LONDON (ShareCast) - (Sharecast News) - Internet of things investment company Tern announced on Thursday that, together with its co-investors, it has committed a further convertible secured loan to its portfolio company Device Authority, which specialises in internet of things security.
The AIM-traded firm said the total funds secured by Device Authority through the loan were $0.42m, of which Tern contributed $0.32m.

Following the investment, Tern's total convertible secured loan note position with Device Authority was $2.42m, with the loan repayable on 31 December.

Tern said its continued support was "testament" to Device Authority's "strong" track record of using the funds it had raised to deliver critical components of its go-to-market strategy.

During 2018, it reportedly enhanced its products to ensure that they met key client challenges, and expanded its ecosystem of partners.

Device Authority had continued that trend in 2019, and had secured three new orders in the first quarter through its partner network, as well as consistently increasing annual recurring revenue quarter-on-quarter.

The loan note accrued an interest coupon of 5% per annum, and was convertible automatically on completion of an equity fundraising by Device Authority of at least $2.5m if completed before 31 December.

Tern said the conversion would be into the most senior class of shares issued in the qualifying fundraising, at the lowest fundraising price per share.

If a qualifying fundraising was not completed before 31 December, but Device Authority was able to procure an exit for its shareholders, the providers of the loan could elect to either receive 300% of the principal amount of the loan notes held by them in addition to the accrued interest, or to convert the loan and accrued interest into class A preference shares of Device Authority at a conversion price of £0.036681585 per share.

Providers of the loan would also be issued with 2.6 warrants for each $1.00 of loan notes subscribed for by them, rounded down to the nearest whole number.

Each warrant, which would be exercisable at any time before 10 April 2026, provided each warrant holder with the right to subscribe for one class A preference share of Device Authority for each warrant held at an exercise price of £0.036681585 per share.

As part of the process, Tern said it has been agreed by all noteholders that all previous convertible loan notes provided to Device Authority had their maturity dates extended to 31 December.

"We are pleased with the progress that Device Authority continues to make with its partners, including the recent contract win with nCipher Security to deliver a security solution for high quality surgical devices," said Tern chief executive officer Al Sisto.

"The capital we provided in 2018, together with our co-investors, made a marked difference to Device Authority as it set out to refine its product and expand its partnership network, leading to new contract wins in the second half of 2018 and into the first quarter of 2019.

"With this in mind, we are pleased to continue this support and to maintain our holding as Device Authority focuses on building its client base in the coming months."

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