AI Terminal

MODULE: AI_ANALYST
Interactive Q&A, Risk Assessment, Summarization
MODULE: DATA_EXTRACT
Excel Export, XBRL Parsing, Table Digitization
MODULE: PEER_COMP
Sector Benchmarking, Sentiment Analysis
SYSTEM ACCESS LOCKED
Authenticate / Register Log In

TERN PLC

Interim / Quarterly Report Sep 17, 2018

7958_rns_2018-09-17_69553262-42ca-4b5a-8c7f-4a314b1370cc.pdf

Interim / Quarterly Report

Open in Viewer

Opens in native device viewer

17-Sep-2018 / 07:00 GMT/BST

Dissemination of a RegulatoryAnnouncement, 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
£ £ £
Netassets 13,942,757 10,787,236 10,580,802
Currentassets 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 £3.1m duringthe period and re6red aconver6ble loan note facility, strengtheningthe balance sheetand improvingTern's investment op6ons.
  • £1.5m invested into growingthe por9olio with a new medical Virtual Reality (VR) IoTinvestment,FVRVSLimited (tradingas FundamentalVR),and into exis6ng por9olio companies, Device Authority Limited ("Device Authority") and InVMA Limited.
  • Year-on-year turnover of principal por9olio companies 1 from calendaryear 2016 to 2017 increased by 126% and the increase forcalendar year 2017 to 2018 is expected to be of the order of 12%.This includesareduc6on in turnover for flexiOPS due to the receipt of the final EU grants. Without this reduc6on, the growth increases to 50%.
  • Year-on-year increase in employees within principal por9olio companies 1 ,akeygrowth measurement or KPI, increased by 55% from calendaryear 2016 to 2017 and increased afurther 12% in the six months to June 2018.
  • A close focus on cost management ensured that monthlyadministra6ve 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 2017was primarily due to asmall fairvalue increase (£282,987).
  • Netassetvalue 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 atan apprecia6ve netassetvalue per share.
  • Details of shareholderconference 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 thatTern has made posi6ve progress in terms of posi6oning our companyasa leading investor in technology companies specialising in the IoTsector in the UK. Our recent ac6vi6es, which include strengthening our balance sheet and makinginvestments into new and poten6ally high-growth companiesataFrac6ve valua6ons, place us in a more solid posi6on for the full yearand beyond.

"Tern's hands-on approach, consulta6ve support and excellent industry network represents an appealing proposi6on 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 havinga dozen companies in our por9olio by the 2019 year-end, as we outlined at our Annual General Mee6ng (AGM) in April this year. The increased turnover reported by our por9olio companies reflect their posi6ve progressand we are confident that we can con6nue 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 fora scalable founda6on that will drive sustainable growth for our shareholders, brought about by our management'syears of experience in growing technology businesses; a unique approach in finding opportuni6es;and afocus on the dynamicIoTsector. Lookingforward, over the next six months, we are planning to expand our team, by addingaddi6onal technology exper6se to support the growing por9olio."

Note 1: Por9olio companygrowth excludes Seal and Push, in which Tern has a <1% holdingand minimal influence.

Enquiries:
Tern Plc
AlbertSisto/Sarah Payne
via Redleaf
Allenby Capital Limited
(Nomad and joint broker)
David Worlidge/Alex Brearley
Tel: 0203 328 5656
Whitman Howard
(Joint broker)
Nick Lovering/ChristopherFurness
Tel: 020 7659 1234

Chief Execu1ve'sStatement

During the first six months of 2018, Tern focused on building a por9olio of exci6ng IoT companies in the UK that the Board believes will be aFrac6ve candidates foracquisi6on or IPO, with valua6ons between £1million to £10million.

Our focus remains on delivering consistent investee company turnover growth; growing and expanding the exis6ng investment business, as measured by investee company employee numbergrowth;and focusing on year-on-year netassetgrowth.

With this in mind, we were pleased to have added an investment in an addi6onal company to our por9olio 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 por9olio companies from four to six. Our stated objec6ve is to hold twelve investments by 31 December 2019 within a synergis6c por9olio and this con6nues to be afocus of the Company.

