Xeros Tech Regulatory News (XSG)

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO CONSTITUTE INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL.

29 November 2018

Xeros Technology Group plc

Posting of Circular

Xeros Technology Group plc (AIM: XSG, 'the Company', 'Xeros'), the developer and provider of patented polymer based technologies with multiple commercial applications, announces that further to its announcement of 27 November 2018 (the "First Announcement"), and following the grant of the Rule 9 Waiver by the Panel Executive, it will today post a circular (the "Circular") to Shareholders regarding a placing of 150,000,000 new Ordinary Shares with existing and new institutional investors at a placing price of 10 pence per share (the "Placing") and an Open Offer of approximately £5 million. The Circular will also be made available today on the Company's website.

Placing

The terms and conditions of the Placing are set out in the First Announcement, which is available on the Company's website.

Open Offer

The Open Offer is being made to Qualifying Shareholders on the register as at the Record Date, being 6.00 p.m. on 29 November 2018, for up to 49,588,971 Open Offer Shares at 10p per Open Offer Share (being the same price as the Issue Price for the Placing) on the basis of:

1 Open Offer Share for every 2 Existing Ordinary Shares

Full details of the Open Offer, including terms and conditions and details on how to accept the Open Offer, are set out in the Circular.

Subject to:

(i) the Shareholders' approval to authorise the Directors to allot the New Ordinary Shares and disapply pre-emption rights in relation to the issue of the New Ordinary Shares; and

(ii) the Independent Shareholders' approval of the Rule 9 Waiver by way of the Whitewash Resolution,

settlement and admission to trading on AIM of the new Ordinary Shares is expected to occur at 8.00 a.m. on 20 December 2018.

Enquiries:

Notes to Editors

Xeros Technology Group plc (AIM: XSG) is a platform technology company that is reinventing water intensive industrial and commercial processes.

Xeros' uses its patented XOrbTM technologies to significantly reduce the amount of water used in a number of major applications and to increase the efficiency in either affixing or removing molecules from substrates such as fabrics and garments. Adoption of the technology drives significant economic, operational and sustainability outcomes.

Xeros current portfolio of applications are within the areas of garment finishing (Textile Technologies), tanning (Tanning Technologies under the "Qualus" brand) and cleaning/laundry (Cleaning Technologies). The cleaning/laundry business of the Company covers domestic laundry, commercial laundry (under the "Hydrofinity" brand) and the cleaning of high performance workwear (under the "Marken" brand).

For more information, please visit - http://www.xerostech.com/

Jefferies, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority ("FCA"), and Berenberg, which is authorised by the German Federal Financial Conduct Authority and subject to limited regulation by the FCA, are acting exclusively for the Company and for no‐one else in relation to the Placing, and will not be responsible to any other person for providing the protections afforded to their respective clients nor for providing advice in connection with the matters contained in this announcement.

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 Jefferies, Berenberg nor by any of their respective affiliates, partners or agents (or any of their respective directors, officers, employees or advisers), as to or in relation to, the contents, accuracy or completeness of this announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, or any other statement made or purported to be made by or on behalf of either of Jefferies or Berenberg or any of their respective affiliates in connection with the Company or the Placing, and any liability therefor is expressly disclaimed.

Jefferies, Berenberg and each of their respective affiliates accordingly disclaim all and any liability, whether arising in tort, contract or otherwise (save as referred to above) in respect of any statements or other information contained in this announcement.

This announcement does not identify or suggest, or purport to identify or suggest, the risks (direct or indirect) that may be associated with an investment in the Placing Shares. Any investment decision to buy Placing Shares in the Placing must be made solely on the basis of publicly available information, which has not been independently verified by Jefferies or Berenberg.

EXPECTED TIMETABLE OF KEY EVENTS

2018

Announcement of the Placing and Open Offer 27 November

Record Date for entitlements under the Open Offer 6.00 p.m. on 29 November

Ex-entitlement date for the Open Offer 29 November

Posting of this document, the Form of Proxy and, to Qualifying Non-CREST 29 November

Shareholders only, the Application Form

Basic Entitlements and Excess Entitlements credited to stock accounts of 30 November

Qualifying CREST Shareholders

Recommended latest time for requesting withdrawal of 4.30 p.m. on 12 December

Basic Entitlements and Excess Entitlements from CREST

Latest time and date for depositing Basic Entitlements and 3.00 p.m. on 14 December

Excess Entitlements into CREST

Latest time and date for splitting of Application Forms 3.00 p.m. on 17 December

(to satisfy bona fide market claims only)

Latest time and date for receipt of Forms of Proxy or 10.00 a.m. on 17 December

electronic proxy appointments for use at the General Meeting

Latest time and date for receipt of completed Application Forms 10.00 a.m. on 19 December

from Qualifying Non-CREST Shareholders and payment in full

under the settlement of relevant CREST instructions (as appropriate)

General Meeting 10.00 a.m. on 19 December

Announcement of the results of the General Meeting and Open Offer 19 December

Issue of the New Ordinary Shares 20 December

Admission and commencement of dealings in 8.00 a.m. on 20 December

the New Ordinary Shares

CREST Members' accounts credited in respect of New Ordinary Shares 20 December

in uncertificated form

Expected despatch of definitive share certificates for New Ordinary Shares by 3 January 2019

in certificated form

(Note: each of the above dates is subject to change at the absolute discretion of the Company, Jefferies and Berenberg. All events listed in the above timetable following the General Meeting are conditional on, inter alia, the passing of the Resolutions at the General Meeting. All of the above times refer to London times).

PROPOSED PLACING OF 150,000,000 NEW ORDINARY SHARES AT 10 PENCE EACHOPEN OFFER OF A MAXIMUM OF 49,588,971 NEW ORDINARY SHARES AT 10 PENCE EACHAPPROVAL OF WAIVER OF OBLIGATIONS UNDER RULE 9 OF THE TAKEOVER CODE

1. INTRODUCTION

Your Board announced on 27 November 2018 that the Company intends to raise approximately £15 million before fees and expenses by a Placing of 150,000,000 new Ordinary Shares with existing and new institutional investors at an Issue Price of 10 pence per Placing Share.

The Board is grateful for the continued support received from Shareholders and in recognition for this support is pleased to offer to all Qualifying Shareholders the opportunity to participate in the Open Offer to raise up to £5 million (assuming full take up of the Open Offer but being less than the €8 million maximum amount permitted without requiring the publication by the Company of a prospectus under the Prospectus Rules), in addition and separate to the funds raised pursuant to the Placing, through the issue of Open Offer Shares to Qualifying Shareholders at the Issue Price on the basis of 1 Open Offer Share for every 2 Existing Ordinary Shares held on the Record Date. Qualifying Shareholders subscribing for their full Basic Entitlement under the Open Offer may also apply for additional Open Offer Shares through the Excess Application Facility. The Open Offer is not being underwritten.

The Issue Price represents a discount of 68.8% to the Closing Price, being the latest practical date prior to the publication of this document. The Placing Shares and Open Offer Shares together will represent approximately 66.8% of the Company's issued ordinary share capital following Admission (assuming the Open Offer Shares are taken-up in full).

The total amount that the Company could therefore raise under the Placing and Open Offer is £20 million (before expenses), assuming that the Open Offer is fully subscribed.

