Blue Star Capital Plc Annual Report and Financial Statements for the year ended 30 September 2019 Blue Star Capital Plc Annual report and financial statements FOR THE YEAR ENDED 30 SEPTEMBER 2019 Contents Page 2 3 8 Directors and Advisors Chairman’s Statement Chairman’s Corporate Governance Statement 14 Strategic Report 16 Directors’ Report 18 Statement of Directors’ Responsibilities 19 Independent Auditor’s Report 22 Statement of Comprehensive Income 23 Statement of Financial Position 24 Statement of Changes in Equity 25 Cash Flow Statement 26 Notes to the Financial Statements 39 Notice of Annual General Meeting 1 Blue Star Capital Plc Directors and Advisors FOR THE YEAR ENDED 30 SEPTEMBER 2019 Directors Derek Lew (Non-Executive Chairman) Anthony Fabrizi (Chief Executive Officer) Sean King (Non-Executive Director) Registered Office Griffin House 135 High Street Crawley RH10 1DQ Company Number 05174441 Nominated Adviser And Broker Cairn Financial Advisers LLP Cheyne House Crown Court 62-63 Cheapside London EC2V 6AX Auditor Adler Shine LLP Chartered Accountants and Statutory Auditor Aston House Cornwall Avenue London N3 1LF Solicitors Gowling WLG (UK) LLP 4 More London Riverside London SE1 2AU Registrars Link Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU 2 Blue Star Capital Plc Chairman’s Statement FOR THE YEAR ENDED 30 SEPTEMBER 2019 2019 has been a year of consolidation as the Company came to terms with the disappointment and costs associated with the termination of the proposed reverse take-over of SatoshiPay in January 2019. An unfortunate consequence of the transaction terminating was that, as the Company had incurred significant transaction fees, it was forced to raise equity on two separate occasions to fund ongoing operations. Despite these setbacks, the Company’s portfolio has continued to develop with both SatoshiPay and Sthaler making good progress and post year end the Company invested in a portfolio of six esports businesses which offer significant potential. Finally, the legacy investment in Disruptive Tech Limited (“DTL”) which was acquired in 2007, well before the current Board were in place, has been written off and this has resulted in a further write down in the second half of the year of £300,000. Financials The Company reported a loss for the period of £684,964 compared to a profit of £1.471,319 in the corresponding period to 30 September 2018. This reflects the net revaluation of the portfolio with the significant gain on SatoshiPay achieved last year representing the major difference. Net assets have decreased to £5,209,377 at 30 September 2019, changing from £5,459,581 at 30 September 2018, reflecting the write down in DTL. Blue Star’s cash position at 30 September 2019 was £120,808 compared to a balance of £31,416 at 30 September 2018. Post year end, the Company raised £900,000 before expenses through a further issue of equity in November 2019 and invested a similar amount in the esports portfolio of companies. Portfolio Review SatoshiPay Company Description SatoshiPay is a fintech company supplying payment and money transfer infrastructure based on blockchain technology to digital industries and globally operating SMEs. SatoshiPay’s micropayment infrastructure provides a frictionless online payment service, allowing digital content and service providers to monetise their products both efficiently and at a low cost across vendor platforms. The technology is offered both through in-house built products and as an application programming interface (“API”) upon which third party developers may build their own solutions. The vision for the future of SatoshiPay’s micropayment solution is a fast, secure, cross- platform and login-free global peer-to-peer payment system for the commercial internet which transforms the mainstream payment market and facilitates fair, transparent value exchange between any internet- connected device. To further advance SatoshiPay’s mission to connect the world through instant payments, the company recently announced SatoshiPay B2B, a cross-border payments service for businesses. SatoshiPay Technology The SatoshiPay technology is designed to overcome existing issues with online payments. In the field of micropayments, it is addressing issues that have prevented them from achieving mainstream adoption, primarily the high level of transaction costs driven by existing bank infrastructure that makes such levels of payments commercially unfeasible. The foundation of SatoshiPay’s platform is built upon blockchain technology. A blockchain is a decentralised database of transactions that exists on multiple computers at the same time. It is a record keeping technology that, in simple terms, is conceptually similar to a spreadsheet that is duplicated thousands of times across a network of computers and that is constantly updated. The advantages of blockchain are that it is, by its inherent set-up, independent, transparent and secure. Its security comes from the fact that its data cannot be altered, it cannot be controlled by any single entity and has no single point of failure that can be exploited by hackers. Encryption technology allows individuals’ digital assets to be kept anonymous and protected. Further, removing intermediaries from the process allows transactions on a blockchain to be carried out faster and cheaper than traditional methods. 3 Blue Star Capital Plc Chairman’s Statement CONTINUED SatoshiPay’s payment platform is based on the Stellar blockchain network, a distributed ledger technology, and uses Stellar lumens (XLM) as the underlying settlement token. Micropayments and the SatoshiPay Solution Existing issues relating to micropayments include financial costs (transaction costs being high in relation to the level of payment) and usability costs (cumbersome, multi-step online payment mechanisms for the end user). SatoshiPay’s solution is able to overcome these issues by offering a P2P payment method which does not require download, installation or log-in for the end user, and that is transferable across vendor platforms and facilitates instant transactions of very small amounts. This flexible, low-cost solution allows for pricing strategies at a more granular level, and the board of Blue Star believe that it has many potential applications. Potential Applications of SatoshiPay The directors of SatoshiPay believe that its micropayment technology can be employed in a range of sectors. Wherever instant, login-free, granular payments open up the potential to improve existing revenue streams or generate new ones for online publishers and content providers, micropayments and the SatoshiPay technology have a potential application. Examples include purchase of digital goods, direct streaming of content, cross-border payments, as a settlement mechanism for machine-to-machine transactions (i.e. toll payments) and in-app/game closed- loop systems. Recent developments at SatoshiPay During the year, SatoshiPay raised approximately £2m at a £15m pre-money valuation from investors including Börsenmedien AG (Germany), Danny Masters (UK), Aeternity Anstalt (Liechtenstein), Aergo Limited (Hong Kong) and Neofin Hamburg GmbH (Germany). In addition to the fundraise, SatoshiPay was granted £360k in cash from the HMRC R&D tax credits fund. The two independent blockchain organisations, Aeternity and Aergo, partnering with SatoshiPay lead the development of their respective networks and developer ecosystems, with focus on smart contract capabilities and scalability. Their investment is part of SatoshiPay’s strategy to support multiple blockchain ledgers in the future, in addition to its current default ledger Stellar. SatoshiPay’s leadership in the Stellar blockchain ecosystem has been extended by adding infrastructure nodes containing the full ledger history to the Stellar network and by releasing “Solar”, an open-source wallet application for Stellar. Solar is available on all major platforms including Android, iOS, Windows and MacOS, and its features include easy access to the network’s decentralised trading and multi- signature account capabilities. The company’s angel investor, Danny Masters, was appointed as Non-executive Director on 18 April 2019. His extensive experience in blockchain-based financial projects makes his profile a very valuable addition to SatoshiPay. On 31 January 2019, SatoshiPay and Axel Springer SE announced a joint offering, enabling users to pay for content with the digital SatoshiPay wallet. Powered by blockchain technology, the wallet will be used to send direct payments from the user’s device to the publisher without an intermediary. On 9 December 2019, SatoshiPay announced its move into the international B2B money transfer space. Using its existing technology platform, SatoshiPay is currently developing a service allowing companies to instantly transfer funds globally, generating recurring revenues and processing high transaction volumes by facilitating macro-payments. The SatoshiPay B2B service aims to solve issues typically connected with cross-border payments, such as delayed transfers, high transaction and forex costs, and lack of transparency, by leveraging the Stellar network and its connected financial services institutions across the globe. Blue Star’s holding in SatoshiPay The Company’s shareholding in SatoshiPay was acquired for £1,876,788 and represents 27.9 per cent, of SatoshiPay as at 30 September 2019. This investment has a carrying value of £4,754,201. 4 Blue Star Capital Plc Chairman’s Statement CONTINUED Sthaler Limited (“Sthaler”) Company Description In June 2015 the Company invested £50,000 in Sthaler Limited, an early stage identity and payments technology business which enables a consumer to identify themselves and pay using just their finger at retail points of sale. Sthaler was founded in 2012 by Nick Dryden when he introduced a biometric identity authentication and payment platform into the UK live entertainment industry with British Telecom and Bancorp/Elavon. The system, named Fingopay, uses a biometric called VeinID which instantly recognises an individual through the unique pattern of veins inside each finger. Also in 2012, the Company entered a long-term partnership with Hitachi for exclusive use of Fingopay across many areas of the globe. Sthaler also has a patent pending 2016 VeinID™ “cloud matching engine manager” to maintain matching speeds as its database scale. During the period of 2016-2019 the Company conducted several successful authentication security trials with Hitachi, Visa, Mastercard, Worldpay and Ernst and Young, all funded by these companies and all of which produced revenues to these companies. Such trials led the deployment of Fingopay to various UK consumer and sports establishments. Also, in 2019 Fingopay was deployed in Denmark with Nets and Dankort, the Danish national debit card scheme. In 2020, Fingopay was piloted successfully by the UK’s Open Banking Authority with the Financial Conduct Authority to introduce a new fraud free bank-to-bank account payment scheme. Fingopay wants to be a component of digital cities, which aspire to be international hubs for technology, digital and creative industries. One of those cities is Manchester, the Company’s oldest market where management has invested up to 5 years to build relationships with key decision makers who are supporting the ‘city- wide’ Identity Platform to support innovation, job creation and social inclusion targets The largest market the company is targeting is Egypt, with a population of 100 million. In 2019, the Chairman of Egypt Post approached the Company to build a demo as a solution for citizens to access digital government and financial services. The Egypt Post Chairman then presented Fingopay to Egypt’s President El Sisi. Approval at this level led to the project being passed to the Central Bank of Egypt (CBoE) which oversees the national biometric identity project. Fingopay is now being piloted in Egypt by the banking industry to authenticate payment