Whilstacquiringinvestments has been one focus of the Board, it hasalso worked on suppor6ng our por9olio companiesand developing strategic rela6onshipsamong our por9olio companies, with the aim of successfully exi6ng investments within a 6meframe of 36 - 60 months aNer our ini6al investment. With this in mind, we delivered follow-on investmentand supportamoun6ngto £0.7m duringthe period. In par6cular, we are pleased by how Device Authority con6nues to expand its important market ecosystem and its strategic alliances and partnershipsagainst our stated objec6ves outlined in the 2017 annual report. We are also pleased to see the rapid progressFundamentalVR has made in conver6ng to a SaaSrevenue model and expandinginto the important North America market since receiving our £0.8m investment.

Key to ourvalue crea6on is the increase in turnover delivered by our por9olio companies. Pleasingly, the year-over-yeargrowth in the aggregate revenue of our principal por9olio companies 1 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 reduc6on in turnover from flexiOPS is removed, reflec6ng 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 por9olio companies 1 :year-over-year employee headcount growth, increased by 55% from calendaryear 2016 to calendaryear 2017,and 12% in the six months to June 2018, highligh6ngacon6nuing growth in the por9olio overall.

The period also saw us build up our balance sheet resources. Duringthe first six months of 2018, Tern re6red the conver6ble loan notes obtained at the end 2017. We subsequently raised £3.1 million to improve our deployment capabili6es. Our strategy was further developed in July 2018, when we added £2.9million to our balance sheet to bolster our financial posi6on for upcominginvestment opportuni6es and to provide addi6onal finance to develop the businesses of the exis6ng por9olio companies. While our net asset value per share decreased by 16% duringthe period, primarily due to our fundingac6vi6es in late 2017 and early 2018, during the laFer half of this period and looking forward into the second half of the year, fundingac6vi6es have been netassetvalue per share genera6ve.

With the world becoming more connected than ever, we believe that 2018/19 will be an inflec6on point for the IoTsector. The IoT sector will be facinggreater investment and more widespread adop6on of IoT applica6ons. An increase in IoT devices encompasses a wide range of physical devices with embedded electronics, soNware, 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 solu6ons, mo6vated by lower opera6ng costs and increased produc6vity. IoT devices play acrucial role in the management of ourglobal cri6cal infrastructure and furtheradop6on in cri6cal infrastructure is expected to increase rapidly. For example,a Business Intelligencereport "The IOTForecast Book 2018" suggests that by 2023:

  • Companies offeringIoT pla9orm soNware and services will bringin nearly \$18 billion annually;
  • Total low-power wide-area network (LPWAN) connec6ons 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 12million sensors worldwide;and
  • The installed base for robo6csystems will approach 6million globally, for example.

The Board believes thatTern is building a strong por9olio in industries that support companies within several of these cri6cal infrastructure sectors with ourcompaniesaddressingthose segments of these markets where u6lisa6on and adop6on isalready occurring.

Note 1: Por9olio companygrowth excludes Seal and Push, in which Tern has a <1% holdingand minimal influence

Por4olio Review

Device Authority Limited ("Device Authority"): £9.9m valuaon

Device Authority isan award winning, industry-recognised, interna6onal business deliveringinnova6ons in IoTsecurity with offices in the UK and Silicon Valley.Since our ini6al investment in CryptosoN Limited over three years ago, Device Authority has expanded its product por9olio, world class team and ecosystem of well-established business partners.Tern today isa 56.8% shareholder in Device Authority.

We were disappointed that the original objec6ves for 2017 were delayed by product integra6on issues, delays in customer implementa6on and restructuring. During the first six months of 2018, Device Authority con6nued to build on a strong base of strategic partners, includingSyroCon Consul6ngand Eon6, Larsen and Toubro Infotech ('LTI') and Gemalto. Furthermore, itannounced support for the MicrosoN Azure IoT Hub. Device Authorityalso con6nued to be recognised asacri6cal force in the global IoTsecurity market.For example,gainingrecogni6on as a 2018 Emerging Star in the IOT Security Market b y Quadrant Knowledge Solu6ons. The Board is pleased with Device Authority's con6nued focus and is encouraged by the recent pipeline development for KeyScaler.

