NAPS.L Regulatory News (NAPS)

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THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND IS NOT AN OFFER OF SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014 AS IT FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("MAR"), AND IS DISCLOSED IN ACCORDANCE WITH THE COMPANY'S OBLIGATIONS UNDER ARTICLE 17 OF MAR.

2 December 2021

Napster Group PLC

("Napster", the "Company" or the "Group")

Proposed disposal of the Assets, Share Consolidation, Capital Reduction,

De-Listing and Re-Registration and Notice of General Meeting

The Board of Napster is pleased to announce the proposed disposal of Rhapsody (a subsidiary of the Company containing almost all of the Group's assets and liabilities) to NM Inc for US$45.6 million.

Background to the proposals

Following the acquisition of the Napster business in December 2020, Napster has become more US centric with approximately 42 per cent. of its revenues generated in North America during the first half of 2021. Its major stakeholders which include rights holders, investors, artists, consumers and a growing employee base are now predominantly concentrated in the US.

As such, the Directors believe that a listing in the US is appropriate for the Napster Business and most beneficial for all stakeholders. Having already considered the opportunity with a number of financial institutions and with a leading full service US investment bank having been engaged, the Directors also believe that a US listing would provide not only the appropriate access to capital, but a valuation more aligned to the metrics which have been attributed to some of our music competitors and peers and consequently less dilutive to the existing shareholder base.

Once the Proposals have been completed, NM Inc will focus on the launch of the new music service without the regulatory burden of a listing on the LSE whilst also distancing itself from the Company's current public valuation. Furthermore, as a private company, the Directors believe that the Napster business will have greater access to growth capital than it would have if it remained quoted in the UK. It is anticipated that any listing of NM Inc in the US would be completed during 2023 in conjunction with the launch of the new platform and an anticipated period of subscriber growth following an extensive awareness campaign. The Board believes that this should help secure a listing in the US for NM Inc at an enhanced valuation to that of the Company which is ultimately in all Shareholders' interests.

Assuming completion of the Disposal and subject to shareholder approval at the General Meeting, it is proposed that the Company will cancel its admission to trading on AIM of the New Ordinary Shares and re-register as a private company limited by shares as part of a process of collapsing the existing corporate structure. Furthermore, as a result of the Capital Reduction Demerger, the Company will retain certain assets and liabilities, of which the liabilities will be discharged prior to a dissolution of the Company which will be carried out in due course.

NM Inc and the Disposal

NM Inc is a corporation incorporated in the State of Delaware and having its registered office at 251 Little Falls Drive, City of Wilmington, County of New Castle, 19808, United States. The company was incorporated on 12 November 2021 for the purpose of completing the Disposal.

Subject to the Capital Reduction being approved by Shareholders at the General Meeting, on completion of the Disposal, NM Inc will issue Consideration Shares to the holders of New Ordinary Shares so that they will hold one NM Inc Share for every one New Ordinary Share held by them in the Company as at the Disposal Record Time which is expected to be 6.00 p.m. on 27 January 2022. Shareholders on the Register at this time will participate in the Disposal and will receive Consideration Shares. The Disposal is expected to occur at 11.59 p.m. on 27 January 2022.

At this time the Share Purchase Agreement will complete:

(i) the Company will transfer Rhapsody to NM Inc; and

(ii) NM Inc will issue the Consideration Shares to Shareholders on the register at the Disposal Record Time.

NM Inc's directors have the power to issue the Consideration Shares. The Consideration Shares will not be freely tradable and will be restricted until NM Inc lists on Nasdaq, which cannot be guaranteed to occur. It is anticipated that NM Inc will seek to secure a listing on Nasdaq during the first half of 2023, once appropriate disclosure documents have been prepared and audited financial statements for NM Inc for the year ended 31 December 2022 have been prepared.

Following a valuation exercise, it has been determined that the fair market value of the invested capital of NM Inc on a pro forma basis is US$46.6 million as at 31 August 2021 on the basis that the Disposal occurred as at that date and the only assets and liabilities within NM Inc are those that form part of the Disposal.

Set out within the Circular are:

· A pro forma balance sheet (as at 31 August 2021) for the Company showing its expected assets immediately following completion of the Capital Reduction and Disposal; and

· A pro forma balance sheet (as at 31 August 2021) for NM Inc showing its expected assets immediately following completion of the Disposal.

Issue of Consideration Shares

It is proposed that NM Inc will engage the Transfer Agent to issue the Consideration Shares on NM Inc's behalf upon completion of the Disposal. The Transfer Agent will be provided with the relevant details for each Shareholder by the Registrar. As NM Inc is a US entity, Shareholders will not be able to hold NM Inc Shares in CREST so the issue of the Consideration Shares shall be recorded in book form by the Transfer Agent. No stock certificates will be issued to Shareholders in respect of the NM Inc Shares. Should a Shareholder wish to receive a stock certificate in respect of their NM Inc Shares, this can be requested by contacting the Company on the following email address transfers@napster.com.

