Final results for the year to 31 December 2010

Forbidden Technologies, the owner and developer of the FORscene Cloud video platform, is pleased to announce its Final Results for the twelve months to 31 December 2010.

Financial Highlights

  • Sales increase of 33% to £372,139 (2009: £279,826)
  • Placing completed with number of institutions of 4,847,000 new shares at a price of 33p per share providing £1,600,000 to the Company
  • £1,000,000 of cash and cash equivalents at 31 December 2010
  • Strengthened balance sheet, directors loan repaid
  • Net assets of £1,706,726 and a debt free situation
  • Net losses of £129,749 (2009: £56,679) as a result of increased administrative costs as the Company increases its R&D and marketing to extend awareness of its technology

Trading and Strategic Highlights

  • Encouraging growth in the usage of FORscenes video platform in the UK broadcast post-production and professional market. Sales to this segment in 2010 have more than doubled, indicating a growing recognition of the value of FORscene in providing a state of the art, cost-efficient platform for high quality video editing
  • The widespread interest focused on the concept of “Cloud Computing” across a wide spectrum of internet software solutions. Forbidden has designed and implemented Cloud based solutions since 2004, before the description “Cloud” was created. This early development has enabled the Company to stay ahead of others
  • The design excellence of FORscene has prompted global scale systems integrators to enter partnership agreements with Forbidden. They see potential for integrating FORscene into state of the art end to end solutions with major clients around the world. Two such agreements were concluded in the second half of 2010, a third added in early 2011 and others are currently under discussion
  • The introduction of tablet devices also represents a major opportunity for the Clesh consumer editing system to fulfil the emerging needs of tablet users to clip, edit and publish video to friends, family and wider audiences

Vic Steel, Chairman of Forbidden Technologies, commented:

"With an excellent technology, increased awareness and a growing number of strong partnerships, the building blocks are being solidly formed in three of our key strategic markets: Broadcast post-production, Professional web video and User generated video.

Throughout the 2010 year, Forbidden has been increasingly active at Conventions, seminars and relevant Associations, with the purpose of widening awareness and recognition of our name, products and technical excellence and reliability. The Company has recently increased its resources both in R&D and in market development and is now pursuing growth with vigour and confidence."

For further information please visit www.forbidden.co.uk or contact:

Forbidden Technologies plc
Stephen Streater, CEO
Tel: +44 (0)20 8879 7245

Brewin Dolphin
Neil Baldwin, Nominated Advisor
Tel: +44 (0)845 213 4726

Bishopsgate Communications
Duncan McCormick / Deepali Schneider / Natalie Quinn
Tel: +44 (0)20 7562 3350

Chairmans Statement

I am pleased to present the twelfth annual report to shareholders of Forbidden Technologies plc since its flotation on the AIM market of the London Stock Exchange in February 2000.

Income Statement and Statement of Financial Position

In the year to 31 December 2010 the company recorded sales of £372,139, compared to £279,826 in the previous year, an increase of 33%. In the year to 31 December 2010, administrative expenses at £516,529 were £175,337 higher than the £341,192 in the previous year, an increase of 51%. Consequently, the net loss for the year to 31 December 2010 was £129,749 compared to £56,679 in the previous year.

The main increases in administrative expenses were a result of increased expenditure in R&D and an increase in marketing expenditure where extra effort was put behind presence at conventions and the cost of Financial P.R., as the company seeks to extend awareness of its technology amongst relevant target audiences.

When evaluating long term relationships, potential partners tend to view the Balance Sheet as an important indicator of the stability of the Company. I am pleased to report that the Balance Sheet has been strengthened significantly during 2010. Throughout the middle of the year, one institution progressively exercised 2,060,000 share options at a price of 12p per share, providing cash to the Company of £247,000. In October 2010, Forbidden completed a placing with a number of institutions, of 4,847,000 new shares at a price of 33p per share providing £1,600,000 to the Company.

As a result of these activities, Forbidden repaid the directors loans of £785,000 and was able to record more than £1,000,000 of cash and cash equivalents at 31 December 2010, net assets of £1,706,726 and a debt free situation.

