Management is responsible for the preparation
and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of
America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation
of financial statements that are free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the
United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free from material misstatement.
An audit involves performing procedures to obtain
audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those
risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial position of Tommy Boy Music, LLC as of December 31, 2020 and 2019, and
the results of its operations and cash flows for the years then ended in accordance with accounting principles generally accepted in the
United States of America.
|
Note 1
|
Description of Business
|
Tommy Boy Music,
LLC (the “Company”) is a limited liability company that was incorporated in the state of Delaware on June 21, 2017. The Company
was formed to make certain acquisitions in the music recording industry.
On June 30, 2017,
the Company (formerly known as TBM, LLC) purchased all of the stock of Tommy Boy Music Inc. Tommy Boy Music Inc. merged with and into
TBM, LLC, with TBM, LLC being the surviving entity. In connection with the merger, TBM, LLC changed its name to Tommy Boy Music, LLC.
The Company creates,
markets, and distributes audio and video entertainment products through all physical and digital outlets as well as licensing music rights
for re-use globally.
The Company’s
recorded music business primarily consists of the acquisition, management, and development of music catalogs.
|
Note 2
|
Summary of Significant Accounting Policies
|
Basis of Presentation
The financial statements
have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States
of America (“GAAP”).
Use of Estimates
The preparation of
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and
disclosures. Actual results may differ from those estimates.
Revenue Recognition
On January 1, 2020,
the Company adopted the Financial Accounting Standards Board (“FASB”) guidance in Accounting Standards Codification Topic
606 (“ASC 606”) which replaces the guidance in former Topic 605, Revenue Recognition and ASC
928-605, Entertainment – Music. Management determined that revenue recognized pursuant to the new guidance is consistent
with the previous revenue recognition policy. The Company recognizes revenue when, or as, control of the promised services or goods is
transferred to customers and in an amount that reflects the consideration the Company is contractually due in exchange for those services
or goods.
Label Revenue
The Company receives
its label revenue through the exploitation of owned and licensed copyrights sold on retail platforms as physical products, digital downloads
or streams either through its distributor, through a direct sale to consumers, or as a sale to a retailer for distribution to a consumer.
Tommy Boy Music, LLC
Notes to Financial Statements
December 31, 2020 and 2019
Note 2
|
Summary of Significant Accounting Policies (continued)
|
Distributor revenue
is recognized monthly with income reported net of distribution fees and reduced further by expenses incurred by the Company to prepare
product for distribution. These expenses include manufacturing services provided by the distributor, warehouse storage costs and marketing
programs offered by the distributor. The activity from the distribution statement is booked in the month of receipt.
Music Publishing
Revenue
Music publishing
revenue is earned from the receipt of royalties relating to the licensing of rights in musical compositions. The receipt of royalties
principally relates to amounts earned from the public performance of copyrighted material, the mechanical reproduction of copyrighted
material on recorded media including digital formats, and the use of copyrighted material in synchronization with visual images. Consistent
with industry practice, music publishing royalties, except for synchronization royalties, generally are recognized as revenue when cash
is received.
Consistent with industry
practice, revenue from streaming of recorded music through digital distribution channels is recognized when the music is streamed and
related activity accounting reports are delivered by the providers.
At December 31, 2020
and 2019, management has estimated the amount of accrued revenue related to its music royalties that is attributed to performance of its
copyrights for the quarters ended December 31, 2020 and 2019, respectively. Such balances amounted to $899,060 and $681,603, respectively,
and it is reported as a component of prepaid expenses and other current assets on the balance sheets.
Gross Versus Net
Revenue Classification
In the normal course
of business, the Company acts as an intermediary or agent with respect to certain payments received from third parties. Pursuant to ASC
606, the transactions are recorded on a “gross” or “net” basis depending on whether the Company is acting as the
“principal” in the transaction or acting as an “agent” in the transaction. The Company serves as the principal
in transactions in which it has substantial risks and rewards of ownership and, accordingly, revenue is recorded on a gross basis. For
those transactions in which the Company does not have substantial risks and rewards of ownership, the Company is considered an agent and,
accordingly, revenue is recorded on a net basis.
To the extent revenue
is recorded on a gross basis, any royalties paid to third parties are recorded as expenses so that the net amount (gross revenue less
expenses) flows through operating income. To the extent revenue is recorded on a net basis, revenue is reported based on the amounts received
net of participations and royalties paid to third parties. In both cases, the impact on operating income is the same whether the Company
records the revenue on a gross or net basis.
Tommy Boy Music, LLC
Notes to Financial Statements
December 31, 2020 and 2019
|
Note 2
|
Summary
of Significant Accounting Policies (continued)
|
Accounts Receivable
Accounts receivable
are carried at original invoice amount. Management determines if an allowance is necessary on specifically identified customers. Accounts
are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded when received. Accounts
are considered past due if a portion of the receivable balance is outstanding for more than thirty days past the customer’s terms.
At December 31, 2020 and 2019 management has determined that no allowance for doubtful accounts was necessary.
Property and Equipment
Property and equipment
are stated at cost. Depreciation of property and equipment is calculated utilizing the straight-line method over the estimated useful
lives of the assets. Estimated service lives range from three to ten years. Leasehold improvements are amortized over the shorter of the
estimated useful life of the asset or the lease term. When property and equipment is sold or otherwise disposed of, the cost and related
accumulated depreciation and amortization are eliminated from the accounts and any resulting gain or loss is reflected in income. Repairs
and maintenance are charged to operating expenses while improvements and betterments are capitalized.
Advertising
Advertising costs
are expensed as incurred. For the years ended December 31, 2020 and 2019 advertising costs amounted to $67,750 and $137,729, respectively.
Royalty Advances
In connection with
previous acquisitions, the Company allocated certain artist writers advances it believes are recoverable from future royalties to be earned
by the recording artists. Artists’ balances recoverability varies in both amount and expected life based on the earning history
of each recording.
The Company’s
decision to recognize these artists’ balances as an asset (royalty advances) requires significant judgment as to the recoverability
of the advance. In determining whether the artist balance is recoverable, the Company evaluates among other factors, the current and past
popularity of the recording artist and the earning history of the recording artist. As part of the ongoing assessment of recoverability,
the Company monitors the projection of future sales based on the current environment. Royalty advances are periodically reviewed for recoverability.
