Annual Report and Financial Statements for the year ended 30 September 2021 Contents Directors and Advisers Chairman’s Statement Chairman’s Corporate Governance Statement Strategic Report Directors’ Report Statement of Directors’ Responsibilities Independent Auditor’s Report Statement of Comprehensive Income Statement of Financial Position Statement of Changes in Equity Cash Flow Statement Notes to the Financial Statements Notice of Annual General Meeting Blue Star Capital Plc Annual Report for the year ended 30 September 2021 1 Page 2 3 8 14 17 19 20 25 26 27 28 29 45 2 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Directors and Advisors For the year ended 30 September 2021 Directors Derek Lew (Chairman) Sean King (Non-executive Director) Brian Rowbotham (Non-executive Director) Anthony Fabrizi (resigned 8 February 2021) Registered Office Griffin House 135 High Street Crawley RH10 1DQ Company Number 05174441 Nominated Adviser Nominated Broker Cairn Financial Advisers LLP 9th floor 107 Cheapside London EC2V 6DN Stanford Capital Partners Limited 5-7 Cranwood Street London EC1V 9EE Auditor Solicitors Registrars Adler Shine LLP Chartered Accountants and Statutory Auditor Aston House Cornwall Avenue London N3 1LF Gowling WLG (UK) LLP 4 More London Riverside London SE1 2AU Link Group 10th Floor, Central Square 29 Wellington Street Leeds LS1 4DL Blue Star Capital Plc Annual Report for the year ended 30 September 2021 3 Chairman’s Statement For the year ended 30 September 2021 Blue Star Capital plc (“the Company” or “Blue Star”) provides investors with exposure to a global portfolio of quoted and unquoted companies in high-growth, disruptive technology sectors. It consists of 11 companies, eight with a focus on esports and mobile gaming, one within each of decentralised finance, payments and NFT sectors, all of which are demonstrating a strong investment potential and growing investor interest. During the period, the Company’s Net Asset Value has grown by 36%, increasing to £12,715,515 (2020: £9,326,562) with pre-tax profits up 24% to £2,129,135 (2020: £1,714,155). SatoshiPay had a positive year in its development of its blockchain payment technology culminating in the (post period) announcement of its subsidiary Pendulum’s successful €5m raise and launch of the Pen token. SatoshiPay is capitalising on the new business models that are emerging as the demand and use of crypto continues to increase and there is ever greater reliance on decentralised ledger technologies. Decentralised finance solutions (“De-Fi”), such as SatoshiPay’s DTransfer, may be one of the most promising emerging sectors to date. According to Coindesk, De-Fi has an estimated market size of around $100 Billion. The Pen token will further the development of the on-ramps and off-ramps that will be utilised by DTransfer and other De-Fi solutions. Adding to our strategy of investing in early-stage, high growth, disruptive technology businesses is our investment in NFT Investments plc, which was floated on the London AQSE Growth Market in April 2021. NFT Investments was established to take advantage of the many opportunities that the nascent non-fungible token sector offers. Our portfolio approach continues broadly to deliver strong performances and we provide the following portfolio company highlights for the period ended 30 September 2021 and subsequent material post balance sheet developments. Esports It was an extremely busy period for esports in general as market participation grew significantly during the period with a number of lighthouse events bringing the industry to the attention of mainstream sports media. This was exemplified by recent news that esports may be included as a pilot event at the 2022 Commonwealth Games with plans for esports to be part of the full programme by the 2026 Games. According to GrandView Research, the esports gaming market was valued at approximately US$1.1 billion in 2019 with an expected CAGR of 24% to 2027. As the audience reach (players and viewers) continues to expand, the industry is expected to generate revenue of US$6.1 billion by 2027 through sponsorship, merchandising, licensing, broadcasting and tournaments. Newzoo estimates that by 2023, the number of esports viewers globally will grow to 646 million. Given the anticipated growth in the market and the diverse array of commercial opportunities, the Board remains firmly committed to esports in the belief that it will constitute a significant proportion of the global sports industry Our portfolio of esports companies is headlined by Dynasty (renamed Dynasty Media & Gaming in a post period announcement) and Guild Esports PLC, each of which have successfully launched their products, and the remaining six (The Drops Esports, Diemens Esports PTY, Formation Esports SAS, Googly Esports plc, The Dibs Esports Corp and Paidia esports Inc) are continuing to develop their businesses. The Board remains confident in the strong underlying trends in esports and believes in the benefit of the portfolio approach when investing in early-stage companies, and that there continues to be value to be achieved moving forward from the esports portfolio. The Board will continue to monitor their progress and will update the market when appropriate to do so. 4 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Chairman’s Statement continued For the year ended 30 September 2021 Dynasty Media & Gaming Dynasty is a Singapore-based business providing a gaming and media platform bringing together the entire gaming ecosystem into one single integrated solution. The result for Dynasty’s customers is a powerful tool for acquiring and retaining high value users and customers, while creating meaningful, long-term value. During the period, Dynasty’s first partner platform went live in Malaysia with a soft launch of its proprietary EPM platform with the Malaysia esports Federation (www.mesf.gg). The Company also strengthened its management team with a number of senior appointments. Further agreements pending including the development of a fully embedded e-commerce gaming shop that includes a partnership with Boost, Malaysia’s largest eWallet provider. In January 2021, Dynasty reported its first monthly profit, at an operating level, increasing monthly cash inflow with a strong balance sheet following its successful funding round raising US$5 million at a post-money valuation of US$50 million, in April 2021 Blue Star exercised its antidilution rights and invested approximately US$650,000 (approximately £535,000) to maintain its holding in Dynasty at approximately 13 percent of Dynasty’s issued share capital. To date, the Company has invested approximately £968,000 in Dynasty and based on Dynasty’s valuation of US$50 million in this latest fundraising round, the Company’s holding in Dynasty is valued at approximately US$6.5 million (approximately £4.8 million). Guild Esports PLC Guild Esports plc, is a UK based company, with a focus on the European esports market and, in October 2020, the first esports organisation to list on the London Stock Exchange. In March 2021, Guild Esports won its first major trophy in the European Grand Finals of the Fortnite Champion Series, which was followed by a second trophy win at the EU Spring Regional Rocket League Champion Series in April 2021. Furthermore, Guild Esports became the first esports organisation to sign an EMEA-wide sponsorship deal with Subway in March 2021 with a two-year multi-million-pound sponsorship deal covering 55 markets across the EMEA region, becoming its ‘Official Quick-Service Restaurant Partner’. This sponsorship deal was the third revenue-generating agreement signed by Guild since its IPO in October 2020. To date, the Company has