Tern PLC: (AIM: TERN) Unaudited Interim Results for the six months to 30 June 2020 (1133909)

 
 Tern PLC (TERN) 
Tern PLC: (AIM: TERN) Unaudited Interim Results for the six months to 30 
June 2020 
 
21-Sep-2020 / 07:00 GMT/BST 
Dissemination of a Regulatory Announcement that contains inside information 
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group. 
The issuer is solely responsible for the content of this announcement. 
 
21 September 2020 
 
    Tern Plc 
 
    (AIM: TERN) 
 
    Unaudited Interim Results for the six months to 30 June 2020 
 
       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 2020. 
 
Key Highlights 
 
                                     6 months to       6      12 
                                                  months  months 
                                                      to      to 
 
                                    30 June 2020 
 
                                                 30 June      31 
                                                    2019 Decembe 
                                               GBP          r 2019 
 
                                                       GBP 
                                                               GBP 
Net assets                            19,900,647 17,478, 18,913, 
                                                     283     077 
Current assets                           961,566 2,153,0 1,182,4 
                                                      71      51 
Total assets                          20,089,782 17,946, 19,065, 
                                                     668     111 
Profit/(Loss) for the period             142,474 (623,34 (780,64 
                                                      0)      3) 
Net asset value per share                   7.0p    6.9p    7.0p 
 
· The period-on-period increase in turnover of principal portfolio 
companies1 in six months to 30 June 2020 was 62% (year-on-year increase in 
the 2019 full year: 27%), a particularly pleasing result given the impact 
COVID-19 had on the economy during this time. 
 
· An exchange rate gain on the revaluation of the investment in Device 
Authority led to a GBP0.7m increase in fair value, delivering a profit for 
the period. In the six months to 30 June 2019, there was no material 
exchange rate impact. 
 
· The period-on-period increase in the number of employees within the 
principal portfolio companies1, a key growth measurement, increased by 7% 
in the six month period to 30 June 2020 (six months ended 30 June 2019: 
9%). 
 
· Net asset value per share at 30 June 2020 of 7.0p was unchanged during 
the period. 
 
· A sale of Seal Software was achieved, one of Tern's early minority 
investments with a holding of less than 1%. Tern invested GBP50,000 in Seal 
Software and achieved an exit of 99% return on invested capital. 
 
· GBP0.8 million raised during the period, strengthening the balance sheet 
and improving Tern's investment options. Of this, GBP0.5 million was 
re-invested in existing portfolio companies. As at 30 June 2020, Tern had 
GBP0.8 million cash on the balance sheet. This was further increased by a 
post balance sheet fundraise of GBP1.5 million in July 2020. 
 
· Cost management continued to be a central focus with operating costs for 
the period similar to the comparable period in 2019. 
 
Al Sisto, CEO of Tern Plc, said: 
 
   "We recognise the challenges created by the pandemic, but we also see the 
opportunities. Early in the year, we acted quickly to minimise the potential 
  disruption presented by the COVID-19 virus. First, we acted to protect our 
   employee base, whose safety and wellbeing are critical to our portfolio's 
        success and second, we ensured we and our companies created plans to 
 safeguard and preserve the capital needed to maintain momentum. Despite the 
  restrictions established to contain the spread of the virus, our portfolio 
     has remained operational and given its IoT focus, is well positioned to 
      participate in the acceleration towards a contactless digital work and 
   business environment. Looking forward we are confident in making at least 
        one new investment during the second half of 2020 and are focused on 
 achieving at least one further syndicated investment event by the end of Q1 
        2021. 
 
   Our portfolio companies have solidified their leadership positions during 
the first six months of the year and we at Tern are aggressively seeking the 
very best IoT technology companies which can provide compelling solutions to 
  the healthcare and industrial sectors in order to grow our NAV per share." 
 
Note 1: Principal portfolio company growth excludes Push Technology, in 
which Tern has a <1% holding and minimal influence. 
 
        Enquiries: 
 
Tern Plc                                       via Newgate 
 
Albert Sisto/Sarah Payne 
 
Allenby Capital Limited                        Tel: [phone] 
                                               5656 
 
(Nomad and broker) 
 
David Worlidge/Alex Brearley (Corporate 
Finance) 
 
Guy McDougall (Equity Sales) 
 
Newgate Communications                         Tel: [phone] 
                                               4730 
 
Elisabeth Cowell/Megan Kovach 
 
        Chief Executive's Statement 
 
     Building on the momentum created in 2019, Tern has experienced a strong 
start to the year, despite the current unprecedented times. In 2019 we added 
   to our investment team which has given us more capacity to simultaneously 
     increase our focus on the existing portfolio and expand the quality and 
        depth of our pipeline. 
 
     Our progress for the first half of the year shows that our portfolio is 
        comprised of some of what we believe to be the most exciting private 
 technology companies in the UK and, while the COVID-19 pandemic has clearly 
   affected many companies around the world, we firmly expect that novel and 
   disruptive technology will play an important role in the global recovery. 
 
