Preliminary results

Forbidden Technologies plc (AIM: FBT), the AIM-quoted owner and developer of the market leading cloud video platform, Forscene, announces its preliminary results for the year ended 31 December 2014.

Financial Highlights
— Gross sales of GBP689,222 (2013: GBP772,180)
— Loss of GBP3,625,513 (2013: GBP797,547)
— Liquid funds of GBP4,358,900 (GBP7,839,109)
— No debt

Operational Highlights
— Increased investment in the business to open growth opportunities
— Stronger management team
— Upgraded Forscene video platform
— Rationalised North American presence
— Video social network entered beta testing
— Development started on mass market video editor

Stephen Streater, Forbidden Technologies CEO, commented:

“The pace of change has accelerated. The conservative Broadcast market is being transformed by the march of IT in production; the revolution in web and mobile distribution has created new opportunities for Forscene in Sports; the mobile market is ripe for consumer video offerings; and the web-based editing market has moved beyond a specialist niche into a multi-million user market.

Forbidden’s technical agility has, with the new management team, been extended across the professional sales, marketing and consumer sides of the business. The investment in the platform over the years, including the record investment in 2014, makes this coming year an attractive challenge.”

Enquiries

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

Cenkos Securities plc (Nominated Adviser Tel: +44 (0)20 7397 8900
and Broker)
Bobbie Hilliam, Corporate Finance

Redleaf Communications (Financial PR) Tel: +44 (0)20 7382 4730
Rebecca Sanders-Hewett Email:forbidden@redleafpr.com
David Ison
Susie Hudson

About Forbidden Technologies plc

Forbidden Technologies plc (AIM: FBT, www.forbidden.co.uk) floated in February 2000.

The Company develops and markets the powerful cloud video platform, Forscene, which is used by broadcasters, in professional web video, in education and by consumers. Forscene is one of the world’s most advanced browser-based and mobile applications. The Company is also addressing mass market opportunities for its video technology.

Chairman’s Statement

In the year to 31st December 2014, the Company recorded sales of GBP689,222 (GBP772,180 in 2013) which represented a reduction of 11% year on year. Almost all of this reduction is accounted for by a single North American client.

Administrative expenses in the year to 31st December 2014 were a total of GBP4,205,087 compared to GBP1,491,403 in the previous year. The loss for the year of GBP3,625,513 compares to a loss of GBP797,547 in the previous year.

The Company is debt free and had cash and cash equivalent at 31st December 2014 of GBP4,358,900. The increase in costs and the increased loss were the result of three significant investments in the year each made with the intention of leading to increased growth in the years ahead.

The First Investment Area was focussed on the technology of the Company and consisted of developing a new, up-to-date and friendly user interface for the Forscene brand and a Media Asset Management system (MAM), designed to enable Forscene clients to manage production for themselves. To facilitate this development a significant increase in R&D resources was required, both in employees and a supplement of development contractors. Both the user interface and the MAM have been received with high acclaim by the editor and producer communities.

The Second Investment Area was for geographic expansion and consisted of the recruitment of an experienced and talented team in the United States and the incorporation of a USA subsidiary company. In a North American post-production market valued at ten times that of the UK, this was seen to be a significant opportunity, applying experience gained over 10 years in the UK. By December 2014, it was clear that exploitation of the opportunity was taking much longer than expected and that the cash risk to the business was too high to continue. In consequence, the management team in California was disbanded but the modest resources in Canada and the eastern US were maintained.

Post the year end the West Coast management team remain committed associates of the business and have now concluded a contract agreement with the Company to become resellers of Forscene on a revenue share basis under their new company Technicalogy.

The Third Investment Area was and continues to be the development of a unique and compelling video social network for consumers. During 2014 the Company appointed a senior and experienced leader for the commercial development of the consumer division of the Company. Aziz Musa rapidly created a concept, a brand-name (‘eva’) and a detailed product specification. With a high digital marketing dependency for success, Aziz was appointed as Marketing Director for all brand activities in November 2014. Consumer research into the eva plan is producing exciting results and the plan is to launch the new app in the near future.

New Commerical Strategy and Organisation Changes

Following the above investment activities in 2014 the Company has adopted changes in its strategy and organisation.

