Surface Transforms Regulatory News (SCE)

31 Jul 2007 07:05

To be embargoed until 7.05am 31 July 2007 Surface Transforms Plc ("Surface Transforms" or "the Company")

Proposed placing of 5,000,000 new ordinary shares of 1p each at 20p per share

The Company announces that John East & Partners Limited ("John East & Partners"), on behalf of the Company, has placed 5,000,000 new ordinary shares ("the Placing Shares") at 20p per Placing Shares with institutional and other investors ("the Placing"). The Placing is conditional, inter alia, on shareholders approval at an extraordinary general meeting of the Company to be held at 12.00p.m. on 24 August 2007 and admission of AIM of the Placing Shares.

Background to and reasons for the Placing

In my Chairman's Statement that accompanied the interim results for the six months ended 30 November 2006, I highlighted that the Company had made significant financial and operational progress within the automotive ceramic brake market and in completing the ST Tech 2 production process.

The Company has made further progress in the second half of the financial year, in particular, within the automotive aftermarket where, alongside Stop Tech Inc of the US, the Company recently signed an agreement with Mov' it GmBH for the European Market. As we start the current financial year, the Company has supply relationships with three automotive customers which can be relied upon to increase substantially the demand for ceramic discs in future years. A comprehensive update of the current trading position of the Company is contained in my Chairman's Statement which accompanies the preliminary results for the year ended 31 May 2007.

The Company's cash resources as at 31 May 2007 were ‚£878,971, which provides sufficient working capital for at least the next 12 months. However, to build on the progress made by the Company in the last financial year, accelerate the adoption of the Company's carbon ceramic discs in the wider automotive brake market and reduce the direct cost of manufacturing the discs, the Company is proposing to effect the Placing.

The proceeds of the Placing, which amount to approximately ‚£895,000 after expenses, will allow the Company to make the necessary capital investments to continue and accelerate its product development and provide additional working capital.

It is the board of directors' view that the Placing is a very efficient way of providing additional working capital for the Company. The cost of funds raised via the Placing will be substantially lower compared with an open offer or rights issue to Shareholders, which would require the publication of a detailed document and would cost the Company a significantly higher percentage of the funds being raised.

Directors' participation in the Placing

Kenneth Baker and Kevin D'Silva have conditionally agreed to subscribe for 50,000 and 100,000 ordinary shares in the Placing, respectively. Immediately following the admission of the Placing Shares to trading on AIM Kenneth Baker will hold 90,000 ordinary shares and Kevin D'Silva will hold 256,986 ordinary shares, which will represent 0.47 per cent. and 1.35 per cent., respectively, of the enlarged issued share capital.

In addition, a member of the senior management team has conditionally agreed to subscribe for 25,000 ordinary shares in the Placing, which will represent 0.13 per cent. of the enlarged issued share capital.

Following the proposed Placing, the Company will have 19,030,748 ordinary voting shares in issue. It is intended that application will be made for the Placing Shares to be admitted to trading on AIM. Dealings are expected to commence on 28 August 2007.

In addition, the Company announces that John East & Partners Limited has been appointed as joint broker to the Company with immediate effect.

For enquiries, please contact:

Surface Transforms plc Tel: 0151 356 2141 Kevin Johnson 07802 306956 Kevin D'Silva John East & Partners Limited (Nomad and Joint Tel: 020 7628 2200Broker) Simon Clements David Worlidge Teather & Greenwood Ltd (Joint Broker) Tel: 020 7426 9000 Sindre Ottesen Mark Dickenson Redmayne Bentley (Private client broker) Lucy Clapham

Simon Flather