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Toumaz Holdings Limited(Formerley Nanoscience Inc.)

Annual Report & AccountsFor the year ended 31 December 2008

Annual Report and Financial Statementsfor the year ended 31 December 2008

ContentsPage

2 Directors and Advisers

3 Key Products

4 Chairman’s Statement

7 Chief Executive Officer’s Report

12 Report of the Directors

16 Corporate Governance

18 Report on Remuneration

20 Report of the Independent Auditor

22 Principal Accounting Policies

31 Consolidated Iincome Statement

32 Consolidated Statement of Changes in Equity

33 Consolidated Balance Sheet

34 Consolidated Cashflow Statement

35 Notes to the Financial Statements

50 Notice of Annual General Meeting

Toumaz Holdings Limited(Formerly Nanoscience Inc.)

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Directors and Advisersfor the year ended 31 December 2006

Registered office Walkers Corporate Services LimitedWalker HouseMary StreetPO Box 908GT George TownGrand CaymanCayman Islands

Directors Sir Richard Sykes (Chairman)Chris Toumazou (Chief Executive Officer)Patrick Stephansen (Chief Financial Officer)Serge Grisard (Non-executive Director)Martin Knight (Non-executive Director)Ian McWalter (Non-executive Director)Winston Wong (Non-executive Director)Hossein Yassaie (Non-executive Director)

Secretary Walkers Corporate Services Limited

Joint secretary Kitwell Consultants LimitedKitwell HouseThe WarrenRadlettHertfordshire WD7 7DU

Nominated adviser FinnCap4 Coleman Street London EC2R 5TA

Broker J.M.Finn & Co4 Coleman Street London EC2R 5TA

Registrars Capita Registrars (Jersey) Limited12 Castle StreetSt HelierJersey JE2 3RT

Solicitors Fladgate Fielder25 North RowLondon W1K 6DJ

Auditors Grant Thornton UK LLPRegistered AuditorsChartered AccountantsEnterprise House 115 Edmund StreetBirmingham B3 2HJ


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Key Products

AMxAdvanced Mixed Signal

Ultra-Low Power

Ultra Low PowerVital Signs

Ultra LowPower RadioTuner Chip

Consumer

Digital Radio

Healthcare

Digital Plaster

C

Connected Freedom

Lloyd Pople

Stamp

Chairman’s Statementfor the year ended 31 December 2008

IntroductionI am pleased to report the period was one of significant progress for Toumaz’s main investments; its wholly-ownedsubsidiary Toumaz Technology and its previously partly owned, now fully owned Future Waves business.

During the period, the Group recorded a large increase in revenue to £2.754 million in comparison to £174,000 in theprevious year. In addition, pre-tax losses significantly reduced to £2.765 million (2007: £7.726 million). The increasedrevenue derived from development income from Toumaz Holdings’ key partners. The substantial improvements in ourfinancial results is a confirmation of our technological and commercial progress being validated and adopted by marketleaders in their respective industries.

AMx PlatformToumaz Technology and Future Waves have always been synergistic in the AMx technology platform, a flexible multi-standard RF CMOS radio, they utilise. AMx is essentially an ultra low power platform that can be, and has been,applied to a number of verticals; Toumaz Technology focuses on the healthcare sector while Future Waves targetsconsumer products incorporating multi-standard broadcast and receiver solutions. Using the AMx platform as anenabling mechanism, both companies have added application layers with key partners to create an end-to-endsolution to sell to their chosen markets. Toumaz Technology’s Sensium™ has a complete solution using sensors tomonitor human vital signs while Future Waves will produce its AMx-complementary next generation SoC; a multi-standard multimedia solution for numerous emerging broadcast and internet devices such as digital radios and TVs.While the verticals for the two businesses differ, their business models are highly synergistic deploying the sameunderlying technologies in delivering more complete solutions with enhanced revenue and profit opportunities ratherthan focusing on lower value partial offerings.

Toumaz TechnologyIn 2008, Toumaz Technology’s revenues increased significantly to £2.75million (2007: £174,000) and pre-tax losses were reduced to £2.2 million(2007: £3.4 million). Revenues were predominantly derived fromdevelopment income from the company’s agreements with Texas

Instruments Inc. (‘TI’), Cardinal Health Inc. (‘Cardinal Health’) and Infineon Technologies AG (‘Infineon’).

Toumaz Technology’s key strategic relationship with global healthcare product and service provider Cardinal Healthdeveloped further through its qualification and formal acceptance of Toumaz Technology’s Sensium™ at the end of Q22008. A development project based around Sensium™’s technology has since commenced, including the design andmanufacture of wireless disposable body monitoring ‘digital plasters’.

In March 2008, Toumaz Technology signed a strategic licensing and distribution agreement with TI, a global leader insemiconductor technology, providing Toumaz Technology access to TI’s design, process and manufacturingcapabilities, and equally importantly, TI’s substantial marketing and sales channels for the Sensium™ in the healthcaresector.

Toumaz Technology, in addition, signed an agreement with global semiconductor and system solutions providerInfineon to produce the ‘ELRAN’ chip, the first chip using licensed wireless AMx™ technology in the non-healthcaresector. In the period, Toumaz Technology also received ISO 13485-2003 certification for its patented AMx™ platform,the regulatory standard for the international medical industry and a requirement for medical device manufacture.

We are also pleased to add that in May 2008, the Group’s founder and CEO Professor Christofer Toumazou waselected as Fellow of the Royal Society in recognition of his academic work on which much of the AMx™ technology isbased.


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Chairman’s Statementcontinued

Future Waves At end-2007, Future Waves secured its first major design win for its FENIX 1 chip with PUREDigital (‘PURE’), a division of Imagination Technologies Limited (‘Imagination’) and the UK’snumber one digital radio manufacturer. PURE has integrated FENIX 1 into its ‘Highway’ product,an easy to fit in-car DAB digital radio with iPod/MP3 connection. Future Waves started volumeshipments of FENIX 1 during 2008.

Further optimisation of FENIX 1 has allowed its introduction into a larger range of PURE products.Several hundred thousand FENIX 1-based devices have been sold so far. With FENIX 1 achievingfull mass production, Future Waves is confident that it will experience a steady growth in

revenues, as the digital and internet radio sector expands as widely forecast.

As announced earlier in 2009, the Group signed an IP licensing deal with Imagination to further extend its existingrelationship; Toumaz Holdings gains access to Imagination’s market-leading next generation communication anddigital radio multimedia IP platform, benefiting both Future Waves and Toumaz Technology. Imagination is currently amajor shareholder in Toumaz, holding an 8.4 percent interest.

SAWSAW (surface acoustic wave) is a 5 percent Toumaz Holdings’ owned project being developed at the Institute ofBiomedical Engineering, Imperial College London. Developing a wireless SAW-based pressure transducer that can bepermanently implanted in the heart to allow continuous blood pressure monitoring, the project has undergonepreliminary clinical trials, with positive results. Development and testing will continue this year. To date, the project hasbeen funded through grants, avoiding any ownership dilution. In 2008, SAW received a £1.6 million grant from theWellcome Trust and is fully funded for 2009.

Name Change/Strengthening of Board Following a strategic review in mid-2008 and recognising its previous proposition and positioning lacked clarity, theBoard has chosen a more focused business model based on the core AMx™ technology and delivery of completesolutions to customers. The Toumaz brand is well recognised therefore the change of name to Toumaz Holdings wasappropriate. Post-period, Toumaz Holdings has strengthened its Board. I have been appointed the new executivechairman, Professor Christofer Toumazou FRS, co-founder of both Toumaz Technology and Future Waves, is chiefexecutive officer, and Patrick Stephansen, previously a director of Future Waves and Toumaz Technology becomeschief financial officer. Further prominent and relevant non-executive director appointments are Dr. Hossein Yassaie,chief executive officer of Imagination; Dr. Martin Knight, the chief operating officer of Imperial College London andchairman of Imperial Innovations Group plc; Dr. Winston Wong, chief executive officer of Grace T.H.W. Group and Dr.Ian McWalter, currently president and chief executive officer of CMC Microsystems.

Richard Rose, formerly non-executive chairman, Guy Spelman, formerly chief executive officer, and PhilippeTischhauser, non-executive director stepped down from their positions. I would like to thank them once again for theirvaluable contributions in the development of the Group.

Disposal of Sentinel Healthcare Solutions Limited (‘Sentinel’)The Group’s strategic review also recognised that Sentinel as a service business sat uneasily in Toumaz Holdings; it hassold the majority of its holdings in Sentinel however retains a five percent stake as part of a deal in which futureroyalties would be paid to Toumaz Holdings.


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Chairman’s Statementcontinued

OutlookThe Future Waves acquisition and its subsequent consolidation with Toumaz Technology will allow better use ofresources and existing synergies will lead to new market opportunities.

Toumaz Technology’s development programmes continue apace. In May 2009, Cardinal Health signed aMemorandum of Understanding with Imperial College to run the first clinical trials of the Sensium™-based digitalplaster system in Imperial’s London hospitals. In the same month, TI’s extensive Release-to-Market programme forSensium™ Generation 1 chip began. The Sensium™ is sold under the TI brand and logo while Toumaz Technology iscontractually acknowledged as the licensor of the Sensium™ trademark. Phase I trials in the DiAdvisor EU fundedproject (discussed in the chief executive’s report) are nearing completion. The ongoing development projects withCardinal and TI have significantly reduced Group funding for Toumaz Technology and the trend towards self-sustainability should be maintained, ahead of expected operational profitability in the second half of 2010.

Future Waves’ new business model has moved from a component (chips) only supplier to a solutions and subsystemprovider in order for Future Waves to obtain satisfactory prices and margins. The Imagination licensing deal will assistin providing a next generation baseband multimedia chip to complement Future Waves’ proprietary multi-standardwireless tuner technology, reducing risk and time to, market. Additionally it will offer access to PURE and its rapidlyexpanding global DAB product sales. Future Waves’ sales to system equipment manufacturers including PURE areexpected to grow substantially from mid-2010.

Both Toumaz Technology and Future Waves expect significant product sales to be achieved in the second half of 2010targeting Group profitability in 2011. 2009 will be a year of continuing development and progress with the furtherstrengthening of our existing partner relationships by timely delivery of milestones and by generating opportunities todevelop new relationships with key players in our target markets.

We are grateful to our shareholders for their support throughout the past year and appreciate their continuedcommitment as the Company invests in increased turnover and future profitability.

Sir Richard Sykes FRSChairman

22 June 2009


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Chief Executive Officer’s Reportfor the year ended 31 December 2008

I am pleased to present a report on Toumaz Holdings’ Investments’ operations during 2008.

Toumaz Technology Targeting the Healthcare market

Cardinal Health Following the signing of the Strategic AllianceAgreement with Cardinal Health in November2007, Toumaz Technology and Cardinal Health aredeveloping a medical system that will work withthe nursing staff to enhance patient care andprovide immediate and automatic data capture forreal-time feedback and inclusion in an electronichealth record. Importantly, the system will provide anauditable log that offers hospitals and clinicians thenecessary data to qualify for incentives under theObama “Recovery Act 2009” that will provide$19 billion to promote the adoption and use ofhealth information technology and electronichealth records.

The ultra-low power consumption, small size and lowcost of the Toumaz Sensium™ (incorporating AMx™technology) has led to the realisation of the “digital plaster” or smart patch. This disposable, non-intrusive, simpleto use, stick-on device continuously checks patients’ vital signs such as heart rate, respiration rate and temperature.Since the Sensium™ technology is effectively the key enabler for the wireless monitoring system, Toumaz

Technology has been able to negotiate an attractiveroyalty position related to a share of the gross marginof each disposable digital plaster that will be used. Thetotal market for the digital plasters in the hospitalcontext could be considered to be the total number ofhospital admissions. In the US this is more than 30 million per year and in the UK it is in excess of 13 million per year.

