RSVR Reservoir Media, Inc. - 10-K

Item 1A.    Risk Factors

You should carefully review and consider the following risk factors and the other information contained in this Annual Report, including the consolidated financial statements and the accompanying notes and matters addressed in the section titled “Cautionary Note Regarding Forward-Looking Statements,” in evaluating an investment in our Common Stock or Warrants. In addition, past financial performance may not be a reliable indicator of future performance and historical trends may not predict results or trends in future periods. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may adversely affect our business, financial condition and results of operations, in which case the trading price of our Common Stock and Warrants could decline and you could lose all or part of your investment.

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Risks Related to Our Business and Operations

We may be unable to compete successfully in the highly competitive markets in which we operate and may suffer reduced profits as a result.

We are dependent on signing and retaining songwriters who will write the hit songs of today and the classics of tomorrow. We are also dependent on identifying, signing and retaining recording artists with long – term potential, whose debut music is well received on release, whose subsequent music is anticipated by consumers and whose music will continue to generate sales as part of our catalog for years to come. The competition among music publishing and record companies for such talent is intense. Competition among music publishing and record companies to sell and otherwise market and promote music is also intense. Our competitive position is dependent on our continuing ability to attract and develop songwriters and recording artists whose work can achieve a high degree of public acceptance and who can timely deliver their music to us. Our prospects and financial results may be adversely affected if we are unable to identify, sign and retain such songwriters and recording artists under terms that are economically attractive to us because our prospects and financial results are generally affected by the appeal of our music publishing and recorded music catalogs to consumers.

The industries in which we operate have experienced ongoing consolidation among major music entertainment companies and are driven by rapidly changing consumer preferences. We compete with other music publishing companies and recorded music companies to identify and sign new songwriters and recording artists with the potential to achieve long-term success and to enter into and renew agreements with established songwriters and recording artists. In addition, our competitors may, from time to time, increase the amounts they spend to discover, or to market and promote, songwriters and recording artists or reduce the prices of their music in an effort to expand market share. We may lose business if we are unable to sign successful songwriters or recording artists or to match the prices of the music offered by our competitors. Our music publishing business (the “ Music Publishing business ”) competes not only with other music publishing companies, but also with songwriters who publish their own works and companies in other industries that may choose to sign direct deals with songwriters or music publishing companies. Our recorded music business (the “ Recorded Music business ”) competes not only with other recorded music companies, but also with recording artists who may choose to distribute their own works (which has become more practicable as music is distributed online rather than physically) and companies in other industries that may choose to sign direct deals with recording artists or recorded music companies. Our Music Publishing business and Recorded Music business is to a significant extent dependent on technological developments, including access to and selection and viability of innovative technologies, and is subject to potential pressure from competitors as a result of their technological developments. For example, our Recorded Music business may be further adversely affected by technological developments that facilitate the piracy of music, such as Internet peer-to-peer file sharing, by an inability to enforce our intellectual property rights in digital environments and by a failure to further develop successful business models applicable to a digital environment. The Recorded Music business also faces competition from other forms of entertainment and leisure activities, such as cable and satellite television, motion pictures and video games in physical and digital formats.

We may not be able to successfully execute our business strategy which may adversely affect our business, cash flows, financial condition and results of operation.

Our business strategy requires us, among others, to continue to work to maximize the value of our music, to significantly reduce costs to maximize flexibility and adjust to new realities of the market, to continue to work to contain digital piracy and to diversify our revenue streams into growing segments of the music entertainment business by continuing to capitalize on digital distribution and emerging technologies.

Each of these initiatives requires sustained management focus, organization and coordination over significant periods of time. Each of these initiatives also requires success in building relationships with third parties and in anticipating and keeping up with technological developments and consumer preferences and may involve the implementation of new business models or distribution platforms. The results of our strategy and the success of our implementation of this strategy will not be known for some time in the future. If we are unable to implement our strategy successfully or properly react to changes in market conditions, our business, cash flows, financial condition and results of operations could be adversely affected.

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Our business operations in some foreign countries subject us to trends, developments or other events which may adversely affect our results of operations.

We are a global company with strong local presences, which have become increasingly important as the popularity of music originating from a country’s own language and culture has increased in recent years. Our mix of national and international songwriters and recording artists is designed to provide a significant degree of diversification. However, our music does not necessarily enjoy universal appeal and, if it does not continue to appeal in various countries, our results of operations could be adversely impacted. As a result, our results of operations can be affected not only by general industry trends, but also by trends, developments or other events in individual countries, including:

limited legal protection and enforcement of intellectual property rights;

restrictions on the repatriation of capital;

fluctuations in interest rates and foreign exchange rates;

differences and unexpected changes in regulatory environment, including environmental, health and safety, local planning, zoning and labor laws, rules and regulations;

varying tax regimes which could adversely affect our results of operations or cash flows, including regulations relating to transfer pricing and withholding taxes on remittances and other payments by subsidiaries and joint ventures;

exposure to different legal standards and enforcement mechanisms and the associated cost of compliance;

difficulties in attracting and retaining qualified management and employees or rationalizing our workforce;

the impact of tariffs imposed or threatened by the U.S. or foreign governments, duties, export controls and other trade barriers;

global economic and retail environment;

longer accounts receivable settlement cycles and difficulties in collecting accounts receivable;

recessionary trends, inflation and instability of the financial markets; and

armed conflicts or political instability, including ongoing conflicts in the Middle East and Ukraine.

We may not be able to insure or hedge against these risks, and we may not be able to ensure compliance with all of the applicable regulations without incurring additional costs, or at all. For example, our results of operations could be impacted by fluctuations of the U.S. dollar against most currencies. See “— Unfavorable currency exchange rate fluctuations could adversely affect our results of operations .”

In addition, our results can be affected by trends, developments and other events in individual countries. There can be no assurance that in the future country-specific trends, developments or other events will not have a significant adverse effect on our business, cash flows, financial condition and results of operations. Unfavorable conditions can depress revenues in any given market and prompt promotional or other actions that adversely affect our margins.

Unfavorable currency exchange rate fluctuations could adversely affect our results of operations.

As we continue to expand our international operations, we become increasingly exposed to the effects of fluctuations in currency exchange rates. The reporting currency for our consolidated financial statements is the U.S. dollar. We have substantial assets, liabilities, revenues and costs denominated in currencies other than U.S. dollars, principally the British pound sterling and euro. To prepare our consolidated financial statements, we must translate those assets, liabilities, revenues and expenses into U.S. dollars at then-applicable exchange rates. Consequently, increases and decreases in the value of the U.S. dollar versus other currencies will affect the amount of these items in our consolidated financial statements, even if their value has not changed in their original currency. These translations could result in significant changes to our results of operations from period to period. From time to time, we may enter into foreign exchange contracts to hedge the risk of unfavorable foreign currency exchange rate movements.

Any future outbreak of contagious disease or other widespread natural disaster or prolonged geopolitical conflict could materially and adversely affect our business, cash flows, financial condition and results of operations.

A future pandemic could have an adverse effect on our business, cash flows, financial condition and results of operations. An outbreak of contagious disease, pandemic or other widespread natural disaster or prolonged geopolitical conflict could suspend live concert tours, adversely impacting our concert promotion business and its sale of tour merchandise and make it more difficult for artists to engage in marketing efforts around the release of their new recordings. It could delay the release of new recordings by impeding the types of collaboration among artists, songwriters, producers, musicians, engineers and studios which are necessary for the delivery of those recordings. The cessation or significant delay in the production of motion pictures and television programs could negatively affect synchronization revenue in our Music Publishing business and licensing revenue in our Recorded Music business.

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For example, it has been widely reported that advertisers reduced their advertising spend as a result of the COVID-19 pandemic. This resulted in a corresponding decline in licensing revenue and, to a lesser extent, ad-supported digital revenue in our Music Publishing business and synchronization, performance and ad-supported digital revenue in our Recorded Music business. While physical revenue streams — mechanical revenue in our Music Publishing business and physical revenue in our Recorded Music business — have declined significantly over the last decade, the virus outbreak has resulted in declines in our physical revenue streams related to disruptions in manufacturing and physical supply chains, the mandated closure of physical retailers, the requirement that people stay in their homes and our decisions to delay the release of new recordings from artists with a more physical consumer base. Any future pandemic or outbreak of contagious disease like the COVID-19 pandemic or other widespread natural disaster could impact our business in a similar way and could have a material adverse effect on our results of operations and financial condition.

Our ability to operate effectively could be impaired if we fail to attract and retain our executive officers and management team which may have a material adverse effect on our business, cash flows, financial condition and results of operations.

We compete with other music entertainment companies and other companies for top talent and our business requires substantial human capital resources. Our ability to successfully implement our business strategy and to operate profitably depends, in part, on our ability to retain key personnel. If key personnel become unable or unwilling to continue in their present positions, our business, cash flows, financial condition and results of operations could be materially adversely affected. We often cannot anticipate such departures and may not be able to promptly replace key leadership personnel. Our key personnel are generally employed on an “at-will” basis. Our success also depends, in part, on our continuing ability to identify, hire, attract, train and develop other highly qualified personnel.

Competition for these employees can be intense, and our ability to hire, attract and retain them depends on our ability to provide competitive compensation. We may not be able to attract, develop or retain qualified personnel in the future, and our failure to do so could adversely affect our business, including the execution of our business strategy. Any failure by our management team to perform as expected may have a material adverse effect on our business, cash flows, financial condition and results of operations.

Failure to achieve and maintain effective internal control over financial reporting (“ICFR”) in accordance with Section 404 of the Sarbanes-Oxley Act could impair our ability to produce timely and accurate financial statements or to comply with applicable regulations and have a material adverse effect on our business, cash flows, financial condition and results of operations.

Our management previously determined that material weaknesses existed in our ICFR while preparing our consolidated financial statements as of March 31, 2025, 2024 and 2023. Our management has also evaluated the effectiveness of our disclosure controls and procedures and determined in prior fiscal years that our disclosure controls and procedures were not effective.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. The material weaknesses identified in prior fiscal years relate to an ineffective control environment due to improper segregation of duties and a lack of qualified personnel to address certain complex accounting transactions and an ineffective risk assessment process resulting in improper design of control activities to address certain risks of material misstatement.

Matters impacting our ICFR may in the future cause us to be unable to report our consolidated financial information on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions by the SEC or violations of applicable Nasdaq listing rules, which may result in a breach of the covenants under our $550 million senior secured revolving credit facility (the “ Senior Credit Facility ”) or future financing arrangements. There also could be a negative reaction in the financial markets due to a loss of investor confidence and the reliability of our consolidated financial statements. Confidence in the reliability of our consolidated financial statements could also suffer if we report a material weakness in our ICFR in the future . This could materially adversely affect our business, cash flows, financial condition and results of operations and lead to a decline in the market price of our Common Stock and Warrants.