Strategically the focus of development is to:

a) broaden the appeal of our technology platform through our efforts across broadcast post-production;

b) increase our penetration in Sports to take advantage of the rapid changes taking place (where cloud-based technology is forecast to produce opportunities via multi-media publication of sports events);

c) focus our effort on opportunities to license our platform to major players in the post-production markets of the world in order to grow significantly our user base and to increase our global penetration;

d) achieve a significant consumer take-up of our video-sharing brand eva and to follow this with the launch of an income generating version to satisfy the needs of more demanding consumers and small professional businesses which require more choice of editing and publishing tools.

Organisation changes have been made as a consequence of these commercial strategy changes and the need to manage cash. The Company has reduced a layer of senior management through the departure of our business development director (Greg Hirst) to pursue other interests and the head of R&D (Matthew Balchin).

Stephen Streater has chosen to lead R&D directly and Jason Cowan steps into the role of Director, Business Development for professional products alongside Aziz Musa in his capacity as Marketing Director and Director, Consumer Products.

The Company is now managed by a close knit Executive Committee headed by Stephen Streater and consisting of Phil Madden (Finance), Jason Cowan (Business Development) and Aziz Musa (Marketing and Consumer Products). This Executive Committee reports to the Board monthly.

Cash Management

The changes above will produce a total reduction in annual costs across R&D, USA, business development and other administrative areas of GBP1,000,000 and will ensure a continued positive cash balance at the 2015 year end.

Forward Prospects

2015 will be measured by a combination of continuity in post-production UK, modest post-production achievement in North America, growth in Sports in Europe and North America, successful launch of the eva consumer video sharing brand and the introduction of the income generating second consumer brand.

Forscene continues to be well received as its Broadcast user base starts to broaden into Sports and Education. The new features released at the end of last year provide a solid foundation for growth in our professional markets, and the recent contract with IMG is an early sign of our growing acceptance in Sports, a major growth opportunity for Forbidden where Forscene’s exceptional cloud functionality is unrivalled.

As eva grows and our new consumer editor brand starts to generate income in a proven mass market, our prospects in both our original markets and the much wider global video market look set for significant expansion in adoption.

Vic Steel

Chairman

Chief Executive’s Review

Forbidden makes the leading professional cloud video post-production platform, Forscene. Incorporating our own technology, Forscene is used for making and distributing video for broadcast television, sports, education and consumer markets.

Forbidden’s technology has led for many years, but our ability to extend our audience has been limited by the conservative nature of our traditional broadcast market. Historically, a shortage of working capital restricted our ability to extend into new markets.

The fund raising of 2013 allowed us to restructure the platform, push in to the North American market and to set the scene for our first mass market consumer product, ‘eva’.

Investment

Forscene started 2014 well suited to carrying out a specific set of tasks within our traditional professional workflows in broadcast, sport and news. However, recognising an increasing demand emerging within the industry, we invested a considerable sum in the period to upgrade and evolve Forscene into a more complete video platform.

The lean working methodology of our small team worked well in delivering technological results.

With ambitious development targets for 2014, our former Head of R&D expanded the team. He also introduced professional development processes. However, the effectiveness of the much larger workforce did not scale in the expected way. In particular, the delivery timescales estimated within the new team proved inaccurate. Nevertheless, considerable progress was made.

Forscene administration

The first strategic product introduced in the year was a web interface combining Forscene’s platform tools. This comprised account management, control of ingest (bringing content into the platform), access to the video logging / editor software, media management, publishing and billing.

Forscene editor reskin

Forscene is moving up the value chain into editing. This has created the need for a creative-friendly look and feel with more of a focus on aesthetics. The second strategic achievement of the year was a major update to the Forscene editor look and feel.

eva

The third big advance – though this has taken longer to deliver than anticipated – is the development of eva, Forbidden’s new video social network. The new eva video social network, which makes use of the Forscene video platform, is now in beta test on the iPhone.

Brand Y

Work on our planned mid-range web-based editor is already in feasibility testing and UX design. We have a brand, the name of which will be released in due course. We expect this to provide a material income stream in 2016.

Commercial

Our main commercial objective of the year was to expand in North America. To this end, we created a presence on both the West Coast and the East Coast. The West Coast explored the potential for high value end users, while the East Coast adopted a more conservative approach mirroring our European strategy of selling to broadcast productions.

Reorganisation

The record investment highlighted the need for internal changes to reposition Forbidden for a market starting to embrace our Cloud vision.

Forbidden started a detailed research programme early in the year to investigate possibilities in the consumer arena. By May, we had a vibrant consumer brand and marketing operation.

