Blue Star Regulatory News (BLU)

Blue Star Capital plc

("Blue Star Capital" or "the Company")

Final Results for the year ended 30 September 2012

I am pleased to report Blue Star Capital Plc's ("Blue Star Capital" or "the Company") results for the year ended 30 September 2012.

On 1 February 2012 the Company announced that it has conditionally raised £245,000 before expenses (approximately £232,000 net of expenses) via the issue of 12,250,000 new Ordinary Shares at a price of 2 pence per share to new and existing investors. The proceeds were to be used to make a secured loan of £150,000 to Overtis Limited ("Overtis"). The purpose of the loan was to provide Overtis with working capital and to secure a period of exclusivity as part of a process which the Company expected, subject to due diligence, further fund raising and shareholder approvals, to lead to the full acquisition of the issued share capital of Overtis in line with the Company's stated investment policy. Overtis specialised in information protection and compliance which the Company believed had significant potential in the cybersecurity and data security space. The balance of funds raised of £100,000 was to be used by the Company for general working capital purposes.

Unfortunately in the period post drawdown of the loan, Overtis encountered a number of unforeseen difficulties which culminated in the decision being taken by its Board to seek the appointment of an Administrator on 31 May 2012. Having entered Administration, the assets and business of Overtis were subsequently acquired by Vigilant Applications Limited. In relation to this transaction, £116,998 of the £150,000 secured loan held in Overtis was rolled-over into Vigilant Applications Limited and is secured against the assets of that company. The remaining £33,002 of the loan remains in Overtis and while it may be repaid in whole or in part depending on any subsequent realisations by its Administrator, the Company has fully provided against this debt.

Post the year end, on 7 January 2013 the Company announced the acquisition of one of its investee companies, Visimetrics (UK) Limited ("Visimetrics"), including its subsidiary OmniPerception Limited ("OmniPerception") by Digital Barriers plc, ("Digital Barriers").

 Under the terms of the Acquisition, Digital Barriers has acquired the entire issued and to be issued share capital of Visimetrics, including OmniPerception, for an initial cash consideration of £3,300,000 (on a debt free, cash free basis), paid to the vendors of Visimetrics upon completion of the Acquisition ("Completion"). Completion took place on 4 January 2013. Dependent upon the successful satisfaction by Visimetrics of certain financial and operational targets in the period from completion of the Acquisition to 31 December 2014, deferred consideration of a further £4,700,000 may be paid by Digital Barriers to the vendors of Visimetrics; the majority of any such deferred consideration will be satisfied through the issue of new ordinary shares in Digital Barriers, with the remainder paid in cash, although the Digital Barriers Board can, at its discretion, elect to pay deferred consideration fully in cash.

Blue Star Capital's fully diluted holding in Visimetrics was valued at £113,336 in its Interim Accounts at 31 March 2012. The initial cash consideration payable to Blue Star Capital before certain retentions by Digital Barriers in relation to working capital adjustments, was approximately £47,000. The maximum effective consideration payable to Blue Star Capital including any deferred consideration payable in shares in Digital Barriers, will be approximately £137,000.

On 4 February 2013, the Company announced that further to the announcement dated 3 January 2013, it had agreed a further extension to the shareholder loan agreement (the "Loan") entered into on 28 April 2011. The original amount of the Loan was £400,000 which, with the accrued interest at 10% per annum, had been due for repayment by 30 September 2012.

Pursuant to the terms of the Loan extension, the terms of the Loan remain unchanged, except that repayment, which had been extended to 31 January 2013, has now been deferred until 31 March 2013 (the "Final Redemption Date"). In addition, with effect from 1 February 2013 and until 28 February 2013, the full amount (including interest and repayment premium) to redeem the Loan became £564,916 (the "Revised Principal") and from 1 March 2013, the Revised Principal will accrue interest on a compound basis at a rate of 2.0% per month, or part month.

