TIDMPHRM
RNS Number : 6891K
Phorm Corporation Limited
27 June 2014
27 June 2014
Phorm Corporation Limited
("Phorm" or the "Company")
Final Results for the Year Ended 31 December 2013
Phorm (AIM: PHRM), a leading internet personalisation technology
company, announces its audited final results for the year ended 31
December 2013. Copies of the Company's full Annual Report and
Financial Statements are being posted to shareholders today and
will also be made available to download from the Company's website
at www.phorm.com.
Highlights:
-- Total revenue of $279,750 (2012: $63,291)
-- Operating loss of $35.1 million (excluding share based
payment expense) (2012: $31.6 million)
-- Launched with 8 further ISPs globally, in addition to TTNET in Turkey
-- Significant increase in global user numbers to over 30 million daily unique users
-- Advertising performance remains strong
-- Pricing has increased by between 35% and 94%, depending on the product
-- Memorandum of Understanding signed with China Telecom, naming
Phorm as its preferred strategic partner for Online Advertising and
'Big Data' initiatives
-- Equity placings of $39.8 million (net $38.4 million) successfully completed
Turkey
-- Delay in commercialisation, primarily due to the re-design of
the invitation process following the release of the revised BTK
regulatory guidelines in December 2012
-- Significant recent increase in user numbers, from
approximately 1 million to more than 5 million
-- Advertising platform is now able to use both cookie-based and ISP data
-- Inventory available for opted-in users has increased to over
2 billion advertising requests per month
-- Commercial scale has now been achieved
-- Advertising revenue is growing rapidly which is expected to continue throughout 2014
Rest of World
-- Memorandum of Understanding signed with China Telecom, valid for three years
-- Phorm is now China Telecom's preferred strategic partner for
'Big Data' and Online Advertising
-- Agreement signed with national partner to accelerate the
roll-out of Phorm's technology in China
-- Integration with major advertising network in China providing
access to over 5 billion advertising requests per month for
opted-in users
-- Commercial launch with Chinese ISPs, initial paid-for test campaigns currently in progress
-- Operations have been scaled back in Brazil and Romania in
order to focus on markets with higher near term growth
potential
Finances
-- In 2013, the Company completed equity placings to raise, in
aggregate, $39.8 million (net $38.4 million), which enabled the
business to launch its commercial operations in Turkey and to
continue to develop opportunities in China and elsewhere
-- In March 2014, the Company completed a further equity placing
to raise $16.7 million (gross)
For further information please contact:
Phorm Corporation Limited
Andy Croxson (analysts and investors) +44 203 397 6001
UK Investors
Mirabaud Securities LLP (Broker) +44 20 7321 2508
Jason Woollard
Peter Krens
Strand Hanson Limited (Nominated Adviser) +44 20 7409 3494
James Harris
Matthew Chandler
James Dance
US Investors
Lippert/Heilshorn and Associates (Investor Relations) +1 212 838 3777
John Heilshorn
About Phorm
Phorm is a global personalisation 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 Internet Service
Provider ("ISP") partners to offer a new type of online advertising
platform and a free consumer internet content feature, ensuring
more relevant advertisements and personalised content for opted-in
users.
Phorm's advertising platform revolutionises current standards of
online privacy, fully protecting the identity of consumers. 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 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
Chairman and chief executive officer's statement
I am pleased to report upon the further progress made by the
Group during the financial year ended 31 December 2013 and on our
subsequent on-going activities to the date of this statement.
Operational performance
Historically, the major challenge facing Phorm has been to build
a large user base. We learned, during the course of last year, that
our technology worked. Across several dozen case studies in Turkey,
we were able to deliver highly effective advertising in the text
and display space. However, even though it was large enough to
prove the business model and demonstrate the power of the
technology, the scale at which we were able to operate remained too
small deliver significant revenues. In recent months the Company
has made dramatic progress in this regard. At the start of 2013,
the Company had just one commercially operational ISP partner, it
now has nine globally. The number of daily unique users in the same
period has grown from less than 2 million to over 30 million as the
Company previously announced on 27 March 2014. The very significant
increase in users gives Phorm great confidence that this scale will
translate into large revenues as a result of advertiser demand for
the product.
