Tern Plc : Final Results

13 February 2014

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

Final results for the year ended 31 December 2013

Tern Plc, an investment company focused on the cloud and mobile technology sectors, announces its final results for the year ended 31 December 2013.

Operational highlights since formation in August 2013.

• Reorganisation and refinancing of the Company formerly known as Silvermere Energy plc commenced with oil and gas assets and liabilities being sold in August 2013 and concluded with the successful completion of the Company Voluntary Arrangement in December 2013 

• The Company is now investing in established hyper growth private companies and aiming to deliver short term venture capital-type returns to shareholders 

• Tern Plc announced its first investment in November 2013, investing £100,000 in Flexiant Limited, a leading global provider of cloud orchestration software 

• It strengthened its Board through the appointment of Michael Clark in November 2013 and Al Sisto in February 2014  

• All executive directors have invested in the Company 

• Overheads have been reduced and minimised  

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

"Since its formation in August last year we have successfully restructured the Company, strengthened the Board and made our first investment in an exciting cloud software company with a compelling market opportunity in a rapidly growing sector.

I am delighted to welcome Michael Clark and Al Sisto to the board. Michael has 26 years board level experience in the technology sector and a background in restructuring technology companies on behalf of Warburg Pincus. Al has 40 years' experience of the computing and software markets in the United States. His expertise and contacts will be invaluable when advising our portfolio companies on opening up new sales opportunities in the United States, and in terms of identifying potential M&A transactions.

Our first investment shows significant promise. Flexiant Ltd is a leading supplier of cloud orchestration software which trades world-wide.  It allows customers to easily create and launch cloud-based products and services, and respond quickly to new opportunities. Flexiant has a strong recurring revenue model and orders grew 400% in 2013.

The Board is focused on identifying further investment opportunities, and is targeting cloud and mobile data companies with proven technologies, established customer bases, existing revenue and protected IP. We are concentrating on businesses that we fully understand, and where there is an opportunity for Tern directors to provide expertise and add value. We have identified a number of opportunities and will keep shareholders informed of developments."

Enquiries:

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

Chairman's Statement

These are the first accounts for Tern plc since its restructuring and reorganisation commenced in August 2013.

The Company now offers investors a quoted platform to invest in developing private IT companies predominantly operating in the cloud and mobile sectors.  Tern has an entirely new Board of experienced industry professionals who have injected new funds in the Company.  We completed our restructuring and reorganisation in December 2013.

Tern is focussed on delivering short term, venture capital-type returns for investors by building a portfolio of investments in the IT sector. We are targeting established businesses that have proven technologies incorporating their own IP, strong customer bases and growing revenue streams. Our aim is to then exit these portfolio companies within 12-36 months via a trade sale or IPO. We will use the proceeds from realisations to invest in new opportunities, and return surplus cash to shareholders.

The Company is concentrating on cloud and mobile technologies as these sectors are directly benefitting from changes in the way people are using technology at home and work. Several factors contribute to the opportunity that Tern is exploiting to create value:

• New ways of working - Cloud and Mobile 

• New ways of charging and systems - micropayments enable new business models Software as a Service (SaaS) and Infrastructure as a Service (IaaS)  

• Increasingly global markets 

• New legislative drivers for security 

Tern plans to make both passive and active investments. Passive investments will typically be made in companies with an established customer base that require capital to finance hyper-growth.  Active investments will be made in companies that can benefit from Tern's expertise in commercialising IT and public markets in order to accelerate and realise value creation. We aim to do this by providing experience, consultancy and contacts in order to strengthen marketing and distribution initiatives.

Tern announced its first transaction in November 2013 with its £100,000 investment for 1% of Flexiant Limited.  Flexiant is a creator and vendor of cloud orchestration software, and is a passive investment.  Flexiant's software enables service providers to respond quickly to market opportunities and develop, launch and manage cloud-based services and metering and billing products, quickly and easily.  Flexiant now makes sales globally and trades worldwide.  Flexiant won a Gartner Cool Vendor Award in 2013.