As consideration for agreeing to extend the repayment date of the loan as set out above, the Company has further agreed that the warrants issued to the providers of the Loan at the time of the original loan agreement (the "Warrants") will be amended such that the exercise price of the Warrants was to be reduced from 2 pence per ordinary share to 0.6 per ordinary share.

Shareholders will recall that in June 2011, the Company announced the acquisition of one of its investee companies, Zimiti Limited ("Zimiti") by Digital Barriers. Under the terms of that acquisition, Digital Barriers acquired the entire issued share capital of Zimiti on a cash-free, debt-free basis for an initial consideration of £1,500,000 in cash. Dependent on the successful satisfaction by Zimiti of certain financial and operational targets in the period from completion of the acquisition to 30 September 2013, further deferred consideration up to a maximum total consideration of £10,000,000 was potentially available. This deferred consideration was to be satisfied by the payment of a maximum of £4,250,000 in cash, with the balance satisfied through the issue of new Ordinary Shares in Digital Barriers.

Blue Star Capital's fully diluted holding in Zimiti totalled 22.85% and the Company's holding was shown in last years' accounts at a value of £800,436 based on a 50% expectation of the NPV of the various earn out criteria being achieved and using a 10% discount rate. The initial deferred consideration targets were not met by Zimiti and as a result the carrying value has been reduced to £436,050 using the same basis as applied above.

Blue Star Capital reported a loss for the year of £1,439,325 (2011: £485,423) principally reflecting the write down in investments and deferred consideration of £633,699 and £444,430 respectively . During the year, administration costs fell to £361,508 (2011: £640,134) reflecting the steps taken by the board to reduce costs.

There have been a number of changes to the Company's portfolio during the year and details are set out below. The investment holdings are set out in note 14.

1. OMNIPERCEPTION LIMITED 

OmniPerception merged with Visimetrics Limited (a UK developer of high performance digital CCTV and Video Surveillance systems), in May 2012 which resulted in the Company's investment in the merged entity being valued at £113,368. Prior to this merger, OmniPerception had sought shareholder support and had undertaken an internal fund raise in which Blue Star Capital invested a further £7,282 in December 2011. However, due to the Company's limited cash resources the Board felt it prudent to preserve its cash and decided therefore not to invest the funds required to maintain its original equity percentage and the Company's holding.

As referred to above, Visimetrics was acquired by Digital Barriers on 7 January 2013.

2. ESEEKERS LIMITED

eSeekers Limited is a private company, registered in England and Wales, in which Blue Star has a minority shareholding. eSeekers is a holding company, with equity holdings in three independent but synergistic Internet businesses: Xen Inc. (www.xen.com), Nektan Limited (www.nektan.com) and VNU Capital LLC (trading through www.venue.com and www.emporium.com).

Blue Star Capital's investment of £300,000 was made in 2007 and its holding is valued at £1.121m, based on a £50m pre-money valuation for eSeekers set at the time of the last external investment.

3. VIGILANT APPLICATIONS LIMITED (FORMERLY: OVERTIS GROUP LIMITED)

Vigilant Applications is a software development company specialising in security solutions for monitoring and shaping user behaviour at a PC or 'end point'. Its VigilancePro agent software is deployed in the enterprise space in both the public and private sector for monitoring professional standards, securing data and compliance. VigilancePro Retail applies the products unique capabilities to the monitoring of all activity at an Electronic Point of Sale - EPOS. Through its patented technology it is able to integrate with existing security infrastructure (CCTV) to provide irrefutable real-time remote reporting of all transaction activity within a retail environment.

Financials

Blue Star Capital has continued to reduce costs wherever possible, both in its cost base and ongoing investment operations. The Company's cash position at the end of the year was £36,936 (2011: £276,764). and the Company's net assets totalled £1,155,087.

