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Rightster Group plc Annual Report & Accounts 2014

RIGHT DIRECTION

Rightster G

roup plc A

nnual Report &

Accounts 2014

Rightster simplifies the distribution and monetisation of online video through its software powered solutions. The Company brings together Content Owners, Creators, Brands and Publishers and helps them build and engage audiences online with optimal impact and efficiency.

Welcome

Contents

Strategic Report01 Highlights02 Rightster at a Glance04 Right Service06 Case Studies08 Chairman’s Report10 Rightcasting12 Market Overview14 Right Business Model 16 CEO’s Statement18 Right Now20 Financial Review24 Our People

Corporate Governance26 Board of Directors’ Profiles28 Report of the Directors30 Statement of Directors’ Responsibilities31 Statement of Corporate Governance33 Directors’ Remuneration Report

Financial Statements35 Independent Auditor’s Report

– Consolidated36 Consolidated Income Statement

and Consolidated Statement of Comprehensive Income

37 Consolidated statement of Financial Position

38 Consolidated Statement of Cash Flow39 Consolidated Statement of Changes

in Equity40 Notes to the Financial Statements65 Independent Auditor’s Report

– Company66 Company Balance Sheet67 Notes to the Financial Statements72 Company InformationIBC Our Offices

01Rightster Group plc Annual Report & Accounts 2014

Strategic Report

HighlightsThe Company has shown significant growth over the course of the year including the completion of two strategic acquisitions and noteworthy additions to its client roster.

Statistical Highlights• Total Transaction Value1 has risen from

£11.0 million in 2013 to £16.9 million in 2014.• Net Revenue has increased from £6.2 million

in 20132 to £8.7 million in 2014.• Gross Profit has grown from £0.6 million in

2013 to £3.9 million in 2014.• Average monthly video views have risen to

1.2 billion in H2 2014 (369% growth from H2 2013).• Content Owners have increased from 850+

to 2,500+. Publishers have grown from 7,500+ to 10,500.

Mergers and Acquisitions• Acquisition of Viral Management Limited completed

in July 2014 bringing social video management skills, licensing capability and brand knowledge.

• Base79 Limited acquisition completed in August 2014 bringing further YouTube capability, partnerships with influential Creators and Brand expertise.

• Rightster has now become one of the largest Multi-Channel Networks (MCNs) in the world.

Key Deals• In Europe – partnerships with Agence France-

Presse and Bauer Media. • In the US – contracts with 20th Century Fox and

The Jim Henson Company.• In APAC – deals with News Corp Australia, Lehren

Networks and India.com.• 3.5 year deal with the Arts Council England, worth

£1.8 million, to establish and manage their MCN for the arts.

• Partnership with Turkish Airlines for an innovative global YouTube campaign.

Post Period Update• Average monthly video views for Q1 2015

estimated at 1.6 billion.• Surpassed 72 million subscribers by end of Q1 2015

and reached 124 million unique users.• Partnership with Microsoft Lumia and extended

partnership with 20th Century Fox to include 10 additional territories.

• Growth in APAC – partnership with Bauer Media Australia and deals with some of the leading Publishers including Yahoo! AUNZ and Summit Media Philippines.

• Proposed placing to raise approximately £5 million through the issue of new ordinary shares.

£8.7m2014

1.2bn2014

£3.9m2014

£6.2m2013

249.5m2013

£0.6m2013

Net Revenue has increased from £6.2 million in 20132 to £8.7 million in 2014

Gross Profit has grown from £0.6 million in 2013 to £3.9 million in 2014

Average Monthly Video Views have risen to 1.2 billion in H2 2014 (369% growth from H2 2013)

1 Total Transaction Value shows the total amount of business facilitated through Rightster. It sums the total exchange of revenue between Rightster partners before revenue shares are distributed.

2 After adjusting for a key contract terminated during 2013, net revenue in 2013 was £3.0 million.

YouTube Creator: Jamal Edwards

who launched the SBTV:Music channel now has over 550k

subscribers and over 292 million views


Strategic Report

Rightster at a Glance

February 2014Agence France-Presse selects Rightster to be one of its premium news video distribution partners

March 2014Partnership with the International Boxing Association (AIBA) to build a subscription service

May 2014Rightster announces stats for Mercedes-Benz Fashion Week Australia driving over 1 million online views with engagement at an average 12 minute watch time

July 2014Successful acquisition of Viral Management Limited(‘Viral Spiral’)

August 2014Successful acquisition of Base79 Limited(‘Base79’)

June 2014Rightster extends strategic partnership with Barcroft Media and enters into a deal with the Al Jazeera Media Network

September 20143.5 year deal with the Arts Council England, worth £1.8 million

November 2014Rightster achieves over 1.4 billion average monthly video views for Q4 2014 and surpasses 53 million subscribers

October 2014Turkish Airlines partners with Rightster for a global YouTube campaign

April 2014Average monthly video views on network hit 355 million for Q1 2014

As a Multi-Platform Network (MPN), Rightster enables clients to commercialise their content to audiences worldwide on some of the most popular online video platforms, such as YouTube, as well as publisher sites, and owned & operated channels.

What We DoRightster simplifies the distribution and monetisation of online video through its software powered solutions.

With a network of 2,500+ Content Owners and 10,500+ Publishers, Rightster has the scale and expertise to enable Content Owners, Creators, Publishers and Brands to distribute the right video to the right audience in the right place at the right time, a term we call ‘Rightcasting’. With 13 offices in 11 countries, Rightster has both local knowledge and global reach.

Our StrategyRightster focuses on delivering content solutions and brand solutions through its three core capabilities:

• Flexible monetisation models;• Advanced managed services; and• Software & Data powered services.

The core software platform acts as an intelligent switchboard enabling our full range of customers to distribute, monetise and transact in an optimal environment.


LONDON

NEW YORK

PARIS

MADRID

BERLIN

STOCKHOLM

DENMARK

DELHI

BANGALORE

SINGAPORE

SYDNEY

MILANLOS ANGELES

1.4bn+Average monthly video views

2,500+Content Owners

10,500+Publishers

Content

Data

The Rightster NetworkRightster has secured a range of premium Content Owners and Creators on its network and continues to attract prestigious Brands and Media Agencies.

All are keen to utilise the variety of Publishers and Platforms available on Rightster’s network to reach and engage their target audience.

Rightster’s Global Reach

Platforms

Publishers

Owned & operated channels

Brands Audience

Content OwnersRightster protects digital rights and maximises the value of live and on-demand video for Content Owners through:

1 Upload once, commercialise everywhereRightster maximises the value of live and on-demand video with a powerful cloud-based software platform that lets Content Owners upload once and distribute across their own sites, platforms like YouTube, and Rightster’s pre-connected publisher network.

2 Global PartnerWe have 13 offices in 11 different countries around the world, giving us local knowledge in every major market.

3 Maximise revenueOur proprietary content protection tools ensure that Content Owners get paid for the video content they own online, while Rightster’s Media sales and Brand partnership teams help maximise the value of their rights-owned video.

4 IncreaseefficiencyRightster provides an end-to-end solution for the distribution and monetisation of live and on-demand video. Upload, distribute, monetise and track all in one place.

Creators Be seen and heard on all platforms, all around the world:

1 Go globalWe’ve got teams who speak Creators’ language on the ground. From London to Los Angeles, Milan to Singapore – we’re their global and local network.

2 Grow fasterAll our teams are YouTube Certified and have undertaken YouTube exams in audience development. Our Creator tools enable Creators to optimise their content better and scale their audience fast so that they can get on with doing what they love – making great videos.

3 Earn moreYouTube generates advertising revenue. We generate more. Our unique relationships with Brands and creative agencies allow us to create interesting and lucrative brand integration and sponsorship opportunities for our Creators.

4 New opportunitiesWe’re not just limited to YouTube. We enable our Creators to succeed on whatever platform is right for them. With Rightster’s tech and ad sales team behind them, they’re free to use a custom player on their own site, explore new outlets, and collaborate with like-minded Creators from around the world.

Strategic Report


The Company is content, platform and device neutral and its technology, expertise and data-driven insights enable it to simplify the fragmented online video market for its stakeholders, including Content Owners, Creators, Brands and Publishers.

RIGHT SERVICE

PublishersRightster enables Publishers to accelerate growth and revenue while reducing complexity and costs through:

1 Sourcing videoWe allow Publishers to explore, discover and publish video from thousands of premium content right-owners, seamlessly integrated with their editorial processes.

2 Grow audiencePublishers can reach a larger audience for video content on their sites, increasing engagement and time spent with Brands.

3 Drive revenueRightster offers flexible commercial opportunities to monetise video content, tailored to suit Publishers’ exact requirements.

4 Discover Publishers are able to find the perfect match of video to fit their websites, no matter how broad or specialist their audience. In one place Publishers can discover the web’s latest trending videos, and create their own bespoke video feeds of content based on relevant topics, key words and themes.

BrandsActivate campaigns that engage audiences and turn views into fans:

1 The art & science of video marketingRightster offers a unique set of tools and services that deliver engagement and results for Brands and Media Agencies.

2 Get TV-scaleWith more than 2,500 Content Owners and over 10,500 Publishers, 124 million global uniques and over 1.4 billion average monthly video views, Rightster offers unprecedented reach, high quality contextual environments, managed syndication and brand safety across all digital media platforms.

3 FindinfluencersThe secret to success is simply knowing who your audiences are already listening to. We’ve got the tools and experience to identify these influencers, develop relationships with them and get Brands’ videos seen by the right people.

4 Activate anywhereRightster offers the only on and off YouTube activation solution enabling Brands to reach the right audience on the right platform at the right time, and as we operate in 13 offices in 11 different countries around the world, we have local knowledge and global reach.


YouTube Creator: Hannah Trigwell has over 320k subscribers and over 36 million views

Strategic Report


Rémi Gaillard Creator

Challenge

• Grow online audiences on YouTube (in terms of size and engagement) for one of the six major American TV studio power houses.

• Provide expertise for Fox’s marketing and social media team in seven international markets.

Challenge

• To be the #1 YouTuber in France.• To maximise revenue from YouTube.

Solution

• Rightster’s content solution team demonstrated their ability to deliver global to local content management, audience development and branded content with social media influencers.

Solution

• Deep engagement with off YouTube celebrities such as Tony Parker.

• Channel management.• Deployed a rights management strategy

to claim third-party content featuring Rémi.• Cleaned up rights issues on his

official channel.• Helped fund productions to create key

tentpole event programming, including the World Cup video.

Results

• The Rightster partnership has helped to significantly increase Fox’s international reach on one of the most important global video platforms.

• 20th Century expanded the partnership to 17 countries in April 2015.

Results

20th Century Fox Content Owner

2.3m Subscribers

#1 Spot achieved


Squawka Publisher

Turkish Airlines Brand

Challenge

• To provide contextually relevant content that both informs and drives Squawka’s global editorial coverage.

• Increase their revenue and user-engagement.

Challenge

• Turkish Airlines have an ongoing campaign called ‘Widen Your World’ which promotes its various destinations around the globe.

• Promote this campaign by selecting top YouTube talent from different countries and cultures to go to some Turkish Airline’s destinations and record their time there, in their own style and voice.

Solution

• Supplied over 50 bespoke feeds to multiple content producers in multiple languages.

• Deployed a purpose built in-article large video player.

• Pitched Squawka as a premium partner to both media agencies and Brands.

Solution

• 10 top YouTubers from around the world, five from Rightster and five sourced from other MCNs, created three videos documenting their journey on the Turkish Airlines ‘Holiday Roulette’.

• One Intro video and one video in Istanbul Turkey.

• Video in final destination to be revealed by a white rabbit in the second video.

Results

67% Increaseintraffic

10.7m YouTube views

17.7m Twitter reach

264% Increase in CPM

11.3m Facebook reach

19.7m Instagram reach

Results


Strategic Report

Chairman’s ReportThe MarketThe online video market continues to evolve at a rapid pace and the size of the online video advertising opportunity in 2017 is expected to be $17 billion in the US alone, 33% Compound Annual Growth Rate (CAGR) on 2014. Against this backdrop, YouTube still plays an important part, accounting for $26–40 billion of Google’s revenues and appealing to an international audience – approximately 80% of YouTube traffic is from outside the US (Source: Jefferies: The Future of Online Video Advertising (v2.0)). The influence of YouTube stars has gained traction. In a recent survey in the US, it was found that, amongst the teenage population, YouTube stars were more popular than mainstream celebrities (Source: Variety.com 5 August 2014). With their loyal subscribers, YouTubers have the power to connect Brands with huge, incredibly engaged online audiences. This arena has led to the emergence of Multi-Channel Networks (MCNs) who affiliate with multiple YouTube channels in order to assist YouTubers in the areas of monetisation, channel management and cross-promotion. The significance of MCNs has led to many high profile industry deals being completed in the last year, including Disney acquiring Maker Studios and the Chernin Group with AT&T buying Fullscreen, to name but a few. Rightster prides itself on being one of the few remaining independent MCNs and is well regarded in the industry, with Robert Kyncl (Google’s VP and Global Head of Business at YouTube) recently commenting at a YouTube brandcast event that ‘Rightster is our biggest partner in Europe, the first YT MCN to go public and now one of the largest MCNs in the world’.

However, we have also noticed a trend towards Content Owners, Creators and Brands wanting to have a presence off YouTube, on new emerging platforms. These include Vine, Snapchat and Instagram amongst others, as well as more specific Publisher sites and blogs. This stems from a need to reach and engage their desired audience in the most effective and cost efficient manner. Rightster’s StrategyRightster is much more than an MCN: Rightster is a Multi-Platform Network (MPN) with a remit that allows it to

“ Rightster is now positioned as a global leader in the rapidly expanding online video market”Mark Lieberman Non-Executive Chairman

Overview2014 marked Rightster’s first full year on the AIM market and the online video marketplace is growing rapidly. We had some significant changes with the acquisition of Base79 and Viral Spiral, moving into new offices in Covent Garden and, more recently, the transition to a new CEO. We also saw some substantial growth across the business. Our average monthly video views grew an impressive 404% year-on-year, with Q4 bringing in, on average, 1.4 billion monthly video views. Our net revenues also demonstrated significant scale over that timeframe, increasing from £6.2 million in 2013 (which, after adjusting for the terminated Serie A contract, were £3.0 million), to £8.7 million in 2014. Our network both on and off YouTube also scaled significantly with Content Owners growing from 850 to over 2,500 and Publishers growing from 7,500 to over 10,500.


maximise opportunities for clients both on and off YouTube as YouTube is just one piece of the online video puzzle. There are a myriad of platforms through which Rightster can distribute content, ranging from Facebook and Twitter to Brightcove and Ooyala. Rightster is able to work with all these platforms as well as manage content on Vine, Instagram and Snapchat. We also have a network of Publishers we can distribute content to including The Independent, the Evening Standard and publications managed by Hearst, Bauer Media and Northern & Shell, as well as numerous blogs. In addition, Rightster’s software has the capability to distribute content to a Content Owner’s own site, if preferred. This flexibility appeals to Content Owners, Creators and Brands who are increasingly exploring alternative ways to showcase content and maximise commercial value. All this gives Rightster a competitive advantage. It is platform neutral, enabling Content Owners, Creators and Brands to reach the right audience through the right place at the right time. As it is independent, Rightster is also content neutral, attracting Publishers with its diverse array of premium and wide-ranging genre of content. Our recent acquisition activity has enabled Rightster to achieve greater scale and has provided an enhanced brand proposition that has attracted more high value briefs. The resulting geographical enhancement has further developed Rightster’s local knowledge in every major market and builds upon our existing global footprint.

Mergers and AcquisitionsTo further accelerate Rightster’s growth, we previously stated that we would consider strategic acquisition opportunities. Our influence in the online video space was bolstered in 2014 by two significant acquisitions – namely Base79 and Viral Spiral. Base79 brought with it a specialism in YouTube rights management, talent expertise and brand partnerships, whilst Viral Spiral brought expertise in licensing, social video management and brand engagement. Both also provided world-class executives who have enhanced Rightster’s management team. Following the acquisitions, Rightster is now positioned as a global leader in the rapidly expanding online video market and is one of the largest MCNs outside North America. The combined offering has brought significant scale benefits with Media Agencies and Brands. Rightster now regularly receives brand briefs of £500k and upwards. Rightster has also been able to improve the service it offers Content

Owners, Creators and Publishers with its ability to grow bigger audiences and increase monetisation capabilities. The integration of the two businesses into Rightster is now almost complete and, as expected, cost synergies have been identified that will be realised in 2015. A recent strategic review of its global operations has led to the Company deciding to close its technology centre in Bangalore and consolidate its development activities in London to better align the Company’s technology organisation. A number of roles across Europe have also been identified as no longer required. Overall, I am pleased to report that this will result in an annualised cost saving of approximately £3 million in 2015. PerformanceThe Board are pleased with the Company’s performance in 2014, in particular the net revenues of £8.7 million which were achieved, an increase of £2.5 million compared to prior year (and, if allowing for the terminated Serie A contract in 2013, an increase of £5.7 million) – an encouraging growth story.

Despite Rightster’s ongoing success throughout the year, we believe this has not been reflected in the Company’s share price performance. The new management team aim to communicate the market opportunity and Rightster’s strategy more clearly in 2015 and have already indicated their expectations for net revenues, anticipated to grow 80–100% in 2015, continuing Rightster’s growth story. Whilst it is expected that a tiered pricing model powered by the new software platform will contribute to these revenue streams, we consider that these benefits will be realised towards the end of 2015/early 2016, with cash flow breakeven expected in 2016. Board and Management ChangesThroughout 2014, the Board continued their strong working relationship and combined their various areas of expertise to good effect. In September, the Company announced that Charl de Beer had given the Board notice of his intention to step down as CFO in order to return to his home in South Africa. Charl continued to direct Rightster’s finance activities until his departure date in December and, in order to facilitate a smooth transition, David Mathewson, Non-Executive Director (previously CFO of Playtech Limited), took on a more hands-on-role leading the search for Mr de Beer’s successor. I would like to thank Charl for his significant contribution to the business over the last

three years and welcome his successor, Niall Dore, to the Company. Niall joined in January 2015 from Experian Consumer Services where he was Interim Finance Director for UK & Ireland. He previously held the position of Finance Director at Betfair Group plc for over five years (including a year as Interim Group CFO). Niall not only brings public market experience to the Company but also a proven ability to execute different business models across the digital and technology sectors on a global scale, with a strong focus on creating shareholder value. More recently, in January 2015, the Company announced the transition to a new CEO, Patrick Walker. As we enter the next stage of Rightster’s growth, with a strong focus on multi-national operational efficiency and getting to profitability, Charlie Muirhead and the Board decided it was the right time to appoint a successor. I would like to thank Charlie for his dedication to the Company and welcome Patrick, who, since the acquisition of Base79, has served as the Group Chief Commercial Officer. Patrick has held a number of senior roles in the sector including Chief Content Officer at Base79 and Senior Director of Content Partnerships at YouTube, where he was responsible for launching and managing YouTube in EMEA. The Board are delighted that someone of Patrick’s stature in the online video industry will succeed Charlie and lead the next phase of growth. Charlie Muirhead ceased to be a Director of the Company on 6 May 2015. Patrick will be supported by a top-class management team, strengthened through the addition of new members from the recently acquired companies. These include Daniel Fisher and Damian Collier from Viral Spiral, and Nick Savage, Ian Samuel and Ben Lister from Base79. I am pleased to report that this very capable team has integrated well and are already driving new combined opportunities to clients. Looking AheadOn behalf of the Board, I would like to extend my thanks to the investors who have supported us over the course of 2014, the partners who have utilised our services and to all the employees for their hard work and dedication. I look forward to Rightster’s next phase of growth in 2015, when we will roll out our proven combined offering to a broader range of international clients whilst ensuring a renewed focus on operational efficiency across the entire business.

Mark LiebermanNon-Executive Chairman

6 May 2015


Right videoVideo is a powerful form of communication and at the heart of emotive storytelling. Whether it’s a six-second Vine, a six-minute YouTube tutorial or an exclusive live stream, each format has the ability to inspire and engage.

