Reservoir Media, Inc. — Form 10-Q Summary
Reporting period: Three and six months ended June 30, 2021; filed August 6, 2021. The filing’s financial statements cover Roth CH Acquisition II Co., a blank-check company before its business combination, not Reservoir’s music-publishing operating business. The merger closed on July 28, 2021, after quarter-end.
Financial results and position
- Revenue: None reported; the company stated it did not expect operating revenue before completing a business combination. Margins are not meaningful for this pre-combination entity.
- Net loss: $848,707 for the quarter and $1,096,238 for the six months ended June 30, 2021, versus no quarterly loss and an $85 six-month loss in 2020. The 2021 six-month loss comprised $871,563 of operating and formation costs and a $233,750 noncash loss from the change in warrant fair value, partly offset by $9,075 of trust-account interest.
- Cash flow: $572,174 used in operating activities in the first half of 2021, compared with $310 used in the first half of 2020. Cash at June 30 was $124,393, down from $696,567 at year-end 2020.
- Trust assets and liquidity: $115.0 million of cash and marketable securities were held in the trust account at June 30, primarily in money-market funds investing in U.S. Treasury securities. These funds were restricted for the business combination or related purposes. Prepaid expenses were $309,961.
- Debt and liabilities: No long-term debt or other long-term contractual obligations were reported. Total liabilities were $660,117, including $297,117 of accounts payable and accrued expenses and $363,000 of warrant liabilities. Stockholders’ deficit was $210,075; 11.5 million shares were classified as redeemable temporary equity.
- Other metrics: Warrant remeasurement increased the liability from $129,250 at December 31, 2020. The filing reports no income-tax expense or benefit for the periods presented.
Changes versus the prior comparable period
The first-half net loss increased from $85 in 2020 to $1.10 million in 2021, reflecting public-company, formation, and transaction-related expenses and warrant fair-value changes. The prior-year period preceded the December 2020 IPO, so the comparisons are not representative of Reservoir’s operating performance. Cash outside the trust declined by $572,174 during the first half of 2021.
Business combination, outlook, and risks
- On July 28, 2021, the company completed its merger with Reservoir Holdings and changed its name from Roth CH Acquisition II Co. to Reservoir Media, Inc. The company issued 44,714,705 shares to Reservoir holders, who owned approximately 69.8% after the transaction.
- At closing, public shareholders redeemed 10,295,452 shares for approximately $103.0 million. A concurrent PIPE investment raised $150.0 million through the sale of 15.0 million shares at $10.00 each. Reservoir Media shares and warrants began trading under RSVR and RSVRW on July 29, 2021.
- The filing provides no post-merger operating results or quantified guidance. Management said it did not expect to need additional funds for pre-combination expenditures, but warned that cost overruns, additional transaction financing needs, or substantial redemptions could require financing; failure to complete a combination for lack of funds could force liquidation.
- Management said COVID-19 could negatively affect the company’s financial position or target search, but the impact was not readily determinable. Warrant liabilities were valued using a model with significant unobservable inputs, including expected volatility. The filing also notes that warrants could expire worthless if a business combination were not completed.
- Management concluded disclosure controls were effective at a reasonable assurance level and reported no material change in internal control over financial reporting. No legal proceedings or defaults on senior securities were reported.
Important facts for investors to verify
- Review the post-merger financial statements and subsequent filings for Reservoir’s actual revenue, profitability, cash flow, debt, and liquidity; this 10-Q does not provide those operating results.
- Confirm the final cash proceeds from the PIPE, redemptions, transaction expenses, and trust-account release in post-closing disclosures.
- Assess warrant terms, dilution potential, and fair-value measurement assumptions, including the effect of the post-merger share price and volatility.
- Review subsequent disclosures for integration, financing, COVID-19, and other risks, as the filing’s pre-combination liquidity and risk discussion is not a forecast of the combined company.