Surface Transforms plc
Registered number 3769702
Annual Report and
Financial Statements
for the year ended 31 May 2008 Annual Report and Financial Statements 
for the year ended 31 May 2008
2 Highlights
3 Chairman’s statement
5 Chief executive’s report
7 Directors’ report
11 Report on directors’ remuneration
13 Statement of directors’ responsibilities
14 Independent auditors’ report
15 Income statement
16 Statement of changes in equity
17 Balance sheet
18 Cash flow statement
19 Notes to the financial statements
34 Company information and advisers
35 Notice of Annual General Meeting
Surface Transforms plc
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1
Contents Highlights
for the year ended 31 May 2008
l Revenue increased by 90% to £508,111 (2007: £266,789).
l Losses after taxation improved by 8% to £594,065 (2007: £646,422).
l Cash position as at 31 May 2008 of £1,112,719 (2007: £878,971).
l Order Book of £302,124 (as at 31 May 2008).
l Receipt of a 4 year, £300,000 to £400,000 per annum initial contract with a leading,
global, brake systems group for the supply of carbon fibre brake discs.
l Mov’it has signed a further supply agreement with the Company to purchase between
£300,000 to £400,000 of brake discs per annum.
l Award of a £150,000, 3 year development contract with MBDA, a world leading missile
manufacturer jointly owned by BAE Systems, EADS and Finmeccanica.
l Unit costs of ceramic brake discs are now 20% lower than levels in May 2007.
l The commencement of a development contract with a new, US based aircraft brake
system supplier which currently supplies both commercial and defence aircraft.
l Fundraising amounting to £897,000 net of expenses by the issue of new ordinary shares
at 20 pence per share as announced in July 2007.
Surface Transforms plc
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2 Chairman’s statement
for the year ended 31 May 2008
In the 12 months to 31 May 2008, the Company has achieved its financial targets for the year and has also met
a number of the strategic and operating milestones that the management had set themselves.
The Company started the 2008/09 financial year with a record order book; four automotive brake systems clients
that are ordering brake discs on a regular basis and improved prospects for further growth in the business. The
key achievements for the period under review were:
l Receipt of a 4 year, £300,000 to £400,000 p.a initial contract with a leading, global, brake systems group
for the supply of carbon fibre brake discs. 
l Award of a £150,000, 3 year development contract with MBDA, a world leading missile manufacturer jointly
owned by BAE Systems, EADS and Finmeccanica.
l Unit costs of ceramic brake discs are now 20% lower than levels in May 2007.
l The commencement of a development contract with a new, US based aircraft brake system supplier which
currently supplies both commercial and defence aircraft.
l Fundraising amounting to £897,000 net of expenses by the issue of new ordinary shares at 20 pence per
share as announced in July 2007. 
FINANCIAL REVIEW
In the 12 months to 31 May 2008, revenue was £508,111 (2007: £266,789). This represents a 90% increase on
the same period in 2007. Increased automotive brake disc revenues account for most of the increase and now
represents over 80% of the Company’s revenue.
At 31 May 2008, the outstanding order book was £302,124 (2007: £126,097).
Losses after taxation for the 12 months period were £594,065 (2007: £646,422). 
Earnings per share was a loss of 3.33 pence per share (2007: 4.61pence per share).
During the year the Company raised £897,000 by way of an issue of ordinary shares at 20 pence per share.
Shareholder funds at 31 May 2008 were £1,722,839 (2007: £1,413,058) and this included cash deposits of
£1,112,719 (2007: £878,971).
Capital expenditure during the year amounted to £142,599 (2007: £193,382).
The Company has no borrowings.
DEVELOPMENTS
At present, the Company is currently in advanced discussions regarding a supply contract with a leading
European supplier of braking systems to the after-market industry. A further announcement regarding this will be
made in due course.
In addition, in April 2008, the Company signed a four year supply agreement to supply carbon fibre brake discs
to a global automotive brake system supplier.
The directors believe, based on forecasts prepared by the brakes system supplier, that this contract could generate
additional revenues of approximately £300,000 to £400,000 per annum over the life of the agreement and that
the Company has sufficient manufacturing capacity to meet this demand. This agreement demonstrates that
Surface Transforms has the expertise in advanced carbon fibres and industrial fabrics which can provide a
competitive edge in composite brake technology and takes the Company’s leading-edge products into the
forefront of the international automotive performance brake market. 
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3 Chairman’s statement
continued
PEOPLE
The Board would like to thank management and staff who have all contributed to the progress the Company has
made during the year. We continue to incentivise executives with share options as we wish to align their rewards
with those of shareholders.
OUTLOOK
We envisage further progress during the coming year.
The Board believes that Surface Transforms has established itself as an industry operator with world class
technology. The commercial and development contracts which have been signed in the past year underline this
reputation.
In spite of the widely reported slowdown in world consumer and industrial markets, the Company continues to
improve its order book. The Board anticipates that the revenue growth experienced in 2007/08 will continue.
Kevin D’Silva
Chairman
16 September 2008
Surface Transforms plc
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4 Chief executive’s report
for the year ended 31 May 2008
The Company has completed its first year of operations at the new Ellesmere Port site and the relocation, which
consolidated the activities of two previous sites, has delivered measurable improvements in productivity and
management team coordination.
Over the year the business has gained more stability in its revenues and over 80% of revenues derived from
automotive applications. In addition 69% of the revenue produced in the year has arisen from Continental
European markets.
The business in 2008 had 11 OEM and after market automotives clients; 3 in aircraft brake systems and 3 in
rocket components.
AUTOMOTIVE BRAKE SYSTEMS
The Company’s SystemST brake disc product is now on 28 car platforms to date and such cars are typically
priced in excess of —90,000. The main car platforms using SystemST in 2008 were:
Koenigsegg Automotive (www. Koenigsegg.sw)
SystemST brake discs are now on over 40 supercars and current production is between 24-30 cars per year.
Mov’it Gmbh (www.movit.de)
Mov’it is a leading European after market brake system supplier. Sales of SystemST have exceeded expectations
this year. On 22 September 2008 Mov’it signed a further supply agreement with the Company to purchase a
minimum of £300,000 to £400,000 brake discs per annum.
Weber Sport (www.Weber.sw)
Weber now has an established distributor network and will commence production this Autumn, targeting to
build between five and eight of the —1,000,000 price tagged supercars in the first year.
Tramontana (www. Tramontana.sp )
Tramontana, the Spanish supercar manufacturer build just 12 cars per annum and purchased six ceramic brake
car systems last year.
MM Industries Avocet 
The MMI Avocet is a newly built British sports car, launched to great interest on the ST Stand at Autosport 2008
at the NEC Birmingham in January, the 225hp Spyder version will be fitted with SystemST as standard. Final
production volume forecasts have not yet been released by MMI.
In April 2008, the Company signed a four year supply agreement to supply carbon fibre brake discs to a global
automotive brake system supplier.
The directors believe, based on forecasts prepared by the brakes system supplier, that this contract could generate
additional revenues of approximately £300,000 to £400,000 per annum over the life of the agreement, and that
the Company has sufficient manufacturing capacity to meet this demand. This agreement demonstrates that
Surface Transforms has the expertise in advanced carbon fibres and industrial fabrics which can provide a
competitive edge in composite brake technology, and takes the Company’s leading-edge products into the
forefront of the international automotive performance brake market. 
On 22 September 2008 Mov’it Gmbh, already an established customer of the Company, signed a new Supply
and Purchase contract to purchase annually, ceramic brake discs at a much higher level of volumes than had
been experienced in the previous year. The Board believes that this will amount to revenues in excess of between
£300,000 and £400,000 per annum.
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5 Chief executive’s report
continued
AEROSPACE
Aircraft Brake Systems
Revenues from aircraft brake systems are principally from paid development contracts. Revenues in 2008 in this
area have reduced in value from the previous year. One of our clients, Dunlop Braking Systems, a subsidiary of
Meggitt plc, has now merged with a key US competitor, and the combined operations now trade under Meggitt
Aircraft Braking Systems (MABS).
