Haydale Graphene Industries : Interim Report 2022

For immediate release

1 March 2023

Haydale Graphene Industries plc

('Haydale', the 'Company', or the 'Group')

Interim Results

Haydale (AIM: HAYD), the global technology solutions group, announces its unaudited interim results for the six months ended 31 December 2022 (the 'Period' or 'H1 FY2023').

Financial Highlights

• Group Revenues increased by 50% to £1.78 million (H1 FY2022 £1.19 million);
• Adjusted Operational expenses of £3.02 million (H1 FY2022: £2.55 million) reflecting prior year investment in capability;
• Adjusted operating loss for the Period of £1.89 million (H1 FY2022 £1.75 million); and
• Cash at Period end of £2.97million (31 December 2021: £3.84 million).
• Successful fund raise of £5.14 million (Net) in September 2022.

Operational Highlights

• Sales of biomedical inks achieved in Europe with advanced trials being conducted by several parties which include electronic blood glucose reader compatibility tests.
• One tonne of functionalised graphene powder supplied to leading cycle tyre manufacturer Vittoria Spa with more orders anticipated in the current period.
• Strong growth in US revenues with an anticipated rebound in Silicon Carbide powder sales alongside expanding sales of blanks and finished tools;
• Developed a prototype underfloor heating solution with the potential to replace higher voltage electric or water based floor heating systems in residential buildings.

Commenting on the interim results, Keith Broadbent, Chief Executive Officer of Haydale, said:

"We are pleased to see revenues increase by 50% in the Period and currently remain on track to meet expectations for the financial year. Our operational focus remains on those products that should deliver revenue growth within the short to medium term. This strategy is supported by the Group's installed manufacturing capacity that can deliver functionalised nanomaterials to our customers on an industrial scale at a consistent quality and at a market acceptable price. We believe that the patented HDPlas™ plasma treatment provides a superior, highly tuneable and environmentally friendlier solution to the graphene challenge than other processes and this is being validated by our customers.

We are also pleased to see the rebound in our US sales and expect to see continued growth in our cutting tool business in the North American automotive and aerospace sectors in H2 FY2023. The continued progress of our US business will support reduced monthly cash burn and may create the opportunity to secure additional capital facilities for the Group".

For further information:

Haydale Graphene Industries plc

Keith Broadbent, CEO

Tel: [phone]

Mark Chapman, CFO

www.haydale.com

finnCap (Nominated Adviser & Broker)

Julian Blunt/Edward Whiley, Corporate Finance

Andrew Burdis, ECM

Notes to Editors

Tel: [phone]

Haydale is a global technologies group and service provider that facilitates the integration of graphene and other nanomaterials into the next generation of industrial materials and commercial technologies. With expertise in graphene, other nanomaterials and Silicon Carbide, Haydale is able to deliver improvements in electrical, thermal and mechanical properties, Haydale has been granted patents for its technologies in Europe, USA, Australia, Japan and China and operates from five sites in the UK, USA and the Far East. For more information please visit: www.haydale.comor Twitter: @haydalegraphene

Caution regarding forward looking statements

Certain statements in this announcement, are, or may be deemed to be, forward looking statements. Forward looking statements are identified by their use of terms and phrases such as ''believe'', ''could'', "should" ''envisage'', ''estimate'', ''intend'', ''may'', ''plan'', ''potentially'', ''will'' or the negative of those, variations or comparable expressions, including references to assumptions. These forward-looking statements are not based on historical facts but rather on the Directors' current expectations and assumptions regarding the Company's future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Such forward looking statements reflect the Directors' current beliefs and assumptions and are based on information currently available to the Directors.

A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements including risks associated with vulnerability to general economic and business conditions, competition, environmental and other regulatory changes, actions by governmental authorities, the availability of capital markets, reliance on key personnel, uninsured and underinsured losses and other factors, many of which are beyond the control of the Company. Although any forward looking statements contained in this announcement are based upon what the Directors believe to be reasonable assumptions, the Company cannot assure investors that actual results will be consistent with such forward looking statements. Accordingly, readers are cautioned not to place undue reliance on forward looking statements. Subject to any continuing obligations under applicable law or any relevant AIM Rule requirements, in providing this information the Company does not undertake any obligation to publicly update or revise any of the forward looking statements or to advise of any change in events, conditions or circumstances on which any such statement is based.

Chief Executive's Report

Overview

The Group has seen solid progress in its core graphene and nano particle operations in the UK supported by a strong rebound in its US sales.

Within the graphene and nano materials side of our operations, we have continued to concentrate on our focus products, those that we believe are most likely to deliver revenue within the short to medium term. Specific development of our core ink, elastomers and composite products has also resulted in further enhancement of our core functionalisation technology which has led to several new patent applications being submitted in the Period.