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.
Royalty costs are reported and paid
by the Company semi-annually. The Company first reduces the unrecouped portion of the artist’s advance by the amount of royalties
earned by the writer, if applicable. Once the artist’s advance has been recouped, the Company will remit directly to the artist
his or her portion of the payment, while retaining their share of the payment as stipulated in the artist agreement. The amount of unrecouped
royalty advances was $3,082,490 and $3,410,803 as of the years ended December 31, 2020 and 2019, respectively.
Tommy Boy Music, LLC
Notes to Financial Statements
December 31, 2020 and 2019
|
Note 2
|
Summary of Significant Accounting Policies (continued)
|
In connection with
the royalty revenue that the Company receives, the Company pays a certain percentage to the recording artist to the extent that revenues
are received. The percentage paid is in accordance with the underlying rights agreement. As of December 31, 2020 and 2019, the Company
has accrued $1,260,830 and $1,042,471 of royalties that are due and payable to the recording artists.
Intangible Assets
Intangible assets
consist of music recording copyrights. The Company evaluates the recoverability of its intangible assets whenever events or changes in
circumstances indicate that an intangible asset’s carrying amount may not be recoverable. Such circumstances could indicate but
are not limited to a significant adverse change in the estimated future cash inflows attributable to the assets and related future economic
benefits. 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. The Company has determined there was no impairment to intangible assets during the years ended December 31, 2020 and 2019.
Deferred Financing
Costs
The Company accounts for its deferred
financing costs in accordance with FASB Accounting Standards Update (“ASU”) No. 2015-03 Interest-Imputation of Interest
(Subtopic 835-30). Financing costs are presented on the balance sheet as a direct reduction from the carrying value of the debt liability,
and amortization expense is included as a component of interest expense.
Income Taxes
The Company is treated
as a partnership for federal and state income tax purposes. A partnership is not a tax paying entity for federal and state income tax
purposes. Income, loss, deductions and credits pass through proportionally to its members and are taxed at the individual members’
income tax rates. Accordingly, no provision for federal and state income taxes is recorded in the financial statements. The Company is
subject to New York City unincorporated business tax which is reported on the statements of income.
Tommy Boy Music, LLC
Notes to Financial Statements
December 31, 2020 and 2019
|
Note 2
|
Summary
of Significant Accounting Policies (continued)
|
The Company follows
the provisions of ASC 740-10, Accounting for Uncertainty in Income Taxes, where an entity must recognize the effect associated
with the tax position taken for tax return purposes when it is more likely than not that the position will be sustained. The implication
of FASB ASC 740-10-25 had no impact on the Company’s financial statements. Currently the 2018 through 2020 tax years are open and
subject to examination by the taxing authorities. The Company does not believe there are any material uncertain positions and, accordingly,
it did not recognize any liability for unrecognized tax effects in the accompanying financial statements.
During 2020, the
Company entered into an agreement to acquire revenue rights of a music catalog for a total amount of $1,375,000. As of December 31, 2020
and 2019, intangible assets consisting of music recording copyrights, are recorded at cost of $6,315,801 and $4,940,801 less accumulated
amortization of $983,497 and $589,804, respectively. The music recording copyrights are amortized using the straight-line method over
15 years. Amortization expense was $393,693 and $328,053 for the years ended December 31, 2020 and 2019, respectively. The expected amortization
for each of the next five years and thereafter are as follows:
Years Ending
|
|
|
|
December 31,
|
|
|
|
2021
|
|
$
|
419,720
|
|
2022
|
|
|
419,720
|
|
2023
|
|
|
419,720
|
|
2024
|
|
|
419,720
|
|
2025
|
|
|
419,720
|
|
Thereafter
|
|
|
3,233,704
|
|
|
|
|
|
|
Total
|
|
$
|
5,332,304
|
|
|
Note 4
|
Revolving
Loans Payable
|
Effective
March 25, 2020, the Company entered into a revolving loan agreement with a bank with a maximum amount available under the credit facility
of $20,000,000. The revolving loans are secured by certain assets of the Company. All amounts drawn on the credit facility bear interest
at prime rate minus 0.25%. The effective rate as of December 31, 2020 was 3.00%. All outstanding loans are due and payable upon the maturity
date of March 25, 2025. At December 31, 2020 the outstanding balance was $2,815,993, net of unamortized financing costs of $257,234.
The
Company incurred deferred financing costs of $302,628 which are being amortized over the term of the revolving loan agreement.
Tommy Boy Music, LLC
Notes to Financial Statements
December 31, 2020 and 2019
|
Note 4
|
Revolving Loans Payable (continued)
|
Interest expense for the year ended
December 31, 2020 was $89,706, including $45,394 of deferred financing costs amortization.
As provided for in
the Company’s Operating Agreement (“Agreement”), there are three classes of members, Class A, Class B, and Class C.
The Company maintains a separate capital account for each type of member. Such accounts are increased or decreased by the amounts of any
capital contributions or distributions as well as any allocation of profits or losses in proportion of their ownership percentages.
Class A Members are
entitled to a preferred return (as defined in the Agreement) of 19% per annum based on their outstanding Member’s capital contribution.
