Tern Plc : Final Results

10 February 2015

Tern Plc
("Tern" or the "Company")

Final results for the year ended 31 December 2014

Tern Plc, the investment company focused on the cloud and mobile technology sectors, announces its final results for the year ended 31 December 2014.

Operational highlights

• Investment portfolio now includes holdings in Cryptosoft Ltd, Flexiant Corporation Ltd, Push Technology Ltd and Seal Software Group Ltd
• These companies are performing well, and making good progress against their development strategies
• Growth in key performance indicators at 31 December :
  • Total assets 2014 £1,367,308 (2013: £297,729)
  • Net assets 2014 £943,631 (2013: £24,683)
  • Net assets per share 2014 2.09 pence (2013: 0.23 pence)

Commenting on the results, Angus Forrest, Executive Chairman of Tern Plc, said:

"We have made good progress against our stated strategy of investing in established private software companies operating in the fast growing cloud and mobile sectors. We now have shareholdings in four rapidly developing companies. I am delighted by the support we have received for our strategy during the year and we are now well placed to pursue further exciting opportunities in the cloud and mobile sectors."

Enquiries:

Tern plc	Tel: [phone]
Angus Forrest
WH Ireland NOMAD and Broker	Tel: [phone]
John Wakefield
Peterhouse Corporate Finance  (Joint broker)	Tel. [phone]
Lucy Williams / Duncan Vasey
Redleaf Polhill	Tel. [phone]
Charlie Geller

Chairman's Statement

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	2014	2013
Total assets	£1,367,308	£297,729
Net assets	£943,631	£24,683
Net assets per share	2.09 pence	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

INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2014

		2014	2013
	Notes	£	£
Turnover		41,000	-
Movement in fair value of investments		100,000	-
Gross profit		141,000	-
Administration costs		(161,654)	(534,183)
Exceptional item	5	-	1,005,209
Loss arising on disposal of subsidiary operations	10	-	(106,500)
Operating (loss)/profit	7	(20,654)	364,526
Finance income		105	-
Finance costs	8	(33,146)	(128,571)
(Loss)/profit before tax		(53,695)	235,955
Tax	9	-	-
(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:	11
Basic (loss)/profit per share		(0.3 pence)	5.0 pence
Fully diluted (loss)/profit per share		(0.3 pence)	3.8 pence

STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2014

		2014	2013
	Notes	£	£
ASSETS
NON-CURRENT ASSETS
Investments held for trading	12	631,978	100,000
Investment in subsidiary undertaking	13	-	-
		631,978	100,000
CURRENT ASSETS
Trade and other receivables	14	301,056	50,912
Cash and cash equivalents	15	434,274	146,817
		735,330	197,729
TOTAL ASSETS		1,367,308	297,729
EQUITY AND LIABILITIES
Share capital	16	1,310,613	1,303,746
Share premium	16	7,563,193	6,646,376
Loan note equity reserve		53,624	29,341
Share option and warrant reserve		797,773	797,773
Retained earnings		(8,781,572)	(8,752,553)
		943,631	24,683
CURRENT LIABILITIES
Trade and other payables	17	162,763	118,293
TOTAL CURRENT LIABILITIES		162,763	118,293
NON-CURRENT LIABILITIES
Borrowings	18	260,914	154,753
TOTAL NON-CURRENT LIABILITIES		260,914	154,753
TOTAL LIABILITIES		423,677	273,046
TOTAL EQUITY AND LIABILITIES		1,367,308	297,729

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2014

	Share	Share	Loan note equity	Option and warrant	Retained	Total
	capital	premium	reserve	reserve	earnings	equity
	£	£	£	£	£	£
Balance at 31 December 2012	1,296,607	6,004,030	25,274	795,699	(9,013,782)	(892,172)
Total comprehensive income	-	-	-	-	235,955	235,955
Transactions with owners
Issue of share capital	7,139	692,096	-	-	-	699,235
Share issue costs	-	(49,750)	-	-	-	(49,750)
Transfer on redemption of convertible loan notes	-	-	(25,274)	-	25,274	-
Issue of convertible loan notes	-	-	29,341	-	-	29,341
Share based payments	-	-	-	2,074	-	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	-	-	-	-	(53,695)	(53,695)
Transactions with owners
Issue of share capital	6,867	952,685	-	-	-	959,552
Share issue costs	-	(35,868)	-	-	-	(35,868)
Transfer on conversion of convertible loan notes	-	-	(24,676)	-	24,676	-
Issue of convertible loan notes	-	-	48,959	-	-	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.

