TERN PLC
ANNUAL REPORT
Year ended
31 December 2014
Company No. 05131386
(England and Wales)
1
TERN PLC
CONTENTS
Company information
Chairman’s statement
Investment report
Strategic report
Directors’ report
Corporate governance statement
Report on directors’ remuneration
Independent auditor’s report
Income statement and statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Notice of 2014 Annual General meeting
Page
2
3
4
6
8
11
12
13
15
16
17
18
19
35
2
TERN PLC
COMPANY INFORMATION
DIRECTORS:
REGISTERED OFFICE:
SECRETARY:
Angus Forrest (Executive Director)
Michael Clark (Executive Director)
Bruce Leith (Executive Director)
Laurence Read (Non-executive Director)
Albert Sisto (Executive Director)
9 Catherine Place
London
SW1E 6DX
Mrs P A Keith
COMPANY’S REGISTERED NUMBER
5131386
AUDITORS:
Jeffreys Henry LLP
Finsgate
5-7 Cranwood Street
London EC1V 9EE
NOMINATED ADVISOR AND JOINT BROKER: W H Ireland
JOINT BROKER
REGISTRARS
BANKERS
24 Martin Lane
London
EC4R 0DR
Peterhouse Corporate Finance Limited
15 Eldon Street
London, EC2M 7LD
Share Registrars Limited
Suite E, First Floor
9 Lion and Lamb Yard
Farnham
Surrey GU9 7LL
Handelsbanken
5th Floor
13 Charles II Street
London
SW1Y 4QU
3
TERN PLC
CHAIRMAN’S STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2014
Tern’s strategy is to invest in established private software companies operating in the fast growing mobile and cloud
sectors. Where necessary we assist with improving the business model, recruiting the management team, and
negotiating strategic partnerships. The aim is to exit these investments via trade sales in 12 – 36 months from
investment, and reinvest part of the proceeds while returning surplus cash to shareholders.
Our investment portfolio now includes shareholdings in Cryptosoft Ltd, Flexiant Corporation Ltd,, Push Technology Ltd,
and Seal Software Group Ltd.
During the year these companies have performed well, making good progress against their development strategies.
The markets for cloud and mobile are growing strongly as mobile changes how people work and behave. As a result the
global markets are featuring a growing trend for large multi-national organisations to acquire new players. Yahoo, IBM,
Oracle, Microsoft and Salesforce are amongst the large corporations to make strategic acquisitions in 2014. This gives
us confidence that we will attract acquisitive interest in our investee companies.
This has been the first full year with the new management team in place. It has been our objective to operate with low
overheads whilst the business gains momentum, increases in scale and starts generating income and capital. In
keeping with this, the operating and non-executive Directors have taken no remuneration since the reorganisation of
Tern in August 2013. As a result, Tern has incurred modest operating expenses during the year and will continue to
focus on the prudent use of its operating capital.
To date, Tern’s executive directors have invested £600,000 in the Company to enable it to make its initial investments
and acquire Cryptosoft Limited. There is c. £300,000 shown as loans in note 20, and this is expected to be converted by
the Directors into equity as soon as practically possible. In addition to the Directors’ investment, the Company raised
further funds as follows:
•
•
•
£85,000 in a placing at 1.25 pence per share in September.
£378,000 in a placing at 3 pence per share in November, plus a warrant exerciseable within three years to
subscribe for 1 share for each 10 shares bought in the placing at 3p per share; and,
£294,500 in a placing at a price of 9p per share in December.
The proceeds from these fund raises will be used to facilitate further investments in accordance with the Company's
investing policy, and to provide additional finance for the existing portfolio.
The financial position of the Company has strengthened over the year as measured by:
Year ended 31 December
Total assets
Net assets
Net assets per share
2014
£1,367,308
£943,631
2.09 pence
2013
£297,729
£24,683
0.23 pence
The Company now has exposure to several interesting investments and is reviewing a pipeline of excellent
opportunities. We have plans to investigate further investments during the year, and continue to work closely with our
investee companies to support software sales into new markets, particular in the US, and identify trade sales.
Angus Forrest
Chairman
Date: 9 February 2015
4
TERN PLC
INVESTMENT REPORT
FOR THE YEAR ENDED 31 DECEMBER 2014
The Company’s current investment portfolio consists of the following investments, all of which are unquoted:
Cryptosoft Limited
Activity: Data Security software
Equity ownership: 100% ‘A’ Shares Cost: £332,026
Valuation is based on cost, which is taken as Fair Value
Valuation: £332,026
Cryptosoft is a specialist data security business. It has developed innovative authentication and encryption
software, which is hardware and software agnostic, that encrypts data flows. It is easy to deploy and scaleable
whilst being transparent to users.
The software has been proven over the past three years in the enterprise market where it is in daily use within
several large multinational organisations and it is a critical integrated OEM component to large application
software vendors and bespoke enterprise applications via partners.
A new version of Cryptosoft is under development for launch in the short term. This is expected to be the first
security software platform designed specifically for use in the rapidly growing cloud, mobile networks, machine-
2-machine (M2M) and internet of things (IoT) sectors.
There is a second class of shares, ‘B’ shares, which are owned by employees and are non-voting. They are
entitled to 25% of the net proceeds in the event of a sale of Cryptosoft Ltd.
For more information visit: www.cryptosoft.com
Flexiant Corporation Limited
Activity: Cloud Orchestration software
Equity ownership: <1%
Valuation is based on the price of shares in the most recent fund raise, which is taken as Fair Value
Valuation: £200,000
Cost: £100,000
Flexiant has developed a software platform for cloud management. Flexiant Cloud Orchestrator is an easy to use
solution for MSPs (Managed Service Providers) to manage cloud infrastructure, create and deliver differentiated
services and for metering and billing. With Flexiant, MSPs target market through innovation, compete more
effectively by developing unique, differentiated services, generate more revenue, and accelerate growth.
Flexiant’s partners include Dell, Arrow Electronics and Parallels.
In 2014 Flexiant announced:
New partnerships with Arrow Electronics Inc and Parallels Inc
Flexiant acquired Tapp multi-cloud software in May
New products including: updated cloud orchestration; product integration with Parallels and new multi-cloud
management software
For more information visit: www.flexiant .com
5
TERN PLC
INVESTMENT REPORT
FOR THE YEAR ENDED 31 DECEMBER 2014
Push Technology Limited
Activity: Data distribution software
Equity ownership: <1%
Cost: £49,952
Valuation is based on cost, which is taken as Fair Value
Valuation: £49,952
Push Technology solves the complexity around data distribution by removing redundant data to offer
organisations intelligent delivery of real-time data to any device regardless of connectivity or location. The
Company’s robust and innovative flagship communication platform, Diffusion™ helps to reduce infrastructure
requirements while delivering high performance and scalable services to any Internet connected device.
Push Technology works with organisations in the e-gaming, financial services, telecommunications, media and
broadcast and transportation sectors to optimise data, mobile application performance, Web scale and data
acceleration. Delivering data that’s live to the millisecond, Push Technology ensures that businesses can deliver
engaging real time customer experiences to drive revenues, increase competitiveness, develop new business
models to reduce network strain and recover costs and also elevate consumer engagement across multiple
channels in real time. IBM’s Bluemix product incorporates a Push component.
Customers include Betfair, Lloyds Bank, Racing Post, Sportingbet, Tradition and William Hill.
For more information visit: www.pushtechnology.com.
Seal Software Group Limited
Activity: Database Analytics and Search software
Equity ownership: <1%
Cost: £50,000
Valuation is based on cost which is taken as Fair Value
Valuation: £50,000
Seal specialises in writing software which performs complex analysis of contractual data. Seal Software is
specifically designed to locate contractual documents and extract and present key contractual information
related to language, clauses, clause combinations, and the key contextual metadata held within them.