Followingthe announcement of astrategic partnership with Thales, Device Authorityand Thalesannounced 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 predictgrowth to reach \$612bn by 2024,accordingto areport by Grand View Research, Inc published in 2016.

Duringthe period, Device Authorityannounced the launch of KeyScaler As A Service, providingIoTSecurity 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 runningcosts associated with on-premise environments, expandingisability to make market for its pla9orm by simplifyingcustomer deployment op6ons.

Device Authority's fundraising ac6vi6es with US Capital Partners con6nue in the US. A fundraise has not yet been completed but interested

par6es con6nue to meet with Device Authority. In the mean6me, the Device Authority shareholders have supported the con6nued progress of the company by providing a total of \$2.9 million in the form of conver6ble 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 £9.9million (31 December 2017: £9.7 million) as a result of favourable exchange rate movements.

The annual reportand accounts for Device Authority for the year ended 31 December 2017 are expected to be released in September 2018.

FVRVS Limited ('Fundamental VR'): £0.8m valuaon

Tern invested £0.8m in FundamentalVR in May 2018 fora 18.3% holding. FundamentalVR provides Tern with exposure to the rapidly growing medical simula6on market using low cost open system IoT devices, a market an6cipated to grow to \$2.3bn by 2021 according to a 2016 report by MarketsandMarketsand providesa basis for developing our IoTanaly6cs 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. Americaisan important strategic market for the company and over the next six monthsFundamentalVR will focus on the US medical industry as the next stage of theirambi6on of buildinga world leadingSaaS based immersive surgical simula6on and datagathering pla9orm.

It is important to note that the decrease in turnoveratFundamentalVR from £1m in the year ended 31 December 2016 to £0.3m 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 growingsubscrip6on-based recurringrevenue model which is securingand growingthe value of the business.

flexiOPS Limited ("flexiOPS"): £78,000 valuaon

flexiOPS,a wholly-owned Tern investment, completed its historic por9olio ofEU funded research and development cloud projects during 2018. It has now re-focused on suppor6ngthe networking element of our IoT enablement strategy by aiding the growth and development of the Wyld Technology Limited ("Wyld Technology") ad-hocmesh networking offeringfollowingtheiracquisi6on in late 2017.

During the first six months of 2018, Wyld Technology has focused on building out its development team and product pla9orm, and now has a product roadmap that is in line with current market requirementsviaits ability to deliverand collect cri6cal data via its ad-hoc mesh networking pla9orm in the all cri6cal "last mile:".

Mesh networks enable data to be transmiFed from different devices simultaneously. This topology can withstand high trafficand even if one of the components fail,an alterna6ve isalwaysavailable, ensuring datatransfer is notaffected. As mesh network topology is self-forming and selfhealingit is more efficientat crea6ngrobustad-hoc networks; providingassured quality to ensure con6nuity of service.

InVMA Limited ("InVMA"): £0.6m valuaon

InVMA, a company in which Tern has a 50% holding, delivers IoTapplica6ons, based on the industry leading PTC/Thingworx development pla9orm that deliver real business value and compe66ve advantage to its customers. Its founding team combines years of world-class industrial design exper6se with the Thingworx pla9orm to create state of the art IoT systemsand products in the medical and industrial IoT market segments.

Since our investment in late 2017, InVMA, as part of its business transforma6on, has launched AssetMinder, a product which monitors and manages datafrom all types of sensors that providesalerts when pre-determined thresholds or rules have been met or broken. In the first half of 2018, InVMA has focused on genera6ng AssetMinder product sales to drive value crea6on. InVMA also announced the integra6on of InVMA's AssetMinder with Device Authority's KeyScaler which is an important proof point of Tern's influence in integra6ngthe products and technologies of its por9olio companies.

Real-time monitoring's many benefitsar e fuelling IoTgrowth and 69% of manufacturersare relying on real-6me monitoring to increase the accuracy of tracking produc6on 6me, down6me, total parts created, rejects and parts remaining to be produced, according to a 2018 report by IQMS ManufacturingSoNware.

