The directors present the strategic report for the year ended 31 December 2024.

The principal activities of the company are: the production and exploitation of musical recordings and publishing assets and the promoting and delivery of multiple global live music events. Defected Records Limited is also the operating vehicle for the Optimum Defected Holdings Group that employs all staff, incurs the vast majority of overheads and recharges group costs back to the relevant group member company.

Defected Records Limited was incorporated on 28 September 1998 and is Incorporated in England and Wales.

Principal business risks

The company considers its key risks and uncertainties for the musical recordings and publishing business to be the further potential physical music market decline, piracy, uncertainty over the rate of long term growth of the streaming market and the strength of the release schedule. Operating in a fast-changing and highly competitive industry the directors are confident these risks can be mitigated by working with both new and existing artists to create and market excellent music, and by adapting the business model to changing market conditions.

The company consider its key risks and uncertainties for the live events business to be the impact the cost of living crisis and rising interest rates will have on attendees disposable income and appetite to attend our live events across the globe. The directors are confident these risks can be mitigated by negotiating live events contracts that protect us from downside risk as well as taking a proactive approach to managing the cost of sale for each event to ensure profitability is maintained despite potential reductions to tickets sales.

The wider Firebird Defected Holdings Limited (formerly known as Optimum Defected Holdings Limited) Group of companies operates a number of diverse businesses built on the foundations of a globally recognised brand and a long history of innovating and growing successful companies. This reputation has helped build a strong customer base across all its business activities. For example, multiple record labels, live events brands and publishing interests.

Financial risk management

The company consider the potential further increase to interest rates to be a credit and liquidity risk to the company. The Directors have reviewed cash flow forecasts of the Company and have a reasonable expectation that the Company has adequate resources to continue operations for the foreseeable future, despite potential further increases to interest rates.

The company’s primary objective is to collaborate with artists to create and promote exceptional music and events. The key performance indicators used to assess progress against this objective include turnover, EBITDA, and the overall strength of the balance sheet.

For the year ended 31 December 2024, the company generated turnover of £10,345,647 and net loss was £3,442,619. The companies EBITDA was £2,675,959. The company was in a net liability position of £1,356,925 at 31 December 2024.

A summary of the Group’s turnover, gross profit, net profit, and EBITDA for the year is presented below.

Adjusting Item Definitions

To provide a clearer picture of the company’s underlying operating performance, management has adjusted reported EBITDA to exclude non-recurring or non-operational items. The adjusting items are defined as follows:

• Interest – Relates to senior debt finance secured against the Group’s music catalogues, which formed part of the financing for the acquisition of the Defected Group.

• Tax – Represents tax liabilities incurred during the year.

• Depreciation & Amortisation – Non-cash accounting adjustments in respect of the depreciation and amortisation of the Group’s tangible and intangible assets.

• Artist Advances, Royalties and Provisions – During the year, the company revised its accounting policy such that artist advances are now capitalised when paid (previously expensed on payment). Impairment reviews and provisions against these advances are recognised through the profit and loss account. This category also includes one-time provisions for potential future royalty liabilities, following the implementation and full reconciliation of a new royalty accounting system.

• Unrealised FX Gain on Pinnacle Debt Facility – The Group’s debt facility is denominated in USD. Foreign exchange movements during the year generated a material unrealised gain, which is excluded from operating EBITDA.

• One-Time Costs – Includes redundancy and severance costs, as well as the one-time write-off of historic income accruals.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 December 2024.

The principal activity of the company continued to be that of a record label.

The results for the year are set out on page 9.

No ordinary dividends were paid. The directors do not recommend payment of a final dividend.

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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 of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

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

• 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.

We have audited the financial statements of Defected Records Limited (the 'company') for the year ended 31 December 2024 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

• give a true and fair view of the state of the company's affairs as at 31 December 2024 and of its loss for the year then ended;

• 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.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

• the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.

We 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, or returns adequate for our audit have not been received from branches not visited by us; or

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

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

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

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

As part of our planning process:

• We enquired of management the systems and controls the company has in place, the areas of the financial statements that are most susceptible to the risk of irregularities and fraud, and whether there was any known, suspected or alleged fraud. The company did not inform us of any known, suspected or alleged fraud.

• We obtained an understanding of the legal and regulatory frameworks applicable to the company. We determined that the following were most relevant: FRS 102 and Companies Act 2006.

• We considered the incentives and opportunities that exist in the company, including the extent of management bias, which present a potential for irregularities and fraud to be perpetuated, and tailored our risk assessment accordingly.

• Using our knowledge of the company, together with the discussions held with the company at the planning stage, we formed a conclusion on the risk of misstatement due to irregularities including fraud and tailored our procedures according to this risk assessment.

The key procedures we undertook to detect irregularities including fraud during the course of the audit included:

• Identifying and testing journal entries and the overall accounting records, in particular those that were significant and unusual.

• Reviewing the financial statement disclosures and determining whether accounting policies have been appropriately applied.

• Reviewing and challenging the assumptions and judgements used by management in their significant accounting estimates, in particular in relation to accrued income and royalty accrued costs.

• Assessing the extent of compliance, or lack of, with the relevant laws and regulations.

• Testing key revenue lines, in particular cut-off, for evidence of management bias.

• Performing a physical verification of key assets.

• Obtaining third-party confirmation of material bank and loan balances.

