The plan has three important elements:

1. Expansion of the field sales team.

2. Recruitment of a finance director and sales director into the senior management team.

3. Refinement and expansion of the product portfolio.

The field sales team has been doubled ahead of schedule and the finance director and sales director joined in February 2007 and September 2007 respectively. These key appointments have significantly increased the management capacity and skills which can be focussed on all areas of the business.

COE replaced 55 percent of its products by revenue in 2006 and 2007 has seen further rapid progress. The product portfolio has been significantly extended to provide an integrated IP video surveillance system. Specific new products and enhancements include:

o X-Net video management system, the latest of COE's control room management software products.

o X-Net network video recording, a distributed recording system for small and large video networks.

o Further collaboration with Texas Instruments to enhance COE's open platform for high end codecs.

o New H-Box codec using the more cost-effective H.264 compression algorithm.

o Integrated video intelligence.

The growth activity has been reflected in key competitive wins including a key codec win with Transport for London, Randstad Rail (Netherlands), Martignano Tunnel (Italy), and extensions with Siemens in Kowloon Canton Railway (Hong Kong) and in London Bus Lane enforcement COE's focus on transport remains sharp.

Because of these wins and others, second half (H2) order intake was at its highest level for 3 years. Sales activity in general is also sharply higher with quotes up 25 percent in H2 over the corresponding half in 2006.

Financial improvements continued. Gross margins rose and losses both before and after tax were reduced. The company finished the year with net cash balances of GBP 0.9M, and continues to be backed by its major investor IP Group which had GBP 48M in cash on its balance sheet at the end of June 2007.