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A significant portion of our revenues are subject to rate regulation either by government entities or by local third-party collecting societies throughout the world and rates on other income streams may be set by governmental proceedings, which may limit our profitability.

Mechanical royalties and performance royalties are two of the main sources of income to our Music Publishing business and mechanical royalties are a significant expense to our Recorded Music business. In the U.S., mechanical royalty rates are set every five years pursuant to an administrative process under the U.S. Copyright Act, unless rates are determined through industry negotiations, and performance royalty rates are determined by negotiations with performing rights societies, the largest of which, the ASCAP and the BMI, are subject to a consent decree rate-setting process if negotiations are unsuccessful. Outside the U.S., mechanical and performance royalty rates are typically negotiated on an industry-wide basis. In most territories outside the U.S., mechanical royalties are based on a percentage of wholesale prices for physical product and based on a percentage of consumer prices for digital formats. The mechanical and performance royalty rates set pursuant to such processes may adversely affect us by limiting our ability to increase the profitability of our Music Publishing business. If the mechanical and performance royalty rates are set too high, it may also adversely affect us by limiting our ability to increase the profitability of our Recorded Music business. In addition, the rates that our Recorded Music business receives in the U.S. for webcasting and satellite radio are set every five years by an administrative process under the U.S. Copyright Act unless rates are determined through industry negotiations. It is important as revenues continue to shift from physical to diversified distribution channels that we receive fair value for all the uses of our intellectual property as our business model now depends upon multiple revenue streams from multiple sources. The rates set for our Music Publishing and Recorded Music income sources through collecting societies or legally prescribed rate-setting processes could have a material adverse impact on our business prospects.

We may not have full control and ability to direct the operations we conduct through joint ventures which could subject us to increased risk and limit our ability to realize the intended benefits of such joint ventures.

We currently have interests in a number of joint ventures and may in the future enter into further joint ventures as a means of conducting our business. In addition, we structure certain of our relationships with songwriters and recording artists as joint ventures. We may not be able to fully control the operations and the assets of our joint ventures, and we may not be able to make major decisions or may not be able to take timely actions with respect to our joint ventures unless our joint venture partners agree, which could subject us to increased risk and limit our ability to realize the intended benefits of such joint ventures.

As part of our growth strategy, we intend to acquire, combine with or invest in other businesses and will face risks inherent in such transactions which could adversely affect our business, cash flows, financial condition and results of operations.

We have in the past engaged, and will continue, from time to time in the future, to engage, in opportunistic strategic acquisitions or other transactions, which could involve, in addition to acquisitions, combinations or dispositions of businesses or assets, or strategic alliances or joint ventures with companies engaged in music entertainment, entertainment or other businesses. Any such combination could be material, be difficult to implement, disrupt our business or change our business profile, focus or strategy significantly. In addition, to the extent we seek to grow our business through acquisitions, we may not be able to successfully identify attractive acquisition opportunities or consummate any such acquisitions if we cannot reach an agreement on commercially favorable terms, if we lack sufficient resources to finance the transaction on our own and cannot obtain financing at a reasonable cost or if regulatory authorities prevent such transaction from being consummated. Furthermore, competition for acquisitions in the markets in which we operate has increased during recent years, and may continue to increase in the future, which may result in an increase in the costs of acquisitions or may cause us to refrain from making certain acquisitions. We may not be able to complete future acquisitions on favorable terms, if at all.

If we do complete future acquisitions, there can be no assurance that they will ultimately strengthen our competitive position or that they will be viewed positively by customers, financial markets or investors. Furthermore, future acquisitions could pose numerous additional risks to our business, cash flows, financial condition and results of operations, including:

potential disruption of our ongoing business and distraction of management;

potential loss of songwriters or recording artists from our rosters;

difficulty integrating the acquired businesses or segregating assets to be disposed of;

exposure to unknown and/or contingent or other liabilities, including litigation arising in connection with the acquisition, disposition and/or against any businesses we may acquire;

reputational or other damages to our business as a result of a failure to consummate such a transaction for, among other reasons, failure to gain antitrust approval;

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changing our business profile in ways that could have unintended consequences and challenges in achieving strategic objectives, cost savings and other anticipated benefits;

difficulty in maintaining controls, procedures and policies during the transition and integration;

challenges in integrating the new workforce and the potential loss of key employees, particularly those of the acquired business; and

use of substantial portions of our available cash or the incurrence of debt to consummate the acquisition.

If we enter into significant transactions in the future, related accounting charges may affect our financial condition and results of operations, particularly in the case of any acquisitions. In addition, the financing of any significant acquisition may result in changes to our capital structure, including the incurrence of additional indebtedness, which may be substantial. Conversely, any material disposition could reduce our indebtedness or require the amendment or refinancing of our outstanding indebtedness or a portion thereof. We may not be successful in addressing these risks or any other problems encountered in connection with any strategic or transformative transactions. There can be no assurance that if we make any future acquisitions, investments, strategic alliances or joint ventures or enter into any business combination, that they will be completed in a timely manner, or at all, that they will be structured or financed in a way that will enhance our creditworthiness or that they will meet our strategic objectives or otherwise be successful.

We may also be unsuccessful in implementing appropriate operational, financial and management systems and controls to achieve the benefits expected to result from these transactions. Failure to effectively manage any of these transactions could result in material increases in costs or reductions in expected revenues, or both. In addition, if any new business in which we invest or which we attempt to develop does not progress as planned, we may not recover the funds and resources we have expended and this could have a negative impact on our businesses or us and our subsidiaries as a whole.

Governments could enact new legislation or could make regulatory determinations that affect the terms of our contracts with songwriters and recording artists which could have a material adverse effect on our business, cash flows, financial condition and results of operations.

Some songwriter and recording artist groups, particularly in Europe, are urging governments to intervene in the music streaming business in ways that could affect the terms agreed in our contracts with them. Governments, including states in the United States, have enacted or considered enacting legislation limiting the duration that an individual can be bound under a “personal services” contract, which could impair our ability to retain the services of key artists and songwriters. Government intervention in the music streaming business could have an adverse effect on our business, cash flows, financial condition and results of operations.

We are aware of a number of judicial decisions and legislative proposals that could bring about major reforms in worker classification. Although we believe that the songwriters and recording artists with which we partner are properly characterized as independent contractors, tax or other regulatory authorities may in the future challenge our characterization of these relationships. If such regulatory authorities or state, federal or foreign courts were to determine that our songwriters and recording artists are employees, and not independent contractors, we would be required to withhold income taxes, to withhold and pay Social Security, Medicare and similar taxes and to pay unemployment and other related payroll taxes. We would also be liable for unpaid past taxes and subject to penalties. As a result, any determination that our songwriters and recording artists are our employees could have a material adverse effect on our business, cash flows, financial condition and results of operations .

If streaming adoption or revenues grow less rapidly or level off, our prospects, business, cash flows, financial condition and results of operations may be adversely affected.

Streaming revenues are important because they have offset declines in downloads and physical sales and represent a growing area of our Music Publishing business and Recorded Music business. There can be no assurance that this growth pattern will persist or that digital revenues will continue to grow at a rate sufficient to offset and exceed declines in downloads and physical sales. If growth in streaming revenues levels off or fails to grow as quickly as it has over the past several years, our Music Publishing business and Recorded Music business may experience reduced levels of revenues and operating income.

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We are substantially dependent on a limited number of digital music services for the online distribution and marketing of our music, and they are able to significantly influence the pricing structure for online music stores and may not correctly calculate royalties under license agreements which may adversely affect our cash flows, financial condition and results of operation.

We derive an increasing portion of our revenues from the licensing of music through digital distribution channels. We are currently dependent on a small number of leading digital music services. We have limited ability to increase our wholesale prices to digital music services as a small number of digital music services control much of the legitimate digital music business. If these services were to adopt a lower pricing model or if there were structural changes to other pricing models, we could receive substantially less for our music, which could cause a material reduction in our revenues, unless offset by a corresponding increase in the number of transactions. We currently enter into short-term license agreements with many digital music services and provide our music on an at-will basis to others. There can be no assurance that we will be able to renew or enter into new license agreements with any digital music service. The terms of these license agreements, including the royalty rates that we receive pursuant to them, may change as a result of changes in our bargaining power, changes in the industry, changes in the law, or for other reasons. Decreases in royalty rates, rates of revenue sharing or changes to other terms of these license agreements may materially impact our business, operating results and financial condition. Digital music services generally accept and make available all of the music that we deliver to them. However, if digital music services in the future decide to limit the types or amount of music they will accept from music entertainment companies like us, our revenues could be significantly reduced. See “ Description of Our Business—Recorded Music—Sales and Digital Distribution. ”

We are also substantially dependent on a limited number of digital music services for the marketing of our music. A significant proportion of the music streamed on digital music services is from playlists curated by those services or generated from those services’ algorithms. If these services were to fail to include our music on playlists, change the position of our music on playlists or give us less marketing space, it could adversely affect our business, cash flows, financial condition and results of operations.

Under our license agreements and relevant statutes, we receive royalties from digital music services in exchange for the rights to stream or otherwise offer our music. The determination of the amount and timing of such payments is complex and subject to a number of variables, including the revenue generated, the type of music offered and the country in which it is sold, identification of the appropriate licensor, and the service tier on which music is made available. As a result, we may not be paid appropriately for our music. Failure to be accurately paid our royalties may adversely affect our business, cash flows, financial condition and results of operations.

Because our success depends substantially on our ability to maintain a professional reputation, adverse publicity concerning us or our songwriters, artists or key personnel could adversely affect our business.

Our professional reputation is essential to our continued success and any decrease in the quality of our reputation could impair our ability to, among others, recruit and retain qualified and experienced key personnel, retain or attract songwriters and artists and/or enter into licensing or other contractual arrangements. Our overall reputation may be negatively impacted by a number of factors, including negative publicity concerning us or our artists, songwriters or key personnel. Any adverse publicity relating to us or such individuals or entities that we employ or represent, including from reported or actual incidents or allegations of illegal or improper conduct, such as harassment, discrimination or other misconduct, could result in significant media attention, even if not directly relating to or involving us, and could have a negative impact on our professional reputation. This could result in termination of licensing or other contractual relationships or impact our ability to attract and retain songwriters, artists or key personnel, all of which could adversely affect our business, cash flows, financial condition and results of operations.

The obligations associated with being a public company involve significant expenses and require significant resources and management attention, which may divert from our business operations and adversely affect our financial condition.

As a public company, we are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business, financial condition and results of operations. The Sarbanes-Oxley Act requires, among other things, that we assess, document and test our internal control procedures, and our management is required to assess and issue a report concerning our ICFR. As a result, we incur significant legal, accounting and other expenses. Our management team and many of our other employees need to devote substantial time to compliance and other requirements of being a public company.

