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Tern PLC: Unaudited Interim Results for the six months to 30 June 2018

17/09/2018 7:02am

UK Regulatory (RNS & others)


Dow Jones received a payment from EQS/DGAP to publish this press release.

 
 
 Tern PLC (TERN) 
Tern PLC: Unaudited Interim Results for the six months to 30 June 2018 
 
17-Sep-2018 / 07:00 GMT/BST 
Dissemination of a Regulatory Announcement, transmitted by EQS Group. 
The issuer is solely responsible for the content of this announcement. 
 
17 September 2018 
 
Tern Plc 
 
(AIM: TERN) 
 
Unaudited Interim Results for the six months to 30 June 2018 
 
 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 2018. 
 
Key Highlights 
 
                    30 June 2018 30 June 2017 31 December 2017 
 
                               GBP            GBP                GBP 
Net assets            13,942,757   10,787,236       10,580,802 
Current assets         2,671,784      429,729          850,675 
Total assets          14,221,704   11,031,059       11,069,300 
Loss for the period    (221,252)    (469,116)      (1,689,555) 
 
· Raised GBP3.1m during the period and retired a convertible loan note 
facility, strengthening the balance sheet and improving Tern's investment 
options. 
 
· GBP1.5m invested into growing the portfolio with a new medical Virtual 
Reality (VR) IoT investment, FVRVS Limited (trading as FundamentalVR), and 
into existing portfolio companies, Device Authority Limited ("Device 
Authority") and InVMA Limited. 
 
· Year-on-year turnover of principal portfolio companies1 from calendar 
year 2016 to 2017 increased by 126% and the increase for calendar year 
2017 to 2018 is expected to be of the order of 12%. This includes a 
reduction in turnover for flexiOPS due to the receipt of the final EU 
grants. Without this reduction, the growth increases to 50%. 
 
· Year-on-year increase in employees within principal portfolio 
companies1, a key growth measurement or KPI, increased by 55% from 
calendar year 2016 to 2017 and increased a further 12% in the six months 
to June 2018. 
 
· A close focus on cost management ensured that monthly administrative 
costs over the period remained comparable to the monthly burn rate in the 
year ended 31 December 2017. The reduced loss for the period compared to 
the six months to June 2017 was primarily due to a small fair value 
increase (GBP282,987). 
 
· Net asset value per share fell to 6.2p for the period, this was due to 
share issues early in the year. The most recent fundraises were achieved 
at an appreciative net asset value per share. 
 
· Details of shareholder conference call, to be held on Thursday 20 
September, can be found at the end of this release. 
 
Al Sisto, CEO of Tern Plc, said: 
 
 "I am pleased that Tern has made positive progress in terms of positioning 
 our company as a leading investor in technology companies specialising in 
the IoT sector in the UK. Our recent activities, which include strengthening 
 our balance sheet and making investments into new and potentially 
 high-growth companies at attractive valuations, place us in a more solid 
 position for the full year and beyond. 
 
 "Tern's hands-on approach, consultative support and excellent industry 
network represents an appealing proposition to the IoT companies in which we 
 seek to invest. As a result, we believe that we are on track to meet our 
 goal of having a dozen companies in our portfolio by the 2019 year-end, as 
 we outlined at our Annual General Meeting (AGM) in April this year. The 
 increased turnover reported by our portfolio companies reflect their 
 positive progress and we are confident that we can continue to support this 
 type of success in the future. 
 
 "At this point of our company's development, we believe we have the 
 components in place for a scalable foundation that will drive sustainable 
 growth for our shareholders, brought about by our management's years of 
 experience in growing technology businesses; a unique approach in finding 
 opportunities; and a focus on the dynamic IoT sector. Looking forward, over 
 the next six months, we are planning to expand our team, by adding 
 additional technology expertise to support the growing portfolio." 
 
Note 1: Portfolio company growth excludes Seal and Push, in which Tern has a 
<1% holding and minimal influence. 
 