  Right from the start of the pandemic, Tern formed a crisis management team 
comprised of the CEOs of our portfolio companies and the Tern Board, with an 
  objective of sharing ideas and experiences to assist in navigating through 
  the crisis. Weekly meetings were held to bring forward the lessons learned 
     as the pandemic unfolded and to adopt strategies on employee wellbeing, 
        business agility and to leverage the synergies within the portfolio 
      companies' businesses themselves. These meetings enabled the portfolio 
     companies to quickly adapt to the new challenges and, most importantly, 
        opportunities presented by the COVID-19 crisis. 
 
     Our portfolio companies are leaders in their targeted markets. They are 
        capable of being on the frontline, leading the recovery, given their 
  expertise in the secure and remote management of devices and services, and 
the delivery of innovative virtual-environment training. These are all areas 
   which are in increasing demand because of the changes made to enterprise, 
        public sector and government work environments around the world. 
 
    Our "hands-on" approach to working with entrepreneurs as they set out to 
   drive growth in their businesses is focused on providing our shareholders 
        with long-term NAV growth per share. 
 
   By backing companies from their post product development lifecycle phase, 
    from their seed funding to Series A rounds, we gain affordable access to 
high growth companies targeting large markets but with reduced product risk. 
   By way of example, the step up in FundamentalVR's valuation at the end of 
    2019 highlighted how we are well positioned to scale up the value of our 
        investment capital. 
 
        New portfolio company investments 
 
Tern is focused on carefully growing its portfolio to continue providing our 
shareholders with exposure to bold and disruptive early-stage IoT companies. 
        We target businesses which have synergies with our existing base of 
     best-in-class investee companies, both in terms of their target markets 
      (healthcare and industrial) and technology type. This creates a highly 
        productive ecosystem for growth. 
 
       With the additional Director added in 2019 we have increased both the 
        quality and size of our pipeline. We are seeking IoT companies with 
   technologies centered on Artificial Intelligence ("AI"), Machine Learning 
  ("ML") and Data Sciences, which we believe will add strength and resources 
   to our existing investments and lead to an acceleration of NAV growth for 
  our shareholders. Each of these markets are rapidly increasing in size and 
        importance in the deployment of IoT solutions. 
 
Follow on portfolio investments and support 
 
      During the first six months of the year, we were pleased to announce a 
        realisation from our investment into Seal Software, with its sale to 
        DocuSign. Seal was a minority investment made by the Company at its 
    formation. The exit achieved a 99% return on invested capital and a cash 
         contribution to the Company of GBP0.1 million. 
 
Having raised GBP0.8 million in March 2020, we were well positioned to support 
        and enable the continued growth of our portfolio companies during a 
    challenging period. We delivered follow on investments amounting to GBP0.5 
        million, by participating in funding rounds directly or with other 
  shareholders and provided hands-on support to help our portfolio companies 
        scale in their respective markets and secure new partnerships. 
 
        For example, the Company provided Wyld Networks with an additional 
convertible loan of GBP0.3 million which enabled it to continue its commercial 
  progress and helped secure additional external investment of GBP0.4 million. 
 
    Tern, along with Alsop Louie Partners and the Samenuk Family Trust, also 

 continued with our convertible loan note support of Device Authority during 
the period, with the Company providing an additional GBP0.2 million in capital 
during the period. This 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. 
 
         Tern later raised an additional GBP1.5 million in new capital (before 
expenses) post period end, with the target of prudently putting a proportion 
    of this additional capital to work in at least one new investment by the 
        year end. 
 
Environmental, Social and Governance ("ESG") 
 
       The Tern Board is committed to conducting its investment and business 
  activities in line with best practice ESG principles. We are enhancing our 
        investment strategy to include ESG criteria and portfolio company 
  scorecards. We are also reviewing our internal policies to ensure they are 
     inclusive and comprehensive, for example, this included an annual Board 
        Performance Review which was completed in August 2020. 
 
Financial Priorities 
 
 Our financial priorities remain to accelerate the progress of our portfolio 
   companies' commercial success; value creation; create robust realisations 
        and the addition of new investments by: 
 
· Investing in and creating businesses which have market validation and 
disruptive market opportunities; 
 
· Providing hands-on support to achieve sustainable value creation; 
 
· Making introductions which help our companies achieve global scale and a 
presence particularly in the USA; 
 
· 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; 
 
· Strengthening management and boards where appropriate; and 
 
· Continuing to explore innovative ways to expand the synergistic benefits 
of our portfolio. 
 
        Outlook 
 
 We believe that the current world situation is accelerating the adoption of 
technology across our portfolio's key markets. This belief is underpinned by 
      the range of new partnerships and contracts delivered by our portfolio 
companies during this time. Of course, we must remain cognisant of the wider 
     uncertainty and regulatory changes being implemented on the back of the 
    pandemic, but the agility of our portfolio companies is a clear strength 
        when it comes to managing this. 
 
