Surface Transforms plc
Registered number 3769702
Annual Report and
Financial Statements
for the year ended 31 May 2009 Annual Report and Financial Statements 
for the year ended 31 May 2009
2 Highlights
3 Chairman’s statement
5 Chief executive’s report
7 Directors’ report
10 Report on directors’ remuneration
12 Statement of directors’ responsibilities
13 Independent auditors’ report
14 Income statement
15 Statement of changes in equity
16 Balance sheet
17 Cash flow statement
18 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
● Revenue increased by 34% to £679,284 (2008: £508,111).
● Losses after taxation £840,740 (2008: £594,065).
● Cash position as at 31 May 2009 of £404,275 (2008: £1,112,719).
● Order Book of £166,370 as at 31 May 2009, which had grown to £308,108 by 5 August
2009.
● Sales to the Defence and Aerospace Markets increased by 182% to £236,279.
● ISO 9001 Qualification was achieved – a pre-requisite for doing business in the aerospace
and automotive sectors.
● Completion of the CVIST process for carbon infiltration so reducing the unit cost of an
automotive disc by 20 per cent.
● In December 2008, the award of a further £100,000 order from MBDA, Europes leading
missile supplier. 
● The award of a multi-year contract with Mov’it GmbH, a leading supplier of high
performance brake systems within the European aftermarket, which is forecast to yield
revenues of £300,000 to £400,000 per annum in future years.
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2 Chairman’s statement
for the year ended 31 May 2008
In the 12 months to 31 May 2009 the Company achieved a number of strategic and operating milestones
although this was against the background of a severe global recession and a sustained reduction of output within
the automotive industry. The key milestones were:
● The award of a multi-year contract with Mov’it GmbH, a leading supplier of high performance brake systems
within the European aftermarket, which is forecast to yield revenues of £300,000 to £400,000 per annum in
future years.
● ISO 9001 qualification. 
● Completion of the CVIST manufacturing project which provides the capability of the carbon infiltration of
discs in house and contributes to the reduction in manufacturing costs of approximately 20% for an
automotive brake disc.
● A further £100,000 contract from MBDA the European leader in missile and rocket technology.
There were disappointments as well and these resulted from the very sharp decline in business confidence during
the final months of 2008 and the first quarter of 2009. In February 2009, we signalled that the Company’s
revenues for the full year would fall short of the market expectations that were set in August 2008 and that the
principal cause of the revenue reduction was a prospective fall in orders from our automotive customers. The
Company has now met its revised expectations for revenues and operating losses for the full year. Business in
the year was considerably higher than budget from the aerospace and defence market sectors and this provides
the Company with a platform for growth despite the continued low levels of business expected from the
automotive sector during the remainder of 2009 and most of 2010.
FINANCIAL REVIEW
In the 12 months to 31 May 2009, revenue was £679,284 (2008: £508,111). This represents an increase of 34%
over the prior year.
At 31 May the Order Book, representing confirmed orders, was £166,370 (2008: £302,124). The reduction in
the order book level over the period is mainly due to the reduction in business from the automotive sector,
however, the Order Book had grown to £308,108 by 5 August 2009. The Order Book does not reflect orders not
yet placed with regards to the annual, multi-year supply contracts the Company has signed during 2008 with
MBDA for rocket components; for carbon-ceramic brake automotive discs with Mov’it or for the supply of carbon
brake discs with a leading European brake systems group.
Losses after taxation for the 12 month period were £840,740 (2008: £594,065). These include a non cash charge
of £94,424 (2008: £56,609) relating to share based payments under IFRS 20.
Earnings per share for the year was a loss of 4.42p (2008: 3.33p).
Capital Expenditure in the period was £71,428 (2008: £142,599).
The Company had a Cash balance of £404,275 (2008: £1,112,719) at 31 May 2009 and it has no borrowings.
Shareholder Funds at 31 May 2009 were £1,026,523 (2008: £1,722,839).
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3 Chairman’s statement
continued
DEVELOPMENTS
The Company has progressed sufficiently far in the application of its technology that it now has a number of
global based customers operating in each of its main end user markets: Aerospace & Defence; High Performance
Automotive and the Automotive Race Market.
A number of these clients are either evaluating the Company’s technology for license or are purchasing brake
discs or rocket components for their development programmes or for commercial use. 
To facilitate the management of the operations and to ensure its core Intellectual Property (IP) is fully protected,
the Company has created four wholly owned operating subsidiaries. The IP and the management is held within
the Group plc company and the technology is licensed down to each subsidiary. This means that Licensing 
and Commercial supply agreements within each subsidiary are kept separate and the Group can now consider
the sale of one or more of its subsidiaries should the opportunity arise. The new Group structure commenced 
1 June 2009.
PEOPLE
Mr. Julio Faria, one of the founder directors, left the board during December 2008 and now has sold the majority
of his shareholding in the Company. We wish him well for the future.
OUTLOOK
The Group is focussed on achieving new business wins in the aerospace and defence markets whilst it recognises
that business from the automotive brake sector will remain subdued until well into the second half of 2010. The
Chief Executive’s report describes the opportunities in each of the main user markets and there is good reason
to be confident that we shall report improved results in the 2010 financial year.
Management has reduced the overhead base by an estimated £200,000 p.a going forward and the Company has
received initial notice from the DTI that it has been awarded another multi year development grant which will
reduce overheads further and improve cash flows.
The Company secured a fundraising of £410,000 net of expenses during July 2009. The issue of 4,516,580 new
ordinary shares at 10 pence per share will take place on 13 August 2009. This will be used to assist with working
capital needs over the next 24 months.
Whilst forecasting accurately can be difficult in these economic conditions, the board is cautiously optimistic
that it can increase business revenues and reduce losses in the 2010 financial year ending 31 May 2010 and
work towards breaking even in cash terms. 
Kevin D’Silva
Chairman
12 August 2009
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4 Chief executive’s report
for the year ended 31 May 2008
AUTOMOTIVE
High performance and Race car brake systems
Following the sharp economic decline within the automotive market, income from the automotive sector has
remained steady year on year with growth in overall turnover being achieved in other areas, as described below.
As a result, sales to automotive customers represented 65% of total turnover compared to 84% in 2008.