transactions and by the Ministry of Supply to authenticate government food subsidies. The Egyptian approach came from global television coverage of Fingopay including CNBC, BBC, Al Jazeera and Fox, to name just a few. In addition, Fingopay has won the following awards this year: • The Fintech Power 50 - Most influential, innovative and powerful figures in the Global Fintech industry 2020 • Card & Payment Industry Awards – Industry Innovation of the Year 2020 • Fast Company – Top 50 World’s most Innovative Companies 2020 Blue Star’s Shareholding in Sthaler The Company’s shareholding in Sthaler is 0.9 per cent at 30 September 2019 and is valued on the basis of Sthaler’s last completed fund raise at approximately £350,000. Disruptive Tech Limited (“DTL”) Blue Star invested £300,000 in DTL in 2007. Post the Company’s original investment, DTL raised money at significantly higher valuations and as a result it’s carrying value had risen to £1.6 million at 30 September 2017. Unfortunately, DTL’s key investments did not perform as expected and as a result DTL’s performance has declined and the investment had been written down to cost at 30 September 2018. Having consulted in depth with DTL and the Company’s advisors, the Directors have decided it now prudent to write off the investment in full. 5 Blue Star Capital Plc Chairman’s Statement CONTINUED Esports portfolio Background on Esports Esports are electronic sports, usually in the form of competitions, using video or electronic games for multiple professional players and watched at a physical venue or through digital media. The Esports market is large and experiencing significant growth. By way of illustration, in 2018 the market was estimated at approximately 395 million viewers and is projected to reach around 640 million viewers by 2022. This is expected to result in revenues growing over the same period from $885 million to $1.80 billion. As Esports are now one of the most popular spectator sports, its increasing global following has enabled esports businesses to commercialise their activities through sponsorship, merchandising, licensing, broadcasting and tournaments. Given the growth in the market and the diverse array of commercial opportunities, the Board believes that esports will eventually constitute a significant proportion of the global sports industry. Esports portfolio and investment approach During the second half of last year, the Board was presented with an opportunity to invest in a number of esports businesses and given the early stage nature of these businesses the Board decided it appropriate to adopt a portfolio approach. It is the intention of each of the six Esports businesses in which the Company has invested to create or acquire Esport businesses, such as a competitive esports franchise, a platform on which Esports competitors gather to compete, or the creation of Esports tournaments. Each investee company will monetize engagement of the growing number of Esport participants, fans and sponsors, generating revenue from a variety of sources, including, tournament winnings, digital marketing opportunities, sponsorship, merchandise, platform fees, and promotional tours and events. Each of the companies is targeting a different region globally for financing and launch, but all will attempt to become global players. Further details on each of the six companies Blue Star has invested in are shown below: The Lords Esports plc, is a UK based company with a focus on the European esports market. The Lords acquired Cyqiq Gaming at the end of 2019 and is expected to launch the UK’s most recognizable franchise in the first half of 2020. Blue Star’s shareholding in The Lords is currently just over 11%. Googly Esports plc is an Indian based company with a focus on the Indian Esports market. The company is aiming to become the largest and most respected professional esports events/media company in India, playing in the intersection between traditional sports (ex: cricket) and Esports. Blue Star’s shareholding in Googly is currently 11%. Dynasty Esports PTE ltd is based in Singapore and is focussed on monetizing grass roots Esports participation across South East Asia. It will enable participation through a combination of a full featured online portal and in person leagues and events at the local, regional and country wide level. Blue Star’s shareholding in Dynasty is currently 13.7%. The Drops Esports Inc is a Canadian based company and has already announced a proposed transaction with FibreSources Corporation. If the transaction proceeds the enlarged business is expected to list on the Canadian Securities Exchange. Blue Star’s shareholding in The Drops prior to the transaction was 18.6%. Further details will be announced in due course. Diemens Esports PTY ltd is an Australian company which has already announced a potential merger with Critical Hit Entertainment. Blue star’s shareholding in Diemens prior to the proposed transaction was 13.3%. Further details will be announced in due course The Dibs Esports Corp is a US business based in Los Angeles. The company will focus on empowering female Esports players and has the goal of creating the largest female network of Esports in the North American esports market. Blue Star’s shareholding in The Dibs is currently 13.7%. 6 Blue Star Capital Plc Chairman’s Statement CONTINUED Outlook The Board believes the Company’s portfolio, enhanced by the recent esports investments, has significant potential. SatoshiPay and Sthaler have been developing their businesses and are on the verge of commercialisation. Such developments should lead to access to capital and the creation of shareholder value for the Company’s shareholders. These historic investments are now complimented by an exciting portfolio of esports businesses which, although early stage, are already showing signs of capital appreciation. The Board expects to see significant activity within this portfolio in the remainder of 2020. The appointment of Sean King to the Board as a non-executive director in January and Derek Lew as non-executive Chairman in November 2019 brings valuable knowledge and experience. Overall, the Directors believe the Company is at an exciting stage in its development and the Board views the future outlook with confidence. Derek Lew Chairman 4 March 2020 7 Blue Star Capital Plc Chairman’s Corporate Governance Statement FOR THE YEAR ENDED 30 SEPTEMBER 2019 As Chairman of the Board of Directors of Blue Star Capital Plc (the Company), it is my responsibility to ensure that the Company has sound corporate governance and an effective Board and committees. The Company is an AIM listed investment Company with a focus on new technologies. The Company has adopted the principles of the Quoted Companies Alliance Corporate Governance Code (QCA Code) for small and mid-size quoted companies. The QCA Code identifies ten principles that they consider to be appropriate arrangements and asks companies to provide an explanation on how they are meeting the principles. The Board considers that the Company complies with the QCA Code so far as it is practicable having regard to the size, and complexity of the Company and its business. These disclosures are set out on the basis of the current Company and the Board highlights where it has departed from the Code presently. The following paragraphs set out the Company’s compliance with the 10 principles of the QCA code and the information below was last updated on 28 February 2020. 1. Establish a strategy and business model which promotes long-term value for shareholders The Company’s strategy is to invest in fast growing private companies with the objective of achieving an increase in capital value. Our business model is to attract businesses through our network of contacts and to offer a pro-active and supportive approach to the management of investee companies which fosters confidence and trust. The Board maintains close dialogue with a number of other funds and specialist funding businesses and brokers to help identify suitable investment opportunities. Investing in early stage companies presents many challenges. The Board considers that the key challenge in executing the Company’s plan is identifying early stage opportunities where it is likely that the investee will progress rapidly and the investment will therefore rise in value. The Board intends to deliver shareholder returns through capital appreciation. Challenges to delivering strategy, long-term goals and capital appreciation are uncertainty in relation to organisational, operational, financial and strategic risks, all of which are outlined in the 2019 Annual Report and in the Risk Management section below, as well as steps the Board takes to protect the Company by mitigating these risks and secure a long-term future for the Company. Given the size of the Company and the historic limited cash resources we believe the strategy and business model we have adopted is consistent with our goal of promoting long term value for shareholders. 2. Seek to understand and meet shareholder needs and expectations The Company is committed to communicating openly with its shareholders to ensure that its strategy, business model and performance are clearly understood. The principal forms of communication are the Annual Report and Accounts, full and half-year announcements, trading updates, other Regulatory News Service announcements and its website. The Company also maintains a dialogue with shareholders through Annual General Meetings, which provides an opportunity to meet, listen and present to shareholders, and shareholders are encouraged to attend in order to express their views on the Company’s business activities and performance. External PR advisors have recently been appointed and there is only limited broker or analyst coverage at this stage. The Company’s website is kept updated and contains details of relevant developments and has a facility for questions to be addressed to the Company and it is the Board’s commitment that all reasonable questions are answered promptly. Tony Fabrizi is the shareholder liaison and his contact details are on all announcements made by the Company, and also the website. 8 Blue Star Capital Plc Chairman’s Corporate Governance Statement CONTINUED 3. Take into account wider stakeholder and social responsibilities and their implications for long-term success The Company’s business is focused on making and appraising investments as a minority shareholder. As such, stakeholder and social responsibilities, in terms of impact on society, the communities within which the Company operates and the environment, apply less than that of an operating company. Therefore, the Company appraises its social responsibilities as part of its investment appraisal process. The key resource on which the Company relies is the collective experience of the Directors. All employees within the Company are valued members of the team, and the Board seeks to implement provisions to retain and incentivise all its employees. The Company offers equal opportunities regardless of race, gender, gender identity or reassignment, age, disability, religion of sexual orientation. In terms of its shareholders, the Company aims to provide transparent and balanced information to encourage support and confidence in the Board’s approach. The Board recognises that the long-term success of the Company is reliant upon the efforts of employees, regulators and many other stakeholders and has close ongoing relationships with a broad range of its stakeholders. 