Strategy

The 2010 financial year has been characterised by four significant developments along Forbiddens strategic path:

1. Encouraging growth in the usage of FORscenes video platform in the UK broadcast post-production and professional market. Sales to this segment in 2010 have more than doubled, indicating a growing recognition of the value of FORscene in providing a state-of-the-art, cost efficient platform for high quality video-editing.

2. There is widespread interest focussed on the concept of “Cloud Computing” across a wide spectrum of internet software solutions. Forbidden has designed and implemented Cloud based solutions since 2004, before the description “Cloud” was created. This early development has enabled the Company to stay ahead of others with key differentiators such as:

  • Users having no need to back up material because it is automatically backed-up on one of three interconnected but geographically separated locations available to FORscene;
  • Scalability – each users machine actually adds to the total processing power as most of the processing is conducted on the user machine, not on a Forbidden server. This reduces cost dramatically compared to systems that process on a server and therefore require more and more servers as user numbers grow;
  • Forbidden systems can communicate with one another through the Cloud. This enables FORscene to be machine neutral and allows the editing of videos on many devices and publishing to others Cloud servers, such as Facebook. Thus a user can log on anywhere, anytime as long as there is access to a broadband connection.

3. The design excellence of FORscene has prompted global scale systems integrators to enter partnership agreements with Forbidden. They see potential for integrating FORscene into state of the art end to end solutions with major clients around the world. Although the arrangements take time to come to fruition, the potential scale is very attractive to the Company. Two such agreements were concluded in the second half of 2010, a third added in early 2011 and others are currently under discussion.

4. The introduction of tablet devices also represents a major opportunity for the Clesh consumer editing system to fulfil the emerging needs of tablet users to clip, edit and publish video to friends, family and wider audiences. With an intuitive, sophisticated “app” at a modest cost of £2.49, it is expected to provide a significant number of consumer users.

Awareness and Recognition

Throughout the 2010 year Forbidden has been increasingly active at Conventions, seminars and relevant Associations, with the purpose of widening awareness and recognition of our name, products and technical excellence and reliability. We achieved high visibility and interest at the two ma
in broadcast conventions in the world, NAB in the USA and IBC in Europe.

Stephen Streater and other executives have had speaking roles at BVE in the UK, at Streaming Media Europe conference, The Royal Television Society, Talkback THAMES and Cloud Camp. In addition, the Company is an active member of the Quoted Company Alliance and has taken part in the QCA meetings with senior members of the Treasury.

Outlook

With an excellent technology, increased awareness and a growing number of strong partnerships, the building blocks are being solidly formed in three of our key strategic markets:

  • Broadcast post-production,
  • Professional web video,
  • User generated video.

The Company has recently increased its resources both in R&D and in market development and is now pursuing growth with vigour and confidence.

Vic Steel
Chairman

Chief Executives Review

Background
Forbidden brings together two areas in the world economy which I find most exciting: video, and the Internet. Modern consumer electronics has put video creation, through low cost cameras and phones, within reach of the mass market. The Internet is the flip side of this content creation explosion, enabling global video distribution.

While attending Googles video Summit in November as an invited speaker, it became clear that the focus of new developments was on the distribution of video rather than its creation. Few seemed aware of the cost and complexity of video creation or addressed how the demand for new Internet content was to be met.

Forbiddens FORscene video platform, launched in 2004, is designed to fill this void. Many years after its release, its approach remains fresh and modern. The widespread recognition of the advantages of Cloud services has taken many years; the buzzword Cloud is one indication that the market is now ready for services like this.

Video post-production (the stages between shooting and distributing video) is particularly suited to Cloud services. Professionals often work as part of a production team or complex workflow; Cloud access enables efficient collaboration between workers and also between equipment. Consumers benefit from cross platform access to their material, as well as automatic back ups.

FORscenes technology has anticipated both the demand for Cloud services and the extension of the Cloud from desktops at work to encompass tablets and smartphones everywhere.

