FINAL RESULTS-BLUE STAR CAPITAL PLC

FINAL RESULTS-BLUE STAR CAPITAL PLC

Final Results for the year ended 30 September 2023

 

Blue Star Capital plc (AIM: BLU), the investing company with a focus on esports, technology and its applications within media and gaming, announces its final results for the year ended 30 September 2023.

 

Operating and financial summary

 

-    The Company incurred a pretax loss for the period of £6,329,473 compared to a loss for the previous period of £1,301,008.

-    The main factors behind this year's significant loss were the write down in value of the Company's investments in Dynasty Media & Gaming and Sthaler and losses incurred on the realisation of the Company's quoted investments.

-    The operating expenses of the Company have been significantly reduced from £517,003 to £201,118

-    The cash position of the Company at 30 September 2023 was £63,158 compared with £86,575 in the previous period.

-    The formal sales process for SatoshiPay is ongoing and the Company will update shareholders as appropriate. The Company has a 27.9% interest in SatoshiPay which is valued on the basis of the last external fund raise in 2019 at approximately £4.65 million.

-    The Company's Net Asset value per share is 0.11p

-    Post year end a decision was taken by the management of Dynasty to merge with Googly. To help support Dynasty through this transitioning phase, Blue Star invested US$75,000 in a US$3 million fundraise undertaken by Dynasty in November 2023. The Convertible Loan Note has a two-year expiry period, is non-interest bearing and convertible at a discount of 50 per cent to Dynasty's next funding round.

 

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

 

The AGM will be held at the offices of Cairn Financial Advisers LLP, 80 Cheapside, 3rd Floor, EC2V 6EE on 17 April 2024 at 10.30 a.m. Shareholders wishing to vote on any matters of business at the AGM are encouraged to do so through completion of a proxy form which can be completed and submitted to the Company. Proxies should be completed and returned in accordance with the instructions on the form of proxy by no later than 10.30 a.m. on 15 April 2024.

 

Tony Fabrizi Executive Chairman of Blue Star Capital plc, commented:

"The last year was one of considerable disappointment for all those connected with Blue Star. The material and unexpected write down in value in our investment in Dynasty has had a significantly detrimental impact on the Company's net asset value and this has obviously impacted sentiment towards the Company. Our focus is on securing an attractive offer for our shareholding in SatoshiPay later this year at which point the Board will consult with shareholders over the Company's future."

 

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

 

For further information, please contact:

 

Blue Star Capital plc

+44 (0) 777 178 2434

Tony Fabrizi

Cairn Financial Advisers LLP

+44 (0) 20 7213 0880

(Nominated Adviser & Broker)

Jo Turner / Liam Murray

 

 

Chairman's Statement

Blue Star Capital plc ("the Company" or "Blue Star") provides investors with exposure to a portfolio of geographically diverse companies in high-growth, disruptive technology sectors.

 

During the period, the Company's Net Asset Value ("NAV") decreased by 53% to £5,329,347 (2022: £11,414,507) with the Company incurring a pre-tax loss of £6,328,408 (2022: loss £1,301,008). The significant decline in NAV and loss for the year principally reflect the write down of our investments in Dynasty Media & Gaming and Sthaler plus the losses incurred on the realisation of the Company's quoted investments. The Company ended the year with cash of £63,158 (2022: £86,575).

 

In September 2022, the Board set out its strategy for the next two years. The key components were to refrain from making any new investments while it sought offers for its shareholdings in SatoshiPay and Dynasty. The Board also advised that, if possible, it would endeavour to manage the business without any further equity raises.

 

We provide the following portfolio company overviews for the year ended 30 September 2023.

 

Blockchain and decentralised finance

 

SatoshiPay's mission is to connect the world through instant payments. To achieve this ambition, SatoshiPay is initially focusing on building the Pendulum Network Project ("Pendulum").

 

Pendulum, a smart-blockchain infrastructure technology company, aims to decentralize forex and traditional finance, by providing the missing link between fiat currency and De-Fi ecosystems through a sophisticated smart contract network. Pendulum is committed to advancing foreign exchange ("Forex") trading into the blockchain space to integrate a tranche of the US$6.6 trillion traded daily in Forex markets.