MABS has been and remains a key partner of the £1.34 million, three year collaborative R&D project funded by
the UK Technology Strategy Board (formerly the DTI). This project is being led by Surface Transforms.
In recent months, development work has commenced with a second US brake system supplier that supplies both
commercial and military aircraft principally in US markets. 
Rocket Components
Surface Transforms proprietary technology is uniquely positioned to deliver high performance (in terms of
extended life time and reduced mass), affordable ceramic rocket propulsion components.
The award of a £150,000, 3 year development contract with MBDA, a world leading missile manufacturer jointly
owned by BAE Systems, EADS and Finmeccanica, recognises the potential for Surface Transform’s material
technology.
In addition, interest from other defence contractors has been shown and the Board believe progress during this
financial year will lead to further development agreements.
PRODUCTION & NEW TECHNOLOGY PROJECTS
The development of CVIST, the carbon vapour infiltration process plant has taken longer than had been
expected. Technical challenges have arisen with the process plant capabilities and this has prolonged final
commissioning. We now believe we are in the final stages of commissioning and expect production parts to be
manufactured during the second half of the current financial year.
Improved machining and finishing operations in the manufacture of brake discs has contributed to the reduction
in the unit cost of a ceramic brake disc. Cost levels currently are 20 per cent below levels of May 2007 and the
CVIST process will contribute further to lowering unit costs.
PEOPLE
The Company has a strong senior management team who have now worked together for over two years. 
This year we have taken the opportunity to appoint two new senior engineers, Geoff Whitfield BSc, MSc, and
Martin Bell BEng (Hons) MIET to the management organisation. 
The blend of skills, experience and commitment has allowed the Company to build solid foundations and the
team are well equipped to continue the good progress made to date.
We have continued to incentivise our management and staff with share options, as we wish to align their rewards
with those of shareholders.
I would like to thank all my colleagues for their dedication over the past year.
Dr. Kevin Johnson
Chief Executive
23 September 2008
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6 Directors’ report
for the year ended 31 May 2008
The directors present their annual report and the audited financial statements for the year ended 31 May 2008.
PRINCIPAL ACTIVITY
The principal activity of the Company during the year was the development and manufacture of carbon fibre
reinforced ceramic products (CFRC) for aircraft brake, automotive brake and rocket component applications. 
BUSINESS REVIEW
A review of the Company’s activities during the year is dealt with in the financial review section of the
Chairman’s statement. 
KEY RISKS AND UNCERTAINTIES 
The principal risk faced by the Company is unchanged from last year and relates to the speed at which our
customers and potential customers adopt the new ceramic disc technology. Indications in the automotive area
are that the technology continues to be well received and is being adopted over an increasing number of
vehicles. This risk is constantly assessed by monitoring the level of enquiries and orders for both the Company
and industry wide.
KEY PERFORMANCE INDICATORS
The Directors continue to monitor the business internally with a number of performance indicators: order intake,
sales output, profitability and manufacturing cost of automotive discs. The Company has met its performance
targets in each of these areas as evidenced below:
l Turnover £508,111 (2007: £266,789)
l Losses after taxation £594,065 (2007: £646,422) 
l Order Book of £302,124 (as at 31 May 2008)
l Manufacturing cost of automotive discs, as at July 2008, 20% below levels of May 2007.
The Company produces an annual business plan and full monthly forecasts detailing sales, profitability and cash
flow to help monitor business performance going forward.
FUTURE DEVELOPMENTS
The Board aims to continue with its corporate strategy which is to exploit its technologies in carbon fibre
reinforced ceramics by:
l establishing contract development opportunities and collaborations with national and multi-national
customers in the aerospace and automotive industries; and 
l expanding commercial sales of CFRC products.
RESEARCH AND DEVELOPMENT
The majority of the Company’s staff are employed in research and development activities which are concentrated
on the ongoing development of carbon fibre reinforced ceramic friction and non-friction materials for new
products and applications.
PROPOSED DIVIDEND AND TRANSFER TO RESERVES
The loss for the year after taxation amounted to £594,065 (2007: £646,422). The directors do not recommend
the payment of a dividend.
Surface Transforms plc
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7 Directors’ report
continued
POLICY AND PRACTICE ON PAYMENT OF PAYABLES 
It is the Company’s policy that payments to suppliers are made in accordance with the terms and conditions
agreed between the Company and its suppliers, providing that all trading terms and conditions have been
complied with. The Company does not follow any code or standard on payment practice.
At the year end, there were 53 days (2007: 74 days) purchases in trade payables.
POLITICAL AND CHARITABLE DONATIONS
The Company made no political or charitable donations during the year (2007: £nil).
DIRECTORS AND DIRECTORS’ INTERESTS
The directors who held office during the year were as follows:
K D’Silva* (Chairman)
Dr K Johnson (Managing Director)
JJ Faria*
Professor DT Clark*
Dr G Gould 
KM Baker* 
*denotes non-executive Director.
JJ Faria resigned as an executive director on 30 November 2007 and was immediately appointed as a non-
executive director.
The directors retiring by rotation are K D’Silva and JJ Faria who, being eligible, offer themselves for re-election.
The directors who held office at the end of the financial year had the following interests in the ordinary shares
of the Company according to the register of directors’ interests:
% of issued Number of £0.01 ordinary shares
share capital at Interest at Interest at
end of year end of year start of year
JJ Faria 9.71 1,848,089 1,848,089
Professor DT Clark 5.15 979,661 979,661
K D’Silva 1.35 256,986 156,986
Dr K Johnson 0.42 79,750 79,750
KM Baker 0.47 90,000 40,000
Dr G Gould 0.02 4,350 4,350
According to the register of directors’ interests, no rights to subscribe for shares in or debentures of the Company
were granted to any of the directors or their immediate families, or exercised by them during the financial year,
except as disclosed in the report on directors’ remuneration on pages 11 and 12. 
The directors benefited from qualifying third party indemnity provisions in place during the financial year and at
the date of this report. 
Surface Transforms plc
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8 Directors’ report
continued
SUBSTANTIAL SHAREHOLDERS
In addition to the directors’ interests noted above, the directors are aware of the following who were interested
in 3% or more of the Company’s equity as of 5 September 2008: 
Number of % of issued
ordinary share 
Registered holding shares capital
JM Finn Nominees Limited 3,983,860 20.93%
Pershing Nominees Limited 1,675,000 8.80%
Octopus Investments Nominees 1,006,292 5.29%
HSBC Global Custody (Nominee) Ltd 807,143 4.24%
Sinjul Nominees Ltd 730,000 3.84%
CORPORATE GOVERNANCE
Surface Transforms plc is committed to maintaining high standards of corporate governance. The Company
complies with the Combined Code as modified by the recommendations of the Quoted Companies Alliance to
the extent the directors consider appropriate, given the size of the Company, its current stage of development
and the constitution of the Board. 
The Board has appointed an Audit Committee whose primary role is to review the Company’s interim and annual
financial statements before submission to the Board for approval. The Board has also appointed a Remuneration
Committee, which is responsible for reviewing executive remuneration and performance. The Remuneration and
Audit Committees are made up of four non-executive directors, David Clark, Julio Faria, Kevin D’Silva and Ken
Baker. Details of the Remuneration Committee are disclosed in the report on directors’ remuneration on pages
11 and 12.
INTERNATIONAL FINANCIAL REPORTING STANDARDS (‘IFRS’) AS ADOPTED BY THE EU
The Company has successfully applied IFRS as adopted by the EU, and a restatement report is included in these
financial statements. 
DISCLOSURE OF INFORMATION TO AUDITORS
The directors who held office at the date of approval of this directors’ report confirm that, so far as they are each
aware, there is no relevant audit information of which the Company’s auditors are unaware; and each director
has taken all the steps that he ought to have taken as a director to make himself aware of any relevant audit
information and to establish that the Company’s auditors are aware of that information. 