Right audienceSecuring the right audience is key. We’ve got the tools and experience to identify and develop relationships with relevant influencers,platformsandPublishersonaglobal scale, ensuring videos get seen by the rightpeople.Weoperateacross13officesin11differentcountriesaroundtheworld,withlocal knowledge for every major market.

Strategic Report

In 2014, Rightster introduced the ‘Rightcasting’ concept – using software and networks to put the right video in front of the right audience in the right place at the right time. All our clients benefit from this overarching approach.

RIGHTCASTING


Right placeRightsterofferstheonlyonandoffYouTubeactivation solution, enabling video content to succeed on the platform or publisher site that best showcases it, regardless of the device. Our Multi-Platform Network means we can reach a larger, more targeted audience, increasing engagement.

Right timeRightster’s platform caters for both live and on-demand online video content and we can provide 24/7 support to ensure that no opportunities are missed. Publishers can easily explore and discover new content from our software platform and seamlessly integrate it with their own editorial processes.


$230bn TV advertising market

15%

ZenithOptimedia estimates that online video is growing faster than any other digital category or sub-category, growing 34% to $10.9 billion in 2014, and forecast to grow at an average of 29% a year to reach $23.3 billion in 2017.

2014

10.9bn

23.3bn

2015 2016 2017

29%average growth each year in online video ad expenditure to 2017.

Strategic Report

Market Overview

Digital media advertising (which includes online video).

The online video market we serve continues to grow exponentially. Audiences are growing internationally and across platforms, offering enormous opportunities to aggregate at scale.

The Online Video Market The online video market continues to grow rapidly and internationalise and this is expected to accelerate in 2015.• The $230 billion TV advertising market

(Carat AdSpend Report, March 2015) faces challenges as audiences move to multiple online video platforms and devices. As a result, the online video market is growing rapidly and TV advertising budget is progressively shifting to online video. Nielsen and the IAB have publicly recommended Brands shift at least 15% of their TV budgets to digital media.

• A recent report by ZenithOptimedia (Executive summary: Advertising Expenditure Forecasts March 2015) predicts global ad expenditure will reach $544 billion by the end of 2015. Within this global ad expenditure, it estimates that online video is growing faster than any other digital category or sub-category, growing 34% to $10.9 billion in 2014, and forecast to grow at an average of 29% a year to reach $23.3 billion in 2017.

Industry Consolidation Industry consolidation demonstrates the value of scale and independence.• This growth opportunity has driven a

spate of Multi-Channel Network (MCN) acquisitions/strategic investments in the last year by large media outlets – Maker Studios (by Disney), Fullscreen (by Otter Media/AT&T), Machinima (by Warner Bros), Stylehaul (by RTL) and AwesomenessTV (by Dreamworks/Hearst).

• Power of independence – Rightster acquired Base79 and Viral Spiral to build an agile, independent and technology focused online video company.

• Major media and technology players are expected to continue exploring acquisitions to build capabilities in this accelerating market.

Neilsen and the IAB recommend that Brands shift at least 15% of their TV budgets to digital media.

13

100mmonthly

video views

100mactive

monthly users

Online Video PlatformsYouTube no longer represents the only major video platform.• YouTube celebrates its 10th anniversary

in 2015 and still represents a significant force in online video with 1 billion+ users. Jefferies estimates that YouTube is worth between $26 – $40 billion (Jefferies: The Future of Online Video Advertising (v2.0); A Focused Deep Dive on YouTube).

• In August 2014, Facebook overtook YouTube for monthly desktop video views, amassing 12.3 billion views versus YouTube’s 11.3 billion, an increase from just approximately 1 billion on Facebook a year earlier. Other social media platforms such as Vine (with over 100 million monthly video views) and Snapchat (where over 100 million active monthly users produce over 400 million ‘snaps’ per day) are growing to provide even more compelling destinations for audiences and Brands. Furthermore, new distribution platforms are emerging, such as Vessel, who are launching a Subscription Video On Demand service in the US to provide exclusive, early access content.

• It is clear that the value of being a true Multi-Platform Network is materialising.

Online Native Video Creators Online native video Creators are increasingly in demand from Brands as they continue to grow in influence and capture more mainstream media outlets.• As young audiences watch increasing

amounts of video online across a broad range of devices, they gravitate towards new online talent. Brands identify an opportunity to engage these young audiences more effectively.

• In the UK, Zoella and her beauty and fashion focused channel has gained fame for acquiring over 7 million YouTube subscribers. She has successfully partnered with Brands ranging from Unilever to Asda and has even published her own book ‘Girl Online’ with Penguin.

• Connecting Creators and Brands to a targeted audience is critical in this evolving environment.

Demand for Improved Analytics and Measurement• As audiences continue to grow, so does

the importance of analysing viewing data to gain a better understanding of who the audience is and how to engage them.

• Possessing the underlying infrastructure to analyse and optimise data will provide foundation to scale, especially as viewing of online video is anticipated to increase.


YouTube no longer represents the only major video platform. Other social media platforms are growing and providing compelling destinations for audiences and Brands.

12.3bnmonthly desktop

video views

11.3bnmonthly desktop

video views

YouTube Creator: F2Freestylers have over 1 million subscribers

and over 97 million views


Strategic Report

Right Business Model

Overview• Today, the distribution and

monetisation opportunity in online video remains incredibly fragmented. Diverse types of organisations own and produce content and deliver to audiences through a large range of sites, including platforms, publishers, magazines and blogs spread across many geographies and devices. Attempting to deliver an economically viable in-house digital solution across this fragmented network remains extremely complex and resource-intensive.

• Rightster solves this problem by providing a simple distribution and monetisation platform for online video. Content Owners, Creators,Brands and Publishers can utilise Rightster’s software enabled services to effectively engage and monetise their audiences on an international scale.

• Rightster is differentiated as the leading independent MCN and MPN that, through technology, can connect Content Owners, Creators, Brands and audiences at scale both on and off YouTube.

Rightster’s business model is based around three core capabilities – Flexible monetisation models, Advanced managed services and Software and Data powered services.

1 Flexible Monetisation Models• Clients access Rightster’s solution as

a service, through which they are able to benefit from a range of different revenue streams to optimise the value of their live and on-demand content online. The revenue streams for Rightster in 2014 were advertising, subscriptions and theatrical.

• Rightster charges clients with two primary models: Revenue shares and Advanced Service and Support fees.

ǟ Revenue shares – this model aligns business outcomes for both parties and means that costs are primarily only charged to the client when revenue is delivered. This is contrasted to those companies attempting an in-house solution, which may require significant up-front investment without guarantee of return. Typical revenue

shares range from 20–50% and vary based on the level of service allocated to each client and the scale of the business opportunity. Rightster’s revenue share is reported as Net revenue (i.e. gross transaction revenues minus any commission due to third parties).

ǟ Advanced Service and Support fees – Rightster also offers hosting, premium managed services, brand campaigns/solutions and additional software features at the client’s request for additional monthly fees.

• Rightster supports a full range of monetisation models, across four primary stakeholder groups, to flexibly optimise their commercial policies and maximise value:

ǟ Publishers – pay for rights to display content on their sites.

ǟ Brands and Media Agencies – pay to advertise alongside content.

ǟ Content Owners – pay to ensure their content is viewed by the right audiences.

ǟ Audiences – pay to access specific content.

• This approach enables Rightster to adapt to the rapidly evolving online video market which continues to develop new revenue and monetisation models.

• Furthermore, this provides a powerful platform from which to expand into growing emerging markets.

2 Advanced Managed Services• In addition, Rightster employs specialist

teams that offer a range of advanced managed services. These include audience development on YouTube, Facebook and other social media platforms, premium advertising and sponsorship sales, content marketing, live event streaming and 24/7 support.

• Rightster possesses a uniquely experienced management team to deliver and grow these solutions, and a strong platform from which to create long-term value to customers.

• Services were enhanced through the acquisitions, with Viral Spiral bringing the addition of social video management skills, licensing capability and brand knowledge whilst Base79 added further YouTube capability,

partnerships with influential Creators and Brand expertise.

• New clients can access a large and growing pre-connected network of partners, with 2,500+ Content Owners and 10,500+ Publishers.

3 Software and Data Powered Services• The core software platform acts as an

intelligent switchboard enabling our full range of clients to distribute, monetise and transact in an optimal environment. It can be deployed efficiently due to its modular design, constructed as a service-oriented cloud-based architecture for maximum scalability.

• Further automation and self-service tools are intended to allow Rightster to provide more advanced services to more clients without adding significantly to the cost base.

• Content Owners can quickly access a diverse range of Publishers and platforms with pre-agreed commercial agreements and technical integrations. Publishers and platforms are able to access a wide range of rights-cleared, relevant premium content across Rightster’s multi-genre catalogue.

• As a result, Rightster benefits from a ‘network effect’ – as each Content Owner is added, the network becomes more attractive to Publishers and platforms, as each Publisher and platform is added, integration becomes more attractive to Content Owners. Ultimately this scale then provides a compelling opportunity to Brands and Media Agencies, enabling monetisation.

• Underpinning all these services is a rigorous approach to data – from collation and reporting through our next generation platform to optimisation based on the insights that are derived.

• Rightster provides clients with audience insight and intelligent automation from leveraging its data capabilities. Furthermore, as the scale of the network continues to grow and the number of transactions increases, Rightster’s aggregated dataset grows exponentially, enabling optimisation of processes across the Company, resulting in delivering even greater value to clients.

Rightster’s software powered solutions simplify online video in a fragmented market.


Rightster distributes everywhere

Content uploaded Brands plug-In Audiences consume

StrategyRightster’s strategy is driven by four key areas:

Users upload once

PlatformsBeyond just YouTube

Publishers

DirectOwned & Operated Channels

Focus Progress in 2014

Pure B2B Continue to drive network effect and grow B2B network of Content Owners, Creators, Brands, Publishers and Platforms.

Increased network of Content Owners from 850+ to 2,500+ and network of Publishers from 7,500+ to 10,500+.

Software powered services Continue to innovate on cloud-based platform to underpin all key service offerings.

Launched beta version of the next generation platform, incorporating software features that enable self-service functionality. Rolled out to selected customers in 2014 and commercial rollout continues throughout 2015.

Multi-platform distribution Create the leading technology-driven content switchboard to enable simple distribution capability to global audiences. Both platform and content neutral.

Distributed a range of content to various platforms including Facebook, YouTube, AOL, Yahoo and Vine as well as a wide network of Publishers, including Northern & Shell and Bauer Media publications.

Global and local Unlock global audiences in fast growing emerging markets.

Increased revenue growth in Rest of the World (outside of UK, Ireland, Europe and US) by 145% from year ending 31 December 2013 to year ending 31 December 2014 and became one of the largest MCNs outside of North America.

Business ModelRightster’s solution unlocks the true potential of online video and, in the increasingly fragmented online video market, Rightster provides the central switchboard

to enable Content Owners, Creators, Brands and Publishers to engage audiences with optimal impact and efficiency.


Strategic Report

CEO’s StatementIntroductionI have been fortunate in my career to witness first hand how technology can enhance and amplify storytelling, and how great content can lead people around the world to adopt new technology. From being a young producer on the world’s first Hi-Definition TV broadcasts in Tokyo, to leading YouTube’s maiden launches outside the US, the excitement, disruption and opportunity found at the crossroads of technology and content has thrilled and inspired me. Today, as the CEO of Rightster, I’m honoured to lead a Company that is truly at the forefront of this ongoing digital video (r)evolution, and more enthusiastic about the opportunity than ever.

“ I’m honoured to lead a company that is truly at the forefront of this ongoing digital video (r)evolution”Patrick Walker Chief Executive Officer

We started 2014 with a promise to become the ‘upload once, commercialise everywhere’ online video network and I am pleased to say that we are continuing to deliver on our vision with a deeper emphasis on operational efficiency and execution. With the work of our exceptionally talented team, we will focus on three main areas in 2015 – creating an invigorating work environment, building and delivering the best products, and generating great results for our clients.

2014 was a year of transition for Rightster, expanding on the successes of 2013 and capitalising on the opportunities presented by the acquisitions of Base79 and Viral Spiral. With this newly formed organisation, we cemented our commitment to creating a Multi-Platform Network that delivers real value and insights to Content Owners, Creators and Brands. There have been challenges merging three companies with unique cultures and products in a short amount of time, but we have experienced many positives too. Revenue is increasing by delivering on cross-company synergies, new and existing clients are tapping into our combined knowledge base, and new territories are opening through our local presence in the most important global media centres. We have scale and clear differentiation now.

TechnologyAt Rightster, we believe that technology is the difference that enables us to outperform the competition and unlock new opportunities. To scale our service offering to all of our constituents globally, cost effectively and at pace with the expanding and constantly changing online video market, we must deliver a powerful, reliable product. And if eight years as a senior executive at Google taught me anything, we must also be nimble: launching, learning, adapting and trying again.

In Q4 2014, we successfully launched live trials of our second-generation Rightster platform, which provides clients with a more self-service-oriented feature set. In 2015, we began integrating our existing and acquired technology into this one platform for greater cost efficiency and impact with a unique common data set. We continue to transition existing clients onto the Rightster platform, and are inducting new clients as we sign them. We will introduce a new, tiered pricing model as the software platform evolves, enabling


users to unlock additional features and support. We will realise the benefits from additional revenue streams toward late 2015/early 2016.

Partnerships2014 began with a focus on adding content Creators and expanding internationally. In addition to a growing roster of YouTube and social video stars such as Wrotetoshaw with 4 million subscribers, we secured noteworthy wins by adding premium content to our news network in the form of Agence France-Presse whilst securing deals with the International Boxing Association, and the International Table Tennis Federation in sport. We also entered into a partnership with Europe’s largest privately owned magazine group, Bauer Media, and the lifestyle programmers Scripps Networks International. Our film vertical is perhaps the most comprehensive, including the world’s largest studios, Warner Bros, Paramount, 20th Century Fox, Universal, and Walt Disney.

In focusing on international expansion, we’ve witnessed significant growth in the Asia Pacific region led by our GM APAC, Richard North, who joined us from Google/YouTube. Noteworthy deals include the Publishers Bauer Media Australia and Unscriptd, a content sourcing deal with News Corp Australia, and a YouTube deal with the smash hit kids phenomenon The Wiggles. In India, significant deals included a YouTube and content syndication deal with Lehren Networks and a content sourcing partnership with the popular news site, India.com. The focus of the APAC region in 2015 will be on winning new deals across an expanded footprint in Asia as well as collaborating with media agencies and Brands.

In the US, we’ve added significant deals to our client base including an international partnership with 20th Century Fox, now expanded to 17 territories, and with the popular children’s content provider The Jim Henson Company. Our team is also actively signing YouTube Creators, adding upcoming stars such as Jesse La Flair (a parkour athlete), Hollywood TV, and Kaitlin Witcher to our roster. Other deals include an off YouTube distribution deal for Fox Sports and a deal to manage Legends Football League’s YouTube channel.

As advertisers begin to shift spending from TV to online video, we have been actively responding to an increasing number of briefs from Brands that need technical and

creative guidance engaging with online audiences. In October 2014, Rightster won the high profile client Turkish Airlines and helped facilitate its innovative global YouTube campaign involving some of the world’s biggest YouTube stars (such as Devin Supertramp and Damian Walters). By utilising Rightster’s expertise in creating branded content, Turkish Airlines was able to reach a global audience. More recently, we have gained further momentum from a partnership with Microsoft Lumia, using our relationship with high-profile YouTube video bloggers to help promote the #lumiamusic campaign in conjunction with Warner Music, the Dentsu Aegis Network, and the award-winning band Clean Bandit.

We also pride ourselves on breaking new ground with first-of-a-kind deals. Most notably, Rightster succeeded in winning a bid to enter into a 3.5 year deal with the Arts Council England, worth £1.8 million, to establish and manage their multi-channel online video network for the arts. Rightster also became the first ever online video partner for Formula E, the world’s first fully electric racing series, and entered into a partnership with Sony Music Entertainment, utilising the popularity of YouTube beauty video bloggers such as Nikkie Tutorials (with more than 600,000 subscribers) to promote the release of Paloma Faith’s new album.

StrategyRightcasting is as a natural evolution of the digital age. First there was broadcasting – namely television, satellite, and cable companies distributing entertainment. Then came narrow-casting, where technology was used to build niche destinations and personalised content. In 2014, we introduced what we call ‘Rightcasting’ – using software, data, and networks to put the right video in front of the right audience in the right place at the right time. This provides clarity to prospective clients on the nature of our comprehensive services.

Our main stakeholders benefit from this overarching approach: • Content Owners: Rightster provides the

technology to distribute their content through a selection of platforms by using our network’s global scale, enabling them to establish the most effective route to their target audience.

• Publishers: Rightster has the tools to source and discover the perfect match of content on our network to fit their audiences’ desires.

• Creators: Rightster provides technology and expertise to broadcast and monetise content more effectively on YouTube and other global and local platforms and explore cross-promotional and brand opportunities.

• Global Brands: Rightster guides Brands to key influencers in the online video space, and enhances their online performance with tools and expertise in audience development and channel management, enabling them to engage audiences in a contextual environment.

Our aim is to unlock the true potential of online video in the most efficient and cost-effective way for both our clients and Rightster itself.

Conclusion I follow a simple management philosophy – we take care of the people, the product, and the profits.

Our team was dedicated and resilient throughout the transition in 2014. Through difficult times, we maintained a high level of customer service, we continued to sign exciting clients, and we effectively collaborated across our international offices.

However, when organisations grow rapidly, as Rightster did in 2014, important work can go unnoticed, the hardest workers can get passed over, and bureaucracy can choke out creativity and remove all the gains. My goal for 2015 is to build an organisation where people can focus on their work and have confidence that if they do good work, good things will happen for both the Company and for them personally.

Having proven that our combined offering is resonating with new and existing clients, 2015 will be about building a great culture and strengthening the product to help us build on the early wins and capitalise on even greater opportunities in 2015. We are thought leaders and disruptors in the fast changing and fragmenting world of online video. We are in the right place at the right time and I’m thrilled to be leading the charge.

Patrick WalkerChiefExecutiveOfficer

6 May 2015

Strategic Report


AcquisitionsRightster acquired Viral Spiral and Base79 in July and August 2014 respectively, propelling Rightster to become one of the largest Multi-Channel Networks (MCNs) in the world and significantlyenhancingRightster’sappealtohighprofileBrands.

Base79Base79 were specialists in YouTube rights management, Audience Development, Media Sales and Brand partnerships. This acquisition bringssignificantscalebenefitswithMediaAgencies, Brands and Content Owners and enhances Rightster’s expertise in the growing YouTube ecosystem.

The online video market has never been hotter as the $230 billion TV advertising market opportunity* continues to shift to digital. Although YouTube still represents a significant force in online video, other social media platforms such as Facebook, Vine and Snapchat also provide compelling destinations for audiences and Brands. Amongst this backdrop, Rightster is building the world’s leading Multi-Platform Network, bolstered by expertise from its recent acquisitions.

* Source: Carat Ad Spend Report, March 2015.

RIGHT NOW


Viral Spiral Viral Spiral was a specialist player in Social Video Management, connecting major Brands and Media Agencies worldwide with next generation audiences via social video talent. This acquisition brings the Company increased social video management skills, licensing capability and brand knowledge.

IntegrationCost synergies have been achieved following the integration, with annualised cost savings of approximately £3 million expected in 2015. Anenhancedbrandofferinghasledtorevenuesynergies, with Rightster now attracting and securinghighprofileclientssuchasTurkishAirlines, Amutus (the Japanese gaming company) and more recently, Microsoft Lumia and an extension to its global partnership with 20th Century Fox.


Strategic Report

Financial ReviewThe 2014 year has been one of continued growth and progression. There have been significant achievements across the Group including growth in revenue, continued investment in our scalable software powered solution and the successful integration of two significant acquisitions. Trading ResultsRevenue rose by £2.5 million against the prior year, a growth rate of 41%. When adjusted for the revenue generated by the Serie A contract which was terminated in May 2013, revenue grew by £5.7 million, a growth rate of 192%.