invested approximately £706,000 in Guild equivalent to a shareholding of 5.95% of the total issued share capital. At the Year end the valuation was £1,561,606. Leaf Mobile Inc. (“Leaf”) LEAF is a leading creator of free to play mobile games and owns a number of successful games titles, including its recent launch of The Office: Somehow We Manage. It is focussed on delivering highly engaging games that produce enduring player engagement. Leaf listed on the TSX Venture Exchange in Canada in April 2020. In February 2021, Leaf Mobile completed its acquisition of 100% of East Side Games Inc. for around C$159m and subsequently graduated from the TSX-V to the TSX and is the leading publicly traded mobile game company in Canada. In April 2020, Blue Star invested approximately £57,000 into LEAF at a price of CAD$1.60 per consolidated share (following a 10:1 share consolidation which occurred in July, 2021), prior to LEAF’s listing on the TSX Venture Exchange. LEAF’s shares traded at a price of CAD$3.04 at the end of the period, valuing Blue Star’s holding in LEAF at approximately £111,000. Blue Star Capital Plc Annual Report for the year ended 30 September 2021 5 Chairman’s Statement continued For the year ended 30 September 2021 Decentralised Finance It was a productive period for all the Company’s investee companies spanning Blockchain, decentralised finance and payments and the rapidly expanding NFT market. Most notably SatoshiPay is now preparing to complete its first cross- border payments on Pendulum network, following its successful launch of its Pen tokens. SatoshiPay SatoshiPay supplies payment and money transfer infrastructure based on blockchain technology to digital industries and globally operating SMEs. Having initially focussed on building a micropayment infrastructure and platform the decision was taken to use the same technology and experience to move into B2B cross border payments service for businesses. In December 2020, SatoshiPay announced that, in respect of DTransfer, it had signed an agreement with German Bankhaus von der Heydt (“BDVH”) to become the first user of the bank’s fully compliant euro-backed stablecoin (“EURB”). BDVH, in partnership with Bitbond, has introduced EURB on the Stellar network. Bitbond was responsible for the development and integration of EURB and BDVH provides its banking infrastructure and regulatory framework. EURB is the first fiat asset directly backed by a banking institution on Stellar and will allow instant money transfer on blockchain. SatoshiPay intends to integrate EURB into its cross-border money transfer service. BDVH establishes a stable on and off- ramp for EURB transactions with instant EUR-based bank transfers within the Single Euro Payments Area (which comprises 36 European member-states). This will provide users with an easy solution to instantly send and receive euro- based payments. In June 2021, SatoshiPay received an R&D grant from Stellar Development Foundation which has been used to kickstart the development of the Pendulum Network Project (“Pendulum”) and develop a proof-of-concept implementation of Pendulum. SatoshiPay proposed the idea for Pendulum as a way to bring more complex features to its open-source network, Stellar, without sacrificing the network’s efficiency. Pendulum is being built around two large blockchain ecosystems, ‘Stellar’ and ‘Polkadot’, an open source blockchain that aims to establish the missing link between fiat currency and De-Fi ecosystems through a sophisticated smart contract network. De-Fi has emerged in the past year and is positioned to profoundly disrupt traditional financial services like trading, credit/lending, and yield-generating accounts. The decentralised finance industry grew in value by over twentyfold in 2020 alone and reached more than $60 billion in Total Value Locked in smart contracts as of May 2021. It is intended that SatoshiPay’s Pendulum network will connect De-Fi to the larger foreign exchange market, building automated market makers to introduce scalable liquidity pools for fiat currencies as well as creating yield earning opportunities for fiat token holders. As such, SatoshiPay expects to become involved in an increasing number of opportunities within the De-Fi space, a market which is currently estimated at $100 billion. The Directors of Satoshi Pay expect that Pendulum will enable the business to enter the ‘protocol space’, something they view as a significant opportunity to increase its impact in the blockchain ecosystem. Blue Star currently has a 27.9% interest in SatoshiPay’s share capital, which is valued on the basis of the last external fund raise in 2019 at £4.6 million. It is the Board’s view that the valuation of SatoshiPay may have increased significantly since the last fund raise given the launch of Dtransfer and Pendulum. 6 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Chairman’s Statement continued For the year ended 30 September 2021 Payments and NFT Sthaler Limited Sthaler is a biometric identity and payments technology business which enables an individual to identify themselves and pay using the unique vein patterns within a finger. Its FinGo ID platform uses a biometric called VeinID which instantly recognises an individual through the unique pattern of veins inside each finger. Overall, the Board is pleased with progress at Sthaler over the last year and believes the recent (post period) appointment of Dermot Smurfit to the Board is an indication that the business is well positioned to optimise the value of its Fingo ID platform. Blue Star’s shareholding in Sthaler is approximately 0.8% at 30 September 2021 and is valued on the basis of Sthaler’s last completed fund raise at approximately £387,000, compared with a cost of £50,000. NFT Investments In April 2021, the Company invested a further £200,000 in the IPO of NFT Investments plc, which admitted to trading on the London AQSE Growth Market. NFT Investments has been launched by the co-founders of Argo Blockchain plc to invest in non-fungible tokens, a specialised class of assets that certifies authenticity and proof of ownership of digital assets. NFT Investments is one of the world’s first pure-play investment companies focused exclusively on investing in NFTs to launch on a stock market in any major jurisdiction worldwide. The Company had previously made an investment, of £50,000, in an earlier funding round of NFT Investment and, as a result of the further investment, holds 9,000,000 ordinary shares representing approximately 0.9 per cent. of NFT’s issued share capital valued at £248,000 at the year end. Post-period highlights: Post period end, SatoshiPay, Leaf, Guild, NFT Investments and Sthaler released further positive news. In November 2021, SatoshiPay’s raised $5m in an oversubscribed private sale round of its PEN token from strategic partners in order to advance its development. It quickly followed the news in January 2022 by announcing a series of senior management appointments and promotions to support the expansion of its Pendulum business as DTransfer is being readied for its first Pendulum-based cross border money transfers. Later in December 2021, Leaf Mobile announced its intention to change its name to East Side Games Group, with trading symbol EAGR on the TSX, and the appointment of Jason Bailey as Executive Chair of the Company’s Board of directors in addition to his existing role as Chief Revenue Officer. In December 2021, Guild Esports signed Nicolas Villalba (“Nicolas99fc”), who has ranked in the top 3 FIFA players worldwide since 2018 and Argentina’s second highest esports earner and signed a three-year global sponsorship deal in January 2022 with Bitstamp, one of the world’s longest-running