Blue Star Regulatory News (BLU)

5 March 2020

Blue Star Capital plc

("Blue Star" or the "Company")

Final Results for the year ended 30 September 2019

Blue Star Capital plc (AIM: BLU), the investing company with a focus on esports, technology and its applications within media and gaming, is pleased to announce its final results for the year ended 30 September 2019.

Highlights:

· The value of our key investments has grown marginally from £5m to £5.1m.

· The Company incurred a loss for the period of £684,964 compared to a profit for the previous period of £1,471,319. The main factor behind this difference is the significant uplift achieved in SatoshiPay valuation in the prior year and the write off of the historic investment in DTL. The operating expenses of the Company remain under strict control and were lower in the current year. The cash position of the Company at 30 September 2019 was £120,828 compared with £31,416 in the previous period.

· Post year end the Company placed 900m shares at 0.1p raising £900,000 before expenses and invested an equivalent amount in a portfolio of six esport businesses. 

The Annual Report and notice of Annual General Meeting ("AGM") will be posted to shareholders shortly and will be available to view on the Company's website http://www.bluestarcapital.co.uk

Attention is drawn by the independent auditor to note 1 of the financial statements (included below), which indicates that the Company is reliant on future fund raisings to continue its activities as budgeted. Since the financial year-end, the Company has raised £900,000 before expenses and subsequently made investments in six esport companies.

The AGM will be held at the offices of Cairn Financial Advisers LLP, Cheyne House, Crown Court, 62-63 Cheapside, London, EC2V 6AX on 31 March 2020 at 12 p.m.

Tony Fabrizi Chief Executive Officer of Blue Star Capital plc, commented:

"The last year was one of consolidation with our main portfolio companies making solid progress in developing their businesses. Post year end, we have invested in a portfolio of esports businesses which offer significant potential and both SatoshiPay and Sthaler have more recently announced key strategic developments which offer great hope for the future. Overall, we are pleased with recent progress and the Board views the future with confidence."

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

For further information, please contact:

About Blue Star Capital plc

Blue Star is an investing company with a focus on new technologies. Blue Star's investments include a 27.7% holding in SatoshiPay, a payments business using blockchain technology; investments in 6 early stage esports companies with shareholdings ranging from 10% to 18% and a 0.9% investment in Sthaler, an identity and payments technology business which enables a consumer to identify themselves and pay using just their finger.

Chairman's Statement

2019 has been a year of consolidation as the Company came to terms with the disappointment and costs associated with the termination of the proposed reverse take-over of SatoshiPay in January 2019. An unfortunate consequence of the transaction terminating was that, as the Company had incurred significant transaction fees, it was forced to raise equity on two separate occasions to fund ongoing operations. Despite these setbacks, the Company's portfolio has continued to develop with both SatoshiPay and Sthaler making good progress and post year end the Company invested in a portfolio of six esports businesses which offer significant potential.

Finally, the legacy investment in Disruptive Tech Limited ("DTL") which was acquired in 2007, well before the current Board were in place, has been written off and this has resulted in a further write down in the second half of the year of £300,000.

Financials

The Company reported a loss for the period of £684,964 compared to a profit of £1.471,319 in the corresponding period to 30 September 2018. This reflects the net revaluation of the portfolio with the significant gain on SatoshiPay achieved last year representing the major difference.

Net assets have decreased to £5,209,377 at 30 September 2019, changing from £5,459,581 at 30 September 2018, reflecting the write down in DTL. Blue Star's cash position at 30 September 2019 was £120,808 compared to a balance of £31,416 at 30 September 2018. Post year end, the Company raised £900,000 before expenses through a further issue of equity in November 2019 and invested a similar amount in the esports portfolio of companies.

Portfolio Review

SatoshiPay 

Company Description

SatoshiPay is a fintech company supplying payment and money transfer infrastructure based on blockchain technology to digital industries and globally operating SMEs. SatoshiPay's micropayment infrastructure provides a frictionless online payment service, allowing digital content and service providers to monetise their products both efficiently and at a low cost across vendor platforms. The technology is offered both through in-house built products and as an application programming interface ("API") upon which third party developers may build their own solutions.