 Enquiries: 
 
Tern Plc                          via Redleaf 
 
Albert Sisto/Sarah Payne 
 
Allenby Capital Limited           Tel: 0203 328 5656 
 
(Nomad and joint broker) 
 
David Worlidge/Alex Brearley 
 
Whitman Howard                    Tel: 020 7659 1234 
 
(Joint broker) 
 
Nick Lovering/Christopher Furness 
 
Redleaf Communications            Tel: 020 3757 6880 
 
Elisabeth Cowell/Fiona Norman 
 
 Chief Executive's Statement 
 
During the first six months of 2018, Tern focused on building a portfolio of 
 exciting IoT companies in the UK that the Board believes will be attractive 
candidates for acquisition or IPO, with valuations between GBP1 million to GBP10 
 million. 
 
Our focus remains on delivering consistent investee company turnover growth; 
 growing and expanding the existing investment business, as measured by 
 investee company employee number growth; and focusing on year-on-year net 
 asset growth. 
 
 With this in mind, we were pleased to have added an investment in an 
 additional company to our portfolio during the period. Accordingly, the 
absolute net asset value of our holdings increased by 32% during the period. 
 Notably, since our 2017 half year end, we have increased the number of 
portfolio companies from four to six. Our stated objective is to hold twelve 
 investments by 31 December 2019 within a synergistic portfolio and this 
 continues to be a focus of the Company. 
 
 Whilst acquiring investments has been one focus of the Board, it has also 
 worked on supporting our portfolio companies and developing strategic 
 relationships among our portfolio companies, with the aim of successfully 
 exiting investments within a timeframe of 36 - 60 months after our initial 
investment. With this in mind, we delivered follow-on investment and support 
  amounting to GBP0.7m during the period. In particular, we are pleased by how 
 Device Authority continues to expand its important market ecosystem and its 
 strategic alliances and partnerships against our stated objectives outlined 
 in the 2017 annual report. We are also pleased to see the rapid progress 
 FundamentalVR has made in converting to a SaaS revenue model and expanding 
  into the important North America market since receiving our GBP0.8m 
 investment. 
 
 Key to our value creation is the increase in turnover delivered by our 
 portfolio companies. Pleasingly, the year-over-year growth in the aggregate 
 revenue of our principal portfolio companies1 increased by 126% from 
 calendar year 2016 to calendar year 2017 and we expect the growth in the 
 aggregate revenue of our investee companies from calendar year 2017 to 
 calendar year 2018 to be of the order of 12%. This growth would increase to 
 50% if the reduction in turnover from flexiOPS is removed, reflecting an 
 increase in customer contracts secured and delivered. flexiOPS received the 
 last of the EU grants in the first six months of 2018 and is now focused on 
 growing and securing contracts for Wyld Technologies. Another important 
 indicator in the growth and success of our principal portfolio companies1: 
 year-over-year employee headcount growth, increased by 55% from calendar 
 year 2016 to calendar year 2017, and 12% in the six months to June 2018, 
 highlighting a continuing growth in the portfolio overall. 
 
 The period also saw us build up our balance sheet resources. During the 
 first six months of 2018, Tern retired the convertible loan notes obtained 
  at the end 2017. We subsequently raised GBP3.1 million to improve our 
 deployment capabilities. Our strategy was further developed in July 2018, 
  when we added GBP2.9 million to our balance sheet to bolster our financial 
 position for upcoming investment opportunities and to provide additional 
finance to develop the businesses of the existing portfolio companies. While 
 our net asset value per share decreased by 16% during the period, primarily 
due to our funding activities in late 2017 and early 2018, during the latter 
 half of this period and looking forward into the second half of the year, 
 funding activities have been net asset value per share generative. 
 
