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

Phorm are presently (March 2014) seeking yet more funding for their parasitic scam in the USA.

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, and Brazil. They have never published revenue figures for the remaining markets they currently claim to operate in.

Phorm's losses for the year 2012 were $57,000,000. In their most recent 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 the annual results for 2012, the auditors also stated;

    "The group has incurred further losses during 2013, resulting in a substantial reduction in net assets and in the Group's cash position and further funding is required to enable the Group to continue to meet its liabilities as they fall due. The Group's business plan assumes cash inflows from revenue arising from the expansion of the Group's existing commercial deployment and from fund raising which is not yet secured at the date of our report. These conditions, along with other matters explained in Note 2 to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern"

In their unaudited 2013 interim results, further losses for the first six months of 2013 were reported as $24.8m. Estimating Phorm's cumulative losses between 2003-2014 suggests that they have lost over $300 million of the equity provided by shareholders.

In the same interim results, revenue for six months was quoted as just $28,545 (with cost of sales $541,464, and losses of $24.8m).... despite claims of operations in UK, Romania, Turkey, South Korea, Brazil and China. To put that amount in context, Phorm can burn through six months revenue in approximately six hours.

The total dividend paid to shareholders in the period 2003-2014 has been nil.

Over the course of the last five years or so, the number of shares issued has ballooned from 13,844,863 in March 2008, to 529,333,695 in March 2014. 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 $4m in current liabilities to meet, and circa $3.2m in loans to repay. Their principle asset is cash, which they are burning at approximately $3m/month. If so, Phorm are probably insolvent at the time of writing.

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.

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 Phorm AIM admission statement, 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;".

In April 2013, it was announced that Kent Ertugrul's role as Phorm CEO and Chairman, would be split;

    The Company has decided to split the role of Chairman and Chief Executive Officer. As such an independent Chairman will be appointed and a further announcement will be made shortly.

To date, no such independent appointment has been made, and Kent Erutgrul remains both CEO & Chairman.

Norman Lamont is also a director of Phorm, and 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 recent correction;

    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.