Seal Software interfaces with Salesforce.com’s CRM products to allow contract discovery and contractual
information to be obtained in Salesforce. Also, Seal provides a portfolio of professional consulting and
implementation services that enable customers to maximise the benefits of Seal Software.
Customers include IBM, Lexis Nexis, Thomson Reuters, Old Mutual, Deutsche Bank, Centrica and many other
multi-national organisations.
For more information visit: www.seal-software.com
6
TERN PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2014
BUSINESS REVIEW
The Company is positioned as a quoted platform to invest in, and develop, private IT companies predominantly in the
cloud and mobile sectors.
A more detailed review of the activity and progress of the business, including the portfolio of investments, is contained
in the Chairman’s Statement and Investment Report on pages 3-5.
FUTURE DEVELOPMENTS
As explained in the Chairman’s statement the Company has begun to build a portfolio of investments and a pipeline of
advanced IT investment opportunities. It expects to announce further developments through 2015.
KEY PERFORMANCE INDICATORS
Whilst the Company currently has limited investments in quoted or unquoted companies, as referred to above, the
Company’s principal activity is that of investing in companies. Accordingly the Company’s Key Performance Indicators
(KPI) are the return on investments and the net assets position of the Company including net assets per share. These
indicators are monitored closely by the Board and the details of performance against these are given below.
• The return on investments: Flexiant Ltd, the only investment to be held for more than 12 months has been
revalued in line with IFRS to a level consistent with a recent fund raising.
• The net assets of the Company at 31 December 2014 totalled £943,631 (2013: £24,683). The net assets per
ordinary share as at 31 December 2014 were 2.09p (2013: 0.23p).
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company’s policy in respect of financial instruments and risk profile is set out in Note 2 to the financial statements
PRINCIPAL BUSINESS RISKS AND UNCERTAINTIES
The management of the business and the nature of the Company’s strategy are subject to a number of risks. The
Directors have set out below the principal risks facing the business. Where possible, processes are in place to monitor
and mitigate such risks. The Company operates a system of internal control and risk management in order to provide
assurance that the Board is managing risk whilst achieving its business objectives. No system can fully eliminate risk
and, therefore, the understanding of operational risk is central to the management process.
7
TERN PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2014
To enable shareholders to appreciate what the business considers are the main operational risks, they are briefly
outlined below:
Risk
Potential impact
•
Investment may require additional
finance
Inability to create maximum value
timeously
Investment
risk
An investment fails to
perform as anticipated
•
• Difficulty in realising investment
The Company is
unable to raise new
funds
May have a detrimental effect on the
Company’s ability to cover
administration and other costs
Liquidity
May adversely affect returns of
investee companies if they need to
raise further funds
Strategy
The Company is building a portfolio of
investments to insulate itself against poor
performance of any one.
It monitors the performance of each
investment regularly.
The Company will maintain sufficient
cash balance to finance itself for a
prudent period, or ensure that it has
access to funds.
ASSESSMENT OF BUSINESS RISK
The Board regularly reviews operating and strategic risks. The Company’s operating procedures include a system for
reporting financial and non-financial information to the Board including:
•
•
•
•
•
reports from management with a review of the business at each Board meeting, focusing on any new decisions/risks
arising;
reports on the performance of investments;
reports on selection criteria of new investments;
discussion with senior personnel; and
consideration of reports prepared by third parties.
Angus Forrest
Director
9 February 2015
8
TERN PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2014
The directors present their annual report and the audited financial statements of Tern plc (the ”Company”) for the year
ended 31 December 2014.
The Company is registered as a Public Limited Company (plc). The Company’s shares of 0.02p each are traded on
AIM of the London Stock Exchange.
PRINCIPAL ACTIVITIES
The principal activity of the Company is investing in unquoted and quoted companies to achieve capital growth.
RESULTS AND DIVIDENDS
The results for the period are shown in the income statement on page 15.
The loss for the year was £53,695 (2013: £235,955 profit).
The directors do not recommend payment of a dividend.
EVENTS AFTER THE REPORTING PERIOD
There have been no significant post year end events.
POLITICAL AND CHARITABLE CONTRIBUTIONS
No political or charitable donations were made during the period.
CONTROL PROCEDURES
Operational procedures have been developed for each of the Company’s operating businesses that embody key controls
over relevant areas. The implications of changes in law and regulations are taken into account by the Company.
The Board has considered the need for an internal audit function but has decided that this is not justified at present given
the size of the Company. However, it will keep the decision under review on an annual basis at least.
GOING CONCERN
The financial statements have been prepared on the going concern basis because, as set out in detail in Note 1.4, the
Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence
for the foreseeable future.
DIRECTORS AND DIRECTORS’ INTERESTS
The directors who held office during the year and their interests in the ordinary shares of the Company and the warrants
issued by the Company are as follows:
A G P Forrest
M J Clark
A Kerr
B H Leith
L Read
A E Sisto
(resigned 4 February 2014)
(appointed 4 February 2014)
At 31 December 2014
Ordinary shares
At 31 December 2013
Ordinary shares
4,216,289
4,216,289
—
2,173,900
—
2,400,000
545,000
545,000
—
2,173,900
—
—
The interests of the directors in options granted by the Company are disclosed under the “Report on Directors
Remuneration”.
9
TERN PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2014
SIGNIFICANT SHAREHOLDINGS
As at 6 February 2015, the Company had been notified of the following shareholdings of 3% or more of the share capital
Hargreave Hale Ltd
M J Clark
A G P Forrest
A E Sisto
B H Leith
S Crooks
J Penney
Number of
Ordinary
Shares
Percentage of
Issued Shares
Held
7,950,000
4,216,289
4,216,289
2,400,000
2,173,900
2,060,290
1,922,096
17.6%
9.3%
9.3%
5.3%
4.8%
4.5%
4.2%
STATEMENT OF DIRECTORS RESPONSIBILITIES
The directors are responsible for preparing the directors' report and the financial statements in accordance with applicable
law and regulations.
Company law requires the directors to prepare financial statements for each financial period. Under that law the directors
have elected to prepare the financial statements in accordance with International Reporting Standards (IFRS) as adopted
for use in the European Union. Under company law the directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for
that period. In preparing those financial statements, the directors are required to:
•
select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
•
•
state whether the company financial statements have been prepared in accordance with IFRS as adopted by the
European Union subject to any material departures disclosed and explained in the financial statements.
prepare the accounts on the going concern basis unless it is inappropriate to presume that the company will continue
in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
company's transactions and disclose with reasonable accuracy at any time the financial position of the company and
enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
DISCLOSURE OF INFORMATION
In the case of each person who was a director at the time this report was approved:
(cid:131)
(cid:131)
so far as that director is aware there is no relevant available information of which the Company’s auditors are
unaware: and
that director has taken all steps that the director ought to have taken as a director to make himself aware of
any relevant audit information and to establish that the Company’s auditors were aware of that information.
PUBLICATION OF ACCOUNTS ON THE COMPANY WEBSITE
Financial statements are published on the Company's website. The maintenance and integrity of the website is the
responsibility of the directors. The directors' responsibility also extends to the financial statements contained therein.
10
TERN PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2014
INDEPENDENT AUDITORS
A resolution to re-appoint Jeffreys Henry LLP, as auditors will be put to the members at the annual general meeting.
Signed on behalf of the board
Angus Forrest
Director
9 February 2015
11
TERN PLC
CORPORATE GOVERNANCE AND COMPLIANCE
FOR THE YEAR ENDED 31 DECEMBER 2014
The Company’s shares are traded on AIM and, accordingly, compliance with the revised UK Corporate Governance Code
is not mandatory. However, the Company has sought to comply with a number of the provisions of the Code in so far as it
considers them to be appropriate for a company of this size and nature. The Board is accountable to the Company’s
shareholders for good corporate governance. This report and the Remuneration Report describe how the Company
applies the provisions of good corporate governance. A fuller version is available on the Company’s website
(www.ternplc.com) under Rule 26.