Share consolidation

As part of the transaction, it is proposed that the Company's existing share capital be re-organised such that:

Every 750 Existing Ordinary Shares be consolidated

into 1 New Ordinary Share of £7.50

As all of the Existing Ordinary Shares are proposed to be consolidated, the proportion of issued ordinary shares holdings in the Company held by each Shareholder immediately before and immediately after the Share Consolidation will, save for fractional entitlements (the treatment of which is described below), remain unchanged.

De-Listing

The Directors have for some time been reviewing the merits or otherwise of the Ordinary Shares continuing to be admitted to trading on AIM and remaining a public limited company in the UK. The following key factors have been taken into account by the Directors in reaching the conclusion that, assuming completion of the Disposal, the De-Listing is in the best interests of the Company and its Shareholders as a whole:

· following completion of the Disposal, there will be negligible assets remaining within the Group which would not justify the costs associated with remaining as a listed business; and

· as a cash shell, the Directors believe that the Company would not be of sufficient scale to attract any interest from institutional and other investors and would consequently suffer from a lack of liquidity in its Ordinary Shares.

The Directors strongly believe that for the reasons referred to above, should the Disposal be completed, the Company should seek the cancellation of the admission of its Ordinary Shares to trading on AIM and re-register as a private limited company.

In the event that the Disposal is completed and the De-Listing does not occur and, as an AIM Rule 15 cash shell, the Company does not make an acquisition or acquisitions constituting a reverse takeover under the AIM Rules within twelve months of becoming an AIM Rule 15 cash shell, then the Company's New Ordinary Shares would be suspended from trading on AIM.

Notice of General Meeting

The Disposal is of sufficient size relative to that of the Group to constitute a disposal resulting in a fundamental change of business pursuant to Rule 15 of the AIM Rules and Completion is, therefore, conditional upon the approval of Shareholders at a general meeting of the Company. In addition, Shareholder approval is required to effect the share consolidation and the Capital Reduction as well as the proposed De-Listing.

Accordingly, Shareholder approval of the Proposals will be sought at the General Meeting expected to be held at 11.00 a.m. on 20 December 2021. The notice convening the General Meeting and setting out the Resolutions to be considered at it will be set out in a circular which is expected to be posted to Shareholders shortly, extracts of which can be found in the appendix to this announcement.

Irrevocable Undertakings

The Company has received irrevocable undertakings from the Directors and certain other Shareholders to vote in favour of the Resolutions in respect of, in aggregate, 1,357,616,962 Ordinary Shares representing approximately 45.8% of the Company's issued share capital as at the date of this announcement.

Recommendation

The Directors believe that the Proposals are in the best interests of the Company and the Shareholders as a whole. They are therefore unanimously recommending that Shareholders vote in favour of all of the Resolutions to be proposed at the General Meeting, as they have irrevocably undertaken to do (or procured to be done) in respect of their own beneficial holdings (or shareholdings they control) which, in aggregate, amount to 633,167,326 Ordinary Shares (representing approximately 22.4 per cent. of the current Ordinary Shares in issue).

Commenting on the Proposals, Anthony Matchett, Group CEO, said

"I am delighted by the support we have received from our major shareholders for this proposed transaction in advance of the launch of our new music entertainment platform in February next year. I believe, in particular, that the possibility of a listing of NM Inc in the US will mark the start of an important new chapter in restoring value to our shareholder base. With one of the US West Coast's leading full-service investment banks having been engaged, we are confident in NM Inc's proposed strategy to access near term funding to support the launch of our new platform but ultimately, in its ability to secure a listing in the US at a valuation that is consistent with the metrics of those of our peers."

Capitalised terms in this announcement, unless otherwise defined, have the same meaning as will be set out in the circular to be posted to Shareholders shortly.

For further information please contact:

APPENDIX I - EXTRACTS FROM THE CIRCULAR TO SHAREHOLDERS

TO BE POSTED SHORTLY

1. INTRODUCTION

The Company is pleased to announce that it and its relevant subsidiaries have entered into the Transaction Documents pursuant to which the Group will sell Rhapsody to NM Inc for US$46.6 million.

The Circular: (a) sets out the background to and reasons for the Company's entry into the Transaction Documents; (b) explains why the Directors consider the Proposals to be in the best interests of the Company and its Shareholders; (c) provides details of the General Meeting and the Resolutions to be proposed at that General Meeting; and (d) explains why the Directors unanimously recommend that you vote in favour of the Resolutions to be proposed at the General Meeting, as they have irrevocably undertaken to do in respect of their own beneficial interests in the Existing Ordinary Shares.

I am writing to you to invite you to support the next steps required for the Group to implement those plans and enable Shareholders to hold shares, immediately following the Disposal, in NM Inc in the same proportions as they hold New Ordinary Shares in the Company immediately prior to the Disposal.