Outlook

The Directors of the Company are continuing to review various strategic options available to the Company and are in discussions with a number of parties regarding opportunities to improve the Company's cash position and provide it with sufficient funds in order to repay the Shareholder Loan; and provide general working capital for the Company. However, the outcome of these discussions is dependent on a number of factors, including the actions of a number of third parties, and are therefore outside of the control of the Company or its Directors and there can be no guarantee as to their success.

The Lord Dear

Chairman

Enquiries:

Results and dividends

The directors present their report together with the audited financial statements for the year ended 30 September 2012.

The trading results for the year ended 30 September 2012 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 (2011: £nil).

Principal activities and review of the business

The principal activity of the Company is to invest in Homeland Security Industry based companies which have dual use products and applications (those inclusive of both defence and civilian markets). A review of the business is included within the Chairman's Statement.

Directors serving during the year

The Directors who served during the year are shown on page 2.

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:

Investing Policy

Assets or Companies in which the Company can invest

The principal activity of the Company is to invest in Homeland Security Industry based companies which have dual use products and applications (those inclusive of both defence and civilian markets). These include:

·; Security & Surveillance - including overt/covert autonomous face and voice recognition;

·; Explosives Detection Systems;

·; Surveillance, Border & Perimeter Security Systems;

·; Bio-Terror: Detection, Diagnostics and Treatment;

·; Training & Simulation Systems;

·; Access Control/Biometrics;

·; People Screening;

·; Cyber Security and Data Security;

·; Container Screening;

·; Emergency Planning and Integrated Response Systems.

The Company also holds a small number of investments in investee companies in other sectors.

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. 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).

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 in the Homeland Security sector with a focus on prevention, protection, reaction and recovery.

Principal risks and uncertainties

The Company is focussed in Homeland Security, which embraces a number of application sectors rather than being a vertical and undifferentiated narrow sector of itself. It seeks investments in late stage dual usage opportunities, which by their very nature allow a diverse portfolio of investments with different application sectors and geographic locations whilst maintaining the overarching Homeland Security focus. The 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 publicly traded 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.

Significant shareholders

As at 21 February 2012 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:

General 

The Company has third party Directors and Officers indemnity insurance in place.

Related party transactions

The Company has entered into certain related party transactions and these are disclosed in note 22.

Events after the reporting date 

Events subsequent to the balance sheet date are detailed in note 20 to the financial statements

Policy and practice on the payment of creditors

The Company has no formal code or standard, which deals specifically with the payment of suppliers. However, the Company's policy on the payment of all creditors is to ensure that the terms of payment, as specified and agreed with the supplier, are not exceeded. At the year end, trade creditors represented 241 days purchases (2011: 77 days).

Donations

There were no charitable or political donations during the current or prior year.

Auditors

In so far as each of the Directors is aware:

·; there is no relevant audit information of which the Company's auditors are 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 auditors are aware of that information. 

Adler Shine LLP has indicated their willingness to continue in office and a resolution to re‑appoint them will be proposed at the Annual General Meeting.

On behalf of the board of directors

Anthony Fabrizi

Chief Executive Officer

Directors' responsibilities

The directors are responsible for preparing the Directors' 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. The directors have chosen to prepare the company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

International Accounting Standard 1 requires that financial statements present fairly for each financial year the company's financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Standards Board's 'Framework for the preparation and presentation of financial statements'. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRSs. A fair presentation also requires the directors to:

·; consistently select and apply appropriate accounting policies;

·; present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; and

·; provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance.

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.

