Shares in Forbidden Technologies (LSE: FBT) jumped by as much as 19% in early trade this morning after the company announced that it has started a 12-month proof of concept study for its video-editing tool Forscene with a major UK broadcaster.
Forscene has already been used by a number of broadcasters to edit and show clips from major sporting events such as the Rugby World Cup, but management has described this latest deal as the company’s most significant yet. The UK broadcaster is paying for the proof of concept study and Forbidden is collaborating with an unnamed US editing software specialist on the study to help it achieve the best results.
If the proof of concept study proves successful, Forbidden expects to increase the amount of work it does both with the UK broadcaster and its US collaborator, which could accelerate the company’s growth.
Immediate revenue
According to the press release, the proof of concept study will generate revenue immediately for the company, great news for shareholders as Forbidden desperately needs sales and income to bolster its weak balance sheet. Indeed, for the year ended 31 December 2015 Forbidden generated gross sales of only £708,717, on which the company reported an operating loss of £2.7m and cash reserves fell by 62% year-on-year to £1.7m.
The study isn’t the only good news Forbidden’s shareholders have received this week.
On Tuesday, management issued a press release informing shareholders that Forscene will be used this summer at two major sporting events, in each case for the first time. The first new sporting event is a global tennis tournament occurring in London, the second is a major international sports event for disabled athletes held in Brazil this year! Forscene will be used to edit and distribute highlight packages to social media and various websites.
A transformational year
It’s clear that 2016 is already shaping up to be a transformational year for Forbidden Technologies. Along with the deals covered above, Forbidden has signed a number of other deals with customers this year and but we’ll have to wait until the company releases its interim results before it’s possible to gauge how these deals will add to sales.
Overall, as a speculative play Forbidden looks attractive. Sales are growing and the company has cash on the balance sheet, although it remains to be seen how long this money will last for. Management has made an effort to cut costs over the last year, and this has reduced cash burn, which is a step in the right direction. Contracts signed this year should also go some way to helping the company report a profit.
Still, as with all early stage companies, Forbidden is a high-risk, high-reward play that’s not suitable for widows and orphans. But if you’re prepared to take the risk, Forbidden could be a winner.