2. BACKGROUND

The Directors believe that one of the most significant challenges faced by the Company is its ability to secure the required access to capital that is appropriate to a business seeking to launch a new music platform on a global scale. Following the acquisition of the Napster business in December 2020, Napster has become more US centric with approximately 42 per cent. of its revenues generated in North America during the first half of 2021. Its major stakeholders which include rights holders, investors, artists, consumers and a growing employee base are now predominantly concentrated in the US. As such, the Directors believe that a listing in the US is appropriate for the Napster Business and most beneficial for all stakeholders. Having already considered the opportunity with a number of financial institutions and with a leading full service US investment bank having been engaged, the Directors also believe that a US listing would provide not only the appropriate access to capital, but a valuation more aligned to the metrics which have been attributed to some of our music competitors and peers and consequently less dilutive to the existing shareholder base.

Once the Proposals have been completed, NM Inc will focus on the launch of the new music service without the regulatory burden of a listing on the LSE whilst also distancing itself from the Company's current public valuation. Furthermore, as a private company, the Directors believe that Napster will have greater access to growth capital than it would have if it remained quoted in the UK. It is anticipated that any listing of NM Inc in the US would be completed during 2023 in conjunction with the launch of the new platform and an anticipated period of subscriber growth following an extensive awareness campaign. The Board believes that this should help secure a listing in the US for NM Inc at an enhanced valuation to that of the Company which is ultimately in all Shareholders' interests.

The Board has concluded that the optimal solution to maximise shareholder value is to transfer substantially all of the Group's assets and liabilities of value to NM Inc, a new company which will (immediately following completion of the Disposal) be owned by Shareholders in exactly the same proportions in which they hold New Ordinary Shares in the Company following the Share Consolidation and immediately prior to the Disposal. The Board believes that NM Inc will be able to offer Shareholders a greater return on their investment than the Company is currently able to offer.

Having already held discussions with a number of financial institutions based in the US prior to engaging a leading full service California based investment bank, the Board and its advisors believe that completing the Proposals will allow NM Inc to secure additional funding from investors with a strong knowledge of the Company's core markets that would be unlikely to be forthcoming were the Proposals not effected. It is anticipated that following completion of the Proposals and prior to a listing in the US, NM Inc, in conjunction with the appointed investment bank, will seek to secure appropriate further funding for NM Inc to provide it with the capital it needs to not only complete the development of the new music platform but importantly, to provide it with the funding needed to aggressively market the new platform to help drive subscriber growth.

Assuming completion of the Disposal and subject to Shareholder approval at the General Meeting, it is proposed that the Company will cancel its admission to trading on AIM of the New Ordinary Shares and re-register as a private company limited by shares as part of a process of collapsing the existing corporate structure. Furthermore, as a result of the Capital Reduction Demerger, the Company will retain certain assets and liabilities, of which the liabilities will be discharged prior to a dissolution of the Company which will be carried out in due course.

NM Inc

NM Inc is a corporation incorporated in the State of Delaware and having its registered office at 251 Little Falls Drive, City of Wilmington, County of New Castle, 19808, United States. The company was incorporated on 12 November 2021 for the purpose of completing the Disposal. There are currently NM Inc Shares in issue. The sole incorporator and sole director of NM Inc is Daniel Sallus.

It is anticipated that, following completion of the Disposal, NM Inc will hold cash of approximately £6.0 million (US$7.9 million) and, as a result of the Asset Transfer, will retain the investment currently held by the Company and MVR in Rhapsody. NM Inc will also hold the Assets and Liabilities. As noted above, following completion of the Proposals, NM Inc will seek to raise an appropriate level of funding to help fund the completion of the new platform and the funding required for its sales and marketing following the launch of the new platform.

Following completion of the Disposal, it is intended that NM Inc will seek to list the NM Inc Shares on Nasdaq within the next two years. The Directors believe that seeking a Nasdaq listing for NM Inc following the Disposal would provide the business with access to a significantly larger investment community, greater opportunity for institutional support and the benefits of the heightened profile of being listed on a globally recognised investment exchange with valuation metrics consistent with many of its industry peers.

Shareholders should note that there is no guarantee that the interim funding to be sought by NM Inc or the listing on Nasdaq will be completed or be successful.

3. SHARE CONSOLIDATION 

As at 1 December 2021, the Company had 2,962,945,547 Existing Ordinary Shares in issue. The number of Existing Ordinary Shares in issue may increase if, prior to the Consolidation Record Time, the Company issues any additional shares or if any outstanding warrants in the capital of the Company are exercised. It is also proposed that the Company will issue to the Registrar prior to the Consolidation Record Time the required number of Ordinary Shares to ensure the entire issued share capital of the Company is exactly divisible by 750. Shareholders' interests in NM Inc following completion of the Disposal will be identical to their holding in the Ordinary Shares at the Disposal Record Time.

It is proposed that the Existing Ordinary Shares be re-organised such that:

every 750 Existing Ordinary Shares be consolidated into 1 New Ordinary Share of £7.50.

The 750:1 consolidation is intended to reflect a US$10.00 share in NM Inc when the par value of US$0.0001 is combined with the share premium of an NM Inc Share.