 We have already announced our intention to make at least one new investment 
  during the second half of 2020 and we feel confident in achieving at least 
    one further syndicated investment event by the end of Q1 2021. We have a 
       strong pipeline of new opportunities and are experiencing third party 
        interests in our existing portfolio. 
 
     For the remainder of the year, we will continue to support our investee 
      companies as they pursue new opportunities and adapt to the challenges 
    presented by the pandemic. We will continue to work actively to help our 
     investee businesses grow in order to mitigate risk and increase NAV per 
        share for our stakeholders. 
 
  I would like to extend our thanks to the management teams of our portfolio 
    companies whose dedication to business health and employee wellbeing has 
        provided continuity and strategic leadership in this time. 
 
        Al Sisto 
 
        Chief Executive Officer 
 
Financial 
 
   During these unprecedented times, the Company has monitored costs closely 
  with continued Director salary reductions and mitigation activities in the 
 principal portfolio companies, primarily salary reductions and some limited 
use of furlough schemes, where relevant. It has also supported its portfolio 
  companies in applying for Innovate UK grants, where applicable, to support 
   their ongoing innovative projects. Wyld Networks has successfully secured 
 such a grant and InVMA has secured funding from the Future Fund post period 
        end. 
 
   Tern had an unaudited cash balance of GBP0.8 million on 30 June 2020, which 
  has been strengthened by the net proceeds of the GBP1.5 million subscription 
    announced in July 2020. The period-on-period increase in turnover of the 
     principal portfolio companies1 for the first six months of 2020 was 62% 
 (year-on-year increase in the 2019 full year: 27%). The Directors view this 
     as a positive result given the slow down across the economy during this 
        period. 
 
  We expect for the aggregate turnover of the principal portfolio companies1 
 to increase year-on-year for the full 2020 financial year compared to 2019, 
      however with the uncertainties created by COVID-19 and the fluidity of 
    COVID-19 government requirements it is currently not possible to issue a 
      sufficiently reliable and specific new forecast for the 2020 increase. 
 
   The period-on-period increase in employees within the principal portfolio 
  companies1, a key growth measurement, increased by 7% in the six months to 
        June 2020 (six months ended 30 June 2019: 9%). This measure has been 
   impacted in the latter half of the period by a slowdown in recruitment to 
        ensure prudent management through the COVID-19 period. 
 
 During the six months ended 30 June 2020, Tern raised GBP0.8 million in March 
        2020 and provided ongoing support to its underlying portfolio base, 
investing GBP0.5 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 increased by 
GBP0.7 million following a weakening of the pound against the dollar which led 
 to an increase in the Sterling value of Device Authority which is valued in 
        US Dollars. Cost management continues to be a focus for the Company. 
   Operating costs were broadly stable during the six months compared to the 
  six months to 30 June 2019. A reduction in one-off non-recurring legal and 
   professional costs was offset by an increase in share based payment costs 
   and in Directors' fees, which was in part due to the appointment of a new 
   Executive Director. This increase was mitigated by a 20% salary reduction 
 taken by all Directors from April 2020 because of the uncertainty caused by 
        COVID-19. 
 
   In March 2020 the Company announced the sale of Seal Software, one of its 
    early minority investments with a holding of less than 1%. Tern invested 
  GBP50,000 in Seal Software and following completion, achieved an exit of 99% 
        return on invested capital. 
 
     The net asset value per share of 7.0p as at 30 June 2020 was relatively 
       stable compared to 6.9p at 30 June 2019 and 7.0p at 31 December 2019. 
 
        Sarah Payne 
 
        Chief Financial Officer 
 
Note 1: Principal portfolio company growth excludes Push Technology, in 
which Tern has a <1% holding and minimal influence. 
 
        Portfolio Review 
 
        Device Authority Limited ("Device Authority") 
 
         Valuation of holding: GBP13.8 million 
 
        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, automotive 
and smart connected devices. Their KeyScaler(TM) platform provides trust for 
IoT devices and the IoT ecosystem, to address the challenges of securing the 
        Internet of Things. 
 
    The recent demand for remote working and technologies has reinforced the 
importance of having robust and secure devices, for example telemedicine and 
    remote monitoring devices in the healthcare industry. Device Authority's 
 KeyScaler(TM) platform can provide security and privacy solutions for these 
        remote IoT devices. 
 
In early 2020, Device Authority developed its hardware security module (HSM) 
        Access Controller to help Enterprises protect their critical HSM 
  infrastructure. This offers organisations an out-of-the-box solution which 
       requires minimal integration effort from their internal teams. Device 
Authority also announced its secure code signing and update delivery service 
        with Venafi. 
 
  In late March, Device Authority announced the launch of KeyScaler(TM) as a 
        Service ("KSaaS") hosted in Microsoft Azure Cloud and four essential 
  connectors to Microsoft Azure's IoT Edge, IoT Central, Azure Key Vault and 
    Active Directory Certificate Services ("ADCS") products. These new Azure 
    connectors are in addition to Azure IoT Hub, Device Provisioning Service 
 ("DPS") and Event Hub connectors that are already part of the KeyScaler(TM) 
platform. Soon afterwards, Device Authority was recognised as an Early-Stage 
      Medical Device Security Vendor in Forrester's report on medical device 
        security: New Tech: Medical Device Security Q1 2020. 
 
