Full Year Results, December 2000

Full Year Results for the year ended 31st December 2000

Results

I am pleased to report the full year results to the end of December

2000 for Forbidden Technologies. The company incurred a loss of

£115,218 before tax after using £266,274 on the running

costs of the business and having the advantage of £151,056 of

interest income from its cash resources. The closing balance sheet

shows net assets of £3,405,907 of which cash represents

£3,311,838. The operating costs are in line with those forecast

at the beginning of the year and our interest income proved to be

higher than originally expected giving us a better than expected loss

before tax. Prudent cost control means that the loss after tax

represents a diminution of present cash resources of less than 5 per

cent.

This has been an excellent development year for Forbidden

Technologies. In February we floated the company successfully on the Alternative Investment Market (AIM) of the London Stock Exchange with the objectives of creating a significant shareholder base and of raising sufficient funds to cover the development of our

technology. By approaching the market through an Offer for

Subscription we have laid the foundation of a wide private shareholder base, and have in excess of 2,200 shareholders. Following the Offer for Subscription we did a number of share placings which brought cash into the business of £2,643,628 increasing the cash balance to £3,400,000.

Business Review

The purpose of our business is to make money for our shareholders by enabling people throughout the world to use our technology on the internet to watch whatever they choose, whenever they choose.

At the beginning of the year we had a working assumption that this

was only achievable with the advent of broadband but our rapid

technological progress over the last twelve months has proved that

high resolution and high frame rate video can be achieved via a

standard modem. This opens up market opportunities irrespective of the speed of development of broadband, and recent evidence of further delays in broadband delivery gives us encouragement for the early adoption of our video compression.

Our product is proving to be extremely easy to use by both the user

and the supplier of video content, since no additional hardware or

software is required by either party.

I would like to emphasise that our product development programme is a continuous process and our technology continues to be improved at the rate of approximately 2.5 per cent per week, in terms of the data compression rate. This is quite different from the implanting of an industry standard like MPEG which is very specific, rigid and inflexible. By comparison, Forbidden's compression works within a framework of internet standards including TCP/IP, http and Java, as well as working on a variety of widely used web browsers and operating systems. The number of viewers on our web site has been growing by a factor of ten each quarter.

In our half year results, we anticipated that we would have an

initial product worthy of commercialisation by the end of the

year. This was duly achieved and following announcement of its

availability in February, the level of interest from potential

customers has been most encouraging and the proportion of positive consumer comment increases in line with the upgrades of the video on our web site. We are very grateful to the significant number of our shareholders who have helped us in trialing and testing the different stages of our product development by giving us regular constructive critical feedback and we hope that they will continue with this valuable contribution.

Our management and staff continue to be highly motivated, dedicated and enthusiastic in the pursuit of achieving visible results.

Prospects

There is clear need for an effective method of delivering high quality video via typical internet connections.

As we have introduced better compression rates and better picture

quality, the scope for application of our technology is broadening

into new areas. These include set top boxes, mobile phones, games

consoles - any internet linked device is a potential delivery

platform.

In the year ahead we anticipate some expansion of our people

resources as we begin the commercial development of our

business. Although we expect sales to commence at a modest level

during this next year, we are confident that our rate of expansion

will increase as our technology becomes more widely exposed and

adopted.

Our progress to date makes us increasingly confident of Forbidden

Technologies' ability to become a major participant in the new media

of the world.

Victor Steel Chairman