TIDMNAPS

RNS Number : 2369D

Napster Group PLC

28 June 2021

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

   For Immediate Release      28 June 2021 

Napster Group PLC

('NAPS', the 'Group' or the 'Company')

Full Year Results

Napster Group PLC (AIM: NAPS), Napster Group PLC a leading music company and operator of the MelodyVR and Napster platforms, is pleased to announce its results for the period ended 28 December 2020.

Highlights

-- 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;

-- MelodyVR presented Wireless Connect - a three-day virtual festival featuring more than 70 artists;

-- 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;

-- British musical icon Liam Gallagher performed a one-of-a-kind virtual event "Down by the River Thames" streamed by MelodyVR to a global audience and generating our first ticketing revenue;

-- 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.

Anthony Matchett, Group CEO commented:

"Whilst these results relate to a period immediately preceding our acquisition of the Napster business, they underline our achievements over the course of the last five years and how were successfully able to differentiate ourselves against other suitors in the purchase of Napster.

I am proud of how our talented team, in the face of the obstacles created by COVID 19, took our MelodyVR business to new levels in 2020 and preserved fan and artist engagement. We nearly doubled our users to 325,000, launched a series of live events from London and LA, broadcast the virtual Wireless Connect festival in partnership with Live Nation and at the end of the year, demonstrated our ability to monetise our content via our first paid ticketed event which sold c.40k tickets for Liam Gallagher's "Down by the River Thames".

Our ambition now, having substantially completed the merger of our business with Napster, is to combine our resources and content, making the forthcoming relaunch Napster the new benchmark in music subscription services. We will provide deeper engagement for fans across music with live access to sold out events, 4K+ video, hi-resolution and immersive audio, interviews, documentaries, and over 105m tracks of recorded audio . This period has provided the strongest foundation for that vision and we look forward to the months ahead and the relaunch of the Napster brand."

For further information please contact:

Napster Group PLC email@napster.group

Anthony Matchett, Group CEO

Equitory (IR) equitory@napster.com

Clara Melia/Geoff Callow

   Arden Partners plc (Nominated Adviser and Broker)                  +44 (0)20 7614 5900 

Corporate Finance: Ruari McGirr / Antonio Bossi / Akhil Shah

Corporate Broking: Simon Johnson

Chairman's Statement

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 into 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 licencing across our primary locations, to date we have been able to secure annualised OPEX savings of c.GBP4,8m, 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 GBP8m 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 29(th) 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.

Given the exposure of our live series earlier in the period and the success of Wireless Connect, our series in London sought for the first time to monetise our content via the sale of live digital tickets through Ticketmaster. The series concluded with a performance by Liam Gallagher of Oasis fame on the Thames, an event for which we sold close to 40,000 tickets at an average ticket price of GBP12. With attendance restrictions set to continue for the foreseeable future, our ability to monetise our live performances with meaningful paid ticket sales, not only illustrates increasing engagement with immersive events but also a growing digital engagement between artist and fan, and one which will clearly differentiate our new platform offering post-launch.

Financial Results

The Group reported revenues for the period totalling GBP987.7k (2019 : GBP195.0k) resulting primarily from platform content sales and subscription income from our partnership with O2. The gross loss of GBP4.6m (2019 : GBP1.6m) has been calculated after the deduction of content creation costs and amounts due to rights holders. Cost of sales of GBP5.6m (2019 : GBP1.8m) includes production costs associated with our "Live in LA" on demand series and Wireless Connect Festival staged in partnership with Live Nation, as well as commissions and revenue share arrangements due to app stores, record labels, publishers, song writers and event / venue partners. Given the nature of these "free to air" events, we have not sought to capitalise any costs associated with the creation of this content.

After administrative expenses of GBP21.5m (2019 : GBP14.2m) the Group reported an operating loss for the period of GBP26.0m (2019 : GBP15.9m). Administrative expenses increased by GBP7.3m over that reported for the period to 31 December 2019. An 11% rise in staff numbers over the previous period together with an increase in corporate premises costs despite favourable rental arrangements during the months of lock down accounted for GBP4.3m of this increase. In December 2020, the Group announced that in anticipation of its acquisition of the Napster business it would commence a review of its resource requirements in anticipation of integrating the two businesses. Provisions totalling GBP1.2m are also included within administrative expenses which include the costs of reorganisation, impairment of the Group's viewer inventory and intangible content assets and for the non-recovery of certain receivables form entities significantly impacted by the pandemic.

After non-recurring and non-cash items, net financing charges and taxation including Research and Development Tax credits totalling GBP4.4m associated with the development and creation of new capture and broadcast knowledge, the Group reported a loss of GBP22.4m (2019 : GBP15.0m) resulting in a loss per share of 1.3p (2019 : 1.1p).

