 and December 31, 2020, respectively. The decrease in digital revenue as a percentage of consolidated revenue is due to the continued recovery of synchronization revenue which contributed a higher portion of revenue during the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020.

Music Publishing revenues increased by $6,146 thousand, or 13%, to $52,817 thousand for the nine months ended December 31, 2021 from $46,671 thousand for the nine months ended December 31, 2020. U.S. Music Publishing revenues were $26,683 thousand, or 51% of consolidated Music Publishing revenues for the nine months ended December 31, 2021, and $24,313 thousand, or 52% of consolidated Music Publishing revenues for the nine months ended December 31, 2020. International Music Publishing revenues were $26,133 thousand, or 49% of consolidated Music Publishing revenues for the nine months ended December 31, 2021, and $22,358 thousand, or 48% of consolidated Music Publishing revenues for the nine months ended December 31, 2020.

~~Table of Contents~~

The overall increase in Music Publishing revenue during the nine months ended December 31, 2021 was mainly driven by acquisitions of catalogs and revenue from the existing catalog, which led to increases in digital revenue of $1,115 thousand or 4%, synchronization revenue of $2,825 thousand, or 49%, mechanical revenue of $125 thousand, or 6%, and other revenue of $2,770 thousand, or 169%. These increases were partially offset by a decrease in performance revenue of $689 thousand, or 6%, which can be attributed to declines in performance revenue across the industry due to the impact of the COVID-19 pandemic. The increase in digital revenue partially reflects the continued shift to streaming services for music consumption, while the increase in synchronization ~~reflects the recovery in the film and television industry from the impacts of the COVID-19 pandemic.~~

Recorded Music revenues increased by $11,710 thousand, or 135%, to $20,415 thousand for the nine months ended December 31, 2021 from $8,705 thousand for the nine months ended December 31, 2020. U.S. Recorded Music revenues were $10,686 thousand and $2,668 thousand, or 52% and 31% of consolidated Recorded Music revenues for the nine months ended December 31, 2021 and December 31, 2020, respectively. International Recorded Music revenues were $9,728 thousand and $6,037 thousand, or 48% and 69% of consolidated Recorded Music revenues for the nine months ended December 31, 2021 and December 31, 2020, respectively.

~~The overall increase in Recorded Music~~ revenue ~~during the nine months ended December 31, 2021,~~ was driven in part by the acquisition of Tommy Boy in June 2021, which contributed $7,473 thousand to Recorded Music revenue to the nine months ended December 31, 2021. Digital revenue increased by $7,440 thousand, or 148%, primarily due to the acquisition of Tommy Boy and due to the continued growth at music streaming services. Physical revenue increased by $2,599 thousand, or 119%, primarily due to an increase in physical sales at Chrysalis Records reflective of the growth in global demand for vinyl. Synchronization revenue increased by $1,170 thousand, or 266%, primarily due to the acquisition of Tommy Boy and the recovery in the film and television industry from the impacts of the COVID-19 pandemic. ~~Neighboring rights revenue increased by $500 thousand, or 48%, primarily due to the acquisition~~

On a geographic basis, U.S. Recorded Music revenues represented 50% of ~~Tommy Boy.~~

~~Revenue by Geographical Location~~

~~Three Months Ended December 31, 2021 vs. Three Months Ended December 31, 2020~~

~~U.S. revenue increased by $5,163 thousand, or 61%, to $13,639 thousand~~total Recorded Music revenues for the three months ended ~~December 31, 2021 from $8,476 thousand~~June 30, 2022 compared to 37% for the three months ended ~~December 31, 2020. U.S.~~June 30, 2021. International Recorded Music ~~Publishing revenue increased by $1,653 thousand, or 22%,~~revenues represented 50% of total Recorded Music revenues for the three months ended ~~December 31, 2021 as~~June 30, 2022 compared to ~~the three months ended December 31, 2020. U.S. Recorded Music revenue increased by $3,427 thousand, or 588%,~~63% for the three months ended ~~December 31, 2021 as compared to the three months ended December 31, 2020.~~June 30, 2021. This shift in Recorded Music geographic mix was driven primarily ~~driven~~ by the acquisition of Tommy Boy.

International revenue increased by $410 thousand, or 3%, to $13,489 thousand for the three months ended December 31, 2021 from $13,079 thousand for the three months ended December 31, 2020. International Music Publishing revenue decreased $997 thousand, or 10%, for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020. This was primarily driven by the one-time settlement during the three months ended December 31, 2020, as described above, with no corresponding settlement included during the three months ended December 31, 2021. International Recorded Music revenue increased by $1,406 thousand for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020 primarily due to the acquisition of Tommy Boy and the continued growth of music streaming services.

~~Nine Months Ended December 31, 2021 vs. Nine Months Ended December 31, 2020~~

U.S. revenue increased by $10,631 thousand, or 38%, to $38,420 thousand for the nine months ended December 31, 2021 from $27,789 thousand for the nine months ended December 31, 2020. U.S. Music Publishing revenue increased by $2,370 thousand, or 10%, for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020. U.S. Recorded Music revenue increased by $8,018 thousand, or 301%, for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020. This was primarily driven by the acquisition of Tommy Boy.

International revenue increased by $7,467 thousand, or 26%, to $35,862 thousand for the nine months ended December 31, 2021 from $28,395 thousand for the nine months ended December 31, 2020. International Music Publishing revenue increased $3,775 thousand, or 17%, for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020. This was primarily driven by acquisitions of catalogs, signings of writers and increases in digital revenue, primarily due to growth in streaming.

~~Table of Contents~~

International Recorded Music revenue increased by $3,691 thousand for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020 primarily due to the acquisition of Tommy Boy, the continued growth of music streaming services and a strong physical release schedule.

Cost of Revenues

Our cost of revenues was composed of the following amounts (in thousands):


	For the Three Months Ended								For the Nine Months Ended								For the Three Months
	December 31,				2021 vs. 2020				December 31,				2021 vs. 2020				Ended June 30,				2022 vs. 2021
	2021		2020		$ Change		% Change		2021		2020		$ Change		% Change		2022		2021		$ Change		% Change
Writer royalties and other publishing costs	$	8,471	$	8,307	$	164	2	%	$	24,214	$	21,196	$	3,018	14	%	$	7,752	$	6,019	$	1,733	29	%
Artist royalties and other recorded music costs		2,965		1,380		1,585	115	%		7,007		2,624		4,383	167	%		2,223		1,673		550	33	%
Total cost of revenues	$	11,436	$	9,687	$	1,749	18	%	$	31,220	$	23,820	$	7,401	31	%
Total cost of revenue																	$	9,975	$	7,692	$	2,283	30	%

~~Three Months Ended December 31, 2021 vs. Three Months Ended December 31, 2020~~

Cost of revenues increased by ~~$1,749~~$2,283 thousand, or ~~18%~~30%, ~~to $11,436 thousand for~~during the three months ended ~~December 31, 2021 from $9,687 thousand for~~June 30, 2022 compared to the three months ended ~~December 31, 2020.~~June 30, 2021. Cost of revenues as a percentage of revenues decreased to ~~42%~~41% for the three months ended ~~December 31, 2021~~June 30, 2022 from ~~45%~~46% for the three months ended ~~December 31, 2020.~~June 30, 2021.

Writer royalties and other publishing costs for the Music Publishing segment increased by ~~$164~~$1,733 thousand, or 2%29%, ~~to $8,471 thousand for~~during the three months ended ~~December 31, 2021 from $8,307 thousand for~~June 30, 2022 compared to the three months ended ~~December 31, 2020.~~June 30, 2021. Writer royalties and other publishing costs as a percentage of ~~music publishing~~Music Publishing revenues decreased to ~~46% for the three months ended December 31, 2021 from~~ 47% for the three months ended ~~December 31, 2020.~~June 30, 2022 from 49% for the three months ended June 30, 2021. The increase in margins was due to the change in the mix of earnings by type and songwriting clients with their specific contractual royalty rates being applied to the revenues.

Artist royalties and other recorded music costs for the Recorded Music segment increased by ~~$1,585~~$550 thousand, or ~~115%~~33%, ~~to $2,965 thousand for~~during the three months ended ~~December 31, 2021 from $1,380 thousand for~~June 30, 2022 compared to the three months ended ~~December 31, 2020.~~June 30, 2021. This increase was due primarily to increased revenue from the acquisition of Tommy Boy. Artist royalties and other recorded music costs as a percentage of recorded music revenues decreased to ~~37%~~29% for the three months ended ~~December 31, 2021~~June 30, 2022 from ~~42%~~40% for the three months ended ~~December 31, 2020.~~June 30, 2021. The increase in margins was due to the change in the mix of earnings by type and clients with the specific contractual royalty rates being applied to the revenues.

~~Nine Months Ended December 31, 2021 vs. Nine Months Ended December 31, 2020~~

Our cost of revenues increased by $7,401 thousand, or 31%, to $31,220 thousand for the nine months ended December 31, 2021 from $23,820 thousand for the nine months ended December 31, 2020. Cost of revenues as a percentage of revenues was 42% for both the nine months ended December 31, 2021 and the nine months ended December 31, 2020.

Writer royalties and other publishing costs increased by $3,018 thousand, or 14%, to $24,214 thousand for the nine months ended December 31, 2021 from $21,196 thousand for the nine months ended December 31, 2020. Writer royalties and other publishing costs as a percentage of music publishing revenues increased to 46% for the nine months ended December 31, 2021 from 45% for the nine months ended December 31, 2020. The decrease in margins was due to the change in the mix of earnings by type and songwriting clients with their specific contractual royalty rates being applied to the revenues.