4. Embed effective risk management, considering both opportunities and threats, throughout the organisation The Board recognises the need for an effective and well-defined risk management process and it oversees and regularly reviews the current risk management and internal control mechanisms. The Company considers risk management to fall into two broad categories, being the investment activity of the Company and the operations of the Company. (a) The investment risk is considered as part of the appraisal processes and by way of due diligence and ongoing monitoring. (b) The Company uses internal appraisal and the annual audit to ensure financial risks are evaluated in detail. Board meetings are also used for the directors to raise any issues relating to business risk arising from the Company’s business model and operations. Dealings in the Company’s shares are monitored and any dealings must first be approved by the CEO and Chairman. The Audit Committee consists of Anthony Fabrizi and Derek Lew (Chair). The Committee meets at least twice a year and is responsible for monitoring the quality of internal controls, ensuring the financial performance of the Company is being properly measured and reported on, meeting with the auditors and reviewing reports from the auditors relating to accounting and internal controls. The risk assessment matrix below sets out and categorises key risks, and outlines the mitigating actions which are in place. This matrix is updated as changes arise in the nature of risks or the mitigating actions implemented, and the board reviews these on a regular basis. The Company has identified the principal risks to the Company achieving its objectives as follows: Risk Potential Impact Mitigation Loss or impairment of investments The fall in value of investments would have a material adverse effect on our operations and financial performance. The value of investments, in particular those at an early stage of development, can be highly volatile. This is mitigated by careful management of investments and in particular, only continuing to support those investments which demonstrate potential to achieve a positive exit and decisively determining those which do not. Portfolio and capital management techniques are fully applied according to industry standard practice. 9 Blue Star Capital Plc Chairman’s Corporate Governance Statement CONTINUED Risk Potential Impact Mitigation Ability to raise further funds Ability to identify further suitable investment opportunities Our business model depends on our ability to raise debt and/or equity funding to finance future investments and overheads in the Company. There can be no guarantee that we will be able to raise funds, particularly in the current economic climate. There is no guarantee that investment opportunities will be available, and the Company may incur costs in conducting due diligence into potential investment opportunities that may not result in an investment being made. The careful management of our investments underpin our success to date in raising funds. This includes not only making the initial investment after our appraisal process but continuous ongoing monitoring of the investee companies and reporting positive news. The detailed due diligence carried out coupled with the Board’s knowledge and expertise give us confidence that we will continue to identify potential investments. The Board considers that an internal audit function is not considered necessary or practical due to the size of the Company and the day to day control exercised by the Directors. However, the Board will monitor the need for an internal audit function. The Board has established appropriate reporting and control mechanisms to ensure the effectiveness of its control systems. 5. Maintain the Board as a well-functioning, balanced team led by the Chair The Board recognises the QCA recommendation for a balance between Executive and Non-Executive Directors and the recommendation that there be at least two Independent Non-Executives. The Board consists of three directors, the Chief Executive Officer, the non-executive Chairman and a non- executive Director. The Board maintains that the Board’s compositions will be frequently reviewed as the Company develops. The Company has in place two committees, the Audit and Remuneration Committees. The Directors of the Company are committed to sound governance of the business and each devotes sufficient time to ensure this happens. The Board holds at least 6 Board meetings per year and at least two committee meetings. Board meetings cover regular business, investments, finance and operations. The CEO prepares the board agenda and circulates relevant documents. The Chairman is responsible for ensuring that relevant and accurate information is supplied for all board and committee meetings. 6. Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities The Company believes that the Board as a whole has significant experience in the financial services industry and in investments. The Board believes they have the requisite mix of skills and experience to successfully execute the business strategy in order to meet the Company’s objectives. William Henbrey, non-executive chairman Appointed on 1 July 2014. Chair of Audit Committee. Resigned on 6 November 2019 William Henbrey has more than 30 years’ experience in the gaming industry and is a Chartered Accountant. A partner at BDO London from 1978 until his retirement in 2006, William headed up the firm’s Betting and Gaming Unit within the Leisure and Hospitality Group. He has acted as both business assurance and financial adviser to a wide range of clients in the sector, both private and public in the UK and internationally, on business and strategic planning, flotations, acquisitions and disposals. 10 Blue Star Capital Plc Chairman’s Corporate Governance Statement CONTINUED William’s clients have included Coral, Pleasurama, Tote and Boylesports. He has also advised a number of online gaming businesses including 888, Aspinalls Online, Betbull, Bowman International, Empire Poker, Fairground Gaming, FireOne and St Minver. Derek Lew, non-executive chairman Appointed on 6 November 2019. Chair of Audit Committee Derek has advised, started and invested in technology companies for over 20 years. An active member of the technology community in Vancouver, he is President and CEO of venture capital fund manager GrowthWorks Capital Ltd and past-Chair of Innovate BC (formerly the British Columbia Innovation Council), the Crown Agency of the Province of British Columbia mandated to accelerate technology commercialisation. Derek is a Partner with Initio Group, a Vancouver, BC-based early-stage angel investment firm. Derek started his technology career as a lawyer, advising both technology companies and investors in all areas, including life sciences, ITC and e-commerce. Derek holds a Bachelor of Arts from the University of British Columbia and a Bachelor of Laws from the University of Alberta. Tony Fabrizi, CEO Originally appointed a non-executive director in August 2011, and appointed CEO in July 2012. Tony Fabrizi qualified as a chartered accountant with KPMG in 1986 and joined James Capel (later HSBC Investment Bank) in 1987. He worked in corporate finance and spent eight years undertaking UK transactions, becoming a director in 1993. During his last three years at HSBC he was responsible for the other financial and fund management activities within corporate broking. Tony joined RP&C, a US Investment Bank, as a partner in 1998 to help develop its UK business. In 2002 he established Ghaliston Limited as a corporate finance advisory business. Over the next 4 years, Ghaliston acted as financial adviser to 10 companies quoted on AIM and raised capital for a number of private companies. In May 2006, Ghaliston Limited acquired Merchant Securities Limited, a private client stockbroking business and the enlarged company listed on AIM in November 2006. Tony resigned as CEO of that company in June 2008. Sean King, non-executive Director Appointed on 24 January 2019: Chair of Remuneration Committee. Sean King has over 20 years’ experience in publishing and digital content, having set up Square One Group in 1994, which was one of the fastest growing independent content agencies in the UK. In 2007, Square One Group was acquired by rival Seven Publishing (backed by Guardian Media Group and Caledonia Investment Trust) with Sean King acting as CEO for the enlarged group until stepping down in April 2018. After stepping down as CEO of SevenC3, Sean King now acts as an independent adviser to a number of brands including Captify, (a fast growing pioneer in Search Intelligence); Octaive (an ad:tech start-up based in London and New York); DADI (a blockchain-powered decentralised global cloud computing network); and Liberty AIM (a new blockchain-powered ethical search engine). Biographical details of the Directors can be found on the Company’s website. The Company’s Nominated Adviser (“NOMAD”) assists with AIM matters and ensures that all Directors are aware of their responsibilities. The Directors also have access to the Company’s lawyers and auditors as and when required and are able to obtain advice from other external bodies when necessary. Board composition is always a factor for contemplation in relation to succession planning. The Board will seek to take into account any Board imbalances for future nominations, with areas taken into account including board independence and gender balance. The Company considers that at this stage of its development and given the current size of its Board, it is not necessary to establish a formal Nominations Committee. Instead, appointments to the Board are made by the Board as a whole. This position however, is reviewed on a regular basis by the Board. 11 Blue Star Capital Plc Chairman’s Corporate Governance Statement CONTINUED 7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement The Directors consider that the Company and Board are not yet of a sufficient size and complexity for a full Board evaluation to make commercial and practical sense. The Board acknowledges that it is non-compliant with its processes to evaluate the performance of the Board. As the Company grows, it expects to expand the Board and with the Board expansion, re-consider the need for Board evaluation. In view of the size of the Board, the responsibility for proposing and considering candidates for appointment to the Board as well as succession planning is retained by the Board. All Directors submit themselves for re-election at the AGM at regular intervals. 8. Promote a corporate culture that is based on ethical values and behaviours The Board believes that by acting ethically and promoting strong core values it will gain a reputation for honesty and that this will attract business and help the long-term objectives of the Company. As such the Board adopts an open approach to all investors, investment opportunities and all its advisors and service providers. The Board further considers the activities of and persons involved with potential investee companies as part of its due diligence processes. The Board places great importance on the responsibility of accurate financial statements and auditing standards comply with Auditing Practice Board’s (APB’s) and Ethical Standards for Auditors. The Board places great importance on accuracy and honesty, and seeks to ensure that this aspect of corporate life flows through all that the Company does. A large part of the Company’s activities is centred upon an open and respectful dialogue with stakeholders. The Directors consider that the Company has an open culture facilitating comprehensive dialogue and feedback. Whilst the Company has a small number of employees, the Board maintains that as the company grows it intends to maintain and develop strong processes which promote ethical values and behaviours across the Company. The Board complies with Rule 21 of the AIM Rules for Companies relating to dealings in the Company’s securities by the Directors and other Applicable Employees. To this end, the Company has adopted a code for Directors’ dealings appropriate for a company whose shares are admitted to trading on AIM and takes all reasonable steps to ensure compliance by the Board of Directors. 