Final results for the year to 31 December 2011

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 2011.

Financial Highlights

  • Sales increase of 25% to £466,674 (2010: £372,139)
  • Gross profit increase of 29.5% to £417,769 (2010: £322,512)
  • Net assets of £2,044,349 and debt free
  • Loss per share of 0.22p, up from 0.16p the previous year
  • Net losses of £186,218 (2010: £129,749) as a result of the Companys policy of increasing investment in R&D, marketing and sales resources

Trading and Strategic Highlights

  • Forbidden had some major contract wins during the year, including:
    • licensing FORscene, its Cloud-based video editing platform, to YouTube and Ericsson; and
    • partnerships with AP ENPS in News and EVS in sport.

    These reflect Forbiddens increasing credibility in broadcast post-production and progress in more innovative areas including News and Sport, and the Web.

  • The launch of Clesh, the consumer version of FORscene, as an Android app has increased awareness of Forbiddens video platform outside its traditional broadcast market and has kick-started a revenue stream with significant potential.
  • On the technical side, the capacity of the FORscene Cloud architecture has increased markedly. FORscene design improvements and economies of scale mean the double-digit percentage increase in sales over 2011 actually cost less to serve.
  • The Company strategy continues to focus on the four primary sectors where its technology has the opportunity to play a major role in shaping new work flows and to be a significant force: Broadcast Post Production; News and Sports Innovation; The Social Media Consumer; Education.

Vic Steel, Chairman of Forbidden Technologies, commented:

"Over the past year, and in the first quarter of 2012, the Company has achieved increased recognition of its technical excellence among a diverse group of major companies across the world, including the appointment of Techtel as distributor in South East Asia and the licensing of Forbiddens video platform to YouTube announced in December 2011.

In 2012 Forbidden is continuing to focus on the growth sector opportunities described above and increasing its investment in relevant resources to support and enhance that growth."

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

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

N+1 Brewin
Aubrey Powell, Nominated Adviser
Derrick Lee, Corporate Finance
Tel: +44 (0)20 3201 3170

Bishopsgate Communications
Deepali Schneider / Lynne Goulding
Tel: +44 (0)20 7562 3350

CHAIRMANS STATEMENT

It gives me pleasure to present this, the thirteenth annual report to shareholders of Forbidden Technologies since its flotation on the AIM market of the London Stock Exchange in February 2000.

Statement of Comprehensive Income and Statement of Financial Position

In the year to 31st December 2011 the Company achieved sales of £466,674, an increase of 25.4% over the previous year. The cost of sales, at £48,905, remained almost the same as in the previous year (£49,627) resulting in an increase in gross profit of 29.5%, with a gross profit margin of 89%.

Administrative expenses in the year to 31st December 2011 were £674,841, an increase of 30.6% compared to £516,529 in the previous year. The increase results from the Companys policy of increasing investment in R&D, marketing and sales resources as customer product interest builds and creates more sales opportunities.

The loss for the year of £186,218 compares to a loss of £129,749 in the previous year.

The Company Balance Sheet remains strong with a positive cash balance and cash equivalents of £629,494 (2010 £1,023,611) and total assets of £2,044,349 compared to £1,859,713 at the close of 2010. The Company continues to be debt free.

Strategy

The Company strategy has been reviewed recently and continues to focus on the four primary sectors where our technology has the opportunity to play a major role in shaping new work flows and to be a significant force.

1. Broadcast Post Production

Growth in 2011 in this sector has been encouraging as more production companies and facilities houses adopt the FORscene video platform and begin to employ it across a wider range of available uses. For example, we have seen specific interest in:

  • use of editing functionality to support the creation of material for web sites related to individual productions;
  • use of the review functionality on the iPad platform;
  • use of the storage functionality for archiving purposes; and
  • integration of document storage and work management facilities into the user account.

This demonstrates the increasing awareness of FORscene as a corporate, rather than just a production, solution. The reputation of FORscene is growing with its increasing penetration, and we have seen the use of FORscene expand beyond its traditional Soho base to now include South Wales, the North of England including Salford, and Scotland. In future years a strong UK business will help to create international opportunities which offer longer term growth prospects.

