AGM.L Regulatory News (AGM)

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, NEW ZEALAND, THE REPUBLIC OF IRELAND, THE REPUBLIC OF SOUTH AFRICA, JAPAN OR ANY JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF LOCAL SECURITIES LAWS OR REGULATIONS.

THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR FORM PART OF ANY OFFER OR INVITATION TO SELL OR ISSUE, OR ANY SOLICITATION OF ANY OFFER TO PURCHASE OR SUBSCRIBE FOR, ANY NEW ORDINARY SHARES, NOR SHALL IT (OR ANY PART OF IT), OR THE FACT OF ITS DISTRIBUTION, FORM THE BASIS OF, OR BE RELIED ON IN CONNECTION WITH, OR ACT AS ANY INDUCEMENT TO ENTER INTO, ANY CONTRACT OR COMMITMENT WHATSOEVER WITH RESPECT TO THE PROPOSED PLACING AND OPEN OFFER. THIS ANNOUNCEMENT IS NOT A CIRCULAR AND INVESTORS SHOULD NOT SUBSCRIBE FOR OR PURCHASE ANY NEW ORDINARY SHARES REFERRED TO IN THIS ANNOUNCEMENT EXCEPT SOLELY ON THE BASIS OF INFORMATION IN THE CIRCULAR EXPECTED TO BE PUBLISHED TODAY.

Applied Graphene Materials plc

("Applied Graphene Materials", the "Company" or the "Group")

Proposed Placing and Open Offer to raise up to £10.1m

Posting of Circular & Notice of General Meeting

Applied Graphene Materials, the producer of specialty graphene materials, announces that it has conditionally raised £8.1 million before expenses through the placing of 4,628,571 New Ordinary Shares at 175 pence per share. In addition, in order to provide Qualifying Shareholders with the opportunity to subscribe for New Ordinary Shares, the Company has announced an Open Offer to raise up to approximately £2.0 million, on the basis of 1 Open Offer Share for every 15 Existing Ordinary Shares held on the Record Date, at 175 pence each.

Key highlights

· Proposal to raise up to £10.1m (before fees and expenses) to:

§ scale up the Company's production facilities to increase manufacturing capacity to six tonnes per annum;

§ fund collaborations and joint development activity with customers, including development of new intellectual property;

§ fund the Group whilst it pursues production orders; and

§ finance the working capital requirements of the Group for at least twelve months.

· The Fundraising is structured as:

§ a Placing of 4,628,571 New Ordinary Shares at an issue price of 175 pence per share;

§ an Open Offer of up to 1,134,281 New Ordinary Shares at an issue price of 175 pence per share; and

§ Qualifying Shareholders can subscribe for 1 Open Offer Share for every 15 Existing Ordinary Shares held, with the possibility of acquiring additional Open Offer Shares through the Excess Application Facility.

· The Placing and Open Offer are conditional, inter alia, on Shareholder approval

· The Circular is expected to be posted to shareholders today 

· General Meeting to be held at the offices of Squire Patton Boggs (UK) LLP at 2 Park Lane, Leeds LS3 1ES at 11.00 a.m. on 8 January 2016

Notice of General Meeting

A General Meeting of the Company will be held at the offices of Squire Patton Boggs (UK) LLP at 2 Park Lane, Leeds LS3 1ES at 11.00 a.m. on 8 January 2016. Each of the Directors who are also Shareholders, being Bryan Dobson, Jon Mabbitt, Karl Coleman and Oliver Lightowlers, have irrevocably undertaken to vote in favour of the Resolutions in respect of, in aggregate, 1,978,467 Existing Ordinary Shares, representing approximately 11.6 per cent. of the Existing Ordinary Shares.

Commenting, Jon Mabbitt, Chief Executive Officer, said:

"This fundraising is another significant step forward in the development of the Group and follows a period of strong progress for the business during which time Applied Graphene Materials has developed its commercial platform around its proprietary manufacturing process and graphene formulation know-how. The support received from investors enables the Group to continue working closely alongside customers via its collaboration and joint development activities, as we target production orders, as well as funding the scale up of our production facilities to increase manufacturing capacity. We are confident that the Group remains well positioned to become a leading graphene provider."

For further information, please contact:

Applied Graphene Materials +44 (0) 1642 438 214

Jon Mabbitt, Chief Executive Officer

Oliver Lightowlers, Chief Financial Officer

N+1 Singer +44 (0) 207 496 3000

Shaun Dobson / Richard Lindley / Nick Owen

Hudson Sandler +44 (0) 207 796 4133

Charlie Jack / Emily Dillon

Further information

Each of the Placing and Open Offer are conditional, inter alia, on the passing of the Resolutions at the General Meeting, Admission becoming effective by no later than 8.00 a.m. on 11 January 2016 (or such other time and/or date, being no later than 7 February 2016, as the Company and N+1 Singer may agree) and the Placing Agreement between the Company and N+1 Singer becoming unconditional and not being terminated prior to Admission (in accordance with its terms). Notice of the General Meeting is set out on page 59 of the circular to Shareholders (the "Circular"). It is expected that the New Ordinary Shares will be admitted to trading on AIM on or around 8.00 a.m. on 11 January 2016. The Placing and Open Offer are not underwritten.

The Circular, extracts of which are set out below, is expected to be posted today, and will provide details of, and the background to, the Fundraising, and sets out the reasons why the Board believes that the Fundraising is in the best interests of the Company and its Shareholders and to seek Shareholder approval of the Resolutions at the forthcoming General Meeting.

Copies of the Circular will be available shortly following posting on the Company's website (ww.appliedgraphenematerials.com) and will be available, free of charge, at the Company's registered office at The Wilton Centre, Redcar, Cleveland TS10 4RF during normal business hours on any weekday (public holidays excepted) up to and including 11.00 a.m. on 8 January 2016. Unless otherwise defined in this announcement, all defined terms used in this announcement shall have the meaning ascribed to them in the Circular.

A copy of this announcement will be published on the Company's website at www.appliedgraphenematerials.com. For the avoidance of doubt, neither the content of the Company's website nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement nor, unless previously published by means of a recognised information service, should such content be relied upon in reaching a decision as to whether or not to acquire, continue to hold, or dispose of securities in the Company.

Nplus1 Singer Advisory LLP ("N+1 Singer") is acting as Nominated Adviser and broker to the Company in relation to the Fundraising. N+1 Singer, which is a member of the London Stock Exchange and is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting for the Company and for no one else in relation to the Fundraising. N+1 Singer will not be responsible to any other person for providing the protections afforded to its clients nor for advising any other person in connection with the matters contained in this announcement.

This announcement has been issued by, and is the sole responsibility of, the Company. N+1 Singer has not authorised the contents of any part of this announcement and no representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by N+1 Singer, or by any of its respective affiliates or agents, as to or in relation to, the accuracy or completeness of this announcement or any other written or oral information made available to any interested party, and any liability therefore is expressly disclaimed.

All statements in this announcement other than statements of historical fact are, or may be deemed to be, "forward-looking statements". In some cases, these forward-looking statements may be identified by the use of forward-looking terminology, including the terms "targets", "believes", "estimates", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology. They appear in a number of places throughout the announcement and include statements regarding the intentions, beliefs or current expectations of the Company and/or Directors concerning, among other things, the trading performance, results of operations, financial condition, liquidity, prospects and dividend policy of the Company. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. The Company's actual performance, result of operations, financial condition, liquidity and dividend policy may differ materially from the impression created by the forward-looking statements contained in this announcement. Important factors that may cause these differences include, but are not limited to, changes in economic conditions generally; changes in interest rates and currency fluctuations; impairments in the value of the Company's assets; legislative/regulatory changes; changes in taxation regimes; the availability and cost of capital for future expenditure; the availability of suitable financing; the ability of the Group to retain and attract suitably experienced personnel and competition within the industry. Prospective investors should specifically consider the risk factors identified in this announcement which could cause actual results to differ before making an investment decision.