As an indication of the strength of the relationshipbetween Cardinal Health and Toumaz Technology and

the importance of the relationship with ImperialCollege, the first clinical trials for the digital plasterand wireless monitoring system are planned tocommence in the Imperial College hospitals inLondon in August 2009. These trials will be fundedby Cardinal Health but set up and managed byToumaz Technology.

Looking further forward, Federal Drugs Agency (‘FDA’) devicecompliance will commence early in 2010 and is reasonably

expected to be completed before the end of the year. Fulldeployments in US hospitals are planned to be rolled out around the end

of 2010 following FDA approval. Product and royalty revenues from the Cardinal Health business are expected tocommence in the second half of 2010. There are also substantial opportunities for digital plasters in applicationsoutside of hospitals. These include emergency and first response services, defence, professional sports et ceterathat will be investigated.


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Sensum™enabling a new generation of low-cost, non-intrusivewireless body monitors for professional healthcare

Chief Executive Officer’s Reportcontinued

Texas Instruments (‘TI’)Toumaz Technology and TI signed a Licensing, Development and Supply Agreement in March 2008. Under thisagreement TI gained access to certain technologies from Toumaz Technology and Toumaz Technology gained anunequalled supply channel for its silicon chip products. TI is the largest supplier of silicon chips for healthcaredevices with the largest established customer base in the healthcare industry. To gain access to these customers andto leverage the general reach of the TI sales channel, Toumaz granted an exclusive distribution license forSensium™ Generation 1 to TI. As this chip has been fully funded and developed by Toumaz, the commercialarrangement is based on an equal share of the gross margin on each sale.

After production engineering and qualification was finalised on Sensium™ Generation 1, the first production chipswere produced in December 2008 by Toumaz Technology’s foundry partner Infineon in Germany. Furtherqualification work was carried out by TI leading to full acceptance of the chip as a TI part – complete with TI logo –and release to market of Sensium™ Generation 1 in May this year.

TI are positioning Sensium™ not only as a new platform for body area networking devices but also as an upgradethat offers cost reduction and wireless capability for customers producing millions of medical devices such ashandheld blood glucose meters. We expect sales to move slowly at first as customers take the chip through astandard design-in cycle into their own products and systems. Experience of other chip products indicates a design-in cycle time of 12 to 18 months hence volumes are expected to ramp up as sales by TI commence.

TI and Toumaz Technology have agreed the specification for a Sensium™ Generation 2 and under the terms of theagreement between the parties by which TI will fund the work, Toumaz Technology engineers began designactivities on this new chip in Q4, 2008. Since the chip is still based on Toumaz Technology IP, the agreementprovides royalty payments to Toumaz Technology on future sales. To date, the Toumaz Technology team have metall milestones on plan and two test chips have been produced.

Life Pebble SystemThe Life Pebble is a small, ultra-low power vital sign monitoring device developed as an early stage example of theSensium™’s potential as an end-to-end solution. The device continuously monitors common vital signs such asECG, heart rate, temperature, and physical activity – and streams the data over a short range wireless link to aSensium™ USB Network Adapter or Sensium™ Data Logger. Predominantly the Pebble serves as a demonstrationplatform and is currently used in clinical trials; some revenue is expected to be achieved from sales of the device.

DIAdvisorDIAdvisorTM is a collaborative large-scale integrating project, funded by a €7.1 million European CommunityGrant, aiming to develop a prediction-based tool for type I and developed type II diabetes. DIAdvisor™ will allowpatients to actively and accurately predict their short-term blood glucose outlook at any time by analysing dataretrieved from glucose measurements, insulin delivery data and specific patient parameters. The key data, capturedby non-intrusive body-worn wireless monitors including those based on Toumaz Technology’s Sensium™ platform,will be used to create physiological mathematical modelling, control and prediction algorithms. The resultinganalysis and prediction information will be wirelessly transmitted to a healthcare provider advisory service, withrecommended action and treatment advice presented to the patient via a handheld mobile device such as aPersonal Digital Assistant (PDA).

The four year project, coordinated by Novo Nordisk A/S, a world leader in diabetes care and including 13 medical,industrial and academic partners, including the European Division of the International Diabetes Federation,commenced in April 2008. It has implemented a large-scale data-acquisition clinical trial involving 90 patients acrossthree sites in Europe; France, Italy and Czech Republic. Toumaz Technology is receiving approximatley €700,000to develop the device platform, including hardware, software and sensors. To date, the device platform has beendelivered on schedule for the first year of the project.


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Future WavesTargeting the Consumer Product Market

FENIX 1Future Waves’ FENIX 1 chip was the first multi-standard all-CMOS tuner to be offered to themarket in 2007. Since then the chip has gone into mass production and is designed intoPURE radios as well as several personal multimedia products and DAB radio devices fromother manufacturers.

In addition to PURE Digital, Future Waves secured a number of smaller contractswith Korean, Taiwanese and Chinese manufacturers of digital radios and PersonalMultimedia Players. New shipments are expected in 2009 to end user countrieswhere digital audio broadcasting is being launched. Detailed discussions with alphacustomers and distribution channels in the Far-East are ongoing and ensure that ourplatform will find a fast route to the end user market in multiple geographies.

Xenif – Future Waves’ next generation System-on-ChipThe full ownership of Future Waves by Toumaz Holdings and the new relationship with Imagination Technologiespresent a new and very exciting route forward for Future Waves. As a result of the important licensing deal withImagination, Future Waves is developing and will produce a state-of-the-art baseband+application processor chip– codenamed Xenif – with broadcast and Wi-FI/internet functionalities. This chip represents a major step forwardin technology and offers customers a significantly enhanced solution for universal digital receiver platforms at areduced system cost. Xenif will be manufactured on an advanced semiconductor technology node thus reducingsilicon area and hence manufacturing costs as well as power consumption. We expect this solution to lead tosignificantly increased revenues and higher margins for Future Waves. The key advantage of Xenif is a higher levelof integration (that is, more functions on the chip) resulting in fewer ‘off-chip’ components for devicemanufacturers. Xenif-based circuit boards and devices will be smaller and less power hungry, leading to smaller,lower cost batteries and power management systems.

Xenif will be ready for the forthcoming revolution in listeners’ habits and use of broadcast and streamed audio inthe home and on the move. This revolution is based on ‘internet radio’, the early signs of which are beginning to beapparent in services such as BBC iplayer, Napster, Pandora, and portal services such as Spinner. Additionally, thereare a host of do-it-yourself ‘radio stations’ on the web that are usually part of various on-line communities. Firstdeliveries of Xenif are expected to be in 2010 in time to meet manufacturers’ demand for the Christmas season inthat year.

Xenif, however, is not simply an internet interface. It is also a multi-standard processor for all current digitalbroadcast standards. New services that use a combination of internet and broadcast features can be developedaround products that use Xenif. When other devices that are broadcast and internet enabled are taken into account,the total market size could reach tens of millions of units by 2011.

Xenif’s target markets are primarily the new European DAB and global internet radio sectors. The DAB market aloneis currently growing by approximately three million units per year and is expected to grow to circa 10 million unitsby 2011, as other countries including France and Germany are adopting this family of standards. Furthermore, by2015, Xenif’s market could be in excess of 70 million units for Wi-Fi and Internet radio.


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System-On-Chip Integration continuesLeveraging on the technology in FENIX 1 (which itself has roots in the Toumaz AMx™ technology) and theenhanced capabilities of the integrated design team and making use of the extended scope of the Imaginationlicense, in the medium-term a radically new product combining Toumaz AMx technology and the Xenif platformbecomes possible. This super-integrated SoC device will be a major lead ahead of competition and could play a keyrole in the drive from analogue to digital broadcast services (which now needs to include internet capability) beingpushed by governments in Europe, Australia and elsewhere in the on-going quest for bandwidth. This multi-standard functionality, offered in a single chip that will reduce system materials cost and require less power is a veryattractive proposition for manufacturers of any device that will benefit from broadcast and network connectivityincluding radios, TV’s, personal multimedia players, netbooks, laptops, cell phones.

The release date for mass production of this new SoC is not yet fixed but prototypes are planned for late 2010 toearly 2011. In the meantime, the lifetime of FENIX 1 is being extended through a combination of designimprovements and manufacturing efficiencies.

A significant opportunity has been created through the acquisition of Future Waves and integrating the research &development efforts of Future Waves and Toumaz Technology. Firstly, the integration will lead to efficiency gainsand cost savings as well as the formation of an exceptional and, we believe, unique team of integrated circuitdesigners that are now able to leverage the IP and experience of the formerly separate design and developmentefforts.

In addition, and of great importance, there is a strong synergy in product lines across Toumaz Technology’s andFuture Waves’ businesses as the marriage of the Sensium™ and Xenif technologies will ultimately bring a very lowpower monitoring network, relevant for home medical and control/automation applications and a Wi-Fi/internet-connected infrastructure that will enable revolutionary and much needed services in health, automation andsecurity. This will form a strong foundation for the Group as a whole.

SAWSAW (surface acoustic wave) is a project to develop and commercialise a power-free implantable SAW wirelessdevice that will initially focus on chronic blood pressure monitoring. SAW’s remote monitoring will enable medicalprofessionals to be alerted to the possibility of cardiac events in patients. While the device is implanted in patients,the technology, which underwent clinical trials in 2008, is far less intrusive than the current solutions available in themarket. SAW is a passive device that uses radio frequency to send a signal, which receives a return signalproportional to blood pressure (deflects frequency). Development and testing work continues in 2009; it isenvisaged that once SAW has full regulatory approval the technology will be licensed to large medical devicecompanies, a number of which have been identified.

Consolidation of Business ModelThe business models of Toumaz Technology (focussed on healthcare markets) and Future Waves (focussed onconsumer markets) will now be consolidated, strengthening the Group through efficiency gains and new synergiesand capabilities that in turn will lead to new market opportunities.

Benefits of consolidation:

l Both businesses are solution providers – currently in the healthcare and consumer markets

l Both businesses’ solutions are built on the bedrock core proprietary AMx™ technology layer

l The value for both businesses are in the AMx™ Platform and the application layers that are configured formultiple verticals and total solutions

l Relationships with global partners in targeted verticals have been established and will be further developed

l In the medium-term the synergy between Wi-Fi/internet-ready Xenif platform and Sensium™ low powerwireless monitoring system will drive a strong and consistent strategy in line with some of the most importantand exciting emerging trends in the marketplace


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OutlookI am confident of the positive outlook for Toumaz Holdings. The consolidation of the business model andconsequent technological synergies and efficiency gains in our operating businesses; Toumaz Technology andFuture Waves, will allow management to better focus on the key market requirements, strategic goals and customerneeds.

The key objectives for the businesses over the next period are to deliver to the milestones agreed with, or requiredby, lead customers. This includes the timely delivery of Sensium™’s devices and software for the digital plastersystem’s clinical trials later this year and following these trials, making the necessary upgrades and changes to beginFDA compliance trials early next year. This is a very challenging and exciting project and to date remains on plan.Future Waves’ first key milestone is to deliver the highly integrated Xenif SoC to key customers around the globeincluding PURE. The goal is to deliver the solution during 2010 followed by the delivery of the follow-on superintegrated single-chip multi-standard receiver/connectivity system, which is to combine tuner, baseband andapplication processing. Achieving these milestones is expected to lead to profitable operations for Future Waves inthe foreseeable future.

Toumaz Technology and Future Waves have continued product development and I believe when the variousproducts are released to the market in 2010 Toumaz Holdings should be positioned as the leading force in silicon-based solutions in digital healthcare and radio/audio broadcast markets.