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In addition, the need to maintain the corporate infrastructure demanded of a public company may also divert management’s attention from implementing our business strategy, which could prevent us from improving our business, financial condition, cash flows and results of operations. We have made, and will continue to make, changes to our internal control over financial reporting, including information technology controls, and procedures for financial reporting and accounting systems to meet our reporting obligations as a public company. However, the measures that we take may not be sufficient to satisfy our obligations as a public company. If we do not continue to develop and implement the right processes and tools to manage our changing enterprise and maintain our culture, our ability to compete successfully and achieve our business objectives could be impaired, which could negatively impact our business, financial condition, cash flows and results of operations. In addition, we cannot predict or estimate the amount of additional costs we may incur to comply with these requirements. We anticipate that these costs will continue to increase our administration expenses, particularly our legal, accounting and financial compliance costs as a result of our loss of “emerging growth company” status and our compliance with the additional requirements that we were previously exempt from as an “emerging growth company” including the requirement to include our independent registered public accounting firm’s attestation report on ICFR.

Our substantial indebtedness could adversely affect our business, cash flows, financial condition and results of operations.

We are borrowers under the Senior Credit Facility, which has a revolving credit commitment to $550 million and is scheduled to mature in December 2027.

Our substantial indebtedness could:

require us to dedicate a substantial portion of cash flow from operations to payments in respect of our indebtedness, thereby reducing the availability of cash flow to fund working capital, potential acquisition opportunities and other general corporate purposes;

increase the amount of interest that we have to pay, because most of our borrowings are at variable rates of interest, which will result in higher interest payments if interest rates increase and, if and when we are required to refinance any of our indebtedness, an increase in interest rates would also result in higher interest costs;

increase our vulnerability to adverse general economic or industry conditions;

require refinancing, which we may not be able to do on reasonable terms;

limit our flexibility in planning for, or reacting to, competition and/or changes in our business or the industry in which we operate;

limit our ability to borrow additional funds;

restrict us from making strategic acquisitions or necessary divestitures or otherwise exploiting business opportunities; and

place us at a competitive disadvantage compared to our competitors that have less debt and/or more financial resources.

In addition, despite our anticipated levels of indebtedness, we may be able to incur substantially more indebtedness under the Senior Credit Facility, which may increase the risks created by our indebtedness and could have a material adverse effect on our business, cash flows, financial condition and results of operations.

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy obligations under our indebtedness, which may not be successful and may adversely affect our cash flows and financial condition.

Our ability to make scheduled payments on or to refinance our debt obligations will depend on our future operating performance and on economic, financial, competitive, legislative and other factors and any legal and regulatory restrictions on the payment of distributions and dividends to which we and our subsidiaries may be subject. Many of these factors may be beyond our control. There can be no assurance that our business will generate sufficient cash flow from operations, that currently anticipated operating improvements will be realized or that future borrowings will be available to us in an amount sufficient to enable us to satisfy our obligations under our indebtedness or to fund our other needs. If our cash flows and capital resources are insufficient to service our indebtedness, we may be forced to reduce or delay acquisitions, sell assets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. Our ability to restructure or refinance our indebtedness will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. In addition, the terms of the Senior Credit Facility or any future debt agreements may restrict us from adopting some of these alternatives. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. We may not be able to consummate those dispositions for fair market value or at all. Furthermore, any proceeds that we could realize from any such dispositions may not be adequate to meet our debt service obligations then due. Our inability to generate sufficient cash flow to satisfy our debt service or other obligations, or to refinance our indebtedness on commercially reasonable terms or at all, could have a material adverse effect on our business, cash flows, financial condition and results of operations.

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Our Charter contains exclusive forum provisions which may have the effect of discouraging lawsuits against us, our directors and officers.

The Charter requires that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery (the “ Chancery Court ”) of the State of Delaware (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action, suit or proceeding brought on behalf of us, (ii) any action, suit or proceeding asserting a claim of breach of fiduciary duty owed by any of our directors, officers or stockholders to us or our stockholders, (iii) any action, suit or proceeding asserting a claim arising pursuant to the Delaware General Corporation Law, the Charter or the Bylaws, or (iv) any action, suit or proceeding asserting a claim governed by the internal affairs doctrine. In addition, subject to the provisions of the preceding sentence, the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. If any action the subject matter of which is within the scope of the first sentence of this paragraph is filed in a court other than the courts in the State of Delaware (a “ foreign action ”) in the name of any stockholder, such stockholder will be deemed to have consented to (x) the personal jurisdiction of the state and federal courts in the State of Delaware in connection with any action brought in any such court to enforce the provisions of the first sentence of this paragraph, and (y) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the foreign action as agent for such stockholder. Any person or entity purchasing or otherwise acquiring any interest in any shares of our capital stock will be deemed to have notice of and to have consented to the forum provisions in the Charter. This forum selection clause may discourage claims or limit stockholders’ ability to submit claims in a judicial forum that they find favorable and may result in additional costs for a stockholder seeking to bring a claim. While we believe the risk of a court declining to enforce this forum selection clause is low, if a court were to determine this forum selection clause to be inapplicable or unenforceable in an action, we may incur additional costs in conjunction with our efforts to resolve the dispute in an alternative jurisdiction, which could have a negative impact on our business, cash flows, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.

Anti-takeover provisions contained in the Charter and the Bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

The Charter and the Bylaws contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our Common Stock and Warrants.

Risks Related to Intellectual Property and Data Security

Failure to obtain, maintain, protect and enforce our intellectual property rights could substantially harm our business, cash flows, financial condition and results of operations.

The success of our business depends on our ability to obtain, maintain, protect and enforce our trademarks, copyrights and other intellectual property rights. The measures that we take to obtain, maintain, protect and enforce our intellectual property rights, including, if necessary, litigation or proceedings before governmental authorities and administrative bodies, may be ineffective, expensive and time-consuming and, despite such measures, third parties may be able to obtain and use our intellectual property rights without our permission. Additionally, changes in law may be implemented, or changes in interpretation of such laws may occur, that may affect our ability to obtain, maintain, protect or enforce our intellectual property rights. Failure to obtain, maintain, protect or enforce our intellectual property rights could harm our brand or brand recognition and adversely affect our business, cash flows, financial condition and results of operations.

We also in-license certain major trademarks for certain wholly-owned subsidiaries from third parties pursuant to perpetual, royalty-free license agreements that may be terminated by the licensor under certain circumstances, including our material breach of the terms of such license agreements. Upon any such termination, we may be required to either negotiate a new or reinstated agreement with less favorable terms or otherwise lose our rights to use the licensed trademarks.

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Our involvement in intellectual property litigation could adversely affect our business, cash flows, financial condition and results of operations.

Our business is highly dependent upon intellectual property, an area that has encountered increased litigation in recent years. If we are alleged to infringe, misappropriate or otherwise violate the intellectual property rights of a third party, any litigation to defend the claim could be costly and would divert the time and resources of management, regardless of the merits of the claim and whether the claim is settled out of court or determined in our favor. There can be no assurance that we would prevail in any such litigation. If we were to lose a litigation relating to intellectual property, we could be forced to pay monetary damages and to cease using certain intellectual property or technologies. Any of the foregoing may adversely affect our business, cash flows, financial condition and results of operations.

Assertions or allegations, even if not true, that we have infringed or violated intellectual property rights could harm our reputation and business, cash flows, financial condition and results of operations.

Third parties, including artists, copyright owners and other online music platforms, have asserted, and may in the future assert, that we have infringed, misappropriated or otherwise violated their copyright or other intellectual property rights. As we face increasing competition globally, the possibility of intellectual property rights claims against us grows.

We also sublicense some of our licensed music content to other platforms. Our agreements with such third-party platforms typically require them to comply with the terms of the license and applicable copyright laws and regulations. However, there is no guarantee that the third-party platforms to which we sublicense our content will comply with the terms of their license arrangements or all applicable copyright laws and regulations. In the event of any breach or violation by such platforms, we may be held liable to the copyright owners for damages and be subject to legal proceedings as a result, in which case our reputation and business, cash flows, financial condition and results of operations may be materially and adversely affected.

In addition, music, internet, technology and media companies are frequently subject to litigation based on allegations of infringement, misappropriation, or other violations of intellectual property rights. Other companies in these industries may have larger intellectual property portfolios than we do, which could make us a target for litigation as we may not be able to assert counterclaims against parties that sue us for intellectual property infringement. Furthermore, from time to time, we may introduce new products and services, which could increase our exposure to intellectual property claims. It is difficult to predict whether assertions of third-party intellectual property rights or any infringement or misappropriation claims arising from such assertions will substantially harm our reputation and/or business, cash flows, financial condition and results of operations.

Digital piracy could adversely impact our business, cash flows, financial condition and results of operations.

A substantial portion of our revenue comes from the distribution of music, which is potentially subject to unauthorized consumer copying and widespread digital dissemination without an economic return to us, including as a result of “stream- ripping.” In its Global Music Report 2025, the IFPI noted the danger of “streaming manipulation,” a process by which bad actors upload tracks to digital music services that are produced using generative AI tools and then use “bots” to generate artificial streams of those tracks, which ultimately diverts royalties from legitimate copyright holders. Organized industrial piracy may also lead to decreased revenues. The impact of digital piracy on legitimate music revenues and subscriptions is hard to quantify, but we believe that illegal file sharing and other forms of unauthorized activity, including streaming manipulation, have a substantial negative impact on music revenues.

If we fail to obtain appropriate relief through the judicial process or the complete enforcement of judicial decisions issued in our favor (or if judicial decisions are not in our favor), if we are unsuccessful in our efforts to lobby governments to enact and enforce stronger legal penalties for copyright infringement or if we fail to develop effective means of protecting and enforcing our intellectual property (whether copyrights or other intellectual property rights such as patents, trademarks and trade secrets) or our music entertainment-related products or services, our business, cash flows, financial condition, results of operations and prospects may suffer.

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The development, deployment, and use of Artificial Intelligence (AI), including Generative AI, presents challenges for protecting our intellectual property and the rights of our artists and songwriters and could adversely affect our business and results of operation.

As with many technological innovations, AI, including generative AI, and machine learning technologies, also presents additional risks and challenges that could affect our business. AI and machine learning technologies are complex and rapidly evolving and the potential for AI-generated music, vocals, lyrics and other derivative works has also introduced new challenges for protecting our intellectual property and other rights of our artists and songwriters. In addition, the increasing availability of widely accessible AI tools has made it easier for third parties to generate, distribute and monetize synthetic or AI-generated content that may imitate or replicate the style, voice or other distinctive attributes of our artists. Along with a rapidly evolving and uncertain legal and regulatory environment in the U.S. and internationally, these challenges include new forms of intellectual property infringement through the unauthorized reproduction of copyrighted works and the name, images, likeness and voices of our artists and songwriters to “train” AI applications and to create unauthorized derivative works. This issue is the subject of litigation in the U.S. If third parties are legally permitted to use our copyrighted materials without our consent to train an AI model that could create vast quantities of new musical works to compete with and dilute the impact of our copy protected material on digital music services or other distribution platforms, it could have a significant adverse effect on our business.

