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February 2019
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Date: February 2019
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Contents
1. Investment Overview ........................................................................................................................................................................ 4
11. Valuation............................................................................................................................................................................................... 30
Exit opportunity ..................................................................................................................................................... 31
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1. Investment Overview
The digital native generation interacts almost daily with mobile devices and parents have exceedingly
high expectations about the media their kids consume. Add to this that 65% of kids born after 2010 will
grow up to work in industries that do not even exist today, and that 50% of all labour-intensive jobs
globally will be automated by 2030. This puts parents under increasing pressure to fill major learning
gaps: to teach their kids the 21st Century skills that schools do not have time to cover. An overwhelming
number of parents (95%), whilst accepting that new generation learning has to embrace technology, are
also concerned about their children accessing inappropriate content. Screen time needs to be safe, fun,
positive and educational!
At Azoomee, we have a deep understanding of parents’ consumption and preferences when it comes to
screen time for their kids. We have designed a multimedia platform for kids 5+, which provides unlimited
access to fun and educational games, videos and learning activities in one place. Azoomee is on a
mission to build the world's largest library of games, videos and educational activities around topics like
creativity, pro-social skills, STEM and the environment. Launched initially in the UK, today Azoomee is
available through multiple high-profile commercial partnerships with blue chip companies including
O2, Vodafone, easyJet, Clear Channel and the NSPCC and in all the major app stores in over 110
countries.
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Please see Appendix 1 for key company milestones
Azoomee is now seeking to raise £2 million of growth capital to accelerate annual revenues from £900k
to £18 million in the next three years, transforming the company into a global EdTech business. This
strategic investment will allow the business to:
(i) license and develop a market-leading content library (games, videos and activities)
across multiple languages allowing Azoomee to fully leverage our international
distribution partnerships;
(ii) bolster the team from 16 to 25 full time staff by March 2020 to support and deliver our
projected growth in the next three years; and
(iii) increase marketing expenditure to drive greater product awareness, build Azoomee’s
brand and achieve significant revenue growth.
The senior management team, who have over 60 years’ combined experience in the media sector, firmly
believe that Azoomee has the long-term potential to be a global EdTech brand. In a relatively short
time, the business has developed and successfully launched a unique fun learning platform for children
that is consistently featured by the app stores and loved by parents (4.3/5 user rating – higher than
Netflix). Multiple leading global companies have signed commercial partnerships with Azoomee and
the business has a forward pipeline valued at 9x current annual revenues.
Alongside a significant global market need for Azoomee’s services, from an exit perspective, there is
already a growing array of potential trade buyers ranging from traditional education businesses to
global media companies. With this investment, Azoomee is poised to seize this opportunity and put all
shareholders in a very strong position to benefit from a highly attractive exit in the future.
“What a genius genius app and so well delivered. I’ve spent the
last 2 years struggling with the guilt of allowing my two boys to
watch “YouTube” etc etc. … This app provides a solution to all of
that... it is so well designed and I can’t speak more highly of it,
well worth every penny.”
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2. The Azoomee Offer
Tinizine Limited (trading as “Azoomee”) is seeking to raise £2,000,000 of new equity capital via the
issue of EIS compliant Ordinary Shares.
The summary of the rights attached to the ordinary shares is listed below:
The material provisions of the articles of association of Tinizine Limited ("the Company") in respect of
the rights attached to the Ordinary Shares are set out below. This is a description of significant rights
related to the Ordinary Shares and does not purport to be complete or exhaustive. The Ordinary Shares
are ordinary shares of £0.001 each and have attached to them voting and specified distribution and
other capital distribution rights as follows:
Economic Rights
The Company's share capital is divided into ordinary shares of £0.001 each ("Ordinary Shares") and B
Investment Shares of £0.001 each ("B Investment Shares"). Save as specified below with respect to Voting
Rights, the Ordinary Shares and B Investment Shares shall rank pari passu in all respects.
Dividends
The Ordinary Shares and B Investment Shares shall rank pari passu in respect of the payment of
dividends. All dividends shall be declared and paid by reference to each shareholder's holding of shares
on the date of the resolution or decision to declare or pay such dividend. No dividend shall be payable
in respect of any shares unless and until the amount of such dividend when aggregated with all
dividends then payable to the holder of such shares exceeds the sum of £50 and all the dividends
declared but not paid shall be held by the Company as dedicated retained dividends on trust for such
holder of shares and shall be payable to such persons either upon the winding up of the Company or
when the cumulative value of such withheld dividends exceeds £50.
Return of Capital
On a winding up of the Company, the Ordinary Shares and B Investment Shares shall rank pari passu
in respect of a return of capital. If the Company is wound up, the liquidator may, with the sanction of an
extraordinary resolution of the Company and any other sanction required by the Companies Act 2006,
divide among the members in specie the whole or any part of the assets of the Company and may value
any assets and determine how the division shall be carried out as between the members. No member
shall be compelled to accept any assets upon which there is a liability.
Voting Rights
The Ordinary Shares shall each carry one vote. The holders of Ordinary Shares shall have the right to
receive notices of any general meetings and to attend, speak and vote at such general meetings. The B
Investment Shares shall, subject to any variation or abrogation of their rights, have no voting rights
attached to them, and holders of B Investment Shares shall not, subject to any variation or abrogation
of their rights, have the right to receive notices of any general meetings, or the right to attend at such
general meetings. Each ordinary share shareholder who is present in person or present by a duly
authorised representative, not being himself a member entitled to vote, shall have one vote and on a
poll every member shall have one vote for every share of which he is the holder. On a poll, votes may
be given either in person or by proxy.
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3. The Market Opportunity
Today’s children spend billions of hours on connected devices. In the US alone, the Lancet recently found
that kids spend more than 3.5 hours on screens every single day. As a result, research shows that two
thirds of parents are looking for meaningful, high-quality content for their children. (Source: NPD Group)
This provides a substantial and as yet largely
untapped opportunity for Azoomee. Indeed, with
half the world’s population now online and
“I have a 6 year old and he loves this! … I get
devices in the hands of an ever-increasing
number of children, Azoomee is in a unique peace of mind because I know they always
position to provide the kind of curated experience add educational videos and games which
that combines media and learning that modern encourage him to think as well as have fun.
parents are desperately seeking. Also this week they’ve added extra stuff
In parallel, millennial parents realise they need to because it’s half term!”
plug an educational gap that schools are not
equipped to manage; 65% of today’s primary Apple App Store – Customer review (Oct 2017)
school children will have a job that has not been
invented yet but less than 3% of the education
market is currently digitized.