crypto exchanges, for £4.5 million, making it the company’s exclusive official cryptocurrency exchange partner. It also announced trading in its shares commenced on the OTCQB Venture Market in the US during the month. In January 2022, NFT Investments announced the proposed acquisition of Pluto Digital plc (“Pluto”), a crypto technology and venture company, for a total consideration of £96m. The shares in NFT Investments were subsequently suspended from trading pursuant to shareholder approval for NFT Investments to issue 2.4 billion new shares in NFT, which would constitute a Reverse Takeover under the AQSE rules. Blue Star Capital Plc Annual Report for the year ended 30 September 2021 7 Chairman’s Statement continued For the year ended 30 September 2021 Outlook The Board believes the Company’s portfolio has achieved some significant operational and financial milestones during the period. In particular, the Company is pleased that, whilst some have raised additional funds in the private equity markets, others have chosen to list their shares on a regulated exchange to both raise additional funds and deliver liquidity for early-stage investors such as Blue Star. Given the increase in NAV, plus the cash reserves and liquidity provided by our listed investments, the Board is confident that is well-funded and positioned to perform well over the coming years. Derek Lew Chairman 23 March 2022 8 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Chairman’s Corporate Governance Statement For the year ended 30 September 2021 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 22 March 2022. 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 an uncertainty in relation to organisational, operational, financial and strategic risks, all of which are outlined 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 advisers have been appointed but 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. Blue Star Capital Plc Annual Report for the year ended 30 September 2021 9 Chairman’s Corporate Governance Statement continued For the year ended 30 September 2021 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 Chairman. The Audit Committee consists of Brian Rowbotham (Chair) and Sean King. 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. 10 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Chairman’s Corporate Governance Statement continued For the year ended 30 September 2021 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 Ability to raise further funds Ability to identify further suitable investment opportunities 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. 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. of careful management The our investments underpin our success to date in raising funds. This includes not only investment after our making the initial 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 executive Chairman and two non-executive Directors, of which Brian Rowbotham is a senior, independent 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 Chairman 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. Blue Star Capital Plc Annual Report for the year ended 30 September 2021 11 Chairman’s Corporate Governance Statement continued For the year ended 30 September 2021 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. Derek Lew, Chairman Appointed on 6 November 2019. 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. Brian Rowbotham, Senior Independent Non-executive Director. Chair of Audit and Remuneration Committees. Appointed on 8 February 2021. Brian Rowbotham qualified as a Chartered Accountant with Deloitte and Touche and is a Fellow of the Institute of Chartered Accountants in England and Wales. His early career in the City included roles at Save & Prosper and F&C Management Ltd. In 1997 he joined Teather & Greenwood where, as a partner and then Finance Director, he was involved in the company’s flotation on AIM and subsequent move to the Official List. Brian also ran his own consultancy specialising in turnarounds and start-ups until joining Hichens, Harrison & Co. plc in January 2005. Hichens Harrison was sold to Religare Enterprises in May 2008 and Brian subsequently stepped down from its Board in October 2008 remaining as a consultant. He holds a number of other board positions. Sean King, Non-executive Director Appointed on 24 January 2019. 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 businesses in media and technology and is heavily involved in the start-up sector. 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. 12 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Chairman’s Corporate Governance Statement continued For the year ended 30 September 2021 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 advisers 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 expects these to evolve 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 Executive Chairman 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 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 13 Chairman’s Corporate Governance Statement continued For the year ended 30 September 2021 (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; and (g) Approving changes to the Board structure. 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 Brian Rowbotham (Chair) and Sean King. 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 Brian Rowbotham (Chair) and Sean King. 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 23 March 2022 14 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Strategic Report For the year ended 30 September 2021 The Directors present their strategic report on the Company for the year ended 30 September 2021. Review of Business and Analysis Using Key Performance Indicators The full year’s profit was £2,129,315 compared to a profit of £1,714,155 For the year ended 30 September 2020. Net assets have increased to £12,715,515 at 30 September 2021, changing from £9,326,562 at 30 September 2020. The cash position at the end of the year increased to £296,106 from £132,167 as at 30 September 2020. 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 2021. The main KPIs for the Company are listed as follows: Valuation of investments Cash and cash equivalents Net current assets Profit before tax Investing Policy 2021 2020 £12,367,204 £296,106 £197,465 £2,129,315 £9,063,432 £132,167 £106,949 £1,714,155 Assets or companies in which the Company can invest The Company can invest in assets or companies in, inter alia, the following sectors: • • • Technology; Gaming and esports; 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 27.7% stake in SatoshiPay, which the Board believes represents a rare opportunity to generate significant shareholder value. In addition, the Company has accumulated stakes above 10% in some of its esports investments which are early stage and expected to be diluted over time. Blue Star Capital Plc Annual Report for the year ended 30 September 2021 15 Strategic Report continued For the year ended 30 September 2021 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. Promotion of the Company for the benefit of the members as a whole The Director’s believe they have acted in the way most likely to promote the success of the Company for the benefit of its members as a whole, as required by s172 of the Companies Act 2006. The requirements of s172 are for the Directors to: • • • • • • Consider the likely consequences of any decision in the long term, Act fairly between the members of the Company, Maintain a reputation for high standards of business conduct, Consider the interests of the Company’s employees, Foster the Company’s relationships with suppliers, customers and others, and Consider the impact of the Company’s