Profits for any year
are allocated among the Members in the following order and priority, as provided for in the Agreement:
|
a)
|
Class A Members, Class B Members and Class C Members who have received allocations of losses pursuant
to the Agreement, in proportion to and in reverse order of such allocations of losses, until the aggregate amount of profits allocated
to such Members for the current and all preceding years equals the aggregate amount of losses allocated to such Members in all preceding
years;
|
|
b)
|
Class A Members in proportion to their capital contributions, until each Class A Member has been allocated
profits equal to such Class A Member’s preferred return;
|
|
c)
|
Class A Members and Class B Members in proportion to 42.5% and 57.5%, respectively, until the Class A
Members and Class B Members have been allocated profits equal to an aggregate amount of $3,478,260 ($1,478,260 to the Class A Members
and $2,000,000 to the Class B Members) for the current and preceding years; and
|
|
d)
|
Members in proportion to their Company’s percentages.
|
Losses for any year
shall be allocated among the Members in the following order and priority, as provided for in the Agreement:
|
a)
|
Class A Members, Class B Members, and Class C Members who have received allocations of profits pursuant
to the Agreement, in proportion to and in reverse order of such allocations, until the aggregate amount of losses allocated for the current
and all preceding years equals the aggregate amount of profits previously allocated to such Members in all preceding years;
|
|
b)
|
Class A Members, in proportion to their positive capital account balances until such balances are reduced
to zero; and
|
|
c)
|
Class A Members, Class B Members and Class C Members, in proportion to their Company’s percentages.
|
Tommy Boy Music, LLC
Notes to Financial Statements
December 31, 2020 and 2019
|
Note 5
|
Members’ Equity (continued)
|
The Class B Member
has been appointed as the manager of the Company as described in the Agreement. As compensation for the services required pursuant to
the operating agreement, the Company paid the manager $220,000 and $150,000 in 2020 and 2019, respectively. In addition, the Class C member
received a compensation of $220,000 and $150,000 in 2020 and 2019, respectively, for services rendered to the Company. Compensation expenses
were reported in payroll and related expenses on the statements of income.
|
Note 6
|
Commitment
and Contingencies
|
Lease Commitment
The Company is under
a cancelable operating lease for office space in New York City, which expires on August 31, 2024.
Future minimum rent
payments under the lease is as follows:
Years Ending
|
|
|
|
December 31,
|
|
|
|
2021
|
|
$
|
154,030
|
|
2022
|
|
|
149,437
|
|
2023
|
|
|
153,918
|
|
2024
|
|
|
105,042
|
|
|
|
$
|
562,427
|
|
Contingencies
In connection with
the acquisition of Tommy Boy Music, Inc. (Note 1), the Company is indemnified by the seller party against certain losses incurred by the
Company that arose from or as a result of the acquisition of Tommy Boy Music, Inc. As of December 31, 2020 and 2019, the Company has not
incurred losses that were a result of the acquisition.
From time to time
in the normal course of business, the Company may be a party to various claims or litigation matters. At December 31, 2020 and 2019, no
active claims or litigations were pending against the Company.
Uncertainty Due to COVID-19
The
worldwide outbreak of COVID-19, which was declared a pandemic by the World Health Organization in March 2020, has impacted and may continue
to impact global commerce. The full impact of the COVID-19 outbreak continues to evolve, and management is actively monitoring the situation.
It is uncertain as to the magnitude the COVID-19 pandemic will have in
the future on the global economy as well as the Company’s financial condition and future results of operations. To date,
management has been able to effectively navigate the impact of the COVID-19 pandemic in meeting its operating and financial goals.
Tommy Boy Music, LLC
Notes to Financial Statements
December 31, 2020 and 2019
|
Note 7
|
Concentration
of Credit Risk
|
Cash
The Company maintains
its cash balances at one financial institution. Concentration of credit risk arises from balances that from time to time may exceed the
Federal Deposit Insurance Corporation’s insurance limit. The Company has not experienced any losses in such accounts. The Company
evaluates the financial strength and stability of the financial institution and it believes it is not exposed to any significant credit
risk on its cash balance.
Revenue
For the year ended
December 31, 2020, revenue to three major customers accounted for approximately 69% of total revenue. For the year ended December 31,
2019, revenue to four major customers accounted for approximately 74% of total revenue.
The Company has evaluated
subsequent events through May 28, 2021, which is the date the financial statements were available to be issued.
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION
The following unaudited pro forma
condensed combined financial information presents the combination of the financial information of Reservoir Media, Inc. (formerly known
as Roth CH Acquisition II Co. (“ROCC”)), a Delaware corporation (“RMI”), Reservoir
Holdings, Inc., a Delaware corporation (“Reservoir”), and Tommy Boy Music, LLC, a Delaware limited liability
company (“Tommy Boy”), adjusted to give effect to (i) the consummation of (x) the acquisition of Reservoir pursuant
to the agreement and plan of merger, dated as of April 14, 2021 (the “Merger Agreement”), by and among
RMI, Roth CH II Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of ROCC (“Merger Sub”),
and Reservoir, pursuant to which Merger Sub was merged with and into Reservoir and, as a result, the separate corporate existence of Merger
Sub ceased and Reservoir survived the merger as a wholly-owned subsidiary of ROCC (the “Business Combination”),
and (y) the related private investment in public equity transaction (the “PIPE Investment”) and the (ii) the
consummation of the acquisition of Tommy Boy (the “Tommy Boy Acquisition”) pursuant to a membership interest
purchase agreement, dated as of June 2, 2021 (the “Tommy Boy Purchase Agreement”). Unless the context otherwise
requires, references to “RMI” mean (i) Reservoir Media, Inc., a Delaware corporation, and its consolidated
subsidiaries following the consummation of the Business Combination and (ii) Roth CH Acquisition II Co., a Delaware corporation, and its
subsidiaries prior to the consummation of the Business Combination.
The following unaudited pro forma
condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule,
Release 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.”
The unaudited pro forma condensed
combined balance sheet as of March 31, 2021 combines the historical balance sheet of Reservoir, the historical balance sheets of ROCC
and the historical balance sheet of Tommy Boy on a pro forma basis as if the Business Combination, the PIPE Investment and the Tommy Boy
Acquisition had been consummated on March 31, 2021. The unaudited pro forma condensed combined statement of operations for the year ended
March 31, 2021 combines the historical statement of operations of Reservoir for the year ended March 31, 2021, the historical statement
of operations of ROCC for the year ended December 31, 2020 and the historical statement of operations of Tommy Boy for the year ended
December 31, 2020 on a pro forma basis as if the Business Combination, the PIPE Investment and the Tommy Boy Acquisition had been consummated
on April 1, 2020, the beginning of the earliest period presented.
