What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-05-31 compared with 2022-06-21 · 248 added, 457 removed, 731 unchanged (49% of the section changed)

31 unchanged sentences

New York, New York

June 21, 2022

We have served as the Company’s auditor since 2021

13 unchanged sentences

( 10,870,866 )

Gain (loss) on foreign exchange

Loss on early extinguishment of debt

Gain on foreign exchange

Gain on fair value of swaps

Interest and other income

Other income (expense), net

Income before income taxes

9 unchanged sentences

Fiscal Year Ended March 31,

Other comprehensive income (loss):

Other comprehensive loss:

Translation adjustments

( 3,657,271 )

Total comprehensive income

( 3,294,416 )

Total comprehensive (loss) income

Comprehensive income attributable to noncontrolling interests

Total comprehensive income attributable to Reservoir Media, Inc.

Total comprehensive (loss) income attributable to Reservoir Media, Inc.

( 1,118,070 )

See accompanying notes to the consolidated financial statements.

13 unchanged sentences

Property, plant and equipment, net

Operating lease right of use assets, net

Fair value of swap assets

5 unchanged sentences

Other current liabilities

Amounts due to related parties (Note 12)

Current portion of loans and secured notes payable

Income taxes payable

Total current liabilities

Loans and secured notes payable

Secured line of credit

Deferred income taxes

Fair value of swap liabilities

Operating lease liabilities, net of current portion

Other liabilities

2 unchanged sentences

Shareholders’ Equity

Preferred stock, $ 0.0001 par value 75,000,000 shares authorized, 0 shares issued and outstanding at March 31, 2022;

98,032,767 shares authorized, 16,175,406 shares issued and outstanding at March 31, 2021

Preferred stock, $ 0.0001 par value 75,000,000 shares authorized, 0 shares issued and outstanding at March 31, 2023 and 2022

Common stock, $ 0.0001 par value;

750,000,000 shares authorized, 64,441,244 issued and outstanding at March 31, 2023;

196,065,534 shares authorized, 28,539,299 shares issued and outstanding at March 31, 2021

64,150,186 issued and outstanding at March 31, 2022

Additional paid-in capital

Retained earnings (accumulated deficit)

Accumulated other comprehensive income (loss)

Retained earnings

Accumulated other comprehensive loss

( 4,855,329 )

( 1,198,058 )

Total Reservoir Media, Inc.

15 unchanged sentences

Balance, March 31, 2021

RHI Preferred Stock Conversion

( 16,175,406 )

( 81,632,500 )

Retrospective application of reverse recapitalization

Balance, March 31, 2020 after effect of reverse recapitalization conversion

Business Combination and PIPE Investment, net of transaction costs

Share-based compensation

Issuance of common shares

Other comprehensive loss

( 3,294,416 )

Issuance of common shares

Share-based compensation

Other comprehensive income

Balance, March 31, 2022

RHI Preferred Stock Conversion

( 1,198,058 )

( 81,632,500 )

Business Combination and PIPE Investment, net of transaction costs

Share-based compensation

Issuance of common shares

Stock option exercises

Vesting of restricted stock units, net of shares withheld for employee taxes

Reclassification of liability-classified awards to equity-classified awards

Other comprehensive loss

14 unchanged sentences

Non-cash interest charges

Loss on early extinguishment of debt

Gain on fair value of swaps

10 unchanged sentences

( 1,417,051 )

( 2,635,092 )

Royalty advances

1 unchanged sentence

( 15,430,674 )

Accounts payable and accrued expenses

Income tax payable

Other assets and liabilities

Accounts payable and accrued liabilities

Income taxes payable

Net cash provided by operating activities

3 unchanged sentences

( 194,155,476 )

Investment in unconsolidated affiliates

Investment in equity method and other investments

( 2,464,486 )

4 unchanged sentences

Cash flows from financing activities:

Issuance of common shares, net of issuance costs

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

4 unchanged sentences

( 18,500,000 )

( 1,000,000 )

Proceeds from stock option exercises

Taxes paid related to net share settlement of restricted stock units

Deferred financing costs paid

( 3,533,254 )

( 4,377,473 )

Repayments of related party loans

4 unchanged sentences

( 3,585,491 )

Increase (decrease) in cash and cash equivalents

(Decrease) increase in cash and cash equivalents

( 2,912,216 )

26 unchanged sentences

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 fiscal years ended March 31, 2022 and 2021.

Government-imposed restrictions and general behavioral changes in response to the pandemic adversely affected the Company’s results of operations during the fiscal years ended March 31, 2023 and 2022.

This included performance revenue generated from retail, restaurants, bars, gyms and live shows, synchronization revenue, and the release schedule of physical product.

1 unchanged sentence

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, royalty advances or intangible assets, which may be material to our consolidated financial statements.

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.

RESERVOIR MEDIA, INC.

2 unchanged sentences

March 31, 2023 and 2022

Paycheck Protection Program Loan

During the fiscal year ended March 31, 2021 (“ fiscal 2021 ”), 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.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

17 unchanged sentences

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.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 and 2021

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.