This announcement or any part of it does not constitute or form part of any offer to issue or sell, or the solicitation of an offer to acquire, purchase or subscribe for, any securities in the United States (including its territories and possessions, any state of the United States and the District of Columbia). The New Ordinary Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (the "Securities Act") or with any securities regulatory authority of any state or jurisdiction of the United States, and may not be offered, sold or transferred, directly or indirectly, in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. There will be no public offering of securities in the United States.

The New Ordinary Shares have not been and will not be registered under the relevant laws of any Restricted Jurisdiction or any state, province or territory thereof and may not be offered, sold, resold, delivered or distributed, directly or indirectly, in or into any Restricted Jurisdiction or to, or for the account or benefit of, any person with a registered address in, or who is resident or ordinarily resident in, or a citizen of, any Restricted Jurisdiction except pursuant to an applicable exemption.

Extracts from the Circular

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

LETTER FROM THE CHAIRMAN

1. Introduction

The Company has conditionally raised £8.1 million before expenses by means of a Placing with certain new and existing institutional and other investors of 4,628,571 New Ordinary Shares at 175 pence per share. In addition, in order to provide Qualifying Shareholders with the opportunity to subscribe for New Ordinary Shares, the Company has announced an Open Offer to raise up to £2.0 million, on the basis of 1 Open Offer Share for every 15 Existing Ordinary Shares held on the Record Date, at 175 pence per share. Shareholders subscribing for their full entitlement under the Open Offer may also apply for additional Open Offer Shares through the Excess Application Facility. The Issue Price of 175 pence represents a discount of approximately 10.3 per cent. to the Closing Price.

Each of the Placing and Open Offer are conditional, inter alia, on the passing of the Resolutions at the General Meeting, Admission becoming effective by no later than 8.00 a.m. on 11 January 2016 (or such other time and/or date, being no later than 8.00 a.m. on 7 February 2016, as the Company and N+1 Singer may agree) and the Placing Agreement between the Company and N+1 Singer becoming unconditional and not being terminated prior to Admission (in accordance with its terms). It is expected that the New Ordinary Shares will be admitted to trading on AIM on or around 8.00 a.m. on 11 January 2016.

The Net Proceeds are intended to be used in the near term to scale up the Group's production processes to increase manufacturing capacity, to fund further collaborations and joint development activity with customers, for near term working capital and to fund the Group whilst it pursues production orders. The Board believes that raising equity finance by way of a placing and open offer is the most appropriate method of financing for the Group at this time. This method allows both existing institutional holders and new institutional and other investors to be targeted and to participate in the Fundraising. It also avoids the need for a prospectus to be prepared and issued, which is a costly and time consuming process, whilst permitting Shareholders to participate through the Open Offer.

The purpose of the Circular is to set out the reasons for, and provide further information on, the Fundraising, to explain why the Board considers the Fundraising to be in the best interests of the Company and its Shareholders as a whole and why the Directors unanimously recommend that you vote in favour of the Resolutions, as they have irrevocably undertaken to do in respect of their own beneficial holdings of Ordinary Shares, in aggregate representing approximately 11.6 per cent. of the Company's issued share capital on 17 December 2015 (being the last Business Day prior to publication of the Circular). In support of the Company's proposals, the Directors intend to participate in the Placing in respect of a total of 45,714 New Ordinary Shares, as set out below in paragraph 6.

At the end of the Circular you will find a notice convening the General Meeting at which the Resolutions will be proposed by the Directors. The General Meeting has been convened for 11.00 a.m. on 8 January 2016 and will take place at the offices of Squire Patton Boggs (UK) LLP, 2 Park Lane, Leeds LS3 1ES.

2. Background to, and reasons for, the Fundraising

Overview

Since admission to AIM in November 2013, the Company has made significant progress. It has established and advanced a large number of customer engagements in each of its three core target sectors and further developed its intellectual property, know-how and knowledge base through extensive work on formatting graphene. This knowledge is intended to help the Group's customers to gain significant property enhancements and performance benefits from the introduction of its formatted graphene into their products.

The Group is now seeing commercial opportunities convert into formal joint development agreements and programmes, although in most cases the exact nature of these remains confidential due to their commercial sensitivity. Importantly, the pace of progress increased as the year has advanced with momentum in customer engagement continuing in the current financial year. The Directors believe that the progress achieved with customers provides evidence of the benefits of graphene and the value that the Company can add, which is helping the business to gain further traction. The Company has to date been focused on its three key markets of polymers and composites, functional fluids and paints and coatings.

The evidence that has been gathered by the Group supports the view that graphene remains highly novel and potentially hugely disruptive and the Directors believe that graphene will establish itself across a wide range of markets over the coming years. The Group's proprietary production process has proven its ability to offer a specialty product of consistent quality. This, together with its knowledge of formatting blends and suspensions, along with the capability to efficiently disperse graphene in the end product has, the Directors believe, positioned the Group to become a leading graphene provider.

Commercial Relationships

The Group has built its commercial platform based around its proprietary manufacturing process and formulation know-how. The Group's targeted customer engagement has led to product evaluation, supported by the Group's own material characterisation and data generation. This has enabled the Group to develop and expand commercial relationships across its target markets.

In 2015, the Group successfully engaged with two industry recognised, independent test organisations whose preliminary findings in base oils and reinforced polyurethane coatings demonstrate property enhancements when the Group's graphene nanoplatelets are added into these base materials. The Group was able to utilise this information to drive customer engagement, leading to customer evaluations in the final quarter of the 2015 financial year exceeding all of the first three quarters combined. In the current financial year the momentum in customer engagement has continued with relationships extending into joint development activity and collaborations.

The Group is working with over 250 potential customers to consider the benefits of graphene and is providing evaluation samples to an increasing number of potential customers, with over 120 samples provided in the year ended 31 July 2015. Through these programmes both the Group and its customers have generated a broad range of test results.

The Group is currently working at pre-production stage with over 20 customers through a combination of formal joint development agreements, application development work, repeat supplies and with pre-production sampling. The objective of the Group is to convert some of these into production orders and the Board believes a number of these relationships represent near term opportunities which will support the planned increase in production capacity.

Most of the Company's customer relationships are subject to confidentiality provisions. However, in one such partnership with Millers Oils Limited, an independent blender of oil and fuel additives, the customer has recognised the benefits that graphene can deliver in terms of lubricity and reduced wear, and is considering how and where to incorporate this technology into its products. Similarly, under the Group's collaboration with Puralube Germany GmbH, a German based lubricants and oils business, graphene will be formatted for inclusion in sustainable base oil products where improved machine performance and reduced environmental impact from lower CO2 output are being targeted.

In addition, two of the largest coatings manufacturers in the world are investigating the use of the Group's graphene in products to provide a barrier coating in harsh environments to increase corrosion protection and toughness, reduce wear and improve anti-fouling properties via particulate lubricity.

In the field of composites and polymers, the Group continues its work on the previously reported collaborative projects with Procter & Gamble, Dyson and DuPont Teijin Films, but the Group is also working with other leading consumer brands including customers looking to incorporate graphene into injection moulded thermoplastic to achieve increased mechanical properties without impacting existing manufacturing processes. The Group is also working with a Formula 1 team to improve the toughening of impact structures and has additional customer opportunities in pre-impregnated graphene composites, formulated greases and composite sports goods.