Resources
Forbiddens Board has ensured the Company is well financed, using its AIM quote to raise significant finance through the market. Organic year on year sales growth of over 30% has given us confidence to continue to invest in expansion.

Forbidden is a dynamic and robust company. Staff changes in 2010 included only one departure, three additions, and four others who varied their hours during the year. The net result is that by the year end we had employed three additional customer facing staff.

Forbiddens infrastructure revolves around its Cloud software, where development has been concentrated. Forbiddens four Cloud networks run on standard low cost hardware; the biggest, distributed over three sites, has now handled over 1,500,000 hours of professionally shot content.

Forbiddens ability to embrace third party resources, from the small scale of individual users smartphones to the large scale of our Systems Integrator partners, is a hallmark of the FORscene platform.

Forbidden concentrates the CPU requirements in the client – a “fat client” approach that enables scaleability at low cost. Forbiddens range of real time video editing codecs are even efficient enough to work on the new range of ARM CPUs dominating smartphones and tablets.

Products and Services
So what does the FORscene platform actually do? Its functions include:

  • Ingest – getting video, audio and stills into FORscene
  • Review – checking over content and adding comments where necessary
  • Log – adding metadata text to the video to simplify and speed up the editing process
  • Shot selection – choosing the good shots before craft editing
  • Assembly edit – Directors / Producers can order good shots prior to full editing
  • Rough cut – frame accurate editing allows the basic story to be told before finishing
  • Fine cut – finishing the edit; mostly used in FORscene for web distribution
  • Publish – up to 1080p HD; output usually sent via the Cloud for hosting on third party systems
  • Multi-user – helps teams making television series
  • Multi-platform – clients can run on Microsoft, Apple, Linux and Google Android

Forbidden considers that being able to allocate relevant advertising to video is key to its monetisation – and FORscenes metadata is a powerful tool here. At the time of writing, the search below gives me 1,040,000 results – including my four relevant holiday videos as the top search results: http://www.google.co.uk/search?client=safari&rls=en&q=juliette+sophie+trampoline.

This year, FORscenes capacity has again been increased markedly, both in video storage capacity and number of concurrent users supported. The more flexible ingest system, supporting more professional input formats, has opened up more opportunities. FORscene also supports more output formats. Other improvements include an evolutionarily better experience with the GUI and new APIs to support third party website integration.

Clesh, the consumer interface to the FORscene platform, has also benefited from the improvements to the platform. In November, Forbidden officially announced it would be releasing Clesh for Android tablets. This was released in February 2011, and has since been extended to work on Android smartphones.

Infrastructure landscape
Forbiddens technology sits on top of customers existing infrastructure.

Java is still an excellent platform for the desktop editing front end. It allows the FORscene review, logging and editing interfaces to run without installation or configuration, through corporate firewalls on typical locked down machines. Javas popularity amongst users seems undiminished.

Android is a good starting point for Forbiddens mobile ambitions, with its vibrant Market and millions of users. Its Java-like syntax and ARM powered installed base have allowed a rapid port of the Clesh GUI to a wide range of Android devices.

The FORscene Cloud platform is well placed for the growth in the tablet market. Tablets are portable and responsive, allowing efficient review and assembly editing.

In the professional world, editors back at base can immediately continue editing on desktops. For consumers, Cleshs cross-platform Cloud nature allows work to be switched from desktop to mobile in an instant.

Customer mix
Forbidden still has a notable lead in Broadcast. Six years after FORscenes launch, other companies are starting to incorporate Cloud elements into their post-production; but there is no system to rival FORscene for power and price.

In professional web, potential rivals are more dispersed, and Forbiddens full end-to-end post-production Cloud service has many advantages in an increasingly connected world.

Forbiddens more experimental consumer side is epitomised by our recent Android launch. While we tend to deal with consumers indirectly, a working showcase helps B-C companies understand the power of the system.

And of course, we welcome shareholders trying out the system for themselves, and contributing feedback to help Forbidden grow and prosper.

Stephen B Streater
Chief Executive