Professor Christofer Toumazou FRSChief Executive Officer

22 June 2009


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Report of the Directorsfor the year ended 31 December 2008

The Directors present their annual report together with the audited consolidated financial statements of the Groupfor the year ended 31 December 2008.

Principal activityThe principal activity of the Company is that of an investment company.

The principal activity of the Group is that of commercial exploitation of nano technologies.

Business reviewA review of the business in the year and of future developments is given in the Chairman’s statement and ChiefExecutive Officer’s report on pages 4 to 11.

The results of the Group are shown within the financial statements. The Directors are unable to recommend thepayment of a dividend.

The key performance indicators the Directors utilise to monitor the performance of the Group are as follows:

Rate of commercialisation of intellectual propertyMeasured by the number of licence deals, third party development projects and technology companies formedinside or outside the Group. Progress assessment includes regular updates on key partners and market segments.

Product development costs and milestonesOperating companies, subsidiaries and associates, are closely monitored against their product developmentbudgets.

Product commercialisation and customer pipelineThe Group is acutely aware of the customer relationship development cycle, including early reference designs,development kits and products release processes at customers. Therefore, blue chip relationships are duly reportedupon at each board meeting.

Potential value of portfolioEstimated on the basis of the M&A and Corporate Finance experience amongst the board and management team,this is supported by reviews of the robustness of the development progress and commercial pipeline.

Share priceConstantly under scrutiny by the management, and commented upon at Board meetings, this indicator is a majorcontributor to medium and long term decisions.

Post balance sheet events Full details of post balance sheet events are provided in note 22 to the financial statements.


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Report of the Directorscontinued

Financial risk management objectives and policiesThe Group’s principal financial instruments comprise cash and cash equivalents and investments. The Group hasvarious other financial instruments such as trade receivables and trade payables, which arise directly from itsoperations.

The Group is exposed to a variety of financial risks which result from both its operating and investing activities. TheBoard is responsible for co-ordinating the Group’s risk management and focuses on actively securing the Group’sshort to medium term cash flows. Long term financial investments are managed to generate lasting returns.

The Group does not actively engage in the trading of financial assets and has no financial derivatives. The mostsignificant risks to which the Group is exposed are described below:

Credit riskThe Group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheetare net of any allowance for doubtful receivables, estimated by the Directors. The Group has no significantconcentration of credit risk, with exposure spread over a number of customers.

Cash flow risksThe Group seeks to manage risks to ensure sufficient liquidity is available to meet foreseeable needs and to investcash assets safely and profitably. Short term flexibility is achieved by the use of money markets to deposit excesscash which is not required in the short term. The Directors prepare rolling cashflow forecasts and seek to raiseadditional funding whenever a shortfall in facilities is forecast. Details of the funding status of the Group areincluded in the going concern paragraph of the Corporate Governance Report.

Currency risksThe Group is exposed to translation foreign exchange risk in connection with its investment in Future Waves UKLimited whose subsidiary, FutureWaves Pte Ltd, is a Singapore incorporated company engaged in the design anddevelopment and the trading of integrated circuits, which it does not seek to hedge.

DirectorsThe Directors who served during the year are set out below.

Sir Richard Sykes (appointed 29 September 2008)Chris ToumazouSerge GrisardGuy Spelman (resigned 20 May 2009)Richard Rose (resigned 16 February 2009)Graham Porter (resigned 29 September 2008)Philippe Tischhauser (resigned 20 May 2009)

In addition, the following were appointed as directors on 20 May 2009:

Patrick StephansenMartin KnightHossein YassaieWinston WongIan McWalter

Details of share options held by the Directors are set out in the Report on Remuneration.


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Substantial shareholdingsThe only interests in excess of 3% of the issued share capital of the Company which have been notified as at 11 June2009 were as follows:

Ordinary shares Percentageof 0.25p each of capital

Number %

BNY(OCS) Nominees Limited 49,066,666 11.73Imagination Technologies Limited 35,132,765 8.40Mr Winston Wong 25,649,302 6.13Vidacos Nominees Limited 21,330,500 5.10Pershing Nominees Limited 20,477,353 4.89Glastad Invest Limited 19,371,882 4.63JM Finn Nominees 17,331,176 4.14Roy Nominees Limited 16,955,625 4.05Chase Nominees Limited 16,092,154 3.85Herald GP II Limited 15,135,920 3.62Applied Bionics Pte Limited 13,321,567 3.18Professer Christofer Toumazou 13,184,895 3.15

Payment to suppliersIt is the Group’s policy to agree appropriate terms and conditions for its transactions with suppliers by meansranging from standard terms and conditions to individually negotiated contracts and pay suppliers according toagreed terms and conditions, provided that the supplier meets those terms and conditions. The Group does nothave a standard or code, dealing specifically with the payment of suppliers.

Group trade payables at the year end amounted to 57 days purchases (2007: 26 days).

Directors’ responsibilitiesThe Company was incorporated as a corporation in the Cayman Islands, which does not prescribe the adoption ofany particular accounting framework. Accordingly, the Board have resolved that the Group will follow InternationalFinancial Reporting Standards (IFRSs) as adopted by the European Union, as issued by the International AccountingStandards Board when preparing its annual financial statements.

The Directors prepare financial statements for each financial period which give a true and fair view of the state ofaffairs of the Group and of the profit or loss of the Group for that period. In preparing these financial statements,the Directors are required to:

l select suitable accounting policies and then apply them consistently;

l make judgements and estimates that are reasonable and prudent;

l state whether applicable accounting standards have been followed, subject to any material departuresdisclosed and explained in the financial statements;

l prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Groupwill continue in business.


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The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at anytime the financial position of the Group, for safeguarding the assets of the Group and hence for taking reasonablesteps for the prevention and detection of fraud and other irregularities.

In so far as the Directors are aware:

l there is no relevant audit information of which the Group’s auditors are unaware; and

l the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant auditinformation and to establish that the auditors are aware of that information.

The Directors are responsible for the maintenance and integrity of the corporate and financial information includedon the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination offinancial statements may differ from legislation in other jurisdictions.

AuditorsGrant Thornton UK LLP offer themselves for reappointment as auditors.

ON BEHALF OF THE BOARD

Kitwell Consultants LimitedCompany Secretary

22 June 2009


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Corporate Governancefor the year ended 31 December 2008

DirectorsThe Group supports the concept of an effective board leading and controlling the Group. The Board is responsiblefor approving Group policy and strategy. It meets on a regular basis, at least six times a year, and has a schedule ofmatters specifically reserved to it for decision. Management supply the Board with appropriate and timelyinformation and the Directors are free to seek any further information they consider necessary. All Directors haveaccess to advice from the Company Secretary and independent professional advice at the Group’s expense.

The Board consists of an executive Chairman and two executive directors, who hold the key operational positionsin the Group and five non-executive directors, who bring a breadth of experience and knowledge.

Relations with shareholdersThe Group values the views of its shareholders and recognises their interest in the Group’s strategy andperformance. The Annual General Meeting will be used to communicate with private investors and they areencouraged to participate. The Directors will be available to answer questions. Separate resolutions will beproposed on each issue so that they can be given proper consideration and there will be a resolution to approve theannual report and accounts.

Internal controlThe Board is responsible for maintaining a strong system of internal control to safeguard shareholders’ investmentand the Group’s assets and for reviewing its effectiveness. The system of internal financial control is designed toprovide reasonable, but not absolute, assurance against material misstatement or loss.

An audit committee has been established and comprises three non-executive directors, Serge Grisard, MartinKnight and Ian McWalter. The Committee will meet at least half yearly and will be responsible for ensuring that thefinancial performance of the Group is properly monitored and reported on, as well as meeting the auditors andreviewing any reports from the auditors regarding accounts and internal control systems.

The Board has considered the need for an internal audit function but has decided the size of the Group does notjustify it at present. However, it will keep the decision under annual review.


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Corporate Governancecontinued

Going concernThe Directors have prepared profit and cashflow forecasts through to 30 June 2010 which incorporate the Groupand its subsidiary undertakings as at 31 December 2008, together with Future Waves UK Limited which became a100% subsidiary on 20 May 2009.

The key assumptions in preparing the forecasts are as follows:

l the costs for Toumaz Holding Limited reflect the changes to the Board structure since 31 December 2008;

l the development income from the strategic partnership between Toumaz Technology Limited and CardinalHealth will continue at the current levels;

l no further income will be generated by Toumaz Technology Limited from Texas Instruments beyond thatcontracted at the date of these financial statements;

l initial income will start to be generated by Toumaz Technology Limited from product sales in the second half of2009 and throughout 2010;

l Future Waves UK Limited generates sales of its Fenix 1 chip and settles the amounts due to ImaginationTechnologies Limited under the agreement with that company, as detailed in note 22; and

l the Group raises the following funds:

l the net proceeds of £2.4 million raised on 15 May 2009

l further funding from existing and new shareholders.

The Directors are confident that the fund raising will be successful but at the date of the financial statements it isnot completed nor committed.

The forecasts, underpinned by the assumption that the fund raising will be successful, demonstrate that the Groupis able to continue in business for a period of at least twelve months from the date of approval of the financialstatements. Accordingly the financial statements have been prepared on a going concern basis.


17

Report on Remunerationfor the year ended 31 December 2008

Directors’ remunerationThe Board recognises that Directors’ remuneration is of legitimate concern to shareholders. The Group operateswithin a competitive environment where performance depends on the individual contributions of the Directors andemployees and it believes in rewarding vision and innovation.

Policy on executive Directors’ remunerationThe Remuneration Committee meets at least twice a year and is responsible for recommending to the Board thepolicy and structure for the remuneration of the Executive Directors and senior management and approvingperformance based remuneration. The Remuneration Committee also fulfils the role of an options committee for theEmployee Share Option Scheme and its main duty in this context is to approve the grant of options to relevantemployees.

The policy of the Board is to provide executive remuneration packages designed to attract, motivate and retainDirectors of the calibre necessary to maintain the Group’s position and to reward them for enhancing shareholdervalue and return. It aims to provide sufficient levels of remuneration to do this, but to avoid paying more than isnecessary. The remuneration will also reflect the Directors’ responsibilities and contain incentives to deliver theGroup’s objectives. A separate remuneration committee has been established comprising three non-executivedirectors, Ian McWalter, Hossein Yassaie and Winston Wong.

The remuneration of the Directors for the year ended 31 December 2008 is as follows:

G Spelman R Rose G Porter C Toumazou S Grisard R Sykes P Tischhauser Total£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

2008Fees and emoluments 157 25 13 90 146 3 7 441

2007Fees and emoluments 109 30 10 90 121 – 7 367

Pensions and benefits in kindThe Directors did not participate in the Group’s pension scheme and do not receive any benefits in kind.

BonusesNo amounts are payable for bonuses in respect of the year ended 31 December 2008 or 31 December 2007.

Following the Board changes in May this year, the Directors Bonus Plan (“the Plan”) adopted for the Directors in2007 has been discontinued and the Remuneration Committee will consider this matter further and developmentswill be reported to shareholders as appropriate.

Notice periodsThe Directors have letters of appointment which are terminable on six months notice on either side for PatrickStephansen and on three months notice on either side for all other executive and non-executive directors.


18

Report on Remunerationcontinued

Share option incentivesAt 31 December 2008 and 31 December 2007, C Toumazou had an interest in options over 1,683,835 OrdinaryShares which were granted to him on 3 November 2005 in replacement of options that he held over shares inToumaz Technology Limited. These options vested on 31 May 2006 and are exercisable at an exercise price of 6.94pence per share at any time before September 2015.

On 24 October 2006, G Spelman was granted options over 2,000,000 Ordinary Shares at an exercise price of 8.75pence per share. The options were/are first exercisable as to 1,000,000 on 23 October 2008 and 1,000,000 on 23 October 2009 subject to the share price of the Company being in excess of 25 pence. The options expire on 24 October 2016.