Artist royalties and other recorded music costs increased by $4,383 thousand, or 167%, to $7,007 thousand for the nine months ended December 31, 2021 from $2,624 thousand for the nine months ended December 31, 2020. This increase was due primarily to increased revenue from the acquisition of Tommy Boy as well as costs associated with the increased physical revenue during the nine months ended December 31, 2021. Artist royalties and other recorded music costs as a percentage of recorded music revenues increased to 34% for the nine months ended December 31, 2021 from 30% for the nine months ended December 31, 2020. This was primarily

3627

Table of Contents

Amortization and Depreciation

Our amortization and depreciation expenses are composed of the following amounts (in thousands):


	For the Three Months
	Ended June 30,					2022 vs. 2021
	2022		2021		$ Change		% Change
Music Publishing amortization and depreciation	$	3,954	$	3,169	$	785	25	%
Recorded Music amortization and depreciation		1,385		865		520	60	%
Other amortization and depreciation		23		25		(2)	(8)	%
Total amortization and depreciation	$	5,362	$	4,060	$	1,302	32	%

Amortization and depreciation expense increased by $1,302 thousand, or 32%, during the three months ended June 30, 2022 compared to the three months ended June 30, 2021, driven by increases in both the ~~increase in sales of physical products which have a higher cost base than our other revenue streams, as well as~~Music Publishing and Recorded Music segments. Music Publishing amortization and depreciation expense increased by $785 thousand, or 25%, during the ~~change in the mix of earnings by type and clients with the specific contractual royalty rates being applied~~three months ended June 30, 2022 compared to the ~~revenues.~~three months ended June 30, 2021, primarily due to the acquisition of additional music catalogs. Recorded Music amortization and depreciation increased by $520 thousand, or 60%, during the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily due to Tommy Boy.

Administration Expenses

Our administration expenses are composed of the following amounts (in thousands):


	For the Three Months Ended								For the Nine Months Ended								For the Three Months
	December 31,				2021 vs. 2020				December 31,				2021 vs. 2020				Ended June 30,				2022 vs. 2021
	2021		2020		$ Change		% Change		2021		2020		$ Change		% Change		2022		2021		$ Change		% Change
Administration expenses	$	6,732	$	3,816	$	2,917	76	%	$	17,052	$	10,400	$	6,651	64	%
Music Publishing administration expenses																	$	5,002	$	2,786	$	2,216	80	%
Recorded Music administration expenses																		2,382		1,743		639	37	%
Other administration expenses																		238		136		102	75	%
Total administration expenses	$	6,732	$	3,816	$	2,917	76	%	$	17,052	$	10,400	$	6,651	64	%	$	7,622	$	4,665	$	2,957	63	%

~~Three Months Ended December 31, 2021 vs. Three Months Ended December 31, 2020~~

Total administration expenses increased by ~~$2,917~~$2,957 thousand, or ~~76%~~63%, ~~to $6,732 thousand for~~during the three months ended ~~December 31, 2021 from $3,816 thousand for~~June 30, 2022 compared to the three months ended ~~December 31, 2020.~~June 30, 2021, reflecting increases in both the Music Publishing and Recorded Music segments. Expressed as a percentage of revenues, administration expenses increased to ~~25%~~31% for the three months ended ~~December 31, 2021~~June 30, 2022 from ~~18%~~28% for the three months ended ~~December 31, 2020. Administration~~June 30, 2021, due to administration expenses associated with being a public company, an increase in share-based compensation expense and increased costs related to ~~acquisitions were~~establishing a U.S. Recorded Music platform due to the ~~primary drivers~~acquisition of ~~this increase.~~Tommy Boy.

~~Nine Months Ended December 31, 2021 vs. Nine Months Ended December 31, 2020~~

~~Total~~Music Publishing administration expenses increased by ~~$6,651~~$2,216 thousand, or ~~64%~~80%, ~~to $17,052 thousand for~~during the ~~nine~~three months ended ~~December 31, 2021 from $10,400 thousand for~~June 30, 2022 compared to the ~~nine~~three months ended ~~December 31, 2020.~~June 30, 2021. Expressed as a percentage of revenues, Music Publishing administration expenses increased to 30% for the three months ended June 30, 2022 from 23% for the ~~nine~~three months ended ~~December 31,~~June 30, 2021, ~~from 19% for the nine months ended December 31, 2020. Administration~~driven primarily by new administration expenses associated with ~~preparing for and~~ being a public company ~~along with an increase in share-based compensation,~~ and increased costs related to acquisitions were the primary drivers of this increase. In addition, the benefit of a forgiven PPP Loan (as defined below) of $617 thousand was recorded during the nine months ended December 31, 2020, while no such benefit was recorded for the nine months ended December 31, 2021. Adjusting for the impact of the one-time benefit of the PPP Loan forgiveness for the nine months ended December 31, 2020, administrativeacquisitions.

Recorded Music administration expenses increased by ~~$6,034~~$639 thousand, or ~~55%. This increase was in line~~37%, during the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily due to increases at Chrysalis Records and the acquisition of Tommy Boy. Expressed as a percentage of revenue, Recorded Music administration expenses decreased to 31% for the three months ended June 30, 2022 from 41% for the three months ended June 30, 2021 primarily due to taking advantage of operating leverage on the Recorded Music platform, partially offset by new administration expenses associated with ~~management’s expectations of incremental administrative expenses related to preparing for and~~ being a public ~~company as well as anticipated incremental administrative expenses associated with acquisitions.~~company.

Interest Expense

~~Three Months Ended December 31, 2021 vs. Three Months Ended December 31, 2020~~

Interest expense increased by ~~$240~~$197 thousand, or ~~11%~~7%, ~~to $2,500 thousand for~~during the three months ended ~~December 31, 2021 from $2,259 thousand for~~June 30, 2022 compared to the three months ended ~~December 31, 2020.~~June 30, 2021. This increase was primarily driven by increased debt balances due to use of funds in catalog and business acquisitions and writer signings, partially offset by a decline in LIBOR rates as well as lower interest rates as a result of refinancing transactions, the impact of which was in turn partially offset by interest rate swap hedges.

~~Nine Months Ended December 31, 2021 vs. Nine Months Ended December 31, 2020~~

Interest expense increased by $1,340 thousand, or 20%, to $8,007 thousand for the nine months ended December 31, 2021 from $6,668 thousand for the nine months ended December 31, 2020. This was primarily driven by increased debt balances due to use of funds in catalog and business acquisitions and writer signings, partially offset by a decline in LIBOR rates as well as lower interest rates as a result of refinancing transactions, the impact of which was in turn partially offset by interest rate swap hedges.

~~Gain (Loss) on Foreign Exchange~~

~~Three Months Ended December 31, 2021 vs. Three Months Ended December 31, 2020~~

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~~Loss~~acquisitions and writer signings, as well as increases in LIBOR. Our credit agreement provides for the transition from LIBOR as the index rate to SOFR once LIBOR is discontinued. We do not expect a negative impact on interest expense as a result of the transition.

Gain (Loss) on Foreign Exchange

Gain on foreign exchange was ~~$48~~$107 thousand for the three months ended December 31, 2021 compared to $342 thousand for the three months ended December 31, 2020. This change was due to fluctuations in the two foreign currencies we are directly exposed to, namely British pound sterling and euro.

~~Nine Months Ended December 31, 2021 vs. Nine Months Ended December 31, 2020~~

~~Gain on foreign exchange was $127 thousand for the nine months ended December 31, 2021~~June 30, 2022 compared to a loss on foreign exchange of ~~$550~~$18 thousand for the ~~nine~~three months ended ~~December 31, 2020.~~June 30, 2021. This change was due to fluctuations in the two foreign currencies we are directly exposed to, namely British pound sterling and euro.

Gain on Fair Value of Swaps

~~Three Months Ended December 31, 2021 vs. Three Months Ended December 31, 2020~~

Gain on fair value of swaps increased by ~~$811~~$1,023 thousand ~~to $1,664 thousand for~~during the three months ended ~~December 31, 2021 from $852 thousand for~~June 30, 2022 compared to the three months ended ~~December 31, 2020. This change was due to a rising forward yield curve for LIBOR and the marking to market of our interest rate swap hedges.~~

~~Nine Months Ended December 31, 2021 vs. Nine Months Ended December 31, 2020~~

~~Gain on fair value of swaps increased by $1,629 thousand to $2,889 thousand for the nine months ended December 31, 2021 from $1,260 thousand for the nine months ended December 31, 2020.~~June 30, 2021. This change was due to a rising forward yield curve for LIBOR and the marking to market of our interest rate swap hedges.

Income Tax Expense (Benefit)

~~Three Months Ended December 31, 2021 vs. Three Months Ended December 31, 2020~~

Income tax expense ~~decreased by $41~~was $5 thousand ~~or 6%, to $717 thousand for~~during the three months ended ~~December 31, 2021 from $759 thousand for~~June 30, 2022 compared to income tax benefit of $527 thousands during the three months ended ~~December 31, 2020.~~June 30, 2021. The ~~decrease in~~effective income tax ~~expense was related to the lower pre-tax income in~~rate during the three months ended ~~December 31, 2021~~June 30, 2022 was 24.1% compared to 25.9% during the three months ended June 30, 2021. The decrease in the effective income tax rate was driven primarily by changes in the mix of income from multiple tax jurisdictions.

Net Income (Loss)

Net income was $17 thousand during the three months ended June 30, 2022 compared to a net loss of $1,507 thousand during the three months ended June 30, 2021. The change in net income from net loss was driven primarily by a $1,105 thousand increase in operating income as a result of company growth and a $1,023 thousand increase in gain on fair value of swaps, partially offset by costs of being a public company and a $532 thousand increase in income tax expense.

