Braveheart Inv Regulatory News (BRH)

The following announcement replaces the announcement released at 07.00 today under RNS number 4535H. The Record Date in the first sentence of the penultimate paragraph of the Chief Executive Officer's Report has been corrected to 20 September 2019. All other details remain the same.

1 August 2019

Braveheart Investment Group plc

("Braveheart", the "Company" or the "Group")

Final Results for the year ended 31 March 2019 & Notice of AGM

Braveheart Investment Group plc (AIM: BRH), the fund management and strategic investor group, announces its audited annual results for the financial year ended 31 March 2019, highlights of which are set out below:

• Proposed dividend of 0.5p per share

• Like-for-like loss of 1.04 pence per share

• Loss per share of 6.4 pence per share (2018: profit of 5.51 pence per share)

• Two existing Strategic Investments now consolidated into these accounts

• Capital reconstruction completed

• Post period end disposal of Viking Fund Managers Limited

• Post period end investment into Pharm2Farm Limited

For further information:

Braveheart Investment Group plc +44 (0) 1738 587555

Trevor Brown, Chief Executive

Allenby Capital Limited (Nominated Adviser and Broker) +44 (0) 20 3328 5656

David Worlidge / Nicholas Chambers

Chief Executive Officer's Report

I am pleased to report to shareholders for the year ended 31 March 2019.

Overview

Our Group strategy continues to be to apply the Board's expertise and financial resources, (at the year end we held £1.2m cash on the balance sheet), to those businesses which the Board consider have the greatest potential for outperformance. We have increased our investments into both Kirkstall and Paraytec over the past year and have provided significant management resource to both these companies. This has meant that as we have acquired in excess of 50% of the issued share capital of these two companies and are providing significant management resource to them we are deemed to have 'control'. The consequence of this is that we have had to consolidate the accounts of these two companies, which form a part of our Strategic Investments, into our Group accounts. This change in classification within these full year accounts was discussed in our Interim Report for the six months ended 30 September 2018. I think it is important to emphasise that this accounting change and the consequential change in the holding value of these investments are essentially non-cash accounting changes and do not affect the underlying operational businesses in any material sense nor our opinion regarding the potential value of these businesses in the future. If there had been no change in accounting treatment for these two investments then the loss before tax for the period under review would have been much reduced, to approximately £282,000.

In the period under review we have continued to develop and expand our Strategic Investments. In particular, during the year we made one entirely new investment, namely Phasefocus Holdings Limited and we also participated in and supported the spin-out of Sentinel Medical Limited from our existing Strategic Investment, Paraytec Limited. In addition, since the year end we also completed an entirely new investment into Pharm2Farm Limited (which we announced on 8 July 2019). This means that we now hold investments in six Strategic Investments (including Paraytec and Kirkstall) as follows:

·; Phasefocus Holdings Limited;

·; Paraytec Limited;

·; Sentinel Medical Limited;

·; Kirkstall Limited;

·; Gyrometric Systems Limited; and

·; Pharm2Farm Limited.

We have provided details of these investments together with operational updates about each of these companies below. We regard this growing portfolio of Strategic Investments as the principal way forward for generating significant value for our shareholders. This CEO Report seeks to reflect that fact by focusing on these companies and their development.

In the financial period under review the board undertook a capital reconstruction in order to enable the payment of dividends in the future. This was a lengthy process and was completed, and announced to the market, on 18 October 2018. The Board has now carefully reviewed the on-going cash requirements of the Company and decided to recommend the payment of a dividend of 0.5p per share for the year. We believe that this maiden dividend represents a reasonable balance between our desire to return as much cash as possible to our shareholders whilst at the same time maintaining sufficient cash within the business to ensure that we can generate future growth in shareholder value.