The vision for the future of SatoshiPay's micropayment solution is a fast, secure, cross-platform and login-free global peer-to-peer payment system for the commercial internet which transforms the mainstream payment market and facilitates fair, transparent value exchange between any internet-connected device.

To further advance SatoshiPay's mission to connect the world through instant payments, the company recently announced SatoshiPay B2B, a cross-border payments service for businesses.

SatoshiPay Technology

The SatoshiPay technology is designed to overcome existing issues with online payments. In the field of micropayments, it is addressing issues that have prevented them from achieving mainstream adoption, primarily the high level of transaction costs driven by existing bank infrastructure that makes such levels of payments commercially unfeasible.

The foundation of SatoshiPay's platform is built upon blockchain technology. A blockchain is a decentralised database of transactions that exists on multiple computers at the same time. It is a record keeping technology that, in simple terms, is conceptually similar to a spreadsheet that is duplicated thousands of times across a network of computers and that is constantly updated.

The advantages of blockchain are that it is, by its inherent set-up, independent, transparent and secure. Its security comes from the fact that its data cannot be altered, it cannot be controlled by any single entity and has no single point of failure that can be exploited by hackers. Encryption technology allows individuals' digital assets to be kept anonymous and protected. Further, removing intermediaries from the process allows transactions on a blockchain to be carried out faster and cheaper than traditional methods.

SatoshiPay's payment platform is based on the Stellar blockchain network, a distributed ledger technology, and uses Stellar lumens (XLM) as the underlying settlement token.

Micropayments and the SatoshiPay Solution

Existing issues relating to micropayments include financial costs (transaction costs being high in relation to the level of payment) and usability costs (cumbersome, multi-step online payment mechanisms for the end user).

SatoshiPay's solution is able to overcome these issues by offering a P2P payment method which does not require download, installation or log-in for the end user, and that is transferable across vendor platforms and facilitates instant transactions of very small amounts. This flexible, low-cost solution allows for pricing strategies at a more granular level, and the board of Blue Star believe that it has many potential applications.

Potential Applications of SatoshiPay

The directors of SatoshiPay believe that its micropayment technology can be employed in a range of sectors. Wherever instant, login-free, granular payments open up the potential to improve existing revenue streams or generate new ones for online publishers and content providers, micropayments and the SatoshiPay technology have a potential application. Examples include purchase of digital goods, direct streaming of content, cross-border payments, as a settlement mechanism for machine-to-machine transactions (i.e. toll payments) and in-app/game closed-loop systems.

Recent developments at SatoshiPay

During the year, SatoshiPay raised approximately £2m at a £15m pre-money valuation from investors including Börsenmedien AG (Germany), Danny Masters (UK), Aeternity Anstalt (Liechtenstein), Aergo Limited (Hong Kong) and Neofin Hamburg GmbH (Germany). In addition to the fundraise, SatoshiPay was granted £360k in cash from the HMRC R&D tax credits fund.

The two independent blockchain organisations, Aeternity and Aergo, partnering with SatoshiPay lead the development of their respective networks and developer ecosystems, with focus on smart contract capabilities and scalability. Their investment is part of SatoshiPay's strategy to support multiple blockchain ledgers in the future, in addition to its current default ledger Stellar.

SatoshiPay's leadership in the Stellar blockchain ecosystem has been extended by adding infrastructure nodes containing the full ledger history to the Stellar network and by releasing "Solar", an open-source wallet application for Stellar. Solar is available on all major platforms including Android, iOS, Windows and MacOS, and its features include easy access to the network's decentralised trading and multi-signature account capabilities.

The company's angel investor, Danny Masters, was appointed as Non-executive Director on 18 April 2019. His extensive experience in blockchain-based financial projects makes his profile a very valuable addition to SatoshiPay.

On 31 January 2019, SatoshiPay and Axel Springer SE announced a joint offering, enabling users to pay for content with the digital SatoshiPay wallet. Powered by blockchain technology, the wallet will be used to send direct payments from the user's device to the publisher without an intermediary.

