Tern Regulatory News (TERN)

28 October 2022

Tern Plc

("Tern" or the "Company")

Device Authority convertible loan note funding

Tern Plc (AIM:TERN), the company focused on value creation from Internet of Things ("IoT") technology businesses, announces that Device Authority Limited ("Device Authority"), of which Tern currently owns 53.8% of the equity, has completed a US$440,000 working capital funding in the form of unsecured convertible loan notes (the "Convertible Notes") from Tern and certain of its other existing shareholders, including Venafi and Alsop Louie Partners. Tern has subscribed for approximately US$303,401 of Convertible Notes, representing approximately 69% of the total funding.

The Convertible Notes and accrued interest (at a rate of 9% per annum) are repayable or convertible into Device Authority equity, at the holder's election, at the earlier of the maturity date of 30 June 2023 (the "Maturity Date"), and inter alia, on a change of control of Device Authority, or on Device Authority completing a qualifying fundraise, being a new equity financing of Device Authority which raises aggregate gross cash proceeds of at least US$5 million.

On a change of control of Device Authority prior to the Maturity Date, being a sale or disposal of the business as defined in Device Authority's Articles of Association, the Convertible Note holders will be entitled to a premium payment equal to 300% of the original principal amount of the Convertible Notes, or at the discretion of the Convertible Note holders the outstanding principal amount and accrued interest may be converted into the most senior class of share at a 30% discount to the price paid for the shares sold at the change of control. Additionally, subscribers to the Convertible Notes have received warrants to acquire additional Device Authority equity at a fixed price, exercisable on a change of control of Device Authority prior to the Maturity Date (the "Warrants").

Alternatively, should Device Authority complete a qualifying fundraise before the Maturity Date, the Convertible Notes are convertible into Device Authority equity at a 30% discount to the fundraising price. If a qualifying fundraise occurs the Warrants will expire and become non-exercisable. The Convertible Notes provide for customary events of default.

The valuation of Tern's holding in Device Authority, as stated in the Company's unaudited interim results for the six months to 30 June 2022, was £16.3 million. Based on Device Authority's latest statutory accounts for the year ended 31 December 2021, as at that date it had net assets of £3,824,398 and incurred a loss for the year of £2,185,382. Given the historic nature of these figures Tern does not consider this to be representative of the current business and trading performance of Device Authority.

Tern also currently has loans of approximately US$175,000 to Device Authority, which are short-term, non-convertible, unsecured loans.

Commenting Al Sisto, CEO of Tern, said:

"As outlined at the time of Tern's recent fundraise, the use of proceeds included capital that we can deploy to provide further funding for Tern's portfolio companies, both protecting Tern's position and providing them with the growth capital they require.

"We are delighted with the progress Device Authority is continuing to make and we are very happy to continue to support its working capital needs as it continues to grow its monthly recurring revenues through its subscription base and modularised licence platform, KeyScaler®.

"The Board remains focussed on continuing to maximise the investment value for Tern shareholders and I look forward to making further announcements in due course."

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About Device Authority

Device Authority is a global leader in Identity and Access Management (IAM) for the IoT; focused on the automotive, medical device (IoMT) and industrial (IIoT) sectors. Device Authority's KeyScaler™ platform provides zero touch provisioning and complete automated lifecycle management for securing IoT devices and data at scale, with frictionless deployment across device provisioning, authentication, credential management, policy based end-to-end data security/encryption and secure OTA (over the air) and HSM (hardware security module) updates.