AUDITORS
In accordance with Section 384 of the Companies Act 1985, a resolution for the re-appointment of KPMG Audit
Plc as auditors of the Company is proposed at the forthcoming Annual General Meeting.
POST BALANCE SHEET EVENT
On 22 September 2008 Mov’it Gmbh, already an established customer of the Company, signed a new Supply
and Purchase contract to purchase annually, ceramic brake discs at a much higher level of volumes than had
been experienced in the previous year. The Board believes that this will amount to revenues in excess of between
£300,000 and £400,000 per annum.
Surface Transforms plc
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9 Directors’ report
continued
ANNUAL GENERAL MEETING
The notice convening the Annual General Meeting to be held at 11.30am. on 28 October 2008 at the offices of
Halliwells LLP, 3 Hardman Square, Spinningfields, Manchester M3 3EB is set out on pages 35 and 36.
SPECIAL BUSINESS AT THE ANNUAL GENERAL MEETING
Under resolution 7, it is proposed in accordance with section 80 of the Companies Act 1985, to renew the
directors’ authority to allot shares in the Company up to a nominal amount of £63,436, representing
approximately 33% of the issued share capital of the Company.
Resolution 8 seeks to renew, in accordance with section 89 of the Companies Act 1985, the directors’ authority
to allot further shares for cash without first offering them to existing shareholders under the statutory pre-emption
procedure. This authority is limited to the issue of equity securities in connection with rights issues and otherwise
up to a nominal amount of £19,031, representing approximately 10% of the Company’s present issued share
capital.
The authorities contained in resolutions 7 and 8 will both expire at the conclusion of the annual general meeting
of the Company to be held in 2008 or 15 months after the passing of such resolutions (whichever is the earlier).
The directors consider that it is appropriate for these authorities to be granted. It is not the directors’ present
intention to allot any ordinary shares except to satisfy options that may be exercised under the Company’s share
option schemes.
By order of the Board
K D’Silva
Chairman
23 September 2008
Unit 4
Olympic Park
Poole Hall Road
Ellesmere Port
Cheshire CH66 1ST
Surface Transforms plc
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10 Report on directors’ remuneration
for the year ended 31 May 2008
POLICY ON EXECUTIVE DIRECTORS’ REMUNERATION
The Remuneration Committee comprises of Kevin D’Silva, Julio Faria, David Clark and Ken Baker.
The Remuneration Committee is responsible for reviewing and determining the Company’s policy on executive
remuneration (including the grant of options under the Share Option Scheme) and ensuring compliance with and
implementation by the Company, as far as reasonably practicable, the recommendations and guidelines of the
Combined Code. Executive remuneration packages are designed to ensure the Company’s executive directors
and senior executives are fairly rewarded for their individual contributions to the Company.
FEES FOR NON-EXECUTIVE DIRECTORS
The fees for non-executive directors are determined by the Board. The non-executive directors are not involved
in the decisions about their own remuneration.
DIRECTORS’ REMUNERATION
Set out below is a summary of the fees and emoluments received by all directors for the year or, where
applicable, period of office:
2008 2007
££
Executive directors
Dr K Johnson 84,399 74,886
JJ Faria* 30,049 57,966
Dr G Gould 53,943 52,890
168,391 185,742
Non-executive directors
K D’Silva 18,000 18,000 
Professor DT Clark 18,253 20,854
JJ Faria* 9,000 – 
KM Baker 18,000 13,500
63,253 52,354
231,644 238,096
With the exception of Kevin Johnson, none of the directors received pension contributions in respect of their
office. In addition to the emoluments received, as stated above, Kevin Johnson received £3,898 (2007: £3,600)
in respect of pension contributions. 
*JJ Faria resigned as an executive director on 30 November 2007 and was immediately appointed as a non-executive director.
DIRECTORS’ INTERESTS
Details of any contracts in which a director has a material interest are disclosed in note 18.
None of the directors received any remuneration or benefits under long term incentive schemes.
Surface Transforms plc
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11 Report on directors’ remuneration
continued
SHARE OPTIONS
The Company operates a share incentive scheme. All options are granted at the discretion of the Board. The
options granted, date of grant, exercise price and exercise periods under the scheme are set out below. No
options were granted during the year. 
None of the directors exercised options during the year. Directors’ options outstanding and the options which
were granted and expired during the year are as follows:
Enterprise Management Incentive Scheme
Number of Number of
Date of Share options Share options Exercise Expiry
Director Grant granted expired Price Exercise Period Date
JJ Faria 19/12/02 64,286 – £0.70 19/12/05-19/12/12 19/12/12
Dr G Gould 19/12/02 64,286 – £0.70 19/12/05-19/12/12 19/12/12
Dr G Gould 08/12/03 34,091 – £0.88 08/12/06-08/12/13 08/12/13
Dr G Gould 08/03/04 20,000 – £0.665 08/03/07-08/03/14 08/03/14
Dr G Gould 14/09/05 29,000 – £0.40 14/09/08-14/09/15 14/09/15
Dr G Gould 18/04/07 50,000 – £0.21 18/04/10-18/04/17 18/04/17
Dr K Johnson 04/04/05 50,000 – £0.50 04/04/08-04/04/15 04/04/15
Dr K Johnson 14/09/05 180,000 – £0.40 14/09/08-14/09/15 14/09/15
Dr K Johnson 18/04/07 100,000 – £0.21 18/04/10-18/04/17 18/04/17
Prof. DT Clark 18/04/07 15,000 – £0.21 18/04/10-18/04/17 18/04/17
KA D’Silva 18/04/07 50,000 – £0.21 18/04/10-18/04/17 18/04/17
KM Baker 18/04/07 15,000 – £0.21 18/04/10-18/04/17 18/04/17
671,663
The market price of the shares at 31 May 2008 was £0.1475 and during the year varied from £0.225 to £0.105. 
By order of the Board
K D’Silva
Chairman
23 September 2008
Unit 4
Olympic Park
Poole Hall Road
Ellesmere Port
Cheshire CH66 1ST
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12 Statement of directors’ responsibilities
for the year ended 31 May 2008
The directors are responsible for preparing the Annual Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law they
have elected to prepare the financial statements in accordance with IFRSs as adopted by the EU and applicable
laws.
The financial statements are required by law to present fairly the financial position and the performance of the
Company; the Companies Act 1985 provides in relation to such financial statements that references in the
relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair
presentation. 
In preparing these financial statements, the directors are required to:
l select suitable accounting policies and then apply them consistently;
l make judgments and estimates that are reasonable and prudent;
l state whether they have been prepared in accordance with IFRSs as adopted by the EU; and
l prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
Company will continue in business.
The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at
any time the financial position of the Company and enable them to ensure that its financial statements comply
with the Companies Act 1985. They have general responsibility for taking such steps as are reasonably open to
them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information
included on the Company’s website. Legislation in the UK governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
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13 Independent auditors’ report 
to the members of Surface Transforms plc
We have audited the financial statements of Surface Transforms plc for the year ended 31 May 2008 which comprise
the Income Statement, the Statement of Changes in Equity, the Balance Sheet, the Cash Flow Statement and the related
notes. These financial statements have been prepared under the accounting policies set out therein. 
This report is made solely to the Company’s members, as a body, in accordance with section 235 of the Companies
Act 1985. Our audit work has been undertaken so that we might state to the Company’s members those matters we
are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we
do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for
our audit work, for this report, or for the opinions we have formed.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The directors’ responsibilities for preparing the Annual Report, and the financial statements in accordance with
applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU are set out in the
Statement of Directors’ Responsibilities on page 13.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements
and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial
statements have been properly prepared in accordance with the Companies Act 1985. We also report to you whether
in our opinion the information given in the Directors’ Report is consistent with the financial statements. The
information given in the Directors’ Report includes that specific information presented in the Chairman’s Statement
that is cross referred from the Business Review section of the Directors’ Report.
