Prospectus Supplement No. 8 Filed Pursuant to Rule 424(b)(3)
(to prospectus dated July 28, 2021) Registration No. 333-257610

 

RESERVOIR MEDIA, INC.

 

59,714,705 Shares

 

Common Stock

 

 

 

This prospectus supplement is being filed to update and supplement the information contained in the prospectus, dated July 28, 2021 (the “Prospectus”), related to the resale from time to time by the selling stockholders named in the Prospectus or their permitted transferees of up to 59,714,705 shares of common stock, par value of $0.0001 per share (the “Common Stock”), of Reservoir Media, Inc., a Delaware corporation (formerly known as Roth CH Acquisition II Co.) (“RMI”), issued pursuant to the terms of (i) that certain agreement and plan of merger, dated as of April 14, 2021 (the “Merger Agreement”), by and among RMI, Roth CH II Merger Sub Corp. and Reservoir Holdings, Inc., and (ii) those certain subscription agreements entered into in connection with the Merger Agreement, with the information contained in RMI’s Quarterly Report on Form 10-Q as of September 30, 2021 and for the three and six months ended September 30, 2021, which was filed with the Securities and Exchange Commission (the “SEC”) on November 9, 2021 (the “Quarterly Report”). Accordingly, RMI has attached the Quarterly Report to this prospectus supplement.

 

This prospectus supplement updates and supplements the information in the Prospectus and is not complete without, and may not be delivered or utilized except in combination with, the Prospectus, including any amendments or supplements thereto. This prospectus supplement should be read in conjunction with the Prospectus and, if there is any inconsistency between the information in the Prospectus and this prospectus supplement, you should rely on the information in this prospectus supplement.

 

The Common Stock and RMI’s warrants are traded on The Nasdaq Capital Market under the symbols “RSVR” and “RSVRW,” respectively. On November 8, 2021, the closing price of the Common Stock was $9.90, and the closing price of RMI’s warrants was $2.14.

 

RMI is an “emerging growth company” as defined under the federal securities laws and, as such, has elected to comply with certain reduced public company reporting requirements.

 

Investing in RMI’s securities involves risks. See Risk Factors” beginning on page 11 of the Prospectus and in any applicable prospectus supplement.

 

Neither the SEC nor any state securities commission has approved or disapproved of the securities to be issued or sold under the Prospectus or determined if the Prospectus or this prospectus supplement is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

 

The date of this prospectus supplement is November 9, 2021.

 

 

 

 

 

Table of Contents

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 September 30, 2021

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 November 1, 2021, there were 64,069,253 shares of Common Stock of Reservoir Media, Inc. issued and outstanding.


Table of Contents

RESERVOIR MEDIA, INC.

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2021

TABLE OF CONTENTS

    

Page

Part I. Financial Information

1

Item 1. Financial Statements

1

Condensed Consolidated Statements of Income for the Three and Six Months Ended September 30, 2021 and 2020 (unaudited)

1

Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended September 30, 2021 and 2020 (unaudited)

2

Condensed Consolidated Balance Sheets as of September 30, 2021 and March 31, 2021 (unaudited)

3

Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended September 30, 2021 and 2020 (unaudited)

4

Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, 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

28

Item 3. Quantitative and Qualitative Disclosures About Market Risk

49

Item 4. Controls and Procedures

49

Part II. Other Information

51

Item 1. Legal Proceedings

51

Item 1A. Risk Factors

51

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

51

Item 3. Defaults Upon Senior Securities

51

Item 4. Mine Safety Disclosures

51

Item 5. Other Information

52

Item 6. Exhibits

52

Part III. Signatures

53

i


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

    

Six Months Ended

 

 

September 30, 

 

September 30, 

    

2021

    

2020

    

2021

    

2020

Revenues

$

30,435,488

$

20,985,117

$

47,153,638

$

34,629,310

Costs and expenses:

Cost of revenue

12,091,903

8,228,951

19,784,290

14,132,243

Amortization and depreciation

4,777,683

3,859,268

8,856,928

7,289,136

Administration expenses

 

5,654,840

 

3,579,348

 

10,319,670

 

6,583,982

Total costs and expenses

 