9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board The Board is committed to, and ultimately responsible for, high standards of corporate governance and notes the departure from the Code in terms of independence on the Board. The Board reviews the Company’s corporate governance arrangements regularly and expect to evolve these over time, in line with the Company’s growth. The Board delegates responsibilities to Committees and individuals as it sees fit. It is the role of the Chairman to manage the Board and advise its conduct. The CEO is responsible for the day to day management of the Company’s activities. The matters reserved for the Board are: (a) Defining the long-term strategy for the Company (b) Approving all major investments (c) Approving any changes to the Capital and debt structure of the Company (d) Approving the full year and half year results and reports (e) Approving resolutions to be put to the AGM and any general meetings of the Company. (f) Approving changes to the Advisory team. (g) Approving changes to the board structure. 12 Blue Star Capital Plc Chairman’s Corporate Governance Statement CONTINUED The Board delegates authority to the Audit and Remuneration Committees to assist in meeting its business objectives and the Committees meet independently of Board meetings. The membership of each Committee is listed below. Audit Committee The Audit Committee consists of Anthony Fabrizi and Derek Lew (Chair). The Committee meets at least twice a year and more frequently if required. The Committee is responsible for monitoring the quality of internal controls, ensuring the financial performance of the Company is being properly measured and reported on, meeting with the auditors and reviewing reports from the auditors relating to accounting and internal controls. Remuneration Committee The Remuneration Committee consists of Sean King (Chair) and Anthony Fabrizi. The Committee reviews the performance of the Executive Directors, sets the scale and structure of their remuneration and reviews the basis of their service agreements with due regard to the interests of the shareholders. The Remuneration Committee will also make recommendations concerning the allocation of share options to Directors and employees, if appropriate. No Director is permitted to participate in discussions concerning their own remuneration. The remuneration and terms of appointment of Non-Executive Directors are set by the Board as a whole. In exercising this role, the members of the Remuneration Committee regard the recommendations put forward in the QCA Code and, where appropriate, the UK Corporate Governance Code guidelines. 10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders The Board is committed to maintaining effective communication and having constructive dialogue with its stakeholders. All shareholders are encouraged to attend the Company’s Annual General Meeting and the Board discloses the result of General Meetings by way of announcement. All AGM resolutions in the financial year were passed comfortably. Accounts are also available to highlight any governance matters which the Board believes should be brought to the attention of shareholders and other relevant stakeholders. Information on the Investor Relations section of the Company’s website is kept updated and contains details of relevant developments, regulatory announcements, financial reports and shareholder circulars. Shareholders with a specific enquiry can contact us on the website contact page. Derek Lew Chairman 4 March 2020 13 Blue Star Capital Plc Strategic Report FOR THE YEAR ENDED 30 SEPTEMBER 2019 The Directors present their strategic report on the Company for the year ended 30 September 2019. Review of Business and Analysis Using Key Performance Indicators The full year’s loss was £684,964 compared to a pre-tax profit of £1,471,319 for the year ended 30 September 2018. Net assets have decreased to £5,209,377 at 30 September 2019, changing from £5,459,581 at 30 September 2018. The cash position at the end of the year increased to £120,828 from £31,416 as at 30 September 2018. Key Performance Indicators The Board monitors the activities and performance of the Company on a regular basis. The indicators set out below have been used by the Board to assess performance over the year to 30 September 2019. The main KPIs for the Company are listed as follows: 2019 2018 Valuation of investments Cash and cash equivalents Net current assets (Loss)/profit before tax £5,101,587 £5,288,943 £31,416 £120,828 £107,790 £170,638 (£684,964) £1,471,319 Investing Policy Assets or Companies in which the Company can invest The Company can invest in assets or companies in the following sectors: • Technology; • Gaming; and • Media. The Company’s geographical range is mainly UK companies but considers opportunities in the mainland EU and will actively co-invest in larger deals. The Company can take positions in investee companies by way of equity, debt or convertible or hybrid securities. Whether investments will be active or passive investments The Company’s investments are passive in nature but may be actively managed. The Company may be represented on, or observe, the boards of its investee companies. Holding period for investments The Company’s investments are likely to be illiquid and consequently are to be held for the medium to long term. Spread of investments and maximum exposure limits, Policy in relation to cross-holdings and Investing Restrictions The Company does not have any maximum exposure limits, limits on cross-holdings or other investing restrictions. Under normal circumstances, it is the Directors intention not to invest more than 10% of the Company’s gross assets in any individual company (calculated at the time of investment). The Company has accumulated a 27.9% stake in SatoshiPay, which the Board believes represents a rare opportunity to generate significant shareholder value. Policy in relation to gearing The Directors may exercise the powers of the Company to borrow money and to give security over its assets. The Company may also be indirectly exposed to the effects of gearing to the extent that investee companies have outstanding borrowings. Returns and Distribution Policy It is anticipated that returns from the Company’s investment portfolio will arise upon realisation or sale of its investee companies, rather than from dividends received. Whilst it is not possible to determine the timing of exits, the Board will seek to return capital to shareholders when appropriate. Life of the Company The Company has an indefinite life dependent on obtaining sufficient funding. Future Developments The Company is continuing to develop an investment portfolio with the capacity for substantial growth and increases in value. 14 Blue Star Capital Plc Strategic Report CONTINUED Principal risks and uncertainties The Company seeks investments in late stage venture capital and early stage private equity opportunities, which by their very nature allow a diverse portfolio of investments within different sectors and geographic locations. The Company’s primarily risk is loss or impairment of investments. This is mitigated by careful management of the investment and in particular, only continuing to support those investments which demonstrate potential to achieve a positive exit and decisively determining those which do not. Portfolio and capital management techniques are fully applied according to industry standard practice. It will be necessary to raise additional funds in the future by a further issue of new Ordinary shares or by other means. However, the ability to fund future investments and overheads in Blue Star Capital Plc as well as the ability of investments to return suitable profit cannot be guaranteed, particularly in the current economic climate. The Company may not be able to identify suitable investment opportunities and there is no guarantee that investment opportunities will be available, and the Company may incur costs in conducting due diligence into potential investment opportunities that may not result in an investment being made. The value of companies similar to those in Blue Star Capital’s portfolio and in particular those at an early stage of development, can be highly volatile. The price at which investments are made, and the price which the Company may realise for its investment, will be influenced by a large number of factors, some specific to the Company and its operations and some which may affect the sector. By Order of the Board Derek Lew Chairman 4 March 2020 15 Blue Star Capital Plc Directors’ Report FOR THE YEAR ENDED 30 SEPTEMBER 2019 The Directors present their report together with the audited financial statements for the year ended 30 September 2019. Results and dividends The trading results for the year ended 30 September 2019 and the Company’s financial position at that date are shown in the attached financial statements. The Directors do not recommend the payment of a dividend for the year (2018: £nil). Principal activities and review of the business The principal activity of the Company is to invest in the media, technology and gaming sectors. A review of the business is included within the Chairman’s Statement and Strategic Report. Directors serving during the year Anthony Fabrizi William Henbrey Resigned on 6 November 2019 Sean King Appointed on 29 January 2019 Directors’ interests The Directors at the date of these financial statements who served and their interest in the ordinary shares of the Company are as follows: Number of Ordinary Shares Warrants 62,000,000 90,000,000 — — 100,000,000 130,000,000 6,136,364 18,250,000 Anthony Fabrizi William Henbrey Sean King Derek Lew Significant shareholders As at 4 February 2020 so far as the Directors are aware, the parties (other than the interests held by Directors) who are directly or indirectly interested in 3% or more of the nominal value of the Company’s share capital is as follows: Number of Ordinary Shares Percentage of issued share capital 224,012,398 11.24% 158,067,678 150,000,000 5.02% 4.77% Nicolas Slater Smaller Company Capital Limited Krishan Rattan Related party transactions On 6 November 2019, Derek Lew was appointed as Chairman of the Company. Related party transactions and relationships are disclosed in note 16. 16 Blue Star Capital Plc Directors’ Report CONTINUED Events after the reporting date On 14 October 2019, the Company granted warrants to subscribe for Ordinary shares as follows: Exercise price: 0.1p Exercise price: 0.175p Exercise price: 0.25p Toro Consulting Ltd Tony Fabrizi Derek Lew Total Warrants 220,000,000 25,000,000 55,000,000 300,000,000 Term from date of grant (months) Term from date of grant (months) Term from date of grant (months) Warrants Warrants 6 220,000,000 25,000,000 45,000,000 12 12 12 180,000,000 15,000,000 12 30,000,000 18 18 24 24 290,000,000 225,000,000 Auditor Adler Shine LLP have expressed their willingness to continue as auditor and a resolution to re appoint Adler Shine LLP will be proposed at the Annual General Meeting. On behalf of the board of Directors Derek Lew Chairman 4 March 2020 On 6 November 2019, Derek Lew was appointed as Chairman, replacing William Henbury with immediate effect. On 6 November 2019, the Company placed 900,000,000 new Ordinary shares at a price of 0.1 pence per share, raising gross proceeds of £900,000 and subsequently made investments of approximately £150,000 each in six Esport companies. On 19 February 2020, the Company allotted 50,000,000 new Ordinary shares of 0.1 pence per share pursuant to an exercise of warrants. Political Donations There were no political donations during the current or prior year. Provision of information to Auditor In so far as each of the Directors are aware: • there is no relevant audit information of which the Company’s auditor is unaware; and • the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information. 