“ Revenue rose by £2.5 million against the prior year, a growth rate of 41%”Niall Dore Chief Financial Officer

Due to the nature of our ‘upload once, commercialise everywhere’ policy, coupled with a predominantly revenue share-based commercial model, a key KPI, which we track very closely, is Total Transaction Value (TTV). This reflects the total value of the business being enabled by the Rightster software system and network of partners and not just the value that Rightster itself invoices. Our TTV for the year ended December 2014 was £16.9 million, up from £11.0 million for the prior year. The increase is driven by the rise in Brand deals which have generated additional advertising revenue for the Group. The business has grown significantly over the past 12 months and our enhanced network of Content Owners and Publishers, which is generating over 1.4 billion views per month, enables the Group to provide a greater offering to major Brands.

The Group operates one operating segment, being the monetisation of online content. The performance of the underlying revenue streams in Advertising, Subscription and Theatrical are detailed below.

Advertising revenue rose £2.2 million to £6.3 million in 2014 due primarily to the impact of the acquisition of Base79 and Viral Spiral.

Subscription revenues rose £0.2 million to £1.2 million due to continued growth in our live streaming of the Australian Football League.

Theatrical revenues rose £0.1 million to £1.2 million compared to prior year. The increase is due to 2014 results including a full year of revenues compared to nine months in 2013. Like for like sales are down £0.2 million compared to prior year due to challenging market conditions in Europe.

Operating costs comprising R&D expenses and administration and sales expenses rose by £1.6 million compared to the prior year ended 31 December 2013, a reflection on the continued investment by the Group in software and people. At the end of the year the Group had 231 employees in 13 offices in 11 locations, up from 183 employees in 10 offices in 10 locations at the end of the prior period.


£42mraised in equity financing to fund acquisitions and

working capital.

Operating losses for the year ended 31 December 2014 totalled £16.2 million versus £17.3 million for the prior year. These losses are generated primarily by investment in people, infrastructure costs and the rental of office premises. Restructuring costs of £0.5 million were included in operating expenses (2013: £nil). Exceptional costs in 2014 were £1.0 million which comprised acquisition related items. The Company continues to operate employee stock option plans and the costs for the period totalled £1.3 million. This will continue to be an employee acquisition and retention tool going forward. Finance costs totalled £1.6 million for the year (2013: £1.5 million). This related to the discount on deferred consideration on the acquisitions made in the year and is a non-cash charge.

The loss for the year ended 31 December 2014 totalled £18.0 million versus £19.4 million for the prior year. The current year losses were impacted by non-cash charges including the unwinding of a £1.6 million discount on deferred consideration (2013: £nil) and amortisation of £1.7 million (2013: £0.4 million).

The Group generated an operating cash outflow of £16.0 million in 2014 (2013: £16.0 million). Rightster is an early stage business and the negative cash flow is reflective of the investment in people and software required during this period of growth. We believe that revenue and margins will improve as the Group achieves scale following the integration of the new acquisitions and the release of our new platform in 2015.

AcquisitionsRightster completed two acquisitions during the period: the 100% acquisition of Base79 for a consideration of up to £50 million payable through a mixture of cash and shares; and the remaining 75% of Viral Spiral for a consideration of up to £4.1 million. These businesses have brought immediate benefits including scale, increased revenue opportunities and management expertise to the Group.

Statement of Financial PositionRightster is a growth business and cash flow is thus negative. Cash utilised by operating activities was £16.0 million for the period, compared to £16.0 million for the 12 month prior period ended 31 December 2013. The Group successfully raised £42 million in equity financing during the period to fund a proportion of the acquisitions and the working capital requirement. The Group ended the year with £8.5 million in cash and cash equivalents and no debt (2013: £12.7 million and no debt). On 7 May 2015, the Group also announced a proposed placing to raise approximately £5 million through the issue of new ordinary shares. Intangible assets comprise goodwill and intangibles. Goodwill that arose on the acquisition of Base79, Viral Spiral and Preview Networks, are reviewed each year end for impairment. The intangibles are amortised over their useful lives. The Group capitalised R&D spend of £3.1 million on the development of the software platform. The beta release of the platform took place in December 2014 and a selection of clients have been invited to use the product as we prepare for general release in 2015.

Revenue Split 2014

Advertising revenue £6.3mSubscription revenue £1.2mTheatrical revenue £1.2m

73%

13.5%

13.5%


Strategic Report

Key Performance IndicatorsThe Group monitors a number of KPIs that allow it to track performance against targets as follows: • Video view growth: The average

monthly video views in H2 2014 were up 212% from H1 2014 (1.2 billion up from 375.3 million) and up 369% from H2 2013 (1.2 billion up from 249.5 million).

• Total video views for the year were 9.277 billion, up from 2.461 billion over the prior 12 month period.

• Revenue for the year ended 31 December 2014 was £8.7 million, an increase of £2.5 million versus prior year.

• After allowing for a key contract terminated during 2013, Revenue has increased from £3.0 million for the year ended 31 December 2013 to £8.7 million for the year ended 31 December 2014.

• Total Transaction Value (‘TTV’): this represents the total amount of business that is facilitated through the Group. It sums the total exchange of revenue between Rightster partners before revenue shares are distributed. For the year ended 2014, the TTV was £16.9 million, up from £11.0 million for the year ended 2013.

• GrossProfit increased to £3.9 million for the year ended 31 December 2014, from £0.6 million for the year ended 31 December 2013.

• Headcount increased from an average of 193 employees during the year ended 31 December 2013, to an average of 202 employees during the year ended 31 December 2014.

Principal Risks and UncertaintiesIndustry RiskThe digital rights and media industry is relatively new and changing rapidly and, as such, it is difficult to predict the prospects for and direction of growth in the industry. The Group may fail to adapt successfully. The Group derives its revenues from the commercialisation of digital rights through content distribution and monetisation, and the provision of technology and professional services to various stakeholders in the media industry.

The Group operates within competitive markets. The Group’s competitors could bring superior scale, better known brand, deeper experience or more compelling products to bear against the Group’s existing and potential business. Intense competition could increase pricing pressure in the market, manifested, for example, through declining revenue shares, or increased reliance on paying advances ahead of commercial deals. Mitigation: Rightster strives to offer a software and services platform to Content Owners, Publishers and Advertisers that is more cost effective than running such a platform themselves. The Group’s level of investment in R&D means it can deliver continuous innovation and when coupled with continuous investment in the network of Content Owners and Publishers means it can use technology to reduce costs and remain competitive.

Technology RiskTechnological innovation is progressing quickly and the Group may fail to keep pace or make the wrong choices. Customer preferences across the breadth of the Group’s platform and commercial offerings are subject to fast and relatively unpredictable change, as advances in technology progress. Recent changes have included proliferation of device types, operating systems, video formats and delivery methods and further changes are difficult to predict. If the Group fails to adapt sufficiently quickly to any changes, there is a risk that revenue will be lost and ultimately that its proposition will become less competitive in the market. Technology may progress to the point that in-house bespoke solutions become so efficient to build and adapt that the Group’s outsource proposition may become obsolete which could materially affect the Group’s business and its reputation, financial condition and operating results. As Rightster’s profile grows and it expands into new markets (including emerging markets), there is an increasing risk of

malicious attacks on its system. If premium content managed by the Group is used or made available by the Group or its customers other than in accordance with the terms of its licences, the Group may face contractual liability to its licensors in connection with a failure to adequately protect the rights granted under the Group’s licences, which could have a material effect on the business, reputation, financial condition or results of operations. Mitigation: Rightster has numerous paths for collecting business requirements and industry trends and regularly discusses business requirements with both customers and prospective customers. The Group’s sales team is the most effective conduit for customer needs and has direct involvement in setting the platform roadmap. The Group believes its pool of talented staff operating across all aspects of the business means it can innovate and deliver quality technology features and services that set it apart from competition and ensures it is meeting customer need. Agile technology development sprints means it can react quickly to industry change and adapt as necessary. The Group partners with enterprise-quality industry partners who are proven and reliable in the areas of cloud computing, content hosting and delivery, and content protection.

Intellectual Property RiskThe Group’s ability to compete effectively is highly dependent on its ability to protect its software, commercial offerings and trade secrets from unauthorised use. Rightster believes that it has taken appropriate measures to protect itself to date (including copyrights, trademarks, non-disclosure agreements etc.). However, the protection provided by these intellectual property rights, confidentiality and contractual restrictions is limited and varies between the UK and other countries. There can be no guarantee that these protections may be adequate to prevent competitors from taking commercial advantage of unauthorised disclosure of the Group’s sensitive business information.

Financial Review continued


Similarly, these protections may not prevent competitors from copying, reverse engineering or independently re-creating the Group’s products, services and technologies to create similar offerings. In addition, as the number of products and services offered in the Group’s markets, as well as the volume of content that the Group distributes, increases, claims relating to ownership of content may increase. Any claims, regardless of their merit, could be expensive and time-consuming to defend. Mitigation: Since its inception the Group has prioritised protection of its Intellectual Property (IP), primarily that generated by its staff. Robust employment contracts protect internally generated IP whilst commercial contracts as well as non-disclosure contracts protect the Group’s IP from external parties. The Group does not sell or distribute its software, thereby making reverse engineering more difficult, because the Software as a Service nature of the Rightster.com platform means all customer activity utilises the same instance of the securely hosted platform. Financial Risk ManagementThe Group’s financial instruments comprise cash and liquid resources and various items, such as trade receivables and trade payables, that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the Group’s operations. The principal financial risks faced by the Group are liquidity, foreign currency, credit and interest rate risks. The policies and strategies for managing these risks are summarised below. Foreign currency riskTransactional foreign currency exposures arise from both the export of services from the UK to overseas clients, and from the import of services directly sourced from overseas suppliers.

The Group is primarily exposed to foreign exchange in relation to movements in sterling against the US Dollar, Euro and Indian Rupee. The Group does not use derivatives to hedge translation exposures. All gains and losses are recognised in the income statement on translation at the transaction date. Credit RiskThe Group’s principal financial assets are cash and cash equivalents and trade and other receivables. The Group has no significant concentration of credit risk. The maximum exposure to credit risk is that shown within the balance sheet. All amounts are short-term and management consider the amounts to be of good credit quality. Liquidity/Funding RiskLiquidity risk is the risk that the Group may be unable to meet short-term financial demands. The Group’s funding strategy is to ensure a mix of funding sources offering flexibility and cost effectiveness to match the requirements of the Group. Operating subsidiaries are financed by the Group. The Group has been funded through a combination of equity and debt finance provided by the shareholders. The Directors review the cash flow requirements of the business regularly and ensure that a sufficient mix of funding is in place to ensure the Group can meet its obligations as they fall due. Interest Rate RiskThe Group held the majority of its cash and cash equivalents in corporate current accounts. These accounts offer a competitive interest rate with the advantage of quick access to the funds. The Group has zero debt and has no interest rate risk at the current time.

Environmental MattersAs far as the Directors of the Group are aware, the Group’s business does not cause an adverse impact on the environment. Social, Community and Human Rights IssuesThe Company has held internal fundraising events amongst its employees in order to raise money for the Digital Pipeline Charity (who provide access to communications technology in developing countries for educational and welfare purposes) and for Womankind Worldwide (who are dedicated to ensuring that women’s organisations in Africa, Asia and Latin America get the information, resources and platforms they need to create change with, and improve the lives of, women and girls). Rightster has adopted a formal equal opportunities policy which is contained in its employee handbook. The aim of the policy is to ensure no job applicant, employee or worker is discriminated against either directly or indirectly on the grounds of race, sex, disability, sexual orientation, gender reassignment, marriage or civil partnership, pregnancy or maternity, religion or belief, or age.

EmployeesAs at 31 December 2014, the Group employed 231 staff across 13 offices in 11 locations, 174 of which were male and 57 were female. Of the 13 senior members of management, one was female. On behalf of the Board Niall DoreChiefFinancialOfficer

6 May 2015

9.3bn2014

£16.9m2014

2.5bn2013 £11.0m

2013

Total Video Views for 2014 = 9.277 billion up from 2.461 billion in 2013

Total Transaction Value £16.9 million for 2014 up from £11.0 million for 2013

Revenue £8.7 million in 2014 up from £6.2 million in 2013

£8.7m2014

£6.2m2013


Strategic Report

This year, we moved into a more spacious and creative office space in the hub of Covent Garden. It’s provided us with more desk space, meeting room options and break out areas, as well as creating a more inspiring atmosphere for our employees.

Our People

Since the acquisitions, our team has grown and we enjoyed welcoming a wide range of talented individuals into Rightster this year, adding to our experienced team. We invite you to meet some of the Rightster team below:

Above Richard North (left)‘ Prior to Rightster, I spent eight years at Google in Asia-Pacific across a variety of roles including ad sales, agency relationships, ads syndication, resellers, content acquisition and YouTube Content Partnerships. I joined Rightster in May 2014 as GM, Asia-Pacific, based in Singapore. I’m responsible for growing the existing client base across India and Australia as well as expanding the business into new markets across Asia. In the past 12 months, the Rightster APAC team has grown from three to eight people and added dozens of new clients, including large Content Owners like Lehren Networks, Badminton World Federation, Tennis Australia, News Corp Australia and Bauer Media. We also support the global teams by providing APAC YouTube talent for campaigns, including Turkish Airlines and Universal Pictures. We are in the process of building up the APAC Publisher network and expect to have new deals to announce in 2015.’

âBelow Teresa Lynch (left)‘ My digital career began as SEO specialist for Shopzilla.com (part of E.W. Scripps), an online shopping comparison site based in Los Angeles. In 2009, I relocated to London and soon joined Preview Networks to manage the portfolio of UK film clients & grow the organic publisher network. Rightster acquired Preview Networks in 2012 and, since the acquisition, my role has expanded to include the US market. I transferred to the New York office last year and, in addition to managing my film clients, I build & maintain partnerships with paid placement networks to support engagement activation campaigns globally.’

Above Sam Ross (right)‘ I started working for Rightster almost five years ago, and have seen tremendous growth in the Company over that period of time. The new challenges and opportunities in the evolving online video space continue to keep me engaged and excited to be part of this growth story. Initially I worked in Product Management, launching and managing the first version of our platform and then taking the learnings from that into the evolution of our second generation platform. I’ve developed a bigger passion for the actual definition of our solutions and now look after Rightster’s Product Architecture and oversee the detailed functional specification for our software. I’m looking forward to the continued roll-out of our second generation software and seeing the benefits it brings to our clients.’


Above Johanna Bergqvist (left)‘ As one of the Founding Members of Viral Spiral in 2012, I managed the Licensing & Brands teams. Our focus was connecting Brands and Media Agencies with appropriate social video content and online influencers for the purpose of commercial campaigns, where we covered licensing, distribution and activation. In my current role at Rightster, I manage the Licensing & Research Team as well as working with the Brands Solutions department on branded content campaigns across emerging platforms including Vine, Instagram and Snapchat. Recent brand deals include campaigns for Coca-Cola, Purina, Delta and most recently, Spotify.’

ß Left Dan Woodbury (left)‘ I’ve worked for Rightster for the last four and a half years. In that time, I have been fortunate to work on a host of projects including the build and delivery of our first generation platform to support our clients and the private syndication portals which are used daily by our network of Publishers to source videos. This experience allowed me to evolve from a junior web developer to my current position as Technical Lead of the applications team. As Technical Lead, my responsibilities are to ensure work produced is of a high standard on all of the projects that we are aligned to, including the ongoing front-end development of the second generation platform, the Rightster corporate website and maintenance of our Live Subscription platform. Rightster is a great Company to work for and it’s great to be part of an exciting future as we strive to become the leader in online video.’âBelow

Jamie Searle (right)‘ I was an early member of the team at Base79, joining in 2011, where I developed the music and talent content verticals and played a key role in the growth of our YouTube MCN. In my time at Base79, I pitched and won YouTube original programming commissions worth $1.5 million for Flow and Guinness World Records. I get a huge buzz working at the cutting edge of digital media, and my role at Rightster enables me to do this in a way where I can have a role in shaping the video industry and contribute to our success within it. In the last 10–11 months at Rightster we have helped the Company become a talent agnostic content network through the creation of the GRIN – Global Rightster Influencer Network. We’ve also signed major deals including Comedy Shorts Gamer and Al Jazeera, made key partner renewals and worked with our Global teams on growing our content business. Previously, I worked in digital roles at Universal Music Group and NBC Universal and, prior to embarking on a career in the music business, I toured the world in an indie band.’


Corporate Governance

Board of Directors’ Profiles

Mark Lieberman (top left)Non-Executive ChairmanMark Lieberman has been an entrepreneur in the media and technology industry throughout his career. He is currently the President and CEO of Viamedia, the largest non-MSO affiliated video ad sales organisation in the US. Previously, he was Co-founder, CEO and Chairman of TRA, Inc. (TiVo Research & Analytics, Inc.), a media research and data software company. Previous roles include Managing Director of Hudson Abel Partners LLC, Chairman/CEO of IVT, President of About.com Ventures and Executive Vice President of Reed Elsevier Business Information. In the mid-1990s, Mark founded Sarnoff Real Time Corp., a video server company that became DIVA systems (the first commercially viable video-on-demand provider). Mark also served as Associate Deputy Secretary and Assistant Secretary for Technology (Acting) at the US Department of Commerce from 1989–1991 and was a practising lawyer. Mark is on the advisory board of Adfin and on the board of Center for Leadership and Learning.

Jack Barnett (bottom left)Non-Executive DirectorJack Barnett is a senior executive with over 20 years of experience with high-growth companies in the technology sector. Beginning with QRS, one of the early successful software-as-a-service companies in the San Francisco Bay Area, Jack has spent much of his career developing and delivering innovative analytical solutions to data-driven companies such as BT, Bet365, Bwin.Party, TRA (TiVo), Sainsbury’s, Safeway, The GAP and AIMIA. With an emphasis on business intelligence, corporate reporting, customer insight and loyalty programmes, Jack has a deep understanding of the significant opportunities and complex challenges of big data. Jack began his career in operational management at Costco and holds a BA in Political Science from the University of California, Berkeley. Jack resides in the UK and holds dual US/UK citizenship, and also serves as a Non-Executive Director of several privately held companies.

Michael Broughton (top right)Non-Executive DirectorMichael Broughton is currently a managing partner at Sports Investment Partners LLP, a European investment firm focused on driving investment and growth in the sport industry. In conjunction with this role, Michael is also a Non-Executive Director of Supponor Holdings Limited. For three years he worked at Nolan Partners Ltd, the leading sports executive search business, placing senior executives in some of the UK’s leading sports organisations including Manchester United, Chelsea, Arsenal, Liverpool, The FA, and Honda Racing F1. Prior to joining Nolan Partners Ltd in 2008, Michael spent seven years working in motorsport. Michael was responsible for Lucky Strike’s F1 sponsorship across the Latin American region and in 2007 set up the Global Social Responsibility programme for Johnnie Walker’s involvement with the Vodafone McLaren Mercedes team.

David Mathewson (bottom right)Non-Executive DirectorDavid Mathewson is a qualified Chartered Accountant and an experienced Non-Executive Director with significant experience in the financial sector and in the gaming and software industries. He served on the Board of Rodime plc (renamed Sportech plc following the acquisition of Littlewoods Football Pools) for 13 years and was Chairman until 2006. He was previously a Director of Corporate Finance at Noble Grossart Limited and a Non-Executive Director at Noble & Co Limited. Until May 2010, David was Senior Independent Director at Edinburgh UK Tracker Trust plc where he served on the board for 12 years and was Chairman of Asian Growth Properties Limited. In 2010 he was appointed as a Non-Executive Director of Playtech Limited where he chaired the audit committee and in 2011 became Chief Financial Officer, retiring in December 2012. He is currently a Non-Executive Director of 24/7 Gaming Group plc and Non-Executive Chairman of Macromac plc, both listed on AIM.


Niall Dore (top left)Chief Financial OfficerNiall Dore took over as CFO on 5 January 2015 and joins the business from Experian Consumer Services where he was Interim Finance Director UK & Ireland. Previously, Niall was Finance Director at Betfair Group plc for over five years, which included a year as Interim Group CFO. Niall has also held the positions of Group Financial Controller at both GE Life and Hyder Consulting Plc. Niall has a proven ability to execute different business models across the digital and technology sectors on a global scale with a strong focus on creating shareholder value.