The cornerstone upon which scale in the business is being built
is advertising performance. The current text advertising market is
dominated by search engines, which have demonstrated a hitherto
unique ability to target advertising at the keyword level based
upon search terms entered by individual users. Phorm's system, the
Open Internet Exchange, is able to discern audience-buying intent
by anonymously understanding repeat keyword activity across
multiple pages. Of particular note is that despite Phorm's system
being able to address a specific audience without reference to
search, the propensity of users who click on our advertisements to
then go on to purchase or take some desired action has, in a large
number of cases, significantly exceeded their propensity to do so
on the same advertisement shown on a search engine. This has
created a situation where demand for our product exceeds supply by
a considerable margin. Compared to last year, our pricing has
increased between 35% and 94% depending on the product and a large
share of our advertisers have re-booked campaigns for the past six
months.
In Turkey, the ability of the business to generate large-scale
revenue has been held back by the relatively slow growth - until
recently - in the number of users. Low user numbers have meant
that, in many cases, Phorm has been unable to accept the full
campaign budgets available from advertisers who require specific
budgets and, hence, volumes to be consumed within a given
time-frame. The more tightly advertisers target specific
behaviours, the smaller the available volume of users who exhibit
those behaviours. With just over 1 million users, therefore, Phorm
lacked the user numbers and, hence, campaign volumes necessary to
consume large budgets. However, in the last month the number of
daily unique users has grown from just over 1 million to more than
5 million, as a result of supplementing ISP data, as appropriate,
with traditional cookie-based data. We are now working with our
advertising partners to increase campaign size and the prospects
for the business in Turkey look very good.
Outside Turkey, the growth in users has been even more
remarkable. Phorm is now commercially live with a further eight ISP
partners and well over 25 million users. Although the non-Turkish
users are now live and opted-in, the Company is still in the ramp
up process of building the publisher partnerships and commercial
advertising pipeline to address this audience. However, early
results in non-Turkish markets suggest that advertising performance
will meet or exceed that achieved in Turkey. In China, we expect to
achieve in excess of 50 million users opted in this year, the
Company previously announced on 27 March 2014 that it had reached
30 million daily unique users globally.
There are four main drivers of the business: users, publishers,
advertisers and advertisement performance.
1. Users
A user is defined as a unique ID which can be profiled for the
purpose of delivering targeted content and advertising. Over the
last six months user numbers have increased by a factor of over 15
and the strength of growth outside Turkey ensures that the ultimate
success of the Company has been substantially de-risked. Phorm
expects strong user growth to continue in 2014 as the Company
progressively signs up more ISPs in multiple markets.
2. Publishers
Over the past twelve months the Company significantly increased
the amount of inventory to which it had access. Integrating with ad
exchanges as well as advertising networks and direct publishers
provided access to over 900 million of advertising requests per day
at peak. This demonstrates the potential for large-scale revenues
as user numbers grow. The Company is continuing to integrate with a
wide variety of players in the eco-system and this has provided a
further substantial increase in the amount of inventory available
to the platform.
The Company, globally, now has access to over 18 billion
advertising requests per month across thousands of websites.
3. Advertisers
In 2013 the Company delivered both targeted display and targeted
text advertising. The response that the Company has received from
advertisers for both products has been excellent. The Company is
now working with all of the top five global advertising agencies,
through their local subsidiaries.
The key focus for the Company now is to deliver substantial
volume. While the growth of the global advertiser pipeline is still
at an early stage it is expected that substantial volume can now be
achieved as the result of the recent growth in users and inventory
in 2014. Bolstering the global sales effort through recruitment,
training and broad presentation to market players is now the
Company's main focus.
4. Performance
Phorm's advertising platform, the OIX, provides an unprecedented
level of targeting, on an anonymous basis. This has enabled
advertisers to address precisely the audiences that they are trying
to reach. The result has been very strong performance. The
effectiveness of the advertising is measured in post click and post
view conversions.
In many cases, the Company has been able to demonstrate that it
can deliver superior conversion performance in comparison to the
market leader across multiple advertising sectors. This is
particularly exciting as the optimisation of the system is still at
a relatively early stage. The conversion performance will under-pin
future growth as this is a key metric used by the advertisers.