Tern has built a pipeline of advanced IT investment opportunities and expects to announce further developments through 2014.

A great deal has been achieved in the four months since Tern was launched with the CVA started and completed, a capital structure reorganisation finalised, overheads reduced and the Company evaluating new investments.

I would like to thank my fellow directors, all shareholders and our advisers for their contribution.

Angus Forrest

Chairman

INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2013

	Notes	£	£
Administration costs		(534,183)	(715,727)
Exceptional items	5	1,005,209	-
Loss from subsidiary operations disposed of	10	(106,500)	(4,111,394)
Operating profit/(loss)	7	364,526	(4,827,121)
Finance costs	8	(128,571)	(190,147)
Profit/(loss) before tax		235,955	(5,017,268)
Tax	9	-	-
Profit/(Loss) for the period		235,955	(5,017,268)
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 earnings per share		5.0 pence	(399.5 pence)
Fully diluted earnings per share		3.8 pence	(399.5 pence)

*The comparative results of the Company for 2012 only reflect the results of the Company as it is no longer required to present a consolidated income statement.

**The comparative figures for earnings per share for 2012 have been adjusted to reflect the unconsolidated results of the Company and the share consolidation in October 2013.

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2013

		2013	2012
	Notes	£	£
ASSETS
NON-CURRENT ASSETS
Investments available for sale	12	100,000	-
Investment in subsidiary undertaking	13	-	207,771
		100,000	207,771
CURRENT ASSETS
Trade and other receivables	14	50,912	84,640
Cash and cash equivalents	15	146,817	19,248
		197,729	103,888
TOTAL ASSETS		297,729	311,659
EQUITY AND LIABILITIES
Share capital	16	1,303,746	1,296,607
Share premium	16	6,646,376	6,004,030
Loan note equity reserve		29,341	25,274
Share option and warrant reserve		797,773	795,699
Retained earnings		(8,752,553)	(9,013,782)
		24,683	(892,172)
CURRENT LIABILITIES
Trade and other payables	17	118,293	1,175,399
TOTAL CURRENT LIABILITIES		118,293	1,175,399
NON-CURRENT LIABILITIES
Borrowings	18	154,753	28,432
TOTAL NON-CURRENT LIABILITIES		154,753	28,432
TOTAL LIABILITIES		273,046	1,203,831
TOTAL EQUITY AND LIABILITIES		297,729	311,659

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2013

	Share	Share	Loan note equity	Option and warrant	Retained	Total
	capital	premium	reserve	reserve	earnings	equity
	£	£		£	£	£
Balance at 31 December 2011	1,287,815	5,179,647	25,274	839,274	(3,996,514)	3,335,496
Total comprehensive income	-	-	-	-	(5,017,268)	(5,017,268)
Transactions with owners
Issue of share capital and warrants	8,792	760,198	-	-	-	768,990
Exercise of warrants	-	64,185	-	(64,185)	-	-
Share based payments	-	-	-	20,610	-	20,610
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

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 2013

		2013	2012
	Notes	£	£
OPERATING ACTIVITIES
Net cash used in operations	21	(320,548)	(290,634)
INVESTING ACTIVITIES
Purchase of investments		(100,000)	-
Investment in joint venture		-	-
Investment in subsidiary undertaking		(120,487)	(537,510)
Net cash used in investing activities		(220,487)	(537,510)
FINANCING ACTIVITIES
Net proceeds on issues of shares		518,354	645,040
Share issue expenses		(49,750)	-
Proceeds from issue of convertible loan notes		200,000	-
Net cash from financing activities		668,604	645,040
Increase/(Decrease) in cash and cash equivalents		127,569	(183,104)
Cash and cash equivalents at beginning of year		19,248	202,352
Cash and cash equivalents at end of year		146,817	19,248

