Interim Results, June 2001

Posted: 18/09/2001

Interim Results for the six months ended 30th June 2001

In the six months to the end of June 2001 the company has incurred
a loss of £87,386 (last year £92,909). This reflects the continuing cost consciousness and tight focus on development by the management. At the end of June we had a positive bank balance of £3,248,047. With this healthy cash position we can expand resources to commercialise our development with the confidence that we are financially secure.

The Market Place

Technology and telecoms stocks have been hit by a severely adverse
investment climate and Forbidden Technologies’ share price has
reflected this. However, unlike many companies who are suffering from the disappointing pace of development of broadband links, with narrowband still dominating the market beyond 2005, Forbidden Technologies stands to benefit significantly. Its products provide narrowband playback without the installation of a player and support large pictures at full frame rate and high resolutions. Thus our market opportunity and positioning becomes even more attractive.

As microprocessors continue to improve, mobile computing becomes more accessible. This creates market opportunities for Forbidden to introduce product for GPRS and 3G phones and PDAs (personal digital assistants). As with broadband, the well publicised problems surrounding the technical development of 3G is to Forbidden Technologies’ advantage. We are working on a native ARM version of our codec and expect to have a first demonstration available, on the popular Compaq iPAQ, in the near future. We are also working with the Symbian operating system on the new Nokia 9210 mobile phone and we are now one of the developer community for both Symbian and Nokia.

Technology Progress

Our first Forbidden codec (Mark I), concentrated on delivering full
frame rate and large pictures over modems on typical (500Mhz) PCs. We have continuously improved this product by reducing the data rate and improving the picture quality. This codec, targeted at “talking heads” videos is demonstrated on our website.

We are now in the exciting process of developing a new (Mark II)
codec using our valuable experiences of Mark I and the useful feedback from our shareholder participants. This entirely new codec will have higher picture quality, variable picture sizes and will support a much wider range of content. We expect our starting version to be available in a few months time. Our technology will be suitable for a large range of applications due to its superior reach, quality and the flexibility of the software that we are building. These features include:

• Usability across multiple devices
• Flexible delivery, e.g. built into web pages,
  pop-ups, and e-mails
• Automatic upgrades without requiring downloads
• Flexible picture sizes to support multiple devices
  and features such as banner ads

Strategic Development

We entered this year as a video compression technology
developer. In the following six months we have seen significant change in our business. We have increased our management resources, particularly with the appointment of Greg Hirst as our Business Development Director. Greg has led an extensive internal project which has mapped and prioritised the many market sector opportunities available to Forbidden. This has resulted in the identification of priority sectors upon which we will focus over the next period. The combination of our focus on narrowband, a multi-device approach and flexible delivery will make us more responsive to the changing growth opportunities in the market.

We now have a balance of effort between the continuous and rapid
development of our compression technology and the advancing
commercialisation process. We are increasingly in partnership with
prospective customers so that we can develop end-to-end video
communication solutions appropriate to each opportunity. We expect some of these opportunities to crystallise over the next few months, particularly following the demonstration of the new codec.

The Forbidden Website

I would commend you to visit and regularly revisit our website, where we have now established a news section. This will contain both public news announcements and market and company news. We plan to develop the website as a dynamic window on our business, with shareholders, customers and partners in mind.

Outlook

The timing of the launch of Forbidden Technologies last year is
proving ever more prescient. Timing in technology markets is important and as the “Wide World Waits” for a typical internet link to be available on broadband, the continuous advance of our technology will be providing ever more impressive video over existing narrowband connections. This means that we have an even bigger opportunity to fill the need that to date cannot be satisfied by broadband and given the technical difficulties and the need for significant infrastructure spend is unlikely to be met in the short term. As our commercial development begins to take shape we are confident of both financial stability and a bright future for the business.

Victor Steel
Chairman