Applied Graphene Materials : 2022 Interim Report

PROUD TO BE A LEADING INNOVATOR

IN GRAPHENE DISPERSION

AND APPLICATION TECHNOLOGY

Applied Graphene Materials plc

Interim Report 2022

ABOUT US

INNOVATIVE TECHNOLOGY

We work in partnership with our clients using our knowledge and expertise to provide standard and customised graphene dispersions and formats to deliver enhancements and benefits for a wide range of applications where we can deliver maximum value.

Operational highlights

Coatings

• ¥ Increase in pipeline engagements in the past twelve months

• ¥ Completed projects leading to customer product launches

• ¥ Successful engagements with

  • y UK Environment Agency

  • y Alltimes Coatings

  • y Stanvac

  • y Protective floor applications

  • y Launch of finished anti-corrosion primers

• ¥ Strong product range with continuing commitment to develop further for industrial coatings opportunities

• ¥ Chemical resistant coatings portfolio expected to launch in April 2022

• ¥ Car care sector progress continues apace with a number of customer products coming to market

• ¥ Pace of evaluation of our materials has slowed due to the COVID legacy and supply chain issues within the sector impacting customer R&D activity

• ¥ Growth in total pipeline engagements to 192 (2021: 135) including 24 completed developments (2021: 10)

  and resulting revenue potential to £3.2 million (2021: £3.7 million)

Composites and functional materials ¥ Growth in engagements for graphene in composites in the hydrogen storage sector

¥ Development of Thermal Interface Materials

Distribution ¥ Steady progress with deeper technical input has established greater distributor capability

¥ Addition of Rayoung Chemtech in Taiwan

OUR PURPOSE

AGM aims to create value for all of its stakeholders, contribute to global knowledge on graphene application technology and play a leading role in the development of innovative graphene-enhanced new products that stand out in their respective markets.

AGM aims to continue to innovate and be a technical leader in the application of graphene dispersions and to create commercially successful outcomes for our customers and our Company.

OUR MISSION

OUR VISION

AGM is focused on strengthening its position as a world leader in the development, production and supply of graphene dispersions, exploring the possibilities and pushing the boundaries of material performance to enable our customers to realise the true potential of sustainable graphene solutions.

Strategic highlights

• ¥ Technology development continuing apace

  • y Innovative coatings technology to meet the need for sustainable innovation and to support new opportunities in, for example, chemical resistance applications

  • y Battery technology materials evaluations

  • y Hydrogen fuel cells materials solutions and storage

  • y IP platform grown

• ¥ Positive regulatory activity in the USA

• ¥ Continuing IP development

Financial overview

¥	Revenue - £46,000 (2021: £42,000)
¥	Operating expenses unchanged at £1.7 million
(2021: £1.7 million)
¥	EBITDA* - loss of £1.7 million (2021: loss of £1.6 million)
¥	Loss before tax - £1.9 million (2021: loss of £1.8 million)
¥	Cash at bank - £4.2 million (2021: £2.3 million)
¥	Basic EPS - loss of 2.6 pence per share (2021: loss
of 3.3 pence)
*	EBITDA comprises loss on ordinary activities before interest, tax,
exceptional costs, depreciation and amortisation.

CONTENTS

Overview

IFC About us and highlights 02 Business review

14 Financial review

Financial information

• 16 Consolidated income statement and statement of comprehensive income

• 17 Consolidated statement of changes in shareholders' equity

• 18 Consolidated balance sheet

• 19 Consolidated cash flow statement

• 20 Notes to the interim report

• 24 Glossary of terms

Overview

BUSINESS REVIEW

with Adrian Potts

FOCUSED ON CUSTOMER ENGAGEMENT WITH THE RIGHT PRODUCTS FOR COMMERCIALISATION.

ADRIAN POTTS

Summary

Strong technology platform, mature product range coupled with support for distributors is enabling positive customer engagement and revenue opportunities.

Overview

Steady engagement

In the industrial protective coatings industry, where the bulk of our current customer engagement currently sits, progress has been impeded by the continuing impact of COVID-19 and customers' supply chain challenges for basic raw materials. Whilst this has affected AGM somewhat less from an operational and technology development standpoint, we have seen a significant slowing of pace of activity at our customers. As a result, revenues for the period have been below our expectations. We are, accordingly moderating our current year revenue expectations. Despite this, we have seen an increase in total engagements in the twelve months and five new products using our graphene dispersion technology have come to market in the past six months.

Long term sales prospects through distribution Supplying graphene in standard dispersions with a long shelf life is key to successful customer engagement through distribution. Our distributors have developed a solid appreciation for our products over the past months.

Applied Graphene Materials plc Interim Report 2022

Over the past year of integrating our products with our distributors, we have focused on a deeper level of technical support to enable them to be successful. We are now confident that momentum is being realised and that this will become a solid foundation for future growth.