The Group has received notification from NATEP (the National Aerospace Technology Exploitation Programme) that its funding application, working with the Advanced Manufacturing Research Centre with Boeing, for the development of novel graphene processing and deployment techniques into composites and polymers for the aerospace industry, has been successful. At its current evaluation scale this project is expected to be worth in excess of £100,000 to the Group over the project term. As noted above, the pace of engagement with these partners in the Group's target sectors continues to accelerate and the Directors expect such collaborations to flow through into production orders in due course, with the precise timing dependent on the period to qualification, approval and adoption. The Directors believe that the earliest adopters of graphene are likely to be customers seeking multiple benefits of graphene, where graphene can be incorporated into a material with limited impact to existing manufacturing processes or where minimal change is required, such as polymers. The Directors believe that adoption will be in the longer term for step change technologies and where significant change is required to manufacturing processes and supply chains in order to incorporate graphene.

Manufacturing technology and know-how and development of manufacturing capacity

 In June 2015, the Company received its first patent approval from the Japanese Patent Office in respect of its proprietary graphene production process used by the Group for manufacturing graphene nanoplatelets. This was a significant milestone for the Group as it confirms the proprietary nature of its process and the Board anticipates that Japan will be an important market for the Group. Applications for patents relating to the production process are being pursued in other geographic territories.

Whilst graphene has a relatively simple definition, its variety of forms is complex. Data generated by the Group shows that all sources of graphene do not share the same characteristics and the method and conditions of manufacture have a significant influence on the resultant properties exhibited. The Group's proprietary production processes allow it to produce graphene which can be formatted to deliver a range of complementary property enhancements and performance benefits. The Group's understanding of how to format graphene and successfully incorporate it into a host material is absolutely critical for imparting the desired enhancements and performance benefits. Recognising the inherent value of this know-how, the Group's technical team has been significantly expanded to provide the strength and depth of collaboration and technical support that its customers require.

Underpinning the Group's commercial progress is its detailed knowledge, understanding and ability to produce graphene of consistent quality. In the year ended 31 July 2015 the Group successfully demonstrated its ability to produce graphene on a continuous basis, through a period of continuous production for five consecutive days. Production was sustained at volumes below peak capacity in order to ensure the graphene produced was of a consistent quality to achieve the key characteristics that customers require.

Planning for future growth is always complicated in an evolving market, but the Group is committed to putting in place appropriate additional manufacturing capacity in advance of the anticipated growth in demand and intends to expand capacity to six tonnes of graphene per annum.

This proposed increase in capacity will utilise two existing, complementary bottom-up processes for which the Group owns the intellectual property and which are subject to its existing patent and patent applications, to produce graphene formatted specifically for customer requirements. These requirements include a range of attributes including mechanical strength, electrical conductivity, thermal conductivity, lubricity and impermeability and vary considerably depending on the intended customer application. The Board's objective is for the Group to become a global graphene market leader founded on its in-depth knowledge of manufacture and graphene formulation. The Fundraising will enable additional manufacturing capacity to be put in place in advance of the anticipated growth in demand.

3. Current trading

The Company announced its audited results for the financial year ended 31 July 2015 on 16 November 2015 and these are available on its website (www.appliedgraphenematerials.com). The Company has continued to trade in line with management expectations since that date.

4. Use of proceeds

 The Company is proposing to raise a total of up to £10.1 million (before fees and expenses) from the Fundraising. The Net Proceeds are expected to be used in the near term as follows:

• to scale up the Company's production facilities to increase manufacturing capacity to six tonnes per annum;

• to fund collaborations and joint development activity with customers, including development of new intellectual property;

• to fund the Group whilst it pursues production orders; and

• to finance the working capital requirements of the Group for at least twelve months.

5. Information on the Placing and Open Offer

The Company proposes to raise, in aggregate, up to £10.1 million (up to approximately £9.5 million net of expenses) by way of a Placing of 4,628,571 New Ordinary Shares with certain new and existing institutional and other investors and an Open Offer of up to 1,134,281 New Ordinary Shares, representing, in aggregate, up to 25.3 per cent. of the Enlarged Share Capital, at an issue price of 175 pence per Ordinary Share.

The Issue Price of 175 pence per New Ordinary Share represents a discount of 10.3 per cent. to the Closing Price of 195 pence on 17 December 2015, being the last Business Day prior to the announcement of the Fundraising. The Directors are in agreement that the level of discount and method of issue are appropriate to secure the investment necessary.

In connection with the Fundraising, the Company has entered into the Placing Agreement with N+1 Singer, pursuant to which N+1 Singer has agreed to use reasonable endeavours, as agents on behalf of the Company, to procure placees for the Placing Shares at the Issue Price. The Fundraising is conditional, inter alia, on:

• the passing of the Resolutions at the General Meeting;

• the conditions in the Placing Agreement being satisfied or (if applicable) waived and the Placing Agreement not having been terminated in accordance with its terms prior to Admission; and

• Admission becoming effective by no later than 8.00 a.m. on 11 January 2016 (or such later time and/or date, being no later than 8.00 a.m. on 7 February 2016, as the Company and N+1 Singer may agree).

Accordingly, if any of such conditions are not satisfied, or, if applicable, waived, the Fundraising will not proceed and any Basic Entitlements and Excess Entitlements admitted to CREST will thereafter be disabled.

The Placing Agreement contains provisions entitling N+1 Singer to terminate the Placing Agreement at any time prior to Admission in certain circumstances that are customary for an agreement of this nature. If this right is exercised, the Fundraising will not proceed. The Fundraising has not been underwritten by N+1 Singer or any other party.

The Placing Agreement contains customary warranties given by the Company to N+1 Singer and a customary indemnity given by the Company to N+1 Singer in respect of liabilities arising out of or in connection with the Fundraising. N+1 Singer is entitled to terminate the Placing Agreement in certain circumstances prior to Admission, including circumstances where any of the warranties are found not to be true or accurate or were misleading and which in any such case is material, or the occurrence of certain force majeure events.

A Qualifying Non-CREST Shareholder who has sold or transferred all or part of their holding of Existing Ordinary Shares prior to18 December 2015, being the date upon which the Existing Ordinary Shares were marked "ex" the entitlement to the Open Offer by the London Stock Exchange, should consult their broker or other professional adviser as soon as possible, as the invitation to acquire Open Offer Shares under the Open Offer may be a benefit which may be claimed by the transferee. Qualifying Non-CREST Shareholders who have sold all or part of their registered holdings should, if the market claim is to be settled outside CREST, complete Box 10 on the Application Form and immediately send it to the stockbroker, bank or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. The Application Form should not, however, subject to certain exceptions, be forwarded to or transmitted in or into a Restricted Jurisdiction.

Application will be made to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on AIM. The New Ordinary Shares will rank pari passu in all respects with the existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid in respect of the Ordinary Shares following Admission. It is expected that such Admission will become effective and that dealings on AIM will commence at 8.00 a.m. on 11 January 2016.

6. The Placing

N+1 Singer has conditionally placed the Placing Shares at the Issue Price pursuant to the Placing Agreement. The Placing Shares represent approximately 80.3 per cent. of the New Ordinary Shares (assuming the maximum number of Open Offer Shares are issued) and have been placed with certain new and existing institutional and other investors. The Placing Shares are not part of the Open Offer. The Placing is conditional, inter alia, upon the passing, without amendment, of the Resolutions at the General Meeting, the Placing Agreement not having been terminated prior to Admission and Admission becoming effective by 8.00 a.m. on 11 January 2016 (or such later time and date as the Company and N+1 Singer may agree, being not later than 8.00 a.m. on 7 February 2016).

Directors' participation in the Placing

 It is intended that the Directors will subscribe for New Ordinary Shares in the Placing at the Placing Price, details of which are set out below:

1 Assuming nil take-up by any Shareholders under the Open Offer

7. The Open Offer

Basic Entitlement

Qualifying Shareholders (other than, subject to certain exemptions, those Shareholders in Restricted Jurisdictions) have the opportunity under the Open Offer to subscribe for Open Offer Shares at the Issue Price, payable in full on application and free of expenses, pro rata to their existing shareholdings, on the following basis:

1 Open Offer Share for every 15 Existing Ordinary Shares

held by them and registered in their names on the Record Date, rounded down to the nearest whole number of Open Offer Shares. Qualifying Shareholders may apply for any whole number of Open Offer Shares up to their Basic Entitlement.