Strategic partnerships
We were also pleased to announce a memorandum of understanding
with China Telecom. This MOU, which names us as a preferred
strategic partner for Online Advertising and Big Data initiatives,
is a reflection of the progress which we are making on the ground
in furthering ISP partnerships across numerous additional
provinces
The Company is continuing with its strategy of focusing on those
global markets that can deliver results quickly and the success of
this strategy can be seen by the growth in the key value drivers
over recent months.
Legal Action
The Company has, for several years now, been subject to a very
active campaign by a known group of individuals whose primary goal
has been to harm the business and its employees through the
dissemination of false information to partners and investors. These
individuals have also adopted tactics designed to harass and
intimidate the Company and its employees. Accordingly, we have
recently obtained an interim injunction against one of these
individuals, preventing him from continuing such activity against
me and other employees of Phorm. The Company intends to vigorously
defend its reputation and employees against such actions in the
future.
Funding and going concern
In 2013, the Company completed share placings of GBP25.2m, which
enabled the business to launch its commercial operations in Turkey
and to continue to develop opportunities in China and elsewhere.
However, the re-design of the invitation process led to a delay in
the commercialisation of the Turkish opportunity and, as a result,
further fund raising was required.
In March 2014, the Company announced that it had successfully
completed a placing of GBP10.0m in shares.
During the course of this year, we have begun to introduce
ourselves to US and Chinese capital markets. Response to our
progress has been strong as demonstrated by the participation of
several US investors in the GBP10 million raised in March 2014. We
expect this exposure to the US investor base to increase
significantly during the course of this year.
As a result of the extended delays involved in reaching the
current operational stage, the Company has seen a substantial
decrease in its stock price. It has nevertheless retained the
support of key shareholders who currently account for more than 60%
of the Company's shareholding.
The delays described above have meant that revenues have not
grown as rapidly as expected. The Company is very encouraged by the
progress made but, nevertheless, further funds will be required in
the near term. The business plan approved by the Directors
forecasts the need for this further funding and access to
sufficient working capital to allow the operating businesses to
reach full commercial scale. This is the principal risk to the
business at the current time.
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. However, given the success of the recent fund raising
activities and the operational progress that has been achieved, the
Directors are confident that this further funding will be achieved
as required. As at 31 May 2014, the Group held cash and cash
equivalents of $8.8m.
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 from operations in Turkey and elsewhere.
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.
Further information in respect of the directors' assessment of
going concern, including the material uncertainties identified, is
set out in Note 2 to the financial statements.
Financial report
Results for the year
Revenue generation in Turkey took significantly longer than
originally anticipated and was interrupted as a result of the
adjustments made to the invitation process in line with the new BTK
(Bilgi İleti im ve Teknolojileri Kurumu, the telecommunications
authority in Turkey) guidelines. However, following the regulatory
review, revenue billing restarted in June 2013. While the current
revenues, at this stage, remain small, key lead indicators such as
the number of pages enabled for advertising, as well as the number
and value of campaigns show strong positive trends. In addition,
the recent significant growth in user numbers has given the Company
considerable cause for optimism and it is very pleased with the
opt-in rate that it has for its invitations.
Total revenue of $279,750 was generated for the year ended 31
December 2013 (2012: $63,291). The Group expects revenue growth to
be driven by a combination of four key factors: users, publisher
inventory, advertising campaigns and targeting performance.
Operating losses for the year (before non-cash share-based
payment charges) were $35.1 million (2012: $31.6 million). The
non-cash share-based payment charges for the year were $10.7
million (2012: $26.1 million).
For the six months ended 30 June 2013, the Company reported an
operating loss (before non-cash share-based payment charges) of
$16.9 million; this compares to $18.2 million in the second half of
the year.
Losses after taxation were $46.6 million (2012: $58.1 million).
Loss per share was $0.16 (2012: $0.74).
The Group used $33.1 million (2012: $30.6 million) in funding
its operating activities.
Financial position
The Company's balance sheet at 31 December 2013 showed net
assets of $8.4 million (2012: net assets of $6.4 million) with cash
and cash equivalents of $9.7 million (2012: $5.9 million). The year
on year movement of $2.0 million is attributable to the loss for
the year of $46.6 million, foreign exchange losses on translation
of overseas subsidiaries of $0.3 million, offset by new share
subscriptions of $38.2 million and a share-based payment of $10.7
million.
