NAPSTER GROUP PLC (FORMERLY MELODYVR GROUP PLC)

CONSOLIDATED

REPORT AND FINANCIAL STATEMENTS

FOR THE PERIOD ENDED

28 DECEMBER 2020

Company Number: 05628362

NAPSTER GROUP PLC (FORMERLY MELODYVR GROUP PLC)

REPORT AND FINANCIAL ACTIVITIES

FOR THE PERIOD ENDED 28 DECEMBER 2020

CONTENTS

Page

Chairman's statement

2

Strategic report

6

Directors' report

9

Independent auditors' report

13

Consolidated income statement and statement of comprehensive income

19

Consolidated Statement of financial position

20

Consolidated Statement of changes in equity

21

Consolidated Statement of cash flows

22

Statement of financial position - company

23

Statement of changes in equity - company

24

Statement of cash flows - company

25

Notes to the financial statements

26 - 50

NAPSTER GROUP PLC (FORMERLY MELODYVR GROUP PLC)

COMPANY INFORMATION

FOR THE PERIOD ENDED 28 DECEMBER 2020

Directors

Anthony Matchett

Steven Hancock

Simon Cole

Ian Hanson (resigned: 1st April 2020)

Andy Botha

Grant Dollens (appointed: 14th April 2020)

Secretary

Sohail Bhatti (appointed 12 November 2020)

Reed Smith (resigned 12 November 2020)

Registered Office

55 Poland Street

London

England

W1F 7NN

Company number

05628362

Registrar and transfer office

Neville Registrars Limited

Neville House

18 Laurel Lane

Halesowen

B63 3DA

Auditors

RMT Accountants & Business Advisors Limited

Gosforth Park Avenue

Newcastle upon Tyne

NE12 8EG

Nominated adviser

Arden Partners plc

125 Old Broad Street

London

EC2N 1AR

Broker

Arden Partners plc

125 Old Broad Street

London

EC2N 1AR

1

NAPSTER GROUP PLC (FORMERLY MELODYVR GROUP PLC)

CHAIRMAN'S STATEMENT

FOR THE PERIOD ENDED 28 DECEMBER 2020

I am pleased to present our Group results for the period to 28 December 2020. This was a difficult period for everyone, with the COVID 19 pandemic fundamentally changing the way people lived their lives and, before anything else, I would like to thank all our employees for their commitment and hard work during this challenging time. With the reverse acquisition of Napster being completed on 29 December 2020, your Board felt it would be a more appropriate representation of the business for 2020 to prepare these financial statements to an accounting reference date which immediately preceded the completion of the Napster business. In doing so, these results solely reflect the activities of the MelodyVR business and conclude definitively what has been a period of significant progress and development since the Company initially listed in 2015.

Having taken this decision, our first set of results incorporating the enlarged Napster business will be for the interim period ending 30 June 2021. In the absence of any pre-acquisition trading update our interim results will provide a clear picture of activities for the enlarged business and will provide a meaningful performance comparative for future trading periods.

The acquisition of the Napster business marked a significant step in our Company's development. As a Board we are aware of the amount of capital we have had to invest in our technology and people over the last 5 years. This investment allowed us to create a platform in the music industry which gave us the credibility to secure the acquisition of Napster from a competitive field of multi-national suitors also vying to acquire the business. The Board believes that this acquisition will be the catalyst for us to transform the revenue and growth profile of the Company.

Looking forward, we see an extremely exciting future ahead for our business. We expect to launch an updated version of Napster towards the end of Q4 2021 that combines the numerous content types that the legacy Napster and MelodyVR platforms represented in to a single offering. Music is much more than sound and our new platform will offer the only streaming membership where fans can get access to an entire repertoire of an artist's work, be it on stage, in the studio or under the radar. We believe the front row belongs to everybody and our new subscription service will provide all area access including the ability to be part of sold out "360" shows live from across the globe, 4K+ video, hi-resolution and immersive audio, interviews, documentaries and downloadable libraries on any device, uninterrupted by advertising.

Following the launch of the new platform Napster will soon deliver a cross-platform experience that spans traditional listening on mobile devices, through to shared experiences on living room big screens - and beyond. We have the ambition to change an industry and have a solid-foundation to build on based on our heritage. Our primary objective is to drive significant customer and revenue growth and consumer acquisition via innovation whilst challenging engrained industry norms. As larger Digital Service Suppliers (" DSP's") diversify away from music content into areas such as spoken word

  • Napster will cement its position as the original music-platform for music fans, providing deeper connections with the artists they love, and a new platform to discover new music and talent.

We have a clear plan for monetisation of the new platform. Subscriber growth will be at our core - initially focussing on relationships with both existing and new telco partners as 5G mobile networks roll out across the globe and our partners look to showcase their own technology. MelodyVR already has agreements in place with SingTel, Telefonica and NOS. We expect to reach new agreements with these partners as well as the 6 other telco providers Napster currently partners with. In addition, we are in discussions with several new telco operators about partnerships for the new Napster platform and expect to conclude several agreements during 2021 ahead of the platform's launch. Further announcements in relation to new agreements will be made as and when they are signed.