On 20 November 2005, S Grisard was granted options over 1,000,000 Ordinary Shares at an exercise price of 8.5pence per share. The options were exercisable on 20 November 2008 subject to the share price of the Companybeing in excess of 25 pence. The options expire on 20 November 2016.

On 3 May 2005, P Stephansen was granted options over 1,000,000 Ordinary Shares. These options vested in April2007 and are exercisable as to 500,000 at an exercise price of 10 pence per share and, in respect of the balance, atan exercise price of 25 pence per share at any time before April 2015.

None of the other Directors had any interests in share options of the Company.


19

Report of the Independent Auditorsto the members of Toumaz Holdings Limited (formerly Nanoscience Inc.)

We have audited the consolidated financial statements of Tourmaz Holdings Limited (formerly Nanoscience Inc.)for the year ended 31 December 2008, which comprise the principal accounting policies, the consolidated incomestatement, the consolidated statement of changes in equity, the consolidated balance sheet, the consolidated cashflow statement and notes 1 to 22. These consolidated financial statements have been prepared under theaccounting policies set out therein.

This report is made solely to the Company’s members, as a body. Our audit work has been undertaken so that wemight state to the Company’s members those matters we are required to state to them in an auditors’ report and forno other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone otherthan the Company and the Company’s members as a body, for our audit work, for this report, or for the opinionswe have formed.

Respective responsibilities of the Directors and auditorsThe Directors’ responsibilities for preparing the Annual Report and the consolidated financial statements inaccordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EuropeanUnion are set out in the Statement of Directors’ Responsibilities.

Our responsibility is to audit the consolidated financial statements in accordance with relevant legal and regulatoryrequirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the consolidated financial statements give a true and fair view. We alsoreport to you whether, in our opinion, the information given in the Report of the Directors is consistent with theconsolidated financial statements. The information given in the Report of the Directors includes that specificinformation in the Chairman’s statement and the Chief Executive Officer’s report that is cross referenced from theReport of Directors.

In addition we report to you if, in our opinion, the Group has not kept proper accounting records, if we have notreceived all the information and explanations we require for our audit or if information specified by law regardingDirectors remuneration and transactions with the Group is not disclosed.

We read other information contained in the Annual Report, and consider whether it is consistent with the auditedconsolidated financial statements. This information comprises only the Chairman’s Statement, the Chief ExecutiveOfficer’s report, the Report of the Directors, the Corporate Governance report and the Report on Remuneration.We consider the implications for our report if we become aware of any apparent misstatements or materialinconsistencies with the consolidated financial statements. Our responsibilities do not extend to any otherinformation.

Basis of audit opinionWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by theAuditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts anddisclosures in the consolidated financial statements. It also includes an assessment of the significant estimates andjudgements made by the Directors in the preparation of the consolidated financial statements, and of whether theaccounting policies are appropriate to the Group’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considerednecessary in order to provide us with sufficient evidence to give reasonable assurance that the consolidatedfinancial statements are free from material misstatement, whether caused by fraud or other irregularity or error. Informing our opinion we also evaluated the overall adequacy of the presentation of information in the consolidatedfinancial statements.


20

Report of the Independent Auditorscontinued

OpinionIn our opinion:

l the consolidated financial statements give a true and fair view, in accordance with IFRSs as adopted by theEuropean Union, of the state of the Group’s affairs as at 31 December 2008 and of its loss for the year thenended; and

l the information given in the Report of the Directors is consistent with the financial statements for the yearended 31 December 2008.

Emphasis of matter – going concernIn forming our opinion, which is not qualified, we have considered the adequacy of the disclosure made in theprincipal accounting policies on page 22 concerning the Group’s ability to continue as a going concern. The Groupincurred a net loss of £2,235,000 during the year ended 31 December 2008. This condition, along with the othermatters explained in the principal accounting policies on page 22, in particular the requirement to raise furtherfunding from existing and new shareholders, indicate the existence of a material uncertainty which may castsignificant doubt about the Group’s ability to continue as a going concern. The financial statements do not includethe adjustments that would result if the Group was unable to continue as a going concern.

Grant Thornton UK LLPRegistered AuditorChartered AccountantsBirmingham

22 June 2009


21

Principal Accounting Policiesfor the year ended 31 December 2008

Basis of preparationThe Company was incorporated in the Cayman Islands which do not prescribe the adoption of any particularaccounting framework. The Board has therefore adopted and complied with International Financial ReportingStandards (IFRS) as adopted by the European Union. The Company’s shares are listed on the AIM market of theLondon Stock Exchange.

Going concernThe Directors have prepared profit and cashflow forecasts through to 30 June 2010 which incorporate the Groupand its subsidiary undertakings as at 31 December 2008, together with Future Waves UK Limited which became a100% subsidiary on 20 May 2009.

The key assumptions in preparing the forecasts are as follows:

l the costs for Toumaz Holding Limited reflect the changes to the Board structure since 31 December 2008;

l the development income from the strategic partnership between Toumaz Technology Limited and CardinalHealth will continue at the current levels;

l no further income will be generated by Toumaz Technology Limited from Texas Instruments beyond thatcontracted at the date of these financial statements;

l initial income will start to be generated by Toumaz Technology Limited from product sales in the second half of2009 and throughout 2010;

l Future Waves UK Limited generates sales of its Fenix 1 chip and settles the amounts due to ImaginationTechnologies Limited under the agreement with that company, as detailed in note 22; and

l the Group raises the following funds:

l the net proceeds of £2.4 million raised on 15 May 2009

l further funding from existing and new shareholders.

The Directors are confident that the fund raising will be successful but at the date of the financial statements it isnot completed nor committed.

The forecasts, underpinned by the assumption that the fund raising will be successful, demonstrate that the Groupis able to continue in business for a period of at least twelve months from the date of approval of the financialstatements. Accordingly the financial statements have been prepared on a going concern basis. The financialstatements do not include the adjustments that would result if the Group was unable to continue as a goingconcern.

The principal accounting policies of the Group are set out below.


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Principal Accounting Policiescontinued

Basis of consolidationThe Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn upto the balance sheet date. Subsidiaries are entities over which the Group has the power to control the financial andoperating policies so as to obtain benefits from their activities. The Group obtains and exercises control throughvoting rights.

Unrealised gains on transactions between the Group and its subsidiaries are eliminated. Unrealised losses are alsoeliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported inthe financial statements of subsidiaries have been adjusted where necessary to ensure consistency with theaccounting policies adopted by the Group.

Acquisitions of subsidiaries are dealt with by the purchase method. The purchase method involves the recognitionat fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the acquisitiondate, regardless of whether or not they were recorded in the financial statements of the subsidiary prior toacquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the consolidated balancesheet at their fair values, which are also used as the bases for subsequent measurement in accordance with theGroup accounting policies. Goodwill is stated after separating out identifiable intangible assets. Goodwillrepresents the excess of acquisition cost over the fair value of the Group’s share of the identifiable net assets of theacquired subsidiary at the date of acquisition.

RevenueThe Group follows the principles of IAS 18 “Revenue” in determining the appropriate revenue recognition policies.In principle therefore, revenue is recognised to the extent that the Group has obtained the right to considerationthrough its performance.

Revenue excluding VAT comprises revenue arising from development contracts. Development contracts aredesigned to meet the specific requirements of each customer. Revenue on such contracts is recognised on apercentage of completion basis over the period from signing the agreement to customer acceptance that thecontract deliverables have been fulfilled.

When invoicing milestones on development contracts are such that the proportion of work performed is greaterthan the proportion of total contract value, the Group evaluates whether it has obtained, through its performanceto date, the right to the uninvoiced consideration and therefore whether revenue should be recognised. Whereinvoices are raised that exceed the work performed the Group defers that excess revenue.

Associates and jointly controlled entitiesA jointly controlled entity is an entity which operates under a contractual agreement whereby the Group and otherparties undertake an economic activity that is subject to joint control and exists only when the strategic, financialand operating decisions relating to the activity require the unanimous consent of the venturers.

Associates are those entities over which the Group has significant influence but which are neither subsidiaries norinterests in joint ventures.

The Group’s interests in associates or jointly controlled entities are recognised initially at cost and subsequentlyaccounted for using the equity method. Acquired investments in associates or jointly controlled entities are alsosubject to purchase method accounting. However, any goodwill or fair value adjustment attributable to the share inthe associate or jointly controlled entities is included in the amount recognised as investment in associates or jointlycontrolled entities.


23


All subsequent changes to the share of interest in the equity of the associate or jointly controlled entity arerecognised in the Group’s carrying amount of the investment. The consolidated financial statements include theGroup’s share of the post acquisition, post tax results for the year, including any impairment loss on goodwillrelating to the interest in associates or jointly controlled entities and movements of reserves of jointly controlledentities on an equity accounting basis.

Items that have been recognised directly in the associate’s equity are recognised in the consolidated equity of theGroup. However, when the Group’s share of losses in an associate or jointly controlled entities equals or exceedsits interest in the associate or jointly controlled entity, including any unsecured receivables, the Group does notrecognise further losses, unless it has incurred obligations or made payments on behalf of the associate or jointlycontrolled entity. If the associate or jointly controlled entity subsequently reports profits, the investor resumesrecognising its share of those profits only after its share of the profits equals the share of losses not recognised.

Unrealised gains on transactions between the Group and its associates or jointly controlled entities are eliminatedto the extent of the Group’s interest in the associates or jointly controlled entities. Unrealised losses are alsoeliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported inthe financial statements of associates or jointly controlled entities have been adjusted where necessary to ensureconsistency with the accounting policies adopted by the Group.

GoodwillGoodwill, representing the excess of the cost of acquisition over the fair value of the Group’s share of theidentifiable net assets acquired, is capitalised and reviewed annually for impairment. Goodwill is carried at cost lessaccumulated impairment losses. Any excess in the net fair value of an acquiree’s identifiable net assets over the costof acquisition is recognised immediately after acquisition in the income statement.

TaxationCurrent income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relatingto the current or prior reporting period, that are unpaid at the balance sheet date. They are calculated according tothe tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable result for theyear. All changes to current tax assets or liabilities are recognised as a component of tax expense in the incomestatement.

Deferred income taxes are calculated using the liability method on temporary differences. This involves thecomparison of the carrying amounts of assets and liabilities in the consolidated financial statements with theirrespective tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initialrecognition of an asset or liability unless the related transaction is a business combination or affects tax oraccounting profit. Deferred tax on temporary differences associated with shares in subsidiaries, joint ventures andassociates is not provided if reversal of these temporary differences can be controlled by the Group and it isprobable the reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forwardas well as other income tax credits to the Group are assessed for recognition as deferred tax assets.

Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it isprobable that they will be able to be offset against future taxable income. Deferred tax assets and liabilities arecalculated, without discounting, at tax rates that are expected to apply to their respective period of realisation,provided they are enacted or substantively enacted at the balance sheet date.

Most changes in deferred tax assets or liabilities are recognised as a component of tax expense in the incomestatement. Only changes in deferred tax assets or liabilities that relate to a change in value of assets or liabilities thatis charged directly to equity are charged or credited directly to equity.


24


Intangible assetsIntellectual property rightsThe costs of creating and protecting internally generated property, patents and know-how are written-off to theincome statement in the period in which they are incurred if they do not meet the recognition criteria in IAS38Intangible Assets.