9 unchanged sentences

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

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023 and 2022

Accounts Receivable

7 unchanged sentences

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

Two customers accounted for approximately 37 % of total accounts receivable as of March 31, 2022 and two customers accounted for approximately 43 % of total accounts receivable as of March 31, 2021.

Three customers accounted for approximately 43 % of total accounts receivable as of March 31, 2023 and two customers accounted for approximately 37 % of total accounts receivable as of March 31, 2022.

No other single customer accounted for more than 10% of accounts receivable in either period.

9 unchanged sentences

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.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 and 2021

If treated as an asset acquisition, the assets are recorded on a relative fair value basis in accordance with the Company’s accounting policies and related acquisition costs are capitalized as part of the asset.

5 unchanged sentences

Intangible assets are amortized over their expected useful lives using the straight-line method.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023 and 2022

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.

2 unchanged sentences

The Company had $ 402,067 of goodwill as of March 31, 2023 and 2022, which is classified with “Other assets” in the Company’s consolidated balance sheets.

All of the goodwill arose in connection with an acquisition in 2019 and has been assigned to a reporting unit within the Music Publishing segment.

All of the goodwill arose in connection with an acquisition accounted for as a business combination 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 fiscal years ended March 31, 2023 and 2022.

7 unchanged sentences

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.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 and 2021

Investments in Equity Affiliates

7 unchanged sentences

Deferred finance charges are netted against the loans.

See Note 8, “ Loans ” for additional information with respect to the Company’s financing arrangements.

See Note 8, “ Secured Line of Credit ” for additional information with respect to the Company’s financing arrangements.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023 and 2022

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.

12 unchanged sentences

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.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 and 2021

Principal versus Agent Revenue Recognition

5 unchanged sentences

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 and recording artists, are recorded as expenses.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023 and 2022

Royalty Costs and Royalty Advances

20 unchanged sentences

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.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 and 2021

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, restricted stock units (“ RSU’s ”) and warrants outstanding during the period.

8 unchanged sentences

Expenses totaled $ 188,727 and $ 143,937 for employer contributions to the 401(k) retirement savings plan in the fiscal years ended March 31, 2023 and 2022, respectively.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023 and 2022

Income taxes are determined using the asset and liability method of accounting.

15 unchanged sentences

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 consolidated statements of income.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 and 2021

Fair Value Measurement and Hierarchy

8 unchanged sentences

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.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023 and 2022

● 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.

9 unchanged sentences

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.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 and 2021

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.

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.

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 elected to apply the effective date method and elected 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 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.

The Company performed an analysis of the impact of the new lease guidance and is in the process of completing the final phase of a comprehensive plan for its implementation of the new guidance.

The project plan includes analyzing the impact of the new guidance on its current lease contracts, reviewing the completeness of its existing lease portfolio, comparing its accounting policies under current accounting guidance to the new accounting guidance and identifying potential differences from applying the requirements of the new guidance to its lease contracts.

Upon its transition to the new guidance, the Company currently expects to recognize approximately $ 2,268,681 of operating lease liabilities.

Additionally, the Company expects to record right-of-use assets in a corresponding amount, net of amounts reclassified from other assets and liabilities, as specified by the new lease 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 2016-13, “ Financial Instruments–Credit Losses (Topic 326):

In June 2016, the FASB issued Accounting Standards Update (“ 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.

1 unchanged sentence

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 the Company, ASU 2016-13 is effective beginning April 1, 2023.

The Company is currently evaluating the effect that ASU 2016-13 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 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 adoption of ASU 2019-12 will not have a material impact on the Company’s consolidated financial statements or the Company’s disclosures.

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 does not expect the adoption of ASU 2016-03 will have a material effect on the Company’s consolidated financial statements.

RESERVOIR MEDIA, INC.

2 unchanged sentences

March 31, 2023 and 2022

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, but does not expect it will have a material effect.

In October 2021, the FASB issued ASU 2021-08, “ Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ” (“ ASU 2021-08 ”).

ASU 2021-08 provides guidance to help improve the accounting for acquired revenue contracts with customers in a business combination by requiring acquired contract assets and contract liabilities (i.e., unearned revenue) to be recognized and measured in accordance with revenue from contracts with customers guidance.

For the Company, the amendments in ASU 2021-08 are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

Early adoption is permitted.

The Company early adopted this guidance on January 1, 2022, and retrospectively applied the standard to acquisitions that have taken place since April 1, 2021.

The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

Accounting Standards Recently Adopted

In February 2016, the FASB issued 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 ”).

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.

BUSINESS COMBINATION AND PIPE INVESTMENT

8 unchanged sentences

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.

RESERVOIR MEDIA, INC.

2 unchanged sentences

March 31, 2023 and 2022

ROCC consummated the PIPE Investment immediately prior to the consummation of the Business Combination.

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.

8 unchanged sentences

The Company recognized revenue of $ 3,478,970 and $ 1,210,132 from performance obligations satisfied in previous periods for the fiscal years ended March 31, 2023 and 2022, respectively.