Portfolio and Strategic Investments

As in previous years we have continued to divide our investments into two categories, namely our Strategic Investments, of which there were five at the end of the year under review and with one further investment added after year under review, and our Portfolio Investments. Each of the Strategic Investments is summarised below in this annual report. The Portfolio Investments are direct investments into third party companies that were made by Braveheart from 2002 until the summer of 2015 (the 'Portfolio Investments'). There are investments into a total of 11 different companies within the Portfolio Investments as at 31 March 2019. Therefore, at the end of the period under review there were investments into a total of 16 companies.

As at 31 March 2019 the Strategic Investments (including Paraytec and Kirkstall which have been capitalised into the Company accounts but which we regard, from a management perspective, as investments) had a valuation of £595,350 (2018: 1,687,000). The Portfolio Investments had a valuation of £433,134 (2018: £444,836) and, therefore, the valuation of all the direct investments (Strategic Investments, including Kirkstall and Paraytec, and Portfolio Investments) had a valuation of £1,028,484 (2018: 2,220,132). The consolidation into these accounts of Parytec and Kirkstall, though a non-cash process, has resulted in change in accounting treatment which has led to a reduction in the net asset value of the total value of our investment holdings in the balance sheet. This has resulted in a reduction of goodwill of £1,451,000.

We will continue to manage the Portfolio Investments with a view to seeking exits wherever possible.

Strategic Investments Overview

Phasefocus Holdings Limited

Braveheart has held a small (0.19%) shareholding in Phase Focus Limited for some years. Following a restructuring of this company during the year under review, Phase Focus Limited was acquired by Phasefocus Holdings Limited ('Phasefocus') for a nominal sum. Braveheart participated in the restructuring with an investment of £60,000, in return for 21.2% of the equity.

Phasefocus, a spin-out from the University of Sheffield, has developed a series of patented computational imaging techniques that have a wide range of applications including live cell imaging, engineering metrology and electron microscopy. The Phasefocus Virtual Lens™ is a novel method for high fidelity quantitative imaging and microscopy. It is known in the scientific literature as "ptychography". It works equally well in both transmitted light and reflected light applications and, given suitable illumination sources and detectors, it can operate using any wavelength in the electromagnetic spectrum, as well electron and other particle waves and even sound waves. No focusing devices are required, so the Phasefocus Virtual Lens is an inherently 'lensless' imaging method. There are therefore no associated lens-related aberrations or limitations. However, the method can also be integrated with conventional microscopes that already possess a variety of lenses and these can be used to provide optical or geometric flexibility, or for conventional imaging.

The company's flagship product, Livecyte, quantifies and compares dynamic live cell behaviour, an important area for stem cell and cancer research. Powered by Phasefocus's computational imaging technology, Livecyte produces high-contrast videos of precious human cells, without the use of fluorescent labels that can affect the behaviour of cells. Integrated analysis software automatically tracks individual cells to unlock multi-parametric data and enable users to explore and compare cellular phenotypes under defined conditions, long-term, in micro-titre plates. Livecyte combines gentle imaging, high contrast images and tangible outputs to provide users with deeper insights previously unattainable without dyes or labels.

The live cell imaging market was worth $1.8bn globally in 2018, (source: Live Cell Imaging Market by Product by MarketsandMarkets Research Private Ltd, published February 2019), and is forecast to grow at 8.9% per annum, (source: Live Cell Imaging Market by Product by MarketsandMarkets Research Private Ltd, published February 2019). In December 2018, Phasefocus announced its second-generation Livecyte instrument, developed to address the needs of this market for quantitative and repeatable measurements of live cell phenotypic behaviour. Primary customers are currently research institutions active in cancer and stem cell research, with the pharmaceutical drug discovery sector a longer-term target market. Formally launched at the CYTO 2019 conference in Vancouver, the first instrument has already been purchased by University of Leicester, UK.

Paraytec Limited

Paraytec continues to operate profitably and with positive cashflow. The R&D project to develop a new point of care diagnostic device for bladder cancer detection and monitoring has progressed well. The opportunity in the bladder cancer area is of such magnitude that a new company, Sentinel Medical Ltd, has been formed in order to focus on the exploitation of this and closely related opportunities. This initiative is summarised in more detail below.