For the Placing and Open Offer to proceed, the Company requires Shareholders' approval to authorise the Directors to allot the New Ordinary Shares and disapply pre-emption rights in relation to the issue of the New Ordinary Shares and requires the approval of the Independent Shareholders of the Rule 9 Waiver. I am writing to provide you with details of the Placing and Open Offer and to give you notice of the General Meeting to consider and, if thought fit, approve the Resolutions to grant these authorities. The General Meeting is to be held at the offices of Squire Patton Boggs (UK) LLP at 7 Devonshire Square, London EC2M 4YH at 10.00 a.m. on 19 December 2018. The formal notice of General Meeting is set out at the end of this document.

The Board believes that raising equity finance using the flexibility provided by a placing and an open offer is the most appropriate and optimal structure for the Company at this time. This allows both existing Shareholders and new investors the opportunity to participate in the fundraising and avoids the requirement for a prospectus, which is a costly and time consuming process.

The Company is a developer and provider of water saving technologies with multiple, IP protected, applications which are variously in development, pre-commercialisation or in commercialisation. The Company's applications are focused on large scale markets which are being impacted by increasing water scarcity and water costs. The Company's technology has the dual attraction of both increasing environmental sustainability through reducing water and chemical use and effluent production while simultaneously delivering cost benefits to the customer. The Company's Commercial Laundry business, branded Hydrofinity, and High Performance Workwear business, branded Marken, are already generating revenue and the Tanning business has a contract which is forecast to generate revenue in 2019. The majority of the technical development of the Company's applications has been completed and as a result the Company's cash burn rate has reduced during 2018 and the Company has plans for it to reduce further in 2019.

The Net Proceeds are intended to be used to enable the Company to progress the commercialisation of those applications within its portfolio which it believes represent the best return on investment taking into account their risk/return profile and the level of funding required. The successful commercialisation of the applications within the portfolio is dependent upon a number of factors including the Company's ability to successfully enter agreements with partners, some of whom are global enterprises, for the adoption of the Company's technologies. The Company reviews the likely success of its plans to commercialise individual applications of its technologies and adds and removes developments to/from the portfolio based upon its judgement as to their likely future commercial success.

The Company is organised into discrete business units dedicated to specific applications which are at pre-commercialisation or commercialisation stages. These business units are served by shared technical and business support functions.

The Group's current portfolio of applications are within the areas of Cleaning Technologies in domestic, commercial and high performance workwear markets, Tanning Technologies in the bovine tanning market and Textile Technologies in the garment and denim finishing markets. The Company intends to use the Net Proceeds to progress its current development and commercialisation plans in these applications and reach milestones which can provide demonstrable value to commercial partners and investors alike. The key milestones being targeted by the Company as of the date of this circular are set out below:

Cleaning Technologies

Domestic Laundry: The Company is targeting to negotiate commercialisation and development agreements for its domestic laundry technology, including XDrumTM, with one or more domestic laundry machine OEMs. Within such agreements, the Company will look to receive up-front payments in exchange for territorial exclusivity and a royalty per machine sold once the technology has been successfully commercialised by the OEM. Similarly, it is targeting to license its XFiltraTM technology to one or more OEMs and will look to receive up-front payments in exchange for territorial exclusivity and a royalty per unit sold once the technology has been successfully commercialised by the OEM.

Marken (High Performance Workwear): Having now established a network of four sites in the US, the Company plans to demonstrate the differentiation of the Company's technology in the market and increase revenues and profitability. Following this market validation, the Company would plan to target licensing options to cleaners and owners of large fleets of personal protective equipment. Further expansion of the Company's network will be considered if necessary to achieve these objectives.

Hydrofinity (Commercial): The Company is forecasting to continue the migration of this business to a licensing model with further agreements targeted with distributors and OEMs in 2019. The Company expects to receive first revenues in 2019 from its China licensing agreement signed with SeaLion earlier this year.

Tanning Technologies

Having signed a multi-year contract with LeFarc in Mexico in September 2018 for the Company's technologies to be incorporated within their re-tanning and dyeing operations, the Company expects to receive initial revenues from this contract in the first half of 2019. The Company is targeting to win additional contracts during 2019. With the evidence of successful implementations in 2019, the Company then expects to convert further customers from its pipeline and grow its contract base. The Company also plans to trial its technology in the upstream tanning process during the year which, if successful, is an additional potential source of revenue for the Company.

Textile Technologies

In both denim and garment finishing the Company is targeting the completion of trials with denim and garment manufacturers in 2019 and, if successful, to pursue commercial agreements with first revenues in 2019. The target business model for this business would be for the Company to receive a commission on machine sales as well as ongoing royalties for continued use of the technology.

This document provides you with information about the Placing and Open Offer and explains why the Directors consider it to be in the best interest of the Company and its Shareholders, and why the Directors recommend that you vote in favour of each of the Resolutions to be proposed at the General Meeting on which you are entitled to vote.

2. BACKGROUND TO THE PLACING AND OPEN OFFER

2.1. Information on the Company

The Directors believe Xeros has a platform technology that is reinventing water intensive industrial and commercial processes. The Company uses its patented XOrbTM technologies to significantly reduce the volume of water used in a number of major applications and to increase the efficiency in either affixing or removing molecules from substrates such as fabrics and garments. Adoption of the technology drives significant economic and operational benefits as well as enhanced sustainability through lower water, chemical and energy consumption.

The Company's strategy is to develop and commercialise its XOrbTM technology for application in industries that manufacture and clean soft substrates, specifically garments and fabrics. Where necessary the Company will enter markets directly to prove and de-risk applications of its technology prior to migrating to intellectual property rich, asset light, licensing business models.

The Company has developed from a single application business to its current portfolio of strategically selected polymer technology applications in three world-scale industries: cleaning, tanning and garment production in the textile industry.

Given the scale of the markets in which it operates, the Company's strategy is to commercialise its technology with partners, who already have strong market positions, demonstrate a strategic intent to deliver increased levels of sustainability and who also have a significant incentive to deliver products that can demonstrate substantial water and energy savings while substantially reducing process related pollutants. These markets have been evaluated and selected based upon the size of their potential economic returns net of the investment needed to realise them. For each, the Company seeks to generate returns on its intellectual property and know-how with low capital intensity. These returns can be generated through licence and royalty income streams and, at appropriate value inflection points, via potential trade sales or the pursuit of capital market liquidity opportunities for each of the businesses in the Company's portfolio.

The Company's Ordinary Shares were admitted to trading on AIM on 25 March 2014, at which point the Company also raised £27.6 million of gross proceeds via the issue of new Ordinary Shares to investors. On 30 November 2015 the Company raised £40.0 million of gross proceeds via the issue of new Ordinary Shares to investors, and on 29 December 2017 the Company raised a further £25.0 million of gross proceeds via the issue of new Ordinary Shares to investors.

Since November 2015 the Company has developed its business from a single commercial application in a single market (the North American hotel and lodging laundry market) to having a clearly defined portfolio of businesses.

In order to accelerate the commercialisation of polymer technology, the Company has dedicated commercial teams to each of its businesses. Its Hydrofinity and Marken businesses have reached the commercialisation stage, are generating revenues and are moving into growth. Tanning, Textile and Domestic washing machine technologies are approaching commercialisation with the target of delivering their first revenues in 2019.

2.2. Global Backdrop

Water scarcity is a global imperative. There are 1.3 billion km3 of water on the planet, 97% of which is in our oceans. Of the remaining 3%, 2.5% is inaccessible, for example in polar ice caps or as a result of pollution. So only 0.5% of the world's water is accessible and greater than 80% of this water is from ground sources which are being rapidly depleted. Immediate problems caused by this over extraction include infrastructure collapse, with further stress being caused by pollution. As a result, there are major supply implications to address.