In June 2020 Device Authority announced the availability of KeyScaler(TM) in 
 the Microsoft Azure Marketplace [1], an online store providing applications 
 and services for use on Azure. The marketplace significantly expands Device 
 Authority's sales channel as it lets customers worldwide discover, try, and 
   deploy KeyScaler(TM) solutions that are certified and optimized to run on 
       Azure. The company has also secured contract renewals via key channel 
     partners and their customers during the period, including a contract to 
  provide security services to a leading international automotive design and 
    manufacturing company in conjunction with its use of the Azure platform. 
 
  In recent months, Device Authority continues to gain industry recognition, 
 being identified as the 2020 technology leader in the SPARK Matrix analysis 
        of the global IoT Identity and Access Management (IoT IAM) market by 

Quadrant Knowledge Solutions. Device Authority also continues to protect its 
intellectual property, securing the UK trademark for KeyScaler(TM) in August 
        2020. 
 
 Device Authority's shareholders continue to support the ongoing progress of 
       the company, having provided a total of US$5.4 million in the form of 
     convertible loan notes since November 2017, with US$3.6 million of this 
  being provided by Tern (US$0.3 million in the six months to 30 June 2020). 
 
As at 30 June 2020, the value of Tern's shareholding in Device Authority has 
 increased to GBP13.8 million (31 December 2019: GBP12.7 million), primarily due 
  to a weakening of the pound against the dollar which led to an increase in 
       the Sterling value of Device Authority which is valued in US Dollars. 
 
   The annual report and accounts for Device Authority for the year ended 31 
      December 2019 are expected to be submitted to Companies House shortly. 
 
        FVRVS Limited ('Fundamental VR') 
 
         Valuation of holding: GBP3 million 
 
        Holding: 26.9% 
 
        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. 
 
        FundamentalVR continues to work with its customers to complete the 
 simulations that they need to deliver their medical device and pharma-based 
 products. Its virtual reality-based platform can keep the learner safe from 
    unnecessary potential exposure to COVID-19, provide an endless supply of 
 virtual patients and measure the performance of the healthcare professional 
    in achieving the necessary operational skill levels, helping to create a 
        more agile healthcare workforce. 
 
     In April 2020, FundamentalVR announced the expansion of the Fundamental 
Surgery [2] platform, with the addition of a new education modality @HomeVR. 
    In these current times, where rapid learning and remote access has never 
been more relevant, this has enabled health care professionals to prepare to 
   use new equipment and undertake new procedures. FundamentalVR's multiuser 
  support enables its enterprise customers to provide virtual master classes 
  to accelerate the adoption of new products and procedures. This ability to 
 access training remotely worldwide via the cloud enables collaboration in a 
 virtual operating room or clinic with no requirement for physical presence. 
 In the current COVID-19 environment, FundamentalVR's shared virtual setting 
also improves the overall communication process among surgeons and trainees. 
   This was evidenced in a real world setting when the team at FundamentalVR 
      designed and launched an online training tool that could quickly teach 
        nurses and doctors how to operate ventilators. The new online tool, 
 developed by Imperial College London, Imperial College Healthcare NHS Trust 
        and FundamentalVR, allows the redeployed clinicians to gain the key 
        knowledge they need for ventilating patients in just 30 minutes. 
 
   In June 2020, FundamentalVR achieved another important milestone when all 
  the orthopaedic education simulations available on the Fundamental Surgery 
      platform were reviewed by the American Academy of Orthopaedic Surgeons 
  (AAOS) and awarded accreditation status. This recognition demonstrates the 
        AAOS's commitment to innovation in medical education and will allow 
  orthopaedic surgeons to collect continuing medical education (CME) credits 
 while utilising the unique cutting-edge haptic FundamentalVR platform. This 
was followed in July 2020 by the company receiving centre accreditation from 
the Royal College of Surgeons of England. This kite mark of quality has been 
     adopted by many leading organisations that develop world-class surgical 
        education courses, solutions and platforms. 
 
     During the first half of 2020, FundamentalVR continued to gain industry 
        recognition with the award of first place in Hit Consultants Top 18 
   Healthcare Augmented Reality and Virtual Reality companies to watch. More 
 recently, the @HomeVR modality was selected as a finalist in the VR Awards. 
 
      The annual report and accounts for FundamentalVR for the year ended 31 
      December 2019 are expected to be submitted to Companies House shortly. 
 
Wyld Networks Limited ("Wyld Networks") 
 
Valuation of holding: GBP1.2 million 
 
        Holding: 100% 
 
        Sector: IoT enablement 
 
        Invested Since: June 2016 
 
Wyld Networks provides secure, intelligent and scalable mobile mesh networks 
and Low Power Wide Area Network (LPWAN) software and modules connecting both 
  smartphones and IoT devices together without the need for WiFi or cellular 
        networks. 
 