If we or our service providers do not maintain the security of information relating to our customers, employees and vendors and our music, security information breaches through cyber security attacks or otherwise could damage our reputation with customers, employees, vendors and artists, and we could incur substantial additional costs, become subject to litigation and our results of operations and financial condition could be adversely affected.

We receive certain personal information about our customers and potential customers, and we also receive personal information concerning our employees, artists and vendors. In addition, our online operations depend upon the secure transmission of confidential information over public networks.

We maintain security measures with respect to such information, but despite these measures, such information may still be vulnerable to security breaches by computer hackers and others that attempt to penetrate the security measures that we have in place. A compromise of our security systems (through cyber-attacks, which are rapidly evolving and sophisticated or otherwise) that results in personal information being obtained by unauthorized persons or other bad actors could materially adversely affect our reputation with our customers, potential customers, employees, artists and vendors, as well as our business, cash flows, financial condition and results of operations, and could result in litigation against us or the imposition of governmental penalties. Unauthorized persons have also attempted to redirect payments to or from us. If any such attempt were successful, we could lose and fail to recover the redirected funds, which loss could be material. The increasing sophistication and resources of cyber criminals make it difficult to keep up with new threats and could result in a breach of security. For example, AI tools, including generative AI models and machine learning, develop rapidly, and threat actors use them to identify currently unknown vulnerabilities and create sophisticated attack methods that are increasingly automated, coordinated and more difficult to defend against. This may necessitate has necessitated and may in the future necessitate ongoing enhancements to our cybersecurity systems and infrastructure. We may also be subject to cyber-attacks that target our music, including not-yet-released music. The theft and premature release of this music may adversely affect our reputation with current and potential artists and adversely impact our business, cash flows, financial condition and results of operations. In addition, a security breach could require that we expend significant additional resources related to our information security systems and could result in a disruption of our business operations.

We rely on third-party data storage providers, including cloud storage solution providers, resulting in less direct control over our data. Such third parties may also be vulnerable to security breaches and compromised security systems, which could adversely affect our business, cash flows, financial condition and results of operations.

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Evolving laws and regulations concerning data privacy may result in increased regulation and different industry standards, which could result in monetary penalties, increase the costs of operations or limit our activities.

We engage in a wide array of online activities globally and are thus subject to a broad range of related laws and regulations including, for example, those relating to privacy, consumer protection, data retention and data protection, online behavioral advertising, geo-location tracking, text messaging, e-mail advertising, mobile advertising, content regulation, defamation, age verification, the protection of children online, social media, AI, and other Internet, mobile and online-related prohibitions and restrictions. The regulatory framework for privacy and data security issues worldwide has become increasingly burdensome and complex, and is likely to continue to be so for the foreseeable future. Practices regarding the collection, use, storage, transmission, security and disclosure of personal information by companies operating over the Internet and mobile platforms are receiving ever-increasing public and governmental scrutiny.

The U.S. government, including Congress, the Federal Trade Commission and the Department of Commerce, has announced that it is reviewing the need for even greater regulation for the collection of information concerning consumer behavior on the Internet and mobile platforms, including regulation aimed at restricting certain targeted advertising practices, the use of location data and disclosures of privacy practices in the online and mobile environments, including with respect to online and mobile applications. State governments are engaged in similar legislative and regulatory activities (including the California Consumer Privacy Act (“ CCPA ”) effective on January 1, 2020, the California Privacy Rights and Enforcement Act, effective January 1, 2023 and other analogous statutes more recently in other states). The effects of CCPA and these other recently adopted laws includes an increased ability of individuals to control the use of their personal data; heightened transparency obligations, increased obligations of companies to maintain the security of data; and increased exposure to fines or damages for companies that do not accord individuals their specified privacy rights, that experience data breaches or that do not maintain cybersecurity at certain levels of quality.

In addition, privacy and data security laws and regulations around the world are being implemented rapidly and evolving. These new and evolving laws (including the European Union General Data Protection Regulation effective on May 25, 2018) have resulted in greater compliance burdens for companies with global operations. Globally, many government and consumer agencies have also called for new regulation and changes in industry practices with respect to information collected from consumers, electronic marketing and the use of third-party cookies, web beacons and similar technology for online behavioral advertising.

Our business, including our ability to operate and expand internationally, could be adversely affected if laws or regulations are adopted, interpreted or implemented in a manner that is inconsistent with our current business practices and that require changes to these practices. Therefore, our business could be harmed by any significant change to applicable laws, regulations or industry practices regarding the collection, use or disclosure of customer data, or regarding the manner in which the express or implied consent of consumers for such collection, use and disclosure is obtained. Such changes may require us to modify our operations, possibly in a material manner, and may limit our ability to develop new products, services, mechanisms, platforms and features that make use of data regarding our customers and potential customers. Any actual or alleged violations of laws and regulations relating to privacy and data security, and any relevant claims, may expose us to potential liability, fines and may require us to expend significant resources in responding to and defending such allegations and claims, regardless of merit. Claims or allegations that we have violated laws and regulations relating to privacy and data security could also result in negative publicity and a loss of confidence in us.

We face a potential loss of catalog to the extent that our songwriters or recording artists have a right to recapture rights in their musical compositions or recordings under the U.S. Copyright Act, which may adversely affect our business, cash flows, and financial condition.

The U.S. Copyright Act provides authors (or their heirs) a right to terminate U.S. licenses or assignments of rights in their copyrighted works in certain circumstances. This right does not apply to works that are “works made for hire.” Since the enactment of the Sound Recordings Act of 1971, as amended, which first accorded federal copyright protection for sound recordings in the U.S., virtually all of our agreements with recording artists provide that such recording artists render services under a work-made-for-hire relationship. A termination right exists under the U.S. Copyright Act for U.S. rights in musical compositions that are not “works made for hire.” If any of our commercially available sound recordings were determined not to be “works made for hire,” then the recording artists (or their heirs) could have the right to terminate the U.S. federal copyright rights they granted to us, generally during a five-year period starting at the end of 35 years from the date of release of a recording under a post-1977 license or assignment (or, in the case of a pre-1978 grant in a pre-1978 recording, generally during a five-year period starting at the end of 56 years from the date of copyright). A termination of U.S. federal copyright rights could have an adverse effect on our Recorded Music business. From time to time, authors (or their heirs) have the opportunity to terminate our U.S. rights in musical compositions. We believe the effect of any potential terminations is already reflected in the financial results of our business.

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Risks Related to Our Common Stock and Warrants

The market price of our Common Stock and Warrants is volatile and may fluctuate from period to period, and you may lose some or all of your investment.

The market price of our Common Stock and Warrants may be highly volatile and may be subject to wide fluctuations in response to a variety of factors, including the following:

our quarterly or annual earnings or those of other companies in our industry compared to market expectations;

the size of our public float;

our inability to maintain the listing of our Common Stock and Warrants on Nasdaq;

coverage by or changes in financial estimates by securities or industry analysts or failure to meet their expectations;

changes in accounting standards, policies, guidance, interpretations or principles;

changes in senior management or key personnel;

changes in applicable laws or regulations;

risks relating to the uncertainty of our projected financial information;

risks related to the organic and inorganic growth of our business and the timing of expected business milestones; and

changes in general market, economic and political conditions in the U.S. and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war and responses to such events.

In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors, as well as general economic, political, regulatory and market conditions, may negatively affect the market price of our Common Stock and Warrants, regardless of our actual operating performance. In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could adversely affect our business, cash flows, financial condition and results of operations.

We have Warrants outstanding that are exercisable for our Common Stock, which, if exercised, would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

As of March 31, 2026, our 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 ”). Each whole Warrant entitles the registered holder to purchase one whole share of Common Stock at a price of $11.50 per share. To the extent such Warrants are exercised, additional shares of our Common Stock will be issued, which will result in dilution to the holders of our Common Stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such Warrants may be exercised could adversely affect the prevailing market price of our Common Stock.

We may redeem unexpired Warrants prior to their exercise at a time that is disadvantageous to you, thereby making the Warrants worthless.

We have the ability to redeem the outstanding Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per Warrant, provided that the closing price of our Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30 trading-day period ending three business days before we send the notice of redemption to the registered holders. If we call the Public Warrants for redemption, our management will have the option to require all holders that wish to exercise the Public Warrants to do so on a cashless basis. In addition, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. As a result, we may redeem the Public Warrants as set forth above even if the holders are otherwise unable to exercise such Public Warrants. Redemption of the outstanding Public Warrants could force you to (i) exercise your Warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) sell your Warrants at the then-current market price when you might otherwise wish to hold your Warrants or (iii) accept the nominal redemption price which, at the time the outstanding Warrants are called for redemption, may be substantially less than the market value of your Warrants. The Private Warrants are non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable by us and exercisable by such holders on the same basis as the Public Warrants.

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Due to the nature of our business, our results of operations, cash flows and the trading price of our Common Stock and Warrants may fluctuate significantly from period to period.

Our results of operations are affected by the amount and quality of music that we release, the number of releases that include musical compositions published by us, timing of release schedules and, more importantly, the consumer demand for these releases. We also make advance payments to songwriters and artists, which impact our results of operations and operating cash flows. The timing of releases and advance payments is largely based on business and other considerations and is made without regard to the impact of the timing of the release on our financial results. In addition, certain of our license agreements with digital music services contain minimum guarantees and/or require that we are paid minimum guarantee payments. Our results of operations and cash flows in any reporting period may be materially affected by the timing of releases and advance payments and minimum guarantees, which may result in significant fluctuations from period to period, which may have an adverse impact on the price of our Common Stock or Warrants.

We may be unable to maintain the listing of our securities on Nasdaq in the future and an active trading market in our Common Stock and Warrants may not be maintained.

If we fail to meet the continued listing requirements and Nasdaq delists our Common Stock or Warrants, we could face significant material adverse consequences, including:

a limited availability of market quotations for our Common Stock and Warrants;

a limited amount of news and analyst coverage for us; and

a decreased or complete loss of ability to issue additional securities or obtain additional financing in the future.

If securities or industry analysts do not publish research or reports about us, or publish negative reports, our stock price and trading volume could decline.