We have audited the financial statements of Blue Star Capital Plc for the year ended 30 September 2012, which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Cash Flow Statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

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

Respective responsibilities of directors and auditors

As explained more fully in the statement of directors' responsibilities set out on page 10, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements

In our opinion the financial statements:

·; give a true and fair view of the state of the Company's affairs as at 30 September 2012 and of the company's loss for the year then ended;

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

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

Emphasis of matter - Going concern

In forming our opinion, which is not qualified, we have considered the adequacy of the disclosures made in note 1 to the financial statements concerning the Company's ability to continue as a going concern. The going concern assumption is predicated on one of two scenarios, either the receipt of funds from the sale of certain investments in order to fund working capital and the repayment of the shareholder loan or a restructuring and subsequent equity investment to fund working capital and the repayment of the shareholder loan. The receipt of these funds is not yet certain. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Company was unable to continue as a going concern.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion the information given in the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

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

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

·; certain disclosures of directors' remuneration specified by law are not made; or

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

Christopher Taylor (Senior Statutory Auditor)

For and on behalf of Adler Shine LLP, statutory auditor

Aston House

Cornwall Avenue

London N3 1LF

Adler Shine LLP is a limited liability partnership registered in England and Wales (with registered number OC301724).

Blue Star Capital Plc

Statement of Comprehensive Income

for the year ended 30 September 2012

Blue Star Capital Plc

Statement of Financial Position

for the year ended 30 September 2012

Blue Star Capital Plc

Statement of Changes in Equity

for the year ended 30 September 2012

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.

Retained earnings

Retained earnings represent the cumulative net income and losses of the Company recognised through the statement of comprehensive income along with the fair value of the equity settled share based payments.

1. Accounting policies

General information

Blue Star Capital Plc (the Company) invests principally in Homeland Security Industry based companies which have products and applications in both the defence industry and civilian markets.

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 London Stock Exchange's AIM.

Basis of preparation

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated.

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.

The historical cost convention has been applied as modified by the revaluation of assets and liabilities held at fair value.

Going concern

The financial statements have been prepared on the going concern basis, which assumes that the company will be able to meet its liabilities as they fall due.

As at 4 February 2013, the Company has agreed a further extension to the shareholder loan agreement (the "Loan") entered into on 28 April 2011, and thereafter extended on 1 June 2012, 12 October 2012 and 3 January 2013. The original amount of the Loan was £400,000 which, with the accrued interest at 10% per annum, had been due for repayment by 30 September 2012.

The terms of the Loan remain unchanged, except that repayment, which had been extended to 31 January 2013, has now been deferred until 31 March 2013 (the "Final Redemption Date"). With effect from 1 February 2013 and until 28 February 2013, the full amount (including interest and repayment premium) to redeem the Loan is £564,916 (the "Revised Principal"). From 1st March 2013, the Revised Principal will accrue interest on a compound basis at a rate of 2.0% per month, or part month.

The Company is seeking to progress the sale of certain investments or a restructuring and subsequent equity issue. However, this is not certain and the amount realised may or may not provide sufficient funds to cover the repayment of the Loan and the on-going working capital needs of the Company. Should these expected transactions not take place, the Company would need to obtain alternative finance. There can be no certainty that further financing will be available.

These conditions constitute a material uncertainty that may cast doubt about the Company's ability to continue as a going concern. The financial statements do not contain the adjustments that would result if the Company were unable to continue as a going concern.

Property, plant and equipment 

Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses.

Depreciation is calculated to write off the cost of property, plant and equipment less estimated residual values over their expected useful lives as follows:

Plant and machinery 25% per annum, straight line

Fixture and fittings 25% per annum, straight line

Motor vehicles 25% per annum, straight line

Impairment provisions are made if the carrying value of an asset exceeds the recoverable amount.

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 either financial assets held for trading or other investments that have been designated at fair value through profit or loss on initial recognition.

Financial assets at fair value through profit or loss are initially recognised at fair value and any gains or losses arising from subsequent changes in fair value are presented in the statement of comprehensive income in the period in which they arise.