These parents – and their children – are digital natives. They are willing (and even keen!) to spend money
on a fun, high-quality and educational product that prepares their children for the future by teaching
essential 21st Century skills. That’s why we are leveraging this opportunity by building the world's largest
library of games, videos and educational activities around topics like creativity, pro-social skills, STEM
and the environment.
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4. A Fun Learning Platform for Kids 5+
Available on any mobile device, a subscription to the award-winning
Azoomee app gives families unlimited access to premium multimedia
content in one place:
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Videos
Azoomee has more than 400 hours of video content available to stream today. With the help of this
investment, we expect this library to grow to more than 1000 hours by 2020.
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5. Competitive Landscape
Azoomee operates in a large but under-served segment of the EdTech market, the nexus of media and
learning. Millennials already make up the biggest cohort of parents in most countries and are spending
exponentially more on all things related to learning. Their digital consumption is significantly higher per
capita than all other generations, yet they are currently underserved in their access to engaging learning
content.
Here’s how Azoomee meets the demands of these parents:
1. Mobile-first: optimised for and available on mobile devices
2. Multimedia: providing games, videos and learning activities
3. Prepares the kids for the world of tomorrow: 21st century skills are the future
4. Fun & educational: combining media with learning
Major media incumbents like Netflix, YouTube and BBC iPlayer focus almost exclusively on “fun”. The
traditional EdTech curriculum-based services don’t cover 21st century skills and are boring.
Hopster, PlayKids and Marco Polo only target the under 5s segment (pre-school) and as such have
minimal crossover with Azoomee.
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6. Senior Management Team & Non-Executive Directors
Azoomee’s senior management team have been working together successfully for over three years;
together they combine over 60 years’ experience in children’s media and technology.
Azoomee operates a four-pillar company structure with commercial operations managed by the CEO,
Douglas Lloyd, all educational, content & creative decisions made by Estelle Lloyd, product overseen by
Mahesh Ramachandra and all technical development carried out in-house under the supervision of
Klaas Ardinois. Outside the management team, Azoomee has invested in developing a committed and
talented team of experts in technology, education, content, marketing and design.
Relative to the market opportunity and the availability of Azoomee’s service in app stores in 110 countries,
the team is small. One of the key purposes of the fundraising is to add new members to the team to
develop more clearly defined roles for individuals and to reduce reliance on the co-founders specifically,
to go after large global business development opportunities.
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in digital publishing, sold to FTSE 250 Centaur Media plc in 2011. As one of the UK’s leading female
technology entrepreneurs, Estelle is an experienced public speaker and press interviewer on the subjects
of financing entrepreneurial businesses, building and scaling a tech business and mobile & technology
trends. A strong supporter of women-led businesses, she is also an investor and non-executive board
director to several start-ups. Estelle won Innovator of the Year (2017) at the Women in IT Awards.
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7. Business Model
To date Azoomee has generated the majority of its revenues through commercial partnerships (see
below) with large blue-chip companies (O2, Vodafone, Amazon) who provide direct access to their large
existing customer base in the family segment. The two most common business models that are used with
these partners are:
i) revenue share (where a partner assumes all or the vast majority of the direct consumer
marketing expenditure); and
ii) pre-paid subscriptions (where a partner buys Azoomee subscriptions and then includes
them as part of a bundled offer).
Direct to consumer revenues (B2C) are driven by paid advertising on social media, PR and influencers,
and has not been a major focus to date. Now that the business is starting to generate more traction in
particular markets and brand awareness is growing, the intention is to increase spend in those markets
to accelerate B2C revenues.
“As a partner, Azoomee really stands out for its responsiveness, its strong
customer-focus and the reliability of its core product. The company and its
staff are well known within O2; Azoomee has become a great example
internally of how a partnership should work between a large and high
growth entrepreneurial company.”
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Signed commercial partnerships (B2B2C)
Since Azoomee was launched as a product in July 2016 via a commercial partnership with O2 in the UK,
the company has signed a series of B2B2C partnerships globally. The majority of these B2B2C
partnerships generate revenue for Azoomee whilst also growing visibility for the company’s brand and
its characters (the Oomees) within its target family audience. These commercial partnerships currently
account for the majority of Azoomee’s revenues.
Summary:
O2 (UK Partnership)
Azoomee was launched as a consumer product following signature of a partnership with O2 in July 2016.
Under the terms of the partnership, customers purchase tablets pre-loaded with Azoomee either via the
O2 website or in-store. Every tablet includes an Azoomee voucher providing customers with a 2-year
subscription to the service.
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Summary:
Tomorrow Street
Azoomee joined Tomorrow Street, a 50:50 JV between Vodafone Group and the Luxembourg
Government in May 2018. Since it was founded in 2017, over 2,000 companies have applied to join; only
6 companies including Azoomee have been accepted.
Tomorrow Street’s mission is to identify scale-up companies anywhere in the world with developed
products / services that can generate significant revenues for the entire Vodafone group (70 operating
companies and partners) and the scale-ups. Being part of Tomorrow Street is a huge achievement and
provides a significant high visibility platform for Azoomee to grow globally. Furthermore, the
involvement of the Luxembourg government means that Tomorrow Street can provide high level access
and introductions to other companies and telcos outside the Vodafone group.
Tomorrow Street’s role is to assist its companies in winning business through introductions, meetings
and tactical interventions. They are remunerated exclusively based on success, which is calculated solely
on revenues. Since joining Tomorrow Street, Azoomee has signed two deals with Vodafone operating
companies, been invited in the largest kids’ content tender process in the US (Sprint) and opened up
conversations with a further 15 companies within the Vodafone group.