22,524,426

 

15,667,567

 

38,960,888

 

28,005,361

Operating income

 

7,911,062

 

5,317,550

 

8,192,750

 

6,623,949

Interest expense

 

(2,728,825)

 

(2,201,090)

 

(5,507,877)

 

(4,408,786)

Gain (loss) on foreign exchange

 

193,260

 

(91,333)

 

174,939

 

(207,260)

Gain on fair value of swaps

677,730

661,570

1,225,218

407,289

Interest and other income

 

287

 

67

 

355

 

4,845

Income before income taxes

 

6,053,514

 

3,686,764

 

4,085,385

 

2,420,037

Income tax expense

 

1,575,325

 

899,586

 

1,064,679

 

577,663

Net income

4,478,189

2,787,178

3,020,706

1,842,374

Net loss attributable to noncontrolling interests

77,508

44,631

131,491

103,421

Net income attributable to Reservoir Media, Inc.

$

4,555,697

$

2,831,809

$

3,152,197

$

1,945,795

Earnings per common share (Note 14):

Basic

$

0.08

$

0.06

$

0.06

$

0.04

Diluted

$

0.08

$

0.06

$

0.06

$

0.04

Weighted average common shares outstanding (Note 14):

Basic

53,641,984

28,539,299

41,159,228

28,207,901

Diluted

58,992,972

44,714,705

52,231,699

44,383,307

See accompanying notes to the condensed consolidated financial statements.

1


Table of Contents

RESERVOIR MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In U.S. dollars)

(Unaudited)

    

Three Months Ended

    

Six Months Ended

September 30,

September 30,

2021

    

2020

2021

    

2020

Net income

$

4,478,189

$

2,787,178

$

3,020,706

$

1,842,374

Other comprehensive income (loss):

 

  

 

  

 

  

 

  

Translation adjustments

 

(1,779,437)

 

4,337

 

(1,564,295)

 

1,978,989

Total comprehensive income

 

2,698,752

 

2,791,515

 

1,456,411

 

3,821,363

Comprehensive loss attributable to noncontrolling interests

 

77,508

 

44,631

 

131,491

 

103,421

Total comprehensive income attributable to Reservoir Media, Inc.

$

2,776,260

$

2,836,146

$

1,587,902

$

3,924,784

See accompanying notes to the condensed consolidated financial statements.

2


Table of Contents

RESERVOIR MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(Unaudited)

September 30, 

March 31, 

    

2021

    

2021

Assets

    

    

Current assets

 

  

 

  

Cash and cash equivalents

$

12,771,926

$

9,209,920

Accounts receivable

 

19,329,072

 

15,813,384

Current portion of royalty advances

 

12,772,425

 

12,840,855

Inventory and prepaid expenses

4,406,145

1,406,379

Total current assets

49,279,568

39,270,538

Intangible assets, net

 

511,091,322

 

393,238,010

Investment in equity affiliates

 

3,993,984

 

1,591,179

Royalty advances, net of current portion

36,324,858

28,741,225

Property, plant and equipment, net

273,723

 

321,766

Other assets

740,946

781,735

Total assets

$

601,704,401

$

463,944,453

 

 

Liabilities

 

 

Current liabilities

Accounts payable and accrued liabilities

$

5,326,502

$

3,316,768

Royalties payable

17,448,203

14,656,566

Accrued payroll

 

627,046

 

1,634,852

Deferred revenue

1,310,414

1,337,987

Other current liabilities

 

8,626,012

 

2,615,488

Amounts due to related parties (Note 11)

 

100,596

 

290,172

Current portion of loans and secured notes payable

 

 

1,000,000

Income taxes payable

490,713

533,495

Total current liabilities

33,929,486

25,385,328

Loans and secured notes payable

203,937,323

211,531,875

Deferred income taxes

20,569,924

19,735,537

Fair value of swaps

3,341,319

4,566,537

Other liabilities

1,120,769

6,739,971

Total liabilities

262,898,821

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 September 30, 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, 64,069,253 issued and outstanding at September 30, 2021; 196,065,534 shares authorized, 28,539,311 shares issued and outstanding at March 31, 2021

6,407

2,854

Additional paid-in capital

333,489,211

110,496,300

Retained earnings

3,903,693

751,496

Accumulated other comprehensive income

532,063

2,096,358

Total Reservoir Media, Inc. shareholders’ equity

337,931,374

194,979,508

Noncontrolling interest

874,206

1,005,697

Total shareholders’ equity

338,805,580

195,985,205

Total liabilities and shareholders’ equity

$

601,704,401

$

463,944,453

See accompanying notes to the condensed consolidated financial statements.

