Tern PLC (TERN) 
Tern PLC: Unaudited Interim Results for the six months to 30 June 2019 
 
25-Sep-2019 / 07:00 GMT/BST 
Dissemination of a Regulatory Announcement, transmitted by EQS Group. 
The issuer is solely responsible for the content of this announcement. 
 
25 September 2019 
 
Tern Plc 
 
(AIM: TERN) 
 
Unaudited Interim Results for the six months to 30 June 2019 
 
 Tern Plc ("Tern" or the "Company"), the AIM quoted investment company 
 specialising in the Internet of Things ("IoT") market, is pleased to 
 announce its interim results for the six months to 30 June 2019. 
 
Key Highlights 
 
                                 30 June 2019   30 June       31 
                                                   2018 December 
                                                            2018 
 
                                            GBP 
                                                      GBP 
                                                               GBP 
Net assets                         17,478,283 13,942,75 16,751,7 
                                                      7       73 
Current assets                      2,153,071 2,671,784 2,152,98 
                                                               1 
Total assets                       17,946,668 14,221,70 17,009,2 
                                                      4       20 
Loss for the period                (62 3,340) (221,252) (312,564 
                                                               ) 
Net asset value per share                6.9p      6.2p     7.1p 
 
· The increased loss for the period compared to the six months to June 
2018 was primarily due to a GBP0.1m increase in operating costs and a GBP0.3 
million lower fair value increase. In the six months to 30 June 2019, 
there was no exchange rate revaluation required compared to 2018 where the 
fair value increase was primarily due to exchange rate movements. 
 
· Cost management continues to be a central focus. The increase in 
administrative costs in the period compared to the monthly burn rate in 
the year ended 31 December 2018 was due to additional advisory costs in 
the UK and the USA, along with an increase in Directors' salaries to begin 
to bring them closer to more conventional market levels. 
 
· The Company raised GBP1.5 million during the period, strengthening the 
balance sheet and improving Tern's investment options. As at 30 June 2019, 
Tern had GBP1.4 million cash on the balance sheet. 
 
· Year-on-year increase in turnover of principal portfolio companies1 from 
calendar year 2018 to 2019 is expected to be of the order of 50%. 
 
· Year-on-year increase in employees within principal portfolio 
companies1, a key growth measurement, increased by 9% in the six months to 
June 2019. 
 
· Net asset value per share remained comparable across the period. 
 
Al Sisto, CEO of Tern Plc, said: 
 
 "During the first half of 2019, Tern has actively focused on developing 
 opportunities to expand its portfolio and to increase the fair valuation of 
 its existing portfolio companies. We have also built our portfolio value 
 through some follow-on investment activities, all the while maintaining our 
 focus on adding value to our investment companies through advice, 
 introductions and capital. 
 
 "Our involvement has enabled the technology entrepreneurs in our portfolio 
 to grow their businesses and has provided our investors with a portfolio of 
 exciting early and growth-stage technology companies. Positive progress was 
 also achieved on our marketing objective to position Tern as a leading 
 investor in UK IoT technology companies and we will be doing more to 
 progress this in the next 12 months. 
 
 We are committed to supporting our portfolio and investing in the very best 
 IoT technology companies in the UK in order to grow our NAV per share. We 
are grateful for the ongoing support of our shareholders and look forward to 
 providing updates to the market as we deliver on our strategy." 
 
Note 1: Principal portfolio company growth excludes Seal and Push, in which 
Tern has a <1% holding and minimal influence. 
 
 Enquiries: 
 
Tern Plc                          via Newgate 
 
Albert Sisto/Sarah Payne 
 
Allenby Capital Limited           Tel: 020 3 328 5656 
 
(Nomad and joint broker) 
 
David Worlidge/Alex Brearley 
 
Whitman Howard                    Tel: 020 7659 1234 
 
(Joint broker) 
 
Nick Lovering/Christopher Furness 
 
Newgate Communications            Tel: 020 7382 4730 
 
Elisabeth Cowell/Fiona Norman 
 
 Chief Executive's Statement 
 
 Tern is focused on delivering NAV growth per share by providing its 
 shareholders with investments into an exciting array of early-stage IoT 
 companies, which provide best-in-class solutions for the healthcare and 
 industrial IoT markets. These markets present sizable opportunities for 
 generating returns, as they have a large underlying population of IoT 
 devices and use cases in existence today. For example, the "all in" IoT 
 healthcare market [1] size is projected to reach US$534.3 billion by 2025 
 expanding at a CAGR of 20% between 2019 and 2025, according to a report by 
 Grand View Research, Inc. (March 2019). The global Industrial Internet of 
 Things (IIoT) market is expected to reach a value of US$922.62 billion by 
 2025, according to a Million Insights report (March 2019). 
 