The increase in revenue recognized from performance obligations satisfied in previous periods is impacted by an updated estimate of Music Publishing royalties based on the Company’s current estimate of effects arising from the July 2022 ruling by the U.S.

Copyright Royalty Board (the “CRB”) to affirm increases to the statutory royalty rate structure for mechanical royalties in the U.S.

for the period 2018 to 2022.

For much of the period between 2018 and 2022, most digital service providers have accounted and submitted payment to the Company using the applicable 2017 rate while the remand process took place.

RESERVOIR MEDIA, INC.

4 unchanged sentences

The Company’s revenue consisted of the following categories during the fiscal years ended March 31, 2023 and 2022:

Fiscal Year Ended March 31,

Revenue by Type

1 unchanged sentence

Total Music Publishing

Synchronization

Neighboring rights

Synchronization

Total Recorded Music

1 unchanged sentence

Total revenue

Fiscal Year Ended March 31,

Revenue by Geographical Location

15 unchanged sentences

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

Mechanical revenues are generated with respect to the musical compositions embodied in recordings sold in any physical

RESERVOIR MEDIA, INC.

2 unchanged sentences

March 31, 2023 and 2022

novelty items and merchandise.

format such as vinyl, CDs and DVDs.

Other revenues represent earnings for use in printed sheet music and other uses.

21 unchanged sentences

Royalty based contracts are recognized as the underlying sales or usage occurs.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023 and 2022

Deferred Revenue

The following table reflects the change in deferred revenue during the fiscal years ended March 31, 2023 and 2022:

Fiscal Year Ended March 31,

Balance at beginning of period

4 unchanged sentences

Balance at end of period

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 and 2021

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 fiscal years ended March 31, 2023 and 2022, the Company completed such acquisitions totaling $ 71,501,353 and $ 202,067,308 , respectively, inclusive of deferred acquisition payments.

Significant acquisition transactions, all of which have been accounted for as asset acquisitions, completed during the fiscal years ended March 31, 2022 and 2021 included the following:

The Company did not complete any individually significant acquisition transactions during the fiscal years ended March 31, 2023.

On June 2, 2021, the Company acquired U.S.

2 unchanged sentences

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 ).

INTANGIBLE ASSETS

10 unchanged sentences

The expected amortization expense of intangible assets for each of the five succeeding fiscal years and thereafter is as follows:

Fiscal year ended March 31:

ROYALTY ADVANCES

The Company made royalty advances totaling $ 27,952,527 and $ 14,474,288 during the fiscal years ended March 31, 2022 and 2021, respectively, recoupable from the writer’s or artist’s share of future royalties otherwise payable, in varying amounts.

Fiscal year ending March 31:

RESERVOIR MEDIA, INC.

2 unchanged sentences

March 31, 2023 and 2022

expected to be recouped within the next twelve months are classified as current assets, with the remainder classified as noncurrent assets.

ROYALTY ADVANCES

The Company made royalty advances totaling $ 22,883,884 and $ 27,952,527 during the fiscal years ended March 31, 2023 and 2022, 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.

The following table reflects the change in royalty advances during the fiscal years ended March 31, 2023 and 2022:

3 unchanged sentences

Balance at end of period

SECURED LINE OF CREDIT

Long-term debt consists of the following as of March 31, 2023 and 2022:

Secured loan bearing interest at LIBOR plus a spread

Secured line of credit bearing interest at LIBOR plus a spread

Secured line of credit

Debt issuance costs, net

1 unchanged sentence

( 5,789,546 )

short term portion of secured loan

Credit Facilities

3 unchanged sentences

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 “ Senior Credit Facility ”) and modified certain covenants (discussed below).

The Senior Credit Facility has a scheduled maturity date of October 16, 2024.

Borrowings under the 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 Senior Credit Facility, if any, at a rate of 0.25 % per annum.

On December 16, 2022, RMM entered into an amendment (the “ Second Amendment ”) to the RMM Credit Agreement.

The Second Amendment amended the RMM Credit Agreement to (i) increase RMM’s senior secured revolving credit facility from $ 350,000,000 to $ 450,000,000 , (ii) increase the incremental borrowing available under the facility’s accordion feature (discussed below) from $ 50,000,000 to $ 150,000,000 , (iii) extend the maturity date of the loans advanced under the RMM Credit Agreement from October 16, 2024 to December 16, 2027, (iv) modify the interest rate to be equal to either the sum of a base rate plus a margin of 1.00 % or the sum of a SOFR rate plus a margin of 2.00 %, in each case subject to a 0.25 % increase based on a consolidated net senior debt to library value ratio, (v) remove the existing total leverage ratio financial covenant of no greater than 7.50 :1.00 (net of up to $ 20,000,000 of certain cash balances) as of the end of each fiscal quarter, (vi) reduce the minimum required fixed charge coverage ratio financial covenant to 1.10 :1.00 and (vii) modify the consolidated senior debt to library value ratio financial covenant to 0.450 , subject to certain adjustments.

In connection with the Second Amendment, RMM recorded a loss on early extinguishment of debt of approximately $ 914,000 that reflects the write-off of a portion of unamortized previous debt issuance costs and capitalized approximately $ 3,500,000 in new debt issuance costs.