Introductions from Tomorrow Street since May 2018
Summary:
Vodafone (Global)
Since the Tomorrow Street partnership was signed, Azoomee has launched commercially with two
Vodafone OpCos (South Africa and Malta – endorsement video available here) and began generating
revenue from Vodafone operating companies in Q4’2018. Azoomee is about to go live with Vodafone in
Albania and is in active discussion to launch in a further 12 markets. The management team forecast
that at least three additional Vodafone operating companies will be active by the end of the next
financial year building on successes in Malta and South Africa.
Case study: Vodafone Malta
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Following 9 months of collaboration, Tomorrow Street and Azoomee have agreed the following strategy
with international Vodafone OpCos.
(i) Priority 1 markets are English-speaking OpCos where Azoomee’s current product offering
and English-language content library can be commercialised with no additional localisation.
Azoomee has already begun discussions with a number of OpCos in these locations with a
view to launch from the second half of 2019 onwards.
(ii) Priority 2 markets are markets where limited local language content is available and
customers expect largely English-language content on digital services. These are forecast to
launch from 2020 onwards.
(iii) Priority 3 markets require local language content to allow Azoomee to meaningfully enter
the market. Azoomee will expand its non-English language content library as part of this
fundraising to accelerate internationalisation in these markets from the second half of 2020.
Aligned with this focus, is also an understanding to capitalise on specific opportunities within the
Vodafone group as they arise even if an operating company is not a Priority 1 market geographically.
For example, there are detailed discussions ongoing with Vodafone in Greece and Portugal. Both
markets require localised content but deals are being pursued because of these two markets’ interest in
reinforcing their family proposition.
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Summary: Azoomee TV (Amazon Channels, Amazon Fire TV, Cable TV)
Recognising the quality of Azoomee’s app on the Amazon mobile Appstore, the Amazon UK team invited
Azoomee to launch a kids’ video channel on their new Amazon Prime Video Channels service in
November 2017.
Under the terms of this partnership, Azoomee provides a fun learning video channel on Amazon
Channels based on a revenue share model. The success of Azoomee TV in the UK is now driving
significant interest from other international markets, particularly the US. In addition to discussions about
extending Azoomee TV into the US with Amazon, the business is also in detailed talks with multiple cable
operators in the US, including Comcast, AT&T and Dish, to launch Azoomee TV. This underpins the
projected growth in Azoomee TV during the next three years.
Our close relationship with Amazon, cemented by our
extensive use of their AWS hosting platform, has also
opened up other opportunities with Amazon. Most
significantly, we have been in discussions to create a
games-only service for their wildly popular Fire TV
device (in the US, UK and German markets over 35m
units have been sold). We have created an innovative
prototype that makes compelling use of Amazon
hardware, which Amazon have agreed to support
when it comes to market. It is management’s intention
to dedicate part of the fundraising to develop this
solution for launch before the end of this year.
Note: revenue from this Fire TV games service has not
been included in Azoomee’s financial projections.
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Summary: Infomedia (Direct Carrier Billing)
There are three ways in which a mobile phone user can pay for a digital service or app:
• In-app payments (IAPs): this is managed by Apple, Google and Amazon on their respective
operating systems and devices, and is usually linked to the user’s credit card.
• Credit cards, PayPal or other methods linked to a bank account: the user pays for the service
directly to the supplier/publisher with their card or by providing bank details
• Direct Carrier Billing (DCB): the user pays for the service or app with their phone credit, or when
settling their phone bill. The user’s mobile carrier essentially handles the billing, often through
an intermediary or gateway.
Direct Carrier Billing (DCB) is the fastest-growing payment method across all geographic markets and
user demographics (DOCOMO Digital, 2018). It is particularly popular in developing markets where
traditional banking methods are not widespread. The ease of making a digital purchase, using an
existing relationship with the mobile carrier and the easily understood currency of phone credit, has
made this method of payment wildly popular. Given the growth of DCB, Azoomee has taken steps to
ensure that it is a core part of its platform capabilities.
Infomedia is a well-established DCB gateway that is integrated with 50+ signed telecommunication
companies globally. Azoomee has concluded a comprehensive agreement with Infomedia with the
objective of rolling out Azoomee around with world with DCB payment capability from the end of Q1
2019. There are two immediate benefits to our relationship with Infomedia:
• Build once, bill everywhere: Azoomee needs to make only a single integration with Infomedia,
who are in turn already integrated with 50+ carriers, ready to take payment. Thus high ROI on
the initial development.
• Local marketing to drive success: Infomedia has strong relationships with local marketing
agencies in each of their operational markets. These agencies, selected by a rigorous tender
process conducted by Infomedia, will market Azoomee locally on a revenue share basis.
We believe that success with Infomedia will translate into not only into much higher B2C revenues, but
also accelerate new B2B2C opportunities with local carriers.
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Signed marketing partnerships
• Press and public relations activities in Sweden including regular thought-leadership pieces in the
Metro newspaper
• Digital marketing activities across multiple channels including social, display and programmatic
• Print advertising in Metro newspapers
• Influencer marketing campaigns (Instagram, YouTube etc.)
The partnership provides strong financial incentivize for Metro Media House to ensure that their
marketing campaigns are successful for both parties.
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Summary: NSPCC
The NSPCC is the UK’s leading children’s charity and is a supporting
partner of Azoomee. Based on a shared belief that children should be safe
online, we have been working together since February 2015. As a part of
this partnership, Azoomee can use the NSPCC logo in its marketing –
instantly instilling trust and reinforcing our brand – and receives visibility
via the NSPCC and Childline websites, social media and beyond.
Since the beginning of our relationship, the NSPCC has also provided
safeguarding support and guidance for the application and acted as
supporting partner for our original internet safety series Search It Up,
which received a BAFTA nomination and is regularly one of the most
popular shows on Azoomee.
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Business to consumer (B2C)
Azoomee is unique in that its service comfortably embraces both B2B2C opportunities (i.e. partnering
with large corporates to supply Azoomee directly to their customers) as well as a Direct or Business to
Consumer offering – selling the app directly to customers through the popular app stores.