  In May 2020 it secured GBP0.4 million of convertible loan note investment to 
   support its growing pipeline of opportunities in mobile mesh networks and 
        wireless IoT connectivity [3]. 
 
Wyld Networks' mesh technology was originally designed for applications such 
as major sporting events, music festivals, retail centres and transport hubs 
     to deliver relevant, location-aware information. In March 2020 the team 
       focused on repurposing its technology to support the COVID-19 efforts 
        earlier in the year to enable it to play a vital role in protecting 
residents, staff and visitors in care homes and hospitals as well as helping 
        business and education get back to work safely. 
 
   In May 2020, Wyld Networks announced that it had signed an agreement with 
    Highland Health Ventures Ltd [4] (HHVL) to test and deploy its Wyld mesh 
   technology into certain care homes in Scotland to help protect residents, 
    staff and visitors, and prevent the spread of COVID-19 or other viruses. 
        This was recently confirmed to be due to commence in a care home in 
       Inverness in October 2020. The patented solution connects smartphones 
directly to smartphones, without the need for WiFi or cellular connectivity, 
    to create an infrastructure-lite wireless mesh communication network, as 
        well as provide social distance monitoring and alerting. HHVL is an 
independent company with a Collaboration Agreement with NHS Highland [5] for 
        the purpose of developing innovations in healthcare. 
 
     Continuing its commercial traction, Wyld Networks also announced it had 
signed an agreement with a global satellite operator to co-develop, test and 
  co-market a LoraWAN direct to satellite solution that is intended to bring 
       the cost of satellite IoT services in line with terrestrial based IoT 
      solutions, aimed at opening up a new frontier in the deployment of IoT 
solutions. In September 2020 it was announced that an initial GBP0.1m purchase 
     order had been received for the test phase as part of this agreement to 
   develop and deliver a small number of proprietary-designed Low Power Wide 
        Area Network ("LPWAN") IoT modems to be functionally tested with a 
pre-commercial low earth orbiting ("LEO") satellite. The Tern Board believes 
    that, following successful testing, a full deployment of this technology 
        with a LEO satellite constellation could follow. 
 
 Wyld Networks continues to deliver solutions against its existing contracts 
        with Delta-T, Develco, RCD, CADIS, Eltek and Envirosystems. 
 
  More recently, Wyld Networks announced the launch of Wyld Mesh and Fusion, 
 its innovative mobile mesh networking technology, data curation and content 
        delivery platform. Wyld Mesh and Fusion provides businesses with an 
   innovative way to generate new revenue streams, operate more efficiently, 
  get back to work safely and monitor social distancing practices. Wyld Mesh 
 harnesses the power of mobile devices to create wireless mesh communication 
    networks with applications in enterprise, healthcare, retail, education, 
        events and industry. 
 
        Wyld Networks also successfully filed a patent application for its 
      disruptive mesh (Wyld Mesh) and data curation (Wyld Fusion) technology 
        platform to protect its IP and further establish value. 
 
Tern continues to support the growth of the business with an additional loan 
        of GBP0.3 million provided during the period, bringing the outstanding 
         convertible loan balance to GBP1.1 million as at 30 June 2020. 
 
      The annual report and accounts for Wyld Networks for the year ended 31 
      December 2019 are expected to be submitted to Companies House shortly. 
 
InVMA Limited ("InVMA") 
 
Valuation of holding: GBP1 million 
 
        Holding: 50% 
 
        Sector: IoT enablement 
 
        Invested Since: September 2017 
 
 InVMA is an Industrial Internet of Things (IIoT) software solutions company 
   enabling their customers to digitally improve performance using real-time 
        analytics and predictive intelligence. InVMA empowers industrial and 
        manufacturing companies by converging their physical assets with new 
    transformational digital insights, enabling customers to reduce internal 
       operating costs and downtime risk, while creating new revenue streams 
  through remote monitoring and management. InVMA has recently announced the 
        appointment of a new CEO, Peter Stephens, to help finalise the 
   transformation of the business to a SaaS based software products company, 
  which was coupled with a GBP0.25 million investment from Tern and the Future 
        Fund. 
 
   A significant milestone in InVMA's product transformation was achieved in 
  January 2020 when it was announced that the company had secured an initial 
     order commitment worth GBP817,000 over a two-year period to provide their 
   AssetMinder(R) SAAS IIoT solution to a global, multi-billion Euro revenue 
 supplier to the industrial and construction sectors. This was achieved as a 

      result of the re-positioning of InVMA from a consultancy services to a 
       Software as a Service (SaaS) product business, in which Tern has been 
        instrumental. 
 
