PHRM.L Regulatory News (PHRM)

30 September 2010

Phorm, Inc. ('Phorm' or 'the Company')

Interim results for the six month period ended 30 June 2010

Phorm (AIM: PHRM and PHRX), the web personalisation technology company, today announces its unaudited financial statements for the six months ended 30 June 2010.

Highlights:

Year to date 2010

·; Launch of Navegador in Brazil with Oi (announced on 26 March 2010)

·; Trial of Navegador in Brazil with Telefonica (announced on 22 September 2010)

·; Opening of Brazil office

·; Restructuring of operations: building the Brazilian team while reducing the size of the UK team

·; Delay in ramp up of Oi users, which has now recommenced following the announcement of Telefonica

·; Successful completion of test advertising campaigns in Brazil

·; Taking orders for commercial campaigns in Brazil

Kent Ertugrul, Chief Executive of Phorm, commented: "The launch of our services in Brazil with Oi, Telefonica and a group of leading publishers and advertisers marks the start of a new chapter for Phorm. We are extremely pleased with the initial results that we have had from our operations in Brazil and look forward to the generation of meaningful revenues in the coming months. We expect to resolve our funding position shortly and, consequently, we remain confident about the Company's future and our ability to deliver substantial shareholder value."

Enquiries:

Phorm, Inc:

Andy Croxson +44 20 7297 2326 (analysts and investors)

Alex Laity +44 7917 682293/+44 20 7297 2710 (press)

Citigate Dewe Rogerson +44 20 7638 9571

Simon Rigby

Justin Griffiths

Canaccord Adams Limited +44 20 7050 6500

(Nominated Adviser)

Mark Williams

Andrew Chubb

Evolution Securities Limited +44 20 7071 4300

(Joint Broker)

Stuart Andrews

Mirabaud Securities LLP +44 20 321 2508

(Joint Broker)

Rory Scott

Chairman and CEO's statement

Operating losses for the six month period ended 30 June 2010 were $15.7m (six month period ended 30 June 2009: $15.0m). During this period, the Company underwent further restructuring, building up its operations in Brazil while reducing the size of the UK office to reflect the focus of our current operations. Losses after taxation were $15.7m (2009: $15.0m). Loss per share was $0.91 (2009: $1.06).

During the first six months of the year, our monthly cash burn was approximately $2.3m (£1.5m) and despite growing operations in Brazil, we have recently reduced this monthly burn to $1.8m (£1.2m) by transferring a number of operational roles from the UK to Brazil.

During the first half of the year, we invoiced Oi $1.6m (Brazilian Real (R$) R$2.88m) in line with the terms of our contractual arrangements. We have successfully completed a number of test advertising campaigns and are currently taking orders for our first commercial advertising campaigns. The launch of our commercial advertising campaigns will result in the first payments from Oi against the amounts invoiced.

At 30 June 2010 our cash balance was $5.7m (£3.8m) (31 December 2009 - $19.7m) with no borrowings.

Strategy and business update

Progress in 2010 to date has seen us bring together all of the pieces which we believe are necessary to generate scaleable revenue.

·; Our strategy of explicitly opting in users helped us to establish a privacy standard beyond reproach while opt-in rates to date have significantly exceeded our commercial expectations in terms of user adoption numbers to date.

·; Telefonica joined Oi in beginning deployment of our technology in Brazil, putting us on track for providing the substantial user base required to run commercial advertising campaigns in the next few months.

·; We were joined in Brazil by a broad cross-section of leading websites which demonstrated acceptance not only of our advertising proposition but also of Navegador, the technology which enables the automated personalization of any participating website.

·; We have also been very pleased with the response of the advertising community in Brazil, both in terms of the quantity and quality of advertising campaigns lined up to be shown, as the user base grows.

At this point, we are very confident in our business model and look forward to demonstrating the commercial viability of the Open Internet Exchange.

We are also very actively exploring opportunities in markets outside of Brazil. In particular, we are pleased with our progress in Asia and expect to announce a number of developments over the next year as various opportunities come to fruition.

In our Annual Report released on 30 June 2010, we highlighted that we expected to need to raise funds in the near-term. A funding round of approximately £2m ($3m) was subsequently completed successfully on 7 July 2010 The executive management team has been working to secure further funding, whilst at the same time taking steps to reduce our cash burn. We expect to be in a position to update shareholders in the near future.

Kent Ertugrul

Interim Chairman and Chief Executive Officer

Unaudited consolidated income statement For the six months ended 30 June 2010

* Research and development includes a charge for share-based payment expense of $0.3m (six months ended 30 June 2009: $0.4m, year ended 31 December 2009: $0.7m).

** Sales and administrative expenses include a charge for share-based payment expense of $1.0m (six months ended 30 June 2009: $2.3m, year ended 31 December 2009: $2.7m).