The Company has three main automotive contracts:
● Supply of ceramic discs to Mov’it GMBH – a leading European aftermarket brake system supplier. 
● Supply of carbon fibre brake discs to a global automotive brake system supplier.
● Supply of ceramic discs to Koenigsegg Automotive – supplier of high performance super cars.
Sales to Koenigsegg have remained strong; however revenue from the other two contracts, both with forecasted
annual revenues of £300,000-£400,000, has been significantly below the company’s initial expectations in 
July 2008. 
The Company recognises that trading conditions for the Company’s current automotive contracts will remain
difficult well into 2010. 
In addition to the Company’s existing contracts the Company continues to work to bring in new business,
receiving new orders from a US brake system supplier which has won the contract to supply approximately 20
prototype vehicles for the next generation of US military transport vehicle.
AEROSPACE
The company continues to work on development programmes with two aircraft brake system suppliers.
Meggitt Aircraft Braking Systems (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.
The second development programme is with a US brake system supplier that supplies both commercial and
military aircraft principally in US markets. The Company and the customer are pleased with both the pace of
development and the technical advances made during the last 12 months, with the Company progressing
through a number of key technical milestones. 
It is always very difficult to predict the adoption of new technologies and the aerospace market is no different.
The Company expects the development programme with the US supplier to continue to progress, with the focus
on the development and commercialisation of the company’s proprietary carbon ceramic technology.
DEFENCE
Rocket Components
Surface Transforms carbon ceramic technology is uniquely positioned to deliver affordable, high performance (in
terms of extended life and reduced mass) rocket components.
During the last 12 months the company has seen the level of interest increase significantly, with the defence
sector providing more than 25% of the group’s revenues during the financial year. 
We have successfully completed year one of a three year development programme with MBDA, a world leading
missile manufacturer jointly owned by BAe Systems, EADS and Finmeccanica. The £150,000 contract of over
three years generated some positive results and lead to additional revenues from MBDA including an additional
contract in excess of £100,000 to further investigate and accelerate the development. We are also pleased that
the company has been officially awarded the year two contract with MBDA and continues to work closely with
MBDA who recognise the potential for the carbon ceramic technology and are focused on the development of
the material for use in its range of products. 
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5 Chief executive’s report
continued
The company has signed a new contract for £75,000 over 3 years with the UK MoD (Ministry of Defence). The
programme although small is strategically important to the MoD with Surface Transforms technology offering the
potential of affordable, high performing ceramic composite components for the future. 
In addition the award of a £200,000, 2 year development contract with Microturbo, a world leading turbojet
engine manufacturer, for the development of carbon ceramic components for turbojet engines further recognises
the potential for use of the materials in demanding environments which require affordable solutions.
The company expects the defence sector to continue to make a significant contribution to the group revenues
going forward.
OPERATIONS
Affordability is a key requirement for all of our chosen markets, particularly with the current economic pressures
the world is facing. The development and commissioning of CVIST, the carbon vapour infiltration process plant
has been completed and has reduced the cost to manufacture a ceramic brake disc by 20%.
The operations team successfully achieved ISO 9001 accreditation in September 2008. An important milestone
for the business in terms of continuous improvements and a prerequisite to truly operating in our chosen market. 
In the autumn of 2008 the management recognised the change in trading conditions in the automotive sector
and took steps to reduce its operational cost base by £200,000. The savings came from two areas. Some non-
recurring costs associated with achieving ISO accreditation and bringing the CVIST plant online as well as a
reduction in production resources to reflect the reduced demand in two of our main automotive contracts.
PEOPLE
The company has a strong senior management team who have shown tremendous commitment and maturity
during the last 12 months.
The blend of skills, experience and determination within the team means we are well placed to continue the
good progress made to date.
I would like to thank all my colleagues for their dedication over the past year.
Dr. Kevin Johnson
Chief Executive
12 August 2009
Surface Transforms plc
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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 2009.
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 on pages 3 and 4.
KEY RISKS AND UNCERTAINTIES 
As in previous years the principal risk faced by the Company is considered to be 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. In addition the Company faces the continuing uncertainty created by the current economic
climate, particularly within the automotive sector.
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 revised
performance targets in each of these areas – please see Chairman’s report for more details:
● Turnover £679,284 (2008: £508,111)
● Losses after taxation £840,740 (2008: £594,065) 
● Order Book of £166,370 (as at 31 May 2009)
● Completion of the CVIST process for carbon infiltration so reducing the unit cost of an automotive disc by
20 per cent.
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:
● establishing contract development opportunities and collaborations with national and multi-national
customers in the aerospace and automotive industries; and 
● expanding commercial sales of CFRC products.
RESEARCH AND DEVELOPMENT
The majority of the Company’s staff are employed in research activities which are concentrated on the ongoing
identification of new products and applications for carbon fibre reinforced ceramic friction and non-friction
materials. 
PROPOSED DIVIDEND AND TRANSFER TO RESERVES
The loss for the year after taxation amounted to £840,740 (2008: £594,065). The directors do not recommend
the payment of a dividend.
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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 27 days (2008: 53 days) purchases in trade payables.
POLITICAL AND CHARITABLE DONATIONS
The Company made no political or charitable donations during the year (2008: £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 a non-executive director on 3 December 2008. 
The directors retiring by rotation are K Johnson and DT Clark 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
Professor DT Clark 5.15 979,661 979,661
K D’Silva 1.35 256,986 256,986
Dr K Johnson 0.42 79,750 79,750
KM Baker 0.47 90,000 90,000
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 10 and 11. 
The directors benefited from qualifying third party indemnity provisions in place during the financial year and at
the date of this report.
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 13 July 2009:
Number of % of issued
ordinary share 
Registered holding shares capital
TD Waterhouse Nominess (Europe) 5,238,599 27.53%
JM Finn Nominees Limited 3,869,860 20.33%
Octopus Investments Nominees 986,420 5.18%
Pershing Nominees Limited 785,000 4.12%
Surface Transforms plc
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8 Directors’ report
continued
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 three non-executive directors, David Clark, Kevin D’Silva
and Ken Baker. Details of the Remuneration Committee are disclosed in the report on directors’ remuneration
on pages 10 and 11.
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 489 of the Companies Act 2006, a resolution for the re-appointment of KPMG 
Audit Plc as auditors of the company is to be proposed at the forthcoming Annual General Meeting.