Non-GAAP Reconciliations

We use certain financial information, such as OIBDA, OIBDA Margin, EBITDA, Adjusted EBITDA and Pro Forma Adjusted EBITDA, which are non-GAAP financial measures, which means they have not been prepared in accordance with U.S. GAAP. Reservoir’s management uses these non-GAAP financial measures to evaluate our operations, measure its performance and make strategic decisions. We believe that the use of these non-GAAP financial measures provides useful information to investors and others in understanding our results of operations and trends in the same manner as our management and in evaluating our financial measures as compared to the ~~three months ended December 31, 2020.~~financial measures of other similar companies, many of which present similar non-GAAP financial measures. However, these non-GAAP financial measures are subject to inherent limitations as they reflect the exercise of judgments by our management about which items are excluded or included in determining these non-GAAP financial measures and, therefore, should not be considered as a substitute for net income, operating income or any other operating performance measures calculated in accordance with GAAP. Using such non-GAAP financial measures in isolation to analyze our business would have material limitations because the calculations are based on the subjective determination of our management regarding the nature and classification of events and circumstances. In addition, although other companies in our industry may report measures titled OIBDA, OIBDA margin and Adjusted EBITDA, or similar measures, such non-GAAP financial measures may be calculated differently from how we calculate such non-GAAP financial measures, which reduces their overall usefulness as comparative measures. Because of these limitations, such non-GAAP financial measures should be considered alongside other financial performance measures and other financial results presented in accordance with GAAP. Reconciliations of OIBDA to operating income and EBITDA and Adjusted EBITDA to net income are provided below.

~~Nine Months Ended December 31, 2021 vs. Nine Months Ended December 31, 2020~~We consider operating income (loss) before non-cash depreciation of tangible assets and non-cash amortization of intangible assets (“OIBDA”) to be an important indicator of the operational strengths and performance of our businesses and believe this non-GAAP financial measure provides useful information to investors because it removes the significant impact of amortization from our results of operations and represents our measure of segment income. However, a limitation of the use of OIBDA as a performance measure is that

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it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses and other non-operating income (loss). Accordingly, OIBDA should be considered in addition to, not as a substitute for, operating income, net income attributable to us and other measures of financial performance reported in accordance with GAAP. In addition, our definition of OIBDA may differ from similarly titled measures used by other companies. OIBDA Margin is defined as OIBDA as a percentage of revenue.

~~Income~~EBITDA is defined as earnings (net income or loss) before net interest expense, income tax (benefit) expense, ~~increased~~non-cash depreciation of tangible assets and non-cash amortization of intangible assets and is used by ~~$446 thousand,~~management to measure operating performance of the business. Adjusted EBITDA is defined as EBITDA further adjusted to exclude items or ~~33%~~expenses such as, among others, (1) any non-cash charges (including any impairment charges), (2) any net gain or loss on foreign exchange, (3) any net gain or loss resulting from interest rate swaps, (4) equity-based compensation expense and (5) certain unusual or non-recurring items. Adjusted EBITDA is a key measure used by our management to ~~$1,782 thousand~~understand and evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. However, certain limitations on the use of Adjusted EBITDA include, among others, (1) it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenue for our business, (2) it does not reflect the significant interest expense or cash requirements necessary to service interest or principal payments on our indebtedness and (3) it does not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments. In particular, Adjusted EBITDA measure adds back certain non-cash, unusual or non-recurring charges that are deducted in calculating net income; however, these are expenses that may recur, vary greatly and are difficult to predict. In addition, Adjusted EBITDA is not the same as net income or cash flow provided by operating activities as those terms are defined by GAAP and does not necessarily indicate whether cash flows will be sufficient to fund cash needs.

Pro Forma Adjusted EBITDA is defined as Adjusted EBITDA plus the pro forma EBITDA of assets acquired in the previous four quarters representing the earnings of those assets for the ~~nine months ended December 31, 2021 from $1,336 thousand for~~portion of the ~~nine months ended December 31, 2020. The increase in income tax expense was related to~~prior four quarters before the ~~higher pre-tax income~~Company’s acquisition of such assets. This is the measurement defined in the ~~nine months ended December 31, 2021~~Company’s credit agreement. The Company believes that including the supplemental adjustments that are made to calculate Pro Forma Adjusted EBITDA provides additional information to investors about the Company’s ability to comply with its financial covenants as ~~compared~~well as providing meaningful information about the historic earnings of acquired assets. Pro Forma Adjusted EBITDA is not defined by GAAP. Pro Forma Adjusted EBITDA is not a measure of financial condition, liquidity or profitability, and should not be considered as an alternative to net income determined in accordance with GAAP or operating cash flows determined in accordance with GAAP. Additionally, Pro Forma Adjusted EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not take into account certain items such as interest and principal payments on our indebtedness, depreciation and amortization expense (because the ~~nine months ended December 31, 2020.~~

~~Net Income~~

~~Three Months Ended December 31, 2021 vs. Three Months Ended December 31, 2020~~

~~Net income decreased by $10 thousand, or less than 1%~~Company uses capital assets, depreciation and amortization expense is a necessary element of our costs and ability to generate revenue), working capital needs, tax payments (because the payment of taxes is part of our operations, it is a necessary element of our costs and ability to ~~$2,376 thousand for the three months ended December 31, 2021 from $2,387 thousand for the three months ended December 31, 2020 as a result of the factors described above.~~

~~Nine Months Ended December 31, 2021 vs. Nine Months Ended December 31, 2020~~

~~Net income increased by $1,168 thousand, or 28%~~operate), ~~to $5,397 thousand for the nine months ended December 31, 2021 from $4,229 thousand for the nine months ended December 31, 2020 as a result of the factors described above.~~non-recurring expenses and capital expenditures.

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Reconciliation of Operating Income to OIBDA

We use OIBDA as our primary measure of financial performance. The following ~~table reconciles~~tables reconcile operating income to OIBDA (in thousands):


																	Consolidated
	For the Three Months Ended								For the Nine Months Ended								For the Three Months
	December 31,				2021 vs. 2020				December 31,				2021 vs. 2020				Ended June 30,						2022 vs. 2021
	2021		2020		$ Change		% Change		2021		2020		$ Change		% Change		2022			2021			$ Change		% Change
Operating income	$	3,978	$	4,893	$	(916)	(19)	%	$	12,171	$	11,517	$	653	6	%	$	1,321		$	216		$	1,105	512	%
Amortization expense		4,933		3,102		1,831	59	%		13,713		10,279		3,435	33	%
Depreciation expense		49		56		(6)	(13)	%		125		169		(42)	(26)	%
Amortization and depreciation expenses																		5,362			4,060			1,302	32	%
OIBDA	$	8,960	$	8,051	$	908	11	%	$	26,009	$	21,964	$	4,045	18	%	$	6,683		$	4,276		$	2,407	56	%

OIBDA Margin																		28	%		26	%


	Music Publishing
	For the Three Months
	Ended June 30,							2022 vs. 2021
	2022			2021			$ Change		% Change
Operating (loss) income	$	(261)		$	229		$	(490)	(214)	%
Amortization and depreciation expenses		3,954			3,169			785	25	%
OIBDA	$	3,693		$	3,398		$	295	9	%

OIBDA Margin		22	%		28	%


	Recorded Music
	For the Three Months Ended
	June 30,						2022 vs. 2021
	2022			2021			$ Change		% Change
Operating income (loss)	$	1,581		$	(73)		$	1,654	NM
Amortization and depreciation expenses		1,385			865			520	60	%
OIBDA	$	2,966		$	792		$	2,174	274	%

OIBDA Margin		39	%		19	%

NM – Not meaningful

OIBDA

~~Three Months Ended December 31, 2021 vs. Three Months Ended December 31, 2020~~

Consolidated OIBDA increased by ~~$908~~$2,407 thousand, or ~~11%~~56%, during the three months ended June 30, 2022 compared to ~~$8,960 thousand~~the three months ended June 30, 2021, driven by a 274% increase in Recorded Music OIBDA and a 9% increase in Music Publishing OIBDA. Expressed as a percentage of revenue, OIBDA Margin increased to 28% for the three months ended ~~December 31, 2021~~June 30, 2022 from ~~$8,051 thousand~~26% for the three months ended ~~December 31, 2020~~June 30, 2021, primarily as a result of ~~an increase in revenue~~improved operating leverage on the Recorded Music platform as a result of ~~$5,573 thousand,~~growth, partially offset by an increase in cost of revenue of $1,749 thousand and an increase in administration expenses of $2,917 thousand. Expressed as a percentage of total revenue, OIBDA margin decreased to 33% for the three months ended December 31, 2021 from 37% for the three months ended December 31, 2020. OIBDA margin decreased primarily because of increased overhead associated with being a public company and increased costs related to acquisitions.