RMM is required to pay an unused fee in respect of unused commitments under the 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 Senior Credit Facility.

RESERVOIR MEDIA, INC.

2 unchanged sentences

March 31, 2023 and 2022

In addition, the Company, on a consolidated basis with its subsidiaries, must comply with financial covenants requiring the Company to maintain (i) a fixed charge coverage ratio of not less than 1.10 :1.00 for each four fiscal quarter period, and (ii) a consolidated senior debt to library value ratio of 0.45 :1.00, subject to certain adjustments.

The Senior Credit Facility also includes an “accordion feature” that permits RMM to seek additional commitments in an amount not to exceed $ 150,000,000 that would increase the Senior Credit Facility.

1 unchanged sentence

Interest Rate Swaps

At March 31, 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:

At March 31, 2023, RMM had interest rate swaps outstanding, under which it pays a fixed rate and receives a floating interest payment from the counterparty, which was originally based on LIBOR.

In January 2023, RMM modified these outstanding interest rate swaps to replace the floating rate interest payments received from the counterparty based on LIBOR to floating rate interest payments received from the counterparty based on SOFR, with corresponding adjustments to the fixed rates paid by RMM.

The change in the reference rate in these interest rate swaps from LIBOR to SOFR did not have a material impact on the Company’s consolidated financial statements.

At March 31, 2023, RMM had the following interest rate swaps outstanding with reference to notional amounts adjusted to match the original scheduled principal repayments pursuant to the indenture agreement:

Notional Amount at

Effective Date

March 31, 2023

March 10, 2022

September 2024

5 unchanged sentences

Through the expiration date of these previous interest rate swaps, RMM paid fixed rates of 2.812 % and 2.972 %, 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.

OTHER NON-CURRENT LIABILITIES

As of March 31, 2022, the Company’s other non-current liabilities, which consist primarily of obligations related to certain asset purchases and acquisitions that are due more than a year in the future, are as follows:

Fiscal year ended March 31:

2028 and later

The following table presents domestic and foreign income before income taxes for the fiscal years ended March 31:

Income before income taxes

In April 2023, the Company added an additional interest rate swap in the amount of $ 100,000,000 .

This swap has an effective date of September 30, 2024, which coincides with the expiration of the Company’s existing swaps, and a maturity date of December 16, 2027, which corresponds to the maturity date of the loans advanced under the RMM Credit Agreement.

The Company will pay a fixed rate of 2.946 % and receive a floating interest from the counterparty based on SOFR with reference to notional amounts adjusted to match the original scheduled principal repayments pursuant to the indenture agreement.

RESERVOIR MEDIA, INC.

2 unchanged sentences

March 31, 2023 and 2022

OTHER LIABILITIES

The Company’s other current liabilities consist primarily of obligations related to certain asset purchases and acquisitions that are due within the next twelve months, which totaled $ 9,883,039 and $ 12,272,577 as of March 31, 2023 and March 31, 2022, respectively.

As of March 31, 2023, the Company’s other non-current liabilities, which consist primarily of obligations related to certain asset purchases and acquisitions that are due more than a year in the future, are as follows:

Fiscal year ending March 31:

2029 and later

The following table presents domestic and foreign income before income taxes for the fiscal years ended March 31:

Income before income taxes

The provision for income taxes consists of the following for the fiscal years ended March 31:

11 unchanged sentences

A determination of an unrecognized deferred tax liability related to these earnings is not practicable.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023 and 2022

A reconciliation of the statutory tax rate to the effective rate is as follows for the fiscal years ended March 31:

2 unchanged sentences

Foreign subsidiary earnings

Impact of change in statutory rates on deferred tax balances

Return to provision adjustments

1 unchanged sentence

Effective income tax rate

The Company’s effective tax rate may vary from period to period depending on, among other factors, the geographic and business mix of earnings and losses.

During 2022, the Company changed its estimate of the applicable tax rate used to measure its international deferred tax liabilities in the United Kingdom resulting in a significant increase in its effective tax rate for the fiscal year ended March 31, 2023.

The increase of the estimate of the applicable future tax rate from 19 % to 25 % used to measure the international deferred tax liabilities in the United Kingdom resulted in incremental tax expense of $ 3,558,874 during the fiscal year ended March 31, 2023 due to the increase in the value of deferred tax liabilities.

The Company’s effective tax rate also may vary from period to period depending on, among other factors, the geographic and business mix of earnings and losses.

These same and other factors, including history of pre-tax earnings and losses, are taken into account in assessing the ability to realize deferred tax assets.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 and 2021

Significant components of the Company’s deferred income tax liability as of March 31, 2023 and 2022 are as follows:

1 unchanged sentence

Net operating loss carryforward

Fair value of swaps

Interest expense carryforward

Lease liability

Charitable contributions

6 unchanged sentences

( 26,156,253 )

Lease right of use

( 1,663,528 )

Fair value of swaps

( 1,553,150 )

Total deferred tax liabilities

4 unchanged sentences

( 24,884,170 )

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023 and 2022

As of March 31, 2023, the Company has income tax Net operating loss carry forwards of $ 53,348,105 related to the U.S.