As 28 December 2020 the Group had cash reserves of GBP2.6m (2020: GBP6.8m). On 29 December 2020, as part of the acquisition funding raised to complete the purchase of the Napster business, the Group raised by way of an equity issue a further $10.1m and entered in to a $25m term loan arrangement with Davis Capital. These funding arrangements when combined with our facility with Nice & Green as referred to above and further equity placing completed during February 2021 will provide the group with access to c.$40m of funding during the course of 2021.

Outlook

We believe that 2021 is a year where we will lay the foundations for future growth. Our ambition this year is to develop and launch our vision for a next generation music platform preserving the best elements of the existing MelodyVR and Napster technologies and supplementing them with new content, extending beyond the boundaries of traditional music platforms. Our belief is that the new platform will be attractive to music fans and artists, offering fans more content at a single price point and fairly compensating artists whilst offering them greater control of their content.

During the course of 2021 we expect to invest some $27m (including internal resourcing) in the development of our differentiated cloud-based platform which is intended to launch during Q4 2021 across mobile, web and TV.

We have started marketing the new platform within the music industry and as we enter the second half of 2021, we will launch a co-ordinated marketing and PR campaign to build awareness of the new platform and drive subscriber growth. This campaign will see:

   -       the launch of the new Napster brand identity 
   -       previews of the new platform design, look and feel 
   -       third party marketing agreements and partnerships 
   -       a media campaign to promote the new platform 

I would like to thank all our employees for their commitment and hard work during this challenging time - during which the cancellation of live mass attended events and performances has created many unforeseen challenges for the music industry. In addition, we would also like to take this opportunity to extend our gratitude to our shareholders, customers and business partners for their support, effort and insights over the course of this last period - our continued progress would not have been attained without the efforts of the management team and the unwavering commitment of our staff. As we increase the level of commercial activity, we will look to keep our shareholders updated through a combination of regular interviews on prominent retail investor platforms and, when appropriate, stock exchange announcements.

Having completed the Napster acquisition, we are excited at the prospects for the forthcoming growth of our business and our ability to become the new benchmark in music subscription services serving artists and fans alike. At our core will be subscriber and revenue growth and the ambition of serving fans and artists alike; delivering long-term value for all of our stakeholders. We look forward to updating you over the coming weeks and months and sharing our progress during the lead up to our new platform launch later this year.

Simon Cole

Chairman

PRIMARY FINANCIAL STATEMENTS

Consolidated Statement of Comprehensive Income for the period ended 28 December 2020

 
                                                       2020                   2019 
                                                       GBP                    GBP 
 
 Continuing operations:                                     987,726                194,971 
  Revenue                                               (5,562,891)            (1,832,042) 
  Cost of sales                                  ------------------     ------------------ 
                                                        (4,575,165)            (1,637,071) 
  GROSS LOSS                                     ------------------     ------------------ 
 Administrative expenses                               (21,451,129)           (14,227,561) 
                                                 ------------------     ------------------ 
 OPERATING LOSS                                        (26,026,294)           (15,864,632) 
 
 Operating loss before non-cash items                  (23,618,286)           (13,794,485) 
 
  Depreciation                                          (1,276,340)              (624,862) 
  Amortisation                                            (996,046)            (1,001,809) 
  Share based payments                                    (135,622)              (443,476) 
                                                 ------------------     ------------------ 
  OPERATING LOSS                                       (26,026,294)           (15,864,632) 
--------------------------------------------  ---------------------  --------------------- 
 
   Finance income                                            29,597                106,891 
 Finance costs                                             (67,990)               (14,229) 
  Foreign exchange gain/(loss)                            (749,808)              (381,101) 
                                                 ------------------     ------------------ 
 LOSS FOR THE PERIOD BEFORE TAXATION                   (26,814,495)           (16,153,071) 
 
 Taxation                                                 4,377,298              1,184,287 
                                                 ------------------     ------------------ 
 LOSS FOR THE PERIOD                                   (22,437,197)           (14,968,784) 
                                                          =========              ========= 
 Attributable to: 
  Owners of the parent company                         (22,437,197)           (14,968,784) 
  Non - controlling interest                                      -                      - 
                                                 ------------------     ------------------ 
 LOSS PER SHARE - from continuing                     (1.3)p                 (1.1)p 
  operations - basic and diluted                     =========              ========= 
 
 
 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME            2020                 2019 
 FOR THE PERIODED 28 DECEMBER                          GBP                  GBP 
  2020 
 
 LOSS FOR THE PERIOD                                      (22,437,197)         (14,968,784) 
 OTHER COMPREHENSIVE INCOME: 
  Exchange differences on translating 
  foreign operations                                           230,091              109,900 
                                                    ------------------   ------------------ 
 TOTAL COMPREHENSIVE EXPENSE FOR THE PERIOD               (22,207,106)         (14,858,884) 
                                                             =========            ========= 
 