The costs of acquiring rights to the use of third party intellectual property are capitalised and, subject to impairmentreviews, amortised over the estimated economic life of the intellectual property concerned. Amortisation iscalculated so as to write off the cost of an asset, less its estimated residual value on a straight line basis over theuseful economic life of the asset as follows:

Intellectual property rights 4-9 years

Assets acquired as part of a business combinationIn accordance with IFRS 3 “Business Combinations”, an intangible asset acquired in a business combination isdeemed to have a cost to the Group of its fair value at the acquisition date. The fair value of the intangible assetreflects market expectations about the probability that the future economic benefits embodied in the asset will flowto the Group. The fair value is then amortised over the economic life of the asset. Where an intangible asset mightbe separable, but only together with a related tangible or intangible asset, the Group of assets is recognised as asingle asset separately from goodwill where the individual fair values of the assets in the Group are not reliablymeasurable. Where the individual fair value of the complimentary assets are reliably measurable, the Grouprecognises them as a single asset provided the individual assets have similar useful lives.

Research and developmentExpenditure on research activities is recognised in the income statement as an expense as incurred.

Expenditure on development activities is capitalised if the product or process is technically and commerciallyfeasible, the Group intends to and has the ability to complete the intangible asset and use or sell it, the intangibleasset will generate probable future economic benefits, the expenditure on the intangible asset can be reliablymeasured and the Group has sufficient resources to complete its development. The expenditure capitalisedincludes the cost of materials, direct labour and an appropriate proportion of overheads. Other developmentexpenditure is recognised in the income statement as an expense as incurred. Capitalised developmentexpenditure is stated at cost less accumulated amortisation and impairment losses.

Impairment testing of goodwill, other intangible assets, property, plant andequipment, interests in joint ventures, interests in associate and other investmentsFor the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separatelyidentifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment andsome are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expectedto benefit from synergies of the related business combination and represent the lowest level within the Group atwhich management monitors the related cash flows.

Goodwill, other individual assets or cash-generating units that include goodwill, other intangible assets with anindefinite useful life, and those intangible assets not yet available for use are tested for impairment at least annually.All other individual assets or cash-generating units are tested for impairment whenever events or changes incircumstances indicate that the carrying amount may not be recoverable.


25


An impairment loss is recognised in the income statement for the amount by which the asset’s or cash-generatingunit’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value,reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation.Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initiallyto the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cashgenerating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that animpairment loss previously recognised may no longer exist. An impairment loss is reversed if there has been afavourable change in the estimates used to determine the assets recoverable amount and only to the extent that theasset’s carrying amount does not exceed the carrying amount that would have been determined, net ofamortisation, if no impairment loss had been recognised.

Financial assetsThe Group’s financial assets include investments in shares, cash and trade and other receivables.

All financial assets are recognised when the Group becomes party to the contractual provisions of the instrument.All financial assets are initially recognised at fair value, plus transaction costs.

Non-compounding interest and other cash flows resulting from holding financial assets are recognised in theincome statement when received, regardless of how the related carrying amount of financial assets is measured.

Available for sale financial assets include non-derivative financial assets that are either designated as such or do notqualify for inclusion in other categories of financial assets. Available for sale financial assets are measuredsubsequently at fair value with changes in value recognised in equity through the statement of changes in equity.Where the fair value cannot be measured reliably such financial assets are held at cost. Gains or losses arising frominvestments classified as available for sale are recognised in the income statement when they are sold or when theinvestment is impaired.

Trade and other receivables are subsequently measured at amortised cost. Trade and other receivables areprovided against when objective evidence is received that the Group will not be able to collect all amounts due toit in accordance with the original terms of the receivables. The amount of the write-down is determined as thedifference between the asset’s carrying amount and the present value of estimated future cash flows.

Cash and cash equivalentsCash and cash equivalents comprise cash on hand, bank demand deposits, together with other short-term highlyliquid investments that are readily convertible into known amounts of cash and which are subject to an insignificantrisk of changes in value with original maturities of three months or less from the date of acquisition.

EquityThe share capital is determined using the nominal value of shares that have been issued.

The share premium account represents premiums received on the initial issuing of the share capital. Any transactioncosts associated with the issuing of shares are deducted from share premium, net of any related income taxbenefits.

Share based payment reserve represents the cumulative amount which has been expensed in the income statementin connection with share based payments, less any amounts transferred to the profit and loss account on theexercise of share options.

Retained earnings include all current and prior period results as disclosed in the income statement.


26


Share based paymentsAll share based payment arrangements are recognised in the financial statements. The Group operates equity-settled share based remuneration plans for remuneration of its employees and has issued a share warrant.

All services received in exchange for the grant of any share-based remuneration are measured at their fair values.These are indirectly determined by reference to the fair value of the share options/warrants awarded. Their valueis appraised at the grant date and excludes the impact of any non-market vesting conditions (for example,profitability and sales growth targets).

Share based payments are ultimately recognised as an expense in the income statement with a corresponding creditto the share based payment reserve, net of deferred tax where applicable. If vesting periods or other vestingconditions apply, the expense is allocated over the vesting period, based on the best available estimate of thenumber of share options/warrants expected to vest. Non-market vesting conditions are included in assumptionsabout the number of options that are expected to become exercisable. Estimates are subsequently revised, if thereis any indication that the number of share options/warrants expected to vest differs from previous estimates. Noadjustment is made to the expense or share issue cost recognised in subsequent periods if fewer shareoptions/warrants ultimately are exercised than originally estimated.

Upon exercise of share options/warrants, the proceeds received net of any directly attributable transaction costs upto the nominal value of the shares issued are allocated to share capital with any excess being recorded as sharepremium.

Financial liabilitiesThe Group’s financial liabilities include trade and other payables. Financial liabilities are obligations to pay cash orother financial assets and are recognised when the Group becomes a party to the contractual provisions of theinstrument.

All financial liabilities are recognised initially at fair value, net of direct issue costs, and are subsequently recordedat amortised cost using the effective interest method with interest related charges recognised as an expense in theincome statement.

Dividend distributions to shareholders are included in ‘other short term financial liabilities’ when the dividends areapproved by the shareholders’ before the year end.

Provisions, contingent liabilities and contingent assetsProvisions are recognised when present obligations will probably lead to an outflow of economic resources fromthe Group and they can be estimated reliably. Timing or amount of the outflow may still be uncertain. A presentobligation arises from the presence of a legal or constructive commitment that has resulted from past events, forexample, legal disputes or onerous contracts.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the mostreliable evidence available at the balance sheet date, including the risks and uncertainties associated with thepresent obligation. Any reimbursement expected to be received in the course of settlement of the presentobligation is recognised, if virtually certain as a separate asset, not exceeding the amount of the related provision.Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement isdetermined by considering the class of obligations as a whole. In addition, long term provisions are discounted totheir present values, where time value of money is material. All provisions are reviewed at each balance sheet dateand adjusted to reflect the current best estimate.

In those cases where the possible outflow of economic resource as a result of present obligations is consideredimprobable or remote, or the amount to be provided for cannot be measured reliably, no liability is recognised inthe balance sheet. Probable inflows of economic benefits to the Group that do not yet meet the recognition criteriaof an asset are considered contingent assets.


27


Property, plant and equipment(i) Measurement bases

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Thecost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to theworking condition and location for its intended use. Subsequent expenditure relating to property, plant andequipment is added to the carrying amount of the assets only when it is probable that future economicbenefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Allother costs, such as repairs and maintenance are charged to the income statement during the period in whichthey are incurred.

When assets are sold, any gain or loss resulting from their disposal, being the difference between the netdisposal proceeds and the carrying amount of the assets, is included in the income statement.

(ii) DepreciationDepreciation is calculated so as to write off the cost of property, plant and equipment, less its estimatedresidual value, which is revised annually, over its useful economic life as follows:

Leasehold improvements 33.3% straight lineOffice equipment 33.3% straight lineFixtures and fittings 25% straight lineComputer equipment 33.3% straight line

Retirement benefit schemeThe Group operates a defined contribution retirement benefit scheme. The assets of the scheme are heldseparately from those of the Group in independently administered funds. Entrants into this scheme are entitled tohave a percentage of their basic salary paid into the scheme by the Group. These contributions are charged to theincome statement as an employee benefit expense in respect of the accounting period in which they becomepayable.

Foreign currenciesThe financial statements are presented in UK Sterling which is the presentational currency of the Group. Monetaryassets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balancesheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the dateof the transaction. Exchange differences are taken into account in arriving at the operating profit or loss.

Segmental reportingA segment is a distinguishable component of the Group that is engaged either in a particular business (businesssegment) or conducting business in a particular geographical area (geographical segment), which is subject to risksand rewards that are different from those of other segments.


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Critical accounting estimates and judgementsEstimates and judgements are continually evaluated and are based on historical experience and other factors,including expectations of future events that are believed to be reasonable under the circumstances.

(i) Critical accounting estimates and assumptionsThe Group makes estimates and assumptions concerning the future. The resulting accounting estimates will,by definition, seldom equal the related actual results. The estimates and assumptions that have a significantrisk of causing a material adjustment to the carrying amounts of assets and liabilities within the nextaccounting year are discussed below:

Going ConcernThe financial statements have been prepared on the going concern basis. As detailed in the section aboveheaded ‘Going Concern’ the preparation of the financial statements on the going concern basis is dependenton fund raising which is not completed nor committed. Therefore, there is some uncertainty over theappropriatenesss of preparing the financial statements on a going concern basis.

Impairment of assetsThe Group conducts impairment reviews of assets when events or changes in circumstances indicate thattheir carrying amounts may not be recoverable annually, or in accordance with the relevant accountingstandards. An impairment loss is recognised when the carrying amount of an asset is lower than the greaterof its net selling price or the value in use. In determining the value in use, management assesses the presentvalue of the estimated future cash flows expected to arise from the continuing use of the asset and from itsdisposal at the end of its useful life. Estimates and judgments are applied in determining these future cashflows and the discount rate. Details of the estimates and assumptions made in respect of the potentialimpairment of intellectual property, goodwill on consolidation, interests in joint venture and interests inassociate are detailed in notes 5,7 and 8 to the financial statements.

Valuations of share options grantedThe fair value of share options granted was calculated using a standard methodology, called the Binomialoption pricing model, which requires the input of highly subjective assumptions, including the volatility ofshare price. Because changes in subjective input assumptions can materially affect the fair value estimate, inthe opinion of Directors of the Company, the existing model will not always necessarily provide a reliablesingle measure of the fair value of the share options. Details of the inputs are set out in note 18 to the financialstatements.

(ii) Critical judgements in applying the Group’s accounting policiesManagement in applying the accounting policies, which are described above, considers that the mostsignificant judgement they have had to make is whether any impairment provision is required against theintellectual property, goodwill on consolidation and interests in associate as detailed in Notes 5 and 8 to thefinancial statements.


29


Adoption of new or amended IFRSThe Group has not early adopted the following new standards, amendments or interpretations that have beenissued but are not yet effective. Except for IAS 1 and IFRS 8 which will result in changes in the future as to how theGroup’s financial performance and financial position are prepared and presented, the Directors anticipate that theadoption of these other standards will not result in significant changes to the Group’s accounting policies. TheGroup has commenced its assessment of the impact of IAS 1 and IFRS 8 but it is not yet in a position to state whetherthese standards would have a material impact on its results of operations and financial position.

IAS 1 Presentation of financial statements Effective for annual periods beginning on (revised 2007) or after 1 January 2009.

IAS 23 Borrowing costs (revised 2007) Effective for annual periods beginning on or after 1 January 2009.

IAS 27 Consolidated separate financial statements – Effective for annual periods beginning on consequential amendments arising from or after 1 July 2009.amendments to IFRS 3

IFRS 2 Amendments to IFRS 2 share based payment – Effective for annual periods beginning on vesting conditions and cancellations or after 1 January 2009.

IFRS 7 Amendment to IFRS7 – Financial instruments: Effective for annual periods beginning on disclosures – improving disclosures about or after 1 January 2009.financial instruments

IAS39/IFRIC 9 Embedded derivatives – amendments to Effective for annual periods ending on or IAS39 and IFRIC 9 after 30 June 2009.