       Although COVID-19 has had a material impact on the industrial sector, 
  interest in remote monitoring remains a key growth area for development as 
    manufacturers increase efficiencies using machine learning and connected 
 devices. InVMA has carefully managed demand for their services and products 
while effectively utilising government furlough support where required. Over 
this period InVMA has continued to focus on the growth of its AssetMinder(R) 
     SaaS product supported by a rapidly evolving market where the Directors 
 believe that remote monitoring has moved to the forefront of industrial and 
 manufacturing agendas. AssetMinder(R) is a unique customisable platform for 
   a wide variety of assets as it enables its customers to remotely collect, 
  aggregate and monitor real-time data on their specific assets, devices and 
        equipment; providing analytics and predictive insights that drive 
  intelligence-based decisions for individual machines, entire manufacturing 
  lines, and across a portfolio of facilities. Tern's Directors believe that 
        InVMA has the potential to be the go to SAAS platform for smart 
        manufacturing and machine condition monitoring. 
 
    In June 2020, InVMA announced that it had signed a partnership agreement 
        with Senseye [6] Limited, the Industry 4.0 software company using 
    machine-learning algorithms for predictive maintenance. This partnership 
   enables customers to more easily, and cost-effectively, capture and share 
    their shop-floor and machine performance data, driving better predictive 
maintenance insights on assets using proprietary machine-learning algorithms 
 that automatically forecast machine failure and remaining useful life. This 
   seamless capability means that companies at any stage of IoT maturity can 
       leverage advanced machine learning intelligence to improve shop floor 
       productivity, product quality and to proactively reduce manufacturing 
        downtime. 
 
Tern had an outstanding convertible loan balance of GBP50,000 with InVMA as at 
    30 June 2020, this increased by a further GBP125,000 post period end, with 
         Tern's investment being accompanied by GBP125,000 of convertible loan 
        investment from the Future Fund. 
 
The annual report and accounts for InVMA for the year ended 31 December 2019 
        are expected to be submitted to Companies House shortly. 
 
        Push Technology Limited ("Push Technology") 
 
         Valuation of holding: GBP34,205 
 
        Holding: <1% 
 
        Sector: Data distribution 
 
        Invested since: July 2014 
 
Push Technology, a company in which Tern holds less than 1%, secured GBP10m of 
       Series A funding in April 2020, led by Maven Capital Partners. It was 
     reported that the company has begun the year strongly, benefitting from 
     market momentum building as the use of web and mobile devices to access 
        global busines systems grows. 
 
 For organisations worldwide, Push Technology's software product, Diffusion, 
    powers the real-time applications and systems critical to their business 
        expansion, revenue growth, and optimal ongoing business operations. 
     Diffusion simplifies and speeds development, deployment, and scaling of 
   customers' systems, providing peace of mind that data is securely managed 
        and efficiently delivered in real-time. 
 
Unaudited Income Statement and Statement of Comprehensive Income 
 
For the six months ended 30 June 2020 
 
                        Notes 6 months to  6 months to  12 months 
                                  30 June      30 June      to 31 
                                     2020         2019   December 
                                                             2019 
                              (Unaudited)  (Unaudited)  (Audited) 
                                        GBP            GBP          GBP 
 
Fee income                         42,076       51,965    124,766 
Movement in fair        9         736,470       11,724    293,756 
value of 
investments 
Total investment                  778,546       63,689    418,522 
income 
 
Administration                  (632,644)    (494,028)  (1,028,60 
costs                                                          5) 
 
                                 (95,857)    (192,718) 
Other Expenses                                          (245,414) 
Operating                          50,045    (623,057)  (855,497) 
profit/(loss 
) 
 
Finance                            92,429        1,943     74,854 
income 
Finance                                 -      (2,226)          - 
costs 
Profit/(loss)                     142,474    (623,340)  (780,643) 
before tax 
Tax                                     -            -          - 
Profit/(Loss) and                 142,474    (623,340)  (780,643) 
total comprehensive 
income/(loss) for 
the period 
 
Earnings per share        8 
Basic and diluted                    0.1p       (0.3)p     (0.3)p 
earnings/(loss) per 
share 
 
Unaudited Statement of Financial Position 
 
As at 30 June 2020 
 
                               30 June       30 June          31 
                                                        December 
                                                            2019 
 
                                  2020          2019 
                           (Unaudited)   (Unaudited)   (Audited) 
                      Note           GBP             GBP           GBP 
Assets 
 
Non-current 
assets 
Investments            9    19,128,216    15,793,597   17,882,66 
                                                               0 
 
                            19,128,216    15,793,597   17,882,66 
                                                               0 
 
Current 
assets 
Trade and                      172,024       780,347     174,486 
other 
receivables 
Cash and                       789,542     1,372,724   1,007,965 
cash 
equivalents 
 
                               961,566     2,153,071   1,182,451 
 
Total assets                20,089,782    17,946,668   19,065,11 
                                                               1 
 
Equity and 
liabilities 
Share                  10    1,358,238     1,352,433   1,355,571 
capital 
Share                       23,335,580    21,006,754   22,578,61 
premium                                                        9 
Retained                   (4,793,171)   (4,880,904)   (5,021,11 
earnings                                                      3) 
 
                            19,900,647    17,478,283   18,913,07 
                                                               7 
 