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2014

		2014	2013
	Notes	£	£
OPERATING ACTIVITIES
Net cash used in operations	21	(326,328)	(320,548)
INVESTING ACTIVITIES
Purchase of investments		(407,952)	(100,000)
Investment in joint venture		-	-
Investment in subsidiary undertaking		-	(120,487)
Net cash used in investing activities		(407,952)	(220,487)
FINANCING ACTIVITIES
Net proceeds on issues of shares		757,500	518,354
Share issue expenses		(35,868)	(49,750)
Proceeds from issue of convertible loan notes		300,000	200,000
Interest received		105	-
Net cash from financing activities		1,021,737	668,604
Increase in cash and cash equivalents		287,457	127,569
Cash and cash equivalents at beginning of year		146,817	19,248
Cash and cash equivalents at end of year		434,274	146,817

Notes to the Financial Statements

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.

1.4	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.

1.8	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.
	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.

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	Trade and other Payables £	Convertible  Loans £	Total £
	6 months or less	116,755	-	116,755
	1 to 2 years	-	260,914	260,914
	Total contractual cash flows	116,755	260,914	377,669
	Market price risk
	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.

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
		2014	2013
		£	£
	Credit arising on CVA (see note below)	-	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.

6.	STAFF COSTS
	Staff  costs for the Company during the period, including directors	2014	2013
		£	£
	Wages and salaries	-	98,930
	Compensation for loss of office	-	-
	Pension payments	-	5,250
	Other benefits	-	-
	Share based payment expense	-	-
	Social security costs	-	10,237
	Total staff costs	-	114,417
	The average number of people (including executive directors) employed by the Company during the period was:
		2014 No	2013 No
	Head office and administration	4	2
	Total staff	4	2
	DIRECTORS' AND REMUNERATION
	Other than directors the Company had no employees.  Total remuneration paid to directors during the period was as follows:
		2014	2013
		£	£
	Directors' remuneration
	- Salaries and benefits	-	104,180
	- Consultancy fees	-	-
	Total directors' remuneration	-	104,180
	Total emoluments of the highest paid director were	-	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
		2014	2013
		£	£
	(Loss)/profit from operations has been arrived at after charging:
	Remuneration of directors and staff	-	104,180
	Share-based payment expense	-	2,704
	Provision for doubtful debts	-	80,000
	Auditor's remuneration
	- Audit services	12,000	12,000

8.	FINANCE COSTS
		2014	2013
		£	£
	Interest charge in respect of shareholder convertible loan notes	33,146	6,068
	Interest charge in respect of other convertible loan notes	-	122,503
		33,146	128,571

9.	TAXATION
		2014	2013
		£	£
	Current tax	-	-
	Under/(over) provision from prior period	-	-
	Taxation attributable to the Company	-	-
	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:
		2014	2013
		£	£
	Profit/(Loss) before tax	(53,695)	235,955
	Tax at the domestic income tax rate	(10,739)	47,191
	Expenses not deductible for tax purposes	1,507	11,050
	Brought forward tax losses used	-	(58,241)
	Unutilised tax losses	9,232	-
	Tax (credit)/expense	-	-
	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.

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:
		2014	2013
		£	£
	Administration expenses	-	(25,720)
	Provision for impairment	-	-
	Loss before tax	-	(25,720)
	Tax	-	-
	Loss after tax	-	(25,720)
	Assets disposed of	-	(238,610)
	Liabilities disposed of	-	157,830
	Loss on disposal of discontinued operations	-	(80,780)
	Overall loss attributable to subsidiary operations disposed of	-	(106,500)

11.	EARNINGS PER SHARE
		2014	2013
		£	£
	(Loss)/profit for the purposes of basic and fully diluted earnings per share	(53,695)	235,955
		2014	2013
		Number	Number
	Weighted average number of ordinary shares:
	For calculation of basic earnings per share	16,142,804	4,679,305
	For calculation of fully diluted earnings per share (see note below)	16,142,804	6,119,657
		2013	2013
	Earnings per share:
	Basic (loss)/profit per share	(0.3 pence)	5.0 pence
	Fully diluted (loss)/profit per share (see note below)	(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.

12.	INVESTMENTS HELD FOR TRADING
		2014	2013
		£	£
	Cost of investments brought forward	100,000	-
	Additions	431,978	100,000
	Cost of investments carried forward	531,978	100,000
	Fair value adjustment to investments	100,000	-
	Fair value of investments carried forward	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)
		2014	2013
		£	£
	Investment in subsidiary undertaking brought forward	-	207,771
	Payments to the operator of the JOA on behalf of Silvermere Energy LLC	-	120,487
	Amount due under the JOA at start of year	-	(247,478)
	Amount due under the JOA at date of disposal	-	157,830
	Disposal of subsidiary undertaking	-	(238,610)
	Investment in subsidiary undertaking carried forward	-	-

14.	TRADE AND OTHER RECEIVABLES
		2014	2013
		£	£
	Other receivables (see note below)	284,170	33,486
	Prepaid expenses	16,886	17,426
	Total	301,056	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.