In Paraytec's traditional business area, the ongoing £1m UKTI grant funded R&D project, where Paraytec is working with Malvern Panalytical, GSK, Medimmune, Fujifilm Diosynth Biotechnologies and others to develop a new instrument to analyse the quality of protein-based pharmaceuticals, continues to progress well. Testing of Paraytec's initial prototype by the end user companies was successfully completed in late 2018 and their feedback was positive. The next stage is underway to convert the bench demonstrator into a full prototype.

An exciting new project has just been launched, where Paraytec is working with a pan-European consortium of three companies, a University and a hospital, to deploy Paraytec's technology in the field of Alzheimer's disease (AD) diagnosis. This two-year project will develop a prototype instrument to test blood and cerebrospinal fluid for protein biomarkers. By measuring and monitoring these proteins, clinicians aim to more accurately diagnose patients and monitor their treatment. As previously reported, the ability to forecast the likely rate of mental decline for a given AD patient will be a major advance.

In its core, royalty-based business, sales have not progressed as expected with one licensee for technical reasons, which are beyond their or Paraytec's control. Relationships with this licensee remain good and Paraytec and future generation products are not expected to be affected.

Sentinel Medical Limited

This company was incorporated on 29 March 2019 with Braveheart currently owning approximately 38.4% of the issued share capital. Sentinel Medical has been formed in order to provide a focus on the exploitation of bladder cancer detection and monitoring that has historically been developed within Paraytec. Whilst the bladder cancer test will utilise Paraytec's underlying technology, there will also be a significant amount of new Intellectual Property developed by Sentinel Medical itself. The regulatory regime and commercial skills required for success are somewhat different to the traditional areas of Paraytec's business, so to this end a high calibre management team of seasoned technological, commercial and medical experts in the field have been aligned with the business and will come on board in a more formal way, either as employees or as members of the Scientific Advisory Board when appropriate funding has been achieved. As a new entity, Sentinel Medical Ltd will seek EIS and SEIS approval, thus making it attractive to angel and high net worth investors in addition to, possibly, institutional investors. Braveheart is actively supporting the process of seeking equity and grant funding to drive this venture forward.

Kirkstall Limited

Kirkstall Limited ("Kirkstall") has developed Quasi Vivo™, a system of interconnected chambers for cell and tissue culture in laboratories. It has established a significant position in the rapidly emerging field that has become known as 'organ-on-a-chip', where its patented technology is used by researchers in academia and drug development companies to maintain living cells in a nutrient flow.

Global distributor Lonza made significant sales of Kirkstall's Quasi Vivo™ technology, particularly in the US over the last year. However, both parties agree this relationship has not progressed as quickly as expected and the Company is exploring alternative arrangements. The €4.7m EU grant funded project, CyGenTig, where Kirkstall is part of a consortium which includes the Universities of Wageningen (NL), Edinburgh (UK), Dusseldorf (D), and ETH Zurich (CH), is now underway. The project will allow Kirkstall to design a new range of Quasi Vivo™ products, suitable for live imaging of cells by advanced automated microscopy and digital image analysis. If successful, it will lead to new methods for manipulating cell growth and increased sales of Kirkstall products.

Kirkstall continues to sell products directly to researchers, predominantly in the UK and Europe, where its products are used in approximately 90 laboratories, universities and industrial organisations. Recently the company has seen increased interest from industrial researchers at French CROs and a top cosmetics company, which shows the increasing global profile of Kirkstall products.

The Company has become an active member and sponsor of three new UKRI funded research networks (Organ-On-a-Chip, 3DbioNet, and IBIN). These networks range from 150 to 300 members and are expanding rapidly, they include academic groups and industry (small, medium and large pharma). This forum has given Kirkstall the opportunity to expand into new areas of in-vitro model development including skin, and brain, and to form collaborations under funded projects with new research groups.