FUND RAISING
The Company secured a fundraising of £410,000 net of expenses during July 2009 by the issue of new ordinary
shares at 10 pence per share. This will be completed on 13 August 2009 and used to assist with working capital
needs over the period of the next 24 months.
POST BALANCE SHEET EVENTS
To facilitate the management of the operations and to ensure its core Intellectual Property (IP) is fully protected,
the Company has created 4 wholly owned operating subsidiaries. The IP and the management is held within the
Group plc company and the technology is licensed down to each subsidiary.
By order of the Board
K D’Silva
Chairman
12 August 2009
Unit 4
Olympic Park
Poole Hall Road
Ellesmere Port
Cheshire CH66 1ST
Surface Transforms plc
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9 Report on directors’ remuneration
for the year ended 31 May 2008
POLICY ON EXECUTIVE DIRECTORS’ REMUNERATION
The Remuneration Committee comprises of Kevin D’Silva, 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, of 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:
2009 2008
££
Executive directors
Dr K Johnson 115,912 84,399
JJ Faria* – 30,049
Dr G Gould 44,282 53,943
160,194 168,391
Non-executive directors
K D’Silva 27,000 18,000
Professor DT Clark 18,000 18,253
JJ Faria* 10,004 9,000
KM Baker 18,000 18,000
73,004 63,253
233,198 231,644
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 £4,667 (2008: £3,898)
in respect of pension contributions.
*JJ Faria resigned as a non-executive director on 3 December 2008.
DIRECTORS’ INTERESTS
Details of any contracts in which a director has a material interest are disclosed in note 17.
None of the directors received any remuneration or benefits under long term incentive schemes.
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10 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. 
None of the directors exercised options during the year. Dr K Johnson and Dr G Gould surrendered options
during the year. Directors’ options outstanding and the options which were granted, surrendered and expired
during the year are as follows:
Enterprise Management Incentive Scheme
Number 
of Share 
Holding options Holding
on Granted expired, on
Date of 1 June during waived 31 May Exercise Expiry
Director Grant 2008 the year or lapsed 2009 Price Exercise Period Date
JJ Faria 19/12/2002 64,286 – 64,286 – £0.7000 19/12/05-19/12/12 19/12/2012
Dr G Gould 19/12/2002 64,286 – 64,286 – £0.7000 19/12/05-19/12/12 19/12/2012
Dr G Gould 08/12/2003 34,091 – 34,091 – £0.8800 08/12/06-08/12/13 08/12/2013
Dr G Gould 08/03/2004 20,000 – 20,000 – £0.6650 08/03/07-08/03/14 08/03/2014
Dr G Gould 14/09/2005 29,000 – 29,000 – £0.4000 14/09/08-14/09/15 14/09/2015
Dr G Gould 18/04/2007 50,000 –– 50,000 £0.2100 18/04/10-18/04/17 18/04/2017
Dr G Gould 30/06/2008 – 86,000 – 86,000 £0.1825 30/06/11-30/06/18 30/06/2018
Dr G Gould 22/09/2008 – 21,219 – 21,219 £0.1850 22/09/11-22/09/18 22/09/2018
Dr K Johnson 04/04/2005 50,000 – 50,000 – £0.5000 04/04/08-04/04/15 04/04/2015
Dr K Johnson 14/09/2005 180,000 – 180,000 – £0.4000 14/09/08-14/09/15 14/09/2015
Dr K Johnson 18/04/2007 100,000 –– 100,000 £0.2100 18/04/10-18/04/17 18/04/2017
Dr K Johnson 30/06/2008 – 288,000 – 288,000 £0.1825 30/06/11-30/06/18 30/06/2018
Dr K Johnson 22/09/2008 – 481,707 – 481,707 £0.1850 22/09/11-22/09/18 22/09/2018
Prof. DT Clark 18/04/2007 15,000 –– 15,000 £0.2100 18/04/10-18/04/17 18/04/2017
KA D’Silva 18/04/2007 50,000 –– 50,000 £0.2100 18/04/10-18/04/17 18/04/2017
KM Baker 18/04/2007 15,000 –– 15,000 £0.2100 18/04/10-18/04/17 18/04/2017
671,663 876,926 441,663 1,106,926
The market price of the shares at 31 May 2009 was £0.115 and during the year varied from £0.195 to £0.075.
By order of the Board
K D’Silva
Chairman
12 August 2009
Unit 4
Olympic Park
Poole Hall Road
Ellesmere Port
Cheshire CH66 1ST
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11 Statement of directors’ responsibilities
in respect of the annual report and the financial statements
The directors are responsible for preparing the Directors’ Report and the Annual Report 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
law.
Under company law the directors must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that
period. In preparing these financial statements, the directors are required to:
● select suitable accounting policies and then apply them consistently;
● make judgements and estimates that are reasonable and prudent;
● state whether they have been prepared in accordance with IFRSs as adopted by the EU; and
● 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 adequate accounting records that are sufficient to show and explain
the company’s transactions and disclose with reasonable accuracy at any time the financial position of the
company and enable them to ensure that the financial statements comply with the Companies Act 2006. 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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12 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 2009 set out on
pages 14 to 33. The financial reporting framework that has been applied in their preparation is applicable law
and International Financial Reporting Standards (IFRSs) as adopted by the EU.
This report is made solely to the company’s members, as a body, in accordance with sections 495 and 496 of
the Companies Act 2006. 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 auditors’ 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
As explained more fully in the Directors’ Responsibilities Statement set out on page 12, the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and fair
view. Our responsibility is to audit the financial statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s
(APB’s) Ethical Standards for Auditors.
SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS
A description of the scope of an audit of financial statements is provided on the APB’s web-site at
www.frc.org.uk/apb/scope/UKNP.
OPINION ON FINANCIAL STATEMENTS
In our opinion the financial statements:
● give a true and fair view of the state of the company’s affairs as at 31 May 2009 and of its Loss for the year
then ended;
● have been properly prepared in accordance with IFRSs as adopted by the EU; and
● have been prepared in accordance with the requirements of the Companies Act 2006.