Excess Application

The Open Offer is structured so as to allow Qualifying Shareholders to subscribe for Open Offer Shares at the Issue Price pro rata to their holdings of Existing Ordinary Shares. Qualifying Shareholders may also make applications in excess of their pro rata initial entitlement. To the extent that pro rata entitlements to Open Offer Shares are not subscribed for by Qualifying Shareholders, such Open Offer Shares will be available to satisfy such Excess Applications where Qualifying Shareholders have taken up their full Basic Entitlement. Subject to the terms of the Placing Agreement, applications for Excess Shares may be allocated in such manner as the Directors and N+1 Singer may determine, and no assurance can be given that applications by Qualifying Shareholders will be met in full or in part or at all. Excess Applications will be rejected if and to the extent that acceptance would result in a Qualifying Shareholder, together with those acting in concert with him/her for the purposes of the City Code, holding 30 per cent. or more, or increasing an existing holding of 30 per cent. or more, of the Enlarged Share Capital immediately following Admission.

The Open Offer is not a rights issue. Qualifying CREST Shareholders should note that although the Basic Entitlements and Excess Entitlements will be admitted to CREST and be enabled for settlement, they will not be tradable and applications in respect of the Basic Entitlements and Excess Entitlements may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim raised by Euroclear's Claims Processing Unit. Qualifying Non-CREST Shareholders should note that the Application Form is not a negotiable document and cannot be traded. Qualifying Shareholders who do not apply to take up their Basic Entitlements will have no rights under the Open Offer or receive any proceeds from it. If valid acceptances are not received in respect of all Basic Entitlements under the Open Offer, unallocated Open Offer Shares may be allotted to Qualifying Shareholders to meet any valid applications under the Excess Application Facility and the proceeds retained for the benefit of the Company.

Qualifying Shareholders should be aware that in the Open Offer, unlike in a rights issue, any Open Offer Shares not applied for will not be sold in the market or placed for the benefit of Qualifying Shareholders.

Application has been made for the Basic Entitlements and Excess Entitlements of Qualifying CREST Shareholders to be admitted to CREST. It is expected that such Basic Entitlements and Excess Entitlements will be admitted to CREST on 21 December 2015.

Further details of the Open Offer and the terms and conditions on which it is being made, including the procedure for application and payment, are contained in Part 3 of the Circular and for Non-CREST Qualifying Shareholders on the accompanying Application Form. To be valid, Application Forms or CREST instructions (duly completed) and payment in full for the Open Offer Shares applied for must be received by the Receiving Agent by no later than 11.00 a.m. on 7 January 2016. Application Forms should be returned to Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU by no later than 11.00 a.m. on 7 January 2016.

Further information on the Open Offer and the terms and conditions on which it is made, including the procedure for application and payment, are set out in Part 3 of the Circular and, where relevant, on the Application Form.

It is expected that Qualifying CREST Shareholders will receive a credit to their appropriate stock accounts in CREST in respect of their Basic Entitlements and Excess Entitlements on 21 December 2015. If the conditions of the Placing Agreement are not fulfilled or (where capable of waiver) waived on or before 8.00 a.m. on 11 January 2016 (or such later time and date as the Company and N+1 Singer may agree, being not later than 8.00 a.m. on 7 February 2016), the Open Offer will not become unconditional and application monies will be returned to applicants, without interest, as soon as practicable thereafter.

8. Overseas Shareholders

The attention of Qualifying Shareholders who have registered addresses outside the United Kingdom, or who are citizens or residents of countries other than the United Kingdom, or who are holding Existing Ordinary Shares for the benefit of such persons, (including, without limitation, custodians, nominees, trustees and agents) or who have a contractual or other legal obligation to forward the Circular or the Application Form to such persons, is drawn to the information which appears in paragraph 8 of Part 3 of the Circular.

In particular, Qualifying Shareholders who have registered addresses in or who are resident in, or who are citizens of, countries other than the UK (including without limitation any Restricted Jurisdiction), should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to take up their Open Offer.

9. Related party transactions

IP2IPO is a related party of the Company for the purposes of the AIM Rules as it holds greater than 10 per cent. of the Existing Ordinary Shares, being 20.3 per cent. It is anticipated that IP2IPO will participate in the Placing in respect of 1,142,857 New Ordinary Shares and such participation represents a related party transaction pursuant to Rule 13 of the AIM Rules.

Top Technology Ventures (trading as IP Capital) is engaged by the Company as an adviser in relation to the Fundraising. Top Technology Ventures is affiliated with IP2IPO by virtue of it also being a wholly owned subsidiary of IP Group. The Company will pay a fee to Top Technology Ventures of £20,000 and 2.5 per cent. of all funds raised from investors introduced to the Company by Top Technology Ventures in connection with the Fundraising. As IP2IPO is a related party of the Company for the purposes of the AIM Rules, this transaction represents a related party transaction pursuant to Rule 13 of the AIM Rules.

The Directors (apart from Mike Townend who is not regarded as independent due to his directorships of Top Technology Ventures, IP2IPO and IP Group), having consulted with the Company's Nominated Adviser, N+1 Singer, consider that the terms of the related party transactions are fair and reasonable insofar as the Shareholders are concerned.

10. Dilution resulting from the Fundraising

Following the issue of New Ordinary Shares to be allotted pursuant to the Fundraising, Shareholders who take up their full Basic Entitlements (and do not take up any Excess Shares under the Excess Application Facility) will suffer a dilution of up to 20.3 per cent. to their interests in the Company. Shareholders who do not take up any of their Basic Entitlements will suffer a dilution of up to 25.3 per cent. to their interests in the Company as a result of the Fundraising.

11. The City Code

The City Code applies to quoted public companies and, in addition unquoted public companies whose central management and control remain in the UK. Accordingly the City Code applies to the Company. Under Rule 9.1 of the City Code, if any person acquires, whether by a series of transactions over a period of time or not, an interest in shares which (taken together with shares in which persons acting in concert with him are interested) carry 30 per cent. or more of the voting rights of a company, the acquirer and, depending on circumstances, its concert parties would be required (except with the consent of the Panel) to make a cash offer for the outstanding shares in the company at a price not less than the highest price paid for interests in shares by the acquirer or persons acting in concert with him during the previous 12 months.

This requirement would also be triggered if a person, together with persons acting in concert with him, is interested in ordinary shares which in the aggregate carry not less than 30 per cent. of the voting rights of the Company but does not hold shares carrying more than 50 per cent. of such voting rights and such person, or any person acting in concert with him, acquires an interest in any other shares which increases the percentage of shares carrying voting rights in which he is interested.

IP2IPO (which is a wholly owned subsidiary of IP Group), NETF (which is a fund managed by Top Technology Ventures, also a wholly owned subsidiary of IP Group) and Mike Townend (who is a director and employee of IP Group, and a director of Top Technology Ventures and NETF) are deemed to be acting in concert under the City Code ("the IPG Concert Party").

IP2IPO and NETF have an existing combined interest in the capital of the Company of 32.4 per cent. IP2IPO and Mike Townend are participating in the Placing and, following Admission (and assuming nil take-up by any Shareholders under the Open Offer), the IPG Concert Party will be interested in 30.8 per cent. of the Enlarged Share Capital.

As there is no increase in the IPG Concert Party's percentage of Ordinary Shares carrying voting rights, no Rule 9.1 implications arise. The IPG Concert Party will still be subject to the provisions of Rule 9.1 of the City Code in the normal way.