operations on the community and the environment. The following paragraphs summarise how the Directors fulfil their duties: The Company is quoted on AIM and its members will be fully aware, through detailed announcements, shareholder meetings and financial communications, of the Board’s broad and specific intentions and the rationale for its decisions. The Board recognises its responsibility for setting and maintaining a high standard of behaviour and business conduct. There is no special treatment for any group of shareholders and all material information is disseminated through appropriate channels and available to all through the Company’s news releases and website. When selecting investments, issues such as the impact on the community and the environment have actively been taken into consideration. The Company’s approach is to use its position to promote positive change for the people with whom it interacts. The Company is committed to being a responsible business. The Company pays its employees and creditors promptly and keeps its costs to a minimum to protect shareholders funds. There were no employees in the Company other than the 3 Directors in the current and prior-year and therefore effectiveness of employee policies is not relevant for the Group. 16 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Strategic Report continued For the year ended 30 September 2021 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 primary 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 23 March 2022 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 17 Directors’ Report For the year ended 30 September 2021 The Directors present their report together with the audited financial statements for the year ended 30 September 2021. Results and dividends The trading results for the year ended 30 September 2021 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 (2020: £nil). Principal activities and review of the business The principal activity of the Company is to invest in the technology and the esports and gaming sectors. A review of the business is included within the Chairman’s Statement and Strategic Report. Directors serving during the year Derek Lew Brian Rowbotham Appointed on 8 February 2021 Sean King Anthony Fabrizi Resigned on 8 February 2021 On 9 February 2021, Derek Lew also assumed the role of Chief Executive Officer. 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: Anthony Fabrizi Sean King Derek Lew Brian Rowbotham 30 September 2021 30 September 2020 Number of ordinary Shares Warrants Number of ordinary Shares 77,000,000 18,250,000 211 ,527,778 — 62,000,000 — — 18,250,000 — 138,750,000 — —— Warrants 65,000,000 — 130,000,000 Significant shareholders As at 22 March 2022 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: Mark White Nicolas Slater Pioneer Media Holdings Inc Paniolo Ventures Limited Derek Lew Number of Ordinary Shares 549,395,525 500,119,024 329,916,333 208,333,333 211,527,778 Percentage of issued share capital 11.00% 10.17% 6.60% 4.80% 4.20% 18 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Directors’ Report continued For the year ended 30 September 2021 Related party transactions Related party transactions and relationships are disclosed in note 18. Going concern The Company has reported a loss for the year excluding fair value gain on the valuation of investments and foreign exchange movements of £317,588. The Company had cash reserves at the year-end of £296,106 and a portfolio of investment companies which include listed investments which can be easily liquidated should further funds be required. The Directors therefore consider that the company has adequate resources to continue its operational existence for the foreseeable future. The Company’s employees carry out their duties remotely, via the network infrastructure in place. As a result, there was no disruption to the operational activities of the Company during the COVID-19 social distancing and working from home restrictions. All key business functions continue to operate at normal capacity and overall, our investment portfolio has been relatively unaffected by the impact of COVID-19. Events after the reporting date Events after the reporting date are disclosed in note 21. 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 at the time of approval of the report: • • 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. 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 23 March 2022 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 19 Statement of Directors’ Responsibilities For the year ended 30 September 2021 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 international accounting standards (IAS), in conformity with the requirements of the Companies Act. The financial statements are required by law and IAS to present fairly the financial position and performance of the Company; the Companies Act 2006 provides in relation to such financial statements that references in the relevant part of the Act to financial statements give a true and fair view and references to their achieving a fair presentation. 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 AIM 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 applicable international accounting standards (IAS), in conformity to the Companies Act, been followed, subject to any material departures disclosed and explained in the financial statements; prepare the financial statements on a going concern basis unless it is inappropriate to assume the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the 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. 20 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Independent Auditor’s 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 2021 which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Statement of Cash Flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and international accounting standards in conformity with the requirements of the Companies Act 2006. In our opinion, the financial statements: • • • give a true and fair view of the state of the Company’s affairs as at 30 September 2021 and of the Company’s profit for the year then ended; have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006; and have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed 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 the audit; and directing the efforts of the engagement team. These 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. Blue Star Capital Plc Annual Report for the year ended 30 September 2021 21 Independent Auditor’s Report continued to the members of Blue Star Capital Plc The key audit matters identified were: Valuation of Investments Area of focus The Company is an investment company with a focus on technology and its application within media, gaming and esports. Its value is based on its investments. The Company holds both listed and unlisted investments. How our audit addressed the area of focus We considered the existence of investments as well as the valuations placed on 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, where available, filed with Companies House, including the price at which the investee companies were able to issue shares in the period. Key observations As a result of our work, we agreed with the valuation changes in the Company’s investments, as well and confirming ownership and valuation of its investment additions during the year. Going concern Area of focus Refer to Note 1 to the financial statements for the directors’ disclosures of related accounting policies, judgement and estimates. The directors have concluded they have a reasonable expectation that the Company will have sufficient cash resources, or the ability to generate such 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 value of listed investments and the need for additional funding during the forthcoming year. Key observations As a result, we concluded that the Company is not reliant on raising additional funds during the forthcoming year and has the ability to dispose of its listed investments should additional funds be required. We concluded there is no material uncertainty in respect of going concern. Our application of materiality The scope of our audit was influenced by our application of materiality. The quantitative and qualitative thresholds for materiality determine the scope of our audit and the nature, timing and extent of our audit procedures. Materiality was set at £129,400 which is based on 1% of the Company’s gross assets. In our professional judgement, this benchmark is considered appropriate as it reflects the investment nature of the business, representing a key performance indicator for users of the financial statements in assessing the Company’s financial performance. 