On 9 December 2019, SatoshiPay announced its move into the international B2B money transfer space. Using its existing technology platform, SatoshiPay is currently developing a service allowing companies to instantly transfer funds globally, generating recurring revenues and processing high transaction volumes by facilitating macro-payments. The SatoshiPay B2B service aims to solve issues typically connected with cross-border payments, such as delayed transfers, high transaction and forex costs, and lack of transparency, by leveraging the Stellar network and its connected financial services institutions across the globe.

Blue Star's holding in SatoshiPay 

The Company's shareholding in SatoshiPay was acquired for £1,876,788 and represents 27.9 per cent, of SatoshiPay as at 30 September 2019. The investment has a carrying value of £4,754,201.

Sthaler Limited ("Sthaler") 

Company Description 

In June 2015 the Company invested £50,000 in Sthaler Limited, an early stage identity and payments technology business which enables a consumer to identify themselves and pay using just their finger at retail points of sale.

Sthaler was founded in 2012 by Nick Dryden when he introduced a biometric identity authentication and payment platform into the UK live entertainment industry with British Telecom and Bancorp / Elavon. The system, named Fingopay, uses a biometric called VeinID which instantly recognises an individual through the unique pattern of veins inside each finger. Also in 2012, the Company entered a long-term partnership with Hitachi for exclusive use of Fingopay across many areas of the globe. Sthaler also has a patent pending 2016 VeinID™ "cloud matching engine manager" to maintain matching speeds as its database scale.

During the period of 2016-2019 the Company conducted several successful authentication security trials with Hitachi, Visa, Mastercard, Worldpay and Ernst and Young, all funded by these companies and all of which produced revenues to these companies. Such trials led the deployment of Fingopay to various UK consumer and sports establishments. Also, in 2019 Fingopay was deployed in Denmark with Nets and Dankort, the Danish national debit card scheme. In 2020, Fingopay was piloted successfully by the UK's Open Banking Authority with the Financial Conduct Authority to introduce a new fraud free bank-to-bank account payment scheme.

Fingopay wants to be a component of digital cities, which aspire to be international hubs for technology, digital and creative industries. One of those cities is Manchester, the Company's oldest market where management has invested up to 5 years to build relationships with key decision makers who are supporting the 'city-wide' Identity Platform to support innovation, job creation and social inclusion targets

The largest market the company is targeting is Egypt, with a population of 100 million. In 2019, the Chairman of Egypt Post approached the Company to build a demo as a solution for citizens to access digital government and financial services. The Egypt Post Chairman then presented Fingopay to Egypt's President El Sisi. Approval at this level led to the project being passed to the Central Bank of Egypt (CBoE) which oversees the national biometric identity project. Fingopay is now being piloted in Egypt by the banking industry to authenticate payment transactions and by the Ministry of Supply to authenticate government food subsidies. The Egyptian approach came from global television coverage of Fingopay including CNBC, BBC, Al Jazeera and Fox, to name just a few.

In addition, Fingopay has won the following awards this year:

· The Fintech Power 50 - Most influential, innovative and powerful figures in the Global Fintech industry 2020

· Card & Payment Industry Awards - Industry Innovation of the Year 2020

· Fast Company - Top 50 World's most Innovative Companies 2020

Blue Star's Shareholding in Sthaler 

The Company's shareholding in Sthaler is 0.9 per cent at 30 September 2019 and is valued on the basis of Sthaler's last completed fund raise at approximately £350,000.

Disruptive Tech Limited ("DTL") 

Blue Star invested £300,000 in DTL in 2007. Post the Company's original investment, DTL raised money at significantly higher valuations and as a result it's carrying value had risen to £1.6 million at 30 September 2017. Unfortunately, DTL's key investments did not perform as expected and as a result DTL's performance has declined and the investment had been written down to cost at 30 September 2018. Having consulted in depth with DTL and the Company's advisors, the Directors have decided it now prudent to write off the investment in full.

Esports portfolio

Background on Esports

Esports are electronic sports, usually in the form of competitions, using video or electronic games for multiple professional players and watched at a physical venue or through digital media. The Esports market is large and experiencing significant growth. By way of illustration, in 2018 the market was estimated at approximately 395 million viewers and is projected to reach around 640 million viewers by 2022. This is expected to result in revenues growing over the same period from $885 million to $1.80 billion.