DIRECTORS
The Company supports the concept of effective Board leadership and control of the Company. The Board is responsible
for approving Company policy and strategy. All Directors have access to advice from the Company Secretary and
independent professionals at the Company’s expense.
The Board consists of four Executive Directors and one Non-executive Director. The Non-executive Director is
independent of management and any business or other relationship which could interfere with the exercise of his
independent judgement.
The Board members are listed on page 2.
RELATIONS WITH SHAREHOLDERS
The Company values the views of its shareholders and recognises their interest in the Company’s strategy and
performance, Board membership and quality of management. It therefore encourages shareholders to offer their views.
The Company’s website (www.ternplc.com) maintains up to date newsflow for shareholders and other interested parties.
The AGM provides an opportunity for shareholders, particularly private investors, to question the Board on issues arising.
The notice convening the AGM is the notice of the meeting sent to shareholders with this report. A separate motion will be
put to the meeting on each substantial issue.
APPOINTMENT OF DIRECTORS
The Board deals with all matters relating to the appointment of Directors including determining the specification, identifying
suitable candidates and selection of the appointee. No separate Nominations Committee has been formed.
Throughout the year the Articles of Association have required each Director to seek re-election after no more than three
years in office. Therefore the Board considers it inappropriate that Non-executive Directors be appointed for a fixed term
as recommended by the Code.
ACCOUNTABILITY AND AUDIT
The Board as a whole endeavours to present a balanced and understandable assessment of the Company’s position and
prospects in all reports as well as in the information required to be presented by statutory requirements. No separate Audit
Committee has been formed.
INTERNAL CONTROL
The Board is responsible for maintaining a sound system of internal control to safeguard shareholders’ investments and
the Company’s assets and for reviewing its effectiveness. Such a system is designed to manage, but not eliminate, the risk
of failure to achieve business objectives. There are inherent limitations in any control system and accordingly even the
most effective systems can provide only reasonable, and not absolute, assurance against material misstatement or loss.
Angus Forrest
9 February 2015
12
TERN PLC
REPORT ON DIRECTORS’ REMUNERATION
FOR THE YEAR ENDED 31 DECEMBER 2014
The Board submits its Directors’ Remuneration Report for the year ended 31 December 2014.
REMUNERATION POLICY
The policy of the Board is to provide executive remuneration packages designed to attract, motivate and retain
Directors of the calibre necessary to manage the Company and to reward them for enhancing shareholder value and
return. It aims to provide sufficient levels of remuneration to do this but to avoid paying more than is necessary. Due
to the Board’s current size it does not have a Remuneration Committee.
The current Directors have received no remuneration since they were appointed to the Board. There will be three
main elements of the Directors’ remuneration package being basic annual salary, performance related bonus and
share option incentives.
All Directors’ salaries are reviewed annually by the Board.
DIRECTORS’ EMOLUMENTS
The remuneration of each Director, excluding share options awards, during the year ended 31 December 2013 is
detailed in the table below:
A G P Forrest
M Clark
B H Leith
L Read
A E Sisto
Previous directors
F H Moxon
A J G Morrison
S J Dalby
Salary and
fees
£
Pension
payments
£
Other
benefits
£
Annual
bonuses
£
2014
Total
£
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2013
Total
£
—
—
—
—
—
27,000
63,180
14,000
104,180
None of the current directors received any remuneration either in 2013 or 2014.
£55,250 of the previous directors’ total remuneration in 2013 was paid in cash and the balance was settled in shares
as part of the CVA.
DIRECTORS’ SHARE OPTIONS
None of the Directors have any share options.
Laurence Read
9 February 2015
13
TERN PLC
INDEPENDENT AUDITOR’S REPORT
FOR THE YEAR ENDED 31 DECEMBER 2014
We have audited the financial statements of Tern plc for the year ended 31 December 2014, which
comprises the income statement and statement of comprehensive income, statement of financial position,
statement of changes in equity, statement of cash flows, and the related notes on pages 15 to 34. The
financial reporting framework that has been applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union and as applied in accordance
with the provisions of the Companies Act 2006.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s
members those matters we are required to state to them in an auditors’ report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Director’s Responsibilities Statements set out on page 9 the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and
fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance
with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to
comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements
sufficient to give reasonable assurance that the financial statements are free from material misstatement,
whether caused by fraud or error. This included an assessment of: whether the accounting policies are
appropriate to the company’s circumstances and have been consistently applied and adequately disclosed;
the reasonableness of significant accounting estimates made by the directors; and the overall presentation
of the financial statements.
In addition we read all financial and non-financial information in the Chairman’s Statement, Strategic Report,
Directors Report and Statement of Corporate Governance to identify material inconsistencies with the
audited financial statements and to identify and information that is apparently materially incorrect based on,
or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we
become aware of any apparent material misstatements or inconsistencies we consider the implications for
our report.
Opinion on financial statements
In our opinion:
•
•
•
the financial statements give a true and fair view of the state of the Company’s affairs as at 31 December 2014
and of the Company’s loss for the year then ended;
the financial statements have been properly prepared in accordance with IFRS’s as adopted by the European
Union; and
the financial statements have been properly prepared in accordance with the requirements of the Companies
Act 2006 and Article 4 of the IAS regulation.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
The information given in the Strategic Report and Director’s Report for the financial period for which the
•
financial statements are prepared is consistent with the financial statements.
14
TERN PLC
INDEPENDENT AUDITOR’S REPORT
FOR THE YEAR ENDED 31 DECEMBER 2014
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to
you if, in our opinion:
adequate accounting records have not been kept by the Company, or returns adequate for our audit have not
•
been received from branches not visited by us; or
•
•
•
the company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of director’s remunerations specified by law are not made; or
we have not received all the information and explanations we require for our audit.
David Warren (Senior Statutory Auditor)
For and on behalf of Jeffreys Henry LLP
Chartered Accountants
Statutory Auditors
Finsgate
5-7 Cranwood Street
London
EC1V 9EE
Date: 9 February 2015
15
TERN PLC
INCOME STATEMENT
AND STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2014
Turnover
Movement in fair value of investments
Gross profit
Administration costs
Exceptional item
Loss arising on disposal of subsidiary operations
Operating (loss)/profit
Finance income
Finance costs
(Loss)/profit before tax
Tax
Notes
5
10
7
8
9
2014
£
41,000
100,000
141,000
2013
£
—
—
—
(161,654)
(534,183)
—
—
1,005,209
(106,500)
(20,654)
364,526
105
—
(33,146)
(128,571)
(53,695)
235,955
—
—
(Loss)/profit for the period
(53,695)
235,955
Since there is no other comprehensive income, the loss for the period is the same as the total comprehensive income
for the period.
EARNINGS PER SHARE:
Basic (loss)/profit per share
Fully diluted (loss)/profit per share
11
(0.3 pence)
5.0 pence
(0.3 pence)
3.8 pence
The accompanying accounting policies and notes are an integral part of these financial statements.
16
TERN PLC
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2014
ASSETS
NON-CURRENT ASSETS
Investments held for trading
Investment in subsidiary undertaking
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY AND LIABILITIES
Share capital
Share premium
Loan note equity reserve
Share option and warrant reserve
Retained earnings
CURRENT LIABILITIES
Trade and other payables
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Borrowings
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
Notes
2014
£
2013
£
12
13
14
15
16
16
17
18
631,978
100,000
—
—
631,978
100,000
301,056
434,274
50,912
146,817
735,330
197,729
1,367,308
297,729
1,310,613
7,563,193
53,624
797,773
(8,781,572)
1,303,746
6,646,376
29,341
797,773
(8,752,553)
943,631
24,683
162,763
162,763
260,914
260,914
423,677
118,293
118,293
154,753
154,753
273,046
1,367,308
297,729
The financial statements were approved and authorised for issue by the Board of Directors on 9 February 2015 and were
signed on its behalf by:
Angus Forrest
Director
Company number 05131386
The accompanying accounting policies and notes are an integral part of these financial statements.
