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Due Diligence: You're Thinking of Investing in Phorm?

Phorm are presently (September 2015) seeking yet more funding for their parasitic industrial espionage/mass surveillance scam.

Ignoring the legal and technical concerns about Phorm for a moment, here are a few pertinent financial facts that you might wish to consider before investing in Phorm stock...

Present Financial Status

Phorm's attempts to deploy their mass surveillance/industrial espionage scam have failed in the UK, Romania, South Korea, Brazil, and Turkey. They have never published revenue figures for the remaining markets they currently claim to operate in.

Phorm's losses for the year 2012 were $58,000,000. In their annual results for 2012 they stated;

    "To date the Group has incurred cumulative losses of $220.6 million. The Group has funded these losses and its operations through equity provided by its shareholders".

In their 2014 final results, losses were reported as $47.8m. Estimating Phorm's cumulative losses since 2003 suggests that they have lost circa $400 million of the equity provided by shareholders.

Phorm are currently burning through cash at approximately $3.1m a month. In the 2014 results they claimed,

    "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 and is, therefore, not fully-funded at the current time... The Group's statement of financial position as at 31 December 2014 showed net liabilities of US$7.5 million (2013: net assets of US$8.4 million) with cash and cash equivalents of US$0.6 million (2013:US$9.7 million)."

If so, and despite further attempts to raise funds in the interim, their cash will be exhausted in September 2015.

The 2014 results include various notes on the question of 'Going Concern',

    "These conditions ... indicate the existence of a material uncertainty which may cash significant doubt about the Group's ability to continue as a going concern""

In the 2014 results, revenue for twelve months was quoted as just $351k (with cost of sales $5.7m, and losses of $47.8m).... despite claims of operations in UK, Romania, Turkey, South Korea, Brazil and China. To put that amount in context, Phorm can burn through their entire 12 months revenue in approximately 2 days.

The total dividend paid to shareholders in the period 2003-2015 has been nil.

Over the course of the last seven years, the number of shares issued has ballooned from 13,844,863 in March 2008, to 922,260,775 in 2015;

The share price has collapsed from £35.00 to £0.10 over the same period.

The dynamic chart below estimates Phorm's current financial status, by extrapolating data from Phorm's annual/interim results;

Phorm presently have approximately $10.6m in current liabilities to meet. Their principle asset is cash, which they are burning at approximately $3.1m/month. If so, Phorm are probably insolvent at the time of writing (September 2015).

In June 2012 Phorm claimed to have agreed £20m of funding from a Chinese investor. That funding failed to materialize, with Phorm retracing their steps in September 2012;  "we are unable at this time to provide definitive timelines".

As at 12 February 2014, Phorm's Delware subsidiary were listed as tax delinquent, owing approximately $60,000 to the Delaware Government.

Past Directors & AIM Admission

Kent Ertugrul was previously a director of a UK company called Hamburger Halt. Hamburger Halt was compulsorily liquidated in 1992. Kent Ertugrul neglected to mention that fact in the original Phorm AIM admission statement (now deleted) saying instead;

    "Pursuant to schedule 2 (g) of the AIM Rules, none of the Directors has: been a director of any company which, while he was a director or within 12 months after he ceased to be a director, had a receiver appointed or went into compulsory liquidation, creditors voluntary liquidation, administration or company voluntary arrangement, or made any composition or arrangement with its creditors generally or with any class of its creditors;".

Ertugrul was eventually fired, with a generous severance package, in 2015.

Norman Lamont was also a director of Phorm, resigning in February 2015. He was formerly a director of Pantin Hotels, Balli Group, and Galileo Innovation.

Lamont similarly neglected to acknowledge the collapse of Pantin Hotels in the Phorm AIM admission statement, resulting in this correction (now, also deleted);

    Lord Lamont was, until 30 March 2009, a director of Pantin Hotels (Management) Limited, a private company incorporated in the UK, subsequently renamed Hallco 1063 Limited ("Hallco") on 7 May 2009. Hallco entered into a creditors’ voluntary liquidation on 24 July 2009 with an estimated total deficit as regards creditors on that date of £116,438. Hallco was dissolved on 14 January 2011.

In 2010 Balli Group were subjected to a record penalty by the US DoJ for illegally exporting airliners to Iran.

    The $2 million fine, combined with a related $15 million civil settlement among Balli Group PLC, Balli Aviation Ltd., the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), and the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), that was also announced today, represents one of the largest fines for an export violation in BIS history.

When the group failed to pay the fine, the Judge accelerated the penalty payments, and described the conduct of directors as 'egregious'.

    "[Balli] failed in my judgment to arrange its business and financial affairs in such a manner as to ensure compliance with its civil penalty payment obligations – obligations that were imposed, moreover, as a result of Balli’s egregious conduct that violated U.S. export control laws and provided support to Iran and its proliferation efforts."

Galileo Innovation was dissolved after the company failed to file accounts and liquidators were called in.

 

Please. Don't invest in Phorm.

 

Protect your right to privacy, security, and integrity in personal and commercial data communications. Stop Phorm.