LONDON (Alliance News) - Phorm Corp Ltd on Monday revealed a flurry of activity on its financing arrangements.
In a statement, the advertising technology company said the US-based institution with which it agreed a USD1.0 million equity subscription last month has failed to transfer the required funds to settle the deal under their legally binding deal.
Phorm said it is taking legal advice over enforcing its rights under the subscription deal. Though the investor has provided "assurances" it will honour the agreement, Phorm said there can be "no guarantee" the funds will be forthcoming.
In the meantime, Phorm has agreed a short-term loan with Meditor, a major shareholder in Phorm with just shy of a 23% stake. Meditor will lend up to USD2.8 million to Phorm broken down in three tranches. The first two are each USD250,000, while the third is USD2.25 million.
The loan was agreed due to Phorm's "short-term liquidity requirements arising as a direct result of the delay in receiving the abovementioned subscription funds". Those requirments include the need to make payments due to creditors within the next week.
Following legal advice, Phorm said the loan is necessary to "avoid the company becoming insolvent and having to commence appropriate insolvency proceedings, such as administration or liquidation".
Meanwhile, Phorm also has received signed subscription agreements from FiveT Investment Management Ltd and Arminius Verwaltung AG, with each of them committing to invest USD250,000 before expenses at 1.2 pence per new share. Funds are expected by Wednesday this week, which will in turn allow Phorm to draw down the second tranche of the Meditor loan.
As part of the subscription, FiveT and Arminius will be granted warrants equivalent to 25% of the amount invested, with an exercise price of 1.5p per share, which will be valid for a period of five years.
Shares in Phorm were quoted at 1.33p on Monday, up 6.4% on the day.
FiveT is a company associated with Johannes Minho Roth, a non-executive director of Phorm. Roth is the founding director, chief executive officer and majority shareholder of FiveT's parent company, FiveT Capital Holding AG.
Separately, Phorm said it has received notices from Michael Bigger and Arminius, under their options, to receive repayment of the principal amount of their unsecured term loans in full, together with accrued interest thereon and the associated redemption fees.
The payments amount to USD165,330 and USD413,325, respectively, and will be met through the issue of 9.8 million and 24.5 million shares at a "revised" exercise price of 1.2 pence, Phorm said.
"Further to the receipt of funds pursuant to the draw down of tranche 1, tranche 2 and the receipt of the proceeds of the second subscription, the board believes that the company has adequate working capital to support its activities until at least the end of February 2016," Phorm said.
"In order to continue operating as a going concern thereafter and in order to satisfy a condition to draw down of the final USD2.25 million third tranche under the loan, the board will be seeking to secure further equity funding of at least GBP2.5 million by 24 February 2016," Phorm added.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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