We were extremely pleased to add Rayoung Chemtech to the AGM sales network in March 2022, and their enthusiastic approach is already leading to product sampling for their prospective customer base. Regulatory support for all distributors is progressing to plan.

Right products for Protective Coatings progress The protective coatings industry is slowly emerging from the damaging effects of COVID and major supply disruption. Our efforts in technology development enable us to have confidence that as customer resources return, we will see improved progress in the use of our products - from customers in the evaluation stages through to increasing activity with launched products. Having a broad dispersion product range approach whereby graphene dispersions can contribute to a range of chemistries and end-user scenarios is a key enabler to future success in graphene application in this sector.

Our innovative solutions serve customer needs well for ease of materials adoption on a repeatable basis. Where innovators are looking to adopt more sustainable technical solutions, we have already established a solid product range to meet these opportunities. The industry push towards lower VOC and water-based solutions for higher performance coatings means our dispersions are well placed to fulfil this opportunity.

We are excited about the imminent marketing and application of our graphene dispersions into the Chemical Resistant coatings sector. A major data generation project for such coatings immersed in a range of harsh chemicals is expected to establish graphene as an important protective agent in this sector.

With stable dispersion products already established, we are well placed to pursue this sector with products that we know are easily integrated into end formulations. Similarly, we are also developing further additions to the product range with the inclusion of top coat product solutions to add to primer technologies in due course.

We are seeing positive opportunities emerging for our products in harsh environment coastal flood defence applications, construction, infrastructure, electrical, aerospace and concrete.

The car care sector continues to engage with graphene as a materials technology with a number of larger partners currently working with our materials. Once successful, these represent a potential step-change in volume use for this market.

Composites and functional materials technologies Our graphene dispersions offer specific technology progress opportunities in these sectors. Efforts in the hydrogen storage space are gathering momentum from the solid example established with Infinite Composites Technologies.

We are progressing the development of thermal interface materials from the platform of thermal adhesive technology. We anticipate a positive engagement in the automotive sector for such materials which embody high thermal conductivity and low weight gain through low density. Other speciality applications include the printing of conductive graphene inks.

Platform technology for broad application scope We have established a solid technology base of standard dispersions of a number of graphene types to enable breadth of engagement in the sectors in which we operate. As well as developing innovative solutions for the protective coatings industry for anti-corrosion and bringing new application opportunities for innovators to consider this material, we are now engaged in new products to generate future application possibilities for graphene. Evolution of the product range to enable industrial anti-static coatings is one such example.

Our longer-range technology development in the areas of material evaluation for battery technologies and hydrogen fuel and storage are progressing well. Our IP portfolio has been further increased, underpinning the value of the dispersion and application technology we have developed.

Our proactive approach to regulatory matters is making positive progress, particularly in the USA.

Sustainability is key to our product development and AGM offers both innovative products to meet the needs of product formulators wanting to integrate graphene into greener, more sustainable solutions. We are underpinning the efficiency of graphene in industrial coatings with a life cycle analysis study to demonstrate the sustainability benefits of use of this innovative material in such applications.

Manufacturing base

Further leased space to accommodate an increase in dispersion capability is being contracted and equipment is on order to support the anticipated need for increased demand.

COVID impact and supply chain

We have seen the direct impact on our customers' activity in terms of resourcing availability and continuity. When the severe impact of supply chain constraint is overlaid with the impact of COVID, it is clear that this has impacted our direct engagement with our customers insofar as progressing evaluation and use of graphene, as customers' priorities have shifted away from research and development. As activity levels begin to return to normal, we see AGM as well placed to engage with the industry, having managed our own COVID protocols well and progressed our technology development in the background.

Commercial progress

Revenues

Trading has been difficult within our focus sector of industrial protective coatings due to the continuing impact of COVID and the challenges around supply chain issues for basic raw materials. With many engagements, we have seen a slowing of activity within our customers as their priorities have been centred on basic supply management with diminished resources. As a result, our revenues for the six months have proven to be disappointing. We are however positive about the gradual emergence of activity levels in the protective coatings sector and the potential to re-commence materials testing on a number of accounts. Behind the scenes, our technology team has been making good progress on developments to support new opportunities with the broader coatings sector, which we see ourselves as well placed to capitalise on.

Pipeline of engagements

We have seen progressive growth in our pipeline of engagements over the past 12 months, with an increase from 135 to 192, including now 24 completed products. It is pleasing to see this steady growth in the number of products being launched by our customers, which will drive our future sales of dispersed graphene materials. We believe steady, positive progress is being made in the evaluation of our graphene materials by customers interested in both graphene as a novel material and in the practical use of this innovative materials technology. The pace of a number of customer evaluations has unfortunately slowed as discussed due to the effects of COVID and the supply chain within the coatings industry. We see this as a timing issue only.