 With the world becoming more connected than ever, we believe that 2018/19 
 will be an inflection point for the IoT sector. The IoT sector will be 
 facing greater investment and more widespread adoption of IoT applications. 
An increase in IoT devices encompasses a wide range of physical devices with 
 embedded electronics, software, sensors or actuators, with many of them 
 allowing objects to be sensed or controlled remotely across networks. As a 
result, businesses are becoming the top adopters of IoT solutions, motivated 
 by lower operating costs and increased productivity. IoT devices play a 
 crucial role in the management of our global critical infrastructure and 
further adoption in critical infrastructure is expected to increase rapidly. 
 For example, a Business Intelligence report "The IOT Forecast Book 2018" 
 suggests that by 2023: 
 
· Companies offering IoT platform software and services will bring in 
nearly $18 billion annually; 
 
· Total low-power wide-area network (LPWAN) connections will rise to more 
than 2 billion devices with about 1 in every 20 IoT devices connected to 
an LPWAN; 
 
· The agriculture sector will install nearly 12 million sensors worldwide; 
and 
 
· The installed base for robotic systems will approach 6 million globally, 
for example. 
 
 The Board believes that Tern is building a strong portfolio in industries 
 that support companies within several of these critical infrastructure 
 sectors with our companies addressing those segments of these markets where 
 utilisation and adoption is already occurring. 
 
Note 1: Portfolio company growth excludes Seal and Push, in which Tern has a 
<1% holding and minimal influence 
 
 Portfolio Review 
 
  Device Authority Limited ("Device Authority"): GBP9.9m valuation 
 
 Device Authority is an award winning, industry-recognised, international 
 business delivering innovations in IoT security with offices in the UK and 
 Silicon Valley. Since our initial investment in Cryptosoft Limited over 
 three years ago, Device Authority has expanded its product portfolio, world 
 class team and ecosystem of well-established business partners. Tern today 
 is a 56.8% shareholder in Device Authority. 
 
 We were disappointed that the original objectives for 2017 were delayed by 
 product integration issues, delays in customer implementation and 
 restructuring. During the first six months of 2018, Device Authority 
continued to build on a strong base of strategic partners, including SyroCon 
 Consulting and Eonti, Larsen and Toubro Infotech ('LTI') and Gemalto. 
 Furthermore, it announced support for the Microsoft Azure IoT Hub. Device 
 Authority also continued to be recognised as a critical force in the global 
 IoT security market. For example, gaining recognition as a 2018 Emerging 
 Star in the IOT Security Market by Quadrant Knowledge Solutions. The Board 
 is pleased with Device Authority's continued focus and is encouraged by the 
 recent pipeline development for KeyScaler. 
 
 Following the announcement of a strategic partnership with Thales, Device 
Authority and Thales announced the launch of their joint blueprint to secure 
 the connected health industry. This IoT market is a strategic focus for 
 Device Authority as healthcare forecasts predict growth to reach $612bn by 
 2024, according to a report by Grand View Research, Inc published in 2016. 
 
 During the period, Device Authority announced the launch of KeyScaler As A 
 Service, providing IoT Security in the Cloud. This service enables IoT 
 service providers and manufacturers to offer their customers the best 
 security for IoT devices without the infrastructure or running costs 
associated with on-premise environments, expanding is ability to make market 
 for its platform by simplifying customer deployment options. 
 
 Device Authority's fundraising activities with US Capital Partners continue 
 in the US. A fundraise has not yet been completed but interested parties 
 continue to meet with Device Authority. In the meantime, the Device 
 Authority shareholders have supported the continued progress of the company 
 by providing a total of $2.9 million in the form of convertible loan notes 
 since November 2017, $1.7m of this provided by Tern ($0.5m post 30 June 
 2018). 
 
As at 30 June 2018, the value of Tern's shareholding in Device Authority has 
   increased to GBP9.9 million (31 December 2017: GBP9.7 million) as a result of 
 favourable exchange rate movements. 
 
 The annual report and accounts for Device Authority for the year ended 31 
 December 2017 are expected to be released in September 2018. 
 
  FVRVS Limited ('Fundamental VR'): GBP0.8m valuation 
 
  Tern invested GBP0.8m in FundamentalVR in May 2018 for a 18.3% holding. 
 FundamentalVR provides Tern with exposure to the rapidly growing medical 
 simulation market using low cost open system IoT devices, a market 
 anticipated to grow to $2.3bn by 2021 according to a 2016 report by 
 MarketsandMarkets and provides a basis for developing our IoT analytics 
 pillar of the Tern investment strategy. 
 