The fair value of unlisted securities is established using International Private Equity and Venture Capital ("IPEVC") guidelines. The valuation methodology used most commonly by the Company is the 'price of recent investment' contained in the IPEVC valuation guidelines. The following considerations are used when calculating the fair value using the 'price of recent investment' guidelines:

·; Where the investment being valued was itself made recently, its cost will generally provide a good indication of fair value;

·; Where there has been any recent investment by third parties, the price of that investment will provide a basis of the valuation;

·; If there is no readily ascertainable value from following the 'price of recent investment' methodology, the company considers alternative methodologies in the IPEVC guidelines, being principally discounted cash flows and price earnings multiples requiring management to make assumptions over the timing and nature of future earnings and cash flows when calculating fair value;

·; Where a fair value cannot be readily estimated the investment is reported at the carrying value at the previous reporting date unless there is evidence that the investment has been impaired.

Loans and receivables

The Company's loans and receivables comprise cash and cash investment in the balance sheet and loans receivable from third parties.

Cash and cash equivalents includes 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.

Loans receivable from third parties are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method.

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.

Leased assets

Where substantially all of the risks and rewards incidental to ownership are not transferred to the group (an "operating lease"), the total rentals payable under the lease are charged to the statement of comprehensive income on a straight-line basis over the lease term. The aggregate benefit of lease incentives is recognised as a reduction of the rental expense over the lease term on a straight-line basis.

Pension costs

Company contributions to defined contribution pension schemes are charged to the statement of comprehensive income in the period in which they become payable.

Operating loss

Operating loss is stated after crediting all items of operating income and charging all items of operating expense, but before recognising the Company's share of the results of associated undertakings.

Foreign currency

The functional and presentational currency of the Company is Sterling, which is the currency of the primary economic environment in which the entity operates.

Foreign currency transactions are translated into sterling at the rate of exchange at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of foreign currency monetary assets and liabilities at the yearend rate are recognised in the statement of comprehensive income.

Foreign currency gains or losses arising on financial assets at fair value through profit or loss are included in the statement of comprehensive income in fair value gains or losses.

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).

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, its 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.

Standards, Amendments and Interpretations in issue not yet effective

The Company has not applied the following new and revised IFRSs that have been issued but are not yet effective:

The directors anticipate that the adoption of these standards and interpretations in future periods will have no material impact on the financial statements other than in terms of presentation. Share-based payments

Share-based payments

Where equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the statement of comprehensive income over the vesting period.

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 discussed in note 3 below.

3. Fair value of financial instruments

The Company holds other 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 such as Black Scholes option pricing. These techniques are significantly affected by certain key assumptions, such as discount rates. 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 14.

4. Estimate of the fair value of contingent consideration

The Company has contingent consideration receivable on the disposal of certain unquoted investments. This has been designated at fair value based upon the discounted cash flows of the expected receivable using a post-tax discount rate.

The methods and assumptions applied, and the valuation techniques used, are disclosed in note 15.

5. Operating loss

6. Finance income

7. Finance costs

8. Share based payments

The Company operates an unapproved scheme for executive directors and employees, and a corresponding unapproved scheme for non executive directors. Under both unapproved schemes, one third of the options vest if the average share price of the Company exceeds 6p for three consecutive months; similarly one third vest if its average share price exceeds 9p for three consecutive months and the final third vest if the average share price exceeds 12p for three consecutive months.

The exercise price of options outstanding at the end of the year was 4.5p (2011: 4.5p) and their weighted average contractual life was 3 years (2011: 4 years).

Of the total number of options outstanding at the end of the year, nil (2011: nil) had vested and were exercisable at the end of the year.

The following information is relevant in the determination of the fair value of options granted during the year under the equity share based remuneration schemes operated by the Company.

The volatility assumption, measured at the standard deviation of expected share price returns, is based on a statistical analysis of daily share prices over the Company's life.

The Black-Scholes valuation technique was adopted because, in the opinion of the directors, the market based vesting conditions were not materially sensitive to the valuation.

Share warrants

The Company entered into a shareholder loan agreement on 28 April 2011 with certain existing shareholders. The arrangement also included the issue of 15,000,000 warrants to subscribe for ordinary shares at £0.02 pence per share, exercisable at any time within the next two years. The charge to the profit and loss account for the current year is £70,559.