14 unchanged sentences

The Company does not expect to settle any material tax audits in the next twelve months.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 and 2021

SUPPLEMENTARY CASH FLOW INFORMATION

4 unchanged sentences

Acquired intangible assets included in other liabilities

Reclassification of liability-classified awards to equity-classified awards

Conversion of RHI Preferred Stock to Common Stock

1 unchanged sentence

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 March 31, 2022 and $ 290,172 as of March 31, 2021.

These agreements cover services such as IT support, a sublease of office space, and re-billed services of staff who perform services across multiple entities.

Amounts due to (from) this shareholder and other affiliated entities totaled $( 22,500 ) as of March 31, 2023 and $ 0 as of March 31.

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 bore interest of 4.66 % per year and were payable upon the earlier of the

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023 and 2022

consummation of the Business Combination and December 21, 2021.

The Tommy Boy Related Party Notes and accrued interest were paid on the Closing Date.

12 unchanged sentences

The Company did not declare any dividends subsequent to the issuance of RHI Preferred Stock through the RHI Preferred Stock Conversion.

As of March 31, 2022, the Company had no shares of RHI Preferred Stock outstanding.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 and 2021

RHI Common Stock Issuance

During the fiscal year ended March 31, 2021, 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.

As of March 31, 2023 and 2022, the Company had no shares of RHI Preferred Stock outstanding.

As of March 31, 2023, 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.

7 unchanged sentences

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.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023 and 2022

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.

6 unchanged sentences

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.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 and 2021

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.

6 unchanged sentences

Share-based compensation expense is classified as “Administration expenses” in the accompanying consolidated statements of income.

The increase in share-based compensation expense during the fiscal year ended March 31, 2022 reflects the accelerated vesting of stock options and new grants of restricted stock units (“ RSU’s ”), as discussed below.

Additionally, share-based compensation expense for the fiscal year ended March 31, 2022, includes $ 240,000 to record a liability for a variable number of awards to be granted to non-employee directors based on a fixed dollar amount during the fiscal year ending March 31, 2023.

During the fiscal year ended March 31, 2023, the Company granted restricted stock units (“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 $ 1,171,428 was reclassified from accounts payable and accrued liabilities to additional paid-in capital.

Restricted Stock Units

During the fiscal year ended March 31, 2023 and 2022, the Company granted restricted stock units (“ RSU’s ”) to certain employees and executive officers under the 2021 Incentive Plan.

RSUs are not entitled to dividends or dividend equivalents and are not considered to be participating securities.

During the fiscal year ended March 31, 2023, 399,978 of these RSUs vested, with the remainder scheduled to vest over the following 2.7 years.The Company records share-based compensation expense for RSUs based on their grant date fair value.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023 and 2022

The following is a summary of RSU activity for the fiscal year ended March 31, 2023:

Outstanding as of April 1, 2022

Vested and settled

Outstanding as of March 31, 2023

Outstanding RSUs as of April 1, 2022, and RSUs vested and settled during the fiscal year ended March 31, 2023 include 102,541 RSUs with a fair value of $ 1,007,978 that vested on March 31, 2022 and converted to common shares in April 2022.

Outstanding RSUs as of March 31, 2023, include 217,864 RSUs with a fair value of $ 1,420,470 that vested on March 31, 2023 and converted to common shares in April 2023.

The total fair value, determined as of the date of vesting, of RSUs vested and converted to common shares of the Company during the fiscal year ended March 31, 2023 was $ 2,245,881 .

Stock Options

10 unchanged sentences

which is based on consideration of the contractual terms of the stock-based awards, vesting schedules, and expectations of future employee behavior.

● expected volatility of 39.1 % to 57.7 % determined by using an average of historical volatilities of selected companies deemed to be comparable to the Company corresponding to the expected term of the awards.

RESERVOIR MEDIA, INC.

2 unchanged sentences

March 31, 2023 and 2022

● expected dividend yield of 0 % , which reflects the Company’s lack of history or expectation of declaring dividends on its common stock.

4 unchanged sentences

Vested or expected to vest as of March 31, 2023

Restricted Stock Units

During the fiscal year ended March 31, 2022, the Company granted RSUs to certain employees and executive officers under the 2021 Incentive Plan.

RSUs are not entitled to dividends or dividend equivalents and are not considered to be participating securities.

During the fiscal year ended March 31, 2022, 183,474 of these RSUs vested, with the remainder scheduled to vest over the following two years .

The Company records share-based compensation expense for RSUs based on their grant date fair value.

The following is a summary of RSU activity for the fiscal year ended March 31, 2022:

Outstanding as of April 1, 2021

Vested and settled

Outstanding as of March 31, 2022

The total fair value, determined as of the date of vesting, of RSUs vested and converted to common shares of the Company during the fiscal year ended March 31, 2022 was $ 741,492 .