3


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 Three and Six Months Ended September 30, 2021

Preferred Stock

Common Stock

Retained

Accumulated

earnings

other

Additional

(accumulated

comprehensive

Noncontrolling

Shareholders’

    

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

Share-based compensation

 

 

 

 

25,675

 

 

 

 

25,675

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

Net income (loss)

 

 

 

 

 

4,555,697

 

 

(77,508)

 

4,478,189

Other comprehensive loss

(1,779,437)

(1,779,437)

Balance, September 30, 2021

 

$

64,069,253

$

6,407

$

333,489,211

$

3,903,693

$

532,063

$

874,206

$

338,805,580

    

For the Three and Six Months Ended September 30, 2020

Preferred Stock

Common Stock

Retained

Accumulated

earnings

other

Additional

(accumulated

comprehensive

Noncontrolling

Shareholders’

    

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

Share-based compensation

 

25,674

25,674

Net loss

(886,014)

(58,790)

(944,804)

Other comprehensive income

 

 

 

 

 

 

1,974,652

 

 

1,974,652

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)

2,831,809

(44,631)

2,787,178

Other comprehensive income

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

See accompanying notes to the condensed consolidated financial statements.

4


Table of Contents

RESERVOIR MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In U.S. dollars)

(Unaudited)

    

Six Months Ended September 30,

    

2021

    

2020

Cash flows from operating activities:

 

  

 

  

Net income

$

3,020,706

$

1,842,374

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

Amortization of intangible assets

 

8,780,146

 

7,176,770

Depreciation of property, plant and equipment

 

76,782

 

112,366

Share-based compensation

 

217,153

 

51,349

Non-cash interest charges

 

591,795

 

380,695

Gain on fair value of swaps

 

(1,225,218)

 

(407,289)

Dividend from equity affiliates

 

23,896

 

25,562

Deferred income taxes

 

834,387

 

405,136

Changes in operating assets and liabilities:

 

 

Accounts receivable

 

(3,515,688)

 

120,846

Inventory and prepaid expenses

(2,999,766)

(477,050)

Royalty advances

(7,515,203)

(4,495,264)

Other assets

71,277

Accounts payable and accrued expenses

3,466,757

1,527,624

Income tax payable

(42,782)

451,860

Net cash provided by operating activities

1,712,965

6,786,256

Cash flows from investing activities:

Purchases of music catalogs

(125,902,112)

(85,921,308)

Investment in equity affiliates

(2,464,487)

Purchase of property, plant and equipment

(28,739)

(36,686)

Net cash used for investing activities

(128,395,338)

(85,957,994)

Cash flows from financing activities:

Issuance of common shares, net of issuance costs

7,973,010

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

141,146,811

Proceeds from secured line of credit

67,554,867

20,800,000

Repayments of secured line of credit

(55,000,000)

Repayments of secured loans

(18,500,000)

(500,000)

Deferred financing costs paid

(3,241,214)

(325,968)

Repayments of related party loans

(81,103,196)

Draws on related party loans

80,913,620

292,102

Net cash provided by financing activities

131,770,888

28,239,144

Foreign exchange impact on cash

(1,526,509)

2,001,574

Increase (decrease) in cash and cash equivalents

3,562,006

(48,931,020)

Cash and cash equivalents, beginning of period

9,209,920

58,240,123

Cash and cash equivalents, end of period

$

12,771,926

$

9,309,103

See accompanying notes to the condensed consolidated financial statements.

5


Table of Contents

RESERVOIR MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(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, “Business Combination and PIPE Investment” for additional information with respect to the Business Combination and related transactions.

