Surface Transforms : Completion of Accelerated Book Build

20 January 2021

THIS ANNOUNCEMENT, AND THE INFORMATION CONTAINED HEREIN, IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, NEW ZEALAND, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH IT WOULD BE UNLAWFUL TO DO SO.

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY THE COMPANY TO CONSTITUTE INSIDE INFORMATION STIPULATED UNDER THE MARKET ABUSE REGULATION (EU) NO. 596/2014 ("MAR"). UPON THE PUBLICATION OF THIS ANNOUNCEMENT VIA THE REGULATORY INFORMATION SERVICE, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

Surface Transforms plc.

("Surface Transforms" or the "Company")

Result of Placing and Subscription

and proposed Open Offer

Notice of General Meeting

Surface Transforms (AIM: SCE), manufacturers of carbon fibre reinforced ceramic automotive brake discs, is pleased to announce that further to the Company's announcement released at approximately 5.30 p.m. on 19 January 2021 ("Launch Announcement"), the Bookbuild has closed and the Company has conditionally raised gross proceeds of £18.0 million, through the successful placing of 35,750,000 Placing Shares and 250,000 Subscription Shares at the Issue Price of 50 pence per Ordinary Share.

The Placing Shares and Subscription Shares represent approximately 23.2 per cent. of the Company's Existing Ordinary Shares. The Issue Price represents a discount of approximately 5.7% to the closing price on 5 January 2021 following the Company's Trading Update announced on that date, and 11.0 per cent. to the volume weighted average price of 56.3263 pence per Ordinary Share for the period from 5 to 19 January 2021 being the period following the Company's last Trading Update to the date of the Launch Announcement. The Issue Price also represents a discount of approximately 17.0 per cent. to the closing mid-marketprice per Ordinary Share of 60.5 pence on 19 January, being the date of the Launch Announcement.

In addition to the Placing and Subscription, the Company intends to provide all Qualifying Shareholders with the opportunity to subscribe for an aggregate of up to 4,000,000 Open Offer Shares at the Issue Price, to raise up to approximately £2.0 million (before expenses), on the basis of 1 Open Offer Share for every 38.72957975 Existing Ordinary Shares held on the Record Date. Qualifying Shareholders subscribing for their full entitlement under the Open Offer may also request additional Open Offer Shares through an excess application facility (the "Excess Application Facility").

The Placing, Subscription and Open Offer are conditional upon, inter alia, the passing of the Resolutions at the General Meeting and upon the Placing Agreement becoming unconditional in all respects. The Placing is not conditional on the Open Offer proceeding or on any minimum take- up under the Open Offer.

David Bundred, Chairman of Surface Transforms commented:

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"We are delighted with the success of this Placing which now enables us to proceed with building OEM Production Cell Two and thus removing this impediment in winning target business with OEM 8 and OEM 9. In addition, it is most encouraging to welcome a number of new institutional investors, as well as receiving significant ongoing support from our existing institutional shareholders.

We are also pleased to be announcing the Open Offer, again demonstrating our determination that our smaller, early stage, retail investors should continue to have the opportunity to participate in the increasing success of the Company as we mature."

Reasons for the Fundraising and use of proceeds

As set out in the Launch Announcement, the Company is very pleased with recent discussions and progress made with other new OEMs to build upon its current contract expected revenue pipeline of £43 million¹. Since the start of the financial year, no new nominations have been made but should one or more be awarded to Surface Transforms, the Board considers that they would likely be material.

With regard to potential contracts, OEM 8 and OEM 9 operate quite differently to Surface Transforms' other existing OEM customers, including requiring a more compressed 12-15 month (not 24 month) period between contract award and start of production. Given the compressed start of production timelines required by OEM 8 and OEM 9, the Board consider it sensible to build capacity ahead of any such contract awards.

It is possible that neither OEM 8 nor OEM 9 will award any new contract to the Company. However, continued progress with OEM 1, OEM 3 (also covering OEM 4), OEM 6 and three new potential OEM customers are progressing well with numerous new vehicle launches being targeted for 2024. Indeed, the prospective contract pipeline has the potential to utilise the entire production capacity of Knowsley by 2024. Accordingly, the Board are confident that production capacity of a new OEM Production Cell Two will be required in due course, regardless of new contracts being awarded by either or both OEM 8 or OEM 9 to the Company.

1 This is based on the directors' expectations and their understanding of the relevant OEM's production plan and estimated demand for discs.

Use of proceeds

Net proceeds of the Placing and Subscription are circa £17.0 million. The construction cost of OEM Production Cell Two is approximately £9.2 million. A further £0.7 million is to be allocated for machinery improvements to OEM Production Cell One.

Forecast increased production will require additional investment in working capital. The balance of the net proceeds will therefore be allocated for future general working capital requirements and together with the Open Offer, to the extent it is taken up, provide further working capital headroom, as well as the flexibility to respond quickly to other opportunities or requirements that present themselves, such as incremental capital expenditure improvements and ad hoc projects.