Water scarcity is only expected to increase as populations grow. GDP per capita has been shown to correlate with water demand in developing countries. The price of water is increasing to manage this growing demand and to recover the cost of increasing and replacing ageing infrastructure. For example, in China in 2018 the National Development and Reform Commission and Ministry of Housing and Urban-Rural Development has dictated nationwide implementation of tiered pricing for non-residential water.

The Company's technology achieves reductions in water of between 50% and 80%, reductions in chemistry of up to 50%, reductions in energy of up to 50% and reductions of effluent production of between 50% and 80%. Consequently, the potential cost benefits for users will increase in line with water costs providing ever more incentive to adopt the Company's technology.

The increasing amount of plastic pollution in the world's oceans and rivers is becoming a major environmental issue with the washing of clothes containing synthetic fibres estimated by scientists to be the largest source of primary micro-plastic pollution in our oceans. The Company's filtration technology, XFiltraTM, has been developed to address this issue and the Company believes increasing regulatory pressures and consumer awareness have the capacity to drive the adoption of this technology by washing machine manufacturers.

2.3. Update on progress

Cleaning Technologies

The Company's dramatic improvements to water use and cleaning efficacy are delivered through the use of re-usable and re-cyclable nylon polymers introduced into the washing cycle within the drum.

The Company's technology achieves reductions in water of up to 80%, reductions in detergent of up to 50%, reductions in energy of up to 50% and reductions of effluent usage of up to 80%. The polymers are designed to a specific shape, size, density and composition and effect a significantly enhanced cleaning performance. Additionally, engineering solutions have been developed by the Company and applied to introduce and remove the polymer XOrbTM from the garments and fabrics they clean. In the area of Cleaning Technologies, the Company currently has three applications:

Domestic Laundry: The Company launched its XOrbTM, XDrumTM and XFiltraTM technologies for the home at the Consumer Electronics Show in Las Vegas in January 2018. The XDrumTM is designed to offer domestic washing machine OEMs the ability to make simple and inexpensive changes in their production lines to incorporate the Company's technology. The XDrumTM design is applicable to many washing machine sizes as well as garment finishing machines used in the clothing industry. Patent applications for the XDrumTM innovation will, if granted, extend the Company's core IP coverage. The Company is involved in discussions with a number of domestic washing machine OEMs, with the objective of concluding development and licencing agreements for different geographic regions. The regions being targeted are China, India, EMEA, the Americas and Asia Pacific (excluding China and India).

The company is involved in discussions regarding the potential licensing of the Company's XFiltraTM technology which is designed to significantly reduce the micro-plastic pollution from the washing of garments containing synthetic fibres. Patents have been applied for covering this device.

Globally 119 million washing machines are sold annually with a retail market value of $70 billion per annum. In addition, the consumer laundry detergent market is worth $57 billion per annum. The Company's technology reduces the use of detergent, water and energy along with providing improved fabric care. This results in a reduced cost per wash and a reduced environmental footprint for consumers.

Marken (High performance workwear): The Company first started trialling its Cleaning Technology within the personal protective equipment market in 2016. This market includes the uniforms worn by firefighters, military personnel, petrochemical, construction, mining and other workers. The Company has received independently verified evidence of the cleaning efficacy and garment life extension delivered by its technology. The Company plans to use this independent verification to generate revenues from the cleaning and life extension of large, high-value fleets of personal protective equipment including those owned by garment rental companies.

Globally, the value of personal protective clothing expenditure is £9.5 billion per annum and the Company estimates that the potential value of the US firefighter protective clothing cleaning, inspection and repair market is $0.3 billion per annum based on an addressable market of c1.5 million firefighter uniforms.

The Company's market strategy has been to establish its own network of specialist facilities addressing the US firefighter market with the objective of setting new minimum standards in cleaning and demonstrating the opportunity to enhance profitability and establish a new standard in cleaning efficacy. The firefighter market has been targeted because of the high value of a single firefighter's ensemble (costing between $4,000 and $6,000) and therefore significant economic opportunity in garment life extension and the high level of decontamination required to reduce the health hazard to firefighters.

A network of four facilities is now in place in the US undertaking the cleaning, inspection and repair of firefighter uniforms: in July 2017, the Company acquired MarKen PPE Restoration, a specialist independent service provider of cleaning, inspection and repair services to fire and military customers in North America and overseas. In March 2018, the Company acquired two sites in Atlanta and Miami from Gloves Inc, a business providing cleaning, inspection, and repair services for firefighters' personal protection equipment and in July 2018 the Company converted one of its existing premises in Southern California to a Marken facility. These four sites have an estimated addressable market of around 1,400 fire stations, housing 30,000 professional firefighters. The Company also has a contract with Ex Nihilo SARL, a French garment fleet provider, to use the Company's technology to clean uniforms of the French railway company, SNCF.

The Company has converted its four facilities to Xeros technology and the Company has also successfully developed and introduced its MTrackTM garment life-cycle tracking system to provide asset tracking management and analytics for its customers. The Company plans to increase the revenue and profitability from its network through 2019 in the first instance and will consider increasing its US footprint if it deems it necessary to achieving its longer term commercial objectives.

Hydrofinity (Commercial): The Company entered the US market in 2013 with its own brand machines and an 'all requirements' multi-year contract package including the supply of cleaning chemistry, which was sold and delivered by the Company's own staff and also by FCPs. In 2017, the Company initiated a plan to migrate from this direct, vertically-integrated business model to a model whereby existing market incumbents incorporate and sell the Company's proprietary technology globally in exchange for royalties. To this end the Company announced the Symphony Project in April 2017 and demonstrated a leading conventional commercial size washing machine, incorporating its technology, at the Clean Show in Las Vegas in June 2017. Following this demonstration the Company signed the first Symphony Project testing and validation agreement with an OEM in September 2017. A second agreement was signed in January 2018 with another OEM. During the year the Company has scaled the XDrumTM design (developed initially for the domestic machine) for use in larger commercial washing and garment finishing machines. The trials with OEMs were extended during 2018 to accommodate this new drum design.

Following the XDrumTM development, the Company announced in July 2018 that it had signed its first Symphony Project licensing agreement with Jiangsu SeaLion Technology Development Co., Ltd, a wholly owned subsidiary of Jiangsu SeaLion Machinery Co., Ltd ("Sea-Lion") a market-leading Chinese commercial washing machine manufacturer. The agreement runs for a 10-year period with minimum annual sales targets agreed between both parties. Under the terms of the agreement, the Company will receive a royalty on both machine sales and on the multi-year service contracts signed between SeaLion and the customer. SeaLion will integrate the Company's proprietary technologies into its own commercial washing machines and sell them through its own distribution network in China, on an exclusive basis. The first sales are expected in 2019. SeaLion will be the first partner to incorporate the Company's new XDrumTM technology in a commercial washing machine.

In countries where the Company is yet to put in place Symphony Project agreements, the Company's strategy is to migrate to a fully indirect distribution model whereby FCPs provide sales and full lifecycle services to commercial laundry customers. The Company is focusing this strategy on countries and regions with a combination of premium hotel customers and high water rates. The Company's EMEA business now operates this model and has signed agreements with FCPs who market, sell and provide the full set of services for Xeros-enabled machines. In this regard, the Company recently announced its first two major orders with 16 machines for fanute (Proprietary) Limited, its FCP in South Africa, and 32 machines for Encom Trading LLC, a subsidiary of Electro RAK LLC, its FCP in the UAE. The Company now plans to implement this model in the US and in November 2018, the Company announced that Eastern Laundry Services Inc. ("ELS") would take over the delivery of service and chemistry to Hydrofinity's current and future customers in 9 States in the North East United States. ELS will also continue to stock and sell Xeros commercial machines. Similar arrangements are planned to cover the whole of the US with the objective of increasing revenue and lowering costs whilst maintaining customer service. The agreement with ELS follows a programme by the Company to improve the quality of its direct customer base by removing machines from poor credit quality customers and redeploying them with better quality customers.