Consolidated Statement of Financial Position as at 28 December 2020

 
                                                 2020                      2019 
                                                  GBP                       GBP 
 ASSETS 
 NON-CURRENT ASSETS 
 Property, plant and equipment                        1,019,662                   813,728 
  Right-of-use assets                                 1,498,740                   515,706 
  Financial assets                                      243,809                   235,446 
  Goodwill                                              603,476                   603,476 
 Other intangible assets                                811,737                 2,043,574 
                                        -----------------------   ----------------------- 
 TOTAL NON-CURRENT ASSETS                             4,177,424                 4,211,930 
                                        -----------------------   ----------------------- 
 
 CURRENT ASSETS 
 Inventories                                                  -                   371,877 
 Trade and other receivables                         16,359,041                 3,382,819 
 Cash and cash equivalents                            2,622,526                 6,795,341 
                                        -----------------------   ----------------------- 
 TOTAL CURRENT ASSETS                                18,981,567                10,550,037 
                                        -----------------------   ----------------------- 
 TOTAL ASSETS                                        23,158,991                14,761,967 
                                                    ===========               =========== 
 
 CURRENT LIABILITIES 
 Trade and other payables                           (5,156,790)               (1,143,311) 
 Borrowings                                         (4,317,451)                         - 
 Lease liabilities                                    (644,018)                 (156,964) 
                                        -----------------------   ----------------------- 
                                                   (10,118,259)               (1,300,275) 
 NON-CURRENT LIABILITIES 
 Lease liabilities                                    (970,660)                 (323,443) 
 
                                        -----------------------   ----------------------- 
 NET ASSETS                                          12,070,072                13,138,249 
                                                    ===========               =========== 
 
 EQUITY 
 Share capital                                       21,226,709                14,944,850 
 Share premium reserve                               55,252,677                40,531,229 
 Retained Earnings                                 (57,679,787)              (35,242,590) 
 Share option reserve                                 2,553,363                 2,417,741 
 Merger relief reserve                                  486,611                   486,611 
 Non-controlling interests                             (44,990)                  (44,990) 
  Currency Translation Reserve                          278,032                    47,941 
 Reverse takeover reserve                          (10,002,543)              (10,002,543) 
                                        -----------------------   ----------------------- 
 TOTAL EQUITY                                        12,070,072                13,138,249 
                                                    ===========               =========== 
 

Consolidated Statement of Changes in Equity For the period ended 28 December 2020

 
                       Share        Share      Merger      Share       Retained       Reverse      Non-Controlling    Currency     Total Equity 
                      capital      premium     Relief     Option        Losses        Takeover        Interest       Translation 
                                               Reserve    Reserve                     Reserve                          Reserve 
                        GBP          GBP         GBP        GBP          GBP            GBP              GBP             GBP           GBP 
 
 Balance at 1 
  January 2019       13,690,204   36,258,164   486,611   1,974,265   (20,273,806)   (10,002,543)          (44,990)      (61,959)     22,025,946 
 
 Share issue          1,111,111    3,477,603         -           -              -              -                 -             -      4,588,714 
 Grant of share 
  options/warrants      143,535      795,462         -     443,476              -              -                 -             -      1,382,473 
 Loss for the 
  period                      -            -         -           -   (14,968,784)              -                 -             -   (14,968,784) 
 Other 
 comprehensive 
 income: 
 Currency 
  transaction 
  reserve                     -            -         -           -              -              -                 -       109,900        109,900 
 
 Balance at 31 
  December 2019      14,944,850   40,531,229   486,611   2,417,741   (35,242,590)   (10,002,543)          (44,990)        47,941     13,138,249 
                    -----------  -----------  --------  ----------  -------------  -------------  ----------------  ------------  ------------- 
 
 Share issue          6,104,354   14,690,473         -           -              -              -                 -             -     20,794,827 
 Grant of share 
  options/warrants      177,505       30,975         -     135,622              -              -                 -             -        344,102 
 Loss for the 
  period                      -            -         -           -   (22,437,197)              -                 -             -   (22,437,197) 
 Other 
 comprehensive 
 income: 
 Currency 
  transaction 
  reserve                     -            -         -           -              -              -                 -       230,091        230,091 
 
 Balance at 28 
  December 2020      21,226,709   55,252,677   486,611   2,553,363   (57,679,787)   (10,002,543)          (44,990)       278,032     12,070,072 
                    ===========  ===========  ========  ==========  =============  =============  ================  ============  ============= 
 

Consolidated Statement of Cash Flows For the period ended 28 December 2020

 
                                                                 2020                    2019 
                                                                  GBP                     GBP 
 
   Operating activities 
 Loss from continuing operations before tax                       (26,814,495)            (16,153,071) 
 
 Adjustments for: 
 R&D taxation credits                                                1,747,190                       - 
  Depreciation of tangible assets                                      889,549                 610,128 
  Depreciation of right-of-use assets                                  386,791                  14,734 
  Amortisation of intangible assets                                    996,046               1,001,809 
 Loss on disposal of intangible and tangible assets                    356,905                 169,596 
 Share based payment expense                                           135,622                 443,476 
 Increase in inventories                                               371,877               (371,877) 
 Increase in trade and other receivables                          (10,346,114)               (596,636) 
 (Decrease)/increase in trade and other payables                     4,013,479               (790,126) 
                                                         ---------------------   --------------------- 
 