~~Nine Months Ended December 31, 2021 vs. Nine Months Ended December 31, 2020~~

Music Publishing OIBDA increased ~~by $4,045~~$295 thousand, or ~~18%~~9%, ~~to $26,009 thousand for~~during the ~~nine~~three months ended ~~December 31, 2021 from $21,964 thousand for~~June 30, 2022 compared to the ~~nine~~three months ended December 31, 2020 primarily as a result of an increase in revenue of $18,097 thousand, partially offset by an increase in cost of revenue of $7,401 thousand and an increase in administration expenses of $6,651 thousand.June 30, 2021. Expressed as a percentage of ~~total~~ revenue, Music Publishing OIBDA ~~margin~~Margin decreased to ~~35% for~~22% in the ~~nine~~three months ended ~~December 31, 2021~~June 30, 2022 from ~~39% for~~28% in the ~~nine~~three months ended ~~December 31, 2020. Adjusting for the impact of the one-time benefit of the PPP Loan forgiveness of $617 thousand for the nine months ended December 31, 2020 (as described~~June 30, 2021. The decreases in “—~~Administrative Expenses~~~~”),~~Music Publishing OIBDA ~~for the nine months ended December 31, 2020 would have been $21,347 thousand. When excluding the impact of the one-time benefit of the PPP Loan forgiveness for the nine months ended December 31, 2020,~~and OIBDA ~~for the nine months ended December 31, 2021 increased by $4,662 thousand, or 22%, which can be attributed to the increased costs for the nine months ended December 31, 2021~~Margin reflect increases in administration expenses associated with ~~preparing for and~~ being a public company and writers’ royalties and other publishing costs as ~~well as anticipated incremental administrative expenses associated with acquisitions.~~a percentage of revenue, partially offset by revenue growth.

~~Depreciation Expense~~

~~Three Months Ended December 31, 2021 vs. Three Months Ended December 31, 2020~~

~~Depreciation expense decreased by $6~~Recorded Music OIBDA increased $2,174 thousand, or ~~13%, to $49 thousand for~~274% during the three months ended ~~December 31, 2021 from $56 thousand for~~June 30, 2022 compared to the three months ended ~~December 31, 2020, primarily due~~June 30, 2021. Expressed as a percentage of revenue, Recorded Music OIBDA Margin increased to 39% during the ~~full depreciation of some prior capital expenditures.~~

~~Nine Months Ended December 31, 2021 vs. Nine Months Ended December 31, 2020~~

Depreciation expense decreased by $42 thousand, or 26%, to $125 thousand for the nine months ended December 31, 2021 from $169 thousand for the nine months ended December 31, 2020, primarily due to the full depreciation of some prior capital expenditures.

~~Amortization Expense~~

~~Three Months Ended December 31, 2021 vs. Three Months Ended December 31, 2020~~three

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~~Amortization expense increased by $1,831 thousand, or 59%, to $4,933 thousand for~~months ended June 30, 2022 from 19% in the three months ended ~~December 31, 2021 from $3,102 thousand for the three months ended December 31, 2020, primarily due to the acquisition of additional music catalogs and music company purchases, including Tommy Boy.~~

~~Nine Months Ended December 31, 2021 vs. Nine Months Ended December 31, 2020~~

Amortization expense increased by $3,435 thousand, or 33%, to $13,713 thousand for the nine months ended December 31, 2021 from $10,279 thousand for the nine months ended December 31, 2020, primarily due to the acquisition of additional music catalogs and music company purchases, including Tommy Boy.

~~Business Segment Results~~

~~Revenues, operating income and OIBDA by business segment were as follows (in thousands):~~

For the Three Months Ended

For the Nine Months Ended

December 31,

2021 vs. 2020

December 31,

2021 vs. 2020


2021

2020

$ Change

% Change

2021

2020

$ Change

% Change

Music Publishing

















Revenues

$
18,403

$
17,746

$
657

4
%
$
52,817

$
46,671

$
6,146

13
%
Operating income

908

3,928

(3,020)

(77)
%

5,338

8,860

(3,522)

(40)
%
OIBDA

4,450

6,458

(2,008)

(31)
%

15,389

17,586

(2,197)

(12)
%
Recorded Music















Revenues

$
8,110

$
3,277

$
4,834

147
%
$
20,415

$
8,705

$
11,710

135
%
Operating income

2,747

904

1,843

204
%

6,434

2,554

3,881

152
%
OIBDA

4,163

1,533

2,630

172
%

10,148

4,275

5,874

137
%
Other















Revenues

$
615

$
532

$
82

16
%
$
1,050

$
808

$
242

30
%
Operating income

322

61

262

428
%

398

104

295

NM

OIBDA

347

61

286

469
%

472

104

369

NM

Total















Revenues

$
27,128

$
21,555

$
5,573

26
%
$
74,281

$
56,184

$
18,097

32
%
Operating income

3,978

4,893

(916)

(19)
%

12,171

11,517

653

6
%
OIBDA

8,960

8,051

908

11
%

26,009

21,964

4,045

18
%

~~Music Publishing~~

~~Revenues~~

~~Three Months Ended December 31, 2021 vs. Three Months Ended December 31, 2020~~

Music Publishing revenues increased by $657 thousand, or 4%, to $18,403 thousand for the three months ended December 31, 2021 from $17,746 thousand for the three months ended December 31, 2020. The increase was primarily attributed to the increase in Other revenue of $2,282 thousand from $455 thousand to $2,737 thousand, or 502%. Additionally, Performance, Mechanical, and Synchronization revenues increased by 6%, 46%, and 79%, respectively. The overall increase was partially offset by a decline in Digital revenues of 27%.

~~The overall increase in Music Publishing revenue was mainly driven by reasons described in “—~~~~Total Revenues~~~~” and “—~~~~Revenue by Geographical Location.~~”

~~Nine Months Ended December 31, 2021 vs. Nine Months Ended December 31, 2020~~

~~Table of Contents~~

Synchronization revenue of $2,825 thousand from $5,715 thousand to $8,541 thousand, or 49%. Additionally, Digital, Mechanical, and Other revenues increased by 4%, 6%, and 169%, respectively. The overall increase was partially offset by a decline in Performance revenues of 6%.

~~The overall increase in Music Publishing revenue was mainly driven by reasons described in “—Total Revenues” and “—Revenue by Geographical Location.~~”

~~Cost of Revenues~~

~~Music Publishing cost of revenues was composed of the following amounts (in thousands):~~

For the Three Months Ended

For the Nine Months Ended

December 31,

2021 vs. 2020

December 31,

2021 vs. 2020


2021

2020

$ Change

% Change

2021

2020

$ Change

% Change

Writer royalties and other publishing costs

$
8,471

$
8,307

$
164

2
%
$
24,214

$
21,196

$
3,018

14
%
Total cost of revenues

8,471

8,307

$
164

2
%
$
24,214

$
21,196

$
3,018

14
%

~~Three Months Ended December 31, 2021 vs. Three Months Ended December 31, 2020~~

Music Publishing cost of revenues increased by $164 thousand, or 2%, to $8,471 thousand for the three months ended December 31, 2021 from $8,307 thousand for the three months ended December 31, 2020. This increase was due primarily to acquisitions of catalogs and writer signings. Expressed as a percentage of Music Publishing revenue, Music Publishing cost of revenues decreased to 46% for the three months ended December 31, 2021 from 47% for the three months ended December 31, 2020. The increase in margins was due to the change in the mix of earnings by type and songwriting clients with their specific contractual royalty rates being applied to the revenues.

~~Nine Months Ended December 31, 2021 vs. Nine Months Ended December 31, 2020~~

Music Publishing cost of revenues increased by $3,018 thousand, or 14%, to $24,214 thousand for the nine months ended December 31, 2021 from $21,196 thousand for the nine months ended December 31, 2020. This increase was due primarily to acquisitions of catalogs and writer signings. Expressed as a percentage of Music Publishing revenue, Music Publishing cost of revenues increased to 46% for the nine months ended December 31, 2021 from 45% for the nine months ended December 31, 2020. The decrease in margins was due to the change in the mix of earnings by type and songwriting clients with their specific contractual royalty rates being applied to the revenues.

~~Administration Expenses~~

~~Music Publishing administration expenses were comprised of the following amounts (in thousands):~~

    For the Three Months Ended




For the Nine Months Ended





December 31,

2021 vs. 2020

December 31,

2021 vs. 2020


2021


2020


$ Change

% Change


2021

2020

$ Change

% Change

Administration expenses

$
5,481

$
2,517

$
2,964

118
%
$
13,214

$
7,425

$
5,789

78
%
Total administration expenses

$
5,481

$
2,517

$
2,964

118
%
$
13,214

$
7,425

$
5,789

78
%

~~Three Months Ended December 31, 2021 vs. Three Months Ended December 31, 2020~~

~~Table of Contents~~

Music Publishing administration expenses increased by $2,964 thousand, or 118%, to $5,481 thousand for the three months ended December 31, 2021 as compared to $2,517 thousand for the three months ended December 31, 2020. This was partly due to new administration expenses associated with being a public company along with increased costs related to acquisitions. Expressed as a percentage of Music Publishing revenues, Music Publishing administration expenses increased to 30% for the three months ended December 31, 2021 from 14% for the three months ended December 31, 2020.

~~Nine Months Ended December 31, 2021 vs. Nine Months Ended December 31, 2020~~

Music Publishing administration expenses increased by $5,789 thousand, or 78%, to $13,214 thousand for the nine months ended December 31, 2021 as compared to $7,425 thousand for the nine months ended December 31, 2020. This was partly due to new administration expenses associated with preparing for and being a public company along with increased costs related to acquisitions. Additionally, administration expenses for the nine months ended December 31, 2020 included a benefit of approximately $617 thousand for a forgiven PPP Loan while no such benefit was recorded for the nine months ended December 31,June 30, 2021. Expressed as a percentage of Music Publishing revenues, Music Publishing administration expenses increased to 25% for the nine months ended December 31, 2021 from 16% for the nine months ended December 31, 2020. Adjusting for the impact of the one-time benefit of the PPP Loan forgiveness for the nine months ended December 31, 2020, administrative expenses increased by $5,172 thousand, or 64%.