22 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Independent Auditor’s Report continued to the members of Blue Star Capital Plc Our approach to the audit In designing our audit approach, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we looked at areas involving significant accounting estimates and judgement by the Directors which includes valuation of financial assets at fair value through profit and loss, the recognition and valuation of digital assets and the consideration of future events that are inherently uncertain. We also addressed the risk of management override of internal controls, including an evaluation of whether there was evidence of bias by the Directors that represented a risk of material misstatement due to fraud. Procedures were designed and performed to address the risks identified. The audit was planned to ensure that the audit team obtained sufficient and appropriate audit evidence in relation to the significant operations of the Company for the year ended 30 September 2021. Other information The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The Directors are responsible for the other information contained within the annual report. Our opinion on the Company’s financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. 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 course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements 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. Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • • the information given in the Strategic Report and the Directors’ Report for the financial period 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. Matters on which we are required to report by exception In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • • • • adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or the 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. Blue Star Capital Plc Annual Report for the year ended 30 September 2021 23 Independent Auditor’s Report continued to the members of Blue Star Capital Plc Responsibilities of Directors As explained more fully in the Statement of Directors’ Responsibilities, 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. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The procedures and the extent to which these are capable of detecting irregularities, including fraud is detailed below: • We obtained an understanding of the legal and regulatory framework that the Company operates in, focusing on those laws and regulations that had a direct effect on the financial statements. We obtained an understanding in this regard through discussions with management and the application of our cumulative audit knowledge and experience of this sector. The key laws and regulations we considered in this context included the Companies Act 2006, AIM regulations and applicable tax legislation. • Enquiry of management to identify any instances of non-compliance with laws and regulations. • We considered the nature of the industry and sector, control environment and business performance including the design of the Company’s remuneration policies, key drivers for Director’s remuneration, bonus levels and performance targets. • • Discussing matters among the audit engagement team regarding how and where fraud might occur in the financial statements and potential indicators of fraud. Undertaking appropriate sample-based testing of bank transactions. • We addressed the risk of fraud arising from management override of controls by performing audit procedures which included, but were not limited to: the testing of journals; enquiries of management, review of minutes and announcements, reviewing accounting estimates for evidence of bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business. 24 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Independent Auditor’s Report continued to the members of Blue Star Capital Plc Due to the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation. 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. Alexander Chrysaphiades FCA (Senior Statutory Auditor) for and on behalf of Adler Shine LLP Chartered Accountants and Statutory Auditor Aston House Cornwall Avenue London N3 1LF Date: 23 March 2022 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 25 Statement of Comprehensive Income For the year ended 30 September 2021 Revenue Notes 2021 £ — 2020 £ — Fair valuation movements in financial instruments designated at fair value through profit or loss 11 2,772,447 2,056,698 Administrative expenses Operating profit Finance income Profit before and after taxation and total comprehensive income for the year Profit per ordinary share: Basic earnings per share on profit for the year Diluted earnings per share on profit for the year 2,772,447 2,056,698 (650,339) (349,159) 2,122,108 1,707,539 7,207 6,616 2,129,315 1,714,155 0.05p 0.05p 0.05p 0.05p 3 4 5 10 10 The notes on pages 29 to 44 form part of these financial statements. 26 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Statement of Financial Position For the year ended 30 September 2021 Non-current assets Financial assets at fair value through profit or loss Convertible loan note Total non-current assets 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 Notes 2021 £ 2020 £ 11 12 13 14 15 16 12,367,204 150,846 9,063,432 156,181 12,518,050 9,219,613 135,501 296,106 431,607 2,668 132,167 134,835 12,949,657 9,354,448 234,142 234,142 27,886 27,886 12,715,515 9,326,562 4,892,774 9,575,072 — (1,752,331) 4,133,251 9,074,957 143,210 (4,024,856) 12,715,515 9,326,562 The financial statements were approved by the Board, authorised for issue on 23 March 2022 and were signed on its behalf by: Derek Lew Director Registered number: 05174441 The notes on pages 29 to 44 form part of these financial statements. Blue Star Capital Plc Annual Report for the year ended 30 September 2021 27 Statement of Changes in Equity For the year ended 30 September 2021 Share capital £ Share premium £ Other reserves £ Retained earnings £ Total £ Year ended 30 September 2020 At 1 October 2019 Profit for the year and total comprehensive income Shares issued in year Lapse of warrants Share issue costs Exercise of warrants Share based payment 2,142,584 8,852,724 64,190 (5,850,121) 5,209,377 — 1,990,667 — — — — — 277,833 — (55,600) — — (64,190) — (46, 920) 190,130 1,714,155 — 64,190 — 46,920 — 1,714,155 2,268,500 — (55,600) — 190,130 At 30 September 2020 4,133,251 9,074,957 143,210 (4,024,856) 9,326,562 Year ended 30 September 2021 At 1 October 2020 Profit for the year and total comprehensive income Shares issued in year Exercise of warrants Lapse of warrants 4,133,251 9,074,957 143,210 (4,024,856) 9,326,562 — 759,523 — — — 500,115 — — — — (54,704) (88,506) 2,129,315 — 54,704 88,506 2,129,315 1,259,638 — — At 30 September 2021 4,892,774 9,575,072 — (1,752,331) 12,715,515 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 29 to 44 form part of these financial statements. 