Gerard Cranley (bottom left)Company SecretaryGerard Cranley has over 20 years of experience practising as a solicitor in the City of London. He has been a partner of Howard Kennedy (now Howard Kennedy Fsi) and Penningtons (nowPenningtons Manches), ‘Counsel’ for White & Case and Senior Associate at Weil. Before leaving private practice, Gerard’s focus was on mid-market mergers and acquisitions and early stage investment, with a particular interest in corporate governance.

Patrick Walker (top right)Chief Executive OfficerPatrick Walker has over 20 years of experience at the crossroads of the media and technology industries, starting as a TV producer for Japan’s public broadcaster, NHK and Senior Broadcast Journalist for BBC News, where he used state-of-the-art digital technology to transmit breaking news from often hostile environments worldwide. In his role as RealNetworks’ GM for International Video Services, he launched early Internet video and music consumer products for clients such as BBC, UEFA, Channel 4 and Fremantle. In 2006, Patrick was Google’s first YouTube hire outside of the US to work on its video strategy, initially with Google Video and then as YouTube’s European boss. In his role as Senior Director of Content Partnerships at YouTube, Patrick launched YouTube in over 40 EMEA countries. In 2013, Patrick joined Base79 Limited as its Chief Content Officer and Executive Director (having been a Non-Executive Director since 2008). In his role there, he was tasked with helping clients succeed in a global, multi-device, multi-platform online video market. Following Rightster’s acquisition of Base79 Limited in July 2014, Patrick joined Rightster’s Executive Team as Chief Commercial Officer, taking on responsibilities for Rightster’s global content and commercial partnerships. Patrick succeeded Charlie Muirhead as CEO of Rightster in January 2015.



Report of the Directors

The Directors are pleased to present their report to shareholders and the audited financial statements for the year ended 31 December 2014. Rightster Group plc was incorporated on 30 October 2013. On 11 November 2013 it acquired the whole of the shares in Rightster Limited (incorporated in May 2011) which had wholly owned subsidiaries in Gibraltar, Rightster (Gibraltar) Limited (incorporated in July 2012) and the USA, and Rightster Inc. (incorporated in April 2012) and had established a limited liability partnership in India, Rightster LLP (incorporated in October 2012). The preparation of the Group’s financial statements is in compliance with IFRS as adopted by the European Union and gives a true and fair view of the assets, liabilities, financial position and loss of the Group. The Group financial statements consolidate the financial statements of Rightster and its subsidiaries. Principal activity and business modelThe principal activity of the Group is online video syndication and monetisation services. Rightster provides cloud-based services that optimise the distribution and monetisation of live and on-demand video. Rightster is a global business to business video network for 360 degree distribution content-sourcing, audience engagement and monetisation. Rightster’s software and services make it simple for sports, fashion, news, entertainment and viral rights holders to enhance the value of their video whether on a licensed, ad-funded, direct to consumer or paid placement basis. Results and dividendsThe results for the period ended 31 December 2014 are set out in the consolidated income statement. The Directors do not propose payment of a dividend for the year ended 31 December 2014. Review of the periodA comprehensive analysis of the Group’s progress and development is set out in the Chairman’s Statement, CEO’s Statement and CFO’s Financial Review. This analysis includes comments on the position of the Group at the end of the financial period.

Significant eventsOn 7 July 2014, Rightster acquired the whole of the shares in the capital of Viral Management Limited (Viral Spiral), having previously held minority interest in that company. The consideration payable by Rightster for Viral Spiral was up to £4,100,000 and is payable in a mix of cash and shares. The following day, Rightster announced that it had entered into an agreement to acquire Base79 Limited for a consideration of up to £50,000,000 payable in a mix of cash and shares and that it was raising £42,000,000 (before expenses) by way of a placing of new shares. The placing was completed on 28 July 2014 and the acquisition of Base79 Limited was completed on 1 August 2014. Significant shareholdingsAs at 31 December 2014, the following persons held more than 3% of the issued shares in the capital of Rightster:

Shareholder Shares % IC

Invesco Asset Management 54,714,333 28.31Vesuvius Limited 50,459,092 26.11Woodford Investment Management 38,350,000 19.85Mr Charles Muirhead 7,110,666 3.68

The Directors’ interests are shown in the Remuneration Report

Deferred share capitalDeferred shares of £6.66 million were repurchased by the Company and cancelled on 31 July 2014.

Principal risks and uncertaintiesDetails of the Group’s principal risks and uncertainties are included in the Strategic Report.

Related party transactionsDetails of all related party transactions are set out in note 28 to the Financial Statements.

Corporate governanceThe Directors’ statement on Corporate Governance is set out on pages 31–32 and forms part of this report.


Insurance and indemnityRightster has purchased and maintains Directors’ and officers’ liability insurance cover against certain legal liabilities and costs for claims incurred in respect of any act or omission in the execution of their duties and which has been in place throughout the year.

Political donationsNo political donations were made in the year (2013: £nil).

Research and development expenditureResearch and development expenditure amounted to £1.0 million (2013: £4.3 million). A further £3.1 million of development costs were capitalised in the year (2013: £0.3 million).

Going concern assessmentThe consolidated financial statements have been prepared on the going concern basis on the assumption that the Group and Rightster continue in operational existence for the foreseeable future. The Group made a loss of £18,045,072 for the year ended 31 December 2014 (2013: £19,389,934).

The Group has continued to experience rapid growth although it is still loss making. The new management team have taken steps to reduce the amount of cash consumed by the business by approximately £3 million on an annualised basis in the 2015 financial year without materially affecting the Group’s growth prospects. Most of the cost savings related to the closure of the Group’s technology centre in Bangalore and the consolidation of those activities in London as well as redundancies resulting from changes in the way that the Group’s business is organised. The Board now expects the Group’s business to achieve cash flow break even in 2016.

In order to meet the growth plans assumed in our forecast, the Group will require additional financing. The Group has received a commitment from existing shareholders of £5 million on 6 May 2015. Accordingly the going concern basis of accounting has been adopted in preparing these consolidated financial statements.

Future outlookThe Directors are confident that the Group’s forecasts are achievable, and are committed to taking any actions available to them to ensure that any shortfall in forecast revenues is mitigated by cost savings. The Board is confident of the Group’s outlook for 2015.

Annual General Meeting Rightster’s Annual General Meeting is scheduled to take place in June 2015.

DirectorsThe Directors, who served during the year were as follows:

J A Barnett M LiebermanD MathewsonM BroughtonC S MuirheadC A de Beer (Resigned 5 January 2015)

All six of the above Directors are male.

Resignations and New AppointmentsMr Charl de Beer resigned as Group CFO and Executive Director on 5 January 2015. Mr Niall Dore was appointed as Group CFO and Executive Director of the Group on 5 January 2015.

Mr Charlie Muirhead resigned as Group CEO on 28 January 2015. Mr Patrick Walker was appointed as Group CEO on 28 January 2015 and appointed as an Executive Director on 23 April 2015.

Statement as to disclosure of information to auditorsSo far as the Directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the Company’s auditor is unaware, and each Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.

AuditorsGrant Thornton UK LLP were appointed as auditors on 10 June 2014 and, having expressed their willingness to continue in office, will be proposed for reappointment at the Company’s forthcoming Annual General Meeting in accordance with section 489 of the Companies Act 2006.

On behalf of the Board

Niall DoreChief Financial Officer

6 May 2015



Statement of Directors’ Responsibilities

The Directors are responsible for preparing the Strategic Report, the Report of the Directors and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial period. Under that law the Directors have prepared the Group financial statements in accordance with International Financial Reporting Standards IFRS as adopted by the European Union and elected to prepare the parent company financial statements in accordance with the UK Generally Accepted Accounting Practice (UK accounting standards and appropriate laws). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and Group and of the profit or loss of the Company and Group for that period. In preparing these financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently;• state whether applicable IFRS/UK accounting standards have

been followed, subject to any material departures disclosed and explained in the financial statements;

• make judgements and accounting estimates that are reasonable and prudent; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and, hence, for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.


Statement on Corporate Governance

Corporate governanceAs a Company listed on AIM, Rightster Group plc (Rightster) is not required to comply with the UK Corporate Governance Code. However, without undertaking voluntary compliance with the Code, we have reported on our corporate governance arrangements including those aspects of the UK Corporate Governance Code we consider to be relevant to the Company and best practice. The Board is committed to the regular review of Rightster’s governance structures, its practices and procedures and the composition and performance of the Board itself to ensure the highest standard of corporate governance having regard to available resources.

The statement set out below describes how the Group applies certain of the principles identified in the Code. As at 31 December 2014, the Board comprised the Non-Executive Chairman, the Chief Executive Officer, the Chief Financial Officer and two Non-Executive Directors. The Board considers the Chairman to have been independent on his appointment and also considers Mr Mathewson to be independent. The Board constitution and proceduresAll of the persons who served as Directors throughout the year ended 31 December 2014 have served since the date of Rightster’s admission to AIM.

The Non-Executive Directors are all considered by the Board to be independent of management and free of any relationship, which could materially interfere with the exercise of their independent judgement. The Board considers this to be the case notwithstanding that Mr Broughton has been acting as interim Chief Operating Officer since 1 December 2014 and Mr Mathewson has, since 28 September 2014 been in attendance at the Group’s London office on a regular basis to assist with various projects including the restructuring of the Company’s cost base. Mr Mathewson is the Senior Independent Non-Executive Director. Rightster’s General Counsel is also its Company Secretary and acts as secretary to the Board and its subsidiaries. The Company Secretary is a member of Rightster’s senior management team and all the Directors have access to his advice and services. Board operationThe roles of the Chairman and the Chief Executive Officer are separated, clearly defined and their respective responsibilities are summarised below. ChairmanThe Chairman provides leadership to the Board. He is responsible for setting the agenda for Board meetings, ensuring that the Board receives the information that it needs to properly participate in Board meetings in a timely and user friendly fashion and that the Board has sufficient time to discuss issues on the agenda.

Chief Executive OfficerThe Chief Executive Officer is responsible for leadership of Rightster’s management and its employees on a day-to-day basis. In conjunction with senior management, he is responsible for the execution of strategy approved by the Board and the implementation of Board decisions.

How the Board functionsThe Board is collectively responsible for the long-term success of the Group. The Board provides entrepreneurial leadership for Rightster within a framework of prudent and effective controls which enables risk to be assessed and managed. The Board considers the management team’s proposals for strategy and, following a consideration of those proposals, determines Rightster’s strategy and ensures that the necessary resources are in place for the management to execute that strategy. An important part of the Board’s role is the review of management performance. The Board met on 14 occasions during 2014 and all members of the Board attended all those meetings. Board meetings have been held at Rightster’s registered office. Directors are provided with comprehensive background information for each meeting and all Directors have been able to participate fully and on an informed basis in the Board decisions. In addition, certain members of the senior management team are invited to attend the whole or parts of the meetings to deliver reports on the business. Any specific actions arising during meetings as agreed by the Board are followed up and reviewed at subsequent Board meetings to ensure their completion.

Responsibility and delegationThe Board has specifically reserved a number of matters for its consideration and approval. These include:

• Overall leadership of Rightster and setting Rightster’s values and standards.

• Approval of Rightster’s long-term objectives and commercial strategy.

• Approval of the annual operating and capital expenditure budgets and any changes to them.

• Major investments or capital projects.• The extension of Rightster’s activities into any new business

or geographic areas.• Any decision to cease any material operations.• Changes in Rightster’s capital structure or management and

control structure.• Approval of the annual report and accounts and preliminary

and half-yearly financial statements.• Approval of treasury policies, including foreign currency

exposures and use of financial derivatives.• Ensuring the maintenance of a sound system of internal

control and risk management.• The entering into of agreements that are not in the ordinary

course of business or material strategically or by reason of their size.

• Changes to the size, composition or structure of the Board and its committees.



The Board has delegated certain of its responsibilities to committees. These committees comprise the Audit Committee, the Remuneration Committee and the AIM Compliance and Corporate Governance Committee. The Terms of Reference for each of the committees are available to view on Rightster’s website: www.rightster.com. Board tenureUnder article 35 of Rightster’s articles of association, Directors are required to stand for re-election by shareholders at an AGM if they have held office at the two preceding AGM’s. Since the AGM to be held in June 2015 will be Rightster’s second AGM, no members of the Board are required to submit themselves for re-election. However, as they did at Rightster’s previous AGM the Board has decided to voluntarily comply with the Code requirements that Directors of companies in the FTSE350 Index submit themselves for re-election annually and accordingly, all the Directors are seeking their re-election at the AGM.

The Board has collectively agreed that the Directors proposed for re-election have made significant contributions to the business and each has a key role to play in determining Rightster’s future strategy.

Insurance and indemnityIn accordance with Article 54 of Rightster’s articles of association Rightster’s Directors and officers are entitled to an indemnity from Rightster against liabilities incurred by them in the actual or purported exercise of their duties, or exercise of their powers including liability incurred in defending any proceedings (whether civil or criminal) which relate to anything done or omitted to be done and in which judgement is given in his favour, or in which he is acquitted, or which are otherwise disposed of.

Board balanceThe Board comprises individuals with wide business experience gained in various industry sectors related to Rightster’s business and it is the intention of the Board to ensure that the balance of the Directors reflects the changing needs of that business. The Board considers that it is of a size and has the balance of skills, knowledge, experience and independence that is appropriate for Rightster’s business. While not having a specific policy regarding the constitution and balance of the Board, potential new Directors are considered on their own merits with regards to their skills, knowledge, experience and credentials. Male or female candidates or candidates from any particular ethnic or national background would each be considered equally.

The Non-Executive Directors contribute their considerable collective experience and wide-ranging skills to the Board and provide a valuable independent perspective; where necessary constructively challenging proposals, policy and practices of executive management. In addition, they helped formulate Rightster’s strategy.

Relationship with shareholdersPrimary responsibility for effective communication with shareholders lies with the Chairman, but all Rightster’s Directors are available to meet with shareholders throughout the year. The Chief Executive Officer and Chief Financial Officer have been active in meeting with and preparing presentations for analysts and institutional investors. Rightster endeavours to answer all queries raised by shareholders promptly.

Rightster’s largest shareholder is Invesco Asset Management Limited (‘Invesco’) which, as at the date of this report, held circa 28.5% of Rightster’s issued share capital. Rightster, Invesco and Cenkos Securities plc (in its capacity as nominated adviser to Rightster for the purposes of the AIM Rules) have entered into a relationship agreement, to regulate their continuing relationship and ensure that any transactions between them are on arm’s length terms and on a normal commercial basis.

Investor relations (IR) and communicationsRightster’s Chief Executive Officer, Chief Financial Officer and members of Rightster’s IR team have attended a number of industry conferences and regularly meet or are in contact with existing and potential institutional investors. Rightster’s IR team provides regular reports to the Board on related matters, issues of concern to investors, and analyst’s views and opinions.

Whenever required, the Executive Directors and the Chairman communicate with Rightster’s brokers to confirm shareholder sentiment and to consult on particular governance issues. In the period since Rightster’s admission to AIM, three regulatory announcements have been released informing the market of the results of Rightster’s first day of trading on AIM, new content deals in sports, news and celebrity entertainment, and providing a trading update. Copies of these announcements, together with other IR information and documents, are available on Rightster’s website www.rightster.com. SummaryIn presenting this report, and having monitored, reviewed or approved all shareholder communications since the date of Rightster’s admission to AIM, the Board is confident that it has presented a balanced and understandable assessment of Rightster’s position and prospects.

On behalf of the Board

Gerard CranleyCompany Secretary

6 May 2015

Statement on Corporate Governance continued


Directors’ Remuneration Report

The Remuneration Committee considers and evaluates remuneration arrangements for senior managers and other key employees and makes recommendations to the Board. The purpose is to support the strategic aims of the business and shareholder interest, by enabling the recruitment, motivation and retention of key employees while complying with the requirements of regulatory and governance bodies. The Committee’s report, which is unaudited, except where indicated, is set out below. The CommitteeThe Committee held three meetings during the year, chaired by Mark Lieberman, a member of the Committee. The members of the Committee have no personal interest in the outcome of their decisions and give due regard to the interests of shareholders and to the continuing financial and commercial health of the business. Remuneration policyThe policy of the Board is to attract, retain and motivate the best managers by rewarding them with competitive compensation packages linked to the Group’s financial and strategic objectives. The components of remuneration for Executive Directors currently comprise base salary, other fees, benefits, bonus and participation in the Group’s Share Plan. Base salaryThe Group aims to provide salaries which are fair and reasonable in comparison with companies of a similar size, industry, complexity and international scope. When making salary determinations, the Committee takes into account not only competitive performance but also each executive’s individual performance and overall contribution to the business during the year. Annual bonusBonuses are currently based on performance against the Group’s strategic and financial objectives and provides for an on-target bonus opportunity subject to the achievement of financial performance targets. Service contractsCharles MuirheadCharles Muirhead entered into a service agreement with the Company on 11 November 2014. The terms of the agreement provide for, amongst other things: (i) salary of £180,000 per annum, payable in monthly instalments in arrears (such salary to be reviewed annually); (ii) termination upon 12 months’ written notice by the Company; and (iii) surrender by Charles Muirhead of certain rights to intellectual property created or developed by Charles Muirhead whilst an employee of the Company. Charles Muirhead is also entitled to: (a) a bonus on a sliding scale of up to a maximum of 50 per cent of his base salary, upon achieving certain targets in respect of, inter alia, revenue, operating profit and total operating costs; and (b) a bonus up to a maximum of 50 per cent of his base salary if and to the extent that the Remuneration Committee (in its absolute discretion) agrees that the Shareholders’ position has been materially improved by actions

conducted. Charles Muirhead is also subject to certain restrictive covenants, which, among other things prevent him from using or disclosing confidential information otherwise than in the proper course of employment, soliciting or inducing any customers or suppliers of the Company, persuading or attempting to persuade any employee to terminate their employment with any member of the Group or being engaged, concerned or interested in any business which is in competition with the Group.

Charl de BeerCharl de Beer entered into a service agreement with the Company on 11 November 2014. The terms of the agreement provide for, amongst other things: (i) salary of £150,000 per annum, payable in monthly instalments in arrears (such salary to be reviewed annually); (ii) termination upon six months’ written notice by the Company; and (iii) surrender by Charl de Beer of certain rights to intellectual property created or developed by Charl de Beer whilst an employee of the Company. Charl de Beer was also entitled to a bonus on a sliding scale of up to a maximum of 60 per cent of his base salary, upon achieving certain targets in respect of, inter alia, net revenue, operating profit and total operating costs. Charl de Beer was also subject to certain restrictive covenants, which, among other things prevent him from using or disclosing confidential information otherwise than in the proper course of employment, soliciting or inducing any customers or suppliers of the Company, persuading or attempting to persuade any employee to terminate their employment with any member of the Group or being engaged, concerned or interested in any business which is in competition with the Group.

Non-Executive Director Appointment LetterEach Non-Executive Director has entered into a letter of appointment with the Company on substantially the same terms. Non-Executive Directors are paid fees and the Company shall reimburse their reasonable, authorised and properly documented expenses that are incurred in the performance of their duties. The initial term of appointment is four years, unless terminated earlier by either the Company or the Non-Executive Director giving the other one month’s prior written notice. The Non-Executive Director may be removed as a Director at any time in accordance with the New Articles or the Companies Act (for example, by a valid resolution of the shareholders). The Company may terminate the appointment immediately in certain circumstances, such as if a material breach of obligations is committed by the Non-Executive Director. Mark Lieberman and David Mathewson have each been granted share options in the Company, as set out below. Audited information

Salary £

Bonus £

Aggregate Emoluments

£

C S Muirhead 205,000 100,000 305,000C A de Beer 128,000 50,000 178,000



Non-Executive DirectorsThe Non-Executive Directors serve under contracts, and have received fees in 2014, as detailed in the table below:

Fees £

Bonus £

Aggregate Emoluments

£

Vesuvius Limited (J Barnett appointed as nominee) 35,000 – 35,000M Lieberman 80,000 – 80,000D Mathewson 104,833 – 104,833Sports Investment Partners LLP (M Broughton appointed as nominee) 112,500 – 112,500

Share optionsUnder the Group’s share option scheme, executives may be awarded shares. The vesting of the award is over four years from the date of grant.