Accordingto 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 aFributed to the developing cloud compu6ng market, increasing government ini6a6ves for suppor6ngsustainable smart factoriesgrowth,and rising number of connected devices thatgenerate alarge 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 pla9orm which will be powered my MicrosoN Azure IOT and PTC'sThingWorx pla9orm.

The annual reportand accounts for InVMA for the year ended 31 December 2017 are expected to be released in September 2018.

SealSo/ware Group Limited ("SealSo/ware") : £125,439 valuaon

Duringthe first half of 2018,Seal SoNware,acompany in which Tern holds less than 1%,aleader in contract discoveryand analy6cs, has con6nued to grow and develop its business with numerousawards, new contractsand strategic partnershipsannounced.Specifically:

  • Seal SoNware unveiled aglobal partnership with DocuSign to automate and connect the process of how agreementsare prepared, signed, enacted and managed.
  • Seal SoNware won the award for Outstanding Data Analy6csSolu6on at the annual Big DataExcellence awards in May 2018. Seal SoNware wasalso named a 2018 Cool Vendor in ContentServices by Gartner.
  • The annual reportand accounts forSeal SoNware for the year ended 31 December 2017 are expected to be released in September 2018.

Push Technology Limited ("Push Technology"): £11,326 valuaon

We have been informed by management that Push Technology,acompany in which Tern holds less than 1%, con6nues on its path to profitability followinga 2017 strategicrealignment from a product focused company to acustomercentriccompany outwardly focused on expandinginto new markets. This includesareduc6on in the sales cycle and a move to work more efficientlyand control costs.

The annual reportand accounts for Push Technology for the year ended 31 December 2017 are expected to be released in September 2018.

Duringthe six months ended 30 June 2018, the Board focused on strengtheningthe balance sheet to support the exis6ng por9olio companiesand to enable investments in new exci6ng growth IoT companies. As a result, the total assets of Tern increased to £14.2 million at 30 June 2018, compared to £11.1million at 31 December 2017. The total assetsat 30 June 2018 included acash balance of £1.5m and net currentassets of £2.4m, of which £0.9m related to the conver6ble loans issued to Device Authority during 2017 and 2018.

The improved loss for the period reflects a close focus on cost management, with monthlyadministra6ve 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 por9olio was recognised, reflec6ng a posi6ve exchange rate variance for Device Authority Limited (£0.2m) and a 100% increase in the valua6on of Seal SoNware Group Limited followingarecent 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 furtherconversion in January 2018.

Post balance sheet events

A placing of 11,192,307 ordinary shares at an issue price of 26 pence raisinggross proceeds of £2.9m was completed in July 2018, which has strengthened the cash and currentasset posi6on of the Company. The proceeds place the Company in a stronger financial posi6on for upcoming investment nego6a6onsand also providesaddi6onal finance to develop the exis6ng por9olio company businesses.

Outlook

The Board remains commiFed to increasing our investment in the IoT market in the UK, focusing on adding new technology companies to the por9olio, including UK companies delivering pla9orms that include AI and machine learning for IoT, while con6nuously suppor6ng and growing the exis6ng por9olio. Addingan addi6onal technology strong director to the Tern team will help support thisaim.

We have set for ourselves a financial benchmark of achievingan average of 20% year-on-year growth in por9olio value by year end 2019 and at the half year we have achieved a 13% growth in the por9olio and stand well posi6oned to deliver over the full year with significant cash balances remainingto deploy.

By changingthe tradi6onal venture capital model and making our exper6se accessible to a widergroup of companies we believe we are breaking new ground. Our partnership approach offers Tern investors access to exci6ng technology companies which may not otherwise be available to them.The placings of £3.1 million in the first six months of 2018, gives us addi6onal capacity and nego6a6ngstrength and is a valida6on of that model, havingaFracted support from high profile new investors,as well as the strong exis6ngshareholder base.

We feel confident of making further progress duringthe second half of 2018 and look forward to making more announcements about business performance, new developments and improvements for each of our por9olio companies and repor6ng exci6ng new addi6ons to the Tern por9olio.