IFRS 3 Business Combinations – (revised 2008) Effective for annual periods beginning on or after 1 July 2009.

IFRS 8 Operating segments Effective for annual periods beginning on or after 1 January 2009.

IFRIC 17 Distributions of non-cash assets to owners Effective for annual periods beginning on or after 1 July 2009

IFRIC 18 Transfers of assets from customers Effective prospectively for transfers on or after 1 July 2009


30

Consolidated Income Statementfor the year ended 31 December 2008

2008 2007Note £’000 £’000

Revenue 1 2,754 174

Cost of sales (736) (209)

Gross profit/(loss) 2,018 (35)

Administrative expenses – amortisation of intellectual property 5 (534) (534)Administrative expenses – impairment of available for sale investments 9 – (391)Administrative expenses – other (4,599) (3,658)

Total administrative expenses (5,133) (4,583)

Loss from operations (3,115) (4,618)

Result from equity accounted joint venture 7 (162) (10)Impairment of equity accounted joint venture (204) –Result from equity accounted associate 8 (576) (1,537)Reversal of impairment/(impairment) of equity accounted associate 8 1,249 (1,643)Finance income 2 133 82

Loss before taxation 1 (2,675) (7,726)

Taxation 3 440 392

Loss after taxation and retained loss attributable to the equity holders of the company (2,235) (7,334)

Loss per ordinary share (pence)Basic and diluted 4 (1.01p) (3.67p)

All operations are continuing.

There were no recognised gains or losses other than the loss for the financial year.

The accompanying principal accounting policies and notes form an integral part of these financial statements.


31

Consolidated Statement of Changes in Equityfor the year ended 31 December 2008

Sharebased

Share Share payment Retained Totalcapital premium reserve earnings equity£’000 £’000 £’000 £’000 £’000

At 1 January 2007 462 22,837 405 (4,907) 18,797

Loss for the year – – – (7,334) (7,334)

Total recognised income and expense for the year – – – (7,334) (7,334)

Issue of share capital 82 3,182 – – 3,264

Cost of share issue – (86) – – (86)

Share based payments – – 178 – 178

Transfer on exercise of options – – (8) 8 –

At 31 December 2007 544 25,933 575 (12,233) 14,819

Loss for the year – – – (2,235) (2,235)

Total recognised income and expense for the year – – – (2,235) (2,235)

Issue of share capital 58 1,337 – – 1,395

Cost of share issue – (33) – – (33)

Share based payments – – 176 – 176

At 31 December 2008 602 27,237 751 (14,468) 14,122



32

Consolidated Balance Sheetat 31 December 2008

2008 2007Note £’000 £’000

AssetsNon-current assetsIntangible assets 5 12,901 13,435Property, plant and equipment 6 171 60Interests in joint venture 7 28 208Interests in associate 8 1,407 –

14,507 13,703

Current assetsInventories 10 120 15Tax receivable 439 392Trade and other receivables 11 888 377Cash and cash equivalents 296 1,535

Total current assets 1,743 2,319

Total assets 16,250 16,022

LiabilitiesCurrent liabilitiesTrade and other payables 12 1,628 594

Total current liabilities 1,628 594

Non-current liabilities 12 500 609

Total liabilities 2,128 1,203

EquityShare capital 13 602 544Share premium 27,237 25,933Share based payment reserve 751 575Retained earnings (14,468) (12,233)

Total equity attributable to equity holders of the Company 14,122 14,819

Total equity and liabilities 16,250 16,022

The consolidated financial statements were approved by the Board on 22 June 2009.

Patrick StephansenDirector



33

Consolidated Cash Flow Statementfor the year ended 31 December 2008

2008 2007£’000 £’000

Cash flows from operating activitiesLoss before taxation (2,675) (7,726)Amortisation 534 534Depreciation 63 50Share of loss of associates 576 1,537Reversal of impairment/(impairment) of equity accounted associate (1,249) 1,643Impairment of available for sale investments – 391Share of loss of joint venture 162 10Provision against loan from joint venture 204 –Share based payments 176 178Interest receivable (133) (82)Increase in inventories (105) (15)Increase in trade and other receivables (511) (48)Increase in trade and other payables 925 160Tax refund 393 414

Net cash outflow from operating activities (1,640) (2,954)

Cash flows from investing activitiesPurchase of and loans to joint ventures and associates (822) (1,030)Purchase of property, plant and equipment (175) (32)Interest received 36 82

Net cash used in investing activities (961) (980)

Cash flows from financing activitiesProceeds from issue of share capital 1,395 3,264Share issue costs (33) (86)

Net cash inflow from financing activities 1,362 3,178

Net change in cash and cash equivalents (1,239) (756)

Cash and cash equivalents at beginning of period 1,535 2,291

Cash and cash equivalents at end of period 296 1,535



34

Notes to the Financial Statementsfor the year ended 31 December 2008

1 Revenue, loss before taxation and segmental informationRevenue and loss before taxationThe revenue and loss before taxation is attributable to the principal activities of the Group.

The loss before taxation is stated after charging:2008 2007£’000 £’000

Share based payment expense 176 178Staff costs 2,361 1,712Research and development costs written off 2,222 1,782Amortisation of intangible assets 534 534Depreciation of owned fixed assets 64 50Auditors remuneration:Fees payable to the Company’s auditors of the Company financial statements 30 30Fees payable to the Company’s auditors for other services– audit of the Company’s subsidiaries pursuant to the legislation 13 13– taxation services 5 5

Segmental information(a) Primary reporting format – business segment

As defined under International Accounting Standard 14 “Segment Reporting” (IAS 14), the only materialbusiness segment the Group has is that of the commercial exploitation of nano technologies.

(b) Secondary reporting format – geographical segmentUnder the definitions contained in IAS 14 the only material geographic segment that the Group operatesin is the UK.

2 Finance income 2008 2007£’000 £’000

Bank interest receivable 35 82Interest on loans to associate 98 –

133 82


35

Notes to the Financial Statementscontinued

3 TaxationThe tax credit for the period is as follows:

2008 2007£’000 £’000

Current taxUK corporation tax at 19% – –UK research and development tax credit (440) (392)

(440) (392)

The tax assessed for the period differs from the standard rate of corporation tax in the UK as follows:

2008 2007£’000 £’000

Loss before tax ` (2,675) (7,726)

Loss multiplied by standard rate of corporation tax in the UK of 28% (2007:30%) (749) (2,318)

Effect of:Disallowable expenses 170 156Research and development tax credit adjustment 28 98Losses not utilised 111 1,672

Tax credit for year (440) (392)

The Group has tax losses in the UK, of approximately £5.7 million (2007: £5.6 million) available for offsetagainst future operating profits. The Group has not recognised any deferred tax asset in respect of theselosses, which would amount to £1,596,000 (2007: £1,680,000) due to there being insufficient certaintyregarding its recovery.

4 Loss per shareThe calculation of the basic loss per share is based on the loss after tax of £2,235,000 (2007: £7,334,000)divided by the weighted average number of ordinary shares in issue during the year of 220,674,233 (2007: 199,783,178).

The impact of the share options and share warrant is anti dilutive.


36


5 Intangible assets Intellectual Goodwill onproperty consolidation Total

£’000 £’000 £’000

CostAt 1 January 2007, 31 December 2007 and 31 December 2008 4,016 10,582 14,598

AmortisationAt 1 January 2007 629 – 629Charge in the year 534 – 534

At 31 December 2007 1,163 – 1,163Charge in the year 534 – 534

At 31 December 2008 1,697 – 1,697

Net book amount at 31 December 2008 2,319 10,582 12,901

Net book amount at 31 December 2007 2,853 10,582 13,435

The goodwill on consolidation relates to the acquisition of Toumaz Technology Limited on 3 November 2005.The other intangible asset relates to the option to exploit certain intellectual property rights and intellectualproperty relating to the core technology acquired on the acquisition of Toumaz Technology Limited.

The Directors have tested the goodwill relating to the acquisition of Toumaz Technology Limited forimpairment in accordance with the Group’s accounting policy of testing goodwill annually for impairment. Inaddition they have tested the intellectual property for impairment as Toumaz Technology Limited incurredlosses in the year ended 31 December 2008 which is an indicator of impairment. As the goodwill andintellectual property relates to Toumaz Technology Limited the assets have been grouped as a single cash-generating unit when considering whether any impairment is required. The Directors, in assessing therecoverable amount for this cash-generating unit, have considered the technical feasibility of the ToumazTechnology Limited’s technology and the opportunities for commercial exploitation, including the positionwith the current commercial relationships entered into. On the basis of this, the Directors have produced afive year cashflow forecast to determine the value in use, using assumptions with regard to the sales andprofitability of Toumaz Technology Limited and using a discount rate of 19.7%. The discount rate of 19.7% hasbeen used given the level of risk with the technology. The key assumptions with regard to the sales andprofitability of Toumaz Technology Limited are as follows:

l development revenue is only received under existing contracts with Cardinal Health and Diadvisor

l product sales commence in the year ending 31 December 2010 and increase significantly for the threeyears ending 31 December 2013

l royalties are received in respect of the Cardinal Health/Carefusion opportunity in the year ending 31 December 2012 onwards

They have also sensitised these forecasts and have estimated sales forecasts would have to reduce by 50% interms of the Cardinal Health/Carefusion opportunity and 25% on other sales, without any reduction in director indirect costs, before an impairment of the cash generating unit is required.

On the basis of these calculations the Directors do not consider any impairment of the goodwill or intellectualproperty is required.


37


6 Property, plant and equipmentLeasehold Office Fixtures Computer

improvements equipment and fittings equipment Total£’000 £’000 £’000 £’000 £’000

CostAt 1 January 2007 55 37 18 155 265Additions – 12 20 – 32

At 31 December 2007 55 49 38 155 297Additions 141 – 1 33 175Disposals (55) – – (74) (129)

At 31 December 2008 141 49 39 114 343

DepreciationAt 1 January 2007 48 13 13 113 187Additions 7 14 25 4 50

At 31 December 2007 55 27 38 117 237Charge in the year 21 15 1 26 63On disposals (55) – – (73) (128)

At 31 December 2008 21 42 39 70 172

Net book amountAt 31 December 2008 120 7 – 44 171

At 31 December 2007 – 22 – 38 60

7 Interests in joint venture AmountsInvestment in due fromjoint venture joint venture Total

£’000 £’000 £’000

At 31 December 2006 – – –Additions in the year 50 168 218Group’s share of loss in the year (10) – (10)

At 31 December 2007 40 168 208Addition in year 150 36 186Group’s share of loss in the year (162) – (162)Provision against loans – (204) (204)

At 31 December 2008 28 – 28

The amounts due from the joint venture have been fully impaired due to uncertainty over the financial positionof Sentinel Healthcare Solutions Limited.


38


7 Interests in joint venture (continued)Summarised financial information in respect of the Group’s joint venture is set out below:

2008 2007£’000 £’000

Total assets 330 330Total liabilities (278) (26)

52 304

Group’s share of joint ventures net assets 26 152

Revenue 40 25Loss for the year (323) (21)

Group’s share of joint ventures loss for the year (162) (10)

At 31 December 2008, the following investments in joint venture were held by the Group:

ProportionClass of held by theShare subsidiary Country of Nature of

Name capital undertaking incorporation business

Sentinel Healthcare Ordinary 50.0% England and Wales Development and saleSolutions Limited of monitoring devices

As detailed in note 22 since the year end the Group acquired a further 31.25% share in Sentinel HealthcareSolutions Limited for £1 in cash and sold 76.25% of it’s shareholding.

