Posted: 14/04/2005

Press Releases

Preliminary Results for the year ended 31st December 2004

Chairman’s statement

Results

In the year to 31 December 2004, the fifth year of our development,
the company achieved sales of £76,788, compared with £40,471 in the previous year. We doubledour expenditure on our sales and marketing activities as our innovative products become ready for full commercial exploitation. This resulted in an increase in the companys loss to £614,127 compared with £476,843 in the previous year. Expenditure on sales and marketing increased from £92,856 to £185,820 in 2004.
Consistent with previous years the company continued its prudent management of resources, and has maintained a strong balance sheet with £1.68 million of net current assets and liquid resources of £1.61 million.

Strategy

Following an in depth and detailed review of strategy, the Board has
focused the development and sales and marketing activities upon four key market sectors for video:

1. Professional post production
2. Consumer (i.e. in-home) editing and publishing
3. Mobile phone applications
4. Intruder and fire security

Each of the sectors utilises a number of the leading-edge technological developments that the company has made over the past five years. These technologies enable Forbidden to offer superior performing, easy to use products in very large market sectors.

Marketplace

Since its early days, Forbidden has been creating, developing and refining technologies in anticipation of the emergence of markets dependent on widespread availability of such vehicles as higher speed computers, extensive coverage of the UK by broadband connections and mass take-up of 2½G and 3G mobile phones. In 2005, these are all becoming of sufficient scale to provide meaningful market opportunities for Forbidden to increase its penetration and exploitation.

Current Programme

1. Professional post productionThe response to our professional version of FORscene has been most encouraging. The company is now in the process of demonstration and negotiation with an exciting list of potential
   partners ranging from several BBC departments, GMTV, major production companies such as Mentorn, several post production facilities houses including NATS and a number of educational establishments. Potential partners have widely commented upon the potential cost saving advantage of FORscene, its simplicity in
   use and the attraction of ongoing developments and upgrades, which are automatically available at no
   effort to the user.
2. Consumer editing and publishingThe company believes that there is a major opportunity to create a new, young market using a simple version of FORscene for home use. This will enable shooters of home video to edit their own product easily and simply and then publish it to family, friends, work or school colleagues anywhere in the world on mobile phones or on web sites.
   Forbidden expects to soft-launch this product in the second half of the current year.
3. Mobile phonesThe application of Forbiddens technologies on mobile phones is attracting attention in conjunction with the FORlive product and the Viewtooth capability. The company is working to develop complete products with a range of potential partners in the UK and internationally. Potential partners range from a major pharmaceutical company, a Finnish TV broadcaster, an Italian
   multi-media company, a Canadian medical monitoring firm and the multi-media arm of a leading telecoms
   provider.
4. SecurityForbidden believes that the huge security market will develop from an audio-based market dependent upon bells and sirens to one where video will dominate and be used widely to monitor homes and business in order to prevent losses by fire and intruders.
   The company has developed a working prototype of such a product and has recently signed an agreement to licence it, for sales and marketing implementation, to an Internet based security
   company. In addition, Forbidden is in discussion with other potential partners in traffic and other surveillance areas. Beta testing of the security product is planned for the second half of 2005.

Board and staff

As we announced last year, our Finance Director Douglas Blaikie retires this year. I would like to thank him for his contribution over the last five years. During the year, we added another full time member to our technical team, and employed a Sales Manager with experience in the video editing market, who joined us at the beginning of 2005.

Prospects

As outlined above, the company has generated a wide level of serious interest in the strategic market sectors with the current product line-up.
Accepting that innovative technology products take time to gain large scale committed customers, each sector has significant sales and profit potential. The Board is increasingly confident that the past five years of technological innovation and development will lead to attractive returns to shareholders, as larger customers begin to adopt and expand their use of Forbidden Technologies portfolio of state-of-the-art solutions.