In August, I took temporary charge of professional marketing, allowing our then Business Development Director to focus on sales. Marketing is key to success as we move beyond our traditional markets to the global stage.

In November, Aziz Musa, who was appointed to lead our consumer team earlier in the year, was appointed Director of Marketing. He quickly delivered new Forbidden and Forscene websites to match his team’s award nominated eva website and has now developed a modern digital marketing team.

Marketing metrics illustrate the improvements: the Forscene website has 297% more traffic than 2014; Google ranks us three times higher for our target keywords; web visitors engage 507% more than last year; and a 450% increase in recorded visitors to our BVE Show stand this year.

In January, Greg Hirst, Forbidden’s long standing Business Development Director, who had in the past helped bring us years of consecutive high percentage compound growth in turnover, moved on. Jason Cowan takes on his role as director of Business Development. Jason has extensive management experience and a broadcast background.

Since his appointment, Jason has ensured continuity with Field 59 and our other existing North American partners, as well as with our former West Coast operation. He is maintaining both our growth in partners and our sales in broadcast. Jason is experiencing increasing success in Sports, developing our relationship with deltatre and recently signing a deal with IMG, the world’s largest independent distributor of sports programming.

Following our surge in R&D investment last year, I now lead a more compact and focussed R&D team, whilst making full use of the systems successfully brought in by our erstwhile head of R&D.

A rationalised North American team is based in the East Coast, where Forscene is used for multiple productions. The leaders of our former West Coast team have set up their own Forscene reseller, which also provides US support for Forbidden and Forscene.

Product update

Following the December launch, Forscene had a major update for the BVE trade Show in February, and is set for another for the NAB Show later this month.

With the iPhone’s advantages in perfecting user experience, Forbidden has prioritised the release of eva on the platform. Integration of Forbidden’s libraries with iPhone has taken longer than was expected from experience of our Android apps.

eva has now started beta testing on iOS and is showing promise. We’re delighted with the progress the app is making and are confident it will provide a useful pipeline of users for Brand Y once released.

Conclusion

The pace of change has accelerated. The conservative Broadcast market is being transformed by the march of IT in production; the revolution in web and mobile distribution has created new opportunities for Forscene in Sports; the mobile market is ripe for consumer video offerings; and the web-based editing market has moved beyond a specialist niche into a multi-million user market.

Forbidden’s technical agility has, with the new management team, been extended across the professional sales, marketing and consumer sides of the business. The investment in the platform over the years, including the record investment in 2014, makes this coming year an attractive challenge.

SB Streater

Chief Executive

Consolidated statement of comprehensive income for year ended 31 December 2014

2014 2013
GBP GBP

CONTINUING OPERATIONS

Revenue 689,222 772,180

Cost of Sales (128,303) (105,078)
================================ ============ ============

GROSS PROFIT 560,919 667,102

Administrative expenses (4,205,087) (1,491,408)
================================ ============ ============

OPERATING LOSS (3,644,168) (824,306)

Finance costs – –

Investment income 18,655 21,528
================================ ============ ============

LOSS BEFORE INCOME TAX (3,625,513) (802,778)

Income Tax 33,650 5,231
================================ ============ ============

LOSS FOR THE YEAR (3,591,863) (797,547)

Other comprehensive income – –

TOTAL COMPREHENSIVE INCOME
FOR THE YEAR (3,591,863) (797,547)
================================ ============ ============

Earnings per share expressed
in pence per share:
Basic – continuing and total
operations (3.34p) (0.74p)
Fully diluted – continuing
and total operations (3.34p) (0.74p)
================================ ============ ============