We have continued the optimisation process for the HT1400 industrial scale plasma reactor that was commissioned in April 2022. Our installed capacity has, amongst other customers, proved invaluable in our supply of one tonne of functionalised nano material for Vittoria Spa in the Period.

Revenue increased by 50% in the Period to £1.78 million (H1 FY2022 £1.19 million) driven by a strong recovery at the Group's US operation. Silicon Carbide whisker ("SiC") sales to a long term customer in East Asia recommenced after a hiatus of nearly 18 months and were supported by expanding sales of blanks and finished tools (together "Tools").

The focus on improving operational capability alongside the increase in production capacity led to strategic investment in the wider Haydale team in FY 2022. In H1 FY2023 we are seeing the full year effect of this with a 18.6% increase in Adjusted Administrative expenses in the Period. The Group's adjusted operating loss for the Period was £1.89 million (H1 FY2022 £1.75 million).

Commercial Operations

UK

The UK has made consistent progress towards commercialising its proprietary technology in the Period and has continued to focus on the inks (biosensor, heater and conductive), elastomers and composites that we believe have a shorter commercial time horizon and can deliver a sustainable financial return.

Inks

Our biomedical ink products are gathering momentum, and we have secured small scale sales to the UK based subsidiary of a global leader in the glucose monitoring and diabetes management field, as well as several customers in East Asia. We are pleased that our functionalised graphene inks have demonstrated consistent performance uplifts against existing carbon based inks in initial trials. Customers are now performing advanced testing and are looking to ensure compatibility with their blood glucose readers.

For context, the global blood glucose test strips market size was $12.31 billion in 2021 and is poised to grow at a CAGR of 6.2% to reach $21.16 billion by 20301. Population aging, obesity, and unhealthy lifestyle are the main factors contributing to this market growth. Small disposable plastic blood glucose test strips play a critical role in assisting people to monitor and control their diabetes.

Academic and commercial laboratories have shown that the electrically conductive properties of our HDPlas® functionalised graphene, improved the accuracy and responsiveness of the ink within the test strips when compared to the existing products on the market. Furthermore, our next generation product uses less metallics and will be environmentally friendlier than current inks.

Haydale has the installed capacity to produce circa 25 tonnes of biomedical inks per annum to a consistent and high quality standard, and at a competitive cost versus current suppliers. We anticipate that capacity could be substantially increased, as required, with a projected return on future investment of under one year.

Our biomedical inks are also potentially capable of detecting a wide variety of other conditions. Our work with the Wales Kidney Research Unit at Cardiff University on a urinary electrochemical sensor has the potential to replace

1 Strategic Market Research - Global Glucose Test Strip Market Size - Global Report Analysis 2030

costly and invasive PCR based methods and to enable more timely intervention. The diagnostic potential of our functionalised powder inks, utilising microRNA to detect a wide range of conditions, has been recognised by The Engineer, a respected magazine focusing on technological innovation, which shortlisted the parties in the 2023 'Collaborate to Innovate Awards' category.

Haydale has been working with Cadent to develop graphene based heater inks to generate low power hot water in off grid situations. This work programme has now advanced to the development of a demonstrator, and the parties are discussing further projects.

Haydale has also been working to enhance the conductivity and printability of its heater inks for use in caravans and other mobile platforms and underfloor heating situations. The Group has recently developed a prototype distributed heating solution with the potential to replace high voltage electric or water based under floor heating systems in residential buildings. Haydale heater ink can be printed onto various substrates and using low voltage battery or solar energy could, when fully developed, effectively heat domestic buildings as part of a wider sustainable energy ecosystem. We have received interest from a number of energy utilities and are currently investigating the cost of developing a prototype for field testing, with a view to having a commercial offering with a certified energy rating value. Against the backdrop of the global energy crisis, discussions on this potentially ground breaking technology continue apace.

Elastomers

Through several feasibility studies, Haydale demonstrated the capacity of functionalised masterbatches to deliver enhanced elastomer performance. Our work in this field has kickstarted our collaboration with Vittoria Spa ("Vittoria"), the leading Italian bicycle tyre manufacturer which has pioneered the use of graphene in high performance tyres. Haydale's functionalised nanomaterial has been proven to create substantial improvements in grip, puncture resistance, rolling drag and durability. During the period the Group was excited to continue our collaboration by supplying one tonne of functionalised graphene nanomaterials to Vittoria. The parties expect more orders to follow in H2 FY2023 as Vittoria expand the use of the material to other high performance tyre offerings. The applicability of this technology to the wider tyre market and also to other sectors is being explored with the anti- static non marking properties of our functionalised elastomer products receiving interest from a supplier to the medical sector.