Unaudited consolidated statement of comprehensive income For the six months ended 30 June 2010

Attributable to equity holders of the parent (16,649,536) (13,219,358) (28,883,859)

Unaudited consolidated statement of changes in equity

Six months ended 30 June 2010 (Unaudited)

Six months ended 30 June 2009 (Unaudited)

Unaudited consolidated statement of changes in equity (continued)

Year ended 31 December 2009 (Audited)

Unaudited consolidated balance sheet as at 30 June 2010

Unaudited consolidated cash flow statement for the six months ended 30 June 2010

Notes to the interim financial statements (unaudited)

for the six months ended 30 June 2010

1. Basis of preparation

The annual consolidated financial statements of the Company are prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRS") as adopted by the European Union.

These interim financial statements include the results of operations, the financial position, the cash flow statement and the statement of changes in equity of Phorm, Inc. (the "Company") and its subsidiaries (together, "the Group") as at and for the six months ended 30 June 2010. The same accounting policies, presentation and methods of computation are followed in the interim financial statements as applied in the Group's latest annual audited financial statements.

The AIM rules do not require the interim financial statements to be prepared in compliance with IAS 34 "Interim Financial Reporting" and these interim financial statements have not been prepared under that standard.

These interim financial statements have not been audited or reviewed by the Company's auditors.

The information for the year ended 31 December 2009 does not constitute a complete set of financial statements. A copy of the financial statements for that year are available on the Phorm web-site, www.Phorm.com. The auditors' report on those statements was not qualified, but did include reference to uncertainties which may cast significant doubt about the Group's ability to continue as a going concern, to which the auditors drew attention by way of an emphasis of matter without qualifying their opinion.

The financial statements have been prepared in US dollars. 

Going concern

For the six months ended 30 June 2010, the Group has reported cash outflows of $13.1 million, with a closing cash position at 30 June 2010 of $5.7 million. Continuing cash outflows were forecast in the Group's business plan, as set out in our 2009 Annual Report. The Group is forecasting revenues for FY10 sufficient to cover the operating costs in Brazil. These forecasts include a number of key assumptions which have been validated through our market trials but have yet to be confirmed at scale due to the early stage of the Group's commercial deployment. At the date of approval of these financial statements, the Group has yet to secure the additional funding requirements set out in the business plan, but is in discussions with a number of parties regarding funding. In preparing these financial statements, the Directors have assumed that sufficient further funding will be made available to the Group to enable it to execute its business plan and realise the forecast inflows following commercial launch and roll-out of its technology.

In common with similar businesses at this stage of their development, and in light of the Group's dependence on further financing being made available to it from its shareholders or other providers of finance, the Directors consider the combination of these circumstances represent a material uncertainty that may cast significant doubt upon the Group's ability to continue as a going concern.

Nevertheless, after making enquiries, and considering the uncertainties described above, the directors have a reasonable expectation that the Group will have access to adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the financial statements.

The financial statements do not reflect any adjustments that would be required if the Group were unable to secure such financing to enable the Group to achieve profitability and positive cash flow, such that the going concern basis of preparation ceased to be appropriate.

2. Loss per share

The calculation of the basic earnings per share and diluted earnings per share is based on the loss attributable to equity shareholders of $ 15,683,682 (31 December 2009: $ 29,652,385; 30 June 2009: $ 14,955,886) divided by the weighted average number of shares in issue during the period.

The weighted average number of shares used in the calculations is set out below:

3. Reconciliation of operating loss to net cash used in operating activities

4. Share-based payments

The Group issues equity-settled share-based payments to certain employees and consultants.

The cost of share-based compensation awards is recognised as an expense. Equity-settled share-based payments are measured at fair value, excluding the impact of non-market vesting conditions at the date of grant. The fair value determined at the date of grant is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.

For equity-settled share-based payments with market-based vesting conditions, the fair value is determined at the date of grant, having regard to the expected achievement of such performance conditions. Once determined, the expected achievement is not adjusted, even where the market-based vesting conditions are not subsequently met.

The charges arising under IFRS 2 included in the income statement are:

Employer's taxes on share options, principally comprising employer's National Insurance contributions in the UK, are calculated using the market value of the company's shares at the reporting date, and pro-rated over the vesting period of the options.

The (charge)/credit arising in respect of UK Employers National Insurance and US social security included in the income statement are:

5. Approval by the Board of Directors

The unaudited interim financial statements were approved by the Board and authorised for issue on 29 September 2010. The Directors do not propose to pay an interim dividend.

6. Copies of this statement will be posted on the Phorm website www.phorm.com and will be available from the Company's UK principal office at Liberty House, 222 Regent Street, London, W1B 5TR.