The trading market for our Common Stock and Warrants will depend, in part, on the research and reports that securities or industry analysts publish about us. We do not have any control over these analysts. In addition, because we did not become a public reporting company by means of a traditional underwritten initial public offering, security or industry analysts may not provide, or be less likely to provide, coverage of us. If our financial performance fails to meet analyst estimates or one or more of the analysts who cover us downgrade our Common Stock or Warrants or change their opinion, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.

Because we do not anticipate paying any cash dividends in the foreseeable future, capital appreciation, if any, would be your sole source of gain.

We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. As a result, capital appreciation, if any, of our Common Stock or Warrants would be your sole source of gain on an investment in our Common Stock or Warrants for the foreseeable future.

The future sales of shares by our stockholders may adversely affect the market price of our Common Stock and Warrants.

Sales of a substantial number of shares of our Common Stock in the public market could occur at any time. If our stockholders sell, or the market perceives that our stockholders intend to sell, substantial amounts of our Common Stock in the public market, the market price of our Common Stock could decline.

The holders of the Founder Shares are entitled to registration rights pursuant to a registration rights agreement entered into in connection with the IPO. The holders of the majority of these securities are entitled to make up to three demands that we register such securities. The holders of the majority of the Founder Shares, the Private Units and any working capital loans made to us are entitled to make up to two demands that we register such securities. The holders of the majority of the Founder Shares can elect to exercise these registration rights at any time commencing three months prior to the date on which the Founder Shares are to be released from escrow. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of the Business Combination. The presence of these additional Founder Shares trading in the public market may have an adverse effect on the market price of our Common Stock.

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Stockholder activism or unsolicited acquisition proposals could disrupt our business, divert management’s attention and adversely affect our ability to execute our long-term strategy.

Activist investors may from time to time threaten or commence proxy contests, “vote no” campaigns, or take other actions, including advancing shareholder proposals, or otherwise attempting to effect changes and assert influence over our Board and management and the Company may, from time to time, receive unsolicited acquisition proposals. For example, in February 2026, Irenic submitted a non-binding indication of interest to acquire all of our outstanding common equity. In March 2026, the Company received a separate non-binding proposal from Wesbild/Richmond.

Responding to activist shareholders or unsolicited acquisition proposals can be costly and time-consuming and may significantly divert the time and attention of our Board and management team from executing our business strategy, as well as generate substantial legal, advisory, and public relations costs.

If an unsolicited acquisition proposal were to result in a transaction, we may not realize the long-term value of our strategic plan as a standalone public company. Alternatively, actual or perceived stockholder activism or the perception that the Company may be involved in a potential transaction could cause significant volatility in the market price of our Common Stock. Any of these factors could materially adversely affect our business, cash flows, financial condition and results of operations.

As of March 31, 2026, we no longer qualify as an emerging growth company, but remain a smaller reporting company, which permits us to continue to take advantage of certain scaled disclosure requirements, and we cannot be certain if our use of such scaled disclosure requirements will make our Common Stock or Warrants less attractive to investors which may result in a less active trading market for our Common Stock or Warrants.

As of March 31, 2026 (the last day of the fiscal year following the fifth anniversary of our initial public offering), we ceased to be an emerging growth company, as defined in the Jumpstart Our Business Startups Act (“JOBS Act”). As a result, we are no longer able to rely on certain exemptions from various reporting and governance requirements that were previously available to us, including the exemption from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We elected to avail ourselves of this exemption from new or revised accounting standards and, therefore, we were not subject to the same new or revised accounting standards as other public companies during the period we were an emerging growth company. As a result, our financial statements while we were an emerging growth company may not be comparable to companies that complied with new or revised accounting pronouncements as of public company effective dates.

Because the worldwide market value of our common stock held by non-affiliates, or “public float”, is below $250 million, we continue to qualify as a “smaller reporting company” as defined under the Exchange Act. As a “smaller reporting company,” this allows us to take advantage of many of the same scaled disclosure requirements available to emerging growth companies, including scaled executive compensation disclosures. We have elected to utilize the accommodations available to smaller reporting companies. Until we cease to be a smaller reporting company, the scaled disclosure in our SEC filings will result in less information about our company being available than for public companies that are not smaller reporting companies.

We cannot predict if investors will find our Common Stock or Warrants less attractive because we may rely on these exemptions. If some investors find our Common Stock or Warrants less attractive as a result, there may be a less active trading market for our Common Stock and Warrants and their market prices may be more volatile.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of Reservoir Media, Inc.’s financial condition and results of operations should be read in conjunction with Reservoir Media, Inc.’s consolidated financial statements, including the accompanying notes thereto contained elsewhere in this Annual Report on Form 10-K (this “ Annual Report ”). Certain statements contained in the discussion and analysis set forth below include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. Unless the context otherwise requires, the terms “ we ,” “ us ,” “ our, ” the “ Company ” and “ Reservoir ” refer collectively to Reservoir Media, Inc. and its consolidated subsidiaries.

Introduction

We are a holding company that conducts substantially all of our business operations through Reservoir Media Management, Inc. (“ RMM ”). RMM is one of the world’s leading independent music companies. We operate a music publishing business, a recorded music business, a management business and a rights management entity in the Middle East.

Our fiscal year ends on March 31. Unless otherwise noted, all references to Fiscal 2026 represent the fiscal year ended March 31, 2026 and all references to Fiscal 2025 represent the fiscal year ended March 31, 2025.

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Recent Developments

On March 4, 2026, we announced that the Board formed the Special Committee to evaluate the Proposals. On May 1, 2026, we announced that the Special Committee engaged Morgan Stanley & Co. LLC as its financial advisor and Wachtell, Lipton, Rosen & Katz as its legal counsel in connection with the Special Committee’s evaluation of the Proposals. There can be no assurance that any definitive agreement will result from either of the Proposals or that any transaction will be consummated with Irenic, Richmond Hill, Wesbild or any other party.

Business Overview

We are an independent music company operating in music publishing and recorded music. Both of our business areas are populated with hit songs dating back to the early 1900s and represent an array of artists across genres and geography. Consistent with how we classify and operate our business, our company is organized in two reportable segments: Music Publishing and Recorded Music. A brief description of each segment’s operations is presented below.

Music Publishing Segment

Music Publishing is an intellectual property business focused on generating revenue from uses of the musical composition itself. In return for promoting, placing, marketing and administering the creative output of a songwriter or engaging in those activities for other rightsholders, our Music Publishing business garners a share of the revenues generated from use of the musical compositions.

The operations of our Music Publishing business are conducted principally through RMM, our global music publishing company headquartered in New York City, with operations in multiple countries through various subsidiaries, affiliates and non-affiliated licensees and sub-publishers. We own or control rights to a vast collection of musical compositions, including numerous pop hits, American standards, and motion picture and theatrical compositions. Assembled over many years, our catalog represents a diverse range of genres, including pop, rock, jazz, classical, country, R&B, hip-hop, rap, reggae, Latin, folk, blues, symphonic, soul, Broadway, techno, alternative and gospel. In addition to the catalog, we represent many active songwriters who are consistently generating new music.

Music Publishing revenues are derived from five main sources:

Digital ––the rightsholder receives revenues with respect to musical compositions embodied in recordings distributed in streaming services, download services and other digital music services;

Performance ––the rightsholder receives revenues if the musical composition is performed publicly through broadcast of music on television, radio and cable and in retail locations ( e.g. , bars and restaurants), live performance at a concert or other venue ( e.g. , arena concerts and nightclubs), and performance of music in staged theatrical productions;

Synchronization ––the rightsholder receives revenues for the right to use the musical composition in combination with visual images such as in films or television programs, television commercials and video games;

Mechanical ––the rightsholder receives revenues with respect to musical compositions embodied in recordings sold in any machine-readable format or configuration such as vinyl, CDs and DVDs; and

Other ––the rightsholder receives revenues for use in sheet music and other uses.

The principal costs associated with our Music Publishing business are as follows:

Writer Royalties and Other Publishing Costs –– the artist and repertoire (“ A&R ”) costs associated with (i) paying royalties to songwriters, co-publishers and other copyright holders in connection with income generated from the uses of their works and (ii) signing and developing songwriters, all of which are classified as cost of revenue; and

Administration Expenses ––the costs associated with general overhead, and other administrative expenses, as well as selling and marketing.

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Recorded Music Segment

Our Recorded Music business consists of three types of sound recording rights ownership. First is the active marketing, promotion, distribution, sale and licensing of newly created frontline sound recordings from current artists that we own and control (“ Current Artist ”). This is a new area of focus for us and does not yet produce significant revenue. The second is the active marketing, promotion, distribution, sale and license of previously recorded and subsequently acquired catalog recordings (the “ Catalog ”). The third is acquisition of full or partial interests in existing record labels, sound recording catalogs or income rights to a royalty stream associated with an established recording artist or producer contract in connection with existing sound recordings. Acquisition of these income participation interests are typically in connection with recordings that are owned, controlled, and marketed by other record labels.

Our recorded music businesses is operated by our label teams based in London and New York City, which release music from our labels Chrysalis Records, Tommy Boy Music, New State and Reservoir Recordings. We primarily manage Catalog recorded music, but we have a small roster of current artists for whom we release new music. We also own income participation interests in recordings by The Isley Brothers, The Commodores, Wisin and Yandel, Alabama and others. Our core Catalog includes recordings under the Chrysalis Records label by artists such as Sinéad O’Connor, The Specials, Generation X and The Waterboys, and De La Soul, recordings under the Tommy Boy label by artists such as Coolio, House of Pain, Naughty By Nature and Queen Latifah, plus select catalog artists on Fool’s Gold Records, which we also distribute.

Our Current Artist and Catalog recorded music distribution is handled by a mix of direct deals, such as with Amazon, Apple, TikTok and YouTube, plus a network of distribution partners, including MERLIN, AMPED and Proper. Chrysalis Records’ current frontline releases are distributed through Secretly Distribution.

Through our distribution network, our music is being sold in physical retail outlets, as well as in physical form to online physical retailers, such as amazon.com, and distributed in digital form to an expanding universe of digital partners, including streaming services such as Amazon, Apple, Deezer, SoundCloud, Spotify, Tencent Music Entertainment Group and YouTube, radio services such as iHeart Radio and SiriusXM, and download services. We also license music digitally to fitness platforms such as Apple Fitness+, Equinox, Hydrow and Peloton and to social media outlets, such as Facebook, Instagram, TikTok and Snap.

Recorded Music revenues are derived from four main sources:

Digital ––the rightsholder receives revenues with respect to streaming and download services;

Physical ––the rightsholder receives revenues with respect to sales of physical products such as vinyl, CDs and DVDs;

Neighboring Rights –– the rightsholder receives royalties if sound recordings are performed publicly through broadcast of music on television, radio, and cable, and in public spaces such as shops, workplaces, restaurants, bars and clubs; and

Synchronization ––the rightsholder receives royalties or fees for the right to use sound recordings in combination with visual images such as in films or television programs, television commercials and video games.

