PHRM.L Regulatory News (PHRM)

10 Apr 2008 07:01

Phorm Inc10 April 2008 Phorm, Inc. ("Phorm" or the "Company") Preliminary Results Phorm (AIM: PHRM and PHRX), the advertising technology company, today announcesits preliminary results for the year ended 31 December 2007. Operational Highlights: Year to 31 December 2007 • Reorganisation of the Company from 121Media, Inc. to Phorm, Inc completed • Focus on preparation of OIX and Webwise technology and development of relationships with ISPs, publishers and advertisers • Successful $30 million equity fundraising completed • Several senior appointments made Q1 2008 • OIX and Webwise successfully launched in February 2008 • Exclusive agreements announced with ISPs BT, Talk Talk and Virgin Media, representing nearly 70% of the UK broadband user base • Consumer trials are expected to begin in the near term, followed by roll-out across these networks • Significant progress made with the advertising and publishing community • Advanced talks with other ISPs both in the UK and internationally • Independent report by Ernst & Young published, supporting Phorm's commitment to privacy protection • Positive initial feedback received from a number of regulatory bodies • Successful $65 million equity fundraising completed Executive Chairman's statement Introduction: During the year under review, Phorm made significant progress, both in terms ofits corporate development and in executing the Company's Internet ServiceProvider (ISP) relationship strategy, providing a solid foundation on which totake the business forward to the next stage of its development. As a result ofour hard work, I am extremely happy to report that on 14 February 2008, weannounced exclusive agreements with BT, Talk Talk and Virgin Media, furtherdetails of which I have provided below. Results and financial position: In line with our previous decision to focus the Company's efforts entirely onimplementing our strategy of developing our proprietary technology platform andbuilding ISP relationships, advertising revenue ceased in 2006. Operatinglosses for the year were $32.8 million (2006: $11.6 million) reflectingcontinued investment in business infrastructure, technology, people and systems.The operating loss includes a non-cash share based payment charge of $8.9million (2006:$1.5 million). Losses after taxation were $32.2 million (2006:$11.5 million). Loss per share was $2.74 (2006: $1.13). During the course of 2007, the Company benefited from continuing support fromits investors. In February 2007, Morgan Stanley Principal Investments invested$5 million in the Company and in June 2007, we carried out an institutionalplacing which raised $30 million before expenses. This considerable supportunderpinned the rapid progress of the Company. I am also pleased to report that on 19 March 2008 we announced the completion ofa further institutional equity fundraising which raised an additional $65million for the Company before expenses. In these current times of uncertaintyin the financial markets, the fact that we were able to raise significant fundsis testament to the strength and potential of our business model. Our balance sheet at 31 December 2007 showed net assets of $15.1 million (2006:$3.2 million) with cash and cash equivalents of $16.6 million (2006: $3.8million) and virtually no debt. Together with these existing cash resources, theadditional funds raised will enable the Group to embark on its next phase ofdevelopment. Net cash used in operating activities was $22.4 million (2006: $8.3 million),principally due to the operating costs incurred (less non-cash share-basedpayment charges). This cash usage was principally funded by the equityfundraising in the year (net of issue costs) of $35.2 million (2006: $11.7million). People: Over the course of 2007, a number of high profile executives joined Phorm. On21 May 2007, we announced three senior board appointments; Firstly, David Dormanjoined us as a Non Executive Director having been an advisor to the Companysince July 2006. He is currently senior advisor and partner at global privateequity firm Warburg Pincus and was previously Chairman and Chief ExecutiveOfficer of AT&T Corp. Before that, he was Chief Executive Officer of Concert,the global venture created by AT&T and British Telecommunications. David servesas Non Executive Chairman on the Board of Motorola Inc, and serves on the Boardsof CVS Corporation, LLC, and YUM! Brands, Inc. Christopher Lawrence also joined us as a Non Executive Director. Christopher iscurrently Co-Head of Investment Banking, Rothschild Inc. (North America), andwas previously Chief Strategic Officer of Credit Suisse Group as well as a ViceChairman of Credit Suisse First Boston. We also announced that Virasb Vahidi had joined the Board as Chief OperatingOfficer. Virasb is an international business executive with a distinguishedcareer encompassing senior finance, strategy and planning roles in globalcompanies including AT&T Corp. and American Airlines, Inc. On 1 October 2007, we announced another senior appointment to our Board. StephenJ Heyer joined the Board as a Non Executive Director. A seasoned and innovativeleader, operator, marketer, brand builder and strategist, Steve is currently theCo-Chairman and CEO of Fathom Studios and Vice Chairman of Mistral AcquisitionCompany. Steve was CEO of Starwood Hotels & Resorts Worldwide, and joinedStarwood from The Coca-Cola Company, where he served as President and COO. Priorto joining Coca-Cola, Steve was President and COO of Turner Broadcasting System,Inc., and a member of AOL Time Warner Inc.'s Operating Committee. Previously,Steve was President and COO of Young and