Current 
liabilities 
Trade and                      189,135       468,385     152,034 
other 
payables 
Total                          189,135       468,385     152,034 
liabilities 
 
Total equity                20,089,782    17,946,668   19,065,11 
and                                                            1 
liabilities 
 
Unaudited Statement of Changes in Equity 
 
For the six months ended 30 June 2020 
 
                       Share     Share     Retained     Total 
                      capital   premium    earnings     equity 
                        GBP         GBP           GBP          GBP 
Balance at 31        1,348,903 19,660,434 (4,257,564) 16,751,773 
December 2018 
Total comprehensive          -          -   (623,340)  (623,340) 
income 
Transactions with 
owners 
Issue of share           3,530  1,496,470           -  1,500,000 
capital 
Share issue costs            -  (150,150)           -  (150,150) 
Balance at 30 June   1,352,433 21,006,754 (4,880,904) 17,478,283 
2019 
Total comprehensive          -          -   (157,303)  (157,303) 
income 
Transactions with 
owners 
Issue of share           3,138  1,746,865           -  1,750,003 
capital 
Share issue costs            -  (175,000)           -  (175,000) 
Share based payment          -          -      17,094     17,094 
charge 
Balance at 31        1,355,571 22,578,619 (5,021,113) 18,913,077 
December 2019 
Total comprehensive          -          -     142,474    142,474 
income 
Transactions with 
owners 
Issue of share           2,667    797,333           -    800,000 
capital 
Share issue costs            -   (40,372)           -   (40,372) 
Share based payment          -          -      85,468     85,468 
charge 
Balance at 30 June   1,358,238 23,335,580 (4,793,171) 19,900,647 
2020 
 
Unaudited Statement of Cash Flows 
 
For the six months ended 30 June 2020 
 
                  6 months to 30   6 months to 30   12 months to 
                       June 2020        June 2019    31 December 
                                                            2019 
                     (Unaudited)      (Unaudited)      (Audited) 
             Note              GBP                GBP              GBP 
OPERATING 
ACTIVITIES 
Net cash      11       (554,777)        (521,944)    (1,337,878) 
used in 
operations 
Purchase of            (517,221)        (925,634)    (1,808,034) 
investments 
Loan to                        -        (445,292)      (688,332) 
investee 
companies 
Cash                      92,864                -              - 
received 
from sale of 
investments 
Interest                   1,083            1,943          3,555 
received 
Net cash               (978,051)      (1,890,927)    (3,830,689) 
used in 
operating 
activities 
 
FINANCING 
ACTIVITIES 
Proceeds on              800,000        1,500,000      3,250,003 
issue of 
shares 
Share issue             (40,372)        (150,150)      (325,150) 
expenses 
 
Net cash                 759,628        1,349,850      2,924,853 
from 
financing 
activities 
 
Decrease in            (218,423)        (541,077)      (905,836) 
cash and 
cash 
equivalents 
Cash and 
cash 
equivalents 
at beginning 
of period              1,007,965        1,913,801      1,913,801 
 

Cash and                 789,542        1,372,724      1,007,965 
cash 
equivalents 
at end of 
period 
 
Notes to the Unaudited Interim Statements 
 
For the six months ended 30 June 2020 
 
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 2019. The 
   financial information for the year ended 31 December 2019 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 2019 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 and drew attention by way of emphasis to the impact of COVID-19 on 
the Company. 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. The post period end fundraise and the impact of 
        COVID-19 has been considered as part of the Directors' assessment. 
 
4) Investments 
 
The investment valuation consists of equity investments and convertible loan 
notes. 
 
  In accordance with IFRS 10, para 4, 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. 
 
5) 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. The convertible loan facilities issued to InVMA and Wyld 
    Networks are financial assets with multiple embedded derivatives. IFRS 9 
       permits the entire contract for both loans to be designated at FVTPL. 
 
6) 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 of GBP19.1 million 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 that has a significant risk of causing a material 
adjustment to the carrying amounts of assets and liabilities within the next 
   financial year is the assessment that investments should be consolidated. 
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. 
 
7) 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 and therefore the figures 
    presented on the face of the income statement and statement of financial 
        position represent the segmental information. 
 
8) Earnings/Loss 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 2020   30 June 2019   31 December 
                                                        2019 
 
                                                        GBP 
 
                          GBP              GBP 
Profit/(Loss) for the      142,474      (623,340) 
purposes of basic and 
fully diluted loss 
per share 
                                                       (780,643) 
Weighted average            Number         Number         Number 
number of ordinary 
shares (see note 
below): 
For calculation of     277,271,791    245,256,672    251,945,498 
basic earnings/(loss) 
per share 
   For calculation of  278,608,041    245,256,672    251,945,498 
        fully diluted 
  earnings/(loss) per 
                share 
 
Earnings/(Loss) per 
share 
Basic and diluted             0.1p         (0.3)p         (0.3)p 
earnings/(loss) per 
share 
 
 The fully diluted loss per share for 2019 is the same as the basic loss per 
share as the loss for the period has an anti-dilutive effect on earnings per 
        share. 
 
