Applied Graphene Materials : Interim Financial Report

6 April 2022

Applied Graphene Materials plc

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

Interim results for the six months ended 31 January 2022

Applied Graphene Materials, the producer of specialty graphene materials, is pleased to announce its interim results for the six months ended 31 January 2022.

Highlights

Operational highlights

Coatings

• Increase in pipeline engagements in the past twelve months
• Completed projects leading to customer product launches
• Successful engagements with

• 1. UK Environment Agency o Alltimes Coatings
     o Stanvac
     o Protective floor applications
     o 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

Strategic highlights

• Technology development continuing apace

1. Innovative coatings technology to meet the need for sustainable innovation and to support new opportunities in, for

example, chemical resistance applications

1. Battery technology materials evaluations

• 1. Hydrogen fuel cells materials solutions and storage o 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.

Adrian Potts, Chief Executive Officer, commented:

"We continue to make excellent progress with our graphene nanoplatelet dispersion technology for a broad range of applications in the protective coatings, composites and functional materials sectors alongside our longer-range development activity into green energy. Despite the COVID-19 legacy, we have managed our in-house resources well which has the development of new applications for the chemical resistant coatings and composites industries. We look forward to actively marketing this data to the industry soon.

Commercial revenues have been slower to develop than we would have liked for the period due to the compound effects of COVID- 19 and supply chain challenges across the liquid resins industry. Many of our customers have been challenged to source the raw materials needed for their standard products and have temporarily refocused resources away from research and innovation, which has led to a slowing of customer evaluation, formulating and testing of our products.

We have worked hard with our distributors through this period to support their efforts technically with their customers and we see this as a good investment for future potential. With the progressive re-emergence of the industry, we are anticipating increasing engagement with our graphene nanoplatelet products."

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

Applied Graphene Materials' results presentation, with audio commentary, is expected to be made available on its website at http://www.appliedgraphenematerials.com in due course.

For further information, please contact:

Notes to Editors

Applied Graphene Materials - For the last decade, AGM has been at the forefront of harnessing the possibilities of graphene. Founded originally by Professor Karl Coleman, the Group has grown from an academic idea from Durham University to a world leader in the development and application of graphene nanoplatelet dispersions for customers in the coatings, composites and functional materials sectors.

The Group utilises its proprietary bottom-up manufacturing process to produce high purity graphene nanoplatelets. Its expertise in dispersion chemistry enables AGM to create optimised, stable and easy to handle dispersions that customers use in real-world industrial products. AGM's unique approach enables industries to fully realise the potential of graphene in a simple, safe and easy to formulate way.

AGM, based at the Wilton Centre on Teesside, was admitted to AIM in November 2013, raising £11 million. The Group successfully raised £8.5m in January 2016 and a further £9.8m in November 2017. Since August 2020, the Group's shares are also listed on OTCQB in the United States and, in January 2021, the Group successfully raised a further £6m gross. As a result of the funding support and its industry leading technology platform, AGM has been able to develop a significant sales distribution network covering Europe, North America and Asia. The Group continues to work closely with industrial partners, and has seen the successful launch of numerous commercial products enhanced by its Graphene Dispersions. https://www.appliedgraphenematerials.com/

Business review

with Adrian Potts

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 . 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. 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 toward 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 within 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.

Opportunities by stage of development and pipeline value:

* The value of development stages 1 - 5 is probability-weighted. The value of completed projects is at full sales opportunity.

The number of opportunities in the final stages of the pipeline (stages 4 and 5) has grown from 17 to 21 during the period as a result of eleven opportunities moving up the pipeline, 5 opportunities being completed and 2 opportunities discontinued. In total, net of additions to the pipeline, eight opportunities have been discontinued during the period.

The majority of our activity within the pipeline continues to be centred upon protective coatings technology. Protective coatings is our strategically important market where we have demonstrated the performance advantages of graphene nanoplatelet dispersions. Most of this activity is for industrial-focused customers with activity also in aerospace, oil/gas and marine.

We currently can identify six further customer engagements which we believe are close to commercial traction.

The probability weighted average sales value of the 168 projects in the pipeline at 31 January 2022 is £2.7m (31/7/21: £2.9m) reflecting the completion of 5 projects and the net discontinuation of 8 projects. The sales opportunity of the completed projects at that date is £0.5m (31/7/21: £0.8m) and this reduction in sales value reflects a more cautious valuation of these projects based on recent sales experience and the ongoing difficult trading environment.