• Documenting and verifying all significant related party balances and transactions.

• Reviewing documentation such as the company board minutes for discussions of irregularities including fraud.

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements even though we have properly planned and performed our audit in accordance with auditing standards. The primary responsibility for the prevention and detection of irregularities and fraud rests with the directors.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

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.

The profit and loss account has been prepared on the basis that all operations are continuing operations.

Defected Records Limited is a private company limited by shares incorporated in England and Wales. The registered office is Ground Floor, 23 Curtain Road, London, England, EC2A 3LT.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:

• Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;

• Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’: Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;

• Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.

The financial statements of the company are consolidated in the financial statements of Firebird Defected Holdings Limited (formerly known as Optimum Defected Holdings Limited). These consolidated financial statements are available from its registered office, Ground Floor, 23 Curtain Road, London, England, EC2A 3LT.

During the year the company made losses of £3,442,619  and the balance sheet was in deficit by £1,356,925. The directors have introduced relevant cost-saving measures and are forecasting to return to profitability in the future. At the time of approving the financial statements, the directors therefore have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. The directors have also obtained assurance from its ultimate parent company, Firebird Music Holdings LLC, that it will provide financial support to the company for a period of at least 12 months after the date of signing these financial statements. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.true

Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes.

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.

Stocks are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items.

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.

Cash and cash equivalents are basic financial assets and include cash in hand.

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Financial liabilities and equity instruments 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 company after deducting all of its liabilities.

Basic financial liabilities, including creditors, bank loans and loans from fellow group companies, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

The tax expense represents the sum of the tax currently payable and deferred tax.

Taxation for the year comprises current and deferred tax. Tax is recognised in the Income Statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

The company operates a defined contribution pension scheme. Contributions payable to the company's pension scheme are charged to profit or loss in the period to which they relate.

Rentals paid under operating leases are charged to profit or loss on a straight line basis over the period of the lease.

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.

The company relies on third party statements to recognise royalty and digital streaming income for the year. In the absence of these statements, the directors consider the income received post-year end in prior years, and any anticipated growth in sales based on recent releases of music, to calculate a reasonable estimate of royalty and digital streaming income to accrue at year end totalling £972,571 (2023: £1,231,882)

The company relies on third party statements and confirmations to recognise royalties payables for the year. In the absence of these statements and confirmations, the directors consider the expenses incurred post-year end, and any anticipated increase in costs based on recent releases of music, to calculate a reasonable estimate of royalties payable at year-end totalling £2,259,500 (2023: £551,027)

The average monthly number of persons (including directors) employed by the company during the year was:

Their aggregate remuneration comprised:

The actual (credit)/charge for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:

During the year, the company conducted an impairment review of its current asset investments in accordance with FRS102. As a result of this review, the investment was assessed to be fully impaired due to a significant decline in value. Consequently, the carrying value of the investment has been written down to nil. The impairment charge has been recognised in the profit and loss account.

The company is a joint borrower with Defected Music Limited. Both companies jointly guarantee the loan facility of which either company may drawdown. Defected Music Limited holds long-term loans under the joint guarantee of £0 at 31 December 2024 of which Defected Records Limited is jointly liable. Interest is charged on this facility at 1/2 of 1% on top of the US Federal Funds Rate.

The loan facility is split into separate loan amounts, being a Term loan and a Revolving loan. The repayment terms of the term loan is repayable in quarterly instalments of $200,000 until the balance is fully settled in accordance with the loan agreement. The repayment terms of the revolving loan is drawn amounts are repayable in full on the facility's maturity date, 29 July 2027. However, they're exploring refinancing options under the new group structure.

The long-term loans are secured by fixed and floating charges over all property and assets of both the companies, including all of the company's rights in any intellectual property and vehicles, both present and future, for the duration of the loan.

At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

The long-term loans are secured by fixed and floating charges over all property and assets of Defected Records Limited and Defected Music Limited, including all of the company's rights in any intellectual property and vehicles, both present and future, for the duration of the loan.

The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:

The deferred tax liability set out above is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.

The corporation tax rate used to calculate deferred tax was 25%.

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

The ordinary A and ordinary B shares rank pari passu

At the year end, a balance of £67,800 (2023: £19,000) was owed by a director of the company.

During the year donations of £36,000 (2023: £36,000) were made to a charity with directors in common.

During the year payments for publishing rights of £28,667 (2023: £nil) were made to a company with directors in common.

During the year payments for royalties of £45,982 (2023: £nil) were made to a company with directors in common.

During the year the company acquired a music catalogue for £99,999 (2023: £nil) from a company with directors in common.

During the year payments for consultancy services of £nil (2023: £314,973) were made to a company with directors in common.

The immediate parent company is Firebird Defected Holdings Limited (formerly known as Optimum Defected Holdings Limited), a company incorporated in England and Wales. The ultimate controlling party is Firebird Music Holdings LLC.

The smallest group into which this entity is consolidated is Firebird Music Limited, with the registered address of 2-20 Scrutton Street, Studio 15, Shoreditch Works, London, England, EC2A 4RJ. Copies of the group financial statements can be obtained from the UK Registrar of Companies.

The largest group into which this entity is consolidated is Firebird Music Holdings LLC, a company registered in the USA, with a registered address of Nashville, Tennessee, at 150 Third Avenue South, Suite 2800. The group financial statements are not publically available.