The Remuneration Committee granted shares to the Board of Directors during the year. The interests of the Executive Directors in Ordinary Shares subject to awards under this plan as at 31 December 2014 were as follows:

Granted during the year

Exercised during the year

Lapsed in the year

Outstanding as at 31 December

2014 Exercise prices Vesting dates

C S Muirhead – – – 4,000,000 £0.90–£1.80 Nov 2014–2017C A de Beer – – 349,167 410,833 £0.05–£0.075 Dec 2014

The interests of the Non-Executive Directors in Ordinary Shares subject to awards under this plan as at 31 December 2014, were as follows:

Granted during the year

Exercised during the year

Lapsed in the year

Outstanding as at 31 December

2014 Exercise prices Vesting dates

J A Barnett – – – – – –M Lieberman 370,000 – – 690,000 £0.075–£0.54 Apr 2014–2018D Mathewson 96,000 – – 396,000 £0.32–£0.6 Nov 2014–2018M Broughton – – – – – Nov 2014–2018

In addition to the above, during 2013 2,326,031 warrants were issued to Sports Investment Partners LLP a partnership in which M Broughton is a member with a further 43,860 issued during the year to 31 December 2014. The warrants were issued at an exercise price of 60p and vest on 12 November 2017. Directors’ interestsThe interests of the Directors in the issued Ordinary Shares as at the date of this document are as follows:

Number of Ordinary shares

C S Muirhead 7,110,666

Other transactions that occurred with Directors during the year are detailed in note 28 to the financial statements under Related Party Transactions.

Mark LiebermanChairman of the Remuneration Committee

6 May 2015

Directors’ Remuneration Report continued


Independent Auditor’s Report to the Members of Rightster Group plcFor the year ended 31 December 2014

We have audited the Group financial statements of Rightster Group plc for the year ended 31 December 2014 which comprise the consolidated income statement and consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of cash flow, consolidated statement of changes in equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and auditorAs explained more fully in the Statement of Directors’ Responsibilities set out on page 30, the Directors are responsible for the preparation of the Group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.

Scope of the audit of the financial statementsA description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate.

Opinion on financial statementsIn our opinion the Group financial statements:

• give a true and fair view of the state of the Group’s affairs as at 31 December 2014 and of its loss for the year then ended;

• have been properly prepared in accordance with IFRSs as adopted by the European Union; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006In our opinion the information given in the Strategic Report and Directors’ Report for the financial year for which the Group financial statements are prepared is consistent with the Group financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you if, in our opinion:

• certain disclosures of Directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Other matterWe have reported separately on the parent company financial statements of Rightster Group plc for the year ended 31 December 2014.

Mark HenshawSenior Statutory Auditorfor and on behalf of Grant Thornton UK LLPStatutory Auditor, Chartered AccountantsLondon

6 May 2015

Financial Statements


Consolidated Income Statement and Consolidated Statement of Comprehensive IncomeFor the year ended 31 December 2014

Note

31 December 2014

£

31 December 2013

£

Total revenues including commission share 13,876,508 8,533,394Less commission share (5,172,100) (2,369,842)

Revenue 8,704,408 6,163,552Cost of sales (4,777,729) (5,529,929)

Gross profit 3,926,679 633,623

Research and development expenses (1,015,387) (4,314,342)Administration expenses (18,605,816) (13,665,038)Share of result in associates 807 27,191Restructuring costs (554,261) –

Operating loss 7 (16,247,978) (17,318,566)

Exceptional items 8 (991,688) (492,618)Finance income 29,292 1,464Finance costs 9 (1,558,572) (1,537,900)

Loss before tax 7 (18,768,946) (19,347,620)

Analysed asOperating loss before tax adjusted for exceptional items and non-cash charges (12,452,841) (16,153,483)Restructuring costs (554,261) –Exceptional items (991,688) (492,618)Equity settled share-based payments (1,272,002) (560,587)

EBITDA (15,270,792) (17,206,688)Finance costs (1,558,572) (1,537,900)Finance income 29,292 1,464Depreciation (306,212) (244,019)Amortisation (1,662,662) (360,477)

Loss before tax (18,768,946) (19,347,620)

Income tax credit/(expense) 10 723,874 (42,314)

Loss attributable to equity holders of the parent (18,045,072) (19,389,934)

Statement of Comprehensive IncomeLoss for the year (18,045,072) (19,389,934)Items that may be reclassified subsequently to profit or lossExchange loss on translation of foreign subsidiaries (123,861) (26,508)Total comprehensive loss for the year/period attributable to owners of the parent (18,168,933) (19,416,442)

Loss per share (basic and diluted)Basic and diluted loss per ordinary share (pence) 11 12.1p 34.4p

All transactions arise from continuing operations.


Consolidated Statement of Financial PositionFor the year ended 31 December 2014

Note

31 December 2014

£

31 December 2013

£

Non-current assetsIntangible assets 13 56,538,210 2,666,844Property, plant and equipment 14 340,201 436,798Investments accounted for using the equity method 15 – 45,154Deferred tax asset 16 103,863 29,097

56,982,274 3,177,893Current assetsTrade and other receivables 17 7,117,330 2,172,246Cash and cash equivalents 8,458,247 12,719,074

15,575,577 14,891,320Current liabilitiesTrade and other payables 18 (8,744,964) (4,709,903)Deferred consideration 15 (22,163,229) –Borrowings and other financial liabilities 19 – (229,559)Reorganisation provision (214,047) –

(31,122,240) (4,939,462)Non-current LiabilitiesDeferred tax 16 (3,726,524) (107,164)

Net Assets 37,709,087 13,022,587

EquityShare capital 20 193,714 116,372Share premium 22 64,470,509 23,563,470Deferred share capital 21 – 6,660,000Capital redemption reserve 22 6,660,000 –Merger reserve 22 (24,059,625) (24,059,625)Merger relief reserve 22 41,009,443 40,410,393Retained deficit (50,414,585) (33,641,515)Translation reserve (150,369) (26,508)

Total equity 37,709,087 13,022,587

The financial statements on pages 36 to 71 were authorised for issue by the Board of Directors on 6 May 2015 and were signed on its behalf by:

Patrick WalkerDirector



Year ended 31 December

2014 £


2013 £

Operating activitiesLoss before tax (18,768,946) (19,347,620)Adjustments:Depreciation and amortisation 1,968,874 604,496Finance income (29,292) –Finance costs 1,558,572 1,651,916Share-based payment charges 1,272,002 560,587Share of profit from associates 807 (27,191)Profit arising on deemed disposal of associate (743,736) –Deferred consideration classified as remuneration 362,938 –(Increase)/Decrease in trade and other receivables (2,293,602) 978,896Increase/(Decrease) in trade and other payables 479,794 (427,931)Movement in provisions 214,047 –Tax paid (38,477) –

Cash outflow from operating activities (16,017,019) (16,006,847)

Investing activitiesPurchase of property plant and equipment (89,685) (57,411)Purchase of intangible assets (3,125,254) (265,382)Payment of deferred consideration (152,665) –Purchase of subsidiary undertakings (26,947,312) (224,378)Cash acquired with subsidiary undertakings 1,165,363 –Loans to associates 100,000 (100,000)Interest received 29,292 –

Cash outflow from investing activities (29,020,261) (647,171)

Cash flows from financing activitiesInterest paid (8,218) (28,450)Issue of share capital 42,083,168 20,499,998Share issue costs (1,099,737) (1,789,837)Loan finance raised – 11,799,136Repayment of loan notes – (2,549,899)

Net cash inflow from financing 40,975,213 27,930,948

Net change in cash and cash equivalents (4,062,067) 11,276,930

Movement in net cashCash 12,719,074 1,212,585Bank overdraft (229,559) –

Cash and cash equivalents, beginning of period 12,489,515 1,212,585(Decrease)/increase in cash and cash equivalents (4,062,067) 11,276,930Movement in foreign exchange 30,799 –

Cash and cash equivalents, end of period 8,458,247 12,489,515

Cash 8,458,247 12,719,074Bank overdraft – (229,559)

Cash and cash equivalents, end of period 8,458,247 12,489,515

Consolidated Statement of Cash FlowFor the year ended 31 December 2014


Share capital

£

Share premium

£

Deferred share capital

£

Capital redemption

reserve £

Merger reserve

£

Merger relief reserve

£

Translation reserve

£

Retained earnings

£

Total equity

£

At 31 December 2012 3,353 8,256,230 – – – – – (15,010,642) (6,751,059)

Shares issued during the year 113,019 17,097,077 6,660,000 – – – – – 23,870,096

Reserve arising on Merger – – – – (24,059,625) 40,410,393 – – 16,350,768

Share issue costs – (1,789,837) – – – – – – (1,789,837)Equity settled share

based payments – – – – – – 560,587 560,587Conversion of

embedded derivatives – – – – – – 198,474 198,474

Transactions with owners 113,019 15,307,240 6,660,000 – (24,059,625) 40,410,393 – 759,061 39,190,088

Other Comprehensive income

Loss and total comprehensive income for the period – – – – – – (26,508) (19,389,934) (19,416,442)

At 31 December 2013 116,372 23,563,470 6,660,000 – (24,059,625) 40,410,393 (26,508) (33,641,515) 13,022,587

Shares issued during the year 77,342 42,006,776 – – – 599,050 – – 42,683,168

Share issue costs – (1,099,737) – – – – – – (1,099,737)Equity settled share

based payments – – – – – – – 1,272,002 1,272,002Repurchased

during the year – – (6,660,000) 6,660,000 – – – – –

Transactions with owners 77,342 40,907,039 (6,660,000) 6,660,000 – 599,050 – 1,272,002 42,855,433

Other Comprehensive income

Loss and total comprehensive income for the period – – – – – – (123,861) (18,045,072) (18,168,933)

At 31 December 2014 193,714 64,470,509 – 6,660,000 (24,059,625) 41,009,443 (150,369) (50,414,585) 37,709,087

Consolidated Statement of Changes in EquityFor the year ended 31 December 2014



Notes to the Financial StatementsFor the year ended 31 December 2014

1 Rightster LimitedRightster Group plc (the Company) was incorporated in England and Wales on 30 October 2013 under the Companies Act 2006 (registration number 08754680) and its registered address is 3rd Floor, 1 Neal Street, London, WC2H 9QL. On 12 November 2013 the Company entered into share exchange agreements to acquire 100% of the issued share capital of Rightster Limited, a company incorporated in England and Wales on 16 May 2011 and registered at the same address. On 12 November 2013 the Company was admitted to the Alternative Investment Market (AIM) where its ordinary shares are traded.

The consolidated financial statements of the Group for the year ended 31 December 2014 comprise the Company and its subsidiaries (together referred to as the Group). The Group provides an online video distribution and marketing network, providing rights holders, online publishers and advertisers with the tools and expertise required to engage audiences and optimise digital revenues. The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman’s Report on pages 8 and 9, in addition, note 26 to the financial statements includes the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and its exposure to credit risk and liquidity risk.

2 Basis of preparation2.1 Going concernThe financial statements have been prepared on a going concern basis, which assumes that the Group will be able to meet its liabilities as they fall due for the foreseeable future. The Group is dependent for its working capital requirements on cash generated from operations, cash holdings and from equity markets. The cash holdings of the Group at 31 December 2014 were £8,458,247.

The Group made a loss of £18,045,072 for the year ended 31 December 2014 (2013: £19,389,934). These loses are consistent with the financial profile of an early stage technology company as the Group continues to invest in the growth of the business and the development of its software platform.

The Directors have prepared detailed cash flow projections (the Projections) which are based on their current expectations of trading prospects. The forecasts have been prepared over a period of five years. In order to fund the existing growth plans and working capital requirement the Group required additional financing to meet its obligations. The Directors have approached existing shareholders and have received funding commitment of £5 million on 6 May 2015. Accordingly, the Directors have concluded that it is appropriate to continue to adopt the going concern basis in preparing these financial statements.

2.2 Basis of consolidationThe consolidated financial statements consolidate the financial statements of Rightster Group plc and all its subsidiary undertakings up to 31 December 2014, with comparative information presented for the year ended 31 December 2013. No profit and loss account is presented for Rightster Group plc as permitted by section 408 of the Companies Act 2006.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group.

All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

Entities other than subsidiaries or joint ventures, in which the Group has a participating interest and over whose operating and financial policies the Group exercises significant influence, are treated as associates. The results of associate undertakings are consolidated under the equity method of accounting. The Group applies uniform accounting policies and any profits or losses arising on intra-Group transactions have been eliminated.

Group reconstructionThe merger method of accounting was used to consolidate the results of Rightster Limited because the transaction was a Group reconstruction with no changes in the ultimate ownership of the Company and shareholdings transferred via a share for share transfer. The legal parent company did not actively trade at the time. The merger of the two companies took place on 12 November 2013. Under merger accounting the shares issued were recorded in the consolidated balance sheet at the nominal value of the shares issued plus the fair value of any additional consideration. The difference between the nominal value of the shares issued and the nominal value of the shares acquired, if any, is taken to a merger reserve in the Group accounts. The assets and liabilities of the subsidiary are consolidated at book value. In the Group accounts Rightster Limited is treated as if it had always been a member of the Group and therefore comparative information is provided for the Group from the date the subsidiary was formed.


2 Basis of preparation continued2.3 Adoption of new and revised standardsNew and amended standards issued in the year have not had a significant impact on the financial statements. At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published by the IASB but are not yet effective, and have not been adopted early by the Group. Management anticipates that all of the relevant pronouncements will be adopted in the Group’s accounting policies for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Group’s financial statements is provided below. Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Group’s financial statements.

• Annual Improvements to IFRSs 2010–2012 Cycle (IASB effective date generally 1 July 2014).• Annual Improvements to IFRSs 2011–2013 Cycle (IASB effective date 1 July 2014).

3 Statement of complianceThe financial statements have been prepared in accordance with the accounting policies and presentation required by International Financial Reporting Standards (IFRS), and International Financial Reporting Interpretations Committee (IFRIC) Interpretations as endorsed by the European Union. They are presented in Pounds Sterling. The financial statements have also been prepared in accordance with those parts of the Companies Act 2006 that are relevant to companies that prepare financial statements in accordance with IFRS.

4 Summary of accounting policiesThe Company’s presentation and functional currency is £ (Sterling).

4.1 Basis of consolidationThe Group financial statements consolidate those of the parent company and all of its subsidiary undertakings drawn up to 31 December 2014. Subsidiaries are all entities over which the Group has the power to control the financial and operating policies and is exposed to or has rights over variable returns from its involvements with the investee and has the power to affect returns. Rightster Group plc obtains and exercises control through more than half of the voting rights for all its subsidiaries. All subsidiaries have a reporting date of 31 December and are consolidated from the acquisition date, which is the date from which control passes to Rightster Group plc.

Unrealised gains and losses on transactions between Group companies are eliminated. Where recognised losses on intra-Group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a Group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Business combinations are dealt with by the acquisition method. The acquisition method involves the recognition at fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the consolidated statement of financial position at their fair values, which are also used as the basis for subsequent measurement in accordance with the Group accounting policies. Goodwill is stated after separating out identifiable intangible assets. Goodwill represents the excess of acquisition cost over the fair value of the Group’s share of the identifiable net assets of the acquired subsidiary at the date of acquisition.

Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable.

4.2 Investments in associatesAssociates are those entities over which the Group is able to exert significant influence. Investments in associates are initially recognised at cost and subsequently accounted for using the equity method.

All subsequent changes to the Group’s share of interest in the equity of the associate are recognised in the carrying amount of the investment. Changes resulting from the profit or loss generated by the associate are reported within ‘Share of results in associates’ in profit or loss. These changes include subsequent depreciation, amortisation, impairment or fair value adjustments of assets and liabilities.

Changes resulting from other comprehensive income of the associate or items recognised directly in the associate’s equity are recognised in other comprehensive income or equity of the Group, as applicable. However, when the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. If the associate subsequently reports profits, the investor resumes recognising its share of those profits only after its share of the profits exceeds the accumulated share of losses that has previously not been recognised.



Notes to the Financial Statements continuedFor the year ended 31 December 2014

4 Summary of accounting policies continuedUnrealised gains and losses on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment losses from a Group perspective.

Amounts reported in the financial statements of associates have been adjusted where necessary to ensure consistency with the accounting policies of the Group.

4.3 RevenueRevenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of discounts and sales related taxes.

Revenue is recognised when the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity, the costs incurred or to be incurred can be measured reliably, and when the criteria for each of the Group’s different activities has been met.

Gross versus Net Revenue RecognitionThe Group’s primary market offering is a network or exchange whereby owners and licensors of video rights (Rights Holder/Content Owner) monetise these rights by loading the videos onto the network and allowing Publishers, through access to the network, to embed the video in their websites. The ultimate source of revenue is from a third party, either an advertiser (Media Agency or Brand) or the consumer themselves who pay a subscription fee for access to the video.

Rightster’s fee is a revenue share in the transaction, which is either a share of the gross receipts or a share of the net amount accruing to the Rights Holder (in this instance, Publishers fees are taken off first). The Publisher fee is set by the Rights Holder, either by way of a maximum percentage payable, or by the setting of a fixed percentage payable. In the former case, where the Publisher agrees a lower fee, the benefit of this lower fee is passed on to the Rights Holder i.e. Rightster does not retain the full value of the lower fee but passes the value to the Rights Holder.

Save for the instances, detailed below, where the Company agrees a minimum fee to the Rights Holder, the Company does not guarantee a level of revenue that will be generated by the Rights Holder. In addition it does not modify or alter the video received from the Rights Holder other than what is required for the fulfilment of the contractual obligations agreed with the customer (such as encoding).

In the normal course of business, the Company therefore acts as an agent in executing transactions between these third parties.

In connection with these arrangements, the Company must determine whether to report revenue based on the gross amount billed to the ultimate customer or on the net amount received from the customer after commissions and other payments to third parties. To the extent revenues are recorded on a gross basis, any commissions or other payments to third parties are recorded as expense so that the net amount (gross revenues less expense) is reflected in Operating Profit. Accordingly, the impact on Operating Profit is the same whether the Company records revenue on a gross or net basis.

The determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether the Company is acting as the principal or an agent in the transaction. If the Company is acting as a principal in a transaction, the Company reports revenue on a gross basis. If the Company is acting as an agent in a transaction, the Company reports revenue on a net basis. The determination of whether the Company is acting as a principal or an agent in a transaction involves judgement and is based on an evaluation of the terms of an arrangement.

The Company serves as the principal in transactions in which it has substantial risks and rewards of ownership. In the context of Rightster’s business we take this to be where we have agreed a ‘buy out’ of content which means the Company acts as the principal and pays a fixed fee to the Rights Holder but then retains all revenues associated with the monetisation of the rights. Both risk and reward are hence taken on by Rightster.

The Company may also agree a Revenue Advance or a Minimum Revenue Guarantee (MRG), coupled in both cases with a revenue share. A deal would only be agreed where the revenues forecast from the deal are likely to be in excess of the Advance or MRG. In this case the rewards do not wholly accrue to Rightster as the customer would also receive higher revenue in excess of the Advance or MRG if achieved. We account for these deals as an agent.

For contracts where an agent relationship exists, the aggregate revenue received by the Group is presented as Total revenues including commission share. The net revenue, which is presented as Revenue, represents Total revenues including commission share less revenue shares payable to Publishers and Content Owners.


4 Summary of accounting policies continuedRevenue shareRevenue share agreements are in place on contracts with Publishers and Content Owners. For these contracts, revenue is recognised in line with services performed under the respective contracts and over the period over which the services are performed. The Gross revenues are received by the Company and represent Total revenues including commission share. The revenue share payable to the Publishers and Content Owners is recognised as a deduction to Total revenues including commission share in order to derive net revenue.

Licence feesLicence fees are recognised over the period of the licensing agreement in line with the work performed on the contract.

The licensing of viral video content is recognised when an agreement has been reached with the customer for use of the clip and the clip has been made available to the customer.

Usage feesUsage fees are chargeable to clients in accordance with the services consumed or accessed over a given period. Services include the provision of bandwidth, storage and Ad server fees. Revenue is recognised when the services are provided, based on contracted rates.

Professional servicesA range of professional services are provided to clients including YouTube channel management and live streaming services. Revenue is recognised when the Company has performed the obligations necessary under the contract to fulfil those contractual obligations.