The unaudited pro forma condensed
combined financial statements have been prepared from and should be read in conjunction with:
|
·
|
the accompanying notes to the unaudited pro forma
condensed combined financial statements;
|
|
·
|
the historical audited consolidated financial
statements of Reservoir as of and for the year ended March 31, 2021 and the related notes;
|
|
·
|
the historical unaudited condensed balance sheet
of ROCC as of March 31, 2021 and the related notes;
|
|
·
|
the historical audited financial statements of
ROCC as of and for the year ended December 31, 2020 and the related notes;
|
|
·
|
the historical unaudited condensed balance sheet
of Tommy Boy as of March 31, 2021; and
|
|
·
|
the historical audited financial statements of
Tommy Boy as of and for the year ended December 31, 2020 and the related notes.
|
Pursuant
to RMI’s amended and restated certificate of incorporation as in effect immediately prior to the consummation of the Business Combination,
RMI provided the holders of the shares of common stock, par value $0.0001 per share, of RMI (the “RMI Common Stock”)
acquired in RMI’s initial public offering consummated in
December 2020 (the “Public Shares”) with the opportunity to have their Public Shares redeemed in connection
with the consummation of the Business Combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit
in the trust account as of two business days prior to the consummation of the Business Combination, including interest (which interest
was net of taxes payable), divided by the number of the then outstanding Public Shares, subject to certain limitations.
Notwithstanding the legal form
of the Business Combination pursuant to the Merger Agreement, the Business Combination was accounted for as a reverse recapitalization
in accordance with the generally accepted accounting principles in the United States (“GAAP”). Under this method
of accounting, Reservoir is treated as the acquirer and RMI is treated as the acquired company for financial statement reporting purposes.
Reservoir was determined to be the accounting acquirer primarily based on the fact, that subsequent to the consummation of the Business
Combination, former stockholders of Reservoir have a majority of the voting power of RMI, Reservoir comprises all of the ongoing operations
of RMI, Reservoir controls a majority of the governing body of RMI and Reservoir’s senior management comprises all of the senior
management of RMI.
The unaudited pro forma condensed
combined financial information below reflects the 10,295,452 Public Shares that were redeemed in connection with the consummation of the
Business Combination, resulting in an aggregate payment of $102.97 million out of the trust account, at a redemption price of approximately
$10.00 per Public Share.
The unaudited pro forma condensed
combined financial information is for illustrative purposes only and is not necessarily indicative of what the actual results of operations
and financial position would have been had the Business Combination, the PIPE Investment and the Tommy Boy Acquisition taken place on
the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of RMI.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF MARCH 31, 2021
(in dollars)
|
|
Historical
|
|
|
Historical
|
|
|
Historical
|
|
|
|
|
|
|
|
|
|
|
|
Reservoir
Holdings,
Inc.
|
|
|
Roth
CH
Acquisition
II Co.
|
|
|
Tommy
Boy
Music,
LLC
|
|
|
|
|
|
|
|
|
|
|
|
March
31,
2021
(A)
|
|
|
March
31,
2021
(B)
|
|
|
March
31,
2021
(C)
|
|
|
Transaction
Accounting
Adjustments
|
|
|
Note
|
|
Pro
Forma
Combined
Company
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
9,209,920
|
|
|
$
|
549,040
|
|
|
$
|
1,534,005
|
|
|
$
|
―
|
|
|
|
|
$
|
66,235,893
|
|
Cash and cash equivalents
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
12,043,833
|
|
|
5(c)
|
|
|
―
|
|
Cash and cash equivalents
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
144,235,000
|
|
|
5(d)
|
|
|
―
|
|
Cash and cash equivalents
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
(101,335,905
|
)
|
|
5(h)
|
|
|
―
|
|
Accounts receivable, net
|
|
|
15,813,384
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
15,813,384
|
|
Current portion of royalty advances
|
|
|
12,840,855
|
|
|
|
―
|
|
|
|
328,313
|
|
|
|
―
|
|
|
|
|
|
13,169,168
|
|
Inventory
and prepaid expenses
|
|
|
1,406,379
|
|
|
|
380,555
|
|
|
|
1,348,959
|
|
|
|
―
|
|
|
|
|
|
3,135,893
|
|
Total current
assets
|
|
|
39,270,538
|
|
|
|
929,595
|
|
|
|
3,211,277
|
|
|
|
54,942,928
|
|
|
|
|
|
98,354,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and marketable securities
held in Trust Account
|
|
|
―
|
|
|
|
115,012,821
|
|
|
|
―
|
|
|
|
(115,012,821
|
)
|
|
5(c)
|
|
|
―
|
|
Property, plant and equipment,
net
|
|
|
321,766
|
|
|
|
―
|
|
|
|
13,785
|
|
|
|
(13,785
|
)
|
|
5(i)
|
|
|
321,766
|
|
Intangible assets, net
|
|
|
393,238,010
|
|
|
|
―
|
|
|
|
7,315,173
|
|
|
|
90,762,743
|
|
|
5(j)
|
|
|
491,315,926
|
|
Royalty advances, net of current
portion
|
|
|
28,741,225
|
|
|
|
―
|