NOTES TO THE FINANCIAL STATEMENTS

1.	ACCOUNTING POLICIES
	The summary accounting policies adopted in the preparation of these financial statements are set out below.
1.1	GENERAL INFORMATION
	Tern plc is currently an investment company in private IT companies, predominantly in the cloud and mobile sectors. The Company is a public limited company with its shares traded on AIM, a market of that name operated by the London Stock Exchange and incorporated in England and Wales. The address of its 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 2013. 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	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 £146,817 and net current assets of £79,436, and the Directors have indicated that in respect of the convertible shareholder loans which, if not converted, are due for repayment on 1 January 2015 they will agree to extend the repayment date.  In addition the Directors plan to raise further funds during the period to provide for working capital requirements and to facilitate the implementation of their investing strategy.  They have prepared cash flow forecasts through to 31 March 2015, 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 assumptions: that additional funds will be raised  that no new investment will be undertaken by the Company unless sufficient additional funding is in place  that overhead expenses will be restricted to the minimum level necessary to maintain the Company's quotation on AIM until additional finance is raised  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.
1.4	STATEMENT OF COMPLIANCE
	Issued International Financial Reporting Standards (IFRS's) 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.
1.5	FOREIGN CURRENCIES
	Transactions in foreign currencies are initially recorded at the rates of exchange prevailing on the dates of the transactions. Monetary assets and liabilities denominated in such currencies are retranslated at the rates prevailing on the balance sheet date. Profits and losses arising on exchange are included in the net profit or loss for the period.
1.6	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.
1.7	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.
	Available for sale investments
	Investments are recognised and derecognised on a trade date where a purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at cost, including transaction costs. Investments classified as available for sale are measured at subsequent reporting dates at fair value. Fair value is defined as the price at which an orderly transaction would take place between market participants at the reporting date and is therefore an estimate and as such requires the use of judgement. Where possible fair value is based upon observable market prices, such as listed equity markets or reported merger and acquisition transactions. Alternative bases of valuation may include contracted proceeds or best estimate thereof, implied valuation from further investment and long-term cash flows discounted at a rate which is tested against market data. Gains and losses arising from changes in fair value are recognised directly in other comprehensive income, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in other comprehensive income is included in the net profit or loss for the period. Impairment losses recognised in the income statement for equity investments classified as available-for-sale are not subsequently reversed through the income statement.
	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 income when the loans and receivables are derecognised or impaired, as well as through the amortisation process,
1.8	IMPAIRMENT OF FINANCIAL ASSETS Available-for-sale financial assets
	If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost and its fair value is transferred from equity to the Income statement. Any reversal of an impairment of an equity instrument classified as available-for-sale is not recognised in the income statement.
	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.
	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.
1.9	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.
1.10	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.
1.11	TRADE PAYABLES
	Trade payables are initially measured at fair value and are subsequently measured at amortised cost, using the effective interest rate method.
1.12	EQUITY INSTRUMENTS
	Equity instruments are recorded at the proceeds received net of direct issue costs.
1.13	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.
1.14	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 for the long term. Accordingly the Company rarely trades investments in the short term. Whilst the Company has no listed investments at present, if it holds such investments these may be sold to meet the Company's funding requirements. However, the market in small capitalised companies can be illiquid.  Any unlisted investments in the portfolio are normally subject to greater liquidity risk.  This risk is taken into account by the Directors when arriving at the valuation of these assets. 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 2013	Trade and other Payables £	Convertible  Loans £	Total £
		6 months or less	36,133	-	36,133
		1 to 2 years	-	178,426	178,426
		Total contractual cash flows	36,133	178,426	214,559
		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 fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Company uses its judgement to make assumptions that are mainly based on market conditions existing at each balance sheet date. 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
	Until the disposal of the Company's oil and gas production operations that was its single business segment. Subsequently the Company's single business segment has been investing in unquoted and quoted companies to achieve capital growth, and on that basis the directors do not consider that the expense of preparing a segmental analysis is justified.
5.		EXCEPTIONAL ITEMS
			2013	2012
			£	£
		Credit arising on CVA (see note below)	1,005,209	-
			1,005,209	-
		Note - In August 2013 the Company entered a Company Voluntary Arrangement ("CVA").  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 December2013.