 NET CASH OUTFLOW FROM OPERATING ACTIVITIES                       (28,263,150)            (15,671,967) 
                                                         ---------------------   --------------------- 
 Investing activities 
 Purchase of property, plant and equipment                         (1,216,595)               (489,864) 
 Investment in intangible assets                                             -             (1,722,908) 
 Purchase of financial assets                                                -               (235,446) 
                                                         ---------------------   --------------------- 
 NET CASH OUTFLOW FROM INVESTING ACTIVITIES                        (1,216,595)             (2,448,218) 
 
 Financing activities 
 Proceeds from issue of ordinary share capital                      20,794,827               4,588,714 
 Proceeds from the exercise of warrants                                208,480                 938,997 
 Proceeds from borrowings                                            4,317,451                       - 
                                                         ---------------------   --------------------- 
 NET CASH GENERATED FROM FINANCING ACTIVITIES                       25,320,758               5,527,711 
                                                         ---------------------   --------------------- 
 
 (Decrease)/increase in cash and cash equivalents                  (4,158,987)            (12,592,474) 
  Effect of changes in foreign exchange rates                         (13,828)                  59,867 
 Cash and cash equivalents brought forward                           6,795,341              19,327,948 
                                                         ---------------------   --------------------- 
 CASH AND CASH EQUIVALENTS CARRIED FORWARD                           2,622,526               6,795,341 
                                                                   ===========             =========== 
 
 
 
   ABRIDGED NOTES TO THE PRIMARY FINANCIAL STATEMENTS 
   FOR THE PERIODED 28 DECEMBER 2020 
 

The Financial Statements of the Group for the period ended 28 December 2020 and for the year ended 31 December 2019 have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

The financial information set out above does not constitute the Company's statutory accounts for the period ended 28 December 2020 or the year ended 31 December 2019 as defined by sec on 435 of the Companies Act 2006 but is derived from those accounts. Statutory accounts for 2019 have been delivered to the Registrar of Companies, and those for 2020 will be delivered in due course.

Basis of Consolidation

Where the Group has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.

Business Combinations

The Consolidated Financial Statements comprise the period to 28 December 2020. Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. Consolidated within these financial statements are results from subsidiaries: MelodyVR Ltd (100% ownership), MelodyVR Inc (100% ownership), MelodyVR Holdings Ltd (100% ownership) and Immersive Construction Ltd (51% ownership).

Going Concern

The Financial Statements have been prepared on the going concern basis. In adopting a going concern basis for the preparation of the financial statements, the Directors have made appropriate enquiries and have considered the Group's business activities, cash flows and liquidity position, in addition to the principal risks and uncertainties set out in the strategic report.

The Directors have prepared cash flow forecasts through to June 2022, covering the 12-month period beyond the signing date of these financial statements, which took into account sensitivity analysis with regard to some of the material variables and assumptions made in the preparation of those forecasts, including the continuing potential impact of COVID 19 to ensure that cashflow is positively managed and the impact to the Group's operations is mitigated.

The Directors expect that, until the launch of its new music platform later this year, the Group will continue to experience a reduction in revenues generated from its music streaming service and will continue to be loss-making. Whilst the Group has adequate resources to fund operations up to and beyond end of 2021, the management of working capital is critical during this period.

Our material variables and assumptions include the uptake of our new service which we plan to launch in Q4 2021 and a reliance on significant contracts. The Board is conscious of the need to manage its cash resources carefully if its operations are to be funded for 12 months from the date of this report and any delay in the launch of the new service or in the award of new contracts could have a materially adverse effect on our headroom.

Mitigations available to the business include general reductions in expenditure alongside management of working capital terms with suppliers, as well as the ability for the business to secure additional funding if required. The Board has also reviewed the plans made by management for securing additional financing should this become necessary.

Based on the Group's forecasts, and subject to the above, the Directors are satisfied that Group as a whole has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the financial statements have been prepared on the going concern basis.

Statement of compliance

a) New standards, interpretations and amendments effective from 1 January 2020

During the period ended 28 December 2020, the Group were not required to adopt any new IFRS, IAS or amendments issued by the IASB, and interpretations by the IFRS Interpretations Committee, which would have had a material impact on the Group's financial statements.

b) New standards, interpretations and amendments not yet effective

The Group currently adopts all relevant accounting standards that have been endorsed by the EU. There are various standards that are expected to be endorsed in 2021. The Group believes these standards will have no material impact on the financial statements.

Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received in the ordinary course of the Group's activities, excluding discounts, rebates, value added tax and other sales taxes.

   (a)        Content sales 

Content revenue is recognised in the period the content is purchased from the MelodyVR platform either directly or via third party resellers. Revenue from content sales is recognised gross of costs paid to third party licence and rights holders in line with contracts, with the corresponding cost recognised as cost of sales.

   (b)        Content licence revenue 

Revenue from licence contracts for the use of artist/label content is recognised over the period to which the contract relates.