In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not
received all the information and explanations we require for our audit, or if information specified by law regarding
directors’ remuneration and other transactions is not disclosed. 
We read the other information contained in the Annual Report and consider whether it is consistent with the audited
financial statements. We consider the implications for our report if we become aware of any apparent misstatements
or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.
BASIS OF AUDIT OPINION
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made
by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate
to the Company’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered
necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are
free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also
evaluated the overall adequacy of the presentation of information in the financial statements.
OPINION
In our opinion:
l the financial statements give a true and fair view, in accordance with IFRSs as adopted by the EU, of the state of
the Company’s affairs as at 31 May 2008 and of its loss for the year then ended;
l the financial statements have been properly prepared in accordance with the Companies Act 1985; and 
l the information given in the Directors’ Report is consistent with the financial statements.
KPMG Audit Plc
Chartered Accountants 
Registered Auditor
Manchester
23 September 2008
Surface Transforms plc
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14 Income statement
for the year ended 31 May 2008
2008 2007
Note £ £
Revenue 2 508,111 266,789
Cost of sales (252,874) (138,955)
Gross profit 255,237 127,834
Administrative expenses:
Before research costs (678,078) (586,643)
Research costs (615,617) (560,005)
Total administrative expenses (1,293,695) (1,146,648)
Other operating income 3 220,652 176,530
Operating loss (817,806) (842,284)
Financial income 6 67,347 59,845
Loss before tax (750,459) (782,439)
Taxation 7 156,394 136,017
Loss for the year 15 (594,065) (646,422)
Loss per ordinary share
Basic and diluted 19 (3.33p) (4.61p)
All amounts relate to continuing activities.
Surface Transforms plc
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15 Statement of changes in equity
at 31 May 2008
Share Profit
Share premium Capital and loss
Capital account reserve account Total
£££ £ £
2007
Credit in relation to share based payments – – – 62,375 62,375
Net income recognised directly to equity – – – 62,375 62,375
Loss for the year – – – (646,422) (646,422)
Total recognised income and expense – – – (584,047) (584,047)
Opening shareholders funds at 1 June 2006 140,308 4,902,715 463,885 (3,509,803) 1,997,105
Closing shareholders funds at 31 May 2007 140,308 4,902,715 463,885 (4,093,850) 1,413,058
Share Profit
Share premium Capital and loss
Capital account reserve account Total
£££ £ £
2008
Credit in relation to share based payments – – – 56,609 56,609
Net income recognised directly to equity – – – 56,609 56,609
Loss for the year – – – (594,065) (594,065)
Issue of new shares 50,000 847,237 – – 897,237
Total recognised income and expense 50,000 847,237 – (537,456) 359,781
Opening shareholders funds at 1 June 2007 140,308 4,902,715 463,885 (4,093,850) 1,413,058
Closing shareholders funds at 31 May 2008 190,308 5,749,952 463,885 (4,631,306) 1,772,839
Surface Transforms plc
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16 Balance sheet
at 31 May 2008
2008 2007
Note £ £ £ £
Non-current assets
Intangible assets 8 – 1,886
Property, plant and equipment 9 382,975 289,455
382,975 291,341
Current assets
Inventories 10 258,874 212,181
Trade and other receivables 11 292,923 289,576
Cash and cash equivalents 1,112,719 878,971
Total Assets 1,664,516 1,380,728
2,047,491 1,672,069
Current Liabilities
Trade and other payables 12 (274,652) (259,011)
Total Liabilities (274,652) (259,011)
Net assets 1,772,839 1,413,058
Equity
Share capital 14 190,308 140,308
Share premium 15 5,749,952 4,902,715
Capital reserve 15 463,885 463,885
Retained earnings 15 (4,631,306) (4,093,850)
Total equity attributable to equity shareholders 
of the Company 1,772,839 1,413,058
These financial statements were approved by the Board of directors on 23 September 2008 
and were signed on its behalf by:
K D’Silva
Director
Dr K Johnson
Director
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17 Cash flow statement
for the year ended 31 May 2008
2008 2007
Note £ £
Cash flows from operating activities
Loss for the year (594,065) (646,422)
Adjusted for:
Depreciation charge 49,079 74,083
Amortisation charge 1,886 2,218
Equity settled share-based payment expenses 56,609 62,375
Financial income (67,347) (59,845)
Taxation (156,394) (136,017)
(710,232) (703,608)
Changes in working capital
Increase in inventories (46,693) (87,846)
Increase in trade and other receivables (3,347) (205,441)
Increase in trade and other payables 15,641 129,997
(744,631) (866,898)
Finance income received 17 67,347 59,845
Taxation received 156,394 136,017
Net cash used in operating activities (520,890) (671,036)
Cash flows from investing activities
Acquisition of property, plant and equipment 17 (142,599) (193,382)
Net cash used in investing activities (142,599) (193,382)
Cash flows from financing activities
Proceeds from issue of share capital 897,237 –
Net cash from financing activities 897,237 –
Net increase/(decrease) in cash and cash equivalents 233,748 (864,418)
Cash and cash equivalents at the beginning of the period 878,971 1,743,389
Cash and cash equivalents at the end of the period 1,112,719 878,971
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18 Notes to the financial statements
for the year ended 31 May 2008
1 ACCOUNTING POLICIES
Surface Transforms plc (the “Company”) is a Company incorporated and domiciled in the UK.
Statement of compliance
The financial statements have been prepared in accordance with International Financial Reporting
Standards (‘IFRSs’) as adopted by the EU.
Basis of preparation
The financial statements have been prepared in accordance with applicable accounting standards and
under the historical cost accounting rules, modified to include revaluation to fair value of certain financial
instruments described below. 
The accounting policies set out below have, unless otherwise stated, been applied consistently to all
periods presented in these financial statements and in preparing an opening IFRS balance sheet at 1 June
2006 for the purposes of the transition to Adopted IFRSs. 
Going concern
The financial statements have been prepared on a going concern basis which the directors believe to be
appropriate. The Company incurred a net loss of £594,065 during the year however the directors are
satisfied, based on detailed cash flow projections, that sufficient cash is available to meet the Company’s
needs as they fall due for at least 12 months from the date of signing the accounts. In addition revenues are
expected to continue to increase in the coming years resulting in the Company becoming profitable in due
course.
Transition to Adopted IFRSs
The Company is preparing its financial statements in accordance with Adopted IFRS for the first time and
consequently has applied IFRS 1. An explanation of how the transition to Adopted IFRSs has affected the
reported financial position, financial performance and cash flows of the Company is provided in note 24.
IFRS 1 grants certain exemptions from the full requirements of Adopted IFRSs in the transition period. The
following exemptions have been taken in these financial statements:
Share based payments – IFRS 2 is being applied to equity instruments that were granted after 7 November
2002 and that had not vested by 1 June 2006.
Share based payments
The share option programme allows employees to acquire shares of the Company. The fair value is
measured at grant date and spread over the period during which the employees become unconditionally
entitled to the options. The fair value of the options granted is measured using an option pricing model,
taking into account the terms and conditions upon which the options were granted. The amount recognised
as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is
only due to share prices not achieving the threshold for vesting.
Intangible assets and amortisation
Expenditure on patents is capitalised and amortised to nil by equal annual instalments over the useful
economic life of seven and a half years.
Property, plant and equipment
Depreciation is provided to write off the cost less the estimated residual value of property, plant and
equipment by equal instalments over their estimated useful economic lives as follows:
Plant and machinery – 12.5%-20% per annum
Fixtures and fittings – 25% per annum
Motor vehicles – 25% per annum
Leasehold Improvements – Over life of lease.
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19 Notes to the financial statements
continued
1 ACCOUNTING POLICIES (continued)
Foreign currencies
Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies are translated to the
functional currency at the foreign exchange rate ruling at the balance sheet date and the gains or losses on
translation are included in the income statement.