In the multi-billion-pound app industry, the kids or family category is one of the fastest-growing
segments. It is important to note that, for young children, tablets and smartphones are the primary way
they consume digital media content, whether it’s pure entertainment or education or the fun learning
mix that Azoomee specialises in. Moreover, children are getting their own tablets younger and at a
faster rate than any other device – more than half of kids in the UK have their own tablet by the age of
8 (Ofcom, 2018). The only way to get apps on these devices is through the official Apple, Google or
Amazon stores where both parents and children discover new apps. These stores offer unprecedented
access to a global and growing market for digital media.
Through these stores, Azoomee is available globally in over 110 countries. Customers can subscribe
directly to the Azoomee app through the included popular in-app purchasing method; monthly pricing
varies by country ranging from £5.45 to £2.25.
All sales & payment are automated and handled by the stores, with a 30% commission paid to Apple,
Google or Amazon (dropping to 15% for subscriptions longer than one year). Since launching in 2016,
Azoomee has consistently developed a strong app store presence
and a high-performing app that appeals directly to both children and
to parents. Azoomee’s efforts have been recognized by Apple - the
store with the highest revenues and standards – by selecting
Azoomee as ‘App of the Day’ on 11 May 2018, and subsequently
featuring it several times both in the UK and internationally. Azoomee
has also been featured by Amazon, and has been approved by
Google for its ‘Made for Families’ programme. All these editorial
features are key drivers of download traffic.
To date, Azoomee has been almost exclusively focused on partnerships. With product market fit now
established and new agreements in place with partners like Clear Channel, Custos and Infomedia,
Azoomee is actively exploiting the many new opportunities of the direct-to-consumer model. For
example, Direct Carrier Billing (DCB – see above) has opened up many new markets and customer
segments by offering users easier and more relevant payment methods. Azoomee will be implementing
DCB in Q1 2019. When combined with our increasingly localised product and optimisation for lower-end
budget devices, Azoomee will continue to be a consumer-friendly proposition for the developing world.
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8. Azoomee Financial Projections
1. O2 Family Tablet Bundle (UK only) £239,000 £392,000 £535,000 £669,000 £733,000
* Approximately 60% of operational expenses are capitalised on the balance sheet as assets to recognise the investment in the platform,
technologies, intellectual property and content.
Current trading
In the current financial year, the business is forecasting 80+% growth in revenues.
At the start of the year, growth was underpinned by the O2 partnership. Following an upgrade to the
family tablet bundle in December, which now has Azoomee pre-installed, we anticipate continued
growth (+33%) next financial year as more subscriptions get enabled. During the second half of the year
revenues have grown further as the business diversified from being reliant on a single telco partnership
contract in the UK to multiple international partnerships. By the end of this financial year, management
anticipate to be generating meaningful revenues with at least seven different revenue-generating
partners in five countries. As at 31 January 2019, the business has live or about to go-live revenue-
generating partnerships in the UK, Malta, South Africa, Albania and Sweden.
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Analysis: Year ending March 2020
Revenue Analysis
1. O2 Family Tablet Bundle (UK only): Since O2 launched their updated family tablet in Q4 2018,
subscription rates have increased markedly and are likely to grow further now that their new
family device is pre-installed with Azoomee. As a result, Azoomee expects revenues to increase
36% in YE March 2020. As an existing long-term contract with agreed pricing, margins will
remain stable. Conservatively, we have assumed that no new propositions will be launched next
year.
2. B2B2C (Other Telco Partners): Azoomee is currently live in two Vodafone markets (South Africa
and Malta) and is in late stage commercial discussions to launch in its third Vodafone market
(Albania). Based on our large pipeline of other telco opportunities, including those leveraging
our Tomorrow Street relationship, Azoomee expects the total number of revenue-generating
telco partnerships to increase to seven by the end of YE March 2020. Over the longer term,
management forecasts assume that Azoomee converts no more than 2% of the total
addressable market of family customers in any geography; these projections are based on
targets discussed with existing partners.
We have assumed a flat 55% cost of sales associated with all revenue from this channel,
reflecting existing agreements with Vodafone in Malta and Vodacom in South Africa.
Discussions with multiple international telcos indicate a cost of sales through their channels
ranging from 40% to 55% depending on the business model that they use.
3. B2B2C (hospitality and others): Azoomee’s web portal for the hospitality industry is currently
being trialled by one major hotel chain and is being reviewed as part of a wider proposition by
certain other large international chains.
4. Direct to Consumer (App stores): Revenue from Azoomee’s direct to consumer business via the
app stores is forecast to grow significantly in YE March 2020. This growth is driven by:
(i) increased organic installs as a result of ongoing international app store features, and a
4x increase in spending on branding in YE March 2020. This includes the cost of
performance-based marketing partnerships with outdoor advertising giant Clear
Channel in the UK and Custos Group/Metro Media House in Sweden;
(ii) a substantial increase in user acquisition spending combined with better cost of
acquisition metrics achieved through the optimisation of existing campaigns, new
product features and recruiting a specialised digital marketing team; and
(iii) additional marketing partnerships replicating those already signed with Metro Media
House and Clear Channel. Azoomee signed both partnerships within a month of an initial
meeting and expects to sign additional agreements within the next 12 months and
beyond rapidly.
5. Amazon Prime Channel and other TV Channels: Azoomee expects revenue from our Amazon
Channel to continue to grow due to ongoing marketing investment from Amazon. Alongside this,
and based on active discussions with a number of cable operators in the US, we expect to launch
Azoomee TV with three additional partners by the end of March 2020. This will focus on North
America where we are seeing significant demand for our service due to a shortage of kids-
based content in our target age group, resulting in substantial revenue growth in YE March
2020.
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6. Grant Funding: Management has already secured funding through the H2020 program.
Through its new subsidiary in Luxembourg, management expects to secure £175k of grant
funding in YE March 2020 based on existing applications/discussions with a number of funding
bodies including Lux Innovation and Creative Europe.
7. Deferred Revenue: This relates to subscription revenue that has been generated with partners
in one financial year but cannot be accounted for until the following financial year. (This is a
standard feature of subscription-based businesses like Azoomee).
Cost of sales
This principally includes commission payments due to the app stores, business development consultants,
Tomorrow Street and revenue share with partners. This is a variable cost that grows with sales, which
is also why gross margin is a very important financial metric for the business. Depending on the revenue
mix between the various revenue streams and as the business becomes less reliant on third party
business development consultants who often charge introduction fees, management believe the gross
margin could be higher than currently projected.