~~Operating Income and OIBDA~~

~~Music Publishing OIBDA includes the following amounts (in thousands):~~

For the Three Months Ended

For the Nine Months Ended

December 31,

2021 vs. 2020

December 31,

2021 vs. 2020

2021

2020

$ Change

% Change

2021

2020

$ Change

% Change

Operating income

$
908

$
3,928

$
(3,020)

(77)
%
$
5,338

$
8,860

$
(3,522)

(40)
%
Depreciation and amortization

3,541

2,529

1,012

40
%

10,051

8,726

1,324

15
%
OIBDA

$
4,450

$
6,458

$
(2,008)

(31)
%
$
15,389

$
17,586

$
(2,197)

(12)
%

~~Three Months Ended December 31, 2021 vs. Three Months Ended December 31, 2020~~

Music Publishing OIBDA decreased by $2,008 thousand, or 31%, to $4,450 thousand for the three months ended December 31, 2021 from $6,458 thousand for the three months ended December 31, 2020. Expressed as a percentage of Music Publishing revenues, Music Publishing OIBDA margin decreased to 24% for the three months ended December 31, 2021 from 36% for the three months ended December 31, 2020. The decrease in Music Publishing OIBDA was primarily attributed to new administration expenses associated with being a public company, substantially all of which are included in the Music Publishing segment.

Music Publishing operating income decreased by $3,020 thousand, or 77%, to $908 thousand for the three months ended December 31, 2021 from $3,928 thousand for the three months ended December 31, 2020 due to the factors that led to the decrease in Music Publishing OIBDA noted above.

~~Nine Months Ended December 31, 2021 vs. Nine Months Ended December 31, 2020~~

Music Publishing OIBDA decreased by $2,197 thousand, or 12%, to $15,389 thousand for the nine months ended December 31, 2021 from $17,586 thousand for the nine months ended December 31, 2020. Expressed as a percentage of Music Publishing revenues, Music Publishing OIBDA margin decreased to 29% for the nine months ended December 31, 2021 from 38% for the nine months ended December 31, 2020. The decrease in Music Publishing OIBDA was primarily attributed to higher administration expenses related to preparing for and being a public company, substantially all of which are included in the Music Publishing segment. Adjusting for the impact of the one-time benefit of the PPP Loan forgiveness for the nine months ended December 31, 2020, Music Publishing OIBDA decreased by $1,580 thousand, or 9%, from the nine months ended December 31, 2020 to the nine months ended December 31, 2021.

Music Publishing operating income decreased by $3,522 thousand, or 40%, to $5,338 thousand for the nine months ended December 31, 2021 from $8,860 thousand for the nine months ended December 31, 2020 due to the factors that led to the decrease in Music Publishing OIBDA noted above.

~~Table of Contents~~

~~Recorded Music~~

~~Revenues~~

~~Three Months Ended December 31, 2021 vs. Three Months Ended December 31, 2020~~

Recorded Music revenues increased by $4,834 thousand, or 147%, to $8,110 thousand for the three months ended December 31, 2021 from $3,277 thousand for the three months ended December 31, 2020. The increase was attributed to the increase in digital revenue from $1,541 thousand to $4,892 thousand, or 217%. Additionally, Physical, Synchronization, and Neighboring Rights revenues increased by 9%, 1,222%, and 57%, respectively. These increases ~~were primarily driven by the acquisition of Tommy Boy.~~

~~The overall increase in Recorded Music revenue was driven reasons described in “—~~~~Total Revenues~~~~” and “—~~~~Revenue by Geographical Location.~~”

~~Nine Months Ended December 31, 2021 vs. Nine Months Ended December 31, 2020~~

Recorded Music revenues increased by $11,710 thousand, or 135%, to $20,415 thousand for the nine months ended December 31, 2021 from $8,705 thousand for the nine months ended December 31, 2020. The increase was attributed to the increase in digital revenue from $5,026 thousand to $12,466 thousand, or 148%. Additionally, Physical, Synchronization, and Neighboring Rights revenues increased by 119%, 266%, and 48%, respectively. These increases were primarily driven by the acquisition of Tommy Boy and increased physical sales by Chrysalis.

~~The overall increase in Recorded Music revenue was driven reasons described in “—~~~~Total Revenues~~~~” and “—~~~~Revenue by Geographical Location.~~”

~~Cost of Revenues~~

~~Recorded Music cost of revenues was composed of the following amounts (in thousands):~~

For the Three Months Ended

For the Nine Months Ended

December 31,

2021 vs. 2020

December 31,

2021 vs. 2020

2021

2020

$ Change

% Change

2021

2020

$ Change

% Change

Artist royalties and other recorded music costs

$
2,965

$
1,380

$
1,585

115
%
$
7,007

$
2,624

$
4,383

167
%
Total cost of revenues

$
2,965

$
1,380

$
1,585

115
%
$
7,007

$
2,624

$
4,383

167
%

~~Three Months Ended December 31, 2021 vs. Three Months Ended December 31, 2020~~

Recorded Music cost of revenues increased by $1,585 thousand, or 115%, to $2,965 thousand for the three months ended December 31, 2021 from $1,380 thousand for the three months ended December 31, 2020. Expressed as a percentage of Recorded Music revenue, cost of revenues decreased to 37% for the three months ended December 31, 2021 from 42% for the three months ended December 31, 2020. The increase in margins was due to the change in the mix of earnings by type and clients with the specific contractual royalty rates being applied to the revenues.

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~~Nine Months Ended December 31, 2021 vs. Nine Months Ended December 31, 2020~~

Recorded Music cost of revenues increased by $4,383 thousand, or 167%, to $7,007 thousand for the nine months ended December 31, 2021 from $2,624 thousand for the nine months ended December 31, 2020. Expressed as a percentage of Recorded Music revenue, cost of revenues increased to 34% for the nine months ended December 31, 2021 from 30% for the nine months ended December 31, 2020. This was primarily driven by the increase in sales of physical products which have a higher cost base than our other revenue streams as well as the change in the mix of earnings by type and clients with the specific contractual royalty rates being applied to the revenues.

~~Administration Expenses~~

~~Recorded Music administration expenses were composed of the following amounts (in thousands):~~

For the Three Months Ended




For the Nine Months Ended





December 31,


2021 vs. 2020

December 31,


2021 vs. 2020


2021


2020

$ Change

% Change

2021

2020


$Change

% Change

Administration expenses

$
983

$
756

$
227

30
%
$
3,260

$
2,199

$
1,061

48
%
Total administration expenses

$
983

$
756

$
227

30
%
$
3,260

$
2,199

$
1,061

48
%

~~Three Months Ended December 31, 2021 vs. Three Months Ended December 31, 2020~~

Recorded Music administration expenses increased to $983 thousand for the three months ended December 31, 2021 from $756 thousand for the three months ended December 31, 2020. The increase in administration expenses was primarily due toreflect increases at Chrysalis Records and the acquisition of Tommy Boy. Expressed as a percentage of Recorded Music revenue, Recorded Music administration expense decreased to 12% for the three months ended December 31, 2021 from 23% for the three months ended December 31, 2020. This was primarily due to taking advantage ofBoy and improved operating leverage on the Recorded Music ~~platform.~~

~~Nine Months Ended December 31, 2021 vs. Nine Months Ended December 31, 2020~~

Recorded Music administration expenses increased to $3,260 thousand for the nine months ended December 31, 2021 from $2,199 thousand for the nine months ended December 31, 2020. The increase in administration expenses was primarily due to increases at Chrysalis Records and the acquisition of Tommy Boy. Expressedplatform as a ~~percentage~~result of ~~Recorded Music revenue, Recorded Music administration expense decreased~~growth.

Reconciliation of Net Income to ~~16% for the nine months ended December 31, 2021 from 25% for the nine months ended December 31, 2020. This was primarily due~~EBITDA and Adjusted EBITDA

The following table reconciles net income (loss) to ~~taking advantage of operating leverage on the Recorded Music platform.~~

~~Operating Income and OIBDA~~

~~Recorded Music OIBDA included the following amounts~~Adjusted EBITDA (in thousands):

For the Three Months Ended




For the Nine Months Ended




December 31,

2021 vs. 2020

December 31,

2021 vs. 2020

2021

2020

$ Change

% Change

2021

2020

$ Change

% Change

Operating income

$
2,747

$
904

$
1,843

204
%
$
6,434

$
2,554

$
3,881

152
%
Depreciation and amortization

1,416

629

787

125
%

3,714

1,721

1,993

116
%
OIBDA

$
4,163

$
1,533

$
2,630

172
%
$
10,148

$
4,275

$
5,874

137
%


	For the Three Months Ended
	June 30,				2022 vs. 2021
	2022		2021		$ Change		% Change
Net income (loss)	$	17	$	(1,507)	$	1,524	(101)	%
Income tax expense (benefit)		5		(527)		532	(101)	%
Interest expense		2,976		2,779		197	7	%
Amortization and depreciation		5,362		4,060		1,302	32	%
EBITDA		8,360		4,805		3,555	74	%
(Gain) loss on foreign exchange^(a)		(107)		18		(125)	NM
Gain on fair value of swaps^(b)		(1,570)		(547)		(1,023)	187	%
Non-cash share-based compensation^(c)		766		26		740	NM
Adjusted EBITDA	$	7,449	$	4,302	$	3,147	73	%

~~Three Months Ended December 31,~~NM - Not meaningful

(a)Reflects the loss or (gain) on foreign exchange fluctuations.

(b)Reflects the non-cash gain on the mark-to-market of interest rate swaps.