As Esports are now one of the most popular spectator sports, its increasing global following has enabled esports businesses to commercialise their activities through sponsorship, merchandising, licensing, broadcasting and tournaments. Given the growth in the market and the diverse array of commercial opportunities, the Board believes that esports will eventually constitute a significant proportion of the global sports industry.

Esports portfolio and investment approach

During the second half of last year, the Board was presented with an opportunity to invest in a number of esports businesses and given the early stage nature of these businesses the Board decided it appropriate to adopt a portfolio approach. It is the intention of each of the six Esports businesses in which the Company has invested to create or acquire Esport businesses, such as a competitive esports franchise, a platform on which Esports competitors gather to compete, or the creation of Esports tournaments. Each investee company will monetize engagement of the growing number of Esport participants, fans and sponsors, generating revenue from a variety of sources, including, tournament winnings, digital marketing opportunities, sponsorship, merchandise, platform fees, and promotional tours and events. Each of the companies is targeting a different region globally for financing and launch, but all will attempt to become global players.

Further details on each of the six companies Blue Star has invested in are shown below:

The Lords Esports plc, is a UK based company with a focus on the European esports market. The Lords acquired Cyqiq Gaming at the end of 2019 and is expected to launch the UK's most recognizable franchise in the first half of 2020. Blue Star's shareholding in The Lords is currently just over 11%.

Googly Esports plc is an Indian based company with a focus on the Indian Esports market. The company is aiming to become the largest and most respected professional esports events/media company in India, playing in the intersection between traditional sports (ex: cricket) and Esports. Blue Star's shareholding in Googly is currently 11%.

Dynasty Esports PTE ltd is based in Singapore and is focussed on monetizing grass roots Esports participation across South East Asia. It will enable participation through a combination of a full featured online portal and in person leagues and events at the local, regional and country wide level. Blue Star's shareholding in Dynasty is currently 13.7%.

The Drops Esports Inc is a Canadian based company and has already announced a proposed transaction with FibreSources Corporation. If the transaction proceeds the enlarged business is expected to list on the Canadian Securities Exchange. Blue Star's shareholding in The Drops prior to the transaction was 18.6%. Further details will be announced in due course.

Diemens Esports PTY ltd is an Australian company which has already announced a potential merger with Critical Hit Entertainment. Blue star's shareholding in Diemens prior to the proposed transaction was 13.3%. Further details will be announced in due course

The Dibs Esports Corp is a US business based in Los Angeles. The company will focus on empowering female Esports players and has the goal of creating the largest female network of Esports in the North American esports market. Blue Star's shareholding in The Dibs is currently 13.7%.

Outlook

The Board believes the Company's portfolio, enhanced by the recent esports investments, has significant potential. SatoshiPay and Sthaler have been developing their businesses and are on the verge of commercialisation. Such developments should lead to access to capital and the creation of shareholder value for the Company's shareholders. These historic investments are now complimented by an exciting portfolio of esports businesses which although early stage, are already showing signs of capital appreciation. The Board expects to see significant activity within this portfolio in the remainder of 2020. The appointment of Sean King to the Board as a non-executive director in January and Derek Lew as non-executive Chairman in November 2019 brings valuable knowledge and experience. Overall, the Directors believe the Company is at an exciting stage in its development and the Board views the future outlook with confidence.

Derek Lew

Chairman

4 March 2020

Strategic Report

The Directors present their strategic report on the Company for the year ended 30 September 2019.

Review of Business and Analysis Using Key Performance Indicators

The full year's loss was £684,964 compared to a pre-tax profit of £1,471,319 for the year ended 30 September 2018.

Net assets have decreased to £5,209,377 at 30 September 2019, changing from £5,459,581 at 30 September 2018.

The cash position at the end of the year increased to £120,828 from £31,416 as at 30 September 2018.

Key Performance Indicators

The Board monitors the activities and performance of the Company on a regular basis. The indicators set out below have been used by the Board to assess performance over the year to 30 September 2019. The main KPIs for the Company are listed as follows:

Investing Policy

Assets or Companies in which the Company can invest

The Company can invest in assets or companies in the following sectors:

· Technology;

· Gaming; and

· Media.