6.	STAFF COSTS
	Staff costs for the Company during the period, including directors	2013	2012
		£	£
	Wages and salaries	98,930	295,792
	Compensation for loss of office	-	2,000
	Pension payments	5,250	7,500
	Other benefits	-	698
	Share based payment expense	-	20,610
	Social security costs	10,237	17,662
	Total staff costs	114,417	344,262
	The average number of people (including executive directors) employed by the Company during the period was:
		2013 No	2012 No
	Head office and administration	2	2
	Total staff	2	2
	DIRECTORS' AND REMUNERATION
	Other than directors the Company had no employees.  Total remuneration paid to directors during the period was as follows:
		2013	2012
		£	£
	Directors' remuneration
	- Salaries and benefits	104,180	305,990
	- Consultancy fees	-	-
	Total directors' remuneration	104,180	305,990
	Total emoluments of the highest paid director were	63,180	191,228

A summary of remuneration paid to each director, including pension payments, is included in the Report on Directors' remuneration (page 10).

7.	OPERATING PROFIT/(LOSS)
		2013	2012
		£	£
	Profit/(loss) from operations has been arrived at after charging:
	Remuneration of directors and staff	104,180	305,990
	Share-based payment expense	2,704	20,610
	Provision for doubtful debts	80,000	155,845
	Auditor's remuneration
	- Audit services	12,000	14,000
	- Other services	-	-

8.	FINANCE COSTS
		2013	2012
		£	£
	Interest charge in respect of convertible loan notes	128,571	190,147
		128,571	190,147

£122,503 of this charge relates to loan notes converted to equity in the CVA.

9.	TAXATION
		2013	2012
		£	£
	Current tax	-	-
	Under/(over) provision from prior period	-	-
	Taxation attributable to the Company	-	-
	Domestic income tax is calculated at 20% (2012: 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:
		2013	2012
		£	£
	Profit/(Loss) before tax	235,955	(5,035,018)
	Tax at the domestic income tax rate	47,191	(1,007,004)
	Expenses not deductible for tax purposes	11,050	60,020
	Brought forward tax losses used	(58,241)	-
	Unutilised tax losses	-	946,984
	Tax (credit)/expense	-	-
	The Company has unutilised losses of approximately £5,200,000 (2012: £5,500,000).  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 FROM SUBSIDIARY OPERATIONS DISPOSED OF
	In August the Group 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:
		2013	2012
		£	£
	Administration expenses	(25,720)	(261,394)
	Provision for impairment	-	(3,850,000)
	Loss before tax	(25,720)	(4,111,394)
	Tax	-	-
	Loss after tax	(25,720)	(4,111,394)
	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)	(4,111,394)

11.	EARNINGS PER SHARE
		2013	2012
		£	£
	Profit/(loss) for the purposes of basic and fully diluted earnings per share	235,955	(5,017,268)
		2013	2012
		Number	Number
	Weighted average number of ordinary shares (see note 1 below):
	For calculation of basic earnings per share	4,679,305	1,255,879
	For calculation of fully diluted earnings per share (see note 2 below)	6,119,657	1,255,879
		2013	2012
	Earnings per share (see note 1 below):
	Basic profit/(loss) per share	5.0 pence	(399.5 pence)
	Fully diluted profit/(loss) per share (see note 2 below)	3.8 pence	(399.5 pence)
	Note 1.  The comparative number of shares and earnings per share for 2012 have been adjusted to reflect the share consolidation in October 2013. Note 2.  The fully diluted loss per share for 2012 is the same as the basic loss per share as the loss for the year has an anti-dilutive effect.

