Tern Regulatory News (TERN)

11 August 2022

Tern Plc

("Tern" or the "Company")

FundamentalVR Fund Raise

Further to the announcement dated 31 May 2022, Tern Plc (AIM:TERN), the company focused on value creation from Internet of Things ("IoT") technology businesses, is pleased to announce that FVRVS Limited ("FundamentalVR"), has closed a second tranche of its Series B fund raising round, securing an additional £5 million in new investment (the "FundamentalVR Series B second tranche") from a new institutional investor at the same valuation as the first tranche, which was an uplift of 35% from the previous book valuation of Tern's holding prior to the Series B fund raising.

Highlights

FundamentalVR has now raised a total of £13.2 million in Series B funding ("FundamentalVR Series B"), from a new institutional investor and its existing investors:

· As previously announced on 31 May 2022, Tern converted the £570,000 in loan notes and accrued interest it held in FundamentalVR into equity in the business and has not invested additional new money in this FundamentalVR Series B second tranche;

· The FundamentalVR Series B is intended to provide FundamentalVR with funding to enable the business to focus on accelerating its annual recurring revenue growth through the significant pipeline of opportunities it has, together with launching new data and analytical products, and establishing a US-based artificial intelligence innovation centre;

· Prior to the second tranche of the FundamentalVR Series B fund raise Tern held 20.0% of FundamentalVR's equity. With the completion of the £5 million FundamentalVR Series B second tranche, Tern will hold 16.58% of FundamentalVR's equity (before any dilution on exercise of any future FundamentalVR employee share options), valued at £4.8 million at the valuation implied by the FundamentalVR Series B funding round.

Commenting Al Sisto, CEO of Tern, said:

"We are delighted that FundamentalVR has secured the funding to take advantage of the significant market traction it has gained in the last eighteen months, particularly with growth in annual recurring revenues, and the opportunities it is seeing.

"Given our focus on funding and assisting the earlier stages of our company's development it is appropriate that we have not committed further capital at the Series B stage. However, with the funds raised we believe FundamentalVR has the potential to generate significant future value for Tern and its shareholders and we are delighted to continue to remain one of its largest shareholders.

"FundamentalVR provides Tern and its shareholders with exposure to the rapidly growing medical simulation market using low cost open-system IoT devices. It is quickly building its annual recurring revenues and the lifetime value of its contracts, and we believe that the business will be an attractive target for a trade buyer or for an IPO in due course. In the meantime, we look forward to continuing to participate in the value it is creating."

FundamentalVR Fund Raise

Prior to the FundamentalVR Series B Tern had a holding of 26.9% in FundamentalVR, plus a loan convertible into FundamentalVR equity of £530,000 and accrued interest of £39,932. As at 31 December 2021, the date of Tern's last published book valuation, this holding had an audited book value of £3.6 million. Including the convertible loan notes, Tern has invested £2.9 million in FundamentalVR since May 2018.

Following the two tranches of FundamentalVR Series B funding of £13.2 million, Tern now has a holding of 16.58% in FundamentalVR (before any dilution on exercise of any future FundamentalVR employee share options), with an unaudited book valuation of £4.8 million, representing a 35% uplift on the 31 December 2021 book value of Tern's holding and an uplift of 62% over the amount invested by Tern in FundamentalVR to date. The change in the valuation and uplift of £6.3 million and 77%, respectively, as disclosed in the announcement on 31 May 2022, has come to light as a result of the calculations relating to the new holding following the FundamentalVR Series B second tranche.

Further information on FundamentalVR

Since Tern's initial investment in FundamentalVR in May 2018 the business has focussed on the commercialisation of its haptics virtual reality simulation solutions, as a credible alternative to in-person and on human learning. The adoption of FundamentalVR's solutions accelerated as a result of the challenges of social distancing and the reduction in elective surgeries as a result of the Covid-19 pandemic and this trend is continuing. 

Today, FundamentalVR is the world's first scalable medical simulation platform to combine virtual reality and haptics through data, artificial intelligence, and multimodal learning. FundamentalVR's patented HapticVRTM technology mimics the physical touch of surgical actions which allows users to experience the sights, sounds, and physical sensations of real-life surgery. Scalable and hardware agnostic, the platform immerses users in a controlled training environment that lowers the surgical risk to patients.

Deployed in over 30 countries, FundamentalVR's high-fidelity simulations help life sciences, pharmaceutical, and med-device companies deploy medical innovations in disciplines from ophthalmology to robotics, gene therapy, and more. The growth investment will enable further development of HapticVRTM, the machine learning data insights product, and geographic expansion throughout the US. FundamentalVR's multiuser platform enables medical institutions, hospitals, and surgical educators, to scale professionally accredited surgical training throughout their organisations. Partnerships with hospital groups, including flagship clients and investors Mayo Clinic and Sana Kliniken, will help drive further growth. FundamentalVR has continued to trade strongly in the past year, with significant new business wins and long-term contracts secured.

Further information on FundamentalVR may be found at: https://www.fundamentalvr.com

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