 FundamentalVR has already begun to use the funds received from Tern to 
 further refine its SaaS delivery model and expand into the US market. 
 America is an important strategic market for the company and over the next 
 six months FundamentalVR will focus on the US medical industry as the next 
 stage of their ambition of building a world leading SaaS based immersive 
 surgical simulation and data gathering platform. 
 
 It is important to note that the decrease in turnover at FundamentalVR from 
   GBP1m in the year ended 31 December 2016 to GBP0.3m in the year ended 31 
 December 2017 reflects the beginning of the change in its business model 
 from one of bespoke sales to that of a growing subscription-based recurring 
 revenue model which is securing and growing the value of the business. 
 
  flexiOPS Limited ("flexiOPS"): GBP78,000 valuation 
 
 flexiOPS, a wholly-owned Tern investment, completed its historic portfolio 
of EU funded research and development cloud projects during 2018. It has now 
 re-focused on supporting the networking element of our IoT enablement 
strategy by aiding the growth and development of the Wyld Technology Limited 
 ("Wyld Technology") ad-hoc mesh networking offering following their 
 acquisition in late 2017. 
 
During the first six months of 2018, Wyld Technology has focused on building 
out its development team and product platform, and now has a product roadmap 
 that is in line with current market requirements via its ability to deliver 
and collect critical data via its ad-hoc mesh networking platform in the all 
 critical "last mile:". 
 
 Mesh networks enable data to be transmitted from different devices 
 simultaneously. This topology can withstand high traffic and even if one of 
 the components fail, an alternative is always available, ensuring data 
 transfer is not affected. As mesh network topology is self-forming and 
 self-healing it is more efficient at creating robust ad-hoc networks; 
 providing assured quality to ensure continuity of service. 
 
  InVMA Limited ("InVMA"): GBP0.6m valuation 
 
InVMA, a company in which Tern has a 50% holding, delivers IoT applications, 
 based on the industry leading PTC/Thingworx development platform that 
 deliver real business value and competitive advantage to its customers. Its 
founding team combines years of world-class industrial design expertise with 
 the Thingworx platform to create state of the art IoT systems and products 
 in the medical and industrial IoT market segments. 
 
 Since our investment in late 2017, InVMA, as part of its business 
 transformation, has launched AssetMinder, a product which monitors and 
 manages data from all types of sensors that provides alerts when 
 pre-determined thresholds or rules have been met or broken. In the first 
 half of 2018, InVMA has focused on generating AssetMinder product sales to 
 drive value creation. InVMA also announced the integration of InVMA's 
 AssetMinder with Device Authority's KeyScaler which is an important proof 
 point of Tern's influence in integrating the products and technologies of 
 its portfolio companies. 
 
 Real-time monitoring's many benefits are fuelling IoT growth and 69% of 
 manufacturers are relying on real-time monitoring to increase the accuracy 
 of tracking production time, downtime, total parts created, rejects and 
 parts remaining to be produced, according to a 2018 report by IQMS 
 Manufacturing Software. 
 
 According to a report by Grand View Research published in 2016, the global 
 industrial IoT market is expected to reach US$933.62 billion by 2025 from 
 $109.28bn in 2016. Growth in this segment can be attributed to the 
 developing cloud computing market, increasing government initiatives for 
 supporting sustainable smart factories growth, and rising number of 
 connected devices that generate a large amount of data. InVMA have also 
secured new strategic partnerships and contract wins in key segments of this 
 market already, including the announcement of a contract with ESAB, part of 
 the Colfax Group, to support the architecture of a new ESAB WorldCloud 
 platform which will be powered my Microsoft Azure IOT and PTC's ThingWorx 
 platform. 
 
The annual report and accounts for InVMA for the year ended 31 December 2017 
 are expected to be released in September 2018. 
 
  Seal Software Group Limited ("Seal Software"): GBP125,439 valuation 
 
 During the first half of 2018, Seal Software, a company in which Tern holds 
less than 1%, a leader in contract discovery and analytics, has continued to 
 grow and develop its business with numerous awards, new contracts and 
 strategic partnerships announced. Specifically: 
 
· Seal Software unveiled a global partnership with DocuSign to automate 
and connect the process of how agreements are prepared, signed, enacted 
and managed. 
 