Last year Kirkstall organised two very successful ACTC conferences, in Cardiff and Cambridge. More than 50 speakers and 300 delegates attended from industry and academia, all were leading experts of in-vitro cell culture. The first of this year's ACTC conferences was held in Cardiff on 4 and 5 June 2019, over 100 delegates attended and the company has seen a significant increase in sales of its QV600 product for studying cells at the air/liquid interface.

Gyrometric Systems Limited

Gyrometric has developed a patent protected system of hardware and software to accurately monitor the runout in rotating shafts. As reported in September 2018, Braveheart disposed of part of its holding in Gyrometric and now holds 18% of the equity.

Over the past year, the company has a developed a number of new opportunities which are now coming to fruition. The company is working with Vulkan, its agent in the Marine market, and a UK manufacturer, to develop smart couplings for ships, wind turbines and other heavy machinery. Gyrometric is also working in the steel industry to develop systems for monitoring the very large number of rotary drives in steel plants and to provide better control of the drive rollers in high speed rolling mills.

Naturally, the bearings in steel mills are subject to very high loads and temperatures. Wear in these bearings adversely affects the finished product and can cause line failures. It is planned to use Gyrometric technology to monitor these bearings and save operators costs by better maintenance planning. Another the new applications being developed is for the monitoring of mud pumps in the Middle East, used in the oil and gas industry. These pumps are critical to the operation of drilling rigs, but they can wear out quickly and fail. The plan is to use the Gyrometric system to monitor pump and bearing performance.

Following on from the demonstration project at ORE, the UK's centre of excellence for wind turbine testing, two of the world's leading wind turbine producing companies are planning to run their own test programmes using Gyrometric's technology. Two new products have been developed and will shortly come to market. The first is a fully digital Universal Bearing Monitor. This is a device supplied as a kit which automatically provides warnings when the bearing is coming to the end of its life and sounds an alarm when the bearing is actually damaged. This product is believed to be unique on the market and beneficial to all users of critical bearings. The second is an engine monitoring unit which analyses firing on reciprocating combustion engines, useful primarily in ships, remote pumping stations and automatic backup power generating sets. Gyrometric Systems is well placed to take advantage of the move towards the Internet of Things (IOT) being a provider of accurate and reliable digital information on industrial plant equipment.

Pharm2Farm Limited

Braveheart announced on 8 July 2019 that it has acquired a 33 per cent. holding in Pharm2Farm Limited ("P2F"), a spin out from Nottingham Trent University ("NTU"), based in Nottingham, UK.

NTU and P2F have developed and patented a process to increase the bioavailability of trace minerals in plant feeds. Their patented process uses nanotechnology to dramatically improve trace element take-up in both flower and crop farming. P2F produce and sell these products through an exclusive licence to this technology from NTU.

Since records began in the 1940's, the nutritional value of the UK's crops has diminished dramatically. For example, potatoes now have 47% less copper, 45% less iron and 35% less calcium. It is now estimated that a single 1940's tomato would be nutritionally equivalent to 10 of today's tomatoes for copper minerals. Hidden hunger, a lack of vitamins and minerals, is not restricted to third world and developing countries but is prevalent throughout the globe. In today's current economic climate, more and more families are priced out of iron rich foods, such as red meat, and turn to cheaper alternatives such as chicken and vegetables. This has resulted in a global increase in the rates of iron deficiency anaemia.

Traditional fertilisers use a method called chelation to make trace minerals such as iron, zinc, manganese and copper soluble in water. This involves using a manmade 'cage like' molecule, called a ligand to entrap the mineral. The problem is that the ligand is so tightly bound to the metal that it requires a lot of energy to release it so that the plant or animal can use it (bioavailability). P2F and NTU have developed a new way to increase the bioavailability of trace minerals using nanotechnology that moves away from chelated minerals and instead uses natural minerals and amino acids to improve their take-up.