In September 2017, the Company announced the commissioning of its XConnect online portal which monitors and analyses real-time machine performance and usage data to enable customers to manage their laundry operations and track water, chemistry and energy savings. The XConnect information portal also provides access to data to allow FCPs to perform planned and preventative maintenance. The XConnect system is connected to all Xeros machines in all geographic markets and is targeted to be used in the China market from 2019.

Globally the commercial washing machines market is worth $881 million per annum and the value of chemistry sold into commercial laundries is worth $819 million per annum.

Tanning Technologies

In Cleaning Technologies, the Company's polymer technology gently removes unwanted molecules and contaminants from materials; in Tanning Technologies, however, the Company's polymer technology is highly effective in pushing molecules into hides during leather processing. This technology is effective in both the tanning and the re-tanning and dyeing processes. Initially, the Company has chosen to focus on the re-tanning and dyeing process. The application of polymer technology in the tanning industry is supported by intellectual property patents.

The Company's approach in Tanning Technologies is to introduce re-usable and re-cyclable polypropylene polymers into the tanning drums enabling a substantial reduction in the volume of process water and chemistry used, whilst delivering leather hides of a comparable or improved quality to traditional re-tanning and tanning processes. The Company's technology achieves reductions in water and effluent of up to 50% and reductions in chemistry of up to 25%. The polymers are designed in shape, size, density and composition to achieve the above benefits. Additionally, engineering solutions have been developed by the Company and applied to introduce and remove the polymer beads from bovine hides in a tanning drum.

Globally approximately 300 million bovine hides are processed on an annual basis with a value of $55 billion to the tanning industry.

Retanning and Dyeing: Having successfully conducted multiple re-tanning and dyeing trials, the Company has recently signed a 10-year contract with LEFARC to convert its re-tanning operations in León, Mexico to use the Company's patented polymer technology. With a published weekly production of 5,000 hides, LEFARC produces leather for shoes, supplying brands such as Timberland and Wolverine. The Company anticipates leather produced by LEFARC using its technology to be incorporated in consumer products after March 2019. The tannery is located in one of the world's leading tanning centres, supporting major brands in the shoe and auto industries. The contract follows extensive trials which demonstrated material reductions in process inputs and effluent production and improves the sustainability of production, whilst maintaining the quality of leather output. The Company has also signed a Heads of Terms with another tannery. The terms of the contract with LEFARC and those within the Heads of Terms are consistent with the previously disclosed financial assumptions in the Company's business case.

Tanning: The Company's XOrbTM technologies teams in Sheffield and the Institute of Creative Leather Technologies at the University of Northampton have demonstrated that the technology could also be applicable in the tanning process step of leather production (upstream of the re-tanning and dyeing process). These evaluations indicate potential reductions in water and chemistry process inputs. The Company plans to validate the efficacy of its technology in the Tanning process steps in the second half of 2019. The XOrbTM technology team has established that the Company's technology reduces the total volume of polymer microparticles in tannery effluent.

Following the expected implementation of contracts in 2019, the Company will look to accelerate its penetration of the re-tanning market having demonstrated the economic benefits that accrue to customers and demonstrated the technology's opportunity to overcome constraints in water availability and effluent disposal which are expected to increase over time.

Textile Technologies

Similar to Tanning Technologies, in Textile Technologies the Company uses re-usable and re-cyclable polypropylene polymers within rotating drums to substantially reduce the water and chemistry used and the effluent produced in the fading and texturing of denim, texturing of other garments and in the dyeing of cotton garments. Scale trials performed in the Company's UK Technology Centre in Sheffield have demonstrated that the Company can process denim jeans from their raw state to a finished product in a single XDrumTM enabled machine in a continuous process at scale. These results have been achieved with ultra-low chemistry, water ratios and effluent. Following these trials the Company is now in the process of testing garments from leading Chinese manufacturers.

Garment finishing: The global cotton processing industry adds $26 billion of value per annum through the garment finishing process, which includes dyeing. The Company aims to reduce the cycle time for the dyeing and finishing of garments whilst simultaneously reducing the water and chemistry used. The Company has successfully applied its XDrumTM technology to garment finishing in its Technology Centre, allowing simple and inexpensive changes to be made to existing machine designs to incorporate the Company's technology.

Denim finishing: 1.2 billion pairs of denim jeans are manufactured every year. The global retail market value for denim jeans is $60 billion. The Company aims to reduce the cycle time for the finishing of denim which includes the process steps of de-sizing, cleaving and stonewashing whilst simultaneously reducing the amount of water and chemistry used. The Company's process uses a combination of bio-technology and polymer technology to reduce the chemistry that is normally required in traditional processes. The Company has successfully applied its XDrumTM technology to denim applications.

China - All Applications

The Company sees China as an important market given the large addressable markets for each of its applications. In China there are currently: 390,000 professional firefighters; 37 million domestic washing machines sold per annum; 27,000 commercial laundry machines sold per annum; 75 million finished leather hides produced; 7 million tonnes of natural fibres processed; and 483 million pairs of jeans sold.

The Company has established a wholly owned subsidiary in China and has appointed an Executive Chairman. The Company has signed its first Symphony Project licence agreement in China with SeaLion. It is also in discussions with Chinese domestic washing machine OEMs and Chinese Garment manufacturers.

Other

The Company supports the commercialisation of the above applications with technical and corporate functions, including polymer development, engineering and process cycle development and intellectual property management.

The Company has a full suite of patents either granted or in application covering the processes and applications mentioned above.

2.4. Future plans

Cleaning Technologies

Domestic Laundry: The Company is in active discussions with a number of washing machine OEMs with the objective of negotiating at least one international commercialisation and development agreement. Its targeted business model is to agree upfront payments in exchange for regional exclusivity and a royalty per machine sold. A parallel process is running in relation to the XFiltraTM with the same targeted outcomes.

The Company's objective is penetrate a meaningful share of the domestic washing machine market where a 1.5% share of the annual global market would represent 1.8 million units. The Company is using as its target an average royalty of 4% of the retail price of a machine.

Marken (High performance workwear): The Company is looking to win orders to maximise the revenues from its network of four sites in the US using the independent verification of the cleaning efficacy and the garment life extension provided by the Company's technology. Orders being targeted in 2019 are for firefighters uniforms and other types of high performance workwear which are intended to demonstrate the applicability and benefits of the technology across multiple sectors of this market.

The Company will consider expanding its network of service providers in the US if it believes it is necessary to achieving its longer terms objectives of broad licensing to the firefighter market and garment fleet rental and cleaning companies.

The addressable market of Marken's current network is estimated to be 30,000 professional structural firefighters out of a total US market of approximately 300,000. Once it has implemented its strategy, the Company estimates that the Marken business could achieve a margin of approximately 40%.

Hydrofinity (Commercial): The Company plans to progress its strategy to fully implement a licensing model with major branded OEMs, such as SeaLion in China, manufacturing and selling Xeros enabled products. In the interim, Xeros will continue to selectively build and utilise its network of FCPs.

The Company's medium-term target is to have over 1,000 Xeros enabled machines generating revenues by the end of 2020.

Tanning Technologies

The Company's strategy is to establish a low capital intensity business in Europe and the Americas with the capital expenditure required to implement its technology funded by customers.