The Company's geographical range is mainly UK companies but considers opportunities in the mainland EU and will actively co-invest in larger deals.

The Company can take positions in investee companies by way of equity, debt or convertible or hybrid securities.

Whether investments will be active or passive investments

The Company's investments are passive in nature but may be actively managed. The Company may be represented on, or observe, the boards of its investee companies.

Holding period for investments

The Company's investments are likely to be illiquid and consequently are to be held for the medium to long term.

Spread of investments and maximum exposure limits, Policy in relation to cross-holdings and Investing Restrictions

The Company does not have any maximum exposure limits, limits on cross-holdings or other investing restrictions. Under normal circumstances, it is the Directors intention not to invest more than 10% of the Company's gross assets in any individual company (calculated at the time of investment). The Company has accumulated a 27.9% stake in SatoshiPay, which the Board believes represents a rare opportunity to generate significant shareholder value.

Policy in relation to gearing

The Directors may exercise the powers of the Company to borrow money and to give security over its assets. The Company may also be indirectly exposed to the effects of gearing to the extent that investee companies have outstanding borrowings.

Returns and Distribution Policy

It is anticipated that returns from the Company's investment portfolio will arise upon realisation or sale of its investee companies, rather than from dividends received. Whilst it is not possible to determine the timing of exits, the Board will seek to return capital to shareholders when appropriate.

Life of the Company

The Company has an indefinite life dependent on obtaining sufficient funding.

Future Developments

The Company is continuing to develop an investment portfolio with the capacity for substantial growth and increases in value.

Principal risks and uncertainties

The Company seeks investments in late stage venture capital and early stage private equity opportunities, which by their very nature allow a diverse portfolio of investments within different sectors and geographic locations.

The Company's primarily risk is loss or impairment of investments. This is mitigated by careful management of the investment and in particular, only continuing to support those investments which demonstrate potential to achieve a positive exit and decisively determining those which do not. Portfolio and capital management techniques are fully applied according to industry standard practice.

It will be necessary to raise additional funds in the future by a further issue of new Ordinary shares or by other means. However, the ability to fund future investments and overheads in Blue Star Capital Plc as well as the ability of investments to return suitable profit cannot be guaranteed, particularly in the current economic climate.

The Company may not be able to identify suitable investment opportunities and there is no guarantee that investment opportunities will be available, and the Company may incur costs in conducting due diligence into potential investment opportunities that may not result in an investment being made.

The value of companies similar to those in Blue Star Capital's portfolio and in particular those at an early stage of development, can be highly volatile. The price at which investments are made, and the price which the Company may realise for its investment, will be influenced by a large number of factors, some specific to the Company and its operations and some which may affect the sector.

By Order of the Board

Derek Lew

Chairman

4 March 2020

Directors' Report

The Directors present their report together with the audited financial statements for the year ended 30 September 2019.

Results and dividends

The trading results for the year ended 30 September 2019 and the Company's financial position at that date are shown in the attached financial statements.

The Directors do not recommend the payment of a dividend for the year (2018: £nil).

Principal activities and review of the business

The principal activity of the Company is to invest in the media, technology and gaming sectors. A review of the business is included within the Chairman's Statement and Strategic Report.

Directors serving during the year

On 6 November 2019, Derek Lew was appointed as Chairman of the Company.

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:

Significant shareholders

As at 4 February 2020 so far as the Directors are aware, the parties (other than the interests held by Directors) who are directly or indirectly interested in 3% or more of the nominal value of the Company's share capital is as follows:

Related party transactions

Related party transactions and relationships are disclosed in note 16.

Events after the reporting date

On 14 October 2019, the Company granted warrants to subscribe for Ordinary shares as follows:

On 6 November 2019, Derek Lew was appointed as Chairman, replacing William Henbury with immediate effect.

On 6 November 2019, the Company placed 900,000,000 new Ordinary shares at a price of 0.1 pence per share, raising gross proceeds of £900,000 and subsequently made investments of approximately £150,000 each in six Esport companies.