17
TERN PLC
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2014
Share
capital
£
Share
premium
£
Loan note
equity
Option and
warrant
reserve
£
reserve
£
Retained
earnings
£
Total
equity
£
Balance at 31 December 2012
1,296,607
6,004,030
25,274
795,699
(9,013,782)
(892,172)
Total comprehensive income
—
—
Transactions with owners
Issue of share capital
7,139
692,096
Share issue costs
Transfer on redemption of
convertible loan notes
Issue of convertible loan notes
Share based payments
—
—
—
—
(49,750)
—
—
—
—
—
—
(25,274)
29,341
—
—
—
—
—
—
2,074
235,955
235,955
—
—
25,274
—
—
699,235
(49,750)
—
29,341
2,074
Balance at 31 December 2013
1,303,746
6,646,376
29,341
797,773
(8,752,553)
24,683
Total comprehensive income
—
—
Transactions with owners
Issue of share capital
6,867
952,685
Share issue costs
Transfer on conversion of
convertible loan notes
Issue of convertible loan notes
—
—
—
(35,868)
—
—
(24,676)
48,959
—
—
—
—
—
—
—
—
(53,695)
(53,695)
—
—
24,676
—
959,552
(35,868)
—
48,959
Balance at 31 December 2014
1,310,613
7,563,193
53,624
797,773
(8,781,572)
943,631
SHARE CAPITAL
The amount subscribed for shares at nominal value.
SHARE PREMIUM
This represents the excess of the amount subscribed for share capital over the nominal value of the respective shares net of share
issue expenses.
LOAN NOTE EQUITY RESERVE
This represents the equity component of convertible loans issued
OPTION AND WARRANT RESERVE
This represents the calculated value of the options and warrants issued
RETAINED EARNINGS
Cumulative loss of the Company.
The accompanying accounting policies and notes are an integral part of these financial statements.
18
TERN PLC
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2014
OPERATING ACTIVITIES
Net cash used in operations
INVESTING ACTIVITIES
Purchase of investments
Investment in joint venture
Investment in subsidiary undertaking
Net cash used in investing activities
FINANCING ACTIVITIES
Net proceeds on issues of shares
Share issue expenses
Proceeds from issue of convertible loan notes
Interest received
Net cash from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Notes
2014
£
2013
£
21
(326,328)
(320,548)
(407,952)
(100,000)
—
—
(407,952)
—
(120,487)
(220,487)
757,500
(35,868)
300,000
105
518,354
(49,750)
200,000
—
1,021,737
668,604
287,457
146,817
434,274
127,569
19,248
146,817
The accompanying accounting policies and notes are an integral part of these financial statements.
19
TERN PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
1.
ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these financial statements are set out below.
1.1
GENERAL INFORMATION
Tern plc is an investment company specialising in private IT companies, predominantly in the cloud and mobile
sectors.
The Company is a public limited company, incorporated in England and Wales, with its shares traded on AIM, a
market of that name operated by the London Stock Exchange.
The address of Tern’s registered office is 9 Catherine Place, London, SW1E 6DX. Items included in the financial
statements of the Company are measured in Pound Sterling, which is the Company’s presentational and
functional currency.
1.2
BASIS OF PREPARATION
The financial statements of the Company have been prepared in accordance with International Financial
Reporting Standards (IFRSs). The financial statements have also been prepared in accordance with IFRSs
adopted by the European Union (EU) and therefore the financial statements comply with Article 4 of the EU IAS
Regulation.
IFRS is subject to amendment and interpretation by the International Accounting Standards Board (IASB) and
the International Financial Reporting Interpretations Committee (IFRIC) and there is an ongoing process of
review and endorsement by the European Commission. The financial statements have been prepared on the
basis of the recognition and measurement principles of IFRS that were applicable at 31 December 2014.
The preparation of financial statements in conformity with generally accepted accounting principles requires the
use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Although
these estimates are based on management's best knowledge of the amount, event or actions, actual results may
ultimately differ from those estimates.
The financial statements have been prepared on the historical cost basis. Historical cost is generally based on
the fair value of the consideration given in exchange for the assets. The principal accounting policies set out
below have been consistently applied to all periods presented, except where stated.
1.3
CHANGE OF ACCOUNTING POLICY
The Company has adopted “Investment Entities (Amendments to IFRS 10, IFRS 12, and IAS 27)” issued by the
International Accounting Standards Board in October 2012 and effective for accounting periods beginning on or
after 1 January 2014. The effect of this accounting policy change is that the Company’s investments which
previously were all classified and designated as available for sale are classified as held for trading and
designated as at fair value through profit or loss. As a result unrealised fair value gains on investments are
disclosed in the income statement rather than in other comprehensive income.
No adjustments to the income statement or statement of financial position for 2013 have been required in
accordance with IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ as a result of the
change in accounting policy.
Under IFRS 10 the investments held by the Company, which otherwise would either be accounted for as
associated undertakings or consolidated as subsidiary undertakings, have been classified as investment entities.
As a result they are not accounted for as associates or consolidated as subsidiaries, and are instead held at fair
value.
20
TERN PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
1.
1.4
ACCOUNTING POLICIES (continued)
GOING CONCERN
The financial statements have been prepared on the going concern basis.
In determining the appropriate basis of preparation of the financial statements, the Directors have considered
whether the Company can continue in operational existence for the foreseeable future. The Company has cash
resources of £434,274 and net current assets of £572,567, and the Directors have indicated that in respect of the
convertible shareholder loans which, if not converted, are due for repayment on 1 January 2016 they will agree
to extend the repayment date. They have prepared cash flow forecasts through to 31 March 2016, which show
that the Company will have sufficient available cash resources to provide for its future requirements. In preparing
their forecasts they have given due regard to the risks and uncertainties affecting the business as set out in the
Strategic Report and the liquidity risk disclosed in note 2.1, and they have made the following key assumption that:
no new investment will be undertaken by the Company unless sufficient funding is in place
•
On this 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.
1.5
STATEMENT OF COMPLIANCE
Issued International Financial Reporting Standards (IFRS) and Interpretations (IFRICS) relevant to Group
operations
There are no IFRS or IFRIC interpretations that are effective for the first time in this financial period that would be
expected to have a material impact on the Company.
Standards, interpretations and amendments to published standards that are not yet effective
There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a
material impact on the Company.
1.6
REVENUE
Revenue is recognised, as amounts are invoiced, earned and become payable, with adjustment for any amount
that is considered uncollectable. In the event that revenues are invoiced for services to be rendered in respect of
a future period, the revenues are apportioned.
1.7
TAXATION
The charge for current tax is based on the results for the period as adjusted for items which are non-assessable
or disallowed. It is calculated using rates that have been enacted or substantively enacted by the balance sheet
date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising
from differences between the carrying amount of assets and liabilities in the financial statements and the
corresponding tax basis used in the computation of taxable profit. In principle, deferred tax liabilities are
recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible temporary differences can be utilised.
Such assets and liabilities are not recognised if the temporary difference arises from goodwill (or negative
goodwill) or from the initial recognition (other than in a business combination) of other assets and liabilities in a
transaction which affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries
and associates, and interest in joint ventures, except where the Company is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax is calculated at the rates that are expected to apply when the asset or liability is settled. Deferred
tax is charged or credited in the income statement, except when it relates to items credited or charged directly to
equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation
authority and the Company intends to settle its current tax assets and liabilities on a net basis.
21
TERN PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
1.
1.8
ACCOUNTING POLICIES (continued)
FINANCIAL ASSETS
The Company classifies its financial instruments in the following categories: at fair value through profit or loss,
held to maturity, loans and receivables, and available-for-sale. The classification depends on the purpose for
which the financial instrument was acquired. Management determines the classification of its financial
instruments at initial recognition and re-evaluates this designation at each financial period end.