Outstanding RSUs as of March 31, 2022, include 102,541 RSUs with a fair value of $ 1,007,978 that vested on March 31, 2022 and converted to common shares in April 2022.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 and 2021

EARNINGS PER SHARE

4 unchanged sentences

( 1,182,247 )

( 3,359,927 )

Net income attributable to common shareholders

12 unchanged sentences

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, 5,914,526 shares of Common Stock equivalents comprised of 27,026 RSUs and 5,887,500 warrants have been excluded from the diluted earnings per share calculation for the fiscal year ended March 31, 2023.

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 fiscal year ended March 31, 2022.

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 fiscal year ended March 31, 2021.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023 and 2022

FINANCIAL INSTRUMENTS

5 unchanged sentences

(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, “ Loans, ” the Company entered into interest rate swap agreements to partially reduce its exposure to fluctuations in interest rates on its Credit Facilities.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 and 2021

The fair value of the outstanding interest rate swaps was a $ 3,991,802 asset as of March 31, 2022 and a $ 4,566,537 liability as of March 31, 2021.

The Company is exposed to market risk from changes in interest rates on its secured line of credit.

As described in Note 8, “ 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 $ 6,756,884 asset as of March 31, 2023 and a $ 3,991,802 asset as of March 31, 2022.

Fair value is determined using Level 2 inputs, which are based on quoted prices and market observable data of similar instruments.

6 unchanged sentences

The carrying values of these instruments as of March 31, 2023 and 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 owed to related parties at March 31, 2021 are impracticable to determine due to the related party nature of such amounts and the lack of readily determinable secondary market.

CONTINGENCIES AND COMMITMENTS

(a) Lease Commitments

The Company leases its business premises under operating leases which have expiration dates between 2024 – 2033.

Rent expense totaled $ 1,075,723 and $ 962,224 during the fiscal years ended March 31, 2022 and 2021, respectively.

Future minimum lease payments as of March 31, 2022 are as follows:

Many of the Company’s leases provide for future rent escalations and renewal options.

Most of the Company’s leases also obligate the Company to pay, as lessee, variable lease cost related to an allocation of maintenance, insurance and property taxes.

The Company defines lease term as the noncancellable term of the lease plus any renewals covered by renewal options that are reasonably certain of exercise based on the Company’s assessment of relevant economic factors.

The noncancellable term of the lease commences on the date the lessor makes the underlying property in the lease available to the Company, irrespective of when lease payments begin under the contract.

The Company recognizes a right-of-use (“ROU”) asset and lease liability at lease commencement, which are measured by discounting lease payments using the Company’s incremental borrowing rate as the discount rate.

The Company determines the incremental borrowing rate applicable to each lease by reference to its outstanding secured borrowings and implied spreads over the risk-free discount rates that correspond to the term of each lease.

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

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023 and 2022

asset and the change in the lease liability are included in changes in Other long-term assets and liabilities in the Consolidated Statement of Cash Flows.

The Company reassesses lease classification and remeasures ROU assets and lease liabilities when a lease is modified and that modification is not accounted for as a separate contract or upon certain other events that require reassessment.

Maintenance and property tax expenses are accounted for on an accrual basis as variable lease cost.

The following is a summary of lease cost for the fiscal year ended March 31, 2023:

Operating lease cost

Variable lease cost

Total lease cost

Rent expense totaled $ 1,075,723 during the fiscal year ended March 31, 2022.

The following is a summary of supplemental cash flow information related to leases for the fiscal year ended March 31, 2023:

Cash paid for amounts included in the measurement of operating lease liabilities

Right-of-use assets received in exchange for operating lease obligations

Supplemental balance sheet information related to leases is as follows:

Classification

March 31, 2023

Operating lease right-of-use assets

Operating lease right of use assets, net

Current portion of operating lease liabilities

Other current liabilities

Noncurrent portion of operating lease liabilities

Operating lease liabilities, net of current portion

The weighted average remaining lease term for the Company’s operating leases as of March 31, 2023 was 8.7 years.

The weighted average discount rate for the Company’s operating leases as of March 31, 2023 was 6.0 %.

Maturities of the Company’s operating lease liabilities as of March 31, 2023 were as follows for the fiscal years ending March 31:

Fiscal year ended March 31:

(b) Royalty Advances

Total lease payments

imputed interest

( 2,672,594 )

Present value of operating lease payments

current portion of operating lease liabilities

Operating lease liabilities, net of current portion

As of March 31, 2023, there have been no leases entered into that have not yet commenced.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023 and 2022

CONTINGENCIES AND COMMITMENTS

(a) Royalty Advances

The Company has committed to make payments for additional Royalty advances totaling $ 2,413,542 through March 2024, and a further $ 160,000 through March 2025, subject to certain conditions.

These Royalty advances are to be used to fund future music compositions and sound recordings and will be recorded as royalty advances when paid.

(b) Deferred Acquisition costs

As discussed in Note 9, the Company has obligations related to certain asset purchases and business acquisitions, which are recorded as liabilities.

1 unchanged sentence

The Company has recorded liabilities based on its view of the future performance of those assets, but it is possible that the actual performance and resulting obligations may be different than current estimates.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 and 2021

(d) Litigation

On September 8, 2020, an action was filed in the U.S.