On 19 February 2020, the Company allotted 50,000,000 new Ordinary shares of 0.1 pence per share pursuant to an exercise of warrants.

Political Donations

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

Provision of information to Auditor

In so far as each of the Directors are aware:

· there is no relevant audit information of which the Company's auditor is unaware; and

· the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.

Auditor

Adler Shine LLP have expressed their willingness to continue as auditor and a resolution to re‑appoint Adler Shine LLP will be proposed at the Annual General Meeting.

On behalf of the board of Directors

Derek Lew

Chairman

4 March 2020

Statement of Comprehensive Income

(Loss)/profit per ordinary share:

Statement of Financial Position

The financial statements were approved by the board, authorised for issue on 4 March 2020 and were signed on its behalf by:

Anthony Fabrizi

Director

Registered number: 05174441

Statement of Changes in Equity

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.

Cash Flow Statement

Notes to the Financial Statements

1. Accounting policies

General information

Blue Star Capital Plc (the Company) invests principally in the media, technology and gaming sectors.

The Company is a public limited company incorporated and domiciled in the United Kingdom. The address of its registered office is Griffin House, 135 High Street, Crawley RH10 1DQ.

The Company is listed on the Alternative Investment Market (AIM) market of the London Stock Exchange plc.

Summary of significant accounting policies

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

Basis of preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB) as adopted by the European Union ("adopted IFRSs") and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

These financial statements have been prepared under the historical cost convention, as modified by the revaluation of assets and liabilities held at fair value.

Associates are those entities in which the Company has significant influence, but no control, over the financial and operating policies. Investments that are held as part of the Company's investment portfolio are carried in the statement of financial position at fair value even though the Company may have significant influence over those companies. This treatment is permitted by IAS 28 Investment in Associates, which requires investments held by venture capital organisations to be excluded from its scope where those investments are designated, upon initial recognition, as at fair value through profit or loss and accounted for in accordance with IFRS 9, with changes in fair value recognised in the statement of comprehensive income in the period of the change. The Company has no interests in associates through which it carries on its business.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant in the financial statements, are disclosed in note 2.

Going concern

The company has reported a loss for the year excluding fair value loss on the valuation of investments of £287,662.

The company carries out regular fund-raising exercises in order that it can provide the necessary working capital to continue its activities.

The board expects to continue to raise additional funding as and when required to cover the company's activities, primarily from the issue of further shares. Since the year end, the company has raised £900,000, before expenses and subsequently made investments in six Esport companies.

Although the Directors have a reasonable expectation that the company has adequate resources to continue its operational existence for the foreseeable future the successful completion of future fund raisings constitutes a material uncertainty that may cast doubt over the company's ability to continue as a going concern. The financial statements do not contain the adjustments that would result if the company was unable to continue as a going concern.

New standards, amendments and interpretations adopted by the Company

The Company has applied the following standards and amendments for the first time for its annual reporting period commencing 1 October 2018:

· IFRS 9 Financial Instruments;

· Classification and Measurement of Share-based Payment Transactions - Amendments to IFRS 2;

· Annual improvements 2014-2016 cycle; IAS 28

· Interpretation 22, Foreign Currency Transactions and Advance Consideration

None of these standards are considered to have a material effect on the Company's financial statements.

New standards, amendments and interpretations not yet adopted

The International Accounting Standards Board (IASB) has issued the following new and revised standards, amendments and interpretations to existing standards that are not effective for the financial year ended 30 September 2019 and have not been adopted early.

Not yet adopted by European Union*

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

The Directors anticipate that the adoption of these standards and interpretations in future periods will have no material impact on the financial statements other than in terms of presentation and additional disclosure requirements for "investment entities".

Financial assets

The Company classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was acquired. The Company has not classified any of its financial assets as held to maturity or available for sale.

The Company's accounting policy for each category is as follows:

Fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets designated upon initial recognition as at fair value through profit or loss.

Financial assets designated at fair value through the profit or loss are those that have been designated by management upon initial recognition. Management designated the financial assets, comprising equity shares and warrants, at fair value through profit or loss upon initial recognition due to these assets being part of the Company's financial assets, which are managed and their performance evaluated on a fair value basis.