The principal costs associated with our Recorded Music business are as follows:

Artist Royalties and Other Recorded Costs ––the A&R costs associated with (i) paying royalties to recording artists, producers, songwriters, other copyright holders and trade unions, (ii) signing and developing recording artists and (iii) creating master recordings in the studio; and product costs to manufacture, package and distribute products to wholesale and retail distribution outlets, all of which are classified as cost of revenue; and

Administration Expenses ––the costs associated with general overhead and other administrative expenses as well as costs associated with the promotion and marketing of recording artists and music, including costs to produce music videos for promotional purposes and artist tour support.

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Use of Non-GAAP Financial Measures

We prepare our financial statements in accordance with accounting principles generally accepted in the United States (“ U.S. GAAP ” or “ GAAP ”). However, this Management’s Discussion and Analysis of Financial Condition and Results of Operations also contains certain non-GAAP financial measures to assist readers in understanding our performance. Non-GAAP financial measures either exclude or include amounts that are not reflected in the most directly comparable measure calculated and presented in accordance with GAAP. Where non-GAAP financial measures are used, we have provided the most directly comparable measures calculated and presented in accordance with U.S. GAAP, a reconciliation to GAAP measures and a discussion of the reasons why management believes this information is useful to them and may be useful to investors.

Results of Operations

Income Statement

Our income statement was comprised of the following amounts (in thousands):

Fiscal 2026

Fiscal

Fiscal

vs. Fiscal 2025

$ Change

% Change

Revenues

Costs and expenses:

Cost of revenue

Amortization and depreciation

Administration expenses

Total costs and expenses

Operating income

Interest expense

Gain on foreign exchange

Loss on fair value of swaps

Other (expense) income, net

Income before income taxes

Income tax expense

Net income

Net loss attributable to noncontrolling interests

Net income attributable to Reservoir Media, Inc.

NM – Not meaningful

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Revenues

Our revenues were comprised of the following amounts (in thousands):

Fiscal 2026

Fiscal

Fiscal

vs. Fiscal 2025

$ Change

% Change

Revenue by Type

Digital

Performance

Synchronization

Mechanical

Other

Total Music Publishing

Digital

Physical

Neighboring rights

Synchronization

Total Recorded Music

Other revenue

Total Revenue

Fiscal 2026

Fiscal

Fiscal

vs. Fiscal 2025

$ Change

% Change

Revenue by Geographical Location

U.S. Music Publishing

U.S. Recorded Music

U.S. Other Revenue

Total U.S.

International Music Publishing

International Recorded Music

Total International

Total Revenue

Revenues

Total revenues increased by $16,958 thousand, or 11%, during Fiscal 2026 compared to Fiscal 2025, driven by a 9% increase in Music Publishing revenue and a 16% increase in Recorded Music revenue. Music Publishing revenues represented 66% and 68% of total revenues during Fiscal 2026 and Fiscal 2025, respectively. Recorded Music revenues represented 29% and 28% of total revenues during Fiscal 2026 and Fiscal 2025, respectively. U.S. and international revenues represented 56% and 44% of total revenues, respectively, during Fiscal 2026. U.S. and international revenues represented 59% and 41% of total revenues, respectively, during Fiscal 2025.

Total digital revenues increased by $9,845 thousand, or 11%, during Fiscal 2026 compared to Fiscal 2025. Total digital revenues represented 58% of consolidated revenues during Fiscal 2026 and Fiscal 2025.

Music Publishing revenues increased by $9,390 thousand, or 9%, during Fiscal 2026 compared to Fiscal 2025. This increase in Music Publishing revenue was mainly driven by a $4,163 thousand increase in digital revenue, primarily due to the acquisition of additional music catalogs and continued growth at music streaming services, a $2,869 thousand increase in performance revenue driven by the performance of hit songs, a $1,114 thousand increase in Other revenue primarily attributable to acquired stage rights and an $897 thousand increase in synchronization revenue driven by the timing of licenses.

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On a geographic basis, U.S. Music Publishing revenues represented 54% and 58% of total Music Publishing revenues during Fiscal 2026 and Fiscal 2025, respectively. International Music Publishing revenues represented 46% and 42% of total Music Publishing revenues during Fiscal 2026 and Fiscal 2025, respectively.

Recorded Music revenues increased by $7,264 thousand, or 16%, during Fiscal 2026 compared to Fiscal 2025. This increase in Recorded Music revenues was mainly due to a $5,682 thousand increase in digital revenue, primarily due to the acquisition of additional music catalogs and continued growth at music streaming services, partially offset by the non-recurrence of royalty recoveries recognized during Fiscal 2025 related to underreported usage for music catalogs (the “ Royalty Recovery ”). Additionally, the increase in Recorded Music revenues reflects a $1,211 thousand increase in synchronization revenue driven by the timing of licenses.

On a geographic basis, U.S. Recorded Music revenues represented 54% and 55% of total Recorded Music revenues during Fiscal 2026 and Fiscal 2025, respectively. International Recorded Music revenues represented 46% and 45% of total Recorded Music revenues during Fiscal 2026 and Fiscal 2025, respectively.

Cost of Revenue

Our cost of revenue was comprised of the following amounts (in thousands):

Fiscal 2026

Fiscal

Fiscal

vs. Fiscal 2025

$ Change

% Change

Writer royalties and other publishing costs

Artist royalties and other recorded music costs

Total cost of revenue

Cost of revenue increased by $4,561 thousand, or 8%, during Fiscal 2026 compared Fiscal 2025, primarily as a result of the increase in revenues. Cost of revenue as a percentage of revenues decreased to 35% during Fiscal 2026 from 36% during Fiscal 2025, reflecting decreases in cost of revenue as a percentage of revenue for the Music Publishing and Recorded Music segments.

Writer royalties and other publishing costs for the Music Publishing segment increased by $3,309 thousand, or 7%, during Fiscal 2026 compared to Fiscal 2025, primarily as a result of the increase in Music Publishing revenues. Writer royalties and other publishing costs as a percentage of Music Publishing revenues decreased to 41% during Fiscal 2026 from 42% during Fiscal 2025, driven primarily by the change in the mix of revenues by type and songwriting clients with their specific contractual royalty rates being applied to the revenues.

Artist royalties and other recorded music costs for the Recorded Music segment increased by $1,252 thousand, or 10%, during Fiscal 2026 compared to Fiscal 2025, primarily as a result of the increase in Recorded Music revenues. Artist royalties and other recorded music costs as a percentage of Recorded Music revenues decreased to 26% during Fiscal 2026 from 28% during Fiscal 2025, driven primarily by the change in the mix of revenues by type and songwriting clients with their specific contractual royalty rates being applied to the revenues.

Amortization and Depreciation

Amortization and depreciation expense increased by $4,484 thousand, or 17%, during Fiscal 2026 compared to Fiscal 2025, primarily driven by the acquisition of additional music catalogs.

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Administration Expenses

Our administration expenses are comprised of the following amounts (in thousands):

Fiscal 2026

Fiscal

Fiscal

vs. Fiscal 2025

$ Change

% Change

Music Publishing administration expenses

Recorded Music administration expenses

Other administration expenses

Total administration expenses

Total administration expenses increased by $4,744 thousand, or 12%, during Fiscal 2026 compared to Fiscal 2025, driven by increases in administration expenses in the Music Publishing and Recorded Music segments, as well as an increase in Other administration expenses. This increase also reflects $328 thousand of professional fees and other costs associated with (i) the acquisition of ViralWave Content Consultancy DWC-LLC (“Viral Wave”), which closed in April 2026 (the “Viral Wave Acquisition”), and (ii) the Special Committee (the “Transaction costs”). Expressed as a percentage of revenues, administration expenses were 25% during Fiscal 2026 and Fiscal 2025.

Music Publishing administration expenses increased by $2,538 thousand, or 10%, during Fiscal 2026 compared to Fiscal 2025. Expressed as a percentage of revenues, Music Publishing administration expenses were 23% during each of Fiscal 2026 and Fiscal 2025.

Recorded Music administration expenses increased by $1,897 thousand, or 21%, during Fiscal 2026 compared to Fiscal 2025. Expressed as a percentage of revenue, Recorded Music administration expenses increased to 22% during Fiscal 2026 from 21% during Fiscal 2025, primarily due to investments made in the Recorded Music business to address frontline opportunities, as well as increased compensation and other costs due to inflation.

Other administration expenses increased by $308 thousand, or 5%, during Fiscal 2026 compared to Fiscal 2025, primarily due to selling expenses associated with our artist management business, consisting mostly of manager compensation.

Operating Income

Operating income increased by $3,170 thousand, or 9%, during Fiscal 2026 compared to Fiscal 2025, primarily driven by an increase in revenues, partially offset by an increase in amortization and depreciation and administration expenses. Operating income margin (operating income expressed as a percentage of revenues) was 22% during each of Fiscal 2026 and Fiscal 2025.

Interest Expense

Interest expense increased by $4,569 thousand, or 21% during Fiscal 2026 compared to Fiscal 2025. The increase in interest expense was driven primarily by increased debt balances due to use of funds in acquisitions of music catalogs and writer signings, as well as an increase in effective interest rates. The increase in the Company’s effective interest rates primarily reflects an increase on the portions of its borrowings that are hedged, as its swap contracts in effect during Fiscal 2026 have a higher fixed interest rate than the Company’s previous swap contracts, which were in effect during a portion of Fiscal 2025 until they matured on September 30, 2024.

Gain on Foreign Exchange

Gain on foreign exchange was $231 thousand during Fiscal 2026 compared to $578 thousand during Fiscal 2025. This change was due to fluctuations in the two foreign currencies we are directly exposed to, namely the British pound sterling and the euro.

Loss on Fair Value of Swaps

Loss on fair value of swaps was $351 thousand during Fiscal 2026 compared to $4,214 thousand during Fiscal 2025. This change was due to the marking to market of our interest rate swap hedges. Additionally, the loss during Fiscal 2025 reflects the September 2024 decrease in the Secured Overnight Financing rate (“ SOFR ”), as well as the time value of the swaps that expired on September 30, 2024.

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Other (Expense) Income, Net

Other (expense) income, net during Fiscal 2026 was comprised primarily of the Company’s recognition of its share of losses incurred by equity method investments. Other (expense) income, net during Fiscal 2025 consisted of a $104 thousand gain recorded on the disposal of an equity investment during the period (the “ Investment Gain ”) and the Company’s share of proceeds related to underreported usage for acquired music catalogs that pertained to periods prior to the Company’s acquisition of the music catalogs, which totaled $823 thousand (the “ Recovery Income ”). These factors were partially offset by a $500 thousand impairment of an investment (the “ Investment Write-down ”) and the Company’s share of loss recorded by an equity method investment. See Note 2, “ Summary of Significant Accounting Policies – Investments in Equity Affiliates ” to the accompanying consolidated financial statements for discussion about the Investment Gain and Investment Write-down.