|
|
|
2,747,491
|
|
|
|
―
|
|
|
|
|
|
31,488,716
|
|
Investment in equity affiliate
|
|
|
1,591,179
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
1,591,179
|
|
Other assets
|
|
|
781,735
|
|
|
|
―
|
|
|
|
61,500
|
|
|
|
―
|
|
|
|
|
|
843,235
|
|
Total assets
|
|
$
|
463,944,453
|
|
|
$
|
115,942,416
|
|
|
$
|
13,349,226
|
|
|
$
|
30,679,065
|
|
|
|
|
$
|
623,915,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
3,316,768
|
|
|
$
|
125,034
|
|
|
$
|
957,292
|
|
|
$
|
13,875,000
|
|
|
5(f)
|
|
$
|
18,274,094
|
|
Amounts due to related parties
|
|
|
290,172
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
290,172
|
|
Accrued payroll
|
|
|
1,634,852
|
|
|
|
―
|
|
|
|
29,019
|
|
|
|
―
|
|
|
|
|
|
1,663,871
|
|
Royalties payable
|
|
|
14,656,566
|
|
|
|
―
|
|
|
|
1,727,908
|
|
|
|
―
|
|
|
|
|
|
16,384,474
|
|
Other current liabilities
|
|
|
2,615,488
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
2,615,488
|
|
Current portion of loans and secured
notes payable
|
|
|
1,000,000
|
|
|
|
―
|
|
|
|
―
|
|
|
|
(1,000,000
|
)
|
|
5(e)
|
|
|
―
|
|
Income taxes payable
|
|
|
533,495
|
|
|
|
―
|
|
|
|
48,060
|
|
|
|
―
|
|
|
|
|
|
581,555
|
|
Deferred
revenue
|
|
|
1,337,987
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
1,337,987
|
|
Total current
liabilities
|
|
|
25,385,328
|
|
|
|
125,034
|
|
|
|
2,762,279
|
|
|
|
12,875,000
|
|
|
|
|
|
41,147,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of current
maturities
|
|
|
17,500,000
|
|
|
|
―
|
|
|
|
3,338,624
|
|
|
|
(17,500,000
|
)
|
|
5(e)
|
|
|
―
|
|
Long-term debt, net of current
maturities
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
(3,338,624
|
)
|
|
5(k)
|
|
|
―
|
|
Debt issue cost, net
|
|
|
(3,058,973
|
)
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
(3,058,973
|
)
|
Secured line of credit
|
|
|
197,090,848
|
|
|
|
―
|
|
|
|
―
|
|
|
|
18,500,000
|
|
|
5(e)
|
|
|
215,590,848
|
|
Fair value of swaps
|
|
|
4,566,537
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
4,566,537
|
|
Deferred income taxes
|
|
|
19,735,537
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
19,735,537
|
|
Warrant liabilities
|
|
|
―
|
|
|
|
178,750
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
178,750
|
|
Other liabilities
|
|
|
6,739,971
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
6,739,971
|
|
Total liabilities
|
|
|
267,959,248
|
|
|
|
303,784
|
|
|
|
6,100,903
|
|
|
|
10,536,376
|
|
|
|
|
|
284,900,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock subject to possible
redemption
|
|
|
―
|
|
|
|
110,638,630
|
|
|
|
―
|
|
|
|
(110,638,630
|
)
|
|
5(c)
|
|
|
―
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
―
|
|
|
|
359
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
359
|
|
Common stock
|
|
|
1
|
|
|
|
―
|
|
|
|
―
|
|
|
|
4,470
|
|
|
5(b)
|
|
|
4,471
|
|
Common stock
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
77
|
|
|
5(c)
|
|
|
77
|
|
Common stock
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
1,500
|
|
|
5(d)
|
|
|
1,500
|
|
Preferred stock
|
|
|
81,632,500
|
|
|
|
―
|
|
|
|
―
|
|
|
|
(81,632,500
|
)
|
|
5(a)
|
|
|
―
|
|
Additional paid-in capital
|
|
|
―
|
|
|
|
5,370,137
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
5,370,137
|
|
Additional paid-in capital
|
|
|
110,499,153
|
|
|
|
―
|
|
|
|
―
|
|
|
|
81,632,500
|
|
|
5(a)
|
|
|
192,131,653
|
|
Additional paid-in capital
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
(4,470
|
)
|
|
5(b)
|
|
|
(4,470
|
)
|
Additional paid-in capital
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
7,669,565
|
|
|
5(c)
|
|
|
7,669,565
|
|
Additional paid-in capital
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
144,233,500
|
|
|
5(d)
|
|
|
144,233,500
|
|
Additional paid-in capital
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
(13,875,000
|
)
|
|
5(f)
|
|
|
(13,875,000
|
)
|
Additional paid-in capital
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
(370,494
|
)
|
|
5(g)
|
|
|
(370,494
|
)
|
Retained earnings (accumulated
deficit)
|
|
|
751,496
|
|
|
|
(370,494
|
)
|
|
|
―
|
|
|
|
370,494
|
|
|
5(g)
|
|
|
751,496
|
|
Members' equity
|
|
|
―
|
|
|
|
―
|
|
|
|
7,248,323
|
|
|
|
(7,248,323
|
)
|
|
5(l)
|
|
|
―
|
|
Accumulated other comprehensive
income
|
|
|
2,096,358
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
2,096,358
|
|
Noncontrolling
interest
|
|
|
1,005,697
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
1,005,697
|
|
Total stockholders’
equity
|
|
|
195,985,205
|
|
|
|
5,000,002
|
|
|
|
7,248,323
|
|
|
|
130,781,319
|
|
|
|
|
|
339,014,849
|
|
Total liabilities
and stockholders’ equity
|
|
$
|
463,944,453
|
|
|
$
|
115,942,416
|
|
|
$
|
13,349,226
|
|
|
$
|
30,679,065
|
|
|
|
|
$
|
623,915,160
|
|
See accompanying
notes to the unaudited pro forma condensed combined financial information.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2021
(in dollars, except share amounts)
|
|
Historical
|
|
|
Historical
|
|
|
Historical
|
|
|
|
|
|
|
|
|
|
|
|
|
Reservoir
Holdings, Inc.
|
|
|
|
Roth
CH
Acquisition II
Co.