District Court for the Southern District of New York against a consolidated subsidiary of the Company and certain prior owners (the “ Prior Owners ”) of certain music copyrights acquired by such consolidated subsidiary of 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.

The plaintiff alleges, among other things, that the Prior Owners breached the Engagement Letters by consummating a purchase agreement with a consolidated subsidiary of 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, 2022, the plaintiff, the Prior Owners, and such consolidated subsidiary of the Company entered into a settlement agreement and mutual release which required the Prior Owners to pay a settlement amount to the plaintiff, which amount was paid by the Prior Owners prior to the stipulated deadline.

On January 26, 2022, the plaintiff filed an agreed-upon stipulation of dismissal with prejudice with the U.S.

District Court for the Southern District of New York.

As a result, all liens granted by the Prior Owners were terminated.

As of January 31, 2022, the consolidated subsidiary of the Company has terminated all filings made by the Prior Owner with respect to such liens.

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.

In addition to the foregoing, the Company is subject to claims and contingencies in the normal course of business.

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, no provision for any contingent liabilities has been made in the consolidated financial statements.

8 unchanged sentences

The Company does not have sales between segments.

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023 and 2022

The following tables present total revenue and reconciliation of OIBDA to operating income by segment for the fiscal years ended March 31, 2023 and 2022:

2 unchanged sentences

Reconciliation of OIBDA to operating income:

Operating income (a)

Operating income

Amortization and depreciation

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 and 2021

Fiscal Year Ended March 31, 2022

1 unchanged sentence

Reconciliation of OIBDA to operating income:

Operating income (a)

Operating income

Amortization and depreciation

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.

The Company’s CODM manages assets on a consolidated basis.

5 unchanged sentences

No other customer accounted for more than 10% of revenue.

CORRECTION OF PRIOR PERIOD ERRORS

During the current fiscal year-end financial reporting process, 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.

The financial reporting periods affected by these errors include the Company’s previously reported consolidated financial statements for the fiscal years ended March 31, 2020, and 2021, and the Company’s previously reported unaudited interim condensed consolidated financial information for each of the quarterly and fiscal year-to-date periods ended December 31, 2020, and 2021 (collectively the “previously reported 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 financial statements.

However, the Company further concluded the accounting errors cannot be corrected as an out-of-period adjustment in the Company’s current period 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 has corrected these accounting errors in the accompanying consolidated financial statements as of and for the fiscal years ended March 31, 2022, and 2021 as an immaterial revision of these financial statements.

In addition, the Company plans to correct the accounting errors in its previously reported interim condensed consolidated financial information for the three-month period ended June 30, 2021, the three- and six-month periods ended September 30, 2021, and the three- and nine-month periods ended December 31, 2021, as an immaterial revision of those financial statements upon filing of the Company’s fiscal year 2023 Quarterly Reports on Form 10-Q.

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

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 and 2021

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.

Annual Periods:

The following table presents the impact of correcting the accounting errors on the Company’s previously reported consolidated statements of income for the fiscal years ended March 31, 2021, and 2020:

Fiscal Year Ended March 31, 2021

Fiscal Year Ended March 31, 2020

( 1,532,125 )

Cost of revenue

Amortization and depreciation

Total costs and expenses

Operating income

( 1,343,468 )

Income before income taxes

( 1,343,468 )

Income tax expense

( 1,036,006 )

Net income attributable to Reservoir Media, Inc.

( 1,036,006 )

Earnings per common share - basic

Earnings per common share - diluted

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 and 2021

The following table presents the impact of correcting the accounting errors on the Company’s previously reported consolidated statements of comprehensive income for the fiscal years ended March 31, 2021, and 2020:

Fiscal Year Ended March 31, 2021

Fiscal Year Ended March 31, 2020

( 1,036,006 )

Total comprehensive income

( 1,036,006 )

Total comprehensive income attributable to Reservoir Holdings, Inc.

( 1,036,006 )

The following table presents the impact of correcting the accounting errors on the Company’s previously reported consolidated balance sheet and consolidated statements of changes in shareholders’ equity as of March 31, 2021, and 2020:

March 31, 2021

March 31, 2020

Intangible assets, net

( 2,088,847 )

Income taxes payable

Deferred income taxes

Total liabilities

Retained earnings (accumulated deficit)

( 1,614,604 )

( 9,537,465 )

( 10,116,062 )

Total Reservoir Media, Inc.

shareholders’ equity

( 1,614,604 )

Total shareholders’ equity

( 1,614,604 )

Total liabilities and shareholders’ equity

( 2,088,847 )

The following table presents the impact of correcting the accounting errors on the Company’s previously reported consolidated statements of cash flows for the fiscal years ended March 31, 2021, and 2020:

Fiscal Year Ended March 31, 2021

Fiscal Year Ended March 31, 2020

( 1,036,006 )

Amortization of intangible assets

Accounts payable and accrued expenses

Income taxes payable

Deferred income taxes

Net cash provided by operating activities

( 1,532,125 )