OPINION ON OTHER MATTER PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion the information given in the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
● adequate accounting records have not been kept, or returns adequate for our audit have not been received
from branches not visited by us; or
● the financial statements are not in agreement with the accounting records and returns; or
● certain disclosures of directors’ remuneration specified by law are not made; or
● we have not received all the information and explanations we require for our audit.
Richard Evans (Senior Statutory Auditor)
for and on behalf of KPMG Audit Plc, Statutory Auditor
Chartered Accountants 
Manchester
14 August 2009
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13 Income statement
for the year ended 31 May 2009
2009 2008
Note ££
Revenue 2 679,284 508,111
Cost of sales (282,487) (252,874)
Gross profit 396,797 255,237
Administrative expenses:
Before research costs (733,700) (615,617)
Research costs (839,509) (678,078)
Total administrative expenses (1,573,209) (1,293,695)
Other operating income 3 166,035 220,652
Operating loss (1,010,377) (817,806)
Financial income 6 20,646 67,347
Financial expenses 6 (1,854) –
Loss before tax (991,585) (750,459)
Taxation 7 150,845 156,394
Loss for the year 15 (840,740) (594,065)
Loss per ordinary share
Basic and diluted 18 (4.42p) (3.33p)
All amounts relate to continuing activities.
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14 Statement of changes in equity
at 31 May 2009
Share Profit
Share premium Capital and loss
capital account reserve account Total
£££ £ £
2008
Loss for the year –– – (594,065) (594,065)
Total recognised income and expense –– – (594,065) (594,065)
Credit in relation to share based payments –– – 56,609 56,609
Issue of new shares 50,000 847,237 –– 897,237
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
Share Profit
Share premium Capital and loss
capital account reserve account Total
£££ £ £
2009
Loss for the year –– – (840,740) (840,740)
Total recognised income and expense –– – (840,740) (840,740)
Credit in relation to share based payments –– – 94,424 94,424
Opening shareholders funds at 1 June 2007 190,308 5,749,952 463,885 (4,631,306) 1,772,839
Closing shareholders funds at 31 May 2008 190,308 5,749,952 463,885 (5,377,622) 1,026,523
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15 Balance sheet
at 31 May 2009
2009 2008
Note £££ £
Non-current assets
Property, plant and equipment 8 382,448 382,975
382,448 382,975
Current assets
Inventories 9 228,251 258,874
Trade and other receivables 10 212,851 292,923
Cash and cash equivalents 404,275 1,112,719
Total current assets 845,377 1,664,516
Total assets 1,227,825 2,047,491
Current liabilities
Other interest bearing loans and borrowings 11 (14,438) –
Trade and other payables 12 (168,669) (274,652)
Total current liabilities (183,107) (274,652)
Non current liabilities
Other interest bearing loans and borrowings 11 (18,195) –
Total liabilities (201,302) (274,652)
Net assets 1,026,523 1,772,839
Equity
Share capital 14 190,308 190,308
Share premium 15 5,749,952 5,749,952
Capital reserve 15 463,885 463,885
Retained earnings 15 (5,377,622) (4,631,306)
Total equity attributable to equity shareholders 
of the Company 1,026,523 1,772,839
These financial statements were approved by the board of directors on 12 August 2009 and were signed on its
behalf by:
K D’Silva
Director
Dr K Johnson
Director
Surface Transforms plc
■ ■ ■ ■ ■ ■ ■ ■ ■ ■
16 Cash flow statement
for the year ended 31 May 2009
2009 2008
££
Cash flows from operating activities
Loss for the year (840,740) (594,065)
Adjusted for:
Depreciation charge 71,282 49,079
Amortisation charge – 1,886
Profit on disposal of plant and equipment (4,402) –
Equity settled share-based payment expenses 94,424 56,609
Financial income (20,646) (67,347)
Financial expense 1,854 –
Taxation (150,845) (156,394)
(849,073) (710,232)
Changes in working capital
Decrease/(Increase) in inventories 30,623 (46,693)
Decrease/(Increase) in trade and other receivables 80,072 (3,347)
Decrease/(Increase) in trade and other payables (105,983) 15,641
(844,361) (744,631)
Finance income received 20,646 67,347
Financial expense paid (1,854) –
Taxation received 150,845 156,394
Net cash used in operating activities (674,724) (520,890)
Cash flows from investing activities
Acquisition of property, plant and equipment (22,150) (142,599)
Proceeds from sale of property, plant and equipment 5,075 –
Net cash used in investing activities (17,075) (142,599)
Cash flows from financing activities
Proceeds from issue of share capital – 897,237
Payment of finance lease liabilities (16,645) –
Net cash from financing activities (16,645) 897,237
Net decrease/(increase) in cash and cash equivalents (708,444) 233,748
Cash and cash equivalents at the beginning of the period 1,112,719 878,971
Cash and cash equivalents at the end of the period 404,275 1,112,719
Surface Transforms plc
■ ■ ■ ■ ■ ■ ■ ■ ■ ■
17 Notes to the financial statements
for the year ended 31 May 2009
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.
The financial statements were approved by the board on 12 August 2009.
Basis of preparation
The financial statements have been prepared in accordance with applicable accounting standards and
under the historical cost convention, as modified for financial assets and liabilities at fair value through the
income statement.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all
periods presented in these financial statements.
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 £840,740 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. Revenues are expected
to continue to increase in the coming years resulting in the company becoming profitable in due course.
In addition the Company has secured a fundraising of £410,000 net of expenses during July 2009. The issue
of new ordinary shares at 10 pence per share will take place on 13 August 2009.
The Company’s business activities, together with the factors likely to affect future development,
performance and position are set out in the Chairman’s statement on pages 3 and 4 and the Director’s report
on pages 7 to 9. In addition, note 19 to the financial statements includes the group’s objectives, policies
and processes for managing its capital; its financial risk management objectives; details of its financial
instruments and its exposures to credit risk and liquidity risk.
The directors believe that the group is well placed to manage its business risks successfully despite the
current uncertain economic outlook. After making enquiries, the directors have a reasonable expectation
that the Company and has adequate resources to continue in operational existence for the foreseeable
future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and
accounts.
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.
Surface Transforms plc
■ ■ ■ ■ ■ ■ ■ ■ ■ ■
18 Notes to the financial statements
continued
1 ACCOUNTING POLICIES (continued)
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated
impairment losses.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for
as separate items of property, plant and equipment.