The exercise price of warrants outstanding at the end of the year was 2p (2011: 2p) and their weighted average contractual life was 2 years (2011: 3 years).

Of the total number of warrants outstanding at the end of the year, all had vested and were exercisable at the end of the year.

The following information is relevant in the determination of the fair value of warrants granted during the year under the equity share based remuneration schemes operated by the Company.

The volatility assumption, measured at the standard deviation of expected share price returns, is based on a statistical analysis of daily share prices over a three year period.

The Black-Scholes valuation technique was adopted because, in the opinion of the directors, the market based vesting conditions were not materially sensitive to the valuation.

The share-based expense (note 5) comprises:

9. Staff costs, including directors

During the year the company had an average of 1 employee who was administrative (2011 - 2). The employee was both a director and the key management personnel of the company.

10. Directors' and key management personnel

There was one director in the Company's defined contribution pension scheme during the year (2011 - 1).

The value of the share options were computed using the Black Scholes option pricing methodology, with a 5 year volatility of 78% and evenly divided over the five year period from issue (6 October 2009).

11. 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 20% (2011: 20.5%). The differences are explained below:

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 deferred tax asset at 30 September 2012 is £474,023 (2011: £459,452).

It has been announced that the UK tax rate will be reduced to 21% for the tax year commencing 1 April 2014. The impact of these adjustments will be reflected when the relevant legislation is fully enacted.

12. Loss per ordinary share

The share options in issue do not have any dilutive effect at the year-end date.

13. Property, plant and equipment

14. Other investments

All of the above investments are incorporated in the United Kingdom barring Medcenter Holdings Inc, which is a company incorporated in the Cayman Islands. The methods used to value these unquoted investments are described below.

Fair value

The fair value of unquoted investments is established using valuation techniques. These include the use of recent arm's length transactions, the Black-Scholes option pricing model and discounted cash flow analysis. Where a fair value cannot be estimated reliably the investment is reported at the carrying value at the previous reporting date in accordance with International Private Equity and Venture Capital ("IPEVC") guidelines.

The Company holds convertible loan notes that have been designated at fair value through profit or loss on initial recognition. Any changes in fair value are recognised through the fair value gains/ (losses) line in the statement of comprehensive income.

The Company also holds convertible loan notes where at inception, the option to convert to equity at a future point in time is valued using the Black-Scholes option pricing model. The residual amount represents a loan receivable.

The option is then fair valued at each reporting date, with any fair value gains/ (losses) recognised through the fair value gains/ (losses) line in the statement of comprehensive income. The loan receivable is measured at amortised cost, with any interest income recognised as finance income through the statement of comprehensive income using the effective interest rate method.

In the case of convertible loan notes where the fair value of the option cannot be separated and measured in a reliable manner, the instrument is recognised as a single financial asset at fair value through profit or loss.

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.

15. Trade and other receivables

The directors consider that the carrying value of trade and other receivables approximates to their fair value. Included within other receivables is an amount of £436,050 (2011: £800,436) relating to contingent consideration receivable on the disposal of Zimiti Limited. The fair value of the contingent consideration is based upon the discounted cash flows of the expected receivable using a post-tax discount rate of 10%. The Directors have assessed the fair value of the deferred consideration receivable to be £484,500 (2011: £970,000) and consequently this figure has been used in the calculation of discounted fair value. An amount of £444,430 has been expensed to statement of comprehensive income along with £80,044, being the unwinding of the discount presented in finance income.

16. Cash and cash equivalents

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.

17. Trade and other payables

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.

18. Borrowings

The Company entered into a shareholder loan agreement on 28 April 2011 with certain existing shareholders. These shareholders agreed to lend the Company £400,000 (the Loan) with a commitment to lend a further £350,000 if required by the Company, reduced on a pound for pound basis by the amount of any realisation made by the Company on the sale of any of the Company's investment assets.