Finally, I wish to thankall shareholders for their supportand acknowledge the hard work of the all the directorsand ouradvisors.

AlSisto

Chief Execuve Officer

14 September 2018

Unaudited Statement of Comprehensive Income for the 6months ended 30 June 2018

Notes 6months to 30 June
2018
6months to 30 June
2017
12months to 31
December 2017
(Unaudited) (Unaudited) (Audited)
£ £ £
Revenue 64,245 42,639 97,940
Movement in fairvalue of investments 282,987 - (757,705)
Gross Profit/(Loss) 347,232 42,639 (659,765)
Administra6on costs (571,952) (522,105) (1,030,603)
Opera6ngloss (224,720) (479,466) (1,690,368)
Finance income 4,376 10,484 1,020
Finance costs (908) (134) (207)
Loss before tax (221,252) (469,116) (1,689,555)
Tax - - -
Loss for the period (221,252) (469,116) (1,689,555)
Earnings pershare 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 Posi1on as at 30 June 2018

30 June
2018
(Unaudited)
30 June
2017
(Unaudited)
31 December 2017
(Audited)
Note £ £ £
Assets
Investments held for trading 11,549,920 10,601,330 10,218,625
Loans to investee companies - - -
Non-current assets 11,549,920 10,601,330 10,218,625
Current assets
Trade and other receivables 1,133,132 93,763 576,849
Cash and cash equivalents 1,538,652 335,966 273,826
2,671,784 429,729 850,675
14,221,704 11,031,059 11,069,300
Total assets
Equity a <ributable company's="" equity="" holders<="" td="" the="" to="">
Share capital 7 1,346,665 1,325,614 1,330,225
Share premium 16,833,172 12,420,593 13,237,362
Loan note equity reserve - 17,479 123,482
Share op6on and warrant reserve - 1,126,581 175,982
Retained earnings (4,237,080) (4,103,031) (4,286,249)
13,942,757 10,787,236 10,580,802
Current liabili1es
Trade payables
Accrualsand other payables
34,024
244,923
542
168,077
47,600
229,564
278,947 168,619 277,164
Non-current liabili1es
Borrowings - 75,204 211,334
Total liabili1es 278,947 243,823 488,498
Total equity and liabili1es 14,221,704 11,031,059 11,069,300

Unaudited Changes in Equity as at 30 June 2018

Loan note
Share Share equity Op6on and warrant Retained Total
capital premium reserve reserve earnings equity
£ £ £ £ £ £
Balance at 1 January 2017 1,325,270 12,390,310 20,650 1,088,595 (3,637,086) 11,187,739
Total comprehensive income - - - - (469,116) (469,116)
Issue of share capital 344 30,283 - - - 30,627
Transfer on conversion of conver6ble loan notes - - (3,171) - 3,171 -
Share based payment charge - - - 37,986 - 37,986
Balance at 30 June 2017 1,325,614 12,420,593 17,479 1,126,581 (4,103,031) 10,787,236
Total comprehensive income - - - - (1,220,439) (1,220,439)
Issue of share capital 4,611 941,925 - - - 946,536
Issue of conver6ble loan note - - 112,563 - - 112,563
Share and loan issue costs - (125,156) - - - (125,156)
Transfer on conversion of conver6ble loan notes - - (6,560) - 6,560 -
Transfer of lapsed and exercised warrants - - - (713,326) 713,326 -
Transfer of op6on reserve - - - (199,287) 199,287 -
Share based payment charge - - - (37,986) 118,048 80,062
Balance at 31 December 2017 1,330,225 13,237,362 123,482 175,982 (4,286,249) 10,580,802
Total comprehensive income - - - - (221,252) (221,252)
Issue of share capital 16,440 3,953,310 - - - 3,969,750
Share and loan issue costs - (357,500) - - - (357,500)
Conversion of conver6ble loan notes - - (123,482) - - (123,482)
Transfer of lapsed warrants - - (175,982) 175,982 -
Share based payment charge - - - - 94,439 94,439
Balance at 30 June 2018 1,346,665 16,833,172 - - (4,237,080) 13,942,757