Having signed its first re-tanning and dyeing contract in September 2018 with revenues expected after March 2019, the Company is targeting signing a number of additional contracts for implementation in 2019. Following successful contract implementations during the year, the Company expects to grow its customer and contract base. In parallel, the Company plans to validate the efficacy of its technology in the upstream tanning process.

The Company's medium-term target is to achieve a high teens percentage market penetration of bovine hide processing by 2022.

Textile Technologies

Following initial engagement with multiple garment manufacturers, the Company plans to continue trial programmes with them ahead of seeking commercialisation and development agreements with manufacturers. The Company is targeting initial revenue in 2019 based on an envisaged business model of a commission paid to the Company for machine sales and ongoing monthly royalties for use of the technology.

China - All Applications

The Company anticipates that China will continue to be an important market for the commercialisation of its applications. The Company is targeting initial revenue in 2019 under its agreement with SeaLion. In addition, discussions are ongoing with Chinese manufacturers for the development and commercialisation of the Company's Domestic Laundry and Textile applications. The Company also plans to evaluate the opportunity in China for the commercialisation of its High Performance Workwear technology.

2.5. Summary

Based upon the progress achieved to date on commercialisation and subject to the successful delivery of the planned and targeted milestones described above, the Company estimates the following breakeven dates for the applications currently in its portfolio:

Hydrofinity: It is estimated that the business would be EBITDA positive in the EMEA region in 2019, with the overall Hydrofinity business estimated to become EBITDA positive in 2020.

Marken: It is estimated that the business would be EBITDA positive by the end of 2019.

Domestic Laundry: The domestic business could become EBITDA positive upon receipt of up-front license payments.

Tanning: It is estimated that the tanning business could be EBITDA positive in 2021 and the Company is targeting having a ten year forward book of contracted revenue by the end of 2019.

Textiles: Subject to signing agreements in 2019, it is estimated that the business could become EBITDA positive in late 2019 or in 2020.

The costs related to the Company's technical functions of engineering, XOrbTM development, IP and cycle development are planned to continue to reduce as the businesses move into commercialisation. Corporate overheads and plc costs are also targeted to reduce in 2019.

3. CURRENT TRADING AND OUTLOOK

Since the Company announced results for the 6 months to 30th June 2018 on 13th September trading has continued in line with the Director's expectations.

4. TAKEOVER CODE, CONCERT PARTY AND RULE 9 WAIVER

4.1. Application of the Takeover Code

The Company is subject to the Takeover Code. Brief details of the Panel, the Takeover Code and the protections they afford are described below.

The Takeover Code is issued and administered by the Panel. The Takeover Code applies to all takeover and merger transactions, however effected, where the offeree company is, inter alia, a listed public company registered in the United Kingdom. The Company is a listed public company registered in the United Kingdom and its Shareholders are therefore entitled to the protections afforded by the Takeover Code.

Under Rule 9 of the Takeover Code, where any person acquires, whether by a series of transactions over a period of time or not, an interest in shares (as defined in the Takeover Code) which (taken together with shares already held by him and any interest in shares held or acquired by persons acting in concert with him) carry 30% or more of the voting rights of such a company, that person is normally required to make a general offer to all the holders of any class of equity share capital or other class of transferable securities carrying voting rights in that company to acquire the balance of their interests in the company.

Rule 9 of the Takeover Code also provides that, among other things, where any person who, together with persons acting in concert with him, is interested in shares which in aggregate carry not less than 30% of the voting rights of such a company but does not hold shares carrying more than 50% of the voting rights of such a company, and such person, or any person acting in concert with him, acquires an additional interest in shares which increases the percentage of shares carrying voting rights in which he is interested, then such person is normally required to make a general offer to all the holders of any class of equity share capital or other class of transferable securities carrying voting rights of that company to acquire the balance of their interests in the company.

An offer under Rule 9 of the Takeover Code must be in cash (or with a cash alternative) and at not less than the highest price paid within the preceding 12 months for any shares in the company by the person required to make the offer or any person acting in concert with him.

For the purposes of the Takeover Code, persons acting in concert comprise persons who, pursuant to an agreement or understanding (whether formal or informal), cooperate to obtain or consolidate control of a company. As explained further below, certain categories of person are presumed to be acting in concert under the Takeover Code unless the contrary is established.

4.2. The Concert Party

The Takeover Code provides that certain categories of person are presumed to be acting in concert, including:

· a company, its parent, subsidiaries and fellow subsidiaries, and their associated companies, and companies of which such companies are associated companies, all with each other (for this purpose ownership or control of 20% or more of the equity share capital of a company is regarded as the test of associated company status); and

· a fund manager (including an exempt fund manager) with any investment company, unit trust or other person whose investments such fund manager manages on a discretionary basis, in respect of the relevant investment accounts.

Mercia holds the entire issued share capital of Enterprise Ventures Group Limited, of which EVL is a wholly owned subsidiary. EVL is the discretionary fund manager of, inter alia, the Enterprise Ventures Funds. On the basis that certain members of Woodford (acting through WIML) hold more than 20% of the voting rights of Mercia, Woodford is presumed to be acting in concert with Mercia, EVL and the Enterprise Venture Funds.

4.3. Rule 9 Waiver

In December 2017, the Panel waived the obligation for the Concert Party to make a general offer for the Company under Rule 9.1 that would have otherwise arisen from the issue of Ordinary Shares to Woodford pursuant to the 2017 Placing. Immediately after completion of the 2017 Placing, the Concert Party held Ordinary Shares representing 31.56% of the voting rights of the Company.

Between the 2017 Placing and the date of this document, the Company has issued 7,986 Ordinary Shares to holders of options and the Concert Party has not traded any Ordinary Shares. As at the date of this document, Woodford therefore holds 25.29% of the voting rights of the Company and the Enterprise Venture Funds (acting through EVL) holds 6.26% of the voting rights of Company. Accordingly, the Concert Party holds an aggregate of 31.55% of the voting rights of the Company.

It is proposed that Woodford subscribes for the WCP Shares and each member of the Concert Party has confirmed that it has no intention of subscribing for any Open Offer Shares, which would result in the Concert Party holding Ordinary Shares representing a maximum controlling position of 43.46% of the voting rights of the Company following Admission (assuming no take up of the Open Offer). As a consequence of the issue of the WCP Shares, without a waiver of the obligation under Rule 9 of the Takeover Code, the Concert Party would be required to make a general offer for the balance of Ordinary Shares in issue immediately following Admission. The Panel has been consulted and has agreed, subject to the Whitewash Resolution being passed by the Independent Shareholders (on a poll) at the General Meeting, to waive the obligation that would otherwise arise under Rule 9 of the Takeover Code as a result of the issue of WCP Shares to Woodford pursuant to the Placing. The Whitewash Resolution will be passed, if approved, by a simple majority of votes cast by Independent Shareholders (on a poll).

Following completion of Admission, Rule 9 of the Takeover Code will continue to apply to the Concert Party, requiring a general offer to be made to all Shareholders if any member of the Concert Party or persons acting in concert with them acquires any Ordinary Shares in addition to those which are the subject of the Whitewash Resolution, unless a further waiver is obtained. Shareholders should note that the Rule 9 Waiver which the Panel has agreed to give (conditional on the Whitewash Resolution being passed by the Shareholders) is only in respect of the acquisition of WCP Shares by Woodford as a result of the Placing and not in respect of any other future acquisition of Ordinary Shares by any member of the Concert Party or persons acting in concert with them.