Income Tax Expense

Income tax expense increased to $3,328 thousand during Fiscal 2026 compared to $2,141 thousand during Fiscal 2025. The increase in income tax expense during Fiscal 2026 was primarily due to an increase of income before income taxes.

The Company’s effective income tax rate during Fiscal 2026 was 29.8% compared to 21.7% during Fiscal 2025. The increase in the effective income tax rate during Fiscal 2026 reflects the non-recurrence of a Fiscal 2025 return to provision reconciliation related to certain international tax liabilities, partially offset by an increase in earnings, which reduced the relative impact of statutory limitations on certain deductions.

Net Income

Net income increased by $96 thousand to $7,827 thousand during Fiscal 2026 compared to $7,731 thousand during Fiscal 2025, driven primarily by a decrease in loss on fair value of swaps and an increase in operating income, partially offset by increases in interest expense and income tax expense.

Non-GAAP Reconciliations

We use certain financial information, such as OIBDA, OIBDA Margin, EBITDA and Adjusted EBITDA, which are non-GAAP financial measures, which means they have not been prepared in accordance with U.S. GAAP. Reservoir’s management uses these non-GAAP financial measures to evaluate our operations, measure its performance and make strategic decisions. We believe that the use of these non-GAAP financial measures provides useful information to investors and others in understanding our results of operations and trends in the same manner as our management and in evaluating our financial measures as compared to the financial measures of other similar companies, many of which present similar non-GAAP financial measures. However, these non-GAAP financial measures are subject to inherent limitations as they reflect the exercise of judgments by our management about which items are excluded or included in determining these non-GAAP financial measures and, therefore, should not be considered as a substitute for net income, operating income or any other operating performance measures calculated in accordance with GAAP. Using such non-GAAP financial measures in isolation to analyze our business would have material limitations because the calculations are based on the subjective determination of our management regarding the nature and classification of events and circumstances. In addition, although other companies in our industry may report measures titled OIBDA, OIBDA Margin and Adjusted EBITDA, or similar measures, such non-GAAP financial measures may be calculated differently from how we calculate such non-GAAP financial measures, which reduces their overall usefulness as comparative measures. Because of these limitations, such non-GAAP financial measures should be considered alongside other financial performance measures and other financial results presented in accordance with GAAP. Reconciliations of OIBDA to operating income and EBITDA and Adjusted EBITDA to net income are provided below.

We consider operating income before non-cash depreciation of tangible assets and non-cash amortization of intangible assets (“ OIBDA ”) to be an important indicator of the operational strengths and performance of our businesses and believe this non-GAAP financial measure provides useful information to investors because it removes the significant impact of amortization from our results of operations and represents our measure of segment income. However, a limitation of the use of OIBDA as a performance measure is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses and other non-operating income. Accordingly, OIBDA should be considered in addition to, not as a substitute for, operating income, net income attributable to us and other measures of financial performance reported in accordance with GAAP. In addition, our definition of OIBDA may differ from similarly titled measures used by other companies. OIBDA Margin is defined as OIBDA as a percentage of revenue.

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EBITDA is defined as earnings (net income or loss) before net interest expense, income tax (benefit) expense, non-cash depreciation of tangible assets and non-cash amortization of intangible assets and is used by management to measure operating performance of the business. Adjusted EBITDA is defined as EBITDA further adjusted to exclude items or expenses such as, among others, (1) any non-cash charges (including any impairment charges, loss on early extinguishment of debt and to write-down an equity investment to its fair value), (2) any net gain or loss on foreign exchange, (3) any net gain or loss resulting from interest rate swaps, (4) equity-based compensation expense and (5) certain unusual or non-recurring items. Adjusted EBITDA is a key measure used by our management to understand and evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. However, certain limitations on the use of Adjusted EBITDA include, among others, (1) it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenue for our business, (2) it does not reflect the significant interest expense or cash requirements necessary to service interest or principal payments on our indebtedness and (3) it does not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments. In particular, Adjusted EBITDA measure adds back certain non-cash, unusual or non-recurring charges that are deducted in calculating net income; however, these are expenses that may recur, vary greatly and are difficult to predict. In addition, Adjusted EBITDA is not the same as net income or cash flow provided by operating activities as those terms are defined by GAAP and does not necessarily indicate whether cash flows will be sufficient to fund cash needs.

Reconciliation of Operating Income to OIBDA

We use OIBDA as our primary measure of financial performance. The following tables reconcile consolidated operating income to OIBDA and presents OIBDA by segment (in thousands):

Consolidated

Fiscal 2026

Fiscal

Fiscal

vs. Fiscal 2025

$ Change

% Change

Revenues

Cost of revenue

Administration expenses

OIBDA

Amortization and depreciation

Operating income

OIBDA Margin

Music Publishing

Fiscal 2026

Fiscal

Fiscal

vs. Fiscal 2025

$ Change

% Change

Revenues

Cost of revenue

Administration expenses

OIBDA

OIBDA Margin

Recorded Music

Fiscal 2026

Fiscal

Fiscal

vs. Fiscal 2025

$ Change

% Change

Revenues

Cost of revenue

Administration expenses

OIBDA

OIBDA Margin

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OIBDA

OIBDA increased by $7,654 thousand, or 12%, during Fiscal 2026 compared to Fiscal 2025, driven by a $3,543 thousand increase in Music Publishing OIBDA and a $4,115 thousand increase in Recorded Music OIBDA. Expressed as a percentage of revenue, OIBDA Margin was 39% during each of Fiscal 2026 and Fiscal 2025.

Music Publishing OIBDA increased by $3,543 thousand, or 9%, during Fiscal 2026 compared to Fiscal 2025, driven primarily by an increase in revenues, partially offset by an increase in administration expenses. Expressed as a percentage of revenue, Music Publishing OIBDA Margin was 35% during each of Fiscal 2026 and Fiscal 2025.

Recorded Music OIBDA increased by $4,115 thousand, or 18% during Fiscal 2026 compared to Fiscal 2025, driven primarily by an increase in revenues, partially offset by an increase in administration expenses. Expressed as a percentage of revenue, Recorded Music OIBDA Margin increased to 52% during Fiscal 2026 from 51% during Fiscal 2025, reflecting an improvement in artist royalties and other recorded music costs as a percentage of Recorded Music revenues.

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

Fiscal 2026

Fiscal

Fiscal

vs. Fiscal 2025

$ Change

% Change

Net income

Income tax expense

Interest expense

Amortization and depreciation

EBITDA

Gain on foreign exchange (a)

Loss on fair value of swaps (b)

Non-cash share-based compensation (c)

Transaction costs (d)

Other expense (income), net (e)

Adjusted EBITDA

NM – Not meaningful

(a) Reflects the gain on foreign exchange fluctuations.

(b) Reflects the non-cash loss on the mark-to-market of interest rate swaps.

(c) Reflects non-cash stock-based compensation expense related to the Reservoir Media, Inc. 2021 Omnibus Incentive Plan.

(d) Reflects transaction costs incurred in connection with the Viral Wave Acquisition and by the Special Committee.

(e) Reflects the Company’s share of losses recorded by equity method investments during Fiscal 2026. Reflects the Investment Gain and Recovery Income, partially offset by the Investment Write-down and the Company’s share of loss recorded by an equity method investment during Fiscal 2025.

Consolidated Adjusted EBITDA increased by $7,868 thousand, or 12%, during Fiscal 2026 compared to Fiscal 2025, primarily as a result of an increase in revenues, partially offset by an increase in administration expenses.

Liquidity and Capital Resources

Capital Resources

As of March 31, 2026, we had $455,705 thousand of debt (net of $3,123 thousand of deferred financing costs) and $25,927 thousand of cash and equivalents.

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Cash Flows

The following table summarizes our historical cash flows (in thousands).

Fiscal

Fiscal

$ Change

Cash provided by (used for):

Operating activities

Investing activities

Financing activities

Operating Activities

Cash provided by operating activities was $50,140 thousand during Fiscal 2026 compared to $45,279 thousand during Fiscal 2025. The primary drivers of the $4,861 thousand increase in cash provided by operating activities during Fiscal 2026 as compared to Fiscal 2025 were increases in earnings and cash provided by working capital. The increase in cash provided by working capital was due primarily to the timing of payments of accounts payable and the timing of collections of accounts receivable and royalty advances and recoupments, partially offset by the timing of royalty payments to artists.

Investing Activities

Cash used for investing activities was $104,320 thousand during Fiscal 2026 compared to $96,719 thousand during Fiscal 2025. The increase in cash used for investing activities was primarily due to an increase in acquisitions of music catalogs.

Financing Activities

Cash provided by financing activities was $64,203 thousand during Fiscal 2026 compared to $54,518 thousand during Fiscal 2025. The increase in cash provided by financing activities in Fiscal 2026 reflects an increase in borrowings from the secured line of credit, partially offset by an increase in repayments of the secured line of credit.

Liquidity

Our primary sources of liquidity are the cash flows generated from our subsidiaries’ operations, available cash and cash equivalents and funds available for drawing under our Senior Credit Facility (as described below). These sources of liquidity are needed to fund our debt service requirements, working capital requirements, strategic acquisitions and investments, capital expenditures and other investing and financing activities we may elect to make in the future.

We believe that our primary sources of liquidity will be sufficient to support our existing operations over the next twelve months.

Existing Debt as of March 31, 2026

As of March 31, 2026, our outstanding debt consisted of $458,828 thousand borrowed under the Senior Credit Facility. As of March 31, 2026, remaining borrowing availability under the Senior Credit Facility was $91,172 thousand.

We use cash generated from operations to service outstanding debt, consisting primarily of interest payments through maturity, and we expect to continue to refinance and extend maturity on the Senior Credit Facility for the foreseeable future.

Debt Capital Structure

RMM is a borrower under a revolving credit agreement (as amended or supplemented from time to time, the “ RMM Credit Agreement ”) governing RMM’s Senior Credit Facility. The maturity date of the loans advanced under the Senior Credit Facility is December 16, 2027.

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The interest rate on borrowings under the Senior Credit Facility is equal to, at our option, either the sum of a base rate plus a margin of 1.00% or the sum of a Secured Overnight Financing Rate (“ 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. 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. The Senior Credit Facility also includes an “accordion feature” that permits RMM to seek additional commitments in an amount not to exceed $150,000 thousand.

Subject to market conditions, we expect to continue to take opportunistic steps to extend our maturity dates and reduce related interest expense. From time to time, we may incur additional indebtedness for, among other things, working capital, repurchasing, redeeming or tendering for existing indebtedness and acquisitions or other strategic transactions.