DISTRIBUTION NETWORK

Steady progress has been made with our distributor development, although the investigation of graphene as a new class of candidate technology has taken longer than desired with some of our distributors' customers. This has required targeted support from AGM

technical staff to enable product engagements to progress. However, we are confident that this investment will pay off in the successful outcomes that will be reached with our distributors. It is now a key objective to increase the quantum of engagements through our distribution partners to enable greater traction in commercial results.

Post period we were pleased to announce the addition of Rayoung Chemtech to the AGM team as our distribution partner for the Taiwan coatings and composites market. We are very encouraged by the level of activity already happening through them and the number of samples requested for testing. We are also anticipating adding further distributors to the team; progress has been made in Latin America and India and we anticipate further announcements in due course.

We continue to assist our distributors with product regulatory support for our products in the respective territories. This is particularly important for future volume sales of our A-GNP35-based dispersions in the United States, where engagement with the Environmental Protection Agency (EPA) is active in pursuit of a Pre-Manufacture Notice and TSCA listing.

PROTECTIVE COATINGS SECTOR

As AGM's strategically important sector for delivery of our technology solutions, sales volumes have been slower to develop than expected. This is directly as a result of activity levels in the sector having been substantially reduced and this is due to:-

• COVID-19has continued to adversely affect work patterns and continuity at a number of our customers - particularly those in early-stage evaluation of our products. This has resulted in much slower testing and adoption and hence a reduced stream of launched products to market. At some engagements, R&D programmes have been shelved altogether.
• Global supply chain issues in the coatings industry have significantly changed priorities for development, innovation and R&D staff. Unprecedented supply issues for many constituents of coatings including resins, solvents, additives have been significantly disrupted. In a number of cases, customers have reprioritised their R&D team efforts to solely address integration of alternate basic product supply; this has a direct impact on longer-range innovation activities, particularly when overlayed with the impact of disrupted work patterns from COVID.

Two years on, we are starting to see a return in activity in the industrial coatings space which is encouraging.

Current Sector Products and Marketing

Despite the slow pace of customer activity, AGM has focused on continuing the important work of developing our comprehensive platform of technology and our product offerings for the protective coatings sector. These are supported by extensive data and guidance documents on exemplar formulations, arising from many months of testing. These data serve to equip customers on how to be successful with the use of graphene dispersions. Across the range of applications, we have products that which can fulfil requirements in:-

• general Industrial C3 anti-corrosion applications;
• use of graphene in harsher C4 to C5 applications in primers, and intermediate coats. This gives the end-user substantial flexibility to design systems where the graphene can be used throughout the various layers in a protective coatings assembly, or selectively in tandem with an existing primer system;
• dispersions that can confidently be used to achieve very harsh corrosion performance in CX type applications e.g. for coastal and offshore environments; and
• innovative water-based applications for sustainable advantage.

AGM's extensive product portfolio for this sector and beyond includes

• standard, stable, easy to use graphene dispersions to enable our end customer to formulate their own products using a range of additive chemistries from resins to solvents;
• a range of innovative low VOC and bio-based dispersion products to meet the needs of innovators looking for a greener sustainable solution;
• water-baseddispersions specifically engineered for effective water-based solutions for coatings innovators;
• dispersions based on a range of types of graphenes to match customer need; and
• finished primers to enable customers to use directly or evaluate performance of a graphene-based product with ease.

We are planning a major marketing push in the area of chemical resistant coatings in April 2022. This application opportunity is anticipated to open up substantial new prospects for use of our graphene dispersions in a broader range of coatings possibilities beyond corrosion. This application portfolio is expected to include engagements in both the areas of protective coatings for diverse aggressive chemicals for storage, transport, flooring through to composite materials which are often used in chemical storage applications.

We are also expecting the successful development of a graphene-enhanced top coat product to complement the use of AGM's graphene-enabled primers and intermediate barrier coats. This will give the end user full flexibility in determining the specification of their protective coatings system developments.

Customer experiences of successfully formulated products using our graphene where we anticipate growing usage as these products become adopted include: -

Harsh corrosion - UK Environment Agency (UKEA)

We have supplied our Graphene HC Primer to UKEA contractors for the first use of this finished coating on UK flood defence assets in the Northeast of England. We are pursuing the next phase of this engagement with sales of primer anticipated to further locations. This is an important project for AGM as it marks the practical use of a harsh environment corrosion primer in real-world applications where the objective is maintenance reduction through longer life graphene-enhanced coating systems in harsh, salty coastal environments. The coating deployed is the result of some 18 months of product formulation and extensive testing. As well as sales to UKEA, the use serves as an important demonstrator of graphene use in a new platform of coatings innovation for further harsh