When financial assets are recognised initially, they are measured at fair value, being the transaction price plus
directly attributable transaction costs.
Investments held for trading
All investments determined upon initial recognition as held at fair value through profit or loss were designated
as investments held for trading. Investment transactions are accounted for on a trade date basis. Asset sales
are recognised at the trade date of the disposal. Assets are sold at their fair value, which comprises the
proceeds of sale less any transaction cost. The fair value of the financial instruments in the balance sheet is
based on the quoted bid price at the balance sheet date, with no deduction for any estimated future selling cost.
Unquoted investments are valued by the directors using primary valuation techniques such as recent
transactions, last price and net asset value. Changes in the fair value of investments held at fair value through
profit or loss and gains and losses on disposal are recognised in the statement of comprehensive income as
“Net gains on investments”. Investments are initially measured at fair value plus incidental acquisition costs.
Subsequently, they are measured at fair value in accordance with IAS 39. This is either the bid price or the last
traded price, depending on the convention of the exchange on which the investment is quoted.
The Company determines the fair value of its Investments based on the following hierarchy:
LEVEL 1 – Where financial instruments are traded in active financial markets, fair value is determined by
reference to the appropriate quoted market price at the reporting date. Active markets are those in which
transactions occur in significant frequency and volume to provide pricing information on an on-going basis.
LEVEL 2 – If there is no active market, fair value is established using valuation techniques, including discounted
cash flow models. The inputs to these models are taken from observable market data including recent arm’s
length market transactions, and comparisons to the current fair value of similar instruments; but where this is
not feasible, inputs such as liquidity risk, credit risk and volatility are used.
LEVEL 3 – Valuations in this level are those with inputs that are not based on observable market data.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market, do not qualify as trading assets and have not been designated as either fair value
through profit or loss or available-for-sale. Such assets are carried at amortised cost using the effective interest
rate method. Gains and losses are recognised in the Income Statement when the loans and receivables are
derecognised or impaired, as well as through the amortisation process,
1.9
IMPAIRMENT OF FINANCIAL ASSETS
Assets carried at cost
If there is objective evidence that an impairment loss on an unquoted equity instrument that is not carried at fair
value because its fair value cannot be reliably measured, has been incurred, the amount of the loss is measured
as the difference between the asset's carrying amount and the present value of estimated future cash flows
discounted at the current market rate of return for a similar financial asset.
22
TERN PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
1.
1.9
ACCOUNTING POLICIES (continued)
IMPAIRMENT OF FINANCIAL ASSETS (continued)
Assets carried at amortised cost
If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has
been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and
the present value of estimated future cash flows discounted at the financial asset's original effective interest
rate. The carrying amount of the asset is reduced, with the amount of the loss recognised in administration
costs.
If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment charge was recognised, the previously recognised
impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the income
statement, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal
date.
1.10
TRADE RECEIVABLES
Trade receivables are recognised initially at fair value less provision for impairment. A provision for impairment of
trade receivables is established when there is objective evidence that the Company will not be able to collect all
amounts due according to the original terms of receivables. The amount of the provision is the difference between
the asset's carrying amount and the present value of estimated future cash flows discounted at the effective
interest rate. The amount of the provision is recognised in the income statement.
1.11
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are carried in the balance sheet at cost. Cash and cash equivalents comprise cash in
hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three
months or less and bank overdrafts. Bank overdrafts are included within borrowings in current liabilities on the
balance sheet.
1.12
TRADE PAYABLES
Trade payables are initially measured at fair value and are subsequently measured at amortised cost, using the
effective interest rate method.
1.13
EQUITY INSTRUMENTS
Equity instruments are recorded at the proceeds received net of direct issue costs.
1.14
CONVERTIBLE LOANS
Convertible loans are accounted for as compound instruments. The fair value of the liability portion of the
convertible loan notes is determined using a market interest rate for an equivalent non-convertible loan note. This
amount is recorded as a liability on an amortised cost basis until extinguished on conversion or maturity of the loan
notes. The remainder of the proceeds is allocated to the conversion option, which is recognised and included in
shareholders’ equity, net of tax effects, and is not subsequently re-measured.
1.15 SHARE BASED PAYMENTS
All share based payments are accounted for in accordance with IFRS 2 – “Share-based payments”. The Company
issues equity-settled share based payments in the form of share options to certain directors and employees. Equity
settled share based payments are measured at fair value at the date of grant. The fair value determined at the
grant date of equity-settled share based payments is expensed on a straight line basis over the vesting period,
based on the Company’s estimate of shares that will eventually vest.
Fair value is estimated using the Black-Scholes valuation model. The expected life used in the model has been
adjusted, on the basis of management’s best estimate for the effects of non-transferability, exercise restrictions and
behavioural considerations. At each balance sheet date, the Company revises its estimate of the number of equity
instruments expected to vest as a result of the effect of non-market based vesting conditions. The impact of the
revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the
revised estimate, with a corresponding adjustment to retained earnings.
23
TERN PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
2.
FINANCIAL RISK MANAGEMENT
The Company uses a limited number of financial instruments, comprising cash, short-term deposits, loans and
overdrafts and various items such as trade receivables and payables, which arise directly from operations. The
Company does not trade in financial instruments.
2.1
FINANCIAL RISK FACTORS
The Company’s financial instruments comprise its investment portfolio, cash balances, debtors and creditors
that arise directly from its operations and derivative instruments. The Company is exposed to market risk
through the use of financial instruments and specifically to liquidity risk, market price risk and credit risk, which
result from the Company’s operating activities.
The Board’s policy for managing these risks is summarised below.
Liquidity risk
The Company makes investments in private companies for the Medium term. The Company manages this risk
by holding cash to support its investments and for working capital. The Company has no borrowings, save
loans from the directors. Whilst the Company has no quoted investments at present, if it holds such
investments these may be sold to meet the Company’s funding requirements..
As the Company has no significant interest bearing assets, the Company's income and operating cash flows
are substantially independent of changes in market interest rates.
The following table shows the contractual maturities of the Company's financial liabilities, including repayments
of both principal and interest where applicable.
As at 31 December 2014
6 months or less
1 to 2 years
Total contractual cash flows
Market price risk
Trade and
other Payables
£
116,755
—
116,755
Convertible
Loans
£
—
260,914
260,914
Total
£
116,755
260,914
277,669
When the Company owns quoted investments it will be exposed to market price risk as shown by movements
in the value of its equity investments. Any such risk will be regularly monitored by the Directors.
Credit risk
The Company’s primary credit risk arises from cash and cash equivalents and deposits with banks and other
financial institutions. The credit risk on liquid funds is limited because the counterparties are banks with high
credit ratings assigned by international credit-rating agencies.
2.2
CAPITAL RISK MANAGEMENT
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a
going concern in order to provide returns for shareholders, benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital.
The Company monitors capital on the basis of carrying amount of equity, less cash and cash equivalents as
presented on the face of the Statement of Financial Position. In order to maintain or adjust the capital structure,
the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue
new shares or sell assets to reduce debt.
2.3
FAIR VALUE ESTIMATION
The nominal value less impairment provision of trade receivables and payables is assumed to approximate
their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the
future contractual cash flows at the current market interest rate that is available to the Company for similar
financial instruments.
24
TERN PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
3.
CRITICAL ACCOUNTING ESTIMATES AND 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. Other valuation methodologies such as
discounted cash flow analysis assess estimates of future cash flows and it is important to recognise that in that
regard, the derived 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. Details of these
assumptions are set out in Note 19.
4.
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.
5.