As all of the Existing Ordinary Shares are proposed to be consolidated, the proportion of issued ordinary shares in the Company held by each Shareholder immediately before and immediately after the Share Consolidation will, save for fractional entitlements (the treatment of which is described below), remain unchanged.

Shareholder approval of the Share Consolidation is being sought pursuant to Resolution 1 and is conditional on Shareholder approval of the Disposal at the General Meeting.

Issue of additional Ordinary Existing Ordinary Shares

In anticipation of Resolution 1 being passed by shareholders, the Company intends, immediately prior to the General Meeting, to issue such number of additional Existing Ordinary Shares (being up to 749 Existing Ordinary Shares) as will result in the total number of Ordinary Shares in issue being exactly divisible by 750. Since these additional Ordinary Shares will only represent a fraction of a New Ordinary Share, this fraction will be combined with other fractional entitlements and sold pursuant to the arrangements for fractional entitlements described below.

Fractional entitlements

It is likely that the consolidation will result in fractional entitlements to a New Ordinary Share where any holding is not precisely divisible by 750. No certificates will be issued for fractional entitlements to New Ordinary Shares.

Accordingly, following the implementation of the Share Consolidation, any Shareholder who as a result of the Share Consolidation has a fractional entitlement to any New Ordinary Share, will not have a resultant proportionate shareholding of New Ordinary Shares exactly equal to their proportionate holding of Existing Ordinary Shares.

Furthermore, any Shareholder who holds fewer than 750 Existing Ordinary Shares as at the Consolidation Record Time will cease to be a Shareholder. The minimum threshold to receive New Ordinary Shares will be 750 Existing Ordinary Shares.

The Articles permit the Directors to sell shares representing fractional entitlements arising from the proposed consolidation. Any New Ordinary Shares in respect of which there are fractional entitlements will therefore be aggregated and sold in the market for the best price reasonably obtainable on behalf of shareholders entitled to fractions. The Company will distribute the proceeds of sale in due proportion to any such Shareholders in accordance with the Articles (subject to the minimum threshold referred to in the next paragraph).

In accordance with the Articles, in the event that the net proceeds of sale to be distributed to any relevant shareholder amount to £3 or less, the proceeds of sale are to be retained for the benefit of the Company.

For the avoidance of doubt, the Company is only responsible for dealing with fractions arising on registered holdings. For Shareholders whose shares are held in the nominee accounts of UK stockbrokers, the effect of the Share Consolidation on their individual shareholdings will be administered by the stockbroker or nominee in whose account the relevant shares are held.

The effect is expected to be the same as for shareholdings registered in beneficial names however, it is the responsibility of the stockbroker or nominee to deal with fractions arising within their customer accounts, and not the responsibility of the Company.

Following the Share Consolidation, current share certificates in regards to the Existing Ordinary Shares will become invalid and if required, new share certificates in regards to the New Ordinary Shares will be issued to Shareholders.

4. PROPOSALS

Through the Transaction Documents, NM Inc has conditionally agreed to acquire Rhapsody. The Disposal will be effected through a series of steps which are set out in detail below.

The Disposal is subject to the fulfilment of conditions including, among others, the approval of the Shareholders to the Share Consolidation being granted at the General Meeting and the agreement by certain third parties to the novation of the relevant assets. On completion of the Disposal, which is expected to occur on or around 27 January 2022, subject to the Court's availability, Shareholders will receive shares in NM Inc in exactly the same proportions in which they will hold New Ordinary Shares (as at the Disposal Record Time) such that their percentage shareholding in NM Inc will be identical to their percentage shareholding in the Company.

4.1 Asset Transfer to NewCo

On 1 October 2021, Rhapsody incorporated NewCo. Pursuant to the Asset Purchase Agreements, NewCo has conditionally agreed to acquire the Assets and Liabilities from the Company and MVR. In consideration for the transfer, certain loan balances will be created between NewCo and the Company and MVR, respectively, such balances being equal to the net book values of the Assets and Liabilities transferred by each of the Company and MVR.

On 2 December 2021, NewCo entered into the Asset Purchase Agreements with the Company and MVR, respectively. Under the terms of the Asset Purchase Agreements, the Company and MVR each agreed to sell the Assets with full title guarantee to NewCo. Completion of the transfer of the Assets is conditional on the Disposal being approved at the General Meeting. The transfer of the Assets is also subject to receipt of the necessary third party consents which will be sought by the Company prior to completion of the Disposal. The consideration due to NewCo shall be the sum of approximately £13.6 million in respect of the transfer from the Company and the sum of approximately £1.0 million in respect of the transfer from MVR. The amount of the consideration shall be satisfied by an inter-company interest free loan equal to the net market value of the Assets owing by the Company and MVR to NewCo.