15.	CASH AND CASH EQUIVALENTS
		2014	2013
		£	£
	Cash at bank and on hand	434,274	146,817

16.	ISSUED SHARE CAPITAL
		Number of shares	Nominal value	Share premium
		No.	£	£
	ISSUED AND FULLY PAID:
	At 31 December 2013
	Ordinary shares of £0.0002	10,891,700	2,178
	Deferred shares of £29.999	42,247	1,267,368
	Deferred shares of £0.00099	34,545,072	34,200
			1,303,746	6,646,376
	Ordinary shares issued for cash	22,672,222	4,534	752,966
	Ordinary shares issued as consideration for acquisition of Cryptosoft Ltd	1,922,066	385	23,641
	Ordinary shares issued on conversion of loan stock	9,742,539	1,948	176,078
	Share issue expenses			(35,868)
			1,310,613	7,563,193
	At 31 December 2014
	Ordinary shares of £0.0002	45,228,527	9,045
	Deferred shares of £29.999	42,247	1,267,368
	Deferred shares of £0.00099	34,545,072	34,200
			1,310,613	7,563,193
	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.

17.	TRADE AND OTHER PAYABLES
		2014	2013
		£	£
	Trade payables	16,755	36,133
	Amount to be invested in Cryptosoft	100,000	-
	Accruals	46,008	82,160
	Total	162,763	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.
		2014		2013
		£		£
	Liability brought forward	154,753		-
	Convertible loan notes issued	300,000		200,000
	Equity component of loan notes issued	(46,223)		(29,341)
	Adjustment to equity component on extension of convertible loan	(2,736)		-
	Loan notes converted	(178,026)		(21,974)
	Interest charge	33,146		6,068
	Liability at 31 December 2014	260,914		154,753
		2014		2013
	LOAN MATURITY ANALYSIS	£		£
	Non-current liabilities - More than one year, but not more than five years	260,914		154,753
		260,914		154,753

	OTHER CONVERTIBLE LOANS
		2014	2013
		£	£
	Liability brought forward	-	659,105
	Interest charge	-	122,503
	Settled through the CVA	-	(781,608)
	Liability carried forward	-	-

19.	WARRANTS
	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	At 31 Dec 2013	Issued	Exercised	Lapsed	At 31 Dec 2014	Exercise  Price per share	Exercisable on or before
	31.08.11	5,000	-	-	5,000	-	600p	31.08.14
	16.08.13	163,375	515,052	-	-	678,427	4.6p	16.08.16
	12.09.14	-	198,151	-	-	198,151	2.0p	12.09.17
	12.09.14	-	198,151	-	-	198,151	4.0p	12.09.17
	25.11.14	-	1,260,000	-	-	1,260,000	3.0p	3.12.17
		168,375	2,171,354	-	5,000	2,334,729

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
		2014		2013
		£		£
	(Loss)/profit for the year	(53,695)		235,955
	Adjustments for items not included in cash flow:
	Movement in fair value of investments	(100,000)		-
	Share-based payment expense	-		2,074
	Shares issued in settlement of fees and remuneration	-		-
	Loss on disposal of subsidiary undertaking	-		80,780
	Finance expense	33,146		128,571
	Finance income	(105)		-
	Credit arising on CVA	-		(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	(250,144)		33,728
	Increase in trade and other payables	44,470		203,553
	Cash used in operations	(326,328)		(320,548)

22.	OPERATING LEASE COMMITMENTS
		Year to 31 Dec 2014	Year to 31 Dec 2013
		£	£
	Minimum lease payments under operating leases recognised as an expense in the period	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:
		31 Dec 2014	31 Dec 2013
		£	£
	Land and Buildings: Within one year	-	-
		-	-

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:
		2014		2013
		£		£
	FINANCIAL ASSETS:
	Cash and bank balances	434,274		146,817
	Loans and receivables	278,350		-
	Investments held for trading	631,978		100,000
	FINANCIAL LIABILITIES AT AMORTISED COST:
	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:
		2014	2013
		£	£
	Trade and other payables	116,755	36,133
	Borrowings	260,914	154,753

24.	EVENTS AFTER THE REPORTING PERIOD
	There have been no significant post year end events.

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This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Tern Plc via Globenewswire

HUG#1892955