EXCEPTIONAL ITEM
Credit arising on CVA (see note below)
2014
£
—
—
2013
£
1,005,209
1,005,209
Note - Until August 2013 the Company operated as an oil and gas investment company, these interests were
sold in August 2013, and it entered a Company Voluntary Arrangement (“CVA”), as part of a reorganisation to
become an IT investment company, run by new directors. It was agreed that the equivalent of 3,454,507
shares of 0.02p post the November 2013 share consolidation would be issued in settlement of all amounts
claimed in the CVA. The CVA was completed on 27 December 2013.
25
TERN PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
6.
STAFF COSTS
Staff costs for the Company during the period, including directors
Wages and salaries
Compensation for loss of office
Pension payments
Other benefits
Share based payment expense
Social security costs
Total staff costs
2014
£
—
—
—
—
—
—
—
2013
£
98,930
—
5,250
—
—
10,237
114,417
The average number of people (including executive directors) employed by the Company during the period was:
Head office and administration
Total staff
2014
No
4
4
2013
No
2
2
DIRECTORS' AND REMUNERATION
Other than directors the Company had no employees. Total remuneration paid to directors during the period
was as follows:
Directors' remuneration
- Salaries and benefits
- Consultancy fees
Total directors' remuneration
Total emoluments of the highest paid director were
2014
£
2013
£
—
—
—
—
104,180
—
104,180
63,180
A summary of remuneration paid to each director, including pension payments, is included in the Report on
Directors’ remuneration (page 12).
7.
OPERATING (LOSS)/PROFIT
(Loss)/profit from operations has been arrived at after charging:
Remuneration of directors and staff
Share-based payment expense
Provision for doubtful debts
Auditor’s remuneration
- Audit services
2014
£
—
—
—
2013
£
104,180
2,704
80,000
12,000
12,000
26
TERN PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
8.
FINANCE COSTS
Interest charge in respect of shareholder convertible loan notes
Interest charge in respect of other convertible loan notes
9.
TAXATION
Current tax
Under/(over) provision from prior period
Taxation attributable to the Company
2014
£
33,146
—
2013
£
6,068
122,503
33,146
128,571
2014
£
—
—
—
2013
£
—
—
—
Domestic income tax is calculated at 20% (2013: 20%) of the estimated assessable profit for the period. The
charge for the period can be reconciled to the profit per the income statement as follows:
Profit/(Loss) before tax
Tax at the domestic income tax rate
Expenses not deductible for tax purposes
Brought forward tax losses used
Unutilised tax losses
Tax (credit)/expense
2014
£
2013
£
(53,695)
235,955
(10,739)
1,507
—
9,232
—
47,191
11,050
(58,241)
—
—
The Company has unutilised losses of approximately £5,240,000 (2013: £5,200,000). The Company has not
recognised a deferred tax asset in respect of these losses as there is insufficient evidence of future taxable
profits.
27
TERN PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
10. LOSS ARISING ON DISPOSAL OF SUBSIDIARY OPERATIONS
In August 2013 the Company disposed of its subsidiary and the assets and liabilities associated with its oil and
gas exploration and production operations. (see Note 13)
The results of the operations, associated with its subsidiary company activities, and the loss on disposal included
in the income statement are as follows:
Administration expenses
Provision for impairment
Loss before tax
Tax
Loss after tax
Assets disposed of
Liabilities disposed of
Loss on disposal of discontinued operations
Overall loss attributable to subsidiary operations disposed of
11.
EARNINGS PER SHARE
2014
£
—
—
—
—
—
—
—
—
—
2013
£
(25,720)
—
(25,720)
—
(25,720)
(238,610)
157,830
(80,780)
(106,500)
2014
£
2013
£
(Loss)/profit for the purposes of basic and fully diluted earnings per share
(53,695)
235,955
Weighted average number of ordinary shares:
For calculation of basic earnings per share
For calculation of fully diluted earnings per share (see note below)
Earnings per share:
Basic (loss)/profit per share
Fully diluted (loss)/profit per share (see note below)
2014
Number
2013
Number
16,142,804
16,142,804
4,679,305
6,119,657
2013
2013
(0.3 pence)
5.0 pence
(0.3 pence)
3.8 pence
Note. The fully diluted loss per share for 2014 is the same as the basic loss per share as the loss for the year
has an anti-dilutive effect on earnings per share.
28
TERN PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
12.
INVESTMENTS HELD FOR TRADING
Cost of investments brought forward
Additions
Cost of investments carried forward
Fair value adjustment to investments
Fair value of investments carried forward
2014
£
100,000
2013
£
—
431,978
100,000
531,978
100,000
100,000
—
631,978
100,000
All the investments held by the company are Level 3 investments as defined in Note 1.8
13.
INVESTMENT IN SUBSIDIARY UNDERTAKING
In August 2013 the Company entered into an agreement to sell its subsidiary company, Silvermere Energy
LLC, in which all the Group’s oil and gas assets are held, to the operator in full and final settlement of all
monies owed between the parties and of any future liabilities. (see Note 10)
Investment in subsidiary undertaking brought forward
Payments to the operator of the JOA on behalf of Silvermere Energy LLC
Amount due under the JOA at start of year
Amount due under the JOA at date of disposal
Disposal of subsidiary undertaking
Investment in subsidiary undertaking carried forward
14.
TRADE AND OTHER RECEIVABLES
Other receivables (see note below)
Prepaid expenses
Total
2014
£
—
—
—
—
—
—
2014
£
284,170
16,886
301,056
2013
£
207,771
120,487
(247,478)
157,830
(238,610)
—
2013
£
33,486
17,426
50,912
Note: Other receivables includes an amount of £278,350 held in an escrow account in respect of share
subscriptions which was transferred to the Company on 5 January 2015.
The directors consider that the carrying amount of trade and other receivables approximates to their fair value.
The other classes within trade and other receivables do not contain impaired assets.
The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable
mentioned above. The Company does not hold any collateral as security.
29
TERN PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
15.
CASH AND CASH EQUIVALENTS
Cash at bank and on hand
16.
ISSUED SHARE CAPITAL
ISSUED AND FULLY PAID:
At 31 December 2013
Ordinary shares of £0.0002
Deferred shares of £29.999
Deferred shares of £0.00099
2014
£
2013
£
434,274
146,817
Number of
shares
No.
Nominal
value
£
Share
premium
£
10,891,700
2,178
42,247
1,267,368
34,545,072
34,200
Ordinary shares issued for cash
Ordinary shares issued as consideration for acquisition of
Cryptosoft Ltd
Ordinary shares issued on conversion of loan stock
22,672,222
1,922,066
9,742,539
1,303,746
4,534
6,646,376
752,966
385
1,948
23,641
176,078
(35,868)
1,310,613
7,563,193
45,228,527
9,045
42,247
1,267,368
34,545,072
34,200
1,310,613
7,563,193
Share issue expenses
At 31 December 2014
Ordinary shares of £0.0002
Deferred shares of £29.999
Deferred shares of £0.00099
On 15 September 2014, 1,922,066 ordinary shares of 0.02p were issued at 1.25p as consideration for the
acquisition of the equity of Cryptosoft Limited.
On 17 September 2014, 6,800,000 ordinary shares of 0.02p were issued at 1.25p per share for cash as the
result of a private placing, raising £85,000 before expenses. On the same date 3,294,126 ordinary shares of
0.02p were issued to directors of the Company on the conversion of loan stock; of the shares issued 2,400,000
were issued at 1.25p per share and 894,126 shares were issued at 2.016p per share.
On 25 November 2014, 12,600,000 ordinary shares of 0.02p were issued at 3p per share for cash as the result
of a private placing, raising £378,000 before expenses. On the same date 4,464,287 ordinary shares of 0.02p
were issued to directors of the Company on the conversion of loan stock at 2.016p per share.
On 24 December 2014, 3,272,222 ordinary shares of 0.02p were issued at 9p per share for cash as the result of
a private placing, raising £294,500 before expenses. On the same date 1,984,126 ordinary shares of 0.02p
were issued to directors of the Company on the conversion of loan stock at 2.016p per share.