 12. General Meeting

Set out at the end of the Circular is a notice convening the General Meeting of the Company to be held at the offices of Squire Patton Boggs (UK) LLP, 2 Park Lane, Leeds LS3 1ES at 11.00 a.m. on 8 January 2016, at which the Resolutions summarised below will be proposed:

 Resolution 1 - authority to allot

An ordinary resolution to authorise the Directors to allot New Ordinary Shares up to an aggregate nominal amount of £115,257.04 pursuant to the Fundraising, representing approximately 33.9 per cent. of the Existing Ordinary Shares.

Resolution 2 - disapplication of pre-emption rights

Conditional on the passing of the ordinary resolution to allot the New Ordinary Shares, a special resolution to authorise the Directors to allot New Ordinary Shares pursuant to the Fundraising on a non pre-emptive basis.

13. Irrevocable Undertakings

The Directors have irrevocably undertaken to vote in favour of the Resolutions in respect of their own beneficial holdings of 1,978,467 Ordinary Shares, in aggregate representing approximately 11.6 per cent. of the Existing Ordinary Shares.

Additionally, each of IP2IPO, NETF and Ruffer LLP, has given an irrevocable undertaking to vote in favour of the Resolutions in respect of the Ordinary Shares registered in their names, which together with the Directors' irrevocable undertakings, represent, in aggregate 51.6 per cent. of the Existing Ordinary Shares.

14. EIS/VCT Schemes

The Company has applied for and received advance assurance from HMRC (dated 26 November 2015) that the New Ordinary Shares to be issued pursuant to the Fundraising constitute a qualifying holding for VCT Scheme purposes and also should satisfy the requirements for tax relief under the EIS. Shareholders should be mindful that EIS and VCT qualification rules are subject to change and no guarantees or assurance can be given in this regard.

15. Action to be taken in respect of the General Meeting

Please check that you have received with the Circular:

• a Form of Proxy for use in respect of the General Meeting; and

• if you are a Shareholder based in the United Kingdom, a reply-paid envelope for use in conjunction with the return of the Form of Proxy

Whether or not you propose to attend the General Meeting in person, you are strongly encouraged to complete, sign and return your Form of Proxy in accordance with the instructions printed thereon as soon as possible, but in any event so as to be received, by post or, during normal business hours only, by hand, to Capita Asset Services at PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU, by no later than 11.00 a.m. on 6 January 2016 (or, in the case of an adjournment of the General Meeting, not later than 48 hours before the time fixed for the holding of the adjourned meeting (excluding any part of a day that is not a Business Day)).

If you hold your shares in the Company in uncertificated form (that is, in CREST) you may vote using the CREST Proxy Voting service in accordance with the procedures set out in the CREST Manual (please also refer to the accompanying notes to the Notice of the General Meeting set out at the end of the Circular). Proxies submitted via CREST must be received by the Company's agent (RA10) by no later than 11.00 a.m. on 6 January 2016 (or, in the case of an adjournment, not later than 48 hours before the time fixed for the holding of the adjourned meeting (excluding any part of a day that is not a Business Day)).

Appointing a proxy in accordance with the instructions set out above will enable your vote to be counted at the General Meeting in the event of your absence. The completion and return of the Form of Proxy or the use of the CREST Proxy Voting service will not prevent you from attending and voting at the General Meeting, or any adjournment thereof, in person should you wish to do so.

16. Recommendation and voting intentions

The Directors believe that the Resolutions to be proposed at the General Meeting are in the best interests of the Company and Shareholders as a whole and unanimously recommend that you vote in favour of the Resolutions. Each of the Directors who are also Shareholders, being Bryan Dobson, Jon Mabbitt, Karl Coleman and Oliver Lightowlers, have irrevocably undertaken to vote in favour of the Resolutions in respect of, in aggregate, 1,978,467 Existing Ordinary Shares, representing approximately 11.6 per cent. of the Existing Ordinary Shares.

Yours faithfully,

Bryan Dobson

Chairman

RISK FACTORS

An investment in the Ordinary Shares involves a high degree of risk. Accordingly, prospective investors and Shareholders should carefully consider the risks set out below before making a decision to invest in the Company. The investment offered in the Circular may not be suitable for all of its recipients. Potential investors and Shareholders are accordingly advised to consult a professional adviser authorised under FSMA, who specialises in advising on the acquisition of shares and other securities, before making any investment decision. A prospective investor and Shareholders should consider carefully whether an investment in the Company is suitable in the light of his or her personal circumstances and the financial resources available to him or her. Prospective investors and Shareholders should carefully consider the risks described below before making a decision to invest in the Company. This Part 2 contains what the Directors believe to be the principal risk factors associated with an investment in the Company. However, the risks listed do not purport to be an exhaustive summary of the risks affecting the Group and are not set out in any particular order of priority. Additional risks and uncertainties not currently known to the Directors or which the Directors currently deem immaterial may also have an adverse effect on the Group. In particular, the Company's performance may be affected by changes in market or economic conditions and in legal, regulatory and tax requirements.

If any of the following risks were to materialise, the Company's business, financial condition, results or future operations could be materially adversely affected. In such cases, the market price of the Ordinary Shares could decline and an investor may lose part or all of his or her investment. The Circular contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in the forward-looking statements as a result of many factors, including the risks faced by the Company which are described below and elsewhere in the Circular. Prospective investors and Shareholders should carefully consider the other information in the Circular.

There can be no certainty that the Company will be able to successfully implement its strategy. Additional risks and uncertainties not currently known to the Directors or which the Directors currently deem immaterial may also have an adverse effect on the Company.

1. Risks Factors Relating to the Business and Operations of the Group

1.1 Acceptance of the Group's products

The success of the Group will depend on the market's acceptance of, and attribution of value to, the graphene formulations produced by the Group based on graphene nanoplatelets produced through its proprietary processes and the benefits of incorporating the same into customers' production processes. There can be no guarantee that this acceptance will be forthcoming, that an acceptable value will be placed upon them or that the Group's graphene products will succeed as an alternative to either existing or other new products from both other producers of graphene nanoplatelets and producers of nanomaterials.

The development of a market for the Group's products is affected by many factors, some of which are beyond its control, including the emergence of newer, more successful technologies and products and the cost of production of the Group's products. Notwithstanding the technical merits of a product developed by the Group, there can be no guarantee that its targeted customer base for the product will purchase or continue to purchase the product. If a market fails to develop or develops more slowly than anticipated, the Group may be unable to recover losses incurred in the development of its products and may never achieve profitability. In addition, the Directors cannot guarantee that the Group will continue to develop, manufacture or market its products if market conditions do not support the continuation of such products.

1.2 Early stage of operations

Whilst the Group has made initial limited product sales for research and development projects with partners and for customer evaluation, it is still at an early stage of development. There are a number of operational, strategic and financial risks associated with such early stage companies. In particular, the Group's future growth and prospects will depend on its ability to develop products with commercial partners for applications which have sufficient commercial appeal, to manage growth and to continue to improve operational, financial and management information and quality control systems on a timely basis, whilst at the same time maintaining effective cost controls. Any failure to improve operational, financial and management information and quality control systems in line with the Group's growth could have a material adverse effect on its business, financial condition and results of operations.

There can be no certainty that the Group will achieve increased or sustained revenues, profitability or positive cash flow from its operating activities within the timeframe expected by the Board or at all. Furthermore, the Board expects that the Group will require additional capital in the future to fund the business and there can be no certainty that additional capital will be available. The development of the Group's revenues is difficult to predict and there is no guarantee that it will generate any material revenues in the foreseeable future. The Group has a limited operating history upon which its performance and prospects can be evaluated.