4.2 Transfer of Rhapsody by MVR US

On 2 December 2021, the Company entered into the Intragroup SPA. Under the terms of the Intragroup SPA, the Company has conditionally agreed to acquire the entire issued common stock in Rhapsody from MVR US. Completion of the Intragroup SPA is subject to and conditional on completion of the Asset Purchase Agreements (as detailed above) prior to 28 February 2022. The consideration for the transfer of the common stock in Rhapsody shall be the sum of US$46.6 million which shall be satisfied by the Company by way of discharge (in part) of loans owed by MVR US to the Company equalling the market value of the shares in Rhapsody. The Intragroup SPA contains customary representations and warranties from both MVR US and the Company which terminate upon completion of the Intragroup SPA.

4.3 Capital Reduction and Transfer of Rhapsody to NM Inc

Following completion of the Asset Purchase Agreements and the Intragroup SPA, the Company has conditionally agreed to sell the entire issued share capital of Rhapsody to NM Inc, pursuant to the terms of the Share Purchase Agreement. Rhapsody is being sold to NM Inc for a total consideration of US$46.6 million payable in NM Inc Shares. Following completion of the Share Purchase Agreement, NM Inc will own the Assets and Liabilities, via Rhapsody. The Shareholders' ownership structure (as at the Disposal Record Time) will be mirrored in NM Inc. Details of the NM Inc Shares to be received by Shareholders pursuant to the terms of the Share Purchase Agreement are set out at paragraph 6 below.

It is envisaged that the distribution of the NM Inc Shares will be structured as a capital reduction demerger involving a reduction of capital, which is a process requiring Court approval under the Act. Under the scheme of reconstruction, the following steps will take place:

a) the Company will reduce its share premium by an amount at least equal to the market value of the NM Inc Shares to be issued pursuant to the step set out in sub-paragraph (b) below;

b) the Company will make a repayment of capital (which shall be equal to the market value of the NM Inc Shares to be issued as described in this paragraph) to the Shareholders, which will be satisfied by the Company transferring its entire shareholding in Rhapsody (pursuant to the Share Purchase Agreement) to NM Inc in consideration for NM Inc issuing shares in itself to those Shareholders in respect of and in proportion to their holdings of New Ordinary Shares in the Company; and

c) the Company will retain any balance from the Capital Reduction following the repayment of capital and will transfer that balance to its reserves to support any future distributions and for other purposes.

The resolutions required to be passed to effect the Capital Reduction are set out in the Notice of General Meeting.

As set out at paragraph 8 of Part 1 of the Circular, the Disposal is of sufficient size relative to that of Company to constitute a disposal resulting in a fundamental change of business pursuant to Rule 15 of the AIM Rules. Completion is, therefore, conditional upon (amongst other things) the approval of Shareholders at a General Meeting of the Company.

Subject to all the Resolutions (other than the Resolutions regarding the De-Listing and Re-Registration) being passed at the General Meeting, the Disposal will be completed as soon as the Capital Reduction has been registered by the Registrar of Companies. This is expected to occur within four weeks of the passing of the Resolutions, subject to Court availability.

The Disposal cannot complete as described above unless the Resolutions regarding the Share Consolidation and Disposal are approved by Shareholders at the General Meeting. The Capital Reduction cannot be implemented unless the Capital Reduction is approved by Shareholders at the General Meeting and is subsequently registered with the Registrar of Companies. The De-Listing is subject to the approval of the De-Listing Resolution.

5. CAPITAL REDUCTION

5.1 Approval and Consent of Shareholders

In order to effect the Capital Reduction, the Company requires the approval of its Shareholders in the manner described below. The Capital Reduction cannot be effected unless the Company receives the approval by the requisite majority of Shareholders.

The Shareholders are entitled to receive notice of, attend, speak and vote at the General Meeting. The votes of the Shareholders will be added together at the General Meeting and the Resolutions to approve the Capital Reduction, which will be proposed as special resolutions, require a majority in favour of at least 75 per cent. of those Shareholders attending and voting in person or by proxy in order to be passed.

It should be noted that if the Capital Reduction is not approved by Shareholders at the General Meeting prior to the Longstop Date, the Consideration Shares will be issued to the Company, rather than the Shareholders, and NM Inc will become a subsidiary of the Company. In such an event, Shareholders will not receive their Consideration Shares until the Company's assets are distributed to Shareholders in connection with the liquidation of the Company pursuant to relevant legislation.

5.2 Court Approval

In addition to the approval by the Shareholders of the Resolutions regarding the Capital Reduction, the Capital Reduction requires the approval of the Court. Accordingly, following the General Meeting, an application will be made to Court in order to confirm and approve the Capital Reduction.

In providing its approval to the Capital Reduction, the Court may require protection for the creditors (including contingent creditors) of the Company whose debts remain outstanding on the relevant date, except in the case of creditors which have consented to the Capital Reduction. Any such creditor protection may include seeking the consent of the Company's creditors to the Capital Reduction or the provision by the Company to the Court of an undertaking to deposit a sum of money into a blocked account created for the purpose of discharging the non-consenting creditors of the Company.

It is anticipated that the initial directions hearing in relation to the Capital Reduction will take place as soon as reasonably possible after the General Meeting, with the final Court Hearing taking place around mid-January 2022. The Capital Reduction will become effective following the necessary registration of the Court Order at Companies House.