Rubicam, Inc. Steve is a member of theBoard of Directors of Lazard Ltd and Lazard Group, Mistral Acquisition Company,the National Collegiate Athletic Association and the Special Olympics. At the same time, we announced the hiring of Stratis Scleparis as Group ChiefTechnology Officer (CTO). Stratis has over 20 year's experience incommunications, IT and emerging technology and joined us from BT Retail, part ofBT Group plc, where he was CTO. Furthermore, on 15 January 2008, we appointed Greg Meyer as Senior VicePresident, Global Product Development, who joined from Atlas, a division ofaQuantive, where he was SVP Product and Technology. The expertise and experience that these people have brought to Phorm is provinginvaluable as our business gains further traction throughout the markets inwhich we operate and underlines our commitment to employing the best possiblepeople to deliver upon our strategy. Strategy and business update: 2007 can be characterised as a year of building the foundations for our futuresuccess. In May, we completed the reorganisation of the Company from 121Media,Inc. to Phorm, Inc. We also invested considerable time and funding in ourtechnology and key infrastructure as well as internal processes that will enableus to deliver a first class and highly scalable platform, in addition tosignificantly strengthening our team. I am delighted that the hard work and dedication of the team was rewarded soonafter the year end, when on 14 February 2008, we announced exclusive agreementswith three major UK ISPs - BT, Talk Talk and Virgin Media, which representnearly 70% of the UK internet market, to adopt our online advertising platform,the Open Internet Exchange (OIX), and a consumer internet feature, Webwise.Implementation is on track and consumer trials are expected to begin in the nearterm, followed by roll-out across these networks. Furthermore, we continue to be in advanced discussions with a number of otherISPs, both in the UK and internationally, and following extensive due diligencewe have moved into the trial phase with a number of them. It is worth notingthat we believe we are selected as the preferred partner by leading ISPs overour competitors based on the capabilities of our technology, our team and ourapproach to privacy. We will provide an update on these discussions in duecourse, when appropriate. In addition, since announcing the launch of OIX and Webwise on 14 February 2008,Phorm has continued to make significant progress with the publishing andadvertising community and is delighted with the enthusiastic response it hasreceived to date. A key differentiator of Phorm's technology is our ability to dispel the myththat in order to provide relevant advertising on the internet you need to storedata. The fundamental principles behind our platform support the higheststandards in user privacy and anonymity: • Phorm will not and cannot ever store any personal information which can identify a user • Users will have a clear choice whether to turn Webwise on or off • Our technology complies with all relevant data protection and privacy laws including RIPA (Regulation of Investigatory Powers Act) and the Data Protection Act It is very pleasing to see that our commitment to these principles, and to openand transparent disclosure, has been recognised by leading privacy advocateSimon Davies, Managing Director of privacy consultancy 80/20 Thinking anddirector of Privacy International. Mr Davies and 80/20 Thinking recentlyconducted an interim Privacy Impact Assessment of our technology. Also, as part of our commitment to the privacy of internet users, wecommissioned Ernst & Young to conduct an independent examination of our systemsand assertions. The following components of our privacy programme were examined: • Phorm's privacy policy, controls and procedures • Phorm's compliance with its stated privacy policy • Phorm employees' privacy policy training and compliance • Data retention, integrity and security policies and procedures. The resulting attestation report we received from Ernst & Young confirmed thatour systems have been designed specifically to protect the identity and othersensitive information of consumers - a great validation of our offering. Furthermore, we have initiated a dialogue with the Information Commissioner'sOffice who are pleased with the way that we have engaged with technical expertsand concerned individuals following the announcement of the service. We havealso met with many other leading stakeholders in the area of online privacy, toshare details of our technology and the response to date has been veryencouraging. Finally, during the course of 2007, we appointed leading global professionalservices firm Deloitte & Touche LLP as auditor to Phorm. Outlook: We have made an exceptionally positive start to 2008 with the announcement ofagreements with three key UK ISPs, but there is still a lot of work that needsto be done before we reach critical mass in the UK market. We will work closelywith our ISP partners to ensure a smooth and timely roll out of our platformwhilst continuing discussions with other potential partners at the ISP,advertiser and publisher level as well as developing our internationalprogramme. We have built an excellent team and a market leading technologyplatform and, as a result, we look forward with great optimism to theopportunity that lies ahead for our company. Kent ErtugrulChairman & Chief Executive10 April 2008 Phorm, IncConsolidated income statementYear ended 31 December 2007 Year ended 31 December 2007 Year ended 31 December 2006 Before After Before After share Share share share Share share based based based based based based payment