The depth and breadth of our forthcoming content offering, which the Board believes to be unparalleled within the music industry, will be available via a single app download of Napster. Our established presence in 33 territories will provide an initial platform and foundation for the launch of our new service. In addition, we will seek to target emerging markets, which we believe to date have a lower level of penetration by the other streaming services, delivering value and access to unique content from our extensive content library of over 105m tracks and broadcast content. This targeted approach to new identified key markets will allow us to secure a more dominant market position and deliver a better return on our marketing investments.

Much progress has been made since the completion of the Napster acquisition. Our planning during the months leading up to the acquisition has enabled us to conclude many of the integration initiatives during the first quarter of 2021. As we have sought to eliminate duplicated functions and consolidate operations particularly within the areas of finance, marketing and

2

NAPSTER GROUP PLC (FORMERLY MELODYVR GROUP PLC)

CHAIRMAN'S STATEMENT (continued)

FOR THE PERIOD ENDED 28 DECEMBER 2020

licencing across our primary locations, to date we have been able to secure annualised OPEX savings of c.£4,8m, which in turn has allowed us to channel greater resource into the continued technical development of our new platform.

Given the global resonance of the Napster brand and its legacy as the original disruptor in the music industry, we have embraced its heritage and ethos for change. We have now completed the rebranding of our corporate identity in anticipation of the launch of our new service towards the end of 2021.

To fund these ambitions, we have secured a term loan from Davis Capital and a convertible loan facility from Swiss Investment firm Nice & Green. Davis Capital is represented by Lansing Davis, our largest shareholder who we expect to join the Board in the near future. Our relationship with Nice & Green has provided us with access to £8m of funding and contributes towards the c$40m of aggregate funding we have secured to fund our operations over the near term as we work towards the launch of our new Napster platform. As a company, we are pleased to be partnered with Nice & Green who we view as both a responsible lender and who have retained the vast majority of their shareholding and have embraced both our ambition and vision for our business, providing us with the ability to secure regular funding from the public markets. As a long term quasi-institutional supporter of our business, this access to capital, which is often on terms more favourable than a traditional equity placings, provides for cost effective equity issue without significant shareholder dilution.

Significant events in 2020

2020 was one of the most challenging years on record for live music as the COVID 19 pandemic resulted in many countries implementing lockdowns. We were able to adapt our offering to provide music fans with a number of events that continued to build awareness of MelodyVR, created new revenue opportunities and drove an increase in subscriber numbers:

  • In May 2020, MelodyVR launched "Live from LA" a music series delivered directly to fans homes around the world throughout the pandemic, broadcast from a COVID safe purpose built studio in Los Angeles and featuring exclusive shows from artists such as John Legend, Cypress Hill and Kesha;
  • July saw Wireless Festival and MelodyVR come together to present Wireless Connect - a three day virtual festival featuring more than 70 artists;
  • In September 2020, MelodyVR, Live Nation and Ticketmaster commenced their virtual paid for concert series
    "Live from O2 Academy Brixton" connecting artists and fans for live concerts in "360" degree VR;
  • In December 2020, British musical icon Liam Gallagher performed a one of a kind virtual event "Down by the River Thames" streamed to a global audience and generating our first ticketing revenue;
  • On 29th December 2020 MelodyVR completed the acquisition of the Napster business paving the way for a unique music service offering both immersive live performances, music streaming services and much more.

Review of business and 2020 financial results

As set out above these results reflect the activities of the Group for the period up to and immediately preceding the acquisition of the Napster business. As such, these results reflect the continuing initiatives to extend awareness of the MelodyVR platform and consequent engagement with its content. This was made more challenging given the global COVID pandemic. During the period, our business generated more than 187k new installs of our app and we close the period with, in excess of 325k users in addition to successfully positioning the Company as the leading suitor in the Napster acquisition tender process.

The restrictions imposed by the pandemic and the consequent cancellation of all audience attended events during the course of 2020 provided us with the ability to host a series of events that ensured artists could continue to engage with their fans. Our Live in LA series was host to artists including John Legend, Cypress Hill, Katelyn Tarver, Zella Day, Jo Jo, Nelly and Kesha and accelerated both awareness and acceptance of live streamed content on the MelodyVR platform.

In July 2020, we hosted Wireless Connect in partnership with Festival Republic, a division of Live Nation which saw more than 70 artists perform at the Alexandra Palace to a virtual audience over three days. This event not only showcased our ability as leaders in our field to capture, create and broadcast live immersive content but also captured the imagination of more than 132,000 fans who experienced this immersive festival over three days. Our period closed with a further series of live virtual events held at London's Brixton Academy and staged in partnership with both Live Nation and Ticketmaster.

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Napster Group plc published this content on 30 June 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 June 2021 10:47:37 UTC.