17 Blue Star Capital Plc Statement of Directors’ Responsibilities FOR THE YEAR ENDED 30 SEPTEMBER 2019 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 requirements of 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. Website publication Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein. The Company is compliant with AIM Rule 26 regarding the Company’s website. Directors’ responsibilities 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 they are required to prepare financial statements in accordance with IFRS as adopted by the European Union 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 for the year. The Directors are also required to prepare financial statements in accordance with the rules of the London Stock exchange for companies trading securities on the Alternative Investment Market. In preparing the Company financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether the financial statements have been prepared in accordance with IFRSs as adopted by the EU; • prepare the financial statements on a going concern basis unless it is inappropriate to assume the Company will continue in business. 18 Blue Star Capital Plc Independent Auditors’ Report TO THE MEMBERS OF BLUE STAR CAPITAL PLC Opinion We have audited the financial statements of Blue Star Capital Plc for the year ended 30 September 2019, which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Cash Flow Statement and Notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. In our opinion the financial statements: • give a true and fair view of the state of the Company’s affairs as at 30 September 2019 and of its loss for the year then ended • have been properly prepared in accordance with IFRSs as adopted by the European Union; and • have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We have 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 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 FRS’s Ethical Standards as applied to listed entities 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. Company’s plans. As stated in note 1, this condition indicates that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on the overall audit strategy, the allocation of resources in audit; and directing the efforts of the engagement team. The matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. The key audit matters identified were: Valuation of investments The company is an investment company with a focus on technology and its application within media and gaming and its value is based on its investments. The company holds unlisted investments. How the matter was addressed We considered the existence of investments as well as the valuations placed on unlisted investments at the year end and whether there were any indications of impairment. Valuation of investments was considered by reviewing evidence provided by the Directors and filed with Companies House, including the price at which the investee companies were able to issue shares in the period. Material uncertainty relating to going concern Key Observations We draw your attention to note 1 to the financial statements, which indicates that the Company is reliant on future fund raisings to continue its activities as budgeted. Should future fund raisings be unsuccessful this will impact on the As a result of our work we agreed with the increase in the value of two of the company’s investments, and the full reduction in value of one of the investments to nil. 19 Blue Star Capital Plc Independent Auditors’ Report TO THE MEMBERS OF BLUE STAR CAPITAL PLC Going Concern Refer to Note 1 to the financial statements for the directors’ disclosures of related accounting policies, judgements and estimates. The directors have concluded they have a reasonable expectation that the company will have sufficient cash resources and cash inflows to continue its activities for not less than twelve months from the date of approval of these financial statements and have therefore prepared these financial statements on a going concern basis. How the matter was addressed We addressed this risk by reviewing the cashflow forecasts provided by the directors. Our work included but was not limited to, challenging the assumptions made by the directors, reviewing the level of expenses forecast. We considered the cash position at the year end, the funds raised post year end and the need for additional funding during the forthcoming year. Key Observations As a result, we concluded that the company was reliant on raising additional funds during the forthcoming year. We noted that the company had successfully raised £450,000 before expenses in the period under review and £900,000 before expenses after the year end. Subsequently, the company made investments of approximately £150,000 each in six Esport companies. The company will seek to raise further funds when required. We concluded there was a material uncertainty due the risk of unsuccessful fund raising and have amended our report accordingly. Our application of materiality Materiality for the company was £52,100 (2018: £91,500) based on 1% of net assets (2018: based on an average of 5% of adjusted loss before tax and 2% of net assets). An overview of the scope of the audit We tailored the scope of our audit to ensure we performed enough work to be able to give an opinion on the financial statements as a whole and paying particular attention on key audit matters identified above. The scope of our audit was influenced by our application of materiality which was calculated based on our professional judgement. These together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole. Other information The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. 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 thereon. In connection with our audit of the financial statements, 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 audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. 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. Opinion on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken during the audit: • The information given in the strategic report and directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • The strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. 20 Blue Star Capital Plc Independent Auditors’ Report TO THE MEMBERS OF BLUE STAR CAPITAL PLC Matters on which we are required to report by exception Auditor’s responsibility for the audit of the financial statements In 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 or 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 by the Company, or returns adequate for our audit have not been received from branches not visited by us; or • the Company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of Directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Responsibilities of directors As explained more fully in the statement of Directors’ responsibilities set out on page 18, 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 misstatements, 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 material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis, of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at 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. Darsh Shah (Senior Statutory Auditor) For and on behalf of Adler Shine LLP, Chartered Accountants and Statutory Auditor Aston House Cornwall Avenue London N3 1LF 4 March 2020 Adler Shine LLP is a limited liability partnership registered in England and Wales (with registered number OC301724). 21 Blue Star Capital Plc Statement of Comprehensive Income FOR THE YEAR ENDED 30 SEPTEMBER 2019 Revenue Fair valuation movements in financial instruments designated at fair value through profit or loss Administrative expenses Operating (loss)/profit Finance income (Loss)/profit before and after taxation and total comprehensive loss for the year (Loss)/profit per ordinary share: Basic (loss)/earnings per share on (loss)/profit for the year Diluted (loss)/earnings per share on (loss)/profit for the year Notes 2019 £ — 2018 £ — 10 (399,748) 1,817,983 (399,748) 1,817,983 (287,662) (352,408) (687,410) 1,465,575 2,446 5,744 (684,964) 1,471,319 (0.03p) (0.03p) 0.08p 0.07p 3 4 9 9 The notes on pages 26 to 38 form part of these financial statements. 22 Blue Star Capital Plc Statement of Financial Position FOR THE YEAR ENDED 30 SEPTEMBER 2019 Non-current assets Financial assets at fair value through profit or loss 10 5,101,587 5,288,943 Notes 2019 £ 2018 £ Current assets Trade and other receivables Cash and cash equivalents Total current assets Total assets Current liabilities Trade and other payables Total liabilities Net assets Shareholders’ equity Share capital Share premium account Other reserves Retained earnings Total shareholders’ equity 11 12 10,275 120,828 276,146 31,416 131,103 307,562 5,232,690 5,596,505 13 23,313 136,924 23,313 136,924 5,209,377 5,459,581 14 2,142,584 1,881,473 8,852,724 8,679,075 64,190 64,190 (5,850,121) (5,165,157) 5,209,377 5,459,581 The financial statements were approved by the board, authorised for issue on 4 March 2020 and were signed on its behalf by: Anthony Fabrizi Director Registered number: 05174441 The notes on pages 26 to 38 form part of these financial statements. 23 Blue Star Capital Plc Statement of Changes in Equity FOR THE YEAR ENDED 30 SEPTEMBER 2019 Share capital £ Share premium £ Other reserves £ Retained earnings £ Total £ Year ended 30 September 2018 At 1 October 2017 Profit for the year and total comprehensive income Shares issued in year Share issue costs 1,702,901 8,382,647 64,190 (6,636,476) 3,513,262 — 178,572 — — 321,428 (25,000) — 1,471,319 — — — — 1,471,319 500,000 (25,000) At 30 September 2018 1,881,473 8,679,075 64,190 (5,165,157) 5,459,581 Year ended 30 September 2019 At 1 October 2018 Loss for the year and total comprehensive income Shares issued in year Share issue costs 1,881,473 8,679,075 64,190 (5,165,157) 5,459,581 — 261,111 — — 188,889 (15,240) — (684,964) — — — — (684,964) 450,000 (15,240) At 30 September 2019 2,142,584 8,852,724 64,190 (5,850,121) 5,209,377 Share capital Share capital represents the nominal value on the issue of the Company’s equity share capital, comprising £0.001 ordinary shares. Share premium Share premium represents the amount subscribed for the Company’s equity share capital in excess of nominal value. Other reserves Other reserves represent the cumulative cost of share-based payments. Retained earnings Retained earnings represent the cumulative net income and losses of the Company recognised through the statement of comprehensive income. The notes on pages 26 to 38 form part of these financial statements. 24 Blue Star Capital Plc Cash Flow Statement FOR THE YEAR ENDED 30 SEPTEMBER 2019 Operating activities (Loss)/profit for the year Adjustments: Finance income Fair value losses/(gains) Working capital adjustments Decrease/(increase) in trade and other receivables (Decrease)/increase in trade and other payables Net cash used in operating activities Investing activities Increase in investments Loan issued Interest received Net cash used by from investing activities Financing activities Proceeds from issue of equity Share issue costs Notes 2019 £ 2018 £ (684,964) 1,471,319 (2,446) 391,748 (5,744) (1,817,983) 265,871 (113,612) (54,314) 103,586 (143,343) (303,136) (204,451) — 2,446 — (178,508) 90 (202,005) (178,418) 450,000 (15,240) 500,000 (25,000) Net cash generated from financing activities 434,760 475,000 Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at start of the year Cash and cash equivalents at end of the year 12 12 89,412 31,416 (6,554) 37,970 120,828 31,416 The notes on pages 26 to 38 form part of these financial statements. 