payment payment payment payment payment expense expense expense expense expense expense $ $ $ $ $ $ Continuing operationsRevenue - - - 1,272,254 1,272,254Cost of sales (294,098) - (294,098) (403,306) - (403,306) Gross (loss)/profit (294,098) - (294,098) 868,948 - 868,948 Research and development (3,082,736) (716,301) (3,799,037) (476,658) (161,978) (638,636)Sales and administrative expenses (20,584,528) (8,151,646) (28,736,174) (10,460,630) (1,371,156) (11,831,786) Operating loss (23,961,362) (8,867,947) (32,829,309) (10,068,340) (1,533,134) (11,601,474) Investment income 688,843 82,312Financing expense (8,816) (16,186) Loss before tax (32,149,282) (11,535,348) Tax on loss on ordinary activities (3,941) (12,705) Net loss for the year (32,153,223) (11,548,053) Attributable to equity holders of the parent (32,153,223) (11,548,053) Basic and diluted loss per share ($) (2.74) (1.13) Phorm, IncConsolidated balance sheet31 December 2007 2007 2006 $ $ Assets Non-current assetsProperty, plant and equipment 661,172 128,614 Total non-current assets 661,172 128,614 Current assetsOther receivables 1,350,235 594,063Cash and cash equivalents 16,557,681 3,804,771 17,907,916 4,398,834 Total assets 18,569,088 4,527,448 Current liabilitiesTrade payables (529,370) (156,736)Other payables (1,896,270) (578,856)Obligations under finance leases (15,104) (39,077)Provisions (621,114) (492,742) Total current liabilities (3,061,858) (1,267,411) Non-current liabilitiesObligations under finance leases (5,486) (11,303)Provisions (395,978) (24,245) Total-non current liabilities (401,464) (35,548) Total liabilities (3,463,322) (1,302,959) Net assets 15,105,766 3,224,489 EquityCommon shares 12,136 11,217Additional paid in capital 54,220,477 18,706,233Warrants - 300,300Translation reserve (329,206) (280,896)Accumulated deficit (38,797,641) (15,512,365) Stockholders' equity 15,105,766 3,224,489 Phorm, IncConsolidated cash flow statementYear ended 31 December 2007 Year ended Year ended 31 December 31 December 2007 2006 $ $ Net cash used in operating activitiesNet cash used in operating activities (22,374,122) (8,290,238)Income tax paid (3,941) (12,705) Net cash used in operating activities (22,378,063) (8,302,943) Cash flows used in investing activitiesInterest received 688,843 82,312Purchase of property, plant and equipment (722,308) (174,572) Net cash used in investing activities (33,465) (92,260) Cash flows from financing activitiesFinance lease interest paid (8,816) (16,186)Repayment of obligations under finance leases (41,609) (44,760)Proceeds from issue of shares, net of $1,399,799 expenses 35,214,863 11,690,387 Net cash flows from financing activities 35,164,438 11,629,441 Net increase in cash and cash equivalents 12,752,910 3,234,238Cash and cash equivalents brought forward 3,804,771 570,533 Cash and cash equivalents carried forward 16,557,681 3,804,771 Phorm, Inc - Notes to the Preliminary Announcement of Results 1. Basis of preparation The preliminary results for the year ended 31 December 2007 are an abridgedstatement of the full Annual Report, which was approved by the Board ofDirectors on 10 April 2008. The financial statements contained in the AnnualReport have, for the first time, been prepared in accordance with InternationalFinancial Reporting Standards (IFRS) as adopted by the European Union (EU) andArticle 4 of the EU IAS Regulations, and on a historical basis, except forcertain financial instruments that have been measured at fair value inaccordance with applicable IFRS. The accounting policies applied by the Group inthe preparation of the financial statements for the year ended 31 December 2007are consistent with those published by the Group in its interim results for thesix months ended 30 June 2007 which are available on the Company's website,www.phorm.com. The Auditors' Report on the financial statements for the yearended 31 December 2007 was unqualified. The Annual Report for the year ended 31December 2007 will be made available on the Company's website, www.phorm.com. The financial information included in this preliminary announcement does notitself contain sufficient information to comply with IFRS. The preparation of the preliminary results requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities, anddisclosure of contingent assets and liabilities at the balance sheet date, andthe reported amounts of revenue and expenses during the reporting period. Actualresults could vary from these estimates. The estimates and underlyingassumptions are reviewed on an ongoing basis. Revisions to accounting estimatesare recognised in the period in which the estimate is revised if the revisionaffects only that period or in the period of the revision and future periods ifthe revision affects both current and future periods. For Phorm Enquiries: Kent Ertugrul (Chairman & Chief Executive) +44 20 7638 9571Lynne Millar (Chief Financial Officer) Citigate Dewe Rogerson +44 20 7638 9571Simon RigbyJustin Griffiths Canaccord Adams Limited +44 20 7050 6500(Nominated Adviser)Mark WilliamsAndrew Chubb About Phorm: Phorm is an innovative technology company specialising in deliveringbehaviourally and contextually targeted advertising while preserving users'personal privacy and security. Phorm's partners include leading Internet Service Providers (ISPs), Publishers,Ad Networks and Advertisers. Phorm is a Delaware, US incorporated company, with offices in New York andLondon. The Company was admitted to the AIM market of the London Stock Exchangein 2004 and has over 100 employees. For more information, please visit: www.phorm.com This information is provided by RNS The company news service from the London Stock Exchange