28 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Cash Flow Statement For the year ended 30 September 2021 Operating activities Profit for the year Adjustments: Finance income Fair value gains Foreign exchange Share based payment net charge Working capital adjustments (Increase)/decrease in trade and other receivables Increase in trade and other payables Net cash used in operating activities Investing activities Purchase of convertible loan notes Increase in investments Interest received Net cash used by from investing activities Financing activities Proceeds from issue of equity Share issue costs Net cash generated from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at start of the year Cash and cash equivalents at end of the year Notes 2021 £ 2020 £ 2,129,315 1,714,155 (7,207) (2,772,447) 318,394 — (6,616) (2,056,698) (134,636) 190,130 (132,833) 206,256 7,003 4,575 (258,522) (282,087) — (844,360) 7,183 (156,181) (1,769,909) 6,616 (837,177) (1,919,474) 1,259,638 — 2,268,500 (55,600) 1,259,638 2,212,900 14 14 163,939 132,167 296 106 11,339 120,828 132,167 The notes on pages 29 to 44 form part of these financial statements. Blue Star Capital Plc Annual Report for the year ended 30 September 2021 29 Notes to the Financial Statements For the year ended 30 September 2021 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. The Company is an investment entity and, as such, does not consolidate the investment entities it controls. The Company’s interests in subsidiaries are recognised at fair value through profit and loss. Going concern The Company has reported a loss for the year excluding fair value gain on the valuation of investments and foreign exchange movements of £317,588. The Company had cash reserves at the year-end of £296,106 and a portfolio of investment companies which include listed investments which can be easily liquidated should further funds be required. The Directors therefore consider that the company has adequate resources to continue its operational existence for the foreseeable future. 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. 30 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Notes to the Financial Statements continued For the year ended 30 September 2021 1. Accounting policies continued New standards, amendments and interpretations adopted by the Company The following IFRS or IFRIC interpretations were effective for the first time for the financial year beginning 1 October 2020. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements: Standards/interpretations Application IFRS 16 Amendments to provide lessees with an exemption from assessing whether a COVID- 19 related rent concession is a lease modification IAS 1 & IAS 8 amendments Amendments regarding the definition of materiality IFRS 3 amendments Amendments to clarify the definition of a business and amendments updating a reference to the conceptual framework New standards, amendments and interpretations not yet adopted Standards/interpretations Application IAS 1 amendments IFRS 3 amendments IFRS 7, IFRS 9, IFRS 16 IFRS 16 IAS 8 IAS 12 IAS 16 amendments IAS 37 amendments IFRS 1, IFRS 9, IFRS 16, IAS41 Presentation of Financial Statements: Classification of Liabilities as Current or Non-Current. Effective: Annual periods beginning on or after 1 January 2023 Business Combinations – Reference to the Conceptual Framework. Effective: Annual periods beginning on or after 1 January 2022 Amendments regarding replacement issues in the contract of IBOR reform. Effective: Annual periods beginning on or after 1 January 2021 Amended by Covid-19 Related Rent Concessions beyond 30 June 2021 (amendment to IFRS 16) Effective: Annual periods beginning on or after 1 April 2021 Amendments regarding the definition of accounting estimates Effective: Annual periods beginning on or after 1 January 2023 Amendments resulting from Deferred tax related to Assets and Liabilities arising from a single transaction. Effective: Annual periods beginning on or after 1 January 2023 Amendments prohibiting a company from deducting from the cost of property plant and equipment amounts received from selling items produced while the company is preparing the asset for intended use. Effective: Annual periods beginning on or after 1 January 2022 Amendments regarding the costs to include when assessing whether a contract is onerous. Effective: Annual periods beginning on or after 1 January 2022 Annual Improvements to IFRS Standards 2018-2020 Cycle. (Fees in the ’10 per cent’ test for derecognition of financial liabilities) Effective: Annual periods beginning on or after 1 January 2022 There are no IFRS’s or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company. Blue Star Capital Plc Annual Report for the year ended 30 September 2021 31 Notes to the Financial Statements continued For the year ended 30 September 2021 1. Accounting policies continued 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. 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 any provision considered necessary, until no longer viewed as an early stage (b) or unless significant transactions involving an independent third-party arm’s length, values the investment at a materially different value: (c) 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. (d) 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. 32 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Notes to the Financial Statements continued For the year ended 30 September 2021 1. Accounting policies continued 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. 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). Blue Star Capital Plc Annual Report for the year ended 30 September 2021 33 Notes to the Financial Statements continued For the year ended 30 September 2021 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. 34 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Notes to the Financial Statements continued For the year ended 30 September 2021 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 11. Share based payments The estimates of share-based payments requires that management selects an appropriate valuation model and make decisions on various inputs into the model including the volatility of its own share price, the probable life of the options before exercise, and behavioural consideration of employees. 3. Nature of expenses Directors remuneration Share based payments Legal and professional fees Foreign exchange loss/(gains) Other expenses 4. Operating profit This is stated after charging: Auditor’s remuneration – statutory audit fees Fair valuation movements in financial instruments 2021 £ 117,667 — 144,520 325,554 62,598 650,339 2020 £ 104,291 190,130 167,833 (134,636) 21,541 349,159 2021 £ 2020 £ 14,100 2,772,447 13,000 2,056,698 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 35 Notes to the Financial Statements continued For the year ended 30 September 2021 5. Finance income Interest received on short term deposits Interest receivable on convertible loan note 6. Share based payments Share warrants 2021 £ 24 7,183 7,207 2020 £ 52 6,564 6,616 2021 Weighted average exercise price (p) Number 2020 Weighted average exercise price (p) Number Outstanding at the beginning of the year Lapsed during year Issued during year Exercised during the year 0.21 1,448,333,333 (428,333,333) 0.17 — — (428,333,333) 0.16 0.6 0.6 110,000,000 (110,000,000) 0.21 1,598,333,333 (150,000,000) 0.1 Outstanding at the end of the year 0.25 591,666,667 0.21 1,448,333,333 The contracted average remaining life of warrants at year end was 0.1 years (2020: 0.78 years). At 30 September 2021, the Company had the following warrants in issue: Date of grant Number outstanding Contractual life Exercise price (pence) Estimated fair value per warrant 8 June 2020 3 August 2020 225,000,000 12 months 0.175p N/A 366,666,667 15 months 0.25p N/A The fair value of warrants is determined using the Black-Scholes valuation model. The charge to the profit and loss account was £ NIL (2020: £190,130). The warrants granted on 8 June and 3 August 2020 fall outside the scope of IFRS 2 and as such no charge has been made. 7. Staff costs, including Directors Wages and salaries Share-based payments Social security costs 2021 £ 91,667 50,000 7,130 2020 £ 98,834 46,681 5,457 148,797 150,972 During the year the Company had an average of 3 employees who were management (2020: 3). The employees are Directors and key management personnel of the Company. 