 Our financial priorities continue to be accelerating the progress of our 
portfolio companies' commercial success; value creation; robust realisations 
 and the addition of new investments by: 
 
· Investing in and creating businesses which have market validation and 
competitive advantages; 
 
· Providing hands-on support to achieve value creation and making 
introductions which help our companies achieve scale and a presence in the 
USA; 
 
· Strengthening management and boards where appropriate; 
 
· Syndication of post-seed round investments in our companies, focusing on 
relevant strategic and financial investors, to provide validation, and 
additional growth capital that de-risks the path to commercial success and 
monetisation; and 
 
· Exploring innovative ways to expand the synergistic benefits of our 
portfolio. 
 
 During the six months to 30 June 2019, the fair value per share of our 
 portfolio remained broadly stable at 6.2p (FY18: 6.3p; HY18: 5.1p) which 
 included a 6% increase in the absolute portfolio value. Our operating costs 
 during the period increased compared to the six months to 30 June 2018 by 
    GBP0.1 million to GBP0.7 million (HY18 costs: GBP0.6 million; FY18 costs: GBP1.3 
million). The majority of this increase was due to an increase in Directors' 
 fees and professional fees, alongside one off legal and professional 
 advisory fees. The one-off costs were incurred due to the Company exploring 
 an opportunity to rapidly expand its portfolio through a strategic 
 initiative. This transaction would have added a significant number of 
 companies to the Company's portfolio, increased our NAV and broadened our 
resources to support and manage the larger portfolio. However, after careful 
 due diligence and with the support of our advisers the Board decided not to 
 pursue the opportunity any further. 
 
 Providing a greater opportunity to create and return value to our 
 shareholders is our primary objective and we remain committed to expanding 
 our portfolio to at least twelve companies, leveraging our unique 
 positioning in the IoT space. The timeline for sourcing, structuring and 
executing new investments in market leading UK IoT companies that fit within 
 Tern's investment strategy will sometimes be beyond Tern's direct control. 
As a result, the Board does not now expect to have at least twelve companies 
 within the portfolio by 31 December 2019. However, our deal flow remains 
 strong and this critical goal will be our focus for the remainder of 2019 
 and beyond to fuel the growth of our NAV per share. 
 
During the first six months of 2019 we raised GBP1.5 million to strengthen our 
 financial position for upcoming investment opportunities and to provide 
 additional financing support to our existing portfolio companies to enable 
 their continued growth. During the period we delivered follow-on investment 
  and support amounting to GBP1.4 million. In particular, Wyld Networks, which 
 holds a 90% interest in Wyld Technologies, acquired the assets of Amiho 
 Technology Ltd. As a result of this transaction, we added assets costing 
  only GBP42,910 to the existing business of Wyld Networks and supported the 
  business with additional operating capital of GBP373,292, via a short-term 
 loan. This activity resulted in a new direction for Wyld Networks, which 
 started as flexiOPS, a grant-based business. Wyld Technologies is now 
 focused on the rapidly growing low power IoT mesh connectivity space. 
 
 We, along with Alsop Louie Partners and the Samenuk Family Trust, continued 
 with our convertible loan note support of Device Authority. During the 
 period Tern provided loan note support to Device Authority amounting to 
  GBP622,634 which included a small bridge loan, repaid on receipt of the R&D 
 tax credit. This capital enabled Device Authority to continue its partner 
 and customer development activities, which now includes an expanded list of 
new customers, as it pursues a strategic partner to help leverage its market 
 successes. 
 
 Lastly, the Company provided InVMA with a small convertible loan of GBP50,000 
 and FundamentalVR with a bridge loan advance to a next round of investment 
of GBP325,000. This bridge loan was at favourable terms, with Tern receiving a 
 20% discount upon equity conversion of the bridge at the next round of 
 investment capital into FundamentalVR. 
 
 Year-over-year growth in the aggregate revenue of our principal portfolio 
companies1, a key performance indicator, is forecast to increase by 50% from 
 calendar year 2018 to calendar year 2019 (2017/2018 increase: 58%). In 
 addition, year-over-year employee headcount growth, another important 
 indicator of the growth and success of our principal portfolio companies1, 
 increased by 9% in the six months to June 2019 (six months to June 2018 
 increase: 12%), highlighting a continuing growth in the portfolio overall. 
 
Note 1: Principal portfolio company growth excludes Seal and Push, in which 
Tern has a <1% holding and minimal influence 
 
 Portfolio Review 
 
  Device Authority Limited ("Device Authority"): GBP12.3 million valuation 
 
 Holding: 56.8% 
 
 Sector: Security 
 
 Invested Since: September 2014 
 
 Device Authority is a global leader in Identity and Access Management (IAM) 
for the IoT, focused on medical / healthcare, industrial and smart connected 
 devices. Its KeyScaler(TM) platform provides trust for IoT devices and the 
IoT ecosystem, to address the challenges of securing the Internet of Things. 
 