The Loan, together with the accrued 10% interest, was repayable in full by the Company on 30 May 2012. The Loan is secured by an all assets debenture granted by the Company and the arrangement also provides for the issue of 15,000,000 warrants to subscribe for ordinary shares at £0.02 pence per share, exercisable at any time within the next three years.

On 1 June 2012, the Company completed an extension to the Loan. The original amount of the Loan was £400,000 which, with the accrued interest at 10% per annum. It was agreed that the Loan be extended by four months to 1 October 2012.

£15,000 of the interest accrued to 30 May 2012 was paid and the remaining £25,000 of accrued interest was added to the original Loan, such that the new principal amount is £425,000. Interest at 10% continues to accrue on the new principal sum.

A repayment premium of 10% has been added to the Loan as it was not repaid prior to 1 October 2012.

As at 1 October 2012, the amount outstanding under the loan (including accrued interest and repayment premium) was £483,729 ("Revised Principal"). The Revised Principal will continue to accrue interest at 10% per annum until the redeemed. In addition a further repayment premium will be payable as follows; 5% of the Revised Principal if the Loan is repaid on or before 31 October 2012; or 10% of the Revised Principal if repaid after 1 November 2012.

The Company has further agreed that the warrants issued to the providers of the Loan at the time of the original loan agreement will be amended by no later than 31 December 2012, such that the exercise date of the warrants will be extended from the date currently specified to a date 24 months thereafter, being 31 March 2016.

19. Share capital

During the year the following shares were issued:

20. Events after the reporting date

The following shares were issued on 15 October 2012 in respect of announced share based payments due to the directors as at September 2012:

A total number of shares of 7,421,875.

As at 4 February 2013, the Company has agreed a further extension to the shareholder loan agreement (the "Loan") entered into on 28 April 2011, and thereafter extended on 1 June 2012, 12 October 2012 and 3 January 2013. The original amount of the Loan was £400,000 which, with the accrued interest at 10% per annum, had been due for repayment by 30 September 2012.

The terms of the Loan remain unchanged, except that repayment, which had been extended to 31 January 2013, has now been deferred until 31 March 2013 (the "Final Redemption Date"). With effect from 1 February 2013 and until 28 February 2013, the full amount (including interest and repayment premium) to redeem the Loan is £564,916 (the "Revised Principal"). From 1st March 2013, the Revised Principal will accrue interest on a compound basis at a rate of 2.0% per month, or part month.

The Company has further agreed that the warrants issued to the providers of the Loan at the time of the original loan agreement will be amended such that the exercise price of the warrants will be reduced from 2 pence per ordinary share to 0.6 per ordinary share.

On 4th January 2013, Digital Barriers plc acquired Visimetrics (UK) Limited, including its subsidiary OmniPerception Limited ("OmniPerception"). Under the terms of the Acquisition, Digital Barriers has acquired the entire issued and to be issued share capital of Visimetrics, including OmniPerception, for an initial cash consideration of £3,300,000 (on a debt free, cash free basis), paid to the vendors of Visimetrics upon completion.

Dependent upon the successful satisfaction by Visimetrics of certain financial and operational targets in the period from completion of the Acquisition to 31 December 2014, deferred consideration of a further £4,700,000 may be paid by Digital Barriers to the vendors of Visimetrics; the majority of any such deferred consideration will satisfied through the issue of new ordinary shares in Digital Barriers, with the remainder paid in cash, although the Digital Barriers Board can at its discretion elect to pay deferred consideration fully in cash.

The initial cash consideration payable to Blue Star following certain retentions by Digital Barriers in relation to working capital adjustments is approximately £47,000. The maximum effective consideration payable to Blue Star Capital including any deferred consideration payable in Digital Barrier shares will be approximately £137,000.