 

In the period under review, Pendulum has achieved a number of key operational milestones, most notably:

 

•              In December 2022 Pendulum completed its crowdloan as a precursor to it becoming a Polkadot Parachain. Pendulum's crowdloan was the fastest parachain crowdloan in the history of the Polkadot ecosystem.

•              Pendulum parachain went live on Polkadot mainnet in February 2023 and the corresponding utility token called PEN was listed on MEXC in March 2023.

•              In March 2023 Pendulum announced the development of "Spacewalk", its blockchain bridge connecting the Stellar and Polkadot networks. This innovative bridge is intended to facilitate the transfers of multiple stablecoins, advancing interoperability in the blockchain space. Pendulum described Spacewalk as a trust-minimized bridge that supports the smooth and seamless transfer of stable assets between the two ecosystems, allows closer collaboration in the De-Fi sector and drives synergies between traditional fintech services and the De-Fi sector.

•              In December 2023, an HRMP channel was opened with Moonbeam Network helping to demonstrate Pendulum's partnerships strategy. This launch helped enable additional functionalities for the PEN token and stablecoin activities within the Moonbeam ecosystem and assisted with the listing of PEN on Moonbeam's DEX Stellaswap in early January 2024.

 

SatoshiPay currently owns around 5% of the PEN tokens and has a service contract with Pendulum to provide software development.

 

SatoshiPay also successfully incubated the 0xAmber AMM Project (now called Nabla.fi) for which it secured 5 per cent of the future tokens. Nabla is a novel AMM design for low-risk, single-sided liquidity provision, significantly lower slippage and fees compared to other AMM designs. The nabla.fi team are about to launch their novel-design decentralized exchange with oracle-guided pricing and single-sided liquidity provision for maximum capital efficiency and attractive FX rates on chain.

 

During the period, the SatoshiPay team took the decision to mothball Dtransfer, given the need to focus resources on Pendulum and Nabla. However, the successful incubation of Pendulum followed by Nabla provides the board of SatoshiPay with confidence that they are well positioned to incubate other DeFi applications with a stablecoin, FOREX or business focus.

 

In its most recent results to 31 December 2022, SatoshiPay achieved turnover of €2.93 million and profits after tax of €587,000.

 

Blue Star currently has a 27.9% interest in SatoshiPay's share capital, which is valued on the basis of the last external fund raise in 2019 at approximately £4.65 million. As previously announced, Benchmark International have been appointed to undertake a formal sales process for SatoshiPay which may lead to the sale of all or part of Blue Star's shareholding in SatoshiPay. There is no guarantee that this exercise will result in a whole or partial sale, but the Board believes it's important to undertake such a process so as to obtain a better understanding of SatoshiPay's current and potential value.

 

Esports

 

To date we have invested approximately £2.5 million in our Esports portfolio which originally consisted of eight companies, with the main investments being £712,665 in Guild and £969,268 in Dynasty. In last year's accounts we wrote off four of those investments and started the year with investments in Dynasty, Googly, Paidia and Guild. These investments were carried at either cost or last private fundraising for our private investments or market value for our quoted investments.

 

Details of the four Esports investments are provided below.

 

Dynasty Media & Gaming

Dynasty's original business plan was to provide its gaming platform to large telecoms companies, for which it initially had much success, generating fixed monthly license fee income. However, operational complexities, including the need to support several different and highly customised platforms, led to a pivot to focus on launching B2C platforms with more strategically aligned and complementary partners and in the process, maintaining control of its products and contact with the end users. As a result of extensive technology development, Dynasty's platform has now moved to a single code base, meaning time to launch in new markets has been reduced from at least nine months to one month.

 

As previously reported, Dynasty believes it has built the leading and most comprehensive gaming/esports platform globally, which combines the following key features, licenses, and accreditations in one single platform:

 

•              Enterprise grade international esports tournament engine accredited and endorsed by major international games publishers including Riot, Activision and Supercell to run professional leagues and mass market grassroots esports feeder leagues.