Shareholders should be aware that if the Resolutions are passed, the Concert Party will not be restricted from making an offer for the Company. However, the members of the Concert Party have confirmed that the Concert Party has no intention of making an offer for the Company.

Further information regarding the Concert Party and the Rule 9 Waiver is set out in Part V of this document.

5. REASONS FOR THE PLACING AND OPEN OFFER AND USE OF PROCEEDS

5.1. Reasons for the Placing and Open Offer

The Directors are of the view, given the opportunities available to the Group and its limited current cash resources, that this is the appropriate time for the Company to request shareholder approval in order to raise further funds through the Placing and Open Offer. The Placing and Open Offer will enable the Company to maintain the momentum seen since the Company's last equity issue in December 2017 as it seeks to build on its progress within the Group.

Shareholders should be aware that, if the Resolutions are not approved at the General Meeting, the Placing and Open Offer will not occur and the Net Proceeds will not be received by the Company. If this were to happen, the Group would only have sufficient working capital to trade through to January 2019 without taking any mitigating action.

As further detailed in paragraph 10 below, the Company has received, in aggregate, irrevocable undertakings to vote in favour of the Resolutions to be proposed at the General Meeting in respect of:

- Resolutions 1 and 3, 26,563,149 Existing Ordinary Shares, representing, in aggregate, approximately 26.78% of the existing issued ordinary share capital entitled to vote on these Resolutions; and

- the Whitewash Resolution, 1,477,188 Existing Ordinary Shares, representing, in aggregate, approximately 9.62% of the existing issued ordinary share capital of the Company entitled to vote on this Resolution.

5.2. Use of proceeds

As at 27 November 2018, the Company had existing cash resources of £1.8 million, which together with the Gross Proceeds would result in a pro forma cash balance of £21.8 million.

The Company's cash burn rate has reduced during the year and is targeted to reduce further to an average of approximately £1.2m in 2019.

The gross proceeds of the Placing will give the Company the funding it requires until the end of 2019 assuming the continued pursuit of each of its businesses as set out above. £1 million of the proceeds will fund the Company through the rest of 2018. £5 million of the proceeds will fund the business units through 2019. £6 million of the proceeds will fund the Company's central science, engineering, technology and corporate costs in 2019 and the final £3 million of the proceeds would provide funds for capital expenditure and working capital requirements. A further £5m is expected to be able to fund the business though the first quarter of 2020. If the timely achievement of commercial milestones justifies the continued pursuit of all the Company's businesses the Company may require further funding in 2019 or 2020 although the Company's strategy, cost base and portfolio of market opportunities remains constantly under review.

6. DETAILS OF THE PLACING AND OPEN OFFER

6.1. The Placing

The Company is proposing to raise approximately £15 million (before fees and expenses) by way of a conditional, non-pre-emptive placing of 150,000,000 new Ordinary Shares at the Issue Price.

The issue of the WCP Shares will be conditional upon the approval by the Independent Shareholders of the Whitewash Resolution. The Company intends that all Placing Shares (including the WCP Shares) shall be issued at Admission.

The Issue Price represents a discount of approximately 68.8% from the Closing Price. The Placing Shares will represent approximately 66.8% of the Enlarged Share Capital following Admission. In order to broaden the Company's institutional investors base and to minimise the time and transaction costs of the Placing, the Placing Shares are only being placed by Jefferies and Berenberg with a limited number of existing and new institutional investors. The Placing Shares are not being made available to the public.

The Placing Shares will be issued credited as fully paid and will be identical to and rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all future distributions, declared, paid or made in respect of the Ordinary Shares following the date of Admission.

6.2. Directors' participation in the Placing

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

[1] Excluding Open Offer Shares

6.3. The Placing Agreement

In connection with the Placing, the Company has entered into the Placing Agreement pursuant to which Jefferies and Berenberg have agreed, in accordance with its terms, to use reasonable endeavours to procure subscribers for the Issue Shares at the Issue Price. The Placing is not underwritten. In accordance with the terms of the Placing Agreement, the Placing is conditional upon, amongst other things, the passing of the Resolutions, 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 occurring on or before 20 December 2018 (or such later date as the Company and Jefferies (having consulted with Berenberg) may agree, not being later than 3 January 2019).

The Placing Agreement contains certain warranties given by the Company concerning the accuracy of information given in this circular and the announcement made by the Company in respect of the Placing as well as other matters relating to the Group and its business. The Placing Agreement is terminable by Jefferies and Berenberg in certain circumstances up until the time of Admission, including, inter alia, should there be a breach of a warranty contained in the Placing Agreement or a force majeure event takes place or a material adverse change occurs to the business of the Company or the Group. The Company has also agreed to indemnify Jefferies and Berenberg against all losses, costs, charges and expenses which Jefferies and Berenberg may suffer or incur as a result of, occasioned by or attributable to the carrying out of its duties under the Placing Agreement.

6.4. 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 2 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. Applications for Excess Shares may be allocated in such manner as the Directors 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/it for the purposes of the Takeover Code, holding 30% or more, or increasing an existing holding of 30% or more, of the Enlarged Share Capital immediately following Admission.

Overseas Shareholders

The attention of Qualifying Shareholders who have registered addresses outside the UK, or who are citizens or residents of countries other than the UK, 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 this document or the Application Form to such persons, is drawn to the information which appears in paragraph 8 of Part III of this document.

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.

Settlements and dealings

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 30 November 2018.

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 III of this document and for Qualifying Non-CREST 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 Registrar by no later than 10.00 a.m. on 19 December 2018. Application Forms should be returned to Neville Registrars Limited, Neville House, Steelpark Road, Halesowen B62 8HD by no later than 10.00 a.m. on 19 December 2018.

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 III of this document 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 30 November 2018.

If the conditions of the Placing Agreement are not fulfilled or (where capable of waiver) waived on or before 8.00 a.m. on 20 December 2018 (or such later time and date as the Company, Jefferies and Berenberg may agree, being not later than 8.00 a.m. on 3 January 2019), the Open Offer will not become unconditional and application monies will be returned to applicants, without interest, as soon as practicable thereafter.

Effect of the Placing and Open Offer

Following the issue of New Ordinary Shares to be allotted pursuant to the Placing and Open Offer, 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 50.2% to their interests in the Company and Shareholders who do not take up any of their Basic Entitlements will suffer a dilution of up to 66.8% to their interests in the Company.

6.5. Admission of the New Ordinary Shares

Application will be made to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on AIM. Subject, inter alia, to the passing of the Resolutions at the General Meeting it is expected that Admission will become effective in respect of, and that dealings on AIM will commence in, all of the New Ordinary Shares, on or around 20 December 2018.

It is expected that CREST accounts of the investors in the New Ordinary Shares who hold their Ordinary Shares in CREST will be credited with their New Ordinary Shares on 20 December 2018. In the case of investors in the New Ordinary Shares holding their Ordinary Shares in certificated form, it is expected that certificates will be dispatched by 3 January 2019. Pending dispatch of the share certificates or the crediting of CREST accounts, the Registrar will certify any instruments of transfer against the register.

7. RELATED PARTY TRANSACTIONS

The following Related Parties (as defined by the AIM Rules) will be participating in the Placing:

The Directors, having consulted with the Company's nominated adviser, Jefferies, consider that the terms of WIML's and IP Group plc's participation in the Placing are fair and reasonable insofar as the Company's Shareholders are concerned.

8. IMPORTANCE OF THE VOTE, IRREVOCABLE UNDERTAKINGS AND RECOMMENDATION

Shareholders should be aware that, if the Resolutions are not approved at the General Meeting, the Placing and Open Offer will not occur and the Net Proceeds will not be received by the Company. If this were to happen, the Group would only have sufficient working capital to trade through to January 2019 without taking any mitigating action.