25 Blue Star Capital Plc Notes to the Financial Statements FOR THE YEAR ENDED 30 SEPTEMBER 2019 1. Accounting policies General information Blue Star Capital Plc (the Company) invests principally in the media, technology and gaming sectors. The Company is a public limited company incorporated and domiciled in the United Kingdom. The address of its registered office is Griffin House, 135 High Street, Crawley RH10 1DQ. The Company is listed on the Alternative Investment Market (AIM) market of the London Stock Exchange plc. Summary of significant accounting policies The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Basis of preparation These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB) as adopted by the European Union (“adopted IFRSs”) and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. These financial statements have been prepared under the historical cost convention, as modified by the revaluation of assets and liabilities held at fair value. Associates are those entities in which the Company has significant influence, but no control, over the financial and operating policies. Investments that are held as part of the Company’s investment portfolio are carried in the statement of financial position at fair value even though the Company may have significant influence over those companies. This treatment is permitted by IAS 28 Investment in Associates, which requires investments held by venture capital organisations to be excluded from its scope where those investments are designated, upon initial recognition, as at fair value through profit or loss and accounted for in accordance with IFRS 9, with changes in fair value recognised in the statement of comprehensive income in the period of the change. The Company has no interests in associates through which it carries on its business. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant in the financial statements, are disclosed in note 2. Going concern The company has reported a loss for the year excluding fair value loss on the valuation of investments of £287,662. The company carries out regular fund-raising exercises in order that it can provide the necessary working capital to continue its activities. The board expects to continue to raise additional funding as and when required to cover the company’s activities, primarily from the issue of further shares. Since the year end, the company has raised £900,000, before expenses and subsequently made investments in six Esport companies. The company will seek to raise further funds when required. 26 Blue Star Capital Plc Notes to the Financial Statements FOR THE YEAR ENDED 30 SEPTEMBER 2019 1. Accounting policies (continued) Although the Directors have a reasonable expectation that the company has adequate resources to continue its operational existence for the foreseeable future the successful completion of future fund raisings constitutes a material uncertainty that may cast doubt over the company’s ability to continue as a going concern. The financial statements do not contain the adjustments that would result if the company was unable to continue as a going concern. New standards, amendments and interpretations adopted by the Company The Company has applied the following standards and amendments for the first time for its annual reporting period commencing 1 October 2018: • • • • IFRS 9 Financial Instruments; Classification and Measurement of Share-based Payment Transactions – Amendments to IFRS 2; Annual improvements 2014-2016 cycle; IAS 28 Interpretation 22, Foreign Currency Transactions and Advance Consideration None of these standards are considered to have a material effect on the Company’s financial statements. New standards, amendments and interpretations not yet adopted The International Accounting Standards Board (IASB) has issued the following new and revised standards, amendments and interpretations to existing standards that are not effective for the financial year ended 30 September 2019 and have not been adopted early. New Standards IFRS 16 – Leases IFRS 17 – Insurance Contracts Amendments to Existing Standards IFRSIC 23 Uncertainty over Income Tac Treatments* Annual Improvements to IFRSs (2015-2017 Cycle)*, IFRS 11, IAS 12, IAS 23 Amendments to IFRS 9 Prepayment Features with Negative Compensation Amendments to IAS 28 Long-term Interests in Associates and Joint Ventures Amendments to IAS 19 Plan Amendment, Curtailment or Settlement Not yet adopted by European Union* Effective Date 1 January 2019 1 January 2021 1 January 2019 1 January 2019 1 January 2019 1 January 2019 1 January 2019 There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group. The Directors anticipate that the adoption of these standards and interpretations in future periods will have no material impact on the financial statements other than in terms of presentation and additional disclosure requirements for “investment entities”. Financial assets The Company classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was acquired. The Company has not classified any of its financial assets as held to maturity or available for sale. 27 Blue Star Capital Plc Notes to the Financial Statements FOR THE YEAR ENDED 30 SEPTEMBER 2019 1. Accounting policies (continued) The Company’s accounting policy for each category is as follows: Fair value through profit or loss Financial assets at fair value through profit or loss are financial assets designated upon initial recognition as at fair value through profit or loss. Financial assets designated at fair value through the profit or loss are those that have been designated by management upon initial recognition. Management designated the financial assets, comprising equity shares and warrants, at fair value through profit or loss upon initial recognition due to these assets being part of the Company’s financial assets, which are managed and their performance evaluated on a fair value basis. Financial assets at fair value through the profit or loss are recorded in the statement of financial position at fair value. Changes in fair value are recorded in “Fair valuation movements in financial assets designated at fair value through profit or loss”. Financial assets, comprising equity shares and warrants, are valued in accordance with the International Private Equity and Venture Capital (“IPEVC”) guidelines. (a) Early stage investments: these are investments in immature companies, including seed, start-up and early stage investments. Such investments are valued at cost less an provision considered necessary, until no longer viewed as an early stage or unless significant transactions involving an independent third party arm’s length, values the investment at a materially different value: (b) Development stage investments: such investments are in mature companies having a maintainable trend of sustainable revenue and from which an exit, by way of floatation or trade sale, can be reasonably foreseen. An investment of this stage is periodically re-valued by reference to open market value. Valuation will usually be by one of five methods as indicated below: I. At cost for at least one period unless such basis is unsustainable; II. On a third-party basis based on the price at which a subsequent significant investment is made involving a new investor; III. On an earnings basis, but not until at least a period since the investment was made, by applying a discounted price/earnings ratio to the profit after tax, either before or after interest; or IV. On a net asset basis, again applying a discount to reflect the illiquidity of the investment. V. In a comparable valuation by reference to similar businesses that have objective data representing their equity value. (c) Quoted investments: such investments are valued using the quoted market price, discounted if the shares are subject to any particular restrictions or are significant in relation to the issued share capital of a small quoted company. At each balance sheet date, a review of impairment in value is undertaken by reference to funding, investment or offers in progress after the balance sheet date and provisions is made accordingly where the impairment in value is recognised. 28 Blue Star Capital Plc Notes to the Financial Statements FOR THE YEAR ENDED 30 SEPTEMBER 2019 1. Accounting policies (continued) The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities. Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly. Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less. For the purpose of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Financial liabilities The Company classifies its financial liabilities in the category of financial liabilities measured at amortised cost. The Company does not have any financial liabilities at fair value through profit or loss. Financial liabilities measured at amortised cost Financial liabilities measured at amortised cost include: Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method Finance income Finance income relates to interest income arising on cash and cash equivalents held on deposit and interest accrued on loans receivable. Finance income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable. Operating loss Operating loss is stated after crediting all items of operating income and charging all items of operating expense. Deferred taxation Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs from its tax base. Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised. The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered). 29 Blue Star Capital Plc Notes to the Financial Statements FOR THE YEAR ENDED 30 SEPTEMBER 2019 1. Accounting policies (continued) Provisions Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, it’s carrying amount is the present value of the cash flows (when the effect of the time value of money is material). When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. Present obligations under onerous leases are recognised and measured as provisions. An onerous contract is considered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract. Share-based payments All services received in exchange for the grant of any share-based remuneration are measured at their fair values. These are indirectly determined by reference to the fair value of the share options/warrants awarded. Their value is appraised at the grant date and excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Share based payments are ultimately recognised as an expense in the Statement of Comprehensive Income with a corresponding credit to other reserves in equity, net of deferred tax where applicable. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options/warrants expected to vest. Non-market vesting conditions are included in assumptions about the number of options/warrants that are expected to become exercisable. Estimates are subsequently revised, if there is any indication that the number of share options/warrants expected to vest differs from previous estimates. No adjustment is made to the expense or share issue cost recognised in prior periods if fewer share options ultimately are exercised than originally estimated. Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares issued are allocated to share capital with any excess being recorded as share premium. Where share options are cancelled, this is treated as an acceleration of the vesting period of the options. The amount that otherwise would have been recognised for services received over the remainder of the vesting period is recognised immediately within the Statement of Comprehensive Income. 30 Blue Star Capital Plc Notes to the Financial Statements FOR THE YEAR ENDED 30 SEPTEMBER 2019 2. Critical accounting estimates and judgements The Company makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are those in relation to: Fair value of financial instruments The Company holds investments that have been designated at fair value through profit or loss on initial recognition. The Company determines the fair value of these financial instruments that are not quoted, using valuation techniques, contained in the IPEVC guidelines. These techniques are significantly affected by certain key assumptions. Other valuation methodologies such as discounted cash flow analysis assess estimates of future cash flows and it is important to recognise that in that regard, the derived fair value estimates cannot always be substantiated by comparison with independent markets and, in many cases, may not be capable of being realised immediately. In certain circumstances, where fair value cannot be readily established, the Company is required to make judgements over carrying value impairment, and evaluate the size of any impairment required. The methods and assumptions applied, and the valuation techniques used, are disclosed in note 10. 