Happy New Year and welcome to Oxygen’s financial pages.

2006 has been an interesting and challenging year for us and
for the video games industry in general, as the market finishes
its transition from the current generation to the next generation
formats.

Microsoft X Box 360 is now the established next generation
console and Nintendo’s Wii launched in November 2006 and
was a huge success selling out in a matter of hours. Nintendo
DS continues to be the best selling console on the market, and
with Playstation 2 and PlayStation Portable showing steady
sales and with the launch of Playstation 3 in March 2007 the
industry is about to embark on a huge growth curve.

Oxygen’s growth so far has been steady and profitable.
In 2004, the year the business was established, we hit our
target for making a profit with ease despite all the investment
costs associated with establishing the business and preparing
it for growth.

2005 saw us increase revenues and profits significantly from
2004, Revenues for the period Jan – Dec 2005 were up 523%
on 2004 and profits were up 1249% on the previous year.

During this period operating costs also rose 361%, mainly
due to infrastructure and staff additions as the headcount
increased 3 fold.

Oxygen’s financial year runs from Jan – Dec, so 2006 has now
been completed.

Throughout 2006 we made further major investments into the
sales, development and operational infrastructure of the company
to ensure that we have the right capacity for growth.
These investments include:

i) The establishment of our US office in Van Nuys California,
enabling the company to maximise its sales in the world’s
largest video game market. Further investment in the US office
is planned for 2007.

ii) The creation of Oxygen Interactive Studios, based in London
to focus on IP and technology development and to increase
flexibility in our product development.

This studio will be expanded further during 2007.

iii) The purchase and development of our new headquarters in
Northamptonshire, England.

Despite these investments and tough market conditions we are
pleased to have maintained our profitability and are well placed
to continue our forecasted growth.

Jim Scott CEO
On behalf of the Board