12.	INVESTMENTS AVAILABLE FOR SALE
		2013	2012
		£	£
	Purchase of investments	100,000	-
	Balance at end of year	100,000	-
	The investment held by the company is a Level 3 investment as defined in Note 1.7

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)
		2013	2012
		£	£
	Balance at start of period	207,771	3,255,033
	Payments to the operator of the JOA on behalf of Silvermere Energy LLC	120,487	537,510
	Amount due under the JOA at start of year	(247,478)	-
	Amount due under the JOA at date of disposal	157,830	-
	Amount due under the JOA at year end	-	247,478
	Management charge	-	17,750
	Decommissioning provision	-	-
	Disposal of subsidiary undertaking	(238,610)	-
	Investment in subsidiary undertaking at 31 December at cost	-	4,057,771
	Provision for impairment	-	(3,850,000)
		-	207,771

14.	TRADE AND OTHER RECEIVABLES
		2013	2012
		£	£
	Other debtors	33,486	33,274
	Prepaid expenses	17,426	51,366
	Total	50,912	84,640
	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
		2013	2012
		£	£
	Cash at bank and on hand	146,817	19,248

16.	ISSUED SHARE CAPITAL
		Number of shares	Nominal value	Share premium
		No.	£	£
	ISSUED AND FULLY PAID:
	At 31 December 2012
	Ordinary shares of £0.001	29,239,356	29,239
	Deferred shares of £29.999	42,247	1,267,368
			1,296,607	6,004,030
	Ordinary shares issued for cash	5,305,716	5,306	366,094
	Share issue expenses			(22,750)
			1,301,913	6,347,374
	Share reorganisation:
	Ordinary shares of £0.00001	34,545,072	345
	Deferred shares of £29.999	42,247	1,267,368
	Deferred shares of £0.00099	34,545,072	34,200
			1,301,913	6,347,374
	Ordinary shares issued for cash	76,683,029	767	143,633
	Ordinary shares issued in settlement of CVA liabilities	69,090,144	691	158,216
	Share issue expenses			(27,000)
			1,303,371	6,622,223
	Share consolidation:
	Ordinary shares of £0.0002	9,015,950	1,803
	Deferred shares of £29.999	42,247	1,267,368
	Deferred shares of £0.00099	34,545,072	34,200
			1,303,371	6,622,223
	Ordinary shares issued on conversion of loan stock	1,090,000	218	21,756
	Ordinary shares issued for cash	785,750	157	2,397
			1,303,746	6,646,376
	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

17.	TRADE AND OTHER PAYABLES
		2013	2012
		£	£
	Trade payables	36,133	402,881
	Other payables	-	13,699
	Other taxes and social security	-	22,131
	Accruals	82,160	106,015
	Borrowings (see Note 18)	-	630,673
	Total	118,293	1,175,399
	The directors consider that the carrying amount of trade payables approximates to their fair value.

18.	BORROWINGS
	On 23 March 2010, £81,647 convertible loan notes were issued with a final repayment date of 23 March 2015 (the "2015 Loan Notes").  The 2015 Loan Notes are interest free and unsecured.  £40,515 of the 2015 loan notes were converted into shares in October 2011 and the balance of the loan notes are subject to the terms of the CVA approved by the creditors and shareholders on 16 August 2013. On 1 July 2011, a £750,000 convertible term loan was issued (the "Term Loan") divided into two separate tranches of £375,000 each ("Loan A" and "Loan B").  On the re-admission of the Company's shares to AIM, Loan A loan notes automatically converted into ordinary shares at 22.5p per share.  The Loan B notes are subject to the terms of the CVA approved by the creditors and shareholders on 16 August 2013. On 16 August 2013 the Company entered into an agreement for the issue of £200,000 convertible loan notes (the "Shareholder Loans") 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. The net proceeds from the issue of the 2015 Loan Notes and 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.
		Shareholder Loans	2015 Loan Notes	Term Loan		Total borrowings
		£	£	£		£
	Liability at 31 December 2012	-	28,432	630,673		659,105
	Convertible loan notes issued	200,000	-	-		200,000
	Equity component of loan notes issued	(29,341)	-	-		(29,341)
	Loan notes converted	(21,974)	-	-		(21,974)
	Interest charge	6,068	3,176	119,327		128,571
	Settled through the CVA	-	(31,608)	(750,000)		(781,608)
	Liability at 31 December 2013	154,753	-	-		154,753
				2013		2012
	LOAN MATURITY ANALYSIS			£		£
	Current liabilities - Less than one year			-		630,673
	Non-current liabilities - More than one year, but not more than five years			154,753		28,432
				154,753		659,105

