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
FR FLFSTRSIDFIL
(END) Dow Jones Newswires
June 28, 2021 02:00 ET (06:00 GMT)
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