The Board reserves the right to abandon or to discontinue (in whole or in part) the application to the Court in the event that the Board considers that the terms on which the Capital Reduction would be (or would be likely to be) confirmed by the Court would not be in the best interests of the Company and/or its Shareholders as a whole. The Board has undertaken a thorough and extensive review of the Company's liabilities (including contingent liabilities) and considers that the Company will be able to satisfy the Court that, as at the date (if any) on which the Court Order relating to the Capital Reduction and the statement of capital in respect of the Capital Reduction have both been registered by the Registrar of Companies at Companies House and the Capital Reduction will therefore become effective, the Company's creditors will be sufficiently protected.

6. NM INC AND THE DISPOSAL

Subject to the Capital Reduction being approved by Shareholders at the General Meeting, on completion of the Disposal, NM Inc will issue Consideration Shares to the holders of New Ordinary Shares so that they will hold one NM Inc Share for every one New Ordinary Share held by them in the Company as at the Disposal Record Time which is expected to be 6.00p.m. on 27 January 2022. Shareholders on the Register at this time will participate in the Disposal and will receive Consideration Shares. The Disposal is expected to occur at 11.59p.m. on 27 January 2022. At this time the Share Purchase Agreement will complete: (i) the Company will transfer Rhapsody to NM Inc; and (ii) NM Inc will issue the Consideration Shares to Shareholders on the register at the Disposal Record Time. NM Inc's directors have the power to issue the Consideration Shares. The Consideration Shares will not be freely tradable and will be restricted until NM Inc lists on Nasdaq, which cannot be guaranteed to occur. It is anticipated that NM Inc will seek to secure a listing on Nasdaq during the first half of 2023, once appropriate disclosure documents have been prepared and audited financial statements for NM Inc for the year ended 31 December 2022 have been prepared.

Following a valuation exercise, it has been determined that the fair market value of the invested capital of NM Inc on a pro forma basis is US$46.6 million as at 31 August 2021 on the basis that the Disposal occurred as at that date and the only assets and liabilities within NM Inc are those that form part of the Disposal. Please see Part 4 of the Circular for further detail.

NM Inc attaches great importance to the skills, expertise and experience of the existing management and employees of the Group and believes they will be an important factor in maximising the opportunities and benefits of NM Inc post Completion and in the deliverability of NM Inc's strategic objectives of a listing in the US. Accordingly, in connection and as part of the Disposal certain existing contracts of the Board together with all management and employees, will transfer on the same terms across to NM Inc. It is intended that Lansing Davis will step down from the Board at the General Meeting.

Issue of Consideration Shares

It is proposed that NM Inc will engage the Transfer Agent to issue the Consideration Shares on NM Inc's behalf upon completion of the Disposal. The Transfer Agent will be provided with the relevant details for each Shareholder by the Registrar. As NM Inc is a US entity, Shareholders will not be able to hold NM Inc Shares in CREST so the issue of the Consideration Shares shall be recorded in book form by the Transfer Agent. No stock certificates will be issued to Shareholders in respect of the NM Inc Shares. Should a Shareholder wish to receive a stock certificate in respect of their NM Inc Shares, this can be requested by contacting the Company on the following email address transfers@napster.com.

It should be noted that the Consideration Shares issued upon completion of the Disposal will be "restricted" under US securities laws and will be marked as such on the register held by the Transfer Agent and on any share certificate which is issued. Subject to certain limited exemptions pursuant to the US securities laws, and certain exceptions, the stock cannot be transferred in the United States or to US persons until specified information is made available to shareholders, and transfers outside the US will need to be made in compliance with Rule 904 of Regulation S). This will mean that the Consideration Shares will not be as readily tradeable as the Ordinary Shares have been and some Shareholders may not be able trade their Consideration Shares at all for a period following their issue. However, as noted above, following completion of the Disposal it is intended that NM Inc will seek to list the NM Inc Shares on Nasdaq within the next 18 months.

7. INVESTMENT INTO NM INC

The ongoing success of the business is dependent upon securing an appropriate level of funding to support a successful launch of the business' new music platform. NM Inc has engaged the services of an investment bank headquartered in California (the 'Investment Bank') who will sponsor and co-ordinate the process of listing NM Inc on Nasdaq assuming the Disposal completes. It is anticipated that immediately following the Disposal, the Investment Bank will also assist NM Inc in seeking to secure initial interim funding for NM Inc (the "Placement"), the proceeds of which will be used to support the launch of the new music service and fund NM Inc's operations prior to its intended listing in the US. As such, on 2 December 2021, an agreement to appoint the Investment Bank was entered into and following the Disposal, the investment bank will act as NM Inc's sole placement agent in connection with the Placement. Pursuant to the Placement, NM Inc will seek to secure initial interim funding of up to US$50 million.