Direct to consumer (Subscription)Services or content are provided direct to the consumer. For these contracts, revenue is recognised over the subscription period. Where the subscription period is a month or a week, the full subscription fee received is recognised in the month of receipt. For subscriptions longer than a month, revenue is recognised evenly over the subscription period.

TheatricalTheatrical revenue relates to the placement and distribution of theatrical trailers in the film industry. Revenue is recognised when delivery is made and the risk has passed to the buyer.

4.4 Interest and dividend incomeInterest income and expenses are reported on an accrual basis using the effective interest method. Dividend income, other than from investments in associates, is recognised at the time the right to receive payment is established.

4.5 Foreign currency translationTransactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Non-monetary items that are measured at historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially recorded are recognised in the profit or loss in the period in which they arise.

The assets and liabilities in the financial statements of foreign subsidiaries and related goodwill are translated at the rate of exchange ruling at the balance sheet date. Income and expenses are translated at the actual rate on the date of transaction. The exchange differences arising from the retranslation of the opening net investment in subsidiaries and on income and expenses during the year are recognised in other comprehensive income and taken to the ‘translation reserve’ in equity. On disposal of a foreign operation the cumulative translation differences (including, if applicable, gains and losses on related hedges) are transferred to the income statement as part of the gain or loss on disposal.

4.6 Segment reportingIFRS 8 requires operating segments to be identified on the same basis as is used internally for the review of performance and allocation of resources by the Group Chief Executive (chief operating decision maker – CODM).

The Board has reviewed the Group and all revenues are functional activities of monetising content online and these activities take place on an integrated basis. The senior executive team review the financial information on an integrated basis for the Group as a whole, with respective heads of business who are geographically located and in accordance with IFRS 8, the Company will be providing only a geographical split as it considers that all activities fall within one segment of business which is monetising content online.

Segmental information is presented in accordance with IFRS 8 for all periods presented.




4 Summary of accounting policies continued4.7 LeasingRentals payable under operating leases are charged to the income statement on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.

4.8 Property, plant and equipmentProperty, plant and equipment is stated at historical cost less accumulated depreciation and impairment. Depreciation is calculated to write down the cost less estimated residual value of all property, plant and equipment by equal annual instalments over their expected useful lives less estimated residual values, using the straight line method. The rates generally applicable are:

Fixtures & Fittings 3 years straight line basisComputer equipment 3 years straight line basis

The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

The assets’ residual value and useful lives are reviewed, and adjusted if required, at each balance sheet date. The carrying amount of an asset is written down immediately to its recoverable amount if the carrying amount is greater than its estimated recoverable amount.

4.9 Impairment of property, plant and equipmentAt each balance sheet date, the Group reviews the carrying amounts of its property, plant and equipment to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

4.10 Intangible assetsAn intangible asset, which is an identifiable non-monetary asset without physical substance, is recognised to the extent that it is probable that the expected future economic benefits attributable to the asset will flow to the Group and that its cost can be measured reliably. The asset is deemed to be identifiable when it is separable or when it arises from contractual or other legal rights.

Intangible assets acquired as part of a business combination, are shown at fair value at the date of the acquisition less accumulated amortisation. Amortisation is charged on a straight line basis through the profit or loss. The rates applicable, which represent the Directors’ best estimate of the useful economic life, are:

• Customer relationships – 5–10 years• Technology – 1–5 years• Brand – 3 years• Software – 3 years

4.11 Impairment of intangible assetsAt each balance sheet date, the Group reviews the carrying amounts of its intangible assets and goodwill to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.


4 Summary of accounting policies continuedIf the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

GoodwillGoodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. Identifiable intangibles are those which can be sold separately or which arise from legal rights regardless of whether those rights are separable.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to the cash-generating units that are expected to benefit from the synergies of the combination and is not amortised but tested annually for impairment. Impairment losses in respect of goodwill cannot be subsequently reversed.

4.12 Development costsExpenditure on the research phase of an internal project is recognised as an expense in the period in which it is incurred. Development costs incurred on specific projects are capitalised when all the following conditions are satisfied:

• completion of the asset is technically feasible so that it will be available for use or sale;• the Group intends to complete the asset and use or sell it;• the Group has the ability to use or sell the asset and the asset will generate probable future economic benefits (over and above cost);• there are adequate technical, financial and other resources to complete the development and to use or sell the asset; and• the expenditure attributable to the asset during its development can be measured reliably.

Development costs not meeting the criteria for capitalisation are expensed as incurred. The cost of an internally generated asset comprises all directly attributable costs necessary to create, produce and prepare the asset to be capable of operating in the manner intended by management. Directly attributable costs include employee (other than Director) costs incurred along with third-party costs.

Judgement by the Directors is applied when deciding whether the recognition requirements for development costs have been met. Judgements are based on the information available at the time when costs are incurred. In addition, all internal activities related to the research and development of new projects are continuously monitored by the Directors.

4.13 TaxationTax expenses recognised in profit or loss comprise the sum of the tax currently payable and deferred tax not recognised in other comprehensive income or directly in equity.

Current taxThe tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred taxDeferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and are accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be recognised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to recognise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset recognised based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.




4 Summary of accounting policies continuedDeferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

4.14 Financial InstrumentsFinancial AssetsFinancial assets are recognised when the Group becomes a party to the contractual provisions of the financial instrument.

Loans and receivablesTrade receivables and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are initially recognised at fair value and are subsequently measured using the effective interest method less provision for any impairment.

Financial liabilities and equity instrumentsFinancial liabilities and equity are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Other financial liabilities (including borrowing and trade and other payables) are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method.

Financial liability instrumentsDeferred consideration is measured at fair value discounted using the Group’s average cost of capital.

Contingent consideration is determined using a combination of management forecasts and projections for relevant scenarios in order to estimate the most likely outcome for a given transaction.

Convertible loan notes denominated in currencies other than Sterling are accounted for as financial liabilities. The instruments are split between:

• The ‘host’ debt instrument being a non-convertible debt. The host contract is recognised at amortised cost using the effective interest rate.

• The embedded derivative reflecting the conversion feature, which is carried at fair value through profit or loss.

The valuation of the embedded derivatives is performed at inception of the loan and at each reporting date thereafter.

4.15 Group reconstructionGroup reconstruction accounting has been applied in accounting for the acquisition of Rightster Limited by Rightster Group plc through a share for share exchange on 12 November 2013. Rightster Group plc’s investment in Rightster Limited was recognised at the fair value of the Rightster Group plc shares issued in consideration on 12 November 2013. On consolidation the difference between the carrying value of Rightster Group plc’s investment and the carrying value of Rightster Limited’s share capital has been recorded in a merger reserve.

4.16 Equity, reserves and dividend paymentsShare capital represents the nominal value of shares that have been issued.

Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

Retained earnings include all current and prior period retained profits or losses. It also includes charges related to share-based employee remuneration.

Translation reserve – this represents the differences arising from translation of investments in overseas subsidiaries.

Merger reserve – where group reconstruction accounting is applied the difference between the cost of investment and the nominal value of the share capital acquired is recognised in a merger reserve.

Merger relief reserve – where the following conditions are met any excess consideration received over the nominal value of the shares issued is recognised in the merger relief reserve:

• the consideration for shares in another company includes issued shares; and• on completion of the transaction, the company issuing the shares will have secured at least a 90% equity holding in the other company.


4 Summary of accounting policies continuedDeferred share capital represents the nominal value of the deferred shares that have been issued.

Where the Company purchases its own equity share capital, on cancellation the nominal value of the shares cancelled is deducted from share capital and the amount is transferred to the capital redemption reserve.

Dividend distributions payable to equity shareholders are included in ‘other liabilities’ when the dividends have been approved in a general meeting prior to the reporting date.

4.17 Cash and cash equivalentsCash and cash equivalents include cash in hand, deposits held at call with banks, together with other short-term highly liquid investments that are readily convertible into known amounts of cash having maturities of three months or less from inception and which are subject to an insignificant risk of change in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

4.18 Employee benefitsThe Group operates a defined contribution pension plan on behalf of its employees and amounts due are expensed as they fall due.

4.19 Share based paymentsEmployees (including Directors) of the Group received remuneration in the form of share-based payment transactions, whereby employees render services in exchange for rights over shares (‘equity-settled transactions’). The Group has applied the requirements of IFRS 2 share-based payments to all grants of equity instruments. The transactions have been treated as equity settled.

The cost of equity settled transactions with employees is measured by reference to the fair value at the grant date of the equity instrument granted. The fair value is determined by using the Black-Scholes method. The cost of equity-settled transactions are recognised, together with a corresponding charge to equity, over the period between the date of grant and the end of a vesting period, where relevant employees become fully entitled to the award. The total value of the options has been pro-rated and allocated on a weighted average basis.

4.20 Settlement discountsWhere discounts are negotiated for early settlement of liabilities these are recognised within the income statement.

4.21 Exceptional itemsThe Group separately discloses items which it determines are non-recurring exceptional items. These are non-recurring items or items that are material and unrelated to the principal operating activities of the Group and the normal working capital financing of the Group.

5 Critical accounting judgements and key sources of estimation uncertaintyThe preparation of financial statements under IFRS requires the Group to make estimates and assumptions that affect the application of policies and reported amounts. Estimates and judgements are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and assumptions which have a risk of causing a material adjustment to the carrying amount of assets and liabilities are discussed below.

5.1 Critical accounting judgementsImpairment of goodwillThe Group is required to test, at least annually, whether goodwill has suffered any impairment. The recoverable amount is determined based on value in use calculations. The use of this method requires the estimation of future cash flows attributable to the acquired cash-generating unit and the choice of a suitable discount rate in order to calculate the present value of these cash flows. Actual outcomes could vary.

Intangible assets and impairmentThe Group recognises the intangible assets acquired as part of business combinations at fair value at the date of acquisition. The determination of these fair values is determined by experts engaged by management and based upon management’s and the Directors’ judgement and includes assumptions on the timing and amount of future incremental cash flows generated by the assets and selection of an appropriate discount rate. Furthermore management must estimate the expected useful lives of intangible assets and charge amortisation on these assets accordingly.

Deferred taxationDeferred tax assets and liabilities have been recognised which are contingent and dependent upon future trading performance.




5 Critical accounting judgements and key sources of estimation uncertainty continuedDevelopment costsDevelopment costs incurred on specific projects are capitalised when certain conditions are satisfied. Careful judgement by the Directors has been applied when deciding whether the recognition requirements for development costs are met. Judgements are based on the information available at the time of incurring the costs.

Development of Multi-Channel Network for the Arts Council EnglandRightster has entered into an agreement to develop a Multi-Channel Network for the Arts Council England. The income from this agreement relates to channel management activities which are in line with the ordinary activities of the Company. As such, the income is treated as revenue under IAS18.

Treatment of revenue as agent or principalThe determination of whether the Company is acting as a principal or an agent in a transaction involves judgement and is based on an evaluation of the terms of an arrangement. The Company serves as the principal in transactions in which it has substantial risks and rewards of ownership. The difference in treatment between principal and agent will impact gross and net revenue and cost of sales.

5.2 EstimatesDerivative financial instrumentsThe Group is required to measure the fair value of its derivative financial instruments. The fair value is determined using the Black-Scholes method which requires assumptions regarding exchange rate volatility, the risk free rate, share price volatility and the expected life of the derivative financial instrument. Exchange rate volatility is calculated using historic data over the past three years. The volatility of the Company’s share price has been calculated as the average of similar listed companies over the preceding periods. The risk-free rate used is 0.4% and management, including the Directors, have estimated the expected life of the derivative financial instrument as 6 months.

Base79 deferred contingent considerationThe calculation of the Base79 deferred contingent consideration requires significant estimates of both the value and the timing of the earnout conditions implicit in the agreement. The value of the consideration is contingent on performance criteria and staff retention both of which require estimation in order to quantify the consideration.

The deferred consideration also requires an estimate of the settlement date of the earnout. Changes to the settlement date can have a material impact on the discount charged to income statement.

6 Segment reportingAs explained in the summary of Accounting Policies, management identify only one operating segment in the business, being monetising content online. This single operating segment is monitored and strategic decisions are made on the basis of this segment alone.

As a result only the geographic reporting of turnover analysis has been included in this note.

No customer accounted for 10% of more of the Group’s revenues. Non-current assets held in Denmark were £284,750 at 31 December 2014 (December 2013: £535,819) all other non-current assets were held in the United Kingdom.


6 Segment reporting continuedGeographic reportingRightster has identified four geographic areas (UK, United States of America, Europe and Rest of the World) and the information is presented based on the customers’ location.


2014 £


2013 £

RevenueUnited Kingdom & Ireland 6,613,570 4,604,059United States of America 2,070,154 284,891Europe 2,786,297 2,661,401Rest of the World 2,406,487 983,043

Total Revenue 13,876,508 8,533,394Less commission share (5,172,100) (2,369,842)

Revenue 8,704,408 6,163,552Cost of sales (4,777,729) (5,529,929)

Gross profit 3,926,679 633,623Administration (20,175,464) (17,979,380)Share of result in associates 807 27,191

Operating loss (16,247,978) (17,318,566)

The Group identified three revenue streams, Advertising, Subscriptions and Theatrical. The analysis of revenue by each stream is detailed below.


2014 £


2013 £

Advertising 6,336,737 4,149,526Subscriptions 1,211,846 927,435Theatrical 1,155,825 1,086,591

8,704,408 6,163,552

7 Operating loss and loss before taxationThe operating loss and the loss before taxation are stated after:


2014 £


2013 £

Auditor’s remuneration:– Audit services 100,000 52,500– Tax advisory services 38,250 –– Other services 1,500 287,454Operating lease rentals – land and buildings 1,124,375 1,410,820Depreciation: property, plant and equipment 306,212 244,019Amortisation 1,662,662 360,477Foreign exchange loss 122,463 35,401




8 Exceptional itemsYear ended

31 December 2014

£


2013 £

Acquisition costs 1,628,274 –Aborted acquisition costs 107,150 –IPO costs – 492,618Profit on acquisition (see note 15) (743,736) –

991,688 492,618

9 Finance costsYear ended

31 December 2014

£


2013 £

Interest payable 8,218 –Unwinding of discount on deferred consideration 1,550,354 –Movement in fair value of derivatives – 51,244Discount on early settlement of loan notes – (114,016)Interest on shareholder loans – 1,600,672

1,558,572 1,537,900

10 Tax expense

Major components of tax (credit)/expense:


2014 £


2013 £

Current tax:UK corporation tax at 21.5%

(2013: 23.25%) (467,000) –Foreign TaxOverseas tax 86,226 128,629

Total current tax (380,774) 128,629

Deferred Tax:Originations and reversal of temporary differences (343,100) (86,315)

Tax (credit)/charge on loss on ordinary activities (723,874) 42,314

UK corporation tax is calculated at 21.5% (2013: 23.25%) of the estimated assessable loss for the year. Taxation for other jurisdictions is calculated at the rates prevailing in those jurisdictions.

The charge for the year can be reconciled to the loss per the income statement as follows:

Reconciliation of effective tax rate:Year ended

31 December 2014

£


2013 £

Loss on ordinary activities before tax (18,768,946) (19,347,620)

Income tax using the Company’s domestic tax rate 21.5% (2013: 23.25%) (4,035,324) (4,498,322)Effect of:Expenses not deductible for tax purposes 177,638 226,114Amortisation of intangible assets 361,629 83,810Overseas subsidiaries taxed at different rates 86,236 37,518Difference in capital allowances & depreciation/amortisation 13,909 14,220Tax credit on research and development (467,000) –Unutilised tax losses carried forward 3,139,038 4,178,974

Total (credit)/tax charge for period (723,874) 42,314


11 Loss per shareBoth the basic and diluted loss per share have been calculated using the loss after tax attributable to shareholders of Rightster Group plc as the numerator, i.e. no adjustments to losses were necessary in 2013 or 2014. The calculation of the basic loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. All share options and warrants have been excluded when calculating the diluted EPS as they were anti-dilutive.


2014 £


2013 £

Loss for the year attributable to ordinary shareholders (18,045,072) (19,389,934)Research and development costs charged to income 1,015,387 4,340,850Equity settled share based payments 1,272,002 560,587Amortisation and depreciation 1,968,874 604,496

Adjusted loss for the period attributable to the equity shareholders (13,788,809) (13,884,001)

Rightster LimitedWeighted average number of ordinary shares 149,285,293 56,425,434Basic and diluted loss per ordinary share (pence) 12.1p 34.4p

Adjusted basic and diluted loss per ordinary share (pence) 9.2p 24.6p

The comparative weighted average number of shares for 31 December 2013 was calculated based on the weighted average number of Rightster Limited shares in issue prior to the share for share exchange with Rightster Group plc on 12 November 2013 and the weighted average number of Rightster Group plc shares in issue subsequent to this date, weighted accordingly. Adjustments have been made to reflect the bonus issue and share consolidation during the year such that the weighted average number of shares is expressed in a format consistent with the share capital of Rightster Group at the balance sheet date. The weighted average number of ordinary shares includes the A and B preferred shares because the rights attached to these were similar to the ordinary shares and the preferred shares were converted into ordinary shares during 2013.

12 Directors and employeesThe average number of persons (including Directors) employed by the Group during the years were:


2014 £


2013 £

Finance and Administration 24 24Technology and solution delivery 90 110Sales, account management & audience development 88 59

202 193

The aggregate cost of these employees was:Year ended

31 December 2014

£


2013 £

Wages and salaries 10,347,917 9,728,897Payroll taxes 1,082,755 932,381Pension contributions 208,357 166,781

11,639,029 10,828,059

Directors emoluments paid during the period and included in the above figures were:Year ended

31 December 2014

£


2013 £

Emoluments 875,668 617,439




12 Directors and employees continuedThe highest paid Director received emoluments totalling £305,000 (2013: £490,383). The amount of share based payments charge (see note 23) which relates to the Directors was £313,715 (2013: £35,509). Key management of the Group are the executive members of Rightster Group plc’s Board of Directors. Key management personnel remuneration includes the following expenses:


2014 £


2013 £

Salaries including bonuses 815,333 617,439Social security costs 60,336 83,082Pensions 2,760 –

Emoluments 878,429 700,521

The 31 December 2015 share based payment charge attributable to the Directors was £151,476 (2013: £32,340).

13 Intangible assetsGoodwill

£Software

£Technology

£Brands

£

Customer Relationships

£Total

£

CostAt 31 December 2012 487,374 250,000 – – – 737,374Additions – – 265,382 – – 265,382Acquired with subsidiary 1,378,269 – 490,962 – 405,334 2,274,565Disposals – – – – – –

At 31 December 2013 1,865,643 250,000 756,344 – 405,334 3,277,321

Additions – – 3,125,254 – – 3,125,254Acquired with subsidiary 33,696,767 – – 272,666 18,926,715 52,896,148Disposals (487,374) (250,000) – – – (737,374)

At 31 December 2014 35,075,036 – 3,881,598 272,666 19,332,049 58,561,349

AmortisationAt 31 December 2012 – 250,000 – – – 250,000Charge for the year – – 303,619 – 56,858 360,477Disposals – – – – – –

At 31 December 2013 – 250,000 303,619 – 56,858 610,477

Charge for the year – – 730,091 38,968 893,603 1,662,662Disposals – (250,000) – – – (250,000)

At 31 December 2014 – – 1,033,710 38,968 950,461 2,023,139

Net Book ValueAt 31 December 2012 487,374 – – – – 487,374

At 31 December 2013 1,865,643 – 452,725 – 348,476 2,666,844

At 31 December 2014 35,075,036 – 2,847,888 233,698 18,381,588 56,538,210

Goodwill is not amortised, but tested annually for impairment with the recoverable amount being determined from value in use calculations.

As at 31 December 2014 goodwill has been assessed for impairment at the Group level as revenues are generated from a single cash-generating unit: the monetisation of online content. This represents the lowest level at which the goodwill is monitored for internal management purposes.

The recoverable amount of the cash-generating unit has been determined based on value in use. Value in use has been determined based on future cash flows after considering current economic conditions and trends, estimated future operating results, growth rates and anticipated future economic conditions.