1.3 Commercialisation risk

The Group has, and will continue to enter into, arrangements with third parties in respect of the development, production and commercialisation of products based on graphene nanoplatelets where appropriate. The Group's principal route to market is expected to be through sampling, collaborations and product development partnerships with market-leading companies in particular applications leading to material supply agreements. The Group does not intend to operate large-scale product manufacturing operations outside of the production, formatting and preparation of graphene nanoplatelets. The Directors believe that the strategy has the potential to reduce risk by protecting the Group from having to incur significant direct sales and marketing expense and by utilising the established commercial footprint of potential future partners.

The Group's long-term success will depend both on its ability to progress from the provision of samples for customer evaluation and from its existing collaboration relationships to material supply agreements and on its negotiation of appropriate terms for any future supply agreements. Furthermore, the Group's negotiating position in agreeing terms for either joint development or supply may be affected by its size and limited cash resources relative to potential development partners with substantial cash resources and established levels of commercial success. An inability to enter into such arrangements on favourable terms, if at all, or disagreements between the Group and any of its potential partners could lead to reduced payments and/or delays in the Group's commercialisation strategy and this may have a significant adverse effect on the Group's business, financial condition and results.

The results of any research and development, evaluation or collaboration activity undertaken with a partner may not meet the required specifications or expectations of that partner or be successful, attractive or acceptable in product trials. Accordingly, there can be no assurance that any of the existing evaluations or collaborations or future evaluations or collaborations with the Group's partners will result in a material supply arrangement with those partners on favourable terms or at all, or that the Group will achieve any revenue, profitability or cash flow from such activities. The loss of, or changes affecting, the Group's relationships with commercialisation partners could adversely affect the Group's results or operations and the Group will have limited input on the product strategies adopted by any of its partners. Furthermore, there is a risk that development partners may reprioritise within their product portfolio resulting in the Group achieving sales below that which the Directors anticipate. In any such arrangement, the Group will be dependent on such partners for its revenue and the sales strategies and product positioning of the Group's development partners may have a material and adverse effect on the Group's business, financial condition and results of operations.

The Group is dependent on a relatively small number of commercial partners. If any of these companies were to cease to work with the Group, it could potentially have a material impact on the trading, financial condition and prospects of the Group.

1.4 Competition and pricing risk

The Group may face significant competition from organisations which have greater capital resources than it and/or which have a product offering competitive to that of the Group, to the detriment of the Group. Other companies, with varying volumes of manufacturing capacity, are producing graphene nanoplatelets using alternative production approaches. At the same time, the Group is also competing with other producers of materials which may impede the commercial progress of graphene. There is no assurance that the Group will be able to compete successfully in the marketplace in which it seeks to operate.

1.5 Development of the market for graphene and the risk that graphene will not achieve commercial success

 Although there are numerous potential applications for graphene and potentially a large global market, there is no guarantee that graphene will become a widely accepted material for use on a commercial scale. Even if graphene does become widely accepted, the conversion of current interest into wide scale commercial adoption may take longer than anticipated and the Group may also be unsuccessful in its effort to realise commercial and financial benefits from this wider acceptance.

1.6 Risk of competing materials

 There is a risk that technological advances in existing materials or in potential substitute materials may occur at a faster rate than the advances of graphene, which may impede the commercial progress of graphene. As a consequence, there could be little or no commercial demand for graphene. This would have a significant adverse effect on the Group's business.

1.7 Capacity of graphene production and pricing

The commercial applications of graphene are currently limited. The Directors believe that, at present, the aggregate global manufacturing capacity for graphene exceeds the aggregate demand from customers. The Directors are aware of historical situations where new materials have been developed and the expansion of production capacity in advance of market demand has resulted in a decrease in the price of the material to a level where financial returns are limited.

The development of the market for graphene is at an early stage and there can be no assurance that demand for graphene will grow in line with the Directors' expectations, or at all. In the event that production capacity greatly exceeds customer demand, the Group may not be able to negotiate favourable pricing for the supply of graphene or its graphene-based intermediates and there is no assurance that the Group will achieve any revenue, profitability or cash flow from such activities.

1.8 Proposed scaling up of production

The operation of the Group's production facilities following the planned increase to manufacturing capacity involves significant risks and uncertainties beyond the Group's control, including but not limited to:

• The quality and consistency of the Group's graphene material may vary unexpectedly as production volumes are increased, resulting in lower demand for the Group's products;

• The attributes and properties of the Group's graphene materials may be inadvertently affected by changes in quantities and production techniques used as a result of the scale up, resulting in either lower demand or lower than planned production volumes;

• The application of the technology supporting the Group's planned expansion is relatively new and therefore is subject to higher implementation and operational risk; and

• The actual operating and manufacturing capacity of the scaled up production process may be less than expected due to currently unknown process issues or equipment reliability.

The occurrence of any of these risks could significantly affect the Group's operating results.

1.9 Plant expansion

Any delay or possible problems with the proposed expansion of the plant and development of the Group's production processes to increase capacity, could have an adverse effect on the financial performance of the Group. Considerable capital expenditure will be required for such expansion and the length of the construction period and capital required to complete any plant expansion may be affected by different factors, such as disputes with workers or contractors, price increases, shortages of construction materials, permitting requirements, technical or engineering difficulties, accidents, or unforeseen difficulties or changes in government policies. Such events may give rise to delays or cost over-runs and there can be no guarantee that the proposed projects will be operational within the expected timeframe or within the budgeted cost, which could have an adverse effect on the Group's financial position and results of operations.

1.10 The Group's production process is subject to operating risks

The production process is potentially exposed to the risks of fire, breakdown or failure of equipment, power supply or processes, performance below expected levels of quality, consistency, output or efficiency, obsolescence, sabotage, labour disputes, lock-outs, potential unavailability of services of its external contractors, natural disasters, industrial accidents and the need to comply with the directives of relevant government authorities. The occurrence of any of these risks could significantly affect the Group's operating results.

1.11 The Group could be required to relocate from its premises at short notice

The Group occupies its premises on the Wilton Science Park on Teesside under a tenancy at will, which can be terminated with immediate effect by either party, although the Board has no reason to believe that the landlord will exercise its right to do so in the foreseeable future. In the event that the Group was required to leave its existing premises, then the Board is confident that alternative, appropriate premises could be found and the Group's manufacturing facility relocated. However, such a forced move would cause business disruption and could have a significant effect on the Group's business in the short term.

1.12 Research and development risk

The Group is engaged in the manufacture of graphene nanoplatelets and the preparation and formatting of these platelets into formulations appropriate for incorporation into existing customer products. The Company is therefore involved in complex scientific areas and new product development and industry experience indicates a high incidence of delay or failure to generate results. There is no guarantee that the Group will be successful in its research and product development, evaluation or collaboration activities. Much of the Group's technology and intellectual property portfolio is at an early stage of development. The Group may not be able to develop and exploit its technology sufficiently to enable it to develop commercial and marketable products. Furthermore, the Group may not be able to develop new technology solutions or identify specific market needs that can be addressed by technology solutions developed by the Group.

1.13 Technological advances in graphene production

Graphene production is a very active area of research and development, and it is expected that technological advances in graphene production will continue to occur and new technologies may develop. Advances in the process of producing graphene nanoplatelets or films from either graphite or carbon-containing precursors could allow the Group's competitors to produce products faster and more efficiently and at substantially lower cost than the Group and the competitors may also produce products which exhibit superior characteristics to material produced by the Group. If the Group is unable to adapt or incorporate technological advances into its operations, its production facilities could become less competitive. Further, it may be necessary for the Group to incur significant expenditure to acquire any new technology and retrofit its current processes in order to incorporate new technologies and remain competitive.