The Company’s activities are 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 give the Company an interest in the future delivery of songs. The publishing catalog includes ownership or control rights to more than 130,000 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, “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 six months ended September 30, 2021 and 2020. 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.

6


Table of Contents

RESERVOIR MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(Unaudited)

Paycheck Protection Program Loan

During the six months ended September 30, 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. No interest for the PPP Loan was recognized in the Company’s consolidated financial statements.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

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 and 2020.

The condensed consolidated balance sheet of the Company as of March 31, 2021, 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 six months ended September 30, 2021 are not necessarily indicative of the results to be expected for any subsequent quarter, the fiscal year ending March 31, 2022 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 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 September 30, 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 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 September 30, 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 no impairments, disposals or other acquisitions of goodwill in the six months ended September 30, 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.  

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(Unaudited)

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 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(Unaudited)

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. We use 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(Unaudited)

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. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company has not yet completed an analysis of the impact of the new lease guidance. 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. However, the Company cannot currently quantify this increase or the impact, if any, on its consolidated statements of income. 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.

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 Company is currently evaluating the effect that ASU 2020-04 will have on the Company’s consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(Unaudited)

NOTE 3. 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, 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, “Loans” 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

SEPTEMBER 30, 2021

(Unaudited)

NOTE 4. 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 $993,503 and $2,325,320 from performance obligations satisfied in previous periods for the six months ended September 30, 2021 and 2020, respectively.

Disaggregation of Revenue

The Company’s revenue consisted of the following categories during the three and six months ended September 30, 2021 and 2020:

    

Three Months Ended

    

Six Months Ended

September 30, 

September 30, 

2021

    

2020

2021

    

2020

Revenue by Type

Performance

$

4,386,093

$

4,872,944

$

7,048,849

$

7,975,356

Digital

 

11,582,156

 

8,035,301

 

18,229,588

 

13,941,189

Mechanical

 

959,142

 

1,090,269

 

1,369,090

 

1,478,621

Synchronization

 

4,144,920

 

2,804,869

 

6,096,758

 

4,348,222

Other

 

1,076,098

 

780,148

 

1,669,594

 

1,181,685

Total Music Publishing

 

22,148,409

 

17,583,531

 

34,413,879

 

28,925,073

Digital

 

4,752,522

 

1,761,802

 

7,573,891

 

3,484,392

Physical

 

2,537,924

 

825,849

 

3,506,943

 

1,018,198

Synchronization

 

312,383

 

284,964

 

420,381

 

350,077

Neighboring rights

 

469,964

 

371,896

 

803,195

 

575,780

Total Recorded Music

 

8,072,793

 

3,244,511

 

12,304,410

 

5,428,447

Other revenue

 

214,286

 

157,075

 

435,349

 

275,790

Total revenue

$

30,435,488

$

20,985,117

$

47,153,638

$

34,629,310

    

Three Months Ended

    

Six Months Ended

September 30, 

September 30, 

2021

    

2020

2021

    

2020

Revenue by Geographical Location

 

  

 

  

 

  

 

  

United States Music Publishing

$

10,815,930

$

10,058,429

$

17,669,953

$

16,953,140

United States Recorded Music

 

5,092,686

 

1,426,172

 

6,675,535

 

2,084,423

United States other revenue

 

214,286

 

157,075

 

435,349

 

275,790

Total United States

 

16,122,902

 

11,641,676

 

24,780,837

 

19,313,353

International Music Publishing

 

11,332,479

 

7,525,102

 

16,743,926

 

11,971,933

International Recorded Music

 

2,980,107

 

1,818,339

 

5,628,875

 

3,344,024

Total International

 

14,312,586

 

9,343,441

 

22,372,801

 

15,315,957

Total revenue

$

30,435,488

$

20,985,117

$

47,153,638

$

34,629,310

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(Unaudited)

Only the United States represented 10% or more of the Company’s total revenues in the three and six months ended September 30, 2021 and 2020.

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.

The Company excludes from the measurement of transaction price all taxes assessed by governmental authorities that are both (i) imposed on and concurrent with a specific revenue-producing transaction, and (ii) collected from customers.

Recorded Music

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.