Purchases of music catalogs

( 120,053,289 )

( 118,521,164 )

( 106,841,628 )

( 106,073,777 )

Net cash used for investing activities

( 120,146,556 )

( 118,614,431 )

( 107,806,381 )

( 107,038,530 )

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 and 2021

Unaudited Fiscal Year 2022 Interim Periods:

The following table presents the impact of correcting the accounting errors on the Company’s previously reported unaudited condensed consolidated statements of income for the three-month periods ended June 30, 2021, September 30, 2021, and December 31, 2021, the six-month period ended September 30, 2021, and the nine-month period ended December 31, 2021:

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Three Months Ended December 31, 2021

( 1,315,223 )

Amortization and depreciation

Total costs and expenses

Operating income

( 1,288,511 )

Income (loss) before income taxes

( 1,968,129 )

( 2,034,126 )

( 1,288,511 )

Income tax expense (benefit)

Net income (loss)

( 1,457,483 )

( 1,506,981 )

Net income (loss) attributable to Reservoir Media, Inc.

( 1,403,500 )

( 1,452,998 )

Earnings (loss) per common share - basic

Earnings (loss) per common share - diluted

Six Months Ended September 30, 2021

Nine Months Ended December 31, 2021

( 1,563,066 )

Amortization and depreciation

Total costs and expenses

Operating income

( 1,496,277 )

Income before income taxes

( 1,496,277 )

Income tax expense

( 1,122,208 )

Net income attributable to Reservoir Media, Inc.

( 1,122,208 )

Earnings per common share - basic

Earnings per common share - diluted

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 and 2021

The following table presents the impact of correcting the accounting errors on the Company’s previously reported unaudited condensed consolidated statements of comprehensive income (loss) for the three-month periods ended June 30, 2021, September 30, 2021, and December 31, 2021, the six-month period ended September 30, 2021, and the nine-month period ended December 31, 2021:

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Three Months Ended December 31, 2021

( 1,457,483 )

( 1,506,981 )

Total comprehensive income (loss)

( 1,242,341 )

( 1,291,839 )

Total comprehensive income (loss) attributable to Reservoir Holdings, Inc.

( 1,188,358 )

( 1,237,856 )

Six Months Ended September 30, 2021

Nine Months Ended December 31, 2021

( 1,122,208 )

Total comprehensive income (loss)

( 1,122,208 )

Total comprehensive income (loss) attributable to Reservoir Holdings, Inc.

( 1,122,208 )

The following table presents the impact of correcting the accounting errors on the Company’s previously reported unaudited condensed consolidated balance sheet and consolidated statements of changes in shareholders’ equity as of June 30, 2021, September 30, 2021, and December 31, 2021:

June 30, 2021

September 30, 2021

December 31, 2021

Intangible assets, net

( 2,154,844 )

( 2,296,613 )

( 3,585,124 )

( 2,154,844 )

( 2,296,613 )

( 3,585,124 )

Income taxes payable

Deferred income taxes

Total liabilities

Retained earnings (accumulated deficit)

( 1,664,102 )

( 2,316,106 )

( 1,770,429 )

( 2,736,812 )

Total Reservoir Media, Inc, shareholders' equity

( 1,664,102 )

( 1,770,429 )

( 2,736,812 )

Total shareholders' equity

( 1,664,102 )

( 1,770,429 )

( 2,736,812 )

Total liabilities and shareholders' equity

( 2,154,844 )

( 2,296,613 )

( 3,585,124 )

The following table presents the impact of correcting the accounting errors on the Company’s previously reported unaudited condensed consolidated statements of cash flows for the three-month period ended June 30, 2021, the six-month period ended September 30, 2021, and the nine-month period ended December 31, 2021:

Three Months Ended June 30, 2021

Six Months Ended September 30, 2021

Nine Months Ended December 31, 2021

Net income (loss)

( 1,457,483 )

( 1,506,981 )

( 1,122,208 )

Amortization of intangible assets

Deferred income taxes

Net cash provided by operating activities

( 1,563,066 )

Purchases of music catalogs

( 112,308,497 )

( 112,222,978 )

( 125,902,112 )

( 125,654,269 )

( 157,555,894 )

( 155,992,828 )

Net cash used for investing activities

( 112,785,355 )

( 112,699,836 )

( 128,395,338 )

( 128,147,495 )

( 160,143,142 )

( 158,580,076 )

RESERVOIR MEDIA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 and 2021

Unaudited Fiscal Year 2021 Interim Periods:

For the nine-month period ended December 31, 2020, the impact of correcting the accounting errors on the Company’s previously reported revenue, operating income, and net income was a reduction of $ 376,662 , $ 206,120 , and $ 160,000 , respectively

SUBSEQUENT EVENT

In April 2022, the Company entered into an agreement 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 ”).

Pursuant to the New HQ Lease agreement, the lease term is estimated to commence during the Company’s third or fourth quarter of the fiscal year ending March 31, 2023.

The total commitment of approximately $ 8.4 million is payable monthly with escalating rental payments over the 130 -month lease term.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data