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Operational Expenses
Note: Approximately 60% of operational expenses are capitalised on the balance sheet as assets to recognise the investment in the
platform, technologies, intellectual property and content.
Content costs: Azoomee has budgeted to increase investment in content significantly to £850k in YE
March 2020. This increase will allow Azoomee to:
(i) Expand our English language content library to provide a continually engaging 21st century
learning curriculum that is refreshed even more regularly; and
(ii) license and develop multi-lingual games and video content in several core languages to
leverage the international opportunity.
The content team have developed a very sophisticated content licensing strategy based exclusively on
fixed price contracts. It is worth noting that in the current financial year content costs are 17% less than
the prior year despite revenues growing by c.80%. Operational leverage on content licensing and
investment will become even more beneficial as the business grows further.
Staff costs: Azoomee expects to increase staffing costs to £1.4m in YE March 2020. This investment is
necessary to leverage the global market opportunity and enable the business to grow rapidly resulting
in the average number full-time staff increasing from 16 to 25 during the next 12 months. The new team
members will increase resources dedicated to business development, marketing, content and finance.
For more information on staffing see Appendix 2.
Marketing: Azoomee has budgeted to increase marketing spend significantly in YE March 2020. This
increased investment will be allocated to branding, press and PR, offline activations and user acquisition
marketing to leverage the direct to consumer opportunity. This supports recent partnership wins with
Clear Channel, Infomedia and the Custos Group.
IT operations: As a digital product, Azoomee incurs IT operation costs including hosting and streaming
video content, games and activities. Azoomee has developed a highly efficient and scalable platform
where the user base can grow 12x and only incur a 2x increase in costs. As such the management team
is confident IT operations costs will grow modestly to £180k in YE March 2020.
Other: This includes rent, rates and utilities, professional fees and other expenses. Azoomee operates
an office in central London with space to accommodate additional staff. As such, Azoomee expects costs
to grow modestly in line with inflation and rates rises. The management team has budgeted the cost of
legal and professional fees to increase in YE March 2020 to cover the costs associated with signing
multiple new international partnerships. Additionally, Azoomee expects sundry costs to increase
modestly in YE March 2020 in line with the growth of the business as a whole given the growing
headcount.
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9. Fundraising & Use of Proceeds
Azoomee has achieved product-market fit in the UK; the product has an outstanding user rating of 4.3
stars (higher than Netflix) on the UK App Store and has received multiple features from Apple and
Amazon, including the prestigious App of the Day position in the UK. In H2 2018 Azoomee launched
commercially with Vodafone Malta, Vodacom (South Africa) went live in January, in Sweden we launch
with the Custos Group in early February and Infomedia will be live in early March.
The significant business pipeline (£9.6 million) combined with the imminent launch of four new
partnerships in Q1 2019 (Vodacom, Custos Group, Clear Channel, Infomedia) underlines the very exciting
high growth stage of the business and the substantial global market opportunity that is available.
The purpose of this fundraising is to seize this growth opportunity, establish Azoomee as a true global
EdTech business initially in English speaking markets and build a sustainable, profitable subscription-
based business. The management team is confident that this funding will deliver the growth needed to
deliver our objectives and in turn position Azoomee for a significant trade sale or an IPO. The principal
allocation of the fundraising is as follows:
1. New hires
In terms of people (see Appendix 2) management intend to hire for the following roles once the
fundraising is complete:
- a finance director (this role is currently managed by Douglas Lloyd and means he is not able to
dedicate his time solely to commercial business development);
- a Head of Creative (Estelle Lloyd currently assumes this role alongside the entire content curation
and licensing side of the business. We have identified a senior hire to join from a competitor as
soon as funding is secured);
- four new additions to the marketing team comprising an account manager and a discrete user
acquisition / digital marketing team (3 people) which the business requires to accelerate
partnerships that have and will be signed alongside B2C activity;
- two new content executives tasked with identifying, negotiating and signing content deals in
existing and new markets; and
- a junior software engineer to cover increased front-end development work to cover ongoing
optimisation to the user experience.
2. Content
In the current financial year content costs have remained flat at an average monthly cost of £30,000.
This has been sufficient while we proved product market fit in the UK but needs to be increased to enable
Azoomee to win new partnership deals internationally and to develop a portfolio of its own Azoomee-
branded games. With a much larger library of our own content, Azoomee can reinforce its brand. This
also plugs the gaps of games not currently available on specific topics.
From a licensing perspective, succeeding in the US also necessitates a step change in investment
because of the immediate opportunity to launch a video-based channel (like Azoomee TV on Amazon
in the UK) focused on 21st Century skills. During Q4 2018 and in early January, multiple cable operators
have expressed an interest in working with Azoomee to launch a channel aimed at kids aged 5+ where
they currently have little or no available content. Management have validated the business opportunity
through industry contacts but will need to grow the company’s US video library to win these deals.
The content team has already identified the content assets (games and videos) that need to be licensed
and/or developed as soon as the fundraising is closed, which are associated with the business pipeline
in the revenue projections.
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3. Marketing and business development
A clear marketing and business development plan will be agreed with the new user acquisition / digital
marketing team to complement existing marketing activities. Increased spend will be focused on offline
and online advertising to acquire users, build consumer brand awareness. It will also be invested in pre-
launch costs in new markets (travel, compliance, operations) and business development (regional
consultants).
4. Contingency
It is management’s view that every fundraising should include some level of contingency, which we have
placed at 15% of the total fundraising. Management has calculated that the current fundraising funds
the business even on a low growth scenario (100% YOY revenue growth), to an exit.
Use of proceeds
Content £700,000
Contingency £300,000
Total £2,000,000
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10. Investment History
Equity
Since the company was founded in September 2014, Azoomee has raised £5.4 million in equity and £0.6
million in convertible loans. To date the business has been funded by HNWIs, many of whom made
money from Douglas and Estelle's previous business venture (http://www.cleanenergypipeline.com/),
which was sold to a FTSE250 media company in December 2011.