Forbidden offers professional customers paid-for training. Realising that FORscene offers a wide array of advanced functionality which lies behind the basic utilities, the Company recently ran a free training day in Soho attended by some 60 professionals. The users were impressed that after the training session they could operate the system more easily and discovered that FORscene offers many more uses than they had realised. Further training days are planned in a variety of formats.

2. News and Sports Innovation

This sector, where immediacy and cost are of great importance, involves using the FORscene platform to develop new routes for the manipulation and delivery of video.

The increasing use of FORscene has led the Company to develop standard interfaces (APIs) to simplify integration into wider video infrastructures. Considerable interest in FORscene is emerging from a number of geographically diverse companies. The recent appointment of Techtel as distributor in South East Asia provides an increasing spread of prospective clients in both News and Sports, with the capability of increasing sales not only in 2012 but also in the following years. In addition, discussions with other potential partners in Europe and North America are underway.

3. The Social Media Consumer

The Company has marketed consumer-orientated forms of the platform for some time under the Clesh brand name, a consumer version of the browser-based interface. The launch of an Android version in Spring 2011 brought new visibility to the extent of video editing functionality available to consumers and has kick-started a revenue stream with significant potential. The product fits well with the increasing trends toward crowd-sourced, internet published news and with the increasing drive of social media sites to improve the quality of their video offerings.

4. Education

Whereas the education sector is not expected to be a major direct contributor to Company turnover and profits, it is important for increasing awareness of FORscene among the next generation of video editors and on-line entrepreneurs. The Company has a number of educational partners in both UK and USA and plans to expand involvement more widely in future years.

External Communications

In addition to regulatory announcements and pres
s releases, Forbidden has sought to keep investors informed with many announcements of progress, seminars and two investor shows: Master Investor 2011 and the Growth Company Investor Show 2011.

Much of the press seems to appreciate the work we are doing, with coverage almost universally supportive. In addition to the traditional City and Broadcast web sites many consumer-facing web sites are commenting on our Android consumer application. The acceptance of Cloud Workflows has also led to wide-ranging coverage in the UK trade press and increasing mentions in the UK national press.

The Company feels that, with its growth and increasing band of top global clients, it is becoming more attractive as an investment proposition. This is reflected by the multiple share purchases undertaken by directors. All five board members bought shares in 2011, and share option exercises by directors, institutions and others brought new cash into the Company during the year.

Outlook

Over the past year, and in the first quarter of 2012, the Company has achieved increased recognition of its technical excellence among a diverse group of major companies across the world, including the appointment of Techtel as distributor in South East Asia and the licensing of Forbiddens video platform to YouTube announced in December 2011.

With increasing confidence in the pace of growth, Forbidden has recently recruited both a Digital Marketing Manager and a Producer/Director (for corporate video, training video and website video production).

In 2012 Forbidden is continuing to focus on the growth sector opportunities described above and increasing its investment in relevant resources to support and enhance that growth.

Vic Steel
Chairman

CHIEF EXECUTIVES REVIEW

Introduction

FORscene is Forbiddens Cloud video platform. Customers use it to make videos to a professional standard for TV broadcast or web delivery. Most professionals access FORscene via a web browser.

The FORscene platform incorporates Clesh, Forbiddens consumer targeted Cloud video editing software, available from http://clesh.com/about. Consumers can use Clesh via a web browser or an Android app.

FORscene is a market leading platform in Cloud-based video post-production, having handled over 2,000,000 hours of professionally shot content to date.

FORscene Cloud architecture

Googles infrastructure is estimated to include a million servers and end users depend on this computing power. But the complexity of video demands that the client PC or mobile device shares the work. YouTube, for example, uses client computers to decode and display the video.

In video editing, the CPU demands are higher than for video playback. During editing, multiple tracks of video, audio, graphics and titles must be combined in real time and displayed at a moments notice.