1.14 Intellectual property

The Group's success will depend in part on its ability to maintain adequate protection of its intellectual property, covering its manufacturing process, additional processes and applications, including in relation to the development of specific formulations and the formatting of graphene for use in particular applications. The intellectual property on which the Group's business is based is a combination of patent applications and proprietary know-how. No assurance can be given that any pending patent applications or any future patent applications will result in granted patents, that any patents will be granted on a timely basis, that the scope of any patent protection will exclude competitors or provide competitive advantages to the Group, that any of the Group's patents will be held valid if challenged, or that third parties will not claim rights in, or ownership of, the patents and other proprietary rights held by the Group. There is a risk that certain comments or objections which have been raised by patent offices, in relation to the patent applications which have been filed by the Group, may prevent those patent applications from being granted or may result in a patent being granted, the scope of which is less than originally applied for.

Further, there can be no assurance that others have not developed or will not develop similar products, duplicate any of the Group's products or design around any patent applications held by the Group. Others may hold or receive patents which contain claims having a scope that covers products developed by the Group (whether or not patents are issued to the Group). In addition, no assurance can be given that others will not independently develop or otherwise acquire substantially equivalent techniques or otherwise gain access to the Company's unpatented proprietary technology and know how or disclose such technology or that the Company can ultimately protect meaningful rights to such unpatented technology.

Once granted, a patent can be challenged both in the relevant patent office and in the courts by third parties. Third parties can bring material and arguments which the patent office granting the patent may not have seen. Therefore, issued patents may be found by a court of law or by the patent office to be invalid or unenforceable or in need of further restriction.

A substantial cost may be incurred if the Group is required to assert its intellectual property rights, including any patents, against third parties. Patent litigation is costly and time consuming and there can be no assurance that the Group will have, or will be able to devote, sufficient resources to pursue such litigation. Potentially unfavourable outcomes in such proceedings could limit the Group's intellectual property rights and activities. There is no assurance that obligations to maintain the Group's or partners' know-how would not be breached or otherwise become known in a manner which provides the Group with no recourse.

Any claims made against the Group's intellectual property rights, even without merit, could be time consuming and expensive to defend and could have a materially detrimental effect on the Group's resources. A third party asserting infringement claims against the Group and its customers could require the Group to cease the infringing activity and/or require the Group to enter into licensing and royalty arrangements. The third party could also take legal action which could be costly to defend. In addition, the Group may be required to develop alternative non-infringing solutions that may require significant time and substantial unanticipated resources. There can be no assurance that such claims would not have a material adverse effect on the Group's business, financial condition or results.

If the patent applications are not granted, the consequence is that the techniques and processes described in the patent applications would not be protected and would be in the public domain. The Group would then continue to rely on the confidential know-how it has developed, including process operating conditions and in related, ancillary or other processes, and techniques it uses, such as the techniques it has developed for the dispersion and formatting of graphene nanoplatelets. In addition, the Group would pursue new patent applications for such related, ancillary and other processes and techniques it has developed.

1.15 Third party intellectual property

Although the Board believes that the Group's current products, products in development and processes do not infringe the intellectual property rights of any third parties, it is impossible to be aware of all third party intellectual property. No assurance can be given that third parties will not in the future claim rights in or ownership of the patents and other proprietary rights from time to time held by the Group. As further detailed above, substantial costs (both financially and in management time) may be incurred if the Group is required to defend its intellectual property.

1.16 Management of growth

The ability of the Group to implement its strategy requires effective planning and management control systems. The Group's growth plans may place a significant strain on its management and operational, financial and personnel resource. Therefore, the Group's future growth and prospects will depend on its ability to manage this growth.

The value of an investment in the Company is dependent upon the Company achieving the aims set out in the Circular. There can be no guarantee that the Company will achieve the level of success that the Board expects.

1.17 Dependence on key executives and personnel and the ability to attract and retain appropriately qualified personnel

The Group's future success is substantially dependent on the continued services and performance of its executive Directors and senior management and its ability to attract and retain suitably skilled and experienced personnel. Whilst the Group has entered into employment or secondment arrangements with each of its key personnel with the aim of securing their services, the Directors cannot give assurances that members of the senior management team and the executive Directors will continue to remain within the Group. The loss of the services of any of the executive Directors, members of senior management, secondees or other key employees could have a material adverse effect upon the Group's business and results of operations. Finding and hiring any such replacements could be costly and might require the Company to grant significant equity awards or other incentive compensation, which could adversely impact its financial results.

1.18 Health, safety and environmental risks

The Group's operations will be subject to numerous health, safety and environmental ("HSE") requirements in the jurisdictions in which the Group conducts its business. Such HSE laws and regulations govern, among other matters, air emissions, wastewater discharges, solid and hazardous waste management and the use, composition, handling, distribution and transportation of hazardous materials. Many HSE laws and regulations are becoming increasingly stringent (and may impose strict liability) and the cost of compliance with these requirements can be expected to increase over time. Although the Directors believe that the Group's procedures comply with applicable regulations, any failure to comply with HSE laws and regulations could result in the Group incurring costs and/or liabilities, including as a result of regulatory enforcement, personal injury, property damage and claims and litigation resulting from such events, which could adversely affect the Group's results of operations and financial condition. Failure to comply with HSE requirements of jurisdictions elsewhere in the world may result in the Group being unable to supply products to customers located in those jurisdictions.

Accidents or mishandling involving hazardous substances could cause severe or critical damage or injury to property and human health. Such an event could result in civil lawsuits and/or regulator enforcement proceedings, both of which could lead to significant liabilities. Any damage to persons, equipment or property or other disruption of the Group's business could result in significant additional costs to replace, repair and insure the Group's assets, which could negatively affect the Group's business, prospects, operating results and financial condition.

The Group cannot predict the impact of new or changed HSE laws or regulations or other concerns or changes in the ways that such laws or regulations are administered, interpreted or enforced. The requirements to be met, as well as the technology and length of time available to meet those requirements, continue to develop and change. To the extent that any of the requirements impose substantial costs or constrain the Group's ability to expand or change its processes, the Group's business, prospects, operating results and financial condition may suffer as a result.

 The Group is aware that it will require a permit from the Environment Agency in respect of the commercial production of graphene. The Group will submit an appropriate application for such a permit at the appropriate time. Furthermore, additional permits may be required for the purposes of operating within or supplying into overseas territories. The Directors are not aware of any reason why such permits would not be granted, however, there is no guarantee that such permits would be granted and failure to obtain such permits would have a significant adverse effect on the business of the Group.

1.19 Safety of handling graphene

Graphene is a relatively new material with a limited number of studies into its effects on biological systems. Carbon nanotubes ("CNTs") are a material closely related to graphene. There have been concerns raised recently over the potential toxicity of CNTs, with much of the concern related to their fibre-like geometry, potentially allowing them to penetrate cell membranes. In 2013, the UK Health and Safety Executive published a guide to using CNTs and other high aspect ratio nanomaterials ("HARNs") in the workplace, which outlines regulatory requirements, handling procedures and risk management protocols for the manufacture, handling, storage and shipping of these materials. Whilst graphene is not a fibre due to its extended planar geometry, the Directors believe that the Group is acting prudently by following the Health and Safety Executive guidelines for the handling of HARNs in its procedures for handling graphene nanoplatelets.

However, there is no guarantee that evidence will not emerge that graphene has a deleterious effect on biological systems, which may limit the potential applications of graphene nanoplatelets, require the Group to expend additional funds on safety measures, and potentially have a material adverse effect on the Group's business, financial position or prospects.

1.20 Insurance

There can be no certainty that the Group's insurance cover is adequate to protect against every eventuality. The occurrence of an event for which the Group did not have adequate insurance cover could have a material adverse effect on the business, financial condition and results of operations of the Group.

1.21 Product liability

Some of the Group's product and pipeline product applications are designed for use in industries which are highly regulated. There is a risk that the Group may lose contracts or could be subject to fines or penalties for any non-compliance with the relevant industry regulations. Furthermore, there is a risk of litigation and reputational damage, as well as product liability and indemnity risks.