 Since Tern's initial investment, Device Authority has expanded its product 
 portfolio, world class team and ecosystem of well-established business 
partners. The team at Tern has supported this, providing advice and contacts 
 which have enabled Device Authority to establish a Silicon Valley presence, 
 create connections with certain strategic partners and customers and 
 introducing new experience to the Board and adviser network. 
 
 During 2019 to date, Device Authority has continued to focus on the 
 industrial, medical and automotive IoT sectors, which are forecast to grow 
 substantially over the next five years. Achievements include growing its 
 partnership base through the formation of alliances with nCipher Security, 
 IdenTrust and Wipro and developing the Keyscaler platform alongside PTC 
 Thingworx and Microsoft Azure. Device Authority also strengthened its Board 
 through the appointment of Dr Nicko van Someren, founder of nCipher, and 
 Ramesh Kesanupalli, founder of the FIDO Alliance and Nok Nok labs. Both are 
 recognised leaders in their fields in the USA. 
 
 I am pleased to report that Device Authority continued to gain industry 
 recognition, being ranked as one of the top 20 healthcare technology 
 providers by MyTechMag, a US technology magazine. It was also recognised by 
 Quadrant Knowledge Solutions as a technology leader in the SPARK matrix 
 analysis of the IoT IAM market. 
 
 Device Authority's shareholders continue to support the ongoing progress of 
 the company, having provided a total of US$3.8 million in the form of 
 convertible loan notes since November 2017, with US$2.4 million of this 
 being provided by Tern (US$0.7 million in the six months to 30 June 2019). 
 
As at 30 June 2019, the value of Tern's shareholding in Device Authority has 
 increased to GBP12.3 million (31 December 2018: GBP11.7 million) as a result of 
 the additional cash invested via convertible loan notes. 
 
 The annual report and accounts for Device Authority for the year ended 31 
 December 2018 are expected to be submitted to Companies House shortly. 
 
  FVRVS Limited ('Fundamental VR'): GBP2.2 million valuation 
 
 Holding: 34.7% 
 
 Sector: Healthcare IoT 
 
 Invested Since: May 2018 
 
FundamentalVR is a dynamic technology and data insight business specialising 
 in the intersection between immersive experiences and haptics, to enhance 
 medical training and outcomes. It fits with Tern's strategy to invest in 
 companies targeting the healthcare IoT market. 
 
 Our investment in FundamentalVR provides us with exposure to a rapidly 
 growing healthcare market. A June 2019 report by MarketsandMarkets 
highlighted that the medical simulations market is expected to reach US$5.16 
 billion by 2027 from an estimated US$1.70 million in 2019, at a CAGR of 
 14.9%. 
 
 FundamentalVR's SaaS (software as a service) platform, Fundamental Surgery, 
 features VR Haptics technology that takes advantage of readily available 
 virtual reality hardware to create a simulation system that can be easily 
 used on any modern VR-enabled PC/laptop. 
 
In line with our proactive investment strategy, Tern has worked closely with 
FundamentalVR during the period to support growth in the business. Since our 
 initial investment in May 2018, we have helped the Board to refine its 
 go-to-market strategy, provided them with access to potential new industry 
 customers, elevated their profile within the VC market and established new 
 potential routes to market. 
 
 FundamentalVR has gone from strength to strength since Tern's initial 
 investment, having secured partnerships, significant new contracts, and 
 industry-wide awards and accreditations. It has increased its penetration 
 within the medical industry, with its Total Hip Replacement (Posterior 
 Approach) simulation gaining Continuing Professional Development 
 accreditation from the Royal College of Surgeons and inclusion on the 
 orthopaedic registrar training programme at St George's Hospital. 
 
 FundamentalVR also won the SXSW 2019 Interactive Innovation Award, 2019 Red 
 Herring 100 Europe Awards, and was chosen as one of the top 40 healthcare 
 transformers in MM&M's 2019 class. 
 
The technology has continued to evolve in 2019, including integration with a 
 haptic glove and the inclusion of eye-tracking capability within the 
 simulation programme. FundamentalVR also announced a significant commercial 
  contract (worth approximately GBP0.5 million) with a leading pharmaceutical 
 company to create an additional virtual reality simulation, adding to the 
 Company's continued technological improvements. 
 
 The annual report and accounts for Fundamental VR for the year ended 31 
 December 2018 are expected to be submitted to Companies House shortly. 
 
   Wyld Networks Limited ("Wyld Networks"): GBP78,000 valuation, plus GBP0.5 
 million short term loan 
 
 Holding: 100% 
 
 Sector: IoT enablement 
 
 Invested Since: June 2016 
 
 During the period, this company rebranded from flexiOPS, following the 
 acquisition of the AMIHO product portfolio, from fellow Tern portfolio 
 company InVMA Limited. 
 