3. Operating (loss)/profit This is stated after charging: Auditor’s remuneration – statutory audit fees Fair valuation movements in financial instruments 4. Finance income Interest received on short term deposits Interest receivable on convertible loan note 2019 £ 2018 £ 15,300 399,748 15,050 (1,817,983) 2019 £ 121 2,325 2,446 2018 £ 90 5,654 5,744 31 Blue Star Capital Plc Notes to the Financial Statements FOR THE YEAR ENDED 30 SEPTEMBER 2019 5. Share based payments Share warrants Outstanding at the beginning of the year Lapsed during year Issued during year Outstanding at the end of the year 2019 2018 Weighted average exercise price (p) 0.6 — — 0.6 Number 110,000,000 — — 110,000,000 Weighted average exercise price (p) 0.6 — — 0.6 Number 110,000,000 — — 110,000,000 The contracted average remaining life of warrants at year end was 0.8 years (2018: 1.8 years). At 30 September 2019, the Company had the following warrants in issue. Date of grant Number granted Contractual life Exercise price (in pence) Estimated fair value per warrant 4 July 2017 4 July 2017 4 July 2017 25,000,000 3 years 0.25p 0.09p 42,500,000 3 years 0.6p 0.05p 42,500,000 3 years 0.8p 0.04p The fair value of warrants is determined using the Black-Scholes valuation model. The charge to the profit and loss account was £nil (2018: £nil). The Black-Scholes valuation technique was adopted because, in the opinion of the Directors, the market based vesting conditions were not materially sensitive to the valuation. 6. Staff costs, including directors Wages and salaries Social security costs 2019 £ 63,500 4,518 68,018 2018 £ 50,000 4,494 54,494 During the year the Company had an average of 3 employees who were management (2018: 2). The employees are Directors and key management personnel of the Company. 7. Directors’ and key management personnel Director Anthony Fabrizi Sean King William Henbrey Emoluments Emoluments Emoluments 2019 Total 30,000 13,500 20,000 63,500 2018 Total 30,000 — 20,000 50,000 Emoluments above are paid in full at the end of both financial years. 32 Blue Star Capital Plc Notes to the Financial Statements FOR THE YEAR ENDED 30 SEPTEMBER 2019 8. Taxation The tax assessed on loss before tax for the year differs to the applicable rate of corporation tax in the UK for small companies of 19% (2018: 19%). The differences are explained below: Profit/(loss) before tax Profit/(loss) before tax multiplied by effective rate of corporation tax of 19% (2018:19%) Effect of: (Profit)/loss on disposal of investments Capital losses/(unrealised gains) carried forward Capital gains Capital allowances Expenses not deductible for tax purposes Losses carried forward Tax charge in the income statement 2019 £ 2018 £ (684,964) 1,471,319 (130,143) 279,551 — 75,952 — (303) 2,052 52,442 — — (345,417) — (370) 29,412 36,824 — The Company has incurred tax losses for the year and a corporation tax expense is not anticipated. The amount of the unutilised tax losses has not been recognised in the financial statements as the recovery of this benefit is dependent on future profitability, the timing of which cannot be reasonably foreseen. The unrecognised and revised deferred tax asset at 30 September 2019 is £646,754 (2018: £609,392). 9. (Loss)/Earnings per ordinary share The earnings and number of shares used in the calculation of loss/earnings per ordinary share are set out below: 2019 2018 Basic: (Loss)/Profit for the financial period Weighted average number of shares (Loss)/Earnings per share (pence) Fully Diluted: (Loss)/Profit for the financial period Weighted average number of shares (Loss)/Earnings per share (pence) (£684,964) £1,471,319 2,019,904,010 1,870,219,296 0.08 (0.03) (£684,964) £1,471,319 2,019,904,010 1,978,016,511 0.07 (0.03) As at the end of the financial period ended 30 September 2019, there were 110,000,000 share warrants in issue, which had an anti-dilutive effect on the weighted average number of shares. 33 Blue Star Capital Plc Notes to the Financial Statements FOR THE YEAR ENDED 30 SEPTEMBER 2019 10. Financial assets held at fair value through profit of loss FV movements in investments FV movements in convertible loan notes Fair valuation movements in financial assets designated at fair value through profit or loss Investments At start of year Additions Net fair value (loss)/gain for the year At end of year Unquoted investments Satoshipay Limited Disruptive Tech. Limited Sthaler Limited Class of shares/investment Ordinary 1¢ Ordinary 1p Ordinary 0.1p 2019 £ 2018 £ (391,807) (7,941) 1,792,079 25,904 (399,748) 1,817,983 2019 £ 5,288,943 204,451 (391,807) 2018 £ 3,496,864 — 1,792,079 5,101,587 5,288,943 Book value and fair value 2019 £ 4,754,201 — 347,386 Book value and fair value 2018 £ 4,693,351 300,000 295,592 5,101,587 5,288,943 All of the above investments are incorporated in the United Kingdom with the exception of Disruptive Tech. Limited which is based in Gibraltar. The methods used to value these unquoted investments are described below. Fair value The fair value of unquoted investments is established using valuation techniques. These include the use of recent arm’s length transactions, the Black-Scholes option pricing model and discounted cash flow analysis. Where a fair value cannot be estimated reliably the investment is reported at the carrying value at the previous reporting date in accordance with International Private Equity and Venture Capital (“IPEVC”) guidelines. The Company assesses at each balance sheet date whether there is any objective evidence that the unquoted investments are impaired. The unquoted investments are deemed to be impaired, if and only if, there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the estimated future fair value of the investments that can be reliably measured. 11. Trade and other receivables Convertible loan notes Prepayments Social security and other taxes Other debtors 2019 £ — 2,172 8,103 — 10,275 2018 £ 210,067 4,276 6,259 55,544 276,146 On 1 December 2017, the Company subscribed for €200,000 of convertible loan notes issued by SatoshiPay Limited. Interest of 4% per annum was payable on the loan and the redemption date has been extended to 31 January 2019. 34 Blue Star Capital Plc Notes to the Financial Statements FOR THE YEAR ENDED 30 SEPTEMBER 2019 11. Trade and other receivables (continued) On 6 February 2019, the Company announced that it has elected to convert the convertible loan notes into a further 249 shares in SatoshiPay Limited. Following the conversion of the convertible loan notes, and following the completion of the fundraise by SatoshiPay Limited, the Company now holds a total of 5,739 shares in SatoshiPay Limited, representing approximately 27.9% of its issued share capital. The Directors consider that the carrying value of trade and other receivables approximates to the fair value. 12. Cash and cash equivalents Cash at bank and in hand 2019 £ 120,828 120,828 2018 £ 31,416 31,416 Cash and cash equivalents comprise cash at bank and other short-term highly liquid investments with an original maturity of three months or less. The Directors consider that the carrying value of cash and cash equivalents approximates to their fair value. 13. Trade and other payables Trade payables Accruals Other payables 2019 £ 10,808 12,500 5 23,313 2018 £ 4,301 132,618 5 136,924 All trade and other payables fall due for payment within one year. The Directors consider that the carrying value of trade and other payables approximates to their fair value. 14. Share capital 2019 Number Issued and fully paid 2019 £ 2018 Number 2018 £ At 1 October Shares issued in the year 1,881,471,742 361,111,111 1,881,473 1,702,900,313 178,571,429 261,111 1,702,901 178,572 At 30 September 2,242,582,853 2,142,584 1,881,471,742 1,881,473 During the year ended 30 September 2019 the following shares were issued: 24 January 2019 1 July 2019 Number 111,111,111 250,000,000 361,111,111 £ 200,000 250,000 450,000 Issue price per share 0.18p 0.1p During the year ended 30 September 2018 the following shares were issued: 24 October 2017 178,571,429 500,000 0.28p Number £ Issue price per share 35 Blue Star Capital Plc Notes to the Financial Statements FOR THE YEAR ENDED 30 SEPTEMBER 2019 15. Financial instruments Categories of financial assets and liabilities The following tables set out the categories of financial instruments held by the Company: Financial instruments Trade and other receivables Cash and cash equivalents At 30 September 2019 Investments Convertible loan notes Total financial assets At 30 September 2018 Investments Convertible loan notes Total financial assets At 30 September 2019 Investments Convertible loan notes Total financial assets At 30 September 2018 Investments Convertible loan notes Total financial assets Financial liabilities Trade payables Other payables Notes 11 12 Loans and receivables 2018 2019 £ £ 10,275 120,828 131,103 276,146 31,416 307,562 Designated upon initial recognition Fair value through profit or loss £ Held for trading £ Total £ 5,101,587 — 5,101,587 — 5,101,587 5,101,587 — — — 5,288,943 210,067 5,288,943 210,067 — 5,499,010 5,499,010 Fair value measurement Level 1 £ Level 2 £ Level 3 £ — — — — Notes 13 13 — — — 5,101,587 — 5,101,587 5,288,943 210,067 — 5,499,010 Financial liabilities measured at amortised cost 2019 £ 10,808 5 10,813 2018 £ 4,301 5 4,306 Notes 10 11 10 11 Notes 10 11 11 36 Blue Star Capital Plc Notes to the Financial Statements FOR THE YEAR ENDED 30 SEPTEMBER 2019 15. Financial instruments (continued) The Company’s financial instruments comprise investments recognised at fair value through profit and loss, cash and cash equivalents, convertible loan notes, other receivables and trade payables that arise directly from the Company’s operations. The main purpose of these instruments is to invest in portfolio companies. Investments are held at fair value through profit and loss. The main risks arising from holding these financial instruments is market risk and credit risk. Interest rate risk The Company’s exposure to changes in interest rates relate primarily to cash and cash equivalents. Cash and cash equivalents are held either on current or on short term deposits at floating rates of interest determined by the relevant bank’s prevailing base rate. The Company seeks to obtain a favourable interest rate on its cash balances through the use of bank treasury deposits. Any reasonable change in interest rate would not have a material impact on finance income that the Company could receive in the course of a year, based on the current level of cash and cash equivalents either held in current accounts or short-term deposits. Market risk All trading instruments are subject to market risk, the potential that future changes in market conditions may make an instrument less valuable, due to fluctuations in security prices, as well as interest and foreign exchange rates. Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded. Sensitivity analysis The following table looks at the impact on net result and net assets based on a given movement in the fair value of all the investments; 10% movement either way will result in £510,159 profit or (loss) (2017: £528,894 profit or (loss)) 20% movement either way will result in £1,020,317 profit or (loss) (2017: £1,057,789 profit or (loss)) 30% movement either way will result in £1,530,476 profit or (loss) (2017: £1,586,683 profit or (loss)) Borrowing facilities The operations to date have been financed through the placing of shares and investor loans. It is the Board’s policy to keep borrowing to a minimum, where possible. Liquidity risks The Company seeks to manage liquidity risk by ensuring sufficient liquid assets are available to meet foreseeable needs and to invest liquid funds safely and profitably. All cash balances are immediately accessible and the Company holds no trades payable that mature in greater than 3 months, hence a contractual maturity analysis of financial liabilities has not been presented. Since these financial liabilities all mature within 3 months, the Directors believe that their carrying value reasonably equates to fair value. Credit risk The Company’s credit risk is attributable to cash and cash equivalents and trade and other receivables. Cash is deposited with reputable financial institutions with a high credit rating. The maximum credit risk relating to cash and cash equivalents and trade and other receivables is equal to their carrying value of £131,103 (2018: £307,562). 