13 Intangible assets continuedAs at 31 December 2014, goodwill and other intangible assets were assessed for impairment, the estimated cash flows for a period of five years were developed using internal forecasts, and a pre-tax discount rate of 15%. The cash flows beyond five years have been extrapolated assuming zero growth rates. The key assumptions are based on new customers and forecasts, which are determined through a combination of management’s views, market estimates and forecasts and other sector information.

Whilst management are satisfied that the projections are reasonable and prudent, they recognise that the underlying assumptions require judgement and estimation to forecast future income. Key to these would be the industry and technology risk factors set out on page 22. Based on these sensitivities a fall in projected gross margin of 13% would give rise to an impairment of goodwill and intangibles of £1.18 million.

14 Property, plant and equipmentComputer

equipment £

Fixtures & fittings

£Total

£

At 31 December 2012 689,387 18,221 707,608Additions 49,541 7,870 57,411

At 31 December 2013 738,928 26,091 765,019

Acquired with subsidiaries 98,013 21,917 119,930Additions 63,894 25,791 89,685

At 31 December 2014 900,835 73,799 974,634

DepreciationAt 31 December 2012 81,436 2,766 84,202Charge for the year 236,197 7,822 244,019

At 31 December 2013 317,633 10,588 328,221

Charge for the year 282,410 23,802 306,212

At 31 December 2014 600,043 34,390 634,433

Net Book ValueAt 31 December 2012 607,951 15,455 623,406

At 31 December 2013 421,295 15,503 436,798

At 31 December 2014 300,792 39,409 340,201




15 AcquisitionsBase79 LimitedOn 1 August 2014, the Company purchased 100% of the issued share capital of Base79 Limited for consideration of up to £50,000,000, of which £25,000,000 was paid in cash and the balance in shares based on a number of performance criteria and £197,437 was paid in respect of working capital. The investment has been accounted for using the acquisition method and goodwill of £31,569,470 was recognised on acquisition.

The details of the acquisition are as follows:Assets & Liabilities acquired

Book Value £

Fair Value Adjustments

£Fair Value

£

ASSETSOther intangible assets – 15,594,381 15,594,381Property, Plant & equipment 113,510 – 113,510Trade and other receivables 1,825,903 – 1,825,903Cash and cash equivalents 658,418 – 658,418Trade and other payables (2,768,012) 96,124 (2,671,888)Deferred tax liabilities – (3,118,876) (3,118,876)

Identifiable net assets acquired (170,181) 12,571,629 12,401,448Goodwill capitalised 31,569,470

43,970,918Cash Consideration 25,197,437Contingent consideration* 18,773,481

43,970,918

* The deferred contingent consideration is based on various performance criteria being met, management currently estimate the total amount payable will be £22,500,000. This amount has been discounted by £2,997,827 to present value using the Group’s weighted average cost of capital of 15%.

Goodwill relating to the acquisition amounted to £31,569,470. Goodwill represents the fair value of the expected synergies and other benefits from combining the net assets of Base79 Limited with those of Rightster Group plc. Transaction expenses charged to the income statement were £1,037,050.

In addition ongoing employees were also the selling shareholders of Base79 Limited, therefore a portion of contingent consideration payable to these employees under a key employee clause is classified as remuneration, rather than consideration. £728,692 of the contingent consideration is therefore not classified as consideration and is charged as an acquisition cost within exceptional items over the course of the earnout period (note 8).

The Group’s results for the year reflect post acquisition revenue from Base79 of £3,508,504 and a loss before tax of £105,454. Had Base79 Limited been acquired on 1 January 2014, it would have contributed revenue of £5,349,428 and a loss before tax of £1,901,558.

Gross contractual amounts receivable on acquisition were £1,825,903 and these were expected to be received in full.

The Directors believe that the Base79 acquisition will strengthen the Company’s YouTube business by adding a number of dedicated YouTube professionals and a former Director of Partnerships at YouTube, whilst also offering cross-selling opportunities for the Company’s off YouTube services. The terms of the Base79 acquisition incentivise Base79’s management team to drive growth in the combined Company and Base79 YouTube business. The Directors believe that the Base79 acquisition, together with the VML acquisition, will create a scalable digital distribution solution for Content Creators and Brand Owners globally and accelerate the Company’s path to profitability.

Viral Management LimitedDuring the year ended 31 December 2013 the Group owned 25% of Viral Management Limited. Viral Management Limited was equity accounted as an associate with the Group recognising their share of profits or losses and net assets or liabilities.

On 8 July 2014, the Group acquired the remaining 75% of the company for additional consideration of £3,826,331 comprising of an initial cash payment £1,749,875 and a further £600,000 payable in shares in Rightster Group plc. Deferred contingent consideration is payable subject to various performance criteria being met the maximum cash amount payable being £849,938 and the maximum amount payable in shares being £849,938.

Under IFRS 3 where an entity acquires control over another entity within which it formerly had a non-controlling interest the investment carrying value is remeasured to its fair value with the adjustment in carrying value recognised in the income statement as part of the acquisition accounting.


15 Acquisitions continuedThe purchase price allocation is then prepared on the basis of a 100% purchase consideration, grossing-up the purchase consideration using the actual consideration and the estimated fair value of the non-controlling interest. The fair value of the 25% interest has been estimated using the fair value of the consideration paid for the remaining 75%.

Consideration for the acquisition has been calculated as follows:

£

Cash 1,749,875950,120 ordinary shares (at 63p per share) 600,000Fair value of contingent consideration– Cash* 738,228– Shares* 738,228

Fair value consideration for 75% 3,826,331Implied fair value of 25% interest 1,275,443

Total investment 5,101,774

* The deferred contingent consideration of cash and shares has been discounted by £223,420 to their combined present value of £1,476,456. The Group have used their weighted average cost of capital 15%.

Consideration for the initial 25% holding therefore being £1,275,443, the resulting gain is calculated as follows:

£

Implied value of 25% interest 1,275,443Share of net assets and goodwill at 8 July 2014 (531,707)Gain recognised in income statement (note 8) 743,736

The details of the acquisition of Viral Management and residual goodwill have been calculated as follows:

Assets and Liabilities acquired

Book Value £

Fair Value Adjustments

£Fair Value

£

ASSETSOther intangible assets – 3,605,000 3,605,000Property, Plant & equipment 6,420 – 6,420Trade and other receivables 358,579 – 358,579Cash and cash equivalents 506,945 – 506,945Trade and other payables (668,933) (112,534) (781,467)Deferred tax liabilities – (721,000) (721,000)

Identifiable net assets acquired 203,011 2,771,466 2,974,477Goodwill capitalised 2,127,297

Consideration (as detailed above) 5,101,774

Goodwill relating to the acquisition amounted to £2,127,297. Goodwill represents the fair value of the expected synergies and other benefits from combining the net assets of Viral Management Limited with those of Rightster Group plc. Transaction expenses charged to the income statement were £228,286.

The Group’s results for the year reflect post acquisition revenue from Viral Management Limited of £507,252 and a loss before tax of £306,248. Had Viral Management been acquired on 1 January 2014, it would have contributed revenue of £901,896 and a profit before tax of £311,994.

Gross contractual amounts receivable on acquisition were £358,579 and these were expected to be received in full.

Rightster Limited acquired approximately 25 per cent of the share capital of VML in October 2012 and acquired the remaining 75 per cent in July 2014. Completion of the VML acquisition means that VML has become a wholly-owned subsidiary of the Company. The Directors believe that the VML acquisition will significantly enhance Rightster’s expertise in the social video management and licensing sphere as well as enhancing the Company’s brand and agency relationships.




16 Deferred taxation assets and liabilitiesDeferred tax recognised:

At 31 December 2014

£

At 31 December 2013

£

Deferred tax assetsDifference in depreciation and capital allowances 103,863 29,097Deferred tax liabilitiesDeferred tax on intangible assets (3,726,524) (107,164)

(3,622,661) (78,067)

Unutilised tax losses carried forward at 31 December 2014 were £39,770,082 (2013: £18,272,980). A deferred tax asset has not been recognised as the utilisation of these losses is contingent on the relevant subsidiaries producing taxable profits over a period of time and is subject to compliance with the relevant taxation authority requirements.

Reconciliation of movement in deferred taxDeferred tax on

intangible assets £

Depreciation in excess of capital

allowances £

Total£

As at 31 December 2012 – 14,877 14,877Acquired on acquisition (179,259) – (179,259)Recognised in the income statement 72,095 14,220 86,315

As at 31 December 2013 (107,164) 29,097 (78,067)

Acquired on acquisition (3,887,694) – (3,887,694)Recognised in the income statement 372,197 (29,097) 343,100

As at 31 December 2014 (3,622,661) – (3,622,661)

17 Trade and other receivablesAt 31 December

2014 £

At 31 December 2013

£

Trade receivables 3,714,511 1,182,516Less provision for impairment (196,609) (262,633)Net trade receivables 3,517,902 919,883Other receivables 3,599,428 1,252,363

7,117,330 2,172,246

All trade receivable amounts are short-term. All of the Group’s trade and other receivables have been reviewed for indicators of impairment and where necessary, a provision for impairment provided. The carrying value is considered a fair approximation of their fair value. The Group’s management considers that all the above financial assets that are not impaired or past due are of good credit quality.

The movement in provision for impairment of trade receivables can be reconciled as follows:At 31 December

2014 £

At 31 December 2013

£

Opening provision (262,633) (15,913)Receivables provided for during period – (229,746)Reversal or previous provisions 65,000 –Acquired on acquisition – (16,974)Movement in foreign exchange 1,024 –

(196,609) (262,633)


17 Trade and other receivables continuedIn addition, some of the unimpaired trade receivables of the Group are past due as at the reporting date. The age of financial assets past due, but not impaired, is as follows:

At 31 December 2014

£

At 31 December 2013

£

Not more than three months 1,074,648 322,384More than three months but not more than six months 182,394 258,791More than six months but not more than one year 10,909 97,183More than one year 19,096 19,936

1,287,047 698,294

18 Trade and other payablesAt 31 December

2014 £

At 31 December 2013

£

Trade payables 2,084,469 2,394,788Other payables 173,299 173,622Other taxation and social security 423,885 281,236Deferred income 29,167 54,167Accruals 6,034,144 1,806,090

8,744,964 4,709,903

All amounts are short-term and the Directors consider that the carrying value of trade and other payables are considered to be a reasonable approximation of fair value.

The average credit period taken for trade purchases was 59 days (December 2013 – 56 days).

19 Borrowings and other financial liabilitiesAt 31 December

2014 £

At 31 December 2013

£

Bank loans and overdrafts – 229,559

– 229,559

20 Share capitalOrdinary share capital

At 31 December 2014 At 31 December 2013

Number £ Number £

Ordinary shares of £0.001 193,714,204 193,714 116,372,334 116,372

Total ordinary share capital of the company 193,714 116,372

Rights attributable to ordinary sharesThe holders of ordinary shares are entitled to receive notice of and attend and vote at any general meeting of the Company.

A reconciliation of the movement in share capital during the year is detailed in note 22.




21 Deferred share capitalThe deferred shares were repurchased by the Company and cancelled on 31 July 2014.

Number £

Deferred ordinary shares of £0.0000001 66,599,999,334,000 6,660,000

Rights attributable to the deferred ordinary sharesThe holders of Deferred Shares carry no rights to participate in the profits of the Company. On a return of capital on a winding up or dissolution (but not otherwise) the holders of the Deferred Shares were entitled to participate in the distribution of the assets of the Company pari passu with the holders of the Ordinary Shares but only in respect of any excess of those assets above £1,000,000,000,000.

The holders of the Deferred Shares shall not be entitled, in their capacity as holders of such shares, to receive notice of any general meeting of the Company or to attend, speak or vote at any such meeting. The Deferred Shares shall not be listed on any stock exchange nor shall any share certificates be issued in respect of such shares. The Deferred Shares shall not be transferable, save as referred to below or with the written consent of the Directors.

22 Reconciliation of share capital for the year ended 31 December 2013

Ordinary share capital Preferred A Shares

Number

Preferred B Shares

Number

Deferred Shares

Number£0.0001 Number

£0.0000001 Number

£0.001 Number

Issue of ordinary shares 500,000,000 – – – – –

Issue of shares upon share for share exchange with Rightster Limited 66,166,666,000 – – 200,000,000,000 473,796,205,347 –

Conversion of 1 ordinary share for 999 deferred shares and 1 ordinary share of £0.0000001 (66,666,666,000) 66,666,666,000 – – – 66,599,999,334,000

Conversion of A and B Preferred to ordinary shares – 673,796,205,347 – (200,000,000,000) (473,796,205,347) –

Subdivision of ordinary shares of £0.0000001 to ordinary shares of £0.001 – (740,462,871,347) 74,046,287 – – –

Conversion of debt to equity – – 8,242,722 – – –

Issue of shares at IPO – – 34,083,325 – – –

Closing balance at 31 December 2013 – – 116,372,334 – – 66,599,999,334,000


22 Reconciliation of share capital for the year ended 31 December 2013 continued


Number

Preferred B Shares

Number

Deferred Shares

Number£0.0001

££0.0000001

££0.001

£

Issue Ordinary shares 50,000 – – – – 6,660,000Issue of shares upon share for share

exchange with Rightster Limited 6,616,667 – – 20,000 47,380 –Conversion of 1 ordinary share for 999

deferred shares and 1 ordinary share of £0.0000001 (6,666,667) 6,666 – – – –

Conversion of A and B Preferred to ordinary shares – 67,380 – (20,000) (47,380) –

Conversion of ordinary shares of £0.0000001 to ordinary shares of £0.001 – (74,046) 74,046 – – –

Conversion of debt to equity – – 8,243 – – –Issue of shares at IPO – – 34,083 – – –

Closing balance – Rightster Group plc at 31 December 2013 – – 116,372 – – 6,660,000

Share premium £

Merger reserve £


£

Issue of shares upon share for share exchange with Rightster Limited – (24,059,625) 40,410,393Conversion of debt to equity 4,937,390 – –Issue of shares at IPO 20,415,917 – –Share issue costs (1,789,837) – –

Closing balance – Rightster Group plc at 31 December 2013 23,563,470 (24,059,625) 40,410,393

Reconciliation of share capital for the year ended 31 December 2014


Number

Preferred B Shares

Number

Deferred Shares


£0.0000001 Number

£0.001 Number

Opening balance at 1 January 2014 – – 116,372,334 – – 66,599,999,334,000Issue of ordinary shares – – 77,341,870 – – –

Closing balance – at 31 December 2014 – – 193,714,204 – – 66,599,999,334,000


Number

Preferred B Shares

Number

Deferred Shares


£0.0000001 Number

£0.001 Number

Opening balance at 1 January 2014 – – 116,372 – – 6,660,000Issue of ordinary shares – – 77,342 – – –Repurchased during the year – – – – – (6,660,000)

Closing balance – at 31 December 2014 – – 193,714 – – –

Capital redemption

£Share premium

£Merger reserve

£Merger relief reserve

£

Opening balance at 1 January 2014 – 23,563,470 (24,059,625) 40,410,393Issue of ordinary shares – 40,907,039 – 599,050Share capital repurchased during the year 6,660,000 – – –

Closing balance – at 31 December 2014 6,660,000 64,470,509 (24,059,625) 41,009,443




23 Share optionsIn September 2013 Rightster Limited introduced an approved EMI share option scheme for employees. The first options were granted in September and October 2013, where options were issued in replacement for options issued under the original Rightster Limited unapproved scheme, vesting periods were deemed to have commenced from 30 May 2013. The replacement share options issued by Rightster Group plc were treated as modification of the original scheme, in accordance with IFRS2.28. The options were valued using the Black-Scholes valuation model, using the following assumptions.

Options

Expected option life 4 yearsExpected volatility 50%Weighted average volatility 50%Risk-free interest rate 2.9%Expected dividend yield 0%

The charge included within the financial statements for share options for the year to 31 December 2014 is £914,413 (2013: £495,004).

Within the assumptions above 50% share price volatility has been used, the assumption is based on the average volatility for AIM adjusted Rightster Group plc being a new listed Company. The actual share price volatility since IPO has been comparable with this assumption.

Options vest as follows:• 25% 12 months from grant date• 2.08% each month commencing 13 months from grant date until the options are fully vested at the end of the four year vesting period.

Details of the options issued under the approved scheme are as follows: NumberWeighted average

exercise price

Outstanding at the beginning of the year 13,702,537 44.8pGranted during the year 11,206,679 52.1pExercised during the year (935,984) 6.0pCancelled during the year (1,390,551) 5.5p

Outstanding at the end of the year 22,582,681 53.2pExercisable at the end of the year 4,728,715 11.45p

The weighted average share price on the date options were exercised was 61p.

Share options expire after 10 years, the options above expiring between March 2021 and December 2024.

Other share based paymentsIn addition to the above 2,326,031 warrants were issued. The warrants were issued at an exercise price of 60p and vest on 12 November 2017 and expire in November 2023. The warrants have been valued using the Black-Scholes model using the same assumptions as those stated above for the valuation of the share options. The warrants fair value on grant were £581,908. The charge included within the financial statement at 31 December 2014 is £145,477.

The Company entered into an agreement with one of our partners who is entitled to 978,978 shares to be issued over 3 years. The shares are granted evenly over a 3 year period on 31 December each year the first share issue being on 31 December 2014. The shares have been valued using the Black-Scholes model and the charge included within the 31 December 2014 accounts was £212,112.

24 Undertakings included in the financial statementsThe consolidated financial statements include:

Class of share heldCountry of

incorporation Proportion held Nature of business

Rightster Limited Ordinary UK 100% Online video distributionRightster Inc. Ordinary USA 100% Marketing & developmentRightster India LLP India 100% Software developmentRightster Gibraltar Ordinary Gibraltar 100% Online video distributionPreview Networks ApS Ordinary Denmark 100% Online video distributionViral Management Limited Ordinary UK 100% Online video distributionBase79 Limited Ordinary UK 100% Online video distributionBase79 Inc. Ordinary USA 100% Online video distributionBase79 SL Ordinary Spain 100% Online video distributionBase79 GMBH Ordinary Germany 100% Online video distributionBase79 SARL Ordinary France 100% Online video distribution


25 Investments in AssociatesThe Group’s 25% share of the aggregated financial information of equity accounted associates is set out below. On 8 July 2014, the Group purchased the remaining 75% of the Company and the acquisition accounting is set out in note 15.

Viral Management Limited6 Months to

8 July 2014

£

9 Months to 31 December

2013 £

Total revenue 394,644 1,354,936Share of result in associates 807 27,191

Non-current assets 6,392 30,824Current assets 862,627 904,164

Share of total assets 217,255 233,747

Current liabilities (691,688) (754,372)

Share of total liabilities (172,922) (188,593)

Share of equity shareholders’ funds in associates 44,333 45,154

26 Financial InstrumentsCategories of financial instruments

As at 31 December

2014 £

As at 31 December

2013 £

Financial assetsLoans and receivables 7,117,330 2,172,246Cash and bank balances 8,458,247 12,719,074

15,575,577 14,891,320Financial liabilities at amortised costTrade and other payables (8,744,964) (4,655,736)Borrowings – (229,599)Deferred consideration (22,163,229) –

(30,908,193) (4,885,335)

Financial risk managementThe Group’s financial instruments comprise cash and liquid resources and various items, such as trade receivables and trade payables, that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the Group’s operations. The principal financial risks faced by the Group are liquidity, foreign currency and credit risks. The policies and strategies for managing these risks are summarised as follows:

Foreign currency riskTransactional foreign currency exposures arise from both the export of services from the UK to overseas clients, and from the import of services directly sourced from overseas suppliers. The Group is primarily exposed to foreign exchange in relation to movements in Sterling against US Dollar, Australian Dollar and Euro.