 1.22 Disaster recovery

The Group depends on the performance, reliability and availability of its plant, equipment and information technology systems. Any damage to, or failure of, its equipment and/or systems could result in disruptions to the Group's operations. The Group's disaster recovery plans may not adequately address every potential event and its insurance policies may not cover any loss in full or in part (including losses resulting from business interruptions) or damage that it suffers fully or at all, which could have a material adverse effect on the Group's business, financial position or prospects.

1.23 The expenditure required by the Group may be more than currently anticipated

There is a risk that the amount that the Group anticipates will be needed to fund its growth will be insufficient, that the anticipated timing of such investment may prove incorrect or that the Group may be unable to raise the amounts required (if at all). Costs may be greater than planned, or timings may vary from those targeted, which could have a material adverse effect on the implementation of the Group's strategy and its business, financial condition and results of operations.

The proceeds of the Fundraising are expected to be sufficient to implement the Board's strategy in the short to near term. However, the Board expects that the Group will need to raise additional capital in the future, whether from equity or debt sources, to fund expansion, development and/or the ongoing operating costs of the Group. If the Group is unable to obtain this financing on terms acceptable to it then it may be forced to curtail its planned development. If additional funds are raised through the issue of new equity or equity-linked securities of the Company other than on a pre-emptive basis to then existing shareholders, the percentage ownership of such shareholders may be substantially diluted.

 1.24 Counterparty risk

There is a risk that parties with whom the Group trades or has other business relationships (including partners, customers, suppliers and other parties) may become insolvent. This may be as a result of general economic conditions or factors specific to that company. In the event that a party with whom the Group trades becomes insolvent, this could have an adverse impact on the revenues and profitability of the Group.

1.25 Security of intellectual property and the threat of cyber-attack

Through its research and development activities and operations, the Group holds significant intellectual property. As such, there is a risk that its information technology systems could be subject to cyber-attack and result in the misappropriation or loss of key information. Should this occur, it is highly unlikely that the Group will have recourse against the perpetrators of such an attack or be able to take legal action against another business using this information to its advantage (where not protected by patents).

2. General risks

2.1 Economic conditions and current economic weakness

Any economic downturn either globally or locally in any area in which the Group operates may have an adverse effect on the demand for the Group's products and on the attitude of its customers to participate in collaborations with the Group and to use its products. A more prolonged economic downturn may lead to an overall decline in the volume of the Group's sales, restricting the Group's ability to deliver a profit. In addition, although signs of economic recovery have been perceptible in certain countries, the sustainability of a global economic upturn is not yet assured and the Directors consider that the current level of market risk is higher than normal given geo-political unrest and the risk of a Eurozone break-up. If economic conditions remain uncertain, the Group might see lower levels of growth than in the past, which could have an adverse impact on the Group's operations and business results.

 2.2 Changes in tax laws or their interpretation could affect the Group's financial condition or prospects

The nature and amount of tax which members of the Group expect to pay and the reliefs expected to be available to any member of the Group are each dependent upon a number of assumptions, any one of which may change and which would, if so changed, affect the nature and amount of tax payable and reliefs available. In particular, the nature and amount of tax payable is dependent on the availability of relief under tax treaties in a number of jurisdictions and is subject to changes to the tax laws or practice in any of the jurisdictions affecting the Group. Any limitation in the availability of relief under these treaties, any change in the terms of any such treaty or any changes in tax law, interpretation or practice could increase the amount of tax payable by the Group.

3. Risks relating to the Ordinary Shares

3.1 Investment risk

An investment in a share which is traded on AIM, such as the Ordinary Shares, may be difficult to realise and carries a high degree of risk. The ability of an investor to sell Ordinary Shares will depend on there being a willing buyer for them at an acceptable price. Consequently, it might be difficult for an investor to realise his/her investment in the Group and he/she may lose all of his/her investment.

Investors should be aware that the market price of the Ordinary Shares may be volatile and may go down as well as up and investors may therefore be unable to recover their original investment and could even lose their entire investment. This volatility could be attributable to various facts and events, including the availability of information for determining the market value of an investment in the Group, any regulatory or economic changes affecting the Group's operations, variations in the Group's operating results, developments in the Group's business or its competitors, or changes in market sentiment towards the Ordinary Shares. In addition, the Group's operating results and prospects from time to time may be below the expectations of market analysts and investors. Market conditions may affect the Ordinary Shares regardless of the Group's operating performance or the overall performance of the sector in which the Group operates. Share market conditions are affected by many factors, including general economic outlook, movements in or outlook on interest rates and inflation rates, currency fluctuations, commodity prices, changes in investor sentiment towards particular market sectors and the demand and supply for capital. Accordingly, the market price of the Ordinary Shares may not reflect the underlying value of the Group's net assets, or its trading performance and the price at which investors may dispose of their Ordinary Shares at any point in time may be influenced by a number of factors, only some of which may pertain to the Group while others of which may be outside of the Group's control.

If the Group's revenues do not grow, or grow more slowly than anticipated, or if its operating or capital expenditures exceed expectations and cannot be adjusted sufficiently, the market price of its Ordinary Shares may decline. In addition, if the market for the securities of companies in the same sector or the stock market in general experiences a loss in investor confidence or otherwise falls, the market price of the Ordinary Shares may fall for reasons unrelated to the Group's business, results of operations or financial condition. Therefore, investors might be unable to resell their Ordinary Shares at or above the Issue Price.

3.2 Future need for access to capital

The Board expects that the Group will need to raise further funds to carry out the implementation of its business plan. Any additional equity financing may be dilutive to Shareholders, and debt financing, if available, may involve restrictions in financing and operating activities. In addition, there can be no assurance that the Group will be able to raise additional funds when needed or that such funds will be available on terms favourable to it. If the Group is unable to obtain additional financing as needed it may be required to reduce the scope of its operations or anticipated expansion or cease trading.

3.3 Investment in publicly quoted securities

Investment in securities traded on AIM is perceived to involve a higher degree of risk and be less liquid than investment in companies whose securities are listed on the "Official List'' of the FCA in the UK and traded on the London Stock Exchange's main market for listed securities. An investment in the Ordinary Shares traded on AIM may be difficult to realise. AIM has been in existence since 1995 and is a market designed for small and growing companies, but its future success and liquidity as a market for Ordinary Shares cannot be guaranteed.

3.4 Potentially volatile share price and liquidity

The share prices of companies quoted on AIM can be highly volatile and shareholdings illiquid. The price at which the Ordinary Shares are quoted and the price at which investors may realise their investment in the Company may be influenced by a significant number of factors, some specific to the Company and its operations and some which affect quoted companies generally.

These factors could include the performance of the Company, large purchases or sales of Ordinary Shares, legislative changes and general economic, political or regulatory conditions.

 4. Risks relating to the Open Offer

 4.1 Shareholders will experience dilution in their ownership of the Company

Shareholders will experience dilution in their ownership of, and voting interest in, the Company as a result of the Placing. Shareholders will experience greater dilution in their ownership of, and voting interest in, the Company to the extent they do not subscribe in full for their Basic Entitlement under the Open Offer.

4.2 Overseas Shareholders may not be eligible to participate in the Open Offer

Securities laws of certain jurisdictions may restrict the Company's ability to allow participation by Overseas Shareholders in the Open Offer. In particular, holders of Ordinary Shares who are located in the US may not be able to exercise their pre-emption rights unless a registration statement under the Securities Act is effective with respect to such rights or an exemption from the registration requirements is available thereunder. The Open Offer will not be registered under the Securities Act. Securities laws of certain other jurisdictions may restrict the Company's ability to allow participation by Shareholders in such jurisdictions in any future issue of shares carried out by the Company.

DEFINITIONS

The following definitions apply throughout this announcement (including the Notice of General Meeting) and the Form of Proxy unless the context requires otherwise: