Preliminary Results

Forbidden Technologies PLC
25 April 2006





Forbidden Technologies plc

Preliminary Results for the year ended 31 December 2005


Forbidden Technologies plc ('the company' or 'Forbidden'), through its
proprietary technologies, has developed and is marketing a range of Internet
video editing and sharing platforms for a wide range of market segments in the
wired and wireless world.


Chairman's Statement

In the year to 31 December 2005, the sixth year of our development, the company
recorded sales of £59,705 compared to £76,788 in the previous year.
Administrative expenses were £874,637 (2004: £787,563) and the loss for the year
was £725,379 (2004: loss of £614,127).

At the year end the balance sheet showed £957,369 of net current assets (2004:
£1.68 million) and liquid resources of £876,919 (2004: £1.61 million).

The lower sales level is a reflection of the change in our business model from
the licensing of individual copies of our compression software to organisations
putting video onto websites, to the delivery of logging and editing solutions to
television post production teams.

The increase in administrative expenses was almost entirely due to the
recruitment of new staff.

The balance sheet reflects the continuing tight control which is exercised over
all costs in the company.


Strategy

In the annual report for the year ended 31 December 2004 the board outlined a
revised strategy for the company and indicated key market sectors upon which
Forbidden would concentrate:


1.                   Professional post production
2.                   Consumer (i.e. in-home) editing and publishing
3.                   Intruder and fire security


To date these sectors have proven to be an appropriate selection. Mobile phone
applications which we previously identified separately are now an integral part
of each of our sector offerings. All three of these sectors are developed from
the same core platform; FORscene. All gain from improvements in our dynamic R &
D activities and our ability to enhance our products to meet our partners' and
customers' individual needs.

The pace of commercialisation in each sector has varied through the past year as
we have flexed our resource allocations to reflect the urgency and immediacy of
each opportunity; however, the chosen strategic sectors remain our focus going
forward.


Market place

As predicted, 2005 saw significant growth of the key technologies and their
market penetration in the UK which are critical to the expansion of our
business. Computers provided much increased storage capacity, broadband
connections accelerated at a remarkable rate to a level today in excess of 10
million homes and the typical broadband speed on new computers has gone from
512Kbps to around 2Mbps. Broadband costs have come down from an average of £20+
per month to the latest launch of free broadband 8Mb connection from Carphone
Warehouse. Picture quality on mobile phones has increased significantly. The
latest models can now capture video at near VHS quality.

All of these developments increase the potential sales revenues of the company's
products, since they are the pre-requisite conditions upon which our research
and development efforts have been based.


Current Activities


Professional post production

The continuing development and refinement of FORscene has been our top priority
over the past six months. It has absorbed a high proportion of our R & D effort
as interest and involvement of major broadcasters and partners has increased
month by month throughout the various pilots that have been taking place.
Individual customer needs have been identified and satisfied.

FORscene is a truly revolutionary product in the post production process of
programme creation and is described as 'disruptive technology' by experts in the
industry. In December 2005, Forbidden won the Royal Television Society award for
the best technology innovation in the post production process. The award
ceremony was videoed on one of the new generation mobile phones, uploaded over
the air into FORscene, edited and published for web and mobile delivery. It can
be seen on our website at http://www.forbidden.co.uk/videos/rts/ .

FORscene provides very high value by saving both significant time and money and
simplifying life for loggers, editors, producers and directors. More detail is
provided in the Chief Executive's Review in the next pages.

Post production costs can represent 25% or more of total programme costs, and,
as the hours shot increase for productions (partly driven by lower costs of
digital footage), so the attraction of significant savings offered by FORscene
increases. This is a world-wide market and is worth hundreds of millions of
pounds a year.

Another example of the power of the FORscene platform is its use by the British
Army to publish frequent videos recording an expedition to Mount Everest. The
videos can be downloaded onto mobile phones of interested parties and potential
army recruits as part of an Army recruitment drive.

FORscene will also be used by IBC TV News at the International Broadcasting
Convention in Amsterdam in September, providing a most appropriate exposure of
our mobile capability.


Consumer editing and publishing

Clesh is the consumer version of FORscene. You can sign up for Clesh at our
website at http://info.clesh.com .

The consumer use of video clips is soaring following the introduction of
internet video sites such as Google Video and YouTube, where consumers
contribute and share their video content.

A site such as YouTube in the USA has grown in 12 months to have 40 million
video clips per day viewed by its members, demonstrating the explosive potential
of the web as the primary medium for communication.

Clesh was introduced to the UK market in early 2006 through a promotion with
Tiscali, the internet and broadband company. Consumers now have access to a
free, basic account through the Clesh.com website.

Forbidden believes that Clesh has the three key constituents to be able to take
its place in this explosion:


a)   Simplicity and accessibility: go to the web page and Clesh is there
b)   It is cross-platform: it can be used on PC, mobile or video iPod
c)   The content is generated by the user and consumer: the more videos that
     people put into the system the more there is to view


During the next year the strategic imperative for Clesh is to build our customer
base by attracting large groups of consumers to share their videos across the
globe.