(c)Reflects non-cash share-based compensation expense related to the Reservoir Media, Inc. 2021 ~~vs. Three Months Ended December 31, 2020~~

Omnibus Incentive Plan.

~~Recorded Music OIBDA~~Consolidated Adjusted EBITDA increased by ~~$2,630~~$3,147 thousand, or ~~172%~~73%, ~~to $4,163 thousand for~~during the three months ended ~~December 31, 2021 from $1,533 thousand for~~June 30, 2022 compared to the three months ended December 31, 2020 as a result of the acquisition of Tommy Boy and increases from Chrysalis Records. Expressed as a percentage of Recorded Music revenues, Recorded Music OIBDA margin increased to 51% for

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~~the three months ended December 31,~~June 30, 2021, ~~from 47% for the three months ended December 31, 2020. This~~driven primarily by an increase in ~~OIBDA margin reflects taking advantage~~revenue, partially offset by increases in cost of ~~operating leverage on the Recorded Music platform.~~revenue and administration expenses, including administration expenses associated with being a public company.

Recorded Music operating income increased by $1,843 thousand to $2,747 thousand for the three months ended December 31, 2021 from $904 thousand for the three months ended December 31, 2020 due to the factors that led to the increase in Recorded Music OIBDA noted above.

~~Nine Months Ended December 31, 2021 vs. Nine Months Ended December 31, 2020~~

Recorded Music OIBDA increased by $5,874 thousand, or 137%, to $10,148 thousand for the nine months ended December 31, 2021 from $4,275 thousand for the nine months ended December 31, 2020 as a result of the acquisition of Tommy Boy and increases from Chrysalis Records. Expressed as a percentage of Recorded Music revenues, Recorded Music OIBDA margin increased to 50% for the nine months ended December 31, 2021 from 49% for the nine months ended December 31, 2020. This increase in OIBDA margin reflects taking advantage of operating leverage on the Recorded Music platform.

Recorded Music operating income increased by $3,881 thousand to $6,434 thousand for the nine months ended December 31, 2021 from $2,554 thousand for the nine months ended December 31, 2020 due to the factors that led to the increase in Recorded Music OIBDA noted above.

Liquidity and Capital Resources

Capital Resources

As of ~~December 31, 2021,~~June 30, 2022, we had ~~$225,277~~$277,428 thousand of debt (net of ~~$6,369~~$5,218 thousand of deferred financing costs)~~, $14,633~~ and $12,570 thousand of cash and ~~equivalents and net debt of $210,644 thousand (defined as total debt, less~~ cash ~~and equivalents and deferred financing costs).~~equivalents.

We used a portion of the proceeds from the Business Combination and PIPE Investment to repay $80,600 thousand of debt (amounts to related parties) associated with the Tommy Boy acquisition and $55,000 thousand of debt under the ~~New~~ Senior Credit Facility.

Cash Flows

The following table summarizes our historical cash flows (in thousands).


	For the Three Months
	Ended June 30,				2022 vs. 2021
	2022		2021		$ Change		% Change
Cash provided by (used in):
Operating activities	$	1,803	$	3,742	$	(1,939)	(52)	%
Investing activities	$	(12,773)	$	(112,700)	$	99,927	(89)	%
Financing activities	$	6,517	$	113,564	$	(107,047)	(94)	%

For the Nine Months Ended




December 31,

2021 vs. 2020

2021

2020

$ Change

% Change

Cash provided by (used in):









Operating activities

$
14,414

$
17,332

$
(2,917)

(17)
%
Investing activities

$
(160,143)

$
(107,313)

$
(52,830)

49
%
Financing activities

$
152,534

$
38,231

$
114,303

299
%

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Operating Activities

Cash provided by operating activities was ~~$14,414~~$1,803 thousand for the ~~nine~~three months ended ~~December 31, 2021~~June 30, 2022 compared to ~~$17,332~~$3,742 thousand for the ~~nine~~three months ended ~~December 31, 2020.~~June 30, 2021. The primary driver of the ~~$2,917~~$1,939 thousand decrease in cash provided by operating activities during the ~~nine~~three months ended ~~December 31, 2021~~June 30, 2022 as compared to the ~~nine~~three months ended ~~December 31, 2020~~June 30, 2021 was an increase in cash used for working capital, primarily used for royalty advances (net of recoupments) ~~and to a lesser extent inventory and prepaid expenses,~~, partially offset by higher earnings.

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Investing Activities

Cash used in investing activities was ~~$160,143~~$12,773 thousand for the ~~nine~~three months ended ~~December 31, 2021~~June 30, 2022 compared to ~~$107,313~~$112,700 thousand for the ~~nine~~three months ended ~~December 31, 2020.~~June 30, 2021. The ~~increase~~decrease in cash used in investing activities was primarily due to ~~increased~~decreased acquisitions of music ~~catalogs, including Tommy Boy.~~catalogs.

Financing Activities

Cash provided by financing activities was ~~$152,534~~$6,517 thousand for the ~~nine~~three months ended ~~December 31, 2021~~June 30, 2022 compared to ~~cash provided by financing activities of $38,231~~$113,654 thousand for the ~~nine~~three months ended ~~December 31, 2020.~~June 30, 2021. The ~~increased~~decrease in cash provided by financing activities in the ~~nine~~three months ended ~~December 31, 2020~~June 30, 2022 reflects ~~the proceeds from the Business Combination and PIPE Investment and an increase~~a decrease in net borrowings used for investing activities, ~~primarily acquisitions~~including the June 2021 acquisition of ~~catalogs, partially offset by the payment of financing costs.~~Tommy Boy.

Liquidity

Our primary sources of liquidity are the cash flows generated from our subsidiaries’ operations, available cash and cash equivalents and funds available for drawing under our ~~New~~ Senior Credit Facility (as described below). These sources of liquidity are needed to fund our debt service requirements, working capital requirements, strategic acquisitions and investments, capital expenditures and other investing and financing activities we may elect to make in the future.

~~During the nine months ended December 31, 2020, we borrowed $617 thousand (the “PPP Loan”) under the Paycheck Protection Program (the “PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act of 2020, as amended (the “CARES Act~~”), provided for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. In accordance with the terms of the PPP, we applied for and received confirmation of loan forgiveness for the entire amount borrowed under the PPP.

We believe that our primary sources of liquidity will be sufficient to support our existing operations over the next twelve months.

Existing Debt as of ~~December 31, 2021~~June 30, 2022

As of ~~December 31, 2021,~~June 30, 2022, our outstanding debt consisted of ~~$231,646~~$282,646 thousand borrowed under the ~~New~~ Senior Credit Facility. As of June 30, 2022, remaining borrowing availability under the Senior Credit Facility was $67,354 thousand.

We use cash generated from operations to service outstanding debt, consisting primarily of interest payments through maturity, and we expect to continue to refinance and extend maturity on the ~~New~~ Senior Credit Facility for the foreseeable future.

Debt Capital Structure

Since 2014, RMM has been the borrower under a revolving credit and term loan agreement (the “Prior Credit Facility”) with SunTrust Bank (Truist Bank) as the administrative agent and lead arranger. The Prior Credit Facility has been amended and restated a number of times since 2014, generally leading to extensions of maturity dates and increases in the facility size.

On July 28, 2021, in connection with the consummation of the Business Combination, RMM amended and restated the Prior Credit Facility by entering the Fourth Amended and Restated Credit Agreement (the “RMM Credit Agreement”), providing RMM with a senior secured credit facility in an aggregate amount of $248,750 thousand. On December 7, 2021, RMM entered into an amendment (the “First Amendment”) to the RMM Credit Agreement. The First Amendment amended the RMM Credit Agreement to increase RMM’s senior secured revolving credit facility from $248,750 thousand to an aggregate amount of $350,000 thousand (the “~~New~~ Senior Credit Facility”). The ~~New~~ Senior Credit Facility matures on October 16, 2024, and Borrowings under the ~~New~~ Senior Credit Facility bear interest at a rate equal to either the sum of a base rate plus a margin of 1.25% or the sum of a LIBO rate plus a margin of 2.25%. RMM is also required to pay an unused fee in respect of unused commitments under the ~~New~~ Senior Credit Facility, if any, at a rate of 0.25% per annum.

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Subject to market conditions, we expect to continue to take opportunistic steps to extend our maturity dates and reduce related interest expense. From time to time, we may incur additional indebtedness for, among other things, working capital, repurchasing, redeeming or tendering for existing indebtedness and acquisitions or other strategic transactions.

Certain terms of the ~~New~~ Senior Credit Facility are described below.

Guarantees and Security

The obligations under the ~~New~~ Senior Credit Facility are guaranteed by us, RHI and subsidiaries of RMM. Substantially all of our, RHI’s, RMM’s and other subsidiary guarantors’ tangible and intangible assets are pledged as collateral to secure the obligations of RMM under the ~~New~~ Senior Credit Facility, including accounts ~~receivables,~~receivable, cash and cash equivalents, deposit accounts, securities accounts, commodities accounts, inventory and certain intercompany debt owing to us or our subsidiaries.

Covenants, Representations and Warranties

The ~~New~~ Senior Credit Facility contains customary representations and warranties and customary affirmative and negative covenants. The negative covenants contained in the ~~New~~ Senior Credit Facility limit the ability our, RHI’s, RMM’s and certain of its subsidiaries ability to, among other things, incur debt or liens, merge or consolidate with others, make investments, make cash dividends, redeem or repurchase capital stock, dispose of assets, enter into transactions with affiliates or enter into certain restrictive agreements.