36 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Notes to the Financial Statements continued For the year ended 30 September 2021 8. Directors’ and key management personnel Directors’ remuneration for the year ended 30 September 2021 is as follows: A Fabrizi D Lew B Rowbotham S King Salary 26,667 — 16,000 — 42,667 Share based payments Compensation for loss of office — 50,000 — — 50,000 25,000 — — — 25,000 Fees — — — 24,000 24,000 Derek Lew was issued 50,000,000 ordinary shares at 0.1p in respect of his Directors fees. Directors’ remuneration for the year ended 30 September 2020 is as follows: A Fabrizi D Lew W Henbrey S King Salary 46,667 27,500 1,667 — 75,834 Fees — — — 23,000 23,000 Share based payments Compensation for loss of office 15,372 31,309 — — 46,681 — — — — — Total 2021 51,667 50,000 16,000 24,000 141,667 Total 2021 62,039 58809 1,667 23,000 145,515 Emoluments above are paid in full at the end of both financial years. 9. 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% (2020: 19%). The differences are explained below: Profit before tax Profit before tax multiplied by effective rate of corporation tax of 19% (2020:19%) Effect of: (Profit)/loss on disposal of investments Fair value gain on investments Capital allowances Expenses not deductible for tax purposes Losses carried forward Tax charge in the income statement 2021 £ 2020 £ 2,129,315 1,714,155 404,570 325,690 (526,765) (204) 36 122,363 — (390,773) (249) 42,964 22,368 — — 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 2021 is £817,710 (2020: £717,511). On 10 June 2021, the UK Government’s proposal to increase the rate of UK corporation tax from 19% to 25% with effect from 1 April 2023 was enacted into UK law. Blue Star Capital Plc Annual Report for the year ended 30 September 2021 37 Notes to the Financial Statements continued For the year ended 30 September 2021 10. Earnings per ordinary share The earnings and number of shares used in the calculation of loss/earnings per ordinary share are set out below: 2021 2020 Basic: Profit for the financial period Weighted average number of shares Earnings per share (pence) Fully Diluted: Profit for the financial period Weighted average number of shares Earnings per share (pence) 2,129,315 1,714,155 4,617,745,344 3,360,033,538 0.05 0.05 2,129,315 1,714,155 4,617,745,344 3,397,884,005 0.05 0.05 As at the end of the financial period ended 30 September 2021, there were 591,666,667 share warrants in issue, which had an anti-dilutive effect on the weighted average number of shares. 11. 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 gain for the year FX gain/(loss) for the year At end of year Investments Quoted investments Unquoted investments 2021 £ 2020 £ 2,772,447 — 2,056,698 — 2,772,447 2,056,698 2021 £ 9,063,432 844,360 2,772,447 (313,035) 2020 £ 5,101,587 1,769,906 2,056,698 135,241 12,367,204 9,063,432 2021 £ 2020 £ 1,672,929 10,694,275 1,901,922 7,161,510 12,367,204 9,063,432 The company holds 30,626,500 shares in Guild Esports plc which at the year-end were valued at £1,561,606. The share price of Guild Esports Plc on 15 March 2022 was 2.247p valuing the company’s holding at £688,177. 38 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Notes to the Financial Statements continued For the year ended 30 September 2021 11. Financial assets held at fair value through profit of loss continued The country of incorporation for all investments held at 30 September 2021 are listed below: Dynasty Media & Gaming Guild Esports PLC East Side Group (Formerly Leaf Mobile Inc) SatoshiPay Limited Sthaler Limited NFT Investments PLC Formation Esports SAS The Drops Esports Inc Googly Esports Plc Diemens Esports Pty (Formerly the The Cubs Esports Inc) Paidia Esports Inc £ 4,826,405 1,561,606 111,323 4,609,226 386,744 247,500 115,559 154,091 156,400 139,449 58,901 Country of Incorporation Singapore United Kingdom Canada United Kingdom United Kingdom United Kingdom United Kingdom Canada United Kingdom Australia Canada 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 quoted market prices, 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. 12. Convertible loan note Convertible loan note 2021 £ 150,846 150,846 2020 £ 156,181 156,181 On 11 October 2019, the Company invested US$185,000 in convertible loan notes issued by The Dibs Esports Corp. The loan notes carry interest of 5% per annum and have a 36-month life span. Blue Star Capital Plc Annual Report for the year ended 30 September 2021 39 Notes to the Financial Statements continued For the year ended 30 September 2021 13. Trade and other receivables Prepayments Other receivables 2021 £ 771 134,730 135,501 2020 £ 2,668 — 2,668 Included within other receivables is £122,507 receivable in respect of exercise of warrants. This amount was received post year end. The Directors consider that the carrying value of trade and other receivables approximates to the fair value. 14. Cash and cash equivalents Cash at bank and in hand 2021 £ 296,106 296,106 2020 £ 132,167 132,167 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. 15. Trade and other payables Trade payables Accruals Other payables 2021 £ 13,948 14,731 205,463 234,142 2020 £ 5,030 17,400 5,456 27,886 Included in other payables is an amount of £200,000 payable in respect of the company’s investment in NFT Investments Plc. This amount was paid post year end. 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. 40 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Notes to the Financial Statements continued For the year ended 30 September 2021 16. Share capital At 1 October Shares issued in the year At 30 September Issued and fully paid 2021 Number 2021 £ 2020 Number 2020 £ 4,233,249,519 759,523,477 4,133,251 2,242,582,853 759,523 1,990,666,666 2,142,584 1,990,667 4,992,772,996 4,892,774 4,233,249,519 4,133,251 During the year ended 30 September 2021 the following shares were issued: 9 November 2020 16 April 2021 5 May 2021 5 May 2021 Number £ 95,000,000 585,079,032 34,444,445 45,000,000 95,000 1,023,888 62,000 78,750 759,523,477 1,259,638 Issue price per share 0.1p 0.175p 0.18p 0.175p During the year ended 30 September 2020 the following shares were issued: 18 October 2019 12 November 2019 19 February 2020 17 April 2020 17 April 2020 4 May 2020 9 June 2020 3 August 2020 1 September 2020 11 September 2020 Number £ Issue price per share 450,000,000 450,000,000 50,000,000 100,000,000 17,500,000 29,166,666 416,666,666 193,333,334 184,000,000 100,000,000 450,000 450,000 50,000 100,000 17,500 35,000 500,000 290,000 276,000 100,000 1,990,666,666 2,268,500 0.1p 0.1p 0.1p 0.1p 0.1p 0.12p 0.12p 0.15p 0.15p 0.1p 17. 