|
|
|
|
Tommy
Boy
Music, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
Year
Ended March 31,
2021
(A)
|
|
|
|
Historical
Year Ended
December 31, 2020
(B)
|
|
|
|
Historical
Year Ended
December 31, 2020
(C)
|
|
|
|
Transaction
Accounting
Adjustments
|
|
|
Note
|
|
|
Pro
Forma
Combined
Company
|
|
Revenues
|
|
$
|
81,777,789
|
|
|
$
|
―
|
|
|
$
|
8,271,649
|
|
|
$
|
―
|
|
|
|
|
$
|
90,049,438
|
|
Cost of revenue
|
|
|
32,991,979
|
|
|
|
―
|
|
|
|
2,089,190
|
|
|
|
―
|
|
|
|
|
|
35,081,169
|
|
Administration
expenses
|
|
|
14,128,604
|
|
|
|
109,998
|
|
|
|
1,775,228
|
|
|
|
345,368
|
|
|
6(a)
|
|
|
16,359,198
|
|
Amortization
and depreciation
|
|
|
14,986,085
|
|
|
|
―
|
|
|
|
728,133
|
|
|
|
2,541,131
|
|
|
6(d)
|
|
|
18,255,349
|
|
Total
costs and expenses
|
|
|
62,106,668
|
|
|
|
109,998
|
|
|
|
4,592,551
|
|
|
|
2,886,499
|
|
|
|
|
|
69,695,716
|
|
Operating
income
|
|
|
19,671,121
|
|
|
|
(109,998
|
)
|
|
|
3,679,098
|
|
|
|
(2,886,499
|
)
|
|
|
|
|
20,353,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(8,972,100
|
)
|
|
|
―
|
|
|
|
(89,706
|
)
|
|
|
89,706
|
|
|
6(f)
|
|
|
(8,972,100
|
)
|
Gain
on fair value of swaps
|
|
|
(910,799
|
)
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
(910,799
|
)
|
Loss
on foreign exchange
|
|
|
2,988,322
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
2,988,322
|
|
Change
in fair value of warrant liabilities
|
|
|
―
|
|
|
|
(17,875
|
)
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
(17,875
|
)
|
Initial
public offering costs allocated to warrant liabilities
|
|
|
―
|
|
|
|
(478
|
)
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
(478
|
)
|
Interest
and other income
|
|
|
13,243
|
|
|
|
6,613
|
|
|
|
―
|
|
|
|
(6,613
|
)
|
|
6(b)
|
|
|
13,243
|
|
|
|
|
(6,881,334
|
)
|
|
|
(11,740
|
)
|
|
|
(89,706
|
)
|
|
|
83,093
|
|
|
|
|
|
(6,899,687
|
)
|
Income
before income taxes
|
|
|
12,789,787
|
|
|
|
(121,738
|
)
|
|
|
3,589,392
|
|
|
|
(2,803,406
|
)
|
|
|
|
|
13,454,035
|
|
Income
tax benefit (expense)
|
|
|
(2,454,153
|
)
|
|
|
―
|
|
|
|
(146,897
|
)
|
|
|
(71,593
|
)
|
|
6(e)
|
|
|
(2,672,643
|
)
|
Net
income (loss)
|
|
$
|
10,335,634
|
|
|
$
|
(121,738
|
)
|
|
$
|
3,442,495
|
|
|
$
|
(2,874,999
|
)
|
|
|
|
$
|
10,781,392
|
|
Net
income attributable to noncontrolling interests
|
|
|
(46,673
|
)
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
(46,673
|
)
|
Net
income (loss) attributable to the Company
|
|
$
|
10,288,961
|
|
|
$
|
(121,738
|
)
|
|
$
|
3,442,495
|
|
|
$
|
(2,874,999
|
)
|
|
|
|
$
|
10,734,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
45.29
|
|
|
$
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.17
|
|
Diluted
|
|
$
|
45.29
|
|
|
$
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.17
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
145,560
|
|
|
|
2,545,512
|
|
|
|
|
|
|
|
|
|
|
6(c)
|
|
|
64,069,253
|
|
Diluted
|
|
|
227,198
|
|
|
|
2,545,512
|
|
|
|
|
|
|
|
|
|
|
6(c)
|
|
|
64,069,253
|
|
See accompanying
notes to the unaudited pro forma condensed combined financial information.
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION
|
1.
|
Description of the Business Combination, the PIPE Investment and the Tommy
Boy Acquisition
|
RMI, Merger Sub and Reservoir
entered into the Merger Agreement, pursuant to which Merger Sub merged with and into Reservoir, with Reservoir surviving as a wholly-owned
subsidiary of RMI and the securityholders of Reservoir becoming securityholders of RMI. In connection with the consummation of the Business
Combination, “Roth CH Acquisition II, Co.” was renamed “Reservoir Media, Inc.”
Immediately prior to the effective
time of the Business Combination (the “Effective Time”), each share of Series A preferred stock, par value $0.00001
per share, of Reservoir (the “Reservoir Preferred Stock”) that was issued and outstanding immediately prior
to the Effective Time was automatically converted immediately prior to the Effective Time into a number of shares of common stock, par
value $0.00001 per share, of Reservoir (the “Reservoir Common Stock”) at the then-effective conversion rate
as calculated pursuant to Reservoir’s second amended and restated certificate of incorporation then in effect (the “Reservoir
Preferred Stock Conversion”). All of the shares of the Reservoir Preferred Stock converted into shares of the Reservoir
Common Stock pursuant to the Reservoir Preferred Stock Conversion are no longer outstanding and ceased to exist, and each holder of the
Reservoir Preferred Stock thereafter ceased to have any rights with respect to such shares of the Reservoir Preferred Stock.
Upon the consummation of the Business
Combination, the former stockholders of Reservoir received the RMI Common Stock and, immediately following the consummation of the Business
Combination, the former stockholders of Reservoir own approximately 69.8% of RMI. The former stockholders of Reservoir own the majority
of the outstanding shares of the RMI Common Stock, on an as-exchanged basis and the owner of the majority of the voting shares of RMI
following the consummation of the Business Combination is determined to be the former stockholders of Reservoir.
Subsequent to the consummation
of the Business Combination, the board of directors of RMI is comprised of nine members, of which ROCC initially appointed one member,
and Reservoir initially appointed eight members.
In connection with the execution
of the Merger Agreement, ROCC entered into the subscription agreements with certain accredited investors, pursuant to which such investors
have agreed to purchase an aggregate of 15,000,000 shares of the RMI Common Stock in a private placement transaction at a price of $10.00
per share for an aggregate commitment of $150.0 million. The closing of the PIPE Investment took place concurrently with the consummation
of the Business Combination.
On June 2, 2021,
Reservoir acquired Tommy Boy, the record label and music publishing company, pursuant to the Tommy Boy Purchase Agreement.
The unaudited pro
forma condensed combined financial information was prepared in accordance with Article 11 of SEC Regulation
S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.”
Release No. 33-10786 replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the
transaction (the “Transaction Accounting Adjustments”) and presents the reasonably estimable synergies and other
transaction effects that have occurred or are reasonably expected to occur (the “Management’s Adjustments”).