Composites

The Group recently announced its new graphene enhanced epoxy pre-preg tooling material. A two year field trial at Prodrive, the tier 1 automotive supplier, demonstrated that our material delivered extended tooling life, improved surface quality and increased thermal conductivity. The prolonged tooling life should deliver substantial cost savings to users mainly in the automotive and aerospace sectors, with the move to the new tools requiring no process adjustments. The product was formally launched in H2 FY2023 with our graphene masterbatch being used to manufacture stronger and lighter composite sea kayaks for Norwegian paddle sport brand, Norse Kayaks.

Other UK

Haydale has continued to collaborate with High Tech Systems Ltd on the development, 'real world' testing and optimisation of its boron nitride enhanced thermal fluid, Hi-Therm™. By enhancing the thermodynamic properties of water, Hi-Therm™ has the potential to reduce the energy required to heat buildings and could demonstrate the positive impact that thermally efficient and effectively dispersed nanomaterials could have on reducing energy use.

North America

Revenue at our US SiC and tool manufacturing facility has rebounded in the Period. The Group has recommenced sales with a key customer in East Asia after an 18 month post pandemic hiatus and has also seen meaningful sales of its Tools in the Period.

We reported that our North American operation had started to see demand for its Tools revive in the last quarter of FY2022. We are pleased to report that this momentum has increased and during the Period we have added a number of major customers and are now seeing consistent monthly growth in Tools supplied into the North American automotive and aerospace sector. We have signed distribution contracts covering the important North-East Corridor

and the West Coast and these distributors are working alongside the sales team to promote our Tools. We are confident that we will be able to continue to increase both our user base and the range of tooling geometries that we are supplying to existing customers. We also consider that the wider developments within the ceramic cutting tool sector should allow us to build a significant tooling business that will broaden our strategic options for this unit.

During the pandemic we stated that we were to look to diversify beyond our traditional markets, and in the last two years have signed two non-exclusive sales agreements with Chinese companies and entered into less formal trading arrangements with several others. Whilst progress has been slower than expected, with the recent relaxation in China's zero covid policy, we anticipate more sales to China in the medium term.

The Company agreed an exclusive UK distribution contract for CeramycGuard™ in 2020. Haydale continues to work closely with a number of UK water utilities and wider concrete infrastructure parties and was pleased to recently announce a trial by United Utilities at its Oldham wastewater facility. We are hopeful that the six month trial will demonstrate the long term cost savings that the service life extension shown by CeramycGuard™ can deliver to concrete assets. We expected to receive DWI 31 (Clean Water) Accreditation during the Period, but due to delays outside of our control we are still awaiting the final evaluation, and now anticipate a decision during the current period. Whilst clean water accreditation is important in securing sales of CeramycGuard™, we continue to focus on the substantial wider market which includes sewage treatment facilities, bridges, car parks and other concrete structures.

Asia Pacific "APAC"

Our Thailand business unit is working on some exciting research projects, one of which is looking at the commercial feasibility of using functionalisation to upcycle waste products for use in battery and other applications. Further to the letter of intent with Graphene Creations, an associate company of Vittoria, referred to in our Annual Report released in October 2022, we are still assessing the merits of combining our technical knowledge and resources with their contacts within the Thai industrial community, and we anticipate that the parties will reach a decision on whether to proceed shortly.

We have made positive progress in South Korea and are working with several parties at an early product development stage. We anticipate that some of these collaborations will transition into material supply contracts in the current period and, specifically that our earlier work with NeoEnpla on their biodegradable barrier plastic bags suitable for the food industry, will afford more opportunities in the medium term. iCraft has now confirmed that it will refocus on its core operations and we remain in constructive dialogue with them in respect of their contractual obligations.

Grant Funded Projects

Haydale has been working on a number of grant funded projects in the Period. We highlight two projects that are focused on reducing the barriers to wider commercial adoption of graphene and which recognise our expertise in the characterisation of graphene.

• Iso GScope - a project led by the National Physical Laboratory, aims to validate and standardise measurement and characterisation methods for graphene in powders and liquid dispersions used in industrial applications. By overcoming the "what is my material?" barrier by creating well-characterised graphene structures, the project should facilitate the wider adoption of graphene by industry; and
• Accords - an Horizon Europe project, with Haydale playing a key role in developing imaging techniques to characterise 2D materials to make the process of selection easier. This is the first time that an extensive programme will look to standardise the characterisation of 2D materials with the aim of adoption by standardisation bodies such as ISO. This will also be an important milestone in defining the safe use of nano materials as industry continues to adopt this technology at speed.

As previously set out, the Company only seeks to focus on grant projects that have a clear commercial pathway or add significantly to the Group's knowledge bank. The projects detailed are practical examples of this ethos as are the other grants and awards that we have worked on in the Period.

Business Investment