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 Note 13 14 Loans and receivables 2021 £ 135,501 296,106 431,607 2020 £ 2,668 132,167 134,835 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 41 Notes to the Financial Statements continued For the year ended 30 September 2021 17. Financial instruments continued At 30 September 2021 Investments Total financial assets At 30 September 2020 Investments Total financial assets At 30 September 2021 Investments Total financial assets At 30 September 2020 Investments Total financial assets Financial liabilities Trade payables Other payables Note 11 11 Designated upon initial recognition Held for trading £ Fair value through profit or loss £ Total £ — — — — 12,367,204 12,367,204 12,367,204 12,367,204 9,063,432 9,063,432 9,063,432 9,063,432 Fair value measurement Note Level 1 £ Level 2 £ Level 3 £ 11 1,672,929 1,672,929 1,901,922 1,901,922 — — — — 10,694,275 10,694,275 7,161,510 7,161,510 Financial liabilities measured at amortised cost 2021 £ 13,948 205,463 219,411 2020 £ 5,030 5,456 10,486 Note 15 15 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. 42 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Notes to the Financial Statements continued For the year ended 30 September 2021 17. Financial instruments continued 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 profit or loss based on a given movement in the fair value of all the investments. 10% increase in fair value 10% decrease in fair value 20% increase in fair value 20% decrease in fair value 30% increase in fair value 30% decrease in fair value Borrowing facilities 2021 £ 1,236,720 1,124,291 2,473,441 2,061,200 3,710,161 2,853,970 2020 £ 906,343 823,948 1,812,686 1,510,572 2,719,030 2,091,561 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. Foreign currency risk management The Company undertakes certain transactions denominated in currencies other than pound sterling, hence exposures to exchange rate fluctuations arise. The fair values of the Company’s investments that have foreign currency exposure at 30 September 2021 are shown below. Fair value of investments 4,609,226 4,826,405 324,315 139,449 EUR £ 2021 SGD £ CAD £ AUD £ Fair value of investments 4,866,459 1,382,165 212,026 139,449 EUR £ 2020 SGD £ CAD £ AUD £ Blue Star Capital Plc Annual Report for the year ended 30 September 2021 43 Notes to the Financial Statements continued For the year ended 30 September 2021 17. Financial instruments continued The Company accounts for movements in fair value of financial assets in the comprehensive income. The following table illustrates the sensitivity of the equity in regard to the company’s financial assets and the exchange rates for £/Euro, £/Singapore Dollar, £/Canadian Dollar and £/Australian Dollar. It assumes the following changes in exchanges rates: – – – – £/EUR +/- 20% (2020: +/- 20%) £/SGD +/- 20% (2020: +/- 20%) £/CAD +/- 20% (2020: +/- 20%) £/AUD +/- 20% (2020: +/- 20%) The sensitivity analysis is based on the Company’s foreign currency financial instruments held at each balance sheet date. If £ Sterling had weakened against the currencies shown, this would have had the following effect: Fair value of investments 921,845 965,281 64,863 27,890 EUR £ 2021 SGD £ CAD £ AUD £ Fair value of investments 973,292 276,433 42,405 27,890 If £ Sterling had strengthened against the currencies shows, this would have had the following effect: EUR £ 2020 SGD £ CAD £ AUD £ Fair value of investments (768,204) (804,401) (44,236) (23,242) EUR £ 2021 SGD £ CAD £ AUD £ EUR £ 2020 SGD £ CAD £ AUD £ Fair value of investments (811,077) (230,361) (35,338) (23,242) The Company has also invested in a convertible loan note, denominated in USD, of $185,000. An adverse movement in the exchange rate will impact the ultimate amount of the investment held, a 20% weakening or strengthening in £ Sterling would result in a profit of £30,169 (2020: 29,956) and a loss of £25,141 (2020: 24,964) respectively. The Company’s functional and presentational currency is the pound sterling as it is the currency of its main trading environment. 44 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Notes to the Financial Statements continued For the year ended 30 September 2021 17. Financial instruments continued 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 £431,607 (2020: £134,835). 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. 18. Related party transactions The Company has a 5.95% investment in Guild Esports plc. Derek Lew, a director of the Company, is also a non-executive director of Guild Esports plc. The Company also has a 0.30% investment in Leaf Mobile Inc where Derek Lew is a non-executive director. In April 2021 Derek Lew purchased an investment for £50,000 on behalf of the company which was reimbursed in August 2021. 19. Operating lease commitments At the balance sheet date, the Company had no outstanding commitments under operating leases. 20. Ultimate Controlling Party The Company considers that there is no ultimate controlling party. 21. Post Balance Sheet Events There were no significant Post Balance Sheet Events. Blue Star Capital Plc Annual Report for the year ended 30 September 2021 45 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 Fladgate LLP, 10 Great Queen Street, London WC2B 5DG on Tuesday 19 April 2022 at 10.00 a.m. 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 2021. 2 3 To re-elect Brian Rowbotham as a director of the Company who being eligible offers himself for re-election. 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 4 will be proposed as an ordinary resolution and Resolution 5 will be proposed as a special resolution. Ordinary Resolution 4 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 2023, 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 5 That, subject to the passing of Resolution 4, 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 4 above as if section 561 of the Act did not apply to such allotment, provided that such power be limited to: (i) 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 46 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Notice of Annual General Meeting continued (ii) 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 2022, 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 Brian Rowbotham Company Secretary Registered Office: Griffin House 135 High Street Crawley West Sussex RH10 1DQ Dated 25 March 2022 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 47 Notice of Annual General Meeting continued Notes: 1 2 3 4 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 13 April 2022 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 13 April 2022 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. 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. 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 Group, PXS1, 10th Floor, Central Square, 29 Wellington Street, Leeds LS1 4DL so as to arrive no later than 10.00 a.m. on 13 April 2022 or, in the event that the meeting is adjourned, by no later than 48 hours before the time of any adjourned meeting. 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 Group (ID RA10) by no later than 10.00 a.m. on 13 April 2022. 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. 48 Blue Star Capital Plc Annual Report for the year ended 30 September 2021 Notice of Annual General Meeting continued 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. 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 Group by telephone on 0371 664 0300 calls are charged at the standard geographic rate and will vary by provider. 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 Group, PXS1, 10th Floor, Central Square, 29 Wellington Street, Leeds LS1 4DL. 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. Printed by Michael Searle & Son Limited