Leases
Operating lease rentals are charged to the profit and loss account on a straight line basis over the period of
the lease.
Government grants
Revenue grants are credited to the profit and loss account, and included within other operating income, so
as to match them with expenditure to which they relate.
Post retirement benefits
The Company does not operate a pension scheme, but does contribute to specific employees’ personal
pension schemes. The amount charged to the profit and loss account represents the contributions payable
to employees personal pension schemes during the accounting year.
Research and development expenditure
Expenditure 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
commercially feasible and the Company intends and has the technical ability and sufficient resources to
complete development, future economic benefits are probable and if the Company can measure reliably
the expenditure attributable to the intangible asset during its development. No research costs met the
criteria for capitalisation in the current or preceding years.
Inventories 
Inventories are stated at the lower of cost and net realisable value. In determining the cost of raw materials
and consumables the purchase price is used. For work in progress, cost is taken as production cost, which
includes an appropriate proportion of attributable overheads.
Taxation
The charge for taxation is based on the loss for the year and takes into account taxation deferred or
accelerated arising from temporary differences between the carrying amounts of certain items for taxation
and for accounting purposes. 
Deferred taxation is provided for in full at the tax rate which is expected to apply to the period when the
deferred taxation is expected to be realised, including on tax losses carried forward. 
Deferred taxation assets are recognised only to the extent that it is probable that future taxable profits will
be available against which the temporary differences can be utilised. 
Research and development tax credits are recognised on a cash received basis as a reduction in the current
tax payable as this is when the tax credit is considered recoverable.
Cash and cash equivalents 
Cash and cash equivalents, for the purpose of the cash flow statement, comprises cash in hand and deposits
repayable on demand.
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20 Notes to the financial statements
continued
1 ACCOUNTING POLICIES (continued)
New standards and interpretations that have been endorsed, but which are not yet effective and not early
adopted
A number of new standards, amendments to standards and interpretations are not yet effective for the year
ended 31 May 2008, and have not been applied in preparing these financial statements:
IFRS 8 ‘Operating Segments’ introduces the “management approach” to segment reporting. IFRS 8, which
becomes mandatory for the Company’s 2010 financial statements, will require the disclosure of segment
information based on the internal reports regularly reviewed by the Company’s Chief Operating Decision
Maker in order to assess each segment’s performance and to allocate resources to them. Currently the
Company presents primary segment information in respect of its business segments (see Note 2).
New standards and interpretations that have not yet been endorsed
Amendment to IAS 1 ‘Presentation of Financial Statements: A Revised Presentation’. If endorsed by the EU
this will be applicable to the Company’s 2010 financial statements.
Amendment to IFRS 2 ‘Share Based Payment: Vesting Conditions and Cancellations’. If endorsed by the EU
this will be applicable to the Company’s 2010 financial statements.
Revised IAS 23 ‘Borrowing Costs’ removes the option to expense borrowing costs and requires that an entity
capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying
asset as part of the cost of that asset. If endorsed the revised IAS 23 will become mandatory for the
Company’s 2010 financial statements and will constitute a change in accounting policy for the Company.
In accordance with the transitional provisions the Company will apply the revised IAS 23 to qualifying
assets for which capitalisation of borrowing costs commences on or after the effective date.
Amendment to IAS 32 and IAS 1 ‘Puttable Financial Instruments and Obligations Existing on Liquidation’.
If endorsed by the EU this will be applicable to the Company’s 2010 financial statements.
Revenue
Revenue comprises income derived from research the supply of carbon fibre structures and carbon fibre
reinforced ceramic products. Revenue is recognised on transfer to the customer of significant risks and
rewards of ownership, generally this will be when goods are despatched to the customer. Turnover excludes
value added taxes.
Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity and debt securities, trade and other
receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.
Trade and other receivables
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are
measured at amortised cost using the effective interest method, less any impairment losses.
Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are
measured at amortised cost using the effective interest method.
Interest rate risk
The Company finances its operations through cash. Cash resources are invested to attract the highest rates
for periods that do not limit access to these resources.
Liquidity risk
With regard to liquidity, the Company’s policy has throughout the year been to ensure that the Company is
able at all times to meet its financial liabilities as and when they fall due.
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21 Notes to the financial statements
continued
1 ACCOUNTING POLICIES (continued)
Critical accounting estimates
The preparation of financial statements in conformity with adopted IFRSs requires management to make
judgements, estimates and assumptions that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The estimates and associated assumptions are based on
historical experience and various other factors that are believed to be reasonable under the circumstances,
the results of which form the basis of making the judgements about carrying values of assets and liabilities
that are not already apparent from other sources. Actual results may differ from these estimates. The
estimates and assumptions which have a significant risk of causing a material adjustment to carrying
amount of assets and liabilities within the next financial year are discussed below:
Impairment of property, plant and equipment
Property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate
that the carrying amount of an asset is not recoverable. 
Provision to write inventories down to net realisable value
The Company makes provisions for obsolescence based on historical experiences and management
estimates of future events. Actual outcome could vary significantly from these estimates.
2 ANALYSIS OF TURNOVER AND LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION
Revenue and loss on ordinary activities before taxation is wholly attributable to the principal activity of the
Company.
Primary reporting format – business segments
Revenue by business segment is analysed as follows:
2008 2007
££
Automotive 424,413216,065
Aerospace 83,698 50,724
508,111 266,789
All business segments are serviced by a single production facility. As such, net assets, liabilities, additions
to property, plant and equipment, loss before tax and depreciation cannot be attributed to specific business
segments.
Secondary reporting format – Geographical segments
Revenue by destination is analysed as follows:
2008 2007
££
By geographical market: 
United Kingdom 138,074 93,270
Rest of Europe 353,964 129,522
United States of America 16,073 42,897
Rest of World – 1,100
508,111 266,789
Revenue by origin, net assets and profit before interest and tax all relate to the UK.
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22 Notes to the financial statements
continued
3 EXPENSES AND AUDITORS REMUNERATION 2008 2007
££
Operating loss before taxation is stated
after charging
Depreciation of owned tangible fixed assets 49,079 74,083
Research and development expensed as incurred 615,617 560,005
Amortisation of patents and licences 1,886 2,218
Rents payable under operating leases – land and buildings 50,251 36,463
Exchange losses 2,294 412
after crediting
Exchange gains 2,164 988
Government grants 220,652 176,530
Audit of these financial statements
Amounts receivable by auditors and their associates in respect of:
Audit of financial statements pursuant to legislation 17,450 18,725
Other services relating to taxation 7,242 7,875
Government grants
Grants received comprise revenue grants from DTI and North West Development Agency.
These are subject to making expenditure as stipulated in the grant applications and to audit of the claims.
There are no unfulfilled conditions or contingencies associated with government assistance received.
North West Development Agency grants have been received in full.
4 REMUNERATION OF DIRECTORS
The Company considers key management personnel as defined in IAS 24 “Related party disclosures” to be
the directors of the Company. The aggregate amount of emoluments paid to directors in respect of
qualifying services during the year was £231,644 (2007: £238,096). Of this, £84,299 (2007: £74,886) was
made to the highest paid director and Company pension contributions of £3,898 (2007: £3,600) were made
to a money purchase scheme on his behalf.
Full disclosure of directors’ emoluments, share options and directors’ pension entitlements which form part
of the package as well as remuneration and transactions is given in the Report on directors’ remuneration
on pages 11 and 12.
5 STAFF NUMBERS AND COSTS
The average number of persons employed by the Company (including directors) during the year, analysed
by category, was as follows:
Number of employees
2008 2007
Directors 6 6
Other employees 14 11
20 17
The aggregate payroll costs of these persons were as follows:
2008 2007
££
Wages and salaries 624,013 492,217
Social security costs 61,685 52,334
Other pension costs (see note 16) 19,497 12,568
705,195 557,119
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23 Notes to the financial statements
continued
6 FINANCIAL INCOME 2008 2007
££
Bank interest receivable 67,347 59,845
7 TAXATION
Analysis of credit in year:
2008 2007
£ £
UK corporation tax
Research and development tax repayment (156,394) (136,017)
Income tax credit (156,394) (136,017)
Details of the unrecognised deferred tax asset are included in note 13. 
