MelodyVR Group PLC (MVR.L) Publication of Admission Document

Subscription of 201,349,772 Subscription Shares at 3.75 pence per Ordinary Share

Davis Capital Loan Facility and Bridge Facility

Publication of Admission Document and restoration of trading on AIM

Notice of General Meeting

Further to the announcement of 25 August 2020 of the conditional acquisition of Rhapsody International Inc., a Delaware corporation trading as Napster (“Napster”), MelodyVR Group (AIM: MVR), one of the leading creators of virtual reality content, announces that yesterday it posted to Shareholders the Admission Document, including a notice of General Meeting, which is now available on the Company’s website.

The Company also announces that it has conditionally raised $10 million by way of the Subscription and entered into a binding commitment letter setting out t he terms in respect of a $25 million delayed draw term loan facility from Davis Partnership, LP

Details of the Subscription

The Company is proposing to issue 201,349,772 Subscription Shares at a price of 3.75 pence per share to subscribers.

The Subscription Shares will represent approximately 8.2 per cent of the Enlarged Ordinary Share Capital. The Subscription Shares will have the effect of diluting the Existing Ordinary Shares by approximately 9.8 per cent. and on Admission, the Company will have an implied market capitalisation of approximately £92.4 million at the Issue Price.

Certain directors of the Company have subscribed for an aggregate of 26,619,279 Subscription Shares through the Subscription. It is expected that the subscribing Directors’ interests on Admission will be as follows:

The issue of the Subscription Shares is subject to Shareholder approval of the Authority Resolutions at the General Meeting.

The Subscription Shares will be issued fully paid, and following allotment, will rank in full for all dividends or other distributions hereafter declared, made or paid on the Ordinary Shares of the Company and will rank pari passu in all other respects with all other Ordinary Shares in issue on Admission. The rights attaching to such Ordinary Shares are set out in paragraph 10 of Part VI of the Admission Document.

Key Terms of the Davis Capital Loan Facility

On 8 December 2020, Rhapsody entered into a binding commitment letter setting out the terms in respect of a $25 million delayed draw term loan facility (the “Loan Facility”) from Davis Partnership, LP. The Loan Facility will be closed between the date of publication of this announcement and Admission. The repayment date of the loan will be 20 months from the date of closing the Loan Facility and Rhapsody may drawdown in minimum tranches of $5 million at an interest rate of 10 per cent per annum calculated daily from the date of drawdown until the date of repayment (inclusive). Rhapsody will also be subject to a 2 per cent draw fee in connection with each draw upon the Loan Facility. The Loan Facility will be secured by a first priority lien on all of the assets of Rhapsody and its domestic and certain foreign subsidiaries, including on receivables of Rhapsody and certain subsidiaries, subject to certain exceptions. The Loan Facility will include customary affirmative and negative covenants for transactions of this nature and a covenant that requires Rhapsody to maintain a minimum of US$2 million of liquidity. In consideration for the Loan Facility, Davis Partnership, LP will receive warrants granting the ability to invest $20 million in the Company within a period of 10 years, at the Issue Price. It is a condition of the Loan Facility that the Company will use commercially reasonable efforts to install Lancing Davis as a director of the Company as soon as practicable.

Key Terms of the Davis Capital Bridge Facility

Ahead of signing the Loan Facility, the Company intends to enter into a secured bridge facility agreement and debenture with Davis Partnership, LP (the “Bridge Facility”). The Bridge Facility will be for the principal amount of US$5 million and will bear interest at a rate 15 per cent per annum, which interest is due and payable on the maturity date of 31 March 2021. The Company will repay and terminate the Bridge Facility with proceeds from a subsequent equity offering or by drawing on the Loan Facility prior to the maturity date. While any amounts are outstanding under the Bridge Facility, the Loan Facility will be decreased by such corresponding amount.

Related Party Transactions

The loan by Davis Partnership, LP constitutes a related party transaction for the purposes of the AIM Rules by virtue of Davis Capital Partners, LLC being a substantial shareholder of the Company. The commitment letter, and subsequent Loan Facility, has been entered into in order to ensure sufficient working capital immediately following the Acquisition and support the strategy for the Enlarged Group. The Directors are entering into the Loan Facility having considered the availability to the Company of alternate sources of finance including equity and debt financing. The Directors therefore consider, having consulted with the Company’s nominated adviser, Arden, that the terms upon which Davis Partnership, LP is providing the Loan Facility to the Company are fair and reasonable insofar as the Company’s shareholders are concerned.

The Bridge Facility by Davis Partnership, LP constitutes a related party transaction for the purposes of the AIM Rules by virtue of Davis Capital Partners, LLC being a substantial shareholder of the Company. The Bridge Facility has been entered into in order to ensure sufficient capital is available to the Company until it is able to draw down on the Loan Facility. The Directors are entering into the Bridge Facility having considered the Company’s immediate working capital requirements and no alternate sources of finance being immediately available. The Directors therefore consider, having consulted with the Company’s nominated adviser, Arden, that the terms upon which Davis Partnership, LP is providing the Bridge Facility to the Company are fair and reasonable insofar as the Company’s shareholders are concerned.

Anthony Matchett, Steven Hancock and Grant Dollens, (being current Directors of the Company) are related parties for the purposes of the AIM Rules and have agreed to subscribe for New Ordinary Shares pursuant to the Subscription. Simon Cole and Andrew Botha, being the Directors not participating in the Subscription, are considered to be independent directors of the Company for the purposes of AIM Rule 13 in connection with the Subscription. They consider, having consulted with the Company’s nominated adviser, Arden, that the terms of the Subscription by Anthony Matchett, Steven Hancock and Grant Dollens are fair and reasonable insofar as the Company’s shareholders are concerned.