Leases in which the Company assumes substantially all the risks and rewards of ownership of the leased
asset are classified as finance leases. Leased assets acquired by way of finance lease are stated at an amount
equal to the lower of their fair value and the present value of the minimum lease payments at inception of
the lease, less accumulated depreciation and less accumulated impairment losses. Lease payments are
accounted for as described below.
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of
each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives
are as follows:
Plant and machinery – 12.5%-20% per annum
Fixtures and fittings – 15% per annum
Motor vehicles – 25% per annum
Leasehold improvements – Over life of lease
Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.
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 payments
Payments made under operating leases are recognised in the income statement on a straight-line basis over
the term of the lease. Lease incentives received are recognised in the income statement as an integral part
of the total lease expense.
Finance lease payments
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding
liability. The finance charge is allocated to each period during the lease term so as to produce a constant
periodic rate of interest on the remaining balance of the liability.
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.
Surface Transforms plc
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19 Notes to the financial statements
continued
1 ACCOUNTING POLICIES (continued)
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.
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 2009 and have not been applied in preparing these financial statements:
New standards relevant to the Company
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 considers revenues to be generated via a single business segment (see Note 2).
Amended standards relevant to the Company
Revised IAS 1 “Presentation of Financial Statements” (2007) introduces the term total comprehensive
income, which represents changes in equity during a period other than those changes resulting from
transactions with owners in their capacity as owners. Total comprehensive income may be presented in
either a single statement of comprehensive income (effectively combining both the income statement and
all non-owner changes in equity in a single statement), or in an income statement and a separate statement
of comprehensive income. Revised IAS 1, which becomes mandatory for the Company’s 2010 financial
statements, is expected to have a significant impact on the presentation of the financial statements. The
Company plans to provide total comprehensive income in a single statement of comprehensive income for
its 2010 financial statements.
Amendment to IFRS 2 “Share-based Payment – Vesting Conditions and Cancellations” clarifies the
definition of vesting conditions; introduces the concept of non-vesting conditions; requires non-vesting
conditions to be reflected in grant-date fair value; and provides the accounting treatment for non-vesting
conditions and cancellations. The amendments to IFRS 2 will become mandatory for the Company’s 2010
financial statements, with retrospective application and is not expected to have a significant impact on the
financial statements.
Surface Transforms plc
■ ■ ■ ■ ■ ■ ■ ■ ■ ■
20 Notes to the financial statements
continued
1 ACCOUNTING POLICIES (continued)
Revenue
Revenue comprises income derived from 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.
Contractual arrangements exist with specific customers which set selling prices and target volumes for
future periods. The revenue derived from specific purchase orders raised against these contracts is
recognised in a consistent manner to that described above.
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.
Critical accounting estimates and judgements
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.
Surface Transforms plc
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21 Notes to the financial statements
continued
1 ACCOUNTING POLICIES (continued)
Research and development expenditure
The board considers the definitions of research and development costs as outlined in IAS 38: Intangible
assets when determining the correct treatment of costs incurred. Where such expenditure is technically and
commercially feasible, 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 it is treated as development expenditure and capitalised
on the balance sheet.
In considering whether an item of expenditure meets these criteria, the Board applies judgement. During
the year all such expenditure has been expensed to the income statement on the grounds that it relates to
feasibility studies to identify new applications for the technology or methods of improving the production
process. As the technical feasibility of this work is unknown at the time the costs are incurred, none meet
the criteria for capitalisation during the current or previous year.
2 ANALYSIS OF TURNOVER
Revenue and loss on ordinary activities before taxation is wholly attributable to the principal activity of the
Company, namely the development and manufacture of reinforced ceramic products. As all products are
similar in nature and are manufactured using a single production facility, the board have reassessed the
segmental breakdown of the business during the year and consider that all revenue falls under a single
business segment as defined by IAS 14.
The following additional information is presented solely to assist the reader in understanding the
performance of the Company in the year.
Revenue by type of end user is analysed as follows:
2009 2008
££
Automotive 241,157 345,464
Defence and aerospace 236,279 83,798
Automotive Racing 201,848 78,850
679,284 508,111
All sales 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 categories.
Revenue by geographical destination is analysed as follows:
2009 2008
££
By geographical market: 
United Kingdom 296,821 138,074
Rest of Europe 375,365 353,964
United States of America 7,098 16,073
679,284 508,111
Revenue by origin, net assets and profit before interest and tax all relate to the UK.
Surface Transforms plc
■ ■ ■ ■ ■ ■ ■ ■ ■ ■
22 Notes to the financial statements
continued
3 EXPENSES AND AUDITORS REMUNERATION 2009 2008
££
Operating loss before taxation is stated
after charging
Depreciation of owned tangible fixed assets 71,282 49,079
Research and development expensed as incurred 839,509 678,078
Amortisation of patents and licences – 1,886
Rents payable under operating leases – land and buildings 53,577 50,251
Exchange losses 5,609 2,294
after crediting
Exchange gains 3,831 2,164
Government grants 166,035 220,652
Audit of these financial statements
Amounts receivable by auditors and their associates in respect of:
Audit of financial statements pursuant to legislation 17,450 17,450
Government grants
Grants received comprise revenue grants from DTI.
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.
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 £233,198 (2008: £231,644). Of this, £115,912 (2008: £84,399) was made to
the highest paid director and company pension contributions of £4,667 (2008: £3,898) 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 10 and 11.
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
2009 2008
Directors 66
Other employees 17 14
23 20
The aggregate payroll costs of these persons were as follows:
2009 2008
££
Wages and salaries 609,510 624,013
Social security costs 72,308 61,685
Other pension costs (see note 16) 29,429 19,497
711,247 705,195
Surface Transforms plc
■ ■ ■ ■ ■ ■ ■ ■ ■ ■
23 Notes to the financial statements
continued
6 FINANCIAL INCOME AND EXPENSES 2009 2008
££
Financial income
Bank interest receivable 20,646 67,347
Financial Expenses
Total interest expense on financial liabilities measured at amortised cost 1,854 –
7 TAXATION
Analysis of credit in year:
2009 2008
££
UK corporation tax
Research and development tax repayment (150,845) (156,394)
Income tax credit (150,845) (156,394)
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 (2008: lower) than the standard rate of corporation tax in the UK
of 28% (2008: 28%). The differences are explained below:
2009 2008
Reconciliation of effective tax rate ££
Loss for the year (840,740) (594,065)
Total income tax credit (150,844) (156,394)
Loss excluding income tax (991,584) (750,459)
Current tax at average rate of 28.00% (2008: 29.67%) (277,644) (222,661)
Effects of:
Non-deductible expenses 359 632
Reduction in tax rate – 38,861
Change in unrecognised timing differences 42,306 4,976
Current year losses for which no deferred tax recognised 234,979 178,192
Tax incentives (150,845) (156,394)
Income tax credit (see above) (150,845) (156,394)
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.