8.1. Irrevocable undertakings

In aggregate, the Company has received irrevocable undertakings to vote in favour of the Resolutions to be proposed at the General Meeting in respect of:

- Resolution 1, 26,563,149 Existing Ordinary Shares, representing, in aggregate, approximately 26.78% of the existing issued ordinary share capital entitled to vote on this Resolution;

- Resolution 2, 1,477,188 Existing Ordinary Shares, representing, in aggregate, approximately 9.62% of the existing issued ordinary share capital of the Company entitled to vote on this Resolution; and

- Resolution 3, 26,563,149 Existing Ordinary Shares, representing, in aggregate, approximately 26.78% of the existing issued ordinary share capital of the Company entitled to vote on this Resolution.

John Samuel, who is a Director and holds shares in the Company, has irrevocably undertaken to vote in favour of all Resolutions in respect of his holdings, amounting to 1,477,188 Ordinary Shares representing approximately 1.49% of the existing issued ordinary share capital of the Company.

In addition to John Samuel, certain other Shareholders have irrevocably undertaken to vote in favour of the Resolutions as follows:

- in respect of Resolution 1 and Resolution 3, 25,085,961 existing Ordinary Shares, representing, in aggregate, approximately 25.29% of the existing issued ordinary share capital of the Company entitled to vote on these Resolutions.

Voting rights limitations

The members of the Concert Party are not entitled to vote in respect of the Rule 9 Waiver.

Entrepreneurs Fund LP, Oceanwood Capital, Invesco Asset Management Limited, IP Group Plc, Baillie Gifford & Co, Parkwalk Advisors and Mr Alistair Kilgour are considered not to be independent in respect of the Rule 9 Waiver by virtue of their participation in the Placing or by virtue of their being presumed to be acting in concert (within the meaning of the Takeover Code) with participants in the Placing, and will each therefore only be entitled to vote in respect of Resolution 1 and Resolution 3.

8.2. Recommendation

The Directors, who have been so advised by Jefferies as to the financial terms of the Placing, the Open Offer and Rule 9 Waiver, consider the terms of the Placing and Rule 9 Waiver to be fair and reasonable and in the best interests of the Independent Shareholders and the Company as a whole.

In providing advice to the Directors, Jefferies has taken into account the Directors' commercial assessments.

The Directors consider that the Placing, the Open Offer and the Resolutions are in the best interests of the Company and its Shareholders as a whole and unanimously recommend that you vote in favour of each of the Resolutions to be proposed at the General Meeting on which you are entitled to vote.

Important Notice

MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING. THIS ANNOUNCEMENT AND THE TERMS AND CONDITIONS SET OUT IN THE APPENDIX ARE DIRECTED ONLY AT: (A) PERSONS IN MEMBER STATES OF THE EUROPEAN ECONOMIC AREA ("EEA") WHO ARE QUALIFIED INVESTORS WITHIN THE MEANING OF ARTICLE 2(1)(E) OF THE EU PROSPECTUS DIRECTIVE (WHICH MEANS DIRECTIVE 2003/71/EC, AS AMENDED FROM TIME TO TIME, AND INCLUDES ANY RELEVANT IMPLEMENTING DIRECTIVE MEASURE IN ANY MEMBER STATE) (THE "PROSPECTUS DIRECTIVE") ("QUALIFIED INVESTORS"); AND (B) IN THE UNITED KINGDOM, QUALIFIED INVESTORS WHO ARE PERSONS WHO (I) HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS FALLING WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (THE "ORDER"); (II) ARE PERSONS FALLING WITHIN ARTICLE 49(2)(A) TO (D) ("HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC") OF THE ORDER; OR (III) ARE PERSONS TO WHOM IT MAY OTHERWISE BE LAWFULLY COMMUNICATED (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS").

THIS ANNOUNCEMENT AND THE TERMS AND CONDITIONS SET OUT HEREIN MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. PERSONS DISTRIBUTING THIS ANNOUNCEMENT MUST SATISFY THEMSELVES THAT IT IS LAWFUL TO DO SO. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THE APPENDIX AND THE TERMS AND CONDITIONS SET OUT HEREIN RELATE IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. THE APPENDIX IS FOR INFORMATION PURPOSES ONLY AND DOES NOT ITSELF CONSTITUTE AN OFFER FOR SALE OR SUBSCRIPTION OF ANY SECURITIES IN THE COMPANY. THIS ANNOUNCEMENT AND THE APPENDIX HAS BEEN ISSUED BY AND IS THE SOLE RESPONSIBILITY OF THE COMPANY.

THIS ANNOUNCEMENT, INCLUDING THIS APPENDIX, IS NOT AN OFFER FOR SALE OR SUBSCRIPTION IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION. THE SECURITIES MENTIONED HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR UNDER ANY SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, RESOLD, TRANSFERRED OR DELIVERED, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES EXCEPT PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. THERE WILL BE NO PUBLIC OFFER OF THE SECURITIES MENTIONED HEREIN IN THE UNITED STATES.

THE SECURITIES MENTIONED HEREIN HAVE NOT BEEN, NOR WILL BE, APPROVED OR DISAPPROVED BY THE US SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY IN THE UNITED STATES, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE PLACING OR THE ACCURACY OR ADEQUACY OF THIS ANNOUNCEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE IN THE UNITED STATES.

EACH PLACEE SHOULD CONSULT WITH ITS OWN ADVISERS AS TO LEGAL, REGULATORY, TAX, BUSINESS, FINANCIAL AND RELATED ASPECTS OF AN ACQUISITION OF PLACING SHARES.

No statement in this announcement is intended to be a profit forecast and no statement in this announcement should be interpreted to mean that the earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.

The price of Ordinary Shares and the income from them may go down as well as up and investors may not get back the full amount invested on disposal of the Placing Shares.

Neither the content of the Company's website (or any other 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.

DEFINITIONS

The following definitions apply throughout this announcement, unless the context requires otherwise:

2017 Placing means the placing and issue of new Ordinary Shares completed on 29 December 2017.

Admission means the admission of the New Ordinary Shares to trading on AIM and such admission becoming effective in accordance with the AIM Rules.

AIM means the AIM market of the London Stock Exchange.

AIM Rules means the AIM rules for companies published by the London Stock Exchange.

Americas means North and South America.

Application means the application to be made by or on behalf of the Company to the London Stock Exchange for Admission.

Application Form means the personalised application form accompanying the Circular on which Qualifying Non-CREST Shareholders may apply for Open Offer Shares under the Open Offer.

Basic Entitlement(s) means the pro rata entitlement of Qualifying Shareholders to subscribe for 1 Open Offer Share for every 2 Existing Ordinary Shares registered in their name as at the Record Date, on and subject to the terms of the Open Offer.

Berenberg means Joh. Berenberg, Gossler & Co. KG, London Branch, being the Company's joint broker and joint bookrunner in relation to the Placing.

bona fide market claim has the meaning given to it on page 40 of the Circular.

Circular means the circular, to be published by the Company upon the Panel having granted the Rule 9 Waiver, in relation to the Placing and Open Offer which will include notice of convening the General Meeting at which the Resolutions will be proposed.

Closing Price means the closing middle market quotation of an Ordinary Share as derived from the Daily Official List of the London Stock Exchange on 26 November 2018.