   (c)        Interest income 

Interest income is recognised using the effective interest method.

Capitalisation of development and content creation costs

The Group recognises both internal development costs as well as VR content creation costs as intangible assets only when the following criteria are met: the technical feasibility of completing the intangible asset exists, there is an intent to complete and an ability to use or sell the intangible asset, the intangible asset will generate probable future economic benefits, there are adequate resources available to complete the development and to use or sell the intangible asset, and there is the ability to reliably measure the expenditure attributable to the intangible asset during its development.

Intangible assets with finite lives are amortised on a straight-line basis over their estimated useful lives and are assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset are reviewed at least annually. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation of intangible assets is recognised in the consolidated statement of comprehensive income/costs in the expense category consistent with the function of the intangible assets.

Amortisation rates applicable to development costs is 33% straight line.

Amortisation rates applicable to content assets released during the period is as follows:

   --           Year 1: 80% 
   --           Year 2: 15% 
   --           Year 3: 5% 

Content assets in production are not amortised as these assets are still in development and not in the condition necessary to be capable of operating in the manner intended by management. At the point the asset is in operational condition it is reclassified to Content Assets - released and is amortised in line with the above amortisation policy.

   1.         LOSS FROM OPERATIONS 
 
 This has been arrived at after                    Group 
  charging: 
                                                2020         2019 
                                                 GBP          GBP 
 Depreciation of property, plant 
  and equipment                              889,549      610,128 
 Depreciation of right-of-use 
  assets                                     386,791       14,734 
 Amortisation on internally 
  generated intangible assets                996,046    1,001,809 
 Loss on disposal of intangible 
  assets                                     235,791      169,596 
 Loss on disposal of tangible                121,114            - 
  assets 
                                          === ======   === ====== 
 
   2.         AUDITOR'S REMUNERATION 
 
                                                                    Group 
                                                                 2020                  2019 
 During the period the Group obtained                             GBP                   GBP 
  the following service from the Group's 
  auditors: 
 
 Fees payable to the Group's 
  auditors for the audit of the 
  Group's annual accounts                                      26,000                26,000 
 Fees payable to the Group's 
  auditors for other services: 
 Tax services                                                   4,000                 4,000 
 Other services                                                30,000                     - 
                                                  -------------------   ------------------- 
                                                               60,000                30,000 
                                                            =========             ========= 
 
   3.         DIRECTORS' AND EMPLOYEE REMUNERATION 
 
                                                                          Group 
                                                                   2020                  2019 
 The amount paid to directors and employees,                                GBP                   GBP 
  is as follows: 
 
 Wages and salaries                                                   8,650,828             5,157,779 
  Social security costs                                                 902,648               631,586 
  Pension costs                                                         146,891               114,874 
 Share based payment costs                                              135,622               443,476 
                                                            -------------------   ------------------- 
                                                                      9,835,989             6,347,715 
                                                                      =========             ========= 
 
 

The average number of employees for the period was as follows:

 
                                      2020                                        2019 
                                     Group               Company                 Group               Company 
                                       No.                   No.                   No.                   No. 
 
 Directors                               5                     5                     5                     5 
 Senior Management                       -                     -                     -                     - 
 Staff                                  82                     -                    73                     - 
                       -------------------   -------------------   -------------------   ------------------- 
                                        87                     5                    78                     5 
                                 =========             =========             =========             ========= 
 
 
 
       Details for directors' remuneration 
        is as follows: 
                                                      Salary            Total                 Total 
                                                                         2020                  2019 
  Director                                             GBP               GBP                   GBP 
 
  Anthony Matchett                                     396,000             1,282,191               372,545 
  Steven Hancock                                       316,000               625,403               270,910 
  Sebastian Theron (resigned: 15 January 
   2019)                                                     -                     -                10,154 
  Simon Cole                                           150,000               311,881                96,667 
  Ian Hanson (resigned: 1 April 2020)                        -                33,333                40,000 
  Andy Botha                                            50,000                45,833                40,000 
  Grant Dollens (appointed: 14 April                         -                     -                     - 
   2020) 
                                                                 -------------------   ------------------- 
                                                                           2,298,641               830,276 
                                                                           =========             ========= 
 
 

The remuneration committee approved the salary increases and bonuses for executive directors during the period. Non-executive fees were also increased in line with market rates.