Factors affecting the tax credit for the current period
The current tax credit for the year is lower (2007: lower) than the standard rate of corporation tax in the UK
of 28% (2007: 30%). The differences are explained below:
2008 2007
Reconciliation of effective tax rate £ £
Loss for the year (594,065) (646,422)
Total income tax credit (156,394) (136,017)
Loss excluding income tax (750,459) (782,439)
Current tax at average rate of 29.67% (2007: 30%) (222,661) (234,732)
Effects of:
Non-deductible expenses 632 3,118
Reduction in tax rate 38,861 –
Change in unrecognised timing differences 4,976 (41,302)
Current year losses for which no deferred tax recognised 178,192 272,916
Tax incentives (156,394) (136,017)
Income tax credit (see above) (156,394) (136,017)
The corporation tax rate applicable to the Company has changed from 30% to 28% with effect from 1 April
2008.
Factors that may affect future tax charges 
The effective tax rate in future years is expected to be below the standard rate of corporation tax in the UK
due principally to historical losses which have been carried forward.
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24 Notes to the financial statements
continued
8 INTANGIBLE ASSETS Patents and
licences
£
Cost
At 1 June 2006, 31 May 2007 and 31 May 2008 16,637
Amortisation
At 1 June 2006 12,533
Charge for year 2,218
At 31 May 2007 14,751
Charge for year 1,886
At 31 May 2008 16,637
Net book value
At 1 June 2006 4,104
At 31 May 2007 1,886
At 31 May 2008 –
9 PROPERTY, PLANT AND EQUIPMENT
Assets in the
course of Leasehold Plant and Fixtures and Motor
construction improvements machinery fittings vehicles Total
£££ ££ £
Cost
At 1 June 2006 44,216 – 320,966 10,470 28,660 404,312
Additions – 47,315 127,092 18,975 – 193,382
At 31 May 2007 44,216 47,315 448,058 29,445 28,660 597,694
Additions – 16,453 118,687 7,459 – 142,599
Disposals and write offs – – (203,290) (7,335) – (210,625)
At 31 May 2008 44,216 63,768 363,455 29,569 28,660 529,668
Depreciation 
At 1 June 2006 – – 215,386 9,452 9,318 234,156
Charge for year 44,216 1,454 18,198 3,050 7,165 74,083
At 31 May 2007 44,216 1,454 233,584 12,502 16,483 308,239
Disposals and write offs – – (203,290) (7,335) – (210,625)
Charge for year – 5,557 31,582 4,775 7,165 49,079
At 31 May 2008 44,216 7,011 61,876 9,942 23,648 146,693
Net book value
At 1 June 2006 44,216 – 105,580 1,018 19,342 170,156
At 31 May 2007 – 45,861 214,474 16,943 12,177 289,455
At 31 May 2008 – 56,757 301,579 19,627 5,012 382,975
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25 Notes to the financial statements
continued
10 INVENTORIES 2008 2007
££
Raw materials and consumables 28,059 96,838
Work in progress 230,815 115,343
258,874 212,181
Raw materials, consumables and changes in finished goods and work in progress recognised as cost of sales
in the year amounted to £252,874 (2007 £138,955).
11 TRADE AND OTHER RECEIVABLES 2008 2007
££
Trade receivables 160,954 114,706
Other receivables 86,475 129,786
Prepayments and accrued income 45,494 45,084
292,923 289,576
All receivables fall due within one year.
12 TRADE AND OTHER PAYABLES: AMOUNTS FALLING DUE WITHIN ONE YEAR
2008 2007
£ £
Trade payables 171,620 200,495
Taxation and social security 19,723 17,575
Accruals and deferred income 83,309 40,941
274,652 259,011
13 DEFERRED TAX
The elements of deferred taxation are as follows:
2008 2007
££
Difference between accumulated depreciation and 
amortisation and capital allowances 17,810 (5,866)
Other short term timing differences (2,572) (1,296)
Tax losses (566,180) (538,737)
Unrecognised deferred tax asset (550,942) (545,899)
The Company has an unrecognised deferred tax asset at 31 May 2008 of £550,942 (2007: £545,899)
relating principally to tax losses which the Company can offset against future taxable profits from the same
trade.
The deferred tax asset has not been recognised in the accounts because it is not possible to assess whether
there will be suitable taxable profits from which the future reversal of the underlying temporary differences
can be deducted.
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26 Notes to the financial statements
continued
14 CALLED UP SHARE CAPITAL 2008 2007
££
Authorised
20,000,000 ordinary shares of £0.01 each 200,000 200,000
Allotted, called up and fully paid
19,030,748 shares (2007: 14,030,748) of £0.01 each 190,308 140,308
Enterprise Management Incentive Scheme
The Company operates a share incentive scheme for the benefit of the directors and certain employees. All
options are granted at the discretion of the Board. The scheme grants options to purchase ordinary shares
of £0.01 each. No options were exercised in the period.
The options granted to directors, date of grant and exercise price and exercise periods under the scheme
are set out in the report on directors’ remuneration on pages 11 and 12. In addition to the directors’ share
options, certain employees have been granted the following options:
Number of
unexpired share
Date of grant options at year end Exercise price Exercise period
19/12/02 30,301 £0.70 19/12/05-19/12/12
08/03/04 40,000 £0.665 08/03/07-08/03/14
04/04/05 35,000 £0.50 04/04/08-04/04/15
14/09/05 215,000 £0.40 14/09/08-14/09/15
18/04/07 195,000 £0.21 18/04/10-18/04/17
There are a total of 515,301 unexpired options held by employees and a total of 671,663 unexpired options
held by directors.
15 SHARE PREMIUM AND RESERVES Share premium Capital Profit and
account reserve loss account
££ £
At 1 June 2006 4,902,715 463,885 (3,509,803)
Retained loss for the year – – (646,422)
Reversal of charge in relation to share based payments – – 62,375
At beginning of year 4,902,715 463,885 (4,093,850)
Retained loss for the year – – (594,065)
Share Issue 847,237 – –
Reversal of charge in relation to share based payments – – 56,609
At end of year 5,749,952 463,885 (4,631,306)
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27 Notes to the financial statements
continued
16 PENSION SCHEME
The Company contributes to specific employees’ personal pension schemes. The pension cost charge 
for the year represents contributions payable by the Company to the scheme and amounted to £19,497
(2007: £12,568).
There were outstanding contributions of £nil (2007: £nil) at the end of the financial year.
17 ANALYSIS OF CASH FLOWS 2008 2007
££
Returns on investments and servicing of finance
Interest received 67,347 59,845
Capital expenditure and financial investment
Purchase of tangible fixed assets (142,599) (193,382)
18 RELATED PARTY DISCLOSURES
The results of the Company include the following transactions with related parties:
2008 2007
Company/entity Relationship Purchase £ £
April Training Executive Ltd JJ Faria is a director and Administrative services – 1,174
has a controlling interest
All purchases from related parties are conducted on an arms length basis under normal commercial trading
terms.
19 LOSS ON ORDINARY SHARES
The calculation of basic loss per ordinary share is based on the loss for the financial year divided by the
weighted average number of shares in issue during the year.
Losses and number of shares used in the calculations of loss per ordinary share are set out below:
Basic
2008 2007
££
Loss after tax (594,065) (646,422)
Weighted average number of shares 17,828,562 14,030,748
Loss per share (3.33p) (4.61p)
The calculation of diluted loss per ordinary share is identical to that used for the basic loss per ordinary
share. This is because the exercise of options would have the effect of reducing the loss per ordinary share
from continuing operations and is therefore not dilutive under the terms of IAS33.