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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(Unaudited)

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 six months ended September 30, 2021 and 2020:

    

Six Months Ended September 30, 

2021

    

2020

Balance at beginning of period

$

1,337,987

$

473,022

Cash received during period

 

1,451,623

 

5,254,965

Revenue recognized during period

 

(1,479,196)

 

(3,431,916)

Balance at end of period

$

1,310,414

$

2,296,071

NOTE 5. 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 six months ended September 30, 2021 and 2020, the Company completed such acquisitions totaling $128,125,285 and $83,084,327, respectively, inclusive of deferred acquisition payments. Significant acquisition transactions, all of which have been accounted for as asset acquisitions, completed during the six months ended September 30, 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. Two 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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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(Unaudited)

NOTE 6. INTANGIBLE ASSETS

Intangible assets subject to amortization consist of the following as of September 30, 2021 and March 31, 2021:

    

September 30, 

    

March 31, 

2021

2021

Intangible assets subject to amortization:

 

  

 

  

Publishing and recorded music catalogs

$

584,157,948

 

$

457,662,303

Artist management contracts

 

971,825

 

 

995,464

Gross intangible assets

 

585,129,773

 

458,657,767

Accumulated amortization

 

(74,038,451)

 

(65,419,757)

Intangible assets, net

$

511,091,322

$

393,238,010

Straight-line amortization expense totaled $4,732,180 and $3,802,792 in the three months ended September 30, 2021 and 2020, respectively. Straight-line amortization expense totaled $8,780,146 and $7,176,770 in the six months ended September 30, 2021 and 2020, respectively.

NOTE 7. ROYALTY ADVANCES

The Company made royalty advances totaling $13,253,141 and $9,565,877 during the six months ended September 30, 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.

    

Six Months Ended

September 30, 

2021

    

2020

Balance at beginning of period

$

41,582,080

$

40,263,439

Additions

 

13,253,141

 

9,565,877

Recoupments

 

(5,737,938)

 

(5,070,613)

Balance at end of period

$

49,097,283

$

44,758,703

NOTE 8. LOANS

Long-term debt consists of the following:

    

September 30, 

    

March 31, 

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

 

209,645,715

 

197,090,848

Debt issuance costs, net

 

(5,708,392)

 

(3,058,973)

 

203,937,323

 

212,531,875

Less: short term portion of secured loan

 

 

1,000,000

$

203,937,323

$

211,531,875

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(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”). The RMM Credit Agreement provides RMM with a senior secured revolving credit facility in an aggregate amount of $248,750,000 (the “New Senior Credit Facility”).

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 of no greater than 6.00:1.00 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 0.55, 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 September 30, 2021, the New Senior Credit Facility had a borrowing capacity of $248,750,000.

Interest Rate Swaps

As of March 31, 2019, RMM had entered into two interest rate swaps, both of 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 pays a fixed rate of 2.812% and 2.972% 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. The notional amount of the interest rate swaps was $97,157,674 as of September 30, 2021 and $97,533,496 as of March 31, 2021.

In October 2019 and January 2020, RMM added two additional interest rate swaps in the amounts of $8,875,000 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%, respectively, 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.

NOTE 9. INCOME TAXES

Income tax expense for the three months ended September 30, 2021 and 2020 was $1,575,325 (26.0% effective tax rate) and $899,586 (24.4% effective tax rate), respectively. Income tax expense for the six months ended September 30, 2021 and 2020 was $1,064,679 (26.1% effective tax rate) and $577,663 (23.9% effective tax rate), respectively. The effective tax rates during these periods reflect the amount and mix of income from multiple tax jurisdictions.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(Unaudited)

NOTE 10. SUPPLEMENTARY CASH FLOW INFORMATION

Interest paid and income taxes paid for the six months ended September 30, 2021 and 2020 were comprised of the following:

    

2021

    

2020

Interest paid

$

4,916,082

$

4,028,091

Income taxes paid

$

40,000

$

83,174

Non-cash investing and financing activities for the six months ended September 30, 2021 and 2020 were comprised of the following:

    

2021

    

2020

Acquired intangible assets included in other liabilities

$

2,326,000

$

Conversion of RHI Preferred Stock to Common Stock

$

81,632,500

$

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

The Company has various shared services agreements with its majority shareholder and other affiliated entities under the control of its majority shareholder. These agreements cover services such as IT support and re-billed services of staff who perform services across multiple entities.

