Interim Results

30 September 2013

Phorm Corporation Limited ("Phorm" or the "Company")

Phorm (AIM: PHRM) today announces its unaudited financial statements for the six months ended 30 June 2013.

Financial Overview

· Operating Losses $24.3m (2012: $30.7m)

· Losses after taxation $24.8m (2012: $30.9m)

· Loss per share was $0.18 (2012: $0.41)

· As at 31 Aug 2013, the Group held cash and cash equivalents of $9.0 million

· The average monthly cash burn for the last 3 months (Jun-Aug 2013) was $2.5m (average Jan-Jun 2012: $2.2m)

The financial loss narrowed in the first six months ended 30 June 2013 compared to the equivalent period in 2012. During this period the Company has focused on commercializing operations in Turkey and launching its business in China.

On 27 September 2013 the Company announced that it had made substantial progress in Turkey: users had increased by 100% from 28 June to 1.2 million active on a daily basis; advertising requests had increased from an average of 30 million per day to 40 million per day; and the number of advertising impressions served by the Company had grown by over 70% to 67 million by the end of August. The Company has also received some excellent feedback from its partners with respect to conversion rates, achieving rates of up to 40% in some recent campaigns.

In China, the Company is finalizing its operational launch preparations and will update the market on this progress shortly.

* Research and development includes a charge for share-based payment expense of $0.9m (6 months ended 30 June 2012: $1.6m, year ended 31 December 2012: $2.7m)

** Sales and administrative expenses includes a charge for share-based payment expense of $6.5m (6 months ended 30 June 2012: $14.3m, year ended 31 December 2012: $23.4m)

Six months ended 30 June 2013 (Unaudited)

Six months ended 30 June 2012 (Unaudited)

Year ended 31 December 2012 (Audited)

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 income statement, statement of comprehensive income, the statement of financial position, the statements of cash flows and the statement of changes in equity of Phorm Corporation Ltd (the "Company") and its subsidiaries (together, "the Group") as at and for the six months ended 30 June 2013. 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.

The information for the year ended 31 December 2012 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 auditor's 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

In accordance with their responsibilities, the directors have considered the appropriateness of the going concern basis, which has been used in the preparation of these financial statements. During 2012 and up to the date of approval of these financial statements, the Group has continued to progress in the development and deployment of its technology and services.

Significant progress has been made in Turkey where commercial results are demonstrating the potential of the platform. The Directors anticipate increasing revenue from Turkish operations.

Progress has also been made in China following the signature of commercial agreements with three major Chinese ISP partners in 2012. The Company has completed the deployment for its first ISP in China and is in the final stages of preparing for operational launch. The size of the potential user base made available through existing Chinese ISP partners and related prospective revenues give the Directors confidence in the ability of Chinese operations to generate revenue within 2013.

To date, the Group has incurred cumulative losses of $238.0 million. The Group has funded these losses and its operations through equity provided by its shareholders, including the equity issuance of $23.0 million, net of issue costs in April and July 2013, which was used to repay the Group's secured convertible loan notes and provide working capital for the Group.

The Directors have approved a business plan which forecasts continuing cash outflows in the near term. The Group has forecast growing revenues for FY13 and FY14. The forecast includes a number of key assumptions, which have been validated through our market trials but have yet to be confirmed at scale.

The principal risk with respect to achieving the results anticipated by the business model is the speed of roll-out of the service in each of its operational markets.

In the near term, as in previous years, the principal risk to the business is to ensure that the Group has sufficient working capital to allow the operating businesses to reach full commercial scale. At this scale, the Group's forecast shows that the business would be generating significant operating profits. The Group requires additional funding in the last quarter of 2013 to continue to meet its liabilities as they fall due and 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 additional markets.

In making this going concern assessment, the Directors have had regard to the following matters:

- the Group's track record of successful fund raising from shareholders and other investors, as evidenced in 2008, 2009, 2010, 2011, 2012 & 2013

- the potential to secure revenue commitments from new ISP partners;

- the potential opportunity to raise further finance in local markets; and

- the commercial progress being made internationally.

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 and, therefore, that it may be unable to realize its assets and discharge its liabilities in the normal course of business.

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 ceases to be appropriate.

Since the year end, there has been a material reduction in the net asset position of the Group as a result of continuing operating losses. As at 31 Aug 2013, the Group held cash and cash equivalents of $9.0 million.

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 $24,830,388 (31 December 2012: $ 58,075,076; 30 June 2012: $ 30,881,050) 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:

5. Dividend

The Directors do not propose to pay an interim dividend.

6. Other information

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 27 Mortimer Street, London, W1T 3JF.

-ends-

Contact

Phorm Corporation Limited

Andy Croxson (analysts & investors) +44 207 297 2067

UK Investors

Mirabaud Securities LLP +44 20 7321 2508 (Joint Broker)

Jason Woollard

Peter Krens

Liberum Capital +44 20 3100 2222 (Nominated Advisor and Joint Broker)

Chris Bowman

Richard Bootle

US Investors

Lippert Heilshorn and Associates +1 212 838 3777 (Investor Relations)

John Heilshorn

About Phorm

Phorm is a global personalization technology company that makes content and advertising more relevant to the consumer. Phorm's innovative platform preserves user privacy and delivers a more interesting online experience.

Phorm's industry leading technology enables its ISP partners to offer a new type of online advertising platform and a free consumer internet content feature, ensuring more relevant advertisements and personalized content for opted-in users.

Phorm's advertising platform revolutionizes current standards of online privacy, fully protecting the identity of consumers. Unlike virtually all other targeted advertising propositions, Phorm's solution is completely opt-in. Only those users consenting to the service are profiled and only ever on an anonymous basis.

Phorm's partners include leading Internet Service Providers (ISPs), Publishers, Advertising Networks and Advertisers.

Phorm, under a predecessor holding company, was admitted to the AIM market of the London Stock Exchange in 2004.

For more information, please visit: www.phorm.com