 By combining Wyld Network's product portfolio, a compelling proposition in 
 the IoT embedded communications industry, which currently operates in over 
250,000 smart meters, with Wyld Technologies' Mesh solutions (90% owned); we 
 have now established a unique and value enhanced product suite delivering 
 secure intelligent mesh solutions empowering resilient IoT and 5G networks 
 to create value for people, places and things. 
 
 Networks have traditionally been centralised. This means that everything 
 connects to a central point, such as a base station or router which has to 
 handle all the network's traffic. However, decentralised networks, where 
 devices are linked to each other, are also possible. Decentralised networks 
 create an interlaced 'mesh' and can communicate through direct device to 
 device connections using multiple wireless technologies such as Bluetooth, 
 Wi-Fi Direct/P2P Wi-Fi and 5G. 
 
 Wyld's technology is unique in that it creates a wireless network which 
 connects people to people directly from smartphone to smartphone or device 
 to device, as well as device to people. It establishes a resilient and 
 low-latency mesh network without the need to route all the traffic through 
 the traditional hierarchical mobile infrastructure. This creates multiple 
 revenue generating and cost reducing use cases in areas of high population 
 density and also where there is no mobile coverage. 
 
 In 2018, Wyld Networks signed smart-device delivery contracts and license 
 agreements for its wireless sensor technology in the smart energy (Cadis, 
 RCD, Develco) and smart agritech (Delta-T) sectors. 
 
  Wyld Networks was also awarded a GBP121,000 grant by Innovate UK to 
 collaborate on a new mass production technology, SmartDrop, for Archipelago 
 Technology Group Ltd. 
 
 Wyld Technologies launched its Intelligent Device Mesh Agent software 
 development kit (SDK) after completing technical trials with a large 
 underground metro system, and in 2019 participated in a large rail operator 
 accelerator, which launched Wyld Fusion, an Intelligent Content Management 
 System and Integration Platform. 
 
 The annual report and accounts for Wyld Networks for the year ended 31 
 December 2018 are expected to be submitted to Companies House shortly. 
 
  InVMA Limited ("InVMA"): GBP1 million valuation 
 
 Holding: 50% 
 
 Sector: IoT enablement 
 
 Invested Since: September 2017 
 
 InVMA is an end-to-end IoT and 'Industry 4.0' solution provider of IoT 
products. It combines world-class management consulting expertise along with 
 hardware, software, IT and operational technology (OT) capabilities. This 
 allows it to build bespoke solutions that enable customers to disrupt their 
 market, create new revenue streams and reduce their operating costs quickly 
with low risk. Tern has supported InVMA's management through this process in 
 line with our investment approach. 
 
 Its innovative product 'AssetMinder', which also integrates with Device 
 Authority's KeyScaler, enables management of all of an IoT client's assets 
 through one application, and has been the focus of growth during 2019. It 
 facilitates real-time monitoring, which is critical to fuelling IoT growth, 
 particularly in the Industrial IoT market, which is a key area of focus for 
 all our portfolio companies. 
 
During the first half of 2019, InVMA increased its strategic partner base by 
 securing agreements with XL Group, Solid State Supplies, Robustel and ECA 
 Services. 
 
 InVMA has collaborated on 'Industry 4.0' contracts with ECA Services for 
 several of the UK's largest manufacturers. InVMA also secured an initial 
GBP0.25m contract with a leading aerospace and defence organisation, to enable 
 an innovative Smart Factory implementation. 
 
The annual report and accounts for InVMA for the year ended 31 December 2018 
   show net assets of GBP0.2 million and a loss of GBP0.5 million. 
 
  Seal Software Group Limited ("Seal Software"): GBP115,145 valuation 
 
 Holding: <1% 
 
 Sector: Database Analytics 
 
 Invested since: July 2014 
 
 During the first half of 2019 Seal Software, a leader in contract discovery 
 and analytics, in which Tern holds less than 1%, has continued to grow and 
 develop its business with numerous new contracts and strategic partnerships 
 announced. Specifically: 
 
· The company announced that Airbus will further expand its use of Seal 
Software's artificial intelligence-driven technology in support of its 
Digital Transformation Procurement. 
 
· TPR, a leading German legal-tech provider, has selected Seal Software's 
AI-driven contract analytics and extraction software as the basis for its 
contract analysis business. 
 
· Seal Software announced a partnership with AI Innovation of Sweden. 
 
· Kevin Gidney, co-founder and chief technology officer at Seal Software 
[2], was named one of the world's most influential voices in artificial 
intelligence (AI). The list was based on a global analysis [3] by 
AIBusinessCase.ai, a specialist research organisation focused on reporting 
the competitive, cultural, and financial benefits of AI as a catalyst to 
speeding its adoption. 
 