Events of Default

The ~~New~~ Senior Credit Facility includes customary events of default, including nonpayment of principal when due, nonpayment of interest or other amounts, inaccuracy of representations or warranties in any material respect, violation of covenants, certain bankruptcy or insolvency events, certain ERISA events and certain material judgments, in each case, subject to customary thresholds, notice and grace period provisions.

~~Interest Rate Swaps~~Covenant Compliance

As of December 31, 2021, RMM had entered into five interest rate swaps. Two of these swaps expire on March 10, 2022, one with a notional amount of $40,228 thousand and one with a notional amount $59,325 thousand. Under the terms of the interest rate swaps, RMM pays a fixed rate of 2.8% and 3.0%, respectively, to the counterparty and receives a floating interest from the counterparty based on LIBOR with reference to notional amounts adjusted to match the original scheduled principal repayments pursuant to the indenture agreement.

As of December 31, 2021, two additional interest rate swaps, which were entered into during the year ended March 31, 2020, had notional amounts of $8,875 thousand and $88,099 thousand. These swaps have an effective date of March 10, 2022, which coincides with the expiration of the previous two swaps and expire in September 2024. RMM will pay a fixed rate of 1.6% and 1.5%, respectively, and receive a floating interest rate from the counterparty based on LIBOR with reference to notional amounts adjusted to match the original scheduled principal repayments pursuant to the indenture agreement. Additionally, on December 1, 2021, RMM added an interest rate swap in the amount of $53,030 thousand, which has an effective date of December 31, 2021, and expires in September 2024. RMM pays a fixed rate of 1.0% and receives a floating interest from the counterparty based on LIBOR with reference to notional amounts adjusted to match the original scheduled principal repayments pursuant to the indenture agreement

~~Covenant Compliance~~

The ~~New~~ Senior Credit Facility contains financial covenants that requires us, on a consolidated basis with our subsidiaries, to maintain, (i) a total leverage ratio of no greater than 7.50:1.00 (net of up to $20,000 thousand of certain cash balances) as of the end of each fiscal quarter, (ii) a fixed charge coverage ratio of not less than 1.25:1.00 for each four fiscal quarter period, and (iii) a consolidated senior debt to library value ratio of no greater than 0.475:1.00, subject to certain adjustments. RMM’s ability to borrow funds under the ~~New~~ Senior Credit Facility may depend upon its ability to meet the leverage ratio test at the end of a fiscal quarter to the extent it has outstanding debt.

The leverage ratio test is based on trailing twelve month (“TTM”) Pro Forma Adjusted EBITDA, which is defined in the Senior Credit Facility as Adjusted EBITDA plus the pro forma EBITDA of assets acquired in the previous four quarters representing the earnings of those assets for the portion of the prior four quarters before the Company’s acquisition of such assets. As of June 30, 2022,

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the Company’s leverage ratio was 5.7x. The calculations of Pro forma Adjusted EBITDA in accordance with the Senior Credit Facility is as follows for the trailing twelve months (“TTM”) ended June 30, 2022 (in thousands):


	TTM 6/30/22
Net income	$	14,652
Income tax expense		4,785
Interest expense		11,068
Amortization and depreciation		20,324
EBITDA		50,829
Gain on foreign exchange (a)		(456)
Gain on fair value of swaps (b)		(9,581)
Non-cash share-based compensation (c)		3,631
Interest and other income		(11)
Adjusted EBITDA		44,412
Pro forma EBITDA on acquisitions (d)		4,237
Pro forma Adjusted EBITDA	$	48,649

(a)Reflects the gain on foreign exchange fluctuations.

(b)Reflects the non-cash gain on the mark-to-market of interest rate swaps.

(c)Reflects non-cash share-based compensation expense related to the Reservoir Media, Inc. 2021 Omnibus Incentive Plan.

(d)Reflects the pro forma EBITDA on acquisitions for the portion of the prior twelve months that are not included in the Company’s financial results.

Non-compliance with the leverage ratio, fixed charge coverage ratio and consolidated senior debt to library value ratio could result in the lenders, subject to customary cure rights, requiring the immediate payment of all amounts outstanding under the ~~New~~ Senior Credit Facility, which could have a material adverse effect on our business, cash flows, financial condition and results of operations. As of ~~December 31, 2021,~~June 30, 2022, we were in compliance with each of the financial covenants under the ~~New~~ Senior Credit Facility.

Interest Rate Swaps

At June 30, 2022, RMM had the following interest rate swaps outstanding, under which it pays a fixed rate and receives a floating interest payment from the counterparty based on LIBOR with reference to notional amounts adjusted to match the original scheduled principal repayments pursuant to the indenture agreement:


	Notional Amount at
Effective Date	June 30, 2022		Pay Fixed Rate		Maturity
March 10, 2022	$	8,625,000	1.602	%	September 2024
March 10, 2022	$	87,979,412	1.492	%	September 2024
December 31, 2021	$	53,395,588	1.042	%	September 2024

On March 10, 2022, two previous interest rate swaps expired with original notional amounts of $40,228,152 and $59,325,388. Those interest rate swaps were replaced by two new swaps with original notional amounts of $88,098,862 and $8,875,000 which add to a third interest rate swap with an original notional amount of $53,030,237. All three current interest rate swaps mature on September 30, 2024, and RMM pays fixed rates of 1.492%, 1.602% and 1.042%, respectively, to the counterparty and received a floating interest payment from the counterparty based on LIBOR with reference to notional amounts adjusted to match the original scheduled principal repayments pursuant to the indenture agreement.

Dividends

Our ability to pay dividends is restricted by covenants in the ~~New~~ Senior Credit Facility. ~~For the three months ended December 31, 2021, we~~We did not pay any dividends to ~~stockholders.~~stockholders during the three months ended June 30, 2022.

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Summary

Management believes that funds generated from our operations, ~~and~~ borrowings under the ~~New~~ Senior Credit Facility and available cash and equivalents will be sufficient to fund our debt service requirements, working capital requirements and capital expenditure requirements for the foreseeable future. ~~We also have additional borrowing capacity under the New Senior Credit Facility.~~ However, our ability to continue to fund these items and to reduce debt may be affected by general economic, financial, competitive, legislative and regulatory factors, as well as other industry-specific factors such as the ability to control music piracy and the continued transition from physical to digital formats in the recorded music and music publishing industries. It could also be affected by the severity and duration of natural or man-made disasters, including pandemics such as the COVID-19 pandemic. We and our affiliates continue to evaluate opportunities to, from time to time, depending on market conditions and prices, contractual restrictions, our financial liquidity and other factors, seek to pay dividends or prepay outstanding debt or repurchase or retire our outstanding ~~debt, privately negotiated purchases or otherwise.~~debt. The amounts involved in any such transactions, individually or in the aggregate, may be material and may be funded from available cash or from additional borrowings or equity raises. In addition, from time to time, depending on market conditions and prices, contractual restrictions, our financial liquidity, and other factors, we may seek to refinance the ~~New~~ Senior Credit Facility with existing cash and/or with funds provided from additional borrowings.

Contractual and Other Obligations

As of ~~December 31, 2021,~~June 30, 2022, there have been no material changes, outside the ordinary course of business, in our contractual obligations since March 31, ~~2021.~~2022. See “~~RHI’s~~ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual and Other Obligations” in the ~~Registration Statement~~Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on June 21, 2022 for information regarding our contractual obligations.

Critical Accounting Policies

As of ~~December 31, 2021,~~June 30, 2022, there have been no material changes to our critical accounting policies since March 31, ~~2021.~~2022. See “~~RHI’s~~ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in the ~~Registration Statement~~Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on June 21, 2022 for information regarding our critical accounting policies. We believe that our accounting policies involve a high degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of our operations. The preparation of our condensed consolidated financial statements in conformity with US GAAP requires us to make estimates and judgments that affect the amounts reported in those condensed consolidated financial statements and the accompanying notes thereto. The future effects of the COVID-19 pandemic on our results of operations, cash flows and financial position are unclear. However, we believe we have used reasonable estimates and assumptions in preparing the condensed consolidated financial statements. Although we believe that the estimates we use are reasonable, due to the inherent uncertainty involved in making those estimates, actual results reported in future periods could differ from those estimates.

Off-Balance Sheet Arrangements

As of ~~December 31, 2021,~~June 30, 2022, we had no off-balance sheet arrangements.

New Accounting Pronouncements

See Note 2,3, “~~Significant~~Recent Accounting ~~Policies”~~Pronouncements” to the accompanying unaudited condensed consolidated financial statements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this Item 3, “Quantitative and Qualitative Disclosures About Market Risk.”

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of ~~December 31, 2021,~~June 30, 2022, as such term is defined in Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act.

Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this Quarterly Report, our disclosure controls and procedures were not effective due to the material weaknesses in internal control over financial reporting identified in the ~~Registration Statement.~~Annual Report. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. Our previously identified material weaknesses in internal control over financial reporting relate to (i) an ineffective control environment due to improper segregation of duties and a lack of qualified personnel to address certain complex accounting transactions, and (ii) an ineffective risk assessment process resulting in improper design of control activities to address certain risks of material misstatement. These material weaknesses resulted in immaterial misstatements in our previously reported consolidated financial statements for the fiscal years ended March 31, 2020, and 2021, and unaudited interim condensed consolidated financial information for each of the quarterly and fiscal year-to-date periods ended December 31, 2020, and 2021, related to the accounting for the acquisition of certain music catalogs, which were corrected prior to issuance of our consolidated financial statements for the fiscal year ended March 31, 2022. Notwithstanding these material weaknesses, management has concluded that the ~~condensed~~ consolidated financial statements included in this Quarterly Report are fairly stated in all material respects in accordance with USU.S. GAAP.