30
TERN PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
17.
TRADE AND OTHER PAYABLES
Trade payables
Amount to be invested in Cryptosoft
Accruals
Total
2014
£
16,755
100,000
46,008
162,763
2013
£
36,133
-
82,160
118,293
The directors consider that the carrying amount of trade payables approximates to their fair value.
18.
BORROWINGS
SHAREHOLDER LOANS
On 16 August 2013 the Company entered into an agreement for the issue of £200,000 convertible loan notes
repayable on 1 January 2015 if not converted prior to that date. The Shareholder Loans are interest free and
unsecured and may be converted at 2.016p per share at any time prior to the redemption date. The ordinary
shares to be issued on conversion (assuming full conversion) would amount to 9,920,634 ordinary shares. On
4 November 2013, £21,974 of the Shareholder Loans was converted into 1,090,000 ordinary shares. During
2014, £148,026 was converted into 7,342,834 ordinary shares. In December 2014 the repayment date for the
balance of the loan outstanding was extended to 1 January 2016.
On 30 July 2014 the Company issued a convertible loan note for £100,000, interest free and repayable on 1
January 2016. The loan is convertible at 1.25p per share at any time prior to the redemption date. The ordinary
shares to be issued on conversion (assuming full conversion) would amount to 8,000,000 ordinary shares. On
17 September 2014, £30,000 of the loan was converted into 2,400,000 shares.
On 17 September 2014 the Company issued £200,000 convertible loan notes, interest free and repayable on 1
January 2016. The loan is convertible at 1.25p per share at any time prior to the redemption date. The ordinary
shares to be issued on conversion (assuming full conversion) would amount to 16,000,000 ordinary shares.
The net proceeds from the issue of the Shareholder Loans have been split between the liability element and an
equity component, representing the fair value of the embedded option to convert the liability into equity of the
Company.
Liability brought forward
Convertible loan notes issued
Equity component of loan notes issued
Adjustment to equity component on extension of convertible loan
Loan notes converted
Interest charge
Liability at 31 December 2014
LOAN MATURITY ANALYSIS
Non-current liabilities - More than one year, but not more than five years
2014
£
154,753
300,000
(46,223)
(2,736)
(178,026)
33,146
2013
£
—
200,000
(29,341)
—
(21,974)
6,068
260,914
154,753
2014
£
260,914
260,914
2013
£
154,753
154,753
31
TERN PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
18.
BORROWINGS (continued)
OTHER CONVERTIBLE LOANS
Liability brought forward
Interest charge
Settled through the CVA
Liability carried forward
19.
WARRANTS
2014
£
—
—
—
—
2013
£
659,105
122,503
(781,608)
—
WARRANTS
On 19 August 2013, a warrant was issued to a professional adviser as part of their fees, over 1.5% of the
Company’s share capital from time to time, exercisable at 4.6p per share at any time within 3 years of the date
of issue. At 31 December 2013, 1.5% of the share capital of the Company represented 163,375 shares, which
increased by 515,052 shares to 678,427 shares at 31 December 2014. It has been agreed that no further
warrants will be issued pursuant to this agreement.
On 15 September 2014, 396,302 warrants were issued to the vendor of Cryptosoft Ltd, exercisable at any time
prior to 12 September 2017. 198,151 of the warrants are exercisable at 2p per share and 198,151 are
exercisable at 4p per share. The estimated fair value of these warrants at the date of issue is not considered
material.
On 25 November 2014, 1,260,000 warrants were issued on a one for ten basis to subscribers to the placing for
12,600,000 shares at 3p per share on that date. The warrants are exercisable at 3p per share at any time prior
to 3 December 2017.
The estimated fair value of the warrants issued in 2013 was calculated by applying the Black-Scholes option
pricing model. The assumptions used in the calculation were as follows:
Share price at date of grant
Exercise price
Expected volatility
Expected dividend
Contractual life
Risk free rate
Estimated fair value of each warrant
4.6 pence
4.6 pence
50%
Nil
3 years from vesting date
2.5%
1.66 pence
A total share based payment charge of £2,704 was expensed in 2013 in respect of the warrants issued.
The number of warrants outstanding at 31 December 2014 was as follows:
Date of
issue
31.08.11
16.08.13
12.09.14
12.09.14
25.11.14
At 31 Dec
2013
Issued
Exercised
Lapsed
5,000
163,375
—
—
—
168,375
—
515,052
198,151
198,151
1,260,000
2,171,354
—
—
—
—
—
—
5,000
—
—
—
—
5,000
At 31 Dec
2014
—
678,427
198,151
198,151
1,260,000
2,334,729
Exercise
Price per
share
600p
4.6p
2.0p
4.0p
3.0p
Exercisable
on or before
31.08.14
16.08.16
12.09.17
12.09.17
3.12.17
32
TERN PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
20.
RELATED PARTY TRANSACTIONS
At the year-end £25,000 was owed to Talisman Ventures Limited in respect of amounts invoiced to the
Company in 2013. Angus Forrest is a director and controlling shareholder of Talisman Ventures Limited.
In August 2013 £200,000 was advanced, interest free, to the Company by the Directors by way of convertible
loans. A further £300,000 was advanced by the Directors by way of interest free convertible loans in 2014. At
31 December 2014 the balance of loans unconverted was £260,914, plus an additional £39,086 relating to
equity (2013: £178,026)
Cryptosoft Limited, a company in which Tern has a controlling shareholding, is also considered a related party.
During the year Tern invoiced Cryptosoft £36,000 (2013: £nil) in respect of management services and
expenses. At the year-end Tern was owed £nil by Cryptosoft.
21.
CASH FLOW FROM OPERATIONS
(Loss)/profit for the year
Adjustments for items not included in cash flow:
Movement in fair value of investments
Share-based payment expense
Shares issued in settlement of fees and remuneration
Loss on disposal of subsidiary undertaking
Finance expense
Finance income
Credit arising on CVA
2014
£
2013
£
(53,695)
235,955
(100,000)
—
—
—
33,146
(105)
—
2,074
—
80,780
128,571
—
—
(1,005,209)
Operating cash flows before movements in working capital
(120,654)
(557,829)
Adjustments for changes in working capital:
Decrease in trade and other receivables
Increase in trade and other payables
Cash used in operations
(250,144)
44,470
33,728
203,553
(326,328)
(320,548)
33
TERN PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
22.
OPERATING LEASE COMMITMENTS
Minimum lease payments under operating leases recognised as an
expense in the period
Year to
31 Dec 2014
Year to
31 Dec 2013
£
£
18,221
27,254
At the period end date, the Group had outstanding commitments for future minimum lease payments under non-
cancellable leases which fall due as follows:
Land and Buildings:
Within one year
31 Dec 2014
£
31 Dec 2013
£
—
—
—
—
34
TERN PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
23.
FINANCIAL INSTRUMENTS
The Group uses financial instruments, other than derivatives, comprising cash to provide funding for the
Group's operations.
CATEGORIES OF FINANCIAL INSTRUMENTS
The IAS 39 categories of financial asset included in the statement of financial position and the headings in which
they are included are as follows:
FINANCIAL ASSETS:
Cash and bank balances
Loans and receivables
Investments held for trading
FINANCIAL LIABILITIES AT AMORTISED COST:
2014
£
434,274
278,350
631,978
2013
£
146,817
—
100,000
The IAS 39 categories of financial liabilities included in the statement of financial position and the headings in
which they are included are as follows:
Trade and other payables
Borrowings
24.
EVENTS AFTER THE REPORTING PERIOD
There have been no significant post year end events.
2014
£
116,755
260,914
2013
£
36,133
154,753
35
TERN PLC (the “Company”) Company No. 05131386
NOTICE OF 2015 ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the 2015 Annual General Meeting of the Company will be held at 2.00 pm on 16 March
2015 at the offices of W H Ireland, 24 Martin Lane, London, EC4R 0DR for the following purposes:
ORDINARY BUSINESS
To consider, and if thought fit, to pass the following resolutions as ordinary resolutions:
1.
