NAPS.L Regulatory News (NAPS)

· Revenues of £32.9m for the half year, up from £0.2m on H1 2020;

· Adjusted Operating Loss of £8.1m (H1 2020 Loss £9.4m);

· Annualised integration savings of $5.7m secured during H1 2021;

· Monthly global streams increased by 18% on H1 2020;

· On 8 February 2021, the Company secured £6.48m investment from Nice & Green S.A, a Swiss investment firm and a further £1.6m via open offer on the PrimaryBid.com platform. In April 2021, Nice and Green's investment increased to £8.0m;

· On 2 February 2021, the Company announced the extension of its platform services agreement with SONOS to 14 new territories;

· On 5 February 2021, the Company launched its exclusive 5G music partnership with Singtel, Asia's leading communications technology company;

· On 8 March 2021, the Company changed its name to Napster Group PLC;

· On 13 March 2021, the Company appointed Emmy Lovell, ex Executive President of WEA Europe as Chief Strategy Officer;

· On 14 April 2021, the Company entered in to an exclusive 12-month partnership with NOS, one of Portugal's largest mobile operators;

· On 10 June 2021, the Company announced the expansion of its partnership with SONOS Radio HD into five new territories;

INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR NAPSTER GROUP PLC

for the period 29 December 2020 to 30 June 2021

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR NAPSTER GROUP PLC

for the period 29 December 2020 to 30 June 2021 (unaudited)

CONSOLIDATED STATEMENT OF FINANCIAL POSISITON FOR NAPSTER GROUP PLC

as at 30 June 2021

CONSOLIDATED CASH FLOW STATEMENT FOR NAPSTER GROUP PLC

for the period 29 December 2020 to 30 June 2021

NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR NAPSTER GROUP PLC

for the period 29 December 2020 to 30 June 2021

1. Basis of preparation of interim financial information

The consolidated interim financial statements have been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards as endorsed by the European Union ("IFRS") and expected to be effective for the year ended 31 December 2021.

The consolidated interim financial statements are unaudited and do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 28 December 2020, prepared in accordance with IFRS, have been filed with the Registrar of Companies. The Auditors' Report on these accounts was unqualified, did not include any matters to which the Auditors drew attention by way of emphasis without qualifying their report and did not contain any statements under section 498 of the Companies Act 2006.

The consolidated interim financial statements are for the period 29 December 2020 to 30 June 2021.

The consolidated interim financial information does not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the group's annual financial statements for the year ended 28 December 2020, which were prepared in accordance with IFRS.

Going Concern

The executive management has prepared detailed cash flow forecasts for the Board. The Directors believe that the launch of the Group's new music platform will provide a catalyst for both subscription and revenue growth, but that over the course of the short to medium term prior to launch, it will place reliance on a number of its strategic stakeholders including rights holders and its principal lender Davis Capital to ensure that there is sufficient liquidity to meet its liabilities as and when they fall due.

Whilst such support cannot be guaranteed, the Directors are confident that the discussions to date provide sufficient confidence in securing the continued support from Davis Capital and ultimately securing its listing the US in combination with a further equity fundraising.

In the event of a delay to the timetable, the Directors are confident that cost savings could be implemented, or alternative financing sought to accommodate such a delay.

If ultimately the Directors are not able to secure the requisite support from its key stakeholders and fail to secure additional equity funding doubt would be cast as to the Group's ability to continue as a going concern. However, having regard to their assessment of the potential sources of finance and the existing working capital position, the Directors are of the opinion that the Group has the ability to secure the resources required to enable it to undertake its planned activities for the next twelve months.

Revenue Recognition

Revenue is recognised to the extent that it is probable that economic benefit 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 platform either directly or via third party resellers. Revenue from content sales are recognised gross of costs paid to third party license and right holders in line with contracts, with the corresponding cost recognised as cost of sales.

(b) Content license revenue

Revenue from license 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.

NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR NAPSTER GROUP PLC

for the period 29 December 2020 to 30 June 2021

Intangible assets - 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.

2. Statement of compliance

The financial statements comply with IFRS.

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.

7. Business combination

On 29 December 2020 the Group acquired 100% of the issued capital of Rhapsody International Inc, which trades as Napster, for $25.3m (GBP £18.2m).

Napster, the original music industry disruptor, and a global music streaming service has over 1.1m paying subscribers and 5m total users. Over the coming year, we intend to leverage the existing Napster userbase, partners and underlying technologies developed by the Company as part of the foundation to build a next-generation music platform. At present, music content consumption is extremely fragmented for fans, with audio, video and live-events spanning multiple-platforms with a consequent need for multiple subscriptions. Our ambition over the coming months, with the support of our existing partners, is to build a cross-platform, hybrid music service, delivering audio recordings including the latest albums, video content incorporating music videos and documentaries, as well as renowned live-events, all via a single platform. The aim is to provide rightsholders and artists with fair compensation for their works in conjunction with a new suite of tools for both artists and rightsholders to deliver better engagement from their content and enable cross-promotion between their multiple content outputs.

The fair value of the assets acquired and liabilities assumed were as follows:

241,403,508 ordinary shares were issued at 3.56 pence per share to the vendors as part of the consideration for the acquisition as noted above. The fair value of the 241,403,508 ordinary shares issued as part of the consideration was determined on the basis of a Black-Scholes option pricing model. 

8. Borrowings

8. Borrowings (continued)

US$25 million loan facility 

In December 2020, the Company announced that it had secured a US$25 million secured loan facility arrangement (the "Facility") with Davis Capital Partners LLC. The Facility attracts interest at a rate of 10 per cent per annum on drawn down funds, together with an arrangement fee of 2% payable on each draw. Interest is paid quarterly on the principal amount outstanding and can be paid in either cash or equity at the Company's option. The latest date for repayment is 20 months from the commencement of the Facility, however it may be repaid earlier at the Company's election. Any amounts repaid will not be available for subsequent drawdown. The Facility is secured against the assets of the Group and contains events of default which are customary in nature for this type of loan facility. As at 30 June 2021, US$15 million had been drawn down under the Facility and US$10.0 million of the Facility remained undrawn. 

GBP£8 million Convertible Loan Note facility

In February 2021, the Company announced that it had secured an investment of GBP£6.48 million by way of unsecured, interest free Convertible Loan Notes (the "CLN") from Swiss Investment firm Nice & Green S.A. (the "Investor"). In April 2021, this investment was increased to GBP 8.0 million. Under the terms of the CLN, the loan notes are convertible into Ordinary Shares at the Investors request and will have a conversion price calculated with reference to 93 per cent. of the lowest daily VWAP during the 6 trading days immediately preceding the date of notice of conversion. The Company has the option to redeem the Loan Notes at its absolute discretion in cash at a 3 per cent premium to their nominal value. 

In addition, the Investor will receive a commitment fee equal to 5 per cent of the principal amount of each tranche of CLN subscribed for. The CLN agreement contains customary representations and warranties for a financing arrangement of this nature. As at 30 June 2021, GBP £8.0 million of the CLN had been advanced. Of this £3.84m had been converted to equity.

Further copies of this document are available both at the registered office of the Company. The statement

will also be available to download on the Company's website: https://napster.group/