26 Financial Instruments continuedThe Group does not use derivatives to hedge translation exposures. All gains and losses are recognised in profit or loss on translation at the reporting date. The Group’s current exposures in respect of currency risk are as follows:

Other £

Indian Rupee £

US Dollar £

Euro £

Sterling £

Total £

Financial assets – – 5,370 318,985 14,566,965 14,891,320Financial liabilities (229,559) – – (1,000,649) (3,655,127) (4,885,335)

Total exposure 31 December 2013 (229,559) – 5,370 (681,664) 10,911,838 10,005,985

Financial assets 20,581 520,588 1,350,990 2,620,269 68,045,423 72,557,851Financial liabilities (85,447) (758,322) (20,502) (198,262) (33,786,231) (34,848,764)

Total exposure at 31 December 2014 (64,866) (237,734) 1,330,488 2,422,007 34,259,192 37,709,087

Sensitivity analysisThe table below illustrates the estimated impact on profit or loss as a result of market movements in the Australian Dollar, Indian Rupee, US Dollar, Euro and Sterling exchange rate.

Impact on loss and equity

10% Increase in favour

of AUS Dollar £


of Indian Rupee £


of US Dollar £


of Euro £


of Sterling £

For the year to 31 December 2013 (266,360) (81,375) (79,030) (177,452) 624,326

For the year to 31 December 2014 37,607 (115,394) 122,714 81,186 (126,093)

Credit riskThe Group’s principal financial assets are cash and cash equivalents and trade and other receivables. The Group has no significant concentration of credit risk. The maximum exposure to credit risk is that shown within the balance sheet. All amounts are short-term and management consider the amounts to be of good credit quality.

Liquidity/funding riskThe Group’s funding strategy is to ensure a mix of funding sources offering flexibility and cost effectiveness to match the requirements of the Group. Operating subsidiaries are financed by retained profits.

Contractual maturitiesThe Group manages liquidity risk by maintaining adequate reserves.

Interest rate riskThe Group holds the majority of its cash and cash equivalents in corporate current accounts. These accounts offer a competitive interest rate with the advantage of quick access to the funds.

Capital policyThe Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain a capital structure that optimises the cost of capital.

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of cash and cash equivalents as disclosed in the statement of financial position and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in the consolidated statement of changes in equity.

The Group has no debt.

Debt is defined as long and short-term borrowings (excluding derivatives). Equity includes all capital and reserves of the Group that are managed as capital.


26 Financial Instruments continuedFinancial instruments measured at fair valueFinancial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three levels of fair value hierarchy. This grouping is determined based on the lowest level of significant inputs used in fair value measurement, as follows:

• Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities.• Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly

(i.e. as prices) or indirectly (i.e. derived from prices).• Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The estimated fair value of the deferred consideration is categorised within Level 3 of the fair value hierarchy. The fair value estimate has been determined using a present value technique. The fair value is estimated by discounting the liability at 15%. The discount rate has been determined using the Group’s average cost of capital. The most significant input is the discount rate of 15%.

Contingent consideration is determined using a combination of management forecasts and projections for relevant scenarios in order to estimate the most likely outcome for a given transaction.

Maturity analysisSet out below is a maturity analysis for non-derivative financial liabilities. The amounts disclosed are based on contractual undiscounted cash flows. The table includes both interest and principal cash flows. The Group had no derivative financial liabilities at either reporting date.

Total £

Less than 1 Year

£1–3 Years

£3–5 Years

£

As at 31 December 2013Borrowing principal payments 229,599 229,599 – –Trade and other payables 4,655,736 4,655,736 – –

As at 31 December 2014Borrowing principal payments – – – –Deferred consideration 850,000 850,000 – –Trade and other payables 8,715,797 8,715,797 – –

For details as to how management is planning to manage liquidity risk to ensure debts are paid as due please see note 2.1.

27 Financial commitmentsThe present value of future minimum rentals payable under non-cancellable operating leases are as follows:

At 31 December 2014

£

At 31 December 2013

£

Less than 1 year 157,551 787,245Between 2 and 5 years 1,075,149 –Over 5 years – –

1,232,700 787,245

Minimum GuaranteesThe Group has entered into contracts committing to the following minimum guarantees:

At 31 December 2014

£

At 31 December 2013

£

Minimum guaranteesLess than 1 year 1,489,216 934,966Between 2 and 5 years 1,082,120 1,022,514

2,571,336 1,957,480




28 Transactions with Directors and other related parties28.1 Director loansIncluded within other receivables at 31 December 2012 was an interest free loan owed to the Company by Charles Muirhead, a Director of the Company which is repayable on demand. The amounts due at each reporting date are detailed below:

At 31 December 2014

£

At 31 December 2013

£

Loan outstanding at period end – –Repaid during the period – 118,982

28.2 Viral Management LimitedDuring the periods, the Group entered into transactions, in the ordinary course of business, with Viral Management Limited, an associated undertaking for part of the year prior to the company becoming a subsidiary (see note 15). Prior to the date where Viral Management Limited became a subsidiary undertaking the Group made purchases and the balances due were as follows:

At 31 December 2014

£

At 31 December 2013

£

Purchases made during the period 517,695 913,285Balance due at period end – 101,887

28.3 Vesuvius LimitedLoans at 31 December 2013 include amounts payable to Vesuvius Limited a shareholder of the Company. The amounts outstanding and interest payable on the loans to Vesuvius Limited were as follows:

At 31 December 2014

£

At 31 December 2013

£

Loan outstanding at period end – –Interest charged during the period – 556,387

28.4 Tixdaq LimitedTixdaq Limited is a group of sport sites owned by William Muirhead who is a connected party through his relationship with Charles Muirhead. During the period to 31 December 2014 the Group paid a revenue share to Tixdaq Limited, from advertising generated on the above websites of £96,431 (2013: £108,187) to Tixdaq Limited. The balance outstanding at 31 December 2014 was £5,860 (2013: £17,142).

28.5 Sports Investment Partners LLPFees of £178,800 (2013: £491,300) were paid to Sports Investment Partners LLP which is a connected party through its relationship with Michael Broughton, a Director of the Company. The amount outstanding at 31 December 2014 was £Nil (2013: £178,800).

28.6 Michael BroughtonLoans included amounts payable to a connected party through their relationship with Michael Broughton, a Director of the Company. A loan of £Nil was received in the year by Rightster Limited (2013: £1,000,000) and loan repayments of £Nil were made in the year (2013: £1,000,000). Interest charged on the loan during the year was £Nil (2013: £114,838) and the amount outstanding at 31 December 2014 was £Nil (2013: £Nil).

29.7 J DeleonLoans included amounts payable to J Deleon a Director of Rightster Limited. Interest charged on the loan during the year was £Nil (2013: £426,741). The balance outstanding at 31 December 2014 was £Nil (2013: £Nil).

28.8 Sorbus Holdings SALoans included amounts payable to Sorbus Holdings SA which is a related party due to its connection with T Al Swaidi a Director of Rightster Limited in 2013. Interest charged on the loan during the year was £Nil (2013: £4,504). The balance outstanding at 31 December 2014 was £Nil (2013: £Nil).

28.9 London Labs LimitedLondon Labs Limited is owned by William Muirhead who is a connected party through the relationship with Charles Muirhead. During the year purchases of £Nil (2013: £8,363) were made from the company and the balance outstanding at 31 December 2014 was £Nil (2013: £10,035).


Report of the Independent Auditor to the Members of Rightster Group plcFor the year ended 31 December 2014

Independent auditor’s report to the members of Rightster Group plcWe have audited the parent company financial statements of Rightster Group plc for the year ended 31 December 2014 which comprise the Company balance sheet and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and auditorAs explained more fully in the Statement of Directors’ Responsibilities set out on page 30, the Directors are responsible for the preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the parent company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.

Scope of the audit of the financial statementsA description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate

Opinion on financial statementsIn our opinion the parent company financial statements:

• give a true and fair view of the state of the Company’s affairs as at 31 December 2014;

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006In our opinion the information given in the Strategic Report and Directors’ Report for the financial year for which the financial statements are prepared is consistent with the parent company financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

• the parent company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of Directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Other matterWe have reported separately on the Group financial statements of Rightster Group plc for the year ended 31 December 2014.

Mark HenshawSenior Statutory Auditorfor and on behalf of Grant Thornton UK LLPStatutory Auditor, Chartered AccountantsLondon

6 May 2015



Note

At 31 December 2014

£

At 31 December 2013

£

Fixed asset investmentsInvestments in subsidiaries 30 49,467,997 47,094,439

Current AssetsDebtors 31 31,478,596 23,258,845

31,478,596 23,258,845Creditors: amounts falling due within one year – –

– –Net current assets 31,478,596 23,258,845

Total assets less current liabilities 80,946,593 70,353,284

Capital and reservesCalled up share capital 32 193,714 116,372Share premium account 33 64,470,509 23,563,470Deferred share capital 33 – 6,660,000Capital redemption reserve 33 6,660,000 –Merger relief reserve 33 41,009,443 40,410,393Profit and loss account 34 (31,387,073) (396,951)

35 80,946,593 70,353,284

The financial statements on pages 36 – 71 were approved by the Board of Directors on 6 May 2015 and were signed on its behalf by:

Patrick WalkerDirector

Company Balance SheetFor the year ended 31 December 2014


Notes to the Financial Statements continuedAs at 31 December 2014

29 Accounting PoliciesThe financial statements are prepared in accordance with United Kingdom generally accepted accounting standards, under the historical cost convention. The accounting policies are set out below:

Going concernThe financial statements have been prepared on a going concern basis, which assumes that the Company will be able to meet its liabilities as they fall due for the foreseeable future. The Company is dependent for its working capital requirements on cash generated from operations, cash holdings and from equity markets. The cash holdings of the Company and its subsidiary undertakings at 31 December 2014 were £8,458,247.

The Directors have prepared detailed cash flow projections (the Projections) which are based on their current expectations of trading prospects. The forecasts have been prepared over a period of five years. In order to fund the existing growth plans and working capital requirement the Group required additional financing to meet its obligations. The Directors have approached existing shareholders and have received funding commitment of £5 million on 6 May 2015. Accordingly, the Directors have concluded that it is appropriate to continue to adopt the going concern basis in preparing these financial statements.

Deferred taxationDeferred taxation is provided at appropriate rates of taxation on timing differences between the recognition of items of income and expenditure for accounting and tax purposes, to the extent that it is expected that a liability will crystallise in the foreseeable future. Deferred tax balances are not discounted.

InvestmentsInvestments are stated at cost less provision for impairment.

DebtorsDebtors are stated in the balance sheet at estimated net realisable value.

LeasesRentals applicable to operating leases are charged to the profit and loss account on a straight line basis over the term of the lease.

Share based paymentsEmployees (including Directors) of the Company received remuneration in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (‘equity-settled transactions’).

The Group has applied the requirements of FRS20 share based payments to all grants of equity instruments. The transactions have been treated as equity settled.

The cost of equity settled transactions with employees is recovered by reference to the fair value at the grant date of the equity instrument granted. The fair value is determined by using the Black-Scholes method. The cost of equity-settled transactions are recognised, together with a corresponding charge equity, over the period between the date of grant and the end of vesting period, where relevant employees become fully entitled to the award. The total value of the options has been pro-rated and allocated on a weighted average basis.

The charge included within the financial statements for share options for the year to 31 December 2014 is £Nil (2013: £Nil).

ExemptionsThe Directors have taken advantage of the exemption available under section 408 of the Companies Act 2006 and not presented a profit and loss account for the Company alone. The Company is also exempt under the terms of FRS 8 Related Parties from disclosing related party transactions with entities that are wholly owned and part of Rightster Group plc. Finally, the Company has taken advantage of the exemption within FRS1 from preparing a cash flow statement.

Share capital and reservesShare capital represents the nominal value of shares that have been issued.

Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

Retained earnings include all current and prior period retained profits or losses. It also includes charges related to share-based employee remuneration.

Merger relief reserve – where the following conditions are met any excess consideration received over the nominal value of the shares issued is recognised in the merger relief reserve:

• the consideration for shares in another company includes issued shares; and• on completion of the transaction, the company issuing the shares will have secured at least a 90% equity holding in the other company.




29 Accounting Policies continuedDeferred share capital represents the nominal value of the deferred shares that have been issued.

Where the Company purchases its own equity share capital, on cancellation the nominal value of the shares cancelled is deducted from share capital and the amount is transferred to the capital redemption reserve.

Dividend distributions payable to equity shareholders are included in ‘other liabilities’ when the dividends have been approved in a general meeting prior to the reporting date.

30 Investments in subsidiaries and associates

Investments

At 31 December 2014

£

At 31 December 2013 47,094,439Additions 2,373,558

At 31 December 2014 49,467,997

At 31 December 2014 the Company had the following subsidiary undertakings.

Class of share held Country of incorporation Proportion held Nature of business

SubsidiariesRightster Limited Ordinary UK 100% Online video distributionIndirect subsidiariesRightster Inc. Ordinary USA 100% Marketing & developmentRightster India LLP India 100% Software developmentRightster Gibraltar Ordinary Gibraltar 100% Online video distributionPreview Networks ApS Ordinary Denmark 100% Online video distributionViral Management Limited Ordinary UK 100% Online video distributionBase79 Limited Ordinary UK 100% Online video distributionBase79 Inc. Ordinary USA 100% Online video distributionBase79 SL Ordinary Spain 100% Online video distributionBase79 GMBH Ordinary Germany 100% Online video distributionBase79 SARL Ordinary France 100% Online video distribution

31 DebtorsAt 31 December

2014 £

At 31 December 2013

£

Prepayments 1,815 –Other debtors 26,663 –Amounts due from Group undertakings 31,450,118 23,258,845

31,478,596 23,258,845

32 Capital and reservesOrdinary Share Capital

Number2014

£

Ordinary shares of £0.001 193,714,204 193,714


33 Capital and reserves – 31 December 2013The movement in share capital can be reconciled as follows


Number

Preferred BShares

Number

Deferred Shares


£0.0000001 Number

£0.001 Number

Issue of ordinary shares 500,000,000 – – – – –

Issue of shares prior upon share for share exchange with Rightster Limited 66,166,666,000 – – 200,000,000,000 473,796,205,347 –

Conversion of 1 ordinary share for 999 deferred shares and 1 ordinary share of £0.0000001 (66,666,666,000) 66,666,666,000 – – – 66,599,999,334,000

Conversion of A and B Preferred to ordinary shares – 673,796,205,347 – (200,000,000,000) (473,796,205,347) –

Subdivision of ordinary shares of £0.0000001 to ordinary shares of £0.001 – (740,462,871,347) 74,046,287 – – –

Conversion of debt to equity – – 8,242,722 – – –

Issue of shares at IPO – – 34,083,325 – – –

Closing balance – – 116,372,334 – – 66,599,999,334,000


£

Preferred B Shares

£

Deferred Shares

££0.0001

££0.0000001

££0.001

£

Issue ordinary shares 50,000 – – – – 6,660,000Issue of shares upon share for share

exchange with Rightster Limited 6,616,667 – – 20,000 47,380 –Conversion of 1 ordinary share for 999

deferred shares and 1 ordinary share of £0.0000001 (6,666,667) 6,666 – – – –

Conversion of A and B Preferred to ordinary shares – 67,380 – (20,000) (47,380) –

Conversion of ordinary shares of £0.0000001 to ordinary shares of £0.001 – (74,046) 74,046 – – –

Conversion of debt to equity – – 8,243 – – –Issue of shares at IPO – – 34,083 – – –

Closing balance – Rightster Group plc – – 116,372 – – 6,660,000

Share premium £


£

Issue of shares prior to share for share exchange with Rightster Limited – 40,410,393Conversion of debt to equity 4,937,390 –Issue of shares at IPO 20,415,917 –Share issue costs (1,789,837) –

Closing balance – Rightster Group plc 23,563,470 40,410,393




33 Capital and reserves – 31 December 2014 continuedThe movement in share capital can be reconciled as follows:


Number

Preferred B Shares

Number

Deferred Shares


£0.0000001 Number

£0.001 Number

Opening balance at 1 January 2014 – – 116,372,334 – – 66,599,999,334,000Issue of ordinary shares – – 77,341,870 – – –

Closing balance at 31 December 2014 – – 193,714,204 – – 66,599,999,334,000


Number

Preferred B Shares

Number

Deferred Shares


£0.0000001 Number

£0.001 Number

Opening balance at 1 January 2014 – – 116,372 – – 6,660,000Issue of ordinary shares – – 77,342 – – –Repurchased during the year – – – – – (6,660,000)

Closing balance – at 31 December 2014 – – 193,714 – – –

Capital redemption

£Share premium

£Merger reserve

£


£

Opening balance at 1 January 2014 – 23,563,470 (24,059,625) 40,410,393Issue of ordinary shares – 40,907,039 – 599,050Share capital repurchased during the year 6,660,000 – – –

Closing balance – at 31 December 2014 6,660,000 64,470,509 (24,059,625) 41,009,443

Number £

Deferred ordinary shares of £0.0000001 66,599,999,334,000 6,660,000

All deferred shares were repurchased and cancelled by the Company on 31 July 2014.

Rights attributable to the deferred ordinary sharesThe holders of Deferred Shares carry no rights to participate in the profits of the Company. On a return of capital on a winding up or dissolution (but not otherwise) the holders of the Deferred Shares shall be entitled to participate in the distribution of the assets of the Company pari passu with the holders of the Ordinary Shares but only in respect of any excess of those assets above £1,000,000,000,000.

The holders of the Deferred Shares shall not be entitled, in their capacity as holders of such shares, to receive notice of any general meeting of the Company or to attend, speak or vote at any such meeting. The Deferred Shares shall not be listed on any stock exchange nor shall any share certificates be issued in respect of such shares. The Deferred Shares shall not be transferable, save as referred to below or with the written consent of the Directors.


34 Profit and loss accountAt 31 December

2014 £

At 31 December 2013

£

At 31 December 2013 (396,951) –Loss for the year (32,763,680) (396,951)Share based payments granted on behalf of subsidiaries 1,773,558 –

At 31 December 2014 (31,387,073) (396,951)

35 Reconciliation of movement in equity shareholders’ funds

At 31 December 2014

£

At 31 December 2013

£

Loss for the financial year (32,763,680) (396,951)Share options granted to employees of subsidiaries 1,773,558 –Net proceeds from shares issued 41,583,431 70,750,235

Net increase in shareholders’ funds 10,593,309 70,353,284Opening shareholders’ funds 70,353,284 –

Closing shareholders’ funds 80,946,593 70,353,284


Company Information

The Board of Directors P WalkerN DoreJ A BarnettM LiebermanD MathewsonM Broughton

Company Secretary G Cranley

Registered Office 3rd Floor 1 Neal StreetLondonWC2H 9QL

Auditors Grant Thornton UK LLPGrant Thornton HouseMelton StreetLondonNW1 2EP

Solicitors Covington & Burling LLP265 StrandLondonWC2R 1BH

LONDON (HEAD OFFICE)1 Neal Street LondonWC2H 9QLUnited KingdomT: +44 (0)20 7183 4545E: [email protected]

BANGALORE3rd FloorSilver Spring LayoutOld Airport – Varthur Road MarathahalliBangalore 560 037KarnatakaIndiaT: +91 80 65696241E: [email protected]

BERLINRosenthaler Strasse 34/3510178 BerlinGermanyT: +49 (0)30 509 688 40E: [email protected]

COPENHAGENNjalsgade 21F1st Floor2300 Copenhagen SDenmarkT: +45 7027 8777T: +45 3132 3262E: [email protected]

GURGAON758, Udyog Vihar Phase VGurgaon 122016HaryanaIndiaT: +91 124 4922417E: [email protected]

LOS ANGELES604 Arizona Avenue,Santa MonicaCA 90401T: +1 310 450 7625E: [email protected]

MADRIDPérez Cidón 4828027 MadridSpainT: +34 646 983 937E: [email protected]

Our Offices

MILANvia Guido d’Arezzo, 420145 MilanItalyT: +39 02 4855 9429E: [email protected]

NEW YORK1115 BroadwayNew YorkNY 10010USAT: +1 646 699 5967E: [email protected]

PARIS45 rue Sainte-Anne75001 ParisFranceT: +33 970 406 672E: [email protected]

SINGAPORE48B Club Street Singapore 069425E: [email protected]

STOCKHOLMNybrogatan 34 Business CenterPO Box 5216102 45 StockholmSwedenT: +46 (0)735 330039E: [email protected]

SYDNEYLevel 355 Pyrmont Bridge RoadPyrmontNSW 2009 E: [email protected]

rightster.com

Rightster G

roup plc A

nnual Report &

Accounts 2014

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