The largest shareholders have all invested in excess of £250,000 each. Together, Douglas and Estelle
Lloyd have invested over £0.5 million in the business and are the second largest investors in terms of
invested capital. Following a successful £2 million fundraising, Estelle and Douglas will own c.25% of the
business and remain heavily incentivised to grow the business to a substantial valuation on exit.
Shareholder register
# # of options/ # of shares # of shares
Shareholder name # of shares % shareholding
shareholders warrants (convertible) (fully diluted)
B shareholders (excl
current & former 335 231,776 - - 231,776 1.07%
employees)
Fundraising £2,000,000
27,377,840 100.00%
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Since the business was founded, Azoomee has invested approximately £4 million (2/3 of total
investment) in product development, technology and intellectual property. Key areas of investment
include:
1. Scalable technology platform - the business has invested heavily to develop its award-winning
technology platform, with key features as follows:
o core application accessible on any mobile device (Apple, Android, Amazon)
o complementary video and games modules for TVs and hospitality
o supports any media type (videos, games, activities, audio, etc.)
o supports multiple languages
o international availability with remote cost-effective support functionality
o highly scalable infrastructure with asymmetric technical operation costs
o industry leading stability (99.9% service uptime)
2. Intellectual property: From its inception, Azoomee has invested in its brand to ensure that kids
associate with the name and its values. Working with award-winning designers, the team at
Azoomee made a significant investment at a very early stage to create a beautifully-designed
range of characters – the Oomees!
The Oomees are a family of much-loved characters that live within the Azoomee world and play
a large role in making the app engaging and fun for the kids. The Oomees are the avatar of
each child user’s personal profile, and feature heavily in games, chat messaging and creative
activities.
This IP has significant value for the business, its consumers and its partners. The business has
continually demonstrated the substantial (and growing) value of this IP, which is used extensively
by partners including Vodafone, Vodacom and O2 to market Azoomee and their family
propositions online and offline.
For a legal appraisal of our IP Management Policy, please click here.
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Current debt
Convertible Loan - £150,000 outstanding [8.0% coupon floating over LIBOR – Unsecured]
In 2016 and 2017, Azoomee issued unsecured convertible loans totalling £530,000. Today only £150,000
remains outstanding. This is held by the management team, split between Douglas Lloyd & Estelle Lloyd
(£125,000) and Klaas Ardinois (£25,000). Interest is payable every 6 months on the outstanding principal.
The convertible loans have a 10-year maturity from date of issuance but can only be redeemed before
this date at the request of the company.
HSBC Flexible Loan Facility - £192,000 outstanding [3.2% coupon floating over LIBOR - Debenture]
The company has a flexible loan provided by HSBC secured with a debenture and a joint personal
guarantee provided by Douglas and Estelle Lloyd. This is being repaid on a straight-line basis over four
years. It is the board’s intention to re-finance this loan during 2019 to remove HSBC’s first charge over
the company’s assets.
11. Valuation
The Edtech sector, and specifically kids’ focused Edtech, continues to attract landmark investments. One
of the most exciting success stories in this field is LA-based Age of Learning who raised $150m on a $1
billion valuation in May 2016. Age of Learning trades under the ABCmouse brand. Iconiq (family office
of the Zuckerbergs, Sheryl Sandberg, Reid Hofmann and Jack Dorsey) is the lead investor. ABCmouse’s
current revenue is c.$100m. ABCmouse – Age of Learning’s lead product – operates a similar
subscription business model to Azoomee, and sells for a monthly subscription of $9.95 (Azoomee
charges $6.99). Other recent investment activity includes Kahoot!, a game-based learning platform, that
raised $15.4m (Oct 2018) for a total funding to-date of $58m, valuing it at $300m. Institutional funds are
increasingly active in the sector and already include: Reach Capital, Collaborative Fund, Horizons
Ventures, Insight Venture Partners and NorthZone.
The board believes that if sold as a going concern, taking account of Azoomee’s IP, assets, technical
infrastructure and distribution partnerships, negotiations would commence at a valuation in excess of
£11m and could increase significantly depending on the successful negotiation of certain of the many
business partnership opportunities in the pipeline and/or the level of interest from multiple buyers. This
standalone valuation is supported by Tomorrow Street, Vodafone’s scale up accelerator, who agreed a
valuation of Azoomee at £10.6 million as part of our contract negotiations last year. This is significant
for investors because Tomorrow Street will only receive an exit fee if a deal is agreed at a valuation that
exceeds the agreed baseline of £10.6 million. In short, when they signed the deal Tomorrow Street had
no vested interest in over-valuing the business.
For the purposes of raising additional growth capital to accelerate the company’s international
expansion, the Board has agreed a pre-money valuation of £7.6 million (35p per share) with the
company’s largest shareholders.
The pre-money valuation for this fundraising has been agreed by the Board with input from the
company’s largest shareholders. It has been calculated based on a forward revenue multiple of 2.0x
(current revenue multiple of 8.3x). EdTech companies at a similar stage and growth trajectory to
Azoomee are currently valued on current revenue multiples ranging between 8x – 12x. This valuation is
further supported by the significant investment in and 100% ownership of Azoomee’s award-winning
technology platform and its rich IP asset portfolio comprising its Oomee characters, original games and
videos.
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It is the combined view of the board and its largest shareholders that this valuation (underpinned by
Tomorrow Street’s benchmark) provides an additional incentive for new investors and current
shareholders to invest given the very exciting stage of development of the company, the significant
business pipeline and the compelling growth dynamics of the global EdTech sector.
Exit opportunity
Douglas and Estelle Lloyd have a successful exit track record; many of the company’s existing investors
invested in their prior business, which was sold successfully on a 7x current revenue multiple in a much
lower growth sector (B2B business media).
Unsurprisingly, the EdTech sector is one of the most dynamic technology sectors right now. Millennial
parents are the largest cohort of parents in the world. Their digital consumption is significantly higher
per capita than all other generations, yet they are currently underserved in their access to engaging
learning content. With two thirds of today’s children born with work in industries that do not even exist
today, there is a desperate need among parents (and society as a whole) for solutions that meet the
needs of modern parents: mobile-first platforms that curate meaningful learning content around 21st
Century skills. Based on the current projections and the business pipeline, management believe that an
exit between £50 million and £250 million is achievable within a 5-year timeframe.