We continue to take steps to remediate the material weaknesses described above by hiring additional qualified accounting personnel and further evolving our accounting processes. We will not be able to fully remediate these material weaknesses until these steps have been completed and we have been operating effectively for a sufficient period of time.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the three months ended ~~December 31, 2021~~June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Controls and Procedures

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all cases of error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We may, from time to time, become involved in various legal and administrative proceedings, claims, lawsuits and/or other actions incidental to the conduct of our business. Some of these legal and administrative proceedings, claims, lawsuits and/or other actions may be material and involve highly complex issues that are subject to substantial uncertainties and could result in damages, fines, penalties, non-monetary sanctions or relief. We recognize provisions for claims or pending litigation when we determine that an unfavorable outcome is probable and the amount of loss can be reasonably estimated. Due to the inherently uncertain nature of litigation, the ultimate outcome or actual cost of settlement may materially vary from estimates. As of the date of this Quarterly Report, we are not involved in any legal proceedings that we believe could have a material adverse effect on our business, financial condition and/or results of operations.

Item 1A. Risk Factors.

~~As a result of~~There have been no material changes in the ~~consummation of the Business Combination, certain of the~~Company’s risk factors ~~previously~~from those disclosed in Part I, Item 1A ~~of ROCC’s~~to the Company’s Annual Report ~~on Form 10-K~~ for the year ended ~~December~~March 31, ~~2020, may no longer apply. Following~~2022. The risk factors disclosed in the ~~consummation of~~Annual Report, in addition to the ~~Business Combination, factors that could cause our actual results to differ materially from the results~~other information set forth in this ~~Quarterly Report are any of the risks described in our registration statement on Form S-1 (file no. 333-257610) (the “Registration Statement”) filed with the SEC on July 1, 2021, as amended on July 23, 2021 and July 26, 2021. Any of these factors~~report, could ~~result in a significant or material adverse effect on~~materially affect our business, financial condition ~~and/~~or results of operations. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business, financial condition and/or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors previously disclosed in the definitive proxy statement filed by ROCC with the SEC on July 8, 2021 and the Registration Statement. We may, however, disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

In connection with the consummation of the Business Combination, ROCC consummated the PIPE Investment, pursuant to which ROCC issued 15,000,000 shares of ROCC Common Stock at a purchase price of $10.00 per share for an aggregate purchase price of $150.0 million to certain accredited investors. In addition, in connection with the consummation of the Business Combination, the Company issued an aggregate of 44,714,705 shares of Common Stock to the former stockholders of RHI pursuant to, and in accordance with, the Merger Agreement. Each of the issuance of (x) the shares of ROCC Common Stock to certain accredited investors pursuant to the PIPE Investment and (y) the shares of Common Stock to the former stockholders of RHI pursuant to, and in accordance with, the Merger Agreement was made pursuant to and in accordance with the exemption from registration contained in Section 4(a)(2) and/or Regulation D of the Securities Act. The Registration Statement relating to 15,000,000 shares of ROCC Common Stock and 44,714,705 shares of Common Stock was declared effective by the SEC on July 28, 2021. We did not and will not receive any proceeds from the sale of Common Stock included on the Registration Statement by the selling stockholders named therein.

There have been no other unregistered sales of equity securities during the three months ended ~~December 31, 2021,~~June 30, 2022, which have not been previously disclosed on a Current Report on Form 8-K.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

~~Table of Contents~~

Item 5. Other Information.

None.

Table of Contents

Item 6. Exhibits

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.

No.		Description of Exhibit

~~3.1~~		Second Amended and Restated Certificate of Incorporation of Reservoir Media, Inc. (incorporated by reference to Exhibit 3.1 to Reservoir Media, Inc.’s Current Report on Form 8-K filed with the SEC on July 28, 2021).
~~3.2~~		~~Amended and Restated Bylaws of Reservoir Media, Inc. (incorporated by reference to Exhibit 3.2 to Reservoir Media, Inc.’s Current Report on Form 8-K filed with the SEC on July 28, 2021).~~
~~10.1†~~		Fourth Amended and Restated Credit Agreement, dated as of July 28, 2021, by and among Reservoir Media Management, Inc., Reservoir Media, Inc., the lenders party thereto from time to time and Truist Bank, as administrative agent (incorporated by reference to Exhibit 10.6 to Reservoir Media, Inc.’s Current Report on Form 8-K filed with the SEC on July 28, 2021).
~~10.2~~		~~Reservoir Media, Inc. 2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to Reservoir Media, Inc.’s Registration Statement on Form S-8 filed with the SEC on October 14, 2021).~~
~~10.3~~		Form of Non-Employee Director Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.2 to Reservoir Media, Inc.’s Registration Statement on Form S-8 filed with the SEC on October 14, 2021).
~~10.4~~		~~Form of Nonqualified Stock Option Award Agreement (incorporated by reference to Exhibit 10.3 to Reservoir Media, Inc.’s Registration Statement on Form S-8 filed with the SEC on October 14, 2021).~~
~~10.5~~		~~Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.4 to Reservoir Media, Inc.’s Registration Statement on Form S-8 filed with the SEC on October 14, 2021).~~
~~10.7~~		First Amendment to the Fourth Amended and Restated Credit Agreement, dated as of December 7, 2021, by and among Reservoir Media Management, Inc., Reservoir Media, Inc., the other loan parties party thereto from time to time, the lenders party thereto from time to time and Truist Bank, as administrative agent (incorporated by reference to Exhibit 10.1 to Reservoir Media, Inc.’s Current Report on Form 8-K filed with the SEC on December 7, 2021).
~~10.6~~		~~Form of Stock Award Agreement (incorporated by reference to Exhibit 10.5 to Reservoir Media, Inc.’s Registration Statement on Form S-8 filed with the SEC on October 14, 2021).~~
31.1*		Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*		Inline XBRL Instance Document.
101.SCH*		Inline XBRL Taxonomy Extension Schema Document.
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*		Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

†	Certain of the schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant hereby undertakes to furnish copies of any of the omitted schedules or exhibits upon request by the SEC.

*	Filed herewith.

**	Furnished herewith.

5139

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	RESERVOIR MEDIA, INC.

Date: ~~February 8,~~August 5, 2022	By:	/s/ Golnar Khosrowshahi
		Name: Golnar Khosrowshahi
		Title: Chief Executive Officer (Principal Executive Officer)

Date: ~~February 8,~~August 5, 2022	By:	/s/ Jim Heindlmeyer
		Name: Jim Heindlmeyer
		Title: Chief Financial Officer
		(Principal Financial and Accounting Officer)

5240


	Nine Months Ended December 31,
	2021		2020
Cash flows from operating activities
Net income	$	5,397,090	$	4,229,126
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of intangible assets		13,713,202		10,278,508
Depreciation of property, plant and equipment		125,474		168,507
Share-based compensation		1,425,838		77,025
Non-cash interest charges		1,067,946		577,613
Gain on fair value of swaps		(2,888,961)		(1,259,738)
Dividend from equity affiliates		17,584		—
Deferred income taxes		863,512		833,768
Changes in operating assets and liabilities:
Accounts receivable		(2,734,615)		(3,003,789)
Inventory and prepaid expenses		(3,136,275)		(465,120)
Royalty advances		(9,880,464)		(3,181,225)
Other assets		345,682		240,168
Accounts payable and accrued expenses		10,107,397		8,477,794
Income tax payable		(9,053)		358,902
Net cash provided by operating activities		14,414,357		17,331,539
Cash flows from investing activities:
Purchases of music catalogs		(157,555,894)		(107,225,238)
Investment in equity affiliates		(2,464,486)		(18,839)
Purchase of property, plant and equipment		(122,762)		(69,157)
Net cash used for investing activities		(160,143,142)		(107,313,234)
Cash flows from financing activities:
Issuance of common shares, net of issuance costs		—		7,973,009
Proceeds from Business Combination and PIPE Investment, net of issuance costs		141,146,811		—
Proceeds from secured line of credit		89,554,866		31,500,000
Repayments of secured line of credit		(55,000,000)		—
Repayments of secured loans		(18,500,000)		(750,000)
Deferred financing costs paid		(4,377,473)		(609,212)
Repayments of related party loans		(81,203,792)		—
Draws on related party loans		80,913,620		116,797
Net cash provided by financing activities		152,534,032		38,230,594
Foreign exchange impact on cash		(1,382,372)		5,912,546
Increase (decrease) in cash and cash equivalents		5,422,875		(45,838,555)
Cash and cash equivalents beginning of period		9,209,920		58,240,123
Cash and cash equivalents end of period	$	14,632,795	$	12,401,568


	Nine Months Ended December 31, 2021
	Music		Recorded
	Publishing		Music		Other		Consolidated
Total revenue	$	52,816,592	$	20,414,623	$	1,050,202	$	74,281,417

Reconciliation of OIBDA to operating income:
Operating income		5,338,102		6,434,370		398,176		12,170,648
Amortization and depreciation		10,050,589		3,713,896		74,191		13,838,676
OIBDA	$	15,388,691	$	10,148,266	$	472,367	$	26,009,324


	Nine Months Ended December 31, 2020
	Music		Recorded
	Publishing		Music		Other		Consolidated

Total revenue	$	46,671,027	$	8,705,000	$	808,163	$	56,184,190

Reconciliation of OIBDA to operating income:
Operating income		8,859,977		2,553,779		103,529		11,517,285
Amortization and depreciation		8,726,212		1,720,803		0		10,447,015
OIBDA	$	17,586,189	$	4,274,582	$	103,529	$	21,964,300