8 Interests in associate AmountsInvestment in due from

associate associate Total£’000 £’000 £’000

At 1 January 2007 1,974 394 2,368Additions 812 – 812Group’s share of loss in the year (1,537) – (1,537)Impairment (1,249) (394) (1,643)

At 1 January 2008 – – –Additions 98 636 734Group’s share of loss in the year (576) – (576)Reversal of prior year impairment 1,249 – 1,249

At 31 December 2008 771 636 1,407

The carrying amount of the investment in associate includes goodwill recognised on the initial acquisition ofthe associate. Additions in the year represent further investments and sums loaned to Future Waves UKLimited.

On 28 March 2008 $1,900,000 of loan notes were converted into 410,637 shares of $4.63 or £2.30 per shareand an additional 33,258 shares representing $153,986 of interest relating to the investment by ToumazHoldings Limited. A further £160,000 and $67,500 of loan notes and £16,027 and £7,212 of interest wastransferred from Toumaz Technology Limited to Toumaz Holdings Limited and converted into 88,322 shares.


39


8 Interests in associate (continued)Summarised financial information in respect of the Group’s associate is set out below:

2008 2007£’000 £’000

Total assets 806 1,145Total liabilities (1,961) (1,726)

(1,155) (581)

Group’s share of associate’s net liabilities (199) (168)

Revenue 115 68Loss for the year (3,350) (5,315)

Group’s share of associate’s loss for the year (576) (1,537)

At 31 December 2008 the Board was in discussions to purchase the remaining share capital of Future WavesUK Limited. The valuation placed on Future Waves UK Limited was circa £9 million, which fully supports thecarrying value of the Group’s 17.2% holding at 31 December 2008, of £1,407,000. The acquisition of theremaining balance of shares was completed on 15 May 2009 valuing Future Waves UK Limited at £8.75million. On this basis the Directors have reversed the impairment provided against the investment in theassociate of £1,249,000 in the year ended 31 December 2007. The Company will not seek repayment of the£394,000 loan impaired in the year ended 31 December 2007 and so this impairment will not be reversed.

At 31 December 2008, the following investments in associate was held by the Group:

ProportionClass of held by theShare subsidiary Country of Nature of

Name capital undertaking incorporation business

Future Waves UK Limited Ordinary 17.2% England and Wales Development, manufacture and sale of

RF Tuner products

Future Waves UK Limited owns 100% of Future Waves Pte Ltd, a company registered in Singapore, throughwhich the business of the development, manufacture and sale of RF Tuner products is carried out.

9 Available for sale investmentsAvailable for sale investments represented the Group’s minority investments in Applied Sensor Sweden ABand XRT Limited which were stated at cost as the fair value could not be measured reliably.

The Directors considered in the year ended 31 December 2007 that the recoverable value of the available forsale investments was £nil as there is considerable uncertainty with regard to the future profitability of AppliedSensor Sweden AB and XRT Limited and so fully provided against the cost of £391,000 in that year.


40


10 Inventories 2008 2007£’000 £’000

Consumables and small parts 120 15

11 Trade and other receivables 2008 2007£’000 £’000

Trade receivables 477 195Other debtors 126 101Prepayments and accrued income 285 81

888 377

Trade and other receivables are usually due within 30-60 days and do not bear any effective interest rate. Noprovision for doubtful debts has been provided at 31 December 2008 or 2007.

The fair value of these short term financial assets is not individually determined as the carrying amount is areasonable approximation of fair value.

At the balance sheet date, trade receivables are aged as follows:2008 2007£’000 £’000

0-30 days 143 14831-60 days 227 1561-90 days 2 1Over 90 days 27 31

399 195

All trade and other receivables have been reviewed for indicators of impairment based on the age of thebalances outstanding and the credit worthiness of the third parties from which these balances are due. Duringthe year certain trade receivables were found to be impaired and a provision of £32,000 (2007: £nil) has beenmade accordingly. The movement in the provision for impairment during the year is as follows:

£’000

At 1 January 2007 –Increase in provision for impairment –

At 31 December 2007 –Increase in provision for impairment 32

At 31 December 2008 32

Of the above trade receivables £27,000 which are all over 90 days old, are past due but are considered to befully recoverable by the Directors.


41


12 Trade and other payables 2008 2007£’000 £’000

CurrentTrade payables 840 165Other payables 142 62Accruals 646 367

1,628 594

All of the above are due within one year.2008 2007£’000 £’000

Non currentAccruals and deferred income 500 609

The fair value of trade and other payables has not been disclosed as, due to their short duration, managementconsiders the carrying amounts recognised in the balance sheet to be a reasonable approximation of their fairvalue.

13 Share capital 2008 2007£’000 £’000

Authorised4,000,000,000 ordinary shares of 0.25p 10,000 10,000

Allotted, issued and fully paid240,717,469 (2007: 217,459,138) ordinary shares of 0.25p 602 544

The movement in the number of shares is as follows:Number of

ordinary shares

At 31 December 2006 184,634,639Shares issued 32,824,499

At 31 December 2007 217,459,138Shares issued 23,258,331

At 31 December 2008 240,717,469

Allotments during the yearOn 15 October 2008 and on 28 November 2008, 9,300,000 and 13,958,331 ordinary shares of 0.25p wereissued in each case at 6.0p each in order to provide working capital. The difference between the totalconsideration received of £1,395,500 and the total nominal value of shares issued of £58,146 has beentransferred to share premium account.

Options and warrantsAt 31 December 2008, options over 4,683,835 Ordinary Shares were in issue to directors serving at that dateas disclosed in the Report on Remuneration. In addition, at that date the Company has in issue 10,745,157further options of which 1,000,000 were in issue to Patrick Stephansen who has subsequently been appointedto the Board. Details of the fair value of all options in existence is provided in Note 18.

On 21 February 2005, a warrant was issued to Strand Partners Limited, the Company’s nominated adviser, inconnection with their role in the admission of the Company to the AIM market to subscribe at a price of 10 penceper share for such number of Ordinary Shares as are equivalent (on a fully-diluted basis) to the lower of 1% ofthe issued ordinary share capital of the Company at the time of exercise or a maximum of 1,000,000 OrdinaryShares. The warrant may be exercised at any time during the period from 8 March 2005 to 8 March 2010.


42


14 Contingent liabilitiesThere were no contingent liabilities at 31 December 2008 or 31 December 2007.

15 Capital commitmentsThere were no capital commitments at 31 December 2008 or 31 December 2007.

16 Financial instrumentsThe Group uses financial instruments comprising cash and cash equivalents, other loans and various othershort-term instruments such as trade receivables and trade payables which arise from its operations. The mainpurpose of these financial instruments is to fund the Group’s business strategy and the short-term workingcapital requirements of the business.

Financial assets by categoryThe IAS 39 categories of financial asset included in the balance sheet and the headings in which they areincluded are as follows:

2008 2007Loans Non Balance Loans Non Balanceand financial sheet and financial sheet

receivables assets total receivables assets total£’000 £’000 £’000 £’000 £’000 £’000

Trade receivables 477 – 477 195 – 195Other receivables 126 – 126 101 – 101Prepayments and accrued income – 285 285 – 81 81Cash and cash equivalents 296 – 296 1,535 – 1,535

Total 899 285 1,184 1,831 81 1,912

Financial liabilities by categoryThe IAS 39 categories of financial liability included in the balance sheet and the headings in which they areincluded are as follows:

2008 2007Other Liabilities Other Liabilities

financial not financial notliabilities at within the liabilities at within theamortised scope of amortised scope of

cost IAS 39 Total cost IAS 39 Total£’000 £’000 £’000 £’000 £’000 £’000

Other loans 500 – 500 – – –Trade payables 840 – 840 165 – 165Other payables 142 – 142 62 – 62Accruals – 646 646 – 976 976

Total 1,482 646 2,128 227 976 1,203

The Group is exposed to a variety of financial risks which result from both its operating and investing activities.The Board is responsible for co-ordinating the Group’s risk management and focuses on actively securing theGroup’s short to medium term cash flows. Long term financial investments are managed to generate lastingreturns.


43


16 Financial instruments (continued)The Group does not actively engage in the trading of financial assets and has no financial derivatives. Themost significant risks to which the Group is exposed are described below:

Credit riskThe Group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the balancesheet are net of any allowance for doubtful receivables, estimated by the Directors. The Group has nosignificant concentration of credit risk, with exposure spread over a number of customers.

Liquidity risksThe Group seeks to manage risks to ensure sufficient liquidity is available to meet foreseeable needs and toinvest cash assets safely and profitably. Short term flexibility is achieved by the use of money markets todeposit excess cash which is not required in the short term. The Directors prepare rolling cashflow forecastsand seek to raise additional funding whenever a shortfall in facilities is forecast. Details of the funding statusof the Group are included in the going concern paragraph in the principal accounting policies.

Currency risksThe Group is exposed to translation foreign exchange risk in connection with its investment in Future WavesUK Limited whose subsidiary, FutureWaves Pte Ltd, is a Singapore incorporated company engaged in thedesign and development and the trading of integrated circuits, which it does not seek to hedge. Future WavesUK Limited carries out transactions in US dollars and therefore the Group is subject to foreign currency risk inrespect of accounting for it’s share of the losses of it’s investment in the associate.

17 Related party transactionsDuring the year, companies within the Group headed by a shareholder in the Company, provided accountingand administrative services to the Group amounting to £nil (2007: £22,525). At the year end £nil (2007: £nil)was owed to these companies by the Group.

18 Employee remuneration(i) Employee benefits expense

The average number of employees during the year was 41 (2007: 24).

Expense recognised for employee benefits, including Directors’ emoluments, is analysed below:

2008 2007£’000 £’000

Wages and salaries 2,131 1,688Share based payment 176 178Pensions – defined contribution scheme 54 24

2,361 1,890

Included within the above are amounts in respect of Directors, who are also considered to be the keymanagement personnel, as follows:

2008 2007£’000 £’000

Fees and emoluments 441 367Share based payment 32 39

473 406


44


18 Employee remuneration (continued)(ii) Equity compensation benefits

The Group has adopted an employee Share Option Scheme (the “Employee Share Option Scheme”) inorder to incentivise key management and staff. Pursuant to the Employee Share Option Scheme, a dulyauthorised committee of the Board of Directors of the Company may, at its discretion, grant options toeligible employees, including Directors, of the Company or any of its subsidiaries to subscribe for sharesin the Company at a price not less than the higher of (i) the closing price of the shares of the Companyon the Stock Exchange on the date of grant of the particular option or (ii) the average of the closingprices of the shares of the Company for the five trading days immediately preceding the date of thegrant of the options or (iii) the nominal value of the shares. Options which lapse or are cancelled priorto their exercise date are deleted from the register of outstanding options and are available for re-use.The fair value of options granted was determined using the Black-Scholes valuation model. Significantinputs into the calculation’s were as follows:l 50% volatility based on expected share price (ascertained by reference to historic share prices of

both the Company and comparable listed companies)l a risk free interest rate of between 3.5% and 5.0%l share prices at date of grant of between 8.0p and 16.5pl exercise prices of between 3.6p and 25pl 0% dividend yieldl estimated option lives of between 24 months and 60 months

At 31 December 2008, the Group had the following options outstanding:Shareprice

Exercise at dateDate of original grant Dates exercisable price of issue Number Fair value

13 January 2003 50% after 13 January 2005 3.6p 16.25p 2,016,224 12.95p and and 50% after 13 January 2006 13.12p

26 September 2003 50% after 26 September 2005 3.6p 16.25p 288,032 12.92p and and 50% after 26 September 2006 13.08p

3 March 2005 50% after 3 March 2007 5.2p 16.25p 3,744,416 12.58pand 50% after 3 March 2008

3 May 2005 50% after 1 May 2007 10p and 8p 1,000,000 1.85p and and 50% after 2 May 2008 25p 0.28p

30 September 2005 After 31 May 2006 6.94p 16.25p 2,880,320 9.54p

Issued prior to the acquisition of Tourmaz Technology Limited 9,928,992

24 October 2006 50% after 23 October 2008 8.75p 8.75p 2,000,000 2.72p and and 50% after 23 October 2009 3.35psubject to a share price of 25p

20 November 2006 50% after 19 November 2008 8.5p 8.5p 1,000,000 2.66p and and 50% after 19 November 2009 3.28psubject to a share price of 25p

13 March 2007 50% after 13 March 2009 and 50% after 13 March 2010 9.75p 9.75p 2,500,000 3.99psubject to last 12 months revenue being greater than £12 million and the last six months average monthly revenue is greater than £750,000

15,428,992


45


18 Employee remuneration (continued)The movement on share options and their weighted average exercise price are as follows:

Weightedaverage

exercise price Number (pence)

Outstanding at 1 January 2008 and at 31 December 2008 15,428,992 7.56

Of the 15,428,992 share options in existence at 31 December 2008, 11,428,992 are exercisable.