9) Investments 
 
                             30 June       30 June   31 December 
                                2020          2019          2019 
                                   GBP             GBP             GBP 
Fair value of             17,882,660    14,856,239    14,856,239 
investments brought 
forward 
Reclassification of cash           -             -       165,000 
flow loans from other 
debtors 
Interest accrued on           91,346             -        71,299 
convertible loan note 
Additions                    517,221       925,634     2,496,366 
Disposals                   (99,481)             -             - 
Cost of investments       18,391,746    15,781,873    17,588,904 
carried forward 
Fair value adjustment to     736,470        11,724       293,756 
investments 
Fair value of             19,128,216    15,793,597    17,882,660 
investments carried 
forward 
 
Fair value of equity      10,808,679     8,034,875    10,196,240 
investments 
Fair value of              8,319,537     7,758,722     6,833,088 
convertible loans 
Fair value of cash flow            -             -       853,332 
loans 
Fair value of             19,128,216    15,793,597    17,882,660 
investments 
 
     The convertible loan facility issued to Device Authority is a financial 
        liability with multiple derivatives and the entire contract has been 
designated at FVTPL, with any movement in fair value taken to profit or loss 
for the year. For the six months to 30 June 2020 the fair value increase was 
       GBP0.7 million (30 June 2019: GBPnil). The convertible loan note has been 
        secured with a charge over Device Authority's intellectual property. 
 
     The cash flow loan issued to Wyld Networks was converted into a secured 
      convertible loan note in May 2020. It is a financial liability and the 

     entire contract has been designated at FVTPL, with any movement in fair 
   value taken to profit or loss for the year. The convertible loan note has 
       been secured with a charge over Wyld Network's intellectual property. 
 
10) Issued share capital 
 
                  30 June 2020   30 June 2019   31 December 2019 
                        Number         Number             Number 
Issued and fully 
paid: 
Ordinary shares    283,352,376    254,323,945        270,019,045 
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         56,670         50,865             54,003 
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 
                     1,358,238      1,352,433          1,355,571 
 
  The deferred shares have no voting or dividend rights. The deferred shares 
        are not quoted on the AIM market of the London Stock Exchange. 
 
    During the period, Wyld Networks issued a GBP400,000 convertible loan note 
 ("CLN") to an external party (the "CLN Holder") which includes a put option 
 on Tern shares. Under the terms of the convertible loan note, and following 
   a conversion event, any amount of the convertible loan note not converted 
   into Wyld shares will automatically be converted into fully paid ordinary 
       shares of 0.02 p each in the capital of Tern ("Tern Shares") at a 15% 
   discount to the market price of Tern Shares on AIM at market close on the 
   date of the conversion event. If a conversion event has not occurred by 6 
 May 2021 (the "Maturity Date"), then the CLN Holder has the option to elect 
to convert all of the CLN into Tern Shares at a 15% discount to the five-day 
        average closing price of Tern Shares on AIM immediately prior to the 
Maturity Date, or, failing such election, the maturity date of the CLN is to 
        be extended for one further year ("the Second Maturity Date"). If a 
   Conversion Event has not taken place by the Second Maturity Date, the CLN 
 will automatically convert into fully paid Tern Shares at a 15% discount to 
  the five-day average closing price of Tern Shares on AIM immediately prior 
        to the Second Maturity Date. 
 
11) Cash flow from operations 
 
                  6 months to 30   6 months to 30  12 months to 
                       June 2020        June 2019   31 Dec 2019 
                     (Unaudited)      (Unaudited)     (Audited) 
                               GBP                GBP             GBP 
Profit/(Loss) for        142,474        (623,340)     (780,643) 
the period 
Adjustments for 
items not 
included in cash 
flow: 
Movement in fair       (736,470)         (11,724)     (293,756) 
value of 
investments 
Share-based               85,468                -        17,094 
payment charge 
Deferred cash on           6,617                -             - 
sale of 
investment 
Interest income         (91,346)                -      (71,299) 
accrued 
Finance income           (1,083)          (1,943)       (3,555) 
Operating cash         (594,340)        (637,007)   (1,132,159) 
flows before 
movements in 
working capital 
Adjustments for 
changes in 
working capital: 
-                          2,462         (95,875)     (100,306) 
Decrease/(increas 
e) in trade and 
other receivables 
(excluding loan 
to investee 
companies) 
-                         37,101          210,938     (105,413) 
Increase/(decreas 
e) in trade and 
other payables 
Cash used in           (554,777)        (521,944)   (1,337,878) 
operations 
 
12) Availability of interim results 
 
        Copies of this report will be available from the Company's website 
        www.ternplc.com [7]. 
 
ISIN:          GB00BFPMV798 
Category Code: IR 
TIDM:          TERN 
LEI Code:      2138005F87SODHL9CQ36 
Sequence No.:  84485 
EQS News ID:   1133909 
 
End of Announcement EQS News Service 
 
 
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(END) Dow Jones Newswires

September 21, 2020 02:01 ET (06:01 GMT)