FORscene achieves scale, but without a vast server infrastructure. The efficiency stems from the ability of the technology to hand over almost all the server work to client hardware – at no cost to Forbidden. A key element of this is the tight integration between the editing software and Forbiddens Blackbird video codec (compression and decompression component), which was designed specifically for video editing over the internet.

Forbidden works continuously to increase the scale of the FORscene platform – while maintaining its low cost.

On the technical side, the speed of access to the underlying database – previously a limiting factor in terms of scaleability – was increased around 50 times during the year. Evidence from our existing Android user-base suggests that a single Cloud server could support 1,000,000 Android users once the mobile version of the professional FORscene Server is released.

FORscene design improvements and economies of scale meant the double-digit percentage increase in sales over 2011 actually cost less to serve.

The Company has also been scaling up commercially. Forbiddens trade shows and partnerships have led to traction in broadcast post-production and some valuable wins in more innovative areas including News and Sport, and the Web. Partners span North America, Europe, South and South East Asia. Increasingly, partners sell FORscene to their existing customers, and provide front line product support, freeing Forbidden to focus on development.

Whereas video editing systems as a whole have generally fallen in price, FORscene has demonstrated strong pricing power by maintaining its end user price for the eight year since its launch. This pricing power has been seen further in the areas of News and Sport, where the live aspects of FORscene are being priced at five times FORscenes traditional uses in broadcast.

Service upgrades have supported FORscenes pricing. Last year saw the first use of FORscene Multicam in a broadcast television series – supporting up to nine cameras at once is good for FORscene pricing, as the charge takes into account the amount of content. Simplifying integration with third party systems was another theme in 2011, as was support for more management-style features, including cross platform file sharing, improvements to commenting and Work Order Management System support.

Some of the largest multinationals have approached Forbidden. Last year we announced deals with Ericsson and YouTube, and partnerships with AP ENPS in News and EVS in sport. We have recently been approached on an exploratory basis by one of Japans largest consumer electronics manufacturers.

Forbidden has an active strategy of patenting its intellectual property, giving the Company a growing international patent portfolio in the area of Internet video.

Mobile and social media

Forbidden addresses the compelling business opportunities of mobile and social media through its consumer application, Clesh.

In 2011, Forbidden added publishing directly to YouTube to the FORscene platform. We have supported publishing to Facebook since 2010.

The launch of the Clesh app for Android in February 2011 has increased awareness of Forbiddens video platform utside its traditional broadcast market. Clesh gives unrivalled access to Cloud video editing on tablets and smartphones and serious editors can also have PC access via a Web browser. The Android version has also demonstrated Cleshs suitability for large scale OEM sales to consumer-facing companies.

There are now over 4,500 Android Clesh accounts, which also work on PCs. The app is seeing an increase in sales and also improving ratings on the Google Play store. There is no major technical hurdle to developing an IOS version, should Apple support it.

Android Clesh has allowed Forbidden to push the boundaries of its knowhow, developing both touch screen interfaces and software designed for the ARM architecture. Both these technologies look set to dominate consumer electronics for some time to come. The trends towards faster processors, better cameras and faster internet connections are all positive for a Cloud video editing app.

The FORscene platform provides a path leading professional clients into the mobile and social media worlds for making programmes, promoting them and distributing them.

Finishing on the platform

Consumers have been able to finish their videos on the FORscene platform for some time. The arrival of 1080p HD cameraphones has simplified the creation of good quality source material. FORscene and Clesh support publishing in HD, and with distribution through YouTube, provide end-to-end video creation, editing and distribution from a single app.

There has been an upsurge in demand from professional users to finish their videos in FORscene – instead of on old-style desktop systems. We have been adding new features, such as improved titling support, to make this possible.

F
orbidden believes finishing on FORscene is a major potential growth area.

Conclusion

Forbidden is well positioned to address major market opportunities. Our core technologies and Cloud services fit everywhere from consumer to professional, niche to mass market, low cost to high added value, long form broadcast to low latency news and sport, desktop to mobile.

It would take a much larger company than Forbidden to take advantage of every opportunity directly, but as a small growth company we are finding it easy to recruit partners to promote the FORscene platform in the markets they know best.

SB Streater
Chief Executive