This pioneering technology was initially developed to enrich the nutritional value of potatoes, in conjunction with the Agriculture and Horticulture Development Board ("AHDB") which represents farmers. Preliminary results not only showed a 20 per cent. increase in iron uptake by the tubers, but also an increase in yield and an approximate two-week reduction in the time to harvest. This patented technology has now been developed for use in the growing of other commercial crops, both in soil and hydroponically.

The worldwide hydroponics market alone is estimated to be $8.1 billion in 2019 and is expected to continue to grow at a compound annual growth rate of over 12 per cent. to $16.0 billion by 2025, with the EU remaining the largest market for hydroponically produced crops. (Source: Hydroponic Market by Type by MarketsandMarkets Research Private Ltd, published May 2019.)

The Board of Braveheart believes there is a substantial market opportunity for this technology and is now in negotiations to take the Group's shareholding in P2F to 54 per cent. by way of a working capital investment.

Fund Management

As previously reported, shortly after the end of the financial period under review, the entire issued ordinary share capital of the subsidiary company, Viking Fund Managers Limited ("Viking") was sold for £110,000 in cash together with an additional payment, estimated to be approximately £170,500, which is due to be paid in cash once the performance fee of an existing fund management contract has been agreed with the client in early 2020 ("Performance Fee"). Furthermore, cash held by Viking at the date of completion, which totalled £72,000, was not included in the sale and was transferred to Braveheart and the intercompany loans payable by Braveheart, Strathtay Ventures Limited (another subsidiary of Braveheart)("Strathtay") and Ridings Early Growth Investment Company Limited (another subsidiary of Braveheart)("REGIC") to Viking, amounting to approximately £650,000, were forgiven immediately prior to completion of the sale.

In the year ended 31 March 2018, Viking achieved a profit before tax of £404,388 on revenues of £715,523. However, due to the declining fees that are being generated from existing contracts, the unaudited revenue of Viking for the year ended 31 March 2019 is estimated to be approximately £478,000 and the unaudited profit for the same period is estimated to be approximately £75,000. If no new contracts were entered into by Viking, the revenues for the year ending 31 March 2020 were expected to be significantly lower as the management contract for the Finance Yorkshire Equity Fund expires on 31 December 2019, as has been previously disclosed. As at 31 March 2018, Viking had audited net assets of £794,474, including intercompany loan balances of £457,171 due from Braveheart, Strathtay and REGIC, investments in RHL and REGIC of £45,000, an accrual for the Performance Fee of £174,939 and cash of £42,541. None of these assets are included as part of the sale of Viking.

Whilst we continue to perform fund management activities for a number of other funds, the income likely to be received by Braveheart from this work in the future is now materially reduced for at least the short term. The Board has, over the course of the period under review, worked to create a new business plan for this part of the Group but has concluded that at this time the focus for Braveheart should be to develop and support the Strategic Investments rather than to devote what the board believes would need to be significant investment and management time towards seeking new fund management contracts. There is a real risk that it would be some time before any further effort in winning additional fund management contracts would generate any meaningful additional revenue and the conclusion reached is that the focus of our efforts should be on the Strategic Investments.

Consolidation

The conversion of our loan to Paraytec into equity and a review of our role in Kirkstall has resulted in Braveheart being considered to have control as defined by the IFRS accounting standards (IFRS10), and it is therefore a requirement to consolidate Paraytec and Kirkstall in the Group accounts. The change of status from investment to subsidiary of the Group means that each of these two company's results are included within the consolidated Group accounts at 31 March 2019 and, in addition, the valuation previously used for these shareholdings will be now partly recognised as a goodwill figure in our Balance Sheet and will therefore be subject to an impairment review. As the net asset values of both these companies are lower than the investment value, goodwill has been written down as a result of this impairment review resulting in a significant one-off write-down in the accounts of the group. This is treated as an exceptional non-cash change in the accounts. I think it is important to emphasise that these changes and the change in the value of these investments are essentially non-cash accounting changes and do not affect the underlying operational businesses in any material sense. If there had been no change in accounting treatment for these two investments then the loss before tax for the period under review would have been much reduced, to approximately £282,000.