Chief Executive’s Review

Forbidden’s position

Forbidden Technologies stands on the shoulders of computer and technology giants. These giants power the advancing installed base of CPUs (Central Processing Units), memory, discs, displays and internet connectivity of today’s modern PCs and mobile phones. To lay the foundations of our visionary position in the new internet based video world, Forbidden Technologies had to understand and accurately predict multiple trends.
Predictions we made five years ago
Our long term product success relies on the successful outcome of predictions we made five years ago:
Java would become widely available. Even Microsoft has been unable to prevent the extremely high penetration of Java, on Windows PCs, Macs and Linux. Java enables anyone with a modern computer to access Forbidden’s software without installing any software.
Broadband would have high pene
tration. A dramatic improvement in price and speed has led to a surge in usage. This is a key development for Forbidden, whose products use the internet for video distribution.
Internet access would become unmetered. Customers don’t have to pay by the minute to be on the internet. When combined with broadband, this opens up the world of data rich internet applications.
The installed base of PCs would be increasingly high powered. Consumers continuing willingness to upgrade their computers at their own expense has accelerated Forbidden’s ability to deliver
impressive products to standard desktops.
Mobile phones would become high performance. Gone are the small black and white screens. Modern handsets have colour screens, faster CPUs, 2.5G/3G internet connectivity, and high memory. Devices which can run Forbidden’s software are becoming mainstream.
Customers. Customers can take time to adopt new technology, and this is what we planned for.
Accessibility
The key to Forbiddens product strategy is accessibility:

• simple things are simple to do;
• common things are quick to do;
• minimal training is needed to use the product; and
• the product is reliable.

Open a web page containing Forbidden format content, and our Java technology springs into action automatically. Simplicity itself. By the beginning of 2004, Forbidden’s powerful technology was already easily accessible to end users.
Forbidden spent 2004 creating our master tool to simplify content creation. FORscene combines our web and mobile publishing expertise with an intuitive, flexible and powerful
editing front end.
Anyone can access our complete editing and web/mobile publishing system from a PC, Mac or Linux computer through their web browser. There is no need to install hardware or software customers have access their FORscene accounts from any computer.

Market clarity

Forbidden’s new customers are helping us gain valuable insight. Our FORscene tools are well placed to tackle the professional video post production market, particularly in the areas of web/mobile publishing, client review, and off-line editing (which typically covers the bulk of editing time). FORscene‘s simplicity allows directors and executive producers direct access to the editing process from their own PCs. Forbidden is proving a valuable strategic alternative supplier in a market currently occupied by US players.

Exhibitions

Forbidden again stepped up the level of promotion during the year. The launch of FORscene at the International Broadcasting Convention (IBC) caused quite a stir. IBC also chose FORmobile
to distribute IBC Television News. This industry traditionally takes time to adopt new products, and Forbidden has been actively promoting FORscene to interested parties.

IFRS

Forbidden Technologies plc will have the option to adopt IFRS in the financial statements for periods starting on or after 1 January 2005. The Board has begun considering the differences between UK accounting standards and IFRS. We have initially identified accounting for share options and development costs as two areas which could impact on our financial statements.

Technology development

Last summer, we gave FORmobile users the ability to forward videos (and the FORmobile application itself) from phone to phone for free using Forbidden’s Viewtooth technology. This push technology
complements the pull technology of downloading video over the internet.
Just as FORscene unifies web and mobile publishing within an editing user interface, our next video compression technology, under development since September, will unify web, mobile and live compression under the FORscene banner.

Internet distribution

Forbiddens visionary policy of making FORscene run in a web page makes it ideally suited for internet distribution with electronic payment – and the mass market. See below for demonstration web pages:
http://www.forbidden.co.uk/demos/live/ shows live video from Forbiddens offices, http://forscene.net/guest/ lets you try out the latest version of FORscene for yourself.

Shareholder offer

Forbidden has benefited from shareholder feedback over the last year of FORscene development. We have increased the value of the shareholder offer this year to reflect the wider capabilities of FORscene and our increased capacity to serve it. This year, Forbiddens registered shareholders are being offered £1000.00 of free credits. Shareholders can now actively participate in our vision.