Business context and reporting period
This is Roth CH Acquisition II Co.’s unaudited Form 10-Q for the quarter ended March 31, 2021—not an operating-company 10-Q filed under Reservoir Media, Inc. Roth CH was a blank-check company seeking a business combination and had not commenced operating activities. On April 14, 2021, after quarter-end, it agreed to combine with Reservoir Holdings, Inc.; Reservoir would become a wholly owned subsidiary of the combined company. The proposed transaction remained subject to customary closing conditions, including stockholder approval and a concurrent $150 million private placement.
Financial results and position
| Metric | Three months ended March 31, 2021 | Comparable 2020 period |
|---|---|---|
| Operating revenue | None | None |
| Operating and formation costs | $204,239 | $85 |
| Interest earned on Trust Account | $6,208 | None |
| Loss from change in warrant fair value | $49,500 | None |
| Net loss | $247,531 | $85 |
| Basic and diluted loss per non-redeemable share | $0.07 | $0.00 |
| Net cash used in operating activities | $147,527 | $310 |
At March 31, 2021, total assets were $115.9 million, including $115.0 million in the Trust Account and $549,040 of cash outside it. Total liabilities were $303,784, including $178,750 of warrant liabilities; the filing reports no long-term debt. Current liabilities were $125,034, compared with $929,595 of current assets. Stockholders’ equity was $5.0 million, with $110.6 million of redeemable shares presented as temporary equity. Operating margins are not meaningful because the SPAC had no operating revenue.
Trust Account funds were invested in a money market fund holding short-term U.S. Treasury securities. Management reported no material interest-rate exposure due to their short maturities. No off-balance-sheet financing arrangements were reported.
Changes, outlook, risks and unusual items
- The quarter’s net loss increased from $85 in the 2020 comparable period, largely reflecting public-company and transaction-related costs and the non-cash warrant remeasurement. The comparison is limited because Roth had not completed its IPO in the 2020 period.
- Following SEC staff guidance on SPAC warrants, management revised prior-period accounting: private placement warrants were reclassified from equity to liabilities and are remeasured at fair value. Management said the prior misstatement was not material to the previously issued statements. The revision increased reported 2020 net loss by $18,353 for the year.
- The April 14 Reservoir merger agreement is a subsequent event, not a completed transaction as of March 31. The filing cautions that closing conditions may not be satisfied. Management anticipated the transaction would be funded using trust proceeds, equity, debt, or a combination; no operating-company guidance is provided.
- Roth had until December 15, 2022 to complete a business combination. If it failed, it would wind up and redeem public shares from the Trust Account, subject to applicable law. Public shareholders could redeem shares in connection with a business combination.
- Management said COVID-19 could adversely affect the company’s financial position or target search, but the impact was not determinable. It did not expect to need additional funds for planned expenditures, while noting that cost overruns or transaction financing needs could require additional financing. Failure to obtain sufficient funds could prevent a deal and lead to liquidation.
- Management assessed disclosure controls as effective at a reasonable assurance level and reported no material change in internal control over financial reporting during the quarter. No legal proceedings were reported.
Key facts investors should verify
- Confirm the filing entity and period: this 10-Q is for Roth CH Acquisition II Co. for Q1 2021, not Reservoir Media, Inc.
- Review the merger agreement, proxy materials, closing conditions, and status of the proposed $150 million private placement; the deal was not yet closed at quarter-end.
- Check the warrant-liability accounting, Level 3 valuation assumptions, and the stated revision to prior-period financial statements.
- Assess redemption levels and available funds: the Trust Account was $115.0 million, while unrestricted cash was $549,040 at March 31, 2021.
- Consider the SPAC’s December 15, 2022 combination deadline, potential dilution or debt from transaction financing, and COVID-19 uncertainty.