Mon, 1st Feb 2016 15:49
1 February 2016
Phorm Corporation Limited
("Phorm" or the "Company")
Subscription Update, Short Term Loan Agreement, New Subscription and
Conversion of Existing Unsecured Term Loans
Phorm (AIM: PHRM), a leading advertising-technology company and first party data platform provider, announces that, further to its announcement of 18 January 2016 regarding a subscription to raise approximately US$1 million (gross) (the "Subscription"), the sole US based institutional subscriber (the "Subscriber") has to date failed to transfer the requisite funds to settle the transaction as required pursuant to the terms of a legally binding subscription agreement entered into between the Company and the Subscriber (the "Subscription Agreement").
The Subscriber has continued to provide assurances to the Company that it will honour the terms of the Subscription Agreement however, whilst productive dialogue continues between the Subscriber and Phorm, there can be no guarantee that the Subscription funds will be forthcoming and, accordingly, the Company is taking appropriate legal advice with respect to enforcing its rights under the terms of the Subscription Agreement. A further announcement(s) will be made as and when appropriate.
Due to the Company's short term liquidity requirements arising as a direct result of the delay in receiving the abovementioned Subscription funds, including the need to make payments due to certain creditors within the next week, and having obtained appropriate legal advice, in order to avoid the Company becoming insolvent and having to commence appropriate insolvency proceedings, such as administration or liquidation, the Company has today entered into an unsecured short term loan agreement with Meditor European Master Fund Limited ("Meditor") for the provision of a loan facility of up to US$2.75 million to be drawn down in three tranches, dependent on certain conditions being satisfied as set out below (the "Loan").
The Company has already served notice on Meditor in respect of the immediate unconditional draw down of the first tranche of the Loan amounting to US$250,000 ("Tranche 1"), whilst the second tranche, amounting to a further US$250,000 ("Tranche 2") will be provided on 4 February 2016, conditional on the Company completing the Loan Conversion (as defined and set out below) and raising not less than US$500,000 in equity with such funds to be received by no later than 3 February 2016.
In this regard, the Company is pleased to announce that it has received signed subscription agreements from FiveT Investment Management Limited ("FiveT") and Arminius Verwaltung AG ("Arminius"), committing to invest US$250,000 each before expenses, at a price of 1.2 pence per new ordinary share of nil par value each in the capital of the Company ("Ordinary Shares") (the "Second Subscription"), with such funds intended to be remitted to the Company by 3 February 2016, thereby enabling the drawdown of Tranche 2 of the Loan on 4 February 2016. A further announcement will be made by the Company when the aforementioned funds in respect of this Second Subscription are received. As part of the Second Subscription, FiveT and Arminius will be granted warrants ("Warrants") over 25 per cent. of the amount invested in the Second Subscription, with an exercise price of 1.5 pence per Ordinary Share, which will be valid for a period of five years.
In addition, further to its announcement of 28 July 2015, the Company announces that it has received notices from each of Mr Michael Bigger and Arminius, pursuant to their options, electing to receive repayment of the principal amount of their respective existing unsecured term loans in full, together with accrued interest thereon and the associated redemption fees, amounting to, in aggregate, US$165,330 and US$413,325 respectively, by way of the issue of 9,791,667 and 24,479,167 new Ordinary Shares to each of Mr Bigger and Arminius respectively, at a revised exercise price of 1.2 pence per Ordinary Share (together the "Loan Conversion"). A further announcement will be made by the Company in due course following due processing of the option notices and allotment of the new Ordinary Shares concerned.
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. In order to continue operating as a going concern thereafter and in order to satisfy a condition to draw down of the final US$2.25 million third tranche under the Loan ("Tranche 3"), the Board will be seeking to secure further equity funding of at least £2.5 million by 24 February 2016.
Principal Terms of the Loan
Meditor has agreed to provide Phorm with an unsecured term loan of, in aggregate, up to US$2,750,000 principal amount. In accordance with the terms of the Loan, Phorm shall pay interest on the Loan amounts drawn down at a rate of 6 per cent. per annum. The Loan, together with accrued interest thereon, is repayable 6 months from the date of execution of the loan agreement although such repayment date can be extended for a further 6 or 18 month period by mutual agreement between the parties. Upon repayment, Phorm is obliged to pay, at Meditor's sole election, either an additional (i) 15 per cent. of the Loan principal amount drawn down; or (ii) 3.75 per cent. of the market value of the Ordinary Shares in issue, calculated using the mid-market closing share price on the last trading day prior to the repayment date, as a redemption fee (the "Redemption Fee").