The weighted average remaining contractual life of share options outstanding at 31 December 2007 is6.7 years (2007: 7.7 years).

No options have been exercised or lapsed or fresh options granted after 31 December 2008.

Employee share-based expense of £176,000 (2007: £178,000) has been included in the consolidatedincome statement in accordance with IFRS 2 “Share Based Payments” which gave rise to a share basedpayment reserve. No liabilities were recognised due to share-based payment transactions. The deferredtax asset amounting to approximately £49,000 (2006: £53,000) has not been provided on the share-based payment expense due to there being insufficient certainty regarding its recovery.

19 Approval of the financial statementsThe financial statements were approved by the Board of Directors on 22 June 2009.

20 Principal subsidiary undertakingsName Principal activity Place of incorporation

Tourmaz Technology Limited Nano technology England and WalesNanoscience Limited Dormant England and Wales


46


21 Capital managementThe Company’s capital management objectives are:

l to ensure the Company’s ability to continue as a going concern;

l to provide an adequate return to shareholders;

l to support the group’s stability and growth;

l to provide capital for the purpose of strengthening the Group’s risk management capability; and

l to provide capital for the purpose of further investments.

The Group actively and regularly reviews and manages its capital structure to ensure an optimal capitalstructure and to maximise equity holder returns, taking into consideration the future capital requirements ofthe Group and capital efficiency, prevailing and projected profitability, projected operating cash flows,projected capital expenditures and projected strategic investment opportunities. The management regardscapital as total equity and reserves, for capital management purposes.

22 Post balance sheet eventsSentinel Healthcare Limited (“Sentinel”)On 15 January 2009 Toumaz Holdings Limited increased its total interest in Sentinel from 50.0% to 81.25%having acquired the additional 31.25% shareholding from Continum Group Limited for £1 in cash. However,following a review of its activities the decision was taken by the Board to dispose of the majority of this interestin Sentinel to reflect the Group’s increased focus on its two primary investments Future Waves UK Limitedand the wholly-owned subsidiary undertaking, Toumaz Technology Limited. Accordingly, on 14 April 2009Toumaz Holdings Limited disposed of 76.25 per cent. of its shareholding of Sentinel for a consideration of£25,000 to Neil Bryant, a director of Sentinel. Toumaz Holdings Limited retained a five per cent. shareholdingin Sentinel. For the year to 31 December 2008, Sentinel made a loss of £323,000.

Placing of shares On 26 January 2009 Toumaz Holdings Limited raised £561,631.28 by way of a placing of 9,360,538 newordinary shares of 0.25p each (‘Placing Shares’) in the Company at a price of 6p. The placing completed thethree-stage fundraising that was previously announced on 16 October 2008 and 26 November 2008 wherethe shares were also placed at 6p.

In addition, on 15 May 2009, as part of wider arrangements referred to below, Toumaz Holdings Limitedplaced 48,333,333 new Ordinary Shares of 0.25p each at a price of 6p, with certain existing and newshareholders to raise £2.9 million before expenses.

Acquisition of Future Waves UK Limited (“Future Waves”)On 20 May 2009, Toumaz Holdings Limited acquired the remaining share capital of Future Waves UK Limited(`Future Waves’), in which it already held a 23.2 per cent. interest, on the basis of a share swap on a two forone relative valuation. Under the proposals, Future Waves shareholders received 16.22 new ordinary sharesin Toumaz Holdings Limited for each ordinary Future Waves share resulting in the issue of an additional91,836,779 new ordinary shares in the Company. Toumaz Holdings Limited intends to consolidate Futurewaves with Toumaz Technology Limited (`Toumaz Technology’) to benefit from technology and costsynergies.


47


22 Post balance sheet events (continued)The book values under IFRS and the provisional fair values of the assets and liabilities of the acquired entityas at the date of acquisition were as follows:

Book valuebefore Fair value

acquisition Fair value to Toumazunder IFRS adjustments Holdings

$000 $000 $000

Non-current assetsProperty, plant and equipment 352 – 352

Current assetsInventory 122 – 122Trade and other receivables 296 – 296Cash and cash equivalents 39 – 39

Total assets 809 – 809

Current liabilitiesTrade and other payables (2,674) – (2,674)

Total liabilities (2,674) – (2,674)

Net liabilities (1,865) – (1,865)

£’000 £’000 £’000

Sterling equivalent (at US$1.523:£1) (1,225) – (1,225)

Proportion acquired (76.8%) (940) – (940)Goodwill arising on acquisition 6,510 – 6,510

Consideration 5,570 – 5,570

Consideration is represented by:

Fair value of shares issued (91,836,779 shares at 6p, being the market value of the shares at the date of acquisition) 5,510Cost associated with the acquisition, settled in cash 60

5,570

The intangible assets of Future Waves will be independently valued and any remaining difference betweenthe fair value of net liabilities acquired and the fair value of the consideration will be treated as goodwill.

In addition, Future Waves employee share options were transferred and converted into Toumaz HoldingsLimited share options representing a total of 8,507,390 options. A fair value adjustment in respect of thecancellation of the old share options and new share based payment charge will be made and the goodwill willbe reduced accordingly.


48


22 Post balance sheet events (continued)License agreement with Imagination Technologies Limited (`Imagination’)On 14 May 2009 Toumaz Holdings Limited entered into an agreement with Imagination, a leading provider ofSystem-on-Chip (SoC) silicon IP, to license a next generation communication and digital radio multimedia IPplatform. The agreement is applicable to both Future Waves and Toumaz Technology. The intention of theagreement is to further develop the existing co-operation between Toumaz Holdings and Imagination and alsoexpand collaboration into new areas.

The consideration for the license deal will consist of a number of payments scheduled over the duration of theGroup’s development projects. The first of these payments, amounting to US$2.5 million, was settled throughthe issue of 28,153,153 new ordinary shares in Toumaz Holdings Limited on 14 May 2009. The remainder ofthe payments will be settled in cash.

The proposals to acquire Future Waves and to enter into the agreement with Imagination Technologies wereapproved in a general meeting of shareholders on 14 May 2009.

The impact of the above events on the issued share capital of the Company may be summarised as follows:

Value ofNumber of Share Share shares

shares Capital Premium issuedNo. £000 £000 £000

At 31 December 2008 240,717,469 602 27,237 1

28 January 2009 Placing for cash 9,360,538 23 538 561 14 May 2009 Placing for cash 48,333,333 121 2,779 2,900 14 May 2009 Imagination Technologies 28,153,153 70 1,619 1,689 20 May 2009 Future Waves acquisition

shares 91,836,779 230 5,281 5,511

At 19 June 2009 418,401,272 1,046 37,454


49

Notice of Annual General Meetingfor the year ended 31 December 2006

Notice is given that the annual general meeting of the members of Toumaz Holdings Limited will be held at ToumazHoldings Limited’s Geneva offices, Place Chevelu 6, 1211 Geneva 1, Switzerland on 22 July 2009 at 11:00 am CEST(Geneva time) to consider and, if thought fit, to pass the resolutions set out below:

Ordinary resolutions1. To receive the accounts and reports for the year ended 31 December 2008.

2. To re-elect Serge Grisard as a director who is retiring by rotation in accordance with the articles of associationof the Company and being eligible offers himself for re-election.

3. To re-elect Sir Richard Sykes as a director who is retiring having been appointed since the last annual generalmeeting and being eligible offers himself for re-election.

4. To re-elect Patrick Stephansen as a director who is retiring having been appointed since the last annual generalmeeting and being eligible offers himself for re-election.

5. To re-elect Martin Knight as a director who is retiring having been appointed since the last annual generalmeeting and being eligible offers himself for re-election.

6. To re-elect Hossein Yassaie as a director who is retiring having been appointed since the last annual generalmeeting and being eligible offers himself for re-election.

7. To re-elect Winston Wong as a director who is retiring having been appointed since the last annual generalmeeting and being eligible offers himself for re-election.

8. To re-elect Ian McWalter as a director who is retiring having been appointed since the last annual generalmeeting and being eligible offers himself for re-election.

9. To re-appoint Grant Thornton UK LLP as auditors and to authorise the directors to determine their remuneration.

10. That the directors be authorised to disapply the pre-emption rights set out in article 17 of the Company’sarticles of association, such power to expire at the conclusion of the Company’s next annual general meeting,and the directors may allot equity securities following an offer or agreement made before the expiry of theauthority and provided that the authority is limited to:

10.1 the allotment of equity securities pursuant to the exercise of the warrants issued to Strand AssociatesLimited (now known as Strand Partners Limited) dated 14 March 2005;

10.2 the allotment of equity securities pursuant to the exercise of any of the options either granted or to begranted under the company’s share option scheme; and

10.3 the allotment of equity securities, otherwise than in accordance with paragraphs 10.1 and 10.2 up to anaggregate nominal amount of £258,375.80 being twenty five per cent of the company’s issued sharecapital on the date of this notice.

By order of the board

Kitwell Consultants LimitedSecretary

Registered Office:Palm ChambersP.O. Box 119Road TownTortolaBritish Virgin Islands

Date: 22 June 2009


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Notice of Annual General Meetingcontinued

Notes to the notice of annual general meeting1. A member entitled to attend and note at the above meeting may appoint one or more proxies to attend and,

on a poll, vote in his place. A proxy need not be a member of the Company.

2. The instrument appointing a proxy and (in the case of an instrument signed by an agent of the member whois not a corporation) the authority under which such instrument is signed or an office copy or duly certifiedcopy must be deposited at the office of Capita Registrars, The Registry, 34 Beckenham Road, Kent BR3 4TU,not less than 48 hours before the time appointed for the meeting or any adjourned meeting. A prepaid formof proxy for use in respect of the meeting is enclosed.

3. Completion of a form of proxy will not prevent a member from attending and voting in person.

4. Members will be entitled to attend and vote at the meeting if they are registered on the Company’s registerof members 48 hours before the time appointed for the meeting or any adjourned meeting.

5. In the case of joint holders of the shares in the Company, the vote of the senior holder shall be accepted tothe exclusion of the votes of the other joint holder(s). For this purpose, seniority will be determined by theorder in which the names appear in the Company’s register of shareholders (or the Company’s registrars’records).

6. In the case of holders of depositary interests representing ordinary shares in the capital of the Company, aform of direction must be completed in order to appoint Capita Registrars, to vote on the holder’s behalf atthe meeting, or if the meeting is adjourned, at any adjourned meeting. To be effective, a completed andsigned form of direction must be delivered to Capita Registrars, The Registry, 34 Beckenham Road, Kent BR3 4TU by no later than 72 hours before the time fixed for the meeting or any adjourned meeting.


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