  Push Technology Limited ("Push Technology"): GBP61,161 valuation 
 
 Holding: <1% 
 
 Sector: Data distribution 
 
 Invested since: July 2014 
 
We have been informed by management that Push Technology, a company in which 
 Tern holds less than 1%, has expanded both its international footprint and 
 the breadth of industries served by the company's 'Diffusion(R)' Real-Time 
 API Management platform during the first half of 2019. 
 
For organisations worldwide, Diffusion powers the real-time applications and 
 systems critical to their business expansion, revenue growth, and optimal 
 ongoing business operations, by solving their real-time data management and 
 distribution challenges. 
 
Financial 
 
 During the six months ended 30 June 2019, Tern provided ongoing support to 
  its underlying portfolio base, investing GBP1.4 million via loan note 
 facilities to provide capital for these entrepreneurial companies to enable 
 them to continue to grow and develop within their focused markets. The fair 
 value of the portfolio remained stable across the period with no movement 
 due to exchange rate fluctuations, which had impacted the previous 
comparable periods. Cost management continues to be a focus for the Company. 
 The increase in administration costs during the six months compared to the 
six months to 20 June 2018, was principally due to additional advisory costs 
 in the UK and the USA, along with an increase in Directors' salaries to 
 begin to bring them closer to more conventional market levels. Other 
 expenses in the period included costs associated with Tern exploring an 
 expansion to its portfolio through a strategic initiative with synergistic 
 value. 
 
 The net asset value per share of 6.9p as at 30 June 2019 remained broadly 
comparable across the periods, compared to 7.1p at 31 December 2018 and 6.2p 
 at 30 June 2018. 
 
 Outlook 
 
 The Company remains committed to the areas of the IoT market outlined 
earlier by expanding our participation in this start-up ecosystem in the UK, 
 through direct investments and innovative partnerships. We firmly believe 
 that the current entrepreneurial environment is spawning opportunities at a 
 rapid pace that are creating solutions to global problems, using a 
 combination of new and existing technologies that can benefit from our 
 investment thesis. We also believe that the model that we have transitioned 
 to lends itself to working with late seed and early stage series 'A' 
 partners in Europe to further syndicate our investments at reasonable 
 values, to reduce risk and accelerate portfolio company growth and value. 
 
 We are aiming to achieve US Venture Capital valuations for our UK 
 investments in later series 'B' rounds and beyond, to create shareholder 
value and premium exit opportunities. We have set a target for our portfolio 
 activities to achieve an average of 20% year-on-year growth in portfolio 
 value by year end 2019 and beyond. We have achieved a modest 6% growth 
 during this reporting period within the portfolio and the Directors will be 
 seeking to achieve the target growth over the remainder of the financial 
 year. 
 
 We feel confident of making further progress during the second half of 2019 
 and look forward to making more announcements about business performance, 
 new developments and improvements for each of our portfolio companies and 
 reporting exciting new additions to the Tern portfolio. The timeline for 
sourcing, structuring and executing new investments in market leading UK IoT 
 companies that fit within Tern's investment strategy will sometimes be 
 beyond Tern's direct control and although we now do not expect to reach our 
objective of 12 investments by 31 December 2019, this remains a key strategy 
 for the Company at the earliest opportunity. 
 
 I would also like to extend our thanks to the management teams of our 
 portfolio companies who remain central to our whole investment business 
model. We enter the second half of the year well positioned to capitalise on 
 opportunities in 2019 and remain focused on executing our strategy driving 
 long-term, sustainable NAV growth for our shareholders. 
 
 Al Sisto 
 
 Chief Executive Officer 
 
 25 September 2019 
 
Unaudited Statement of Comprehensive Income 
 
for the six months ended 30 June 2019 
 
                               Notes 6 months to  6 months to  12 months 
                                         30 June      30 June      to 31 
                                            2019         2018   December 
                                                                    2018 
                                     (Unaudited)  (Unaudited)  (Audited) 
                                               GBP            GBP          GBP 
 
Turnover                                  51,965       64,245    106,117 
Movement in fair value                    11,724      282,987    775,910 
of investments 
 
Gross Profit                              63,689      347,232    882,027 
 
Administration costs                   (494,028)    (393,212)  (792,534) 
 
Other Expenses                         (192,718)    (178,740)  (476,716) 
Operating loss                         (623,057)    (224,720)  (387,223) 
 
Finance                                    1,943        4,376     74,659 
income 
Finance costs                            (2,226)        (908)          - 
 
Loss before tax                        (623,340)    (221,252)  (312,564) 
 
Tax                                            -            -          - 
Loss and total                         (623,340)    (221,252)  (312,564) 
comprehensive income for 
the period 
 
Earnings per share               9 
Basic                                    (0.25)p       (0.1)p     (0.1)p 
Diluted                                  (0.25)p       (0.1)p     (0.1)p 
 