Subject to a successful launch, and a period of subsequent growth in which the business is able to demonstrate appropriate traction in terms of user engagement and revenue generation, NM Inc will seek to secure a listing on Nasdaq. It is anticipated that NM Inc will seek to secure such a listing during the course of the first half of 2023, once audited results for NM Inc for the year ended 31 December 2022 have been prepared.

A pro forma balance sheet (as at 31 August 2021) for the Company showing its expected assets immediately following completion of the Capital Reduction and Disposal is set out in Part 4 of the Circular.

A pro forma balance sheet (as at 31 August 2021) for NM Inc showing its expected assets immediately following completion of the Disposal is set out in Part 4 of the Circular.

8. AIM RULE 15

In accordance with AIM Rule 15, the Disposal constitutes a fundamental change of business of the Company and in order to effect the Disposal the Company requires the approval of its Shareholders in the manner described below. The Disposal cannot be effected unless the Company receives the approval by the requisite majority of Shareholders.

The votes of the Shareholders will be added together at the General Meeting and the Resolutions to approve the Disposal, which will be proposed as an ordinary resolution, therefore requiring a majority in favour of more than 50 per cent. of those Shareholders attending and voting in person or by proxy in order to be passed.

Subject to the requisite Shareholder approval being received at the General Meeting, on completion of the Disposal, the Company would cease to own, control or conduct substantially all of its existing trading business, activities or assets. Following completion of the Disposal therefore, the Company will become an AIM Rule 15 cash shell. It is the Company's intention that once it becomes an AIM Rule 15 cash shell, subject to Shareholder approval of the De- Listing Resolution at the General Meeting, the Company will pursue the De-Listing and Re- Registration.

9. DE-LISTING

The Directors have for some time been reviewing the merits or otherwise of the Ordinary Shares continuing to be admitted to trading on AIM and remaining a public limited company in the UK. The following key factors have been taken into account by the Directors in reaching the conclusion that, assuming completion of the Disposal, the De-Listing is in the best interests of the Company and its Shareholders as a whole:

· following completion of the Disposal, there will be negligible assets remaining within the Group which would not justify the costs associated with remaining as a listed business; and

· as a cash shell, the Directors believe that the Company would not be of sufficient scale to attract any interest from institutional and other investors and would consequently suffer from a lack of liquidity in its Ordinary Shares.

The Directors strongly believe that for the reasons referred to above, should the Disposal be completed, the Company should seek the cancellation of the admission of its Ordinary Shares to trading on AIM and re-register as a private limited company.

In the event that the Disposal is completed and De-Listing does not occur and, as an AIM Rule 15 cash shell, the Company does not make an acquisition or acquisitions constituting a reverse takeover under the AIM Rules within twelve months of becoming an AIM Rule 15 cash shell, then the Company's New Ordinary Shares would be suspended from trading on AIM.

9.1 Effect of De-Listing

The principal effects that the completion of the Disposal and the De-Listing would have on Shareholders are as follows:

9.1.1. the Company would no longer be subject to the AIM Rules (and accordingly Shareholders will no longer be afforded the protections given by the AIM Rules). Such protections include:

(a) the Company will not be bound to make any public announcements of material events, or to announce interim or final results, announce substantial transactions and related party transactions, or comply with the requirement to obtain shareholder approval for reverse takeovers and fundamental changes in the Company's business; and

(b) finnCap will cease to be the Company's nominated adviser and broker and the Company will cease to be required to retain a nominated adviser and broker;

9.1.2. the Company would no longer be subject to the DTRs and would therefore no longer be required to specifically disclose major shareholdings in the Company;

9.1.3. the Company will no longer be subject to MAR regulating inside information; and

9.1.4. the Company would no longer be required to comply with any of the additional corporate governance requirements applicable to companies admitted to trading on AIM.

Shareholders should note that the Code will continue to apply to the Company following the De-Listing and Re-Registration for a period of ten years, provided the Company continues to have its place of central management and control in the UK, the Channel Islands or the Isle of Man. The Company will also continue to be bound by the Act (which requires Shareholder approval for certain matters) following the De-Listing. In addition, Shareholders should note that they may find it difficult to sell their Ordinary Shares after De-Listing and that there is no guarantee any purchaser would be willing to purchase Ordinary Shares and that price offered may not reflect the underlying value of the Company.

The above considerations are not exhaustive, Shareholders should seek their own independent advice when assessing the likely impact of the Disposal and De-Listing on them.

Shareholders who receive NM Inc Shares will receive certain protections at such future time if and when NM Inc is successful on listing on Nasdaq (or another stock exchange), for example:

i. NM Inc will become subject to US securities reporting requirements pursuant to the US Securities Exchange Act of 1934, as amended. This will, among other things, require filing quarterly and annual reports, as well as interim reports for material events; and

ii. NM Inc will become subject to Nasdaq's corporate governance requirements, which, among other things, would require that the directors of NM Inc to include a majority of 'independent' directors (as defined in the relevant Nasdaq rules), and require NM Inc to obtain the approval of stockholders for material transactions.