Certain terms of the Senior Credit Facility are described below.

Guarantees and Security

The obligations under the Senior Credit Facility are guaranteed by us, RHI and subsidiaries of RMM. Substantially all of our, RHI’s, RMM’s and other subsidiary guarantors’ tangible and intangible assets are pledged as collateral to secure the obligations of RMM under the Senior Credit Facility, including accounts receivable, cash and cash equivalents, deposit accounts, securities accounts, commodities accounts, inventory and certain intercompany debt owing to us or our subsidiaries.

Covenants, Representations and Warranties

The Senior Credit Facility contains customary representations and warranties and customary affirmative and negative covenants. The negative covenants contained in the Senior Credit Facility limit the ability our, RHI’s, RMM’s and certain of its subsidiaries ability 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.

Events of Default

The Senior Credit Facility includes customary events of default, including nonpayment of principal when due, nonpayment of interest or other amounts, inaccuracy of representations or warranties in any material respect, violation of covenants, certain bankruptcy or insolvency events, certain Employee Retirement Income Security Act (“ ERISA ”) events and certain material judgments, in each case, subject to customary thresholds, notice and grace period provisions.

Covenant Compliance

The Senior Credit Facility contains financial covenants that requires us, on a consolidated basis with our subsidiaries, 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 no greater than 0.45:1.00, subject to certain adjustments.

Non-compliance with the fixed charge coverage ratio and consolidated senior debt to library value ratio could result in the lenders, subject to customary cure rights, requiring the immediate payment of all amounts outstanding under the Senior Credit Facility, which could have a material adverse effect on our business, cash flows, financial condition and results of operations. As of March 31, 2026, with a fixed charge coverage ratio of 3.36x and a consolidated senior debt to library value ratio less than 31%, we were in compliance with both of the financial covenants and all non-financial covenants under the Senior Credit Facility.

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Interest Rate Swaps

At March 31, 2026, 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 SOFR with reference to notional amounts adjusted to match the original scheduled principal repayments pursuant to the Senior Credit Facility (in thousands):

Notional

Amount at

Pay Fixed

Effective Date

March 31, 2026

Rate

Maturity

September 30, 2024

December 2027

September 30, 2024

December 2027

August 29, 2025

December 2027

On September 30, 2024, three previous interest rate swaps expired with original notional amounts of $8,875 thousand, $88,098 thousand and $53,030 thousand, respectively. Through the expiration date of these previous interest rate swaps, RMM paid fixed rates of 1.53%, 1.422% and 0.972%, respectively, to the counterparty and received a floating interest payment from the counterparty based on SOFR with reference to notional amounts adjusted to match the original scheduled principal repayments pursuant to the indenture agreement.

Dividends

Our ability to pay dividends to Reservoir Media, Inc.’s shareholders is restricted by covenants in the Senior Credit Facility. We did not pay any dividends to Reservoir Media, Inc.’s shareholders during Fiscal 2026.

Summary

Management believes that funds generated from our operations, borrowings under the Senior Credit Facility and available cash and equivalents will be sufficient to fund our debt service requirements, working capital requirements and capital expenditure requirements for the foreseeable future. However, our ability to continue to fund these items and to reduce debt may be affected by general economic, financial, competitive, legislative and regulatory factors, as well as other industry-specific factors such as the ability to control music piracy and the continued transition from physical to digital formats in the music publishing and recorded music industries. It could also be affected by the severity and duration of natural or human-made disasters, including pandemics. We and our affiliates continue to evaluate opportunities to, from time to time, depending on market conditions and prices, contractual restrictions, our financial liquidity and other factors, seek to pay dividends or prepay outstanding debt or repurchase or retire our outstanding debt. The amounts involved in any such transactions, individually or in the aggregate, may be material and may be funded from available cash or from additional borrowings or equity raises. In addition, from time to time, depending on market conditions and prices, contractual restrictions, our financial liquidity, and other factors, we may seek to refinance the Senior Credit Facility with existing cash and/or with funds provided from additional borrowings.

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Contractual and Other Obligations

Firm Commitments

The following table summarizes the Company’s aggregate contractual obligations as of March 31, 2026, and the estimated timing and effect that such obligations are expected to have on liquidity and cash flow in future periods.

Less Than

After 5

Firm Commitments and Outstanding Debt

1 Year

2-3 Years

4-5 Years

Years

Total

(in thousands)

Secured line of credit

Interest on secured line of credit (1)

Operating leases

Artist, songwriter and co-publisher commitments (2)

Asset acquisition and share purchase acquisition commitments (3)

Total firm commitments and outstanding debt

The following is a description of our firmly committed contractual obligations as of March 31, 2026:

Interest obligations under the Credit Facility are based on principal amounts outstanding and interest rates in effect as of March 31, 2026. Interest does not include amortization of deferred financing costs or effects of interest rate swaps.

The Company routinely enters into long-term commitments with songwriters and recording artists for the future delivery of music. Such commitments generally become due only upon delivery or release and Reservoir’s acceptance of future musical compositions by songwriters and publishers or albums from the artists. Because the timing of payment, and even whether payment occurs, is dependent upon the timing of delivery of albums and musical compositions, the timing and amount of payment of these commitments as presented in the above summary can vary significantly.

The Company routinely enters into asset acquisition agreements, which can have deferred minimum funding commitments and other related obligations, as reflected in the table above.

Critical Accounting Policies and Estimates

We believe that the following accounting policies and estimates involve a high degree of judgment and complexity. Accordingly, these are the policies and estimates we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of our operations. See Note 2, “ Summary of Significant Accounting Policies” to the accompanying consolidated financial statements for the fiscal years ended March 31, 2026 and 2025, contained in Part II, Item 8 of this Form 10-K for a description of our other significant accounting policies. The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and judgments that affect the amounts reported in those financial statements and related notes thereto. We believe we have used reasonable estimates and assumptions in preparing the consolidated financial statements. Although we believe that the estimates we use are reasonable, due to the inherent uncertainty involved in making those estimates, actual results reported in future periods could differ from those estimates.

Revenue and Cost Recognition

Revenues

As required by Financial Accounting Standards Board (“ FASB ”) Accounting Standards Codification (“ ASC ”) Topic 606, Revenue from Contracts with Customers (“ ASC 606 ”), Reservoir 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 to which Reservoir is expected to be entitled in exchange for those services or goods.

Music Publishing

Music Publishing revenues are earned from the receipt of royalties relating to the licensing of rights in musical compositions and the sale of published sheet music and songbooks. The receipt of royalties principally relates to amounts earned from the public

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performance of musical compositions, the mechanical reproduction of musical compositions on recorded media including digital formats and the use of musical compositions in synchronization with visual images. Music publishing royalties, except for synchronization royalties, generally are recognized when the sale or usage occurs. The most common form of consideration for publishing contracts is sales- and usage-based royalties. The collecting societies submit usage reports, typically with payment for royalties due, often on a quarterly or biannual reporting period, in arrears. Royalties are recognized as the sale or usage occurs based upon usage reports and, when these reports are not available, royalties are estimated based on historical data, such as recent royalties reported, company-specific information with respect to changes in repertoire, industry information and other relevant trends. Synchronization revenue is typically recognized as revenue when the customer has a right to access the license, which is when control is transferred to the customer.

Recorded Music

Revenues from the sale or license of Recorded Music products through digital distribution channels are typically recognized when the sale or usage occurs based on usage reports received from the customer. Digital licensing contracts are generally long-term with consideration in the form of sales- and usage-based royalties that are typically received monthly. For certain licenses where the consideration is fixed and the intellectual property being licensed is static, revenue is recognized at the point in time when control of the licensed content is transferred to the customer. 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.

Accounting for Royalty Costs and Royalty Advances

Reservoir incurs royalty costs that are payable to our recording artists and songwriters generated from the sale or license of our music publishing copyrights and recorded music catalogue. Royalties are calculated using negotiated rates in accordance with songwriter and recording artist contracts. Calculations are based on revenue earned or user/usage measures or by a combination of these calculations. There are instances where such data is not available to be processed and royalty cost calculations may be complex or involve judgments about significant volumes of data to be processed and analyzed.

In many instances, Reservoir commits to pay our recording artists and songwriters royalties in advance of future sales. Reservoir accounts for these advances under the related guidance in FASB ASC Topic 928, Entertainment — Music (“ ASC 928 ”). Under ASC 928, Reservoir capitalizes as assets certain advances, which it believes are recoverable from future royalties to be earned by the recording artist or songwriter, when paid. Recoverability is assessed upon initial commitment of the advance based upon Reservoir’s forecast of anticipated revenue from the sale of future and existing sound recordings or musical compositions. Reservoir regularly updates the recoverability assessment as additional data is available. In determining whether the advance is recoverable, Reservoir evaluates the current and past popularity of the songwriter or recording artist, the sales or license history of the songwriter or recording artist, the initial or expected commercial acceptability of the product, the current and past popularity of the genre of music that the product is designed to appeal to, and other relevant factors. Advances vary in both amount and expected life based on the underlying songwriter or recording artist. 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.

Acquisitions and Business Combinations

In conjunction with each acquisition transaction, Reservoir assesses whether the transaction should follow accounting guidance applicable to an asset acquisition or a business combination. This assessment requires an evaluation of whether the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, resulting in an asset acquisition or, if not, resulting in a business combination. If treated as an asset acquisition, the assets are recorded on a relative fair value basis and related acquisition costs are capitalized as part of the asset.

If treated as a business combination, Reservoir recognizes identifiable assets acquired, liabilities assumed, and non-controlling interests at their fair values at the acquisition date. Any consideration paid in excess of the net fair value of the identifiable assets and liabilities acquired in a business combination is recorded to goodwill and acquisition-related costs are expensed as incurred.

Intangible Assets

Intangible assets consist primarily of music catalogs (publishing and recorded). Intangible assets are recorded at fair value in a business combination and relative fair value in an asset acquisition. Intangible assets are amortized over their expected useful lives using the straight-line method.

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Reservoir periodically reviews the carrying value of its amortizable intangible assets, whenever events or changes in circumstances indicate that the carrying value may not be recoverable or that the lives assigned may no longer be appropriate. To the extent the estimated future cash inflows attributable to the asset, less estimated future cash outflows, are less than the carrying amount, an impairment loss is recognized in an amount equal to the difference between the carrying value of such asset and its fair value. If it is determined that events and circumstances warrant a revision to the remaining period of amortization, an asset’s remaining useful life would be changed, and the remaining carrying amount of the asset would be amortized prospectively over that revised remaining useful life.

New Accounting Pronouncements

See Note 2, “ Summary of Significant Accounting Policies” to the accompanying consolidated financial statements for the fiscal years ended March 31, 2026 and 2025, contained in Part II, Item 8 of this Form 10-K.

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