Unaudited Statement of Financial Position 
 
as at 30 June 2019 
 
                                30 June      30 June         31 
                                                       December 
                                                           2018 
 
                                   2019         2018 
                            (Unaudited)  (Unaudited)  (Audited) 
                       Note           GBP            GBP          GBP 
Assets 
Investments                  15,793,597   11,549,920  14,856,23 
                                                              9 
 
Non-current                  15,793,597   11,549,920  14,856,23 
assets                                                        9 
 
Current 
assets 
Trade and                       780,347    1,133,132    239,180 
other 
receivables 
Cash and                      1,372,724    1,538,652  1,913,801 
cash 
equivalents 
 
                              2,153,071    2,671,784  2,152,981 
 
Total assets                 17,946,668   14,221,704  17,009,22 
                                                              0 
 
Equity 
attributable 
to the 
Company's 
equity 
holders 
Share                   10    1,352,433    1,346,665  1,348,903 
capital 
Share                        21,006,754   16,833,172  19,660,43 
premium                                                       4 
Loan note                             -            -          - 
equity 
reserve 
Share option and                      -            -          - 
warrant reserve 
Retained                    (4,880,904)  (4,237,080)  (4,257,56 
earnings                                                     4) 
 
                             17,478,283   13,942,757  16,751,77 
                                                              3 
 
Current 
liabilities 
Trade                           405,760       34,024     64,370 
payables 
Accruals and                     62,625      244,923    193,077 
other 
payables 
                                468,385      278,947    257,447 
 
Non-current 
liabilities 
Borrowings                            -            -          - 
 
Total                           468,385      278,947    257,447 
liabilities 
 
Total equity                 17,946,668   14,221,704  17,009,22 
and                                                           0 
liabilities 
 
Unaudited Changes in Equity 
 
as at 30 June 2019 
 
               Share     Share     Loan  Option Retained   Total 
                                   note     and 
                                        warrant 
 
                                 equity 
             capital   premium  reserve reserve earnings  equity 
                   GBP         GBP        GBP       GBP        GBP       GBP 
Balance at  1,330,22 13,237,36  123,482 175,982 (4,286,2 10,580, 
1 January          5         2                       49)     802 
2018 
Total              -         -        -       - (221,252 (221,25 
comprehensi                                            )      2) 
ve income 
Issue of      16,440 3,953,310        -       -        - 3,969,7 
share                                                         50 
capital 
Share and          - (357,500)                           (357,50 
loan issue                                                    0) 
costs 
Conversion         -         - (123,482       -        - (123,48 
of                                    )                       2) 
convertible 
loan notes 
Transfer of        -         -        - (175,98  175,982       - 
lapsed                                       2) 
warrants 
Share based        -         -        -       -   94,439  94,439 
payment 
charge 
Balance at  1,346,66 16,833,17        -       - (4,237,0 13,942, 
30 June            5         2                       80)     757 
2018 
Total              -         -        -       - (91,312) (91,312 
comprehensi                                                    ) 
ve income 
Issue of       2,238 2,907,762        -       -        - 2,910,0 
share                                                         00 
capital 
Share and          - (245,500)        -       -        - (245,50 
loan issue                                                    0) 
costs 
Transfer on        -   165,000        -       -        - 165,000 
conversion 
of 
convertible 
loan notes 
Share based        -         -        -       -   70,828  70,828 
payment 
charge 
Balance at  1,348,90 19,660,43        -       - (4,257,5 16,751, 
31 December        3         4                       64)     773 
2018 
Total              -         -        -       - (623,340 (623,34 
comprehensi                                            )      0) 
ve income 
Issue of       3,530 1,496,470        -       -        - 1,500,0 
share                                                         00 
capital 
Share and          - (150,150)        -       -        - (150,15 
loan issue                                                    0) 
costs 
Balance at  1,352,43 21,006,75        -       - (4,880,9 17,478, 
30 June            3         4                       04)     283 
2019 
 
Unaudited Statement of Cash flows 
 
for the six months ended 30 June 2019 
 
                           6 months to   6 months to   12 months 
                          30 June 2019  30 June 2018       to 31 
                                                        December 
                                                            2018 
                           (Unaudited)   (Unaudited)   (Audited) 
                     Note            GBP             GBP           GBP 
OPERATING ACTIVITIES 
Net cash used in      11     (521,944)     (503,436)   (752,350) 
operations 
Investment in              (1,370,926)   (1,513,549)  (3,556,625 
portfolio companies                                            ) 
 
Net cash used in           (1,892,870)   (2,016,985)  (4,308,975 
operating activities                                           ) 
 