Key terms of the acquisition

Under the terms of the Merger Agreement, a wholly-owned subsidiary of the Company will be merged with and into Napster (with Napster being the surviving entity). Upon completion of the transaction, Napster will be a wholly-owned 2nd-tier subsidiary of the Company.

The Company has already advanced the sum of $12 million by way of cash deposits which have been placed into escrow. At any time prior to Completion, Napster may request funds to be released from the deposit in order to pay certain identified rights holder obligations. Any such requests must be approved by the Company. In the event that the Acquisition fails to complete due to Napster being unable to meet the closing conditions of the Acquisition, the deposit will be refunded to the Company and Napster must repay any advances to the Company within six months of Completion. In the event that the Company fails to fulfil certain closing obligations under the Merger Agreement, the deposit may be forfeited. At Completion, the deposit will be released to certain of Napster’s debt-holders and shareholders, and a further $3m will be deposited by the Company into an escrow account. This amount will be used to secure certain indemnity obligations of Napster’s shareholders and unless used pursuant to those indemnity obligations, will be released to the former Napster shareholders 18 months after closing.

As further consideration for the Acquisition, the Company will issue at least 200 million Consideration Shares to Napster’s debt-holders and shareholders at Completion. The number of Consideration Shares may increase as result of any decline in the Company’s share price below 4.30 pence between signing of the Merger Agreement and Completion, pursuant to the terms of the Merger Agreement. As such, the final number of Consideration Shares to be issued will not be confirmed until Completion.

As part of the Acquisition, it has been agreed that $30 million of shareholder loans that would otherwise be repayable by the Enlarged Group will be written off in full upon Completion of the Acquisition. Therefore this liability will be extinguished and no further amounts will be due following Completion.

Publication of Admission Document, General Meeting and Admission

The Ordinary Shares were suspended from trading on AIM on 25 August 2020 pending publication of an AIM admission document, following the announcement of the conditional Acquisition, classified as a reverse takeover under the AIM Rules. With the publication of the Admission Document, trading in the Company’s Ordinary Shares on AIM will be restored at 07.30 a.m. today.

The General Meeting to approve the Resolutions in relation to the Acquisition and the Subscription will be held virtually at 10.00 a.m. on 24 December 2020. A summary of the action Shareholders should take is set out in the Admission Document, and in the accompanying Form of Proxy.

Application will be made to the London Stock Exchange for the Enlarged Ordinary Share Capital to be admitted to trading on AIM. Admission of the Enlarged Share Capital to trading on AIM, subject to the passing of the Resolutions and the satisfaction of all other conditions, expected to take place on or around 29 December 2020.

Notice of General Meeting

A notice convening the General Meeting is set out in the Admission Document, which is to be held virtually at 10.00 a.m. on 24 December 2020, for the purpose of considering, and if thought fit, passing the Resolutions which seek to do the following:

· approve the Acquisition and authorise the Directors to issue the Consideration Shares for the purposes of the Acquisition;

· authorise the Directors to issue the Consideration Shares and disapply pre-emption rights in respect of the Consideration Shares.

· authorise the Directors to issue, grant rights to subscribe for, or convert any security into shares in the Company up to an aggregate nominal amount of £10,309,229.95, being approximately 50 per cent. of the Existing Issued Share Capital and to disapply pre-emption rights in respect of an aggregate nominal amount of £10,309,229.95, being approximately 50 per cent. of the Existing Issued Share Capital.

The Acquisition Resolution will be proposed as an ordinary resolution (Resolution 1). The Authority Resolutions will be proposed as ordinary resolutions (Resolutions 2 and 3) and as special resolutions (Resolutions 4 and 5). An ordinary resolution, in order to be passed, requires the approval of a simple majority of those voting in person or on a proxy or on a poll, and a special resolution requires the approval of 75 per cent. of those voting in person or on a proxy or on a poll.

It is a condition to completion of the Acquisition that the Acquisition Resolution is approved by Shareholders.

Expected timetable of principal events 2020

Posting of the Admission Document and the Form of Proxy to Shareholders 8 December

Latest time and date for receipt of completed Forms of Proxy and receipt of electronic proxy appointments via the CREST system 10.00 a.m. on 22 December

Time and date of the General Meeting 10.00 a.m. on 24 December

Announcement of the result of the General Meeting 24 December

Completion of the Acquisition 29 December

Admission and commencement of dealings in the Enlarged Ordinary Share Capital on AIM 29 December

CREST accounts credited in respect of the Subscription Shares (where applicable) 29 December

Dispatch of definitive share certificates in respect of the Subscription Shares (where applicable) by within 5 business days of Admission

Key Statistics

Existing share capital at the date of the Admission Document

Number of Existing Ordinary Shares 2,061,845,991

Subscription and Acquisition Issue Price 3.75 pence

Number of Subscription Shares 201,349,772

Gross proceeds of the Subscription (receivable by the Company) $10.1 million

Estimated net proceeds of the Subscription available to Company $8.4 million

Costs of the Subscription and Admission $1.7 million

Number of Consideration Shares At least 200,000,000

Upon Admission

Number of Ordinary Shares in issue upon Admission before additional Consideration Shares 2,463,195,763

Percentage of Enlarged Ordinary Share Capital represented by the New Ordinary Shares 16.3%

Estimated market capitalisation of the Company at Admission at the Issue Price £92.4 million

TIDM

MVR

ISIN number GB00BD2YHN21

LEI 213800B2AKGQC3D2R751

Capitalised terms in this announcement shall have the meanings given to such terms in the Company’s Admission Document published today.


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