19.	WARRANTS AND OPTIONS
	WARRANTS On 19 August 2013, a warrant was issued to a professional adviser in lieu of 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. The estimated fair value of the options granted 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 has been expensed in the year in respect of the warrants issued. The number of warrants outstanding at 31 December 2013 was as follows:
	Date of issue	At 31 Dec 2012	Issued	Exercised	Lapsed	At 31 Dec 2013	Exercise  Price per share	Exercisable on or before
	26.05.11	108,810	-	-	108,810	-	600p	26.05.13
	31.08.11	298,189	-	-	298,189	-	600p	31.08.13
	26.09.11	3,182	-	-	3,182	-	600p	31.08.13
	04.11.11	11,520	-	-	11,520	-	600p	31.08.13
	31.08.11	33,800	-	-	33,800	-	600p	31.08.13
	31.08.11	5,000	-	-	-	5,000	600p	31.08.14
	15.04.12	25,714	-	-	25,714	-	600p	31.08.13
	16.08.13	-	163,375	-	-	163,375	4.6p	16.08.16
		486,215	163,375	-	481,215	168,375
	OPTIONS
	The following table is a summary of the options outstanding at 31 December 2013
	Date of grant	At 31 Dec 2012	Granted	Exercised	Forfeited/ Lapsed	At 31 Dec 2013	Exercise Price per share	Exercisable on or before
	19.08.11	35,000	-	-	(35,000)	-	500p	19.08.14
	20.02.12	20,000	-	-	(20,000)	-	500p	20.02.16
		55,000	-	-	(55,000)	-

The number of warrants and options outstanding, and their exercise prices have been adjusted to reflect the share consolidation in the year

20.	RELATED PARTY TRANSACTIONS
	In the year to 31 December 2013, £25,000 was charged by Talisman Ventures Limited for work in respect of the restructuring of the Company.  Angus Forrest is a director and controlling shareholder of Talisman Ventures Limited.  At the year end, £25,000 was owed to Talisman Ventures Limited.

21.	CASH FLOW FROM OPERATIONS
		2013		2012
		£		£
	Profit/(loss) for the year	235,955		(5,017,268)
	Adjustments for items not included in cash flow:
	Share-based payment expense	2,074		20,610
	Shares issued in settlement of fees and remuneration	-		123,950
	Loss on disposal of subsidiary undertaking	80,780		-
	Finance expense	128,571		190,147
	Credit arising on CVA	(1,005,209)		-
	Impairment expense	-		3,850,000
	Group management charge	-		(17,750)
	Operating cash flows before movements in working capital	(557,829)		(850,311)
	Adjustments for changes in working capital:
	Decrease in trade and other receivables	33,728		368,072
	Increase in trade and other payables	203,553		191,605
	Cash used in operations	(320,548)		(290,634)

22.	OPERATING LEASE COMMITMENTS
		Year to 31 Dec 2013	Year to 31 Dec 2012
		£	£
	Minimum lease payments under operating leases recognised as an expense in the period	27,254	46,800
	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 2013	31 Dec 2012
		£	£
	Land and Buildings: Within one year	-	20,700
		-	20,700

23.	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#1761409