Surface Transforms plc
■ ■ ■ ■ ■ ■ ■ ■ ■ ■
24 Notes to the financial statements
continued
8 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 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
Additions – 10,852 45,873 14,703 – 71,428
Disposals and write offs –– –– (28,660) (28,660)
At 31 May 2009 44,216 74,620 409,328 44,272 – 572,436
Depreciation
At 1 June 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
Disposals and write offs –– –– (27,985) (27,985)
Charge for year – 7,068 50,826 9,051 4,337 71,282
At 31 May 2009 44,216 14,079 112,702 18,993 – 189,990
Net book value
At 1 June 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
At 31 May 2009 – 60,541 296,626 25,279 – 382,446
At 31 May 2009 the net carrying amount of leased plant and machinery was £44,298 (2008: £ nil).
9 INVENTORIES 2009 2008
££
Raw materials and consumables 27,249 28,059
Work in progress 201,002 230,815
228,251 258,874
Raw materials, consumables and changes in finished goods and work in progress recognised as cost of sales
in the year amounted to £282,487 (2008: £252,874).
10 TRADE AND OTHER RECEIVABLES 2009 2008
££
Trade receivables 68,626 160,954
Other receivables 83,695 86,475
Prepayments and accrued income 60,530 45,494
212,851 292,923
All receivables fall due within one year.
Surface Transforms plc
■ ■ ■ ■ ■ ■ ■ ■ ■ ■
25 Notes to the financial statements
continued
11 OTHER INTEREST-BEARING LOANS AND BORROWINGS
This note provides information about the contractual terms of the Company’s interest-bearing loans and
borrowings, which are measured at amortised cost. For more information about the Company’s exposure to
interest rate and foreign currency risk, see note 19.
2009 2008
££
Current liabilities
Current portion of finance lease liabilities 14,438 –
Non-current liabilities
Finance lease liabilities 18,195 –
Finance lease liabilities are payable as follows:
Future Present value Future Present value
minimum of minimum minimum of minimum
lease lease lease lease
payments Interest payments payments Interest payments
2009 2009 2009 2008 2008 2008
£££ ££ £
Less than one year 16,684 2,246 14,438 –– –
Between one and five years 19,208 1,013 18,195 –– –
More than five years –– ––– –
35,892 3,259 32,633 –– –
12 TRADE AND OTHER PAYABLES: AMOUNTS FALLING DUE WITHIN ONE YEAR
2009 2008
££
Trade payables 77,634 171,620
Taxation and social security 30,209 19,723
Accruals and deferred income 60,826 83,309
168,669 274,652
13 DEFERRED TAX
The elements of deferred taxation are as follows:
2009 2008
££
Difference between accumulated depreciation and amortisation 
and capital allowances 34,441 17,810
Other short term timing differences (1,738) (2,572)
Tax losses (625,883) (566,180)
Unrecognised deferred tax asset (593,180) (550,942)
The Company has an unrecognised deferred tax asset at 31 May 2009 of £593,180 (2008: £550,942)
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.
Surface Transforms plc
■ ■ ■ ■ ■ ■ ■ ■ ■ ■
26 Notes to the financial statements
continued
14 CALLED UP SHARE CAPITAL 2009 2008
££
Authorised
20,000,000 ordinary shares of £0.01 each 200,000 200,000
Allotted, called up and fully paid
19,030,748 shares of £0.01 each 190,308 190,308
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 10 and 11. 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
18/04/2007 170,000 £0.21 18/04/10-18/04/17
30/06/2008 151,200 £0.1825 30/06/11-30/06/18
22/09/2008 575,839 £0.1850 22/09/11-22/09/18
There are a total of 897,039 unexpired options held by employees and a total of 1,106,926 unexpired
options held by directors.
15 SHARE PREMIUM AND RESERVES Share premium Capital Profit and
account reserve loss account
££ £
At 1 June 2007 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 31 May 2008 5,749,952 463,885 (4,631,306)
Retained loss for the year –– (840,740)
Reversal of charge in relation to share based payments –– 94,424
At 31 May 2009 5,749,952 463,885 (5,377,622)
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 £29,429
(2008: £19,497).
There were outstanding contributions of £nil (2008:£nil) at the end of the financial year.
Surface Transforms plc
■ ■ ■ ■ ■ ■ ■ ■ ■ ■
27 Notes to the financial statements
continued
17 RELATED PARTY DISCLOSURES
The results of the Company include no material transactions with related parties in the current or preceding
year.
18 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 2009 2008
££
Loss after tax (840,740) (594,065)
Weighted average number of shares 19,030,748 17,828,562
Loss per share (4.42p) (3.33p)
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.
19 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 2009 31 May 2008
US Dollar Euro Sterling US Dollar Euro Sterling
£££ ££ £
Cash and cash equivalents –– 404,275 –– 1,112,719
Trade receivables – 43,267 25,359 – 56,803 104,151
Trade payables (1,987) (924) (74,723) (19,531) – (152,089)
Finance lease liabilities –– (32,633) –– –
Net Exposure (1,987) 42,343 322,278 (19,531) 56,803 1,064,781
Average Rate Reporting Date Spot Rate
2009 2008 2009 2008
US Dollar 1.643 2.006 1.619 1.976
Euro 1.182 1.385 1.145 1.273
Surface Transforms plc
■ ■ ■ ■ ■ ■ ■ ■ ■ ■
28 Notes to the financial statements
continued
19 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS (continued)
Sensitivity Analysis
A ten percent strengthening of the pound against the US Dollar and the Euro at 31 May 2009 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 2008.