· Seal Software won the award for Outstanding Data Analytics Solution at 
the annual Big Data Excellence awards in May 2018. Seal Software was also 
named a 2018 Cool Vendor in Content Services by Gartner. 
 
· The annual report and accounts for Seal Software for the year ended 31 
December 2017 are expected to be released in September 2018. 
 
  Push Technology Limited ("Push Technology"): GBP11,326 valuation 
 
We have been informed by management that Push Technology, a company in which 
Tern holds less than 1%, continues on its path to profitability following a 
2017 strategic realignment from a product focused company to a customer 
centric company outwardly focused on expanding into new markets. This 
includes a reduction in the sales cycle and a move to work more efficiently 
and control costs. 
 
The annual report and accounts for Push Technology for the year ended 31 
December 2017 are expected to be released in September 2018. 
 
Financial 
 
During the six months ended 30 June 2018, the Board focused on strengthening 
 the balance sheet to support the existing portfolio companies and to enable 
 investments in new exciting growth IoT companies. As a result, the total 
assets of Tern increased to GBP14.2 million at 30 June 2018, compared to GBP11.1 
 million at 31 December 2017. The total assets at 30 June 2018 included a 
    cash balance of GBP1.5m and net current assets of GBP2.4m, of which GBP0.9m 
 related to the convertible loans issued to Device Authority during 2017 and 
 2018. 
 
 The improved loss for the period reflects a close focus on cost management, 
 with monthly administrative costs over the period remaining comparable to 
 the monthly burn rate in the year ended 31 December 2017. A small increase 
 in the fair value of the investment portfolio was recognised, reflecting a 
  positive exchange rate variance for Device Authority Limited (GBP0.2m) and a 
 100% increase in the valuation of Seal Software Group Limited following a 
 recent fundraise. 
 
The net asset value per share fell slightly during the period, caused by the 
conversion of the loan note in 2017 with shares issued in 2018 and a further 
 conversion in January 2018. 
 
 Post balance sheet events 
 
 A placing of 11,192,307 ordinary shares at an issue price of 26 pence 
  raising gross proceeds of GBP2.9m was completed in July 2018, which has 
 strengthened the cash and current asset position of the Company. The 
 proceeds place the Company in a stronger financial position for upcoming 
 investment negotiations and also provides additional finance to develop the 
 existing portfolio company businesses. 
 
 Outlook 
 
 The Board remains committed to increasing our investment in the IoT market 
 in the UK, focusing on adding new technology companies to the portfolio, 
 including UK companies delivering platforms that include AI and machine 
 learning for IoT, while continuously supporting and growing the existing 
 portfolio. Adding an additional technology strong director to the Tern team 
 will help support this aim. 
 
 We have set for ourselves a financial benchmark of achieving an average of 
 20% year-on-year growth in portfolio value by year end 2019 and at the half 
 year we have achieved a 13% growth in the portfolio and stand well 
 positioned to deliver over the full year with significant cash balances 
 remaining to deploy. 
 
 By changing the traditional venture capital model and making our expertise 
 accessible to a wider group of companies we believe we are breaking new 
 ground. Our partnership approach offers Tern investors access to exciting 
 technology companies which may not otherwise be available to them. The 
  placings of GBP3.1 million in the first six months of 2018, gives us 
 additional capacity and negotiating strength and is a validation of that 
 model, having attracted support from high profile new investors, as well as 
 the strong existing shareholder base. 
 
 We feel confident of making further progress during the second half of 2018 
 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. 
 
 Finally, I wish to thank all shareholders for their support and acknowledge 
 the hard work of the all the directors and our advisors. 
 