Financial assets at fair value through the profit or loss are recorded in the statement of financial position at fair value. Changes in fair value are recorded in "Fair valuation movements in financial assets designated at fair value through profit or loss".

Financial assets, comprising equity shares and warrants, are valued in accordance with the International Private Equity and Venture Capital ("IPEVC") guidelines.

(a) Early stage investments: these are investments in immature companies, including seed, start-up and early stage investments. Such investments are valued at cost less an provision considered necessary, until no longer viewed as an early stage or unless significant transactions involving an independent third party arm's length, values the investment at a materially different value:

(b) Development stage investments: such investments are in mature companies having a maintainable trend of sustainable revenue and from which an exit, by way of floatation or trade sale, can be reasonably foreseen. An investment of this stage is periodically re-valued by reference to open market value. Valuation will usually be by one of five methods as indicated below:

I. At cost for at least one period unless such basis is unsustainable;

II. On a third-party basis based on the price at which a subsequent significant investment is made involving a new investor;

III. On an earnings basis, but not until at least a period since the investment was made, by applying a discounted price/earnings ratio to the profit after tax, either before or after interest; or

IV. On a net asset basis, again applying a discount to reflect the illiquidity of the investment.

V. In a comparable valuation by reference to similar businesses that have objective data representing their equity value.

(c) Quoted investments: such investments are valued using the quoted market price, discounted if the shares are subject to any particular restrictions or are significant in relation to the issued share capital of a small quoted company.

At each balance sheet date, a review of impairment in value is undertaken by reference to funding, investment or offers in progress after the balance sheet date and provisions is made accordingly where the impairment in value is recognised.

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).

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.

2. Critical accounting estimates and judgements

The Company makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are those in relation to:

Fair value of financial instruments

The Company holds investments that have been designated at fair value through profit or loss on initial recognition. The Company determines the fair value of these financial instruments that are not quoted, using valuation techniques, contained in the IPEVC guidelines. These techniques are significantly affected by certain key assumptions. Other valuation methodologies such as discounted cash flow analysis assess estimates of future cash flows and it is important to recognise that in that regard, the derived fair value estimates cannot always be substantiated by comparison with independent markets and, in many cases, may not be capable of being realised immediately.

In certain circumstances, where fair value cannot be readily established, the Company is required to make judgements over carrying value impairment, and evaluate the size of any impairment required.

The methods and assumptions applied, and the valuation techniques used, are disclosed in note 10.

3. Operating (loss)/profit

4. Finance income

5. Share based payments

Share warrants

The contracted average remaining life of warrants at year end was 0.8 years (2018: 1.8 years).

At 30 September 2019, the Company had the following warrants in issue.

The fair value of warrants is determined using the Black-Scholes valuation model. The charge to the profit and loss account was £nil (2018: £nil).

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

6. Staff costs, including Directors

During the year the Company had an average of 3 employees who were management (2018: 2). The employees are Directors and key management personnel of the Company.

7. Directors' and key management personnel

Emoluments above are paid in full at the end of both financial years.

8. Taxation

The tax assessed on loss before tax for the year differs to the applicable rate of corporation tax in the UK for small companies of 19% (2018: 19%). The differences are explained below:

The Company has incurred tax losses for the year and a corporation tax expense is not anticipated. The amount of the unutilised tax losses has not been recognised in the financial statements as the recovery of this benefit is dependent on future profitability, the timing of which cannot be reasonably foreseen. The unrecognised and revised deferred tax asset at 30 September 2019 is £646,754 (2018: £609,392).

9. (Loss)/Earnings per ordinary share

The earnings and number of shares used in the calculation of loss/earnings per ordinary share are set out below:

As at the end of the financial period ended 30 September 2019, there were 110,000,000 share warrants in issue, which had an anti-dilutive effect on the weighted average number of shares.

10. Financial assets held at fair value through profit of loss

All of the above investments are incorporated in the United Kingdom with the exception of Disruptive Tech. Limited which is based in Gibraltar. The methods used to value these unquoted investments are described below.