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, “Business Combination and PIPE Investment” for additional information with respect to the consummation of the Business Combination.

    

September 30, 

    

March 31, 

2021

2021

Due to (from) Wesbild Holdings Ltd., parent company of Wesbild Inc.

Unsecured, bears no interest, with no specific terms of repayment

$

17,216

$

83,480

Sub-total

 

17,216

 

83,480

Due to (from) DRI Capital Inc., a subsidiary of Wesbild Holdings Ltd.

 

 

  

Unsecured, bears no interest, with no specific terms of repayment

 

 

81,738

Due to Reservoir Media Management (Canada) Inc., a subsidiary of Wesbild Holdings Ltd.

 

 

  

Unsecured, bears no interest, with no specific terms of repayment

 

83,380

 

124,954

Sub-total

 

83,380

 

206,692

$

100,596

$

290,172

NOTE 12. 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, “Business Combination and PIPE Investment” for additional information.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(Unaudited)

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 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, “Business Combination and PIPE Investment” for additional information with respect to the RHI Preferred Stock Conversion.

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 September 30, 2021, the Company had no shares of RHI Preferred Stock outstanding.

RHI Common Stock Issuance

During the six months ended September 30, 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 September 30, 2021, 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 one 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 three 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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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(Unaudited)

NOTE 13. 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.  As of September 30, 2021, 8,231,399 shares of Common Stock were available for the Company to grant under 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.  There have been no grants of equity awards under the 2021 Incentive Plan since the effective date of the 2021 Incentive Plan through September 30, 2021. 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. See Note 18, “Subsequent Events” for additional information with respect to equity grants made 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 $191,478 ($147,599, net of taxes) and $217,153 ($167,391, net of taxes) during the three and six months ended September 30, 2021, respectively.  Share-based compensation expense totaled $25,675 ($19,791, net of taxes) and $51,349 ($39,582, net of taxes) during the three and six months ended September 30, 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 three and six months ended September 30, 2021 reflects the accelerated vesting discussed above.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(Unaudited)

NOTE 14. EARNINGS PER SHARE

The following table summarizes the basic and diluted earnings per common share calculation for the three and six months ended September 30, 2021 and 2020:

Three Months Ended

Six Months Ended

September 30, 

September 30, 

    

2021

    

2020

    

2021

    

2020

Basic earnings per common share

 

  

 

  

 

  

 

  

Net income attributable to Reservoir Media, Inc.

$

4,555,697

$

2,831,809

$

3,152,197

$

1,945,795

Less: income allocated to participating securities

 

(370,386)

 

(1,024,398)

 

(637,294)

 

(709,141)

Net income attributable to common shareholders

$

4,185,311

$

1,807,411

$

2,514,903

$

1,236,654

Weighted average common shares outstanding - basic

 

53,641,984

 

28,539,299

 

41,159,228

 

28,207,901

Earnings per common share - basic

$

0.08

$

0.06

$

0.06

$

0.04

Diluted earnings per common share

 

 

 

 

Net income attributable to common shareholders

$

4,185,311

$

1,807,411

$

2,514,903

$

1,236,654

Add: income allocated to participating securities

 

370,386

 

1,024,398

 

637,294

 

709,141

Net income attributable to Reservoir Media, Inc.

$

4,555,697

$

2,831,809

$

3,152,197

$

1,945,795

Weighted average common shares outstanding - basic

 

53,641,984

 

28,539,299

 

41,159,228

 

28,207,901

Weighted average effect of potentially dilutive securities:

 

 

 

 

Assumed conversion of RHI Preferred Stock

 

4,747,130

 

16,175,406

 

10,430,043

 

16,175,406

Effect of dilutive stock options

 

603,858

 

 

642,428

 

Weighted average common shares outstanding - diluted

58,992,972

44,714,705

52,231,699

44,383,307

Earnings per common share - diluted

$

0.08