 Al Sisto 
 
 Chief Executive Officer 
 
 14 September 2018 
 
Unaudited Statement of Comprehensive Income 
 
for the 6 months ended 30 June 2018 
 
                               Notes 6 months to  6 months to  12 months 
                                         30 June      30 June      to 31 
                                            2018         2017   December 
                                                                    2017 
                                     (Unaudited)  (Unaudited)  (Audited) 
                                               GBP            GBP          GBP 
 
Revenue                                   64,245       42,639     97,940 
Movement in fair value                   282,987            -  (757,705) 
of investments 
 
Gross Profit/(Loss)                      347,232       42,639  (659,765) 
 
Administration costs                   (571,952)    (522,105)  (1,030,60 
                                                                      3) 
 
Operating loss                         (224,720)    (479,466)  (1,690,36 
                                                                      8) 
 
Finance                                    4,376       10,484      1,020 
income 
Finance costs                              (908)        (134)      (207) 
 
Loss before tax                        (221,252)    (469,116)  (1,689,55 
                                                                      5) 
 
Tax                                            -            -          - 
 
Loss for the period                    (221,252)    (469,116)  (1,689,55 
                                                                      5) 
 
Earnings per share               6 
Basic                                     (0.1)p       (0.4)p     (1.4)p 
Diluted                                   (0.1)p       (0.4)p     (1.4)p 
 
Unaudited Statement of Financial Position 
 
as at 30 June 2018 
 
                                30 June      30 June         31 
                                                       December 
                                                           2017 
 
                                   2018         2017 
                            (Unaudited)  (Unaudited)  (Audited) 
                       Note           GBP            GBP          GBP 
Assets 
Investments held for         11,549,920   10,601,330  10,218,62 
trading                                                       5 
Loans to                              -            -          - 
investee 
companies 
 
Non-current                  11,549,920   10,601,330  10,218,62 
assets                                                        5 
 
Current 
assets 
Trade and                     1,133,132       93,763    576,849 
other 
receivables 
Cash and                      1,538,652      335,966    273,826 
cash 
equivalents 
 
                              2,671,784      429,729    850,675 
 
Total assets                 14,221,704   11,031,059  11,069,30 
                                                              0 
 
Equity 
attributable 
to the 
Company's 
equity 
holders 
Share                   7     1,346,665    1,325,614  1,330,225 
capital 
Share                        16,833,172   12,420,593  13,237,36 
premium                                                       2 
Loan note                             -       17,479    123,482 
equity 
reserve 
Share option and                      -    1,126,581    175,982 
warrant reserve 
Retained                    (4,237,080)  (4,103,031)  (4,286,24 
earnings                                                     9) 
 
                             13,942,757   10,787,236  10,580,80 
                                                              2 
 
Current 
liabilities 
Trade                            34,024          542     47,600 
payables 
Accruals and                    244,923      168,077    229,564 
other 
payables 
                                278,947      168,619    277,164 
 
Non-current 
liabilities 
Borrowings                            -       75,204    211,334 
 
Total                           278,947      243,823    488,498 
liabilities 
 
Total equity                 14,221,704   11,031,059  11,069,30 
and                                                           0 
liabilities 
 
Unaudited Changes in Equity 
 
as at 30 June 2018 
 
               Share     Share     Loan  Option Retained   Total 
                                   note     and 
                                        warrant 
 
                                 equity 
             capital   premium  reserve reserve earnings  equity 
                   GBP         GBP        GBP       GBP        GBP       GBP 
Balance at  1,325,27 12,390,31   20,650 1,088,5 (3,637,0 11,187, 
1 January          0         0               95      86)     739 
2017 
Total              -         -        -       - (469,116 (469,11 
comprehensi                                            )      6) 
ve income 
Issue of         344    30,283        -       -        -  30,627 
share 
capital 
Transfer on        -         -  (3,171)       -    3,171       - 
conversion 
of 
convertible 
loan notes 
Share based        -         -        -  37,986        -  37,986 
payment 
charge 
Balance at  1,325,61 12,420,59   17,479 1,126,5 (4,103,0 10,787, 
30 June            4         3               81      31)     236 
2017 
Total              -         -        -       - (1,220,4 (1,220, 
comprehensi                                          39)    439) 
ve income 
Issue of       4,611   941,925        -       -        - 946,536 
share 
capital 
Issue of           -         -  112,563       -        - 112,563 
convertible 
loan note 
Share and          - (125,156)        -       -        - (125,15 
loan issue                                                    6) 
costs 
Transfer on        -         -  (6,560)       -    6,560       - 
conversion 
of 
convertible 
loan notes 
Transfer of        -         -        - (713,32  713,326       - 
lapsed and                                   6) 
exercised 
warrants 
Transfer of        -         -        - (199,28  199,287       - 
option                                       7) 
reserve 
Share based        -         -        - (37,986  118,048  80,062 
payment                                       ) 
charge 
Balance at  1,330,22 13,237,36  123,482 175,982 (4,286,2 10,580, 
31 December        5         2                       49)     802 
2017 
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 
 