Funding
In March 2013, the Company completed the placing of GBP3m
($4.6m) of Loan Notes with an initial annualised coupon of 20%
payable upon redemption. The funding was to take place in two
tranches with GBP1.5m ($2.3m) being made immediately available to
the Company as bridge financing.
In April 2013, the Company completed a placing of GBP5.2m
($8.0m) in shares and the issuance of a further GBP2.0m ($3.2m) in
convertible secured loan notes. The Company further announced in
May 2013 that it had redeemed the GBP1.5m ($2.3m) of convertible
loan notes issued in March 2013, cancelling all further
obligations.
In July 2013, the Company raised GBP10.0m ($15.6m) and
subsequently in November 2013 raised a further GBP10.0m ($16.2m)
through two share placings.
In March 2014, the Company announced that it had successfully
completed a placing of GBP10.0m ($16.7m) in shares.
The proceeds of the fund raising activities were used for
business expansion, capital expenditures, marketing and general
working capital for the business.
Kent Ertugrul
Chairman and Chief Executive Officer
26 June 2014
Phorm Corporation Limited
Consolidated statement of profit or loss
Year ended 31 December 2013
Year ended 31 December Year ended 31 December
2013 2012
---------------------------------------- ----------------------------------------
Before After Before After
share Share share share Share share
based based based based based based
payment payment payment payment payment payment
Note expense expense expense expense expense expense
$ $ $ $ $ $
Continuing
operations
Revenue 3 279,750 - 279,750 63,291 - 63,291
Cost of sales (4,066,477) - (4,066,477) (561,493) - (561,493)
Gross loss (3,786,727) - (3,786,727) (498,202) - (498,202)
Other operating
expenses -
research and
development (6,934,168) (1,481,076) (8,415,244) (6,547,655) (2,682,554) (9,230,209)
Administrative
expenses (24,427,137) (9,232,345) (33,659,482) (24,536,799) (23,415,318) (47,952,117)
Operating
loss (35,148,032) (10,713,421) (45,861,453) (31,582,656) (26,097,872) (57,680,528)
Investment
income 8 5,795 11,629
Financing
expense 9 (748,008) (406,177)
Loss before
tax (46,603,666) (58,075,076)
Income tax 10 - -
Loss for the
year 5 (46,603,666) (58,075,076)
Attributable
to equity
holders of
the Company (46,603,666) (58,075,076)
Basic and
diluted loss
per share
($) 11 (0.16) (0.74)
Consolidated statement of profit or loss and other comprehensive
income
Year ended 31 December 2013
Year ended Year ended
31 December 31 December
2013 2012
$ $
Loss for the year (46,603,666) (58,075,076)
Other comprehensive income
Items that may be reclassified
subsequently to profit or loss
Exchange (loss)/gain on translation
of foreign operations, net of
tax (317,902) 634,641
Total comprehensive loss for
the year (46,921,568) (57,440,435)
Attributable to equity holders
of the Company (46,921,568) (57,440,435)
Statements of financial position
31 December 2013
Group Company
--------------------------- -------------------------------
2013 2012 2013 2012
Note $ $ $ $
Assets
Non-current assets
Investment in subsidiary 13 - - 16,963,152 70,591,856
Plant and equipment 12 1,211,291 763,514 - -
Total non-current
assets 1,211,291 763,514 16,963,152 70,591,856
Current assets
Amounts due from
subsidiary undertakings 14 - - 36,925,520 -
Trade and other receivables 15 6,181,141 2,383,090 3,260,657 482,781
Cash and cash equivalents 16 9,662,828 5,877,075 413,393 -
Total current assets 15,843,969 8,260,165 40,599,570 482,781
Total assets 17,055,260 9,023,679 57,562,722 71,074,637
Current liabilities
Trade payables 20 (2,916,160) (632,405) (1,193,223) -
Other payables 21 (2,104,455) (2,021,716) (259,035) (518,073)
Provisions 22 (164,864) - (164,864) -
Amounts due to subsidiary
undertakings 27 - - (382,245) -
Total current liabilities (5,185,479) (2,654,121) (1,999,367) (518,073)
Non-current liabilities
Convertible loan
notes 23 (3,425,673) - (3,425,673) -
Total liabilities (8,611,152) (2,654,121) (5,425,040) (518,073)
Net assets 8,444,108 6,369,558 52,137,682 70,556,564
Equity
Share capital 17 277,744,986 239,507,089 195,140,258 156,902,361
Treasury shares 18 - - - -
Warrants 17 869,430 659,766 869,430 659,766
Translation reserve (13,507,218) (13,189,316) 4,621,646 1,536,343
(256,
Accumulated deficit 663,090) (220,607,981) (148,493,652) (88,541,906)
Total shareholders'