The likely exit route for the business will be a trade sale. Azoomee is already known and stays in touch
with a range of very large global companies including Turner, Amdocs and Pearson all of whom are
potential future partners / acquirers.
For large media businesses, Azoomee offers a logical integration play to integrate their proprietary
content into the Azoomee platform enabling them to drive their digital subscription businesses in the
family segment and reduce reliance on third party distributors where they generate lower margin
revenues from their content.
In the education sector, most educational businesses remain too reliant on their offline business and are
looking to invest in and acquire businesses that enhance their digital capabilities. For instance, Pearson
is interested in adding a gamified learning solution to its K-12 education platform; like many of these
larger companies it is easier to acquire this capability than to build it.
Aggregators like Amdocs have amassed a suite of back-end content solutions enabling them to host
content services to large clients like Virgin Media and Sky. Most lack a flexible end-user platform (and
additional distribution channels) to deliver these solutions to their clients. Azoomee would solve this for
them.
We’re also on the radar of the game industry. Historically the games industry has generated revenues
from advertising via web-based portals. With web-games declining these companies now need a digital
app-based subscription platform as a route to engage with their customers. MTGx and Orange Games
are two companies with a growing kids’ focus that have already expressed an interest in working /
partnering with Azoomee.
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12. How to invest
Investors wishing to participate in this private offer should apply via Wealth Club Ltd
at www.wealthclub.co.uk. Wealth Club Ltd is authorised and regulated by the FCA. The Company will
pay Wealth Club an arrangement fee of 6% of the amount of share capital subscribed by investors
introduced by Wealth Club Ltd, alongside half yearly investor update fees and a performance fee on
investor exit.
The Company has entered into an agreement with Woodside Corporate Services Ltd to act as receiving
agent for the offer. Woodside Corporate Services Ltd is authorised and regulated by the FCA and has
appropriate FCA permissions to hold client money.
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13. Appendices
Appendix 1 – Milestones
33
Partnership milestones
NSPCC Partnership
The NSPCC is the UK’s leading children’s charity and is a supporting partner of Azoomee. Based on a
shared belief that children should be safe online, we have been working together since February 2015.
As a part of this partnership, Azoomee can use the NSPCC logo in its marketing – instantly instilling trust
and reinforcing our brand – and receives visibility via the NSPCC and Childline websites, social media
and beyond.
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Immfly marketing partnership
In December 2017, Azoomee signed a long-term marketing
partnership with in-flight entertainment company Immfly.
Through this partnership, Azoomee’s games and IP gain
high-profile distribution on flights operated by easyJet,
Iberia Express, Pegasus, Sun Express, Volotea, Wamos and
XL Airways.
The UK Council for Child Internet Safety brings together more than 200 organisations drawn from across
government, industry, law, academia and charity sectors that work in partnership to help keep children
safe online. Co-founders Douglas and Estelle Lloyd are both associate members of the body.
35
Vodafone Malta – Signed distribution partnership
During the summer of 2018, Azoomee signed a distribution
and marketing partnership with Vodafone Malta, which
acts as a demonstration market for a wider rollout of
Azoomee throughout the Vodafone estate.
36
Vodacom South Africa – signed distribution
agreement
Azoomee signed its second Vodafone contract with
Vodacom, Vodafone’s South African operating company, in
late summer 2018 and began commercial operations at the
end of the year.
Member
UK Interactive Entertainment (UKIE) is the only trade body for the UK's games and interactive
entertainment industry. The body supports the growth of businesses in the sector and has a particular
focus on education in STEAM subjects.
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Marketing and sales partnership
In December 2018, Custos Group signed a strategic
marketing partnership, through its subsidiary Metro Media
House, with Azoomee. As a part of our agreement Metro
Media House will manage all multi-channel marketing
activities in Sweden for Azoomee.
38
Business Milestones
In January 2017, Azoomee was invited to join the prestigious Mayor’s International Business Programme
(MIBP). Organised by the Mayor of London, MIBP is a scheme of mentoring, expert advice and real
business opportunities for high-growth London companies in the life sciences, technology and urban
sectors. During the programme, Azoomee attended trade missions to China and Silicon Valley securing
meaningful introductions to global corporations and accelerating international distribution.
In Summer 2017, Azoomee was welcomed into the third cohort of the Upscale programme. Upscale is a
growth initiative aimed at accelerating UK’s leading scaleups, through workshops, community building
and coaching. 100 companies have taken part in Upscale and collectively raised over $1bn since joining.
Notable alumni
39
Product milestones
Featured by Apple’
In May 2018, Azoomee was featured as the “App of the
Day” by Apple’s App Store editorial team in the UK. This
high-profile position led to regular features in both the UK
and international app stores.
Internationalisation
In November 2018, Azoomee added support for nine
international languages to the app (English, French,
German, Spanish, Afrikaans, Portuguese, Italian, Greek,
Turkish).
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Global availability
In late 2018, Azoomee released its app globally through the
app stores, making the product available in to families
across the world and enabling additional B2B2C
partnership discussions to take place.
Awards highlights
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- No. 33 in the Startups 100 list (2018)
- No. 56 in the Startups 100 list (2017)
Startups 100 ranks the UK’s top 100 most awe-inspiring
and fast-growth businesses. Azoomee was No. 56 in 2017
list and climbed to No.33 in 2018.
42
50 Start-Up À Suivre
In November 2018, Azoomee was featured in the
respected Luxembourgish publication PaperJam as one
the 50 Start Ups to watch.
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PR highlights
| News
GLENN COPUS
Consumer Business Editor
Technology Reporter
MEXICAN dining chain Wahaca has
TWO London parents have created a become the first restaurant group in
“mini version of the internet” aimed at Britain to be certified carbon neutral.
keeping children safe online. The company, which has 15 outlets in
Entrepreneurs Estelle and Douglas London, said it had used a range of
Lloyd, from Highbury, came up with innovations such as recycling the heat
the idea after their seven-year-old from grills to warm water for the taps
March 2016
daughter Chloe Googled “three kittens” to minimise their carbon footprint.
and found unsuitable content. It has also bought all the energy it uses
The couple, who have two other in the restaurants and head office from
daughters Philomene, nine, and Melu- hydro-electricity generators and uses
sine, two, developed Azoomee, a tablet carbon credits to offset other emissions
January 2017
Thought leadership leveraging
founder Douglas Lloyd’s
experience in online safety for
children.