   4.         EARNINGS PER SHARE 

Basic earnings per share is calculated by dividing the loss attributable to shareholders by the weighted average number of ordinary shares in issue during the period. IAS 33 requires presentation of diluted EPS when a company could be called upon to issue shares that would decrease earnings per share, or increase the loss per share. For a loss-making company with outstanding share options and warrants, net loss per share would be decreased by the exercise of options. Therefore, the anti-dilutive potential ordinary shares are disregarded in the calculation of diluted EPS. Reconciliation of the profit and weighted average number of shares used in the calculation are set out below:

 
                                                       2020                      2019 
                                                        GBP                       GBP 
 Loss attributable to equity holders of the Company: 
 Continuing and total operations               (22,437,197)              (14,968,784) 
                                    -----------------------   ----------------------- 
                                              No. of shares             No. of shares 
 
 Weighted average number of 
  ordinary shares for basic 
  earnings                                    1,770,398,225             1,368,304,682 
                                    -----------------------   ----------------------- 
 
                                                  Pence per                 Pence per 
                                                      Share                     Share 
 Loss per share 
 Basic and diluted per share 
 Continuing and total operations                     (1.3p)                    (1.1p) 
                                                ===========               =========== 
 
   5.   INTANGIBLE FIXED ASSETS 
 
 Group                                               Development            Content assets            Content assets 
                              Goodwill                     costs           - in production                - released                     Total 
 Cost                              GBP                       GBP                       GBP                       GBP                       GBP 
 At 1 
  January 
  2019                         603,476                   667,819                   646,344                   506,981                 2,424,620 
 Additions                           -                 1,282,545                   101,999                   338,364                 1,722,908 
 Disposals                           -                  (69,871)                 (126,766)                         -                 (196,637) 
 Transfers                           -                         -                 (306,701)                   306,701                         - 
               -----------------------   -----------------------   -----------------------   -----------------------   ----------------------- 
 At 31 
  December 
  2019                         603,476                 1,880,493                   314,876                 1,152,046                 3,950,891 
               -----------------------   -----------------------   -----------------------   -----------------------   ----------------------- 
 At 1 
  January 
  2020                         603,476                 1,880,493                   314,876                 1,152,046                 3,950,891 
 Additions                           -                         -                         -                         -                         - 
 Disposals                           -                         -                 (235,791)                         -                 (235,791) 
 Transfers                           -                         -                  (79,085)                    79,085                         - 
               -----------------------   -----------------------   -----------------------   -----------------------   ----------------------- 
 At 28 
  December 
  2020                         603,476                 1,880,493                         -                 1,231,131                 3,715,100 
                           ===========               ===========               ===========               ===========               =========== 
 
 Accumulated Depreciation 
 At 1 
  January 
  2019                               -                   149,279                         -                   179,794                   329,073 
 Charge for 
  the period                         -                   413,294                         -                   588,515                 1,001,809 
 Eliminated 
  on 
  disposal                           -                  (27,041)                         -                         -                  (27,041) 
               -----------------------   -----------------------   -----------------------   -----------------------   ----------------------- 
 At 31 
  December 
  2019                               -                   535,532                         -                   768,309                 1,303,841 
               -----------------------   -----------------------   -----------------------   -----------------------   ----------------------- 
 At 1 
  January 
  2020                               -                   535,532                         -                   768,309                 1,303,841 
 Charge for 
  the period                         -                   626,795                         -                   369,251                   996,046 
 Eliminated 
 on disposal                         -                         -                         -                         -                         - 
               -----------------------   -----------------------   -----------------------   -----------------------   ----------------------- 
 At 28 
  December 
  2020                               -                 1,162,327                         -                 1,137,560                 2,299,887 
                           ===========               ===========               ===========               ===========               =========== 
 
 Net Book 
 Value 
 At 28 
  December 
  2020                         603,476                   718,166                         -                    93,571                 1,415,213 
                           ===========               ===========               ===========               ===========               =========== 
 At 31 
  December 
  2019                         603,476                 1,344,961                   314,876                   383,737                 2,647,050 
               -----------------------   -----------------------   -----------------------   -----------------------   ----------------------- 
 At 1 
  January 
  2019                         603,476                   518,540                   646,344                   327,187                 2,095,547 
               -----------------------   -----------------------   -----------------------   -----------------------   ----------------------- 
 

Goodwill has been calculated as the fair value of the Napster Group PLC ordinary shares pre reverse takeover less the net asset value of the Company at the time of take over. During the period the recognition criteria for intangibles assets as per IAS38 were satisfied for assets internally generated by the Company's subsidiary entity, MelodyVR Ltd and have therefore been capitalised.

The parent entity does not have any items of intangible fixed assets.

   6.   ISSUED SHARE CAPITAL 
 
                                       2020                                                        2019 
                        Number                          Nominal                     Number                          Nominal 
                          of                                                          of 
                        Shares                           Value                      Shares                           Value 
 Issued                  No.                              GBP                        No.                              GBP 
 and fully 
 paid 
 Ordinary 
  shares 
  of 1p 
  each                     2,061,845,991                    20,618,460                 1,433,660,237                    14,336,601 
 Deferred 
  shares 
  of 0.24p 
  each                       150,520,616                       361,249                   150,520,616                       361,249 
 Deferred 
  shares 
  of 0.95p 
  each                        26,000,000                       247,000                    26,000,000                       247,000 
             ---------------------------   ---------------------------   ---------------------------   --------------------------- 
                           2,238,366,607                    21,226,709                 1,610,180,853                    14,944,850 
                           =============                 =============                 =============                 ============= 
 