US Dollar Euro
££
31 May 2009 (180) 3,850
31 May 2008 (1,780) 5,160
A ten percent weakening of the pound against the US Dollar and the Euro at 31 May 2009 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.
Credit Risk
The Company operates a closely monitored collection policy.
The ageing of trade receivables at the reporting date was:
31 May 2009 31 May 2008
Gross Impairment Net Gross Impairment Net
£££ ££ £
Not past due 21,787 – 21,787 151,381 – 151,381
Past due 0 to 30 days –– – 9,264 – 9,264
Past due 31 to 90 days 46,839 – 46,839 5,105 (4,796) 309
68,626 – 68,626 165,750 (4,796) 160,954
The majority of the debt falling in 31 to 90 days at 31 May 2009 relates to one customer for whom trading
terms have been re-negotiated. This customer has adhered to these revised terms since re-negotiation and
as such no impairment of this receivable is deemed necessary.
The movement in the allowance for impairment in respect of trade receivables was as follows:
Impairment
Allowance
£
Balance 1 June 2007 9,499
Impairment loss recognised (4,703)
Balance 31 May 2008 4,796
Impairment loss recognised (4,796)
Balance 31 May 2009 –
Liquidity Risk
The Company’s objective is to maintain a balance between continuity and flexibility of funding through the
use of short term deposits.
The contractual maturity of all cash and cash equivalents, trade and other receivables at the current and
preceding balance sheet date is within one year.
The contractual maturity of trade and other payables at the current and preceding balance sheet date is
within three months.
The contractual maturity of finance lease liabilities can be found in note 11.
Surface Transforms plc
■ ■ ■ ■ ■ ■ ■ ■ ■ ■
29 Notes to the financial statements
continued
19 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS (continued)
Interest Rate Risk
At the balance sheet date the interest rate profile of the Company’s interest-bearing financial instruments
was:
2009 2008
££
Fixed rate instruments
Finance lease liabilities 32,633 –
The Company has cash deposits of £398,780 (2008: £1,039,603).These funds are placed on premium rate
deposit at rates which tracks 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 Barclays base rate of 0.50% (2008: 5.49% HBOS). 
Fair values of the Company’s financial assets and liabilities
Trade and other receivables
The fair value of trade and other receivables, is estimated as the present value of future cash flows,
discounted at the market rate of interest at the balance sheet date if the effect is material.
Trade and other payables
The fair value of trade and other payables is estimated as the present value of future cash flows, discounted
at the market rate of interest at the balance sheet date if the effect is material.
Cash and cash equivalents
The fair value of cash and cash equivalents is estimated as its carrying amount, all cash and cash
equivalents are repayable on demand.
Interest-bearing borrowings
Fair value, which after initial recognition is determined for disclosure purposes only, is calculated based on
the present value of future principal and interest cash flows, discounted at the market rate of interest at the
balance sheet date if the effect is material.
The fair value of financial assets and liabilities, together with the carrying amounts shown in the balance
sheet are as follows:
2009 2008
Carrying Fair Carrying Fair
value value value value
££ £ £
Financial assets:
Cash and cash equivalents 404,275 404,275 1,112,719 1,112,719
Loans and receivables:
Trade receivables 68,626 68,626 160,954 160,954
Total financial assets 472,901 472,901 1,273,673 1,273,673
Financial liabilities at amortised cost
Trade payables (77,634) (77,634) (171,620) (171,620)
Finance lease liabilities (32,633) (32,633) ––
Total financial liabilities (110,267) (110,267) (274,652) (274,652)
Surface Transforms plc
■ ■ ■ ■ ■ ■ ■ ■ ■ ■
30 Notes to the financial statements
continued
20 COMMITMENTS
Total future minimum commitments under non-cancellable operating leases are as follows:
2009 2008
Land and Motor Land and Motor
buildings vehicles buildings vehicles
££ £ £
Operating leases which expire:
Within one year –– – –
In the second to fifth years inclusive 174,103 28,635 183,509 –
174,103 28,635 183,509 –
21 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 2008 Granted Surrendered Lapsed May 2009 price exercisable date
(a) 158,873 – (78,858) (80,015) – 70p 19/12/2005 19/12/2012
(a) 34,091 – (34,091) –– 88p 08/12/2006 08/12/2013
(a) 60,000 – (40,000) (20,000) – 66.5p 08/03/2007 08/03/2014
(a) 85,000 – (70,000) (15,000) – 50p 04/04/2008 04/04/2015
(a) 424,000 – (424,000) –– 40p 14/09/2008 14/09/2015
(a) 314,125 –– (25,000) 289,125 21p 18/04/2010 18/04/2017
(b) 110,875 –– – 110,875 21p 18/04/2010 18/04/2017
(a) – 479,200 – (17,000) 462,200 18.25p 30/06/2011 30/06/2018
(b) – 63,000 –– 63,000 18.25p 22/09/2011 22/09/2018
(a) – 865,327 –– 865,327 18.5p 30/06/2011 30/06/2018
(b) – 213,438 –– 213,438 18.5p 22/09/2011 22/09/2018
1,186,964 1,620,965 (646,949) (157,015) 2,003,965
(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.
Surface Transforms plc
■ ■ ■ ■ ■ ■ ■ ■ ■ ■
31 Notes to the financial statements
continued
21 SHARE BASED PAYMENTS (continued)
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 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
Granted 1,344,527 0.18 276,438 0.18
Forfeited and Surrendered (803,964) 0.50 ––
Outstanding at 31 May 2009 1,616,652 0.41 387,313 0.21
Exercisable at 31 May 2009 –– – –
Range of exercise prices 18.25p to 21p 18.25p to 21p
Weighted average remaining contractual life 9 years 0 months 8 years 11 months
There were no share options exercised during the year (2008 nil).
A charge of £94,424 (2008: £56,609) 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 2009 and the assumptions used of their fair
value on the date of grant were as follows:
Weighted Average Assumptions 2009 2008
Fair Value per share option 14.83p n/a*
Share price on date of grant 18.42p n/a*
Exercise Price 18.42p n/a*
Share options granted in the year EMI 1,344,527 n/a*
Share options granted in the year Unapproved 276,438 n/a*
Expected Volatility 100% n/a*
Exercise Pattern (years) 3-10 years uniformly n/a*
Expected dividend yields 0% n/a*
Risk free rate of return 5% n/a*
*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.