FINANCING ACTIVITIES 
Proceeds on issue of         1,500,000     3,100,000   6,010,000 
shares 
Share issue expenses         (150,150)     (357,500)   (603,000) 
Proceeds from                        -         8,500       8,500 
exercise of options 
Proceeds on issue of                 -       550,000     550,000 
loan note 
Repayment of loan                    -      (20,000)    (20,000) 
stock 
Interest received                1,943           811       3,450 
 
Net cash from                1,351,793     3,281,811   5,948,950 
financing activities 
 
(Decrease)/Increase          (541,077)     1,264,826   1,639,975 
in cash and cash 
equivalents 
Cash and cash 
equivalents at 
beginning of period 
 
                             1,913,801       273,826     273,826 
 
Cash and cash                1,372,724     1,538,652   1,913,801 
equivalents at end 
of period 
 
Notes to the unaudited interim statement 
 
for the six months ended 30 June 2019 
 
1) General information 
 
Tern plc is an investing company specialising in private software companies, 
 predominantly in the Internet of Things sector. 
 
 The Company is a public limited company, incorporated in England and Wales, 
 with its ordinary shares traded on AIM, a market of that name operated by 
 the London Stock Exchange. 
 
 The address of Tern's registered office is 27/28 Eastcastle Street, London 
 W1W 8DH. Items included in the financial statements of the Company are 
 measured in Pounds Sterling, which is the Company's presentational and 
 functional currency. 
 
2) Basis of preparation 
 
 The interim financial statements of Tern Plc have been prepared in 
 accordance with IAS 34, Interim Financial Reporting, as adopted by the 
European Union (EU). They do not include all of the information required for 
full annual financial statements and should be read in conjunction with Tern 
 plc's audited financial statements for the year ended 31 December 2018. The 
 financial information for the year ended 31 December 2018 set out in this 
 interim report does not constitute statutory accounts as defined in Section 
 434 of the Companies Act 2006. The Company's statutory financial statements 
 for the year ended 31 December 2018 have been filed with the Registrar of 
 Companies and can be found on the Company's website: www.ternplc.com. The 
 auditor's report on those financial statements was unqualified and did not 
contain statements under Section 498 (2) or Section 498 (3) of the Companies 
 Act 2006. These interim financial statements have been prepared under the 
 historical cost convention as adjusted for the valuation of investments and 
 have been approved for issue by the Board of Directors. 
 
3) Going concern 
 
 The financial statements have been prepared on the going concern basis. 
 
 The Directors have a reasonable expectation that the Company has adequate 
resources to continue operating for the foreseeable future. For this reason, 
 they continue to adopt the going concern basis in preparing the Company's 
 financial statements. 
 
4) New accounting standards 
 
Leases 
 
 There has been no material effect from the adoption of IFRS 16. 
 
5) Investments 
 
The investment valuation consists of equity investments and convertible 
loans. 
 
 In accordance with IFRS 10, para 31, investments are recognised at FVTPL in 
 line with guidance set out in IFRS 9. Changes in foreign exchange rates 
 impact investments valued in a foreign currency. 
 
6) Convertible Loans 
 
Financial assets 
 
 Convertible loans provided to investment companies are evaluated with 
 reference to IFRS 9. The convertible loan facility issued to Device 
 Authority is a financial asset with multiple embedded derivatives and a 
 warrant instrument. IFRS 9 permits the entire contract to be designated at 
FVTPL. The convertible loan facilities issued to FundamentalVR and InVMA are 
 financial assets with multiple embedded derivatives. IFRS 9 permits the 
 entire contract to be designated at FVTPL. The loan facility provided to 
 Wyld Networks is a financial asset designated at FVTPL. Assets are measured 
 at fair value at each reporting date, with any movement in fair value taken 
 to profit or loss for the year. 
 
7) Critical accounting judgements 
 
Estimates and judgements are continually evaluated and are based on 
historical experience and other factors, including expectations of future 
events that are believed to be reasonable under the circumstances. 
 
 The Company makes estimates and assumptions concerning the future. The 
resulting accounting estimates will, by definition, rarely equal the related 
 actual results. 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 outlined below. 
 
 ESTIMATES 
 
Fair value of financial instruments 
 
 The Company holds investments that have been designated as held for trading 
 on initial recognition. Where practicable the Company determines the fair 
 value of these financial instruments that are not quoted using the most 
 recent bid price at which a transaction has been carried out. These 
 techniques are significantly affected by certain key assumptions, such as 
 market liquidity. Given the nature of the investments being early stage 
 business, other valuation methods such as discounted cash flow analysis 
 assess estimates of future cash flows to derive fair value estimates cannot 
 always be substantiated by comparison with independent markets and, in many 
 cases, may not be capable of being realised immediately. 
 
 The Company holds financial assets that have been held at FVTPL. The value 
of the convertible loan note has been estimated by assessing the probability 
 of each possible redemption or conversion scenario and accounting for this 
 within the overall fair value assessment. 
 