March 2017
Expert thought leadership from
Azoomee co-founder Estelle
Lloyd.
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May 2018
Leading tech-focused business
publication covers Azoomee
joining Tomorrow Street (see
partner milestones for more
details).
July 2018
Debate between founder
Douglas Lloyd and author and
broadcaster Anna Mangan on
the subject of online bullying.
November 2018
Azoomee featured in a list of the
21 best safe gaming solutions for
children.
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Also featured in:
46
Appendix 2 – Organisational structure
47
Appendix 3 – Articles of Association
Tinizine Limited – A certified copy of the Articles of Association are available here.
Appendix 5 - Risks
This Information Memorandum contains “forward-looking statements” that relate to, without limitation,
the Company’s plans, objectives, goals, strategies, future operations and performance. Such forward-
looking statements involve known and unknown risks, uncertainties and other important factors that
could cause circumstances or actual results, performance or achievements to be materially different
from any future circumstances, results, performance or achievements expressed or implied by such
statements. Such forward-looking statements are based on numerous assumptions regarding, among
other things:
• the performance of the world economy, the British economy and EdTech industry generally;
• the Company’s ability to remain competitive in the EdTech industry and its areas of business
generally;
• the effects of changes in laws, regulations, taxation or accounting standards or practices;
• the Company’s ability to continue to diversify and grow its business;
• the Company’s ability to meet its funding obligations and develop and maintain additional
sources of financing; and
• the Company’s success at managing the risks associated with the aforementioned factors.
The foregoing list of important factors is not intended to be and is not exhaustive. The Company
undertakes no obligation to update or revise publicly any forward-looking statements, whether as a
result of new information, future events or otherwise, except as may be required by law, and all
subsequent written and oral forward-looking statements attributable to the Company or individuals
acting on the Company’s behalf are expressly qualified in their entirety by this paragraph. If one or more
risks or uncertainties materialise, or if the Company’s underlying assumptions prove to be incorrect, the
Company’s actual results may vary materially from what the Company projected. Any forward-looking
statements included or incorporated by reference in this Information Memorandum reflect the
Company’s current view with respect to future events and are subject to these and other risks,
uncertainties and assumptions relating to the Company’s operations, results of operations, growth,
strategy and liquidity. Potential investors should not place undue reliance on the forward-looking
statements which speak only as of the date of this Information Memorandum.
Risk Factors
The Directors believe the following risks to be the most significant for the Company. The risks listed,
however, do not necessarily comprise all those associated with an investment and are not intended to
be presented in any assumed order of priority. In particular, the Company’s performance may be
affected by changes in legal, regulatory and fiscal requirements in any of the jurisdictions in which it or
its subsidiary companies operate or intend to operate.
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Shareholders should take their own tax advice as to the consequences of owning Shares as well as
receiving returns from them. No representation or warranty, express or implied, is given to investors in
any jurisdiction as to the tax consequences of their acquiring, owning or disposing of any Shares and
neither the Company nor the Directors will be responsible for any tax consequences for any such
investors.
A number of risk factors and uncertainties may adversely affect the Company. These risk factors include,
but are not limited to, financial risks and risks related to the business operations of the Company. If any
of these or other risks or uncertainties actually occurs, the business, operating results and financial
condition of the Company could be materially and adversely affected, which could have a material
adverse effect on the Company's ability to meet its obligations. The risks described below are not the
only ones the Company is exposed to. Additional risks that are not currently known to the Company, or
that the Company currently considers to be immaterial, could have a material adverse effect on the
Company’s ability to fulfil its obligations. The order in which the risks are presented is not intended to
provide an indication of the likelihood of their occurrence or of their relative significance.
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The Company may become subject to the risks inherent in international sales.
The Company may commercialise Azoomee through partnerships with international partners in their
respective territories. Consequently, the value of Azoomee as determined by such partners will be
dependent upon many factors, including the local media landscape, the economic conditions in the
relevant territory, and the degree of the partner’s bureaucracy and internal working practices. Economic
downturns, changes in currency exchange rates and changes in economic forecasts of any or all of the
individual territories may materially and adversely affect the Company. Even if distribution or
partnership agreements are obtained for certain territories, economic changes in any territory could
have a material adverse effect on the ability to complete any transaction.
If Azoomee is distributed or licensed in foreign countries, some or all of the revenues derived from such
distribution or licence agreements may be subject to currency movements and other restrictions which
may restrict availability of the funds (such as withholding Taxes). Additionally, some foreign countries
may impose government regulations on the commercialisation of non-local products that may delay
the release, if any, or substantially reduce the commercial opportunity in such countries.
The Company will have to rely on the services of professionals and other key personnel who
may be difficult to replace and the loss of any such persons could adversely affect the
Company’s business.
The Company’s success has been built on and will largely depend on the personal efforts of the
professionals and key management and staff within the Company. If the Company is not able to retain
key personnel, such as the senior management team, key creative department leads, key talent or the
two founders, the loss of the services of such professionals hired by the Company may have a material
adverse effect on the Company. If any one of these individuals becomes incapacitated or otherwise
becomes unavailable, a qualified successor would have to be engaged. Azoomee may be adversely
affected if new personnel must be engaged, or if such personnel demand more favourable
compensation. No assurance can be given that a qualified successor could be engaged.
The proposed withdrawal of the United Kingdom from the European Union.
As at the date of this Information Memorandum, Her Majesty’s Government of the United Kingdom is in
the process of withdrawing from the European Union. The legal, economic, political and other impacts
of this withdrawal process on the Company’s business and affairs are difficult to predict at this time. To
this extent the company has already established a 100% owned subsidiary in Luxembourg to facilitate
trading with countries in the European Union. However, it is possible that the effect of the United
Kingdom’s withdrawal from the European Union could materially impact the Company’s financial
condition and/or its affairs.
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