Related Party Transactions

The Directors' interests as at today and following completion of the Fundraising are as follows:

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				Interest in
				Ordinary Shares
			Subscription	after Placing
	Existing beneficial		Shares	and		Open Offer	Interest in
	interest in		subscribed	Subscription		Shares to be	Ordinary Shares	%4
Director	Ordinary Shares	%	for	Admission	%	applied for	after Admission4
David Bundred1	1,310,025	0.8%	50,000	1,360,025	0.7%	-	1,360,025	0.7%
Kevin Johnson	991,308	0.6%	-	991,308	0.5%	-	991,308	0.5%
Richard Gledhill2	14,813,346	9.6%	200,000	15,013,346	7.9%	-	15,013,346	7.7%
Kevin D'Silva3	1,260,315	0.8%	-	1,260,315	0.7%	-	1,260,315	0.6%
Michael Cunningham	120,000	0.1%	-	120,000	0.1%	-	120,000	0.1%

1. Including 516,122 Ordinary Shares held in SIPPs of connected parties
2. Held as to 11,670,628 Ordinary Shares through his investment vehicle Group-14 LTD
3. Held in his SIPPs

4Assuming Open Offer applications in total for the full number of Open Offer Shares available

David Bundred, Chairman of the Company and Richard Gledhill, non-executive director of the Company, and/or persons connected with each of them have conditionally subscribed for an aggregate of 250,000 Subscription Shares, which constitutes a related party transaction under the AIM Rules.

Mr. Richard Sneller, as a substantial shareholder of the Company, is subscribing for 4,133,786 Placing Shares, which constitutes a related party transaction under the AIM Rules for Companies.

Unicorn Asset Management Limited, as a substantial shareholder of the Company, is subscribing for 1,035,715 Placing Shares, which constitutes a related party transaction under the AIM Rules for Companies.

Canaccord Genuity Wealth Management Limited, as a substantial shareholder of the Company, is subscribing for 2,755,958 Placing Shares, which constitutes a related party transaction under the AIM Rules for Companies.

Accordingly, Kevin Johnson, Michael Cunningham and Kevin D'Silva are considered to be independent directors of the Company for the purposes of AIM Rule 13. Having consulted with the Company's nominated adviser, Kevin Johnson, Michael Cunningham and Kevin D'Silva consider that the terms of the Directors' Participation is fair and reasonable insofar as Shareholders are concerned.

In the case of participation by Mr. Richard Sneller, Unicorn Asset Management Limited and Canaccord Genuity Wealth Management Limited, all the Directors are considered to be independent for the purposes of AIM Rule 13. Having consulted with the Company's nominated adviser, the Directors also consider that the terms of the participation in the Placing by Mr. Richard Sneller, Unicorn Asset Management Limited and Canaccord Genuity Wealth Management Limited is fair and reasonable insofar as Shareholders are concerned.

Posting of Circular

The Company will post a Circular to Shareholders later today, containing a Notice of General Meeting, proxy form and full details of the Open Offer including the Open Offer application form. The Circular will also be available on the Company's website at www.surfacetransforms.co.uk

Investor presentation

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The Company will provide a live presentation to investors and any other interested parties on via Hardman & Co's platform at 4:00 p.m. on 25 January 2021. Interested parties can register for the presentation at https://zoom.us/webinar/register/WN_7OKl7yGVTFaK-e_y89aTbg

Surface Transforms is committed to ensuring that there are appropriate communication structures for all its Shareholders. Questions can be submitted in advance as well as during the event via the "Ask a Question" function. Although management may not be in a position to answer every question received, they will address the most prominent ones within the confines of information already disclosed to the market. Responses to questions from the live presentation will be published at the earliest opportunity on the Company's website.

General Meeting

The Fundraising is conditional upon, inter alia, the passing of the Resolutions. The General Meeting will be held at Image Business Park, Acornfield Road, Knowsley Industrial Estate, Liverpool, L33 7UF at 10.00 a.m. on 8 February 2021.

Pursuant to the Stay at Home Order introduced by the UK Government on 6 January 2021 to manage the Covid-19 virus (coronavirus), public gatherings of more than two people and non- essential travel are currently prohibited. The Company will therefore convene the General Meeting with the minimum quorum of two Shareholders necessary to conduct the meeting, being

the Company's Chief Executive, Kevin Johnson (acting as Chairman) and the Company's Finance

Director, Michael Cunningham. All other Shareholders must not seek to attend the General Meeting in person.

Irrevocable commitments

The Directors (or persons connected with the Directors within the meaning of sections 252 - 255 of the Act), who in aggregate hold 18,494,994 Ordinary Shares, representing approximately 11.9 per cent. of the Existing Ordinary Shares of the Company, have irrevocably undertaken to vote in favour of the Resolutions at the General Meeting and not to subscribe for any of the Open Offer Shares.

Expected timetable of principal events
Record Date for the Open Offer	Close of Business on 19 January 2021
Publication of Circular and Application Form	20 January 2021
Ex entitlement date for the Open Offer	8.00 a.m. on 21 January 2021
Open Offer Entitlements and Excess CREST Open Offer	as soon as possible after
Entitlements credited to stock accounts of Qualifying	8.00 a.m. on 21 January 2021
CREST Shareholders
Recommended latest time for requesting withdrawal	4.30 p.m. on 1 February 2021
of Open Offer Entitlements and Excess CREST Open
Offer Entitlements from CREST
Latest time for depositing Open Offer Entitlements and	3.00 p.m. on 2 February 2021
Excess CREST Open Offer Entitlements in to CREST
Latest time and date for splitting of Application Forms	3.00 p.m. on 3 February 2021
(to satisfy bona fide market claims only)

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