equity 8,444,108 6,369,558 52,137,682 70,556,564
Statements of changes in equity
Year ended 31 December 2013
Share Treasury Translation Accumulated
capital Warrants shares reserve deficit Total
Group $ $ $ $ $ $
At 1 January
2013 239,507,089 659,766 - (13,189,316) (220,607,981) 6,369,558
Total comprehensive
loss for
the year - - - (317,902) (46,603,666) (46,921,568)
Share-based
payment
charge (Note
19) - - - - 10,713,421 10,713,421
Issue of
new stock 38,237,897 122,351 - - - 38,360,248
Charge for
warrants - 87,313 - - - 87,313
Provision
for
unsettled
equity
(Note 22) - - - - (164,864) (164,864)
At 31 December
2013 277,744,986 869,430 - (13,507,218) (256,663,090) 8,444,108
Share Treasury Translation Accumulated
capital Warrants shares reserve deficit Total
Group $ $ $ $ $ $
At 1 January
2012 220,834,668 180,286 (341,837) (13,823,957) (188,630,777) 18,218,383
Total
comprehensive
loss for
the year - - - 634,641 (58,075,076) (57,440,435)
Share-based
payment
charge (Note
19) - - - - 26,097,872 26,097,872
Issue of
new stock 19,334,067 373,613 - - - 19,707,680
Cancellation
of stock - (128,301) - - (128,301)
Effects
of redomicile
(Note 1) (661,646) 234,168 341,837 - - (85,641)
At 31 December
2012 239,507,089 659,766 - (13,189,316) (220,607,981) 6,369,558
Share Translation Accumulated Total
capital Warrants reserve deficit equity
Company $ $ $ $ $
At 1 January
2013 156,902,361 659,766 1,536,343 (88,541,906) 70,556,564
Loss for the
year - - - (59,786,882) (59,786,882)
Other
comprehensive
income
for the year - - 3,085,303 - 3,085,303
Issue of new
stock 38,237,897 122,351 - - 38,360,248
Charge for
warrants - 87,313 - - 87,313
Provision for
unsettled
equity
(Note 22) - - - (164,864) (164,864)
Balance at 31
December 2013 195,140,258 869,430 4,621,646 (148,493,652) 52,137,682
Share Translation Accumulated Total
capital Warrants reserve deficit equity
Company $ $ $ $ $
At date of incorporation
- 7 August 2012 - - - - -
Loss for the
period - - (88,541,906) (88,541,906)
Other comprehensive
income for the
period - - 1,536,343 1,536,343
Total comprehensive
loss for the
period - - 1,536,343 (88,541,906) (87,005,563)
Issue of new
stock 156,902,361 - - - 156,902,361
Issue of Warrants - 659,766 - - 659,766
Balance at 31
December 2012 156,902,361 659,766 1,536,343 (88,541,906) 70,556,564
Statements of cash flows
Year ended 31 December 2013
Group Company
--------------------------- -----------------------------------
Period
from 7
August
2012 (incorporation
Year ended Year ended Year ended date)
31 December 31 December 31 December 31 December
2013 2012 2013 2012
$ $ $ $
Operating loss (45,861,453) (57,680,528) (59,086,764) (88,541,906)
Depreciation charges 1,157,272 668,625 - -
Loss/(gain) on disposal
of plant and equipment 2,453 (93,487) - -
Allowance for intercompany
receivables - - 9,619,249 8,697,200
Reversal of allowance
for intercompany receivables - - (8,697,200) -
Impairment of investment
in subsidiary - - 55,092,715 79,314,342
Impairment of plant and
equipment - 50,822 - -
Share-based payment expense 10,713,421 26,097,872 - -
Increase in trade and
other receivables (1,483,015) (616,014) (462,840) (159,774)
Increase in trade and
other payables 2,360,125 814,084 934,185 481,775
Increase in intercompany
payable - - 382,216 208,363
Net cash used in operating
activities (33,111,197) (30,758,626) (2,218,439) -
Investing activities
Interest received 5,795 11,629 - -
Repayment on settlement
of warrants - (160,860) - -
Proceeds on disposal
of plant and equipment - 142,882 - -
Purchase of plant and
equipment (1,598,054) (456,841) - -
Net cash used in investing
activities (1,592,259) (463,190) - -
Financing activities
Finance lease interest - -
paid - -
Repayment of obligations - -
under finance leases - -
Proceeds from issue of
ordinary shares 35,878,102 20,415,489 35,878,102 8,913,431
Increase in intercompany
loan receivable - - (38,342,707) (8,913,431)
Proceeds from issue of
secured convertible loan
notes 5,263,605 - 5,263,605 -
Secured convertible loan - -
note interest paid - -
Repayment of secured
convertible loan note (2,799,000) - (2,799,000) -
Net cash generated from
financing activities 38,342,707 20,415,489 - -
Net increase/(decrease)
in cash and cash equivalents 3,639,251 (10,806,327) (2,218,439) -
Cash and cash equivalents
brought forward 5,877,075 16,149,780 - -
Effect of foreign exchange
