Interim Results, June 2002

Interim Results for the six months ended 30th June 2002


In the six months to 30 June 2002 the Company had sales of
£5,350 (2001: £691) and incurred a loss of £147,906
(2001: £87,386). The increased loss was mainly due to lower
interest income (£40,671 less than the comparable period in
2001) and increased expenditure on commercial development
resources. Cash balances remain strong at £2,950,334.

The Market Place

Three key characteristics were evident in the market place during
the first six months of the year. Firstly broadband penetration and
adoption remained very low in comparison to narrowband. Secondly in mobile telecoms 3G continued to be delayed and is still a long way
from catching up with GPRS/2.5G and thirdly the pressures across the economy increased the level of risk-aversion in most companies,
slowing the rate of adoption of new technologies.

Product Progress

We have moved towards a product focus and this has eroded the
boundaries between our different Codecs. We have made significant progress in the development and refinement of our video compression technology in each of our target markets and through all of the key platforms.

For the advertising market on PCs via websites, we have developed a series of new features to meet the needs of advertisers and
viewers. We can now incorporate buttons, pre-load facilities and, with ad-server integration can count clicks and impressions, thus enabling accurate measurement of campaign reach. Our new suite of tools allows a much wider range of content to be accessible, and using our Java player we can reach the widest possible audience without any need for external ‘plug-in’ software.

One stunning development is our ability to provide full-screen,
high quality colour video on the new generation of hand held
computers/PDAs such as the XDA and iPAQ over existing mobile links. Our new Java mobile phone codec enables real-time compression with much higher picture quality. These developments will prove to be invaluable in helping us to establish our business in the corporate communications, entertainment and related markets.

Business Development

We continue to build the company. We are establishing deeper
relationships with our customers and have increased our internal
resources by adding to our software development team, staffing a
compression bureau function, and adding a further senior sales
manager. Although the results of the efforts are not yet visible from
outside the company they are important steps towards contracts with larger organisations.


There are signs that the market environment is beginning to improve and we have a high level of confidence that the firm foundations which we have built over the past two years are beginning to yield results. We look forward to an accelerating rate of growth in the months ahead and would encourage everyone to visit our website regularly in order to keep up to date with our progress and related news.

Victor Steel