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28 Notes to the financial statements
continued
20 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS
The Company’s policies with regard to financial instruments are set out within the accounting policies note.
The risks arising from the Company’s financial assets and liabilities are set out below with the policies for
their respective management.
Currency Risk
The Company transacts business in foreign currencies and therefore incurs some transaction risk.
The Company had no open foreign exchange contracts at the Balance Sheet date.
The Company’s exposure to foreign currency risk was as follows, this is based on the carrying amount for
monetary financial instruments:
31 May 2008 31 May 2007
US Dollar Euro Sterling US Dollar Euro Sterling
£££ ££ £
Cash and cash equivalents – – 1,112,719 – – 878,971
Trade Receivables – 56,803 104,151 13,407 3,698 97,601
Trade Payables (19,531) – (152,089) (3,365) (4,686) (192,444)
Net Exposure (19,531) 56,803 1,064,781 10,042 (988) 784,128
Average Rate Reporting Date Spot Rate
2008 2007 2008 2007
US Dollar 2.006 1.921 1.976 1.978
Euro 1.385 1.479 1.273 1.472
Sensitivity Analysis
A one percent strengthening of the pound against the US Dollar and the Euro at 31 May 2008 would have
(decreased)/increased profit by the amounts below. This analysis assumes that all other variables, in
particular interest rates, remain constant. The analysis is performed on the same basis for 2007.
US Dollar Euro
££
31 May 2008 (178) 516
31 May 2007 91 (9)
A one percent weakening of the pound against the US Dollar and the Euro at 31st May 2008 would have
an equal and opposite effect to the amounts shown above, on the basis all other variables remain constant. 
Price Risk
The Company aims to minimise its exposure to supplier price increases and customer price decreases by
offsetting reciprocal supplier and customer arrangements.
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29 Notes to the financial statements
continued
20 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS (continued)
Credit Risk
The Company operates a closely monitored collection policy.
The ageing of trade receivables at the reporting date was:
31 May 2008 31 May 2007
Gross Impairment Net Net Impairment Net
£££ ££ £
Not past due 151,381 – 151,381 99,532 – 99,532
Past due 0 to 30 days 9,264 – 9,264 12,219 – 12,219
Past due 31 to 90 days 5,105 (4,796) 309 12,454 (9,499) 2,955
165,750 (4,796) 160,954 124,205 (9,499) 114,706
The movement in the allowance for impairment in respect of trade receivables was as follows:
Impairment
Allowance
£
Balance 1 June 2006 12,439
Impairment loss recognised (10,428)
Increase in impairment allowance 7,488
Balance 31 May 2007 9,499
Impairment loss recognised (4,703)
Balance 31 May 2008 4,796
Liquidity Risk
The Company’s objective is to maintain a balance between continuity and flexibility of funding through the
use of short term deposits.
Interest Rate Risk
The Company has cash deposits of £1,039,603 (2007: £750,000).These funds are placed on deposit at rates
which track and exceed bank base rate. These deposits are reviewed at least every 30 days. These funds are
available on demand. At the year end, the weighted average interest rate for the floating rate cash deposits
was the HBOS base rate of 5.49% (2007: 4.90% Barclays). 
The Company has no borrowings at 31 May 2008 (2007: £nil). The Company does not undertake hedging
of interest rates.
Financial assets
The Company has £1,112,719 (2007: £878,971) held in cash and deposits as financial assets as well as
short term debtors. These cash deposits are placed on the money market and are available on demand. 
Financial liabilities
The Company has no financial liabilities except for short term creditors.
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30 Notes to the financial statements
continued
20 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS (continued)
Fair values of the Company’s financial assets and liabilities
The fair value of financial assets and liabilities, together with the carrying amounts shown in the balance
sheet are as follows:
2008 2007
Carrying Fair Carrying Fair
value value value value
££ £ £
Financial assets:
Cash and cash equivalents 1,112,719 1,112,719 878,971 878,971
Loans and receivables:
Trade receivables 160,954 160,954 114,706 114,706
Total financial assets 1,273,673 1,273,673 993,677 993,677
Financial liabilities at amortised cost
Trade payables (171,620) (171,620) (200,495) (200,495)
Other payables (current) (19,723) (19,723) (17,575) (17,575)
Accruals (83,309) (83,309) (40,941) (40,941)
Total financial liabilities (274,652) (274,652) (259,011) (259,011)
21 COMMITMENTS
Total future minimum commitments under non-cancellable operating leases are as follows:
Land and Land and
buildings buildings
2008 2007
££
Operating leases which expire:
Within one year – –
In the second to fifth years inclusive 183,509 233,557
183,509 233,557
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31 Notes to the financial statements
continued
22 SHARE BASED PAYMENTS
Share Options
The number of options outstanding under the Company’s share option scheme is as follows:
Number of Share Options – Ordinary Shares at 1p
Date from
At 31 At 31 Exercise which Expiry 
Note May 2007 Granted Exercised Lapsed May 2008 price exercisable date
(a) 171,016 – – (12,143) 158,873 70p 19/12/2005 19/12/2012
(a) 34,091 – – – 34,091 88p 08/12/2006 08/12/2013
(a) 80,000 – – (20,000) 60,000 66.5p 08/03/2007 08/03/2014
(a) 85,000 – – – 85,000 50p 04/04/2008 04/04/2015
(a) 444,000 – – (20,000) 424,000 40p 14/09/2008 14/09/2015
(a) 334,125 – – (20,000) 314,125 21p 18/04/2010 18/04/2017
(b) 110,875 – – – 110,875 21p 18/04/2010 18/04/2017
1,259,107 – – (72,143) 1,186,964
(a) These options have been granted under the EMI approved scheme. There have been no variations to
the terms and conditions or performance criteria attached to these share options during the financial
year. There are no performance conditions attached to these shares other than continued employment
by the Company.
(b) These options have been granted under the unapproved scheme. There have been no variations to the
terms and conditions or performance criteria attached to these share options during the financial year.
There are no performance conditions attached to these shares other than continued employment by
the Company.
There was no cost payable by the employees on the grant of any of the above options.
The option holder may only exercise his options during employment with the Company.
The movements of the EMI and unapproved share options outstanding are shown below:
EMI Scheme Unapproved Scheme
Weighted Weighted 
Average Average 
Number Exercise Number Exercise
of awards Price of awards Price
£ £
Outstanding at 1 June 2005 445,965 0.66 – –
Granted 504,000 0.40 – –
Forfeited (55,858) 0.58 – –
Outstanding at 31 May 2006 894,107 0.52 – –
Granted 334,125 0.21 110,875 0.21
Forfeited (80,000) 0.53 – –
Outstanding at 31 May 2007 1,148,232 0.43 110,875 0.21
Forfeited (72,143) 0.47 – –
Outstanding at 31 May 2008 1,076,089 0.41 110,875 0.21
Exercisable at 31 May 2008 337,964 0.66 – –
Range of exercise prices 0.21 to 0.88 0.21
Weighted average remaining contractual life 7 years 3 months 8 years 11 months
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32 Notes to the financial statements
continued
22 SHARE BASED PAYMENTS (continued)
Included within the EMI share options balance are options over 205,107 (2007: 205,107) shares that have
not been recognised in accordance with IFRS2 because either they were granted on or before 7 November
2002 or that they had vested prior to the effective date on 1 June 2006. These options have not been
subsequently modified and therefore do not need to be accounted for in accordance with IFRS 2.
There were no share options exercised during the year (2007: nil).
A charge of £56,609 (2007: £62,375) has been made in the profit and loss account to spread the fair value
of the options over the 3 year service obligations of those incentives.