The Loan can be drawn down in up to three tranches, as follows:
· Tranche 1: US$250,000, for which a draw down notice has already been served, incurring an arrangement fee of 4 million new Ordinary Shares, to be issued to Meditor within one month of drawdown (or such later date as agreed between the parties);
· Tranche 2: US$250,000 to be drawn down on 4 February 2016, subject to the completion of the abovementioned Loan Conversion and the Company raising not less than US$500,000 in equity, at a price at or around the prevailing market price, by 3 February 2016. Meditor has advised the Company that the terms of the abovementioned Second Subscription and the Loan Conversion are sufficient to satisfy these conditions. Phorm will incur a further arrangement fee of 4 million new Ordinary Shares, to be issued to Meditor within one month of draw down (or such later date as agreed between the parties); and
· Tranche 3: US$2,250,000 to be drawn down on 24 February 2016, subject to the Company having drawn down on Tranche 2 and the Company raising a minimum of £2,500,000 via an equity raising, at a price at or around the then prevailing market price, by 24 February 2016. Meditor may waive such conditions at its sole discretion. This will incur a further arrangement fee of 30 million new Ordinary Shares, to be issued to Meditor within one month of draw down (or such later date as agreed between the parties).
In addition, Phorm has granted Meditor an option (the "Share Option") such that it can elect that repayment of the principal amount of the Loan, together with accrued interest thereon and the Redemption Fee, be satisfied, in full or in part, by way of the issue of new Ordinary Shares at a price which represents a 10 per cent. discount to the lower of (i) the lowest price at which any shares are issued by Phorm between the date of entering into the Loan agreement and the date of repayment and (ii) the Company's lowest closing share price in the preceding ten trading days ending one week before the date of repayment. The Loan (including any accrued interest thereon and the Redemption Fee) is capable of early repayment by the Company in full without penalty.
Allotment of the new Ordinary Shares in respect of the abovementioned share based arrangement fees and the Share Option, if exercised, is subject to the mandatory takeover provisions of the Singapore Takeover Code not being triggered or a waiver being obtained as appropriate. The Company has committed to use its best endeavours to seek appropriate waivers from the relevant Singaporean authorities for such share based payments described above, to the extent required. With respect to the arrangement fees, should applicable waivers not be granted by 29 April 2016, to the extent necessary, Phorm will be required to pay Meditor an equivalent cash amount calculated by reference to the average closing middle market price of an Ordinary Share for the five trading days immediately preceding the relevant payment deadline (the "Cash Equivalent Price"). With respect to the Share Option and the Redemption Fee, should applicable waivers not be granted, to the extent necessary, by the relevant repayment date, Phorm will be required to pay Meditor an equivalent cash amount, by reference to the Cash Equivalent Price.
Shareholders should note that, should the relevant waivers not be forthcoming, to the extent required, and payments are required to be made in cash, the Company may not have access to sufficient funds at the appropriate time to be able to continue operating as a going concern.
The Company intends to use the net proceeds from the Loan tranches drawn down and from the Second Subscription for its general working capital purposes.
Related Party Transactions
Meditor is currently interested in 233,556,251 Ordinary Shares, representing approximately 22.7 per cent. of the Company's issued ordinary share capital. In the event that Meditor was to convert in full its pre-existing holding of £0.975 million (approximately US$1.4 million) secured convertible loan notes, originally issued in April 2013 and formally extended in July 2015, its shareholding in the Company would increase to approximately 24.7 per cent.
Solely by virtue of Meditor currently being a substantial shareholder in the Company, entering into the Loan constitutes a related party transaction for the purposes of Rule 13 of the AIM Rules for Companies. Accordingly, the directors of Phorm consider, having consulted with Strand Hanson Limited, that the terms of the Loan are fair and reasonable insofar as the Company's shareholders are concerned.
In addition, pursuant to the abovementioned Second Subscription, FiveT, a company associated with Mr Johannes Minho Roth, a Non-Executive Director of the Company, is investing approximately US$0.25 million for 14,618,750 new Ordinary Shares. This additional investment will result in FiveT being interested, in aggregate, in 99,275,840 Ordinary Shares, representing approximately 9.7 per cent. of the Company's issued ordinary share capital.
Mr Roth is the founding director, Chief Executive Officer and majority shareholder of FiveT's parent company, FiveT Capital Holding AG. The participation of FiveT in the Second Subscription (including granting FiveT the Warrants) is therefore considered to be a related party transaction for the purposes of Rule 13 of the AIM Rules for Companies. Accordingly, the independent directors of Phorm (being Messrs Smith, Fenwick, Alkin and Jieyuan) consider, having consulted with Strand Hanson Limited, that the terms of FiveT's participation in the Second Subscription are fair and reasonable insofar as the Company's shareholders are concerned.
For further information please contact:
Phorm Corporation Limited
Timothy Smith (Chief Executive Officer) +44 (0) 20 3397 6001
Mirabaud Securities LLP (Broker) +44 (0) 20 7321 2508
Strand Hanson Limited (Nominated Adviser) +44 (0) 20 7409 3494
James Harris Matthew Chandler James Dance
Phorm is a leading advertising-technology and first party data platform provider that enables brands and publishers to address online users with personalised content and advertising. Phorm's innovative platform delivers a more interesting online experience for the user and addressable campaign results for marketers. For more information, please visit: www.phorm.com