 JUDGEMENTS 
 
 Investments held at FVTPL 
 
 The critical judgement which has the most significant effect on the 
 financial statements is the assessment that the Company is an Investment 
 entity and therefore should not consolidate investments but should carry 
 them at fair value through profit or loss. This assessment was reached 
 following a review of all the key conditions for an investment entity, as 
 set out in IFRS 10 and the Company was judged to have met those key 
 conditions as follows: 
 
· The Company obtains funds from one or more investors for the purpose of 
providing those investor(s) with investment management services; 
 
· The Company commits to its investors that its business purpose is to 
invest funds solely for returns from capital appreciation, investment 
income, or both; and 
 
· The Company measures and evaluates the performance of substantially all 
its investments on a fair value basis. 
 
 In coming to this conclusion, the Company also judged that its 
 investment-related activities do not represent a separate substantial 
 business activity or a separate substantial source of income to the 
 investment entity. 
 
8) Segmental reporting 
 
 The accounting policy for identifying segments is based on internal 
 management reporting information that is regularly reviewed by the chief 
 operating decision maker, which is identified as the Board of Directors. 
 
 In identifying its operating segments, management generally follows the 
 Company's service lines which represent the main products and services 
provided by the Company. The Directors believe that the Company's continuing 
 investment operations comprise one segment. 
 
9) Earnings per share 
 
Earnings (loss) per share is calculated by reference to the weighted average 
 shares in issue as follows: 
 
                    6 months to    6 months to     12 months to 
                    30 June 2019   30 June 2018    31 December 
                                                       2018 
Weighted average 
number of ordinary 
shares (see note 
below): 
For calculation of   245,256,672    199,609,225      217,221,165 
basic earnings 
(loss) per share 
 For calculation of  245,256,672    199,609,225      217,221,165 
      fully diluted 
earnings (loss) per 
              share 
 
 The same number of shares is used for the calculation of the diluted loss 
per share as for the basic loss per share for the six months to 30 June 2019 
 as the losses in these periods have an anti-dilutive effect. 
 
10) Share capital 
 
                  30 June 2019   30 June 2018   31 December 2018 
                        Number         Number             Number 
Issued and fully 
paid: 
Ordinary shares    254,323,945    225,484,580        236,676,887 
of GBP0.0002 
Deferred shares         42,247         42,247             42,247 
of GBP29.999 
Deferred shares     34,545,072     34,545,072         34,545,072 
of GBP0.00099 
 
                             GBP              GBP                  GBP 
Issued and fully 
paid: 
Ordinary shares         50,865         45,097             47,335 
of GBP0.0002 
Deferred shares      1,267,368      1,267,368          1,267,368 
of GBP29.999 
Deferred shares         34,200         34,200             34,200 
of GBP0.00099 
                     1,352,433      1,346,665          1,348,903 
 
 The deferred shares have negligible value, being subject to restrictions as 
 to voting, participation and redemption according to the new Articles of 
 Association then adopted. The deferred shares are not quoted on the AIM 
 market of the London Stock Exchange. 
 
11) Note to the cash flow statement 
 
                 6 months to 30   6 months to 30   12 months to 
                      June 2019        June 2018    31 Dec 2018 
                    (Unaudited)      (Unaudited)      (Audited) 
                              GBP                GBP              GBP 
Loss for the          (623,340)        (221,252)      (312,564) 
period 
Adjustments for 
items not 
included in 
cash flow: 
Movement in            (11,724)        (282,987)      (775,910) 
fair value of 
investments 
Share based                   -           94,439        165,267 
payment charge 
Transaction                   -                -         55,000 
costs 
associated with 
convertible 
loan note 
Discount on                   -                -        110,000 
issue of 
convertible 
loan note 
Interest income               -                -       (71,209) 
accrued 
Finance income          (1,943)          (4,376)        (3,450) 
Operating cash        (637,007)        (414,176)      (832,866) 
flows before 
movements in 
working capital 
Adjustments for 
changes in 
working 
capital: 
-                      (95,875)         (91,043)        100,233 
(Increase)/decr 
ease in trade 
and other 
receivables 
(excluding loan 
to investee 
companies) 
-                       210,938            1,783       (19,717) 
Increase/(decre 
ase) in trade 
and other 
payables 
Cash used in          (521,944)        (503,436)      (752,350) 
operations 
 
12) Availability of interim results 
 
 Copies of this report will be available from the Company's website 
 www.ternplc.com. 
 
ISIN:          GB00BFPMV798 
Category Code: IR 
TIDM:          TERN 
LEI Code:      2138005F87SODHL9CQ36 
Sequence No.:  21176 
EQS News ID:   879229 
 
End of Announcement EQS News Service 
 
 
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(END) Dow Jones Newswires

September 25, 2019 02:00 ET (06:00 GMT)

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