Intruder and fire security

In the latter stages of the year, management took the decision to focus
resources on the immediate opportunity for FORscene in the broadcast market
rather than an intruder and fire security product. However, the company intends
to use the FORscene platform to develop a competitive product in this large
market, albeit at a somewhat later date than was anticipated previously.


Board and staff

During 2005 the board welcomed Phil Madden as Finance Director following the
retirement of Douglas Blaikie. One sales person resigned to relocate abroad and
two new employees joined the company.

Our thanks are owed to the dedication, enthusiasm and skill of our team in all
capacities and it continues to be a pleasure to see such good product and
service output, consistently achieved.


Prospects

In the interim report for 2005 I indicated that the company had high confidence
in significant sales expansion in 2006. This continues to be our view and orders
in the first quarter are significantly ahead of the first six months of the
previous year. If our expectations of the outcome of the various pilots and
projects with broadcasters are realised, our shareholders should begin to see
significant change in the profile of the business.


Chief Executive's Review

Introduction

In last year's review, I outlined some of the technical and market expectations
which have been fulfilled since the Forbidden Technologies flotation. Forbidden
has applied its technology in an increasingly focussed way as part of its plan
to create the video platform for the internet - FORscene.


Internet video platform

The internet is becoming a major force in video creation and distribution.
Consider the features to expect in an internet video platform:

  • internet based - accessed through a web browser
  • no installation - can run on any / every computer
  • no configuration - easy to get up and running
  • low cost or free
  • simple to learn
  • cross platform editing - PC, Mac, Linux
  • cross platform publishing - Desktop, Mobile phone, video iPod
  • wide in scope:
      • reviewing
      • logging
      • editing
      • web publishing
      • mobile / iPod publishing
      • hosting
  • available in volume


The year has seen a further expansion of FORscene's web and mobile publishing
capability and a major acceleration in the internet video editing tool. It will
come as no surprise that Forbidden's FORscene meets all the criteria above for
an internet video platform.


The professional video market

To appreciate the focus of Forbidden's market entry strategy, it helps to
understand the workflow in the professional video market.

Video post production processes vary widely between productions. Video is shot
using video cameras, and is generally stored on tape. Some or all of the
following steps may then be carried out:

  • ingest - transfer of video into the system
  • review - look through source material and note what is there
  • log - add transcript / enable shots to be found simply during editing
  • shot selection - select shots / speech which might be useful
  • shot ordering - construct the story
  • rough cut - order the shots; trim to about the right length
  • possibly re-ingest tape for the offline
  • offline - make the programme, often at relatively low video quality
  • possible re-ingest tape for the online
  • online - finish the programme at top video quality for broadcast


The strategy has been to introduce FORscene into the relatively simple early
stages of this process: ingest, review and log. As customers discover the
benefits of our intuitive web based solution, it is simple to move up the value
chain by just staying on the FORscene escalator a bit longer. In the few short
months since its first broadcast use, FORscene has already moved up to shot
selection, shot ordering and rough cut.

Both FORscene and the global IT infrastructure it runs on continue to improve.
It is already possible to finish entire programmes with FORscene on web and
mobile.


Consumer video - Clesh

Clesh is the consumer interface into the power of FORscene, with simplicity of
use as the key priority. It allows consumers to experience the functionality and
features of FORscene to edit and share their own video and mobile phone footage
on the Internet, through a home PC. The Internet is so cheap that we can make
our consumer version available for free. You can sign up for Clesh on our
website at http://info.clesh.com/.

As we upgrade the Clesh video library to allow users to submit their own
content, Clesh will be an increasingly attractive one-stop shop for internet
video. Higher volume users will be able to purchase packages with extra
features, extra storage, extra views and extra editing time, depending on
requirements.


Technology

Underlying all Forbidden's work is its technological strength.

Forbidden's video compression technology has provided a unique codec designed
for web-based editing. Control of the codec has led to improvements all the way
through from storyboard editing to web publishing.

Forbidden's Java player gives almost universal reach to Windows and Mac PCs. The
web player, which does not require installation, security updates or machine
configuration, will play automatically on standard machines. Forbidden upgrades
its Java player to meet the evolving needs of the market.

These days, high end mobile phones have internet access. Mobile publishing is a
key component of Forbidden's armoury.

FORscene is robust, automatically tuning itself to work well on a wide range of
computer speeds and internet connection speeds.

These technical solutions are not easily copied by third parties as the
expertise required is so specialised and has taken a long time to accumulate.


Technology Award

FORscene has been recognised in the recent Royal Television Society technology
award, awarded by the unanimous decision of the judges.

FORscene is the perfect product for this potentially vast and exciting market.