2.
To receive and adopt the Company’s annual accounts for the financial year ended 31 December 2014, together with
the Directors’ Report and Auditors’ Report on those accounts;
To re-appoint Jeffreys Henry LLP as auditors to hold office from the conclusion of the meeting to the conclusion of
the next meeting at which the accounts are laid before the Company at a remuneration to be determined by the
Directors.
3. Mr Bruce Leith, retires by rotation, in accordance with the Articles of Association of the Company, having consented
to be considered for re-election, be and is hereby re-elected as a director.
SPECIAL BUSINESS
To consider, and if thought fit, to pass the following resolutions, of which resolution 4 will be proposed as an ordinary
resolution and resolution 5 and resolution 6 will be proposed as special resolutions:
4.
That for the purpose of section 551 of the Companies Act 2006 (the Act) the Directors of the Company be and are
hereby generally and unconditionally authorised to exercise all powers of the Company to allot equity securities
(within the meaning of Section 560 of the Act) up to an aggregate nominal amount of £50,000 provided that this
authority shall expire (unless previously renewed, varied or revoked by the Company in general meeting) at the
conclusion of the next annual general meeting of the Company, save that the Company may before such expiry
make an offer or agreement which would or might require relevant equity securities to be allotted after such expiry
and the board may allot relevant equity securities in pursuance of such an offer or agreement as if the authority
conferred hereby had not expired.
This authority is in substitution for all subsisting authorities previously conferred upon the Directors for the purposes
of section 551 of the Act, without prejudice to any allotments made pursuant to the terms of such authorities.
5.
That, subject to the passing of resolution 4 above, the Directors of the Company be and are hereby empowered
pursuant to section 570 of the Act to allot equity securities (within the meaning of section 560 of the Act) pursuant to
the authority conferred by resolution 4 above as if section 561 of the Act did not apply to any such allotment provided
that the power conferred by this resolution shall be limited to:
5.1 the allotment of equity securities for cash in connection with an issue or offer of equity securities (including,
without limitation, under a rights issue, open offer or similar arrangement) to holders of equity securities in
proportion (as nearly as may be practicable) to their respective holdings of equity securities subject only to such
exclusions or other arrangements as the board may consider necessary or expedient to deal with fractional
entitlements or legal or practical problems under the laws of any territory, or the requirements of any regulatory
body or stock exchange in any territory; and
5.2 the allotment (otherwise than pursuant to sub-paragraph 5.1 of this resolution (5) of equity securities up to an
aggregate nominal value of £50,000.
The power conferred by this resolution 5 shall expire (unless previously renewed, revoked or varied by the Company
in general meeting), at such time as the general authority conferred on the board by resolution 4 above expires,
except that the Company may at any time before such expiry make any offer or agreement which would or might
require equity securities to be allotted after such expiry and the Directors of the Company may allot or sell equity
securities for cash in pursuance of such an offer or agreement as if the authority conferred hereby had not expired.
6.
That the Company be and is hereby generally and unconditionally authorised to make market purchases (within the
meaning of section 693(4) of the 2006 Act) of its Ordinary Shares provided that:-
6.1
the maximum number of Ordinary Shares authorised to be purchased is 10 per cent. of the entire issued share
capital of the Company;
6.2
the minimum price which may be paid for an Ordinary Share is £0.0002
6.3
the maximum price which may be paid for an Ordinary Share is an amount equal to 105 per cent of the average
of the middle-market prices shown in the quotation for an Ordinary Share as derived from the Stock Exchange
Alternative Trading Service of the Stock Exchange for the 5 business days immediately preceding the day on
which the Ordinary Share is purchased.
36
TERN PLC (the “Company”) Company No. 05131386
NOTICE OF 2015 ANNUAL GENERAL MEETING
6.4
6.5
the authority hereby conferred shall expire on the earlier of the date falling 15 months after the Annual General
Meeting or on the conclusion of the next annual general meeting of the Company to be held in 2016; and
the Company may make a contract to purchase its Ordinary Shares under the authority hereby conferred prior
to the expiry of such authority, which contract will or may be executed wholly or partly after the expiry of such
contract.
By Order of the Board
Philippa Keith, Company Secretary
Dated 9 February 2015
Notes to the AGM notice
1.
In accordance with Regulation 41 of the Uncertificated Securities Regulations 2001 and by paragraph 18(c) of The Companies Act (Consequential
Amendments) (Uncertificated Securities) Order 2009, only those members entered on the Company’s register of members not later than 2.00 pm on Thursday
12 March 2015, or if the meeting is adjourned, Shareholders entered on the Company’s register of members not later than 2 days before the time fixed for the
adjourned meeting (excluding non-business days) shall be entitled to attend and vote at the meeting.
2.
3.
4.
5.
A member of the Company entitled to attend and vote at this meeting is entitled to appoint a proxy (or proxies) to attend, speak and vote in his place. A proxy
need not be a member of the Company. You can only appoint a proxy using the procedures set out in these notes and the notes to the Form of Proxy.
To be effective, the Form of Proxy must be deposited at the office of the Company’s registrars, Share Registrars Limited, Suite 6, First Floor, 9 Lion & Lamb
Yard, Farnham, Surrey, GU9 7LL so as to be received not later than 2.00 pm on Thursday 12 March 2015, or if the meeting is adjourned, not later than 48 hours
before the time fixed for the adjourned meeting.
To change your proxy instructions simply submit a new proxy appointment using the methods set out above and in the notes to the Form of Proxy. Note that the
cut-off times for receipt of proxy appointments (see above) also apply in relation to amended instructions; any amended proxy appointment received after the
relevant cut-off time will be disregarded.
Where you have appointed a proxy and would like to change the instructions, please contact the Company’s registrars, Share Registrars Limited, Suite 6, First
Floor, 9 Lion & Lamb Yard, Farnham, Surrey, GU9 7LL.
In order to revoke a proxy instruction you will need to inform the Company by sending a signed hard copy notice clearly stating your intention to revoke your
proxy appointment to the Company’s registrars, Share Registrars Limited, Suite 6, First Floor, 9 Lion & Lamb Yard, Farnham, Surrey, GU9 7LL. In the case of a
member which is a company, the revocation notice must be executed under its common seal or signed on its behalf by an officer of the company or an attorney
for the company. Any power of attorney or any other authority under which the revocation notice is signed (or a duly certified copy of such power or authority)
must be included with the revocation notice.
In either case, the revocation notice must be received by the Company’s registrars, Share Registrars Limited, Suite 6, First Floor, 9 Lion & Lamb Yard,
Farnham, Surrey, GU9 7LL no later than 2.00 pm on Thursday 12 March 2015.
If you attempt to revoke your proxy appointment but the revocation is received after the time specified above, then your proxy appointment will remain valid.
Appointment of a proxy does not preclude you from attending the Meeting and voting in person. If you have appointed a proxy and attend the Meeting in person,
your proxy appointment will automatically be terminated.
6.
CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so by utilising the procedures
described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a voting
service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a ‘CREST Proxy Instruction’) must be properly
authenticated in accordance with CRESTCo’s specifications and must contain the information required for such instructions, as described in the CREST
Manual. The message, regardless of whether it relates to the appointment of a proxy or to an amendment to the instruction given to a previously appointed
proxy must, in order to be valid, be transmitted so as to be received by our agent Share Registrars (ID 7RA36) by the latest time(s) for receipt of proxy
appointments specified in the notice of meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the
message by the CREST Applications Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by
CREST. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities
Regulations 2001.
CREST members and, where applicable, their CREST sponsors or voting service providers should note that CRESTCo does not make available special
procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy
Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or
has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure
that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST
sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system
and timings.