Issue of convertible secured loan notes

Phorm, Inc.

Investment Round

17 December 2010

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE

UNITED STATES, CANADA, JAPAN OR AUSTRALIA

Phorm, Inc.

('Phorm' or the 'Company')

Placing of £6,075,000 convertible secured loan notes

Phorm (AIM: PHRM and PHRX), the internet personalisation technology company, is pleased to announce that it has raised funds through a placing (the "Placing") of convertible secured loan notes (the "Loan Notes") with new and existing investors.

The key terms of the Loan Notes are:

·; Gross proceeds of £6.075 million.

·; Annualised coupon rate of 15% compounded annually, payable upon redemption.

·; Repayable five years from issue.

·; The Company may elect to repay the Loan Notes at any time after issue, in which case the holders of the Loan Notes shall be entitled to a redemption premium (in the form of the issue of new shares of Common Stock of no par value in the Company ("Common Stock")) as follows:

o 200,000 new shares of Common Stock for every £1,000,000 (or pro-rata to the actual amount repaid) of the principal sum repaid from date of issue to the third anniversary of the Loan Notes, together with certain rights to ensure the minimum total internal rate of return is:

§ 100% should full redemption occur on or before the first anniversary of the Loan Notes (the Company's share price would need to be £4.25 or above at/for 5 business days immediately prior to redemption of the Loan Notes for these additional rights not to be triggered);

§ 85% should full redemption of the Loan Notes occur after the first anniversary but on or before the second anniversary (the Company's share price would need to be £10.50 or above at/for 5 business days immediately prior to redemption of the Loan Notes for these additional rights not to be triggered); and

§ 60% should full redemption occur after the second anniversary but on or before the third anniversary the Company's share price would need to be £12.88 or above at/for 5 business days immediately prior to redemption of the Loan Notes for these additional rights not to be triggered;

o 250,000 new shares of Common Stock for every £1,000,000 (or pro-rata to the actual amount repaid) of the principal sum repaid from the day following the third anniversary of the Loan Notes ending on the fourth anniversary of the Loan Notes, together with certain rights to ensure the minimum total internal rate of return is 50% should full redemption occur after the third anniversary but on or before the fifth anniversary (the Company's share price would need to be £13.25 or above at/for 5 business days immediately prior to redemption of the Loan Notes for these additional rights not to be triggered); and

o 300,000 new shares of Common Stock for every £1,000,000 (or pro-rata to the actual amount repaid) of the principal sum repaid from the day following the fourth anniversary of the Loan Notes ending on the fifth anniversary of the Loan Notes, together with certain rights to ensure the minimum total internal rate of return is 50% should full redemption occur after the fourth anniversary but on or before the fifth anniversary (the Company's share price would need to be £18.61 or above at/for 5 business days immediately prior to redemption of the Loan Notes for these additional rights not to be triggered).

o If, the Company elects to redeem the Loan Notes notwithstanding that the Company's share price is not at the levels envisaged by the redemption premium mechanisms set out above, the redemption premium must be paid in full and the Company may elect to pay the holder the same in cash or in shares.

·; The holders of the Loan Notes may elect to convert all or part of Loan Notes (both the principal sum and any accrued interest) into Common Stock of the Company, either:

o in relation to one holder (holding £2 million), from any time after the first anniversary of the issuance of the Loan Notes at a 20% premium to the average closing market price of the Common Stock of the Company for the 10 trading days immediately preceding the day of conversion; or

o in relation to all other holders (holding the balance), from any time after the third anniversary of the issuance of the Loan Notes at a 20% premium to the average closing market price of the Common Stock of the Company for the 10 trading days immediately preceding the day of conversion..

·; The Loan Notes are secured against the non-cash assets and intellectual property of the Company.

Phorm intends to use the net proceeds of the Loan Notes to continue the implementation of its service in Brazil and other future markets, and for general working capital purposes, as the Company continues its discussions with ISPs internationally.

The funds raised include a significant portion from investors based in some of Phorm's key strategic target markets in Asia. Blackrock Investment Management (UK) Limited ("Blackrock") is investing £1.2 million in cash in the Placing on the same terms and conditions (save for the single holder with the early conversion rights set out above) as the other investors. Solely by virtue of its existing shareholding in the Company of 13.2%, Blackrock's Loan Note investment constitutes a related party transaction for the purposes of Rule 13 of the AIM Rules for Companies. In light of the above, the directors of Phorm consider, having consulted with Canaccord Genuity Limited (the Company's nominated advisor), that the terms of Blackrock's participation in the Placing are fair and reasonable insofar as the Company's shareholders are concerned.

As part of its ongoing funding strategy, seeking to minimise dilution for existing shareholders, the Company is also in advanced discussions with respect to a further placing using a similar convertible instrument as well as making good progress in relation to raising funds at the subsidiary level.

Following the launch of Phorm's Navegador service in Brazil with Oi and the subsequent trial of Navegador by Telefonica, the Company is pleased to report that the launch and trial are progressing well. Scaling of user numbers is accelerating and the Company continues to receive encouraging interest from publishers and advertisers. The user base is now of sufficient scale to allow advertising to be shown on a commercial basis and the Company is currently running a number of campaigns and intends to update the market on progress as appropriate.

Kent Ertugrul, CEO of Phorm said: "These Loan Notes provide Phorm with the working capital it needs to progress to full-scale commercial launch in Brazil. We are very pleased to have come up with a structure that allows investors appropriate rewards but also protects existing shareholders from unnecessarily high levels of dilution. We now intend to pursue the financial and operational strategies outlined in our interim results statement ."

Enquiries:

Phorm, Inc.

Andy Croxson (analysts & investors) +44 20 7297 2326

Alex Laity (media) +44 20 7297 2710

Canaccord Genuity Limited +44 20 7050 6500

(Nominated Advisor)

Mark Williams

Andrew Chubb

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 partners include leading ISPs, Publishers, Ad Networks and Advertisers.

Phorm is a Delaware, US incorporated company, with offices in Seoul, Moscow, Sao Paulo and London. The Company was admitted to the AIM market of the London Stock Exchange in 2004 and has over 150 employees and direct contractors. For more information, please visit: www.phorm.com