Outlook and Strategy

For the next year, our attention and resources will continue to be focussed upon the further development of the now six Strategic Investment businesses where we have significant commercial exposure. In each of these businesses there exists the prospect of a single transformational event, for example securing a large sales contract with a major OEM, the development of a new product or application and an outright sale to an acquirer. Of course, there is also the possibility that none of these developments will occur during the current year. Shareholders will make their own minds up about the probability and range of future outcomes, and while I cannot claim to be more prescient than any other shareholder, the Directors believe the current market capitalisation of the Group does not appear to take account of all these possibilities.

Financial Review

During the year we continued the comprehensive review of our cost base and continued to reduce the central costs.

Income Statement

Fee-based revenue was generated by both Strathtay Ventures Limited ('SVL') and Viking Fund Managers Limited ('VFM'). During the year under review the income earned by SVL was transferred across to Viking in order that the final steps for the orderly closure of this company could take place. The principal revenue from the Group's operations comprises investment management fees, with total revenue during the year being £574,000 (2018: £820,000). Finance income was £3,000 (2018: £6,000), this being interest on outstanding loan notes within the directly held portfolio.

As at 31 March 2019, the total number of directly held portfolio of Strategic Investments and Portfolio Investments was 16 companies (2018: 15), of which two have been consolidated into Braveheart's accounts. The fair value of the directly held portfolio, excluding the two companies now consolidated into the Company's accounts, was £736,000 (2018: £2,220,000). During the year the Group made investments of £60,000 into one portfolio company, PhaseFocus Holdings Limited, and decided that it would be appropriate to re-categorise it as a Strategic Investment. Two investments that are considered as Strategic Investments by the Board are now deemed to be 'controlled' by Braveheart Investment Group Plc and as a result of this those companies have been consolidated into Braveheart's accounts (but remain categorised by management as Strategic Investments). At the year end, the value of these two investments was £340,000. Therefore, the fair value of the directly held portfolio (Strategic Investments and Portfolio Investments and including the two investments that have now been consolidated into the Company's accounts) was £1,076,000. Shortly after the year end, the Group sold its subsidiary fund management business, Viking Fund Managers Limited, for £110,000. The majority of the assets and liabilities of that company were transferred to Braveheart Investment Group Plc prior to the sale (totalling £91,000) and a further £170,500 is expected be paid in January 2020, which relates to the expected accumulated performance bonus that Viking Fund Managers was entitled to at 31 March 2019.

Total income for the year ended 31 March 2019, including realised gains and unrealised revaluation gains and losses, was £672,000 (2018: £1,979,000).

The average number of employees increased from 4 to 7 during the period under review. This increase in the number of employees is as a result of the consolidation into these accounts of Kirkstall and Paraytec. The number of employees working within the Group, excluding employees of Kirkstall and Paraytec, fell from 4 to 3 during the year under review. Employee benefits expense was £428,000 (2018: £322,000). Other operating and finance costs increased to £485,000 (2018: £164,000). 

The total loss after tax increased to £1,733,000 (2018: profit of £1,493,000), equivalent to a basic loss per share of 6.40 pence (2018: profit per share of 5.51 pence). This loss is largely due to an impairment of goodwill of £1,451,000.

Financial Position

Net assets at 31 March 2019 were £2,281,000 (2018: £3,984,000), equivalent to 8.42 pence per share (2018: 14.71 pence).

The Group's net assets include goodwill of £340,000 (2018: £380,000). The carrying value of goodwill was reviewed during the year and in light of the sale of Viking Fund Managers, the £380,000 previously held was reclassified as an asset held for sale and impaired to £103K. Additionally, goodwill on the acquisition of Paraytec Limited and Kirkstall Limited amounted to £618,000 and £941,000 respectively. The income method was not deemed appropriate for these companies due to the difficulty of projecting the future income of these companies, so market value approach was considered more appropriate. As a result of this, goodwill has been reduced to £278,000 and £62,000 respectively.