The unaudited pro forma condensed combined financial information presents the Transaction Accounting Adjustments, but does not present
the Management’s Adjustments. The Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial information
have been identified and presented to provide relevant information necessary for an understanding of RMI following the consummation of
the Business Combination, the PIPE Investment and the Tommy Boy Acquisition.
The unaudited pro forma condensed
combined balance sheet as of March 31, 2021 gives pro forma effect to the Business Combination, the PIPE Investment and the Tommy Boy
Acquisition as if they had been consummated on March 31, 2021. The unaudited pro forma condensed combined statement of operations for
the year ended March 31, 2021 gives pro forma effect to the Business Combination, the PIPE Investment and the Tommy Boy Acquisition as
if they had been consummated on April 1, 2020, the beginning of the earliest period presented.
The unaudited pro forma condensed
combined financial information below reflects the 10,295,452 Public Shares that were redeemed in connection with the consummation of the
Business Combination, resulting in an aggregate payment of $102.97 million out of the trust account, at a redemption price of approximately
$10.00 per Public Share.
The unaudited pro forma condensed
combined statement of operations for the year ended March 31, 2021 has been prepared using, and should be read in conjunction with, the
following:
|
·
|
the historical audited consolidated financial
statements of Reservoir as of and for the year ended March 31, 2021 and the related notes;
|
|
·
|
the historical audited statement of operations
of ROCC for the year ended December 31, 2020 and the related notes; and
|
|
·
|
the historical audited financial statements of
Tommy Boy as of and for the year ended December 31, 2020 and the related notes.
|
The fiscal year ends of each of
ROCC and Tommy Boy are December 31, while Reservoir’s fiscal year end is March 31. Therefore, the unaudited pro forma condensed
combined statement of operations for the year ended March 31, 2021 combines the historical statement of operations of Reservoir for the
year ended March 31, 2021 and the historical statements of operations of each of ROCC and Tommy Boy for the year ended December 31, 2020.
Tommy Boy’s revenue of $2.5 million and net income of $1.0 million for the three months ended March 31, 2021 have been excluded
from the unaudited pro forma condensed combined statement of operations for the year ended March 31, 2021. ROCC’s net loss of $247,531
for the three months ended March 31, 2021 has been excluded from the unaudited pro forma condensed combined statement of operations for
the year ended March 31, 2021. ROCC had no revenue for the three months ended March 31, 2021.
Management has made significant
estimates and assumptions in its determination of the pro forma adjustments. As the unaudited pro forma condensed combined financial information
has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented.
The pro forma adjustments reflecting
the consummation of the Business Combination, the PIPE Investment and the Tommy Boy Acquisition are based on certain currently available
information and certain assumptions and methodologies that management believes are reasonable under the circumstances. The unaudited condensed
pro forma adjustments may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual
adjustments will differ from the pro forma adjustments and it is possible the difference may be material. Management believes that its
assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination, the
PIPE Investment and the Tommy Boy Acquisition based on information available to management at the time and that the pro forma adjustments
give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations
and financial position would have been had the Business Combination, the PIPE Investment and the Tommy Boy Acquisition taken place on
the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of RMI.
|
3.
|
Accounting for the Business Combination and the Tommy Boy Acquisition
|
The Business Combination represents
a reverse merger and is accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, ROCC is
treated as the “acquired” company for financial reporting purposes. This determination is primarily based on the fact, that
subsequent to the consummation of the Business Combination, the former stockholders of Reservoir have a majority of the voting power of
RMI, Reservoir comprises all of the ongoing operations RMI, Reservoir controls a majority of the governing body of RMI and Reservoir’s
senior management comprises all of the senior management of RMI.
Accordingly, for accounting purposes,
the Business Combination is treated as the equivalent of Reservoir issuing shares for the net assets of ROCC, accompanied by a recapitalization.
The net assets of Reservoir are stated at historical cost. No goodwill or other intangible assets are recorded. Operations following the
consummation of the Business Combination are those of Reservoir.
The Tommy Boy Acquisition is 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. The excess of consideration transferred over the net
assets acquired has been allocated to intangible assets. The actual allocation of consideration transferred at the date of acquisition
will differ from the allocation assumed in these unaudited pro forma condensed combined financial statements.
|
4.
|
Shares of the RMI Common Stock Issued to the
Former Stockholders of Reservoir upon Consummation of the Business Combination and the PIPE Investment
|
Based on 145,560 shares of the
Reservoir Common Stock and 82,500 shares of the Reservoir Preferred Stock outstanding immediately prior to the consummation of the Business
Combination and the PIPE Investment, assuming the closing occurred on March 31, 2021, and based on the exchange ratio determined in accordance
with the terms of the Merger Agreement of 196.06562028646, RMI issued 44,714,705 shares of the RMI Common Stock in connection with the
consummation of the Business Combination, determined as follows:
Reservoir Common Stock outstanding prior to the consummation of the Business Combination and the PIPE Investment
|
|
|
145,560
|
|
|
|
|
|
|
Exchange Ratio
|
|
|
196.06562028646
|
|
|
|
|
28,539,294
|
|
Reservoir Preferred Stock outstanding prior to the consummation of the Business Combination and the PIPE Investment
|
|
|
82,500
|
|
|
|
|
|
|
Exchange Ratio
|
|
|
196.06562028646
|
|
|
|
|
16,175,411
|
|
Shares of RMI Common Stock issued to former stockholders of Reservoir upon consummation of the Business Combination and the PIPE Investment
|
|
|
44,714,705
|
|
|
5.
|
Adjustments to Unaudited Pro Forma Condensed
Combined Balance Sheet as of March 31, 2021
|
RMI, Reservoir and Tommy Boy have
not had any historical relationship prior to the consummation of the Business Combination. Accordingly, no pro forma adjustments were
required to eliminate activities between the companies.