Unaudited Statement of Cash flows 
 
for the 6 months ended 30 June 2018 
 
                           6 months to   6 months to   12 months 
                          30 June 2018  30 June 2017       to 31 
                                                        December 
                                                            2017 
                           (Unaudited)   (Unaudited)   (Audited) 
                     Note            GBP             GBP           GBP 
Cash flows from 
operating activities 
Net cash used in      8      (503,436)     (438,760)   (783,866) 
operations 
Purchase of                (1,048,309)             -   (375,000) 
investments 
Loan to investment           (465,240)             -   (402,436) 
company 
 
Net cash from              (2,016,985)     (438,760)  (1,561,302 
operating activities                                           ) 
 
Cash flows from 
financing activities 
Proceeds on issue of         3,100,000             -     603,110 
shares 
Proceeds on issue of           550,000             -     550,000 
loan note 
Share issue expenses         (357,500)             -   (125,156) 
and Loan note issue 
expenses 
Proceeds from                        -         2,377      34,303 
exercise of warrants 
Proceeds from                    8,500         9,000       9,000 
exercise of options 
Repayment of loan             (20,000)             -           - 
stock 
Interest received                  811           498       1,020 
 
Net cash from                3,281,811        11,875   1,072,277 
financing activities 
 
Increase/(decrease)          1,264,826     (426,885)   (489,025) 
in cash and cash 
equivalents 
Cash and cash 
equivalents at 
beginning of period 
 
                               273,826       762,851     762,851 
 
Cash and cash                1,538,652       335,966     273,826 
equivalents at end 
of period 
 
Notes to the unaudited interim statement 
 
for the 6 months ended 30 June 2018 
 
1) General information 
 
 The Company is a public limited company which has its ordinary shares 
 admitted to trading on the AIM market operated by the London Stock Exchange 
 and is incorporated in England and Wales. 
 
The address of its registered office is 27-28 Eastcastle Street, London, W1W 
 8DH. Items included in the financial statements of the Company are measured 
 in Pound Sterling which is the currency of the primary economic environment 
in which the entity operates. The financial statements are also presented in 
 Pound Sterling which is the Company's presentational 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 2017. 
 The financial information for the year ended 31 December 2017 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 2017 have been filed with the 
 Registrar of Companies and can be found on the website www.ternplc.com [1]. 
 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 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) 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. 
 
Income taxes 
 
Judgement is required in determining the Company's provision for income tax. 
 Where the final tax outcome is different from the amounts that were 
 initially recorded, the differences will impact the income tax and deferred 
 tax provisions in the period in which such determination is made. 
 
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 (Level 3) 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. 
 
Share based payments 
 
 The calculation of the fair value of equity-settled share based awards and 
 the resulting charge to the statement of comprehensive income requires 
 assumptions to be made regarding future events and market conditions. These 
 assumptions include the future volatility of the Company's share price. 
 These assumptions are then applied to a recognised valuation model in order 
 to calculate the fair value of the awards. 
 
5) 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. 
 
6) Earnings per share 
 
Earnings 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 2018   30 June 2017    31 December 
                                                       2017 
Weighted average 
number of ordinary 
shares (see note 
below): 
For calculation of   199,609,225    119,668,783      124,586,665 
basic earnings per 
share 
 For calculation of  199,609,225    119,668,783      124,586,665 
      fully diluted 
 earnings 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 2018 
 as the losses in these periods have an anti-dilutive effect. 
 