At the year end the Group had cash balances of £1,207,000 (2018: £1,134,000). There were no material borrowings.

A summary analysis of the Group's performance is as follows:

Key Performance Indicators (KPIs)

The KPIs we use to monitor business performance have been changed in order to better reflect the emphasis that the Board has placed upon the development of the Strategic Investments as the best way to increase shareholder value over the short and medium term. Given the nature of our business these KPI's remain as, primarily, financial measures. They are:

Proposed Dividend

The Directors are proposing a dividend of 0.5p per share, to be paid to shareholders who are on the register at the close of business on 20 September 2019. If it is approved by Shareholders at the Annual General Meeting then the dividend would be paid on 11 October 2019. The Board has been seeking to begin to return excess cash to shareholders for some time but was not able to do so until completion of the capital reconstruction that was announced during the year under review. The Board has carefully assessed the short to medium term probable financing requirements that the Company will require and has concluded that this maiden proposed dividend of 0.5 pence per Ordinary Share strikes the right balance between returning to shareholders cash that is not required and maintaining a balance of cash within the Company that allows it to continue to pursue its strategic objectives.

Principal Risks and Uncertainties

Through its operations the Group is exposed to a number of risks. The Group's risk management objectives and policies are described in the Corporate Governance Statement.

On behalf of the Board

Trevor E Brown

Chief Executive Officer

31 July 2019 

Consolidated Statement of comprehensive INCOME

consolidated statement of financial position

Consolidated Statement of CAsh flows

Consolidated Statement of ChAnges in Equity

Notes to the financial statements

1 General information

While the financial information included in this announcement has been prepared in accordance with International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Group has also published full financial statements that comply with IFRSs available on its website and to be circulated shortly.

The financial information set out in the announcement does not constitute the company's statutory accounts for the years ended 31 March 2019 or 2018. The financial information for the year ended 31 March 2018 is derived from the statutory accounts for that year, which were prepared under IFRSs, on which the auditors have given an unqualified report that did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006, and which have been delivered to the Registrar of Companies.

The financial information for the year ended 31 March 2019 is derived from the statutory accounts for that year, which were prepared under IFRSs, on which the auditors have given a qualified report (extract set out below), and which will be delivered to the Registrar of Companies.

Extract from Audit Report

"Basis for qualified opinion

During the year ended 31 March 2019, Braveheart Investments Group Plc acquired controlling shareholdings in Paraytec Limited and Kirkstall Limited. The directors did not make us aware that, as at 31 March 2019, these subsidiaries held, in aggregate, inventories of a material value. We were therefore unable to observe the counting of physical inventories at the end of the year for Paraytec Limited and Kirkstall Limited. Kirkstall Limited did not undertake a count of physical inventories at the year end. We were unable to satisfy ourselves by alternative means concerning the inventory balances held as at 31 March 2019, which are included in consolidated statement of financial position at £116,293, by using other audit procedures. Consequently, we were unable to determine whether any adjustment to this amount was necessary. In addition, were any adjustment to the inventory balance to be required, the strategic report would also need to be amended.

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion."

2 Accounting policies

Basis of preparation

The Group and Company financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRIC interpretations (IFRS IC) as adopted by the European Union as they apply to financial statements for the year ended 31 March 2019 and as applied in accordance with the provisions of the Companies Act 2006. The principal accounting policies adopted by the Group and by the Company are set out in the financial statements.

The financial statements have been prepared on a historical cost basis, except where otherwise indicated. The financial statements are presented in sterling and all values are rounded to the nearest pound (£) except where otherwise indicated.

The Directors have reviewed the Group's and the Company's budgets and plans, taking account of reasonably possible changes in trading performance and have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future and that it is therefore appropriate to continue to adopt the going concern basis in preparing the financial statements. Whilst the company is currently showing a net current liabilities position, the balance is significantly better than it was in the previous year.