The pro forma notes and
adjustments, based on preliminary estimates and assumptions that could change materially as additional information is obtained, are
as follows:
Pro Forma Notes
|
(A)
|
Derived from the audited consolidated balance sheet of Reservoir as of March
31, 2021.
|
|
(B)
|
Derived from the unaudited condensed balance sheet of ROCC as of March 31,
2021.
|
|
(C)
|
Derived from the unaudited condensed balance sheet of Tommy Boy as of March
31, 2021.
|
Pro Forma Adjustments
|
a)
|
To reflect the Reservoir Preferred Stock Conversion
immediately prior to the consummation of the Business Combination.
|
|
b)
|
To reflect the exchange of existing Reservoir
Common Stock for the RMI Common Stock in accordance with the Merger Agreement.
|
|
c)
|
To reflect the release of cash held in the trust
account to Cash and Cash Equivalents, after giving effect to the redemption of 10,295,452 shares of the outstanding ROCC common stock
prior to the consummation of the Business Combination.
|
|
d)
|
To reflect the issuance of an aggregate of 15.0
million shares of the RMI Common Stock at $10.00 per share, less approximately $5.8 million of issuance expenses, in the PIPE Investment.
The issuance expenses of approximately $5.8 million were accrued and reflected in Additional Paid-In Capital.
|
|
e)
|
To reflect the refinancing of $18.5 million outstanding
under the existing term loan of Reservoir Media Management, Inc. by increasing borrowing capacity under a new senior secured credit facility
(the “Senior Credit Facility”), which closed concurrently with the consummation of the Business Combination.
The Senior Credit Facility was increased by $18.5 million to a limit of approximately $248.8 million. Because the Senior Credit Facility
does not have required principal payments, the current portion of loans and secured notes payable is reclassified to the Senior Credit
Facility. The change in interest rate is expected to result in an immaterial change to interest expense and is not adjusted in the pro
forma statements.
|
|
f)
|
To reflect the payment of RMI’s and Reservoir’s
total advisory, legal and other professional fees of approximately $13.9 million that are deemed to be direct and incremental costs of
the Business Combination. The payment of approximately $13.9 million was accrued and reflected in Additional Paid-In Capital.
|
|
g)
|
To reclassify the Accumulated Deficit of RMI
to Additional Paid-In Capital.
|
|
h)
|
To reflect the cash paid at closing to the sellers
of Tommy Boy.
|
|
i)
|
To reflect adjustments to the balance sheet to
eliminate assets excluded from the Tommy Boy Acquisition.
|
|
j)
|
To reflect the intangible assets acquired by
Reservoir under the Tommy Boy Purchase Agreement.
|
|
k)
|
To reflect repayment of Tommy Boy’s revolving
loan upon consummation of the transactions contemplated by the Tommy Boy Purchase Agreement.
|
|
l)
|
To eliminate the members’ equity of Tommy
Boy.
|
|
6.
|
Adjustments to Unaudited Pro Forma Condensed
Combined Statement of Operations for the Year Ended March 31, 2021
|
RMI, Reservoir and Tommy Boy did
not have any historical relationship prior to the consummation of the Business Combination and the Tommy Boy Acquisition. Accordingly,
no pro forma adjustments were required to eliminate activities between the companies.
The pro forma basic and diluted
earnings per share amounts presented in the unaudited pro forma condensed combined statements of operations are based upon the number
of shares of the RMI Common Stock outstanding at the consummation of the Business Combination and the PIPE Investment, assuming the Business
Combination and the PIPE Investment occurred on April 1, 2020, the beginning of the earliest period presented.
The pro forma notes and
adjustments, based on preliminary estimates and assumptions that could change materially as additional information is obtained, are
as follows:
Pro Forma Notes
|
(A)
|
Derived from the audited consolidated statement
of operations of Reservoir for the year ended March 31, 2021.
|
|
(B)
|
Derived from the audited statement of operations
of ROCC for the year ended December 31, 2020.
|
|
(C)
|
Derived from the audited statement of operations
of Tommy Boy for the year ended December 31, 2020.
|
Pro Forma Adjustments
|
a)
|
To reflect acceleration of stock-based compensation
to Reservoir triggered upon consummation of the Business Combination.
|
|
b)
|
To reflect an adjustment to eliminate the interest
earned and unrealized gain on marketable securities held in the trust account for the benefit of the redeeming stockholders of ROCC.
|
|
c)
|
As the Business Combination is being reflected
as if it had occurred at the beginning of the earliest period presented, the calculation of weighted average shares outstanding for pro
forma basic and diluted net income per share assumes that the shares of the RMI Common Stock issuable in connection with the Business
Combination and the PIPE Investment have been outstanding for the entirety of the periods presented. This calculation is retroactively
adjusted to eliminate the shares of the RMI Common Stock actually redeemed for the entire period. Pro forma weighted common shares outstanding—basic
and diluted for the year ended March 31, 2021—are calculated as follows:
|
|
|
Year Ended March 31, 2021
|
|
Weighted-average common shares outstanding, basic and diluted:
|
|
|
|
|
Reservoir Holdings, Inc. weighted average shares outstanding (1)
|
|
|
228,060
|
|
Reservoir Holdings, Inc. shares of common stock surrendered and cancelled upon consummation of the Business Combination
|
|
|
(228,060
|
)
|
Roth CH Acquisition II Co. shares not subject to redemption (2)
|
|
|
3,586,137
|
|
Roth CH Acquisition II Co. shares subject to redemption reclassified to equity
|
|
|
768,411
|
|
Sale of additional Roth CH Acquisition II Co. shares in connection with the consummation of the Business Combination
|
|
|
15,000,000
|
|
Shares issued to Reservoir Holdings, Inc. in connection with the consummation of the Business Combination
|
|
|
44,714,705
|
|
|
|
|
|
|
Weighted-average common shares outstanding, basic and diluted:
|
|
|
64,069,253
|
|
Percent of shares owned by Reservoir Holdings, Inc.
|
|
|
69.8%
|
|
Percent of shares owned by Roth CH Acquisition II Co.
|
|
|
30.2%
|
|
|
(1)
|
Derived from the historical financial statements for the year
ended March 31, 2021.
|
|
(2)
|
Derived from the historical
balance sheet at March 31, 2021.
|
|
d)
|
To reflect one year of amortization of the intangible
assets acquired by Reservoir under the Tommy Boy Purchase Agreement.
|
|
e)
|
To reflect the income tax effect of Tommy Boy
being a taxable entity.
|
|
f)
|
To reflect an adjustment to eliminate the interest
expense on Tommy Boy’s revolving loan.
|