Consolidated statement of financial position at 31 December 2014

2014 2013
GBP GBP
ASSETS
NON-CURRENT ASSETS

Other intangible assets 1,364,539 1,188,960

Property, plant and equipment 189,675 49,366

Investments – –
——————————- ———— ————

1,554,214 1,238,326
——————————- ———— ————

CURRENT ASSETS

Inventories 41,963 3,274

Trade and other receivables 293,878 330,637

Current tax assets 33,650 58,834

Short-term investment 2,000,000 2,000,000

Cash and bank balances 2,358,900 5,839,109
——————————- ———— ————

4,728,391 8,231,854
——————————- ———— ————

TOTAL ASSETS 6,282,605 9,470,180
=============================== ============ ============

EQUITY AND LIABILITES
CAPITAL AND RESERVES

Issued share capital 1,054,518 1,054,518

Share premium 13,317,572 13,317,572

Capital contribution reserve 125,000 125,000

Retained earnings (8,716,062) (5,206,105)
——————————- ———— ————

TOTAL EQUITY 5,781,028 9,290,985
——————————- ———— ————

LIABILITIES
NON-CURRENT LIABILITIES

Trade and other payables – –
——————————- ———— ————

CURRENT LIABILITIES

Trade and other payables 501,577 179,195
——————————- ———— ————

TOTAL LIABILITIES 501,577 179,195
——————————- ———— ————

TOTAL EQUITY AND LIABILITIES 6,282,605 9,470,180
=============================== ============ ============

The financial statements were approved by the Board of Directors on 1 April 2015 and were signed on its behalf by:

……………………………………. ……………………………………………………….

SB Streater – Director PJ Madden – Director

Consolidated statement of changes in equity for the year ended 31 December 2014

Capital
Issued share Retained Share contribution Total
capital earnings premium reserve equity
GBP GBP GBP GBP GBP

Balance at 1
January 2013 696,936 (4,505,365) 5,311,637 125,000 1,628,208

Changes in equity

Issue of share
capital (net
of expenses) 357,582 – 8,005,935 – 8,363,517

Share based
payment – 96,807 – – 96,807

Total comprehensive
income for the
year – (797,547) – – (797,547)
====================== ============= ============ =========== ============== ============

Balance at 31
December 2013 1,054,518 (5,206,105) 13,317,572 125,000 9,290,985
====================== ============= ============ =========== ============== ============

Changes in equity

Share based
payment – 81,906 – – 81,906

Total comprehensive
income for the
year – (3,591,863) – – (3,591,863)
====================== ============= ============ =========== ============== ============

Balance at 31
December 2014 1,054,518 (8,716,062) 13,317,572 125,000 5,781,028

Consolidated statement of cash flows

Notes 2014 2013
GBP GBP

Cash flows from operating activities

Cash used in operations A (2,657,616) (581,785)

Finance costs paid – –

Tax received 58,834 –
—————————————- ——- ———— ————

Net cash from operating activities (2,598,782) (581,785)
————————————————- ———— ————

Cash flows from investing activities

Payments for intangible fixed assets (573,371) (351,106)

Payments for property, plant and
equipment (326,711) (72,832)

Purchase of fixed term deposits – (2,000,000)

Interest received 18,655 21,528
————————————————- ———— ————

Net cash from investing activities (881,427) (2,402,410)
————————————————- ———— ————

Cash flows from financing activities

Share issue (net of expenses) – 8,363,517
————————————————- ———— ————

Net cash from financing activities – 8,363,517
————————————————- ———— ————

(Decrease)/Increase in cash and
cash equivalents (3,480,209) 5,379,322

Cash and cash equivalents at beginning
of year B 5,839,109 459,787
—————————————- ——- ———— ————

Cash and cash equivalents at end
of year B 2,358,900 5,839,109
======================================== ======= ============ ============

Notes to the Consolidated Statement of Cash Flows

A. RECONCILIATION OF LOSS BEFORE INCOME TAX TO CASH (USED IN)/GENERATED FROM OPERATIONS

Group
2014 2013
GBP GBP

Loss before income tax (3,625,513) (802,778)

Depreciation charges 152,283 36,648

Loss on disposal of fixed assets 34,119 –

Amortisation charges 397,792 116,002

Employee share option costs 81,906 96,807

Finance costs – –

Finance income (18,655) (21,528)
——————————————- ———— ———-

(2,978,068) (574,849)
—————————————— ———— ———-

Movements in working capital:

Decrease /(Increase) in trade and
other receivables 36,759 (125,520)

(Increase)/Decrease in inventories (38,689) 20,882

Increase/(Decrease) in trade and
other payables 322,382 97,702
——————————————- ———— ———-

Cash (used in)/generated from operations (2,657,616) (581,785)
=========================================== ============ ==========

B. CASH AND CASH EQUIVALENTS
The amounts disclosed in the Statement of Cash Flows in respect of cash and cash equivalents are in respect of these balance sheet amounts:

Group
Year ended 31 December 2014
31/12/14 1/1/14

Cash and cash equivalents 2,358,900 5,839,109
============================== ========== ==========

Year ended 31 December 2013
31/12/13 1/1/13
GBP GBP

Cash and cash equivalents 5,839,109 459,787
============================== ========== ==========