Assumptions used in the valuation of share based options
In calculating the fair value of the share based payment arrangements the Company has used the Black
Scholes method. The fair value of the share options granted in 2007 and the assumptions used of their fair
value on the date of grant were as follows:
Weighted Average Assumptions 2008 2007
Fair Value per share option N/a* 15.9p
Share price on date of grant N/a* 20p
Exercise Price N/a* 21p
Share options granted in the year EMI N/a* 334,125
Share options granted in the year Unapproved N/a* 110,875
Expected Volatility N/a* 100%
Exercise Pattern (years) N/a* 3-10 years uniformly
Expected dividend yields N/a* 0%
Risk free rate of return N/a* 4.50%
*No share options were granted in the year to 31 May 2008
The fair value of the share options is applied to the number of options that are expected to vest which takes
into account the expected and actual forfeitures over the vesting period as a result of cessation of
employment.
Expected volatility was determined by assessing the Company’s historic data and the market the Company
operates in.
23 CAPITAL MANAGEMENT
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market
confidence and to sustain future development of the business. The Board of directors monitors the return
on capital, defined as net operating income divided by total shareholders’ equity.
At present employees and directors hold 21% of the share capital, assuming all outstanding share options
are exercised.
Shares issued in the year totalled £897,237. There were no changes in the Company’s approach to capital
management in the year.
24 IFRS RESTATEMENT INFORMATION
The Company’s financial statements for the year ended 31 May 2008 are the Company’s first annual
statements in compliance with adopted IFRSs. 
There are no material differences between the figures previously presented under UK GAAP and their
restatement to adopted IFRSs.
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33 Company information and advisers
for the year ended 31 May 2008
WEBSITES www.surface-transforms.com and www.systemsST.com 
REGISTERED NUMBER 03769702
DIRECTORS Kevin D’Silva (Non-executive Chairman)
Dr Kevin Johnson (Managing Director)
Julio Joseph Faria (Non-executive Director)
Geoffrey Gould (Sales and Marketing Director)
Professor David Thomas Clark (Non-executive Director)
Kenneth Michael Baker (Non-executive Director)
ADDRESS Unit 4
Olympic Park
Poole Hall Road
Ellesmere Port
Cheshire CH66 1ST
Tel: 0151 356 2141
NOMINATED ADVISER John East & Partners Limited
10 Finsbury Square
London EC2A 1AD
BROKERS John East & Partners Limited
10 Finsbury Square
London EC2A 1AD
Redmayne Bentley 
1 Skipton Road
Ilkley LS29 9EH
AUDITORS KPMG Audit Plc
St James’ Square
Manchester M2 6DS
SOLICITORS TO THE COMPANY Halliwells LLP
3 Hardman Square
Spinningfields
Manchester M3 3EB
BANKERS Barclays Bank plc
125 Main Street
Frodsham
Cheshire WA6 7AD
Bank of Scotland Plc
The Mound
Edinburgh EH1 1YZ
REGISTRARS Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersfield HD8 0GA
(www.capitaregistrars.com)
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34 Notice of Annual General Meeting
for the year ended 31 May 2008
NOTICE IS HEREBY GIVEN that the annual general meeting of the Company will be held at the offices of
Halliwells LLP, 3 Hardman Square, Spinningfields, Manchester M3 3EB on 28 October 2008 at 11.30am. The
business of the meeting will be:
ORDINARY BUSINESS
1 To receive, consider and adopt the audited accounts for the year ended 31 May 2008 and the reports of the
directors and auditors thereon.
2 To re-elect Julio Faria, who is retiring by rotation in accordance with article 113, as a director of the
Company.
3 To re-elect Kevin D’Silva, who is retiring by rotation in accordance with article 113, as a director of the
Company.
4 To re-appoint KPMG Audit Plc as auditors of the Company and to authorise the directors to fix their
remuneration.
5 To approve the Directors’ Remuneration report.
SPECIAL BUSINESS
To consider and, if though fit, to pass the following resolutions which will be proposed as to resolution 6 as an
ordinary resolution and as to resolution 7 as a special resolution:
6 THAT, in substitution for all existing and unexercised authorities and powers, the Directors of the Company
be and they are hereby generally and unconditionally authorised for the purpose of section 80 of the
Companies Act 1985 (the “Act”) to exercise all or any of the powers of the Company to allot relevant
securities (within the meaning of section 80(2) of the Act) up to a maximum nominal amount of £63,436
to such persons at such times and generally on such terms and conditions as the directors may determine
(subject always to the articles of association of the Company) provided that this authority and power shall,
unless previously renewed, varied or revoked by the Company in general meeting, expire at the conclusion
of the next annual general meeting or 15 months after the passing of this resolution (if earlier) and provided
further that the directors of the Company may before the expiry of such period make an offer or agreement
which would or might require relevant securities to be allotted after the expiry of such period and the
Directors of the Company may allot relevant securities in pursuance of such offer or agreement as if the
authority conferred hereby had not expired.
7 THAT, subject to and conditional upon the passing of resolution 6 and in substitution for all existing and
unexercised authorities and powers, the Directors of the Company be and are hereby empowered pursuant
to section 95 of the Act to allot equity securities (as defined in section 94 of the Act) pursuant to the
authority conferred upon them by resolution 6 as if section 89(1) of the Act did not apply to any such
allotment provided that this authority and power shall be limited to:
(a) the allotment of equity securities in connection with a rights issue or similar offer in favour of ordinary
shareholders where the equity securities respectively attributable to the interest of all ordinary
shareholders are proportionate (as nearly as may be) to the respective numbers of ordinary shares held
by them subject only to such exclusions or other arrangements as the Directors of the Company may
consider appropriate to deal with fractional entitlements or legal and practical difficulties under the
laws of, or the requirements of any recognised regulatory body in, any territory; and
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35 Notice of Annual General Meeting
continued
(b) to the allotment (otherwise than pursuant to sub-paragraph (a) above) of equity securities up to an
aggregate nominal amount of £19,031 representing approximately 10% of the current issued share
capital of the Company,
and shall expire on the date of the next annual general meeting of the Company or (if earlier) 15 months
from the date of the passing of this resolution save that the Company may before such expiry make an offer
or agreement which would or might require equity securities to be allotted after such expiry and the
Directors of the Company may allot equity securities in pursuance of such offer or agreement as if the
power conferred hereby had not expired.
By Order of the Board
G V Hall
Company Secretary
Dated: 23 September 2008
Registered Office:
Unit 4
Olympic Park
Poole Hall Road
Ellesmere Port
Cheshire CH66 1ST
Notes:
1 A person entitled to attend and vote at this meeting is entitled to appoint one or more proxies to attend and, on a poll,
vote in his/her stead. A proxy need not be a member of the Company. Appointment of proxies does not preclude
members from attending and voting at the meeting should they wish to do so.
2 To be valid, the instrument appointing a proxy must be deposited at the office of the Company’s registrars, Capita
Registrars, Proxy Department, The Registry, 34 Beckenham Street, Beckenham, Kent BR3 4TU not less than 48 hours
before the time of the meeting.
3 Copies of the Directors’ contracts of service with the Company will be available for inspection during normal business
hours on any week day at the registered office of the Company from the date of this notice until the annual general
meeting and on the day of the annual general meeting at the place of the meeting from 15 minutes prior to its
commencement until its conclusion.
4 As permitted by Regulation 41 of the Uncertificated Securities Regulations 2001, the Company specifies that only those
shareholders of the Company on the register at close of business on 26 October 2008 shall be entitled to attend or vote
at the meeting in respect of the number of shares registered in their name at the time. Changes to the register of
members after 26 October 2008 shall be disregarded in determining the rights of any person to attend or vote at the
meeting.
5 CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service
may do so by utilising the procedures described in the CREST Manual. CREST Personal Members or other CREST
sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their
CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message must be
transmitted so as to be received by the Company’s agent, Capita Registrars (whose CREST ID is RA10) by the specified
latest time(s) for receipt of proxy appointments. For this purpose, the time of receipt will be taken to be the time (as
determined by the timestamp applied to the message by the CREST Applications Host) from which the Company’s agent
is able to retrieve the message by enquiry to CREST in the manner prescribed.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the
Uncertificated Securities Regulations 2001.
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36 Printed by Michael Searle & Son Limited