7) Share capital 
 
                  30 June 2018   30 June 2017   31 December 2017 
                        Number         Number             Number 
Issued and fully 
paid: 
Ordinary shares    225,484,580    120,230,677        143,286,855 
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         45,097         24,046             28,657 
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 
                     1,346,665      1,325,614          1,330,225 
 
 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, nor are they quoted on the AIM market of the 
 London Stock Exchange. 
 
8) Note to the cash flow statement 
 
                 6 months to 30   6 months to 30   12 months to 
                      June 2018        June 2017    31 Dec 2017 
                    (Unaudited)      (Unaudited)      (Audited) 
                              GBP                GBP              GBP 
Loss for the          (221,252)        (469,116)    (1,689,555) 
period 
Adjustments for 
items not 
included in 
cash flow: 
Movement in           (282,987)                -       (17,621) 
fair value of 
investments 
Exchange rate                 -                -        775,326 
loss 
Share based              94,439           37,986        118,048 
payment charge 
Finance expense               -                -            207 
Finance income          (4,376)         (10,484)        (1,020) 
Operating cash        (414,176)        (441,614)      (814,615) 
flows before 
movements in 
working capital 
Adjustments for 
changes in 
working 
capital: 
-                      (91,043)            6,752       (73,898) 
(Increase)/decr 
ease in trade 
and other 
receivables 
(excluding loan 
to investee 
companies) 
-                         1,783          (3,898)        104,647 
Increase/(decre 
ase) in trade 
and other 
payables 
Cash used in          (503,436)        (438,760)      (783,866) 
operations 
 
9) Availability of interim results 
 
 Copies of this report will be available from the Company's website 
 www.ternplc.com [1]. 
 
 Shareholder Conference Call 
 
 Tern will be hosting a shareholder conference call with accompanying 
 presentation slides at 10:30 AM GMT on Thursday 20 September 2018. 
 
 The call will be hosted by the Tern's CEO, Al Sisto, who will discuss the 
 recent results, as well as answering submitted shareholder questions. To 
 submit a question, please email tern@redleafpr.com no later than 24 hours 
before the scheduled call time. Unfortunately, the Company will be unable to 
accept questions submitted after 10:30 AM GMT on 19 September 2018. Al Sisto 
 will aim to answer as many pre-submitted questions as possible during the 
 call. 
 
 Instructions 
 
 To participate in this conference call, please enter your local dial-in 
number [2] and 64 70 02 62 followed by the hash key on any telephone device. 
 Please note that all lines will be muted with the exception of the Tern 
 host. 
 
A presentation will be live to accompany the call once it has commenced, and 
 be available to view on desktop, smart phones and tablets during the event, 
 but will require a Cisco WebEx [3] application to be installed on certain 
 devices. 
 
 To view the presentation on a desktop computer, please click on this link 
https://arkadin-event.webex.com/arkadin-event/onstage/g.php?MTID=ee37e5f4109 
 43dfc6deaddf89c24e6577 [4], followed by event password 301 240 867. If you 
 wish to view the presentation on a smartphone or tablet, please first 
 download the WebEx application and follow the instructions on the screen, 
 entering the password 702 631 511 for access. 
 
 It is advisable to check compatibility and log in 10 minutes ahead of the 
 call to ensure a smooth experience. 
 
 A recording of the call will be available on the Company's website as soon 
 as practicable. 
 
ISIN:          GB00BFPMV798 
Category Code: IR 
TIDM:          TERN 
LEI Code:      2138005F87SODHL9CQ36 
Sequence No.:  6028 
EQS News ID:   724049 
 
End of Announcement EQS News Service 
 
 
1: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=6e8b33afd1df64b06916721dbe62d785&application_id=724049&site_id=vwd_london&application_name=news 
2: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=613eca41519d9d6f5215db81483fc182&application_id=724049&site_id=vwd_london&application_name=news 
3: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=4672f19e6c5415cb987f4d1e1b707fbc&application_id=724049&site_id=vwd_london&application_name=news 
4: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=fb9a830f773472994cb912f3da9906bd&application_id=724049&site_id=vwd_london&application_name=news 
 

(END) Dow Jones Newswires

September 17, 2018 02:02 ET (06:02 GMT)

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