Company or Xeros means Xeros Technology Group plc, a company incorporated in England and Wales with registered number 8684474, with its registered office at Unit 2, Evolution, Advanced Manufacturing Park, Whittle Way, Catcliffe, Rotherham, South Yorkshire S60 SBL.

Concert Party means Woodford, WIML, Mercia, EVL and the Enterprise Ventures Funds, who are presumed to be acting in concert for the purposes of the Takeover Code.

CREST means a relevant system (as defined in the CREST Regulations) in respect of which Euroclear is the Operator (as defined in the CREST Regulations).

CREST Regulations means the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755) (as amended).

Directors or Board means the board of directors of the Company.

EMEA means Europe, the Middle East and Africa.

Enlarged Share Capital means the issued share capital of the Company immediately following Admission comprising the Existing Ordinary Shares and the New Ordinary Shares.

Enterprise Ventures Funds means RisingStars Growth Fund II, Finance Yorkshire Seedcorn LP and South Yorkshire Investment Fund Limited.

Estimated Expenses means the estimated expenses incurred in connection with the Placing and Open Offer, being £0.8 million.

EU means the European Union.

Euroclear means Euroclear UK & Ireland Limited.

Excess Application or Excess Shares means Open Offer Shares which may be applied for by Qualifying Shareholders under the Excess Application Facility.

Excess Application Facility means the arrangement pursuant to which Qualifying Shareholders may apply for additional Open Offer Shares in excess of their Basic Entitlements in accordance with the terms and conditions of the Open Offer.

EVL means Enterprise Ventures Limited.

Excess Entitlement(s) means in respect of each Qualifying CREST Shareholder who has taken up his Basic Entitlement in full, the entitlement (in addition to the Basic Entitlement) to apply for Excess Shares up to the number of Open Offer Shares credited to his stock account in CREST pursuant to the Excess Application Facility, which may be subject to scaling down according to the Directors' absolute discretion.

Existing Ordinary Shares means the 99,177,942 Ordinary Shares in issue at the date of this document, all of which are admitted to trading on AIM and being the entire issued ordinary share capital of the Company.

FCA means Financial Conduct Authority.

FCP means an independent distributor of commercial laundry equipment who sells, installs, commissions and services the Company's washing machines on a non-exclusive basis within a defined geographic region.

FP Omnis Portfolio Investments ICVC means a company incorporated in England and Wales with registered number IC000982.

FSMA means Financial Services and Markets Act 2000.

General Meeting means the general meeting of the Company to be convened by the Circular.

Gross Proceeds means the proceeds from the issue of the New Ordinary Shares, prior to the deduction of the Estimated Expenses, being up to approximately £20 million.

Group means the Company and its subsidiaries Xeros Limited, Xeros Inc., Xeros High Performance Work Wear, Inc. and Xeros Environmental Protection Technology (Shanghai) Co., Ltd.

Independent Shareholders means the Shareholders, other than (i) members of the Concert Party and any person acting in concert with them (including any members of their immediate families, related trusts or connected persons) who holds Ordinary Shares and (ii) the Shareholders who subscribe for Placing Shares and any person acting in concert with them (including any members of their immediate families, related trusts or connected persons).

Issue Price means 10 pence per New Ordinary Share.

Jefferies means Jefferies International Limited, being the Company's nominated adviser and joint broker and joint bookrunner in relation to the Placing.

LEFARC means Le Farc SA de CV.

LF Woodford Investment Fund means a company incorporated in England and Wales with registered number IC001010.

London Stock Exchange means London Stock Exchange plc.

MAR means the EU Market Abuse Regulation (2014/596/EU).

Mercia means Mercia Technologies PLC.

Net Proceeds means the proceeds from the issue of the New Ordinary Shares, after the deduction of Estimated Expenses, being up to £19.2 million.

New Ordinary Shares means the Placing Shares and the Open Offer Shares.

North America means the US and Canada.

OEM means an original equipment manufacturer.

OI&G means Omnis Income and Growth Fund, being a sub fund of FP Omnis Portfolio Investments ICVC.

Open Offer means the offer by the Company to Qualifying Shareholders, constituting an invitation to apply for the Open Offer Shares, on and subject to the terms and conditions set out in the Circular (and in the case of Qualifying Shareholders who do not hold their Ordinary Shares in CREST, the Application).

Open Offer Shares means the new Ordinary Shares to be offered to Qualifying Shareholders under the Open Offer.

Ordinary Shares means ordinary shares of 0.15 pence each in the capital of the Company.

Placing means the proposed placing by Jefferies and Berenberg, as agents to the Company, of the Placing Shares at the Placing Price on a non-pre-emptive basis, on the terms and conditions set out in the Placing Agreement.

Placing Agreement means the agreement to be entered into between the Company, Jefferies and Berenberg in connection with the Placing.

Placing Price means 10p per Placing Share.

Placing Shares means 150,000,000 Ordinary Shares which may, pursuant to the Placing, be allotted and issued fully paid up at the Placing Price and admitted to trading on AIM.

Qualifying CREST Shareholders means Qualifying Shareholders holding Ordinary Shares in CREST in uncertificated form at the Record Date.

Qualifying Non-CREST Shareholders means Qualifying Shareholders holding Ordinary Shares in certificated form at the Record Date.

Qualifying Shareholder means shareholders set out in the register of members of the Company on the Record Date (as defined in the Circular).

Quilter Investors UKEI2 means Quilter Investors UK Equity Income II Fund, being a sub-fund of Quilter Investors Trust.

Quilter Investors Trust means an authorised unit trust established in England and Wales and authorised by the FCA with product reference number 200108.

Record Date means close of business on 27 November 2018.

Registrar means Neville Registrars Limited.

Resolutions means the resolutions relating to the Placing and the Open Offer in the approved terms set out in the notice convening the General Meeting contained in the Circular.

Restricted Jurisdiction means each and any of the US, Canada, Japan, South Africa and Australia and any other jurisdiction where the extension or the availability of the Open Offer would breach any applicable law

RNS means the regulatory information service approved by the London Stock Exchange for the distribution of AIM announcements.

Rule 9 Waiver means the waiver, conditional on its approval by the Independent Shareholders taken by a poll, by the Panel Executive of the obligation that, following the issue of the Placing Shares, would otherwise arise on the Concert Party to make a general offer to all Shareholders pursuant to Rule 9 of the Takeover Code as a result of the allotment and issue of certain Placing Shares to one or more members of the Concert Party.

SeaLion means Jiangsu SeaLion Technology Development Co., Ltd.

Shareholders means holders of Ordinary Shares.

Symphony Project means the project pursuant to which the Company provides its technology to partner OEMs to allow them to incorporate polymer cleaning systems into their commercial washing machines.

Takeover Code means the City Code on Takeovers and Mergers.

United Kingdom or UK means United Kingdom.

United States or US means United States of America, its territories and possessions, any state of the United States of America and the District of Columbia.

WCP Shares means 77,000,000 Placing Shares to be allotted and issued to one or more members of the Concert Party by the Company pursuant to the Placing.

WEIF means the LF Woodford Equity Income Fund, being a sub fund of LF Woodford Investment Fund.

WIML means Woodford Investment Management Limited, being the investment manager for Woodford.

WPCT means Woodford Patient Capital Trust plc (being a fund managed by WIML).

Whitewash Resolution means the resolution to be proposed to be passed at the General Meeting, which relates to the Rule 9 Waiver.

Woodford means together WEIF, WPCT, OI&G and Quilter Investors UKEI2 (each being a fund managed by WIML).

All references in this announcement to "£", "pence" or "p" are to the lawful currency of the United Kingdom. All references to "USS" or "$" are to the lawful currency of the United States.