changes 146,502 533,622 2,631,832 -
Cash and cash equivalents
carried forward 9,662,828 5,877,075 413,393 -
Notes to the financial statements
Year ended 31 December 2013
Basis of preparation
The financial statements have been prepared in accordance with
the historical cost basis except as disclosed in the accounting
policies below, and are drawn up in accordance with the provisions
of the International Financial Reporting Standards ("IFRS"),
International Accounting Standards ("IAS") and Interpretations
issued by the International Accounting Standards Board
("Interpretations"), as adopted by the EU.
Adoption of new standards and interpretations
On 1 January 2013, the Group adopted all the new and revised
IFRS, IAS, Interpretations, as adopted by the EU that are relevant
to its operations and effective from that date. The adoption of
these new IFRS, IAS and Interpretations, as adopted by the EU does
not result in changes in the Group's accounting policies and has no
material effect on the amounts reported for the current and prior
years, except as mentioned below.
At the date of authorisation of these financial statements, the
following new standard and interpretation has been applied in these
financial statements
IFRS 13 Fair Value Measurement
The group has applied IFRS 13 for the first time in the current
year. IFRS 13 establishes a single source of
guidance for fair value measurements and disclosures about fair
value measurements. The scope of IFRS 13 is broad; the fair value
measurements requirements of IFRS 13 apply to both financial
instrument items and non-financial instrument items for which other
IFRSs require or permit fair value measurements and disclosures
about fair value measurements, except for share-based payment
transactions that are within the scope of IFRS 2 Share-based
Payment, leasing transactions that are within the scope of IAS 17
Leases, and measurements that have some similarities to fair value
but are not fair value (e.g. net realisable value for the purposes
of measuring inventories or value in use for impairment assessment
purposes).
IFRS 13 defines fair value as the price that would be received
to sell an asset or paid to transfer a liability in an orderly
transaction in the principal (or most advantageous) market at the
measurement date under current market conditions. Fair value under
IFRS 13 is an exit price regardless of whether that price is
directly observable or estimated using another valuation technique.
Also, IFRS 13 includes extensive disclosure requirements.
Going concern
In accordance with their responsibilities, the directors have
considered the appropriatness of the going concern basis, which has
been used in the preparation of these financial statements.
During the course of 2014, we have begun to introduce ourselves
to US and Chinese capital markets. Response to our progress has
been strong as demonstrated by the participation of several US
investors in the GBP10 million ($16.7m) raised in March 2014. We
expect this exposure to the US investor base to increase
significantly during the course of this year.
As a result of the extended delays involved in reaching the
current operational stage, the Company has seen a substantial
decrease in its stock price. It has nevertheless retained the
support of key shareholders who currently account for more than 60%
of the Company's shareholding.
The delays have meant that revenues have not grown as rapidly as
expected. The Company is very encouraged by the progress made but,
nevertheless, further funds will be required in the near term. The
business plan approved by the Directors forecasts the need for this
further funding and access to sufficient working capital to allow
the operating businesses to reach full commercial scale. This is
the principal risk to the business at the current time.
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. However, given the success of the recent fund raising
activities and the operational progress that has been achieved, the
Directors are confident that this further funding will be achieved
as required.
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 from operations in Turkey and elsewhere.
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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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