Unaudited Statement of Cash flows

for the 6months ended 30 June 2018

6months to 30 June
2018
6months to 30 June
2017
12months to 31 December
2017
(Unaudited) (Unaudited) (Audited)
Note £ £ £
Cash flows from opera1ng ac1vi1es
Net cash used in opera6ons 8 (503,436) (438,760) (783,866)
Purchase of investments (1,048,309) - (375,000)
Loan to investment company (465,240) - (402,436)
Netcash from opera1ng ac1vi1es (2,016,985) (438,760) (1,561,302)
Cash flows from financing ac1vi1es
Proceeds on issue of shares 3,100,000 - 603,110
Proceeds on issue of loan note 550,000 - 550,000
Share issue expensesand Loan note issue
expenses (357,500) - (125,156)
Proceeds from exercise of warrants - 2,377 34,303
Proceeds from exercise of op6ons 8,500 9,000 9,000
Repayment of loan stock (20,000) - -
Interest received 811 498 1,020
Netcash from financing ac1vi1es 3,281,811 11,875 1,072,277
Increase/(decrease) in cash and cash
equivalents 1,264,826 (426,885) (489,025)
Cash and cash equivalents at beginning of
period
273,826 762,851 762,851
Cash and cash equivalents at end of period 1,538,652 335,966 273,826

Notes to the unaudited interim statement for the 6months ended 30 June 2018

1. General informa1on

The Company is a public limited company which has its ordinary shares admiFed to trading on the AIMmarket 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 en6ty operates. The financial statements are also presented in Pound Sterling which is the Company's presenta6onal currency.

2. Basis of prepara1on

The interim financial statements of Tern Plc have been prepared in accordance with IAS 34, Interim Financial Repor6ng, as adopted by the European Union (EU). They do not include all of the informa6on required for full annual financial statements,and should be read in conjunc6on with Tern plc's audited financial statements for the year ended 31 December 2017. The financial informa6on for the year ended 31 December 2017 set out in this interim report does not cons6tute statutory accounts as defined in Sec6on 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. The auditor's report on those financial statements was unqualified and did not contain statements underSec6on 498 (2) orSec6on 498 (3) of the Companies Act 2006.

These interim financial statements have been prepared under the historical cost conven6on and have been approved for issue by the Board of Directors.

3. Goingconcern

The financial statements have been prepared on the goingconcern basis.

The directors have areasonable expecta6on that the Company has adequate resources to con6nue opera6ng for the foreseeable future. For this reason, they con6nue to adopt the goingconcern basis in preparingthe Company's financial statements

4. Cri1cal accoun1ngjudgements

Es6matesand judgementsare con6nually evaluated and are based on historical experience and other factors, including expecta6ons of future events thatare believed to be reasonable under the circumstances.

The Company makes es6mates and assump6ons concerning the future. The resul6ng accoun6ng es6mates will, by defini6on, rarely equal the related actual results. The es6mates and assump6ons that have a significant risk of causing a material adjustment to the carrying amounts of

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 ini6ally recorded, the differences will impact the income tax and deferred tax provisions in the period in which such determina6on is made.

Fairvalue of financial instruments

The Company holds investments that have been designated as held for trading on ini6al recogni6on. Where prac6cable the Company determines the fairvalue of these financial instruments thatare not quoted (Level 3) usingthe most recent bid price at which atransac6on has been carried out. These techniques are significantly affected by certain key assump6ons, such as market liquidity. Given the nature of the investments being early stage business, othervalua6on methods such as discounted cash flow analysis assess es6mates of future cash flows to derive fairvalue es6mates cannotalways be substan6ated by comparison with independent marketsand, in many cases, may not be capable of beingrealised immediately.

Share based payments

The calcula6on of the fair value of equity-seFled share based awards and the resul6ng charge to the statement of comprehensive income requires assump6ons to be made regarding future events and market condi6ons. These assump6ons include the future vola6lity of the Company's share price.These assump6onsare then applied to arecognised valua6on model in order to calculate the fairvalue of the awards.

5. Segmental repor1ng

The accoun6ng policy for iden6fying segments is based on internal management repor6ng informa6on that is regularly reviewed by the chief opera6ng decision maker, which is iden6fied as the Board of Directors.