However, until such time as NM Inc is listed on Nasdaq (or another stock exchange), there would not be a formal mechanism enabling Shareholders to trade their NM Inc Shares through the public market. Furthermore, as noted in paragraph 6 above, the NM Inc Shares issued upon completion of the Disposal will be "restricted" under US securities laws and will be marked as such on the register held by the Transfer Agent and on any stock certificate which is issued. Accordingly, the NM Inc Shares will not be able to be transferred (subject to certain exemptions) and thereafter, should the listing on Nasdaq (or another stock exchange) not occur, the NM Inc Shares may be more difficult to sell compared to shares of companies admitted to trading on AIM (or any other recognised market or trading exchange).

9.2 De-Listing Process

The AIM Rules require an AIM company wanting the LSE to cancel admission of its shares to trading on AIM to notify the LSE of the intended cancellation and, separately, inform the LSE of its preferred cancellation date at least 20 Business Days prior to such date. The cancellation is conditional upon the consent of not less than 75 per cent. of votes cast by Shareholders given in a general meeting.

The Notice of General Meeting contains a special resolution which proposes that the Company's admission to trading on AIM is cancelled.

Subject to the passing of the De-Listing Resolution it is expected that the last day of dealings in Ordinary Shares on AIM will be 27 January 2022 and that De-Listing will be effective from 7.00 a.m. on 28 January 2022.

9.3 Re-Registration

Following the De-Listing there will be no need for the Company to remain as a public limited company, which has additional requirements over and above those imposed on a private limited company by the Act. As a result, following the De-Listing the Company will seek to re-register as a private company. In order for the Company to effect the Re- Registration, Shareholders will be asked to pass the special resolution set out in the Notice of General Meeting which will be conditional on the approval of the De-Listing Resolution and the De-Listing taking effect.

If the Resolution to approve the Re-Registration is passed, upon the De-Listing taking effect, the Company will file the requisite documents with the Registrar of Companies along with the relevant fee for re-registration. The Re-Registration will become effective upon the Registrar of Companies issuing a certificate of incorporation as a private limited company, which will be issued once the Registrar is satisfied that no valid application can be made to cancel the Resolution approving the Re-Registration.

If the Resolution to approve the Re-Registration is not passed, the Company will still proceed with the De-Listing and the collapse of the existing corporate structure.

10. THE CODE

The Code will continue to apply to the Company and Shareholders will remain entitled to the protections afforded to them by the Code until the tenth anniversary of the date on which admission of the Ordinary Shares to trading on AIM is cancelled.

If the Disposal and the Capital Reduction are implemented, substantially all of the Company's assets will be transferred to NM Inc, which will, at the time of completion of the Disposal, be a foreign entity to which the Code will no longer apply.

11. GENERAL MEETING

Set out at the end of the Circular is a notice convening the General Meeting which is to be held at Reed Smith LLP at The Broadgate Tower, 20 Primrose Street, London, England EC2A 2RS at 11.00 a.m. on 20 December 2021. At the General Meeting:

· ordinary resolutions will be proposed to approve:

o the Share Consolidation (subject to the approval of the Disposal); and

o the Disposal;

· special resolutions of the Company will be proposed to:

o extinguish the amount standing to the credit of the Share Premium Account;

o approve the De-Listing (subject to the approval of the Disposal); and

o approve the Re-Registration (subject to the approval of the De-Listing).

Completion of the Share Consolidation is conditional on Resolution 1 being duly passed at the General Meeting. The Disposal is conditional, amongst other things, on Resolution 2 being duly passed at the General Meeting. The Capital Reduction is conditional on Resolution 3 being duly passed at the General Meeting and upon the Registrar of Companies subsequently registering the Capital Reduction in accordance with the Act. Completion of the De-Listing is conditional on the Disposal Resolution and the De-Listing Resolution being duly passed at the General Meeting.

12. IRREVOCABLE UNDERTAKINGS

The Company has received irrevocable undertakings from Shareholders other than the Shareholder Directors to vote in favour of the Resolutions, in respect of their entire holdings of 724,449,636 Existing Ordinary Shares in aggregate, representing approximately 24.5 per cent. of the Company's issued share capital at the date of this announcement.

In addition, the Company has received irrevocable undertakings from the Shareholder Directors to vote in favour of the Resolutions, in respect of their own beneficial holdings (or shareholdings they control) of, in aggregate, 633,167,326 Existing Ordinary Shares, representing approximately 21.4 per cent. of the Company's issued share capital at the date of this announcement.

In aggregate, therefore, the Company has received irrevocable undertakings to vote in favour of the Resolutions in respect of 1,357,616,962 Ordinary Shares representing approximately 45.8% of the Company's issued share capital as at the date of this announcement.

APPENDIX II

Expected Timetable of Events

1) If any of the above times and/or dates change, the revised times and/or dates will be notified to Shareholders through a Regulatory Information Service.

2) All references to time in this announcement are to London time, unless otherwise stated.

3) Any dates following the General Meeting are dependent on the Resolutions being approved by Shareholders and are subject to court availability in respect of the Capital Reduction