 
 Movement                                       Number                          Nominal                       Share 
                                                  of 
                                                Shares                           Value                       premium 
 Issued and fully paid during the                No.                              GBP                         GBP 
  period 
 Issue of new ordinary shares at 
  1.0p each                                            2,419,592                        24,196                             - 
  Issue of new ordinary shares at 
   1.1p each                                           9,245,270                        92,453                         9,245 
  Issue of new ordinary shares at 
   1.2p each                                           4,615,090                        46,151                         9,230 
 Issue of new ordinary shares at 
  1.85p each                                           1,470,588                        14,706                        12,500 
 Issue of new ordinary shares at 
  3.5p each                                          335,024,248                     3,350,243                     8,375,606 
  Issue of new ordinary shares at 
   3.75p each                                        275,410,966                     2,754,110                     7,573,802 
  Share issue costs                                            -                             -                   (1,258,935) 
                                     ---------------------------   ---------------------------   --------------------------- 
                                                     628,185,754                     6,281,859                    14,721,448 
                                                   =============                 =============                 ============= 
 

The deferred shares do not confer upon the holders right to any dividends or the right to attend or vote at general meetings of the Company.

   7.   SHARE OPTIONS AND WARRANTS 

The Group operates share-based payment arrangements to remunerate directors and key employees in the form of options and warrants. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company's estimate of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.

The fair value at grant date is independently determined using the Black Scholes Model that takes into account the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield, the risk free interest rate for the term of the option and the correlations and volatilities of the peer group companies.

In determining the expected price volatility, the directors have taken account of expectations regarding the current and future circumstances in the virtual reality market, both from the perspective of investment into content creation and hardware manufacture, and from the perspective of consumer trends, to assess the expected uptake of virtual reality as a mainstream outlet for music and other media and entertainment genres.

DIRECTOR OPTIONS AND WARRANTS

The following table sets out the details of options and warrants held by directors at 28 December 2020:

 
  Director       Warrants and options in   Exercised during the period    Warrants and options at 28   Exercise       Expiry 
                parent at 1 January 2020                                               December 2020      price         date 
     Simon 
      Cole                     4,615,090                   (4,615,090)                             -       1.1p   16.05.2026 
   Anthony 
  Matchett                    11,537,725                             -                    11,537,725       1.1p   16.05.2026 
    Steven 
   Hancock                    11,537,725                             -                    11,537,725       1.1p   16.05.2026 
       Ian 
    Hanson                     4,615,090                             -                     4,615,090     8.125p   17.07.2027 
      Andy 
     Botha                     4,615,090                             -                     4,615,090       5.7p   20.12.2028 
             ---------------------------   ---------------------------   --------------------------- 
                              36,920,720                   (4,615,090)                    32,305,630 
                           =============                 =============                 ============= 
 

No options or warrants issued to directors have lapsed or been forfeited during the period. This calculation takes into account warrants and options awarded to directors in the performance of their duties.

EQUITY SETTLED SHARE OPTION SCHEME

The Group operates an approved enterprise management incentive scheme under which employees have been granted options to purchase shares in Napster Group PLC.

The following table sets out the details of share options held at 28 December 2020:

 
                                           2020                                             2019 
                      Average exercise             Number of options    Average exercise             Number of options 
                       price per share                                   price per share 
                                option                                            option 
 As at 1 January                 10.4p                    90,961,255                5.7p                    44,486,521 
 Granted during the 
  period                             -                             -               13.9p                    57,970,410 
 Exercised during 
  the period                      1.2p                   (2,419,592)               14.6p                   (5,475,949) 
 Forfeited during 
  the period                         -                             -                5.3p                   (6,019,727) 
                                         ---------------------------                       --------------------------- 
 As at 28 December               10.7p                    88,541,663               10.4p                    90,961,255 
                                                       =============                                     ============= 
 Vested and 
  exercisable at 28 
  December                       10.9p                    82,887,285               10.9p                    77,894,348 
                                                       =============                                     ============= 
 

Share options outstanding at the end of the period have the following expiry date and exercise prices:

 
 
                                               Weighted 
                                                average                 Share options                 Share options 
                                               exercise                   28 December                   31 December 
 Grant Date            Expiry date                price                          2020                          2019 
 13 October 2016       13 October 2026             1.1p                     9,218,980                    11,613,522 
 02 February 
  2017                 02 February 2027            0.8p                     3,750,000                     3,750,000 
 17 July 2017          17 July 2027                8.1p                 11,647,550                    11,647,550 
 12 March 2018         12 March 2028               9.0p                     6,336,674                     6,361,724 
 20 December 
  2018                 20 December 2028            5.7p                     4,615,090                     4,615,090 
 31 December 
  2019                 31 December 2021           15.3p                    44,973,369                    44,973,369 
 16 October 2019       16 October 2024             5.3p                     8,000,000                     8,000,000 
 
                                                          ---------------------------   --------------------------- 
 Total                                                                     88,541,663                    90,961,255 
                                                                        =============                 ============= 
 
 Weighted average remaining contractual 
  life of options outstanding at end 
  of period                                                                3.52 years                    4.15 years 
 

Of the share options outstanding at 28 December 2020, 9,230,180 (2019: 9,230,180) are held by directors of the Company.