Surface Transforms plc
■ ■ ■ ■ ■ ■ ■ ■ ■ ■
32 Notes to the financial statements
continued
22 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 would hold 18% of the share capital, following the exercise of all
outstanding share options.
23 POST BALANCE SHEET EVENTS
To facilitate the management of the operations and to ensure its core Intellectual Property (IP) is fully
protected, the Company has created 4 wholly owned operating subsidiaries. The IP and the management
is held within the Group plc company and the technology is licensed down to each subsidiary.
Surface Transforms plc
■ ■ ■ ■ ■ ■ ■ ■ ■ ■
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)
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
NOMINATED ADVISER Seymour Pierce Limited
20 Old Bailey
London EC4M 7EN
BROKERS Seymour Pierce Limited
20 Old Bailey
London EC4M 7EN
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
Surface Transforms plc
■ ■ ■ ■ ■ ■ ■ ■ ■ ■
34 Notice of Annual General Meeting
for the year ended 31 May 2008
NOTICE IS HEREBY GIVEN that the annual general meeting of Surface Transforms plc (the “Company”) will be
held at Unit 4, Olympic Park, Poole Hall Road, Ellesmere Port, Cheshire CH66 1ST on 29 September 2009 at
11.30am for the following purposes:
ORDINARY BUSINESS
1. To receive the annual accounts of the Company for the financial year ended 31 May 2009 together with
the last directors’ report, the last directors’ remuneration report and the auditors’ report on those accounts.
2. To re-elect Kevin Johnson, who retires by rotation pursuant to article 113 of the articles of association of
the Company and who, being eligible, offers himself for re-election as a director.
3. To re-elect David Clark, who retires pursuant to article 113 of the articles of association of the Company
and who, being eligible, offers himself for re-election as a director.
4. To re-appoint KPMG Audit plc as auditors of the Company and to authorise the directors to fix their
remuneration.
SPECIAL BUSINESS
To consider and, if thought fit, pass the following resolution which will be proposed as an ordinary resolution:
5. 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 (as defined in section 80(2) of the Act) up to an aggregate nominal value of £77,706 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 shall, unless
previously renewed, varied or revoked by the Company in general meeting, expire at the conclusion of the
next annual general meeting or on the date which is 6 months after the next accounting reference date of
the Company (if earlier) save 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 or equity securities (as the case may
be) to be allotted after the expiry of such period and the directors of the Company may allot relevant
securities or equity securities (as the case may be) in pursuance of such offer or agreement as if the authority
conferred hereby had not expired.
To consider and, if thought fit, pass the following resolution which will be proposed as a special resolution:
6. THAT, subject to and conditional upon the passing of the resolution numbered 5 in the notice convening
the meeting at which this resolution was proposed 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 5 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
(b) the allotment (otherwise than pursuant to sub-paragraph (a) above) of equity securities up to an
aggregate nominal amount of £23,547, representing approximately 10% of the current issued share
capital of the Company,
Surface Transforms plc
■ ■ ■ ■ ■ ■ ■ ■ ■ ■
35 Notice of Annual General Meeting
continued
and shall expire at the conclusion of the next annual general meeting or on the date which is 6 months
after the next accounting reference date of the Company (if earlier) 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 may allot equity securities in pursuance of such offer or agreement as if the power
conferred hereby had not expired.
To consider and, if thought fit, pass the following resolution which will be proposed as an ordinary resolution:
7. THAT, the Company be and is hereby authorised, subject to and in accordance with the provisions of the
Companies Act 2006, to serve any notice on, or send or supply any other documents or information to, its
members or any other person by any electronic means, including by making them available on a website.
By order of the Board
G V Hall
Company Secretary
Dated: 14 August 2009
Registered Office:
Unit 4
Olympic Park
Poole Hall Road
Ellesmere Port
Cheshire CH66 1ST
Notes:
1. A member of the Company entitled to attend and vote at the meeting convened by this notice is entitled to appoint one or more
proxies to exercise any of his rights to attend, speak and vote at that meeting on his behalf. If a member appoints more than one proxy,
each proxy must be entitled to exercise the rights attached to different shares. A proxy need not be a member of the Company.
2. A proxy may only be appointed using the procedures set out in these notes and the enclosed proxy form. To appoint a proxy, a member
must complete, sign and date the enclosed proxy form and deposit it at the office of the Company’s Registrars, Capita Registrars, Proxy
Department, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU by 11.30am on 27 September 2009. Any power of
attorney or any other authority under which the proxy form is signed (or a duly certified copy of such power or authority) must be
enclosed with the proxy form.
3. In order to revoke a proxy appointment, a member must sign and date a notice clearly stating his intention to revoke his 
proxy appointment and deposit it at the the office of the Company’s Registrars, Capita Registrars, Proxy Department, The Registry, 
34 Beckenham Road, Beckenham, Kent BR3 4TU by 11.30am on 27 September 2009.
4. CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so in
relation to the meeting, and any adjournment(s) thereof, by utilising the procedures described in the CREST Manual. 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 registrars, Capita Registrars (whose CREST ID is RA10) by the latest time for receipt of proxy appointments specified
in note 2 above. 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.
5. Any corporation which is a member of the Company may authorise a person (who need not be a member of the Company) to attend,
speak and vote at the meeting as the representative of that corporation. A certified copy of the board resolution of the corporation
appointing the relevant person as the representative of that corporation in connection with the meeting must be deposited at the office
of the Company’s Registrars prior to the commencement of the meeting.
6. As permitted by regulation 41 of the Uncertificated Securities Regulations 2001, only those persons whose names are entered on the
register of members of the Company at 11.30am on 27 September 2009 shall be entitled to attend and vote in respect of the number
of shares registered in their names at that time. Changes to entries on the register of members after that time shall be disregarded in
determining the rights of any person to attend and/or vote at the meeting.
Surface Transforms plc
■ ■ ■ ■ ■ ■ ■ ■ ■ ■
36 Printed by Michael Searle & Son Limited Surface Transforms plc
Unit 4
Olympic Park
Poole Hall Road
Ellesmere Port
Cheshire CH66 1ST
Tel: 0151 356 2141