In iden6fying its opera6ng 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 con6nuinginvestment opera6ons comprise one segment.

6. Earnings pershare

Earnings per share is calculated by reference to the weighted average shares in issue as follows:

6months to 6months to 12months to
30 June 2018 30 June 2017 31 December 2017
Weighted average number of ordinaryshares (see note below):
Forcalcula6on of basic earnings per share 199,609,225 119,668,783 124,586,665
Forcalcula6on of fully diluted earnings per share 199,609,225 119,668,783 124,586,665

The same number of shares is used for the calcula6on 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 an6-dilu6ve effect.

7. Share capital

30 June 2018 30 June 2017 31 December 2017
Number Number Number
Issued and fully paid:
Ordinary shares of £0.0002 225,484,580 120,230,677 143,286,855
Deferred shares of £29.999 42,247 42,247 42,247
Deferred shares of £0.00099 34,545,072 34,545,072 34,545,072
£ £ £
Issued and fully paid:
Ordinary shares of £0.0002 45,097 24,046 28,657
Deferred shares of £29.999 1,267,368 1,267,368 1,267,368
Deferred shares of £0.00099 34,200 34,200 34,200
1,346,665 1,325,614 1,330,225

The deferred shares have negligible value, beingsubject to restric6onsas to vo6ng, par6cipa6on and redemp6on accordingto the new Ar6cles of Associa6on then adopted, norare they quoted on the AIMmarket of the London StockExchange.

8. Note to the cash flow statement

6months to 30 June
2018
(Unaudited)
6months to 30 June
2017
(Unaudited)
12months to 31 Dec
2017
(Audited)
£ £ £
Loss for the period (221,252) (469,116) (1,689,555)
Adjustments for items not included in cash flow:
Movement in fairvalue of investments (282,987) - (17,621)
Exchange rate loss - - 775,326
Share based payment charge 94,439 37,986 118,048
Finance expense - - 207
Finance income (4,376) (10,484) (1,020)
Opera6ngcash flows before movements in workingcapital (414,176) (441,614) (814,615)
Adjustments forchanges in workingcapital:
- (Increase)/decrease in trade and other receivables (excludingloan to
investee companies)
(91,043) 6,752 (73,898)
- Increase/(decrease) in trade and other payables 1,783 (3,898) 104,647
Cash used in opera6ons (503,436) (438,760) (783,866)

9. Availability of interim results

Copies of this report will be available from the Company's website www.ternplc.com.

Shareholder Conference Call

Tern will be hos6ngashareholderconference call with accompanying presenta6on slidesat 10:30 AMGMT 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 submiFed shareholder ques6ons. To submit a ques6on, please email [email protected] no later than 24 hours before the scheduled call 6me. Unfortunately, the Company will be unable to accept ques6ons submiFed aNer 10:30 AMGMT on 19 September 2018. Al Sisto will aim to answeras many pre-submiFed ques6ons as possible duringthe call.

Instruc1ons

To par6cipate in this conference call, please enter your local dial-in number and 64 70 02 62 followed by the hash key on any telephone device. Please note thatall lines will be muted with the excep6on of the Tern host.

A presenta6on 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 applica6on to be installed on certain devices.

To view the presenta6on on a desktop computer, please click on this link hFps://arkadin-event.webex.com/arkadin-event/onstage/g.php? MTID=ee37e5f410943dfc6deaddf89c24e6577, followed by event password 301 240 867. If you wish to view the presenta6on on a smartphone or tablet, please first download the WebEx applica6on and follow the instruc6ons on the screen, enteringthe password 702 631 511 foraccess.

It isadvisable to check compa6bilityand login 10minutesahead of the call to ensure asmooth experience.

A recording of the call will be available on the Company's website as soon as prac6cable.

ISIN: GB00BFPMV798 Category Code:IR TIDM: TERN LEICode: 2138005F87SODHL9CQ36 Sequence No.: 6028 EQS News ID: 724049

End ofAnnouncementEQS News Service

Talk to a Data Expert

Have a question? We'll get back to you promptly.