WARRANTS

The Group issues warrants to directors, key advisors, commercial partners and others in consideration of the benefit accruing to the Group. The following table sets out the details of warrants held at 28 December 2020:

 
                                          2020                                              2019 
                      Average exercise            Number of warrants    Average exercise            Number of warrants 
                     price per warrant                                 price per warrant 
 As at 1 January                  7.3p                   197,714,780                7.0p                   206,985,521 
 Granted during                      -                             -                   -                             - 
 the period 
 Exercised during 
  the period                      1.2p                  (15,330,948)                1.9p                   (8,877,585) 
 Forfeited during 
  the period                         -                             -                1.9p                     (393,156) 
                                         ---------------------------                       --------------------------- 
 As at 28 December                7.8p                   182,383,832                7.3p                   197,714,780 
                                                       =============                                     ============= 
 Vested and 
  exercisable at 
  28 December                     7.8p                   182,383,832                7.3p                   197,714,780 
                                                       =============                                     ============= 
 

Warrants outstanding at the end of the period have the following expiry date and exercise prices:

 
 
 Grant Date             Expiry date           Exercise                 Share options                 Share options 
                                                 price                   28 December                   31 December 
                                                                                2020                          2019 
 31 July 2015           31 July 2020              1.2p                             -                     9,230,180 
 30 June 2016           30 June 2026              1.1p                    46,664,054                    51,294,234 
 16 October 2016        16 October 2019          1.85p                             -                     1,470,588 
 22 December 2016       22 December 2021          4.3p                    43,239,926                    43,239,926 
 17 July 2017           17 July 2022             14.2p                    43,239,926                    43,239,926 
 20 March 2017          20 March 2022            12.4p                    43,239,926                    43,239,926 
 29 October 2018        29 October 2023           5.5p                     6,000,000                     6,000,000 
                                                         ---------------------------   --------------------------- 
 Total                                                                   182,383,832                   197,714,780 
                                                                       =============                 ============= 
 Weighted average remaining contractual 
  life of warrants outstanding at 
  end of period                                                           2.39 years                    3.30 years 
 

Of the warrants outstanding at 28 December 2020, 23,075,450 (2019: 27,690,540) are held by directors of the Company.

MEASUREMENT OF FAIR VALUES

The model inputs for options granted during the period ended 28 December 2020 included:

 
                                                   Share options scheme       Warrants 
                                                    2020            2019    2020    2019 
  Fair value at grant date (weighted-average)        n/a            0.2p     n/a     n/a 
  Share price at grant date (weighted-average)       n/a           5.07p     n/a     n/a 
  Exercise price (weighted-average)                  n/a          13.91p     n/a     n/a 
  Expected volatility                                n/a             40%     n/a     n/a 
  Expected life (weighted average)                   n/a       2.4 years     n/a     n/a 
  Risk-free interest rate                            n/a           0.50%     n/a     n/a 
 

Total expenses arising from share-based payment transactions recognised in profit or loss during the period were as follows:

 
                                                                 2020                           2019 
                                                                  GBP                            GBP 
  Options and warrants issued to 
   directors                                                   42,585                         73,133 
  Options issued under employee share 
   scheme                                                      93,037                        226,343 
  Options issued to commercial and 
   other partners                                                   -                        144,000 
  Warrants issued to commercial and 
   other partners                                                   -                              - 
                                          ---------------------------    --------------------------- 
  Total                                                       135,622                        443,476 
                                                        =============                  ============= 
  Share option reserve                                      2,553,363                      2,417,741 
                                                        =============                  ============= 
 
   8.   POST PERIOD END EVENTS 

On 29 December 2020, the Company acquired Rhapsody International, Inc be means of a reverse triangular merger for a consideration comprising $15m in cash together with 241,403,508 ordinary shares of 1.0 pence each. On the same day, the Company raised gross proceeds of $10m 201,349,772 ordinary shares at a price of 3.75 pence per share.

On 3 February 2021, the Company resolved by Special Resolution to change its name to Napster Group PLC.

On 8 February 2021, the Company raised gross proceeds of GBP1.6m via the placing of 48,458,130 ordinary shares at a price of 3.3 pence per share.

On 8 April 2021, GBP1.27m of convertible loan notes were converted in to 63,310,069 ordinary shares at a conversion price of 2.006 pence per share.

On 10 June 2021, GBP2.3m of convertible loan notes were converted in to 130,164,120 ordinary shares at a conversion price of 1.767 pence per share.

Other than the above, the Directors were not aware of any other material events since the reporting date.

9. POSTING OF ANNUAL REPORT

The annual report for the period ended 31 December 2020, which includes notes to the financial statements, will be available today from the Company's website at www.napster.group and also posted to shareholders today.

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END

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