21. Financial instruments

Categories of financial assets and liabilities

The following tables set out the categories of financial instruments held by the company:

The Company's financial instruments comprise other investments held for trading, cash and cash equivalents and trade payables that arise directly from the company's operations. The main purpose of these instruments is to invest in these companies. Investments held for trading and other investments have been held at fair value through profit and loss. The main risks arising from holding these financial instruments is market risk and credit risk. Market risk is also examined in events after the reporting date (note 20).

Interest rate risk

The Company's exposure to changes in interest rates relate primarily to cash and cash equivalents. Cash and cash equivalents is held either on current or on short term deposits at floating rates of interest determined by the relevant bank's prevailing base rate. The Company seeks to obtain a favourable interest rate on its cash balances through the use of bank treasury deposits. Any reasonable change in interest rate would not have a material impact on finance income that the Company could receive in the course of a year, based on the current level of cash and cash equivalents either held in current accounts or short term deposits.

Market risk

All trading instruments are subject to market risk, the potential that future changes in market conditions may make an instrument less valuable, due to fluctuations in security prices, as well as interest and foreign exchange rates. Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded.

Sensitivity analysis

The following table looks at the impact on net result and net assets based on a given movement in the fair value of all the investments;

10% movement either way will result in £118,860 profit or (loss)

20% movement either way will result in £237,720 profit or (loss)

30% movement either way will result in £356,580 profit or (loss)

Borrowing facilities

The operations to date have been financed through the placing of shares and investor loans. It is Board policy to keep borrowing to a minimum, where possible.

Liquidity risks

The Company seeks to manage liquidity risk by ensuring sufficient liquid assets are available to meet foreseeable needs and to invest liquid funds safely and profitably. All cash balances are immediately accessible and the Company holds no trades payable that mature in greater than 3 months, hence a contractual maturity analysis of financial liabilities has not been presented. Since these financial liabilities all mature within 3 months, the directors believe that their carrying value reasonably equates to fair value.

Credit risk

The Company's credit risk is attributable to cash held on deposit at financial institutions.

Cash is deposited with reputable financial institutions with a high credit rating. The maximum credit risk relating to cash and cash equivalents is equal to their carrying value of £36,937 (2011: £276,764).

The maximum credit risk relating to a loan receivable is equal to its carrying value of £nil (2011: £nil).

Trade receivables arise as a result of day to day operations and at year end the company's maximum exposure to credit risk on trade receivables is £nil (2011: £ 11,520).

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 does not have any borrowings and 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.

22. Related party transactions

Lord Dear, chairman of Blue Star Capital, was a director of OmniPerception Limited.

Dr Richard Leaver is a partner in PegasusBridge Fund Management LLP. As part of the Asset Purchase Agreement between Blue Star Capital and PegasusBridge Fund Management Limited, PegasusBridge Fund Management LLP invoiced monthly monitoring fees from Zimiti Limited of £nil per month (2011: £1,500 per month), OmniPerception Limited £nil per month (2011: £700 per month) and Pedagog Limited £nil per month (2011: £1,500 per month).

Dr Richard Leaver, Noel Lyons, Anthony Fabrizi, Lord Dear, Peter Varnish and General Sir Michael Wilkes were issued 1,272,457, 882,453, 882,453, 988,808, 741,605 and 741,605 shares in the Company respectively for announced share based payments accruing during the year.

Peter Varnish (as Closed Solutions Limited), was paid a total of £nil during the year in respect of director's fees and expenses (2011: £20,295)

General Sir Michael Wilkes (as Marbral Limited) was paid a total of £nil during the year in respect of director's fees and expenses. (2011: £15,090)

At the year end, Anthony Fabrizi was owed £39,116 in current borrowings and accrued interest.

23. Operating lease commitments

At the balance sheet date the company has outstanding commitments under operating leases of which the total future minimum lease payments were due as follows:

24. Ultimate Controlling Party

The Company considers that there is no ultimate controlling party.