Fair value

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

The Company assesses at each balance sheet date whether there is any objective evidence that the unquoted investments are impaired. The unquoted investments are deemed to be impaired, if and only if, there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset (an incurred 'loss event') and that loss event (or events) has an impact on the estimated future fair value of the investments that can be reliably measured.

11. Trade and other receivables

On 1 December 2017, the Company subscribed for €200,000 of convertible loan notes issued by SatoshiPay Limited. Interest of 4% per annum was payable on the loan and the redemption date has been extended to 31 January 2019.

On 6 February 2019, the Company announced that it has elected to convert the convertible loan notes into a further 249 shares in SatoshiPay Limited. Following the conversion of the convertible loan notes, and following the completion of the fundraise by SatoshiPay Limited, the Company now holds a total of 5,739 shares in SatoshiPay Limited, representing approximately 27.9% of its issued share capital.

The Directors consider that the carrying value of trade and other receivables approximates to the fair value.

12. Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and other short-term highly liquid investments with an original maturity of three months or less. The Directors consider that the carrying value of cash and cash equivalents approximates to their fair value.

13. Trade and other payables

All trade and other payables fall due for payment within one year. The Directors consider that the carrying value of trade and other payables approximates to their fair value.

14. Share capital

During the year ended 30 September 2019 the following shares were issued:

During the year ended 30 September 2018 the following shares were issued:

15. 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 investments recognised at fair value through profit and loss, cash and cash equivalents, convertible loan notes, other receivables and trade payables that arise directly from the Company's operations. The main purpose of these instruments is to invest in portfolio companies. Investments are held at fair value through profit and loss. The main risks arising from holding these financial instruments is market risk and credit risk.

Interest rate risk

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

Market risk

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

Sensitivity analysis

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

10% movement either way will result in £510,159 profit or (loss) (2017: £528,894 profit or (loss))

20% movement either way will result in £1,020,317 profit or (loss) (2017: £1,057,789 profit or (loss))

30% movement either way will result in £1,530,476 profit or (loss) (2017: £1,586,683 profit or (loss))

Borrowing facilities

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

Liquidity risks

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

Credit risk

The Company's credit risk is attributable to cash and cash equivalents and trade and other receivables.

Cash is deposited with reputable financial institutions with a high credit rating. The maximum credit risk relating to cash and cash equivalents and trade and other receivables is equal to their carrying value of £131,103 (2018: £307,562).

Capital Disclosure

As in previous years, the Company defines capital as issued capital, reserves and retained earnings as disclosed in statement of changes in equity. The Company manages its capital to ensure that the Company will be able to continue to pursue strategic investments and continue as a going concern. The Company does not have any externally imposed financial requirements.

16. Related party transactions

On 1 July 2019, both Tony Fabrizi and Sean King each subscribed for 12,000,000 shares at a price of 0.1 pence per share.

17. Operating lease commitments

At the balance sheet date, the Company had no outstanding commitments under operating leases.

18. Ultimate Controlling Party

The Company considers that there is no ultimate controlling party.

19. Post Balance Sheet Events

On 14 October 2019, the Company granted warrants to subscribe for Ordinary shares as follows:

On 6 November 2019, Derek Lew was appointed as Chairman, replacing William Henbury with immediate effect.

On 6 November 2019, the Company placed 900,000,000 new Ordinary shares at a price of 0.1 pence per share, raising gross proceeds of £900,000 and subsequently made investments of approximately £150,000 each in six Esport companies.

On 19 February 2020, the Company allotted 50,000,000 new Ordinary shares of 0.1 pence per share pursuant to an exercise of warrants.

Caution regarding forward looking statements

Certain statements in this announcement, are, or may be deemed to be, forward looking statements. Forward looking statements are identified by their use of terms and phrases such as ''believe'', ''could'', "should" ''envisage'', ''estimate'', ''intend'', ''may'', ''plan'', ''potentially'', "expect", ''will'' or the negative of those, variations or comparable expressions, including references to assumptions. These forward looking statements are not based on historical facts but rather on the Directors' current expectations and assumptions regarding the Company's future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Such forward looking statements reflect the Directors' current beliefs and assumptions and are based on information currently available to the Directors.