37 Blue Star Capital Plc Notes to the Financial Statements FOR THE YEAR ENDED 30 SEPTEMBER 2019 15. Financial instruments (continued) Capital Disclosure As in previous years, the Company defines capital as issued capital, reserves and retained earnings as disclosed in statement of changes in equity. The Company manages its capital to ensure that the Company will be able to continue to pursue strategic investments and continue as a going concern. The Company does not have any externally imposed financial requirements. 16. Related party transactions On 1 July 2019, both Tony Fabrizi and Sean King each subscribed for 12,000,000 shares at a price of 0.1 pence per share. 17. Operating lease commitments At the balance sheet date, the Company had no outstanding commitments under operating leases. 18. Ultimate Controlling Party The Company considers that there is no ultimate controlling party. 19. Post Balance Sheet Events On 6 November 2019, Derek Lew was appointed as Chairman, replacing William Henbury with immediate effect. On 6 November 2019, the Company placed 900,000,000 new Ordinary shares at a price of 0.1 pence per share, raising gross proceeds of £900,000 and subsequently made investments of approximately £150,000 each in six Esport companies. The Company also granted warrants to subscribe for Ordinary shares as follows: Exercise price: 0.1p Exercise price: 0.175p Exercise price: 0.25p Toro Consulting Ltd Tony Fabrizi Derek Lew Total Warrants 220,000,000 25,000,000 55,000,000 300,000,000 Term from date of grant (months) Term from date of grant (months) Warrants Warrants 6 220,000,000 25,000,000 45,000,000 12 12 12 180,000,000 15,000,000 12 30,000,000 18 290,000,000 225,000,000 Term from date of grant (months) 18 24 24 On 19 February 2020, the Company allotted 50,000,000 new Ordinary shares of 0.1 pence per share pursuant to an exercise of warrants. 38 Blue Star Capital Plc Notice of Annual General Meeting Notice is hereby given that the Annual General Meeting of Blue Star Capital Plc (the “Company”) will be held at the offices of Cairn Financial Advisers LLP, Cheyne House, Crown Court, 62-63 Cheapside, London, EC2V 6AX on 31 March 2020 at 12.00 noon for the following purposes: ORDINARY RESOLUTIONS 1 To receive and adopt the accounts, together with the directors’ and auditors’ reports, for the period ended 30 September 2019. 2 To re-elect Derek Lew as a director of the Company who being eligible offers himself for re-election. 3. To re-elect Anthony Fabrizi as a director of the Company who being eligible offers himself for re-election. 4 To re-appoint Adler Shine LLP as auditors of the Company until the conclusion of the next annual general meeting and to authorise the directors to fix their remuneration. SPECIAL BUSINESS To consider and, if thought fit, pass the following resolutions of which Resolution 5 will be proposed as an ordinary resolution and Resolution 6 will be proposed as a special resolution. Ordinary Resolution 5 That, the directors be and are hereby generally and unconditionally authorised pursuant to section 551 of the Companies Act 2006 (the “Act”) to exercise all or any part of the powers of the Company to allot shares and grant rights to subscribe for, or convert any security into, shares of the Company up to an aggregate nominal amount of £1,500,000 such authority (unless previously revoked or varied) to expire at the conclusion of the annual general meeting of the Company to be held in 2021 save that the Company may before such expiry make offers or agreements which would or might require relevant securities to be allotted after such expiry and the directors may allot relevant securities in pursuance of such offers or agreements as if the authority conferred hereby had not expired. Special Resolution 6 That, subject to the passing of Resolution 5, the directors be and are hereby granted power pursuant to section 570(1) of the Act to allot equity securities (as defined in section 560(1) of the Act) for cash pursuant to the authority conferred on them by Resolution 5 above as if section 561 of the Act did not apply to such allotment, provided that such power be limited to: (i) (ii) the allotment of equity securities which are offered to all the holders of equity securities of the Company (at a date specified by the directors) where the equity securities respectively attributable to the interests of such holders are as nearly practicable in proportion to the respective number of equity securities held by them, but subject to such exclusions and other arrangements as the directors may deem necessary or expedient in relation to fractional entitlements and any legal or practical problems under any laws or requirements of any regulatory body or stock exchange in any territory or otherwise; and the allotment (otherwise than pursuant to subparagraph (i) above) of equity securities up to an aggregate nominal amount of £1,500,000, and provided that this power shall expire on the conclusion of the next annual general meeting of the Company to be held in 2021, save that the Company may make an offer or enter into an agreement before the expiry of that date which would or might require equity securities to be allotted after that date and the directors may allot equity securities in pursuance of such an offer as if the power conferred hereby had not expired. BY ORDER OF THE BOARD Anthony Fabrizi Company Secretary Registered Office: Griffin House 135 High Street Crawley West Sussex RH10 1DQ Dated 4 March 2020 39 Blue Star Capital Plc Notice of Annual General Meeting CONTINUED Notes: 1 Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, only those members registered on the Company’s register of members at close of business on 27 March 2020 or, in the event that the meeting is adjourned, in the register of members 48 hours before the time of the adjourned meeting, shall be entitled to attend or vote at the meeting in respect of the number of shares registered in their name at the time. Changes to entries in the register of members after close of business on 27 March 2020 or, in the event that the meeting is adjourned, after 48 hours before the time of any adjourned meeting shall be disregarded in determining the rights of any person to attend or vote at a meeting. 2 A member is entitled to appoint one or more persons as proxies to exercise all of any or all of his rights to attend, speak and vote at the meeting. A proxy need not be a member of the Company. A member may appoint more than one proxy in relation the meeting provided that each proxy is appointed to exercise rights attached to a different share or shares held by him. To appoint more than one proxy you may photocopy the proxy form. Please indicate the proxy holder’s name and the number of shares in relation to which they are authorised to act as your proxy (which, in aggregate, should not exceed the number of shares held by you). Failure to specify the number of shares each proxy appointment relates to or specifying a number of shares in excess of those held by the member may result in the proxy appointment being invalid. You can only appoint a proxy using the procedures set out in these notes and the notes to the proxy form. Appointment of a proxy does not preclude a member from attending the meeting and voting in person. 3 A form of proxy is enclosed. To be valid, it must be completed, signed and sent to the offices of the Company’s registrars being Link Asset Services, PXS1, 34 Beckenham Road, Beckenham, Kent BR3 4ZF so as to arrive no later than 12.00 noon on 27 March 2020 or, in the event that the meeting is adjourned, by no later than 48 hours before the time of any adjourned meeting. 4 CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so by using the procedures described in the CREST Manual (available from https://www.euroclear.com/site/public/EUI). CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST message (“a CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s (“EUI”) specifications and must contain the information required for such instructions, as described in the CREST Manual. The message, regardless of whether it relates to the appointment of a proxy or to an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by Link Asset Services (ID RA10) by no later than 12.00 noon on 27 March 2020. No such message received through the CREST network after this time will be accepted. For this purpose, the time of receipt will be taken to be the time (as determined by the time stamp applied to the message by the CREST Applications Host) from which Link Asset Services is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change in instructions to proxies appointed through CREST should be communicated to the appointee through other means. CREST members and, where applicable, their CREST sponsors or voting service provider(s) should note that EUI does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. 40 Blue Star Capital Plc Notice of Annual General Meeting CONTINUED In either case, the revocation notice must be received by Link Asset Services so as to arrive no later than 12.00 noon on 27 March 2020 or, in the event that the meeting is adjourned, by no later than 48 hours before the time of any adjourned meeting. If you attempt to revoke your proxy appointment but the revocation is received after the time specified then, subject to the paragraph directly below, your proxy appointment will remain valid. Appointment of a proxy does not preclude you from attending the meeting and voting in person. If you have appointed a proxy and attend the meeting in person, your proxy appointment will automatically be terminated. 5 To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the cut-off time for receipt of proxy appointments (see above) also apply in relation to amended instructions; any amended proxy appointment received after the relevant cut- off time will be disregarded. Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions using another hard-copy proxy form, please contact Link Asset Services by telephone on 0371 664 0300 calls cost 12p per minute plus your phone company’s access charge. If you are outside the United Kingdom, please call +44371 664 0300. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open between 9.00am – 5.30pm, Monday to Friday excluding public holidays in England and Wales. If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence. 6 In order to revoke a proxy instruction you will need to inform the Company using one of the following methods: By sending a signed hard copy notice clearly stating your intention to revoke your proxy appointment to Link Asset Services, PXS1, 34-Beckenham Road, Beckenham, Kent BR3 4ZF. In the case of a member which is a company, the revocation notice must be executed under its common seal or the hand of its duly authorised agent or officer. In the case of an individual, the proxy must be signed by the appointor or his attorney, duly authorised in writing. Any power of attorney or any other authority under which the revocation notice is signed (or a duly certified copy of such power or authority) must be included with the revocation notice. 41 Blue Star Capital Plc For your Notes 42 Blue Star Capital Plc For your Notes 43 Blue Star Capital Plc For your Notes 44 Printed by Michael Searle & Son Limited