Shareholder Offer

This year's Shareholder Offer is £1,000 worth of free credits. The form is at
the back of the Annual Report and Accounts.


Regulatory (IFRS)

Forbidden Technologies plc expects to adopt IFRS in the financial statements for
the year ended 31 December 2007. The board has begun considering the differences
between UK accounting standards and IFRS, and have identified accounting for
development costs as an area which could impact on the company's financial
statements going forward.


                                                                   25 April 2006



Enquiries:


Forbidden Technologies plc                                                                020 8879 7245
    Stephen Streater, Chief Executive
    Greg Hirst, Business Development Director

College Hill                                                                              020 7457 2020
    Corinna Dorward/Adrian Duffield








Profit and loss account

for the year ended 31 December 2005


                                                                              Unaudited
                                                                                   2005             2004
                                                                    Note              £                £
Turnover                                                                         59,705           76,788

Administrative expenses                                                       (874,637)        (787,563)
Operating loss                                                                (814,932)        (710,775)

Interest receivable and similar income                                           54,605           68,259
Loss on ordinary activities before taxation                                   (760,327)        (642,516)

Tax on loss on ordinary activities                                               34,948           28,389


Loss for the financial year                                                   (725,379)        (614,127)


Basic and diluted loss per ordinary 0.8p share                         2        (0.96p)          (0.81p)



A statement of recognised gains and losses has not been included as part of
these financial statements as the Company made no gains or losses in the year
other than as disclosed in the profit and loss account.

A note on historical cost gains and losses has not been included as part of the
financial statements as the results disclosed in the profit and loss account are
prepared on an unmodified historical cost basis.


The results stated above are all derived from continuing operations.




Balance sheet

as at 31 December 2005


                                                                     Unaudited
                                                           2005           2005         2004           2004
                                                              £              £            £              £
Fixed assets

Tangible assets                                                          9,729                      15,812


Current assets

Debtors                                                 172,592                     142,551
Liquid resources                                        876,919                   1,606,903
                                                      1,049,511                   1,749,454

Creditors: amounts falling

due within one year                                    (92,142)                    (72,789)


Net current assets                                                     957,369                   1,676,665


Net assets                                                             967,098                   1,692,477

Capital and reserves


Called up share capital                                                605,300                     605,300
Share premium account                                                2,925,375                   2,925,375
Capital contribution reserve                                           125,000                     125,000
Profit and loss account                                            (2,688,577)                 (1,963,198)


Shareholders' funds - equity                                           967,098                   1,692,477







Cash flow statement

for the year ended 31 December 2005


                                                                               Unaudited
                                                                                    2005          2004
                                                                                       £             £
Reconciliation of operating loss to net cash outflow
from operating activities

Operating loss                                                                 (814,932)     (710,775)
Depreciation charges                                                              25,541        30,130
(Increase)/decrease in debtors                                                   (4,618)        27,163
Increase/(decrease) in creditors                                                  19,353      (12,193)


Net cash outflow from operating activities                                     (774,656)     (665,675)


Cash flow statement



Cash flow from operating activities                                            (774,656)     (665,675)

Returns on investments and servicing of finance                                   64,130        68,882
Taxation                                                                               -        25,277
Capital expenditure                                                             (19,458)      (32,124)

Cash outflow before management of liquid resources                             (729,984)     (603,640)


Management of liquid resources                                                   710,294       589,945

Financing                                                                              -         5,625

(Decrease) in cash in the year                                                  (19,690)       (8,070)

Reconciliation of net cash flow to movement in net funds

(Decrease) in cash in the year                                                  (19,690)       (8,070)
Cash outflow from decrease in liquid resources                                 (710,294)     (589,945)


Movement in net funds in the year                                              (729,984)     (598,015)

Net funds at the start of the year                                             1,606,903     2,204,918

Net funds at the end of the year                                                 876,919     1,606,903




Notes

1.         Basis of preparation

The preliminary announcement has been prepared using accounting policies
consistent with those set out in the financial statements for the year ended 31
December 2004.

The financial information in this preliminary announcement does not constitute
the company's statutory accounts for the years ended 31 December 2004 or 2005.
The financial information for the year ended 31 December 2004 is derived from
the statutory accounts for that financial year. Those accounts have been
reported on by the company's auditors and have been delivered to the registrar
of companies. The report of the auditors was unqualified and did not contain a
statement under section 237 (2) or (3) of the Companies Act 1985. The statutory
accounts for the year ended 31 December 2005 will be finalised on the basis of
the financial information presented by the directors in this preliminary
announcement and will be delivered to the registrar of companies following the
company's annual general meeting.

The preliminary announcement for the year ended 31 December 2005 was approved by
the directors on 24th April 2006.



2.         Earnings per share


Diluted earnings per share has not been presented, as including all potential
ordinary shares in the calculation would be anti-dilutive.


Basic earnings per share

The weighted average number of shares in issue during the year is 75,662,500
(2004: 75,539,726).



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