3 Revenue

Revenue is attributable to the principal activities of the Group. In 2019 and 2018, all revenue arose within the United Kingdom.

The business is regarded as one segment due to the nature of services provided and the methods used to provide these services. The business is managed and financial performance is reported to the Board on this basis.

Of the revenue stated above, £84,246 (2018: £104,539) related to The Lachesis Seed Fund Limited Partnership.

The group derives revenue from the transfer of goods and services over time and at a point in time in the following major product lines:

4 Earnings per share

Basic earnings per share has been calculated by dividing the profit attributable to equity holders of the parent by the weighted average number of ordinary shares in issue during the year.

The calculations of profit per share are based on the following profit and numbers of shares in issue:

Dilutive earnings per share adjusts for share options granted where the exercise price is less than the average price of the ordinary shares during the period. At the current year end there were 75,675 (2018: 75,675) potentially dilutive ordinary shares.

5 Investments at fair value through profit or loss

As at 31 March 2019, the group total value of investments in companies was £688,058 (2018: £2,220,213). The group total change in fair value during the year was a gain of £165,806 (2018: gain £1,152,597). During the year, investments that were valued at £1,559,386 were transferred to investment in subsidiaries.

Investments, which include equity and debt investments, are designated on initial recognition as financial assets at fair value through profit or loss. This measurement basis is consistent with the fact that the Group's performance in respect of its portfolio investments is evaluated on a fair value basis in accordance with an established investment strategy. When investments are recognised initially, they are measured at fair value.

After initial recognition the fair value of listed investments is determined by reference to bid prices at the close of business on the reporting date. Unlisted equity investments are measured at fair value by the directors in compliance with the principles of the International Private Equity and Venture Capital Guidelines, updated and effective December 2015, as recommended by the European Venture Capital Association. The fair value of unlisted equity investments is determined using the most appropriate of the valuation methodologies set out in the guidelines. These include using recent arm's length market transactions; reference to the current market value of another instrument, which is substantially the same; earnings or profit multiples; indicative offers; discounted cash flow analysis and pricing models.

The Group classifies its investments using a fair value hierarchy. Classification within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant investment as follows:

·; Level 1 - valued using quoted prices in active markets for identical assets;

·; Level 2 - valued by reference to valuation techniques using observable inputs other than quoted prices included within Level 1; and

·; Level 3 - valued by reference to valuation techniques using inputs that are not based on observable market data.

The fair values of quoted investments are based on bid prices in an active market at the reporting date. All unquoted investments have been classified as Level 3 within the fair value hierarchy, their respective valuations having been calculated using a number of valuation techniques and assumptions, notwithstanding that the basis of the valuation methodology preferred by the Group is 'price of most recent investment'.  To reflect the potential impact of alternative assumptions and a lack of liquidity in these holdings, a discount of 15% has been applied to all Level 3 valuations. When using the DCF valuation method, reasonably possible alternative assumptions could have a material effect on the fair valuation of investments.

The impact on the fair value of investments if the discount rate shifts by 1% is £6,881 (2018: £21,305).

6 Goodwill

At the end of the current year, the Group assessed the recoverable amount of the above goodwill associated with Neon's cash-generating unit and determined that goodwill would be moved to assets held for sale as a result of the company being sold after the year end.

The income approach was not deemed a reliable method for valuing the goodwill of Paraytec and Kirkstall. Therefore, the market value method was used in order to ascertain the value of goodwill at the year end.

7 Posting of audited results for the year ended 31 March 2018 and Notice of AGM

The Company is pleased to announce that it expects to post its audited report and accounts for the year ended 31 March 2019 to shareholders shortly. It is also posting notice of its annual general meeting ("Notice of AGM"), to be held at the offices of PKF Littlejohn LLP, 1 Westferry Circus, London, E14 4HD on 29 August 2019 at 11.00 a.m. Copies of the final report and accounts and the Notice of AGM will also be available to view on the Company's website shortly, at http://www.braveheartgroup.co.uk/.