•              The only enterprise grade esports platform and gaming shop that:

 supports international standard professional esports tournaments for both PC and Mobile games, the world's fastest growing gaming sector;

 is optimised for key hyper-growth 'mobile first' markets. Dynasty optimised its mobile experience to 30MB, perfect for mobile first markets such as India, Africa, SEA and LATAM;

 incorporates a payment wallet, subscription engine, digital voucher and top up shop, with full security accreditation;

 can deliver and launch a fully branded, fully functional partner platform within 4 weeks. This has been enabled by a single code cloud-based code structure.

·      Full customer relationship management campaign engine to increase monetisation and engagement.

·      Unique User Generated Tournament engine that allows users to create entry fee and prize pool tournaments, sharing in platform monetisation.

·      The only enterprise grade esports and gaming shop with an AI Academy, allowing players to improve in game performance.

 

Dynasty now has live B2C platforms in several key gaming markets including Googly in India, Lets Play Live in Australia and New Zealand and Lightning Dragon in Philippines. Further details on these platforms are summarised below:

 

Googly: Dynasty advises that India is the world's fastest growing gaming market, with over 750 million gamers forecast in the country by the end of 2026, spending more than US$6.7 billion. By most metrics, the rate of growth in gaming in India is more than double the average of the rest of the world - this includes more mature, slower growth markets like North America and Europe, but also accelerating regions such as Latin America and Southeast Asia. The future growth of gaming in India will continue to be almost entirely driven by mobile, fuelled by a young population of digital natives, increasing wealth, and mass smartphone adoption. Googly's platform offering provides India's gamers a diverse, immersive experience, catering to all levels of casual and competitive gaming, including - leaderboards, live broadcasts, engaging content, unique user-generated prizepool tournaments, and a market leading games shop.

 

Lets Play Live: The platform was launched in June 2023 with the Company's 50/50 JV partner Lets Play Live, the region's leading tournament organiser and gaming content creator. Within the first six months of operation, the platform has already become Oceania's largest and most successful gaming platform with over 420,000 users. Major official publisher-led national and regional tournaments secured with an extensive calendar scheduled throughout 2024 for leading games titles including Valorant, Fortnite, and Clash Royale.

 

Lightning Dragon: The platform was recently launched with large media conglomerate Vera Media Group. Lightning Dragon has already secured significant partnerships including PayMaya, one of the region's leading payment providers with over 40 million users in the Philippines, and Razer, one of the world's largest gaming brands. Lightning Dragon expects to announce several more strategic marketing partnerships in the coming weeks across sectors including TV, radio, telcos, retail, esports tournament organisers and gaming content creators.

 

Dynasty's management believe their new business model will allow them to become cash-flow positive later this year. Within their business model, India is the largest contributor and given the importance of the Indian market and the financial support provided by Googly and its shareholders to Dynasty over the last 9 months, a decision was taken late last year to merge Dynasty and Googly. To help support Dynasty through this transitioning phase, Blue Star invested US$75,000 in a US$3 million fundraise undertaken by Dynasty in November 2023. The Convertible Loan Note had a two-year expiry period, was non-interest bearing and converted at a discount of 50 per cent to Dynasty's next funding round.

 

Details of the merger were announced on 13 March 2024, in which Dynasty has entered into an agreement to acquire the entire assets and business of Googly for a purchase consideration of approximately US$7.6 million in an all-share acquisition that values the combined entity at US$15m. In addition, the Company has also been informed that a number of Convertible Loan Note holders in Dynasty also intend to convert post the Acquisition and the Company has decided that it will also convert its US$75,000 Convertible Loan at that point.

 

Blue Star has been an investor in Dynasty since 2019 and pre the merger with Googly and the conversion of all outstanding Convertible Loan Notes, had a shareholding of approximately 13%. Additionally, the Company had a shareholding of 0.6% of Googly. Post the merger and pre conversion of the Convertible Loan Notes, the Company holds approximately 6.3% of the fully diluted share capital of Dynasty. Assuming all Convertible Loan Notes convert, this holding is expected to fall to around 2.4%.

 

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